Senator Edward Kennedy died early this morning of August 26, 2009.
It has been suggested that in lieu of flowers,
passing health care is the right thing to do to honor his memory.
In that spirit, rather than eulogize him,
I continue here with my focus on health care.
Michael Rodgers’ recommendation to watch the Aug 16 Meet the Press did not disappoint. The show featured former Texas Representative and Republican House Majority Leader Dick Armey, political commentator Rachel Maddow, Senator Tom Coburn, M.D. (R-OK), Senator Tom Daschle (D-SD), and others. There was a nice interlude with Representative Charlie Rangel (D-NY). All in all, it was quite an interesting discussion.
At one point there was this interchange:
MR. GREGORY: Senator Coburn, isn’t a big problem here an area of personal responsibility, and that is that you talk about healthcare costs, there is no consumer sentiment involved here. It’s not like buying a car, when you know how much it costs and what it means to your bottom line. Three-quarters of Americans get their healthcare benefits from their employers. Most people do not pay their own—pay the bills for their health care. They don’t know what it costs. Look at this. This is the average healthcare premiums provided to a, a family, this is from the Kaiser Family Foundation, $12,000-plus worth of premiums. Your employer pays $9300 of that, the individual worker pays about 3300 of it. People don’t know what the costs are.
SEN. COBURN: There’s a disconnect, David, there’s no question, and so therefore we don’t—we don’t have a transparent market to price and quality, which I think everybody would like to see. We would like to see it reconnected so that you have some personal responsibility. The, the proposals before us really aren’t reform level. What they are is more of the same. Now, Rachel just mentioned about how efficient Medicare is. It’s not efficient. The fraud rate’s anywhere from 15 to 20 percent. If you add their true cost of overhead to their fraud rate, they’re about 7 points above what the average 10-K report, including profit, is for private insurance. Now, they have a different motivation. The point is, is any bill that comes through that increases cost is a failure, because we spend too much today. We ought to be getting more efficiency.
Hearing this, I suddenly had an epiphany. All of the observations below are things I knew individually, but I just hadn’t put them together in this way before. If you already knew, pardon me for being slow. But maybe some people are like me (slow to catch on), so I figured I’d share my thoughts.
The apparent notion which Coburn is going after is that if you knew what it was that you were paying, you’d care more about it and act more responsibly. A plausible claim, or so I thought.
And, in fact, I myself have very much wanted to get health care cost separated from employers for a long time. My reasons are somewhat different than Coburn’s. He wants to separate the two in order to put more control in the hands of individuals; I want to separate them merely to get control out of the hands of employers, who are focused on profit rather than health, and also to make it harder on insurance companies who seem to take glee in adjusting insurance terms when people change jobs. (No association with job, less opportunity for plan to be menaced between jobs.) But, ignoring motive, I would have thought I agreed with Coburn on at least this particular goal of making the pricing system more transparent and putting it in the hands of individuals.
But here I was staring at this sample number they mentioned. $12,000 for health care for a family for a year. And I got to thinking: What would families faced with that amount of money do if they got the transparency that Coburn and I were working toward. What kinds of choices would they make? I’ve been in some tight financial situations, and I can probably guess. I bet a lot of them would ask these questions: “Are we feeling pretty healthy? If so, can we gamble on cheaper care this year? Or perhaps none at all?” I bet this will lead to healthy people negotiating lower and lower rates on the basis of the notion that they are healthy.
And suddenly I realized that making the system more transparent by putting more decisions in the hands of individual consumers is not going to automatically help things, in spite of what I may previously have thought. So I shifted position on this. It's not that I didn't previously support a public option, but I had thought a bit of transparency at least might help. Suddenly, I'm not so sure.
My feeling at this point is that moment-to-moment health care is just not appropriately modeled as a simple consumer market. In fact, it might be argued that people should be paying in almost inverse proportion to what they need; that is, if they are very healthy, they can do a lot of work and so can pay a lot for health care they might need another time.
This is why states like Massachusetts are concerned about making sure that young adult males get insured. Many of them figure they won’t need health insurance, so why buy it. And if the matter is left to “personal responsibility,” then indeed why should they? If it’s a market issue, they should be expected to optimize their personal selfish need.
