Debating the Public Plan

Greg Mankiw weighs in directly (as opposed to beating around the bush) on the public plan. Here’s the summary:

Recall a basic lesson of economics: A market participant with a dominant position can influence prices in a way that a small, competitive player cannot. . . .

If the government has a dominant role in buying the services of doctors and other health care providers, it can force prices down. Once the government is virtually the only game in town, health care providers will have little choice but to take whatever they can get. . . .

To be sure, squeezing suppliers would have unpleasant side effects. Over time, society would end up with fewer doctors and other health care workers. The reduced quantity of services would somehow need to be rationed among competing demands. Such rationing is unlikely to work well. . . .

A competitive system of private insurers, lightly regulated to ensure that the market works well, would offer Americans the best health care at the best prices.

Whenever someone uses the phrase “basic lesson of economics” when discussing the U.S. health care system, you should be suspicious. As Paul Krugman says, “the standard competitive market model just doesn’t work for health care: adverse selection and moral hazard are so central to the enterprise that nobody, nobody expects free-market principles to be enough.”

I earlier tried to make this point in more detail: “lightly regulated” private health insurance is a fantasy, because the whole point of a for-profit insurer is to charge premiums that expect the expected payout under the policy; as a result, no sick person would be able to afford insurance. You don’t need adverse selection or moral hazard to explain this: if I know someone has an expensive form of cancer, I’m going to charge him $100,000 for health insurance, and he won’t be able to pay. The free market for health care is one in which sick people die, and smart people who ignore that point are being less than honest. (Or maybe they are hiding behind the phrase “lightly regulated” – if they consider the prohibition of medical underwriting “light regulation.”)

And if dominant market participants are the problem, then we already have that problem. Check out page 6 of this report (hat tip Krugman). In the median state in the U.S., the top two insurers have a combined market share of 69%.

Finally, it’s clear that the current system isn’t working – we have both 50 million uninsured people (plus many millions more who are not sufficiently insured against a major medical problem), and we have rising health care costs that will destroy the federal budget over the next several decades. So when Mankiw says we need “a competitive system of private insurers, lightly regulated to ensure that the market works well,” what is he saying? That we need less regulation than we have now? Or is he just talking about abstract principles?

Update: Once again, you may be better off reading Brad DeLong’s response to Mankiw.

By James Kwak

75 responses to “Debating the Public Plan

  1. By the same rationale, legal services do not really lend themselves to a free market system, either. Besides, is it really fair that a rich person can get away with murder more easily than a poor person?

    We really ought to nationalize the legal profession. What do you think, Dr. Kwak?

  2. Carson Gross

    Looks like it’s time to start another fire fight.

    I’m, obviously, personally against government run healthcare for all but, possibly, the poor. Further, I think that, if there is a public option for everyone, the government subsidy will obviously put private insurance out of business. I’m astounded that Krugman would claim otherwise, and assume he’s being disingenuous.

    But, hey, fine. I’m a monster, and all goodly and decent people really want government run healthcare. But, please, why does this have to be implemented at the Federal level? Can we preserve some places in the U.S. where those of us who don’t believe in this sort of thing can go?

    I’m not saying y’all can’t have a nanny state. I’m saying I don’t want to live in that nanny state. Right now I have the option. If I want a (functional) nanny state, I can move to Massachusetts from my disfunctional nanny state of California.

    A federalist approach to healthcare lets us all live in the manner and society we would like. People in Alabama don’t have to live like people in Connecticut or California. This approach also has the advantage of satisfying the roundly-ignored-in-all-discussions-economic 10th amendment. (Yes, I’m still beating that horse. Sorry, guys.)

    So many of our most heated disagreements, from abortion to environmental policy, would become less contentious if we just let the states exercise their constitutionally granted powers. Let people live the way they want to live. Accept that there are honest libertarians who really just want limited government, as well as honest liberals who want european-style government, and let them both have what they want.

    I know there is no chance in convincing most people on this board that government run healthcare perverts the basic relationship between citizen and government, or that we’ll end up with worse mortality numbers soon enough as the govt. starts rationing care, or that it’s obviously unconstitutional, or any other number of things that I believe to be true. But I hope maybe I can at least ask that people think a bit about projecting such a huge leap in the very conception of our Federal government onto all of us, whether we like it or not.

    Cheers,
    Carson

  3. Why can’t doctors be paid for keeping people healthy? As it is, they have a conflict of interest, and so do insurers.

  4. Nemo, that is disingenuous. There clearly ought to be a better public option for legal services, especially for criminal defense. But saying that the point of the legal profession is to help rich people get away with murder is comparable to saying that the point of the medical profession is to harvest kidneys in hotel bathtubs.

    The legal profession has so much power because people somehow, over time, decided that it was a good idea to outsource all the knowledge of how the system works to a small group of people, and let everyone else live in blissful ignorance. And people choose to ratify this system on an ongoing basis. It is virtually impossible to get most people to spend even five minutes trying to understand any of the legal principles underlying the system.

    It is a good system for maintaining oligarchy. That is probably not a coincidence. But perhaps the most interesting thing is that lawyers for the most part are only functionaries, not oligarchs. Somehow bankers got to be the oligarchs, in this system and most others that I am aware of. Insurance executives are basically bankers.

    So do you consider doctors to be functionaries, oligarchs, or something else? If the answer is something else then it probably does not make much sense to compare the economic functioning of doctors to lawyers.

  5. Tippy Golden


    .

    Over at Economix Uwe Reinhardt said:

    Captain Renault was “shocked, shocked” to discover there was gambling at Rick’s Cafe in foggy Casablanca. (Watch Renault pocket his take.) Last week Congress was “shocked, shocked” to learn the estimated cost of universal health insurance was $1.6 trillion over a decade. (Policy wonks yawned.) Then there was $12 trillion Tab-to-Taxpayers after the casinos on Wall Street broke the banks.

    Speaking of casinos. It seems to me actuarial health insurance can be compared to casino. This is because the odds always favour the house.

    In the free market: Some people are healthy so they don’t buy insurance. Some are insured until they lose their jobs. Some are partly insured. Some are insured until their insurer deems them too sick to be insured. Some are too poor so Medicaid picks up the tab. Some are too old so Medicare picks up the tab. Some consider insurance premiums chump change. Some are happy with the insurance they’ve got. Some go bankrupt for medical reasons.

    Everyone is trying to game the system. But the odds always favour the house. Everyone at some point needs medical care. Everyone at some point will get sick and die. So the casinos pay out enough claims to keep the players coming back.

    Mind numbing.

  6. sippycupnation

    First – someone – any one of the bright economic minds who frequent this blog – please explain to me why in March 2009, my pediatrician billed the insurance company more than $1000 for the well-child check up for my five year old twins – exceptionally healthy little girls, the both of them.

    $508 for each child.

    Costs included office fee, developmental check-up fee, two vaccines, two vaccine admin fees.

    More than $1000 to spend about a half hour – 40 minutes tops – checking out two healthy girls for their (legally mandated to enter kindergarten) well child check up.

