Winged Wheeler

I use the term "healthcare" advisedly as health care and health insurance are two entirely different things.

It might be interesting to discuss the economics of the health reform issues being put out by the politicos and the interest groups. Please note, if we stray off the path of the economics here, it will swiftly get political and this thread will be closed.

Anyway, here is an op ed from the WSJ last week:

The Wall Street Journal Online - WSJ.com Log In

For non-subscribers:

The health-care debate continues. We have now heard from nearly all the politicians, experts and interested parties: doctors, drug makers, hospitals, insurance companies, even constitutional lawyers (though not, significantly, from trial lawyers, who know full well "change" is not coming to their practices). Here is how one humble economist sees some of the main arguments, which I have paraphrased below:

- "The American people overwhelmingly favor reform."
If you ask whether people would be happier if somebody else paid their medical bills, they generally say yes. But surveys on consumers' satisfaction with their quality of care show overwhelming support for the continuation of the present arrangement. The best proof of this is the belated recognition by the proponents of health-care reform that they need to promise people that they can keep what they have now.

- "The cost of health care rises two to three times as fast as inflation."
That's like comparing the price of hamburger 30 years ago with the price of filet mignon today and calling the difference inflation. Or the price of a 19-inch, black-and-white TV 30 years ago with the price of a 50-inch HDTV today. The improvements in medical care are even more dramatic, leading to longer life, less pain, fewer exploratory surgeries and miracle drugs. Of course the research, the equipment and the training that produce these improvements don't come cheap.

- "Health care represents a rising proportion of our income."
That's not only true but perfectly natural. Quality health care is a discretionary, income-elastic expense -- i.e. the richer a society, the larger the proportion of income that is spent on it. (Poor societies have to spend income gains on food and other necessities.) Consider the alternatives. Would we feel better about ourselves if we skimped on our family's health care and spent the money on liquor, gambling, night clubs or a third television set?

- "Shifting funds from health care to education would make for a better society."
These two services have a lot in common, including steadily rising cost. What is curious is that this rise in education costs is deemed by the liberal establishment smart and farsighted while the rise in health-care costs is a curse to be stopped at any cost. What is curiouser still is that in education, where they always advocate more "investment," past increases have gone hand-in-hand with demonstrably deteriorating outcomes. The rising cost in health care has been accompanied by clearly superior results. Thus we would shift dollars from where they do a lot of good to an area where they don't.

- "Forty-five million people in the U.S. are uninsured."
Even if this were true (many dispute it) should we risk destroying a system that works for the vast majority to help 15% of our population?

- "The cost of treating the 45 million uninsured is shifted to the rest of us."
So on Monday, Wednesday and Friday we are harangued about the 45 million people lacking medical care, and on Tuesday and Thursday we are told we already pay for that care. Left-wing reformers think that if they split the two arguments we are too stupid to notice the contradiction. Furthermore, if cost shifting is bad, wait for the Mother of all Cost Shifting when suppliers have to overcharge the private plans to compensate for the depressed prices forced on them by the public plan.

- "A universal plan will reduce the cost of health care."
Think a moment. Suppose you are in an apple market with 100 buyers and 100 sellers every day and apples sell for $1 a pound. Suddenly one day 120 buyers show up. Will the price of the apples go up or down?

- "U.S. companies are at a disadvantage against foreign competitors who don't have to pay their employees' health insurance."
This would be true if the funds for health care in those countries fell from the sky. As it is, employees in those countries pay for their health care in much higher income taxes, sales or value-added taxes, gasoline taxes (think $8 a gallon at the pump) and in many other ways, effectively reducing their take-home pay and living standards. And isn't it odd that the same people who want to lift this burden from businesses that provide health benefits also (again, on alternate days) want to impose this burden on the other firms that do not offer this benefit. What about the international competitiveness of these companies?

- "If you like your current plan you can keep it."
In other words, you can keep your current plan if it (and the company offering it) is still around. This is not a trivial qualification. Proponents have clearly learned from the HillaryCare debacle in the 1990s that radical transformation does not sell. What we have instead is what came to be dubbed "salami tactics" in postwar Eastern Europe where Communist leaders took away freedoms one at a time to minimize resistance and obscure the ultimate goal. If nothing else, a century of vain attempts to break the Post Office monopoly should teach us how welcoming Congress is to competition to one of its high-cost, inefficient wards.

