Obama and his pesky healthcare policies

US readers will probably be completely au fait with this, but UK folks like myself might be interested in hearing about some of the measures which have gotten people so hot under the collar of late. The full healthcare reform act comes into effect in 2014, but there are some interim bits taking effect now. These are:

  • Eliminating lifetime limits on how much insurers will pay to cover claims in a policy.
  • No more dropping of individuals, or “recision,” when an expensive illness results in big claims.
  • No co-pays or other cost-sharing for preventive care, such as immunization or mammograms.
  • Right to include children up to age 26 on family policies, whether they are dependent or not.
  • No more refusal of policies to children with pre-existing conditions.

You can read more from the Whitehouse on these measures here.

How have the insurance companies responded to these new measures? Well some of the biggest companies have decided that they’re not going to issue any more child-only policies, because they can no longer turn away children with ‘pre-existing conditions’ – i.e., sick children. Apparently, Republican MIck Huckabee had the following to say:

It sounds so good, and it’s such a warm message to say we’re not gonna deny anyone from a pre-existing condition. Look, I think that sounds terrific, but I want to ask you something from a common sense perspective. Suppose we applied that principle [to] our property insurance. And you can call your insurance agent and say, ‘I’d like to buy some insurance for my house.’ He’d say, ‘Tell me about your house.’ ‘Well sir, it burned down yesterday, but I’d like to insure it today.’ And he’ll say ‘I’m sorry, but we can’t insure it after it’s already burned.’ Well, no pre-existing conditions.

In a sense, one can’t entirely blame the insurers – the point of their existence is to make money. They don’t pay for healthcare out of the goodness of their hearts, but because it’s a profitable business. As businesses, they have to protect their interests, which means taking measures to ensure their profit isn’t reduced. But what this means is that there’s something deeply wrong with a system that provides healthcare as a way of making money. The whole rotten thing needs to come down. And for us over here, on the other side of the pond, we need to protect the NHS, because we don’t know what we’ve got until we lose it. There’s more on the insurers, Huckabee, etc. here.

26 thoughts on “Obama and his pesky healthcare policies

  1. The trouble is that in order to sell government services to Americans you have to pretend that they’re something else. So consider, e.g. social security: it couldn’t be sold as a state-provided old age pension scheme. It had to be sold as, in effect, an investment program, where workers invested part of their salaries through payroll deductions, the Social Security Trust Fund managed it, and workers got the payback after retirement. Understood in this way, conservatives can make noises about how the Trust Fund is going bust and Social Security needs to be replaced. But of course this is ridiculous because Social Security is a government program and doesn’t have to go bust unless the US government does.

    It’s the same for Obama’s health care program. To sell it, he had to present it as an insurance scheme rather than a government health care service. Once you conceptualize it in that way, by analogy to the insurance schemes profit making insurance providers run, then Huckabee’s remarks make sense. Of course it makes no sense at all to pretend that a state-provided service is an insurance scheme, but many Americans are so averse to the very idea of government services–at least beyond cops, fire fighters and the military–that services have to be organized in such a way that they look like something else. And that is generally inefficient–we pay for the illusion of private enterprise

    What do the majority of Americans, who don’t like this minimal national health insurance program want? Private insurance for those who can afford it; charity for everyone else. One of my daughters friends is uninsured and needs expensive dental work. But isn’t worried because a dentist who belongs to her megachurch is going to do it for free. This is the idea: friends and neighbors helping one another, voluntary community quilting-bees and barn-raisings, scrounging and begging.

  2. we pay for the illusion of private enterprise

    A brilliant phrase! It reminds me of Karl Polanyi’s thesis in The great transformation — that the free market, far from being something that happens naturally when the state gets out of the way of individual freedom, is actually an extremely fragile thing that must be carefully created and maintained by constant government management.

  3. You said it, Dan. I can see that happening up here since Jim Flaherty and the boys started their drive to turn us all into Americans. For every dollar they removed from the tax bills of those in the middle income bracket, they added several more to their utility bills and other essential homeowners’ services.

    I can only guess at the extra cost of policing and institutionalizing the poor rather than giving them the hand up that they need to get out of their rut. And the sermons! Services that used to be government run are church operated now! It’s awful! I can’t even go for a meal at a soup kitchen without some weirdo interrupting my dinner to try to feel up my aura and cram it full of his god’s presence! YUCK!

