Secretary Sebelius: Insurance != Insurance (paging Ezra Klein)

She is quoted saying,

At a White House briefing Tuesday, Health and Human Services Secretary Kathleen Sebelius said some of what passes for health insurance today is so skimpy it can’t be compared to the comprehensive coverage available under the law. “Some of these folks have very high catastrophic plans that don’t pay for anything unless you get hit by a bus,” she said. “They’re really mortgage protection, not health insurance.”

My differing views are here:

The health coverage most Americans have is what I call “insulation,” not insurance. Rather than insuring them against risk, most families’ health plans insulate them from paying for most health care bills, large and small.

I would like to know Ezra Klein’s take on this. Some possibilities:

1. He is alarmed that such an important person and the aides who prepared her talking points are clueless, and he will write a column along those lines.

2. He recognizes that she is clueless, but he thinks it is not an important story. If so, perhaps he will leave a comment here explaining why.

3. He recognizes that she is clueless and that this is an important story, but this is not the sort of thing he wants to call to the attention of Washington Post readers. (This is the least charitable possibility, so it does not really belong on this blog.)

4. He has received a background briefing that “clarifies” her remarks, and he will write a column along those lines.

5. He himself believes that catastrophic health insurance should not qualify as health insurance, and he will write a column along those lines.

11 thoughts on “Secretary Sebelius: Insurance != Insurance (paging Ezra Klein)

  1. Insurance is the transfer of risks.

    Insurers issuing contracts to transfer risks are engaged in the business of *spreading* (not taking and holding) risks.

    “Pre-Paid Plans” for medical and health services (principally Blue Cross and Blue Shield) were developed many years ago. Even they were in part risk transfers, as well as cost-spreading systems.

    Current legislation attempts to “seize” the processing facilities of insurers to facilitate a *partially* pre-paid cost-spreading system of services, unrelated to, but affected by, risk.

    • You assume benefits from incentivizing check ups, but consumers with high deductible catastrophic plans don’t have worse health outcomes.

      • Compelling response! But true?

        http://www.newyorker.com/reporting/2011/01/24/110124fa_fact_gawande?currentPage=all

        The outliers, it turned out, were predominantly early retirees. Most had multiple chronic conditions—in particular, coronary-artery disease, asthma, and complex mental illness. One had badly worsening heart disease and diabetes, and medical bills over two years in excess of eighty thousand dollars. The man, dealing with higher co-payments on a fixed income, had cut back to filling only half his medication prescriptions for his high cholesterol and diabetes. He made few doctor visits. He avoided the E.R.—until a heart attack necessitated emergency surgery and left him disabled with chronic heart failure.
        The higher co-payments had backfired, Gunn said. While medical costs for most employees flattened out, those for early retirees jumped seventeen per cent. The sickest patients became much more expensive because they put off care and prevention until it was too late.

        http://link.springer.com/article/10.1007%2Fs11606-011-1970-8

        Among families with chronic conditions, reporting of delayed/forgone care due to cost is higher for both adults and children in HDHPs than in traditional plans. Families with lower incomes are also at higher risk for delayed/forgone care.

        http://www.rand.org/pubs/external_publications/EP20110048.html

        The HDHPs or CDHPs with at least a $1000 deductible significantly reduced healthcare spending, but they also reduced the use of preventive care in the first year. This merits additional study because of concerns about enrollee health.

        So there’s nothing there that disputes your point, exactly. But the concept “health outcomes” is a fuzzy one. If I choose to accept chronic pain because I can’t afford a doctor’s visit to get painkillers, does that count as a negative health outcome?

  2. Her boss does not understand insurance, either:

    “THE PRESIDENT: And Jon. What I want to do, though, is just focus in on this philosophical debate. This is a legitimate debate…When I was young, just got out of college, I had to buy auto insurance. I had a beat-up old car. And I won’t name the name of the insurance company, but there was a company — let’s call it Acme Insurance in Illinois. And I was paying my premiums every month. After about six months I got rear-ended and I called up Acme and said, I’d like to see if I can get my car repaired, and they laughed at me over the phone because really this was set up not to actually provide insurance; what it was set up was to meet the legal requirements. But it really wasn’t serious insurance.”

      • Of course he can be that stupid and more. In the past, the Dems would usher such away out of the spotlight. Now, they are President and Cabinet members.

        I remember some undersecretary of Treasury something back in the first couple years of the Clinton Administration. She gave a minor speech but it made the news because she advocated taxing savings (principal). She was quickly tucked away. I sometimes wonder if they remembered to let her out of whatever closet at Treasury they locked her away in.

        But the point is, way back even Progressives recognized dangerous ignorance and put a stop to it. Now, it is policy.

  3. I think the only politically viable way to move towards HDHPs will be to set the deductible at a somewhat low level and over do the support within the deductible (cover the deductible and premium for those under 300% poverty level or something like that). There will still be savings but not as high as they could be. As to the likelihood that Ezra Klein will address what the Secretary’s comments, surely you jest. I think, he, like Sebelious, like Obama, and like most Americans call first dollar coverage good insurance. There isn’t anything sinister about it, merely unfortunate. It will be very difficult to unwind public perception of what constitutes good insurance. To a lesser extent we will see how viable this is with T-Mobile selling voice/data plans without the contract. They should be much cheaper (phone+data) but I think there will be a lot of resistance to paying for the phone upfront as opposed to a bundled payment. With health care it is a similar but much more massive challenge. I think proponents of consumer directed reform are going to have to assume that nobody will do the math on secondary effects (conceivably wages will go up now that your employer doesn’t have to pay for first dollar coverage) and commit to significant funding from the outset. which is unlikely. my disjointed two cents.