Free market consumer driven healthcare

“Consumer driven healthcare” plans were introduced in the USA in 2001. The idea was simple enough. Here’s how Republican Presidential hopeful Ben Carson described it:

In order to right the ship, we need to return the responsibility for good health care to the patient and the health care provider. One of the best ways to do this is through health savings accounts, which patients can control.

Republicans see this principle of patient responsibility as particularly important, because they mostly believe in an economic theory called moral hazard. Here’s Timothy Noah explaining it in a Slate article:

The theory that artificially lowering the price of any commodity leads to its overconsumption is called “moral hazard.” In health insurance, the principal method for limiting moral hazard is to require consumers to pay a fee, or “copayment,” every time they go to the doctor.

Unfortunately, increasing copayments also tends to make people less likely to go to the doctor. That, in turn, means that minor medical issues don’t get diagnosed or treated until they have become major problems. At that point, they’re often much more expensive to treat — or in some cases, impossible to cure, becoming chronic problems. Noah cites a study which concluded that increasing copayments would cut spending on outpatient visits by $1,200, bring in $5,950 in extra copayments — and in the long term, increase spending by $24,000. (All figures per 100 health plan participants.)

This is why my healthcare plan has a zero copay for routine checkups and routine preventative care. My employer wants me to get a checkup any time I feel there might be something wrong, because that’s the surest way to save money in the long term. They want me to get a flu shot, because it’s better than having me off work with the flu.

So high deductible patient-driven healthcare clearly has a few problems when it comes to cost/benefit analysis. But in spite of the problems, the Affordable Care Act’s new health insurance plans generally have not just high copayments, but high deductibles as well — so typically, you aren’t able to claim at all until you have paid for over a thousand dollars of medical treatment.

Again, the theory is simple enough: If people have to pay for the first thousand dollars of their healthcare each year, they won’t demand any unnecessary healthcare. Furthermore, they’ll be more inclined to shop around for cheaper providers, and choose more cost-efficient procedures. The free market will force down costs. Simple and obvious, right?

John Stossel, Fox News pundit, put it like this:

[…] insurance is a terrible way to pay for things. It burdens us with paperwork, invites cheating and, worst of all, creates a moral hazard that distorts incentives. It raises costs by insulating consumers from medicine’s real prices.

Suppose you had grocery insurance. With your employer paying 80 percent of the bill, you would fill the cart with lobster and filet mignon. Everything would cost more because supermarkets would stop running sales. Why should they, when their customers barely care about the price?

Aaron Carroll, a Professor at the IU Center for Health Policy and Professionalism Research, points out the stupidity of that argument:

That supermarket example isn’t even remotely comparable. If I made colonoscopies free tomorrow, no one would start picking them up by the dozen. If I declared no one would ever have to pay for chemotherapy again, you wouldn’t ask for extra. If surgeons refused to accept payment for appendectomies anymore, would anyone go and get one just for the hell of it? We have a hard enough time getting people to do the things we want them to do to be healthy without having to expose them to more hardship to get them.

When Obamacare’s high deductibles started to affect people, Republicans briefly feigned outrage at their own ideas, but high deductible insurance has remained the Republican answer to how to deal with America’s rising healthcare costs, usually in combination with a tax-free healthcare savings account. It’s still Jeb Bush’s plan, for example.

But as USA Today published in January, corporations are also pushing employees towards high deductible plans:

[…] a Mercer study showed that 2014 saw the largest one-year increase in enrollment in “high-deductible plans” — from 18% to 23% of all covered employees.

Meanwhile the size of the average deductible more than doubled in eight years, from $584 to $1,217 for individual coverage.

That’s not to say that high deductibles aren’t encouraging people to be mindful of healthcare costs, though. Far from it:

Patients often do a sort of medical and financial triage when they get sick. Jacobs, a former college professor, says every time a doctor suggests a new test, procedure or medication for her severe arthritis, she asks herself: ” ‘Is it critical?’ You’re always playing the odds. … And I’m constantly asking my doctor: Can I stop taking this medication?”

