Skin In The Game
Elmendorf, Senate Finance Committee Chairman Max Baucus, D-Mont., and many economists think a key to lowering health care costs is to tax employers for workers' health benefits, which now are excluded from taxation at all income levels.
The exclusion, they say, is the source of the cost crisis, subsidizing benefits for the well-off and driving spending higher. It also offers a huge pot of money that could help pay to expand coverage to low-wage workers or employees of small businesses, many of whom are uninsured.
In other words the problem with our current health care system is that many people have too much, government subsidized health insurance. This creates excessive demands for health care and drives up costs. And this theory has been adopted by many in the health care debate who are usually wiser than Wonks Anonymous, among them Brad DeLong as promoted by Matthew Yglesias
The Theory starts here: when health care costs more people will buy less of it. And this part of the theory will get no dispute from Wonks Anonymous. It has even been demonstrated by a short term - three to five year - study conducted by the Rand Corporation in the 1970's.and 1980's.
The Theory goes on to argue that this change will produce better long run health outcomes at lower costs. And here Wonks Anonymous must dissent, Noting first, that the length of time of the Rand study, three to five years, is far too short to evaluate long term health impacts. The theory of consumer driven health care rests on a number of assumptions which are most likely not true:
The First Assumption: Consumers consider health care to be a good in itself and face no significant costs other than fees for most health care procedures. Which may be true for some people but, in Wonks Anonymous humble opinion, is untrue for most people. We value health care for its results. The avoidance of discomfort, illness and death.
Indeed there are built in incentives that move the educated and comfort maximizing consumer toward less expensive procedures. Why have a doctor place a large tube up your colon when there is a simple lab test that gives accurate results? Why would anyone in their right mind want to spend more days in the hospital than they really needed to?
The Second Assumption: Consumers are capable of making rational and informed choices between conflicting baskets of health services. Which would argue that we are all entirely capable of navigating the maze of medical technology and conflicting studies by ourselves. which would ultimately mean that we could all be our own doctors and that there is no need for anyone to seek specialized medical education.
This is not supported by the Rand findings:
People in the experiment cut back as much on career that was deemed necessary as on care that was deemed unnecessary (p. 23)
Over the three to five years covered by the study this seemed to have little or no impact on the health of most participants. Basically health people get sick and get well on their own. They get the flu and go to the doctor who tells them that it is, sure enough, the flu. They leave with good advice and are reassured. Wonks Anonymous did a lot of that himself when he was young.
There was an important exception the subgroup consisting of low income people in initially poor health:
The 6% of people in this category fared worse with cost sharing in some important dimensions. One was that people in this group were less likely to receive a diagnosis of hypertension and less likely to have the condition treated when they were subject to cost sharing. Because of this difference alone members of this group who were in cost sharing plans had a 10% higher rate of expected mortality. (p.26)
Please note that many of the long term impacts of untreated high blood pressure are considerably more expensive than death. Congestive heart failure and kidney failure are among our most expensive chronic conditions. These problems take considerably longer that the 5 year time horizon of the study to manifest. Now add in the considerably increased risk of adult onset diabetes which was not a major problem at the time of the study.
The Third Assumption: There is some set of clearly identifiable preventative interventions that will substitute for medical care for people who actually have symptoms. Here Yglesias argues Brad DeLong's point:
you’d have a menu of services that we really think people ought to get, and those services would not only be made available for free, people would to some extent be nagged to get them. That’s your vaccinations, your demographically appropriate cancer screenings, your doctorly advice about healthy behavior, your basic dental hygiene, your regular checkups, etc. The idea is that for people who aren’t sick, this public health system dedicated to doing its best to ensure that you don’t become sick would be your main source of medical care.
In other words, if you have a symptom, you pay. But you can always stop by a blood pressure check station at the mall, if you aren't too busy. Here a nurse or medical assistant will check your blood pressure and give some quick, off the cuff advice. "Lay off the nachos their Bubba!" Of course if you do have high blood pressure you will have to go to your doctor and pay $100 plus for full diagnosis and consultation on you condition, not to mention meds. Because once you are diagnosed it is no longer preventative care.
Or if you are kinda poor you might just put it all off till next month and stop getting your blood pressure checked.
Which ignores my first, basic point, people do not really like to hang out in medical offices or go to clinics. People see doctors because they fear that there is something wrong. Otherwise they have better things to do with their time and money. If we want to foster a healthy population then we must looks somewhere else for our cost controls. The consumer cannot do it.