- "Congress will be strictly neutral between the public and private plans."
Nonsense. Congress has a hundred ways to help its creation hide costs, from squeezing suppliers to hidden subsidies (think Amtrak). And it has even more ways to bankrupt private plans. One way is to mandate ever more exotic and expensive coverage (think hair transplants or sex-change operations). Another is by limiting and averaging premiums and outlawing advertising. And if all else fails Congress can always resort to tax audits and public harassment of executives -- all in the name of "leveling the playing field." Then, in the end, the triumphal announcement: "The private system has failed."

- "Decisions will still be made by doctors and patients and the system won't be politicized."
Fat chance. Funding conflicts between mental health and gynecology will be based on which pressure group offers the richer bribe or appears more politically correct. The closing (or opening) of a hospital will be based not on need but which subcommittee chairman's district the hospital is in. Imagine the centralization of all medical research in the country in the brand new Robert Byrd Medical Center in Morgantown, W.Va. You get the idea.

- "We need a public plan to keep the private plans honest."
The 1,500 or so private plans don't produce enough competition? Making it 1,501 will do the trick? But then why stop there? Eating is even more important than health care, so shouldn't we have government-run supermarkets "to keep the private ones honest"? After all, supermarkets clearly put profits ahead of feeding people. And we can't run around naked, so we should have government-run clothing stores to keep the private ones honest. And shelter is just as important, so we should start public housing to keep private builders honest. Oops, we already have that. And that is exactly the point. Think of everything you know about public housing, the image the term conjures up in your mind. If you like public housing you will love public health care.

Mr. Newman is an economist and retired business executive.

FighterHayabusa

Let me first say I'm not in favor of public options expanding (since the US already has 2 public options). But I see people arguing this issues from two extreme ends when the solution lies somewhere in the middle, or arguing about the Canadian "Straw Man" single payer when it's virtually impossible for us to quarter our health care spending per capita, force single payer, and end up with that system. The only good thing coming out of this is Republicans being amenable to hyper-regulation of the health insurance market, which in concert with tort reform and shifting the actual cost of health care back to the consumer would go a long way toward fixing this system.

- "Forty-five million people in the U.S. are uninsured."
Even if this were true (many dispute it) should we risk destroying a system that works for the vast majority to help 15% of our population?

Our system would not be destroyed. This is a slippery slope fallacy. There are no bills with any chance of passing that would create Canadian single payer or British governemnt owned health care. 46% of Americans are already on a public option, and it has not destroyed the private market. Yes you have to be old or poor, but those are two examples of how you can ensure the public option doesn't kill the private insurance market. Another is buy-ups, for example public option you have to share a room, private gets you your own room. Really, all you have to do is make sure a public option sucks as much as conservatives say it will and private options will stay alive and well. There are also provisions that prohibit companies from dropping their private insurance. I don't think we need a public option, but saying it will kill private insurance is a scare tactic, not a real argument. Yes, private insurance may look different, but dead? No.


- "A universal plan will reduce the cost of health care."
Actually single payer systems do slow the RISING of costs of health care simply because it's very hard to raise people's taxes en masse to improve the system. In Canada, people are older now and there are less people paying into than taking out of it when it was first introduced. Something had to give, thus the rationing. If Canadians spent as much per capita as the US, we probably wouldn't be able to use it as the health care straw man. Take Taiwan, which much more recently introduced single payer. People were already used to paying more, so the single payer costs are higher, and it is successful. For a while a while anyway, until they need to raise taxes and/or reduce care.

The bills in congress will likely raise the cost by not really addressing the core issues of consumers not really being aware of how much their health care really costs. In a way, single payer is more free market than the system we have now since single payers are a lot more aware of their higher tax bill than we are of the nickels and dimes extra we pay for everything as businesses pass the cost of employee healthcare back to the consumer.

