CBO: Obamacare costs revised downward, again. Finds lower than expected premiums.

[Emily's Cat]

Sheesh. It's like there's no attempt to understand what I write at all. The problem I am addressing with welfare programs is poverty. Not health care. To the extent our society wants to provide a safety net, it should be done, to the fullest extent possible, by providing money to poor people. Not various subsidized services, which then cause distortions to the free market (notably overconsumption in the subsidized areas).

Do you see the difference between my preferred poverty solution and Medicaid with respect to health care services? Provide money to people with the only stipulation being that if less than $1,000 is spent on health care services, the remainder of that $1,000 be returned. Yes, it causes a modest distortion to the market, but that is my concession to the belief (partially true) by liberals in the inherent irrationality and shortsightedness of poor people.

Consider it poor quote snipping on my part. I actually wasn't interest in your poverty solution. It was specifically this bit:

Lack of foresight means not making sure one is insured for catastrophic expenses.

 

[jimbob]

Full context added, and additional highlighting.

Someone could simply have lacked the foresight to have been born to rich enough parents. Maybe because they were impoverished as a result of segregation.

Lack of foresight means not making sure one is insured for catastrophic expenses. For the people who can't afford even insurance, there are various welfare programs, including, of course, Medicaid (which I would restructure, but it exists nonetheless).

The median net worth of renting households in 2004 was $4k. You can't do much with that and any children are going to struggle to get an education to get a well-paying job (some will).

People spend out of income. Not so much out of assets. Low net worth might actually be a consequence of extravagant spending (usually is actually).

This might come as a shock to you, but often poor people have a low income. I am sure there are plenty of posters here who can describe what that means. In fact, people on low incomes tend to have fewer assets.

There is a reason why people refer to a "poverty trap". I don't think you have actually thought through what the implications are.

How much money do you propose to give to the poor, and where will it come from.

$5,000 per person per year for health care. Any unused portion up to a maximum of $4,000 could be kept. Medicaid would only cover catastrophic expenses above $5,000 per person (or perhaps starting a little higher).

That is an incredibly wasteful proposal. Remember the statistics that Emily's Cat posted.

In any given year,

• Approximately 20% of all insured individuals have exactly zero claims.
• Approximately 35% of claims are for preventive and routine care. This attributes to just under 40% of insured individuals.
• The remainder are acute incidents (colds, short-term illnesses, injuries) and chronic care.
• The 20% most health-burdened insureds generate over 80% of the total cost of care for all insureds
• The 5% most health-burdened insureds generate about 50% of the total cost of care for all insureds

About 20% of the population will be issued "health stamps" for $5k, which they won't use,* whilst 20% of the population will have requirements that probably exceed the $5k health stamp value that they are issued, and 5% far exceed this. You propose to cover this as well, which is the right thing to do, but that means you can't even remove a layer of bureaucracy.


*so reclaiming that will be "administratively... interesting"

I suspect that your proposed system will either reinvent insurance as it is, or fail to work.

It doesn't reinvent anything. If the problem is poverty, and poverty equals a lack of money, then the solution is to give people a minimum income. Not so much to provide them subsidized consumption, which distorts the market. My proposal does recognize that people may need some encouragement to spend money on the right things, hence the modest social engineering part, but I try to shy away from that stuff as much as possible.

I don't see how it will do anything useful. I don't see how it works better than insurance, and it certainly wouldn't be cheaper than the UK system.

Meanwhile, the UK has a lower proportion of its GDP expended on public healthcare than the US.

So? British people aren't as fat as Americans either. Also, they aren't paying the lion's share of the cost of medical progress like Americans are.

Are you suggesting that if the UK had the levels of obesity that the US has, it would start spending 16% of its GDP on healthcare? If so, you are barking. If not, it is a red herring.

There is a lot of fat in the US healthcare system - 20% of the costs from over or under treatment and 23% from excess administrative overhead, to which your proposed system would add.

