I am eager to see what you come up with. I hope you'll address one root cause of our misery in health care - the monopolies that exist in several key sectors of the industry:
1. Providers: people do not want to travel around the country - understandably - for care. As health systems have consolidated, and bought up practices, they have created regional monopolies that have substantial negotiating leverage with private insurers. They use this to extract very high rates from insurers - who have little recourse. They can try to narrow networks, but employees and employers want breadth.
2. Pharma - obviously, we enable monopolies for new drugs, both innovative ones, as well as less innovative or 'copy cat' products.
3. PBMs - in theory, these behemoths should be able to lower drug spend by being their own monopoly, but it tends not to work. They end up extracting 'rebates', which are secretive, and may or may not be shared with the ultimate purchasers.
I have long contended that routine care should be paid for out of pocket via health savings accounts with insurance for catastrophic health care only. This would force competition on price/quality as people would shop for routine health care like they do other goods and services.
Yes. Health insurance is upside down relative to other insurance. It is like you expecting your home owner policy to pay for cleaning services. The 20% have always generated most of the costs. Back 30 years ago when I was running an employer plan we would get monthly reports on the big claims. It was generally heart attacks and premies. We didn't get the big end of life claims like Medicare does.
"Health insurance is upside down relative to other insurance."
The nature of the risk is simply different. Houses don't have "pre existing conditions" that are difficult/impossible to fix. If they did, we'd just knock the house down and build a better house... we're reluctant to do that with people (although.. .with climate change, we may start seeing more uninsurable properties, where the flood/fire risk isn't a "risk" at all, but a certainty).
Went to the cardiologist yesterday. $10 copay. Whatever in the end a 6-mo visit with EKG will cost will be a surprise when they tell me, b/c 10% of that cost is mine since Dr is in network. Then went for bloodwork, where I am supposed to leave a credit card authorization - which they think will be around $11 but they'll let me know. Meanwhile, made sure I saw the cardiologist now b/c if I gave him breathing room and went in two weeks, I'd trigger a $600 deductible. All the while I pay monthly premiums. This is not healthcare -- it is a financial shell game scam. Meanwhile, my 26-yr old falls off the plan next May but all he can get is no-benefits contractor jobs. If people pretend this is what the "market" can do, don't be surprised people rebel against the market, even if they believe other economic mythologies in its place.
Something to bear in mind... Maybe a quarter of Americans read at a very low level, many are fundamentally illiterate. 50 million are at IQ 85 or below. All of those people need a very simple way to get health care. Walk in, get care.
Most people when given a choice of spend some money or suck it up, suck it up. Prevention is worth a ton of cure. Some things get much worse. To be effective health care needs to take a look at you even when it's just a little old thing.
States suck. I live in a wealthy fit state with a good responsive government led by bright well intentioned people. The single payer system they tried to push on us was horrible, the implementation of our own version of the ACA sucked, we can't even do unemployment.
Forget trying to be as good as some Euro model, if we could be as good as Thailand it would be a huge improvement.
Socialize it. Leave the for profit as a choice for the wealthy. We all need a basic level of care we can't fall below with no one profiting by excess care, inflated prices, or bloated salaries.
Trump's been babbling incoherently for ten years now about the rabbit he's going to pull out of his hat on health care reform any day now. If he really wanted to fix it he could look at... literally any other OECD country for ideas.
Health care costs money and figuring out where that comes from is the ballgame. This isn't that complicated and there are only so many ways to do it. Nobody else does it the way the US does. Unfortunately the alternatives are all "socialism" of one form or another.
Coming up with a sensible improvement would be the easy part. The politics of remaking 17% of the US economy is the hard part, especially in such a polarized society that hates each other so much and has zero social cohesion.
Canada is a bit of an outlier in entirely outlawing the private provision of medically necessary services (except for workplace injuries), but in practice our "private tier" is the US. (Anyone I've ever known who was seriously ill received excellent care in Canada, but for elective surgeries the wait times can be long). European countries just simplify matters by allowing an internal private tier. Either way, nobody in Canada is thinking "gee I wish we were the 51st state".
All insurance faces the major problem of moral hazard, because the consumer has already paid (in the form of premiums).
In auto insurance, it's not that bad; nobody wants insurance to pay for $10K of diagnostic procedures to make sure that your car won't die in the next six months. And nobody wants insurance to pay $100K to keep your 17-year-old car running for (maybe) another three years. With health insurance, it *is* that bad.
