How Not to Think About Health Care
This piece originally appeared at Forbes.
Health care isn’t free. It has a social cost. Someone has to choose between health care and other uses of money — deciding, for example, whether a procedure is worth the sacrifice of other goods and services that it would require.
Who should make these decisions? Under what circumstances do we want the decisions to be made by patients? When should they be made by insurance pools? And when should they be made by government?
New York Times columnist Nicholas Kristof implicitly asked these questions recently. Unfortunately, he got every answer wrong. Because many other people think the same way Kristof does, I’m going to devote this piece to his column.
Kristof wrote about his friend, Scott Androes, who was suffering at the time from stage four prostate cancer. Although he described his friend as “a victim in part of a broken health care system,” nothing could be further from the truth. Androes was a middle class professional who decided not to buy health insurance because it was too expensive. As he developed symptoms, he chose not to see doctors and to avoid other expenses in order to save money. By the time he chose to seek care, he was in critical condition.
Kristof believes that ObamaCare would have prevented the tragedy if the new law had been in place. He’s wrong about that too.
Let’s start with the decision to be uninsured. I want to correct a few assumptions both Kristof and Androes seem to have made, because they are distracting. They imply that individually purchased insurance is more expensive than group insurance provided by employers. This isn’t necessarily the case. For a healthy person, individual insurance is often cheaper. It may seem more expensive because the individual pays the cost directly.
But employer coverage isn’t “free,” as Kristof incorrectly implies. Because Androes worked as a part time consultant, he didn’t have the opportunity to obtain employer coverage. That’s understandable. But even if he had it wouldn’t have been free. Employer-paid premiums are a substitute for monetary wages. Whether through his work or not, the cost of insurance would have come out of Androes’ pocket — not someone else’s.
What is true is that federal tax law provides generous subsidies to employer-provided insurance, but gives little tax relief for insurance individuals purchase on their own. This policy encourages group insurance and discourages individual coverage. It encourages people like Androes to make the very decision he made. This tax policy is an inequity that my colleagues and I at the National Center for Policy Analysis have campaigned against for many years. But it is an inequity that is not — repeat, is not — corrected by ObamaCare.
Kristof believes that Androes cancer would have been caught earlier and his survival chances would have been greater if everyone were forced to have health insurance. But ObamaCare doesn’t force everyone to have health insurance. The penalty for being uninsured is small, relative to the cost of the insurance. There is very little the IRS can do to enforce it. And the IRS has signaled that it doesn’t plan on using a lot of resources to enforce the mandate anyway.
Countries like Britain and Canada actually do force people to have health insurance. Basically, it’s provided to everyone and paid for by taxes that are not optional. But under ObamaCare, people like Androes will have a choice similar to the one they have today: They can obey the mandate and pay a hefty premium or they can save a lot of money by choosing to be uninsured.
Now let’s consider some other decisions Androes made:
- When he had difficulty urinating, he decided against going to the doctor in order to avoid the expense.
- When he spotted blood in his urine, he went online to investigate what the cause might be; but again, he opted against seeing a doctor in order to save money.
- When his temperature hit 102, he went to an urgent care clinic and got a prescription for an antibiotic. (The implication is that a specialist would have done more.)
- When he finally saw an urologist, tests were ordered.
- But even before the tests results were in, his health deteriorated and he went to a hospital emergency room; it was there that prostate cancer was discovered.
Now a question for the reader: Do you want people like Androes to be able to make the decisions he made or do you want them made by others? If the latter, how exactly would you get that done?
The reality is that each of us is to be the first line of defense against disease. For the most part, nothing much happens in health care unless patients do something to initiate it. This is not a bad thing. It is a good thing. The trend in medicine is to delegate more decisions to patients and to give them new tools to help them make better decisions.
Even if money is not involved, patients would still have to choose between seeking professional advice and other uses of their time. But why limit the choice to time? As noted, health care has a real cost. Who better to decide (before the fact) whether a doctor visit is worth the cost than patients themselves?
