The use of emergency rooms for routine care fell, as did hospital admissions for treating preventable conditions, and the proportion of uninsured among hospital inpatients (by 36%), while there was no increase in the growth of hospital costs. From the NBER Digest article summarizing NBER working paper 16012 [ungated version] by Jonathan T. Kolstad and Amanda E. Kowalski:
The national health care legislation passed in March 2010 requires U.S. citizens to obtain health insurance coverage. Modeled on legislation passed in Massachusetts in 2006, the new federal law contains many provisions that are similar to that state’s reform, including new requirements for employers and expansions in subsidized health insurance.
…Using hospital discharge data, they conclude that the Commonwealth’s health insurance reform reduced the number of uninsured among the inpatient hospital population by 36 percent. The reform increased coverage most among: young adults and the near elderly, men, people from the lowest-income zip codes, and people identified as black and Hispanic.
Insurance coverage through Medicaid, the state-run federal program designed for low-income people, expanded by approximately 30 percent among nonelderly residents of Massachusetts. …
Use of hospital emergency rooms for routine care also declined after 2006: the reform’s expanded insurance coverage resulted in a 2 percentage point decrease in the fraction of hospital admissions from the emergency room. The reduction in emergency admissions was particularly pronounced among people in low-income areas of the state.
Hospital admissions for treating preventable conditions also fell. The authors find a decrease of 2.7 percentage points in inpatient admissions attributable to preventable conditions.
The authors note that the Massachusetts mandate for individual insurance coverage widened access to outpatient treatment and thus management of preventable conditions. Despite finding other hospital impacts, this study finds no evidence that hospital cost growth increased following the reform.
Note: the analysis in this paper relies upon data. If you are averse to looking at data, no point in looking at this paper (you know who you are).
Update, 4pm Pacific: Oscar Jorda points to a photo from the Rally for Sanity, which relates to my ending comment and also which would be anathema to the anti-AGW crowd, as well as the folks who can’t add and subtract.
Source: nadaesgratis
We are unable to make precise welfare statements as we do not capture increased costs to the government and to the purchasers of health insurance that resulted from the reform.
An important study, no doubt. However, they miss the welfare implications which are a critical factor in the mandated insurance game.
Figure 1 indicates that almost 90% of MA’s population was already covered before they passed mandated health insurance.
The study ignores the cost to government and ignores the increase in premiums for existing insured who are forced to pay higher premiums to cover the high risk pool of previously uninsured.
I wonder what the total cost was to increase insurance coverage from just under 90% of the population before legislation, to 95% coverage afet legislation.
OT: Over at CR, some of the economic indicators seem better. The DOW is up, for example. But initial claims still seem pretty weak. A where-we-are-now piece would be welcome, if you’re so inclined.
The last link is supposed to go to https://econbrowser.com/archives/2010/11/detachment_from.html. But I can’t recommend following it, unless you get some perverse pleasure out of watching people say “2 + 2 DOES SO equal 5” over and over.
@Menzie said “If you are averse to looking at data, no point in looking at this paper (you know who you are).”
I love that!
I read the paper (quickly). I’m not sure what the take away is. Is it the fact that the people who used to use emergency services at their primary care now use a “regular” primary care provider and not the hospital? Or is it given that fact they are amazed the the growth in hospital costs haven’t fallen?
If the Massachusetts is the model for the Administration’s health plan, is it fair to assume that the budgetary consequences will be similar?
“Massachusetts health program, model for Obama’s reform, strains state budget”
http://dailycaller.com/2010/01/10/massachusetts-health-program-a-model-for-obamas-national-reform-strains-state-budget/#ixzz14LFuhBfC
“Bay State health insurance premiums highest in country
Rein in health costs, Massachusetts urged”
http://www.boston.com/news/health/articles/2009/08/22/bay_state_health_insurance_premiums_highest_in_country/
Lemuel Pitkin: Thanks for noting the error. Have fixed the link.
Steven Kopits: Depends on the financing mechanism; in general the Federal government has a better taxing capacity than states.
