Friday, March 04, 2011

Some Progress on Health Care is Better than None

-- Posted by Neil H. Buchanan

In my post yesterday, I used some recent personal experiences as the springboard to discuss the complexity and perversity of the current U.S. health care system. Even as a person with stable long-term employment, an upper-middle class income, and relative sophistication when dealing with legal matters, I have found that the current system is so opaque that it can only be even partially understood after a person has an incident that triggers insurance coverage.

I noted, for example, that my most recent experience with an emergency room visit resulted in a total out-of-pocket cost to me of over $1,200, a number that was more than twice as high as it should have been, because of the mere happenstance of the "network status" of the ambulance that took me to the hospital. I should have added, moreover, that there is no way for me to be sure that this is really the total. For all I know, there are other adjustments and costs that are still working their way through the system. Because so many different providers (labs, ER doctors, ambulances, radiologists, hospitals, and so on) bill the patient separately for their services, and because the health insurer applies its bizarre rules to each bill, there is no way for a patient ever to be sure that it really is over.

The perversity of the system, however, is not merely a result of the nearly impossible task of understanding the consequences of whatever choices one has in choosing among health care and insurance options. The insurance companies also do a very good job of creating perverse incentives within their systems, using the cover of "discouraging excessive and useless medical care choices" as a reason to shift ever-greater expenses onto individuals and families.

A reader's two-part comment on yesterday's post described a few of the even more perverse incentives in the world of Medicaid, with its combination of private providers and state and federal funding. Because Medicaid is for poor people, and because it is a big part of states' budgets, the system appears to be set up deliberately to make people worse off (with governors constantly looking for ways to bleed money from the system). Complaining about this, however, seems somewhat inappropriate, given the news earlier this week that states are cutting Medicaid benefits for single, childless people who are working at low-wage jobs. The only thing worse than bad coverage is no coverage at all.

So where are we? The poor are losing coverage entirely. Many working people have no benefits and thus no health insurance. Those who are fortunate enough to have jobs with benefits are losing coverage or, in my case (the least sympathetic, in most ways), bearing ever greater burdens under rules that discourage people from using health care even in situations where it is obviously called for (for example, life-threatening head injuries).

What about the wealthy? The standard response to those who point to the high quality of care that is available at many facilities in the US has been, "Yeah, if you can afford it." If I were seriously ill, and money were no object, I'd rather be in New York than, say, Calgary. If I had to choose where to live purely on the basis of my expected longevity and health, however, any US-based location loses not just to Canada and France and England but even to unlikely places like Malta. Living in a place with cutting-edge medical technology does no good to people who have no access to it.

It turns out, however, that even fewer people can afford it here than we thought. In an op-ed last week, Donna Dubinsky, the co-founder of Palm Computer and Handspring, described her attempts to buy health insurance coverage when she no longer had access to an employer-provided plan. She readily acknowledged that she is financially well-off, and she began the process thinking simply that she would have to be willing to pay the price for insurance in the individual market. She described, moreover, why the health care system in the US makes it important for people to be insured, even if they could afford to pay standard expenses out of pocket: uninsured patients are gouged on prices, and even well-off people can spend down huge fortunes if they are afflicted with the worst kinds of diseases.

Dubinsky found that even the most minor health issues (in her case, a corn on her toe) count as pre-exisiting conditions, sufficient for an insurer to deny coverage. Being denied coverage itself became reason for other companies to deny coverage. Finally able to cobble together different policies to cover her family, her premiums have been growing at 20% per year ever since, even on policies with high deductibles and other costs. Even being truly wealthy, in other words, did not save Dubinsky from being nearly locked out of the current system.

Regular readers of this blog know that I have been harshly critical of President Obama. On deficits, on the environment, on Gitmo, and certainly on health care, he has been a bitter disappointment. The health care bill that has become so controversial was, overall, a tragically lost opportunity. Relying on the notion of creating more competition between insurers is a nice idea; but with each insurer offering the same complicated set of impenetrable options (and ex post surprises), the fundamental premise of the bill is deeply flawed.

Even so, as the new majority in the House spends ridiculous amounts of time trying to repeal what they so snidely and childishly call "Obamacare," it is worth remembering how bad the current system is, and how the new law will improve some important parts of what is wrong. The Affordable Care Act will prevent insurers from denying coverage for pre-existing conditions. It will make it impossible for insurers to drop patients once they become sick. It will make it more likely that people can join (or remain members of) employer-provided plans, and it will at least attempt to make non-employer-provided health insurance more affordable. Moreover, it will provide coverage for the tens of millions of people who have been forced to do without insurance, coming closer than ever to universal coverage.

