You are talking, in part, about gaming the system, about someone who doesn’t pay for health insurance, even though he or she could have at relatively low cost. Perhaps someone who could have opted into an employer’s plan but opted not to, if that situation exists. Then, upon realizing they need a $150 K procedure, they want to opt in at the average cost. In this situation, I agree with your implication, that you shouldn’t be a freeloader and then expect everyone else to pay for you when you get an expensive illness and you decide to opt in. In this situation, you should be able to get health insurance but to pay what the market bears, which might be the equivalent of paying for your procedures out of pocket.

I don’t know if this example would hold for 20 somethings just getting started, in a case where they would have to buy expensive insurance on their own (no employer coverage), and they need their scarce funds from a starting job to pay off college loans. There are gray areas, however, for example a kid starting off with a $70 K job, where the kid could clearly afford basic health insurance at age 24 or so.

Here’s a question, though: I read about people who lose their job at a company which offers health insurance which they have signed up for. The former employee or his or her spouse have a pre-existing condition. Either when unemployed, or at their next job (not offering health insurance), they are then denied coverage because of a pre-existing condition. This seems very unfair, because they had been uninsured and hadn’t been freeloading. In such a situation, these people should have the opportunity to opt into health insurance at the same rate as everyone else. Unless, of course in my formulation, they are smokers or alcoholics or grotesquely obese, in which case they pay more.

What is your take on this balance?

John

Sorry, I was overly terse with my last comment. I’m probably failing in the opposite direction now. But it hasn’t been my experience that buffet-style restaurants serve food of lower quality than other comparably-priced restaurants. If anything the quality is at least as good as any other trans-$10 establishment, and the variety generally much greater.

“Unlimited consumption equals poor quality” is a reasonable hypothesis, but the experiment doesn’t seem to confirm the prediction. More interesting is the “why?” Probably because customers are encouraged not to waste food, table turnover is generally higher than a traditional restaurant leading to economy of scale, service is “self-directed” leading to low labor costs, and most people don’t show up intending to gorge as much as possible (and from what I’ve seen those that do tend to load up on low-cost items like pasta and casseroles). Others go there for the opportunity to sample small amounts of a variety of items, or because they can choose items in precisely the desired proportions.

The point is that it’s not reasonable to rely on a single economic equation and ignore other factors, nor to confuse hypothesis with outcome.

Is there a parallel with health care? Try this: if the prediction that “lack of risk-rating leads to poor quality” then the U.S. must have poor quality health care indeed, since most (90% ?) of its citizens do not have individually-underwritten plans; instead they have employer-sponsored group plans or Medicare or Medicaid. Only a small fraction of the public currently holds individually-underwritten coverage.

I live in Florida, and hurricanes are part of the risk we must carry in order to live in paradise. We have pre-ex conditions when it comes to storms as well. Once there is a storm “in the box” , no company will issue a homeowner’s policy until all the storms have passed. The “box” is an area that covers the Gulf of Mexico, all of the Caribbean and the Atlantic north to Bermuda and east past the Lesser Antilles.

Insurance is about covering risks…it is not about shooting fish in a barrel.

I have been in the health insurance field longer than I can even remember, yet I do not remember that 98% law. If you can show me any business that could possibly run all their administration and make a profit using only 2 % of their revenues, I will eat the contents of your mental colostomy bag. Do you realize that they could simply stick their money in even one of our present day lame banks, not run the business at all and make more money?…get a grip!

To John:

You accept that we should not subsidize the premiums of people with bad health as a result of poor personal behaviors (obesity, substance abuse etc..) but you feel we should subsidize (or guarantee issue) those whose conditions are caused through no fault of their own. Your argument is very humane, until you consider that the reason many of these people cannot get or cannot pay for the insurance, is because they opted not to have it back when they were healthy. I am not aware of any single state where it is legal to drop an individual or to rate-up an individual just because their health has changed. (Unless of course they were running around without insurance before their health changed). This is a point that too many people miss in these arguments. If you are allowed unrestricted access to insurance when you get sick, what possible incentive would you have to carry insurance before you get sick.

In the meantime, it may be helpful as we discuss the obvious problems of health insurance (such as what to pool or not pool, to medically underwrite or not medically underwrite, and how to deal with the fiscal cost of whatever it is we decide we need) to hone in on the fact that what everyone is calling health insurance is really pre-paid healthcare. Nothing is going to work cost wise until everyone stops dragging “health insurance” and/or “insurance companies” into every conversation about how to pay for medical costs.

The term “insurance” is only valid when there is a true “risk” to be considered. A “risk” translates to a “rare” and “unexpected occurrence”, and that doesn’t include 90% of all physician encounters. Nor does it mean having insurance companies involved in any medical expenses below a “catastrophic deductible”.

So Jennie, you really don’t need to bash insurance companies for doing what they do when you have asked them to do something that they don’t do well (manage your healthcare expenses). By the way, an even worse organization to assign those duties are government bureaucrats (surely we don’t need to discuss why). So the question is who the hell should be in charge of managing these expenses so that “obscene profits” are not taken out of your hard earned dollars. Jennie, do you have a mirror?

Don Levitt makes this point:

“Median household income is between $50,000 and $60,000. Average family group premiums are $12,000-$13,000. If these figures are correct, then premiums are 20-25% of median household income.”

How can we pay for this? The inevitable outcome will be poorer health care for almost everyone, no matter what system we get.

I don’t think the country is really focussed on adequate health care for everyone until a road map for reducing health care costs is proposed, has public hearings all across the country, and is then made part of legislation.

This cost discussion should be the focus of health care reform, not an afterthought or a fifth priority.

Here’s a question: the Mayo Clinic provides excellent care, at about the lowest cost in the country for institutions of their size. They apparently do so because they put their doctors on salary instead of paying them by the procedure or the test (they do so by pooling all the payments they get from all sources).

Apparently, this allows the doctors to spend more time with patients who need more time, and vice versa. Health outcomes are actually better than in areas where costs are higher and more operations are done, in part because in places like McAllen, TX, the doctors make money from the operations, even if not done by them, because they own the hospital. Many unnecessary operations are done as a result, but health outcomes are not better (see New Yorker article by Dr. Atul Gawande in one of the June issues, you can google it easily and it is free).

So the question is, how can we create more places in the country with the care and costs of the Mayo Clinic? If we can, we can cut cost growth a great deal. What do commenters think?

I’ve boiled down a complex situation to a paragraph, so I understand that I’ve left nuances and details on the table, but I think this is a decent summary.

John