Saturday, August 22, 2009

More OOC: Taking a Second, er, Stab at Health Care

My previous tentative step in this direction was mainly to gripe about those trying to execute a little linguistic jujitsu by tabbing health care a "right," thereby ending debate. One might reasonably point out that it's easy to complain, and not nearly as easy, or fun, to be helpful. Putting only a few small words in his mouth, Mr. Magellan made the reasonable suggestion that, collectively, we have experience with a number of different health care regimes across the planet, and, therefore, we may have some constructive ideas for what health care reform. (Alternatively, we may just have another emotionally-charged back-and-forth. Either way - win!)

Starting from the observation that not knowing what I'm talking about has never stopped me in the past, I thought I would offer a few opinions, and then solicit comments, criticisms, or improvements. And be kind, as this meandering is based on an hour's work on a sleepy Friday afternoon. :)

I start from the premise that the goal is a system that (1) provides a range of health insurance options, at different price points, combined with (2) a system of services, from physicians to hospitals to treatments, that is (3) affordable and (4) available to all. ("Affordable to all" may well require subsidies, so an additional goal is to minimize the transfers, subject to the other constraints.)

As must be obvious from the previous post on the subject, I think minimizing the government's role is a good idea. This is not because I have a low opinion of government employees; rather, I observe that no single organization is nearly as efficient as a market at divining the collective interests of buyers, and the interests of politicians are often not well-aligned with those of the people they govern.

The point of insurance has to be to spread risks across a broad base to cover unusual events. While we often talk about "insurance" covering routine doctor visits, this isn't really insurance: we're just paying the insurance company to pay the doctor, rather than doing it directly.

Here are five ideas to start with.

* allow insurers to offer different levels of coverage, ranging from low-cost, bare-bones policies that cover only a small number of treatments and services, to more full-line policies. This is a little tricky because of adverse selection issues, but if (as I've seen claimed) 80% of health costs involve care for the elderly, and a large fraction of that is used on tests and procedures of questionable value, then it's important for there to be an option that is cheaper but covers a smaller range of treatments.

* remove restrictions on competition across state lines, to increase the number of insurance options.

* reduce barriers to providing services and constructing facilities. If the goal is to reduce costs, then allow lower-cost practitioners to perform a broader range of services (i.e., allow nurses to perform services that, currently, only physicians may perform). Expand the number of slots in medical schools. Don't allow states and localities to block clinics or hospital expansions (as they now do with Certificate of Need requirements; these often allow rival hospitals to intervene in the process in order to reduce competition).

* eliminate the tax deduction to employer-provided insurance. This encourages employers to offer too much insurance to employees, which reduces the salaries of those employees, while at the same time shrinks the number of people interested in individual policies, thereby disadvantaging the self-employed.

* encourage portability of insurance across jobs. Of course, if employers stop offering coverage, this is no longer an issue. To deal with the problem that people who buy insurance and then develop a costly problem are stuck with their existing insurer and, unless the policy has price caps in it, may soon find the policy unaffordable, prohibit companies from charging different prices to customers who are in the same risk pool ex ante, even though some turn out to be more costly to service ex post.

My guess is that these changes - many of them, by the way, reductions in existing regulations that serve only to increase the cost and decrease the availability of insurance or medical care - would take care of much of the problem. Other changes that I have seen suggested, such as encouraging people to save for medical costs by widening the availability of Health Savings Accounts, may well be helpful, but are more tinkering around the edges than solving the four problems outlined above.

As always, I'm happy to hear other opinions and alternatives.

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