Healthcare utopia and reality

If we remove political considerations, such as how we can get to a certain solution in the face of powerful corporate interests, what would be the best solution to healthcare? First, a few baseline assumptions:

  1. We want to have everyone covered.
  2. We want to maximize health.
  3. We want to minimize costs.
  4. We want the cost burden to be progressive (i.e. rich people pay more.).

Let's look at a hypothetical proposal from economist Brad DeLong, the Australian system, our VA system here in the US, and some thoughts of my own.

First, a few words on our current system: It sucks. We spend twice as much per person as just about every other industrialized country for shittier results and we leave tens of millions uninsured and most of us worry about losing our coverage if we get really sick or lose our job.

On top of this, our primarily employer based system makes us less competitive in the global economy and costs us jobs. By providing government healthcare, other countries are in effect subsidizing their industries relative to ours and giving them a competitive advantage. When conservatives talk about taxes hurting "small business" and costing jobs, they are confusing revenue with profits. When businesses don't have healthcare to pay for, that is a cost savings that makes them more competitive. When a business owner makes a profit and takes a fat salary from his business, taxing that salary does not affect the business. It's the profits that are taxed, not the revenue.

Also, an employer based system reduces the efficiency of the overall economy. Most innovation comes from startups and small companies. But our current system keeps workers tied to the bigger businesses that can afford health insurance plans. How many people would change jobs or start their own businesses but for fear of losing health insurance? I don't know how to measure this drag on our productivity, but I assume it is substantial.

Brad DeLong plan

Okay, let's look at the DeLong hypothetical healthcare utopia. Matthew Yglesias sums up the idea here:

— 1. Taxes on public health hazards (booze, sweeteners, etc.)

— 2. An army of publicly employed doctors and nurses working in clinics and vans and such roaming the country dispensing preventive care and lifestyle advice to all and sundry.

— 3. 15 percent of your income is automatically plunked into a Health Savings Account.

— 4. When you want health care services that aren’t covered by the clinics, you pay out of your HSA.

— 5. If there’s money left in your HSA at the end of the year, it gets plunked into your IRA unless you specifically fill in an opt-out form.

— 6. If you run out of money in your HSA and need more health care, the government pays for it.

— 7. On top of the 15 percent HSA deduction, there’s a 5 percent tax to pay for 6.

Because the cost-sharing is all tied to shares of income, the overall impact of this would be strongly progressive. Better-off Americans will in effect be paying for a lot of their care out of pocket (via their HSA) while poor Americans will mostly be on the dole. But nobody will ever have any financial reason to forego the basics of preventive medicine, and nobody will ever need to worry about going bankrupt over medical expenses.

Sounds good to me. The best thing about this plan is that it eliminates the parasites - the insurance industry. As Brad himself says:

Why single-payer above 20%? Because I think there's no space left for insurance companies. Insurance executives' and actuaries' incentives are horribly wrong--they are either to figure out how to exclude the sick from their coverage or to skimp on preventive stuff because twenty years hence the patient will be covered by some other company. You want doctors to have incentives to deliver necessary and appropriate care better. You don't want insurers to have incentives to deliver shoddier and cheaper care in hard-to-monitor ways.

The problem with HSAs is that they are sort of like encouraging people to save money on automotive expenses by cutting out oil changes. When people have to pay for stuff out of pocket, it's the medical equivalent of oil changes that they will skip and then they will have no choice but to go bankrupt or whatever it takes when they need a new engine. DeLong's plan takes care of this by providing free oil changes.

My amateur idea from many years ago

The DeLong plan has an element of an idea I thought of back in the early 90's. If the government pays for everything, wouldn't that make healthcare costs go crazy? Instead of having government act as a health insurance service, why not let them be a healthcare provider in direct competition with for-profit healthcare. The government already provides healthcare directly to active duty military and their dependents and to veterans. Why not expand that? Someone with plenty of money can choose to pay for a private doctor or hospital. Poor people can go to a government clinic or hospital. Those in the middle will decide for themselves. This competition from the government would force for-profit providers to deliver better more cost effective care.