    What astonishes me about the conversation we’re having about health care is the focus on the macro level – when in reality, we need to start looking at the costs at the office visit level.

    Really – the idea that it costs $508 to look over a well child for the annual visit is outrageous.

    Second – the idea that a public plan will force private insurance companies into bankruptcy is laughable. Did HMOs force PPOs out of business? NO.

    Why not?

    Docs don’t want to do business with plans that don’t pay the highest rates. Why would providers sign up for at plan that will squeeze costs for them?

    Are the feds going to make docs become providers with the public plan? Are they going to make docs accept public plan patients?

    I doubt it.

    Is “public option plan” something our senators will be forced to use? Or will they still get the insurance that gives them access to any doc they want?

    I do not understand where we are going with reform. Are we going to get rid of employer pools? So that each family will be left to find insurance on their own? Good luck with ensuring all run out and buy up some expensive health insurance! The sticker shock will be fatal to many.

    How will the public option provide me with any kind of leverage at all against insurance companies? Is this Medicare for everyone who can’t afford insurance on the market today? Isn’t Medicare on the verge of bankruptcy? So when did Medicare become the gold standard by which we measure health care in America? The seniors I know don’t seem thrilled with Medicare, at least that’s what they tell me.

    Despite my questions about pending reform, Mankiw’s shining optimism about the brave new world of the “lightly regulated” health care market makes my blood boil. Obviously not a man who’s ever been responsible for paying for his health insurance out of pocket….

  7. Carson, you misunderstand the statist mind. There is no such thing as an honest difference of opinion; the motivation is all about telling other people what to do.

    So “projecting such a huge leap in the very conception of our Federal government onto all of us, whether we like it or not” is the whole point of the exercise. After all, somebody has to pay for it.

    My favorite canard about the “public option” is the claim that it will not be subsidized. For example, Robert Reich writes:

    Critics charge that the public plan will be subsidized by the government. Here they have their facts wrong.

    Hilarious. If a “public option” is passed, I will give anyone 100-to-1 odds that it is subsidized within 10 years. I mean, can you imagine? “Sorry, your Mom can’t have her operation because the public plan she signed up for is out of money.” Heh heh.

    Of course the “public option” is a Trojan horse to socialize the entire system. But then again, that is probably inevitable. The end result is going to be worse than its proponents think. On the other hand, our current system is so hideous that it will probably not be as different as you or I might think. 2/3 of all health care in the U.S. is paid for by governments already. And does a visit to your doctor’s office today really feel all that different from a visit to the DMV?

  8. Carson Gross

    please explain to me why in March 2009, my pediatrician billed the insurance company more than $1000 for the well-child check up for my five year old twins

    Same reason your local body shop charges your insurance company $2000 for a job they’ll do for you for $500.

    Other People’s Money ™

    Cheers,
    Carson

  9. Jeffrey Yasskin

    The answer I’ve heard to “The free market for health care is one in which sick people die” is that a rational health insurance market would have to give lump sum payouts on a diagnosis, rather than directly providing care after the diagnosis. Then sick people could use that payout to buy further insurance to cover the chance of their illness costing more than average. I think such a system is totally unworkable, but I’m curious to hear your take.

  10. Tippy Golden

    Carson, this is mean. Are you saying Libertarians don’t give a fig about how a modern-developed country takes care of its children?

  11. Carson,

    You don’t want health care implemented by a federal level of government.

    For the sake of a more informed debate:

    In Canada — constitutionally healthcare is not the purview of the federal government — it is the explicit responsibiity of the provinces.

    In practice, this is what happens. The federal government gives each province a large chunk of money (revenue from taxation) based on a formula. It is called a “transfer payment” and each province is responsible for administering its own healthcare system.

    In British Columbia, where I live, the provincial government divides this pool of money to fund the regional health authorities. By law the health authorities cannot run deficits. The province also contributes money from its own budget for healthcare spending.

    So in Canada, we have universal health care, but federal government does not run the healthcare system. Each province administers its own health care system.

  12. Tippy Golden

    Furthemore, most doctors are in private practice. They operate like a business and bill the provincial government based on fees for service. The schedule is negotiated between the government and the BC Medical Association (the doctors association) every two years ago

  13. It’s a myth, designed to scare people with horrors of socialism, that in a single-payer (public) system the government “runs health care”.

    Government collects premiums (taxes) and pays the providers (doctors). So does any private insurance company. The main differences: single-payer is non-profit, has much less overhead and can’t turn down somebody based on preexisting conditions.

    I’m healthy, plus I got good benefits from my employer, so there is no practical sense for me to support public health care. Except a) I don’t believe it’s moral to let insurance companies make profits on people’s health. b) anybody can lose the job and, eventually, everybody needs medical attention and help.

    To all government-hating libertarians here: let’s see what you say about public option if and when (g.d forbid) you become old, sick and broke.

  14. Well, the central point, as Kwak points out, is that people die because of these ideological choices. If you want to base your approach to health care reform on science, then you’ll see that many other countries are paying much less than we are for health care, and are getting far better results. And you will also see that in all of these countries, government dominates the health care sector, not the markets. If discourse in this country weren’t skewed so absurdly right, single payer would be the “centrist” option, and a totally nationalized system the left option. As it is, single payer is off the table, and censored, while the powers that be attempt the buff the t*rd of a for-profit system.

    Of course, if you want to take an non-science based, ideological approach, then you’re faced with the problem of explaining who the last person to die for your ideology is going to be, and why they should do so.

  15. James Twiner

    I’m fairly confident he is saying “I am a captive of the insurance lobby, and I know where my bread is buttered”. Seriously, we need to stop taking statements like this BY ANYONE at face value. Is there any evidence ANYWHERE that our current system is superior IN ANY WAY to single payer health insurance found in every other industrialized democracy? Opponents of reform are disingenuous. Say it out loud. You may be able to shame some of them into honesty.

  16. Why worse? Now we pay up to twice as much as other top tier countries for inferior health care.

  17. “Because they can.”

  18. Very funny and appropriate link Tippy. Makes me laugh every time. I also liked the Reinhardt lecture link you gave. I thought about putting a link up from “My Fair Lady” to a song that I thought would make a great theme song for the bankers, but the whole link was like 7 minutes long and I was afraid James would think it strayed too far off-topic. But that scene from Rick’s is a classic Tippy.

  19. Though I’m a physician I’ll clue you in to the obvious economic implications of this notion. If you pay doctors for “keeping people healthy” you will essentially put doctors in the health insurance business. You will incentivize doctors to cherry pick the way insurance companies do. They you will have trouble getting doctors to treat sick people, or to treat people at higher risk of illness, be they old, or poor, or work in dangerous occupations. You will push doctors to take care of younger, health concious, office workers who have already done the job of keeping themselves healthy.

  20. CAN SOMEONE EXPLAIN TO ME how the trillion+ dollar health care tax credit to cover the investment large companies make in employee health insurance is NOT ALREADY A GIGANTIC SUBSIDY FOR HEALTH CARE in this country?

    And why for the sake of the free market we need to settle for health care that is below the standard of care provided in other first world countries?

