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August 21, 2009

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Actually, since you are citing someone citing Matt, you might want to correct the sidebar to link to his ThinkProgress blog rather than the old Atlantic site, especially since von holds him responsible for myriad health care sins.

Whoops, wrong thread, sorry about that.

Some government action really is unfair. Like not counting collection costs in your bottom line or threatening patent rights to get lower prices. While administrative savings aren't. You can't talk about it in the abstract, you have to focus on the actual.

I believe the full conservative argument is that the government is inherently less efficient, and therefore private companies can't compete with it.

I believe you ought to fairly characterize even arguments you disagree with. The full conservative argument is that government is also the regulator, and tax collector, and court, as well as being a competitor, and THAT is why private companies can't compete with it: They can't change the regulations to screw over the competition, or subsidize their prices through taxes on the competition, or just say, "Eh, so what?" when they lose money, and go on running.

My response is simply: it's a public good and it's basic economic policy, just like roads etc. Compared to tax incentives to lure business to the area it's far less intrusive and far less susceptible to corruption. For the more economically inclined, point out it's going to be a monopoly, so the usual gains from competition won't be there.
But ultimately it comes down to people having a reflexive preference for private actors versus people who just want to get the best possible results. If there was an actual benefit to having private actors involved (both in networks and health insurance) their proponents wouldn't have to resort to the fairness argument.

There's the basic argument that, when you're dealing with private actors, if the deal makes you worse off, you can walk away. So, in principle, only deals that make people better off happen, and the sum of net positive deals is net positive.

Whereas, when you're dealing with the government, if the deal makes you worse off, you simply end up worse off. Because the choice the government gives you is, "Accept this deal, even if it makes you worse off, or we'll make you a LOT worse off!"

The problem with health care as it's configured in the US isn't that the free market has failed, it's that we're such a very long ways from a free market already, that we're getting practically none of the advantages of competition. I consume health insurance, my employer buys it. That's not a normal competitive market, and it's the natural result of tax policy.

We really ought to be cutting loose insurance from employment, so that the actual consumers could make the purchasing decisions, and people didn't have to change policies when they changed jobs. Then if you wanted to roll picking up insurance premiums into unemployment benefits, you could, but the whole preexisting condition issue would be made much easier to deal with.

But, of course, the Democratic plans don't do anything like that, they tie insurance to employers even more strongly, if that's possible.

@Brett
How do you "walk away" when you get cancer?
More importantly, what "advantages of competition" in health insurance are you looking for? The ones I can think of all apply even more so to single-payer, but I don't want to predjudice the debate, so please, give me your list.
(For a quick list of why I don't think free market solutions work for health insurance, see https://www.fivethirtyeight.com/2009/06/george-f-will-admits-public-option-will.html#comment-6304972393489946879 and the original post of that thread)
On the serparation of insurance and employment I agree 100%, but that would be a major change for the majority of americans who are insured through their employer and as such is not going to happen. (Well, it could, if that was something Republicans got behind 100%. I'd love to see them do that. But without, it's just something that structurally can't happen right now.)

We really ought to be cutting loose insurance from employment, so that the actual consumers could make the purchasing decisions, and people didn't have to change policies when they changed jobs. Then if you wanted to roll picking up insurance premiums into unemployment benefits, you could, but the whole preexisting condition issue would be made much easier to deal with.

Brett, I'm curious why you think a standard free market paradigm would work for individual health insurance, given that the sellers have both a right and incentive to refuse to sell insurance to certain would-be buyers, either directly or indirectly by prohibitive pricing. Or are you arguing here for a tightly regulated "free" market where insurers cannot turn down applications, nor drastically vary premiums according to medical history?

Given that Brett has repeatedly claimed that donations to politicians are nothing but protection money (therefore not bribes) and that regulations are bad by definition because they impede the free market that would most effeciently sort itself out, I would not expect much (new) from an answer.
That seems pretty to be an article of faith with him together with the belief that the intentions of the government must necessarily be totalitarian and evil (again cf. the repeated comparisions to the mafia*).

