Eighty-four percent of medical spending is for the 50 percent of people with at least one chronic disease; half of spending is for the 16 percent with three or more chronic conditions. People with chronic diseases know they will have them forever; those without have a low chance of contracting one in any year. Nearly half of people who are in the top 10 percent of spending in one year are in the top 10 percent the next year.
The central question for health policy is who should pay for the predictably expensive.
With these statements, David Cutler has not just pushed the goal posts on health care policy a few yards in one direction. He has moved them to the other side of the field.
Everyone is talking about how many households have insurance and acting as if the main challenge is to get healthy people to buy insurance. If Cutler is right, then health care policy boils down to:
1. Finding a fair way to share financial the burden of chronic illnesses. (Obviously, “fair” involves value judgments.)
2. Putting resources into public health measures and efforts to induce people to comply with behavioral advice that would help to prevent chronic illness.
If Cutler is right, then it seems to me that Obamacare and its relatives are beside the point. And I believe that he is right.
See also Benjamin Domenech, who writes,
By providing catastrophic care for all, President Trump could ensure that everyone has an ultimate backstop against medical bankruptcy, while freeing the states to experiment with options for reform. It would also enable the private sector to offer new insurance products to supplement the basic catastrophic care coverage.
That strikes me as much closer to the correct policy than either Obamacare or Repeal-ish. It certainly aims more squarely at the goal posts as placed by Cutler.
I also agree with Domenech’s idea of catastrophic care for all. The government would be there as a re-insurer of sorts. Then private health insurers could return to an indemnity type cap on what they are on the hook for – perhaps the reduction of risk would encourage more entrants and experiments by private insurers and the states to find something workable. The feds could start it off with a low payroll tax or perhaps preferably a consumption tax to fund the program and set that cap high at first. The accounting regulation for it should be straightforward and simple. They could bring it down gradually and boost the tax for it gradually until we find a political balance of sorts.
But Cutler treats the high and increasing costs of health care as a given and proceeds as if the only problem is how to distribute the costs. But our massive health-care inflation that now makes people with chronic conditions all but uninsurable is not a law of nature. Consider his Rheumatoid Arthritis example. How much better are the current on-patent drugs than what was used before? Does the difference warrant a $30,000 year expense? And according to Cutler’s link, the price of RA drugs have nearly *doubled* since 2013. I seriously doubt the cost of manufacturing has doubled (or increased at all). It sounds like more ‘orphan drug’ pricing shenanigans, which could be addressed by reciprocal approval and re-importation from other industrialized countries (the EU, UK, Japan).
It is true that the government is going to end up as the insurer/healthcare provider of last resort (if only through Medicaid), but that doesn’t mean the only interesting question is how to distribute costs — or that our insurance practices haven’t played the major enabling role in the cost explosion that has already occurred.
Once you decide that you are going to pay for the chronically ill, the question you ask is how to manage the cost (say by negotiating harder, or regulating against useless treatments).
However, if you can’t decide who is going to pay for the chronically ill, then the number one game in town is the selection game. It is way more important to make sure that “the other guy” pays for the chronically ill. You even end up in situations where you don’t want to be too good at treating the chronically ill, lest all the chronically ill select your plan which is still a net negative.
I think the libertarian reluctance to admit these are going to be socialized costs has led to a patchwork of payers with more interest in playing the selection game then playing the cost control game. It’s also the case that their opponents in the cost control game, providers, have a lot more leverage over a divided foe then a unified foe (either single payer or strong government regulations on cost/utilization).
But part of what influences my decision whether to pay for the chronically ill is the cost of doing so.
“Once you decide that you are going to pay for the chronically ill, the question you ask is how to manage the cost (say by negotiating harder, or regulating against useless treatments).”
It’s not that simple. Consider the Rheumatoid Arthritis example again. $30,000/year is a lot of money. But my family could afford to pay that if we had to, and there’s no reason why we should be subsidized by other, much poorer taxpayers. But also, if I were facing those kinds of out-of-pocket costs, I would certainly investigate alternative, less costly treatments. Which, of course, I would not do if the government was paying the full cost of treatment for every RA patient.
The bottom line is that *how* we decide to pay for chronic diseases will have an effect on *how much* we pay.
What if the price was $1,000 instead of $30,000 because the government negotiated a better rate on your behalf. Or what if a government official simply determined that $30,000 was a lot to pay for something that wasn’t substantially clinically better then the less expensive generic alternatives and simply didn’t allow you to access that treatment on the public dime. If you really want it and have the money, you can purchase it on your own dime.
Singapore does do this BTW, they control price and availability at their public funded facilities. They do so in a fair and rational manner. There is no excessive rationing or queues.
