With many subjects under the sun that might be deemed topical, my familiarity with the important minutiae is often minimal. Such is the case with health care policy and the plumbing that makes it such a complicated issue. Seeking to deal with that knowledge shortfall, I picked up Priceless by John Goodman (2012). Goodman is a health economist who espouses a libertarian / free market world view. And while I cannot tell you that his perspective on everything is necessarily accurate, here are some of the details and ideas that I think matter upon reading his book:
-In seeking to create a system with no out-of-pocket expenses for patients, incentives are skewed to overuse the system without much concern for shopping around to find the best service at the lowest cost.
-Having everyone pay the same premium incentivizes the healthy to go without insurance until they are actually in need (as flat premiums create a redistributive effect, where the sick are paying premiums lower than the expected cost of their health care needs, and vice versa for the healthy). And those that are uninsured, generally, are more likely to use emergency rooms, which increases overall costs.
-The world of medical care is largely a system of unpriced services. It is not a market process.
-To quote: “the field has been completely corrupted by the idea that (a) patients should never be in a position to choose between health benefits and monetary cost, (b) doctors shouldn’t have to think about such tradeoffs either, (c) to insulate the patient from having to choose between healthcare and other uses of money, third party payers should pay all the medical bills, and (d) since no one else is going to think about what anything costs, the third-party payer is the only entity left to decide which services are worthwhile and which ones aren’t.”
-There is a supply problem when it comes to care. Grand policy ideas may lead to more people with coverage, but it is not suddenly going to create more doctors to treat them.
-Higher fees often lead to greater access to care. Thus, public programs that don’t allow patients to supplement coverage with out-of-pocket payments (like Medicaid and CHIP) end up decreasing a patient’s ability to see the doctor that he or she needs.
-Where public programs have very specific protocols and guidelines for treatments, there is no incentive / financial benefit to doctors for going outside those boundaries and providing care which is more cost-effective.
-With community rating (same premium for all), insurance is geared to structure its products to encourage only the healthy (by not including certain doctors and specialists).
-Congress favors employer insurance (tax deductible) over individual insurance (deduction only on amount in excess of 7.5% of AGI), meaning it is less portable when people have to move and change jobs. This is where the problem of preexisting conditions often becomes very obvious.
-Data does seem to suggest that every additional dollar put towards public insurance crowds out the private variety.
Goodman spends a bit of time analyzing the provisions of the Patient Protection and Affordable Care Act (“Obamacare”) as well:
-The main way that the ACA plans to lower costs (specifically with respect to Medicare) is by implementing price controls on providers. But, as Goodman notes, the shifting of costs back to doctors is not the same as actually controlling them. If anything, it probably leads to fewer doctors accepting Medicare as a form of payment and making accessibility more difficult. This reality is also why the pro-ACA faction says costs will go down, but perhaps chooses not to recognize that it will take quality and access with it. So, public insurance will provide less, while private insurance will become more expensive.
-Theoretically, everyone will be required to have insurance. But fines associated with going without will be small enough to make it worthwhile to hold off until there is an actual need. Employers will also have to provide plans that meet certain minimum thresholds. But, again, the fines will likely be smaller than the cost of meeting the requirements. So, it seems plausible than many folks will lose their coverage through work.
-There will be a whole host of new taxes to pay for the program (on medical devices, drugs, Cadillac plans, investment income, and raising the AGI threshold for individual insurance), which will add to the costs for individuals.
After reading the book, I don’t have any grand conclusions, except to say that implementation of the best of intentions does not always translate to ideal outcomes. And I suspect that that might be the case with the new law. By coincidence, a blog written by health economists with some left-leaning tendencies also recently reviewed the book chapter-by-chapter, finding much to take issue with. If you’re interested, follow the link.