Canadians want better care, but they don't want to pay more for it as a group. If Canada didn't OUTLAW private insurance (the only reason there are no private insurance competitors) they'd be much better off. There are 2 Supreme Court decisions that have just overturned laws that there can be no private insurance in Canada, health care there is about to get very interesting as well.

- "Congress will be strictly neutral between the public and private plans."

Again, slippery slope fallacy. Fedex and UPS may not be able to mail a letter for 50 cents, but they can provide far better customer service, and do a better job at moving bigger packages with sweet tracking systems. This could be analogous to health care where we make sure the public option sucks so you only go on it when you have to. I never stand in line at the DMV for example, I gladly pay the extra 4 bucks at a private company to do everything I can do at the DMV with better service and no wait.

- "Decisions will still be made by doctors and patients and the system won't be politicized."
Your (his) answer assumes government ownership of hospitals. Even in Canada doctors and hospitals are still private. Single payer means exactly that, only 1 insurance company, the government. Everything else is still private, and why are we even discussing this since it's so unlikely? There are more than just the two worst industrialized nation's health care systems to compare to. Switzerland or the Netherlands or Sweden or France are far better comparisons of what the US would be likely to look like, only ours would be better because it will cost at least twice as much. It won't likely be twice as good, mind you.

THERE IS NO SINGLE PAYER BILL WITH A HOPE OF PASSING!!!!

Winged Wheeler

Thanks for replying to that post--I thought it was a good article but it didn't generate any heat. You make a couple of good points and a couple with which I disagree. I'll try to get back and go over them all later.

One quick thing though. Fedex and UPS are prohibited by law from delivering the mail. They can be contractors for the USPS, but that organization has a monopoly given to it by the federal government. If you got rid of this barrier to competition I'll bet FDX and UPS, or some local outfits, would provide this service efficiently and cheaper than we have it now.

WW

chignutsak

I understand the point you are trying to make but there's no way that Fed Ex and UPS could pick up the slack. They are not set up to hit every residence, every day, like the USPS does. Their business model doesn't even come close to allowing that. There's really no money in delivering coupons and pizza flyers, not enough to justify a UPS guy's $30+ an hour.

FighterHayabusa

This is very interesting. I'd never really looked into this before. Back in the 1800s when this law was written it seemed logical and noble - ensure poor rural Americans have access to affordable mail delivery by making profit from the city dwellers to compensate for the losses to deliver to rural customers. Seems a little outdated at this point with all of the alternatives rural customers can use, yet the the rural mail customer is still used as the primary argument against deregulation.

RXS676

I think this ignores the proverbial "Law of Unintended Consequences." A law doesn't have to specifically require something for it to happen.

Suppose I run a small business. I would like to provide health insurance to my employees. I can't afford a plan that covers chiropractic care, acupuncture, psychiatric counseling, or has a $5 prescription copayment. But I would like to offer a basic plan that covers hospitalization and regular care, and perhaps a $20 prescription copayment.

Now we have a government that will have the authority to limit out-of-pocket costs, and require certain things to be covered. Necessarily, a plan that has $5 copayments and a $100 deductible is more expensive that a plan that has $25 copayments and a $1000 deductible. If the government allows only a certain maximum out-of-pocket cost, (this is a key provision of the latest proposal) the plans that cover that will be more expensive. I may decide that I can't afford the plan with richer benefits, but the government doesn't allow me to offer a a plan that I can afford. So I drop coverage for my employees.

So much for being able to keep the plan you have if you are happy with it.

Or suppose I am young and healthy. My employer offers one plan with better benefits that costs $50 per pay period, and another one with more basic benefits that is free. I may decide the free plan is better for me. But if it doesn't cover what the government decides is a minimum level of benefits, it won't be available to me.

Maybe I'll decide to go without to save the $50 a pay period. Many of those 50 million uninsured are young people who make that decision. Or maybe the government will require me to take the more expensive plan, or to pay a penalty or tax. So much for increasing my choice and keeping costs low.

The result could be even more uninsured, and even more people in a government-run or government-sponsored pool. This is the slippery slope to a single-payer system.