 

[jimbob]

Meh. Pretty weak sauce. Even that article you referenced about the Phoebus cartel actually supported my side of the argument, as the cartel ran into problems with competition (both internal and external) almost immediately. As for governmental action, I'd say this. I think it's far more likely that the government has impeded the beneficial functioning of the markets by harassing legitimate market participants with antitrust legislation and investigations, than it has improved the markets by punishing predatory behavior.



Because it is anything but a captive market, with anything but high barriers to entry. You (and others here) keep suffering from tunnel vision in thinking of health care as restarting a stopped heart in an ambulance with some $1 million machine and a doctor with 20 years of training. The vast majority of spending on healthcare is rather mundane stuff that could be done almost anywhere, by any of hundreds or thousands of different people.
I note that nobody here seems to read my links, or even considers my arguments beyond what small part they think they can successfully rebut. You and Emily do this, in particular. I write hundreds (maybe thousands now) of words spread across several posts, and you quote one sentence and respond to that and try to derail back to your comfortable talking points.

Where is your consideration of the market for corrective eye surgery? Isn't that a market with high barriers to entry? You need some pretty fancy computer controlled lasers and many years of experience in ophthalmology, right? And yet, because it's a free market, undistorted by government subsidized insurance, the inflation adjusted cost has come down, even as quality has improved immensely over the last 20 years. The same is actually true for dentistry, which tends to be a freer market because insurance benefits are usually limited. And cosmetic procedures in general. And veterinary care, although technically not part of human health care.




That two big consumers would complain and that the government would be able to extract concessions from some big players tells me nothing. All I know is that DRAM prices have dropped by, I don't know, six orders of magnitude over the last 30 years? Not good enough for you, huh?

The figures that Emily's Cat supplied suggest otherwise (5% of insureds are responsible for 50% of the costs), as does Krugman's blog that was linked to in a post I quoted.

http://krugman.blogs.nytimes.com/2009/07/25/why-markets-cant-cure-healthcare/?_r=0

Not so. One of the most influential economic papers of the postwar era was Kenneth Arrow’s Uncertainty and the welfare economics of health care, which demonstrated — decisively, I and many others believe — that health care can’t be marketed like bread or TVs. Let me offer my own version of Arrow’s argument.

There are two strongly distinctive aspects of health care. One is that you don’t know when or whether you’ll need care — but if you do, the care can be extremely expensive. The big bucks are in triple coronary bypass surgery, not routine visits to the doctor’s office; and very, very few people can afford to pay major medical costs out of pocket.

All of this doesn’t necessarily mean that socialized medicine, or even single-payer, is the only way to go. There are a number of successful health-care systems, at least as measured by pretty good care much cheaper than here, and they are quite different from each other. There are, however, no examples of successful health care based on the principles of the free market, for one simple reason: in health care, the free market just doesn’t work. And people who say that the market is the answer are flying in the face of both theory and overwhelming evidence.

You then give examples of discretionary surgery (laser eye surgery, etc) where there are cheap alternatives (glasses, or contact lenses), and where the equipment is nowhere near as expensive as the capital investment required for an Intensive Care Unit.

 

[sunmaster14]

This might come as a shock to you, but often poor people have a low income. I am sure there are plenty of posters here who can describe what that means. In fact, people on low incomes tend to have fewer assets.

My objection was to the fact that you are conflating low net worth (which your statistic was based on) with poverty. The two are not the same. There have no doubt been periods when I had a vastly higher net worth than Donald Trump. He was never poor, however, or even not rich.

There is a reason why people refer to a "poverty trap". I don't think you have actually thought through what the implications are.

Of course I have. You, apparently, haven't through through the various conditions under which somebody could have a net worth of $4,000. Some people live paycheck to paycheck and save no money. I know some people with high incomes who do this actually. And people don't need to have a net worth equal to a median new car in order to buy a new car. Nor a net worth equal to a median new house in order to buy a new house. And they don't need a net worth equal to the cost of a myomectomy in order to have a myomectomy.