Australian system

As it turns out, my idea was similar to the current Australian system, except that they have government insurance for most care also:

Australia has a system whereby primary medical care (general practice doctors), much specialist health care (for example a cardiologist) and almost all important pharmaceuticals are covered by the government but with a copayment by patient. Most the copayments are large enough to be annoying (the service is not free) but do not cover anything like the costs.... There are also government run public hospitals... a public emergency room which rations via triage. [Turn up with a sprained ankle and you might wait twelve hours, turn up with chest pains and the waters part for you.]

After admission to the public hospital [either through a consulting specialist or through the emergency room] you will get a shared ward and no doctor of your own choice – but a very high standard of care by global standards. Non-urgent procedures are queue rationed....

You can be admitted to a private hospital in the same way as the public hospital. The admission is either from a consulting specialist or through the emergency room at the public hospital. At a private hospital you have your choice of doctor, often a private room, sometimes slightly better food and distinctly less pressure to leave until you are recuperated. Most importantly, private hospitals are not highly queue rationed...

To go to a private hospital you will either need to pay for it or have private health insurance...

The VA

And how does our government do as a direct healthcare provider? They kick ass. The VA system has the highest quality hospitals in the country. They strongly outperform the for-profit health industry. And they are way more cost-efficient:

Veterans enrolled in [the VHA] are, as a group, older, sicker, poorer, and more prone to mental illness, homelessness, and substance abuse than the population as a whole. Half of all VHA enrollees are over age 65. More than a third smoke. One in five veterans has diabetes, compared with one in 14 U.S. residents in general." Yet the VHA's spending per patient in 2004 was $540 less than the national average, and the average American is healthier and younger (the nation includes children; the VHA doesn't).

Political Reality

Leaving the arena of hypotheticals, the battle now is between having a strong public insurance option or not. We need to fight hard for the public option now. If government insurance is better than for-profit insurance, than the for-profit insurance industry should whither on the vine. Once people have government healthcare, they are not going to give it up. Then, once the government is paying for healthcare, we can push for a government provider as part of the deal. If the government can get more healthcare value for our tax dollars by providing directly rather than insuring, we can push for this to be at least a part of the system then, after we win the battle for a strong public insurance option.

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Comments

Hello

I got into a discussion with Robert Oak a while back in an Open Left thread. He suggested I post here. I registered here and then forgot about it. Someone recently reminded me about this site. I thought it might be appropriate to cross post this here from my own humble blog. I welcome any thoughts or criticisms.

miasmo.com

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Welcome to EP miasmo

You're not going to believe this but a malformed link in your signature crashed the site layout. It shouldn't have done that, but it appears I need to limit signatures for my HTML correcting software doesn't go into sigs! But just be aware to check the site after posting to make sure the post did not destroy the layout or site.

Believe me I was shocked to find this and see what else I can do to make sure that doesn't happen and your post was all formatted correctly.

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Sorry about that.

I realized that the site was malfunctioning, but I had no idea it had something to do with anything I did. It seemed to start working again when I switched the theme configuration from the default theme to the other one in my account settings. Probably just a coincidence in that you fixed the problem right when I did that.

Anyway, I need to start visiting this site more often. Working class people need to understand economics in order to be well informed voters. A site like this is the place to do it. Aside from an occasional Robert Reich, Kuttner, or Jared Bernstein appearance, the economic opinions we are fed on TV are mostly ruling class propaganda or superficial to the point of useless.

Chomsky points out that the average American is perfectly capable of understanding this stuff, if only they would devote the same amount of attention that they routinely give to sports. No coincidence that the detailed and nuanced coverage of sports (no real effect on our lives) dwarfs coverage of economics (which very much does affect our lives.) We little people are supposed to let our ruling class handle all that complicated mysterious stuff. I guess CNBC is like a sports channel about money, but it's mostly Kudlow-esque nonsense. I find CNBC entertaining and a great way to lose money. I'm rambling. Again, sorry for breaking the site.
miasmo.com

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ALL people read this

If you write something and you see a site crash as in layout looks funky...assume it is something you wrote that is serious misformed.