While it might appear that the one group of people this law does not help is the group that includes me -- people currently with employer-provided coverage that, while increasingly expensive, is at least not leading to bankruptcy -- the reality is that I could lose my coverage tomorrow, if the condition for which I have recently been treated is deemed a reason to drop me from the rolls. Those who benefit from the new law thus include those who currently need its protections, and those who might need its protections some day. In short, nearly everyone.

Professor Dorf has written persuasively (most recently here) that the ongoing constitutional challenges to the new health care law are baseless. As a policy matter, even though the Congress that passed that law refused to enact many better choices, what they passed will make matters better. Our health insurance system is a disaster for many, and a disaster-in-waiting for nearly everyone else. The Affordable Care Act will make it somewhat less so. That is progress.

"We must not let the perfect be the enemy of the good" was the admonition against people like me, who spent last year saying that we must do better. Today, there is an even simpler admonition: "Don't go backward."


Paul Scott said...

We had a health care surprise ourselves last year when we had our child and my wife added her to her policy. The immediate and apparently irrevocable conversion of her policy from single to family doubled her deductible. Since, as healthy adults in need of only catastrophic coverage, her deductible was already high.

The problem is that most insurance comes in one of two forms: high-deductible, but 100% after deducible coverage, or low-deductible, then % coverage after deductible (with a cap on o-o-p expenses). So knowing we intended on getting pregnant, we selected a high-deductible plan knowing we would hit out deductible, but then not owe any more.

Baby come out, a month later (the statutory grace-period) gets added to the policy. The policy costs almost twice as much (this we expected and it made sense - 2 people, twice the cost of one person). However, the effect of adding a second person was to not only have two separate deductible pools (again, expected and makes sense), but was also to double the deductible *of each pool* (very surprising and not at all clear by the language of the policy).

So, even when they don't deny you coverage, don't refuse some types of treatment, etc (the litany of horror stories Michael Moore and others have made us aware), the coverage remains confusing and often you are just not getting what you thought you were paying for, even if you spent several days worth of "man-hours" analyzing the information they are willing to give you. (Try, for example, calling an insurer and telling them you want to consider a change in your coverage plan, and would they please send you the full policy document for all the available plans described in the coverage pamphlet they provided you).

This comes from two reasonably smart people doing their best to analyze a set of plans knowing what their health needs were likely to be over the next year. We still failed and paid twice what we were expecting.

I cannot imagine how the typical wage earner selecting a plan from his or her company's offered plans has any hope of making an informed decision.

JP Andreas, Pres. A.C.L.P. said...

“For example, calls to have members of Congress file their own taxes, or to have governors register their own cars with their states' DMVs, are based on the belief that there is nothing quite like lived experience to break through a person's apathy about others' plight. Health care is one of those issues for which seeing how the other 95% live might well lead to changes in policymakers' and analysts' attitudes about what is acceptable.” Mr. Neil Buchanan, “Health Care, Incentives, and Complexity.”

Indeed, while Mr. Benton may have lots of experience in the health care system, he apparently has not visited his state DMV office in quite a while.

Similarly, his claim that:

“when a governmental agency makes a mistake, you have an immediate right to review, and can delay its enforcement until there is a fair hearing,” I find extremely specious vis a vis the context of an expanded role for government in health care, (i.e., Obamacare), for the simply fact that who's to make it if it doesn't? Indeed, from my post on this subject at the ACLP's website,

“If we make government, the current regulator over fair health practices into a health insurance provider or player itself, (as Obamacare ultimately does), who will regulate the regulators?  Right now there are laws against health insurers denying care wrongly, and if necessary, the people's representatives can pass new ones if necessary, as the Democratic process allows...
However, if the government itself is the provider of your health care, if they have the first and final say establishing what care you should receive and the government itself denies your claim, who are you going to turn to then?  Indeed, by making government itself a stakeholder in the outcome, rather than the government merely being an impartial referee which applies the same rules to all, the entire system is rigged from the getgo against you and turned on its head.
From Feb. blog post, “So what's really the problem with Obamacare?”- ACLP blog

Finally, and even though even it might seem counter-intuitive, I am actually heartened at the thought that if personal attack was the only way Benton and Co. could respond to my arguments then they must really be quite bankrupt idea-wise (and likely terrified of the headway I am making! :) Otherwise, why the need to demonize?