    Carson – what does your health care cost you each year?

    And what does your employer pay for your health care? Do you know the full cost of your health care coverage?

  21. Yeah, the government should provide a laywer if you can’t afford one. Wait a second … the government should provide a doctor if you can’t afford one – even if it’s not the best or the most expensive.

  22. It’s a little easier to walk away from that body shop estimate.

    But hey over time the free market will determine the best providers due to competition and market information on who provides the best care and who is really, really bad at it.

    A few dead kids are a small price to pay for market efficiency.

  23. Carson Gross

    Anne,

    I agree with you that it is absurd for employers to provide healthcare (a practice that arose as a way to attract workers due to wage restrictions by the government during WWII.) And, no, beyond taking my monthly withholding for health insurance and doubling it, I really can’t give you a firm number on my healtcare costs. But that’s the problem, in my opinion. I’m not forced to make the hard tradeoffs that efficiently allocate scarce resources amongst competing alternatives. I make enough money and I’m responsible for my families health: *I* should be making those decisions.

    I’m not really a monster: I see the arguments for providing healthcare for the poor and indigent (though I would prefer to see it provided via a strong culture of charity, a separate and long discussion) but for middle and upper class folks? Those are exactly the people who can and should be establishing the market demand and tolerable costs for medical treatments. Otherwise you have bureaucrats doing it with spreadsheets, which is a method I don’t find particularly compelling for, I hope, obvious reasons.

    I should say, I in no way defend the way that we provide healthcare in the United State. I think it’s disastrous and, as Nemo points out, the government is already deeply involved. But I think the total government takeover will prove more disastrous. (Although I’m willing to grant Nemo’s point that it may be less of a radical change than I currently think.)

    Cheers,
    Carson

  24. This is the real issue:
    “I’m, obviously, personally against government run healthcare for all but, possibly, the poor.”

    In many states, only the poor WITH CHILDREN can get health care, and then only as long as the children are living with them. That is one of the incentives for them to have children, then they are reviled for not being “responsible” by not having children they can take care of.

    So, they keep having them, hoping that they will be around until the parents can get Medicare and Medicaid, which means more children or people in their 40’s and 50’s doing without medical care, when they need it the most.

  25. Carson Gross

    Ah, yes.

    Conflate emergency care with preventative, ongoing and elective care, mix in some hyperbole and serve hot.

    Let’s see if I can play this game: But if the *government* says little Timmy is going to die because the treatment is too expensive, I guess that’s OK, right? Or is the idea that with an entirely government run healthcare system we’d just give everyone everything they ask for?

    So much fun!

    There are going to be Jobian tragedies in this world either way. The question is how do we price and allocate scarce resources. I don’t think the Federal goverment is the right way to do it, especially for rich people who should be paying for their healthcare.

    But I do love kids. Especially mine.

    Cheers,
    Carson

  26. “(though I would prefer to see it provided via a strong culture of charity, a separate and long discussion)”

    Two big problems with charity: It’s not nearly as dependable because it slows and/or stops when the economy is in recession, and it is very often associated with religious groups, who really only want to make converts.

    Take food, for instance. Food stamps, given by the government, are consistent and reliable, coming every month without fail. On the other hand, places where food is given to the needy ofter run out of donations just when it’s needed the most. They have to constantly beg for food, and it’s worse now between more needy and fewer donations.

  27. I can’t recall where I read this but “You can take the boy out of the cult, but you can’t take the cult out of the boy.”

    This was in refernce to Greenspan. But it works for Mankiw.

    Either that or he just enjoys pushing progressive hot buttons and he no longer cares about the profession.

    “A competitive system of private insurers, lightly regulated to ensure that the market works well, would offer Americans the best health care at the best prices.” Makiw knows full well this statement is on shaky ground at best. I think he’s just having some fun.

  28. The ones I know love Medicare, especially the ones that have been doing without up until they got Medicare.

    You can go to any doctor you want, there isn’t a lot of paperwork (Except for Part D which is PRIVATELY run, what a mess.), and you are treated with respect. Tests are run, things are suggested as to treatments, and so on. Compared to being uninsured, it’s a dream!

  29. Carson Gross

    Nope. I’m saying that the Federal govt. doesn’t have the constitutional authority to do so and that it would be better to let states explore different alternatives to deal with their different situations. A state with a strong culture of charity, for example, may be able to avoid government involvement at all. And I’m asking for a chance to live in the sort of socio-economic culture I would like to live in: one of independence, strong families and cultural institutions and small government. I’m not asking others to live like this; I just want the option to live like this.

    Given that that isn’t going to happen, I would prefer that rich people pay for their healthcare directly and that only the poor and indigent receive gratis or subsidized healthcare, so that we have some idea where our limited resources should be allocated amongst plausible competing alternatives. If we are going to spend more on healthcare as a country, fine, but let’s only help the poor. Why take the responsibility away from the rich and upper middle to make good choices as stewards of their own and their families health?

    Finally, since I’m a Chestertonian, I can’t really speak for libertarians about children. But I can let Chesterton speak for himself:

    “With the red hair of one she-urchin in the gutter I will set fire to all modern civilization. Because a girl should have long hair, she should have clean hair; because she should have clean hair, she should not have an unclean home; because she should not have an unclean home, she should have a free and leisured mother; because she should have a free mother, she should not have an usurious landlord; because there should not be a usurious landlord, there should be a redistribution of property; because there should be a redistribution of property, there shall be a revolution.”

    http://chesterton.org/acs/quotes.htm

    Cheers,
    Carson

  30. Carson Gross

    Right. So the provinces or regional health authorities get money that has been collected from their citizens after that money takes an expensive trip to Ottawa and back.

    Seems like it could be improved on (although your friends in Ottawa might not view it as such.)

    Cheers,
    Carson

  31. “Otherwise you have bureaucrats doing it with spreadsheets, which is a method I don’t find particularly compelling for, I hope, obvious reasons.”

    Carson – this is what we have today. Bureaucrats doling out the healthcare. They’re called insurance executives.

    And the insurance execs talked freely about their business model when they went before Congress last week. They bump up the rates for the very ill, in the hopes of making the cost of coverage unaffordable, thus the insurance company no longer has to pay for a sick person’s health care. They seek the most egregious reasons to dump a person once they become ill (pre-existing conditions, flaws in an application, etc. and so on.) So that once a person becomes sick, once they need the coverage someone has paid for, the insurance company dumps them.

    And the insurance companies pay themselves quite handsomely. Perhaps that is your industry, I don’t know.

    I agree that the total government takeover makes me uncomfortable. But the profit motive/free market model we have today is terrible failure. “Disastrous” as you say.

    And the spiraling costs of health care are simply unsustainable. Your “do-nothing” approach is a recipe for disaster, in my opinion. Health care will soon become out of reach for all but those who work at the most profitable corporations, which in today’s business environment, are very few in number.

    And I notice you did not answer my question about the cost to insure your health…. I do believe that we are in this situation because most people haven’t a clue to what the actual costs of health care are these days….