*I also think I remember him considering Europe as a bunch of totalitarian police states but I would have to do a search (I am too lazy for) to provide actual quotes.

A free market in health care insurance won't work because the sellers will only compete for those customers who the believe will rarely use it. Once convinced that a particular customer will begin to file claims, they will drop them. At the extreme, even car insurance companies do this today--try getting coverage after two reckless driving convictions and a DUI. This means that only a small cohort of consumers can shop around.

Detaching insurance from employment will not improve such a market because employers are unlikely to pass the labor cost savings along to workers as higher wages except in the case of the most skilled employees who cannot be replaced. And since individuals have little bargaining power, their choices are unlikely to affect prices or quality.

Some argue that if customers purchased care a la carte--that is, simply pay out of pocket for treatment--providers would compete for the business and prices would drop (the logic behind HSAs and other self-insurance mechanisms). This depends, however, on the incorrect assumption that consumers can evaluate the price and quality of health care the same way they do for other purchases, such as cars. It also assumes they can take the time to shop for bargains. They cannot.

In the end, the only complete solution to the problem is a system that covers everyone, and requires payment from everyone. Young and healthy people need to contribute up front to the system so that they can draw care from it later as needed. Some will never get their money back, just as most car insurance consumers don't. But they still get catastrophic coverage, and society gets and added benefit: sick people who could infect others, but have no money, can get treatment before they spread their illness.

By the way, I would challenge the idea that the "choice the government gives you is, 'Accept this deal, even if it makes you worse off, or we'll make you a LOT worse off!'" As a veteran, I can tell you that when the VA system fails me, contacting my congressman gets results. Government may be more responsive than private insurance companies because these guys have to reapply for their jobs every two years. Insurance companies simply drop the customer, knowing that others won't compete for the business.

"On the serparation of insurance and employment I agree 100%, but that would be a major change for the majority of americans who are insured through their employer and as such is not going to happen. (Well, it could, if that was something Republicans got behind 100%. I'd love to see them do that. But without, it's just something that structurally can't happen right now.)"

Perhaps this could be a rough outline for a plan that could, with a few tweaks, accomplish that separation and gain Republican support.

The fallacy is thinking fair competition is like a fair distribution of birthday cake, rather than like a fair experiment for testing a scientific idea or a fair election for figuring out who is most popular.

The competition is fair if it actually reveals who can do the best job for the least money. The problem with the government as competitor is that it can access general revenue and it can write the rules. The problem with THAT is that it can mean the government wins even though someone else (for-profit or non-profit) would actually provide more for less.

Brett inadvertently reveals what he's not seeing in the health care debate:

why private companies can't compete with it: They can't change the regulations to screw over the competition

Oh yes they can, and do. It's called "regulatory capture", and it is not in any way coicidental that the health-related industries are spending heavily to encourage Senators to see things their way.

What Brett (and von) seem to have trouble seeing is that we are not choosing between Big Government and free, individual actors. We are choosing between Big Government and Big Corporations -- to have a health care sector in a country this large *without* massive bureaucracy is not one of the choices.

The point on which I absolutely agree with Brett is that we need to separate health insurance from employment. But to me that necessarily means going with Big Government -- otherwise you're putting individuals up against Big Corp without any backup, and they'll rover over us like bugs.

"Perhaps this could be a rough outline for a plan that could, with a few tweaks, accomplish that separation and gain Republican support."

Or perhaps a link that works

One reason why the government should involve itself in healthcare is that it is far to easy to take advantage of people when faced with serious medical decisions. Again, this argument won't make much headway with Brett, who thinks that exploitation is just the way things are, but given questions of recission and denial of claims, it is one reason why, beyond the question of the uninsured, that this is of importance now.

Given that Brett has repeatedly claimed that donations to politicians are nothing but protection money (therefore not bribes) and that regulations are bad by definition because they impede the free market that would most effeciently sort itself out, I would not expect much (new) from an answer.
That seems pretty to be an article of faith with him together with the belief that the intentions of the government must necessarily be totalitarian and evil (again cf. the repeated comparisions to the mafia*).

