The "goodies"

I apologize for the "all healthcare, all the time" topic du jour. Actually, more like du mois. But I'm reading a lot about it, so that means re-blogging the crud that interests me.

Here's the White House's new sales pitch, which Yglesias calls "the goodies":

1) No Discrimination for Pre-Existing Conditions: Insurance companies will be prohibited from refusing you coverage because of your medical history.

2) No Exorbitant Out-of-Pocket Expenses, Deductibles or Co-Pays: Insurance companies will have to abide by yearly caps on how much they can charge for out-of-pocket expenses.

3) No Cost-Sharing for Preventive Care: Insurance companies must fully cover, without charge, regular checkups and tests that help you prevent illness, such as mammograms or eye and foot exams for diabetics.

4) No Dropping of Coverage for Seriously Ill: Insurance companies will be prohibited from dropping or watering down insurance coverage for those who become seriously ill.

5) No Gender Discrimination: Insurance companies will be prohibited from charging you more because of your gender.

6) No Annual or Lifetime Caps on Coverage: Insurance companies will be prevented from placing annual or lifetime caps on the coverage you receive.

7) Extended Coverage for Young Adults: Children would continue to be eligible for family coverage through the age of 26.

8) Guaranteed Insurance Renewal: Insurance companies will be required to renew any policy as long as the policyholder pays their premium in full. Insurance companies won't be allowed to refuse renewal because someone became sick.

Great stuff, right? Stick it to those evil profit-gouging insurance companies! Well, life's more complicated then that.

I think 1,4,6, and 8 may be good ideas. Perhaps 3 as well.

No "gender discrimination" is a bit bizarre. Women consume more health-care then men, so covering them is more expensive. Why pretend this isn't true? If you charge women the same amount as men, men will be subsidizing their care. Is that what we want? I'm sure it's what the mean Democratic voter would want--they got the women's vote--but it hardly seems fair in an abstract sense.

The other ideas are more mundane populist cost controls and guarantees of coverage. They will, invariably, increase the amount of care that is dispensed, and reduce out-of-pocket expenses. But can you figure out what will also happen, as a consequence of these reforms?

Take a moment.



..premiums are gonna shoot up at even greater rates. Far from dampening costs for most people, these reforms put us on a path to consuming more care. Maybe that's what we'd like, but it's not free. If you consume more, the price goes up. It's supply and demand, that most basic of economic laws. You can't escape it just because you have a D next to your name and the best of intentions. Yet Obama has tried to sell his plan as having the effect of reducing costs.

Additionally, reducing out-of-pocket expenses is really the opposite of what we want to do for the market to function properly. Liberals are fond of claiming that market-based healthcare is a failure, but this is due at least in part to ill-conceived price controls like the ones above. It's really impossible for market-based care to work properly when you remove price signals.

For example, here's Yglesias:

The current market creates strong incentives for people to develop “better and more expensive” methods of treatment, but almost no incentive to develop “as good but cheaper” methods of treatment.

Well, right. That's what happens customers have low out-of-pocket expenses. When you remove the incentive to live healthy and seek out the most cost-effective care, people aren't going to motivated to brush their teeth more to avoid that extra filling, and providers and researchers aren't going to be motivated to provide cheaper products. They're going to be motivated to provide better and more expensive products, since that's what consumers clamor for when they aren't paying much out-of-pocket.

In response to Yglesias, Andrew proposed something sensible yesterday:

I still fail to see why a simple reform - requiring patient co-pays to be a percentage of the actual cost of the drug - cannot be deployed.

It would unleash the market power of consumers to keep healthcare costs down in the pharmaceutical area, which is one of the most expensive. I just switched HIV meds because one of my previous ones had been shown to dramatically increase the rate of heart attacks. But the new ones are almost certainly more expensive - they're newer, a new type of drug, etc. But I had no incentive to weigh the risks of a heart attack against the costs of the new meds, which might, after a few years in use, show similar side-effect problems.

One key issue is taking power away from doctors and giving more to patients. As an aggressive HIV survivor, I long ago learned to treat doctors with respect but not deference. But the system prevents me from managing the costs of my own care in even the slightest way. I pay $20 co-pay each time. It's madness.

Yet above we have the White House proposing worse madness--lower co-pays--in a blatant attempt to rachet up populist support for their reform package.

It's going to be a long mois.