Sunday, November 29, 2009

Social Security Solutions, Part 1: The social contract

Back in the mid-1980s I visited an elderly cousin of mine. She would have been in her mid to late 70s at the time and she had a number of health problems. Nothing major but her vision was very poor and she was generally weak. They - whoever “they” were at the time - were talking about reducing Social Security, possibly across the board, possibly through means testing. My cousin had a pension from her husband and money in the bank - she and her husband had worked hard to make sure she had both - but her Social Security money was something she had counted on when planning for retirement. When we discussed the possibility of her Social Security being reduced she was almost in tears. “They can’t take that money away from me,” she said. “I have no way to make more.”

I went home and wrote a letter to Bill Bradley, one of my Senators at the time, saying that I realized Social Security was unsustainable but that I thought it would be criminal to suddenly cut Social Security for people already over 65 or for those close to 65. Instead, I said, we should start telling younger people that their Social Security would be means-tested. Perhaps, I suggested, we could say that for everyone over 55, Social Security would not be means-tested. For everyone under 55 Social Security would be means-tested when they were old enough to qualify but the reductions would be phased in. For example, let’s say you were between 50 and 55 when the new rules went into effect. When you started receiving Social Security, means-testing would be done to see if your Social Security should be reduced. However, if the means-testing said your Social Security should be cut by $100, it would only actually be cut by $25. For someone 45-50 when the new rules went into effect, the cut would be $50; 40-45, the cut would be $75; and for those under 40 the cut would be in full effect. Knowing head of time that Social Security would be means-tested would give those younger people a chance to save more of their own money for their retirement while not unfairly taking money away from those who were counting on Social Security and no longer had the time or the ability to earn and save more.

Needless to say, nothing like this happened (I got a very nice form letter from one of Senator Bradley’s aides) and here we are twenty years later. Unfortunately the great bulge of baby boomers who would have been subject to means-testing if we’d done this twenty years ago are now so old that we can’t give them advance warning of means-testing. That means we can’t cut their Social Security without great unfairness. How would suddenly beginning to means-test Social Security be unfair to the well-off elderly who would lose money as a result of it? Well, here’s how Megan McArdle puts it when talking about a different entitlement, higher education in California (emphasis mine):

... shutting down prior entitlements suddenly is a very bad thing, even if you're the kind of heartless conservative who hates entitlements ...

People plan their lives around public programs. Allowing an unsustainable program to run until it comes to a screeching halt is often worse than having no program. The UC system is very good, and I am in no way suggesting that we would be better off if it didn't exist. But many, many California students, and their parents, planned their lives around a reasonable expectation of what in-state tuition would be. The protests are childish, but the rage underneath them is understandable: if you suddenly have to leave school because legislators have broken your implied social contract, you're probably going to be pretty mad.


And that, of course, is the problem with a change to Social Security that involves cutting benefits for those already receiving them or for those on the verge of being eligible for them. It’s all very well and good to say that well-off old people shouldn’t be getting money from less well-off younger people but those well-off old people made plans based on those Social Security payments. When they decided what job to take, how much money to save for retirement, what to buy and what to forego so they could have the kind of retirement they wanted, the money from Social Security was always in their calculations. To see how this works, let’s take a look at two hypothetical couples.

Ann and Bob have worked hard their whole lives. They married right out of college and bought a three-bedroom ranch house in a nice enough subdivision; both sets of parents helped them out with the down payment. They lived close to the bone - no dinners out, modest Christmas presents, no getting away on vacation - until they paid back those loans. Once they were making a little more money they had a couple of children but they still watched their pennies. Vacations were driving trips, often to visit relatives; they shopped at discount stores for clothes and food; Christmas and birthday presents were still modest and always included a little extra cash tucked away in their kids’ college accounts. And they always, always put away as much as they could for their retirement. They figured they’d have the house paid off and the kids through college by the time they retired and they calculated that with the $2000 per month - $1000 for each - that they’d get from Social Security plus the $2000 per month they planned to have from their own retirement investments, they’d have enough money to do all the traveling and wining and dining they weren’t doing now.

Carol and Dave have also worked hard their whole lives. They, too, married right out of college and bought a three-bedroom ranch in a nice enough subdivision with the help of their parents. They, too, scrimped and saved to pay back their parents. After that, though, they saw no need to continue to be frugal. They never ran up a lot of debt but except for saving for their kids’ college they spent every penny of their income on trips and clothes and restaurants and just plain stuff. As soon as they got halfway decent equity in their ranch house they traded up to a McMansion. There was no way they could save for retirement after that but they figured that the $2000 - $1000 for each of them - that they would get from Social Security would be plenty: they’d be so old when they retired that they wouldn’t want to do much of anything anyhow.

Now both couples are retiring. Ann and Bob will get $24,000 a year from Social Security plus $24,000 a year from their own retirement investments; their house is long since paid off. Carol and Dave will get $24,000 a year from Social Security but they have no retirement savings and not only is their house not paid off, the lousy real estate market means the value of the house is just barely enough to cover the outstanding mortgage.

The government decides to means-test Social Security. What’s going to happen? Why, Ann and Bob are going to lose their Social Security because they’re financially secure without it. Carol and Dave are going to keep theirs because that’s all they’ve got. And that’s not fair.

So are there ways to keep Social Security solvent without unfairly penalizing those who counted on their Social Security benefit when they planned for retirement? Yes and I’m going to discuss three of them: the three-month solution; the 10% solution; and the Lifetime Endowment. As always, I’ve created a new category to group together the posts in this discussion.

Redargue

A friend gave me one of those page-a-day calendars for Christmas last year, this one called “Forgotten English”. For some reason the September 18 entry on “redargue” amused me. The word itself means “to refute” but what I liked was the quote from James Boswell about Samuel Johnson . (Johnson celebrated his birthday on September 18 hence the reference to him in the calendar.)

About Johnson, Boswell writes:

The truth, however, is, that he loved to display his ingenuity in argument; and therefore would sometimes in conversation maintain opinions which he was sensible were wrong, but in supporting which, his reasoning and wit would be most conspicuous. He would begin thus: "Why, Sir, as to the good or evil of card-playing—"; "Now, (said Garrick,) he is thinking which side he shall take." He appeared to have a pleasure in contradiction, especially when any opinion whatever was delivered with an air of confidence; so that there was hardly any topick, if not one of the great truths of Religion and Morality, that he might not have been incited to argue, either for or against.


I must admit to being in sympathy with Johnson’s view. There is nothing that makes me feel more contrary than an opinion “delivered with an air of confidence”.

Wednesday, November 25, 2009

ClimateGate

[Updated November 25, 2009, at about 4:30pm to add extra Reading.]

Deafening Silence is doing her usual excellent work on ClimateGate, providing a brief narrative, some key points, info on major players, what each side says about the data dump, and links to other sites where more information - including the emails and data themselves - can be found.

I’ve been wandering around reading about this for the last few days and I think the most telling exchange occurred at RealClimate, the Website run by some of the “working climate scientists” who are in the forefront of the research and advocacy that supports the idea of Apocalyptic Anthropogenic Global Warming. Here you will find AAGW luminaries like Gavin Schmidt and Michael Mann and here you will also find Schmidt’s response to ClimateGate. Called “The CRU hack”, this post is a RealClimate masterpiece and well worth reading. As is usually the case at RealClimate, the comments are worth your time also - - although I freely admit I have not made it through all 1,092 comments on the post much less the 502 comments on Schmidt’s follow-up post.

If I may digress briefly, I have often thought there must be a word for writing that is an example of what it is discussing. An easy on the beauty of the English language that uses English beautifully. A piece bemoaning poor grammar that is itself filled with grammatical errors. A paean to courage that required great courage to write. A childish refutation of accusations that the writer is childish. A rant about rants. Onomatopoeia writ large, so to speak. Schmidt’s original post, written in response to charges that science comes far down on the priority list of the AAGW establishment; that said establishment is knowingly making dubious claims; and that said establishment slurs and marginalizes those who disagree with it, would deserve pride of place in any list of such writings.