As a general matter, the costs are borne by somebody. Either the government picks it up (perhaps in a way which reduces overall costs), or charitable entities pick them up, or insured health care users pick them up as higher costs. Or the uninsured die. In that case, the costs are borne by the ones who die (but only temporarily, I guess).
I have not read the paper, but if what the excerpts claim is correct, then there as a huge free lunch available in Massachusetts, that agents (hospitals, patients) were not taking advantage of. And thus, Brother Government had to come in, and turn the private agents’ attention to such free lunch, and VOILA, life is Nirvana in MA now.
Ummmmm. No. As an economist, I do not believe in free lunches. And I do not believe that agents leave money on the table. Somewhere, somehow, there is an opportunity cost of this program.
Living in MA, the program is wildly popular with somewhere over 70% approval in polls. There are continuing issues that need to be addressed and that point is important because it is only after you have data that you can adjust. First, some people have been opting out (paying the fine) and signing up when needed, so a mechanism has to be worked out to make sure people don’t opt out, opt in, opt out whenever they need to see a doctor.
Second – and this is big – a main driver of MA health costs turns out to be much, much, much higher payments to the teaching / research hospitals around Boston. Same work gets much lower payment if done outside the city. (This was uncovered by Atty General Martha Coakley.) One huge problem with the fragmented system we have – which will continue under healthcare reform – is that major cost issues like this are hidden in the seams and have to be dug out. BTW, this payment differential is above any adjustment for quality because the hospital compared are of similar quality, just not of the same national and international stature. In effect, we pay a premium for the existence of premium medicine when the average person in MA would think that outsiders coming here for care would think the opposite, that these extra customers coming in would tend to lower our costs. This is the kind of issue that can only be ferreted out in a unified system.
tj “The study ignores the cost to government and ignores the increase in premiums for existing insured who are forced to pay higher premiums to cover the high risk pool of previously uninsured.”
Huh? Correct me if I’m wrong, but my understanding is that both the MA plan and Obama’s plan mandate that people buy insurance. Shouldn’t that spread out the cost over a larger pool of subscribers? The only way your statement is even coherent is if you assume that the previously uninsured represented a zero cost…which I suppose is true if you literally value their pain at zero.
You seem skeptical that the MA plan would at least lower the rate of growth for healthcare costs. In fact, you seem to think that the Romney and Obama plans are likely to increase the cost growth rate. What economic model or intuition leads you to believe that the MA and Obama plans would do anything other than lower costs?
Also, according to Kaiser, only 63% of pre-Romney healthcare folks in MA were insured through some kind of private insurance. The rest of the insured got their insurance through Medicare or Medicaid.
2slugs,
Look up adverse selection and then get back to me.
What happens when the fine/tax for not participating in the mandated system is lower than the premium?
Citing health overhaul, AARP hikes employee costs
By RICARDO ALONSO-ZALDIVAR,
WASHINGTON – AARP’s endorsement helped secure passage of President Barack Obama’s health care overhaul. Now the seniors’ lobby is telling its employees their insurance costs will rise partly as a result of the law.
http://news.yahoo.com/s/ap/20101104/ap_on_bi_ge/us_aarp_health_plan
This is really funny – it is a joke right.
…the Commonwealth’s health insurance reform reduced the number of uninsured among the inpatient hospital population by 36 percent. The reform increased coverage…
Insurance coverage through Medicaid, the state-run federal program designed for low-income people, expanded by approximately 30 percent among nonelderly residents of Massachusetts…
Hummmm! Where oh where have the hospital patients gone?
Mass health care costs are the fastest growing in the country (the most expensive in the nation with existing budgets falling behind claims to the point of near bankruptcy) and we see a report on how the costs have shifted away from hospitals. Duh!!! What did you expect?
So how are the hospitals doing?