So the reason people say we should make prices transparent simply doesn’t hold up. A 20-year-old male asked to pay $12,000 for health care might say “No way, I didn’t even go to the doctor this year!” And yet, that might be a completely appropriate amount to pay.
Transparency is about the idea of paying for what you get and keeping your eye on precisely that. But health insurance is not about that at all. 
You can't have a transparent view of your future risk without doing a very complicated actuarial analysis that is well beyond the capability of ordinary citizens to understand.
It just isn't reasonable to suppose that allowing people to guess on these matters is going to optimize costs in the medical care system. What it will do is create a shuffle in which insurance vendors can make a lot of money trying to trick overconfident consumers into believing they know more than they really do. And that's pretty much what we're trying to dig our way out of.
It's not that there is something fundamentally wrong with letting people see what they pay for. But there is something fundamentally wrong with the idea that transparency is the mechanism that will fix things. Telling them to judge the goodness of their care by watching each expenditure and asking whether it was appropriately priced is not going to get us there. What it will do is serve as a major distraction—at best a red herring, at worst the Siren's call, leading us to certain destruction.
None of what I’ve said should be taken to imply that I think there is no inefficiency in the health care system. I'm sure there is. But my point is that the simple act of making prices transparent to consumers won't really fix that. In fact, it may make things worse by creating the impression that things should cost a certain amount that in fact they should not.
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I do not mean that this is going to happen and of course, many problems like diabetes and high blood pressure, and heart disease disease can also be caused by bad genes and most insurance companies don't care how you got your risk factor, just whether or not you have it.
I don't see a way to address long-term issues in the way you want without having transparency be a synonym for "out of luck". And then we're into wars over whether no one should eat red meat, whether everyone should eat macrobiotic food, and on and on. Strange for the Republican party, the party of small non-invasive government, to be championing that...
How will we view school sports? Will you have to be heavily insured to play? Not all things that cost money are as simple as overeating. I'm not a watcher of most sports, but I wouldn't insist that just because it seems a gratuitous risk to play many sports I somehow don't want to be saddled with the bill. If we're going to cover everyone, we have to cover everyone, not scrutinize only what we don't like and say that's something I won't pay for. There's risk of head injury in soccer and probably other sports. Does that mean only the heavily insured can play in school? Sports are supposed to be the cure for obesity, but people who are watching TV are not risking head injury or twisted ankles. If we're going to open the door to discussion of what costs us, let's be clear about the risks. Are we going to say people who ride in cars (who must have a higher risk of some injuries) need special insurance rates, or are we only going to pick on things that are politically popular to pick on?
Committing to simply supporting one another medically and assuming that people are well-motivated to be healthy doesn't seem unbearable. Indeed, that might create some cost, but your hidden assumption is that there is no cost to a system where you leave every person to themselves, and I think that simply cannot be true. The mere economies of scale, simplicity of adminstration, and lack of economic motive to bicker seems enough savings to pay for most of the things you're worried about.
I'll leave aside the notion that rampant population growth also makes us less healthy and yet many who want personal responsibility are frequently again lining up to try to block any attempts to allow family planning of almost any sort.
Transparency is very likely to separate us into opposing parties on many political lines, and yet not to really get to the heart of any of the real problems, just as happens with race, gender, and nationality divisions. There are real differences between people that probably matter, but people don't tend to divide along those lines because they're too hard to spot or prove. They pick simple, easy-to-see lines and prefer to divide along those, not because those are fair or productive but because they're easy.
my take-away from this is that buying health-care isn't like any consumer purchase, there's no choice involved, people don't have to option to put off their cancers, their crippling disabilities, their chronic conditions until they can be fit into the household budget, healthcare's not a commodity, the rules of the marketplace don't apply, can never be made to apply
the fundamental question is: are we a community that takes care of our own, or are we at perpetual war with each other, dog eat dog and devil take the hindmost?
