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Tag: Insurance

A Health Plan for Rugged Individualists

In his “The Great American Health Care Divide,” Brad DeLong laments the great ideological divide that has so long prevented this great country from developing a coherent national health policy.

I am glad to have Brad’s company, because I have whined about the same divide for several decades now, as evidenced by my “Turning Our Gaze from Bread and Circus Games,” penned in 1995 and “Is there hope for the uninsured?

Finally, after a nice visit with my friends at the Cato Institute and reading the often amazing commentary on John Goodman’s NCPA blog , I was moved to pen a post on The New York Times blog Economix entitled “Social Solidarity vs. Rugged Individualism.” It was inspired by the often hysterical description of the Affordable Care Act (ACA) as a government takeover of U.S. health care or a trampling on the freedom of Americans, as in mandating individuals to have minimally adequate health insurance, lest they become freeloaders on the system.

The basic idea of my proposal is simple.

In 2009, Paul Starr had warned Democrats of a potential voter backlash against the individual mandate and proposed instead a nudging arrangement. Uninsured Americans would be auto-enrolled into health plan, if they chose not to select one, but could opt out of it with the proviso that for the next five years they could then not buy insurance through the insurance exchanges established by the ACA at community-rated premiums, and potentially with federal subsidies.

My proposal is to make that a lifetime exclusion. An individual would have to choose one or the other system by age 25. Should individuals opting out fall seriously ill and not have the means to pay for their care, we would not let them die, of course, but to the extent possible we would cover their full bill – possibly at charges — by expropriating any assets they might have and garnishing any income above the federal poverty level they subsequently might earn. Something like that.

As Jay Gaskill’s somewhat opaque reaction in “RUGGED INDIVIDUALLISM is NOT the Essential Value of Freedom” suggests, people who oppose the ACA as trampling on their freedom are not comfortable with my prescription, which does not at all surprise me.

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Health Insurance is Wasted on the Young

There has never been a time in my life when I’ve owed a lot of money. That certainly has changed these past two years as my husband and myself find ourselves with medical debt that we may never pay off . As you can guess, we have no health insurance – we can’t afford it and even if we did have an extra $650 a month we couldn’t obtain it due to our pre-existing conditions.

Briefly, I had emergency surgery to remove a cyst on my ovary in 2010, a diagnosis of an auto-immune disease in 2011 and two bladder cancer surgeries in 2012. My husband has had high blood pressure for over 25 years due to a heart defect discovered in his 30’s.

My husband and I live very simple lives and have little debt. For the past 18 years we’ve been self-employed, owning a retail music store, and for many of those years I worked for other companies. Some offered medical coverage, some did not. And for some of those years I was able to offer medical coverage for our few employees which also covered my husband and myself. The group coverage was minimal and started out being affordable but with increases it was impossible to afford for long. I tried catastrophic coverage but that was almost as expensive as regular coverage but with a higher deductible. Of course, neither my husband nor I needed the coverage when we had it! They say youth is wasted on the young. I say health insurance is wasted on the young!

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White House Delays Employer Mandate-But What About Small Employers?

The administration suddenly announced last night that the requirement that all employers with 50 or more workers offer health insurance has been delayed until 2015.

If an employer with 50 or more workers did not provide health insurance to their full time workers in 2014, they would have been subject to a fine of $2,000 per worker. The employer would have also been subject to a $3,000 fine for each worker that went to the insurance exchanges if the employer package was not affordable.

Why did the administration delay the large employer mandate?

Because many employers have been in the early stages of planning to cut back the hours of workers in order to avoid having to offer insurance to those customarily considered part time, those who work at least the 30 hours per week the law established for defining a full time worker––and they haven’t been bashful in telling their employees why. In addition, there has been growing evidence that some employers were holding back on hiring in order to avoid more of the mandate costs at a time of high unemployment.

While the administration cited employer administration issues with mandate reporting as the reason for the delay, the bottom line is that the Affordable Care Act (“Obamacare”) was looking like it was about to be successfully labeled a job killer and the administration wanted to avoid that.

You also have to wonder if all of the reporting challenges were just with employers or was the administration also having trouble with the complex employer mandate information systems they will ultimately have to build?

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Bending the Cost Curve with Reference Pricing


Mitt Romney’s/Paul Ryan’s premium support/voucher plan was heavily derided during the dark days of Campaign 2012, but the devil was always more in the details than the theory. While the re-election of President Obama left premium support dead on the Medicare level, health insurers are increasingly turning to the ideas that drove it – choice, competition, and the power of a (carefully regulated) market – to address high costs on the procedural level. Call it the micro-voucherization of health insurance.

This is known by wonks as reference pricing, and its recent results in California are promising: the costs of hip and knee replacements fell by 19%, with no attendant decrease in quality. Using reference pricing is an assault on the status quo that holds the promise of “bending the curve” in a meaningful way, but it faces technical and political concerns that may consign it to the graveyard of promising-but-unfulfilled ideas.