That is an incredibly wasteful proposal. Remember the statistics that Emily's Cat posted.

In any given year,

• Approximately 20% of all insured individuals have exactly zero claims.
• Approximately 35% of claims are for preventive and routine care. This attributes to just under 40% of insured individuals.
• The remainder are acute incidents (colds, short-term illnesses, injuries) and chronic care.
• The 20% most health-burdened insureds generate over 80% of the total cost of care for all insureds
• The 5% most health-burdened insureds generate about 50% of the total cost of care for all insureds

About 20% of the population will be issued "health stamps" for $5k, which they won't use,* whilst 20% of the population will have requirements that probably exceed the $5k health stamp value that they are issued, and 5% far exceed this. You propose to cover this as well, which is the right thing to do, but that means you can't even remove a layer of bureaucracy.


*so reclaiming that will be "administratively... interesting"

Your definition of wasteful is different from mine. I care about real resources, including labor, not little green pieces of paper (or, in your case, colorful pieces of paper with an unflattering portrait of the Queen).

Giving people money that they need to spend to maintain a minimum standard of living is not waste. Waste would be building a new MRI machine and tossing it into a landfill. Or, perhaps more realistically, building one that wouldn't have been needed if people stopped getting MRIs because they bumped their head on a kitchen drawer.

I don't see how it will do anything useful. I don't see how it works better than insurance, and it certainly wouldn't be cheaper than the UK system.

It realigns consumer incentives. The consumer would care about the price of his consumption again. The results will be stunning, just as they have been in every other area of the economy where free markets have been allowed to flourish.

Are you suggesting that if the UK had the levels of obesity that the US has, it would start spending 16% of its GDP on healthcare? If so, you are barking. If not, it is a red herring.

Not the only factor, but it is an example, yes. Culture is different. Racial demographics are different. And then there is the implicit subsidy the US health care market provides to the world. I have told you many times in the last two years that you are comparing apples to oranges. And yet you persist. Whatever. I realize that I'm not going to change your mind. I'm doing this for lurkers mostly.

There is a lot of fat in the US healthcare system - 20% of the costs from over or under treatment and 23% from excess administrative overhead, to which your proposed system would add.

Why would my system add to administrative costs? According to Emily's data, over 80% of the people wouldn't even need anything except a check and filing at the end of the year documenting that they spent over $1,000 in health care costs (and in the alternative, getting the difference taken out of the following year's grant).

 

[sunmaster14]

The figures that Emily's Cat supplied suggest otherwise (5% of insureds are responsible for 50% of the costs), as does Krugman's blog that was linked to in a post I quoted.

Emily's figures are irrelevant for my argument. You are conflating expensive with non-mundane (e.g. bespoke, urgent, or monopoly services). There are many extremely expensive chronic conditions which are rather mundane, and for which there are many alternatives. My nephew had an extremely rare form of pediatric leukemia, and the bill for his (successful) treatment came to about $500,000. This consisted of dozens of consultations with hematologist/oncologists, stays in the hospital, four rounds of chemo treatment, plus a periodic cocktail of antibiotic and antifungal medications, surgery for a chemo port, dozens of platelet transfusions, dozens of blood tests, many bone marrow samples, imaging, nursing care, etc. None of those things were anything special actually, and they transpired over the better part of eight months. In fact, my brother got fed up with the doctors at one hospital and moved his son to another. And when the doctors thought that he might end up needing a stem cell transplant (he didn't in the end, thankfully), the various clinics were swarming over us like Bill Clinton's hands on an intern. I'll tell you something. If you ever need a stem cell transplant, just come to the US and you'll see how much negotiating power a buyer has. Those transplant clinics are absolutely desperate for business. We were definitely given the hard cell (yuk yuk) by everybody.

http://krugman.blogs.nytimes.com/2009/07/25/why-markets-cant-cure-healthcare/?_r=0



​

I don't trust Krugman's representations as far as I can throw him. He's a partisan shill through and through. I'll take a look at Arrow's paper myself. At first glance, it looks to be rather qualitative for published research.

