Wednesday, November 11, 2009

Five health insurance issues (2)

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.

My post about the first issue is here. This post is about the second 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 2: Grim is right: the health insurance market offers far better deals than 20%* of income. If - and only if - you’re healthy now and you’ve always been healthy. The problem with the market as it currently exists is that for people who become ill (especially if they become too ill to work) and for people who have had a serious illness it is difficult to find health insurance and if it can be found, difficult to afford (especially for people who are too ill to work). Please note that I’m not talking here about people who don’t bother to buy health insurance and then find themselves ill; I’m talking about people who have health insurance and lose it when they lose their job or move to another State or find the premiums beyond their reach because the premiums skyrocket for them because they’re ill or because they’re lost their job or simply because premiums in general have gone up.

I understand that there is an argument to be made that this is exactly how the market should work: people with higher costs/risk pay higher premiums. I have never found this logic compelling perhaps because I think of health insurance longitudinally rather than as a snapshot. Even if you buy this logic, however, that does not solve the problem: what does the market do with people who either cannot get or cannot afford health insurance? A pure market approach would let them die from lack of health care. I’m not comfortable with that and I don’t think most Americans are comfortable with that. This is the basis of the claim that health care is a right, not a consumer good. I cannot accept that claim but I do believe there’s a difference between someone not being able to afford a top of the line car and ending up with a clunker and someone not being able to afford top of the line health care and ending up with considerably less chance of surviving a serious illness.

So, point the second: Health insurance is not universally available or universally affordable through the market as it currently exists.

My belief about the meaning of point the second: Lack of health insurance does in fact often mean less effective medical care when someone is seriously ill. I know this claim is disputed by many people who point to the fact that any emergency room anywhere must take you if you’re really sick but that’s not the situation I’m concerned about. I’m concerned about situations where someone needs lots of expensive, long-term care to survive. (Plus the requirement that ERs take you if you’re sick isn’t exactly a shining example of the free market.)

My moral judgment about the meaning of point the second: This is not right. I understand that of course the richer you are the better chance you have to get super-duper health care. But I do not think someone should get less than, say, the level of care available to a Blue Cross Blue Shield policyholder because he is poor - or because his parents are poor.


* DeLong does not actually want 20% of your income for health care. He wants 5% to buy catastrophic insurance; the other 15% is a mandatory Health Savings Account and you get it back next year if you don’t spend it.

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