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June 25, 2009

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Does the Democratic Party care about these things as a party? Some Democrats in Congress certainly care about them, but others seem as wedded to doing the bidding the insurance industry as the Republicans are.

As with torture, we have one party that is institutionally committed to an odious position and another that's a "big tent" on an issue that ought to be a matter of basic decency.

There's no question which of these two parties is the lesser evil. But it's disgraceful (and a little frightening) that with the better party controlling both houses of Congress and the Presidency the future of both torture and health care is still very much up in the air.

This might be pointless pedantry, but can we please distinguish between "health care" and health insurance a little more vigorously?

Insurance is a financial instrument. Most of us don't buy health care; we buy insurance from a financial-services company that (in principle) buys health care on our behalf if and when we need it. Say "health care", and people think of their doctor. Say "health insurance", and people think of their monthly bill.

If Republicans want to defend the current insurance system, make them say so. Start by eschewing the mellifluous but misleading "health care" formulation.

--TP

For years we've listened to conservatives telling us that government can't do anything right, and the solution to everything is to just turn our affairs over to private industry because they can do it all more effectively and efficiently. So it's odd to see them now being so fearful of private industry's inability to compete with the public option on health care. They clearly don't believe their own rhetoric....

"The fact that any parent would lose sleep because of an inability to afford sufficient coverage for..."

And you said the magic word, coverage. It has nothing to do with health care. In this debate, so far, it is about coverage. That's the overton window locking a lot of valuable voices, and solutions, out.

I was supposedly covered, for about three of the last thirteen years. During the time when I had coverage, I went to the doctor three times, once to get a deer tick pulled out, once for some bad flu, and once for my epi-pens. Funny thing was, I didn't want to go more regularly (for check ups, or typical things) for fear that I'd raise my future insurance rates because of some perceived abuse of the system. Hah. If only I'd known that I wouldn't have health care five years hence, I would have gone to that clinic every weekend, if only to say I had my fill of medicine once upon a time.

The debate is about coverage, and it's a shame.

I don't want health insurance, I want the ability to see a doctor to try and maintain some semblance of health, in circumstances other than an emergency room setting. But that can't happen, because insurance companies must not be put on an unlevel playing field, doctors must meet all their demands, and some people believe medicine is not a right of a free people in an industrial society. I guess I brought this on myself, and if I was living right I'd have insurance. Whatever.

The next pundit or blogger or commenter that argues against a public option, I want them to state whether or not they have 'coverage', for how long they've had it, and whether there was a time in the last ten years where they went without 'coverage' for one year/ two years/ five years. Seriously, if I have to look at Chuck Todd or Andrea Mitchell or Charles Gibson or Sebastian tell me about the state of the health care debate, I want to them to be up front.... 'I got mine' will suffice.

Sorry about the ramble, I've given up. I'm mad, I'm uncovered, have been for a long time, and I don't have the same perspective on this of people who can just 'schedule a doctor's appointment'. Do insured people even realize how foreign that sounds to a lot of us?

Yes, insurance companies are bad, but not because they're seeking profit; it's how they seek profit that's the problem.

An ethical insurance company makes a profit by smart underwriting. That is, it determines an appropriate price for an insurance policy, based on the risk of a payout. Once there is actually a claim, the ethical insurance company treats its insured fairly and does everything possible to pay the contractual amount (absent fraud, of course).

An unethical insurance company treats its insureds as adversaries, and tries to make a profit by reneging on its promise to fairly pay valid claims. It makes claims difficult to file, stalls payments, and denies claims initially in the hopes that the claimant will give up. It also practices sloppy underwriting, accepting insureds it shouldn't because it assumes it will simply deny their claims later.

"tries to make a profit by reneging on its promise to fairly pay valid claims. It makes claims difficult to file, stalls payments, and denies claims initially in the hopes that the claimant will give up."

That may be a part of it, but how does that affect, for instance, price of the good offered to the public at large? We know that price has outstripped inflation. Is it because these unscrupulous insurers have fallen due to their own intransigence, causing a scarcity? No. Maybe one explanation for the astronomical cost of health care is the bandwagon effect. Some of the worst get away with what you describe, and it becomes an industry standard... meanwhile,the definition of the good itself is redefined.

The problem is information: we have too much of it.

Look, insurance is nothing more or less than a way to spread risk. Many people pay a small amount so that they are covered for a large expense that probably won't happen. It's like casino gambling, except you don't get to spend the money on anything fun. And, like gambling, the house can only exist if it takes in more than it pays out.

