Universal health care

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Quiet your inner economist?

December 5, 2008 in Economics - General, Public Policy | No comments

As Health Access California reminds us, tough economic times are often when sweeping government policies are enacted.    President-elect Obama has some tough choices to make.  Should he expand existing government programs to help those who are hurt by the economic crisis?  Or should he scale back these government programs to show some fiscal responsibility?  Or is starting a universal health insurance plan a good idea?

A NEJM editorial states that “The expansion of health care to large populations is expensive, and presidents may need to quiet their inner economists.”  If policymakers quiet their inner economist, not only will I be out of a job, but health care will get a lot more expensive.  Joe Paduda agrees that a focus on cost-effective medical care is paramount.  Paduda claims that not focusing on cost has made Medicare Part D ‘a disaster.’

“On a national scale, the program is a disaster. The ultimate liability for Part D is $8 trillion, a liability that is unfunded. This is what we can expect if Congress passes and President Obama signs into law national health reform that does not aggressively, and forcefully, address cost – a deficit explosion that will make the cost of the current bailouts look like lunch money.”

What does the Healthcare Economist recommend?  Listen to your inner economist!

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Health care in Massachusetts

November 3, 2008 in Health Insurance, Public Policy | No comments

Readers Digest has a nice piece on how universal health insurance is working out for people in Massachusetts.  ”Massachusetts put into practice the health care solution everyone is arguing about. Here’s how it works and what it means for the rest of us.”

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Can a Multi-payer Financing reduce costs to Single-Payer Levels?

September 15, 2008 in Health Insurance, International Health Care Systems | 2 comments

This is the question asked by Newhouse and Sinaiko in their 2008 paper in the Forum for Health Economics and Policy. The answer is yes.

 

Single Payer
Country Health Exp as Share of GDP (2006)
Canada 10.0
Norway 8.7
Portugal 10.2
Spain 8.4
Sweden 9.2
United Kingdom 8.4
Average 9.2


Multi-payer
Country Health Exp as Share of GDP (2006)
Germany 10.6
Japan 8.2
Netherlands 9.3
United States 15.3
Average 10.9
Average (w/o US) 9.4

Source OECD

From the table above, we see that when we exclude the U.S., many multi-payer systems have similar health care costs as single payer systems. Further, Newhouse and Sinaiko find that states in the lower quintile of health care spending spend similarly to the single-payer nations cited above.

Specifically applying a single payer system to the U.S. might not reduce health care costs as much as conventional wisdom thinks. The paper wisely notes that “the dominant American fee-for-service reimbursement method is likely to generate greater billing costs than hospitals on fixed budgets, as in Canada, but it is not necessarily the case that implementing a single-payer regime in the United States would change how hospitals are paid.”

So is a single payer system right for the U.S? This question is still up for debate. A single-payer system is likely a sufficient condition for having lower health care spending levels, but it is not a necessary condition for reducing health care costs.

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Physicians on National Health Insurance

April 8, 2008 in Physician Compensation, Public Policy | Permalink

An Annals of Internal Medicine survey sheds some light on physicians opinions regarding universal health care. Overall 59% of physicians support national health insurance and 32% oppose it. Support for national health insurance increased 10 percentage points since 2002 (49%). Unsurprisingly, surgical subspecialties, anesthesiologists, and radiologists, were the only specialities where more than half of respondents did not support universal health care.

Any economist would not be surprised by these findings. Primary care is not highly compensated now and universal health care would likely not alter this. Further, primary care would likely simplify the world of primary care: there would either be one insurance company (as in the case of government provided care), or it would likely be clearer which treatments would be covered. Further, since there would be no uninsured, the primary care doctors would not have to provide any uncompensated care.

For specialists, however, it is likely that national health insurance will reduce compensation for physicians. Some procedures may not be covered, or will be reimbursed at lower rates. More referral restrictions and likely rationing of care would lead to lower profits for specialists.

Even physicians are divided about whether or not national health insurance is a good idea.

GoozNews has more information on the article.

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California’s Attempt at Universal Health Care

December 21, 2007 in Current Events | Permalink

On Monday, the California Assembly passed a bill that mandates health insurance for all California’s citizens. The government will provide subsidies households with incomes below 250 percent of the federal poverty level. Those earning between 250 percent and 400 percent of the federal poverty level [FPL] would be able to deduct premium costs that exceed 5.5 percent of their incomes. Health insurance will still be privately run, but the government will pay a larger portion of the premiums.

One odd twist of the legislation is that “some Californians would be granted exemptions if their income is too low to afford premiums but too high to qualify for heavy government subsidies.” Which type of people would fall into this group? The poorest poor have Medicaid. People between with income between 0-250% of the FPL are receiving large subsidies from the government.

One of the major arguments in favor of universal health care is that it creates a more equal society, giving the poor a helping hand. Yet if the working poor are exempted from buying health insurance, why is California spending all this money for health insurance when the working poor don’t have insurance.

Of course, providing these subsidies will be expensive. According to the L.A. Times, California is “about to enter a ‘fiscal state of emergency’ because of a $14-billion budget shortfall.” Who is going to pay for the subsidies?

  • Smokers: The California government will raise the tax on cigarette smoking significantly.
  • Business: Business will have to provide health insurance. If they do not, they will be hit with a tax fine.

Do I think the California plan is a step in the right direction? Maybe one step forward and one step back. Providing means-tested subsidies to help the poor afford health insurance is a step in the right direction for those who prefer a more egalitarian society. Further, although the state is financing much of the insurance premiums, it is leaving insurance to the private market. However, in the presence of a private insurance market, I believe that a minimum standard of health insurance should be established by either the government or decided on by insurance groups. This is not because I think regulation is good in general, but because 1) the insurance contract customers sign is incomprehensible and customers do not know the benefits they are receiving and 2) insurance companies often deny claims that they should pay. Setting a minimum standard with regulation could help to clear up some of this ambiguity while allowing insurance companies to offer more generous, more expensive plans if they choose.

What I do not approve of in the California plan is that health insurance is mandated. Poor families may better be able to use cash to buy food and pay for rent rather than health insurance subsidies. Healthy individuals are forced to buy a product they don’t need. Further, do not be fooled by the Governator’s statements that ‘this plan will pay for itself’; this piece of legislation will be very expensive and increase the utilization of medical care in the U.S.

Here are some news stories covering the issue:

And here is the actual text of the bill.

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