Medicare/Medicaid are NOT examples of effective government-paid healthcare. Most healthcare institutions lose money on these patients (witness the fact that more and more doctors are refusing to accept Medicare and Medicaid patients). If everyone in the country was on medicare, and all hospitals and physicians were reimbursed for all patient care at Medicare rates, they'd go bankrupt. Many, many hospitals are already in dire straits precisely because medicare rates have not kept up with actual costs, and have been cut through various budget proposals and "reform" acts over the years.

More people in a "pool" that pays Medicare rates will put further strain on healthcare providers, increasing the calls for a single-payer system.

Interestingly, one of the latest "compromise" proposals would require "exchanges" to negotiate with healthcare providers (just as insurance companies currently do) rather than pay medicare rates, as earlier proposals of a "government option" were going to do. In that case, it seems they wouldn't be able to offer insurance prices any better than what an individual could get from an insurance company now. And since insurance companies would be charging higher rates to cover the higher level of benefits that the government will require, there wouldn't be much option for someone without group coverage.

Unless of course the government subsidizes the exchanges. Which runs counter to the argument that a public plan would compete on a level playing field with private insurers, and would increase the government's cost. Subsidies to a public option, which make it harder for private insurance to compete, would be another slippery slope to a single-payer system.

FighterHayabusa

I'm not ignoring the unintended consequences, I'm just stating that it's not a FACT that we WILL 100% be a single payer system, and arguments that say we shouldn't do anything because we will look like Canada are fallacious and misleading and ignore the problems with the status quo.

So I drop coverage for my employees.

What if you can't drop it? Yes some small businesses may drop health care, but others won't be allowed to.

So much for being able to keep the plan you have if you are happy with it.
You should find someone else to argue this point with since I make no such claim. I'm sure they've thought of this somewhere in the 1000s of pages in at least 1 of the 4 competing bills, though. I don't care so I'm not going to look it up.

This is the slippery slope to a single-payer system.
This is like saying "This is my invalid argument". Look up where "Slippery Slope" comes from, and wonder like I do why all of the sudden it's been legitimized to mean one is saying something valid.
If it's illegal for a large company to have employees on a public system, how can there be no private system? (As I understand it, the public option is only for individual policies, not large groups, I could be wrong)

Medicare/Medicaid are NOT examples of effective government-paid healthcare.

I made no claim of the sort, I merely pointed out that they are government options that haven't killed private care.

Unless of course the government subsidizes the exchanges. Which runs counter to the argument that a public plan would compete on a level playing field with private insurers, and would increase the government's cost. Subsidies to a public option, which make it harder for private insurance to compete, would be another slippery slope to a single-payer system.

The subsidies are not for public option, they are for people who are mandated to buy insurance and can't afford it. You will get the subsidy whether you buy public or private. If the government does this right, public option would be very basic care. No one knows with 100% certainty that it won't be.

You've presented two hypothetical situations that single payer could happen, but you present no solid evidence other than speculation and a non-professional opinion and then frame them by stating they are logical fallacies.

If you address one thing from this post, answer this: Why are the majority of universal health care systems not single payer if single payer is so inevitable?

RXS676

First of all, my post was intended to be a general discussion along the lines of what the original poster proposed. Not every argument was inteded to be a refutation of a specific argument made by "FighterHayabusa." However, I will respond to a few specifics of the most recent post:

I agree, it isn't a fact, and I fully understand that none of the current proposals will themselves set up a single-payer system. But there are many in Washington, and the president has said so much himself, who do favor a single payer system. I'm not saying we shouldn't do anything, and I agree there are many problems in the current system. But I think it is fair to say that current proposals could have some effects that will increase calls for a single-payer system in the future.

There are no proposals being considered that would not allow a business to drop health insurance coverage. You may be thinking of the proposals being considered to require companies who do not provide coverage to pay a fee or tax. But there's nothing to prevent any company of any size from dropping coverage in any of the bills currently being considered. And by the way, additional fees and taxes on small business, especially during a recession, could result in more businesses going under, or having more layoffs, which will increase the number of uninsured who will have to buy coverage on their own.

