Argument: more health insurance does not lower cost
This morning on Washington Journal was a discussion with Marogt Sanger-Katz of the NYT Upshot blog. She wrote a post: No, Giving More People Health Insurance Doesn’t Save Money. It’s a controversial title for sure, but there is some interesting points that I know are often mentioned on a few email lists I’m on for my profession.
Let me just say I’m am a bit cautious of her writing after listening to her answer regarding why the nation did not get a single payer system in her interview this morning. She was correct there was not the political will, but she suggested that it was do to a lack of interest/drive on the part of the people. She states most of the people do not want single payer. My understanding is that is was more the politicians involved namely President Obama and the congressional dem leadership that flat shut down any talk of single payer and then the Medicare option. Ms. Sanger-Katz did not mention this at all. Here is the clip:
In her article however, she does mention the issue of “number to treat”. This is a big issue in health care and has been ignored generally. When the move was on to control costs, medicine began to promote prevention, only it was not prevention by means of better food, better life environment via a reduction in the risks of life (security of housing, income, aging). If you think about it, to promote better food requires going up against our industrialized food system. To promote a better life environment would mean going up against the entire economic model we have been deriving policy from that has lead to the life people are living today.
Medicine did not promote the science that looks at the natural functions and relationships of biology and promote a model based on that while acknowledging that at some point life ends. Medicine promotes a model that comes from its historical approach to health and healing. Its model is fully dependent on performing diagnostic testing because its model over all is about the diagnosis which then leads to a treatment. No judgment here. It is what they do, and it is a fact of living that something will go wrong and need to be figured out and then treated. To back this approach up to an early moment in life when nothing is going wrong in a crisis nature and apply it to everyone if possible ignores what should have been a natural most basic question: What about all the false positive test? Such questioning would have lead to “numbers to treat”. We are not talking vaccination here, let’s be clear.
Such is I believe, the better part of Ms. Sanger-Katz’s article. How many do we have to test and treat for the treatment to save one life? When viewed this way, the theorized (and they were theorized as it was a model promoted based on simply extending what was being done in a crisis model) savings are not so much.
Joshua T. Cohen, the deputy director of the Center for Evaluation of Value and Risk in Health at Tufts Medical Center, said: “We’ve all heard it before: ‘An ounce of prevention is worth a pound of cure.’ It doesn’t really play out when you analyze the numbers, and the reason for that is that you have to give a lot of people those ounces of prevention to end up with one person who’s going to get that pound of cure.”
It may be that we, society decide that we will spend the money regardless of how many need to be tested, and how many will be falsely treated and not treated do to false negatives because one life saved is the humane way to live life. But, we are not having this discussion and that leads me to another point of her article that I find to be bogus. As more people have health insurance, more people use it. Well dah! Are we not about “prevention” via early detection and thus more use of the predominate health care model of crisis care/intervention? She quotes:
…this one of uninsured low-income people in Oregon. Low-income Oregonians who wanted to sign up for the state’s Medicaid program were placed in a lottery. Only some got the insurance, but the researchers tracked both groups. In the first year, they found that the lottery entrants who were given Medicaid spent more on health care than those who remained uninsured.
Amy Finkelstein, a professor of economics at M.I.T. and one of the authors of the Oregon study, described this finding as their least surprising result. “There’s overwhelming evidence from our study and others that when you cover people with health insurance, they use more health care,” she said.
Did fewer people buy houses when people got easier access to credit? Are we not an economy based on consumption? I could be over reading her writing but she is certainly brushing up against that class concept of helping those who need help just means more cost than not helping them at all. That is, providing aid results in dependency. You know the arguments.
started in the 1970s by the RAND Corporation, was designed to answer this exact question. It found that the less expensive you made it for people to obtain medical care, the more of it they used. That follows the pattern for nearly every other good in the economy, including food, clothing and electronics. The cheaper they are for people, the more they are likely to buy.
