Monday, May 20, 2013

Catastrophic again

A post at The Corner about unintended consequences of Obamacare got me thinking about health insurance again. The post is worth reading (although it’s bad news for people like me with significant health problems) but that’s not what I’m thinking about. I’m thinking about this from Megan McArdle:

Certainly, this [the Oregon Medicaid study] bolsters my belief that health insurance should provide financial protection from catastrophic events, not wrap-around first-dollar coverage.  Those who used to read me on The Atlantic may recall that the McArdle Plan for Healthcare involved the government picking up the tab for any medical expenses above 15-20% of income: simple, progressive, and aimed at the actual problem we know health insurance can fix.  Unfortunaely, Obamacare made that sort of coverage functionally illegal.  

That kind of plan tied to income would be great but it’s unlikely to happen while Obama is President.* What might be possible, though, is to modify Obamacare to permit true catastrophic health insurance. You know, the kind Secretary Sibelius is so clueless about. Perhaps the Republicans could agree to pass something the Democrats and Obama want if and only if the bill to do so includes a modification that adds catastrophic insurance policies as one of the options under Obamacare. Ideally, I’d like to see these with a range of deductibles: $1,000; $5,000; $10,000; $15,000; and so on. That way they would be available to people with a range of incomes.

Presumably the cost for a catastrophic plan would be less than for those that cover doctor’s visits for annual exams, flu shots, dropping a pot lid on your toe (don’t ask), and kids with colds. That might encourage people to purchase catastrophic plans which would increase our sensitivity to the cost of medical care and that, in turn, might actually decrease spending on health care a little.**



* I haven’t found a lot of specifics on the “McArdle Plan for Healthcare” but my impression is that she would set a single percentage to be spent on health care before government coverage kicks in. If I were going to take a serious look at this kind of policy, I’d considered percentage brackets, with those who have less money having to spend a lower percentage of their income before the government steps in - much like the brackets we now have for income tax rates.

** Under this modification to Obamacare, as opposed to the McArdle Plan, the insurance companies would still insulate people from true health care costs. When I get a medical procedure, my insurance company decides how much my provider will be paid. So long as insurance companies continue to do so, the insured will continue to pay less than the true cost - and the uninsured will continue to pay more.



These were the Atlantic posts I found that talk about the “McArdle Plan for Healthcare”. They date from February of 2010.

The Benefits of Health Benefits - This began as a response to an Ezra Klein post. The Klein post has links to a number of other McArdle posts, all of which are interesting.

The Limited Benefits of First Dollar Health Care Coverage- Follow up to previous post.


E Hines said...

There are a number of false premises in McArdle's paragraph cited.

[H]ealth insurance should provide financial protection from catastrophic events....

No. Health insurance, like any insurance program, should provide fee-based risk transfer from the insuree to the insurer, with the fee centered on the magnitude of the risk and its likelihood of realization and with the risk to be transferred being whatever the parties agree. "Centered on" because the agreement can only be entered into, legitimately, freely by the parties to the agreement.

[T]he McArdle Plan for Healthcare involved the government picking up the tab for any medical expenses above ....

This isn't insurance at all. It's government mandated, privately funded "health" welfare.


Why must it be progressive?

Then, That kind of plan tied to income would be great....

I disagree. This kind of plan would be just another Federal disaster morphing into a large and overflowing pork trough. And it's not insurance.

The only way to minimize the occurrence of unintended consequences is to not do the underlying deed in the first place. That argues for a small, limited government, not the Progressives' Big Government. And the only way to modify Obamacare that won't have it's own catastrophic unintended consequences is to repeal it.

Those last two certainly are on the harder path to walk, politically. "Hard," though, means "possible."

Eric Hines

Elise said...

I have explained elsewhere (see the Categories "Catastrophic Comparison" and "Five Health Insurance Issues") why I am not sure insurance companies any longer have a place in the health care marketplace and why I don't think leaving people without health insurance is politically viable.


E Hines said...

Those all are government-centric as first resort solutions, though, and so doomed to becoming the Obamacare sewage we have now. For instance, Not even the greediest Federal government could justify continuing to remove that amount once Medicare ceases to exist. Just like no greedy government would ever continue collecting the Spanish-American War tax on our phone bills in the 21st century.

And notice: Obamacare is leaving people without health services, even though the ground will be littered with health "coverage."

People always are going to be left behind. But a free market--in which, for instance, insurance companies (are required/allowed to) act competitively--leaves the fewest behind. After that, family, friends, charity/church, the local community as community will take care of the large bulk of those left. Government is a viable player for the 14 or so who still will need help. As a last resort.

Yeah. MMV.

Eric Hines

Elise said...

This is the great tragedy of the demise of dual federalism. If I want to live in a State that works the way I describe for health care and you want to live in a State that works the way you describe for health care, we should be able to do that. The great mistake is imposing all - any - of these ideas at the national level. (Which gives me an idea for another post.)

E Hines said...

Another...flawed...premise (I seem to do that a lot lately. Not just here, either.).

Dual Federalism, or even American Federalism, hasn't demised, yet. It'll die only if we give up on it. My mouldering, rotten body might give up. I'm not.

Eric Hines

Elise said...

Many years ago, I was talking to someone about something and she said, "I never realized - you're a pessimist. You should read Learned Optimism by Martin Seligman."

I imagine she thought I'd read the book, realize all the wonderful advantages of being an optimist, and do the work to learn to be one. Instead I read the book and came away with one take-away: Psychological testing shows that people who rate high on the pessimism scale are more realistic than people who rate high on the optimism scale.

E Hines said...

Define "realistic."

Speaking from the vasty heights of my 35-year-old MS in psychology, I'm distrustful of "psychological testing."

Was Galileo a pessimist? Newton? Einstein certainly doesn't seem to have been.

Folks who make major advances in our understanding of the world--or who do the grunt engineering work to bring those advances to practical use--seem to me to have a view of the future that's both worth living and improvable.

Folks who simply get about their business, marry, have kids, aren't just satisfying their urges or acting out of habit. They also see the future as worth entering and improvable.

That doesn't seem to me to be very pessimistic.

I guess I'm a quintessential optimist: I hold that the Universe is malleable--and humans are the ones to do the malle-ing.

I don't think you're that pessimistic, either, at bottom--it's why you're essentially conservative. Conservatives, in my lexicon, among other things believe that people are fully capable of seeing to their own imperatives and futures.

It's Progressives who think people are irretrievably fallen and failed, and need Government to do for them. They're the pessimists.

Eric Hines

Elise said...

In that context, realistic simply meant able to accurately assess the extent to which their actions impacted their environment.

I don't think it's realistic to make major changes (like doing away with all income transfers and leaving health insurance in relatively unregulated private hands) in this country. I could be wrong - duh - but given that belief, I think the feasible path is structuring the inevitable in the least destructive way. Hence, welfare in the form of transfers not mediated by the government and health insurance that makes us all more aware of costs.

E Hines said...

The only way to have wealth transfers "not mediated by government" is to not have the government involved at all. Once government mandates, it will then mediate.

But we already have a wealth transfer system not mediated or mandated by government: a free market. It's just currently poorly implemented in the US. That government mediation thing, again.

Obamacare--another government program--conceals costs rather than exposing them, by mandating the coverage, and then paying folks to get the coverage. As does a Lifetime Endowment program, by giving folks money without regard to the folks' efforts.

Eric Hines

Elise said...

Again, all I can say is that I think the possible consists of making the best of a bad situation rather than striving for "the best" and ending up with something worse. See? Pessimist (or, as I prefer, realist) vs optimist. :+)