August 19, 2009

Open Thread: Questions on Healthcare

Carroll Andrew Morse

As we head towards our town hall meetings in the state of Rhode Island where the subject of healthcare reform will be a major issue, here is the big picture question regarding the proposals currently under consideration by Congress: The President and Congressional Democrats are promising that by expanding the Federal role in healthcare regulation (including an individual mandate and various tax penalties on both individuals and companies that don't provide insurance), increasing subsidies and maybe creating a government-run insurance company -- all while simultaneously leaving the Federal tax and regulatory advantages that corporately purchased insurance plans hold over individually purchased insurance plans in place -- they will...

...what exactly?

  • Is the answer reduce healthcare costs? If so, could the public be provided with a few examples to use as a model from economic history where Federalizing regulation, providing subsidies, and mandating spending has brought down the cost of something?
  • Is the answer expanded coverage? If so, could the public be provided with a few examples (in broad terms) of the kinds of regulations that will needed to achieve this goal, and why a vastly-expanded Federal regulatory structure for healthcare is needed to implement them?
And if I might add one slightly-more specific question...
  • Would a government-run insurance company be granted the same legal protections that employer-based plans currently enjoy, and not be held legally responsible for the consequences of erroneous decisions to deny treatment? If so, how will this not lead to a competitive pricing advantage over the non-employer based plans sold through a government "exchange" (which presumably would be held responsible for the consequences of their mistakes) and eventually to predatory pricing on the part of the government-run company?
Other questions, and even answers, are welcome in the comments...

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The only way to truly reduce long-term healthcare costs is to slow the creation and adoption of new treatments. That could simply take the form of the FDA slowing down its approval process (which would be almost invisible despite its high cost), or it could mean refusing to give patients on government plans access to new treatments for some time (which would be even less politically acceptable, even though the overall costs to society would be somewhat lower). Naturally you would expect politicians to be exempted from the latter. The third way is essentially the plan on the table; increase government control over the healthcare sector so that profits can be squeezed out of the system and overall innovation drops to a slow trickle. The chief advantage of this approach is that people won't know what new cures and treatments they aren't getting, just like we don't know today what we would have if it weren't for previous attempts to do the same thing.

I can't see how people who are truly sick could be in favor of this plan. This is offering the chronically ill lifetime symptom management in exchange for a decent chance for a cure. Even people who aren't sick yet will likely get some uncured illness in the future; if you are destined to get diabetes in 15 years, for instance, would you rather have a discount on needles and meters or a 25% (I'm being conservative) chance for a cure?

As for your third question, even if the plan didn't get the same protections that employer-based plans enjoy, I think sovereign immunity would still apply.

Posted by: Mario at August 19, 2009 9:48 AM


I agree that sovereign-immunity is the ultimate back-boundary here. But I also assume that a government-run insurer would set up some kind of administrative appeals process for denied treatments.

So, as an example, say someone is denied a treatment, appeals the decision, but dies during the appeals process.

Does the government run insurer say...

  • The appeal is now moot, because the patient is dead, or
  • We need to finish the appeal process, to determine if the patient's family is owed the money for the treatment he or she should have had (this would be parallel to current ERISA law), or
  • We need to finish the appeal process, to determine our liability for causing the potentially avoidable death of a patient.

Posted by: Andrew at August 19, 2009 10:20 AM

Regardless of whether I would support an effort to perform such a vast re-vamping of the US health care system, I would never support any of the proposals before us now. Not because of their content, but their formation.

Where I work, we habitually design and deploy large systems, which have to interact with other large systems, and which can have significant safety consequences on the people using them. It is de rigour to modularized such systems, testing and validating each segment in isolation, so that any risk to the overall system is minimized. If we ever proposed performing these changes en-mass, we'd be, rightfully, thrown out of the development.

The fact that the health care initiative has not been segmented and presented in inter-operating independent pieces means to me that the people proposing these changes are not smart enough to be allowed to make them.

Posted by: Chris at August 19, 2009 11:08 AM
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