Wednesday, November 11, 2009

Five health insurance issues (1)

In response to my post on catastrophic health insurance, Grim commented:

I like the idea of market-based reforms. However, I'm not sure why a government plan would be better at simulating the market than, you know, the market.

For example, the DeLong plan that I surrender 20% of my income for health care expenses? The market as it currently exists offers much better deals than that.

In general my preference is for a free market with only as much government regulation as is necessary to keep the more predatory impulses of capitalism in check. However, I have a lot of reservations about whether a totally free-market approach is appropriate for health insurance. I prefer regulation that says, “Thou shalt not” rather than regulation that says “Thou shalt”. Once you wander into government telling private companies what they should do, you’re in trouble and that’s increasingly the case with government regulation of insurance companies. They’re being told what they must do - who to cover, what conditions to cover, how much treatment to provide. That’s a bad situation; bad for the companies, bad for the government, bad for the company’s customers.

Yet I understand why we’ve gone down that road. We want certain things from health insurance and we are trying to get them via government intervention while still maintaining - or appearing to maintain - the companies as private entities. I’m not at all sure that’s working well. We may simply be unable to get what we want from health insurance within the framework of our current system.

This is a big part of why I was so intrigued by the catastrophic insurance plans I discuss in my earlier post. These plans may be the best way to address five issues I think any health care or health insurance plan must handle, the issues we’re trying to handle through our increasingly intrusive regulation of the insurance industry. In sorting out why I think these plans are promising, I’ve written at considerable length about those five issues. This post is about the first issue; subsequent posts will deal with the other issues and then I’ll have a grand finale. As usual, I’ve created a new category - “Five Health Insurance Issues” - to link the posts.

Issue 1: If you become seriously ill, it is extremely unlikely you will be able to afford the best possible treatment without health insurance. Paying for normal health care out of pocket is feasible for most people; annual exams, the flu, simple broken bones, childhood immunizations, having a baby, well-child care - these are all health expenses that most of us can pay for as we go or save up for or pay for with credit and have some hope of paying off. Big ticket items, no. Cancer; heart problems; a liver transplant; kidney disease; a premature baby; a child with serious birth defects - health problems of this sort will cost more than most people can afford.

It’s fine to hark back to the days of yore when people paid for their health care themselves but when in comes to serious illness things are not as they were back in good old yore. One of my uncles died of leukemia more than 60 years ago. He felt ill, went in for a blood test, and was dead before the lab results came back - the only lab in the State that did blood work was 100 miles away and backed up. Today he’d be diagnosed almost instantly, admitted, given chemotherapy; everyone who was willing would be tested for a bone marrow match; if a match was found, the bone marrow would be donated. If through some miracle he survived, there would be years of regular exams, regular tests, special tests if he felt ill or something didn’t look right. A lot more expensive than one blood test and a few weeks at home in bed.

My father died of a heart attack 45 years ago. He felt chest pains while over-exerting himself and saw a doctor a few days later (!). He worked overseas so a doctor told him to lose some weight and see a specialist when he got back to the States. His doctor put him on a diet that would curl a cardiologist’s hair today - soft-boiled egg for breakfast, broiled hamburger patty for lunch, that kind of thing - with the predictable result. Today he would have gone to the emergency room at the first hint of pain and gotten at least an EKG and a blood test as soon as he walked in the door. If an attack was confirmed he would have been admitted and put on an array of drugs designed to keep him alive while more tests were done. He would probably have had roto-rooter surgery, stents, and so on. There would have been years of follow-up exams and tests and a lifetime of taking meds. A lot more expensive than one doctor’s visit and a mimeographed diet menu.

Not so very long ago it was simply a given that premature babies died; people with AIDS died; people with Stage IV cancers died; people with serious heart problems died. Now they live. Children with cystic fibrosis were lucky to make it into elementary school; now they can hope to graduate from high school. Childhood leukemia was a death sentence; now most patients survive. Once upon a time when a seventy-year-old woman fell and broke her hip she lived with the break - and probably didn’t live long. Today she gets a hip replacement. All of this is good, all of this is joyous. All of this is very, very expensive.

So, point the first: While most of us could pay for normal health care expenses ourselves, most of us need health insurance to cover serious situations.

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