Back to the post. Schmidt writes:

Clearly no-one would have gone to this trouble if the academic object of study was the mating habits of European butterflies.


Commenter lgarvin replies in part:

That depends on whether or not people were trying to re-order the global economy on the basis of those butterfly studies.


And that, of course, is the crux of the matter. I am willing to accept that most scientific disciplines seethe with personalities, politics, pettiness, and personal attacks. (Hey, I went to grad school.) I am certainly aware that older software often suffers from ugly code, indecipherable routines, an excessive need for manual intervention, and - shall we way - hinky data sets. But most scientific disciplines are not insisting that we need to immediately radically alter the entire basis of our way of life or face cataclysm.

If you’re prophesying the end of the world then - unless you're speaking directly with God - you should be sure both your data and your programs are clean; you should be not merely willing but eager to provide your data and your programs to the whole world for verification; and you should be delighted that people with expertise in related fields like statistics are interested enough in what you’re doing to dissect it. Most important, you should make clear to those who lives you want to at best upend and at worst pretty much destroy that you are, in fact, sure, eager, and delighted. Making it clear that you uncertain, recalcitrant, and scornful is not a good way for you to convince me that you know what you’re talking about, much less that my world is safe in your hands.

*****

Reading:

Deafening Silence points out that the Climate Audit site is difficult to get into due to increased volume. This problem now seems to be resolved but posting is occurring at a Climate Audit mirror site here.

Watts Up With That is posting on Climategate. The oldest post is here.

A stand-alone Website has a searchable data base of the CRU emails, organized somewhat differently from the one Deafening Silence links to.

The emails sound bad but much of what is in them can be explained or spun or is understandable to anyone who has ever written an exasperated email. Not all, but much. I think the state of the computer software code and databases is much more interesting:

L'Ombre de l'Olivier looks at some of the code. He has a link to his copy of HARRY_READ_ME.txt. This is apparently a log kept by the poor programmer who inherited the software at the East Anglia CRU when the original developers left. The programmer (Harry) documents the problems he encounters while trying to figure out what’s going on. You don’t need to read code to follow what’s going on - Harry’s comments tell the story.

HARRY_READ_ME is both agonizing and hysterical. (Be sure to visit Item 17 for a look at squared numbers going negative.) I haven’t read through the whole thing yet but so far my favorite line is in Item 27:

Oh GOD if I
could start this project again and actually argue the case for
junking the inherited program suite!!


Amen, brother. Amen.

*****

Updated November 25, 2009, at about 4:30pm:

This post from the CBS News blog is a must-read. It provides more background thus complementing what Deafening Silence has up. The post concludes with:

The irony of this situation is that most of us expect science to be conducted in the open, without unpublished secret data, hidden agendas, and computer programs of dubious reliability. East Anglia's Climatic Research Unit might have avoided this snafu by publicly disclosing as much as possible at every step of the way.


I found this via Megan McArdle although I’d seen references to it elsewhere. Please do also read McArdle’s post in which she draws an interesting conclusion about the value of any cost-benefit analysis based on the East Anglia CRU software and points out that if - as appears to be the case - the East Anglia CRU itself “cannot now replicate its own past findings” then:

Obviously, this also casts their reluctance to conform with FOI requests in a slightly different light.

Sunday, November 22, 2009

Buyer Be Happy

That’s the current Best Buy slogan. It’s cute with that whole play on “Buyer beware” thing going on. The problem is it sounds an awful lot like, “Buy or be happy”. Which, given the problem of consumer debt, is probably closer to the truth.

Saturday, November 21, 2009

Five health insurance issues: Back to the grocery store

After I finished my Grand Finale post on five health insurance issues I began to worry I had not distinguished clearly enough between health care and health insurance and the role of the free market in each of these. Grim’s comments to that post confirmed my concerns on that score. So let’s return once more to the grocery store and see if I can make myself clearer.

I do most of my grocery shopping at Kings Supermarket, the one on Route 23. It’s bigger than the one in Upper Montclair so there’s a larger variety and it’s less claustrophobic. At the same time it’s smaller than the ShopRite and PathMark stores near me and usually less crowded so it’s a more pleasant place to shop. I think Kings’ prices are in line with those of the larger stores perhaps a few cents cheaper but it’s been worth it to me to have a nicer shopping experience. Now Kings is revamping its product line, however, and attempting to bring prices down. I still do most of my shopping there but I’m beginning to feel like they have too many products on the shelves with too-short expiration dates and I’m not always totally happy with their meats. I just found a butcher shop in Upper Montclair so I may try buying meat there next time. I think they’re a little more expensive but I’ll have to do some comparison shopping to be sure - and then decide if the extra money is buying me better quality.

I don’t do all my shopping at Kings. I like the 365 Day brand olive oil from Whole Foods so I’ll run in there every so often and stock up on that. When I’m in there I also like to pick up a bag of their 365 Day Salt and Pepper Potato Chips - yum! I used to buy more groceries from Whole Foods but once Kings realized how popular some of their stuff was they started carrying it. So now I can buy my soy sour cream from Kings. And, of course, almost every store now carries soy milk. That’s still cheaper at Whole Foods than anywhere else but it’s not enough cheaper to make a separate trip worth the gas and time. I made a wonderful Five Cheese Penne for my husband’s birthday last year and Whole Foods had the best selection of the cheeses I needed for that.

If I need a lot of canned goods - tomatoes, beans - or a lot of non-food items - aluminum foil, laundry detergent - I’ll run to ShopRite. I really don’t like their meat at all but I think they have slightly better prices on non-perishables so it’s worth it to me to make a trip there if I’m going to stock up. They also have a much better selection of Duncan Hines cake mixes than Kings so I’ll pick up a bunch of those while I’m there. ShopRite’s produce is usually quite good so if I’m in there anyhow I’ll buy what I need in the way of lettuce, apples, and so on. And if I want a wide selection of frozen foods - pizza, yum - ShopRite is much better than Kings. It used to not be worth it to run in there just to pick up a California Kitchens Margherita but now that they’ve installed self-checkout - and gotten the bugs out - it’s a breeze especially if I’m already in the area.

I used to hit the FoodTown further up Route 23 because I love Spice Islands spices and it was the only place around here that carried them. They don’t anymore so I never go there. I’ve pretty much adjusted to life with other spice brands - most of the Morton & Bassett brand spice are really good, their bay leaves are great, and the name of the spice is on top of the lid which is very handy is you’re looking down at rows of spices trying to find the one you want. Still I’ve never found a garlic powder that comes anywhere near Spice Islands; luckily I can order that over the Internet.

There is a PathMark near us but I really don’t like shopping there. Their shelves always seem to be understocked and they’re often out of the one thing on my list that I just have to have. However there’s a very nice little Italian deli close by that has wonderful bread and is often a stop to pick up rolls and turkey for lunch.

I love Trader Joe’s but there isn’t really one all that close - and the closest one is near a super-busy mall. I have vegan friends who shop there a lot and also hit a lot of Indian and Asian markets for more exotic ingredients. We do have a farmers’ market in town where I can find wonderful corn and those fabulous Jersey tomatoes during the summer. They also have a brief but incredibly delicious few weeks of peaches.

I buy flour tortillas at Kings but for corn tortillas I like the little corner store up the street. They sell them in packs of 25 or more and they’re always super fresh. There’s also a small liquor store very close to us but their selection is limited so for wine I go to the Wine Merchant. It’s handily in the same shopping center with the ShopRite so sometimes I run in there, too.

I’m sure that by this time you’re fascinated by my grocery shopping adventures - or at least ravenous. But you may be asking what this all has to do with health care and health insurance.

Health care is - or should be - like groceries: a great variety that can satisfy all needs at the best possible price. Health insurance companies are like grocery stores: they don’t produce health care but they are to all intents and purposes where we purchase it. Unfortunately health insurance companies function nothing like grocery stores. We can’t flit from company to company looking for the best deal on a treatment we want or need; we can’t comparison shop; we can’t decide we’ll pay a little more for this treatment because we want this particular doctor.

