Arnold Kling  

The Uninsured and the Health Care Debate

Will David Friedman Revise his... On Freedom and Democracy...

Keith Hennessey writes,

As a policy matter, we care not about the total number of uninsured, but about the subset of that group that we think "deserves" taxpayer-subsidized health insurance. That is a judgment call that involves some value choices.

I will make one value choice for you and boldly assert that, if you are already enrolled in or eligible for one free or heavily subsidized health insurance program, we can rule you out as needing a second. That simple statement reduces the 45.7 million number down to 35 million, by excluding the Medicaid undercount and Medicaid/SCHIP eligible from our potential target population.

Read the whole thing.

I might want to use this for my forthcoming debate on health care. But I'm inclined to go in a different direction. My current outline:

1. I am the radical in the debate. A free-market health care system is a much greater departure from our current system than a single-payer system.

2. From an individual point of view, the ideal health care system is one that gives you all the medical services you want without your having to pay for them. In the aggregate, however, that leads to runaway health care spending.

3. What we think of as health insurance is not really insurance. Instead, it is designed to provide you with medical services without your having to pay for them.

4. Americans make extravagant use of medical procedures with high costs and low benefits.

5. I would like for all Americans to have real health insurance. However, such insurance would not enable you to obtain whatever you want without paying for it. Instead, it would pay for unusually large and persistent medical expenses. Government involvement ought to be limited to vouchers that enable the very poor and the very sick to obtain such insurance.

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COMMENTS (11 to date)
Dan Weber writes:

My biggest fear of UHC is that it will be done via "Medicare-for-all." Right now there is room for local and state governments (and possibly private enterprise) to implement health care systems that put doctors on salaries. If we go to Medicare-for-all, it will take a tremendous amount of activation energy to move to a better system.

another bob writes:

since i think of myself as something of a libertarian and i'm a long time reader of dr. kling's ruminations about medical care, i decided to put my money where my mouth was.

i started paying directly for most of my family's medical care and decided i would only file an insurance claim for a truly major expense. i thought this approach would approximate the "true insurance" approach that seems to have been legislated out of existence.

my experience is that i am charged much higher fees than my insurance company had been for similar much as double. these weren't terribly costly procedures. so, search and negotiation costs would have been high relative to the possible savings had i shopped around. also, never try to separate your wife from her OBGyn just because you're doing "some crazy experiment with my life!!!"

so, during your debate, keep in mind the cost reduction of negotiated rates for a group prior to actually needing the treatment.

Brittancus writes:

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Arthur_500 writes:

Healthcare should, if we choose to go this route, cover regular scheduled preventative checkups and over-the-top expenses.
It does not have to cover hair replacement, boob jobs, and fertility exercises just because that will make some individual have better self-esteem. Sorry, you can't fix stupid.
Individuals need to be responsible for their own deductibles and realization that they may not be able to afford a desired life. Now who wants to bring that into the public debate and get re-elected?

hacs writes:

Until now, a minimal state in health care is synonym of Medicare/Medicaid (and its high cost procedures included) for a few ones or even nobody, while the liberals claim for an universalization of the actual system.

My point is simple (and, perhaps, politically unfeasible and ingenuous, considering the political incentives of an expansion in any basic and inexpensive health care system): a minimal state in health care as a very basic set of medical treatments (including preventive medicine) for all, and a free-market medical care for the remaining more expensive treatments.

shayne writes:

Dr. Kling:

I would only suggest the following modification to your current outline ...

"3. What we think of as health insurance is not really insurance. Instead, it is designed to provide you with medical services without your having to pay for them."

"3. What we think of as health insurance is not really insurance. Instead, it is designed to provide you with medical services without you perceiving that you're having to pay for them."

As long as the perception prevails that health care is or should be 'free', whether by virtue of private or public 'insurance', there will be no rein on expanding health care costs.

Those arguing counter to your (and my) position/recommendations on the U.S. health care system are only compelling as long as they propagate the myth (mis-perception) that medical services are 'free'. One of the most often used methods used to sustain that myth is the notion that health insurance is synonymous with health care. They are NOT synonymous.

Insurance, of any kind, is only a hedge against financial loss. And especially in the case of health insurance (public or private), the assurance is that the medical services providers get reimbursed, not the service recipients. Hence the general support for 'national health insurance' systems on the part of the health care industry - they are virtually guaranteed payment for any 'services' they provide.

These distinctions may be subtle, but they are critical - they are at the core of the 'free health care' myth. Incentives are certainly important - so are (mis)perceptions.

hacs writes:

I do not agree with the point of view that to be sick is a financial loss. Anyone can suffer a financial loss making a bad bet, recovering from it (or at least having physical and mental conditions to that) once he/she is healthy . So, that point of view is secondary. The main point are the handicaps caused by an unhealthy condition which take away the capacity of recovery of an individual. So, the financial loss point of view on health care put the luckless bettor and a sick person on an artificial equal opportunity condition.

From a very personal point of view, I do not see any merit in to defeat a handicapped person, and that course of actions at a general level can generate a very anti meritocratic society.

Less Antman writes:

I hope your debate will also cover the supply side of medical care:

(1) Licensing restrictions that limit the supply of doctors and force their use for procedures that can be performed competently by others.

(2) Immigration restrictions that further limit their supply.

(3) Patent laws that prevent competition in the provision of medicines.

(4) FDA laws that reduce the supply of new medicines and the availability of information.

(5) Paperwork, paperwork, and more paperwork for insurance and compliance that massively reduces the part of a doctor's office budget devoted to actual care.

Also, on the demand side, the distortion of the tax system that encourages minimum deductible plans and the mandates that force policies to cover procedures favored by special interests.

Suzie writes:

I agree with you. I think that a free market system would attack some of the issues that are factoring into the health care cost crisis, however:

My question is: Does that mean that you would outlaw insurance companies from offering other policies or could people have the choice to purchase health insurance as we have now? What if they are risk adverse and want the financial buffer from medical costs? Are you suggesting that the only medical insurance that we can now purchase, if your solution is implemented, is catastrophic insurance?

jl writes:

I think the point is that, left to their own devices, very few people will pay an insurance premium in order to avoid the risk of having to pay $15 for a vaccine or $45 for an office visit because of a sore throat.

And yet today that is exactly what we do. The reason is that our employers can deduct the cost of providing us with pre-paid health care, while we cannot deduct the cost of providing ourselves with health care or insurance, and we don't have to declare these employer-provided benefits as income for tax purposes. So employers provide this benefit, raising our real compensation by giving us expansive coverage rather than increasing our salaries and wages because the total after-tax benefit is greater than paying us in cash on which we do have to pay taxes.

We think that this is a great deal because we are fooled into believing that a portion of the cost of this benefit (the "employer's share") isn't being paid by us in foregone income. (The same mistake that employers make when they imagine that their labor costs will drop if the government takes over the provision of medical care.) At the same time we're told that the economy is stagnating for the middle class because our salaries aren't going up as fast as the GDP - ignoring the value of the medical benefits we receive of course.

rpl writes:
so, during your debate, keep in mind the cost reduction of negotiated rates for a group prior to actually needing the treatment.
Negotiated rates don't really result in a cost reduction so much as they result in a cost increase for people who aren't in on the negotiation (i.e., the uninsured). Russ Roberts has a podcast in which his guest (a hospital CEO) explains how it works. In a nutshell, insurance companies negotiate a "discount" from the list price, but they allow providers to raise the list price such that the actual revenue collected from the insurer is nearly unchanged. The result is that prices go up for people without insurance, while cost reduction for the insurance system is minimal.
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