Use of QALY and DALY would help. But the same Republicans who screamed that COVID restrictions ignored QALY/DALY would scream that using QALY/DALY in health care is "death panels".
So, good luck.
But I'll be very interested to read the pieces coming out this year. Commonplace is clearly aware of the problems, which is better starting place than most.
I'm looking forward to reading what you have to say. I thought people getting more skin in the game via higher copays would rein in costs. Obviously, that hasn't happened. I'm not sure there is a solution other than forcing the system, through legislation somehow, to treat health insurance more like home insurance where only disasters are covered instead of regular home maintenance and repairs. I think the health insurance 'industry' will be a formidable foe in doing that. Or, maybe there are other solutions? I'm out of ideas and looking forward to hearing yours.
All this talk of health insurance and the costs of care misses the fundamental problem: we need to incentivize people to live healthier lives. A possible set of incentives might simply be charging differential prices for insurance coverage, based on documented health of each individual. All who want to have health insurance would be required to go for an annual checkup including a blood test, blood pressure, EKG, etc. Results from the checkup would impact the cost of next year's health insurance. Get healthier, pay less. At present, our medical professionals focus on health problems and ways (such as medications) to lessen the symptoms. These are not health improvements but health bandaids. Let's focus on getting healthier rather than on trying to fix the financial problems of the present system.
Insurance should not pay for routine care, and maybe not even well visits such as physicals. It’s on the consumer to maintain their health.
Health insurance should have a crazy high deductible, aka catastrophic level of care.
Everybody buys insurance on their own - no employer funded plans, though perhaps tax free employers funds towards health care insurance, if the employer chooses to do so.
Providers should be required to post their one and only cost to whomever seeks treatment for each care CPT code. All comers get the same cash price, and pay the providers directly.
Frontline staff at providers should be required to quote these costs in writing (email) prior to treatment, receiving patients OK in advance. In fairness, providers can ask for full or partial payment in advance. Everybody knows who’s getting charged what, and who is paying.
Consumers pay these routine care costs out of pocket until their (catastrophic) deductible is met, then insurance kicks in.
Insurers CAN negotiate with providers to form networks for these catastrophic services, or perhaps, there is single payer insurance to cover catastrophic treatment with insurers providing “above and beyond” coverage.
I’m sure there’s holes in the above, but the goal is to get consumers invested in staying healthy (i.e. limiting their out of pocket cash pre-deductible expenses), creating competition amongst providers for such services, removing layers of administration and expense, and providing market based choices for levels of deductible and levels of catastrophic coverage (good, better, best) and the resultant cost of health care insurance.
The holes in this plan are a) emergency care (nobody's going to be reading email quotes after a car accident or GSW) b) pre-existing conditions.
Plus "requiring providers to provide the same price" "forbidding employers to provide health insurance"... that's more control over provision than even Canada exerts.
I've always thought the "moral hazard" angle is overrated... people don't *want* to be sick or injured, you don't need to apply further financial incentives.
Great post - many thanks! We should eliminate the profit motive (i.e., the insurance/PBM industries) in one swoop and move all of those premiums directly into well-managed/invested accounts - so that there is just a fund in every state for people's medical needs. Then the pricing is made absolutely uniform - per Longman, "medicare pricing for all."
BUT DUDE! ... you have had HOW MANY YEARS since the Trump1 Campaign in which he PROMISED a 'Golden Health Care Plan' to repeal and replace ACA?!
AND YOU STILL are only just promising to study more to produce an example, of a framework, of a model, of a plan, for a policy!
THE EXAMPLE, OF A FRAMEWORK, OF A MODEL, OF A PLAN, for a policy - after so many years - bespeaks laziness and distraction more than brilliance and efficacy.
Do better, faster. In your YEAR of study and writing be sure to visit, meet, hear from and include the priorities of REAL REGULAR Americans!
And yet also, I have been young and indestructible and am now middle-aged and need a little more maintenance. That age means I also have friends and family who have had catastrophes — strokes, cancer — that require the extraordinary and very expensive intervention of 21st-century medicine.
The costs are absolutely shocking and you just never know where the lightning will strike.
Hi Oren. I am also a Ph.D. economist. Here is an article I wrote back in 2017 for Medium. I cannot find the link on-line, so here it is FYI... Seems relevant once again.... I cannot post the whole thing, but here's the begining, and I'd be happy to send the rest.