You then give examples of discretionary surgery (laser eye surgery, etc) where there are cheap alternatives (glasses, or contact lenses), and where the equipment is nowhere near as expensive as the capital investment required for an Intensive Care Unit.

So laser eye surgery is effectively a commodity then because you can substitute contact lenses in its place? I'm not disagreeing necessarily, but somehow this argument looks rather opportunistic coming from you.

 

[Emily's Cat]

Emily's figures are irrelevant for my argument. You are conflating expensive with non-mundane (e.g. bespoke, urgent, or monopoly services). There are many extremely expensive chronic conditions which are rather mundane, and for which there are many alternatives. My nephew had an extremely rare form of pediatric leukemia, and the bill for his (successful) treatment came to about $500,000. This consisted of dozens of consultations with hematologist/oncologists, stays in the hospital, four rounds of chemo treatment, plus a periodic cocktail of antibiotic and antifungal medications, surgery for a chemo port, dozens of platelet transfusions, dozens of blood tests, many bone marrow samples, imaging, nursing care, etc. None of those things were anything special actually, and they transpired over the better part of eight months.

I really don't even know what to say to this. It's so divorced from reality that I'm just baffled.

 

[sunmaster14]

I really don't even know what to say to this. It's so divorced from reality that I'm just baffled.

I suppose one of the differences between you and me is that when I really don't know what to say, I don't say anything.

 

[DavidJames]

I suppose one of the differences between you and me is that when I really don't know what to say, I don't say anything.

and as we've seen, it often takes you multiple paragraphs to say nothing.

 

[3point14]

I really don't even know what to say to this. It's so divorced from reality that I'm just baffled.

I'm impressed with your persistence. Past experience has revealed that you won't have much luck debunking a position that holds no logic in the first place and is purely ideologically based.

 

[sunmaster14]

I'm impressed with your persistence. Past experience has revealed that you won't have much luck debunking a position that holds no logic in the first place and is purely ideologically based.

Says the poster who ran away from the previous discussion and hasn't even tried to advance a logical argument with respect to the current topic.

Where have you been, Sir Robin?

 

[sunmaster14]

and as we've seen, it often takes you multiple paragraphs to say nothing.

Pretty good, as long as I grade on a curve.

 

[Emily's Cat]

I'm impressed with your persistence. Past experience has revealed that you won't have much luck debunking a position that holds no logic in the first place and is purely ideologically based.

"persistence" is so much nicer than what my friends and family call this trait.

 

[jimbob]

More examples of anticompetitive practices in pharmaceutical companies

http://jeclap.oxfordjournals.org/content/5/7/421.extract

Competition authorities around the world have long tried to curb the anticompetitive practices of originator drug companies, including their anticompetitive agreements with generic drug companies that result in the delay of generic entry. Their work appears to bear fruit as the years 2013 and 2014 seem to mark a new chapter in competition enforcement in the sector.

In July 2014 the Commission issued its third prohibition decision in the sector (i) against the French originator company Servier for its exclusionary conduct and for concluding a series of deals with generic companies to protect its best-selling blood-pressure medicine, perindopril, from generic price competition in violation of both Articles 101 and 102 of the TFEU and (ii) against five generic drug manufacturers for violation of Article 101. Through a technology acquisition and a series of reverse payment patent settlements with generic rivals, the Commission found that Servier implemented an unlawful exclusionary strategy to delay the entry of cheaper generic medicine.

The Servier decision was preceded by the Commission's Fentanyl prohibition decision in December 2013 fining Johnson & Johnson and Novartis for their respective Dutch subsidiaries' anticompetitive agreement to delay the market entry of a cheaper generic version of the pain-killer fentanyl in the Netherlands, in breach of Article 101.