But because nobody wants to pay insurance for fun (unlike slot machines), the insurer can only get an exact, fixed amount from each customer. Problem is, it's a perfectly efficient market. Everyone in the industry knows exactly how much you have to charge in order to cover claims. So the profit margin is cut pretty far down. They play around with different packages of insurance, but there really is not too much they can do to improve the product. They invest the money -- but that's just more gambling. Most of their overhead is legally required, impossible to cut. The only possible way to make a profit is to cheat -- deny claims, force out the elderly, etc. So they do.

100 years ago, we didn't know as much. Some insurers really could set rates more intelligently than others and make a profit that way. Not any more. Information arbitrage is a short-term game, and it ran out decades ago.

I've said this before, but:

I don't buy that the problem with US health care stem from health insurers operating under the profit motive; non-profit health care providers (e.g. blue cross) frequently behave in very similar fashion, and other nations with UHC have providers that can operate for profit (e.g Netherlands).

That said, I also think (as I've said before) that HC hyperinflation stems from the private sector, and that von is wrong about his high spending in the public sector point.

An ethical insurance company makes a profit by smart underwriting. That is, it determines an appropriate price for an insurance policy, based on the risk of a payout.

OK. Stipulate that all insurance companies meet this definition of "ethical." The sytem still won't work. Part of "smart underwriting" is not insuring people who are likely to incur very large costs. (Or charging them impractically high premiums).

This is one reason why, IMO, insurance that lasts only a fixed period of time is not a good system. It's like the proverbial banker who lends you an umbrella and wants it back as soon as it starts raining. Once you face the risk of losing your policy through no fault of your own it's not insurance any more.

Your health, and your medical needs, are an ongoing part of your life, not a set of discrete and rare events, like car accidents.The insurance model we have today does a poor job of dealing with that.

Should clarify: I said that in a different thread (where von was weighing in).

"Part of "smart underwriting" is not insuring people who are likely to incur very large costs. (Or charging them impractically high premiums)."

Well, yes. Insurance as an approach to paying for something only really makes sense in an environment of genuine ignorance with regards to specific cases. That is to say, it works when you know general odds, but if you know which specific people are going to incure the costs, then insurance is no longer a reasonable approach; You're just screwing over the people who aren't going to incure the costs, to pay for charity to the people who will.

We're in a transitional period, where we're getting better and better at identifying who is going to get expensive to treat conditions, but haven't yet reached the point of being able to use that knowlege to inexpensively prevent them. Insurance is making less and less sense for medical care every year.

And that's the case no matter who's running the insurance program.

I'm not sure what mythago means by "smart underwriting" -- overseas, HICs can make a profit just by offering policies exclusively in bulk (to companies, etc), or just by working like hell to maximize revenue (even under a tightly regulated market).

The point is, other countries with UHC have health insurers that seek and make profit.

Look at the second to last paragraph in this link.

Arrrgh. Except for a few young healthy and well-off libertarians, nobody wants insurance; we want cost pooling.

As Megan McArdle (!) once wrote, nobody insures a house on fire. So if you have cancer, you can't leave your job, ever, under the insurance model.

However, the fire department will always come put out the fire, even if you've just moved into town and haven't paid any property taxes yet. They'll even come out if (to really stretch the analogy [not to mention mangling grammar]) your mobile home is on fire when you're just pulling into town. Under the cost pooling model, you take your sick body with you wherever you go in the world and the local pooling agency takes you in, because that's what they do.

Note: as early americans found out, private fire companies don't provide adequate service. The only entity that can establish cost pools that include everyone is the entity which represents everyone -- government.

Partisans never consider that their cure might be worse than the disease. Rescission and purging are both subject to fairly straightforward statutory fixes that don't involve a federal insurance company with rationed (see Eric's earlier post) benefits. Rescission can be eliminated by legislatively limiting the remedy (rescission is a legal remedy) to cases of actual and material fraud. As for purging high risk groups, the feds can do nationally what most states do for worker's compensation--create an assigned risk pool that all admitted insurers pay a fee to subsidize comp premiums for high risk employers.

Neither of these modest steps will be greeted enthusiastically by the progressive left. The only good that ever comes, comes from government. The left must have a federal insurance program. Unfortunately, when the left gets its way, all the immoralities that Publius discusses aren't going away any time soon. Mothers can look forward to laying awake at night worrying about how to get around some bureaucrat's denial of an MRI for her child that the doctor says he needs, or someone like me can be angry because only one type of cholesterol medication is approved by the feds, despite the fact that different people respond differently to different meds. Or, you can wait your turn for the dermatologist who can tell if you if that mole is malignant and whether it is too late to intervene surgically. But, if it comes from the government, you know it will be good.