When I buy health insurance as it is currently structured, it’s as if I can now shop at one and only one grocery store. I get only the products that store chooses to carry. If I need something it doesn’t have, I’m out of luck - no Five Cheese Penne for a birthday dinner. If the store decides to start cutting corners on products, I’m out of luck - dinner may have to be whatever is going to expire tomorrow. If Spice Islands decides to stop doing business with the store I’m committed to, I’m out of luck - I spend my life eating inferior garlic bread.

If I get my health insurance through my employer, the situation is even worse. Now it’s as if I’m forced to buy all my groceries from a store I didn’t even get to pick myself - if my employer picks PathMark, too bad for me.

A free market in health care - like a free market in groceries - is a Very Good Thing. Consumers (patients) must decide whether a treatment is worth them spending their own money on. If they decide it is then they will pay careful attention to exactly what they are getting and exactly how much they are paying for it. They will comparison shop; they will seek out innovative products that provide better quality or lower costs or both. On the other side, many producers (health care providers) will compete to make their product better and lower priced. Others will strive to make their product outstanding so they can charge more for it. Some will find innovative ways to deliver services. Both consumers and producers benefit.

A free market in health insurance may or may not be a good thing but to me that’s irrelevant. Health insurance as currently structured deforms the free market in health care. It doesn’t matter if we’re talking about private health insurance or public; traditional or HMO; catastrophic or first dollar. All our existing forms of health insurance are incompatible with a truly free market in health care.

In contrast, I believe the catastrophic health insurance plans of DeLong and Goldhill - if correctly structured - offer the possibility of providing the advantages of a free market in health care while avoiding the great danger of such a market: that in catastrophic situations, people will be unable to purchase the health care they need. That’s why I’ve already spent so much time analyzing their plans and why I’ll be spending even more time doing so.

*****

Reading:

Health 'Reform' Gets a Failing Grade: Read the whole thing but this is what jumped out at me:



Our health-care system suffers from problems of cost, access and quality, and needs major reform.

[snip]

The system we have now promotes fragmented care and makes it more difficult than it should be to assess outcomes and patient satisfaction. The true costs of health care are disguised, competition based on price and quality are almost impossible, and patients lose their ability to be the ultimate judges of value.


The headline says it all (via TigerHawk): This post quotes Milton Friedman’s observations on the four ways to spend money. I contend that health insurance functions like a combination of the second and third ways. The insurance companies think like this:

Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I'm not so careful about the content of the present, but I'm very careful about the cost.


The policyholders think like this:

Then, I can spend somebody else's money on myself. And if I spend somebody else's money on myself, then I'm sure going to have a good lunch!

Thursday, November 19, 2009

Fear, hate, and Palinoia

I like Sarah Palin in that visceral sort of way that one likes or dislikes public figures. I think she would have made a perfectly adequate Vice-President and I don’t think electing her as such would have been a disaster under any circumstances. Best case scenario? John McCain would have served out his term and Palin would have buckled down, taken the opportunity to learn what she didn’t know, and emerged as a clearly qualified Presidential candidate in four (or, less likely, eight) years. Worst case scenario? McCain would have died before his term was over and Palin would have proven to be a bad President. The country would have survived - the goddess knows we’ve survived lots of bad Presidents in our history.

Middling scenarios? McCain would have served out his term and Palin would haven’t learned anything more than how to attend lots of state funerals and weddings. Or McCain would not have served out his term and Palin - with help from everyone in government who would have rallied around in time of crisis - would have proved her mettle and done a decent job as President.

At the same time, I understand there are lots of people who don’t like Sarah Palin in that visceral sort of way one likes or dislikes public figures. I also understand that there are people who thinks she’s not smart enough, too naive, too far right, not experienced enough, not intellectually curious enough to ever be seriously considered as Vice-Presidential material, much less Presidential material. That’s their prerogative and they may be at least partially right. I have some very similar thoughts about Barack Obama.

What I don’t understand is why so many people hate Sarah Palin. I mean really, really hate her. They can’t just ignore her and they can’t mention her without saying something ugly. They think every form of misogynistic insult is perfectly justified as long as it’s directed at Palin. They’re happy - really, really happy - to attack her children. They sound exactly like some bitter drunk who can’t stop talking about his or her ex, who left for a younger, more attractive lover and got the kids, the cars, the house, and the bank accounts. It is quite possibly the most bizarre phenomenon I’ve ever witnessed in politics.

As it happens, three of the bloggers I read regularly are writing about this very phenomenon - from three very different points of view. Reclusive Leftist writes about Fear of women:

... our nation is also in the grip of some kind of atavistic looming fear of women as evil monsters. Sarah Palin is no weirder than most Republican politicians; [snip] Yet based on the media coverage of the woman, you’d think she was the greatest threat to western civilization since the Battle of Tours.


All of her writing about the attack-Palin phenomenon is must reading and this post is no exception.

Megan McArdle presents the best brief summary I’ve seen of the Newsweek problem and coins the term Palinoia (perfect word, perfect concept):

It's when you think people are out to get you, and then they do their best to justify your erroneous belief.


She concludes:

There seems to be an unhealthy obsession with tearing her down. And really, guys, if you'll just back off a little, she'll do the job for you. Have you seen that resignation speech? How about we all act like she's a former governor and vice presidential candidate, rather than Public Enemy #1?


This, of course, is one of the most bizarre aspects of Palin Derangement Syndrome. People were also deranged when it came to George W. Bush but at least he was, like, you know, the President so he couldn't just be ignored. Palin holds no office, has no political position. If she’s as bad as her detractors think, she’s going to disappear without a trace when her fifteen minutes of fame are up. Why the compulsion to keep bashing her?

Meanwhile, Eric at Grim’s Hall quotes and links to InstaPunk, a blogger I don’t read. InstaPunk’s piece, Hating Sarah Palin, contains some language that I, as a feminist, can’t countenance but he asks the right question (emphasis his):

But here's what I don't get. Hating Sarah Palin. That's my whole point here. Think about it. Who do you have to be to hate Sarah Palin?


I can’t pick just one part of his answer to quote - you have to read the whole thing.

I’ve said it before and I’ll say it again. I really hope I’m alive 20 or 30 years from now when sociologists and political scientists look back at the Presidential campaign of 2008 and its aftermath and explain what the heck was going on with all the people who hated - truly hated - Sarah Palin.

Monday, November 16, 2009

Five health insurance issues: Grand finale (updated)

[Updated, November 21, 2009: Grand, perhaps, but not the finale. I have up one more in the sequence here.]

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. As usual, I’ve created a new category - “Five Health Insurance Issues” - to link the posts.

To review my five issues before I sum up:

Issue 1 : While most of us could pay for normal health care expenses ourselves, most of us need health insurance to cover serious situations.

Issue 2: Health insurance is not universally available or universally affordable through the market as it currently exists. Lack of health insurance does in fact often mean less effective medical care when someone is seriously ill. This is not right.

Issue 3: A health care system run entirely by the government is a bad idea.

Issue 4: As currently structured, all insurance - private or government, cheap or expensive, HMO or traditional, catastrophic or first-dollar - masks the true costs of treatment from those who purchase that treatment. This is bad for patients and bad for health care providers and bad for any hope of reining in health care spending through individual decision making.

Issue 5: Either we have to toughen up and let people - including children - die when they - or their parents - are too dumb to buy health insurance they could get and could afford or we have to find a way to force them to chip in for the health care we’re willing to give them if they get sick.

My conclusion - and I assure you it’s a reluctant one - is that a totally free market in health care and health insurance cannot address these issues. A free market will not make insurance affordable or obtainable for everyone; it will continue to mask the true costs of treatment; and it will do nothing to address the problem of free riders - which in a totally free-market system means we’d have to let them and their children die. If someone can describe to me a free-market plan that doesn’t have those effects, I’m all ears. Bonus points is you can describe a system that will guarantee that someone like me, who has cost her insurance company vast sums of money and more pre-existing conditions than you can shake a stick at, will be able to retain my health insurance in a free-market system at a cost I can reasonably expect to afford. Extra bonus points if you can figure out how I could change health insurance companies if I wanted to.

