Saturday Links

4 thoughts on “Saturday Links”

1. People like Senator Sanders push the notion that high medical insurance premium is the problem. That’s a deliberate deception.

   High medical insurance premium is a symptom. The disease is the high cost of modern medical care. No one wants their doctor to treat symptoms, and ignore the disease. Nor does anyone really want to return to the medical care we had in 1921. Or 1971. We must deal with the cost of medical care today.

   In fact, the cost of modern medical care is the main obstacle to getting care when we need it. That’s because almost no one can afford it on their own. Almost everyone needs help to pay their medical bills. That’s what insurance is for.

   And insurance would not be so expensive, if medical care were not so expensive. If the cost of medical care were not rising, no one’s medical insurance premium would be rising. The underlying problem is the cost of medical care, not the cost of medical insurance. Sure, they’re related. But they’re not the same. The one drives the other.

   Sanders keeps telling us that the answer is Medicare for All. More insurance. Like Medicare (and Obamacare), heavily subsidized by Uncle Sam.

   But more insurance hasn’t ever been the solution. It still isn’t the solution.

   Medical costs are continuing to rise. As they do, “Medicare for All” premiums would also rise, requiring higher taxpayer subsidies to keep premiums affordable. Higher subsidies require higher taxes, every year. What’s different from what we have now? At some point, the government will run out of taxpayers’ money.

   Government spending for medical insurance already crowds out other essential functions of government – national, state, and local. The question is, should we pour more money into yet another insurance scheme like Medicare for All when experience shows that insurance is not the fundamental problem?

   Seems to me finding a cure for rising medical costs rests on success at two tasks: a supply task, and a demand task. The supply task is to streamline the delivery system so that doctors, other medical professionals, and institutions can deliver medical care more efficiently at lesser cost and with lesser risk to patients. The demand task is to improve the general public health as a means to reduce the overall need for medical care in the first place and improve quality of life. Neither is an “insurance” task.

   Yeah, much easier said than done. But what’s the alternative?

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2. Thanks for thoughtful comments.

   If you look at areas of the American economy that are NOT inflationary, the feature that jumps out at you is “foreign competition.”

   Consumer electronics is a prime example….vast innovation and efficiency and safety gains, yet lower prices.

   The health sector would benefit from a big increase in “medical tourism” along with reference pricing. Neither of these strategies has grown very much in the last decades. Reforms would be financially wrenching to doctors, nurses, insurance firms, drug companies, et al. Sanders would never stand for it, as you suggest.

   You would enjoy the writing and interviews of John Cochrane, a Stanford economist, on this subject.

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   1. Interesting –

      “foreign competition” “Consumer electronics ”

      That would appear to be mostly from Asia. Yes? No?

      “The health sector would benefit from a big increase in “medical tourism”

      It’s my understanding the number of “medical tourists” is relatively small and only slowly growing.

      Medical tourism a reasonable option for a small number of people. A growing number of foreign medical care centers are catching up and in a few places have surpassed the US in terms of their use of medical technology. Physicians practicing in those places are well-trained and deliver reliable care. But those places do not have the capacity to serve a big increase of American medical tourists – i.e., to a number that would be economically-meaningful to the US. The capacity issue is apart from follow up care issues, or supply-and-demand issues, or not covered by insurance issues.

      I think the lack of foreign capacity is the main reason to doubt whether medical tourism can soon become more significant for the U.S. medical care economy, than it has been over the past 20 years. It’s worth watching.

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3. Good points. I was also a fan of reference pricing –where the insurer pays only the lowest fee offered by any local hospital, and if the patient wants to use a more expensive institution then they have to pay the difference.

   I would think that large self-funded plans would use this tactic all the time, but it appears that they do not, for several reasons:

   – not all procedures are shoppable;
   – the patient might not get the doctor or surgeon that they want if they go with the low-bidding hospital;
   – a covered employee who is careless about this could wind up owing thousands of dollars, and the employer does not want an angry work force.

   Walmart was reputed to be willing to ship an employee and spouse to a cheaper hospital, and waive the deductible, if the cheaper choice was followed. The price difference was that much.
   I do not know how common this was.

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