When her shoulder started hurting a couple of years ago, she had an X-ray but put off the recommended MRI for two years. It worsened, and she couldn’t move her arm without pain or lift her right hand above her head. She finally got that surgery in October but is now forgoing a shoulder procedure, opting for less expensive physical therapy and planning to “tough out the pain.”

As Aaron Carroll summarizes:

Yes, if we make it more expensive to seek care, if we demand more “skin in the game”, if we remove the moral hazard, people will seek less care. That’s fine for healthy people; it’s terrible for those who are ill.

But it’s worse than that. There’s a newly-published study which looked at the impact of high deductibles introduced at a large self-insured firm. Sarah Kliff on Vox summarizes:

Economists Zarek Brot-Goldberg, Amitabh Chandra, Benjamin Handel, and Jonathan Kolstad studied a firm that, in 2013, shifted tens of thousands of workers into high-deductible insurance plans. This was a perfect moment to look at how their patterns of care changed — whether they did, in fact, use the new shopping tools their employer gave them to compare prices.

Turns out they didn’t. The new paper shows that when faced with a higher deductible, patients did not price shop for a better deal. Instead, both healthy and sick patients simply used way less health care.

Another failure of the free market. People did, indeed, look at prices — but only to decide whether to deny themselves care or not.

There’s a basic problem here: healthcare is a terrible match for free market economics, for a number of reasons which I’d think would be pretty obvious, but apparently not, so here we go:

  1. People who need healthcare do not want to go shopping. When I had a kidney stone and suddenly found myself in agonizing pain on the floor of the office restroom, I didn’t give a damn whether MGH was an expensive hospital or not. It was the closest, so it won.

  2. Healthcare professionals are not fungible. It took me years to find a dentist I was completely happy with, and I am absolutely not going to switch to a different dentist even if they offer a procedure at 20% lower cost.

  3. Patients are not free agents. For a true free market to apply, participants have to be able to simply walk away if they don’t like the deal(s) on offer. That’s generally not the case for healthcare, particularly not if (like me) you have chronic conditions to deal with.

  4. There’s a major information imbalance. When the doctor makes a diagnosis and a recommendation, the average patient simply cannot tell whether the doctor is correct or not. Theoretically patients could get second opinions, but that’s expensive, and in practice not something people do. Even for elective surgery, only 30% of patients seek a second opinion, and 18% of those are required to by their insurers.

  5. As Martin Shkreli demonstrated, the drug market is far from a free market, even for generic drugs whose patent protection has expired. As with many other goods (Internet service, water and waste services), there are major cost barriers to competition.

  6. People are really bad at making decisions that are in their long term interest. For example they drink soda, fail to exercise, and end up with diabetes that needs expensive treatment for the rest of their lives.

Let’s all talk about death

End-of-life healthcare is expensive. The top 5% of end-of-life patients incur nearly half of the nation’s healthcare costs. So one of the objections some Americans raise to the idea of universal healthcare, is that we simply can’t afford to offer everyone that kind of care. The assumption is that if everyone has healthcare, everyone will want to be kept alive as long as possible.

Except that’s not true. It turns out that if you actually ask people what they would like in terms of end-of-life care before they are unconscious on a drip feed or in a coma, they say that no, they don’t want to be kept alive if they’re in a coma, they don’t want chemotherapy if it’s only going to keep them alive for another 3 months and will make them feel miserable, they don’t want an extra 6 months of life confined to bed and attached to tubing and machinery.

What’s more, research shows that people who have less spent on their care during the last few months of their life have a better quality of death. Basically, beyond a certain point, you can keep people alive, but you keep them alive in constant misery.

The problem is, you have to get people to indicate their wishes before they get to that point. Otherwise, relatives who are forced to make the decisions will err on the side of keeping the patient alive at all costs, and medical professionals will quietly go along with that, because no doctor or nurse wants to try and talk someone into letting their relative die.

In fact, it’s best to get people to indicate their wishes before they are terminally ill at all, because otherwise it’s a really horrible conversation for everyone involved. And that means that mostly, it doesn’t happen.

