The Singapore system, involving single payer for catastrophic expenses and health savings accounts for smaller expenditures. To varying degrees you can combine this with forced savings for the HSAs and price controls on service provision, both of which you will find in Singapore. Where “catastrophic” starts can vary as well. This is my first choice, although if you wish to dismiss it as “utopian” for the United States you have a point.
My view is that we are headed toward a two-tier system regardless of the political configuration. We will have a government system under which doctors are unhappy with how they are paid and how they are regulated, and in which consumers are denied some treatments that they otherwise would want. We will have a private system in which doctors and patients have more choice, but patients bear much more of the cost directly. People who rely almost entirely on the government system will tend to have lower wealth than people who use the private system.
I do not think that Americans are egalitarian enough or tolerant enough of a price-control regime to be willing to destroy the private tier. On the other hand, I do not think that they have enough confidence in markets to do without a large government tier.
I do not think that Americans would vote for the Singapore system. Maybe Singaporeans would not vote for it, either, but that country runs differently. Consider three choices:
1. Uninsured
2. Comprehensive insurance
3. Catastrophic insurance
Economists strongly prefer (3). But I think that most people around the world would prefer (1) or (2) to (3).
That does not mean that I want to give up on reforms that make catastrophic insurance competitive. On the contrary, I am willing to make the case for it any time I get the opportunity. Obamacare is designed to make it harder, not easier, for people to choose catastrophic insurance. That means either that Obama’s economic advisers failed, or perhaps didn’t try, to make a case that I believe they should have been making. As a result, I am pessimistic about the prospects for Obamacare. My book still needs to be read.
My company does work for state Medicaid agencies, so let me just toss in my two cents:
From what I have read/heard, the folks who crafted the Affordable Care Act wanted to make it easier for people with pre-existing conditions to get insurance; hence the provision forcing insurers to issue policies to such people, whether they wanted to or not. They (the authors of the legislation) were smart enough to realize that this would have an adverse impact on insurers’ bottom lines, so they tacked on the individual mandate, thereby hoping to dilute the number of sick, costly people in the insurer’s risk pools, and supposedly somebody (I don’t know who) guesstimated that this wouldn’t be enough to staunch the bleeding if all the young healthy people out there added to the risk pool were only buying low-cost, catastrophic coverage. The insurers needed them to buy expensive, comprehensive coverage (cost to be subsidized for lower income people by you and me) in order to offset the losses sure to be incurred by providing insurance to all the sickly, chronic-condition types, as well.
This could, of course, be a web of lies woven by health insurance lobbyists as cover for the fact that they of course want everyone to purchase the more expensive options and now they’ve gotten legislation forcing people to do exactly that, but in our internal meetings on the subject, that has been the story we rank and filers have gotten as to why catastrophic coverage is going to be rarer than ever when the opposite would seem the prudent course.
I have no idea why Mr. Cowen thinks so highly of Singapore’s system, when there’s a perfectly good example a few degrees south in Oz. I suppose the fact that the Australian Medicare program is universal was just too bolshe for his tastes, despite the option of private insurance plans to add benefits.
But the Australian system is slowly going away from the description above.
Every few years another level of care is added to the government system. (In this last election campaign we had increased mental health and a push for dental care to be covered.)
This both increases the tax that everyone must pay, and decreases the advantage you get from having private cover.
So more people do the calculation and decide to give up private cover and just rely on the government system.
I’m just about at this point myself.
Do you have any evidence to support your claim that more patients would be denied treatment under single payer than the current system? any at all?
The continent of Europe?
The little known secret is the ACA enshrines catastrophic coverage in the lowest tiers of coverage. Ostensibly they are comprehensive plans, but copays will cover costs until their maximum out of pocket is reached, so are comprehensive in name only. It does cap individual treatments to prevent gaming of the maximum (first visit maximum, all subsequent free) but even catastrophic requires this (ordinary and reasonable).
I get why the average person would prefer Option 2 to Option 3, but I don’t understand why they would prefer Option 1 to Option 3. After all, it seems plausible that a major reason why having health insurance is so important to people is precisely because they want to avoid the truly *catastrophic* tail risks associated with freak accidents or rare conditions. If anything, I would expect them to *overestimate* the probability of unlikely events, relative to their estimation of likely events (I don’t have a cite on that at hand, but I do seem to vaguely recall some research that would support that idea — if anyone could clarify this, that would be great.)
I was abroad recently and went into a clinic where the prices for various visits, treatments, and procedures were clearly marked and non-negotiable. Just like a regular business. I was genuinely stunned. And then I thought it was ridiculous that I was stunned – I should think method of delivery to be normal and be stunned daily by the mechanics of our own system.
I think you greatly underestimate the changes that are coming, from both medical diagnostic software and video conferencing. Of course, the medicos will fight back with all kinds of dumb efforts, like this Texas vet who was barred from offering pet advice on the internet, but that shit won’t fly for long. The existing third-party payment systems won’t matter because they won’t pay for these new services, so as people shift over, the existing payment systems will collapse.
But the owners of very small businesses seem to mostly opt for catastrophic insurance for themselves. Wouldn’t that be evidence that people are fooled by the current system into believing that their employer or the government (through the tax deduction) is paying for their comprehensive policies and might opt for catastrophic insurance if they paid the entire bill with after taxes dollars.
But hasn’t ‘guaranteed issue’ turned #1 into a form of #3? And might this not turn out to be a fairly common option under Obamacare — go without insurance and sign up for a plan only if and when an expensive condition arises?
Arnold is right that people may prefer being uninsured to having just catastrophic insurance.
I know a lot about insurance but I sometimes feel that way myself. Here is why:
– due to some bad luck and my own mistakes, I have very little in the way of savings or financial assets.
– If I got a hospital bill of $10,000, then other than begging from relatives I would not be able to pay it except over a long time.
– In other words, I would be stone broke before a high-deductible policy ever started to help me.
– I am over 60 years old. Even a high deductible policy costs $300-$500 a month at that age.
– So a part of me says, let me save the $300-$500 and at least have a chance to pay a $10,000 bill. If I get a $50,000 bill, I will just ask the hospital to write it off and they probably will.
– So to summarize, people disdain catastrophic insurance because even the deductible is unaffordable.
Arnold made this point in an excellent article a few years ago. He was reading the stories of people who declared bankruptcy, and he mentioned that they were going bankrupt over amounts like $5000 that he considered a reasonable deductible.