What’s next on health care: Single Financer, 326 million Payers.
Dr. Jennifer Kohn
September 26, 2017
Now that the partisan Republican health care effort appears over, perhaps we can go back to the drawing board and think anew about both policy and process. As Susan Collins said in her statement effectively killing Graham-Cassidy, “This is simply not the way that we should be approaching an important and complex issue that must be handled thoughtfully and fairly for all Americans.” Few can disagree with Senator McCain’s statement on the floor of the Senate: “Our health insurance system is a mess. We all know it, those who support Obamacare and those who oppose it. Something has to be done.” But there is clearly no bi-partisan consensus about what should be done. The time seems right for something new. In the spirit evoked by Senators Collins and McCain and many others, I offer this proposal for a single financer, 236 million payer health care reform as a starting point for truly bipartisan political dialogue that may please no one, but may nonetheless provide a more satisfying and financially solvent health care system for the American people...
Conclusion
This proposal means a single financer, the federal government, but 326 million payers who can make their own health care decisions in a new market for health care rather than health insurance. Are there important details still missing – sure. Let the debate begin. But let’s stop the partisan game-playing over an issue so intimate and financially critical to every American and to America as a nation. Let’s have a meaningful, transparent debate that goes beyond Democratic and Republican winners and losers and searches with honesty and humility for a system that can work for the American people.
You can’t have this because grifting political operatives in both wings of “the Uniparty” make bank on the never ending phony war over what passes for “healthcare” in America.
Health care is probably an example where an ounce of prevention is worth a pound of cure. So the extremely expensive care provided to one person denies preventative care for lots of people.
At some point it becomes more reasonable to let one person die in order to take better care of everyone else.
What if organ transplants are at that point, such that the poor are denied access and only the wealthy can afford to get one?
And what about the individual’s responsibility to take care of themselves?
Shouldn’t someone who takes care of themselves get more consideration than an alcoholic, for example?
I am eager to see what you come up with. I hope you'll address one root cause of our misery in health care - the monopolies that exist in several key sectors of the industry:
1. Providers: people do not want to travel around the country - understandably - for care. As health systems have consolidated, and bought up practices, they have created regional monopolies that have substantial negotiating leverage with private insurers. They use this to extract very high rates from insurers - who have little recourse. They can try to narrow networks, but employees and employers want breadth.
2. Pharma - obviously, we enable monopolies for new drugs, both innovative ones, as well as less innovative or 'copy cat' products.
3. PBMs - in theory, these behemoths should be able to lower drug spend by being their own monopoly, but it tends not to work. They end up extracting 'rebates', which are secretive, and may or may not be shared with the ultimate purchasers.
I have long contended that routine care should be paid for out of pocket via health savings accounts with insurance for catastrophic health care only. This would force competition on price/quality as people would shop for routine health care like they do other goods and services.
Yes. Health insurance is upside down relative to other insurance. It is like you expecting your home owner policy to pay for cleaning services. The 20% have always generated most of the costs. Back 30 years ago when I was running an employer plan we would get monthly reports on the big claims. It was generally heart attacks and premies. We didn't get the big end of life claims like Medicare does.
OK, but I also didn't want a heart attack, so apologies if it costs something.
Indeed but I was reacting to Cass implying that 80 20 was new
"Health insurance is upside down relative to other insurance."
The nature of the risk is simply different. Houses don't have "pre existing conditions" that are difficult/impossible to fix. If they did, we'd just knock the house down and build a better house... we're reluctant to do that with people (although.. .with climate change, we may start seeing more uninsurable properties, where the flood/fire risk isn't a "risk" at all, but a certainty).
Went to the cardiologist yesterday. $10 copay. Whatever in the end a 6-mo visit with EKG will cost will be a surprise when they tell me, b/c 10% of that cost is mine since Dr is in network. Then went for bloodwork, where I am supposed to leave a credit card authorization - which they think will be around $11 but they'll let me know. Meanwhile, made sure I saw the cardiologist now b/c if I gave him breathing room and went in two weeks, I'd trigger a $600 deductible. All the while I pay monthly premiums. This is not healthcare -- it is a financial shell game scam. Meanwhile, my 26-yr old falls off the plan next May but all he can get is no-benefits contractor jobs. If people pretend this is what the "market" can do, don't be surprised people rebel against the market, even if they believe other economic mythologies in its place.
