I hadn’t realized, when I wrote yesterday’s post, how many people are emotionally invested in first dollar coverage. To the extent that we’re worried about health insurance coverage, I thought that most of us were agreed that we were talking about the benefits of catastrophic coverage, not this insane scheme we have in the US where catastrophic insurance for the kinds of risks most people can’t finance comes bundled with first-dollar coverage for ordinary treatment of the sort that most people used to pay for out of pocket.
Color me chastened. So let me expressly stake out some more
controversial ground on health care policy: for most people,
first-dollar coverage is probably not a significant driver of health.
If most people paid for normal care for everyday ailments out of
pocket, I don’t think there would be much effect on aggregate national
health. What benefit there is from first-dollar coverage comes from
covering low-income people with chronic conditions, at least as I
understand the literature.
Which is not, to me, all that
surprising. Insulin and checking blood sugar saves the lives of
diabetics, and as a result, most people will find the money they need
to pay for supplies, so that compliance problems are driven more by the
pain-in-the-ass factor than the price. But if you’re severely income
constrained, you’ll chose eating, rent, or shoes over testing strips.
I don’t think it’s an accident that natural experiments involving
Medicaid expansions or terminations tend to find relatively large
effects.
What first dollar coverage for the affluent does is
drive costs. Take the recent kerfuffle over mammograms. Mammograms are
very uncomfortable, and of course, you don’t want to shoot any more
radiation into yourself than necessary, so women should have been
excited by the news that you probably don’t need one until you’re
fifty. Instead they were outraged. Since this was about spending
other peoples’ money, naturally we want the right to spend as much of
it as possible, even if it’s not very useful.
Now, maybe the
recommendations were wrong–but if that’s the case, in a world without
ample first-dollar coverage, you’d simply discuss that with your
doctor, not write the damn newspaper.
This is hardly the only
example. I doubt it’s coincidental that the health care markets where
people pay their own way are the ones where there are more real efforts
at cost control, like plastic surgery, fertility, and vision care. (I
recently heard a local fertility clinic on the radio offering a
money-back guarantee if they take your case!) With all the layers in
between consumers and the providers in the ordinary market, the natural
battle between consumers seeking better value and producers seeking
higher prices is terribly distorted in ways that don’t make us
healthier.
I think that the argument for catastrophic coverage
is much stronger for a variety of reasons, which is why I’d like to see
the government pick up the tab for expenses that total more than 15% or
20% of annual income. There’s certainly also a case for providing
basic care and treatment for certain chronic conditions to the poor,
though even in that case, I’d like to see us at least try to handle the
problem with a combination of catastrophic insurance, and better income
supports. But if that failed–and it might–I’d absolutely support
public provisions of those sorts of treatments to lower income
Americans, along with no-brainers like prenatal and infant care.
But
for the vast swathes of the middle classes? No, I really don’t think
that having extraordinarily generous benefits that insulate them from
almost all the cost of their medical treatments is improving either our
health, or the nation’s financial condition. In fact, I think it’s the
very reason that ordinary treatments are so inflated that they’ve
become “unaffordable”. Call me cynical, or an ideologue. But I think
we’d be better off with markets in every day care, and insurance for
the catastrophic stuff that individuals really can’t afford.
I
should note, however, that very smart health care economists like David
Cutler disagree with me. Cutler notes that compliance rates with many
chronic diseases are very low. For example, majority of people given
hypertension drugs discontinue them within a year, because the drugs
have side effects, and the hypertension doesn’t . . . until you have a
stroke. His reasonable point is that with compliance so low already,
we should be trying to eliminate any possible difficulties. This is
worth considering, but I’m not sure that this is necessarily the best
way to achieve these goals, nor the most cost effective one. What
would happen if we took all the money we’re plowing into the middle
class, and invested heavily in a visting nurse’s service? I know that
I was a lot more religious about monitoring my peak flows when the nice
nurse from the insurance company called to badger me.