  32. Here’s a story a loving father and loving mother/doctor might want to read regarding health care and children. Written by Professor Uwe Reinhardt. I’d be curious you and your wife’s opinions (no sarcasm there).
    http://economix.blogs.nytimes.com/2009/04/24/seriously-what-is-a-child/

  33. tyson vandament

    Excellent point by Anne regarding the already huge subdidies that go to “private” health care providers. Seriously, all statistical evidence shows that a public healthcare system is less expensive, more equitable and more efficient (holding health care outcomes constant). Whether in Canada, France, Germany, it doesn’t matter, the point is simple: huge government bureacracies outperform private corporations in the distribtuion of healthcare. Secondly, conservative politicians/healthcare lobby have consistentley made 2 points since 1950 to stop a public plan: 1) We cant comptete, the government will put us out of business; and 2) The government can’t do anything properly, if the government runs healthcare it will get worse. First, how do you square the circle on these arguments? So the government is slow and inefficient but yet you cannot compete with it? Perhaps if you are incapable of besting government bureacrats you ought to find another line of work. Also, to respond to Mankiw, maybe doctors shouldn’t make so much (especially plastic surgeons, not pediatricians). At a certain point this debate is just as much a moral question as it is about of efficiency or profit.

  34. NYT 06/28/09 The Pitfalls Of the Public Option by Greg Mankiw:

    “A competitive system of private insurers, lightly regulated to ensure that the market works well, would offer Americans the best health care at the best prices.”

    We have that. It doesn’t offer Americans the best health care at the best prices. Mr. Smarty Pants Harvard Professor obviously doesn’t leave Cambridge (at least metaphorically).

    When someone is diagnosed with an aggressive tumor it is not like going shopping at the mall when a myriad of variables influence the decision to hand over the plastic. A thirty y.o. women with breast cancer will do ANYTHING to prolong her life. “Recall a basic lesson of economics….” Mankiw knows health care is fundamentally different than buying a new purse or pair of shoes, but his insurance needs are covered by Harvard and he has tenure so he can continue to publish meaningless tripe.

  35. Tippy Golden

    It is — less expensive — than the American free market where, it take it, the collection of revenue for healthcare is privatized and decentralized. (Although, I can’t see how large HMOs could operate efficiently and still be decentralized.)

  36. I don’t know that a government plan will necessarily put private insurers out of business. Why should it? It will be at a competitive disadvantage, both because it will have to offer coverage to everyone and because it will be run by the government, which is not well-known for efficiency. Surely private insurers can compete with this.

    Public schools have been around forever, and we still have private schools. There will always be people for whom the highest level of care is the only thing they will accept. And then there are people who are happy to get anything.

    As far as a federalist approach is concerned, I think it’s unrealistic to ask the people to move to another state. Most people can’t just move to another state. Especially the people who need government health care the most. Also, I don’t know if having 50 bureaucracies instead of one is a good thing. I really don’t know. It might be.

    I believe care is rationed now, at least in the sense that health care availability is limited to people who can’t pay for it. HMO’s, of course, ration health care. It’s also rationed by the AMA, which heavily restricts the supply of doctors.

    It’s probably unconstitutional, if you don’t accept the Supreme Court’s decision to apply the interstate commerce and general welfare clauses to just about everything. I think this is wrong, but it’s done and is now the generally accepted law of the land.

    I wonder how people would feel today if health care had been included in the original bill of rights. Would those same people who now strenuously object to it on moral, philosophical and economic grounds still feel the same way about this issue? Would they try to repeal the amendment? Or is their opposition simply because they think that it’s unconstitutional and just doesn’t seem right. If a constitutional amendment passed guaranteeing health care to everyone, would they then support it with as much fervor, given that it would then have the seal of constitutional approval and the support of the great majority of people?

  37. “I’m not forced to make the hard tradeoffs that efficiently allocate scarce resources amongst competing alternatives. I make enough money and I’m responsible for my families health: *I* should be making those decisions.”

    Carson, the problem with this market model is that it requires the participants to make informed choices. The majority of people (not, you, I assume, since your wife is a doctor) cannot make these choices because they just don’t know enough about medicine. This is a problem in other markets, as well. Financial markets and auto repair markets come to mind.

    However, uninformed people can choose to stay out of the financial markets (and the auto-repair markets as well, to a lesser degree). But you can’t really opt out of the health care market.

    As an aside, I believe the increasing complexity of modern life is causing many of our market models to break down. It is something that will have to be addressed at some point.

  38. The way to get the lowest rates on any insurance is to ensure that revenue (folks paying premiums) exceeds claims + overhead + profit. So by expanding the pool of folks paying in, and reducing the amt of claims + overhead, you get profit and from the profit you can reduce rates. You get the best rates by having the most people paying in and never paying any claims. Ponzi, anyone?

    So if the goal is to actually PAY CLAIMS, then you have to increase rates, decrease profits, and/or increase the number of folks paying in. To ensure low premiums if claims are actually going to be paid, dividing the folks paying into the system through competing plans doesn’t work because the premiums would have to skyrocket. The only way it works, having health “insurance” that combines the paying of claims with low premiums, is to have EVERYONE paying in to ONE non-profit plan. One plan should also reduce overhead on both the plan administration and provider’s parts. To ensure that everyone pays in, impose a regressive sales tax to fund it. Remember that this would eliminate Medicare, Medicaid, and tax-subsidized employer health coverage, so there would be some reduction in personal cost to offset with the increase.

    Regarding precedent, look at Flood Insurance in the US. After the 1920’s it became too costly to privately offer flood insurance, mainly because only those at highest risk were purchasing it, so the Gov’t took that over in 1968.

  39. Basic health care, like water, is a human necessity and an enlightened society will provide this for its citizens. Every medical therapy promoted by big Pharma, like Vitamin H2O (there is a marketing bonanza), cannot be provided. Rationing will happen as our inefficient system continues to create more and more expensive unproven therapies that everyone wants (understandably) to prolong his or her life. Rationing will be unpopular and widely disparaged, but it will happen. Bold leadership is required and is not forthcoming from Congress or the White House. As a result we will muddle along with pseudo reforms until the health care industry is 25% of GDP. Then the wheels will fall off. Medicare (forget about expanded government coverage) will no longer be offered in its current form. Means testing will be instituted.
    We should act now instead. A single payer system should be instituted. Like France, it will be basic and many will choose to supplement their plans with private insurance. We could reform Medicare and provide basic care for everyone in the U.S. for less than we are currently spending as exemplified by all of Western Europe. Again, there would be rationing at this basic level of services offered and it might be unpopular, but soon there will be no other option.

  40. CBS from the West

    While we can, and should, pay doctors for doing things that help keep people healthy, I don’t think that is a viable basis for overall payment of doctors: it makes unrealistically large assumptions about how much doctors can contribute to prevention.
    For most of the really important things, public policy interventions are far more powerful than anything individual doctors do with individual patients. For example, there is good data showing that doctors are pretty much useless at getting people to lose weight. (Nurses and dietitians do better, but not very much). If we want to crack the obesity epidemic we’re going to need to change the way food is produced and marketed. Similarly, it is the rise of anti-smoking laws and policies and the associated cultural shifts that account for most of our country’s decline in cigarette smoking–doctors have played at best a minor role in this.