Kristof wants government (through insurers) to encourage cancer screenings for everybody. But increasingly, professional societies are advising against giving lots of routine tests to apparently healthy people. Even a casual reader of newspapers must be aware that there is considerable debate about when and how often people should get mammograms, Pap smear tests, PSA tests, and other cancer screenings. Given so much disagreement, this would seem to be an ideal realm for individual choice.
Of course, some preventive measures pay for themselves. Where they do, health plans will have an economic interest in promoting them. But the measures that pay for themselves are few and far between. PSA tests to screen for prostate cancer do not pay for themselves. The cost of giving the test to thousands of healthy people overwhelms the savings from catching cancer in its early stages in the few patients who have the disease.
What then would be a good health care system? Ironically it would be one that is much closer to what Sen. John McCain proposed during the 2008 presidential campaign, rather than ObamaCare. Here are some elements of what we propose:
- Offer everyone a refundable tax credit of, say, $2,500 per adult and $8,000 for a family of four. This means that the first $2,500 of insurance for someone like Androes explicitly would be financed from general tax revenues.
- Penalize people who don’t insure. They would pay higher taxes. For someone like Androes this would be a $2,500 penalty — much larger than the ObamaCare penalties.
- Send the unclaimed tax credits to local safety net institutions, so if the uninsured cannot pay their medical bills there will be a source of funds to provide indigent care.
- Encourage flexible Health Savings Accounts (HSAs) so that someone making the decisions Androes made will have cash available to pay for care when they decide the cost is worth bearing.
- Otherwise leave the health insurance market free to decide which screenings will be covered and which will not and leave individuals free to make their own choices.
Postscript
In his Thursday column (Oct. 18), Kristof announced that his friend Scott Androes had passed away. The new column repeats almost every error that was in the original column. It adds this erroneous thought:
Researchers have estimated that one American dies every 20 minutes for lack of health insurance.
That’s an absurd statement that has been completely discredited by scholarly research. See former CBO Director June O’Neill’s PowerPoint slides. Then he gets emotional with this:
To err is human, but so is to forgive. Living in a community means being interconnected in myriad ways — including by empathy. To feel undiminished by the deaths of those around us isn’t heroic Ayn Rand individualism. It’s sociopathic. Compassion isn’t a sign of weakness, but of civilization…
So Scott, old pal, rest in peace. Let’s pray that this presidential election will be a milestone in bringing to an end this squandering of American lives, including your own.
I report. You decide.
I forget the exact figures — they were estimates anyway — but something like 90% of health care is initially self-care. That is, people treating themselves before deciding their condition warrants a physician visit. The notion that the monetary cost of the decision to seek care should be taken out of the hands of patients by requiring comprehensive health coverage is unconvincing. If anything, Kristof’s friend was harmed by a system that over-relies on third-party payment. When an uninsured person sees a doctor in a system where 90% of health care is paid for by third parties, the uninsured person is at a disadvantage because doctors are not competing on price. The key to Androes’ survival wasn’t to force him to have generous health insurance coverage he couldn’t afford. Rather, it was to free him from an expensive, bureaucratic system where doctors and hospitals aren’t equipped to provide services to those paying out of pocket.
I read your blog frequently, I hear you out. But don’t confuse reporting and opining, John.
Let’s pray we survive the presidential election ..
John,
Could you discuss the reason for the $2500 penalty for not buying insurance?
Cancer is a disease of old age. Encouraging younger people to get free screenings will cost a lot of money and expose millions of people to radiation just to catch a very small number of cancers. Moreover, many people are likely to experience false positive results and get unnecessary medical procedures. Experts cannot even agree whether prostate cancer screening does more harm than good.
Kristof is proposing a simplistic solution (that will make things worse) to a problem that doesn’t exist.
I have come to the belief that virtually all health care is voluntarily, consciously decided by the individual to access or not access.
Even if one is insured, and the insurer pays 100%, the person has to voluntarily fill out and submit a claim form.