Broadly-speaking, reference pricing is the act of offering a set amount of money for the purchase of a good, where the reference is an amount that can reasonably said to offer meaningful coverage for that good. Sometimes, reference pricing is focused on a given procedure – what I’ll refer to as “inputs-oriented reference pricing”; other times, a given outcome, or “outputs-based reference pricing.”

That’s pretty vague, so let’s use the colonoscopy procedure (which has recently received a lot of attention thanks to an informative New York Times article) to help color this in. The inputs-oriented approach would see the payer asking: given the choice to have a colonoscopy – a procedure which varies wildly in cost without varying wildly in quality – what’s a reasonable price to pay? It would decide this based on some combination of price, quality, and geography, and would inform consumers of its spending cap.

Say it finds that most of its insured population can reasonably access a high-quality colonoscopy for $10,000; if a consumer choose provider that charges $15,000, he or she would pay the $5,000 difference out of pocket. Choice is preserved, but at a cost. The simple chart above shows how this may work.

But, if you read the colonoscopy article, you may be asking a separate question: why pay for a colonoscopy at all?

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The Health Insurance Shell Game

The insurance industry had a rocky start a century ago. It was clear that there were untoward events that could befall any of us with catastrophic results, from the incineration of a home to the loss of the ability to maintain gainful employment from injury or death.

Insurance offers a mechanism to share this risk. The stumbling block was the possibility that the insured might burn down their home to collect. Once it was realized that “moral hazard” could be held at bay by investigating for fraud, there was little to hinder the growth of an industry designed to serve our risk adverse proclivities. Almost every adult has some experience valuing the expense of sharing risk for a variety of hazards. After all, automobile insurance is generally compulsory and most of us are familiar with notions of deductibles and riders when it comes to homeowners’ policies. The possibilities are not an abstraction; we can envision the house or its contents damaged, destroyed, or stolen leaving us bereft. What would reducing that prospect be worth to us? As is true for many value-based decisions, the answer brings a mix of reason and intuition (1)that can produce surprising outcomes (2).

Health insurance is even more complex, and has always been so. The industrial revolution saw the development of “Friendly Societies” in Britain and the Prussian “Krankenkassen”. These were trade-based institutions that allowed advantaged workers to purchase insurance to provide “sick pay” but there was little else. The sea change was the Prussian “welfare monarchy” (3), an extensive insurance scheme that encompassed universal health care and a complex approach to disability insurance (4). Modifications of the Prussian scheme spread across the industrial world. It made landfall in the United States in time for the presidential election of 1912. Only one component took root in America: Workers’ Compensation Insurance but not as a national insurance scheme. It fell to the each state to regulate an insurance scheme to compensate injured workers for lost income and medical expenses.

This set the stage for state-based regulation of employer-sponsored private health insurance schemes going forward. But forward momentum appears anything but swift or linear in a country that trusted physicians to charge “commensurate with the services rendered and the patient’s ability to pay” (AMA Code of Medical Ethics, 1957.) Health Insurance as both an industry and a product has become a frustrating web of inefficiency and confusion.

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The Oregon Experiment Revisited

It has been a couple of weeks since the landmark Oregon Experiment paper came out, and the buzz around it has subsided.  So what now?  First, with passage of time, I think it is worth reflecting on what worked in Oregon.  Second, we should take a step back, and recognize that what Oregon really exposed is that health insurance is a small part of a much bigger story about health in general.  This bigger story is one we can’t continue to ignore.

So let’s talk quickly about what worked in Oregon.  Health insurance, when properly framed as insurance (i.e. protection against high, unpredictable costs) works because it protects people from financial catastrophe.  The notion that Americans go bankrupt because they get cancer is awful and inexcusable, and it should not happen. We are a better, more generous country than that.  We should ensure that everyone has access to insurance that protects against financial catastrophe.  Whether we want the government (i.e. Medicaid, Medicare) or private companies to administer that insurance is a debate worth having.  Insurance works for cars and homes, and the Oregon experiment makes it clear that insurance works in healthcare.  No surprise.

The far more interesting lesson from Oregon is that we should not oversell the value of health insurance to improving people’s health.  While health insurance improves access to healthcare services (modestly), its impact on health is surprisingly and disappointingly small.  There are two reasons why this is the case.  The first is that not having insurance doesn’t actually mean not having any access to healthcare.  We care for the uninsured and provide people life-saving treatments when they need it, irrespective of their ability to pay.  Sure – we then stick them with crazy bills and bankrupt them – but we generally do enough to help them stay alive.  Yes, there’s plenty of evidence that the uninsured forego needed healthcare services and the consequences of being uninsured are not just financial.  They have health consequences as well.  But, claims like 50,000 Americans die each year because of a lack of health insurance? The data from Oregon should make us a little more skeptical about claims like that.