1. MassHealth: For 2008, MHA estimates that hospitals were reimbursed by MassHealth at 85.8% of cost. However, due to the state’s financial challenges and the choices that it has made, hospitals have experienced significant reductions in their reimbursement rates. MHA currently estimates that acute hospitals will be paid on average approximately 75% of cost in FY 2010, and will most likely experience reimbursement rates below 70% in FY 2011.
2. Health Safety Net reimbursement is a problem for many hospitals. The Division of Health Care Finance and Policy reported that the Health Safety Net reimbursed hospitals 92 percent of cost in FY 2008 and FY 2009. This percentage is greatly overestimated because it does not reflect the funding contributed by hospitals themselves (more than $175 million annually), nor any funding shortfalls which are paid entirely by hospitals and is expected to exceed $100 million in FY 2011 alone.
3. For years, Medicare payment policy has been aimed at lowering program costs by reducing payments to providers – particularly acute-care hospitals. MHA estimates that the Medicare program reimbursed hospitals 92.7% of cost in the aggregate in FY 2008, a payment level that is projected to worsen going forward.
http://www.mhalink.org/AM/Template.cfm?Section=Home&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=11716
Hospitals see their admissions decline, their revenue fall, and their government reimbursments slip as a percentage of their costs. What a great system!! Don’t we all want that nationally? NOT!!!
Menzie Chin… have you ever heard of externalities? As an economist, I am appalled by your response.
Kirabo: I think you have my comments confused with Manfred’s.
Mr. Chinn
You may want to look further into the Mass. Health care system: much of the costs have been extracted from college students. Many college students in Mass. have health insurance costs sometimes exceeding $2000 added to their tuition. Much of this goes unnoticed because a lot of this funded through credit via student loans. yes, costs did rise under the Mass. health care plan: you’re simply not looking in the right places–and Mass. has a very large population of college students that have now been chained ever tighter by debt.
tj Sorry, but your comment doesn’t make any sense. Yes, I’m sure that there are some people who opt to take their chances and pay the fine rather than buy health insurance. And I’ll take your word for it that the penalty is too small. But what was the penalty before the MA plan and the Obama plan went into effect? Zero. Last time I checked a zero penalty was more of an incentive to game the system than a small but positive penalty. What you’re really arguing for is a larger penalty…and I would agree. Except that’s not what your friends in the GOP seem to be saying…they want to return to the bad old days of no penalty.
No one is saying that the Obama and MA plans are perfect. Given the fact that we’re tied to job-based healthcare there’s only so much that can be done. Sort of like polishing a turd. But given the constraints and given the stupidity of voters and politicians, I think the Obama and MA plans represent a remarkable improvement over the previous way of delivering health insurance.
Brian What college students are you talking about? Anyone under the age of 26 can be attached to their parents healthcare plan.
2slug,
Here it is in a nutshell – assuming the government requires a compressed premium schedule between low risk and high risk individuals. Without that assumption, there is no benefit compared to the system we have now, if high risk individuals are charged a significantly higher rate.
The only way this house of cards works is if you can force a whole bunch of low risk people into the system. The graduate students Brian is referring to above are a case in point. Most universities offer low priced coverage to grad students. However, the government cried foul in this case because the government needs more low risk students in the government pool. Why? Because they pay more in premiums relative to their claims. If you want to charge everybody the same or similar premiumus, then roughly half the insured will be overcharged and half undercharged. Rather than the current system in which your premium depends on your health profile. Government health care is a sikmple transfer from the young and healthy to the less healthy. (Gee, something else besides debt we can burden our youth with.)
This is also why the government wants more 18 – 26 year olds to remain on their parents policy. 18 – 26 year olds file few claims, and many won’t even buy health insurance. But, if the government can entice them into the pool then the government collects more in premiums than they pay out.
At this point you are saying, yes, that is the way it is supposed to work. We liberals believe the system should spread the cost over more individuals. Who cares if it is a transfer from young to old. The fact is, young adults and other healthy individuals should be paying a much lower premium than somebody with a pre-existing condition, but under the new government plan, or the coming single payer system, this won’t be the case. Thus, the government has to force low risk individuals into the system to offset the cost of the high risk individuals.