One other thing missing from the issue of health care cost that goes back to her incorrect statement regarding single payer is the adverse incentive the insurance companies have. Their power, which is their asset is purely dependent on the cost of the policy. Other than the rules now in place from the PPACA, there is little if any natural market force pushing the insurer to find real methods for lowing the cost of health and healing. To due so would reduce the premiums and thus the amount of money managed. With the consolidation happening, it will only get worse even with the ACA rules because the data streams will be more homogenous. That is, there will be less creative thinking happening as to how to lower cost in order to attract that additional customer away from your competitor as a result of a different cohort. It is the natural course of moving to a private sector free market monopoly.
In the end, though, the article is at least attempting to bring into the public a discussion which has been simmering within the world of those who actually do the health and healing.
Some are now managing chronic and potentially life-threatening health conditions. But those benefits don’t mean we should be surprised by the actuaries’ recent findings on spending growth. More people in the health care system means more dollars spent on health care. The increase doesn’t mean that Obamacare is leading to runaway costs, or that it’s failing to reform the health care system to make it more efficient. But it does mean that we can’t think of the coverage expansion as free.
The full scope question is how do we assure the lowest expenditures on health care in an ever increasing population? We’re going to spend money on health and healing. To look at producing savings, that is a reduction in the acceleration and velocity of the costs is proper. To view the obtaining of savings as the same as cutting utilization is to be blinded to the actual model presently used for defining what is health and healing. It is not a bad model, it is a model being inappropriately applied. But, all that testing certainly will make the commercial enterprises who supply all the stuff used in the model very happy.
The honest answer to obtaining the most efficient health care system is going to have to look at much more than the system used to get the money from the patient to the provider. We won’t be able to write enough rules and regs. The honest answer is going to buck up against not just the entire health care industry but the entire ideology of our economy. We can not ignore our environment and the way we use it to generate income, wealth and growth such that people can sustain their lives because health and maintaining it starts with biology (chemistry at its most basic) which leads to physiology which is the result of the environment. Physical health, mental health, it’s all the result of the environment it lives in. Yes, even genetics has an environmental component.
Garbage in, garbage out certainly. Though making the selfish choice only leads to a greater number of problems to solve than would have been otherwise. It may not be you having to experience the “externalities” of your selfish choice but someone will. Just look at the Republicans current conundrum for proof.
Of course more insurance does not mean lower spending — in the short term. The point is to lower costs long-term, by spending more on early detection and prevention short-term.
without getting very deep into the weeds, there’s no way i can see health insurance as anything but an added cost…the revenues of the insurance companies are not insignificant and they produce little if anything in the way of improved patient outcomes…insurance acts to redistribute health care but it is not health care; insurance execs are not doctors…if we eliminated the insurance industry altogether the aggegate of total health care costs would most certainly be lower…
It is your position you can negotiate your own costs?or the healthcare industry would charge a fair rate other than the Charge Master rate??
“…It found that the less expensive you made it for people to obtain medical care, the more of it they used. That follows the pattern for nearly every other good in the economy…”
Sigh. Let’s assume that expense versus care “purchased” is charted. Within one small range of that chart, of course you will see an obvious relationship with lower cost leading to more health care usage. But that doesn’t mean the whole expanse will show the same relationship.
Up here in Canada, where most health care is free, you don’t see the hospitals with long lines snaking out the door and down the street, like a blockbuster summer movie. Most people don’t go to hospitals for fun, and often don’t go even if they ought to. Health care isn’t entertaining, face it. And most people, most of the time, find doctors appointments and so on to be a disruption of their lives.
So, at the cheap need of the range, you don’t find infinite money being spent, because other costs (time wasted, boredom, lack of demand) limit use of those resources.
At the other end of the range, with very,high expense, then OF COURSE you see low or zero usage, because most people don’t have lakes of cash, and many health problems can be endured. At this end, only life threatening conditions will move people to sell the house, do fund raisers, and otherwise scrape together what amounts to ransom.
People who claim that cost and usage will give you a nice smooth inverse ratio slope either don’t get out much, or don’t care.
“My understanding is that is was more the politicians involved namely President Obama and the congressional dem leadership that flat shut down any talk of single payer and then the Medicare option.”