Whether available to particular people or not, there are options other than utilizing health insurance to pay medical expenses – borrowing from a bank, borrowing from a 401(k), liquidating assets, etc.
Because this is a conscious decision, there are consequences, pro and con, for utilizing or not utilizing insurance.
In the final plan we have from Milliman (and which we are working on a presentation to life insurers to form a health insurance subsidiary), there are financial pluses and minuses for filing or for not filing a claim, just as here are consequences from withdrawing or not withdrawing from one’s retirement plan. It is not based on discrimination; rather, it is based on math.
Not filing claims allows an insured to build more paid-up coverage; filing claims has the opposite effect.
The paid-up coverage allows the insured to increase and be able to fund a higher deductible, thus saving on premiums.
Don Levit
I never feel comfortable when people use tremendous amounts of emotion to justify a political viewpoint.
– on either side –
I saw the Kristof piece on his friend, and was really frustrated by the errors in his thinking and his claims for the alleged research supporting his statements, so I very much appreciated seeing your post today, John. Especially nice going on the statistics about people dying for lack of health insurance – I have never seen proper casual linkage between not having health insurance and dying. Now, between not receiving health care and dying? Possibly, but we need to always remind the ignorant media that there is a distinction between health insurance and health care. The other idea is that by the time the friend had the condition, it wasn’t health insurance that would help him, because at that point it wouldn’t have been a true insurance transaction. What he needed was health care financing – which is a totally different concept from insurance. Even with Gov Romney and this idea of eliminating “pre-existing conditions limitations” we see the continuing ignorance on the subject. When someone is already ill, or has just had an accident, the decision to allow them to get medical care and have it paid for is not a question of insurance, but of finance. Who exactly is supposed to pay for this “already happened” event – the burning house? I am not saying that society shouldn’t deal with the ‘already sick” (your suggestion on the “unused tax credits” is an example), I just think we should separate the functions and account them apart so we can know the cost and therefore value of those decisions. When you insist that such costs are somehow merged in with true insurance, things get murky indeed.
Thank you for not countering with a sad story of your own, John. This sort of thing is upsetting. Kristof is warning us against the evils of personal responsibility, and does so in such a way as to make us feel bad for disagreeing.
HD Carroll has a good point. At the point where Kristof’s friend needed care, living in a society that over-relies on insurance becomes an impediment. Systems that rely on third-party payment require bureaucracies that force all care to fit into predetermined episodes and treatments (if delivered by a single payer using global budgets, the perverse incentive is to avoid providing treatments). Insurance might actually pay the bill for these episodes of care, but the bureaucratic inertia of arranging and scheduling the episodes would be a barrier to quick treatment. Moreover, Kristof’s friend probably couldn’t afford insurance because he may have lived in a Northeastern state with costly insurance regulations. Since Kristof’s friend chose to forgo insurance (presumably by choice), he would have been better served to live in a society that all shunned insurance, since an uninsured personal would fare far better in such a society because providers would compete on price and quality and service.
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i think the penalty is sufficient enough to persuade people to get insurance. Even if the cost of the penalty is not as much as getting insurance, people would rather dish out the extra however much it is and get access to health insurance
He was a rational human being and he paid the ultimate price. I don’t buy that third party payer had anything to do with it. If he had had the opportunity to take a tax credit, so what? I agree with John that ObamaCare would not have saved him either. He knew he had a problem and decided too late to act on it. It was tragic and nothing more.
It’s tragic, but the thing I can’t get around is that Androes made a concious decision to forgo care until it was too late.
Kristof’s argument also fails when he talks about 40-some million Americans without inusrance. The CBO estimates that 32 million will remain without insurance even under Obamacare.
I’ve been in the “what if” situation and ended up paying to go to the doctor just to receive a negative diagnosis. Still better than not going to the doctor and potentially having a problem get worse.
Despite the mistreatment of fact, I think his core message is true.