    At least our health care system is almost a non-issue. For the moment, anyway. I’ll never understand the thinking of Americans that oppose healthcare reform. They sound plain crazy to me.

  4. I find it very strange that there’s such dislike of the healthcare reform. The thing that currently is really bothering me is the way conservatives will now say that of course reform is necessary, but Obama’s got it all wrong and they will get it all right. I mean, isn’t there a certain dearth of ideas from them about how to do this?

    I do think that part of what is a very complicated phenomenon has people identifying with the best the country has to offer, as opposed to what is available to them. And another part is voting with values as opposed to self interest and even common interest. And some of it is racist, I am convinced.

    But. I’m pretty out of touch with medical procedures in Europe on a practical basis, but the very best US medical care can be pretty good and very swift. I live in a major medical area and have great insurance; I went in this week to see a specialist about what I thought was a torn muscle. No such luck. next week I’m having hours and hours of tests on the very latest scanners (open MRIs, thank goodness). And other doppler stuff, density stuff. At the end of it, we’ll know everything there is to know about 4 of my joints. (There’s no worry that any of it is dire.)

    In fact, I experience a lot of this as a creation of dependency and a sense of need. I’d also give it up happily to live in a more just society that had free basic care for every one. But somehow it is this immediate, extremely high tech reaction that curiously enough is what many people think of as US medicine. Or so it seems. I’ve seen my home town referred to in “foreign language” films as where they can cure anything.

  5. Hey, that commentary did come from HEB first. Well, I’ll second that well said.
    But I still have to reiterate that why? I mean, it makes sense to people who have money. But how do they manage to silence poor Americans who would benefit from healthcare reform? Don’t they outnumber wealthy Americans by at least 3 to 1, depending on the criteria for “poor”? Barn raising?!? How do they get people to believe that the taxes they pay into the system are better spent paying some preacher to stand around running his mouth about some dream world? I just don’t get it.

  6. Most Americans, including poor Americans, have health insurance and are satisfied with it–even through they’re paying more and more for it.

    I think what underlies the resistance to healthcare reform is widespread assumption that government services are barebones provisions for the poor–in effect government charity. The assumption is that healthcare reform means that ‘the government takes over healthcare’–and that means that all Americans will get barebones charity services. No choice of doctor, long waits, no personal attention, rationing and no say about how they’re to be treated.

    Why do they prefer ‘paying some preacher’ rather than paying taxes into the system? Again, conjecturing…Lots of people just don’t make the connection between taxes and services. They regard taxes as tribute to lazy, crooked politicians and bureaucrats rather than payment for public services.

    More interestingly, I think a large part of it is romanticism–the unshakable faith of both the Right and the Left in small-is-beautiful, grassroots efforts and volunteerism, neighbors helping neighbors. The buzz word is ‘community.’ The Right looks to churches for that ‘community’–everybody takes care of one another and dentists in the church will fix your teeth for free. The Left looks to block associations, co-ops or whatever. But it’s the same thing–anti-institutional bias, distrust of large, impersonal organizations of which distrust of the state is a special case.

  7. Thanks. I think I’m finally beginning to grasp that. I can’t really relate, because the mechanisms by which we keep our crooked politicians in check are different up here. But it’s something to think about for American Studies class.

  8. The extra tests and high-tech gizmos aren’t primarily a response to consumer choice.

    First, of all, doctors are practicing ‘defensive median’–you can be sued for doing too little but not for doing too much. This is why we have a hugely high rate of C-sections–I think close to 25%. This is something consumers definitely don’t want, but doctors are covering their asses in case of malpractice accusations.

    Secondly, doctors and the various people who administer tests and procedures, are often acting as contractors, paid for each procedure, so of course they’re trying to sell as many tests and procedures as possible. It’s economics not culture.

    This I suppose may have trained American consumers to expect lots of gimmicky–though neither I nor lots of people I know particularly want it. But I think mainly what Americans are afraid of is the end of choice and personal treatment. This is a perennial theme in American culture–romanticizing small towns, friendly neighbors, small businesses on Main Street where the shopkeepers know everyone by name and chat…They want to choose a doctor who they find personally congenial and get lots of talk and bedside manner. They imagine that ‘socialized medicine’ means waiting on line, being hustled through to see a different doctor every time, seeing one who doesn’t know who they are or care, issues a pill and sends them out the other door in 2 minutes flat.

