I Edit Austin Frakt’s List
It’s a list of statements economists are supposed to agree with (bolding and cross outs are mine):
- Uncertainty about the timing of need for health care
isand its expense are the reasons for health insurance. Insurers have an incentive for favorable selection.Insurance markets suffer adverse selection.- Competitive insurance markets will use all known information to price risk.
- If regulation prevents premiums from reflecting risks, adverse selection will result.
- Insured people use more care.
Insured people have betterThe relationship between health insurance and health outcomes is uncertain, but probably small.Health insurance does not guarantee good health care.- The relationship between spending on health and health outcomes is also uncertain, but (at the margin) is probably also small.
- Preventive care does not usually pay for itself.
- Employees pay for all employer-based health benefits; they offset wages or other benefits.
- Favorable tax treatment of employer-based health benefits leads to greater employer offers and more generous benefits.
- Employer-based plans serve a risk pooling function.
- Cost sharing reduces utilization.
- Physicians influence patients’ level of utilization.
Technological changeThird-party payment is the primary driver of increasing health care spending.- Technological change tends to increase unit costs under third-party payment and reduce unit costs when patients pay the bill.
Level of educational attainment affects health.- The better educated are healthier.
- Horizontal and vertical integration in the health sector
occurs inmay increase efficiency but may also reflect the pursuit of market power. Income inequality worsens health.- Wealthier is healthier in every country, under every health care system.
- Shortfalls in revenue from one payer do not cause hospitals to raise prices to another.
Physicians influence patients’ level of utilization.
Glad we all agree on that one.
“Wealthier is healthier in every country, under every health care system.”
It’s a deducted conclusion based on strong correlations, but it’s not absolute. But for policy matters, it is safe to assert.
“Insured people use more care.”
-This seems to be the fundamental issue.
“Preventive care does not usually pay for itself.”
On average, sure, but the median is likely different from the mean.
Similarly, we have to adopt counterfactuals to actually determine if this is true. Those are subject to biased estimates based on population data.
Cost sharing reduces utilization.
Another agreed upon rule.
Thank you for the clarification. Austin is addressing the status quo of insurance markets instead of the hypothetical.
“Insurers have an incentive for favorable selection. Insurance markets suffer adverse selection.”
to
“Competitive insurance markets will use all known information to price risk. If regulation prevents premiums from reflecting risks, adverse selection will result.”
Insurance markets are a complicated field. Lots of math
I change the last assertion to read that short-falls in revenue from one payer do not cause hospitals to raise charges for another provided the hospitals are for-profit hospitals.
I think that I’ve seen some work showing that non-profits in relatively uncompetitive markets do cross-subsidize.
This really highlights how both sides are operating based on different assumptions. We need to be focusing on reconciling the fundamentals.
“Horizontal and vertical integration in the health sector may increase efficiency but may also reflect the pursuit of market power.”
I can’t believe that Austin Frakt omitted that this can be a good thing. I’m sure he knows it, but the omission gives of an anti-business vibe.
Mean, median, mode, with the exception of the earlier childhood vaccines, there is virtually no evidence that preventive care reduces population health expenses by more than the cost of delivering it, when the cost of screening is included.
It does lower individual risk, but you have to pay. Risk averse people like me are just fine with that. We’ll pay a lot to lower risk.
Preventive care does not include measures taken to slow the damage done by disease or chronic conditions that people already have. In that case we are treating a disease, not preventing one.
Correct me if I’m wrong, but certain preventive cares are mainly time costs (exercise) or market prices in other areas (diet, abstinence to prevent STD’s, condom usage), and have been shown to reduce population health expenses more than the cost of delivery, on average.
The cost difference between these and not adopting them is minimal, though there are likely some psychic costs involved with having to eat Hummus and not a Big Mac.
It also depends on how you define the types of care, since the line between preventive and reactive/curative care can be blurred (exercise can be seen as both).
That’s where my median does not equal average comes into play.
In my world, using condoms, avoiding promiscuous sex, quitting tobacco, or exercising would be adopting a risk reducing behavior, not getting preventive care.
Preventive care involves medical procedures, mammograms, Pap smears, colonoscopies, immunizations, DEXA scans, or PSA tests, that either prevent disease or screen for it while it is still at a curative stage.
But all of those can prevent disease. Condoms do prevent STD transmission rates (including being effective for preventing HIV transmission). Exercise is able to help prevent some diseases (obesity, for one).
And isn’t one definition of preventive care the ability to reduce health shocks before they occur (say, how Pascaline Dupas defines preventive care)?
Risk-reducing behavior can neatly be enfolded into that definition (you reduce risks, you reduce the probability of incurring some negative health shock).
So, while they certainly are behaviors undertaken that reduce risks, these reduced risks decrease the chances of incurring a nastier disease down the road. Hence, my labeling it (along with others) as preventive care.
So can’t having the right set of parents and grandparents. Want to keep certain people from having kids and call that a preventive health service?
That’s a reductio ad absurdum.
Again, I just defined preventive care as something done, before an illness/injury/disease occurs, that reduces the probability of incurring that illness/injury/disease.
There’s certainly a difference between your example and mine. I fail to see how bad parents is a disease OR a health shock.
Those are not medical care. Drinking water and eating will prevent sickness and death but are not medical care. Living in a home etc. You do not want to cast the net too broadly.
*Competitive insurance markets will use all known information to price risk.
*If regulation prevents premiums from reflecting risks, adverse selection will result.
Seems to me the ACA eliminates (or at least greatly reduces) the reliance on risk assessment within health insurance. Already, health insurers vary premium quotes for employer based insurance upon ability to pay such that industries with higher salary ranges pay more regardless of health risks and vice versa.
And, even within the individual insurance market which does still rely upon some semblance of health risk assessment, the parameters are generalized even as succinct information is readily available to hone in more precisely on health risk assessments. This is to the health insurers’ favor who essentially can and do score a diagnosis such as diabetes or high blood pressure negatively regardless of the variation in acuity and self management. Its much like the way home and car insurers use credit reports to assess risk. Its a generalized parameter that can be easily abused by the insurers.
Health insurers use the “deep pocket” pricing parameter. Those assessed to have deep pockets will pay more and insurers will settle for volume over pricing for the rest.
You could summarize the above statements thusly…
Insurers want to their medical cost ratio as low as possible; enrollees want the ratio of medical claims to premiums to be as high as possible (preferably a greater than 1).
It’s in the interest of policymakers to have a competitive insurance market where risk is accurately priced. Public policies that encourage cross-subsidies in the face of observable differences in risk destabilize the market for risk. It is too much to expect health insurers to thrive in an unstable environment.
Employees pay for all employer-based health benefits; they offset wages or other benefits.
I disagree with “all”; taxpayers pay a substantial portion.