Neither of these modest steps will be greeted enthusiastically by the progressive left.

And how, pray tell, do you think the insurance companies will greet these steps? How, further, will the GOP? I think you know the answer.

that don't involve a federal insurance company with rationed (see Eric's earlier post) benefits

Huh? Who is proposing rationed benefits

Mothers can look forward to laying awake at night worrying about how to get around some bureaucrat's denial of an MRI for her child that the doctor says he needs, or someone like me can be angry because only one type of cholesterol medication is approved by the feds, despite the fact that different people respond differently to different meds. Or, you can wait your turn for the dermatologist who can tell if you if that mole is malignant and whether it is too late to intervene surgically. But, if it comes from the government, you know it will be good.

How is this different now? Are you suggesting that private insurers will cover what the govt doesn't? If so, why not just keep the private insurance then? It would be your choice.

My usual devastating post on this topic seems to have disappeared.

To simplify it, Brett writes,

Insurance is making less and less sense for medical care every year.

But what actually makes less and less sense every year is our current model of insurance. Health insurance that tells you to f**k off, as Brett thinks it should, if you get cancer or diabetes is not insurance. Health insurance, to be a sensible way to protect against medical costs, must be structured in a way that guarantees its availability, at reasonable rates, for your whole life.

Of course this means you pay more when you're young and healthy. This is not becasue you are being cheated, or forced to subsidize others. It's because you are buying a renewal option along with the insurance coverage itself.

I don't think insurance should tell you to "f**k off", if you get an illness the insurance covers. But "insurance" is a form of risk pooling among people of equivalent risks; You take a 1 in 100 per year chance of incuring a cost of $40,000, and turn it into a predictable cost of $400 per year. Instead of 99 out of a hundred people getting off Scot free and the hundreth going broke.

It makes no sense to use "insurance" where the risk is known in advance to be near 100%, because the actuarially sound premium for a 100% chance of incuring a cost of $40,000 IS $40,000. Once you KNOW who is going to get the disease, and who isn't, insurance just isn't a reasonable way of paying for the costs.

Maybe cost pooling does make sense then. But insurance certainly doesn't.

Who is proposing rationed benefits

everybody. health care benefite must be rationed, because they're a scarce good. there is, at least potentially, a demand for far more health care services than any reasonable society could hope to generate; ergo, they have to be rationed somehow.

they're rationed right now, on a "whoever can pay cash" basis. that rationing scheme sucks ass. lots of other countries have far better ones we could emulate, and hopefully we will. but nobody sensible thinks we can do without some rationing scheme.

On the note of medicine for profit, I would like to take a moment to praise the health care system of Japan:

Many Americans (myself included) would like to see a UHC system that excels in medical innovation, and makes new procedures and treatments readily available. Japan has such a system.

One danger of such high use of HC is hyperinflation (like we have now); to minimize this danger, Japan simply regulated HC prices.

Of course, you need super-qualified bureaucrats to make this level of regulation work. (Yet another advantage for or friends in the east.)

Brett,

You seem to be talking about some sort of genetic underwriting. I don't think that's the issue with, say, rescission or pre-existing conditions. It's not the one I'm discussing, anyway.

The problem I'm talking about comes up when you contract an illness while insured, and then, when the policy expires (or even earlier in the rescission case) you can no longer get coverage, because your actuarially fair premium has become astronomical.

The reason it's astronomical is precisely that your policy was for a limited term, and you had no right to retain it. I think that problem is very important. One way to solve it is to have policies automatically include a renewal option. There is no reason this needs to be unfair, or charity, or anything else. It's just a feature that is, I believe, fairly common in lots of contracts.

Another is to provide a lifelong policy, so renewal issues don't arise. As a practical matter, the government is the only entity that can do this. Private companies could, I suppose, but you'd still need the government as a backstop in case of bankruptcy or other problems.

As long as you think of health insurance the same way you think of car insurance I don't think you're going to come to any reasonable conclusions. If getting sick makes you lose your policy, then it's not insurance.

"The reason it's astronomical is precisely that your policy was for a limited term, and you had no right to retain it. I think that problem is very important. One way to solve it is to have policies automatically include a renewal option."

That's an excellent idea. Such an excellent idea, as a matter of fact, that to the best of my knowlege, it's already implemented. At least, I've never heard of a health insurance policy where they can drop you at the end of the term, even if you want to renew, in order to stop paying for medical treatments.

In fact, my wife was 4 months pregnant when I got laid off last year, 8 months when I finally found a new job, with a new insurer. And yet, the delivery was covered. This was because I made the COBRA payments to keep the insurance up, and the new insurer took up the coverage, seamlessly, pre-existing conditions and all.

