Switzerland Anyone? (Health Care Reform)

[Francesca R]

It is my understanding that these reforms would make the US system most closely resemble the Swiss system.

The Swiss system is privately funded up to a threshold after which it is government funded, minimum entitlements are mandatory, it is not employment-based, and it's universal and compulsory.

Yes it sounds sorta similar.

However, the Swiss one (like all of them in Europe i think) has a maximum that the policy-holder can expect to pay. Not a maximum that the insurer will pay. (I think that is of paramount importance personally). It is not clear from what you've submitted if the proposal for the US would work this way?

 

[Cleon]

That's theory not information.

No, it's a succinct description of "health care reform" that involves everyone suddenly having to pay several hundred dollars a month for health care.

 

[Cleon]

Irrelevant. The big three are still spending dollars towards health-care for those former employees, period.

Quite relevant, as the "big three" are not reflective of the health care system in general.

Or we could untie employers from the health insurance business without switching to a single-payer, which would also make that disadvantage go away.

...In theory.

Skilled workers want health insurance. Companies which can provide this benefit attract more potential employees than those who cannot.

Ah, the Market Will Provide. Slightly less silly than God Will Provide, but not by much.

Argg. Is this really going to go in the "I don't care to understand economics, but corporations are evil" diatribe?

I haven't said anything about "corporations are evil." It's a simple fact of life; if a company decides to drop health coverage, there's no reason to suppose it's going to pass the savings on to its employees--who suddenly have to shell out several hundred dollars a month to keep themselves and/or their families covered.

Tax incentives, among other factors, dictate that profits will be reinvested into other avenues rather then kept as cash. If the profits are reinvested and they buy new equipment, the economy benefits. If they reinvest them in the form of higher wages, the economy benefits. If the immediate profits are forfeited to lower prices to gain higher sales/larger market share (larger profits in the future), the economy benefits.

"The economy benefits," but the people who want to stay insured take it in the shorts.

You can keep that system.

 

[Francesca R]

Yes OK Cleon Never Mind.

 

[drkitten]

Plank #4 is irrational and a non-starter.

4. While the Federal government won't set the price of any insurance plan, they will require that everyone buying that particular plan pay the same premium as everyone else buying that particular plan. Joe won't be paying $500/month while Harry pays just $250.

Look at auto or house insurance for a simple counterexample. If I want to buy, say, $250,000 worth of flood insurance, my costs will vary based on where the house is located. If it's at the top of a 14,000 foot mountain, my costs will be minimal, because any flood high enough to take out a house at the top of Pike's Peak will also take out enough of Denver that the insurance company will no longer be around to pay out. If my house is on the middle of an low-lying island in the middle of a river, or backed against a levee, insurance will be much more expensive. Insuring my car will be much more expensive if I've been in four accidents in the past five years.

If I want to buy a $250,000 life or health insurance policy, the same considerations apply. If I'm a twenty-year old non-smoking professional tennis instructor, my rates should be lower than if I'm an overweight sixty year old truck driver with a three-pack a day habit.

 

[Francesca R]

That is approximately the way many universal insurance-based systems operate across Europe. Why not in the US?

 

[boooeee]

I thought it was a good post as well. I do have a question about the following:

4. While the Federal government won't set the price of any insurance plan, they will require that everyone buying that particular plan pay the same premium as everyone else buying that particular plan. Joe won't be paying $500/month while Harry pays just $250.

What if Joe is 55 and Harry is 25? Should they still have to pay the same amount, even though 55 years olds are much more expensive? One of the most problematic elements of the Senate Bill that has gotten little to no coverage is the limitation on how much premiums can very by age. I think the current version has it at 3:1. Since the true variation in cost due to age runs closer to 7:1, this means that younger people, in effect, will be subsidizing older people. This is problematic for two reasons:

1. It's a regressive subsidy. Older people have have higher average incomes than younger people. Why should they get subsidized?
2. It will result in more, not less, uninsured. Younger people are more likely to be uninsured. A limitation on age rating will raise premiums on younger people, making them even more likely to opt out.

 

[drkitten]

That is approximately the way many universal insurance-based systems operate across Europe. Why not in the US?

Because you don't get to pick different "plans" (typically), in Europe.

For simplicity, let's say we've got two plans. Plan A covers everything (womb to tomb) for a uniform price-tag of $2000/month. Plan B covers getting run over by an elephant herd in Times Square for $5/month.

Which am I going to pick?

Depends on how much I expect to spend on health care, right? If I expect to spend only a few hundred, I'll pick plan B and eat my own health expenses; if I expect heavy expenses, I'll pick plan A. But this in turn means the elderly and infirm will preferentially select plan A, the healthy will select plan B, which makes plan A even more expensive, driving more young and healthy into plan B, and we end up with a self-reinforcing cycle.

