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

[Emily's Cat]

They don't need to spend the $1K to get the $4K. You still don't seem to understand the idea.

That really looks like what you've been saying, so you now claiming that it's not what you're saying is a little confusing.

They get $4,000 to spend as they see fit. Only $1,000 that must be spent on healthcare, or else refunded (make sure to keep your receipts).

As is happening more and more frequently with you, you have completely misunderstood what I wrote or proposed. Except for the first $1,000, the money is the consumer's money to do with as he wishes.

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.

...

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).

 

[Emily's Cat]

Krugman's objections are exactly the same ones that people keep parroting back to me on this forum. They're the same ones that your "Cain" post enumerates. I have addressed them repeatedly, mostly by pointing out two truths: (1) the allegedly anti-free market attributes apply only to the 2% of health care spending which is emergency and therefore involuntary; and (2) other areas of the economy where free markets have had undisputed success, e.g. computer chips, or automobiles, have the same sorts of alleged problems.

1) Your assumption that only 2% of spending is emergency is FALSE. Furthermore, your assumption that ER is the only kind of health services that isn't subject to market forces is also FALSE.

2) Your assumption that computer chips, automobiles, etc. are comparable in terms of information asymmetry, urgency, and necessity is FALSE.

Your entire argument is built on false assumptions. That you refuse to acknowledge them as false is a reflection of your belief.

 

[Emily's Cat]

I agree that emergency care is involuntary, but that is not the only section of healthcare where that applies. Chronic conditions also count and these are going to make up the vast majority of the costs.

Most of that 5% top end is actually acute events - traumatic injuries and illnesses that land people in the hospital or the surgical theater. A huge amount of it is concentrated in 3 areas: Neonatal ICU, Cancer Treatment, and Rare Disorders (including End-stage Renal Disease, Hemophilia, and a variety of rare enzyme and metabolic disorders). For things like hemophilia and the enzyme disorders, it's literally a case of get treated now by the expensive thing or die.

 

[Emily's Cat]

It's 80% of the costs, but not 80% of the people. And those costs are made up of a whole bunch of little ones.

1) No, it's not a whole bunch of little costs. Again, this is a false assumption that you have made.

2) It doesn't matter at all if it's only 20% of the people. The other 80% aren't using the services that are creating the huge costs. They're using services that are generally already fairly low. Even if they did somehow start shopping around (which they won't), they're not going to move the needle on the aggregate costs.

Look - this entire "consumer driven health care" thing has been tried. That's what HRAs and FSAs and HSAs are all about. So far, it hasn't materialized. People have already been placed in the situation that you think is going to magically transform the health care market into a lassaiz faire daydream. It did not happen. Let me repeat that: It has been tried and it did not result in what you claim it will.

 

[jimbob]

Most of that 5% top end is actually acute events - traumatic injuries and illnesses that land people in the hospital or the surgical theater. A huge amount of it is concentrated in 3 areas: Neonatal ICU, Cancer Treatment, and Rare Disorders (including End-stage Renal Disease, Hemophilia, and a variety of rare enzyme and metabolic disorders). For things like hemophilia and the enzyme disorders, it's literally a case of get treated now by the expensive thing or die.

Ah, that makes sense... I was thinking that long-term illnesses for example COPD* would contribute a fair amount...



*Possibly this is because I live in a region where there's a lot of industrial ill health from miners and brake lining workers etc.

 

[Emily's Cat]

On any given day, 50% of the consumers will be from the highest spending category, and they are cost insensitive. 30% of the consumers will be from the 2nd highest spending category, and they may be cost sensitive early in the year, but less so later in the year. 20% of the consumers will be from the category with modest claims, who are very price sensitive.

No, they won't be - you've just given them far more free money than they would otherwise spend from their own budgets. They have no incentive to be price sensitive.

Personally, I think having more than 20% of your customers be price sensitive is enough to put pressure on you to be price-competitive.

Personally you can think what you want, but once again you're making a false assumption. You're assuming a relatively uniform degree of purchasing.

In health care, using your $10K swag at health care spend...

80% of the people spend a total of $2M - That's $2,500 per person
20% of the people spend a total of $8M - That's $40,000 per person - 16X higher.
The relative voice of those 80% is therefore about 1/16th the strength of the other 20%. They have a relative voice of about 5%.

When and if they become price-insensitive big spenders in a future year

You persist in framing the situation as if those "big spenders" have a lot of choice in the matter. As if they have the time, the luxury, the good health and mental state to go do a lot of independent research. They do not.

The designers of Obamacare, as well as every insurance company in the US, understands the importance of cost-sharing, even at low levels of spending. That's why deductibles exist, and why they've been increasing rapidly.

