Why universal health coverage might be cheaper than it looks...


Categories: Politics Personal

Been thinking about this for a long time. Medical costs in the US are unreasonably high, for unusually poor results, and that’s been true for a while. But it seems pretty reasonable, at first glance, to assert that providing health coverage for all the people who don’t have it will be pretty expensive.

I think it is likely to be less expensive than it seems, and perhaps more importantly, to produce significant additional funds which could cover those expenses.

A bit of background, since people outside the US often have no idea how strange our system is. In general, medical care in the US is nearly all processed under a “health insurance” model; you buy “coverage” from a company, who then treats it a lot like an insurance product. So, you pay premiums, then if you need things paid for, you pay out some sort of deductible or copay, and they pay the rest. Only, in most cases, you pay only a very small part of the premiums, with the rest paid for by your employer. There are some reasons for which this may not be as insane as it seems at first to most people not from around here, but mostly it’s for historical reasons. As I understand it, back around WWII, the government placed salary caps on hiring, so companies started looking for non-salary ways to improve the deals they were offering people, and “we’ll cover your medical expenses” was one of them.

This produces a lot of very strange outcomes, such as losing health coverage when you lose your job, so we have large and elaborate schemes to allow people to continue their existing health coverage. In general, though, the default has been that if you don’t have a job with health coverage, or a parent (if you’re young) or spouse with health coverage, you have no health coverage, and can’t get any unless you are healthy and considered a “good risk”.

And yes, that really does mean people going without any treatment at all because they can’t afford it, or getting treated and then being bankrupted as a result. Until the 80s, in fact, people would indeed be turned away from emergency rooms or redirected to other hospitals, and die in transit, because they couldn’t pay. So we added a new rule: Emergency rooms have to treat people who have emergency-room type conditions, or women in labor. But this doesn’t specify how that gets paid for. So, in general, people who can’t afford medical care wait until they have something emergency-room worthy, then show up and get very expensive treatment, which they can’t pay for. So the hospital averages those costs up and spreads them to everyone else’s care. Which is to say: Who pays for it is everyone else, indirectly, proportionally to how often they are using hospital or clinic services. And since those costs are in turn often being defrayed over insurance networks, they end up affecting health care premiums.

And a lot of the time, the people involved can’t do anything about it, since they simply can’t get health insurance coverage to begin with.

Enter the “Affordable Care Act”, which is basically modeled on a system that had been used in Massachusetts for a while, only done very badly for a number of political reasons. The basic premise is this: We require insurers to accept anyone, even “bad risks”, and prohibit them from ceasing to cover people who get sick. This solves some of our problems, but then they have the problem that if only sick people buy insurance, the costs go up even faster. So we also mandate that absolutely everyone buys the coverage, so the pool is “the entire population”. This is basically just like what most modern countries do, only we have an extra layer of middle-men taking a cut of the cash flow. But, it’s a thing that allows us to basically expand our existing system rather than overhauling things.

If this works as intended, which isn’t obvious, it’s supposed to reduce costs. One of the ways in which it would do this is increasing the chances that people will get things treated earlier rather than later, and I think that’s quite likely to actually happen. Furthermore, if all the people showing up at emergency rooms do have some kind of coverage, the “overhead” charges from uncovered visits won’t be getting spread around to all the other health care. That might actually work.

But today, on my third day of being too sick to work, I am reminded of another side of this: The side where I think it is likely to increase tax revenues and the general health of our economy. See, people get sick sometimes. Not “have to go to the emergency room” sick, just a general cold or flu or something. And in the US, if you have a lower-end job without health coverage, missing work can get you fired. You might be able to keep your job if you can present a statement from a doctor that you really are sick and need the time to recover, but if you can’t afford to go see a doctor, that doesn’t happen.

Some years back (long before we were married or even in contact with each other), this happened to Jesse. He got a nasty cold in mid-to-late fall, quite a lot like the one I had now. And he tried to get a couple of days off work to recover, and his boss wouldn’t let him. So he’d get one day off, then get told he had to make it in or lose his job the next day. And he’d come in, not yet recovered, and travelling through snowy weather, and get sicker, and this went back and forth until he lost the job. And then became homeless.

And what I’d like to stress here, for the benefit of the people who are so concerned about the costs of this system, is: The cost of our existing system, in that case, was all the taxes that were being paid on his wages over the next couple of months while he tried to recover enough to be able to work and then find a new job. If he’d been able to get to a doctor, get treated, and get the two or three consecutive days off he needed, he would have kept plugging away, with various money from his paychecks going to fund the state and federal governments. Instead, he stopped for quite a while, and consumed social services like food stamps. And that kind of thing sort of adds up over time. And I think people tend to ignore the huge opportunity costs we are paying for not treating illnesses competently and in a timely fashion because we’re too worried about the visible and direct costs.

Me? I work from home, so I worked for about two hours today, then concluded it was unwise to keep standing anymore, so I sent out a couple of emails and went to go do things that are not going to cost my employer money if I screw them up. And they pay my salary for a couple of days, and they don’t worry about whether I have a note from my doctor, and if I do get to the point where I need a doctor, I just go see one, and they keep getting programs and I keep getting money and paying taxes. And everyone wins.

Comments [archived]

From: Dave Leppik
Date: 2013-10-23 10:26:51 -0500

Indeed. And what you fail to add is that not helping people with communicable diseases also helps to spread disease. Nor do you mention that health insurance in most states acts as collective bargaining, so people without insurance are billed far more than those without. (Typically these are the ones who can’t pay, so they either come up with a payment plan, go bankrupt, or have their fees waived as “charity.”)

Other people have done fairly detailed analyses of why Americans pay far more for health care and get middling outcomes. Among the reasons:

1. Something like a third of the costs of health care are related to billing. That is, health care providers haggling with insurance companies. In some states, such as Maine, this is reduced by having a single, standardized price for each drug, device, or procedure. But they still haggle over which procedure was actually rendered. (Was it a “complex” or a “simple” surgery?)

2. American doctors get paid far more than other doctors. In some cases this is good: the world’s best specialists tend to move to America. But part of the cause is that medical education is expensive, and most other countries subsidize the education. American doctors can’t afford to not get paid a lot, since they need to pay off their loans. This also means that young doctors gravitate toward high-paying specialties.

3. There is no incentive for health care providers to keep costs down. In fact, because they make more money if they charge more, there is incentive to do unnecessary tests and use the most expensive, rather than the most effective, techniques. Obamacare addresses this by having Medicare and Medicaid preferentially pay for outcomes rather than procedures.