Health care thoughts

Reflections on turning the age at which government involvement kicks in in earnest

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Freedom is always elegant compared to anything else.

Nowhere is this more true than in the realm of health care.

Next month I turn 65. My actual birthday isn’t until the 21st, but starting on the first I get to use Medicare and the supplemental plan I got from a nice lady who walked me through the procedure and explained the basic concepts to me.

Still, questions occur to me.

Why is it still so byzantine? Why do you have to have a supplemental plan from a private insurance company? Why are there all these scenarios such as that at this level of treatment you have such-and-such copay, but if your reach this level of treatment, it’s different? What’s up with drug tiers 1, 2, and 3? Were these things hammered out as compromises when basic Medicare and subsequent programs were being discussed at the committee level in Congress?

I have an appointment with my family doctor the morning of October 1, and I’m greatly looking forward to it. I’ve been holding off on seeing him until this stuff kicked in. I hope he has the time for a somewhat lengthy conversation. There are some issues I want to discuss in a rather in-depth manner. Nothing really dangerous, I don’t think, but I can tell some stuff just isn’t right.

Why have I been holding off? Well, for the last several years, I’ve had really crummy insurance. I had some of my issues looked into a few years back, and I quickly got so buried in bills, I said, “That’s it.” I got those bills paid, but I wasn’t about to start back down that rabbit hole.

And prior to that, I had okay insurance, but it was pretty expensive because I had a pre-existing condition (high blood pressure).

My thought about that was not “That’s unfair! There ought to be a law!” but rather, “How did people get treated for preexisting conditions, say, 50 years ago, or 80, or 100 years ago?”

Lots of people do react along the lines of “That’s unfair! There ought to be a law!” Erick Erickson came in for a rash of opprobrium on Twitter yesterday for posting the following:

I don't think the government should force coverage for pre-existing conditions.  I think it is bad public policy that will lead to increased healthcare costs and diminish the need for personal responsibility.

Some responses:

Hey! Hey look everybody! It’s an ABLEIST! But, garsh, you’re right Erick.. if only I had a sense of personal responsibility, then I wouldn’t have been born with a debilitating genetic disorder! Why didn’t I think of this sooner?!

And

Saving lives is bad public policy? The emotional stress of worrying about being covered is troublesome. As someone with 10+ pre-existing conditions, I think your opinion is ignorant. On behalf of thousands I've testified for in Congress, I think your opinion is CRUEL!

So why wasn’t pre-existing conditions a big topic of conversation in, say, the 1950s?

For my money, the best history of this whole topic is found in a 2012 Forbes article by Avik Roy. I shall excerpt at some length, because my attempt to paraphrase would be insufficient.

He starts at the beginning:

First, it’s important to understand why we have a “pre-existing condition” problem in America. If we don’t understand what caused the problem in the first place, it’s hard to come up with the right solution. And the problem was caused by an act passed by Congress under the Roosevelt administration called the Economic Stabilization Act of 1942.

Because much of America’s work force was off fighting World War II, the Roosevelt administration feared that the domestic demand for workers would outpace labor supply, leading to a spiral of higher wages and runaway inflation. The 1942 law mandated wage ceilings for a broad range of occupations, and required federal approval for any changes thereof.

But fringe benefits, such as health insurance, were not covered under the 1942 wage controls. As a result, many employers started offering health benefits as a way around the new federal wage limits. This loophole gained further strength when, in 1943, a federal court held that employer-sponsored health insurance was exempt from taxation.

In the early postwar years, courts and the IRS continued to struggle with how to treat the tax status of health insurance. Then, under President Eisenhower, Congress passed a comprehensive revision of the federal tax code called the Internal Revenue Act of 1954. Section 106(a) of the 1954 Internal Revenue Code officially excluded employer-sponsored health insurance from taxation:

General rule — Except as otherwise provided in this section, gross income of an employee does not include employer-provided coverage under an accident or health plan.

The enshrinement of health insurance as non-taxable income meant that employers and their workers had a huge incentive to divert dollars of salary into dollars of health insurance. For example, a worker who pays federal and state income taxes at a combined rate of 30% will receive $7,000 for every $10,000 his employer provides in gross salary. But the same employee will receive $10,000 in benefits for every $10,000 his employer spends on health insurance—a 43% improvement.

This subsidy is even higher for the highest earners. A Wall Street banker who pays federal and state income taxes of 50% will receive $5,000 for every $10,000 his employer provides in gross salary. But by receiving $10,000 in benefits, he gets a 100% improvement on his taxable income. And because he’s a high earner to begin with, he’s likely to benefit from an especially generous health insurance plan.

This exclusion of employer-sponsored insurance from taxable income—known as the employer tax exclusionfor short—is what ties Americans’ health insurance to their jobs. If you lose your job, and stop paying for health insurance on your own, and then get sick, an insurer is under no obligation to cover you, due to what is now your “pre-existing condition”—and, in rare cases, the insurer may do just that.

The reason why people fall victim to pre-existing condition problems is discontinuities in coverage. A person who at one job gets injured, and tries to switch jobs, has to switch health plans. The new insurer is stuck with the costs of treating for the injured worker, and has to charge enough to not lose money on that enrollee.

Same goes for someone who stays uninsured for a prolonged period, waiting to buy insurance after he gets sick. Insurers can’t provide affordable health insurance if the only people they cover with their policies are already sick.