Earlier in June 2013 the Commission also fined the Danish pharmaceutical company Lundbeck and several generic producers for agreeing to delay the market entry of cheaper generic versions of Lundbeck's branded citalopram, a blockbuster antidepressant, in breach of Article 101. In the same month the US Supreme Court issued its landmark Actavis opinion holding that patent owners do not enjoy immunity from the ‘rule

Continues

 

[jimbob]

This might come as a shock to you, but often poor people have a low income. I am sure there are plenty of posters here who can describe what that means. In fact, people on low incomes tend to have fewer assets.

My objection was to the fact that you are conflating low net worth (which your statistic was based on) with poverty. The two are not the same. There have no doubt been periods when I had a vastly higher net worth than Donald Trump. He was never poor, however, or even not rich.

Are you suggesting that most people with a net worth of $4k are not also low income? There might be some who are not, but still that was just the median worth of renting households.

There is a reason why people refer to a "poverty trap". I don't think you have actually thought through what the implications are.

Of course I have. You, apparently, haven't through through the various conditions under which somebody could have a net worth of $4,000. Some people live paycheck to paycheck and save no money. I know some people with high incomes who do this actually. And people don't need to have a net worth equal to a median new car in order to buy a new car. Nor a net worth equal to a median new house in order to buy a new house. And they don't need a net worth equal to the cost of a myomectomy in order to have a myomectomy.

And what about the vast majority of those who are renting with a net worth of $4k, who are not in that. Saying that you know a handful of counterexamples does not negate the fact that most are not

That is an incredibly wasteful proposal. Remember the statistics that Emily's Cat posted.

In any given year,

• Approximately 20% of all insured individuals have exactly zero claims.
• Approximately 35% of claims are for preventive and routine care. This attributes to just under 40% of insured individuals.
• The remainder are acute incidents (colds, short-term illnesses, injuries) and chronic care.
• The 20% most health-burdened insureds generate over 80% of the total cost of care for all insureds
• The 5% most health-burdened insureds generate about 50% of the total cost of care for all insureds

About 20% of the population will be issued "health stamps" for $5k, which they won't use,* whilst 20% of the population will have requirements that probably exceed the $5k health stamp value that they are issued, and 5% far exceed this. You propose to cover this as well, which is the right thing to do, but that means you can't even remove a layer of bureaucracy.


*so reclaiming that will be "administratively... interesting"

Your definition of wasteful is different from mine. I care about real resources, including labor, not little green pieces of paper (or, in your case, colorful pieces of paper with an unflattering portrait of the Queen).

You have not given any convincing argument as to why you should consider it as less efficient.

Giving people money that they need to spend to maintain a minimum standard of living is not waste. Waste would be building a new MRI machine and tossing it into a landfill. Or, perhaps more realistically, building one that wouldn't have been needed if people stopped getting MRIs because they bumped their head on a kitchen drawer.

I don't see how it will do anything useful. I don't see how it works better than insurance, and it certainly wouldn't be cheaper than the UK system.

It realigns consumer incentives. The consumer would care about the price of his consumption again. The results will be stunning, just as they have been in every other area of the economy where free markets have been allowed to flourish.

It couldn't work. People can't plan their healthcare costs - if you have a car accident you might have a whole load more, very suddenly. US states all seem to have low minimum levels of third-party insurance, which would often struggle to cover loss of income in the UK, let alone medical bills. My *bicycle* third party insurance is £10Million.

Are you suggesting that if the UK had the levels of obesity that the US has, it would start spending 16% of its GDP on healthcare? If so, you are barking. If not, it is a red herring.

Not the only factor, but it is an example, yes. Culture is different. Racial demographics are different. And then there is the implicit subsidy the US health care market provides to the world. I have told you many times in the last two years that you are comparing apples to oranges. And yet you persist. Whatever. I realize that I'm not going to change your mind. I'm doing this for lurkers mostly.