  9. Having an extended family full of healthcare providers, I’d be curious to know the argumentation behind the proposition that there is something intrinsically wrong with “providing healthcare as a way of making money”.

  10. Of course there’s nothing wrong with providing healthcare as a way of making money. Or teaching to make money. Or doing any other honest activity to make money.

    I just suggested that the piecework scheme that encourages doctors to prescribe lots of tests and procedures that may not be cost effective is a problem. In addition the paperwork it takes to deal with all the independent contractors involved in the business is also expensive and inefficient.

    I was in hospital overnight when I cracked my head open trying an acrobatic trick (after getting sloshed at Sunday champagne brunch). I am getting bills from various providers of x-rays and other services. I called to get it straightened out and was told that each of the providers bills the hospital independently. Then the hospital bills Kaiser, the health maintence organization with which I’m insured, which runs its own hospitals. If the providers don’t get paid tout suite they bill patients. Just ignore it I was told.

    Cutting to the chase, there is all this paperwork being generated by cadres of clerical workers, sent in quadruplicate to me and everyone else involved in this episode, etc. and this is an expensive waste!

  11. H.E.: I wasn’t referring to anything you wrote; I was referring to an assertion in the opening post of the thread.

  12. I distinguish between working in the healthcare system and so making one’s living, e.g., as a nurse, a doctor, a hospital administrator, etc. and a sort of second-order system whose goal is to make profit by selling healthcare to people. The latter is objectionable, the former is not. The latter is objectionable because there is tension between the goal of making profit, and the goal of providing healthcare to people in a way that is just. There is no such tension in the former. This is not to say that there won’t be difficult cases to decide, because money isn’t infinite. Thus there will be cases where healthcare workers have to decide whether to spend money curing person A, or whether to spend money curing person B. There is room for unjust decisions to be made in such cases. Nevertheless, the decisions will never involve weighing up whether to cure person A, or whether to make a profit. A ‘second-order system’ whose goal is to make profit by selling healthcare to people will be faced with decisions of the latter sort, and since the central goal is to make a profit, the decisions will tend to be on the side of profit rather than on the side of healing people. This is a problem.

  13. My answer to Nemo’s question is similar to Monkey’s, but still importantly different.

    I distinguish between two types of goods: internal goods and external goods. Internal goods can only be produced or achieved by engaging in certain, fairly specific kinds of activities. For example, you can only play a good game of chess by playing chess; you can only become a great painter (or other sort of artist) by going through a period of training and education and lots of practice; and you can only produce reliable knowledge about the empirical world by engaging in scientific inquiry. These sorts of activities are called `practices’, and I say that (certain) internal goods are attached to (certain) practices. External goods, by contrast, are not attached to any practices, meaning there are practically unlimited ways to achieve or produce or acquire them. My standard examples of external goods are wealth, political power, and fame or glory. There are lots of ways to become famous: be a great actor or a prominent politician; be the prodigal child of a wealthy and powerful person; or have a YouTube video go viral, for example. Similarly, there are lots of ways to become wealthy, many of which (in a capitalist economy especially) don’t involve actually doing much of value to anyone else at all, e.g., buying and selling stocks.

    Medicine, I take it, is a practice, with the attached internal goods of promoting and maintaining human health, easing the physical pain of the suffering, and making the inevitability of death as easy and painless as possible for both patients and their loved ones. Or something like those. Anyways, the danger of providing healthcare as a way of making money is the danger that those internal goods will be significantly compromised for the sake of greater wealth. By `significantly compromised’ I don’t mean, for example, not doing a MRI on everyone who comes in with a broken leg or a little cough. I do mean, for example, abusing `pre-existing condition’ clauses as a rationalization for not providing care to someone suffering a recurrence of cancer for no other reason than providing this care would moderately impact your bottom line. More generally, I say that the worry is that external goods (like the pursuit of wealthy) would `dominate’ the attached internal goods.

    I don’t think this domination is necessary every time external and internal goods get tangled up together. But I do think there’s a reasonable case that it has happened in the US health care system.

  14. With US health care, a third major partner is the pharmaceuticals/equipment industry. These people can behave badly, and they can be quite successful in getting doctors and researchers to act in a way that promotes interests other than those of people with health needs.