So the policy solution to the pre-existing condition problem is to make sure that people own their own insurance policies, and don’t have to change plans when they change or lose their jobs. This is what wonks call continuous coverage.

Roy goes on to discuss the attendant problem of health insurance being so danged expensive. Why is that?

Because people don’t buy insurance for themselves, they have no incentive to shop for value and buy the plans that meet their needs, without extraneous coverage. In addition, this fourth-party system in which third parties buy insurance on our behalf makes us all insensitive to the cost of our care. We go to the doctor and expect our costs to be covered. We don’t have any reason to think about how much one hospital costs versus the next.

I have a story that illustrates this point. Some years ago I went to a general-practitioner-type doctor, just to discuss the general state of my health. Routine visit stuff. I knew it was going to cost $85. I had $85 in cash folded up in my wallet to sequester it from my general-purpose walking-around money.

After the visit, the front-desk lady said, “May I see your insurance card?”

I replied that I was prepared to pay cash. You know, make it a nice, clean transaction. She insisted on running it through my insurance.

Oooookay.

Three weeks later, I got a bill from the clinic the doctor worked for - for $85.

People explained to me that I was building up some kind of deductibility eligibility by running it through my insurance. If I’m thinking this through properly, that is only going to help me if I come down with something hairy enough that I need to fool with deductibility, isn’t it?

Health insurance ought to be like car insurance or property insurance - there for bad stuff happening. Catastrophic situations. Not routine maintenance. It’s a cliche, but it’s true that we don’t use auto insurance for oil changes.

But as the towering giant of sound thinking about human freedom, Ronald Reagan, said, a government program is the closest thing to eternal life we’ll see in this realm. The idea of a middle entity between us and health care providers is so entrenched that people can’t conceive of any other model.

So we have to figure “political realities” into the equation. Or so they say. Maybe it’s too quixotic to conceive of a time when people would be willing to look past their assumptions about Medicare and the ACA and covering pre-existing conditions and consider an arrangement whereby people got their health cared for the way they procure anything else in this world.

Time to re-up Old Uncle Barn’s First Law of Economics:

A good or service is worth what buyer and seller agree that it is worth. Period. No other entity has any business being involved in coming to that agreement - certainly not government.

The Very Stable Genius, having no set of core beliefs and no understanding of real human freedom, is of no help. Neither is the party which has become his personal politburo. The VSG has been promising a “beautiful” replacement for the “Affordable” Care Act since he was campaigning four years ago. It would “take care of everybody.”

So far, all he’s come up with is lame stuff like attempting to bribe older votes a month out from the election with “incredible” cards that they can use for prescription drug discounts.

He and the leg-humper party are, at least so far, of no help on this matter of pre-existing conditions:

A significant number of people with chronic conditions had difficulty getting affordable insurance before Obamacare. The law dealt with the problem by prohibiting insurers from discriminating on the basis of health status. If you have a chronic condition, they have to sell you the same policy at the same rate they would offer someone in perfect health. That regulation raises the cost of health insurance for healthy people and thus discourages them from buying it. (It also creates an incentive for insurers to design policies that are more attractive to healthy than to sick people.)

When they tried to legislate a replacement to Obamacare in 2017, Republicans sought to let states relax that regulation. Under their proposal, states could have required insurers to offer the same policies at the same rates to all customers, regardless of health status, so long as they had previously maintained coverage. That way, people would have had an incentive to purchase insurance while healthy, bringing premiums down. States would have been allowed to make this change only if they had shown that they had credible plans to take care of those who fell through the cracks.

This would not have been a return to the pre-Obamacare situation. People would have had much greater ability to maintain continuous coverage than they did back then, thanks both to new forms of federal assistance (tax credits created under Obamacare and largely maintained under Republican replacements) and to the requirement that insurers offer affordable coverage to those who already had it. High-risk pools to assist the uninsured, which had been inadequate to handle the problem before Obamacare, would have much more easily helped a smaller population in need. But Republicans in Congress, largely unfamiliar with the ins and outs of health policy, did not make the case for their approach.

Republicans now have three basic choices in answering the question of how they would help people with pre-existing conditions if they replaced Obamacare or courts invalidated it. The first would be to promise that they would reenact Obamacare’s stringent regulation and provide subsidies for those who need it to afford the high premiums it necessitates — essentially re-creating a lot of Obamacare. The second would be to promise to enact continuous-coverage protections of the type they proposed in 2017. And the third would be to do nothing, telling people with pre-existing conditions that they are on their own (even though the paucity of cheap, renewable catastrophic policies is largely the result of government policies).

To really unwind this whole mess back to the elegant simplicity of a free market would require an understanding on the part of the post-American public that health care, by definition, cannot be a right.

Let me repeat that.

Health care is not, by and definition, cannot be a right.

A succinct and effective way to get this point across in response to those who say it is is to ask, “How did people in the year 1300 exercise their right to a triple bypass?”

Health care - which is a broad, broad category encompassing everything from surgery to pharmaceuticals to physical therapy to CT scans to chiropractic - only exists because particular human beings have some motivation to care for others’ health. And the only reason innovation and advancement has occurred in health care is because people were free to try stuff.

I don’t know that it’s possible, given those pesky “political realities,” for policy to ever move meaningfully in the direction of common sense and the elegance of freedom, but I felt it was important to lay out how that would work if anyone ever cared to try.