So what really matters?  Right now, we are pouring $2.8 trillion into healthcare services while failing to deliver the basics.  To borrow a well-known phrase, our healthcare system is perfectly designed to produce the outcomes we get – and here’s what we get: mediocre care and lousy outcomes at high prices.  Great.

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Think NCAA Athletes Shouldn’t be Paid? What the Kevin Ware Story Says About the Risks of College Sports


In many ways, it had been an exemplary few days for the NCAA and its signature basketball tournament—a weekend that put the madness back in March.

On Friday, Michigan and star guard Trey Burke completed an epic comeback over Kansas. On Saturday, Cinderella team Wichita State crashed the Final Four.

But for many people watching the Louisville-Duke game unfold, a disturbing injury to Louisville guard Kevin Ware illustrated a different sort of madness: the continued lack of compensation for the players who make the tournament so special.

“Pray for [Ware],” columnist Dave Zirin tweeted. “There is no safety-net for the injured NCAA athlete.”

Injury worst seen on TV

Ware’s broken leg—”about the most gruesome injury I’ve seen in a basketball game,” bemoaned analyst Seth Davis—came on a routine play, as he landed awkwardly after trying to block a shot by Duke’s Tyler Thornton.

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Why Only Business Can Save America From Health Care

For a large and growing number of us with meager or no coverage, health care is the ultimate “gotcha.” Events conspire, we receive care and then are on the hook for a car- or house-sized bill. There are few alternatives except going without or going broke.

Steven Brill’s recent Time cover story clearly detailed the predatory health care pricing that has been ruinous for many rank-and-file Americans. In Brill’s report, a key mechanism, the hospital chargemaster, with pricing “devoid of any calculation related to cost,” facilitated US health care’s rise to become the nation’s largest and wealthiest industry. His recommendations, like Medicare for all with price controls, seem sensible and compelling.But efforts to implement Brill’s ideas, on their own, would likely fail, just as many others have, because he does not fully acknowledge the deeper roots of health care’s power.

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Can Health Care Transparency Make A Difference?

There’s been a lot of discussion of transparency in health care recently, e.g., a USA Today op-ed and a counterpoint by Paul Ginsburg. The appeal of transparency is obvious. As movingly documented by Steven Brill in Time, prices are high and often differ quite substantially, even across close by providers. However, we don’t know the prices for the health care that we consume, and it’s extremely difficult to find out what these things cost (e.g., this recent study in JAMA).

While the appeal of transparency is obvious, it’s important to realize that buying health care is not like buying milk at the grocery store. A key factor is health insurance. Health insurance is very important — people need to be insured against the catastrophic expenses that can occur with serious illness. Thus people with high health care expenses won’t be exposed to most of those expenses (and shouldn’t) and therefore will have no reason to respond to information about health care prices.

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Rob’s New Economics of Practice Management

It has always been my assumption that my new practice will be as “digital” as possible. No, I am not going into urology, I am talking about computers. [Waiting for the chuckles to subside]

For at least ten years, I’ve used a digital EKG and spirometer that integrated with our medical record system, taking the data and storing it as meaningful numbers, not just pictures of squiggly lines (which is how EKG’s and spirometry reports appear to most folks). Since this has been obvious from the early EMR days, the interfaces between medical devices and EMR systems has been a given. I never considered any other way of doing these studies, and never considered using them without a robust interface.

Imagine my surprise when I was informed that my EMR manufacturer would charge me $750 to allow it’s system to interface with a device from their list of “approved devices.” Now, they do “discount” the second interface to $500, and then take a measly $250 for each additional device I want to integrate, so I guess I shouldn’t complain. Yet I couldn’t walk away from this news without feeling like I had been gouged.

Gouging is the practice of charging extra for someone for something they have no choice but to get. I need a lab interface, and the EMR vendor (not just mine, all of the major EMR vendors do it) charges an interface fee to the lab company, despite the fact that the interface has been done thousands of times and undoubtedly has a very well-worn implementation path. This one doesn’t hurt me personally, as it is the lab company (that faceless corporate entity) that must dole out the cash to a third-party to do business with me.

Doing construction in my office, I constantly worry about being gouged. When the original estimate of the cost of construction is again superseded because of an unforeseen problem with the ductwork, I am at the mercy of the builder. Fortunately, I think I found a construction company with integrity. Perhaps I am too ignorant to know I am being overcharged, but I would rather assume better of my builders (who I’ve grown to like).

Yet thinking about gouging ultimately brings me back to the whole purpose of what I am doing with my new practice, and what drove me away from the health care system everyone is so fond of. If there is anywhere in life where people get gouged or are in constant fear of gouging, it is in health care. Continue reading…

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