But in La Crosse Wisconsin, 96% of people who reach the end of their lives are found to have set out specific directions regarding their end-of-life care and their death; an amazingly high number. NPR Planet Money has the story of how that happened, but the end result is that La Crosse has sharply reduced end-of-life healthcare costs—$18,000 for the last 2 years of life, compared to $26,000 national average, or $75,000 for New York.

So, if we could persuade people to record their actual preferences for end-of-life treatment beforehand, we could give them all the medical care they wanted, and save money, and make the experience far better for everyone. The process would involve each person having a conversation with a doctor, answering some questions about their wishes, and having the resulting document legally witnessed. Simple enough, so why isn’t that being done?

Well, as NPR explains, an attempt was made to provide a financial incentive for people to engage in that kind of end-of-life planning. The Washington Post explains what happened next, thanks to Sarah Palin:

[Palin’s] first post was about a proposal in the emerging bill that would allow Medicare to pay for doctor’s appointments for patients to discuss living wills and other end-of-life issues. Palin’s decision to call this pending provision a “death panel” ignited a firestorm that resulted in the language being removed from the final legislation.

So the Affordable Care Act was supposed to pay for everyone to have a session where they sat down with a doctor and discussed various possible situations they might end up in at the end of their life, and what treatment they would like in those hypothetical situations. It wasn’t a meeting for them to justify why they deserved to live; it was so that they could express their (free choice) judgement regarding what situations are worth living through.

Thanks to Sarah Palin, the idea of paying for people to go through that process died. But if you’ve read this far, perhaps you’ll consider doing it anyway.

Sticker shock

It’s health insurance enrollment time again. I’m enrolling us, because let’s face it, I hate freedom. I’ve been watching the news, and I therefore know that Obamacare is a vile plot to make wealthy people pay a lot more for healthcare so that the undeserving poor can shirk their duty to die quietly of treatable ailments.

We’re not part of the 1% — not by a long shot — but I think we’re in the 20%, if that’s a thing, so apparently it’s up to us to pay for those single mothers. Over the last few months I had read that the middle class were going to get squeezed, because we would not qualify for any kind of subsidy because we make more than 4x the federal poverty level. Yes, people with pre-existing conditions on group plans would definitely lose out, getting less coverage and having higher costs. But how much higher?

The predictions were pretty dire — premiums were said to be going up by an average of 26% in Texas. Or maybe 37%, for middle aged people. Yes, 37% for middle aged men. Or maybe 88%, for middle aged men with pre-existing conditions opting for bronze-level or equivalent coverage in Texas. In fact, according to the experts at the Heritage Foundation, I could expect a robust 91% increase in insurance premiums.

So obviously, it was with trepidation that I read about the options available to me. Perhaps I would have to stop paying for the best available plan with the ultra low deductibles? I clicked through and saw the final cost. It has gone up by a massive, punitive 10% compared to 2012.

Obviously I am shocked, shocked to find out that so many dire predictions made by right-wing think tanks appear not to be accurate.

Hospital imitates Monty Python sketch

There’s a story in the news about a woman who dropped dead in the waiting room of a hospital. She slid off the chair and ended up face down in the corner of the room. Nobody else in the room did anything. It was 45 minutes until another patient drew attention to the corpse. There’s video.

Maybe I’m fooling myself, but I’d like to think I’d have at least called out "Hey, you in the corner, face down on the floor, are you OK?"  And maybe if there hadn’t been a response I’d have, oh, perhaps got off my ass for a couple of minutes and found someone appropriate to inform about the situation.

Then again, it was the psych ward. Maybe things work differently there.

Google Health has launched

From the contract you have to agree to:

When you provide your information through Google Health, you give Google a license to use and distribute it in connection with Google Health and other Google services. However, Google may only use health information you provide as permitted by the Google Health Privacy Policy, your Sharing Authorization, and applicable law. Google is not a "covered entity" under the Health Insurance Portability and Accountability Act of 1996 and the regulations promulgated thereunder ("HIPAA"). As a result, HIPAA does not apply to the transmission of health information by Google to any third party.

And it’s still solving the wrong problem.