As my third point above makes clear, a single-payer system is not the way to go either. Yes, it will make health insurance/care universally available and it will take care of the free-rider problem. It may make it universally affordable but only if you ignore the taxes necessary to pay for it. However, it most definitely does not unmask the true cost of treatment. This means there is no hope of getting health care spending to come down via individual decision-making; we will be left with no options except to squeeze providers, refuse to cover treatments, and decide what is and isn’t covered based on some political hell’s brew of money and lobbying. If someone can describe to me a single-payer plan that doesn’t have those effects, I’m all ears. Bonus points if you can make me love the fact that birth control is not part of the Basic package on the exchange. Extra bonus points if you are pro-choice and can embrace the Stupak amendment.

What we have now is a hybrid. The free market for health insurance copes well with people who are healthy and employed. The free market copes well with people who are unemployed, healthy, and reasonably well off financially. The free market copes poorly with people who are unemployed and either not healthy or not financially well-off; to some extent the government picks up the slack. If you’re poor enough, there’s Medicaid; if you’re old enough, there’s Medicare; if you’re sick enough, emergency rooms have to treat you. Some people fall through the cracks. The more people who lose their jobs the more people there are who may fall through the cracks. (Surely the idea that health insurance should be tied to jobs is the handiwork of some imp of Satan.)

We can continue with this system, using regulation, government subsidies, and government programs to patch those cracks. If this is what we want to do, then I still think the best solution is to let anyone who wants to buy into the Federal Employees Health Benefits Plan (under a separate risk pool) with government subsidies for those who need them. We’d get rid of Medicaid but keep Medicare. We’d forget the health reform bills currently floating around Congress. We’d keep people from falling through the cracks but we wouldn’t even be attempting to rein in health care via individual decision-making; we’d just be postponing the day when the costs would eventually have to be faced up to.

Alternatively we can follow the route of the Democratic health reform bills. Frankly, I think they’re worse than single-payer. Under those bills we keep Medicare; we expand Medicaid; we set up the Exchange; we get a public option; we force so many conditions on private insurance companies that they’re basically public utilities. We get twice the bureaucracy and twice the overhead. We get less individual choice rather than more. We don’t get any incentive for people to make decisions about how much health care is worth to them. Instead of incentives for providers to innovate we get government pilot projects, government bundling initiatives, government this, that and the other. They won’t work; just look at Medicare. We get a monster.

If we truly want to do something major to overhaul the system then I prefer the Goldhill and DeLong models. They help those who need help but do not put the government totally in charge and do not mask the cost of treatment. Their plans are mandatory which means everyone is forced to buy catastrophic insurance and to set aside money in a Health Savings Account - no free riders here and everyone can (must) participate. Yes, the government runs the catastrophic insurance part of the plan. But the HSA part of the plan is for individuals to do with as they please which means they are fully exposed to health care costs up to the point of their deductible or trigger. Because any unspent money goes back to the individual each of us can decide what health care is important enough for us to spend money on - and each of us has to be willing to spend his or her own money before we can start spending other people’s.

I’m fully aware of the coercive nature of the requirements to buy government-run catastrophic care and to put money in Health Savings Accounts. I know these are an absolute bar to this plan for Libertarians and most Conservatives. I am sympathetic to that point of view. However, I have neither the courage nor the hard-heartedness to live in a world where health care and health insurance are strictly free market. I don’t want to fall through the cracks and I’d rather my fellow citizens didn’t either - especially the young ones. It seems to me that the best combination of free-market and government involvement comes from the Goldhill/DeLong approach. Yes, it takes my money but if structured correctly it gives me back control over my health care decisions while providing a safety net if disaster strikes.

Five health insurance issues (5)

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; about the second issue is here; about the third issue is here; about the fourth issue is here. This post is about the fifth issue; my next post is the grand finale. As usual, I’ve created a new category - “Five Health Insurance Issues” - to link the posts.

Issue 5: Not only are we not willing to let people die because they’re too poor to afford or too sick to get health care and/or health insurance, we’re not willing to let people die because they’re too stupid to buy health insurance even when they could get it and could afford it. And even if we’re willing to let an adult die from such stupidity, we’re not willing to let his children die.

Take a look at Tom. He’s 45 years old, married, two children. He’s made a good salary all his life and been in good health all his life. He’s always free-lanced and has never been willing to ante up for health insurance for himself or his family. Suddenly he’s diagnosed with, say, Hodgkin's lymphoma. This is an eminently treatable disease but Tom can’t afford to pay for the treatment himself - and he’s got no health insurance. It’s possible Tom will be unable to obtain treatment and will die - it depends on whose horror stories you listen to - but if we as a society knew about that outcome we’d be unwilling to tolerate it. And even if we were willing to tolerate Tom’s death, what if his eight-year-old was diagnosed with leukemia? Again, very treatable; again, very expensive. There’s no way we’d be willing to knowingly let her die just because her father was an idiot.

So point the fifth: Either we have to toughen up and let people - including children - die when they - or their parents - are too dumb to buy health insurance they could get and could afford or we have to find a way to force them to chip in for the health care we’re willing to give them if they get sick.

Thursday, November 12, 2009

Five health insurance issues (4)

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; about the second issue is here; about the third issue is here. This post is about the fourth issue; my next post will deal with the fifth issue 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 4: The New York Times, in an article about how Democrats are concerned the health reform proposals on the table won’t control costs, writes (emphasis mine):

There are a variety of ideas for attacking cost increases more aggressively, including setting Medicare reimbursement rates for doctors and hospitals more rigorously and discouraging workers and employers from buying expensive health insurance policies that mask the true costs of treatment.


Guess what? All health insurance policies - private and government - mask the true costs of treatment. I go to the doctor. I have a copay. I pay the copay, let’s say $30. Is that all the doctor gets? I have no idea. Or I go to the doctor. I have a traditional plan so I pay nothing during my visit. The doctor bills my insurance company for $150. My insurance company allows only $70 for the visit. I haven’t met my deductible so I pay the $70. Or I go to the doctor. I don’t have any insurance. I pay $150 on the spot. What is the true cost of the treatment? $50? $70? $150? Who knows?

Why is this bad? For a number of reasons. First, it means patients - health care consumers - with insurance have less incentive to think twice about seeking health care. This reason usually gets expressed as “people go to doctors when they don’t need to”. I’ve never been sold on that idea - I personally would be willing to pay money not to have to go to doctors. I will somewhat grudgingly concede that having insurance means I don’t blink when my doctors tell me I need another blood test or another X-ray or another MRI . And the doctors don’t blink either - we all know I’m not paying for it. But this is not the real problem with that lack of incentive to think twice.

The real problem is that when the true costs of treatment are masked an individual neither has to decide nor gets the opportunity to decide whether a particular treatment is worth what it costs him. This is an easy formulation to attack: why, I’m suggesting some poor person should have to choose between getting a flu shot and putting food on the table. No, I’m not. I am suggesting that all of us should have to choose between getting flu shots and getting FIOS - or buying a latte every morning or buying a new winter coat every year. If you would rather have cable TV than a flu shot why should my tax dollars buy your flu shot?

This is why I’m so intrigued by the catastrophic coverage proposals I wrote about in my earlier post. The existence of Health Savings Accounts (subsidized for those who need it) gives everyone - rich and poor - a chance to decide how to spend their money: health care or something else. If you never, ever get the flu then skip the flu shot and use the money for something else. If you really, really need to avoid the flu then get the flu shot and give up something else. Under these types of plans if my doctor tells me I need another X-ray, I do a lot more than sit glassy-eyed. I ask how much that X-ray will cost me and when I realize getting the X-ray will cost me, say, as much as buying gas for a visit to my relatives, I’m likely to ask a lot more questions about exactly why I need that X-ray and how bad would it be if I waited and can we just see how things go. The flu shot and the X-ray are there for those who need them enough to pay for them - but they’re not forced on those who would rather spend their money on something else.