Reading this really makes me wonder how Brett views the co-opting of police by organized crime. Does he view it as corruption? Regulatory capture? Or, per the above line of reasoning, would mafia bribery of police amount to a cruel protection racket carried out against plucky entrepreneurs by a ruthless government apparatus comparable to a... um... mafia?

THAT is why private companies can't compete with it: They can't change the regulations to screw over the competition,

I would dearly love to live in a world where this were actually true. In practice, getting the government to change regulations that favor your company over the competition is now standard operating procedure. It's especially true in the municipal broadband market, which is usually a heavily regulated oligopoly with enormous regulatory barriers to entry.

"One reason why the government should involve itself in healthcare is that it is far to easy to take advantage of people when faced with serious medical decisions."

Involve itself isn't the same as setting itself up as a competitor with different rules than it sets for the rest of the market.

So Sebastian, you would accept the government legislation not permitting rescission or the cancellation of policies for matters unrelated to the claim? This Tim Noah article may be of interest

I would require that companies investigate their recission claims within a short period of the beginning of the policy (say 3 months). If someone really does lie on their application about something important, sometimes recission is appropriate. But it isn't appropriate to use it as a technicality to avoid payment years later. (They aren't actually going to investigate everyone's recission possibility right away so problem pretty much solved). I'm fine with all sorts of government transparency regulations, and some versions of field of play regulations. But if the government is going to participate as a provider, it should have to follow every single rule that it makes providers follow. And it doesn't get to use its governmental powers to put competitors out of business.

The government has enormous powers that aren't available even to very powerful other competitors. Microsoft can't force you to submit to an audit. Standard Oil couldn't put you in prison.

Microsoft can't force you to submit to an audit.

Actually, Microsoft can force you to submit to an audit if you are most companies. And they do, every day, in the US and in countries around the world.

The competition is fair if it actually reveals who can do the best job for the least money. The problem with the government as competitor is that it can access general revenue and it can write the rules. The problem with THAT is that it can mean the government wins even though someone else (for-profit or non-profit) would actually provide more for less.

Again, what does it mean for the government to "win"? The government agents (ie Congresspeople) who would supposedly be tilting the table in order to "win" (using general tax revenues, changing regulations to harm private service deliverers)- what do they get? Pissed off constituents. Bad press. Budgets moving towards the red, causing reduced services elsewhere, higher taxes, or more borrowing.
See, they aren't CEOs. They don't get stock options. They don't get rewarded for crushing their competition with the power of the government- they get booted out of office.

Because the choice the government gives you is, "Accept this deal, even if it makes you worse off, or we'll make you a LOT worse off!"

I get that a lot when I send stuff via Fedex. Guys in trenchcoats in the shadows, taking down my license plate number. Hang-up calls. Black helicopters.

There's the basic argument that, when you're dealing with private actors, if the deal makes you worse off, you can walk away. So, in principle, only deals that make people better off happen, and the sum of net positive deals is net positive.

Key words: IN PRINCIPLE. That is, this has no bearing on the real world. And I can't get health insurance from a hypothetical market with half-a-dozen contrary to fact assumptions.

It's like you haven't read all these cases of individuals getting screwed by private insurers- either that, or you've decided that theories trump facts.
Or...

it's that we're such a very long ways from a free market already

Just like Communism, whenever it fails, it's just never been tried.

If a plan can drive a harder bargain with providers because it has more subscribers, that isn't evidence of an unfair playing field, but is exactly the kind of competitive advantage a truly level playing field would be expected to tease out.

Moreover, a better word for fairness would be accuracy in accounting. A level playing field is desirable because we are better able to determine which entities can deliver services the most efficiently. Fairness to insurance companies doesn't enter into it; if it is cheaper and better-liked by health-care consumers for private insurance companies not to exist, then they should not be protected from competition by a public option.

Moreover, a better word for fairness would be accuracy in accounting.

I agree with that. A "public option" is fine if it is subject to the same rules and can't access the General Fund. It's just that then the "public option" becomes just another non-profit insurance company.