“To err is human, but so is to forgive. Living in a community means being interconnected in myriad ways — including by empathy. To feel undiminished by the deaths of those around us isn’t heroic Ayn Rand individualism. It’s sociopathic. Compassion isn’t a sign of weakness, but of civilization…”
Just because healthcare is free doesn’t mean people will use it even when they need it. This unfortunate man could have easily been one of them.
This is a sad story about Kristof’s friend, but there is no way to say that ObamaCare would have helped him. If he had insurance, he would also have to decide on if he could pay his co-pays, deductibles, and medications. And if he could, he would still have to take off from work to see the doctor and other procedures therefore losing more money. Unfortunately, being sick and sometimes even preventive care costs more money than people have to spend.
As for the comment regarding cancer screening for everyone, that is a waste of money and time. People need to be educated on who should be screened and when.
It is temp;ting to see this story as an exception, illustrating some less than stellar reasoning process. BUT IQ has little to do with medical decisions–look at Steve Jobs, who chose to treat his pancreatic cancer with New Age diet and nostrums.
There is a knowledge and confidence gap that no insurance can fill. People of all ages and income levels, with or without insurance, would benefit from having a care partner, a support group, or a network of people who have been through whatever a person is facing. There is a social network for health by specific disease categories, such as MyHealthTeamm, for breast cancer patients. The fear of a deadly diagnosis is so hard for some to face with confidence that they really do stay in denial for a long time, possibly with few near them knowing that.
My own work has convinced me that people “at risk” for certain conditions should be members of a local/regional risk group connected by an Internet connection and a support system in a healthcare organization, one that can educate, offer diagnostics,
provide case managers, arrange for coverage if none is held, and follow the person through the entire course of his/her disease. Payments from insurers can be, not fee for service for individual treatments, but monthly, according to stage of the disease and intensity of services over a year or two years at a time. This is called “Cohort Capitation” and was developed by a favorite colleague, Rigby Leighton, in Northern California. (He has a paper.) In other words, while people worry to death the ins and outs of insurance, even as they say the healthcare system is “broken,” they think little about the delivery system itself.
Providers and payers alike are expected to take the people who have acted irresponsibly and just eat it. Other insured people should be offended and irritated that they are paying for the irresponsibility of others. There is so much said about how we are all responsible for each other, as in–you should pay for my care. The least people should do is make fewer self-serving and neglectful decisions.
There is a lot about third party payment that is wrong, so we are moving to more of a catastrophic approach to coverage. I myself would like to see a mid-point between that and direct customer payment; a membership payment that provides a continuing connection with a healthcare system where one of the great benefits is a continual infusion of knowledge about how to stay healthy, what to do with early symptoms, and how to connect up with a support group–lots of things.
Health problems are a product of genetics, lifestyle, environment and decisions, such as discussed here. Do we really want the healthcare system and the financing system to actually come into our homes, evaluate us there, then haul us off in some Black Maria to the nearest surgical resource? No? I thought not.
Regards to everyone….
Wanda J. Jones MPH
President
New Century Healthcare Institute
San Francisco
Hello John,
It is sad how supposedly educated people are so often unable to think through basic issues. Even if the IRS and/or county sheriff made us fill out all the forms to obtain the so-called ‘mandatory’ insurance, it is still the individual (patient) who must decide whether or not they want to know what is causing a given symptom or set of symptoms. Until they decide that, no insurance company or government can protect them from their own decision to avoid going to the doctor.
Glenn Smith
Very good article, question for you. How do so many people end up at the New York Times with bubbles in their thank Tank?
Larry
Good article as always John. I think your (McCain’s) plan is spot on. The only thing I would change is to add (or substitute)vouchers for sending unclaimed tax credits to charitable healthcare organizations.
Vouchers will certainly cost more initially as well as adding a few technical snafus, but in the long term it would make the vast majority of Americans paying customers for healthcare instead of beneficiaries of “direct” charity.