As you point out, the democratically controlled congress was dumb enough to reduce the penalty to the point where there will be too many low risk individuals that opt out and pay the fine because it is less than the premium. Insurance companies will go out of business and we are left with Obama’s single payer system. (maybe they did know what they were doing, ya think?)
At the same time, the penalty on firms is low enough that firms will drop their coverage and dump workers into the government system.
The entire house of cards will collapse under its own weight unless the government can coerce low risk individuals into the system. (OR, RAISE INCOME TAXES ON THE 50% OF THE US CITIZENRY THAT PAYS INCOME TAXES.)
tj So lowering a low penalty was something the Democrats were pushing??? Hmmmm…I seem to recall that it was the GOP that was running around telling everyone how bad it was that Uncle Sam was going to put you in jail if you didn’t buy insurance. So if you’re right, then I guess the GOP supported strong penalties. Thanks for the news flash.
And I suppose the GOP will be campaigning on the idea that the elderly should be paying a lot more in healthcare and getting less Medicare. What else do you mean you say:
“The fact is, young adults and other healthy individuals should be paying a much lower premium than somebody with a pre-existing condition, but under the new government plan, or the coming single payer system, this won’t be the case.”
Guess what? Age is a pre-existing condition. I’ll be waiting for John Boehner to run on the “cut Medicare for seniors” slogan. I suspect I’ll be waiting a long time for that one.
Just wondering, have you ever read any of Uwe Reinhardt’s papers on healthcare economics. You might want to start there. He’s the guru on the subject and he addresses everyone of your points.
Mr. Chinn
It is not necessarily true that a student in Mass. under the age of 26 can be placed under their parents health insurance; that can only happen if the said insurance obtains “a state-government-regulated minimum level of healthcare insurance coverage”–the key here being that the said insurance must conform to Mass. requirements which many out of state insurance providers fail to qualify, and the insurance holders within the state that do qualify have experienced drastic increases in insurance costs. Also, even when on your parents plan there are still fees attached that involve the Mass. health care plan, albeit drastically lower. So costs did increase, but those costs were increased on policy holders or through mandatory college health care plans.
I have to admit that I find it bizarre that you seem to be arguing by implication that increasing the coverage of health care somehow reduces the costs; certainly it will reduce the costs for some groups, but some other group has to pick up that cost; or that the overall costs increase because now resources are being provided to those how would not have normally consumed them. It just seems that a consequential assumption to your argument will ultimately have to rest on that something can be had for no cost in the aggregate. You just happen to look at one particular sample and then induce a general observation.
Brian: I think you have me confused with 2slugbaits. I suggest your question be directed to him/her.
> The fact is, young adults and other healthy individuals should be paying a much lower premium than somebody with a pre-existing condition, but under the new government plan, or the coming single payer system, this won’t be the case. Thus, the government has to force low risk individuals into the system to offset the cost of the high risk individuals.
That is the point of insurance. Are you complaining about the way insurance works?
Anyway, young people will get old – no? You seem to be so sure that you will be hale and hearty tomorrow. Or are you one of those who think that if you get ill, tough luck if you cant afford the high premiums for high risk insurance?
Brian,
You claim that covering more people must lead to more cost. What you fail to appreciate is that everyone is already covered because providers must treat people even if they have no insurance. (I’d like to see the any politician even think about changing that rule!) The main idea is to get more people to pay for the system. So, even if a lot more people make use of preventive medicine, those costs may well be lower than that incurred by a smaller number with high emergency treatment costs.