Moreover, and best of all, since I and the ACLP are just the fledgling "one-person affair" he alleges, it is gratifying to know from our web analytics today that by highlighting our organization and its blog he has single-handedly driven an increase in traffic to our site by more than 300%, (thank you Mr. Benton! :) Moreover, and perhaps most importantly, the fact he felt he had to resort to such tactics heartens me at the soundness of my arguments. Indeed, as another more wise than I once said, "if you must resort to personal attacks and smears to win the argument you've already lost it.”

Jp Andreas, President, ACLP

JP Andreas, Pres. A.C.L.P. said...

You are an excellent and persuasive writer for your point of view Mr. Buchanan. You clearly come from the leftist spectrum for whom even Obama is, amazingly, too conservative and "a bitter dissappointment" for you.
Though I have dealt with most all your arguments in my "What's really the problem with Obamacare" post at the ACLP blog on here, and don't expect to have any more luck getting this blog post to stick than others that have been censored, just in case I would like to point out two key flaws to your claims re the much lauded "Affordable" Health Act.

1) First of all, as health care costs, like any other commodity is driven by supply and demand, no one of your persuasion is able to explain how we can cover 40 million more people while costing less. Indeed, the aging demographics of American society and the lack of adequate health personnel (which Obamacare will drastically escalate) alone will insure that we will see astronomically increasing health care costs as far as the eye can see, (which of course, will require in turn more government control over all our lives which still will not "solve" the problem). Short of full price and wage controls, indeed, the complete socialist package, it would be a travesty much worse than simply going from the pan into the fire, because, as has been shown everywhere else such a system has been tried, people give up trying when there is no incentive, (yes, finances do drive people's conduct); why work hard to achieve or make any effort to more effectively manage your own health when someone else will just bail you out? I have yet to see how your persuasion answers this effectively.

2) You deny the simple equation MORE COMPLEX=MORE EXPENSIVE. Of course, rather than simplifying the insurance system the Affordable Health Act only makes complicates it exponentially.

3) If the government is both provider and self-regulator, in essence plays both "judge and jury" in its regulatory role, who will regulate them when they deny your claim? I deal with this extensively in my posts on this subject but you continue to avoid it.

4) Virtually all ills you describe could be solved by passing much simpler legislation. Pre-existing conditions from simple legislation, individual accountability from health savings accounts, better and cheaper policies and reduction in costs from cross-state competition and tort reform. So which of these reforms did Obamacare implement? (which is not derisive btw, just an apt label easier to type), what of these reforms did your too conservative and bi-partisan President who has repeatedly asked Repubs for their ideas pass? NONE.

Finally, while pundits and professors may have their opinions about the Constitutionality of the brand of "Health reform" passed by the Democrats, a perusal of the comments on just this site shows a lack of unanimous aclaim as to the Acts lawfulness. (Indeed, that more than half the states have joined the lawsuit opposing is convincing evidence it is not just some lunatic fringe that opposes this broadreaching Act).
In any case, the fact remains in the end the only "opinion" that counts on this unprecedented power grab by the Fed government will be the Supreme Court's.

Doug said...

JP - Naa, the act is lawful. Government as insurer (or rather provider) and regulator is a challenge but most places manage it alright (the US does an OK job with medicare and medicate).

Preventative care can drive some overall cost savings. Otherwise, yes, costs will go up. The alternative is dead people - from treatable illness. Seems like an easy choice.

JP Andreas, Pres. A.C.L.P. said...

Preventative care, compared to the cost of adding another 40 million people to the rolls, is a drop in the bucket. You call all the fraud and duplication as repeatedly confirmed by the GAO "ok?" And while I appreciate your right to express your opinion that this legislations is lawful, (a point on which two courts out of five have disasgreed), your assertions of opinion are just that. NOTE: My longer reply to your longer post on Health care, complexities and incentives is now up. I will also post it on ACLP blog in case of censorhip. jp

Francis Sohn said...


Why is a wealthy person bothering for anything beyond truly catastrophic care? Supposing one has billions of dollars at one's disposal, the fact of a premium (in the sense of "what the insurer takes on top of actual costs," not the sense of "what you pay each month to your insurer") should, other things being equal, discourage a rational healthcare consumer from puirchasing insurance.

Of course, other things arent equal (I'm thinking of group buying discounts and the like)but in a market without any lag, free and completete infomration, and perfect competition, shouldn't insurance be unnecessary for those with essentially unlimited access to funds?

In other words, in a highly constructed perfect world, why should we care about the costs of insurance for the wealthy?

californiahealthinsuranceblog said...

I totally agree. Some services are better than having nothing. The most important things is just to be secure with at least one

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