6 thoughts on “Health-Status Insurance”

  1. Creating a derivative product for health insurance is not a free market solution. A free market is one in which buyer and seller meet, negotiate a deal or walk away. The problem with health insurance is that it eliminates any semblance of a market.

    I have health insurance. The carrier agreed beforehand to pay any expenses I may incur. I go to a doctor demanding every service I can get without regard to cost. The doctor is more than happy to oblige me since I won’t walk away. He bills the carrier. The carrier has lost most of its negotiating power since it agreed beforehand to defray my expenses. There is a little give and take between the carrier and the doctor but nothing like what would occur between the doctor and the patient if the patient were paying cash.

    The only way to have a pure market for health care would be to abolish health insurance. It wouldn’t be the disaster that so many believe would happen.

    A pure market for healthcare existed in the USA until the beginning of the Korean War. It worked pretty well. Doctors didn’t get rich then. Hospitals did not have the enormous overhead they have today. When you were sick or hurt, you went to the doctor or the hospital, were treated and then you paid what you could, over time if necessary. Few, if any people were denied treatment. That changed with the largescale implementation of group health insurance in the fifities. This marked the end of any kind of market mechanism in healthcare. Patients could demand more and doctors could charge more. Hospitals could afford to make greater and larger capital improvements. Doctors and hospitals also began refusing treatment to those that were uninsured. Did people live longer with the advent of health insurance? Only a little.

    The greatest gains in group health and longevity were made between 1900 and 1945. These gains were the results of clean drinking water, sanitary sewers, childhood immunization, and anti-biotics developed in the thirties and forties. Of all the great advances in healthcare and technology, since 1950, only improvements in trauma treatment have contributed to longevity. Every other advance has just barely chipped at the edges while costs have spiraled out of control.

  2. Jardinero1 may be right about when the greatest gains in longevity due to medicine happened in the last century. Sure, the low hanging fruit in medical care got picked, and the incremental gains are going to be smaller until some form of anti-aging therapy is developed and we extend life by decades.

    What has gotten quite a bit better in medicine is quality of life therapies. Knee and hip replacement allows people to walk when they would have been wheelchair bound before. Cornea replacement allows recipients to read, and drive instead of being blinded by cataracts. Bypass surgery keeps you from being unable to walk more than a few steps or being bedridden. Antidepressants make people more effective in their lives.

    Life extension is not the only criteria that should be used to evaluate medical therapies. Giving a 50 year old heart patient 15-20 more years of productive life instead of just disabling them is very valuable to society as a whole. Alas, the model that the Obama administration is going down will lead to life extension as the criteria for therapy.

    Oh, and without major productivity advances, medical care will get relatively more expensive. See Baumol’s Cost Disease.

    And there is a strong market in health insurance with cost controls and the like. It’s in the contracts insurance companies negotiate with medical providers and the contracts they negotiate with employers.

  3. Nothing can stop the faster than inflation growth of health-care costs, because technology aside from drugs gives you very little economies of scale. In the steel industry, robots and computers make it possible to produce thousands of tons of steel per employee hour, and it increases over time, so the real cost of steel steadily declines over time.

    Doesn’t happen in medicine. The major machines that treat sick people are doctors and nurses. Despite a lot of pressure, the modern doctor doesn’t see that many more patients per hour than his 1940s counterpart. It’s not humanly possible. Furthermore, some modern therapies — transplant surgeries, to pick one — demand the time of a very large group of trained people, and there’s just about zero chance that technology can reduce that cost. We’re not getting robot surgeons any time soon. Nor are the machines of the future going to let ICU nurses cover 20 patients each instead of 2.

    Goods (cars, computers, food, houses) and services (cell phones, ISPs) in which technology can steadily multiply the productivity of each hour of labor get cheaper and cheaper over time, relative to services (medicine, live performance art, good government) where technology has no such effect.

    But we see it the other way around, because most goods and services do allow technology to multiply labor productivity. That means our baseline intuition about “what things cost” tracks the price of cars, computers, food, cell phone service, or electricity service. Relative to this (actually steadily cheapening) baseline, the cost of medicine seems to go up and up.

    I think this confusion is one of the major difficulties people have with health care reform. They feel like the cost of health care is skyrocketing, and look frantically for some reason why. But it’s actually not, or not as much as it seems. It’s just that everything else is getting cheaper and cheaper, so by comparison medicine looks like it’s getting far more expensive.

    That means, sadly, there’s not much we can do about the problem.

  4. Carl – what you described is Baumol’s Cost Disease. His example was that despite the technological innovations of the last 250+ years, it still takes 4 people to perform a Mozart string quartet.

  5. It still takes 4 people to perform a Mozart string quarter ech. But it can be replayed over and over using a digital recording without those people being around to play it anymore.

    Health costs could decrease with improved screening for genetic diseases for preventive care, eugenics (which despite its ugliness is being done more and more with things like screening for Down’s syndrome), automated diagnostics. Doctors have traditionally been very resistant towards automated diagnostics (for obvious reasons) but that could change in the future.

  6. God — I may call you God, yes? — there is a very interesting set of studies, quoted in The Corner at NRO, although I can’t find it just now, which contradict the common sensical claim you make, that prevention and testing reduce health care costs.

    These are empirical studies, mind you, so it’s not an argument, just a measurement. When you implement lots of “preventative” care, it does not, in the end, reduce your overall health care costs, strange as that may seem.

    The interpretation of these results, which may be flawed, is that what you do get from “preventative” care is longer and better life. In other words, by getting regular EKGs and going on Lipitor and a diet when you’re 55, you live a pretty healthy extra 10 years. But you still die of heart disease, and you still suck up a few hundred thousand dollars of first-class cardiology care in the last months and years of your life. It just happens at age 70 instead of age 60.

    I would be the first to agree that the extra time and quality of life is worth it, both personally and socially. (After all, the longer-lived, healthier person pays lots more taxes during his peak earning years.) But unfortunately quality of life and the tax paid by healthy individuals are not “on the books” as a credit against the debit costs of the health care. When you look just at the health care costs, as I said, it looks very much like adding in lots of “preventative” care doesn’t change the total costs at all. Sad fact, apparently.

    It’s not hugely surprising, in retrospect. If preventative care were clearly and massively a cost-saving move, it seems unlikely no health care insurer or provider would have implemented it, and greatly improved their bottom line. Contrary to popular opinion, a health-care insurer would love to pay $500 up front in benefits to keep you, the insured, from running up a $50,000 tab five years later. That way lies maximum profit, since you pay the same premium either way.

    Now, with eugenics I entirely agree. There’s no question that, for example, suppressing the breeding of all those who die of lingering, expensive diseases, in favor of those who die quickly and cheaply, would reduce health care costs. I guess we should breed for reckless people with a tendency to silent heart disease, who die in accidents and of sudden fatal heart attacks. We need particularly to get rid of all the cancer sufferers, since cancer is a hugely expensive way to go.

    Seems a little unkind, though. You sure we’re still going to Heaven if we do this stuff?

    Thank you, ech. I’d hear the “Mozart” argument before, too. Very persuasive.

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