It just never fen stops..
To lower the cost of health insurance, two things need to be done.
1. Remove profit from health insurance.
2. Lower the cost of medical care.
Oh Holy Hell.
People who are not sick, are not dying or are not dead are ceteris paribus more productive labor units than those who are.
You don’t have to be a soft-headed, soft-hearted, animal loving kumbaya liberal to understand that vet bills are part of the price for keeping your farm animals productive. Sure at some point you need to send Boxer the Horse off to the glue factory or your worn out workers to the Solyent Green plant but in the meantime you need to invest a certain amount of food, shelter and medical care to keep them on the job.
That people with access to health insurance/health care are more likely to use it than those that don’t is not only a “no shit” conclusion but ignores all the externalized costs of people being sick.
Are antibiotics expensive? Well surprisingly so, at least the way we pay for them. Are they from a business point of view cost-effective if giving your worker some on Friday when he falls ill means he is back on the job Monday rather than three weeks from Monday and suffering permanent organ damage from the infection? Hell yes. Does the fact that the second worker didn’t avail himself of health care mean your specific health ledger looks better? Yeah, maybe. But what the hell does that have to do with the entire business’s bottom line? Or the societal bottom line? Which makes the following totally wrong:
“The full scope question is how do we assure the lowest expenditures on health care in an ever increasing population?”
No, no, no! That is a NARROW scope question. Because good health is not only of utility to the person involved. To misappropriate and revise my favorite expression:
“Everything is simple. If you ignore the externalities”.
You would be correct that there is value to society for the dollars we spend on obtaining health and healing. However, my statement was in reference to specifically the dollars spent on obtaining health and healing which is what the article was about.
In that regard, and as mentioned by others that when more people have access to obtaining health and healing the total spend on the population will go up, then how do we assure going forward that we are getting our money’s worth. Especially, as you noted and as I did: externalities.
Savings being discussed is in reference to the excess within the system and not in reference to the value to society and thus the sick person not spreading the sickness assuring greater productivity for…all concerned. Such saving to society in more productivity is not the same as dealing with the medical issue of “numbers to treat”, the false positive/false negative results and responses, nor does it address the effect environment has on health and healing and the cost there.
I think it is wrong to bring in the productivity savings to society as an offset to the costs related to the inefficiencies of the system used to obtain health and healing. What ever savings there are to productivity are a bonus of having a system of obtaining health and healing it is not a design of the system.
Frankly if that were the intent of the system, I think we would be having even funkier numbers making the rounds as people argue to use the productivity gains to cut spending on obtaining health and healing. It’s seems to be what we do. Find any means to cut. God forbid we decide to spend the gains of productivity on society for society’s greater good.
Regarding the overall increase in spending on obtaining health and healing, if a large portion of the population did not have access to such and now they do, then within the system that total population was using, I would suggest the total spent was a false total spending. That is, if we accept that everyone should have had the means to obtain health and healing or if we consider all having access as the norm (like the rest of the modern world societies).
IOW, we have been deluding ourselves as to just how costly our system is by assuring a large number of citizens did not have access.
I suspect the supply of cheap labor is large enough so the boss doesn’t really care if you get sick. He can replace you. This was certainly the way it was done for the years before health insurance was made possible by the government subsidizing the employer provided health insurance.
I think the author of this post, and Noni are on the right track. And I won’t bore everyone with my ideas, but I do need to say that “the people were not demanding single payer” is a rather naive statement: the people have no voice, and they don’t know much. We get the medical care the rulers find convenient and profitable. It’s not that every company finds health care profitable, but when they get together with other money interests, compromises are made.
There are ways to make “more” cheaper. But the one does not follow from the other. It’s just that you COULD provide more and cheaper if that is what you wanted to do. And you ruled the country.
bill, it is “my position” that health insurance is an added and unnecessary cost of health care…if we all had to buy grocery insurance that funded a monstrous financial industry before we could eat, food would cost more too…
But can you imagine how difficult it would be to assess the costs of medical procedures before buying them?
