15.2.17

FINDING THOSE MISSING MARKETS.

Now that Republicans have working majorities in the House and Senate and a president who ran on the Republican ticket, they can no longer pass symbolic repeals of the two lies for the price of one Patient Protection and Affordable Care act without having something substantive to take its place.  Here, from W. R. Mead, is the challenge.
The core problem with American health care is that our delivery system is antiquated, horribly regulated, and overpopulated by vested interests who have built sweetheart deals for themselves into the structure of the system. As a result, we pay much more for health care than we should or can. The result is a system that has all kinds of urgent, fix-me-now problems: access for the poor, affordability for the middle class, quality of care, and so on. But these cannot be fixed in the short term. The party that owns the status quo owns a wretched mess that it cannot actually fix no matter what it does.

What we need is the presence of mind to prioritize the long term, unglamorous work of installing incentives and reforms that reduce costs even as we take short term palliative methods to relieve distress. Obamacare was by and large though not totally a failure in this respect; we will see if the Republicans can do better.
For "incentives and reforms that reduce costs," think market-tested betterments.

Here's one approach, from the Independent Institute.  Getting from bureaucratic muddle to market tests is not going to be easy. "[T]he market in many states is dysfunctional — in part because we have so completely suppressed and distorted normal economic incentives. That means competitive outcomes in many states can’t serve as a reliable guide to public policy decisions."  Ultimately, breaking the bundle of job and insurance coverage facilitates market-tested betterments in labor markets and insurance markets alike.  "That would leave us with a system in which employers would have complete freedom of choice between the individual and group markets and complete freedom of choice of how their employees will receive tax relief."

John "Grumpy Economist" Cochrane also has thoughts.
It’s wiser to start with a vision of the destination. In an ideal America, health insurance is individual, portable, and guaranteed renewable — it includes the right to continue coverage, with no increase in cost. It even includes the right to transfer to a comparable plan at any other insurer. Insurance companies pay each other for these transfers, and then compete for sick as well as healthy patients. The right to continue coverage is separate from the coverage itself. You can get the right to buy gold coverage with a silver plan.

Most Americans sign up as they graduate from high school, get a drivers’ license, register to vote, or start a first job. Young healthy people might choose bare-bones catastrophic coverage, but the right to step up to a more generous plan later. Nobody’s premiums subsidize others, so such insurance is cheap.


People keep their individual plans as they go to school, get and change jobs or move around.  Employers may contribute to these individual plans. If employers offer group coverage, people keep the right to individual plans later.

Health insurance then follows people from job to job, state to state, in and out of marriage, just like car, home and life insurance, and 401(k) savings.

But health insurance is not a payment plan for small expenses, as home insurance does not “pay for” lightbulbs. Insurance protects your wallet against large, unexpected expenses. People pay for most regular care the same way they pay for cars, homes, and TVs — though likewise helped to do so with health savings and health credit accounts to smooth large expenses over time. Doctors don’t spend half their time filling out forms, and there are no longer two and a half claims processors for every doctor.
That is, insurance looks more like catastrophic coverage, which is what people carry on their houses and motor vehicles.  Market-tested betterments might be the way to go.
Big cost control comes from the only reliable source — rigorous supply competition. The minute someone tries to charge too much, new doctors, clinics, hospitals, and models of care spring up competing for the customer’s dollar. “Access” to health care comes like anything else, from your checkbook and intensely competitive businesses jockeying for it.

What about those who can’t afford even this much? Nobody dies in the street. There is also a robust system of government and charity care for the poor, indigent, those who have fallen between the cracks, and victims of rare expensive diseases. For most, this simply means a voucher or tax credit to buy private insurance.

But — a central principle — the government no longer massively screws up the health insurance and health care arrangements of the majority of Americans, who can afford houses, cars, and smartphones, and therefore health care, in order to help the unfortunate. We help people forthrightly, with taxes and on-budget spending.

Why do we not have this world? Because it was regulated out of existence, and now is simply illegal. 
The original sin of American health insurance is the tax deduction for employer-provided group plans — but not, to this day, for employer contributions to portable individual insurance. “Insurance” then became a payment plan, to maximize the tax deduction, and then horrendously inefficient as people were no longer spending their own money.
The best thing for the government to do might be to go away, or, as the Independent Institute post suggests, back away slowly.
Worse, nobody who hopes to get a job with benefits then buys long-term individual insurance. This provision alone pretty much created the preexisting conditions problem.

Patch, patch. To address preexisting conditions, the government mandated that insurers must sell insurance to everyone at the same price. Insurance companies will then try to avoid sick people, so coverage must be highly regulated. Healthy people won’t buy it, so it must be nearly impossible for people to just pay out of pocket. Obamacare added the individual mandate.

Cross-subsidies are a second original sin. Our government doesn’t like taxing and spending on budget where we can see it. So it forces others to pay: It forces employers to provide health insurance. It forces hospitals to provide free care. It low-balls Medicare and Medicaid reimbursement.

The big problem: These patches and cross-subsidies cannot stand competition. Yet without supply competition, costs increase, the number of people needing subsidized care rises, and around we go.

The Republican plans now circulating make progress. Rep. Tom Price’s plan ties protection from preexisting conditions to continuous coverage. His and Speaker Paul Ryan’s “Better Way” plan move toward premium support for private insurance, and greater portability.

So far, though, the announced plans do not really overturn the original sins. But those plans were crafted in a different political landscape. We can now go big, and really fix the government-induced health care mess in a durable way.
We'll also know when the insurance markets are working. When we stop seeing statements from the insurer that read like a cargo manifest, and when invented discounts from invented prices go away.
I visited my dermatologist last month. I spent 20 minutes with a resident, and 5 minutes with the dermatologist. The bill was $1335. An “insurance adjustment” knocked off $779. Insurance paid $438. I paid $118. The game goes on. We start with a fake sticker price to negotiate with the uninsured and to declare uncompensated care. But you cannot just walk in and pay as you can for anything else. Even $438 includes a huge cross-subsidy.

We’ll know we’ve fixed health care when we don’t get bills like this.
Sometimes, we can walk in.  Perhaps, though, we get hit with the $1335.  Or perhaps a counselor gives us a financial proctology, and we pay $438 or $125 or whatever a computer random number generator kicks out.

Medical savings accounts, catastrophic coverage, interstate sales of insurance, portability of insurance, greater commercial freedom for purveyors of pills and procedures.  Stat!

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