Fine, you didn't make the claim. Regardless, the possibility exists. A major claim that was made by the president was that if you were happy with your current plan, you would be able to keep it. These are precisely the questions that should be asked and satisfactorily answered by our lawmakers. "I'm sure they thought of this" and "I don't care so I'm not going to look it up" are precisely the attitudes that I fear the most.

Forget the rhetorical devices like "slippery slope." All I'm saying is that more people without group coverage who have to buy insurance on their own, whether they buy coverage through a public plan or not, will lead to more calls for more government involvement in the future.

Again, this was part of a general discussion, not a specific response any claim you had made. Nevertheless, the only reason Medicare and Medicaid haven't killed private insurance is that they are limited to the elderly and the poor, who probably couldn't afford to buy coverage from a private company anyway. If a similar option were offered to the entire population, it would be a different situation.

That's why I said "unless." There are many different proposals that Congress in considering, and that argument relates to that specific hypothetical only.

You're correct, they are hypothetical. I can't predict the future. But I think we need to consider the possible consequences of potential legislation like this, and I think hypothetical scenarios are a perfectly reasonable way to raise questions that should be answered. I think it's perfectly reasonable to say "Wait a minute... what about this? What if this happens?" and expect a clear answer before supporting any kind of reform.

Since this is an airline pilot forum, I think any discussion on healthcare would be "non-professional." In my case, however, I am a CPA and a registered actuary who worked for several years in the healthcare economics department of a Fortune-200 insurance company. My department directly supported the pricing and provider-negotiation functions. I have also had several hospitals and hospital systems as clients, and I am intimately familiar with their finances, cost structure, and the details of how they are paid by Medicare/Medicaid versus private insurance. Currently I work in the finance department of a major hospital system, one of the largest in a major metropolitan area. When it comes to health insurance, and how healthcare is paid for, particular by Medicare and Medicaid, I am far from a "non-professional."

For the record, I admit that single-payer is not inevitable. I admit that no current proprosals in the US will establish single-payer.

However, Canada, the UK, Spain and Italy are all single-payer (i.e. no insurance, government pays for healthcare directly), and Germany and Canada are effectively single-payer (there is insurance but the government provides it). So I think it is fair to say that most universal healthcare systems in the industrialized, Western world ARE single payer.

And it is clear that there is significant support among the president and many in Congress for single-payer, if in principle only and not yet in any specific bill or current proposal.

RXS676

Actually, I agree. If the government were to provide a public option that provided basic care for a low premium, that might actually be workable.

But what if that's not the case? What if it's a rich plan with low premiums, made possible by requiring providers to give care under Medicare rates, and/or by a taxpayer subsidy to the plan?

I guess you would say that's just a hypothetical. But the fact that it's a hyopothetical doesn't mean it isn't worth thinking about. Especially since just about every other federal entitlement has been over-promised, under-funded, and a major contributor to high levels of debt.

FighterHayabusa

However, Canada, the UK, Spain and Italy are all single-payer (i.e. no insurance, government pays for healthcare directly), and Germany and Canada are effectively single-payer (there is insurance but the government provides it). So I think it is fair to say that most universal healthcare systems in the industrialized, Western world ARE single payer.

Not fair:

single payer:
UK -> though there is still a small private insurance buy-up market (see BUPA)
Canada - private insurance is ILLEGAL. This is important.
Italy -> Has a small % private hospitals and insurance
Finland -> I'll give you this one, there's not much of a private market here.

not single payer (with government options, all but U.S. are universal)
U.S.
France
Australia
Sweden
Norway
Luxembourg
Iceland
Germany -> I don't see why you are saying it's single payer??
Spain -> 15% hold private insurance and go to private hospitals??
New Zealand
Netherlands
Japan* - no it's not Western but I don't see why it should be excluded from this conversation?
Switzerland
Austria
Belgium


As far as I can tell, the only place that has 0 private insurance is Canada, where it's illegal. Yet politicians insist on comparing expansion of the public option to Canadian style health care?? C'mon. Seems like all you have to do is not make private insurance illegal for to still exist.