Right Thinking From The Left Coast
The price of anything is the amount of life you exchange for it - Henry David Thoreau

Missing the Forest for the Fire

Ezra Klein:

In the modern health-care system, there is no higher power than the insurance market. And the insurers who populate that market have grown all the stronger. The Justice Department judges an industry “highly concentrated” if a single company controls more than 42 percent of the market. By that definition, 94 percent of statewide insurance markets are highly concentrated. A recent study by the advocacy organization Health Care for America Now showed that in Indiana, WellPoint controls 60 percent of the insurance market; in Iowa, Wellmark accounts for 71 percent; and in Alabama, Blue Cross/Blue Shield holds 83 percent. In the past 13 years, there have been more than 400 corporate mergers involving health insurers.

Economics textbooks tell us that concentrated markets reduce the competitive behavior that benefits consumers and lead to outsize profits for the dominant firms. Predictably, health-care premiums shot up more than 90 percent between 2000 and 2007, while the profits of the 10 largest insurers increased 428 percent over the same period. Clinton had promised us managed care within managed competition. Instead, the insurers took control of our care and managed to effectively end competition. Neat trick.

So ... the solution is to give one insurer 100% of the market?  To allow the same oligarchy that controls state insurance laws to control federal insurance laws?  Only someone as glib as Ezra would use monopsony abuses to argue for a monopsony.

Actually, I’m being unfair.  Klein actually uses this to argue for “managed competition” where the Feds control insurance exchanges.  But that’s almost as bad.  Gee, Ezra, who do you think is going to wield authority over that managed competition?  Monied interests or average joes?  I’ll wait while you think about it.

Maybe the solution is to break those local monopolies by allowing insurers to compete across state lines.  That would bring federal anti-trust law to guarantee that no player build up a controlling interest in healthcare.  That would force insurers to expand their networks.  That would allow individual doctors and hospital to belong to hundred of networks and have access to more patients.

“Managed competition” is an oxymoron.  In a free market, competition manages itself.  That’s the whole point of competition.

Posted by Hal_10000 on 07/27/09 at 10:21 AM (Discuss this in the forums)

Comments


Posted by on 07/27/09 at 11:38 AM from United States

Maybe the solution is to break those local monopolies by allowing insurers to compete across state lines.

Forget the maybe-this is one of the most important things that would reduce costs and increase choices in insurance. 

If you also made employer provided plans subject to income tax and coupled it with a reasonable individual tax deduction for moderate plans then we would have meaningful, market based reform. 

But that would mean that government (both state and federal) would give up a lot of its power over insurance and politicans almost never want to give up power that they hold.

Posted by on 07/27/09 at 12:06 PM from United States

Economics textbooks tell us that concentrated markets reduce the competitive behavior that benefits consumers and lead to outsize profits for the dominant firms.

The solution is to stop forcing insurance companies to cover everything under the sun so that alternative companies and policies can be established.  By forcing insurance companies to cover everything from acupuncture to aromatherapy they’ve forced the smaller companies out of the market and driven up the prices for insurance.

Less government meddling = better competition and choices

Posted by on 07/27/09 at 12:13 PM from United States

Isn’t insurance one of those things that works best the larger it is?  They’re simply playing the odds with their coverage rates, based on collected statistics.  Which then become more valid and accurate the larger the population.  For a small population they’d be taking an even greater risk and as such would have to charge astronomical rates.  Seems that a few companies that cover people over all parts of the country would reduce costs.

Posted by Miguelito on 07/27/09 at 01:08 PM from United States

Isn’t insurance one of those things that works best the larger it is?  They’re simply playing the odds with their coverage rates, based on collected statistics.

Hah… when I read this, at first I thought the above ended with collectivist statists.

Posted by on 07/27/09 at 01:10 PM from United States

Isn’t insurance one of those things that works best the larger it is?

No

Posted by on 07/27/09 at 01:21 PM from United States

hist: I’m talking the statistical assumptions behind insurance.

If you have a population of 30 million people (all males, 24-25, nonsmokers, relatively good health) you can do a better job predicting their average health expenses over the long run because the sheer numbers would counter the effects of any outliers.

If you have 2 people who fit in that description you could make the same predictions, but you’d likely be wrong because the small sample size would magnify any minor variations (or major ones, the one kid could get hit by a bus the next day, you never know).  All predictions based on statistics perform better the larger the population.

I think this argues for larger, national companies rather than smaller state ones to cut costs. I don’t think it argues for nationalized health care as any benefit from increased risk dispersion and better stats would be outweighed by bureaucratic red tape and political games.

Posted by on 07/27/09 at 01:46 PM from United States

Economies of scale help any industry.  The question becomes how do you get to a situation in which a few companies dominate a national industry.  Any discussion of health care seems to trend to the government having to do something-and if the government does something to reduce the number of insurance companies, then consumers will suffer for it (of course the government is doing that right now--see above). 

When the government restricts competition, the fewer companies you have, the more likely you are to have collusion.  Greater barriers to entry through regulation in any market mean higher prices for consumers.  A few large players will have significant influence over politicians and will bribe like crazy to keep dominating their market. 

This is very different from single companies dominating through competition.  You average Microsoft customer gets a lot more for a lot less than they did 20 years ago (and a lot more bugs as well I suppose). 

Carnegie dominated steel by reducing the price-had he ever tried to raise steel prices in any sustained sort of way, competition would have arisen to take him on. 

Now, obviously you could not operate an insurance company that only insured one person and economies of scale affect all industries.  But having a system in which there are only a few national players-if that system is created by government regulation-means that those players will manipulate the system to increase profits and thus consumer costs.