Something to bear in mind... Maybe a quarter of Americans read at a very low level, many are fundamentally illiterate. 50 million are at IQ 85 or below. All of those people need a very simple way to get health care. Walk in, get care.
Most people when given a choice of spend some money or suck it up, suck it up. Prevention is worth a ton of cure. Some things get much worse. To be effective health care needs to take a look at you even when it's just a little old thing.
States suck. I live in a wealthy fit state with a good responsive government led by bright well intentioned people. The single payer system they tried to push on us was horrible, the implementation of our own version of the ACA sucked, we can't even do unemployment.
Forget trying to be as good as some Euro model, if we could be as good as Thailand it would be a huge improvement.
Socialize it. Leave the for profit as a choice for the wealthy. We all need a basic level of care we can't fall below with no one profiting by excess care, inflated prices, or bloated salaries.
Junk bonds owned by private equity.
"How might that reform look? "
Trump's been babbling incoherently for ten years now about the rabbit he's going to pull out of his hat on health care reform any day now. If he really wanted to fix it he could look at... literally any other OECD country for ideas.
Health care costs money and figuring out where that comes from is the ballgame. This isn't that complicated and there are only so many ways to do it. Nobody else does it the way the US does. Unfortunately the alternatives are all "socialism" of one form or another.
Coming up with a sensible improvement would be the easy part. The politics of remaking 17% of the US economy is the hard part, especially in such a polarized society that hates each other so much and has zero social cohesion.
Canada is a bit of an outlier in entirely outlawing the private provision of medically necessary services (except for workplace injuries), but in practice our "private tier" is the US. (Anyone I've ever known who was seriously ill received excellent care in Canada, but for elective surgeries the wait times can be long). European countries just simplify matters by allowing an internal private tier. Either way, nobody in Canada is thinking "gee I wish we were the 51st state".
All insurance faces the major problem of moral hazard, because the consumer has already paid (in the form of premiums).
In auto insurance, it's not that bad; nobody wants insurance to pay for $10K of diagnostic procedures to make sure that your car won't die in the next six months. And nobody wants insurance to pay $100K to keep your 17-year-old car running for (maybe) another three years. With health insurance, it *is* that bad.
Use of QALY and DALY would help. But the same Republicans who screamed that COVID restrictions ignored QALY/DALY would scream that using QALY/DALY in health care is "death panels".
So, good luck.
But I'll be very interested to read the pieces coming out this year. Commonplace is clearly aware of the problems, which is better starting place than most.
I'm looking forward to reading what you have to say. I thought people getting more skin in the game via higher copays would rein in costs. Obviously, that hasn't happened. I'm not sure there is a solution other than forcing the system, through legislation somehow, to treat health insurance more like home insurance where only disasters are covered instead of regular home maintenance and repairs. I think the health insurance 'industry' will be a formidable foe in doing that. Or, maybe there are other solutions? I'm out of ideas and looking forward to hearing yours.
All this talk of health insurance and the costs of care misses the fundamental problem: we need to incentivize people to live healthier lives. A possible set of incentives might simply be charging differential prices for insurance coverage, based on documented health of each individual. All who want to have health insurance would be required to go for an annual checkup including a blood test, blood pressure, EKG, etc. Results from the checkup would impact the cost of next year's health insurance. Get healthier, pay less. At present, our medical professionals focus on health problems and ways (such as medications) to lessen the symptoms. These are not health improvements but health bandaids. Let's focus on getting healthier rather than on trying to fix the financial problems of the present system.
I look forward to reading the coming posts.
My take, borne of experience:
Insurance should not pay for routine care, and maybe not even well visits such as physicals. It’s on the consumer to maintain their health.
Health insurance should have a crazy high deductible, aka catastrophic level of care.
Everybody buys insurance on their own - no employer funded plans, though perhaps tax free employers funds towards health care insurance, if the employer chooses to do so.
Providers should be required to post their one and only cost to whomever seeks treatment for each care CPT code. All comers get the same cash price, and pay the providers directly.
Frontline staff at providers should be required to quote these costs in writing (email) prior to treatment, receiving patients OK in advance. In fairness, providers can ask for full or partial payment in advance. Everybody knows who’s getting charged what, and who is paying.
Consumers pay these routine care costs out of pocket until their (catastrophic) deductible is met, then insurance kicks in.
Insurers CAN negotiate with providers to form networks for these catastrophic services, or perhaps, there is single payer insurance to cover catastrophic treatment with insurers providing “above and beyond” coverage.