Yes, cost sharing is very important (which is why your $5K of free money is completely backwards for what you're trying to accomplish).

No, cost-shares do not increase rapidly because they're so important to consumer behavior (which is what you're implying). They increase rapidly because the underlying trend for health care exceeds that of CPI, and will continue to do so into the foreseeable future - the basket of goods is NOT fixed. The cost-shares increase because otherwise they leverage and produce premiums that increase far above the trend rate.

 

[Emily's Cat]

Ah, that makes sense... I was thinking that long-term illnesses for example COPD* would contribute a fair amount...



*Possibly this is because I live in a region where there's a lot of industrial ill health from miners and brake lining workers etc.

COPD, Diabetes, Asthma, CHF, etc. all fall in to that 20% who generate 80% range. They're expensive, sure, but more on the order of $10K per year, whereas the top 5% is on the order of $1M per year. Both distributions have a high variance though, and the tail is very long.

 

[sunmaster14]

Amazing. All of those posts you've written in a short time (after a long hiatus), and not a single argument among them. And you still can't understand what my policy proposal is. Very disappointing ...

And, no, free markets have not been tried in the bulk of health care. HRAs, FSAs, and HSAs are distortions of the free market, not experiments in free markets. I've already pointed out how bad FSAs are. The other ones are simply tax-advantaged savings accounts which can be used to defray and mitigate the impact of the little cost-sharing that consumers have now in their health care consumption.

Where free markets have been tried, in those areas which by accident have been largely left out of the tax-subsidized insurance framework, costs have risen at less than the rate of inflation. I have already enumerated some of these areas: laser eye surgery, cosmetic surgery, and dental care.

 

[jimbob]

COPD, Diabetes, Asthma, CHF, etc. all fall in to that 20% who generate 80% range. They're expensive, sure, but more on the order of $10K per year, whereas the top 5% is on the order of $1M per year. Both distributions have a high variance though, and the tail is very long.

Makes sense, and as you have said, there's no reason to think that these are going to be price-sensitive. If you need oxygen you need oxygen... if you need dialysis, you are not going to shop around for a cheap deal.

 

[jimbob]

Sunmaster,

If information asymmetry isn't a problem, why do homeopaths thrive?

Did you see why I chose chiropractors as even more dangerous quacks?

 

[sunmaster14]

No, they won't be - you've just given them far more free money than they would otherwise spend from their own budgets. They have no incentive to be price sensitive.

What part of "it's their money after you give it to them" don't you understand? I thought you said that you knew something about economics.

<snip>

You persist in framing the situation as if those "big spenders" have a lot of choice in the matter. As if they have the time, the luxury, the good health and mental state to go do a lot of independent research. They do not.

Big spenders in one year were small spenders in a prior year when they were price-conscious. They will go to the hospital or doctor they're already familiar with, which is the one that was providing (in their view) the best combination of price and quality in prior years. In other areas, you might call it brand loyalty, and corporations care a lot about pleasing their customers and getting a good reputation because of it.

<snip>

No, cost-shares do not increase rapidly because they're so important to consumer behavior (which is what you're implying). They increase rapidly because the underlying trend for health care exceeds that of CPI, and will continue to do so into the foreseeable future - the basket of goods is NOT fixed. The cost-shares increase because otherwise they leverage and produce premiums that increase far above the trend rate.

Huh? You seem to be saying that the main driving force for higher cost share is to make the optics look better for Obamacare (or the effect of Obamacare on all premiums nationally). I believe that's the case to some extent, but even I'm not that cynical. Increased cost sharing is virtually the only way Obamacare tries to bend the curve of health care costs (other than the Cadillac tax, which is effectively dead and buried).

Of course, to the extent that such cynicism (i.e. hiding the true cost of health care from the consumer by raising deductibles instead of premiums) works, it means that consumers are less likely to alter their spending behavior because of deductibles. If they can't figure out that deductibles are important when choosing a health plan, are they really going to curb their spending because of the deductible?

 

[sunmaster14]

Makes sense, and as you have said, there's no reason to think that these are going to be price-sensitive. If you need oxygen you need oxygen... if you need dialysis, you are not going to shop around for a cheap deal.

What? Why the hell not? I need food to live too, but it doesn't mean I can't shop around a little before going to the grocery store. Even if I'm really hungry. You're claiming things that are manifestly false.

 

[jimbob]

Are you in ill health when you are shopping? Do you have a a wider choice of food vendors than nearby hospitals?

 

[sunmaster14]

Sunmaster,

If information asymmetry isn't a problem, why do homeopaths thrive?