Now, those payments were a bear, destroyed my savings, and if you wanted to suggest that unemployment should cover COBRA, THAT would actually solve a very real problem...

"Now, those payments were a bear, destroyed my savings, and if you wanted to suggest that unemployment should cover COBRA, THAT would actually solve a very real problem..."

But wouldn't that be a case of jackbooted government thugs putting guns to the head of people and stealing their money, their property, purely to totally unfairly give it to other people who should be responsible for taking care of themselves? What right has the government to engage in such theft?

Brett,

And if the problem was not your wife's pregnancy but some sort of long-term illness that lasted after COBRA ended, or that prevented you from working regularly? Or if you had just graduated from college (no COBRA there). Or if your new job didn't include insurance? Or if your new insurer didn't cover pre-existing conditions? Or if you had your coverage rescinded because you overlooked something on your application? Or if you really wanted to go into business for yourself, or retire early, or...


You're right, Gary, of course.

On a theoretical basis, I can't come up with any justification for letting government do anything we won't let the private sector do. IOW, the government is just a protection racket.

As a practical matter, we're not getting rid of government any time soon. And it really offends me to see it badly run on it's own terms. So I really do distinguish between,

1. Things that government shouldn't do for moral reasons, but which are otherwise reasonable policy if you accept the legitimacy of government.

2. Things that government is not, even accepting it's legitimacy, supposed to be doing.

or

3. Things that don't make much sense for it to be doing even if they were legitimate under 1.

I'm simply pointing out that, if you accept the legitimacy of government, having them pay for COBRA for the unemployed would actually solve a very real health insurance related problem, without much in the way of unintended consequences. Doesn't mean that I DO accept the legitimacy of government.


Who's going to make your insurance company pay, Brett?

Disclaimer: I haven't had time to read this thread, except to glance at a comment now and then. So maybe I'm missing the emphasis or the nuance.

But "THAT would actually solve a very real problem" (Brett @ 1:50) sounds suspiciously like saying that all the other problems people see and have in relation to health care and health insurance aren't, well, real.

Got it.

"Who's going to make your insurance company pay, Brett?"

The fact that they want to continue having customers in the future?

"Who's going to make your insurance company pay, Brett?"

The fact that they want to continue having customers in the future?

Just the way it works for Ponzi schemes, no? All businesses are ethical because in the long run it pays, as we here in Bellmore World well know.

The rest of you out there in the Real World [tm] . . . tough luck.

Rescission can be eliminated by legislatively limiting the remedy (rescission is a legal remedy) to cases of actual and material fraud.

It could, except the lobby that wants to keep rescission pretty much as it is has millions and millions of dollars to spend to make it so, and the lobby that would like it changed as you describe is essentially powerless. But otherwise, sure, yeah.

Does anyone remember when insurance companies were calling the surviving next of kin to have them pay off the medical costs incurred even though they didn't have any obligation to do so?

The fact that they want to continue having customers in the future?

I could have predicted this answer. I almost did in my comment. You know you have a libertarian on the ropes when he starts explaining how businesses would never do a bad thing because it would hurt their reputation.

Geez, Brett. Do you really believe that? I mean as a general rule, not a policy that some companies actually do follow.

The fact that they want to continue having customers in the future?

this would require corporations to be good at long-term planning --- heck, at long-term thinking in general.

but if that were the case, the stock market would have no bubbles in it.

discuss.

Yeah, I believe that as a general rule for companies that trade in their reputation, which insurance companies do. General rules have occasional exceptions, but an insurance company which makes a habit of not paying off claims it's clearly required to goes out of business.

Companies which trade in their reputation are not, of course, all companies, and when transactions are structured to obscure who owes what, all bets are off.

Brett,

Some companies worry a lot about their reputations, others less so. But remember, the company is trying to make money. Having a good reputation helps, but so does not paying out money you can avoid paying. In other words, reputation does not override all other considerations. Yet too often we hear it cited as the reason "no one would ever do that." The fact is, companies "do that" all the time.

Just read about the shenanigans insurance companies, especially health insurance companies, pull. And why shouldn't they? If I get treated badly in a clothing store, well, there's lots of places to buy pants, and there's nothing urgent about it, so they do have a strong incentive to be cooperative. But the insurance situation is different for lots of reasons.

So no, I don't think we can take it as a general rule that companies place primary value on maintaining their reputations to the exclusion of other considerations. Nor can we take it that they view good customer relations as the main vehicle for doing that, as opposed to advertising, PR, etc.

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