Month: December 2024

No Obvious Solution to Insurance-Caused Healthcare Costs

With the impending loss of the Star-Ledger Editorial Board and its opinions as a source of blog-fodder, I am trying out a one-year subscription to the online edition of the Washington Post. A few days ago, it published a guest opinion by David Goldhill, described as the CEO of Sesame, a health-care marketplace, entitled “Insurance is what makes U.S. health-care prices so high: America needs a working marketplace where patients are the primary customers.“1 I half agree with the opinion; that is, I agree with half of it, the diagnosis, but the proposed cure still seems rather vague.

The piece starts by quoting Andrew Witty, the CEO of UnitedHealth Group, who points out: “No one would design a system like the one we have. And no one did . . . .2 It’s a patchwork built over decades.”

Goldhill’s basic description of the problem is:

Health insurance was meant to work like other kinds of insurance: When policyholders got sick, they would use the collective financial resources of the healthy to cover their costs. But this model was designed to pay for emergencies such as hospitalizations — not to “share the risk” of erectile dysfunction, weight loss, lifelong management of chronic conditions, or the mental health treatment needed by 1 in 5 Americans. . . . .

It’s as if homeowners’ policies expanded from insuring against fires and floods to also covering utility bills and property taxes, or even replacing worn-out furniture.

This reminds me of the great economic trek that the hypothetical reader of this blog and I took just over three years ago. I said, “Health insurance has grown, not just in the number of insured but in the scope of its benefits. It is no longer just for major expenses (although all medical expenses are now beyond what a typical patient could afford to pay out of pocket), but it covers office visits, physical examinations and prescriptions.”

In the cental post of that extended discussion of economics, I proposed the following thesis: broad-based demand-side subsidies tend to cause the price of the subsidized commodity to increase, a proposition for which I drew further support “from what I described as the SEP Problem: the fact that ‘someone’ else is paying for something can have the effect of increasing the cost that thing, especially where ‘someone’ is someone of whom the consumer is willing to take advantage (the government or insurance companies, for example).”3

The next post applied this concept directly to healthcare:

It has long been my premise that the availability of a source of ready payment for such services means that the cost of the services will increase to absorb available funds. The insured rarely shop for healthcare based on price because the deductible/co-payment will either be a fixed amount or relatively insignificant and somebody else is paying for the balance. Health insurance itself acts as a demand-side subsidy.

So far, Goldhill and I seem to agree. His solution is that “America should get the entire [healthcare] industry to compete vigorously for customers — for patients, that is, not insurance companies.” He believes that “[c]ompetition among providers for dollars spent directly by prudent consumers would not only bring prices down but also encourage more innovative approaches to packaging care.” Perhaps so, but I must have missed how America engenders that competition and prudence. Taking the latter point, how do we encourage such consumers to be prudent? The only obvious answer that springs to mind is that they must have some metaphorical skin in the game, that the consumer must share in the cost of care. This is not going to sit well with those who push for equal access.

Jay Bohn

December 30, 2024

Copyright 2024 by Jay Bohn.

  1. The same opinion actually appeared in yesterday’s Star-Ledger. ↩︎
  2. Unfortunately, I do not have access to the source, so I am uncertain if these are three consecutive sentences. ↩︎
  3. Indeed, in his editorial Goldhill says: “Medicare, Medicaid and Veterans Affairs health care all have been dressed up as pretend insurance. Americans individually pour hundreds of thousands of dollars into the system through premiums and deductibles, yet they somehow keep believing that someone else is paying for their care.” [emphasis added] ↩︎

Biden’s Commutation of 90% of Federal Death Sentences Doesn’t Go Far Enough

For those who are Christian, the Christmas holy day is a good time to reflect on the virtues of mercy and forgiveness. Coincidentally, every four years it coincides with the closing days of a presidential term, a time when presidential pardons and other acts of clemency are common, in part because the political price to be paid is discounted for the incumbent, who is unlikely to run for political office ever again.1

In addition to the now customary and tongue-in-check Thanksgiving turkey pardon, on December 1, shortly after the 2024 presidential election, President Biden granted his son Hunter a broad pardon, asserting that Hunter had been singled out by his political opponents. On December 12, 2024, citing America’s promise of possibility and second chances, President Biden announced that he had pardoned 39 people and commuted the sentences of nearly 1,500 others. As the public reaction to these actions has shown, such actions will often be controversial and a source of further grief to those who were the victims of the recipient’s conduct.

The President’s constitutional prerogative to show mercy is not limited to those whom he believes have been unjustly prosecuted or who have been rehabilitated. Until a few days ago there were 40 people under sentence of death for federal crimes. On December 23 President Biden announced that he was commuting the sentences of 37 of them to life imprisonment without the possibility of parole.

After expressing “condemn[ation of] for these murderers, grie[f] for the victims of their despicable acts, and ache for all the families who have suffered unimaginable and irreparable loss,” the President stated that “guided by my conscience and my experience as a public defender, chairman of the Senate Judiciary Committee, Vice President, and now President, I am more convinced than ever that we must stop the use of the death penalty at the federal level.”

There has been the predictable response by political partisans and relatives of the victims who will not get to experience eye-for-an-eye justice. I, on the other hand, do not believe that President Biden went far enough; as an opponent of capital punishment in all cases, I would have preferred that all federal death sentences had been commuted.

President Biden’s statement itself did not explain the exceptions. An accompanying “fact sheet” rephrased the President’s stated belief in the need to stop the use of the death penalty at the federal level–a categorical statement–into one with an exception for “cases of terrorism and hate-motivated mass murder.” Sounds to me that like some aide wanted to leave some wiggle room. Which is the President’s true position?

The death penalty is either always wrong or sometimes right. If not always wrong, the decision to impose it becomes a matter of degree. If President Biden truly believes, as his statement says, “that we must stop the use of the death penalty at the federal level,” then are the three exceptions being sacrificed on the altar of political expediency?

Jay Bohn

December 26, 2024

Copyright 2024 by Jay Bohn.

  1. As is true for so many other things, the end of President Trump’s first term is an exception to this statement. Not only did he (successfully) repeat his quest for a second term after losing his 2020 re-election bid, but experience probably convinced him that there would be no political price to be paid for anything he did. ↩︎