OK You're barking.

Obesity is a worse problem in the US, but smoking and alcohol are worse in the UK. The differences aren't as great as you make out.

The US doesn't subsidise healthcare for the rest of the world. It has failed to deliver adequate healthcare for a sizable proportion of its most vulnerable citizens, which is somewhat different.

Would it be more profitable to invent a drug that can get round a patent on viagra, or to develop a vaccine for malaria?

There is a lot of fat in the US healthcare system - 20% of the costs from over or under treatment and 23% from excess administrative overhead, to which your proposed system would add.

Why would my system add to administrative costs? According to Emily's data, over 80% of the people wouldn't even need anything except a check and filing at the end of the year documenting that they spent over $1,000 in health care costs (and in the alternative, getting the difference taken out of the following year's grant).

You give people $5k of health stamps - most of which won't be spent, so you have to get this sorted out.

Meanwhile you provide catastrophic cover via mediacaid or medicare for those that need it, so you have a parallel system that needs to run for those with costs above $5k.

You have two parallel systems for no benefit.

What is the incentiveto find the best price? If you overspend, you get catastrophic coverage. If you underspend - what?

 

[jimbob]

Emily's figures are irrelevant for my argument. You are conflating expensive with non-mundane (e.g. bespoke, urgent, or monopoly services). There are many extremely expensive chronic conditions which are rather mundane, and for which there are many alternatives. My nephew had an extremely rare form of pediatric leukemia, and the bill for his (successful) treatment came to about $500,000. This consisted of dozens of consultations with hematologist/oncologists, stays in the hospital, four rounds of chemo treatment, plus a periodic cocktail of antibiotic and antifungal medications, surgery for a chemo port, dozens of platelet transfusions, dozens of blood tests, many bone marrow samples, imaging, nursing care, etc. None of those things were anything special actually, and they transpired over the better part of eight months.

I really don't even know what to say to this. It's so divorced from reality that I'm just baffled.

I suppose one of the differences between you and me is that when I really don't know what to say, I don't say anything.

Emily's figures are irrelevant for my argument. You are conflating expensive with non-mundane (e.g. bespoke, urgent, or monopoly services). There are many extremely expensive chronic conditions which are rather mundane, and for which there are many alternatives. My nephew had an extremely rare form of pediatric leukemia, and the bill for his (successful) treatment came to about $500,000. This consisted of dozens of consultations with hematologist/oncologists, stays in the hospital, four rounds of chemo treatment, plus a periodic cocktail of antibiotic and antifungal medications, surgery for a chemo port, dozens of platelet transfusions, dozens of blood tests, many bone marrow samples, imaging, nursing care, etc. None of those things were anything special actually, and they transpired over the better part of eight months.

The highlighted bit is right. Your assertion that this could be commoditized is wrong. Your nephew's medical history affected the treatment. You yourself state that he had "an extremely rare" condition. You need experts for this, and only fools would choose a consultant surgeon on grounds of cost. If you need a consultant-level doctor, you are going to need complicated and expert treatment.

 

[sunmaster14]

More examples of anticompetitive practices in pharmaceutical companies

http://jeclap.oxfordjournals.org/content/5/7/421.extract



Continues

Not sure what you're trying to prove here. The government makes certain rules, whether they're rational or not, helpful or not. And some companies run afoul of those rules, or at least the government thinks so. That's pretty much inevitable. What you're calling anti-competitive is simply the government's term for an alleged violation of the government's rules. It doesn't actually mean that it was bad for the market, or even the consumer in the long run.

 

[sunmaster14]

Are you suggesting that most people with a net worth of $4k are not also low income? There might be some who are not, but still that was just the median worth of renting households.