Roy, I have the impression that some who are calling for transparency are talking about things like the “waste” involved in paying a lot just to go in and have someone give you a bandaid. But my point is that you aren't paying for that. You're paying money into a system that will later have to give you bypass surgery or something. Of course, some calling for transparency want to say that the only way to make it work is that you yourself have to know you'll be paying for that bypass. That would indeed be a form of transparency. But at that point, I'd call it “every man for himself.” At that point, whether you want transparency or not is a market issue since the government is providing nothing at all. And the issue really isn't, as commonly phrased, “do we pay or does the government?” We pay. We are the government. The issue is whether we pay for use or for membership in a fair society. In a fair society, some think people pay for what they use. Others think people pay evenly. Those are two different theories of fairness. That's the problem.
If we, as a country, pay twice what the rest of the industrialize world pays and get half the benefits, that is an indication that something is seriously wrong with our system. Insurance company profits exploded during the recent Bush years and Big Pharma got a free ride at the taxpayers expense.
Corporate profits seem to rule the day since they are quite eager to contribute to getting people elected that they can manipulate. That has to change, but I don't see much action for reform in that area.
Until campaign contributions are taken away from large companies and elections are put back into the hands of the people, we will be fighting an uphill battle regardless of the topic of reform.
I'm not sure if transparency is a good thing or a bad thing, but like so many others, I don't care for the idea of having the government prying into our lifestyles. I would guess that very few people don't engage in some sort of risky behavior whether the subject be smoking or sex. Everything we do carries with it some type of risk. Otherwise we may as well all wear rubber suits and never leave the house.
One-sixth of our population has no insurance at all and I've seen estimates as high as another 100 million that are under insured with most of them not even being aware of it. I've also read where up to 70% of home foreclosures can be connected to health care problems. These are some very serious problems and I don't have a clue as to how to address them. It's no wonder these health care bills have 1200 pages to them and are so easily misread and misinterpreted.
What I do know is that a family that makes less than $40,000 per year is going to have a hard time paying out $12,000 for insurance and still manage to put food on the table.
Personally, I think it's time for a complete government takeover of the industry, but I would settle for something that managed to allow sick people to go to the doctor when they need to without being sent down the road to financial ruin in the process.
The way I figure it, life is full of unhealthy things. We each do different ones, and we rationalize why the ones we do are better than the ones someone else does. But a lot of it is a wash. And some of the time, people will be healthy in spite of, not because of, their behavior, and yet will feel smug that they did well. Others will become unhealthy in spite of, not becuase of, their behavior, and will be made to feel bad. It's just a bad thing to not accept that good health is its own reward and that people are already motivated to do well for themselves because there's just no fun in being sick. So transparency in the direction of the consumer is a looming cesspool if we go that way.
But I'm mostly in this article talking about transparency in the other direction and just saying that what makes taking $12,000 from me in a single year just to offer me a bandaid ok is not dependent on the transaction, it's dependent on the way the money is invested and saved—or on the way it's drawn out of the system as profit. But, in general, since risk (present and future) itself is not a transparent quantity (which is why the mortgage industry had such trouble), asking people to prefer one vendor over another because they're getting “better value for the dollar” is out-and-out meaningless.
By the way, the best way for someone to pay $12,000 in health care on a $40,000 salary would be for them not to be taxed at all by the government (or to get the $12,000 as a full tax credit). We oughtn't be taxing people at the low end exactly becuase they don't yet have enough money to take care of themselves. If we take money they need for essentials and have to give money back later, money gets lost in the process of taxing and refunding, and no one is better off. (See my article Tax Policy and the Dewey Decimal System.)
However, if health care were provided by the government, that line could be drawn lower (since health care would not be a required expense in order to break even), so in effect at some point people would be paying for the cost of their health care through taxes. The advantage provided by doing it through taxes is that it would be even-handed even during times of financial hardship for the individual, and it wouldn't be a shell game between multiple parties trying to push off costs on one another.
We may have disagreements about this as a general philosophy, e.g. for food or housing or luxuries. In general, it sounds like capitalism vs. communism.
But for health care in particular, it's a special case. There's a reasonable argument that few health expenses are discretionary. While there are exceptions, you can't really choose to consume more or less of health care, than whatever your life and body throws at you.