Mr. Chinn: sorry about the mix up; I was balancing two things at once and I think it’s safe to say I have difficulty enough with one task at a time.
dvdhwl: First I would like to say that the United States doesn’t have a history of people going medically untreated, this function use to be picked up by religious organizations that ran hospitals, such as the Methodists. Second, preventive medicine is not only something not practiced much in the West, but one doesn’t need health insurance to practice preventive medicine since most preventive steps involve eating habits and lifestyles–which Americans are becoming notorious for practicing unhealthy behavior in both. Third, the problem with giving full coverage is how do you control costs? The only effective way is through deductibles, and then we’re back to affordability for the poor. Also, emergency care can still be provided some subsidies, that alone is not going to break the health care system, but trying to do everything else will. Fourth, providing insurance for everyone will only have the effect of raising health care costs as the government pours money into a targeted section of the economy and demand goes up and there’s under capacity, which will remain that way and doctors and nurses have their fees slammed down by the government. Fifth, the cause of why health care costs are experiencing massive inflation is not addressed by simply providing health care coverage in that at best such a step only addresses the symptom. There’s not to say on the subject, but I’ll leave it at that for now.
Brian,
I think you’re taking a lot of different issues and just jumbling them all into some overarching Obamacare issue. First, as to college students. Note that what started out as an apparent claim applying to all college students is now down to just those over age 26 or those under age 26 from out-of-state with plans that do not conform to MA minimum requirements. As objections go, this seems pithy. In any event, Obamacare should fix that problem because it establishes minimal coverage requirements nationwide.
The main problem with your argument is that you don’t seem to understand the difference between range and depth issues. Expanding coverage to the previously “uninsured” does not increase costs overall. Yes, free-riders (like many students) have to pay more, but others who were subsidizing the free-riders pay less. That’s what happens when you increase the range of subscribers. There might be (and I would expect there to be) an increase in cost due to increasing the depth of coverage; but that’s a good thing. For example, many people who think they have private insurance find out that they only have a phantom insurance policy. Insurance companies deliberately deny about 20% of claims just to see if they can get away with it. If they deny too many claims, then this hurts their reputation too much. The trick is to find the right balance between honoring just enough claims that most people will continue to believe they have insurance, but deny enough claims that they can increase profits. That’s how the game is played. One effect of Obamacare is to make it a lot harder for insurance companies to play that game. This amounts to a deepening of insurance coverage, which will cost more, but it also means you will have real insurance and not phantom insurance.
You mentioned a problem of “undercapacity.” Actually, I think you have something there, but your conclusions are wrong. We do have chronic undercapacity…that’s a symptom of a market dominated by monopoly power. The AMA spends a lot of money making sure that the supply of doctors is half of what the market demands. And medical schools are complicit. And hospitals exert monopsony powers over nurses, and here again nursing schools are complicit by overproducing nursing school graduates, which results in a shortage of nurses. [Yes, this is a bit counterintuitive, but read the microeconomic literature on the subject.] And there’s plenty of monopoly power in Big Pharma.
Obamacare will marginally reduce the growth rate of healthcare costs as a percent of GDP. I believe CBO estimates it will lower the rate by about one-quarter of one percent. But if you really want to go after higher healthcare costs, that means someone is going to have to go after the monopoly and monopsony structures that characterize the healthcare industry. And that means taking a lot of money out of the pockets of GOP contributors.
2slugs,
You seem not to understand the issues at all.
For example,
Guess what? Age is a pre-existing condition. I’ll be waiting for John Boehner to run on the “cut Medicare for seniors” slogan. I suspect I’ll be waiting a long time for that one.
You are proving my point. I agree, age is a pre-existing condition. So why will the government insist that the elderly pay the same rate as a healthy 27 year old?
The system won’t work if premiums for the young and healthly are higher than the penalty for not participating in mandated health care. The premium paying pool will be loaded with groups most likely to file a claim, (pre-existing conditions and elderly). The only way to keep the dollar outflow amount of claims below the dollar premium inflow is to raise rates on the high risk individuals (which the government won’t do) or, increase the penalties (which the government won’t do).
The system as currently constructed will not support itself.
We need health care reform, just not the flawed system the government devised.