I'm merely suggesting that a net worth of $4K tells us very little about one's expense paying capacity. From the Consumer Expenditure Survey (Table 1110 - sorry no link - I have the spreadsheet in my files), I can see that the lowest 10% of US households by income have a negative net worth on average, have annual income before taxes of $5,151 on average, and have annual spending of $22,074 on average. Weird huh?

<snip>

You have not given any convincing argument as to why you should consider it as less efficient.

Yes, I have. Until I'm blue in the face. When consumers don't feel the cost of their consumption, they tend to overconsume. Making every dollar from dollar 1,001 to dollar 5,000 on health care come out of the consumer's pocket means he will be more economical about his health care spending.

It couldn't work. People can't plan their healthcare costs - if you have a car accident you might have a whole load more, very suddenly. US states all seem to have low minimum levels of third-party insurance, which would often struggle to cover loss of income in the UK, let alone medical bills. My *bicycle* third party insurance is £10Million.

Regardless of the fact that uncertainty about healthcare costs doesn't change my argument one iota, people often do plan their healthcare costs. And they can delay certain procedures, substitute procedures, or forego them altogether, for a wide range of problems. The vast majority of money is spent on improving quality of life or reducing risk. The same kind of things that people trade money for in other areas of the economy, ranging from transportation to food to shelter, and especially to labor.

OK You're barking.

Great argument. Also, a Rule 12 violation.

Obesity is a worse problem in the US, but smoking and alcohol are worse in the UK. The differences aren't as great as you make out.

Actually, this is not true when one considers the most at-risk age cohort. Yes, smoking in the US has come down a lot, but smoking rates used to be much higher a generation ago. It is unclear whether alcohol consumption is good or bad for health at the median levels of consumption. It certainly mitigates coronary disease, which is still one of the most common and expensive diseases to treat. In any case, there are just such vast lifestyle, cultural, and demographic differences that comparisons are difficult to make. We have way more babies born to teenage mothers for example (young mothers are at risk for low birth-weight babies), as well as fewer abortions for unhealthy fetuses. We also have a higher foreign born population, and for many reasons which I won't go into, they have worse health than non-immigrants.

The US doesn't subsidise healthcare for the rest of the world. It has failed to deliver adequate healthcare for a sizable proportion of its most vulnerable citizens, which is somewhat different.

Well, I have provided academic evidence as well as logical argument that the US does indeed subsidize healthcare for the rest of the world by providing the profit incentive for investment in R&D for the last 40 years as well as the foreseeable future. I have yet to see a coherent rebuttal to my arguments other than simple gainsaying.

Would it be more profitable to invent a drug that can get round a patent on viagra, or to develop a vaccine for malaria?

There doesn't seem to be much demand for a malaria vaccine. Perhaps it's because the only people who could benefit are those who have no money to pay for it. I suppose Bill Gates could rectify this problem by himself, if he thinks it's worth it. Sometimes the market doesn't give us the result we want from an ethical perspective, but it usually gives us a more optimal result from an economic perspective. If there is genuine high demand for a Viagra substitute, who am I to say that the market is wrong? A strong erection is nothing to sneeze at.

You give people $5k of health stamps - most of which won't be spent, so you have to get this sorted out.

It's not $5K worth of health stamps. It's $5K. You only have to provide receipts for $1K worth of health care spending in order to receive your full $5K allotment for the following year. The administrative overhead for such a program is practically nil.

Meanwhile you provide catastrophic cover via mediacaid or medicare for those that need it, so you have a parallel system that needs to run for those with costs above $5k.

Administrative overhead would be reduced since the vast majority of transactions are for amounts under the cumulative cap. Regardless, the purpose is not to lower administrative costs. That's bupkis in the long run. The purpose is to align the consumer's interest with his consumption and thereby impose pricing discipline on the health care market.

You have two parallel systems for no benefit.

You apparently can't see the benefit, or refuse to. Doesn't mean it's not there however.

What is the incentiveto find the best price? If you overspend, you get catastrophic coverage. If you underspend - what?