    Doctors already do get paid for things like administering vaccines, and lowering our blood pressures and LDL cholesterol levels. Interestingly, despite this, adult use of most vaccines is far below what is recommended, and the best efforts of the medical profession on blood pressure and cholesterol are often defeated by our diets and lack of exercise.

    And doctors get paid to do a lot of “early detection” even for diseases where there is little to no evidence it helps, or even where the evidence suggests it may do more harm than good.

    If as a nation we get serious about prevention, it might even require diverting money away from the health care system into other avenues of reducing the unhealthy exposures our environment (physical, commercial, social, etc.) steeps us in.

  41. Any bill that does not include a public option plan is likely to do more harm than good. Churchill once noted that ”You can always count on Americans to do the right thing – after they’ve tried everything else”. We have tried everything else on health care. It hasnt worked. Now it’s time to do the right thing. Over 20 other first-world countries having heath care plans with universal coverage and a public plan (usually single single-payer systems) have equal or better overall health care statistics at costs of 8-12% of GNP compared to our 16-17% of GNP. Pick one of the others you like the best (Germany, Japan, Canada, France, Norway, Sweden, Denmark, Netherlands, England, Switzerland, Austria, Australia, New Zealand, whatever) and increase the costs by 20% to cover what you don’t like about that particular system and you’ve got a much better system than ours at 20-40% less cost than our present system. The successful models already exist. Tweaking our existing, unsuccesful, rapidly sinking, model is almost cetainly the eqivalent of re-arranging the deck chairs on the Titanic. Furthermore, making a basic-coverage public system available to all does not necessarily mean the end of private systems. Many countries with successful, much lower cost public plans cover basic medical needs for everyone. Additional coverage for other, more elective, medical procedures is handled by optional private plans where the total cost of the two is still 20-40% less than ours. As one example, Google Germany.

  42. Bart,

    Do YOU pay twice as much for top-tier care? Who is the WE you’re referring to? The Federal Government? If you pay twice as much for top-tier care, maybe you’d like to go shopping? But then perhaps when there is only one price for all health care, that problem will be resolved. You won’t have to go shopping for care on the basis of price. You’ll have to go shopping on the basis of availability.

  43. CBS from the West

    You know, I agree that many of our most contentious issues would be far less so if we took federalism more seriously. And, yes, I would love to live in a European style nanny state and would be happy to let you take your chances in a more libertarian environment. But it isn’t that simple.

    You can’t run environmental policy that way because the pollution freely crosses state lines. Even national level policies are ultimately inadequate because pollution from any part of the world can be carried by wind and water to any other.

    Health policy also calls for larger-scale uniformity, at least within migration boundaries. Suppose you go off to live in your libertarian state. You buy whatever coverage you choose and things are fine at first. Until one day you get a serious illness. Suddenly, as James Kwak has been pointing out, your expected health care costs exceed all your assets and future income combined. Your insurer now drops you like a hot potato.

    So what will you do? Probably move back to my nanny state where you will be covered–as a freeloader on the people who have been paying larger sums than you did into the system all along.

  44. CBS from the West

    Rationing is already happening, and has been all along. Neither our system nor any other has ever provided everybody with all the health care services they desire. The question is not whether to ration, but how.

    Our current system mostly rations whole people in or out: you have nothing but care in dire emergencies, or you have a pre-paid admission to an all you can eat buffet. Other industrialized countries ration particular services in particular circumstances, or uses queuing to ration care (or both). To me, rationing particular services in particular circumstances makes a lot more sense–not that it doesn’t have its own difficulties.

  45. I, like most of my fellow citizens (by all recent polls) am in favor of single payer. (See the Wikipedia article comparing Canada with the US — Canada wins) However, we could keep the present system, if, and only if, substantial changes were made. In the present system, there is almost no regulation of insurers or practitioners. Thus, everyone overcharges against non-payment by insurer or Medicare/Medicaid. If each procedure/test/operation had a standard fee which is non-negotiable, and all forms were standardized between insurers, and all insurers were required to accept those with health issues (other than lifestyle, i.e. smoking, drinking, etc.), and premiums were only rated based upon age and sex (and lifestyle), then we could probably allow the present system to survive without a public option.

    Interstingly, Medicare has a 3% overhead, and private industry more than 30%. So, where is the efficiency in capitalism. The only efficiency is spending a lot of money developing excuses not to cover things, and a lot of money making misleading advertising claims.

    The math is totally aligned against us. If costs are increasing at 4.5% a year, they will double by 2019!! Can you imagine? Let’s get with it folks. Krugman is right!!!!

  46. donthelibertariandemocrat

    My health care plan
    Let me ask everyone a question: Do you consider price and discount when buying Tylenol and Pepcid? I answer in the affirmative.

    Here’s another question: Do you consider price when considering brain surgery? I answer in the negative.

    Therefore, I suggest splitting health care costs into two categories:
    1) Medical goods that a consumer could price and shop accordingly on.
    2) Medical goods that a consumer cannot price and shop accordingly on.

    Once you do this, you can split up medical costs into:
    1) Costs subject to a deductible.
    2) Catastrophic Costs.

    And, further, you can say the following:
    For 1) You don’t want third party payers, since you want the consumers to shop for the best price.
    For 2) You can have a third party payer. In fact, you can have one: the Federal Government.

    Now, here’s Milton Friedman’s plan:

    “A more radical reform would, first, end both Medicare and Medicaid, at least for new entrants, and replace them by providing every family in the United States with catastrophic insurance (i.e., a major medical policy with a high deductible). Second, it would end tax exemption of employer-provided medical care. And, third, it would remove the restrictive regulations that are now imposed on medical insurance—hard to justify with universal catastrophic insurance.

    This reform would solve the problem of the currently medically uninsured, eliminate most of the bureaucratic structure, free medical practitioners from an increasingly heavy burden of paperwork and regulation, and lead many employers and employees to convert employer-provided medical care into a higher cash wage. The taxpayer would save money because total government costs would plummet. The family would be relieved of one of its major concerns—the possibility of being impoverished by a major medical catastrophe—and most could readily finance the remaining medical costs. Families would once again have an incentive to monitor the providers of medical care and to establish the kind of personal relations with them that were once customary. The demonstrated efficiency of private enterprise would have a chance to improve the quality and lower the cost of medical care. The first question asked of a patient entering a hospital might once again become “What’s wrong?” not “What’s your insurance?”
    I would add a Democratic Party addition to this plan: You could relate the deductible to income.

    That’s my plan. Everyone covered.

    I would add the following: I’ve no idea what the correct amount of money that we should spend on health care should be. That’s why I would like some portion of our medical bills to be subject to our own choice.

  47. Tyson — there’s no contradiction in your points 1) and 2).

    Here’s your answer: government always underprices its services in an attempt to (a) make the service “affordable,” and (b) to build political support for the program by underestimating future costs.