    One factor we might put into the mix is that change may as such be anxiety inducing. In addition, the republicans have been pretty successful in positioning Obama as an outsider.

    In a way, the problem shouldn’t be put just at the door of the ordinary folk; there’s another large and powerful factor at work here, with commercials,, mailings and general slurring going on.

  15. @H.E. Baber – Just a note on your comment re: the caesarean section rate in the US. You said you thought it was around 25% but it is actually at around 32% right now. More than 1 in 3 women are having surgical births in the United States now, mostly in the name of defensive medicine. It’s shocking and sad, but not surprising given the political climate of health care there.

  16. Monkey: I understand the distinction you mean to draw. But leaving aside exactly what constitutes providing healthcare to people in a way that is just (toward whom?), it’s not clear why the individual profit motives of healthcare providers couldn’t find themselves in tension with it too. And since profit motive provides a not-inconsiderable incentive to produce more of a good/service, to make it better and more affordable, and to be very sensitive to the needs of the consumers of that good/service, I’m not sure that the “side of profit” and the “side of healing people” are going to be two opposite sides as often as you think.

    Dan Hicks: I have a good deal of respect for Al MacIntyre, but I’m not sure I’m ready to follow him all the way on this one. I’m continuing to ponder your diagnosis, though.

  17. Nemo –

    The profit motive only makes you sensitive to the needs of people who can afford to pay enough for your good or service to keep your firm profitable.

    Of course it’s an empirical question whether the tension Monkey and I are pointing to actually exists. Sometimes the profit motive works well; sometimes it doesn’t. I take it that the standard list of health care statistics for the US and, say, Canada, France, and Cuba, plus the observation that the major difference is that the US system relies on market incentives and those others don’t, gives at least a preliminary answer to that empirical question.

  18. Dan Hicks: That is a curious and, I believe, incorrect understanding of how the profit motive works. It appears to assume that the affordability of goods or services is static, which in a market context is not the case. In reality, the profit motive sensitizes you a great deal to the needs of people who cannot currently afford to pay for your goods and services – most directly, their need to be able to afford what you can provide (think Henry Ford). As a profit-seeker you are, generally speaking, incentivized to reduce the pool of people who can’t afford your goods/services by finding ways to make the goods and services more affordable.

    As for the empirical question, before we pronounce it answered (even preliminarily) by the “standard list of health care statistics” for the countries you mention, I’d like to have more confidence that that list – whatever it is – is reliable (Cuba?), that it’s accurately measuring the same things across countries, that the things it’s measuring are actually indicating something about the healthcare system, and that the major pertinent variable really is reliance or non-reliance on healthcare market incentives.

  19. Nemo, I think that seems wrong that profit motive incentivizes businesses to reduce the number of people who can’t afford your product. High-end fashion a business that relies quite a bit on the notion that the majority of the population *cannot* afford certain products. For instance, Neiman Marcus as a retailer is built on an exclusivity model. Couture designers make limited amounts of each item purposefully, and the exclusivity of the item is built into the price. Profit motive is just about profit. And if you can make the most profit by charging higher prices but selling to fewer people, than that is what profit motive incentivizes one to do.

  20. Kathryn: I thought someone might bring up luxury niche markets such as high-end fashion, but their existence doesn’t undermine my point with respect to . I believe such markets tend to arise where a mass market is already well served, and competition has already brought down mass market prices to the point where it can be more profitable for a handful of producers to go after upscale niche markets than to join the melee of producers for a mass market. Second, the niche markets you have in mind tend to be oriented toward the production of things that people generally don’t need (or things with certain added features people don’t strictly need). I think it’s actually the profit motive that accounts for why, in a free market, the number of Nieman Marcuses (or concierge doctors) will always be relatively small – even smaller if there is a mass market that is being underserved.

    JJ: For some of the reasons I mentioned earlier, I think we ought to be casting a more critical eye on what statistical reports like the 2000 WHO one you linked really tell us about healthcare systems. But again – Cuba, of all examples? Most WHO data is self-reported by member states, but at least with your average country there’s some realistic hope of independent corroboration.