There is a second reason why masking the true cost of treatment via insurance is a bad idea: it doesn’t give patients any incentive to patronize providers who come up with ways to improve treatment and/or lower costs - which means it doesn’t give providers any incentive to do those things. For example, let’s say I need shoulder surgery. I can get it done at a hospital-based outpatient center for $3000. I’ll need follow-up pain blocks from an anesthesiologist for a few days and for that I’ll have to go to the Emergency Room - there’s no other way for the anesthesiologists associated with the hospital-based center to handle that administratively. On the other hand, my surgeon participates in a free-standing surgical center. I can get my surgery and my follow-up pain blocks there. The surgery will cost me $2500.

Obviously, I’d much rather go to the surgical center - it’s more pleasant, more convenient, and cheaper - and if I’m paying for my surgery myself, I will. The orthopedic group is rewarded for providing a better product at a lower cost. But what if the surgical center doesn’t participate with my insurance company while the hospital does? Then I get the surgery for nothing from the hospital so that’s where I go. The orthopedic group is not rewarded for providing a better product at a lower cost. And why doesn’t the surgical center participate? Because the insurance company won’t actually pay $3000 for the surgery; it won’t even pay $2500. No, the insurance company pays the hospital $1000 for my surgery. The hospital makes this up by charging uninsured patients a higher price; the surgical center can’t do that - their prices are fixed.

And not only is the surgical center not rewarded for its efforts to provide better health care at a lower price, we also have no idea what the market price for my shoulder surgery really is. It might be $1000, $2500, or $3000. Or it might be $500 or $5000. We simply don’t know and we have no mechanism for figuring that out.

Or take this recent editorial from AARP. According to them, manufacturers are selling power wheelchairs to suppliers for about $1000. Then the suppliers are selling those same wheelchairs to Medicare recipients for about $4000. To AARP this is a clear case of waste made possible by the “medical equipment lobby, which spent $6.3 million in presidential and congressional campaign contributions last year” resulting in “Congress [blocking] attempts to impose competitive bidding.” To me this is a result of insurance masking the true costs of treatment. If I was spending my own money to buy a power wheelchair, I’d look for the best possible price. A supplier who was willing to sell the chairs for $3000 would own the market - until another supplier stared selling them for $2500. When producers and consumers deal directly with each other you don’t need competitive bidding.

Ah, you say, but if I bought catastrophic insurance from my insurance company I’d be well aware of the cost of treatment. Um, no. Somewhat more aware, yes; totally aware, no. Even with catastrophic insurance - at least around here - the insurance company differentiates between in-network and out-of-network providers. The company also decides how much it’s going to allow for a procedure. So my shoulder surgery would still cost $1000 for the hospital-based surgery versus $2500 for the surgical center surgery. The difference is that now I’d be paying the $1000 instead of having my insurance company pay it. On the other hand, I’d probably be less likely to think $4000 was a good price for my power wheelchair if I had the high deductible of catastrophic insurance. So catastrophic insurance can help keep government health insurance from paying unreasonably high prices (that’s not usually a problem with private insurance) but even catastrophic insurance as it’s currently structured doesn’t do enough to expose patients to the true cost of their health care. The true costs of treatment will always be masked to some degree as long as insurance companies stand between the consumer (the patient) and the producer (the health care provider).

These two reasons together - lack of incentive to consider the opportunity cost of purchasing health care on the part of patients and lack of incentive to produce a better product at a lower price on the part of health care providers - are also bad for society. It means we have no hope of reining in health care costs via individual decision-making and will be forced to do so by more draconian means such as paying providers less and refusing to pay for certain treatments. This will result in a “one size fits all” approach that will provide some people with services they would have foregone in order to get other, unavailable services they need or want.

So point the fourth: As currently structured, all insurance - private or government, cheap or expensive, HMO or traditional, catastrophic or first-dollar - masks the true costs of treatment from those who purchase that treatment. This is bad for patients and bad for health care providers and bad for any hope of reining in health care spending through individual decision making.

Party of one

This is just a fragment, some left-over thoughts after an earlier post.

For me, the Democrats are too fiscally liberal while still remaining both too corporatist and too statist. They are also too socially liberal by which I mean not that I necessarily oppose their social policies (some I do, some I don’t) but that I think those policies should come about at the State level not the Federal and through voters not courts.

On the other hand, the Republicans claim to be fiscally conservative but don’t show any particular aversion to deficits, pork, and corporate welfare as long as they are in power. Once the Democrats are in power, of course, Republicans suddenly see the light. Republicans are also too socially conservative by which I mean they are every bit as interested as the Democrats in imposing their will on States via national legislation instead of letting the political process play out closer to home.

Neither party seems very interested in doing anything to get my vote. Maybe that means my views are pretty weird. But maybe it means I’m part of a vast untapped reservoir of votes just waiting for a party smart enough to appeal to us.

Wednesday, November 11, 2009

Five health insurance issues (3)

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; about the second issue is here. This post is about the third 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 3: A health care system completely run by the government is a very bad idea. One of two things will happen. The first possibility is that the government-run health care system will pay for anything anyone wants covered. The best description I read of how this happens - and I’m sorry I can’t remember where to credit the author - is that a group which wants a treatment covered has a lot of intensity and can lobby energetically; those who will pay the bill (i.e., the rest of the taxpayers) have little intensity so there is no lobbying group to mount a counter-offensive. The squeaky wheel gets the grease. This is, of course, unsustainable in the long run so even if this is the first result of a totally government-run health care system, we’ll eventually end up with the second possibility.

The government will begin rationing care. Decisions will be be made on some combination of effectiveness and cost with a lot of (again) lobbying thrown in. This is not an irrational approach: there is only so much money to go around and what we spend on health care we don’t have to spend on, say, national defense or education. However as the horror stories that float out of Britain and Canada make clear, this is not a good thing for the individuals who will suffer more pain or die sooner than they would if the most effective possible health care was available to them.

So point the third: A health care system run entirely by the government is a bad idea.

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.

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.

Monday, November 9, 2009

Feminism and health reform (2)

Megan McArdle does her usual excellent job in explaining why the Stupak amendment was pretty much inevitable. After dismissing the “transparently ineffective gimmick” of “segregating the funds so that the federal subsidy wouldn't pay for the abortion part” she writes (emphasis mine):

I knew this was coming two years ago, and not because I'm sort of amazing prognosticator. Medicaid in most places covers abortion only in the cases of rape, incest, and the life of the mother because, well, when the government provides your health care, the procedures that are covered will be determined politically.


My favorite part of her post, though, is what comes right after that quote:

I had thought that Democratic feminists understood the trade off they were making, and believed that it was worth it. But many of them seem to be genuinely surprised that health care rules will be written with respect to the opinions of the National Right to Life Committee.


Yes, they are surprised. Even liberal feminists who saw clearly the misogyny in last year’s Democratic primary fight and Presidential campaign never seem to have realized there would be any trade-off. Oh, sure, they worried a little about what might happen if we had government health care and the Republicans ran the government. But that was a concern for later, not for now. After all, they somehow managed to convince themselves, surely Democratic health reform would include support for abortion funding - and birth control.

I can’t really blame the Democrats for thinking liberal feminists will be willing to sit still for this: 2008 proved the Democratic Party owns most liberal feminists literally body and soul. Or as our mothers might put it, why would they buy the cow when they're getting the milk for free?

Feminism and health reform (1)

Octogalore has up a must-read post about health reform legislation, the Stupak amendment, and why women should not be wholly owned subsidiaries of either political party. She starts off in a way that warms my heart:

“Feminism is about more than women’s rights, it’s about an interlocking network of all oppressions!”

Not by my definition.