    This underpricing effectively crowds out private sector competition (your point #1) and creates an over-demand for the service which leads to program chaos (your point #2) not to mention huge program losses.

    (Only the federal government can underprice a service and forever get away with it, by re-directing tax receipts, borrowing continuously, or printing money, or any combination thereof.)

    This is exactly what happened with the near-universal health scheme implemented in Massachusetts where I live. Premiums, co-pays, and deductibles were priced well below market rates to make the plan “affordable.” And what happened? Utilization soared, and total program cost IN EACH YEAR was 50% higher than the prior year estimate. Duh. With our state budget deficit, talk of cutting the plan is already floating around. Can’t print money, too bad.

    The benefit of the free market may not be in the delivery of the services but in the setting of the market-clearing price which balances supply with demand. Government prices are always set by politics (i.e., too low), not economics, and the result is ALWAYS wicked increase in demand.

    Funny, though, that one never hears the word “utilization.” That’s the real problem with the public option: priced too low, demand is exponential.

    One only has to look at Medicare to see the results of government pricing set by politics at work over the long haul, since, what, 1965 ….

    Medicare’s unfunded liability is $74 TRILLION dollars, that’s trillion with a “t.” Our GDP is $14 trillion so we can see how much more efficient government is at running a health care system. Lousy service PLUS insolvency and financial ruin.

  48. Don:

    I think you described pretty much what health insurance looked like circa the 1960’s, when you paid the doctor for the annual check up, the kid’s broken arm, and the house call.

    Then, if cancer struck, you paid the first hospital dollars then the insurance kicked it. Back then it REALLY was insurance. Insurance for the unforeseen and unexpected. Like auto or home owners insurance.

    The only way to reduce costs is for the individual to begin to pay for their routine care out-of-pocket. Why is it we have run-away costs in health insurance but not computers, shoes, cars, air travel or overnight package delivery? Because we know those products and services cost. My annual flu shot? No clue whether it’s $10, $50, or $250.

    I always thought Health Savings Accounts would help shift away from a third-party system to one where individuals and families take control of the process by paying for routine maintenance, then relying on insurance to cover catastrophic illness.

    HMO’s are really a pre-paid medical spending plan. No wonder they don’t like you to get sick.

  49. It’s good to see that at least most of us realize the Public Health coverage is going to happen. It does remain up to us to make it either good or bad. Bottom line is if the government can run the biggest and best killing machine on the planet it should be able to take care of it’s own citizens health first and do a damn good job of it too. We don’t have to be like any other country. We can turn it into whatever we invision. Having said all this I imagine we are another ten years of misery before anything real is actually done about the problem. I see the ball being dropped again. The oligarchs will continue sucking up the last drops of cash they can get out of this cow and leave it on life support before something is really done.

  50. And in a single-payer public health care system the chances of anyone going bankrupt because of an illness or injury is zero. I’ll take that trade.

  51. And if private health insurance is so great, why are the providers of this insurance so worried about the competition from the government?

  52. Massachusetts mandated coverage, like most states do with car insurance. It did nothing to address the problem that the insurance model doesn’t work, or at best is seriously flawed, for health care. So it isn’t a surprise that the costs are rising.

    Also, why have insurance in the first place if you aren’t supposed to use it? Of course people are going to use it. People use it even when they don’t pay anything at all, and it might not be because they are abusing the system – perhaps they are actually sick or injured.

  53. 4.5% a year? double that and the result will be conservative. I’ve seen premiums increase 9-12% a year since 1998, with the high of 19% and low of 0%. Meanwhile deductibles and copays have increased too.

    i understand your point. This is one of the main reasons that inflation adjusted US median income has decreased since the 1970’s.

  54. Your argument here amounts to “because I don’t like it.”

    The little things are not the problem, so it probably doesn’t matter how much the flu shot costs. What matters is how much it costs if you get the flu (really bad) and you spend a month in the ICU. Does it matter if the backstop is the government or a private insurance plan? No. But if you do spend the month in the ICU and you have private insurance you will probably be bankrupt if you survive.

  55. Sales tax. everyone pays in.

  56. The public option plan will be heavily subsidized from the start, and it will be priced by the democrats at rates substantially lower than private insurers can offer. Politically, the public option plan must appear at least initially to cost substantially less to the public, or what’s the point for the Democrats?

    As a result, private insurers will be driven out of business for at least a couple of reasons. First, more and more employers will likely drop private insurers for the public option to save money, particularly in these difficult economic times. Secondly, the public option has been designed by its advocates intended to drive private insurers out of business, and pave the way for a single payer system. It’s original sponsors havae come right out and admitted it. Furthermore, the long term plan for the Democrats is to make a much greater percentage of the populace dependent on government healthcare, so they will be afraid to vote for those nasty free market types lest the nasties cut their health care. If there is private care left, it will be very expensive “concierge” care for the very wealthy.

    Much of the health care system is under government control now. One of the reasons that costs are spiraling out of control is that the government is significantly underpaying for Medicare and Medicare treatment , while at the same time pressuring doctors and hospitals to treat those same subsidized patients. The government is also very slow to pay. I know doctors who haven’t been paid in 18 months after treatment. These costs have to be borne by someone, so they end up by being paid by the only people left, the privately insured.

    The reason why subsidies must start from the beginning of the plan is that by design all the government plans will be commingled because the illusionary cost savings largely are projected to come from rationing the care of the elderly. Letting the elderly die prematurely through rationing of care is how other nations cut costs, and Dems have picked up on this gambit.

    As it has elsewhere, the single payer system will fail big time. Everyone knows this. The arguments that there is better care elsewhere is just complete crap; or else why when a foreigner needs a critical operation do they almost always come here for it. The horror stories from Canada, Britain, France and other countries are legendary. The US by far leads in new technology, treatments, research, and drugs, and it shows in the level of care. Just today, there is a story of a Canadian premie who was sent to Buffalo, because the Canadians couldn’t treat it.

    Healthcare will decline drastically. There will be long waiting lists for critical operations. Doctors will leave the field. The elderly will die prematurely. Very soon after this plan takes hold, many, many people will be very angry. There will be many stories of neglect and stupid, unfair rationing. I doubt Americans will be too happy to see their loved ones die unnecessarily under this plan.

  57. Carson Gross

    Ted,

    I certainly agree with the authors characterization of children as precious: see the Chesterton quote posted elsewhere in this thread. On a less spiritual level, when I’m not being a 10th amendment bore, I’ll some times ape Mark Steyn as a demography boor.

    Beyond that point of agreement, I certainly understand his ideal, but I think that he ignores other important ideals that would be harmed by such a system. Among these are family responsibility and, indeed authority (a pet-like relationship?); the expressly limited role that the federal govt. is supposed to have in our lives as outlined by the 10th amendment; the devolution of the ideal of charity (we give you this) to low entitlement (I have a right to this) fostered by the abstraction and isolation of social services, and so on.