  21. Nemo, I’m not trying to say that necessarily profit motive is going to be in tension with motivation to serve the masses, but I do think it matters in what way the masses are being served and profit motive alone can’t help us there. Think of the market for toys: are there widely available affordable toys? Generally speaking yes, but if a company can have a higher profit by producing them in dangerous ways (e.g., with lead paint), we’ve already seen that companies are willing to do so.

  22. The appropriate concept from economics is elasticity of demand — the steepness of the demand curve. When demand is inelastic, the demand curve is more flat or horizontal, and so demand doesn’t change all that much with price. When demand is elastic, the demand curve is steeper or more vertical, and so demand changes quite a bit with price. Generally speaking, suppliers (collectively, not individually, which can muck things up) have incentives to decrease the price of elastic goods (strictly, shift the supply curve to the left): chiseling out a small drop in price can dramatically increase demand, increasing overall profits. But, generally speaking, suppliers also have incentives to increase the price of inelastic goods (shift the supply curve to the right): they’ll lose a few customers, but not too many, even with a significant increase in price.

    And health care is an inelastic good. To an extent that’s because (in the US) consumers don’t actually pay the market price for the care they receive — it’s borne primarily by governments (Medicare, Medicaid) and employers. Indeed, since elderly people generally require more health care than younger people, Medicare actually pays some enormous percentage (most?) of the health care bills in this country. The basic economic argument for a free-market health care system is that it, if consumers have to bear the market price of the care they receive, they’ll be more sensitive to the price. That is, the demand curve will become more elastic. The problem is that this source of inelasticity doesn’t seem to be big enough: if the doctor says Aunt Ruth needs chemotherapy and the family can find some way to pay for it, even going into massive debt, they’ll probably do it. For them, money is much less important than health.

    And the statistics I was talking about were things like infant mortality rate (US #33, Cuba #28), life expectancy at birth (US 78, Cuba 79, France 82), health care spending per capita, and similar sorts of things as listed here.

  23. Kathryn: Very good point. Of course, if toy manufacturers are made to bear the full costs of the decision to use lead paint (as they should), the profit motive should in theory incentivize them not to do it. In the United States, the market forced paint companies to stop selling lead paint long before the laws were changed. It’s true that a desire to cut costs (which turns up in both profit and nonprofit contexts) has perversely incentivized some Chinese firms to use lead paint, although the dangers are known in China as well. I suspect this would probably have been avoided in the first place if the environment those firms operate in were more like a U.S.-style market environment.

    Dan Hicks: It’s true that a number of market-distorting factors (such as the small amount of our healthcare costs we pay with our own money, nonmarket price-setting by Medicare, opaque information markets, etc.) decrease elasticity of healthcare demand (though some economists now question the conventional belief that healthcare demand is relatively inelastic: e.g., http://www.econ.yale.edu/seminars/jr-fac/jf09/Kowalski_JMPI.pdf).

    If healthcare insurance worked the way insurance is ordinarily supposed to, I think Aunt Ruth’s need for chemotherapy would be the kind of risk people would insure against: relatively rare, unpredictable and catastrophic (like your house catching fire, for homeowner’s insurance). As far as other situations are concerned, when you say that the elasticity doesn’t seem to be “big enough”, do you mean that if we eliminated the major market-distorting elements, the market would not push down prices?

    With regard to the statistics such as life expectancy at birth, infant mortality and so forth, how sure are we that they tell us anything significant about the relative merits of the U.S. healthcare system versus others, or that the U.S. would do better if it didn’t rely on private sector healthcare? Even assuming for the sake of argument that the underlying data sets are both reliable and are measuring the same thing across countries, I think that the health outcomes in question are affected largely by factors other than healthcare – a few that come to mind are (for longevity) diet, lifestyle, environment, public safety, and education, or (for infant mortality) prevalence of teen motherhood. I would be very reluctant to draw any conclusions about healthcare systems from these statistical comparisons unless such determinants have been controlled for in them.

  24. The American healthcare system is undergoing a transition of epic proportions.
    Too bad the politics of private vs public healthcare gets in the way of doing what’s best for the country as a whole.
    For both sides, ideology seems to be more important than the health of Americans

    This article – The Tea Party Guide to Health & Fitness – was written to bring out that debate, and if you look at the comments, it is clear to see that a lot of people have their identities wrapped up in their politics.

    http://www.healthhabits.ca/2010/10/21/tea-party-guide-health-fitness/

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