I’m sure there’s holes in the above, but the goal is to get consumers invested in staying healthy (i.e. limiting their out of pocket cash pre-deductible expenses), creating competition amongst providers for such services, removing layers of administration and expense, and providing market based choices for levels of deductible and levels of catastrophic coverage (good, better, best) and the resultant cost of health care insurance.
The holes in this plan are a) emergency care (nobody's going to be reading email quotes after a car accident or GSW) b) pre-existing conditions.
Plus "requiring providers to provide the same price" "forbidding employers to provide health insurance"... that's more control over provision than even Canada exerts.
I've always thought the "moral hazard" angle is overrated... people don't *want* to be sick or injured, you don't need to apply further financial incentives.
There is no need to invent a health care system from scratch... these problems have all been solved in other countries. I recommend the health care chapter of this book: https://www.amazon.ca/Economics-Welfare-State-Nicholas-Barr/dp/0198748582
Great post - many thanks! We should eliminate the profit motive (i.e., the insurance/PBM industries) in one swoop and move all of those premiums directly into well-managed/invested accounts - so that there is just a fund in every state for people's medical needs. Then the pricing is made absolutely uniform - per Longman, "medicare pricing for all."
Sir, well done! well described problem!
BUT DUDE! ... you have had HOW MANY YEARS since the Trump1 Campaign in which he PROMISED a 'Golden Health Care Plan' to repeal and replace ACA?!
AND YOU STILL are only just promising to study more to produce an example, of a framework, of a model, of a plan, for a policy!
THE EXAMPLE, OF A FRAMEWORK, OF A MODEL, OF A PLAN, for a policy - after so many years - bespeaks laziness and distraction more than brilliance and efficacy.
Do better, faster. In your YEAR of study and writing be sure to visit, meet, hear from and include the priorities of REAL REGULAR Americans!
... your health care policy paper gets a D- at best!
Start with the food system
I appreciate the thinking here.
And yet also, I have been young and indestructible and am now middle-aged and need a little more maintenance. That age means I also have friends and family who have had catastrophes — strokes, cancer — that require the extraordinary and very expensive intervention of 21st-century medicine.
The costs are absolutely shocking and you just never know where the lightning will strike.
Hi Oren. I am also a Ph.D. economist. Here is an article I wrote back in 2017 for Medium. I cannot find the link on-line, so here it is FYI... Seems relevant once again.... I cannot post the whole thing, but here's the begining, and I'd be happy to send the rest.
What’s next on health care: Single Financer, 326 million Payers.
Dr. Jennifer Kohn
September 26, 2017
Now that the partisan Republican health care effort appears over, perhaps we can go back to the drawing board and think anew about both policy and process. As Susan Collins said in her statement effectively killing Graham-Cassidy, “This is simply not the way that we should be approaching an important and complex issue that must be handled thoughtfully and fairly for all Americans.” Few can disagree with Senator McCain’s statement on the floor of the Senate: “Our health insurance system is a mess. We all know it, those who support Obamacare and those who oppose it. Something has to be done.” But there is clearly no bi-partisan consensus about what should be done. The time seems right for something new. In the spirit evoked by Senators Collins and McCain and many others, I offer this proposal for a single financer, 236 million payer health care reform as a starting point for truly bipartisan political dialogue that may please no one, but may nonetheless provide a more satisfying and financially solvent health care system for the American people...
Conclusion
This proposal means a single financer, the federal government, but 326 million payers who can make their own health care decisions in a new market for health care rather than health insurance. Are there important details still missing – sure. Let the debate begin. But let’s stop the partisan game-playing over an issue so intimate and financially critical to every American and to America as a nation. Let’s have a meaningful, transparent debate that goes beyond Democratic and Republican winners and losers and searches with honesty and humility for a system that can work for the American people.
You can’t have this because grifting political operatives in both wings of “the Uniparty” make bank on the never ending phony war over what passes for “healthcare” in America.
Health care is probably an example where an ounce of prevention is worth a pound of cure. So the extremely expensive care provided to one person denies preventative care for lots of people.
At some point it becomes more reasonable to let one person die in order to take better care of everyone else.
What if organ transplants are at that point, such that the poor are denied access and only the wealthy can afford to get one?
And what about the individual’s responsibility to take care of themselves?
Shouldn’t someone who takes care of themselves get more consideration than an alcoholic, for example?