A one-size fits all plan, one with no choice at all, means that the young and healthy have to pick up the tab for the elderly, since they can't opt for plan B.

 

[boooeee]

That is approximately the way many universal insurance-based systems operate across Europe. Why not in the US?

Two reasons:

1. I believe that premiums for insurance come out of payroll, rather than relying on individuals to purchase them with their take home pay. This lessens the danger of healthier, younger members "opting out".
2. The European insurance systems (as I understand them) apply risk adjustment to shift money to companies that cover older, sicker members.

The Senate Bill incorporates Number 2 (it is currently being done in the US with the Medicare Advantage program). Number 1 has no shot politically (as well as directly contradicting Obama's no-new-taxes campaign pledge).

 

[Francesca R]

Because you don't get to pick different "plans" (typically), in Europe.

Yes you do. IIRC in Switzerland, Germany, France, Netherlands to name some. There is a minimum level of cover / mandated entitlement, but you can get it from a number of providers, and you can bbuy add-ons, or get discounts for "healthy behaviour". The price you pay for the basic cover is capped by law.

A one-size fits all plan, one with no choice at all, means that the young and healthy have to pick up the tab for the elderly, since they can't opt for plan B.

As I said there are ways to benefit from youth/health and the lower risk this provides to the insurer. But these are marginal, and of course the healthy do pick up the tab for the unhealthy. Such is the essence of universal medical care, everywhere. (Well--if I am wrong about that please point out in which country that is)

 

[Upchurch]

Untying health insurance from employment would be a Bad Idea.

Employers are not going to give their employees raises to compensate; there's no incentive for them to do so. So in addition to other monthly expenses, we'd have to find a few hundred dollars to pay for health insurance.

That's a short-term problem* vs long-term benefits.




* maybe, depending on the company. Some businesses I know like their employees feeling they are fairly treated, even if they have no incentive to do so.

 

[Francesca R]

1. I believe that premiums for insurance come out of payroll, rather than relying on individuals to purchase them with their take home pay. This lessens the danger of healthier, younger members "opting out".
2. The European insurance systems (as I understand them) apply risk adjustment to shift money to companies that cover older, sicker members.

Maybe we have crossed wires but European systems (of which there are a variety) are all not tied to employment. So companies are pretty much out of the equation. That is the context (for a putative US system) that I was concerned with in the OP.

 

[boooeee]

Maybe we have crossed wires but European systems (of which there are a variety) are all not tied to employment. So companies are pretty much out of the equation. That is the context (for a putative US system) that I was concerned with in the OP.

Understood. By "payroll", I meant as a payroll tax. In the same way that in the US we have a payroll tax to fund Medicare and Social Security. Employers aren't involved.

 

[IchabodPlain]

Quite relevant, as the "big three" are not reflective of the health care system in general.

No, it's irrelevant to the point that American businesses are hurt by having to pay for employee health care. I remember when the bailout of these companies was under scrutiny, my local St. Pete Times had a wage breakdown between American manufacturers and Japanese. Retirement packages hurt, but it was health care that made up the largest chunk of that total. It's massively disproportionate.

If you want overall numbers, rather than a specific example, say so.

At 12 percent, health care is the most expensive benefit paid by U.S. employers, according to the U.S. Chamber of Commerce.

http://www.cfr.org/publication/13325/

...In theory.

No, not in theory. Other countries already have a system similar in place - Switzerland, the Netherlands, Germany are a few examples.

Ah, the Market Will Provide. Slightly less silly than God Will Provide, but not by much.

Not at all. I gave you the link to a survey which found health care benefits rank higher than pay considerations for employees. Now, maybe you like to post something worthwhile?

As Dr.Kitten highlighted, the "free" market cannot provide health care adequately, because of failures such as adverse selection. I can only forecast my needs for health care tomorrow. I may decide to purchase Dr.Kitten's $5/mo. plan which only covers trampling by a herd of elephants in Times Square. A week from now, I could break my leg falling from a ladder while trying to paint my house. Whoops! I didn't think I needed health care, and bought accordingly, but it turns out I can't predict the future. The unexpected happens.

I haven't said anything about "corporations are evil." It's a simple fact of life; if a company decides to drop health coverage, there's no reason to suppose it's going to pass the savings on to its employees--who suddenly have to shell out several hundred dollars a month to keep themselves and/or their families covered.

No one ever said companies will "pass the savings on to its employees" - you've invented that bit. Instead, you've implied collusion between businesses where no one will raise wages, lower prices, and/or invest in new equipment, but will all keep 100% of the resulting revenue.




"The economy benefits," but the people who want to stay insured take it in the shorts.

You can keep that system.[/QUOTE]

 

[Cleon]

No, it's irrelevant to the point that American businesses are hurt by having to pay for employee health care.