She then explains why electing Republicans who appoint Supreme Court justices who overturn Roe v Wade would not be the cataclysm Democrats would like women to believe. She further explains why the House health reform bill would raise higher barriers to poor women getting abortions than would the overturn of Roe v Wade. She sums up with:

I think in this instance they [Republicans] would be better for women’s rights simply because smaller government has less ability to affect women’s choices, not because they also wouldn’t sell women out for the “greater good.” This particular health plan, rather than simply straight-out subsidizing health care for those Americans who cannot get it through their employers and cannot otherwise afford it, seeks to expand government (male-dominated) power, which then takes advantage of those it sees as reliable, uncomplaining loyalists: women.


Not content with having written a truly outstanding post, Octogalore responds very thoughtfully to a commenter who claims President Obama is not a fiscal liberal but rather a corporatist. She talks about what defines a fiscal liberal and concudes:

I think one can be a corporatist and still be fiscally liberal, in in a lot of ways Obama and Bush were both. And I also think being a fiscal liberal does not equate to caring about lower socioeconomic classes. Some fiscal liberals do -- others don't. The latter are more concerned with expansion of government (and therefore their own) power. Similarly, some fiscal conservatives do care about lower socioeconomic classes -- and others don't.


Read the whole thing.

Sunday, November 8, 2009

Abandon

I know nothing about the context of this quote. I know nothing about Bernard Devoto except what I read in his very brief Wikipedia entry. But I really hope he’s right:

Sure the people are stupid: the human race is stupid. Sure Congress is an inefficient instrument of government. But the people are not stupid enough to abandon representative government for any other kind, including government by the guy who knows.

Welcome to the real world

I’m not happy about the possible inclusion of “religious and spiritual healthcare” in a Senate health reform bill. I’m not entirely happy about the limitations on abortion in the public option and any plans sold on the Exchange and subsidized by the government. I’m really, really not happy about the exclusion of birth control from the required elements of a Basic health insurance plan.

But you know what? I get to be unhappy because I didn’t want government-run health care in the first place. These people - Reclusive Leftist, Blue Lyon, Movin’ Meat - they don’t get to be unhappy. They want government-run health care. And when you get government-run health care you get the health care the government wants you to have. If the Federal government wants you to have people pray over you to make you better, you pay to pray. If the Federal government doesn’t want you to have an abortion, you don’t get an abortion. And if the Federal government doesn’t want you to get birth control, you get pregnant.

Reality-based, my foot.

Saturday, November 7, 2009

Righteous anger

After I said what I had to say about the tragedy at Fort Hood, I read this at Right Wing Nut House:

In the rush to score political points against the opposition, one thing appears to be an afterthought; the unspeakable tragedy of 12 people having their lives extinguished for no good reason at all. In fact, both right and left bloggers are using the dead bodies of the victims to play “gotchya” with the opposition. And that’s what’s got me smoking hot this morning.


Read the whole thing.

(Via Hot Air via neo-neocon)

Brava!

The guys (and I use the word advisedly) over at The Corner are squabbling about an apparent conflict between two of what they call “conservative values”: being anti-abortion and being pro-family. This strikes me as the stupidest argument I’ve seen in a long time. I am not anti-abortion across the board but I simply don’t see how anyone can believe that abortion is a good thing because it reduces the number of single-parent families.

Thank goodness for sensible women. Kathryn Jean Lopez’ response to all this is:

There's no conflict. If you want to assume humans have no reason and can't be encouraged to exercise sexual discipline for the sake of self-respect, if nothing else — which I do not — there is another a word that avoids the "abort or be a single-mother" distraction equation: adoption.

That's not always an easy solution. But it actually is one that avoids ending a human life.


Amen, sister.

Give it a rest

The Fort Hood shooting occurred on Thursday afternoon at about 2:30pm my time. By the time I was reading through blogs between 12 noon and 1pm on Friday - less than 24 hours after the shooting - a lot of people were telling me that the massacre proves something - pretty much whatever they want it to prove. Even some of those who insisted the massacre itself didn’t prove anything were perfectly willing to insist that the other side’s reaction to the massacre proved something. I imagine that today there are people claiming the other side’s reaction to their side’s reaction proves something.

Give it a rest, people. The shooting at Fort Hood doesn’t prove anything, not yet anyhow. Are there questions to be answered? Of course. But even when we know everything we can know there’s a good chance the shooting still won’t prove anything - except that the shooter was crazy, evil, or a coward.

What we know right now is that thirteen people are dead; thirteen families devastated. At least thirty people are wounded. The news report I heard yesterday said that all those wounded were in stable condition but some were so seriously wounded that, as the spokesman put it, it is not possible to say how the situation will resolve.

This is not an occasion for choosing sides; this is an occasion for grieving together. Wikipedia has a list of the names released so far. Read it and weep.

Friday, November 6, 2009

Nag, nag, nag

The Soldiers’ Angels Valour-IT “friendly” fund-raising competition is on until November 11. Air Force, Army, Navy, and Marine teams are vying to see who can raise the most money for this very worthy project:

Project Valour-IT, in memory of SFC William V. Ziegenfuss, helps provide voice-controlled/adaptive laptop computers and other technology to support Soldiers, Sailors, Airmen and Marines recovering from hand wounds and other severe injuries.


All the stuff they provide is very helpful and very clever but I think hand-held GPS units for those suffering from PTSD and TBI are a stroke of genius.

If you’ve already contributed, many thanks. If you haven’t, please consider doing so. See this post for info on how to do so.

Wednesday, November 4, 2009

Catastrophic comparison, Part 1

The idea of government-paid - or government-provided - catastrophic health care has popped up here and there recently. It is the heart of David Goldhill’s proposal; Martin Feldstein urged it last month (via Greg Mankiw without comment); and Ross Douthat has advocated it, linking both Feldstein’s proposal and a June 2007 plan from Brad DeLong.

DeLong, Goldhill, and Feldstein have slightly different motivations for their proposals but one thing all three agree on: more consumer exposure to health care costs. Feldstein puts it thus:

A good system should not try to pay all health-care bills. That would lead to excessive demand, wasteful use of expensive technology and, inevitably, rationing in which health-care decisions are taken away from patients and their physicians. Countries that provide health care to all are forced to deny some treatments and diagnostic tests that most Americans have come to expect.


DeLong uses the specific example of cost sensitivity and resultant price reductions in some types of laser eye surgery:

It does seem to matter that consumers are cost conscious and economize when they have financial skin in the game.


Goldhill is concerned with both the cost and the quality issues that arise when consumers don’t pay directly:

I believe if the government took on the goal of better supporting consumers - by bringing greater transparency and competition to the health-care [note: not health insurance] industry, and by directly subsidizing those who can’t afford care - we’d find that consumers could buy much more of their care directly than we might initially think, and that over time we’d see better care and better service, at lower cost, as a result.


So all three proposals are designed to make individuals see clearly what they are paying for their own health care. The authors believe that will result in careful decision making on the part of consumers about what treatments are really worthwhile and which doctors and hospitals provide the best value. It will also result in providers striving to deliver higher quality and lower costs while encouraging transparency in pricing. Those effects on consumers and providers will in turn result in less spending on health care. At the same time all three writers want to make sure everyone has access to care and no one is financially destroyed by medical costs. Their goals are the same; their methods differ. Let’s look at DeLong versus Goldhill first; I’ll throw Feldstein in at the end.

DeLong proposes a 20% government bite of your income. Five percent goes to pay for government-provided catastrophic insurance while 15% goes into your Health Savings Account. You pay for health bills with your HSA. If you don’t spend all your HSA in one year, you can roll the balance into your IRA or you can just get your money back. If you spend all your HSA and you need to spend more, your catastrophic coverage kicks in and the government pays the overage. In this plan “catastrophic health costs” are defined as more than 15% of your income.

Goldhill on the other hand proposes that “catastrophic health costs” be defined as $50,000:

... the real key would be to restrict the coverage to true catastrophes - if this approach is to work, only a minority of us should ever be beneficiaries.


Like DeLong, he proposes a single government pool for catastrophic coverage. Everyone is required to buy this catastrophic coverage. Those who cannot afford the premiums will be subsidized by the government. Like DeLong, Goldhill also wants Health Savings Accounts to which everyone must “contribute a minimum percentage of post-tax income, subject to a floor and a cap in total dollar contributions.” If someone does not earn enough to meet their floor amount the government tosses in the difference. So long as an individual’s medical bills do not exceed $50,000 a year the bills will be paid out of his HSA.