I can go into a grocery store and find out comparative prices fairly easily. I cannot imagine doing so with medical procedures.
And that is if I depend on providers to actually show all of their charges and not engage in any kind of “salesmanship”(like bait and switch).
And quote frankly I have seen “salesmanship” from providers while using insurance right now.
FYI, Jerry, more than 40% of people who have health insurance have not-for-profit health insurance.
EM, if price discovery is your issue, then that’s an argument for single payer, rather than for insurance companies…
maybe grocery insurance was a poor example…your description of health care providers suggests a behavior akin to used car salesmen….maybe we should have transportation insurance companies, so that those of us who are unaware of the pitfalls of used car buying could be protected from the shysters…
my original comment was intended as just a short take on the post’s question/argument ie, whether more health insurance adds to cost of health care or not, and not what’d i’d replace it with…i have no background in health care or insurance, have not covered or written about it, so i can’t argue the nuances as you all can…the only useful function that the insurance companies perform is to redistribute costs, but that can be done with any kind of socialized medical system that would not add to costs nearly as much as a bloated for-profit insurance industry…
Warren “not for profit” often doesn’t mean what it sounds like, which is something like “public interest”. These are very different things.
Some of the highest paid ‘regular’ jobs in this country are in ‘not for profits’. We can start with University Presidents whose often exorbitant compensation packages are only dwarfed by those given to their own football coaches. And the same in health insurance. Just because the Blue Shield and Kaiser complexes are ‘non-profit’ doesn’t mean the management are not running them with a full focus on their own bottom lines.
This was highlighted back when ACA was being debated and certain critics were pointing out that per AHIP (the trade group for health insurance companies) the average profit margins were only 6%. Meaning member companies were only scraping by and practically giving their services away. Until a few of us looked into it and found they were actually relying on your data point and averaging out profit between officially non-profit and for profit firms where the latter were really booking double digit profit levels. But were not notably compensating their mid-upper management anymore than the “non-profits”.
“Non-profit” is a LONG way from “charity”. In many cases and certainly in these cases. (And hell even “charities” like the Red Cross have some obscene compensation for top management).
Agreed, single payer would be fine and would accomplish the price controls necessary.
At the same time, I have personally encountered two physicians who were basically “used car salesmen” that I know of. And one dentist who did not have the morals to be a used car salesman.
Do you believe fire insurance is unnecessary too?
It should be 100%.
Jerry, right now i dont have it and am not particularly concerned…i had homeowners insurance with Allstate for 42 years and two years ago an 80 foot tree fell on my house and i put in a claim for the roof that ended up costing them $12K, and they cancelled me…
like health insurance companies and health care, casualty insurance companies increase the total cost of disasters…
Just for the record, not that there should be any need to repeat the record:
“The House of Representatives passed legislation for the first time Saturday night that would provide health coverage to almost every American after nearly a century of false starts and un-kept campaign promises.
The final vote was 220-215. In all, 219 Democrats voted to approve the measure in a largely party-line vote, with 39 Democrats voting no. One Republican supported the bill, Rep. Joseph Cao (R-La.).
The bill has a steep cost – both in dollars, $1.2 trillion, and political capital – but Democrats hailed its passage as the next chapter in a governing legacy that produced Medicare and Social Security.
“Oh what a night,” Speaker Nancy Pelosi said moments after the vote, after fielding a congratulatory call from President Barack Obama. “Without President Obama in the White House, this victory would not have been possible. He provided the vision and the momentum for us to get the job done for the American people.”
Obama has made health care reform his signature legislative priority — and he put his personal prestige on the line Saturday by traveling to the Capitol to rally Democrats, telling them to “answer the call of history” by passing the bill. ”
“The public option died tonight. So, it seems, did its eager successor, the Medicare buy-in. Harry Reid buried the ideas at a somber meeting of the Senate Democratic Caucus. “Could it have been better?” asked Sen. Jay Rockefeller. “Yeah. But it could’ve been so much worse if we’d just decided not to do anything because we didn’t get everything we wanted.”…
That left Joe Lieberman. And Lieberman’s price for signing onto the bill was the destruction of the public option and, unexpectedly, the Medicare buy-in provision. There would be no triggers, no opt-outs, no compromises. Lieberman swung the axe and cut his deal cleanly, killing not only the public option, but anything that looked even remotely like it. Some on the Hill remain worried that Lieberman will discover new points of contention in the coming days, as they believe he had signaled that he wouldn’t filibuster the Medicare buy-in. They worry whether his word is good. But assuming it is, he can provide the 60th vote Reid needs to move the bill by the end of next week, and keep health-care reform on some sort of schedule.”