It was in your signature and the other theme doesn't allow them.

Now in this case, it was a malformed URL malformed link....
which seriously should not crash the site!

But the rule of thumb is if you see suddenly the lay out crash, assume it's you and look to either fix what you did or unpublish the post until you find it.

You can email me and I'll look it over too...

but please do not just leave the entire site crashed...

we get a lot of readers and if they see that...a. they cannot read the rest of the site and b. they will think the site might be toast now.

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Public option

I think the real problem is no one trusts Congress to do anything right. We hear of deals Obama made with big pharam, insurance companies crafting bills and frankly, that is "all she wrote" in terms of a lot of people being willing to support it. We just went through this with the Medicare prescription drug bill, where big pharma made out like bandits and Seniors not only had a donut hole, but were confused to oblivion on how to choose a plan.

Then, Obama first did a "Stimulus" where everyone said BS because it didn't generate immediate jobs, did not stop that money from going to offshore outsourcers, did not limit the funds to go to citizens, could go to illegals and so on...then we have the "pet projects", no bid contractors...i.e. political favoritism.

(I'm listing the criticisms)

But the biggest thing is probably the financial crisis, they went and gave more TARP money to banks, have done pretty much nothing about regulation, let many CEOs stay and let many of those same financial institutions have outrageous executive bonuses.

Right there....that blew the trust of many.

the problem really is in the details. Then there are lies.
There is a huge fraction of the public that is outraged, completely disgusted, that U.S. taxpayer dollars are funding social services, costs for illegal immigrants. Now take for example the claim this is all fiction illegals will get covered. Those groups are talking about how the government refuses to check/validate social security numbers, backgrounds on pretty much any service, including if someone has the legal right to work in the U.S....hence one can have something not in a health care bill...but due to other policies....they are covered simply because the governments will not check immigration status, valid identity and literally fight the idea every step of the way.

Another example is emergency rooms....they will not check in emergency rooms immigration status (after that person is treated) or after that person is well, to deport them. Now obviously that's some serious ethical issues rapped up in that...but the costs of using the emergency room for health care as well known. I believe some Hospitals in areas heavily populated with illegals literally were closed due to these costs.

California, you cannot mention these costs even when their budget is crashing and burning...which are ~$10.5 billion a year.

So, special interests, political favors, trump economic realities.

So, in other words, you don't get straight talk on even on what's really going on here.

And you can see, just how much attitudes on health care leak over into other policies and actions....since the administration refuses to do anything about these costs...

often the answer from these groups is to join "starve the beast" and try to keep the government from getting any more of their money.

i.e. the government, through multiple administrations, has broken the trust with the American people.

So of course many in this country look at government as corrupt, full of special interests and cannot be trusted.

In all seriousness, with many of the moves over the last 30 years...can one blame them?

Now, if the Obama administration simply said they were going to expand Medicare, Medicaid and the VA...plus fix it
(for example, force all Doctors to accept Medicare/Medicare patients)...

People know those systems and would have a little more trust, esp. if there was going to be increased efficiencies, and things like stopping MDs, Hospitals etc. for refusing to take these patients who are on these services.

Something as simple as expanding nursing and medical school seats in the U.S. and providing funding....to increase U.S. nurses and Doctors...I think people would say yippie to that because it also provides Americans with jobs.

Expanding specialists, increasing Doctors, giving incentives for rural Doctors and most of all, expanding the number of Americans in American medical schools....graduating...(the AMA has a LOCK on this!) ...all of this would increase the quality of care.

Then, simple stuff like funding medical technology startups, organizations to do things like reduce costs of many common lab tests...the technology is there but we have this "bloat" for profit system, which makes a lot of these test costs just through the stratosphere.

I don't think the U.S. medical system has every heard of the word productivity.