It’s called doing a good job, there is no substitute for human beings doing the right thing. No system, private or public, market or command economy, can survive everyone mercilessly trying to game it.
In our own system the government pays $30,000 for something nobody really wants that much because the only stakeholder not at the table is our children and the taxes they will be paying. They are never going to have a direct seat at the table. Only if the other stakeholders decide they give a damn about that silent stakeholder will anything get done. That takes human courage, there is no system you can design that substitutes for that courage.
But you would not rescind coverage on your neighbor because you wouldn’t want him to rescind coverage on you.
Everyone knows their loved ones can get require ongoing treatment even if they have a low probability of getting it in any given year.
The problem is the insurance pools as they are, they hide this. This is one advantage of the transparency and inherent portability built into systems LIKE Singapore’s. don’t understand what you think I don’t understand or am not admitting.
Also, realize single payer will just hide the unseen in other ways, like deeming you too old, procedures too unproven (and how do they ever get proven?), increasing queue times, reducing reimbursements, etc.
If you buy insurance early enough then many of these diseases are still insurable. We already do this, we just don’t realize it. Parents are in effect even insuring against genetic diseases for their children before they are even conceived. But since transportable insurance shares aren’t formally put into contract, people fight over the float.
1. Finding a fair way to share financial the burden of chronic illnesses.
If the biggest problem is chronic illness, it am guessing the future of health improvements will be actual genetics not insurance, stopping over-testing, or prescription drug pricing. It should be noted anybody with a chronic disease not only has more cost but a lot more complicates any
Of course, with genetic testing, aren’t we moving closer to a ‘Gattaca’ type future with:
1) The government slowly impose an insurance system that forces parents to have a right genetic baby.
2) Or the private health care system is so costly for parents they have to have the right genetic children. (I speak to this personally.)
In reality both will move together on this and it really does matter which one you choose.
The problem with backstopping catastrophic is the almost unlimited potential costs (e.g. cancer and end-of-life conditions), and the impossibility of political management of the “death panels” that would be required to make it feasible. It seems to me this is actually the very most problematic place for government involvement, and it would, realistically, bankrupt us all.
Government belongs, if anywhere, in chronic, prophylactic, and accident – costs that can be reasonably contained.
A near public good would be research into cost-effective treatments.
Are those numbers right? 50% of the population has a chronic illness? 16% has 3? That seems awfully high to me, and smacks of an unconventional definition of “chronic illness”.
I can interpret it two ways- 50% of the population has a chronic illness, or 50% of the population will have a chronic illness at some point. Neither would surprise me- think about the numbers of people over the age of 40 who take blood pressure medications and cholesterol drugs. Of course, you and I may not consider these treatments of “chronic diseases”.
If obesity is included in chronic illnesses it’s probably more like 75%
My issue with the Ryan bill is that it does repeal community rating, which is the one thing that actually makes insurance be insurance. I would:
A) repeal community rating
B) provide universal catastrophic health status insurance through medicare age
C) distribute benefits to poor people via pre-loaded HSA spending accounts
D) just completely remove ESI tax exclusion while raising individual HSA caps
If we do this, insurance will return to it’s original purpose, which is to protect against unlikely events. What we call “insurance” today is really pre-paid medical expense plans. Those can still exist if they can actually provide care more efficiently or convenient, but I think it is far more likely that people will do better for themselves spending a-la-carte out of their HSAs.
What is keeping insurance companies from writing supplemental policies ?
I buy supplemental insurance in the private market for my medicare.
I wouldn’t say Obamacare is beside the point but a way to distribute those costs to everyone. Yes, covering catastrophic solves most of the problem, as long as people can afford the inexpensive care that helps them avoid the expensive care. That is why catastrophic alone is probably not enough by itself. It is also why making low cost care close to universal and free can mostly pay for itself. One tragedy avoided or delayed covers an enormous amount of care. Trump has no such intention though.
If you sell medical care insurance to anyone in any state in the union you must accept all persons in that state on the same terms and at the same price. Breaks the employer-medical insurance link.
Enforce a true insurance policy covering only unlikely-but-catastrophic events on the same terms as their “full service” policies. Insulation type policies seem to be affordable and seem, to me, to be masking the true cost of care.
All health providers must publish a price list and may not bill or accept payment at anything other than that price. There has to be laws on the books for this right now that can do the trick.
“You break it; you fix it.” If your medical treatment causes you a negative side effect you the patient cannot be billed for subsequent treatment.
If you have to go to the hospital, and it’s life or death, you will get treated. If you cannot pay your bill for any reason, no catastrophic care or just cannot afford it at the time, the bill is submitted to Uncle Sam. Uncle Sam becomes the bill collector looking for payment by the person who could not pay. Maybe a tax penalty would be the best way to go.
That should be a start.