Now, bookmark this and the next time you feel like writing something like
“My understanding is that is was more the politicians involved namely President Obama and the congressional dem leadership that flat shut down any talk of single payer and then the Medicare option.”
read it 50 times.
Heh, heh, heh! They will forget. And Lieberman left Congress.For what it is worth and I have said this before repeatedly, few countries have single payer insurance. Most are a two tier system. Th difference being, the countries with a two tier system of Medicare-like coverage for all and healthcare insurance to cover the gaps also tell the healthcare industry what the government will pay for pharma, hospital stays, and for doctors. The in the industry’s pocket Congress will not allow Medicare to negotiate rates much less tell the industry what it will pay. Neither could Congress have ever written a single-payer-healthcare-insurance-program.
Jerry, not-for-profit means that there are no shareholders getting dividends and expecting the stock price to go up.
The simple fact is, if not-for-profit health insurance were really that much better than for-profit health insurance, no-one would buy for-profit health insurance.
Warren you seem to continue confusing “not-for-profit” and “government/single payer”. The difference between them is huge and the latter if properly structured could produce huge cost savings over the former.
Jerry’s original phrasing was I think inartful and didn’t mean to imply that “removing profit from health insurance” meant “turn it over to Blue Shield and Kaiser because they are structured for tax purposes as non-profit”.
Well Michael and Run,
I do recall reading about a meeting of the progressive with Obama staff at the White House for their input and they reported being specifically told that the meeting would not go forward if they brought up single payer. This was well before Lieberman had the means for his power play.
But, Corrente at the time was following Obama et al regarding single payer and posted this March 31, 2009: http://www.correntewire.com/how_will_white_house_make_amends_censoring_single_payer_advocates_its_iowa_health_care_forum_transcript
Before that the PNHP was noting 3/3/09: During the meeting, Congressman Conyers, sponsor of the single payer bill in the House (HR 676), asked President Obama for an invite to the President’s Marchy 5 health care summit at the White House.
Conyers said he would bring along with him two doctors — Dr. Marcia Angell and Dr. Quentin Young — to represent the majority of physicians in the United States who favor single payer.
This week, by e-mail, Conyers heard back from the White House — no invite.
He and Digby pick up on this: “Got the little single-payer advocates up here.” 5/14/09 http://www.correntewire.com/obama_got_little_single_payer_advocates_here
So, I get the politics.
Yes, many “single-payer systems still involve the private sector just as medicare does with Part B. It’s what picked up what Part A did not. And now we have C (advantage plans) and D (drug plans).
It seems to me that a public option would be a very simple thing. Simply have a buy-in to Medicare. Base the premiums on the actual cost for the buy-in participants.
Let the private insurance compete.
You want private insurance, buy it. You want Medicare, buy it. Where’s the problem.
i think that is the best idea so far. but to make it work you’d have to have a very serious oversight to control costs. and if you were making a serious effort to control costs but the private insurance was not, then the doctors would refuse to accept medicare. see, there is “competition,” or not, on both ends of the business,
Bruce: “Warren, you seem to continue confusing ‘not-for-profit’ and ‘government/single payer’.”
Not at all. I never said anything about single-payer. Entirely different things.
Bruce: “Jerry’s original phrasing was I think inartful and didn’t mean to imply that ‘removing profit from health insurance’ meant ‘turn it over to Blue Shield and Kaiser because they are structured for tax purposes as non-profit’.”
Then perhaps it is Jerry who is confusing “not-for-profit” with “single payer.”