As an aside, I am not sure why you insist on making everything a political issue. I just threw in the democratic congress line in my last post to get a rise out of you. You blame conservatives for everything. We have a 2 party system, (okay 2 1/2) there is plenty of blame to go around. Deal with it.
tj There are two types of risk: avoidable and unavoidable. I have no problem with insurance schemes engaging in risk discrimination for risk factors that are avoidable. No one objects when car insurance companies offer good driver discounts and no one complains when they charge high rates for folks that drive expensive cars and have a history of running red lights and going 20 mph over the legal limit. Same with health insurance. But there are some risk factors that are due to bad genes…I would say that probably describes most risk factors. John Rawls seems to be getting a lot of attention lately on this blog, so I’ll continue with the Rawls theme. It’s a basic principle of justice as fairness that no one who set up an insurance scheme behind a veil of ignorance would agree to an insurance system in which accident of birth determined whether or not you could get insurance. The fact that people buy insurance at all is evidence of “maximin” risk behavior, and acceptance of the maximin principle pretty well weds you to the Rawlsian notion of justice as fairness. And that’s what universal access to health insurance is all about. If you don’t understand that, then go find some lonely cabin in Montana and live out your days there.
As to insurance for the elderly…well, that’s why we have Medicare. Younger workers pay for insurance that they cannot use today, but there is a social contract that says they will be able to get it when they retire and employment-based insurance is no longer an option. This is a generational transfer that most of society has accepted ever since 1965.
I agree that we need healthcare reform; but the GOP made it plain that they were not interested in reform. Grassley boasted that he would vote against it even if he got 100% of what he was asking for in committee. That’s not a serious player, but yet he was the minority lead on the committee. Obama’s plan was a good start in the right direction, but just like Medicare in 1965, Congress didn’t get healthcare entirely right the first time either. It’s going to take another 20 years of fixing; but if it’s going to be fixed then it’s important that the GOP negotiate in good faith. By their own admission the GOP wasn’t negotiating in good faith during the healthcare debates. Crapola like death panels and the Dems cutting Medicare were simply focus group tested lies. And it appears the GOP is still up to its old game…yesterday Bachmann and Hannity and Beck and Limbaugh and other GOP politicians were out there spreading the India-trip-will-cost-two-billion-dollars lie. I can’t watch Fox News for fear that Newt Gingrich’s nose will grow right out of my flat screen TV.
The NBER paper that Menzie posted is evidence that the MA plan (and presumably the Obama plan) has had some small but positive results. We need more politicians who have an NBER subscription (I have one) instead of prime time gigs on Fox News.
Slugbaits, you are such a dreamer. If a politician had a subscription to NBER, he wouldn’t read it. Any more than he reads the bills he votes on or signs into law. It would cut into his time campaigning in 30 cities, his golf, & his frequent vacations.
The rarity of intelligent government does not seem to register on statists as worthy evidence.
2slugbaits: I’m not exactly sure where you get your information from but let me address your points. First the AMA and the universities can really do little to manipulate the market on the supply of doctors–and the capacity of med schools has increased not decreased. The cost of med school has certainly gone up, but this is due to the massive influx of credit due to student loans backed or given directly by the government.
Further, the problem with an under capacity of doctors in the medical field is because it has become difficult to make being a doctor worth it in monetary terms–this is something that Michael Moore got right in his documentary: it’s not patients that will quit the health care system but the doctors. Medicare, which is significant force in medical care caps doctors in the fee schedule (based on county “wages”), and just recently nurses have taken a hit as of October, with therapists next in line. The shortage of nurses isn’t based on what schools or anyone else is doing, it’s that business are either regulated to cover more or federal and State government(s) have extended coverage–but also much of the demand has increased to having a much more unhealthy population that carry underlying health problems.
I have no doubt the AMA tries to keep capacity down as under upward move in capacity would put downward pressure on doctors wages, but it is not the primary force driving the market. To address a major underlying cause to the increasing rise of health insurance would be to start with eliminating hospitals and insurance companies being exempt from anti-trust laws; and then the next step would be to reduce the costs of regulations to allow for start up insurance companies–it’s the large corporations that push for regulation because this in effect creates a moat around their industry and makes it harder for competition to enter.