I don't like the idea at all of a 15% to a HSA, that seems to be another donut hole where if the person has a misfortune of getting sick, that wipes out, per individual all of that income, so it's almost a penalty.

The idea of insurance as well as universal single payer is to have the entire society "pay in" and basically "take care of" those who have the misfortune of getting seriously ill. It really is a societal feature...do we care for our fellow citizens or leave them to rot when they fall?

It also spreads out the cost burden across the whole citizenry. It's one of those things, like social security or say the police, fire department, EMTs, libraries, schools...where as a citizen, i.e. a member of a nation, you pay into the system, like every other citizen and you also get benefits for being a citizen.

You might look at citizenship and nations as simply insurance pools.

So, personally I think they need to just expand what we've got, keep private as an option, do something about portability from employer to employer or stop working and focus on fixing the efficiences, incompetence and the details of these systems.

I also think they need to tell the health care sector lobbyists groups to go piss up a rope, tell them they are going to bankrupt this nation and guess what..."you're regulated" and "we're going to take your profits"...
basically nationalize the insurance companies in effect.

To pay for it all, I liked the surtax on $1M+ U.S. incomes...wealth inequality is beyond the pale and for creation of the concept health is a right of every citizen....health care is a right, not a luxury..using good old fashioned wealth redistribution for this benefit I think is a good idea. I think they should tax the super rich, any corporations who offshore outsource jobs...tax the insurance companies themselves and levy a hefty penalty tax on any company who does not offer health insurance...

I think they should also massively increase SEC fines to give a serious blow to companies, individuals who violate regulations...like a fine...PLUS all of the profits made by said illegal/violation transaction....are seized by the U.S. government.

If drug dealers cannot make money and their assets are seized....why not corporations and while collar crimes?

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I agree with your criticisms

I agree with your criticisms of the Obama administration's performance to date, although I sometimes wonder what kind of constraints a President is operating under that we don't know about, i.e. the ability of powerful elites to sabotage the economy and a presidency should he go "too far."

While I share a mistrust of government, I think people who oppose the public option are essentially trusting the obviously greater of two evils. Yes, government's altruistic purpose can be corrupted by money and corporate influence to design a flawed plan. But the alternative (insurance corporations) doesn't even need to be corrupted. It already is 100% greed with no altruistic component. That is it's essence.

And of course we should fight for a strong effective and well designed public option and not just settle for some corrupt garbage like the prescription drug bill. I am counting on the progressives in the House pressured by liberal activists to demand something decent.

Of course I think single payer would be better (and an easier sell - "medicare for all") but Obama took that off the table. Stupid move if you ask me. But now the battle seems to have come down to public option or no public option. At this point we need to play the hand that's been dealt.

I do not see how illegal immigrants play a part in this debate in any rational way. They are treated under the status quo in the most expensive way possible - emergency rooms. So if the expense of treating illegals is a big concern for some Glenn Beck fan, how does blocking any of the legislation currently under consideration reduce that expense one cent?

[To digress into the overall immigration issue, I'll bet if we could levy an extra tax on the top 0.1% that is tied directly to the amount of government services spent on immigrants from Mexico, we would see a big drop in immigration. I don't know the mechanics, but I'm sure that the poverty in Mexico that drives immigration results from corrupt policies that benefit wealthy elites in both countries. Until we improve our democracy enough to stop that stuff, basic human compassion would suggest we suck it up and not punish poor people trying to survive just because of where they were born.]

I am in agreement with you about funding healthcare primarily by taxing the super rich. I am not completely sold on DeLongs 15% HSAs. It seems like a pretty substantial burden for low income families barely scraping by. I think the HSA logic is based on the assumption that consumer discretion can lower prices, at least for non-essential services. The prime example of this is lasic surgery. It is not covered by insurance and its costs continue to go down in stark contrast to the rest of the healthcare world.

I am fully on board with fining the shit out of or even imprisoning the insurance crooks for the many scams they concoct to deny care. This would probably cut down on their overhead, most of which goes to this crap.