Goldhill also wants premiums for catastrophic care to change with age. Similarly he wants the threshold that must be reached before HSA money can be used for non-health purposes to change with age. Interestingly, he does not specify the direction of the change although I assume in both cases it would increase with age. That is, the older you are the higher premium you pay for catastrophic care since you are more likely to need it. And the older you are the more you must have in your HSA since, again, you are more likely to need medical care. Goldhill does say that the percentage of after-tax income you should be required to contribute to your HSA will increase with age since “wages and wealth typically do.” DeLong’s proposal makes no mention of age.

The big difference between DeLong and Goldhill when it comes to HSAs is that Goldhill wants HSAs to be perpetual: money left in Goldhill’s HSAs at the end of a year simply rolls over to the next year. Once the HSA amount meets some threshold (unspecified but I have some thoughts about that later) the HSA money over that threshold can be withdrawn for whatever purpose the HSA owner wants with no penalty. Any money left in an HSA after death would become part of the deceased’s estate.

This difference exists because under DeLong’s plan there can never be a gap between what is in your HSA and what you must spend before your catastrophic coverage kicks in: you throw 15% of your after-tax income into your HSA every year and if you spend more than that the catastrophic insurance foots the bill. There’s no reason for that HSA money to roll over. In Goldhill’s plan there can be a substantial gap - it’s quite possible to have less in your HSA than the $50,000 that will cause your catastrophic coverage to kick in. Goldhill deals with the possibility of such gaps thus:

What about care that falls through the cracks - major expenses (an appendectomy, sports injury, or birth) that might exceed the current balance of someone’s HSA but are not catastrophic? These should be funded the same way we pay for most expensive purchases that confer long-term benefits: with credit. Americans should be able to borrow against their future contributions to their HSA to cover major health needs; the government could lend directly, or provide guidelines for private lending. Catastrophic coverage should apply with no deductible for young people, but as people age and save, they should pay a steadily increasing deductible from their HSA, unless the HSA has been exhausted. As a result, much end-of-life care would be paid through savings.


The last two sentences confused me at first but I think what Goldhill is saying is that if young people incur medical bills of more than $50,000 they should not have to pay the first $50,000 from their HSAs before their insurance kicks in. If I’m correct in my reading of Goldhill, as soon as your medical bills for a given year exceed $50,000, your catastrophic coverage will pay all your health care costs that year - not just the amount that exceeds $50,000. So while DeLong’s 15% is a deductible, Goldhill’s $50,000 is a trigger.

Let’s say you’re 25 and you have $5,000 in your HSA. You’re in a terrible accident and your medical bills total $65,000. As I read it, Goldhill would have your catastrophic coverage pay the entire $65,000 rather than requiring you to fork over the $5,000 in your HSA and go into debt for an additional $45,000 while your insurance pays only the $15,000 that exceeds $50,000. So long as you’re young, that is. As you age you will be required to pay more and more from your HSA before your catastrophic insurance kicks in. So now let’s say you’re 45 and you have $25,000 in your HSA. You have the same terrible accident and the same $65,000 medical bills. Now you might have to fork over, say, $10,000 from your HSA before your catastrophic coverage kicks in. (Goldhill does not go into specifics as far as amounts.) Now let’s say you’re 85, you have $50,000 in your HSA, and you need a hip replacement. You might have to spend the entire $50,000 before your catastrophic coverage kicks in.

Both Goldhill and DeLong want to make sure everyone gets preventive care and both understand that allowing people to spend their HSAs on stuff other than health care may mean some people will choose not to get preventive care. Goldhill:

Some experts worry that requiring people to pay directly for routine care would cause some to put off regular checkups. So here’s a solution: the government could provide vouchers to all Americans for a free checkup every two years. If everyone participated, the annual cost would be about $30 billion - a small fraction of the government’s current spending on care.


DeLong:

Sin Taxes: on Tobacco, Gorgonzola, Three-Liter Bottles of Liquid High-Fructose Corn Syrup, Tanning Clinics (Melanoma), et cetera: Sin taxes (and, perhaps, someday general revenues) pay for an army of barefoot doctors and nurses and mobile treatment vans roaming the country, knocking on doors, and providing preventive and other long-run lifestyle services for free: Let me examine your prostate. Mind if I check your refrigerator and tell you how to eat healthier? Have you exercised today? I'm a Pilates instructor, and we could do a session now? Are you up on your immunizations? Anybody here have a fever and need antibiotics? Come on out to the van and I'll clean your teeth." The idea is to make the preventive care cheaper-than-free, to insure that nothing with a high long-run benefit/cost ratio gets left undone because people would rather get a bigger check the next April to use to buy an HDTV.


Those are the basics of Goldhill and DeLong. Now let’s add Feldstein to the mix. I have to admit I discuss Feldstein with some trepidation. Feldstein is a Harvard economist so I assume he’s both bright and competent. However his plan makes no sense to me which leads me to suspect I’ve missed something crucial and am about to reveal myself as a total moron. I even printed out his article, fearing I had missed something in pixels that would become clear in ink. Sadly I didn’t fare any better with hard-copy so here goes.

Feldstein proposes vouchers to purchase catastrophic insurance in the private market:

Specifically, the government would give each individual or family a voucher that would permit taxpayers to buy a policy from a private insurer that would pay all allowable health costs in excess of 15 percent of the family's income. A typical American family with income of $50,000 would be eligible for a voucher worth about $3,500, the actuarial cost of a policy that would pay all of that family's health bills in excess of $7,500 a year.


How the family covers the medical bills before the catastrophic coverage kicks in is up to them. Feldstein suggests they could pay out of pocket; add their dollars to the voucher to buy a more traditional insurance policy; or join an HMO. What if the family elects to pay out of pocket and then is hit with medical bills that exceed their cash on hand? They use their government credit card:

The credit card would allow the family to charge any medical expenses below the deductible limit, or 15 percent of adjusted gross income. (With its information on card holders, the government is in a good position to be repaid or garnish wages if necessary.)


The families would not have to use the government credit card; they could pay cash or use their own credit cards or take out a bank loan if they preferred. In case none of those options are feasible, however, the government credit card would not only make it possible for families to pay for care they need it would also reassure providers that bills would be covered even if the family does not have the cash or the credit to do so.

Of the three plans, I think Feldstein’s is the weakest. Most importantly, Feldstein’s proposal contains elements that undercut the whole idea of having health care consumers actually weigh the value of the care they receive. First, he proposes a government credit card rather than a mandatory HSA to pay for non-catastrophic medical expenses. Yes, people will be required to pay back anything they charge on the card but many of us find it all too easy to believe that if we pay for something with a credit card it isn’t really costing us anything. (Remember all that consumer debt we’re drowning in right now?) Being able to whip out a government-issued credit card to pay for medical care will probably make many people less sensitive to the cost rather than more.

Plus who among us really believes the government is going to be able to garnish the wages of people who go on television and sob about how their children needed braces and now they’re up to their eyeballs in debt and will go bankrupt if they have to continue to pay off their health care credit card? Please. Government-provided health care credit card debt will be forgiven faster than you can say “cry me a river”.

Additionally, Feldstein anticipates that employer-paid health plans will continue to exist. In fact he counts on them to fund his proposal. Yet employer-paid health plans are arguably one of the mechanisms that keep people from realizing what their health care is costing them.

