{"id":1770,"date":"2024-12-30T00:00:00","date_gmt":"2024-12-30T04:00:00","guid":{"rendered":"https:\/\/bohn.org\/wpmocha\/peanutgallery\/?p=1770"},"modified":"2024-12-30T09:35:00","modified_gmt":"2024-12-30T13:35:00","slug":"no-obvious-solution-to-insurance-caused-healthcare-costs","status":"publish","type":"post","link":"https:\/\/bohn.org\/wpmocha\/peanutgallery\/2024\/12\/30\/no-obvious-solution-to-insurance-caused-healthcare-costs\/","title":{"rendered":"No Obvious Solution to Insurance-Caused Healthcare Costs"},"content":{"rendered":"\n

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<\/em>. 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.<\/a>“1<\/a><\/sup> I half agree with the opinion; that is, I agree with half of it, the diagnosis, but the proposed cure still seems rather vague.<\/p>\n\n\n\n

The piece starts by quoting Andrew Witty, the CEO of UnitedHealth Group, who points out: \u201cNo one would design a system like the one we have. And no one did . . . .2<\/a><\/sup> It\u2019s a patchwork built over decades.\u201d <\/p>\n\n\n\n

Goldhill’s basic description of the problem is:<\/p>\n\n\n\n

\n

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 \u2014 not to \u201cshare the risk\u201d of erectile dysfunction, weight loss, lifelong management of chronic conditions, or the mental health treatment needed by 1 in 5 Americans. . . . .<\/p>\n\n\n\n

It\u2019s as if homeowners\u2019 policies expanded from insuring against fires and floods to also covering utility bills and property taxes, or even replacing worn-out furniture.<\/p>\n<\/blockquote>\n\n\n\n

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<\/a>, “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.”<\/p>\n\n\n\n

In the cental post <\/a>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\u00a0the SEP Problem<\/a>: 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<\/a><\/sup><\/p>\n\n\n\n

The next post <\/a>applied this concept directly to healthcare:<\/p>\n\n\n\n

\n

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<\/a> for the balance. Health insurance itself acts as a demand-side subsidy.<\/p>\n<\/blockquote>\n\n\n\n

So far, Goldhill and I seem to agree. His solution is that “America should get the entire [healthcare] industry to compete vigorously for customers \u2014 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.<\/p>\n\n\n\n

Jay Bohn<\/p>\n\n\n\n

December 30, 2024<\/p>\n\n\n\n

Copyright 2024 by Jay Bohn.<\/p>\n\n\n

  1. The same opinion actually appeared in yesterday’s Star-Ledger<\/em>. \u21a9\ufe0e<\/a><\/li>
  2. Unfortunately, I do not have access to the source, so I am uncertain if these are three consecutive sentences. \u21a9\ufe0e<\/a><\/li>
  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<\/em>.” [emphasis added] \u21a9\ufe0e<\/a><\/li><\/ol>","protected":false},"excerpt":{"rendered":"

    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 … Continue reading “No Obvious Solution to Insurance-Caused Healthcare Costs”<\/span><\/a><\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"[{\"content\":\"The same opinion actually appeared in yesterday's Star-Ledger<\/em>.\",\"id\":\"18932ff3-e165-41ca-a15a-9bc28e0da9ea\"},{\"content\":\"Unfortunately, I do not have access to the source, so I am uncertain if these are three consecutive sentences.\",\"id\":\"e32a6596-af18-437c-81b9-3a02de81b8e9\"},{\"content\":\"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<\/em>.\\\" [emphasis added]\",\"id\":\"e866d374-aeaa-44d7-a5a8-331e118f293d\"}]"},"categories":[5],"tags":[],"class_list":["post-1770","post","type-post","status-publish","format-standard","hentry","category-economics"],"_links":{"self":[{"href":"https:\/\/bohn.org\/wpmocha\/peanutgallery\/wp-json\/wp\/v2\/posts\/1770","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bohn.org\/wpmocha\/peanutgallery\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bohn.org\/wpmocha\/peanutgallery\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bohn.org\/wpmocha\/peanutgallery\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/bohn.org\/wpmocha\/peanutgallery\/wp-json\/wp\/v2\/comments?post=1770"}],"version-history":[{"count":10,"href":"https:\/\/bohn.org\/wpmocha\/peanutgallery\/wp-json\/wp\/v2\/posts\/1770\/revisions"}],"predecessor-version":[{"id":1781,"href":"https:\/\/bohn.org\/wpmocha\/peanutgallery\/wp-json\/wp\/v2\/posts\/1770\/revisions\/1781"}],"wp:attachment":[{"href":"https:\/\/bohn.org\/wpmocha\/peanutgallery\/wp-json\/wp\/v2\/media?parent=1770"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bohn.org\/wpmocha\/peanutgallery\/wp-json\/wp\/v2\/categories?post=1770"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bohn.org\/wpmocha\/peanutgallery\/wp-json\/wp\/v2\/tags?post=1770"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}