What are your thoughts on the general idea that insurance (including government insurance) has a natural tendency to drive up costs versus government directly providing healthcare having a cost minimizing effect by competing with private care? I really think that the VA provides a great model of excellent care and cost efficiency. Why not expand it beyond just veterans?
miasmo.com

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yeah

Well, supposedly the government trumps the lobbyists, i.e. corporate power but my impression is corporate power believes it is the government.

ya know frankly, I don't know what is in the bill and I do read legislation and the reason I do not is so many different versions. I do know those Committee chairs, esp. in the Senate, as well as Daschle has serious campaign contributions from these lobbyists...

But why these politicians won't kick them out...I just don't know what else to say except systemic massive corruption.

On illegals, I'm trying to point out that something which is completely dismissed and labeled "pants on fire lies" and "right wing radical crazies", not only is a huge issue with a large percentage of the American people...but is REAL. It's real by the $$$ and the way to see it is not through the health care reform bills but in other policy areas.

The government as well as states refuse to verify citizenship status, valid SS #, background check, immigration status, hence one has a large percentage of illegals obtaining benefits that are supposed to be denied. ...like jobs.

you have to dig into other policy areas to see the complaint and wala, there it is.

So, you've got a lot of rhetoric, no formal detailed plan, plus a huge "dis" to the real concerns of the people (not the manufactured ones by special interest groups and corporate generated MSM talking pundit du jour) ...

it's like TARP...they just tell the people "oh this was necessary" the "bonuses were necessary" and so on...

i.e. they lie to the American people and outrage brews, trust is blown.

Happens all of the time. Go to any townhall and ask a question on some issue that you know the details on and which your rep. is supporting some special interest group or agenda on...

they will deny that your facts exist...i.e. often it is claimed your facts are simply fiction, and you can sit there with research, statistics, 1000 pages of facts and these politicians will deny those statistics and facts anyway.

(Yes, pressuring Mexico to quit their wealth inequality and create their own middle class would be nice...but frankly the U.S. might have just beaten Mexico in income inequality with these new numbers!)

BTW: I think all of S. CA fills their prescriptions in Mexico and the same is true of Northern states in Canada...

so ya know, we cannot renegotiate with big pharma? No sireee, not only does big Pharma say not....Wall street is pretty insistent on keeping those health sector profits on maximum in the U.S....

So the American people, the consumer suffer.

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Brad DeLong HSA Plan

I suppose the percentages could be massaged for affordability, but with a good information/education push
the risk/reward incentives might prompt a better "healthy
lifestyle" awareness. OTOH my Dad received superior care when he broke down and started using the Veterans health system. He wanted to sue the for-profit providers for malpractice. I am self employed with a high deductible policy... 230/mo 2500ded/yr but for any regular visits I see a doctor who does not take insurance but charges $50
flat rate per visit. MY "Insured " visits are about $225
-$65 mine---$160 insurance.

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Don

that is interesting

is your Doctor saying (s)he can charge $50 because all off the overhead/rules/restrictions in dealing with insurance companies...if he just ignores all of it, it's that much of a savings?

This whole "healthy" thing I really question. Mainly due to big pharma wanting to get the whole world on anti-depressants. There are so many conditions which depression is a symptom, have nothing to do with serotonin levels....

So, I personally don't trust some of this "preventative".

Take weight....they just blast people instead of looking at say, the corn fed problems of cattle, which produce very fatty, high cholesterol meat. So you can get various money interests trying to declare what is healthy so they maintain their profits.

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I think the problem I have with DeLong's dream plan

Is the 15% HSA. The problem is that even with the fact that most poor and working class folks will blow through that quickly and be funded by the government, it's still not progressive enough, because most poor to middling folks need 100% or more of their income to pay for the necessities; even if they have a healthy year and don't use their HSA money, they really can't afford to only get that money on the back end. I explained as much in the Yglesias thread.

Furthermore, since these sums aren't going to cover the cost and are still going to cause people economic pain, it just seems pointless to avoid going to full single-payer, if we're dealing with "dream scenarios."

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