I strongly agree that it shouldn't have access to the General Fund. We should offer subsidies, but it should be accounted for as subsidies to particular people (because coverage is one of the important aims, not to the public option itself. If it can stand on its own because it really is more efficient, I'm thrilled. But we shouldn't fake it.

Agreed. By "No Access to the General Fund", I really mean, access to the general fund only on the same terms available to all competitors. I'm not Brett. I think the General Fund should subsidize people who are unluck in the heath or in their economics. But it should do so even-handedly.

Sebastian said: "But if the government is going to participate as a provider, it should have to follow every single rule that it makes providers follow. And it doesn't get to use its governmental powers to put competitors out of business. "

And he is right. The problem is that reform opponents are ignoring that the current bill (HR 3200) does exactly that. It requires the public option to compete on a level playing field with all the other plans offered on the Exchange.

Put another way, all the hand-wringing about unfair government competition ignores that the bill requires said competition to be fair.

Some of these fiber networks, including the UTOPIA project, are open access. This means that the incumbents are just as free to benefit from the municipal network as any other provider on that network. What this model does promote is complete fairness among providers. Their true objection is that with this model, they will no longer be able to compete unfairly using their legacy networks that can only attract customers in a monopolistic environment. It's a lousy argument.

@Marty
Thanks for the link. There's lots about I don't like, but sure, in the context of other reforms, it could be tweaked. But the issue isn't how to get it done, there are lots of ways to do that. The problem is, AFAICT Republicans won't vote for any health insurance reform. Moreover, the support the death panel nonsense received from the party and its elected officials means this isn't the time to add something that is far more easily demagogued, thus actually might endanger reform and is not a priority for me. If there was a genuine bipartisan effort, or Republicans demanded such a plan on their own, sure. If they offer it up next time they're in power, sure, I'd support it.

" But it isn't appropriate to use it as a technicality to avoid payment years later."

Actually, the Noah article gives lots of examples of this, including
"Blue Cross said this was because she had neglected to state on her forms that she had been treated previously … for acne."

"Otto Raddatz, a restaurant owner in Illinois, was rescinded in 2004 by Fortis Insurance Co. after he was diagnosed with non-Hodgkins lymphoma. Fortis said this was because Raddatz had failed to disclose that a CT scan four years earlier had revealed that he had an aneurism and gall stones. Raddatz replied—and his doctor confirmed—that he had never been told about these conditions (the doctor said they were "very minor" and didn't require treatment), but Fortis nonetheless refused a payout until the state attorney general intervened. The delay in treatment eliminated Raddatz's chances of recovery, and he died."

Also, looking at the numbers, it is suggested that if you have a truly bankrupting illness, you have a 1 in 2 chance of having coverage withdrawn.

But I'm glad that you would support various measures to prevent this kind of behavior, though I'm not sure how this would help the uninsured or the underinsured. Regulation against this kind of rescission would only have insurance companies be more cautious in taking on people. Also, even if stronger language was put in on fraud, it is the insurance company that has time on its side.

Part of a solution might be for Congress to override the SCOTUS decision (sorry, no cite, but I'll bet Gary can get it in seconds) that suits against insurers can only can only be for the actual costs of the refused treatment, and can't include pain and suffering, loss of companionship, or other common remedies under tort law in, for instance, auto or industrial accidents (in most states).
What's the insurer's incentive to come down on the patient's side if the most that can be recovered at action is a few hundred thousand dollars? What's the plaintiff's/patient's lawyer's incentive?
And tort reform me no tort reforms, unless you're prepared to show that in states where tort reform and recovery limits already exist, outcomes for patients are better and costs are lower.

Pure regulations would be a dead letter the moment the next GOP president takes over, even if they were kept formally in place.
I fully agree on the 'no access to funds unavailable to private insurers' and the Dems I heard (Obama and others) repeatedly insisted on just that.
Where I disagree with Obama is that 'illegal aliens' are explictitly to be excluded. In my opinion, who pays the premiums (public option or private) should receive the services. We can/may talk again, if it is financed by tax revenues but not before.

Bristol, VA has a municipal fiber optic network? I'm trying to get my head around this. I lived there for five years in the mid-1990s.

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