    At the same time, I understand that there are people who wish to live in this sort of a relationship with the state, and I have no problem with, for example MA attempting universal health care. I might even, after seeing how it goes, decide that I’ve been wrong and a state run healthcare system is, indeed, just the thing. But what I want to preserve is the ability for people who don’t feel this way to live as they wish.

    That all being said, I am entirely in favor of natalist tax policies. An interesting, against the grain discussion on this topic by David Goldman is here:

    [audio src="http://media.bloomberg.com/bb/avfile/Economics/On_Economy/vCKZqVLz9SKk.mp3" /]

    Thanks for pointing me to the article and being civil!

    Cheers,
    Carson

  58. Carson Gross

    Pete,

    I agree with you entirely: increasing specialization leads towards a reliance on experts, which fosters information asymmetry and dependency, which destroys liberty and human dignity. It is a difficult problem.

    Cheers,
    Carson

  59. Carson Gross

    anne,

    I slave away in the java salt mines for Guidewire Software, the company James helped found. We make software for the insurance industry. <smile/>

    But don’t worry: it’s property and casualty, not health.

    _ducks_

    Cheers,
    Carson

  60. Carson Gross

    CBS,

    And, yes, I would love to live in a European style nanny state and would be happy to let you take your chances in a more libertarian environment.

    I’m not necessarily interested in a libertarian environment. I can’t say it enough on this board, apparently: I’m not particularly libertarian, I’m more interested in Chesterton. I’m interested in local, culturally based environments, in order to avoid the leviathan state (which I see being coopted by and merged into leviathan business and, particularly, leviathan finance.)

    As for me up and moving to a state that provides good coverage, I can imagine all sorts of simple ways to limit or prevent this sort of freeloading legally, and I’m not very smart.

    Federalism lets us all live as we see fit, both individually and communally. Seems like the right thing to me.

    Cheers,
    Carson

  61. Tippy Golden

    Thanks Ted

  62. “middle and upper class folks? Those are exactly the people who can and should be establishing the market demand and tolerable costs for medical treatments.”

    Like if you have any negotiating power agains BS of CA (Blue Shield) or Anthem. They just give you the numbers – take it or leave it. That is, if you’re healthy enough.
    Have you even read the article we’re commenting on? “In the median state in the U.S., the top two insurers have a combined market share of 69%.” This is free market? Where are you gonna go?

  63. So, I’m confused. Is Wal-Mart a good thing or a bad thing? Mankiw is talking about Wal-Mart, right?

  64. From Greg Mankiw
    ‘In his latest post, Paul writes, “the standard competitive market model just doesn’t work for health care: adverse selection and moral hazard are so central to the enterprise that nobody, nobody expects free-market principles to be enough.”

    In my view, these comments are just off point. The Obama administration says it wants a public insurance plan that will compete on a level playing field with private plans (that is, without taxpayer subsidies). Is there any cogent economic analysis that suggests that such a policy addresses problems of adverse selection and moral hazard? None that I know. If it has to stand on its own financially, the public plan has no special advantage in addressing these issues.’

    Paul Krugman is not the last word on this. Mr. Kwak is too enamored with Mr, Krugman.

  65. I actually think that is what the fight is about – who is going to be the arbiter of information asymmetry – the government or health insurance companies.

    Without information arbitrage – it’s difficult for an insurance company to compete – gain advantage over another. But we need someone to continually find efficiencies – which can only truly be found/proven when exploited or realized – so we need arbitrage.

    Not an easy conundrum to address at such a large scale.

  66. While Krugman points out how the market in health insurance isn’t working and why, we need to say, yeah, and then turn around and come right back to the question: is a market lacking?

    Certainly in a very fundamental way: if you yourself wanted to open a one-person business as a health care provider, you cannot, unless….you pay your dues to the monopoly guild, including years of time and usually many tens of thousands of dollars in tuitions, etc. In contrast in a open market, you could indeed open your business, and start working, if customers chose you for care. Now that’s obvious, but…we forget about this non-market situation sometimes.

    But there is a fundamental way to improve the “market” in actual care itself (not insurance, but actual care) other than simply opening it to competition (which would be interesting, and is already happening anyway in a less-efficent way — the expanding black market in care and medicines)

    The “market” until now has been in insurance which pays fee-for-service payments to providers (which of course have and must have most of the decision making power). So the patient feels: I already paid, now I should get what I can. The doctor feels: I could run some more tests, and try a few more things, and that won’t hurt the bottom line. The insurance company feels: we need to raise premiums and cancel more policies.

    Now…what if instead of fee-for-service, we had a very difference mechanism of payment. Not just fee-for-outcome, but a carefully formed outcome-based variable fee tied to diagnoses, both narrow and at times wider?

    Here’s a result of some discussion and a lot of thought:

    http://findingourdream.blogspot.com/2009/06/new-way-to-hold-down-health-care-costs.html

  67. Tippy Golden

    Bayard,

    I am not sure I trust the Wikipedia article on Health care in Canada. It states in Canada, per capital healthcare spending in 2008 is $5,170. (The Canadian dollar was trading, in 2008, at near par with the USD.)

    The OECD states it this way. In 2006 per capita spending on health care: Canada 3678 USD. United States 6714 USD.

    It also quotes the Fraser Institute which is a right-wing think tank (for lower taxation, deregulation, privatization of healthcare and education.) The Fraser Institute has been criticized for publishing healthcare studies that are — not peer reviewed — that the corporate media then reports as credible.

    It also quotes a former Canadian Medical Association president on the state of Canadian health care. This former CMA president has lately appeared in American TV ads with Rick Scott and Conservatives for Patients Rights.

    I could be wrong. But I am wondering if someone (formally or informally affiliated) with the Fraser Institute cranked the Wikipedia article out.

  68. Most of your post is just not true, but I will single out this statement:
    “The arguments that there is better care elsewhere is just complete crap; or else why when a foreigner needs a critical operation do they almost always come here for it.”

    They don’t always come here, they sometimes come here. There are many people that go to places like France to get their care when they are critical. For instance, Charlie Rose went to France when he had heart surgery. He loved it.

  69. “Utilization soared, and total program cost IN EACH YEAR was 50% higher than the prior year estimate.”

    Wow, no thought as to whether those people were suffering and dying before and that now they are actually getting some health care. The only thought is “Oh, my, the are actually USING the health care they can get now. Oh noooo!”

    I’m thinking it’s like a dam bursting, at first there is more use because people have all kinds of things that haven’t been taken care of. It will level out eventually when they can get enough preventative care.

    But, keeping the health insurance companies in the mix really doesn’t help the cost, regardless. They insist on their profits, which drives the cost up, while not doing anything that matters to those that are getting health care. Get them out of the mix, and see the costs go down.

  70. “The only way to reduce costs is for the individual to begin to pay for their routine care out-of-pocket.”

    What you put forth is the recipe for more costly health care.

    The issue with that is people will not go in for routine care if they have to pay up front. Things will always come up, and they will often put off that test or checkup until it hurts too much, then it will be too late to do anything. People need to be encouraged to go in EARLY so things can be caught EARLY in the development of disease.