On top of that, there's catastrophic coverage, which is tailor-made for some kind of insurance. Some very very few -- and generally hard to predict -- people will get unlucky, and require health care which is orders of magnitude more expensive than the average person. It's basically not possible to say, "pay for what you use" in those cases. The vast majority of people will never use those services, so they pay nothing. The few people who get unlucky, will be unable to afford them on their own, so again it doesn't get paid for.
The only possible way of dealing with catastrophic health expenses is through some kind of insurance, where most people pay a little bit but happen to get no benefit (because they stay healthy), while a few people get unlucky in health and have insurance pay their expenses.
I think health care is different enough from most other industries, that the general "theories of fairness" topic can be deferred.
Health is not an issue of responsibility, at least in the sense of having chosen or caused the issue in an obviously avoidable way. (Certainly it is in the sense of that if no one is helping, you're stuck dealing with it, but that's a different sense of the word responsible than I want to address since we're talking about the very issue of whether others should want to help.)
Even in the extreme case where we know that smoking or overeating causes certain problems, I'd argue that on an individual basis you can't know that the cause when a cancer comes along is that thing. (Some people have a hard time with this, but most, I'd wager, would have no hard time with saying with 100% certainty that their decision to eat red meat or failing to eat enough broccoli or fruit was not an election of certain health conditions that might be statistically associated with those conditions. And then what about diet soda, which for many is what keeps them from gaining more weight but may have other side-effects such that you're trading one effect for another?) The fact is that people do not ever elect bad health. At worst they do things that might have a contributory effect but no one other than an insane person (and that person needs medical care for other reasons) would elect bad health. So the right metric of fairness is not “what you use” because it was not a choice how much you use.
There is this notion in the Republican party (or, at least, the Republican spin machine maintainers) that somehow the problem is, as you say, Don, a choice between capitalism and socialism. It's not me that's injecting that rhetoric. I favor a hybrid system, since I see the good and bad in both systems. And the tool I use to help me decide whether something should be born by the government tends to be a set of questions like “did the person cause their own predicament in a totally avoidable way” and “can the person solve this on their own.” (Not that society might not have other reasons to care if the person was an integral part of something bigger, as Ted Kennedy was. He had money, but there could be someone who did as he did and didn't have money. Would we want to fail to save them if they could help us but we believed they had caused their own problem?)
I know this comparison has been made many times, but if we compare healthcare to public services like fire departments, police departments, the military, etc, it is clear that the public is not served well by privatizing these services.
You write, “Transparency is about the idea of paying for what you get and keeping your eye on precisely that. But health insurance is not about that at all.”
NO insurance is about that. Insurance has no certainty about it at all. That’s the irony of all of this. I pay care insurance year after year after year and never get ANYTHING out of it, but those car insurance companies are raking in the profits, from which the general public gets nothing. The public service departments I mentioned above are similar; we all pay for those services through our taxes, but a vast majority of us NEVER get ANYTHING out those expenditures. But society in general is better served by having them.
Coburn says, “If you add their true cost of overhead to their fraud rate, they’re about 7 points above what the average 10-K report, including profit, is for private insurance.”
I don’t have access to the data that led to that statement, but I would bet that it would not hold up under scrutiny. It is almost certainly based on cherry-picked criteria that do not really serve an honest assessment. But that is just cynical prognostication on my part due to past experience with statistics of that sort, and an informed distrust of the individual delivering the message.
;~ )
Ooops...
Beyond that, though, my real point here was about transparency—the notion that somehow someone seeing the price could somehow force the market to tighten by saying “that's too much for that service.” It's just not realistic to suppose one can do that for insurances. Maybe for care, but care is not the problem being solved. It's not like the public is up-in-arms about the idea that an MRI price needs to come down 22% to be affordable. The problem isn't that at all.
I try telling people, who often figuratively put their fingers in their ears and sing "la la la" rather than listen, that they are paying for health care no matter whether there's universal coverage or not, as some astute congresspersons have pointed out. Either you pay higher bills of the emergency rooms and clinics who refuse to let uninsured people die at their front doors, then recoup those costs from the rest of us, or you have a more organized and policy-driven (governmental) system that distributes costs in a far more rational manner.