Next, it appears you might be unfamiliar to the university situation in Mass. (which is what we were talking about). University students make up a significant portion of the Mass. population, and 23-30% are out of state. And it does not just involve out of state students because insurance companies raised fees when the Mass. health care plan went into effect. And student loans are not a free ride, you have to pay them back, with interest.
And what you say here: Expanding coverage to the previously “uninsured” does not increase costs overall. Yes, free-riders (like many students) have to pay more, but others who were subsidizing the free-riders pay less. That’s what happens when you increase the range of subscribers. There might be (and I would expect there to be) an increase in cost due to increasing the depth of coverage; but that’s a good thing. This doesn’t make much sense at all. For one, students had to already pay for their health insurance, all that happened was now that they have to pay more for the same thing they were already paying for. You seem to think that university students were getting their health coverage for free, but they werent. Also, when you expand coverage to cover those who are not insured but now will be, but not pay into: that doesn’t lower costs. Expanding coverage can only lower costs if the new additions pay (which they will pay, but probably they’ll pay indirectly through government inflation). and rising costs are a good thing? You much then be the only person I know who would rather pay more than less.
Obamacare may very well lower the cost of health care, but for some segment of the population, not on aggregate. Price fixing only benefits the recipients but penalizes the suppliers, in this case, the health care professionals, who can and will quit the system, once again leaving an under capacity.
Brian First, congress critters actually do have subscriptions to NBER…it comes with a “.gov” domain name. The problem is that most just don’t know it.
Yes, I do know that MA has a lot of out-of-state students. My niece at Tufts medical school is a good example. But when a student physically lives in MA, then the medical costs they will incur will be bounded by conditions on the ground in MA and not from their home state. So it’s perfectly appropriate that MA insist upon a minimum standard. Afterall, no one compelled those students to go to MA. Students do have medical costs and there is no reason why they should be allowed a free ride.
The shortage in doctors is, to a large extent, a managed shortage. A doctor’s visit for some routine ailment usually involves a 60 second chat with the doctor and 30 minutes with the nurse doing the actual work. Then the doctor takes another 30 seconds to write out a prescription for some medication. And that prescription is based on knowledge the doctor got from a Big Pharma sales person. The doctor’s income isn’t driven by his or her knowledge, it’s derived from equity ownership of the partnership and from monopoly rents that the doctor is able to extract. If you need further tests, then the doctor will refer you to some lab for which the doctor likely has some ownership stake. A lot of what doctors do is nonvalue added or could be done by others at less cost; but doctors have pushed for regulations that mandate their services.
The fact that doctors are able to discriminate against Medicare fees is proof of my point. Price discrimination is the hallmark of monopoly pricing power.
I’m fine with expanding competition between insurance companies. That sounds like an argument for a public option. But what the GOP was proposing was really sham competition that essentially would have allowed out-of-state phantom insurance companies to set up fake operations in order to get around minimum coverage requirements. A good example is the automotive repair insurance plans…that’s what you would have gotten in health insurance under the GOP plan.
As to student insurance, a lot of those kinds of health insurance plans are through the univerity system. In other words, they are self-insurance plans. True, students pay a fee, but the reason many big universities set up these plans isn’t out of any concern with the student, but because they use it as a way to compel students to use university medical schools. University health insurance plans are intended to support the teaching mission of the school and not the health of the students. These kinds of student insurance plans actually drive up costs, which are then passed onto other subscribers. You see a similar thing with Medicaid patients who are pushed through state university teaching hospitals.
People who aren’t paying today will be paying under Obamacare. That’s why so many are opposed to it. Apparently those folks all believe that they will be paying and won’t be allowed to be free riders anymore.
Yes, increasing costs are good if those costs represent an increase in quality. Prior to Obamacare those with health insurance were paying $1 for a good with an 80% chance of actually having a claim honored, for an expected value of 80 cents. Compare that to paying $1.05 for a good for which you will actually get $1.05 worth of value. I’ll take the latter option, how about you? Paying a little more to allow expanded coverage to kids under 26 is a good thing. Paying a little more today in exchange for guaranteed access in the future is a good thing. I’ll happily pay a little more for a much better product. I won’t happily pay more for less, which is what the GOP was offering.