Hello John,
It is sad how supposedly educated people are so often unable to think through basic issues. Even if the IRS and/or county sheriff made us fill out all the forms to obtain the so-called ‘mandatory’ insurance, it is still the individual (patient) who must decide whether or not they want to know what is causing a given symptom or set of symptoms. Until they decide that, no insurance company or government can protect them from their own decision to avoid going to the doctor.
Glenn Smith
“As he developed symptoms, he chose not to see doctors and to avoid other expenses in order to save money. By the time he chose to seek care, he was in critical condition.” This is not the first time I hear a statement of this kind. Sadly, more and more people feel threatened and abandoned by this health care system and it’s only when they are desperate for hope and a cure that they seek for help. Unfortunately, sometimes it’s simply too late.
@Laurence
I think it’s called “life” Laurence. We all make decisions every day. We evaluate risk/reward and voluntarily take our chances. Why should health care decisions be different. The truth is that a person has to decide if risking one’s life is worth depriving oneself of use of that money otherwise.
If that person decides to use that money elsewhere, are you suggesting philosophically that we collectively pay for the medical care because of that decision?
So you see it is not “the healthcare system” that has abandoned us. We are responsible for our own actions.
What this article never actually says, but hints at continually, is that there is a huge difference between “health CARE” and “health INSURANCE”. Androes had neither, by his own choice, but even with health insurance, many people do not have (or do not seek) health care.
With O’bamaDON’TCare, we will all be in that situation because there will be far too few doctors, nurses, hospitals, and other care providers to care for us. Already hundreds or thousands of doctors refuse MediDON’TCare and MediCAN’TAid patients because of payments by the governments that don’t even cover the cost of treatment. This is a feature of O’bamaDON’TCare, touted in the propaganda the regime is spitting out. (“We’ll save money by … {shafting doctors].”)
If the IRS needs new agents to oversee the premium/tax (penalty), but the bill has no provision — as it rightfully should not — for new doctors, etc., then what good is the insurance?
Mr. O’bama, will there ever BE any Jobs?
Unlike a lot of people, I’m not totally against the insurance requirement. However, it should
* be re-written like most auto insurance requirements as a financial responsibility law, insurance not required but bond posted to cover most expenses.
* allow insurance companies to sell nationwide
*apply to EVERYONE, not just citizens and legal residents
* include significant malpractice and lawsuit reforms (the latter needs to be done for ALL lawsuits – multi million $ lawsuits for hot coffee! Give me a break – coffee (except iced, etc.) is SUPPOSED to be hot!)
Part of the overall cost problem is all the illegal immigrants who use the system with no insurance and without paying for service. The current law does NOTHING to address this!
It’s interesting to me that in terms of just insurance solutions no one has mentioned getting rid of the ban on buying health insurance across state lines, which is one reason and a big one, that insurance costs are so high. Almost every state has an insurance monopoly in it fashioned by “mandates” of coverages many of which have to do with political favors and vote buying. The result is higher and higher insurance coverage costs for coverages you don’t care about, but having no other choice within that state. Therefore there is not free market competition for the product offered, insurance. But here we are again with a solution staring us in the face but thwarted by the myriad number of constituencies who will fight to keep this silly system of insurance in place. I’ve contacted my state representatives OFFICE, because of course you can never actually speak to elected officials, for answers and one silly answer is that if we did away with mandates, the Insurance Companies would go wild and charge huge costs. Huh? Typical “we need to be in control” because you poor stupid people can’t take care of yourselves. Thanks to everyone who voted for Socialism in America. You have no idea what you’ve done.
This whole discussion leaves out the fact that Obamacare has nothing to do with improving our healthcare system, it is just yet another step in the process of building a socialist government like Europe (they’ve done so well). It doesn’t control, cost, quality, access, fraud. The only thing people can point to is getting rid of pre-existing condition, which many states already address, and it goes away when insurance can be bought across state lines. And the more illegals encouraged to come here, the more votes for socialism, because right now, votes still count. So power is the real goal here, not empathy for people, or a desire to improve the human condition. Thanks again, those of you who voted for socialism. Remember that after they gain power, voting is banned.