You say you get the politics, but I am not sure.
I spent a decade on the hill. MY father in law was chief of staff to a congressman. I spent many a night at cocktail parties’ dinners, etc.(At no cost, which back then helped a lot). I found out that most legislation is done by aides and not by any kind of meetings.
I will tell you two things. Before Obama took office he knew a couple of things. There would never be a stimulus that reached the trillion dollar level, and that there would never be a public option in his first two years. Now, if Congress had continued to go democratic, that could have changed down the road.
Even the House passing the bill was pure PR, they all knew there was no shot at all. And now people want to discuss the meetings about the public option and the size of the stimulus(and the lack of using the bully pulpit. etc.) when the numbers were not there.
I often wonder what people think staffs do in DC, and what transition teams do.
It seems to me they think when legislation hits a committee it is the first time anyone has ever heard of it and they cannot wait for the response.
What a bunch of maroons.
Profit is an unnecessary component of a health insurance premium be it for a single payer system or a multiple payer system. It only means that the premium is higher than it needs to be to provide the assigned coverage. Profit is a non-healthcare component.
i am fairly sure i understood the version that you are telling. but i don’t think it would take a “maroon” to believe that issues were taken up in committee “for real.” just someone who believed what he was told in high school civics.
as for “maroons” in general… and god help me please, i am not intending to insult you… it surprised me at first that you were connected at such a high level, because i have not been over impressed with the quality of your comments, but then… but then… i have not been over impressed with the quality of most of the people i have heard from the higher levels of our government…. including staff.
sort of an eternal adolescence. again, this is not an insult, just a kind of observation/question.
generally i agree with you about stuff. but you must realize at least
that those in the pfree trade persuasion would argue that “profit” is what
drives “quality.” so you can’t just dismiss profit as “unnecessary.”
there are those who would argue that “profit” is less costly than “waste,
fraud, and abuse” which is what you get with government.
I am of the opinion that profit does have a legitimate economic purpose
… and health care is very much a part of the “economy”. what we need
to oppose is profits that derive from extortion… which is pretty much
the health care model we have today. and of course while opposing
extortion with a countervailing power, aka government, we need to guard
against that waste fraud and abuse.
there are no easy answers. we are currently pretty far down in the
profits from extortion cesspool as a society, with the sides greased by a
government rather slimed by fraud and abuse.
I was never “connected at a high level” nor was my post meant to even suggest anything like that at all.
Try not to talk to me.
And you might want to watch “the American President”. Ignore the romantic comedy part and concentrate on the work of the executive and legislative staffs and lobbyists. It’s a 20 year old movie, and depicts how politics work in real life better than any experience, or stature, could.
you said “i spent a decade on the hill…”
from my lowly perspective that sounds like “connected at a high level.”
but then you illustrate the problem: i try very hard to point the conversation toward where I think the problem really lies… and I get told what a rude person i am. you say “fuck off” and all your friends agree that you are an example of holy diplomacy. of course you are hardly the only one.
also you put your fingers in your ears “try not to talk to me” while at the very same time trying to talk to me about learning politics from television.”
well, i’d say thanks for illustrating my point. but it’s really too tragic for that.
Strangely enough, there are many people who live(or lived) on Capital Hill who were not “connected”.
It is a residential area.
how about “my father in law was chief of staff to a Congressman… I spent many nights at cocktail parties…”?
and what do you mean by “maroons.” if you mean the escaped slaves who fought the British on Jamaica and generally forced the British to examine the economics of a slave based economy….
or is maroon some new days cutsey way of saying “moron”. if so, you would be in a bad place to complain about my deprecation of your opinions.
Oh, you must be so young.
if that’s addressed to me i don’t get your point. and i don’t get U tube.
How do you not get YouTube? What are you running on, a VT100?
Anyway, it’s Bugs Bunny: “What a maroon! What an ignoranimus!”
half the world does not know how the other half lives.
if i had a sense of humor i would suppose that EM was being facetious.
but being what i am, i suppose he was throwing asparagus and was shocked when someone threw some back.