On the other hand both DeLong and Goldhill require the consumer to spend his own money to pay for non-catastrophic health care. And it’s really his own money because if he doesn’t spend it on health care he gets it back either the next year (DeLong) or down the road (Goldhill). DeLong’s plan is slightly stronger in this regard because he does not allow (does not need) borrowing from future HSA contributions either with or without some type of government backing. Thus under DeLong’s plan the trade-off between health care expenditures and other expenditures is quite clear to the consumer. Goldhill’s plan requires more delayed gratification: the money you don’t spend today could help pay for a house 10 years from now or help pay for a really nice nursing home 60 years from now.*

A second aspect of Feldstein’s plan I don’t like is that he would leave Medicare and Medicaid as is. I assume this means the vouchers would be only for people who are too young for Medicare and not poor enough for Medicaid. I understand why he has to do this - he has no mechanism for covering that 15% before the catastrophic coverage kicks in so poor people can’t cover it and those counting on Medicare would view his plan as a reduction in benefits . I could live with leaving Medicare in place - except for that whole running out of money thing - but I have to agree with Senator Ron Wyden about Medicaid:

”... Medicaid is a caste system. It is unfair to poor people and it is unfair to taxpayers." The system, he says, makes it hard for physicians to take care of the most vulnerable in society.


DeLong does not mention either Medicaid or Medicare; my assumption is that he would include everyone in the United States in his plan.

Goldhill would explicitly bring Medicaid patients into his plan:

If we abolished Medicaid, we could spend the same money to make a roughly $3,000 HSA contribution and a $2,000 catastrophic-premium payment for 60 million Americans every year. That’s a $12,000 annual HSA plus catastrophic coverage for a low-income family of four. Do we really believe most of them wouldn’t be better off?


And Goldhill’s plan was developed partially to substitute reliance on ones own savings for reliance on Medicare but he acknowledges that:

It would take a full generation to completely migrate from relying on Medicare to saving for late-life care; ...


(Goldhill also thinks it will take a generation to migrate “from Medicaid for the disadvantaged to catastrophic insurance and subsidized savings accounts” but I’m not sure why given his point about abolishing Medicaid.)

Third, I don’t like the fact that Feldstein is going to give his catastrophic insurance vouchers to everyone not covered by Medicare or Medicaid. This means a guy making a million dollars a year who has a soup to nuts insurance plan with a super-low deductible and super-good coverage totally paid for by his employer will get a voucher. First of all, why are we taxing the health insurance plans of people making minimum wage and getting minimum employer health insurance in order to hand money to someone who doesn’t need it? Second of all, what is the rich worker supposed to do with that voucher? Sign it over to his employer to defray costs?

My fourth and final objection to Feldstein’s plan is that he wants us to buy catastrophic insurance from private companies. That sounds odd, even to me, but it strikes me as a recipe for disaster. Here’s why.

After stating that his plan will insure the uninsured; remove the risk of bankruptcy due to medical costs; and remove the “structure of insurance” as a cause of rising medical costs, Feldstein makes an interesting claim:

All of this would happen without involving the government in the delivery or rationing of health care.


Um, no. The reality is that any time you have the government involved in payment the government is also going to be involved in determining what is and is not going to be paid for. Feldstein’s plan makes that determination indirect but it’s still there. Someone is going to have to decide which medical costs can be charged to that credit card and someone is going to have to decide which medical costs count toward that 15% of income you have to spend before your insurance policy kicks in. Under Feldstein’s plan the logical approach would be for your insurance company to determine both - it should be the same group of charges. That’s fine as far as it goes but I predict it will take about 30 seconds before patient groups and medical groups start demanding that the Federal government require insurance companies to cover this, that, or the other.

If we’re going to go down that road anyhow, I’d rather cut out the middleman and just let the government decide. I’ve read in a couple of places that the Baucus bill is to all intents and purposes going to make insurance companies public utilities. It’s heretical to say so but I’m increasingly inclined to believe that would be worse than single-payer: we’ll get the costs and disadvantages of insurance companies combined with the costs and disadvantages of government-run anything. It’s a double whammy. Plus it allows the government to run health insurance while still blaming the insurance companies for all the problems. The government has the power, the companies get the grief. There’s not much accountability in that setup.

The Feldstein approach has the same drawback. Once the government is paying, the government will decide what will - and will not - be covered. We will still get rationing or over-coverage or probably some bizarre combination of both but with two layers of bureaucracy instead of just one and with little understanding that at least half the problems result from the government. If we’re going to have true catastrophic coverage for everyone then just make it a government plan. Forget the fig-leaf of private insurance companies.

This question of what’s covered is more interesting under the DeLong and Goldhill plans. They assume there are no private insurance companies** and no government credit cards; you will have to actually spend some of your own hard, cold cash before the government’s catastrophic insurance kicks in. This gives us a range of alternative ways to address the issue of what is and isn’t covered, ranging from least to most restrictive.

First, at the least restrictive end, we may find there is no need to specify what medical treatments do and do not count toward the catastrophic amount (except for excluding cosmetic surgery based solely on vanity). In order for the government catastrophic insurance to kick in an individual is going to have to spend a significant amount of his own money first. I would hope that the number of people who are willing to burn through 15% of their income (DeLong) or $50,000 (Goldhill) purchasing ineffective treatments is vanishingly small. Those who are convinced that non-traditional forms of treatment are desirable are free to pursue them and if they manage to burn up a significant amount of their own money doing so, the catastrophic insurance will kick in. The consumers will, in other words, have to put their money where their mouths are before getting the rest of us to fund their non-traditional ideas of health care.

Second, if the strictly market approach doesn’t work and a lot of people are in fact churning through their entire HSAs purchasing dung beetle carcasses to cure acne then we could decide that you can spend your HSA on whatever you want and it will all count toward your catastrophic deductible/trigger but only certain treatments would be covered under your catastrophic insurance. If you pay 15% of your income to a charlatan who chants incantations at sundown to cure diabetes, that’s your call. Once you’ve burned through that 15% the catastrophic insurance will kick in if you need an approved treatment but it won’t pay for more chanting.

Third is a harsher alternative: you can spend your HSA on whatever your want but not only will your catastrophic insurance only pay for approved treatments, only those same approved treatments will count toward the catastrophic deductible/trigger. So now if you spend $50,000 of your HSA money on non-approved treatments and then need an approved treatment, you’re out of luck. As far as your catastrophic insurance is concerned, you haven’t spent a dime.

The fourth possibility is like the third but now the government limits how much of your HSA you can spend on unapproved treatments that don’t count toward your trigger. This is probably more doable under the Goldhill plan than the DeLong one; DeLong has no working room from year to year. Under the Goldhill plan, however, the government could allow a certain percent of your HSA to be used for medical services that don’t count toward your catastrophic trigger. That percent could rise depending on how much money was in your HSA and would probably have to fall as you get older. So if someone wants cosmetic dentistry at the age of 35 that wouldn’t count toward his catastrophic trigger but he could fund some of it out of his HSA if he had enough in there.

The most restrictive alternative is that you can only spend your HSA money on approved treatments - which puts us back where the Feldstein approach did but with government making the decisions directly rather than acting as the man behind the curtain vis-a-vis the insurance companies.

I hope we’d start with the least restrictive and see how that works out. After all, part of the reason to have people spend their own real money on health care is to encourage each of us to make tough decisions on what health care is worth our hard-earned cash. There’s no reason to believe that the health care I’m willing to spend money on is always going to be the same as the health care you’re willing to spend money on.

Okay, these are the basics of the three plans. In the next installment I’ll look at whether the plans are paid for; how they do at handling other health care issue like chronic illnesses and end of life costs; and whether I think any of them are worthy rooting for.

*****

* Goldhill appears to walk close to Feldstein’s idea of government credit cards when he says:

Americans should be able to borrow against their future contributions to their HSA to cover major health needs; the government could lend directly, or provide guidelines for private lending.


However, I believe the ideas are substantively different. Under Feldstein’s plan the money spent on health care and charged to your government credit card would have to be repaid from your general funds, funds that could instead be used for food, clothing, or a trip to Disneyland. Under Goldhill’s plan the money spent on health care and fronted by a government loan or a government-backed loan would be repaid from funds already earmarked for health care.

** Note that the Goldhill plan does not necessarily mean the death of private insurance companies. If someone wants to spend his HSA buying health insurance to cover his costs up to that $50,000 trigger there is no reason the government could not make that an acceptable use of the HSA. I don’t think Goldhill anticipates that happening and I don’t think he would like it if it did but it’s possible.