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Health Insurance and Car Insurance, Redux

A quick hit since he's blocking comments, for me at least:

Kling's argument (standard for those pushing HSAs) that health care in this country is broken because it's covering too many 'normal' procedures is highly disingenuous. First, most expenses for health care are simply NOT of the type that maps to 'oil changes' in car insurance, and second, the mapping itself breaks down - car insurance, with its per-incident deductible, is actually far more like traditional HMO/PPO service (with copays; which are essentially also per-incident deductibles) than it is like the HSA plans Kling apparently favors (with large annual deductible).

This entry was posted in the following categories: Politics (Outside Austin)

Comments

Blocking comments is not cool.

Both car insurance and health insurance are real "insurance"; they're a hedge against the risk of unexpected losses. Health insurance covers relatively few "expected" events.

The problem with health insurance is that it removes the consumer's incentive to conduct a cost-benefit analysis.

I've got high cholesterol. I should lose weight, exercise, and eat more fiber. If I do those things, I probably won't need to take medicine. I'm lazy, though; part of the reason is probably that I know that if I end up taking medicine, it'll only cost me $25/month. If I had to pay for the Lipitor myself (god only knows what it costs), I'd probably take care of myself.

There are lots of other examples. Doctors test for conditions even when the risk is low because the marginal cost to the consumer is effectively $0, and the doctor gets a modest benefit -- if not a cut of the money for the test, then at least a little more protection against a malpractice suit.

So health insurance at least contributes to spiraling medical costs. How do you discipline those costs?

HSAs obviously have their own problems. Our medical system doesn't provide transparent pricing information; there would be a lot of waste during the transition.

It would have a bad effect on wealth distribution. Not just financially, but we'd see more poor people with significant, untreated medical problems. Probably a higher mortality rate for the poor, particularly babies born to poor families. (Here, "poor" means those who wouldn't qualify for Medicaid but who would have little disposable income for medical treatment.)

Eventually, employees who get employer-subsidized health care now would have some or all of the savings returned to them in the form of higher salary. I'm not sure they (we) would be worse off in the long run.

I don't know that HSAs are fair or practical. I do believe though that if we don't figure out some mechanism for getting consumers to make cost/benefit decisions, the HMOs will eventually do it for them (more than they already do).

This is where I diverge the quickest from libertarianism economics - which in general I find quite reasonable.

The primary reason I don't go to the doctor today has nothing at all to do with cost, at least, direct economic cost - it has to do with the pain in the ass it is to go take a couple of hours out of my day, and then go pick up a prescription [...] (I have a ruptured eardrum; and in particular, having to go through these gatekeepers to acquire antibiotics is at least a thrice-yearly chore).

When I DO go to the doctor, I need to; and all the personal cost in the world isn't slowing me down. In fact, my family spent a lot MORE on the first year of our HSA plan than on the last year of the previous company's PPO (HMO-style).

The thing most people don't admit is that most health care spending is occuring in heroic interventions / expensive maintenance for the very old or the prematurely born. All of the cost/benefit decisions you or I might get pale in comparison to even one month of care for an old person on a respirator.

Finally, the fact that many other quite livable countries IN TOTAL spend less than just the amount of PUBLIC money we spent on medical care is particularly compelling. I'm afraid that as I've gotten older, I've come to the conclusion that there simply is no real way to make medical care market-driven. It simply isn't going to work.