Posted by on 07/27/09 at 02:11 PM from United States

If you ever want to know how long your sorry butt will live, ask an insurance company.  Based on your age, education, height & weight, family medical history, geographic location, and a host of other factors, they’ll nail down the time of your death within a few months without any fuss.

It’s like when my wife’s father wanted to know why his pension plan only went out for ten years after retirement, and they told him that he’d be dead then (they were right).  Any sufficiently large population can be very exactingly scrutinized via statistics.  This his how your rates get set - you end up in one of several populations to be insured, and they crunch the numbers.  Generally speaking, you usually want to be part of a larger population when it comes to getting your rates set, particularly if you are a larger user of benefits than average.

The real issue with insurance is that libtards don’t actually understand what it is and how it works (which is why they regulate the hell out of it), and instead think of it is a cover-all for anything that ever happens that needs a doctor.  I remember when I was a kid you’d see advertisements for different insurance options because “basic insurance” didn’t cover expensive cancer treatments and catastrophic care.  For the most part that sort of stuff has been legislated into being part of any insurance coverage (along with all sort of quackery to appease the aging hippies and crackpots).

All it takes is a few tear-jerking stories of how some “insurance company let my son die” stories and they go crazy trying to stop the “evil” insurance company from ever doing that again.

Posted by on 07/27/09 at 03:15 PM from United States

Calling our current medical product “insurance” isn’t really accurate.  We havea group payment plan.  Another great idea for reform (it won’t happen) is to allow a high deductable, basic plan.  You pay the first $1000 of anything, the plan picks up the rest.  That would be insurance, something you hope you never have to use.  I wonder how much it would cost to cover me under that plan.  My employer currently pays about $800/month for a cover anything with a $20 co-pay plan.  If my proposed plan above cost $200/month and I got to pocket the difference I would switch in a heartbeat.

Posted by on 07/27/09 at 04:18 PM from United States

Personally, I think I’d like to be given the option of having my employer just skip the insurance plan and pay me in cash what it would cost to offer me. 

As we don’t have a bunch of kids and my wife and I don’t readily engage in a lot of risky behaviors or sports nor seek out “alternative” medical quackery, I think I could get a better deal on my own.

Posted by on 07/27/09 at 07:06 PM from United States

Personally, I think I’d like to be given the option of having my employer just skip the insurance plan and pay me in cash what it would cost to offer me. 

I’d agree if I could then deduct what I pay for another plan. 

I have three kids.  Both my wife and I have very generous insurance from our employers.  I don’t need mine at all (it would cost my wife about $10/month to cover me).  I’d happily take half what my employer pays for my plan instead of being covered, but that isn’t an option, so I sign up for my insurance since it is marginally better than my wife’s.

Posted by on 07/27/09 at 10:57 PM from United States

SO/Hist_ed:

I just got a CAT scan for kidney stones.  It took like 10 minutes and the results were available for my urologist to look at less than 15 minutes later.  The instrument the test was run on was at least 10 years old.  My insurance was billed over $6,000 for that test. I “need” one of these every year according to my urologist to check for stones. I had a sleep study done this year for apnea.  The three evening study cost over $8,000 and I still have to get the CPAP machine.  I can tell you that if I had a $1,000 deductible, I would have gotten neither of these.  THAT is the problem with “insurance” and “health care” these days.  The expense is ridiculous, but not even considered given that it is essentially “free”.

Posted by on 07/27/09 at 11:46 PM from Germany

How are these costs out of line?  Do you have any idea of what medical imaging technology costs to acquire, maintain, and calibrate?  So fucking what if it’s 10 years old - did you know that a NEW machine is billed at $10,000/use?

I go in and get my kidneys checked out once a year as well - certainly cheaper than the cost of an emergency hospital visit to have another stone removed.  Of course, you can always find another urologist - perhaps one that doesn’t believe in yearly testing and doesn’t bother with prostate exams or blood tests.

As for the $1000 deductible bit, I think you proved our point for us: not every package fits everyone.  While I wouldn’t be put out by a yearly $1000 deductible, many others would be.  Do you want “alternative medicine”, or plan on having babies?  I don’t, but my insurance policy covers that sort of crap.  I’d like to have my policy adjusted to not cover things I won’t ever use, but various laws don’t allow that.

You insurance is great and covers all sorts of shit you’d never be able to afford, and you’re bitching about it?  And it isn’t free - your paycheck would be significantly larger if your employer didn’t have to provide you with this benefit.

Posted by on 07/28/09 at 05:55 PM from United States

NotNeoConMan: Someone has to pay for those things.  Why is it more just for you to shift those costs to healthy people than to pay them yourself? 

Tell you what, I have an idea for you and everyone else that complains about the current cost of health care.  Pick a date when you think its costs were reasonable. Could be 1960, could be 1900.  Then commit to not using any technology or drug that was invented after that. 

No one seems to want to admit that though we pay more for health care, we get more too.  In 1930 you would’t have had to worry about the cost of those scans would you?  Nor the cost of any effective prescriptions or effective major surgury.  In the late 1920s, the son of the president of the United States died from an infection.  It was caused by a blister on his toe that he got while playing tennis.  But hey, his health care was sure cheap.

Posted by on 07/28/09 at 11:19 PM from United States

I can tell you that if I had a $1,000 deductible, I would have gotten neither of these.

That’s the beauty of the Health Savings Account.  You get a high deductable policy and can put around $2500 a year tax free into an interest bearing account.  You can make withdrawals for any health related expense and the money rolls over every year.  Guess what they are trying to make illegal in the new HC proposal?

Do your copays add up to $1000 a year?

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