    Most people don’t like to go to the doctor, so if you take away the excuse that it will cost them you have more going in when something can actually be done for them.

  71. tyson vandament

    While I am for a single payer system, I do think one thing has been left out of this whole debate: the issue of personal responsibility. I don’t want to sound like Milton Friedman here, but at a certain point we are going to have to address the elephant in the room; regardless of what gov’t does, as long as people eat horribly and neglect to exersize what real chance do we have in bringing down healthcare costs? The vast majority of the diseases burdening the US healthcare system are diseases of excess (eat too much fat, eventually diabetes/arthritis, ect). Would perhaps the best way to save the healthcare system to be (in conjunction with a single payer sysmtem, digital records, use of stem cell) to tax the hell out of bad food and use the money subsidize healthy food and gym classes? I feel as if by either blaming the gov’t or private insurers we are only dealing with one issue, the other, a individual’s choices are left open. Now America is a freedom loving country, so infringing upon such a right is not taken lightly, but one could also argue the on the aggregate, poor health is a violation of the concept of negative liberty, which is central to republican govt. One could make the case that by a certain group of Americans making the choice (to eat fatty food and suffer the higher future medical costs) it does actually limit choice for others because the amount of money the govt can spend is finite. So if some choose to lead lives that lead to poor health outcomes depsite evidence and warnings, on a large enough scale (i forgot what % of population is obese) this actually limits the governments ability to provide services to other Americans. In a single payer system this would be worse as all would share the cost. I don’t think people who make bad choices should be left to rot, but at a certain point we are collectively eating ourselves into early graves. This same argument has been made in regards to smoking, so any thoughts policy wonks?

  72. French living in the US, I am quite really surprise to notice that nobody dare to look at the french health system.
    However, it is the most efficient among the western countries in both cost per unhabitants, administrative costs… And it is not run in any way by the government or kind of socialized medicine as probably most of you believe.
    The system is threefold : Health, Family and Retirement, each of them has different structures and financing ; each of them is financially autonomous (no taxpayer’s money but contributions by employers and employees to make it balanced)

    The Health system (Assurance Maladie) is based on the concept of providing a large amount of help for any medical need, and total help when it is serious : on the basis of a standard cost, medical care (doctors appointments and visits, dental care, etc..) is reimbursed around 80%, medicine from 80% when corresponding to a real medical need to 40% for less needed and of course 0% for others ; standard cost for a doctor is 22 Euros (sometimes, they can charge 30 Euros or more: dépassement d’honoraires) ; serious illnesses, including those due to old age, are covered 100%. Practically speaking each person has a chip card (Carte Vitale) which is read by the doctor’s or pharmacist’s terminal and a 13-digit “numéro de Sécurité Sociale”.

    Contrary to what one could expect from a large, state-owned and centralized organization, the system is very efficient : the administrative cost of the health system is around 4,5% (for US private insurance companies : 10 to 13%) and 1,2% for the retirement system (vs. around 10% for most pension funds). The health system reimburses very quickly (after four days).

    The Social Security structure is managed on a paritary basis: each regional organization (Caisse) is managed by a board composed 50/50 of representatives of labor unions on one side, employers associations on the other side, with the State playing the role of a referee ; the financial contribution of the patient is very limited and most of the public funding is public.
    The state is considered responsible of its good functioning, but it is not accurate to call it a “socialized system”.
    The Family system (Allocations Familiales) is a financial help to all families (whatever their income) plus various services such as day-care or vacation centers (according to income) ; when a family is expecting a child, it gets approximately 2,000 Euros in three installments (the first two of them corresponding to a mandatory medical visit, the third to the birth) ; then the family receives a monthly allowance till the child is 20 (for two children or more, around 100 Euros/month/child) ;
    The Retirement system (Assurance Vieillesse) provides a minimal pension (in the range of 750 Euros/month) to any person who has worked 40 years.

    Any system offered by a company to its staff is in addition to these national systems (for example the basic coverage for glasses of orthodontic care is pretty low, so you can chose or your company can provide a additionnal private coverage) and health insurance and retirement pension NEVER depend on the financial situation or even the survival of your employer(s) or former employer(s). For the French, it is just unthinkable that, if you lose your job, you also lose your health plan : those two hazards must not be linked. This is a typical example of what we Frenchs call our social model.

    Forget your prejudices about what so many people call “socialized medicine” without knowing what it is : look at the facts ! In France you can choose freely your doctor and he/she is free of his/her prescription : you are not treated by the governement !

    I am convinced that implementing such system in the US is unrealistic, but I still regret that those options and few good ideas cannot be reused in the public debate here! This kind of system keeps a space for private insurer, keeps your right to chose your doctor, insurer is more fair because there is not taxpayer money use to fund the system…

    Even if our system also face numerous challenge: ageing population, tendancy to overconsume health care there is good things in it and it works!

    for more detailed information, I can advise you this link ( in english)

    http://france.angloinfo.com/countries/france/socialsecurity.asp

    http://en.wikipedia.org/wiki/Social_Security_in_France

  73. We’ve forgotten that we have the highest per-capita health care costs compared to other countries in the developed world, AND THEY COVER ALL THEIR CITIZENS. Some of those are run by those robotic but inefficient socialist bureaucrats. And, Medicare is run by the govt. and has low costs. Sure, it would still be an experiment, but there’s a basis for believing that the govt. could run it better and cheaper than what we have now.

  74. Donald Thieman

    We already have “a competitive system of private insurers, lightly regulated” by any reasonable definition, and it has brought us rationing by cost and wealth, 50 million uninsured and 30 million underinsured. Back to Einstein’s expectations analysis–if we re-do that model, why would we expect a different result?

  75. Donald Thieman

    Regarding the need for a public option, or a single payer design for health care, the journal Health Affairs, in its June 18th issue, in a round table on “The Policy Lessons of Heatlh Care Cost Variations,” quotes Robert Berenson about health care provider market leverage and its impact on prices and costs:

    “I’ve been doing interviews for now many years with the Center for Studying Health System Change (as part of the Community Tracking Study), and I have to maintain the anonymity of those I talk to, but some of the finest, most well-respected multispecialty groups will acknowledge in confidence that they’re able to ask for 200 or even 250 percent of Medicare (costs) to do what they are doing very well. I think this issue of market power is a real one. I would say, however, that this issue exists regardless of whether we move to accountable care organizations; it’s just the ability of hospitals, mostly, but also single-specialty groups increasingly, to figure out what the leverage game is all about. Market power is an issue that we need to find a solution to, and I’m not sure I see one other than a regulatory one.”

    My own years of experience as a medical director, in a multispecialty group and several health plans, confirms Berenson’s statement, particularly including the use of local and sometimes regional market power by single and multispecialty groups, not just hospitals. Anesthesiology, radiology, orthopedics, ENT, multispecialty and other specific examples abound in my own Oregon-Washington market. This is one of the most important reasons why a “public option,” if not a single payer solution, is critical to any realistic hope of addressing costs to make coverage for all affordable. It will address much more than just negotiating drug prices with the pharmaceutical industry.