2slugbaits: first let me say that I’m no fan of the GOP or any plan that the mainstream wings of that party has so far offered; next, I agree that any state has a right to charge and regulate any way it sees fit: my only point was that costs in Mass. were not saved in aggregate, but redistributed (and parents of in-state students had their fees increased). I further agree that doctors do manipulate regulations by mandating their services and they are also exempt from anti-trust laws. Most of what you’ve said in the above I find to be perfectly reasonable; the only disagreement I have is the public option–and whether Obamacare in particular, and the Obama Presidency in general will prove to work.
First, the public option would simply wipe the private market insurers out: there is simply no way to compete against the government when they neither have to show a profit nor even break even. what in effect has happened is that inbalances have been created in favor of insurers through government intervention and this in effect has created a monopolizing effect, and now in the name of ending monopolies and reinstating competition the government enters as a competitor, which will inevitably end the private insures, thus introducing a state run monopoly. This is the same course Germany pursued before and after WWI to unwanted consequences. Further, as a public health care system becomes larger, inevitably the agency problem arises.
The problem with Obamacare and the Obama Presidency is progressivism ultimately fails if you don’t first do two things: (1) clean up the corruption, and (2) simplify the government and rebuild. Neither of these options have been taken and it can be argued that the very reverse has happened. For example, when we talk of phantom insurance companies there are already regulators, commissioners and laws to stop this, but if they’re not enforced or captured, then what makes one suspect that more laws and regulations won’t fall into the same fate? The failure and lack of effort to clean up governmental corruption is ultimately what has made the general populace suspect any steps the government takes.
Ultimately two questions are begged when addressing health care, but are rarely answered (by politicians at least): (1) why are health care costs rising?, and (2) why can people not afford it? You’ve certainly have given responses to the first; and the second will no doubt takes us far from a discussion solely on health care.
Interesting the way the post and the comments began by talking about the importance of understanding the data and then spiraled down into name calling over the most inane subjects.
Buried in the middle is a comment, I think by the blog post’s author, that the choice in Massachusetts was between Romneycare and uninsured people dying. That’s absurd. All Romneycare intended to do was move the free-care-pool money that used to be divvied up among providers and divvy it up among insurers. The uninsured still got medical treatment.
As for the data, all the data you need is right on the web site of the Massachusetts Department of Healthcare Finance and Policy. It’s called the Key Trends report, comes out each quarter, and illustrates that Romneycare — despite its inentions — is caving in on itself after only four years. Obamacare won’t last that long because as one of the first commenters above pointed out, most people in Massachusetts always had health insurance.
a Boston (Newton, actually) biotech guy, not an econ or health guy…what i hear in the news,
1) there is a huge shortage of primary care physcians – long waiting times,esp in western (rural,poor) MA; does an inc in # insured mean people are paying for health care that isn’t helping them ?
2) I hear the state can’t pay for the current coverage; the magic of “cost reduction” doesn’t kick in soon, either someone is gonna have to pony up big bucks, or coverage scaled way back
3) As I first heard from J Califano, on PBS after Obama’s address to the joint houses, the driver is technology…that is something I do know about; the hot thing in biotech pharma are monoclonal antibody drugs; (mAbs) in the jargon – which are hideously $$ and (I think) very hard for generic companies to make (some technical stuff here about synthesizing pharma grade recombinant proteins)…
As a scientist (PhD) in biotech, who makes his living producing data and generating excel graphs, my 1st impression looking at this is that it is pretty crappy quality data.
The 1st figure has a y axis expansion to make what may be a minor trend significant; some of the other figures have no clear labeling on the axis or legend on the same page as the figure; this is
*essential* for easy comprehension (anyone says, your so smart, live with it, kinda missing the boat..)