Catastrophic, chronic, and poor

Cassandra at Villainous Company is talking about mandating the purchase of health insurance. Go read her posts (here and here) for the Constitutional questions but I’ve slid off on a tangent that got too long even for one of my comments. In the comments to the second post, Cassandra says:

I see no need for a soup-to-nuts health care plan that is NOT insurance (insurance spreads the risk of catastrophic events - when it starts to cover checkups, it ain't "insurance").

To a large extent she’s right and this is pretty much the idea behind the Goldhill plan I was so enthusiastic earlier in the week. In a formulation I’ve seen a few places around the Internet, we don’t expect car insurance to pay for our gas or house insurance to pay for the plumber. So why should we expect health insurance to pay for any of the normal “maintenance” work we do on ourselves? Check-ups, dental cleaning, colds, flu, even broken bones can be considered standard expenses we should all pay for just like we pay for food at the grocery store, the new fan belt, and the guy to snake the drains.

I do, however, see two problems with this approach. First, chronic illness. If we define “catastrophic” the way Goldhill does - an expense of more than $50,000 in one year - then we have to figure out what to do about “chronic”. It’s entirely possible to be chronically ill and never have a year where medical expenses are more than $50,000 - but have year after year after year where medical expenses are, say, $25,000. Goldhill covers this problem in a throw-away:

(Chronic conditions with expected annual costs above some lower threshold would also be covered.)

I think this requires more than a parenthetical. I have no idea where the numbers come from but I have seen pundits in the health care arena claim that chronic conditions account for a huge percentage (north of 50%, even north of 70%) of our health care costs. I view that number with skepticism and suspect those making this argument have defined “chronic” so broadly the term is useless but I do nonetheless think that chronic illnesses require more than an afterthought. In addition to what we usually think of as chronic illnesses - diabetes, cystic fibrosis, multiple sclerosis, asthma - there are also things like cancer, heart disease, and stroke which used to just kill us but now are often survivable. We don’t think of those as chronic illnesses but increased costs often continue long after the original problem is fixed: more frequent checkups; more testing for complaints that would be dismissed in someone with a clean medical history; ongoing rehabilitation; even more treatment to fix problems caused by the original treatments. So whatever form of catastrophic insurance we or the insurance companies come up with it needs some kind of multi-year provision to cover slow-moving catastrophes.

The problem of covering chronic illnesses with a catastrophic policy is a technical one that is solvable by a little careful thinking and some number crunching. The more serious problem with making health insurance a “catastrophe only” proposition is societal: we as a society do not seem willing to let people go without health care. So if we have only catastrophic coverage then people who cannot afford to pay for, say, a broken arm are going to get treated somehow. Their treatment will be free for them but someone is going to pay for it whether it's the hospitals who charge everyone more to cover it or the taxpayers who fund the hospitals. So what do we do about that? First we have to sort out the two different kinds of people who cannot afford to pay for non-catastrophic health care expenses.

Some people are simply too poor by any objective measure to pay for even minor health care expenses. My guess is that people this poor don’t have health insurance anyhow unless it’s Medicaid so their status doesn’t really change under the idea of catastrophic health insurance: we as a society will need to pay for their care under any plan we come up with unless we’re willing to let them go without.

The second group of people who cannot afford to pay for non-catastrophic health care expenses are those who under an objective measurement could afford health care but have chosen to spend their money elsewhere. Maybe they blew it on the ponies; maybe they bought a house they could only afford if everything went right; maybe they paid for a child’s math tutoring. Whatever the alternate expense now one of them has slipped and fallen and broken his arm; worse yet, his child has done so. They literally do not have the money to pay for treatment. What do we do about them?

This is where the element of coercion comes in. If society is not willing to let people go without health care as a consequence of poor decision making then society has to coerce people into making the right decision. This is why Goldhill’s Health Savings Accounts as well as his catastrophic insurance are mandatory. He knows we won’t let people go without health care and he also knows some people are going to be willing to gamble - especially if they figure they’re gambling with other people’s money.*

So a system of catastrophic only insurance - like any system of purely individual funding of health care - will work only if we as a society are willing to let people who are too well off to qualify for public assistance - and their children - suffer the consequences of not setting aside money for a rainy health day. I don’t think we are which is why I think a plan like Goldhill’s is our best bet: it coerces people into providing for their own health care but within that coercion it turns as much control as possible over to the patients who will be consuming that care.

*****

*As a side issue, a subset of people who cannot afford to pay for a minor medical expense may be those “young, healthy” people who are going to be forced to buy insurance they probably won’t need under any type of universal mandate. Conservatives seem concerned about these people and with reason: for young, healthy people not buying any insurance may well be a rational financial decision. However, this does put conservatives in a bit of a dilemma. Either our health care system will, in fact, let these young, healthy, uninsured people go without treatment if they break their arm, get hit by a bus, or are stricken by cancer - in which case conservative assurances that while some people may not have health insurance no one in this country goes without health care are hollow; or these young, healthy, uninsured people will get treatment if calamity strikes - in which case their financial decision isn’t rational because they’re young and healthy, it’s rational because they’re playing with house money.