On healthcare: what’s wrong with the status quo ante anyway?

Last updated on: January 19, 2014 at 10:10 pm by Jane the Actuary

On healthcare: what’s wrong with the status quo ante anyway? 2014-01-19T22:10:00-06:00 Jane the Actuary

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This weekend in the blog/commentary world, Avik Roy wrote a piece at National Review Online, “The Conservative Case for Universal Coverage,” which argues that “no Republican health-reform plan will get anywhere until Republicans come to agree that it’s a legitimate goal of public policy to ensure that all Americans have access to quality health care, just as we agree that all Americans should have access to a quality education.” Furthermore, he points to the experience of other countries which manage to cover their entire citizenry for less than the amount we spend on our limited-eligibility healthcare programs (primarily Medicare and Medicaid).

He references a column he’s written for another publication, in which he cites Switzerland and Singapore as worthy models (though he’s got his facts wrong, especially on Singapore, where there is a robust employer-sponsored health insurance market to supplement State benefits). But the core facts are sobering: take a look at the charts at the OECD healthcare statistics site, at http://www.oecd.org/els/health-systems/Health-at-a-Glance-2013-Chart-set.pdf, or the main healthcare site: http://www.oecd.org/health/health-systems/health-at-a-glance.htm. In 2011, the U.S. spent USD 8,500 per person on healthcare, including private and public spending. The next highest country was Norway at USD 5,700, followed by Switzerland at $5,600. The bulk of the Western European countries fall in the low 4,000s. And here is where Roy is making his point: the US government spends nearly as much on healthcare as some countries spend in total — $4,000 vs. $4,100 total in France, for instance. If we could spend that money more effectively, he says, surely we could cover far more people for the same spend.

(Also note the healthcare spend as a percentage of total GDP: 17.7% in the US, vs. 11.9% for the next highest country, the Netherlands.)

But the most revealing thing about the article was ultimately the comment section, with large numbers of commenters essentially arguing that the status quo ante was just fine and any move beyond that was Marxism! Socialism! A violation of the human rights of every American!

Consider two elements of the status quo ante:

First, the situation of the uninsured. Yes, there are sliding-scale clinics, and one can walk into a county hospital and not need to pay — though this isn’t quite correct. Rather, the hospital will treat all patients, not just for emergencies as required elsewhere, but also for such medical needs as chemotherapy. But they’ll still send a bill, though with financial assistance available based on your income. How much financial assistance is available? How low does your income have to be? How much of any meager savings you may have do you lose? Is there, as is the case so often, that middle area where the formulas say you’re able to pay, but those formulas are completely divorced from reality?

What’s more, I wouldn’t want to be a patient at Stroger Hospital. Would you? When my son needed stitches for a gash in the head last week, we went to the nearest emergency room (a five minute drive from our house), which was pretty empty, so that we were in a room with a nurse in a small number of minutes, and the longest wait we had was for the topical anesthetic to take effect before they could begin with the stitches. We were home in less than two hours.

From everything I understand, a county hospital, in contrast, is a nightmare. Can we have the decency to say that our country can do better?

And let’s not say, “these people are too stupid to go to a doctor or Urgent Care clinic; it’s their own fault.” Guess what? The uninsured aren’t stupid. A while back — I can’t find the source now — I read some articles asserting (credibly, it seemed to me) that people coming to the ER unnecessarily for trivial reasons is largely a myth (or perhaps, is limited to Medicaid patients who aren’t responsible for their hospital charges).

And healthcare, and health insurance, is a wholly different situation from other living expenses. Food? A poor person can cut down expenditures by eating beans and rice day after day. Not fun, but — hey, “paleo” is in, and monotonous meals is how our more immediate ancestors at, anyway. Clothes — it’s thrift store purchases vs. Macy’s. Housing: there’s a big difference between a crappy inner-city apartment and a McMansion. Vacation: tent camping at the state park vs. the Four Seasons.

But healthcare is different. You can’t economize on healthcare except to a very small degree, at the margins, and in ways that aren’t really an option much any longer. Ward vs. private room? Most hospitals are moving to an all-private-room building. With the exception of those luxury “spa-like” amenities, there’s not much difference. And there’s certainly very little room for a “no frills” health insurance policy — yes, there are catastrophic health insurance policies, but they likely don’t make sense for the very poor for whom a high deductible is beyond their ability to pay anyway. But there isn’t anything that allows a patient to economize in the same way as one can in other types of services.

And in the pre-Obamacare world, the cost of an individual insurance policy, or even a partially-subsidized employer policy, is generally out of reach for a low-income individual. To look someone in the eye who’s earning minimum wage, or just above that, and say, you should be responsible and pay for your own insurance, is preposterous. Yes, there are plenty of individuals who full well could afford insurance, and choose to go without in order to afford that vacation to Las Vegas, or, more likely, the mortgage payment on a single-family house rather than an apartment. But there are significant numbers who would forgo not vacations, but basic needs.

Second issue with the status quo ante: it’s unsustainable.

The cost of healthcare is increasing; while it seems to have slowed due to the impact of the recession and the changed behavior of people with high-deductible health insurance, we’re still a far cry from healthcare increasing at the rate of inflation. Employers want out. To be sure, some of this is motivated by the availability of ObamaCare subsidies for their employees if they decline to offer health insurance, but even if these were repealed, employers would still be fed up with having to spend time and effort on decision-making related to healthcare benefits, as well as the ever-increasing proportion of the total compensation dollar that’s going to healthcare. (What happened to wage growth? Partly, it got shifted into the sums of money employers pay for health insurance for their employees. And the insurance is getting crappier — Seven years ago, we had an HMO that covered everything with virtually no copays, and a wide network of doctors. Now we have a $3,000 family deductible.)

If ObamaCare hadn’t happened, and if the Republicans hadn’t offered an alternative (say, VoucherCare, which I’ll continue to flog, however fruitlessly), something would have happened. I don’t what, exactly. Current talk in the employee benefits world is of employers simply being tired of matching the growth in insurance costs with increases in subsidies; they’d likely continue to offer health insurance, but with ever-decreasing subsidies, and employee premiums rising to the point that employees really feel the pain.

Third issue (yeah, I know, I said “two issues” initially) is that you know we’re delivering healthcare inefficiently when we spend so much more than every other country. Sure, we get more cutting-edge treatment, and Wesley J Smith at National Review Online is always reporting on the UK’s National Health System’s utilitarian refusal to pay for expensive medicines for the elderly, for instance, but does it really seem credible to you that the entire cost differential is due to our delivering superior care? 17.7% vs. 11.9%? Really?

Sure, you can explain some of the delta as free riders elsewhere (to the extent that the US’s high prescription drug prices cover R&D;, and elsewhere they effectively pay the marginal cost of drug production), and some as defensive medicine, but a large part of it is due to ineffiencies in our system (which are the topic for another blog post).

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