Alternative to ObamaCare
The ideal:
Health insurance should be individual, portable across jobs, states and providers; lifelong and guaranteed-renewable, meaning you have the right to continue with no unexpected increase in premiums if you get sick. Insurance should protect wealth against large, unforeseen, necessary expenses, rather than be a wildly inefficient payment plan for routine expenses.
Getting there:
Rather than a mandate for employer-based groups, we should transition to fully individual-based health insurance. Allow national individual insurance offered and sold to anyone, anywhere, without the tangled mess of state mandates and regulations. Allow employers to contribute to individual insurance at least on an even basis with group plans. Current group plans can convert to individual plans, at once or as people leave. Since all members in a group convert, there is no adverse selection of sicker people.
Samaritan Ministries works pretty much like the idea then…
That’s too simple for the government.
Not to mention it cuts them out.
I have commented on this concept when it was recently cited in Arnold Kling’s Ask Blog.
The goal of lifelong health insurance is great.
However as a former insurance company employee, I see no evidence that any large company would want to offer such a product.
Health insurance claims have a clear and profound “aging cycle”. The more years a person is insured with the same company, the greater their volume of claims.
This is why carriers (if left alone) have at least a 6;1 ratio from oldest to youngest insureds.
Insurance companies want the right to get “off the risk” if they start to lose money on claims. I think they would absolutely dread a “guaranteed renewable” contract as Mr Cochrane proposes.
The history of long- term care insurance and disability insurance shows rather clearly that insurers have a hard time pricing such contracts and staying with them. Companies leave these markets all the time, and it has nothing to do with clumsy state regulators.
The problem is the essentially uncapped nature of the payouts. Think about what companies would do if life insurance payouts were like those in health insurance- they would not want to offer those either.
A long term product for health insurance would have to have a hard cap in order to make it priceable, and such a product should have incentives for the policy holder to not max it out either.
I’m not so sure that “the ideal” is attainable in an absolute sense. Due to the problem of scarcity, we can get better at providing care, but unlimited protection “against large, unforeseen, necessary expenses” is impossible. We need to work toward freeing the market and creating wealth so that the most people can get the best care possible.
I do like the idea of getting rid of employer-based insurance. There’s too many pitfalls and loopholes for it to be sustainable.
Good solution for the insurance problem. We’re still missing the solution for keeping health care costs from spiraling out of control.
Health insurance is not health care. Insurance is a mechanism for redistributing wealth. It is a religious superstition that many, most notably the Amish and Mennonites, do not subscribe to.
I am not a risk-averse person and bristle at any notion that I should insure myself against death, illness, fire or flood. Obamacare, since it is insurance that is not available to anyone traveling overseas, is a tax on travel. Since it offers discounts for families, it is a tax on singles and the childfree. Since men and women pay the same premium, it is a tax on maleness.
Folks wisely invest in the stock market, which is known for its ups and downs. It would be stupid to take out insurance to cover losses in the stock market, even if the “loss-ratio” were 99% instead of the supposed 80% of Obamacare. Indeed, a young man who put his $300 monthly Obamacare premium on a single spin of the roulette wheel and went on like that, investing the proceeds and paying his own medical expenses, would emerge at age 65 a millionaire many times over.
Yancey Ward is absolutely right.
A lot of people could afford a lifetime health policy with a hard cap of $100,000 or $250,000.
The problem is what happens when a tiny percentage of the policyowners get a disease like cancer that costs more than $250,000 to treat.
These are the people one sometimes sees holding bake sales to raise money for late stage cancer treatments.
There are solutions to this, perhaps, maybe a reinsurance pool for large claims or a special category of Medicare for large claims.
Obamacare had the absolutely worst solution, which was to force all insurance policies to have unlimited benefits.
But it is a big deal and must be dealt with in any kind of progress toward a Cochrane world.
This is where I think the policies need to build in the incentives to not max the payouts. Give a policy holder the choice between taking, let’s say, $500,000 worth of cancer treatment, or a $150,000 life insurance settlement upon his death. Some people may consider such a bargaining mechanism noxious, but a society must at some point have the ability to say no to further treatment.
Thanks Yancey.
My own pet solution would be price controls on drugs with no substitutes.
In many cases, that would convert a $500,000 cancer case to an $80,000 cancer case.
It is appalling to me when health insurance premiums for all are driven up by our timidity in regulating drug companies.
Two things- all drugs eventually go off patent, so you would likely be trading a short term cost benefit for the end of new treatments. You might want to rethink that solution.
I mm not an expert in drug policy, but for what it’s worth my opinion is this:
capping the price of a new drug at $10,000 a year or something of that nature would not put an end to all new treatments.
It might put an end to new treatments for last-stage cancer, but I question whether these treatments work beyond extending life for six months.