If you overspend, you spend out of pocket, unless it is an approved catastrophic situation, just like under any insurance regime that exists today. If you underspend, you keep that money, aside from that first $1,000 (this is done to incentivize a minimum amount of spending on preventative care).

 

[xjx388]

This is true - the intermediary totally messes up the demand-supply relationship. The flip side to this, however, is that without that third-party payer system, lots of people would die because they can't afford the treatment costs all in one swell foop. Gotta pick your battles

So we have medical insurance. Not the current "insurance," but real insurance that covers those costs in catastrophic cases. Routine and minor care can be paid OOP in a system where people are more price sensitive and prices are lower.

 

[jimbob]

Why do you think that a fixed amount is remotely appropriate for the whole population? A 30 year old non smoker and light drinker in full time employment with no known medical issues is going to have a completely different requirement to an overweight 50 year old with a family history of diabetes, for example.

There is a reason why most countries use an insurance-based model. Personally, I think that an NHS type of system is better, but insurance-based systems also work.

You have given an example of a relative having a highly bespoke treatment that cost $500k. Medical expenses are not evenly distributed - there is a Pareto.

 

[sunmaster14]

Why do you think that a fixed amount is remotely appropriate for the whole population? A 30 year old non smoker and light drinker in full time employment with no known medical issues is going to have a completely different requirement to an overweight 50 year old with a family history of diabetes, for example.

I'm going on the principle that each human being is of equal worth, and the fairest distribution is to give one $5,000 check per person. Sure, the unhealthy person will have greater medical expenses, and won't be able to use any of that $5,000 for other expenses (or to save it for future ones), but that's life. The unhealthy person is far more likely to dip into the catastrophic coverage that is provided (or subsidized), so he is getting more (on an expected value basis) anyway. More importantly, in terms of real health care resources, the unhealthy person is allocating more to himself (if he chooses - it's always a choice). And he is getting them, for the most part. So, I'm not seeing the problem. Everybody is still incentivized to use less health care resources, which is what matters most.

There is a reason why most countries use an insurance-based model. Personally, I think that an NHS type of system is better, but insurance-based systems also work.

Yes, the reason is that people are irrational about health care - liberals more than most. They think that just because health care has a more direct and visible impact on health that it is different from other areas of the economy (which also can and do impact health in material ways).

You have given an example of a relative having a highly bespoke treatment that cost $500k.

Actually, my point was that it was not bespoke at all. My nephew had AEL, which is a rare form of AML (especially in children), but differs only in its prognosis (worse) but not in its treatment. Every procedure my nephew had, every drug, every test, was completely mundane and routine. When you add it all up, yes, it was an outlier expense for a 7 year old boy. But it was nothing that couldn't be done in at least 2 different hospitals in every major metropolitan area in the country. Like I said, my brother became disenchanted with the care at one hospital and moved his son to a different one (and, he went from the prestigious hospital - Long Island Jewish Medical Center - to the less prestigious one - Winthrop University Hospital). It was not an issue of cost because he had insurance. But if cost did matter, it certainly would have entered into the calculation.

Another thing is that the insurance company never made a peep about any of the expenses except one - an extremely sensitive test for malignant cell markers in bone marrow tissue done by some laboratory in Seattle (tests were done after each cycle of chemo IIRC, and every month thereafter). The insurance company ended up covering it without much trouble, but when we looked into the test, we realized that the insurance company was probably correct in its initial judgment about efficacy and need. The test looked like quacky science to us, and because of the uncertainty involved, it wouldn't have changed the course of treatment anyway. If my brother had to pay for it himself, I'm pretty sure he wouldn't have done it.

Medical expenses are not evenly distributed - there is a Pareto.

Doesn't matter. Lots of things are not evenly distributed, including skill, education, and experience on the production side, and needs and preferences on the consumption side. The market handles these uneven distributions pretty well generally. Or at least better than a central planning committee composed of political hacks could do.