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Saturday, May 29, 2004

Health Care, continued  

I haven't written about health care in a while - other topics have intervened - but Bob Dudley at Truck and Barter reminds me why the problem won't go away, in a post entitled Medicare and Other People’s Money. The two parts of the economy where costs have risen well above inflation for the past ten years are health care and college tuition - both characterized by a predominance of third-party payers. Each, of course, has its own institutional ways of limiting market forces (licensing and other barriers to entry most obvious), but the complete lack of aligned incentives has to be a paramount reason.

There's no point in recounting that we got into this fix due to WWII wage controls; the question is how to begin to climb out. I think we need to work toward dividing "health insurance" into actual insurance against loss and routine health maintenance, however paid for. Imagine that your auto insurance policy covered not only collisions but oil changes and annual inspections - under the not-indefensible logic that better-maintained cars are less likely be in costly accidents: how much higher do you think your annual premiums would be? (Of course, the sticker shock is mitigated by having your employer pick up a hefty percentage, which he then deducts, with your share automatically taken out of your paycheck. But everyone is in the same risk pool: no more safe driver discounts.)

An essential step is separating catastrophic care from routine care - complicated by the fact that a routine exam occasionally leads to emergency treatments. Health Saving Accounts, either tacked on or snuck in to the Medicare bill*, depending on your POV, take two steps in this direction: catastrophic insurance qua insurance, with a high deductible that increases the insured's incentives regarding non-emergency costs. Kerry's plan, in its latest incarnation, takes one forward - the government picks up catastrophic costs in excess of $50,000 - and one-half back - more coverage of chronic disease management.

This is the way things have to move, though not everyone recognizes that. Incremental steps, colored or contaminated (doyPOV) by some basic values: private markets and capital formation for the Republican plan, more government involvement and conditional subsidies for the Democrat. It'll happen, just slowly; hopefully before the current unsustainable system implodes.

So, how does this relate to the Universal/Affordable/Effective pick-any-two model? HSAs try to maintain Effective by assuming user choice will incentivize quality and address Affordable by segmenting the market; the fact that accounts are individual shows that Universal is an acceptable non-priority. Kerry's plan addresses Universal by increasing enrollment in government plans and - to a lesser extent - Effective, with more disease management. However, it shortchanges Affordable, both by assuming significant cost savings from chronic-disease management (which tends to decrease per capita as the managed population expands) and by opening the door to paying for universal catastrophic care from general revenues (which "repealing Bush's tax cuts for the rich" means in budget terms.)

Clearly, choices are being made; they're just not being admitted. It would be nice if someone would say so out loud.

* Analagously, a program to let a limited class of drivers get discounts on fixed quantities of gasoline with the proper government-funded card.

posted by Kelly | 3:11 PM link
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