Did you see why I chose chiropractors as even more dangerous quacks?

What does that have to do with information asymmetry? People believe lots of crazy things, and there's a lot more to health care for some people than actually getting cured. Some people are hypochondriacs and like chatting up doctors or talking about themselves. Some people like taking alternative medicines. Some people like having their spines manipulated. Who am I to say how they should spend their money? As long as they're spending their money, so at least they think seriously about whether or not it is really worth it to them.

I'm certainly not going to argue that chiropractors aren't quacks. I think it's rife with quackery. However, I know a lot of reasonably smart people who use chiropractors. I figure it must be having the same effect as therapeutic massage. Whether or not it does more harm than good to health is something I have not looked at. Certainly the absence of direct harm is not necessarily the same as being harmless. Homeopathy can kill if it is used in lieu of effective treatments for a fatal condition.

 

[sunmaster14]

Are you in ill health when you are shopping? Do you have a a wider choice of food vendors than nearby hospitals?

You make it sound like ill health is incapacitating. It might be, but usually it is not. If it isn't, then I don't see why it's an impediment to shopping around (which doesn't literally mean driving out to each and every hospital and getting a tour). If it is, then I don't see why a family member or a friend can't help with shopping around. This isn't rocket surgery.

 

[jimbob]

The costs are concentrated in hospital treatment. You are suggesting that somehow shopping around for a GP is going to affect those.

 

[sunmaster14]

The costs are concentrated in hospital treatment. You are suggesting that somehow shopping around for a GP is going to affect those.

You should be able to shop around for hospital procedures too.

Here's an example:

Me: "Hi, is this MGH? Can, you tell me the price for a colonoscopy procedure? Uh-huh. 50-year old male, no history, non-smoker. $3,000? Can I get a DVD of the procedure? $100 extra? Ok. And what do you serve for the post-op refreshment? Oh, very nice. Is the chicken cage free? Great."


Of course, today the conversation will go like this:

Me: "Hi, is this MGH? Can, you tell me the price for a colonoscopy procedure?"

Receptionist: "We don't have that kind of information sir."

 

[WildCat]

Of course, today the conversation will go like this:

Me: "Hi, is this MGH? Can, you tell me the price for a colonoscopy procedure?"

Receptionist: "We don't have that kind of information sir. We first have to figure out the maximum amount we think we can get which varies wildly from patient to patient"

Hilited bit added for accuracy.

 

[lobosrul]

You should be able to shop around for hospital procedures too.

Here's an example:

Me: "Hi, is this MGH? Can, you tell me the price for a colonoscopy procedure? Uh-huh. 50-year old male, no history, non-smoker. $3,000? Can I get a DVD of the procedure? $100 extra? Ok. And what do you serve for the post-op refreshment? Oh, very nice. Is the chicken cage free? Great."


Of course, today the conversation will go like this:

Me: "Hi, is this MGH? Can, you tell me the price for a colonoscopy procedure?"

Receptionist: "We don't have that kind of information sir."

Try: http://www.newchoicehealth.com/ it gave me estimated prices for colonoscopies at local hospitals (well under $3,000 BTW), and even a form to contact them for a price quote. But you need to know the exact procedure they're performing (there are several kinds of colonoscopies, who knew?). I'm a bit too shy to do it myself, try it out and let us know if they get you back with an exact price.

 

[Emily's Cat]

Amazing. All of those posts you've written in a short time (after a long hiatus), and not a single argument among them.

What exactly do you consider to be an argument?

And you still can't understand what my policy proposal is. Very disappointing ...

Well, considering that I quoted exactly what you've said... here's your opportunity to actually set me straight instead of just complaining about it.

And, no, free markets have not been tried in the bulk of health care. HRAs, FSAs, and HSAs are distortions of the free market, not experiments in free markets.

Read again - I didn't say they were a free market, I said they were consumer driven health care. And at the end of the day people do not shop around. If they don't shop around when given someone else's money already, why would they suddenly begin to shop around when you give them even more of someone else's money?

I've already pointed out how bad FSAs are. The other ones are simply tax-advantaged savings accounts which can be used to defray and mitigate the impact of the little cost-sharing that consumers have now in their health care consumption.

I don't think you understand what an HSA-qualified health plan looks like. The cost sharing is not little.

Where free markets have been tried, in those areas which by accident have been largely left out of the tax-subsidized insurance framework, costs have risen at less than the rate of inflation. I have already enumerated some of these areas: laser eye surgery, cosmetic surgery, and dental care.

Yes, you've given examples of elective, non-necessary, luxury services. Which is not at all the same as cancer care or life-saving surgery. For reasons that seem very, very obvious to me.