I'm sorry, I thought we were talking about the best health care system, not how American businesses are being cruelly oppressed by those damn tax breaks.

Carry on, then.

 

[IchabodPlain]

I'm sorry, I thought we were talking about the best health care system, not how American businesses are being cruelly oppressed by those damn tax breaks.

Carry on, then.

More backpedaling. Taking potshots is fun and all, but you're seriously lacking in substance at this point. Did you want to continue to debate the merits of employer-based health care delivery?

Oh, now you're on to something else, so let's compare - follow along in the OECD report.

Switzerland's wait times are one of eight countries reported as low, while the UK is one of twelve which is reported as "a serious health policy issue". Switzerland has a higher life expectancy, lower mortality rate, fewer potential years lost due to natural causes, more high-tech imaging devices (CT scanners, MRI) per 1,000, more practicing physicians per 1,000, and lower infant mortality rate than does the UK.

The UK does rank higher in annual doctor visits, staff and nurses per acute care hospital bed, insurance and health administration costs, and also costs less per person.

They both have about the same pay for specialists and gen. practitioners, and number of hospital beds per 1,000.

Feel free to add anything here, or sit back and continue providing worthless hyperbole about how I care more about helping American business than finding the most optimal health care delivery system.

 

[IchabodPlain]

A quick first read through had me agreeing with Wildcat's proposals except for a couple of points.

I doubt companies would be rushing to give their employees raises after they no longer have to carry the cost of helth insurance. From a business perspective that just does not make sense.

I agree with this point - it wouldn't be immediate, and you elaborate later on this point. The key point of this is that American businesses would become more competitive globally v. countries which already provide UHC. This could mean more jobs, lower prices, etc in time.

Having each individual negotiate for health care does not take advantage of economy of scale. Someone with 1000 potential customers instead of just one can negotiate for better terms. So if everyone is out for themselves, I am not sure that would reduce cost at all.

I half agree with you here. Though, I think scale would be mitigated by having an insurance mandate among a national market.

I'd like to see some negotiation on limiting costs.

Could you explain a bit more here? Limiting costs where? Premiums? Out of pocket expenses? Prescription Drugs? All of the above?

I like the Federal guidelines instead of state ones to combat insurers basing themselves in the most corporate friendly state as they start to sell across state lines.

Agreed. This also promotes more choice for individuals and creates more competition between providers.

I wonder how much it would end up costing and how much the federal subsidies would cost the taxpayers?

Honestly, I have no idea. There are areas which would decrease the cost of the overall package (larger risk pool, larger out of pocket expense, more competition between providers, etc). I'll look to see what the Swiss or even MA spend on average per person to subsidize a mandate like this.

 

[WildCat]

Plank #4 is irrational and a non-starter.




Look at auto or house insurance for a simple counterexample. If I want to buy, say, $250,000 worth of flood insurance, my costs will vary based on where the house is located. If it's at the top of a 14,000 foot mountain, my costs will be minimal, because any flood high enough to take out a house at the top of Pike's Peak will also take out enough of Denver that the insurance company will no longer be around to pay out. If my house is on the middle of an low-lying island in the middle of a river, or backed against a levee, insurance will be much more expensive. Insuring my car will be much more expensive if I've been in four accidents in the past five years.

If I want to buy a $250,000 life or health insurance policy, the same considerations apply. If I'm a twenty-year old non-smoking professional tennis instructor, my rates should be lower than if I'm an overweight sixty year old truck driver with a three-pack a day habit.

The idea is to get rid of medical rating. Think of the entire country as the risk pool.

Does your employer deduct from its its younger employees a lower amount than older ones? Not likely. Yes, in this situation the healthy subsidize the unhealthy. This is, after all, the whole point of insurance.

If you want to subsidize smokers less, then you need a system in place to test for tobacco use, adding costs. And you also open the door for other risks, and charging more for those. Like to eat steak? Tack on a heart attack risk. Travel to Africa? Tack on a malaria risk. Like to hike in the woods? Tack on a "mauled by a bear" risk. And so on and so on. Eventually the risk evaluation eats up more and more resources and costs increase.

I really doubt that availability of insurance compels people to smoke or not.

 

[WildCat]

Untying health insurance from employment would be a Bad Idea.

Employers are not going to give their employees raises to compensate; there's no incentive for them to do so. So in addition to other monthly expenses, we'd have to find a few hundred dollars to pay for health insurance.

I find this argument ridiculous on its face. If what you say is true, no company would offer health insurance benefits now. Nor would they pay anyone above minimum wage. The fact that companies do shows conclusively that yes, competition forces them to pay wages and offer benefits above and beyond what the law requires.

 

[WildCat]

btw Ichabod, thanks for the thread!