Back to Obamacare

    By Flavius on Sat, 01/14/2012 - 5:50am |

    Some numbers about US medical costs came out this week.

    o Last year the total was $2.6 trillion.  That's about $8,000 per person.

    o. The Government paid 44% of that and irrespective of Obamacare that’s supposed to go to 50% soon.                                                                                                                                                           

    o 5% of the patients caused half of that $2.6 tn.  5%.                                                                                                                         

    On the back of an envelope I calculate that for that 5%, their cost last year was $80,000 and for the 95% - all the rest of us - ours were $4,200.

    Those numbers help to provide some perspective on the opposition to the mandate. Assume that the mandate was $8,000/year. And the benefit of paying that is that you avoid being hit with an $80,000 bill that one year in 20 when everything goes wrong.

    It’s not irrational to prefer to just pay the $4,200 and use the $3,800 balance however: invest it, pay for something you need, or just want.  It’s worth keeping these numbers in mind when thinking about the Tea Party opposition.

    The magic answer to the problem is for those medical costs to be smaller.  The Tea Party thinks that could be achieved by the good old market economy.  But the GOME hasn’t done that up to now.  In 1963 the Nobel Prize economist Kenneth Arrow published an analysis on Uncertainty and the Welfare Economics of Medical Care.  Which says it never will.  Everyone seems to refer to it and no one seems to have refuted it.  Arrow BTW is some relation of Larry Summers, an uncle or something.

    I’m trying to read the damn thing and when I do you’ll get the "benefit" of my effort.  Don’t hold your breath.  I doubt if there's much danger of that.

    Comments

    I think that's a good point about the psychology of mandate-haters. The stated reason for the mandate, after all, is that the healthy need to subsidize the sick, or we all sink together.  But, there's a lot of ifs there.  We don't all get a serious long-term illness that requires expensive care.  Some of us get hit by busses or just keel over.  Some people have living wills explicitly stating that they don't want end of life care.  Should they pay for my decision to want the opposite?  It's a tough sell.

    It's a tougher sell, I think, without a public health care option.  For one thing, a public health care system would use its immense buying power to drive down costs.  That's the only thing that will work.  The other objection is moral.  The presence of a mandate with the absence of a public system is just a huge subsidy for private industry. The Tea Partiers don't care about that.  They think any public system is akin to Mao's Great Leap Forward.  But liberal mandate opponents do care.  I count myself among them.  I think that if the government makes having health insurance a legal obligation, it should provide a choice, run by the public and beholden to it.

    For the free market to work to bring costs down to the lowest possible levels, the market has to be efficient.  That means buyers and sellers are fully informed and decisions are made freely.  But if you break your arm and are in intense pain, you are in no position to haggle with or even debate with the person who tells you they can alleviate the pain and set your arm to heal.  Providers will largely set the price because they have superior information and are not under duress.  Imagine if you could always wrap you hands around the throat of the person you wanted to sell a stock to.


    by Michael Maiello on Sat, 01/14/2012 - 8:18am

    Yeah , there has to be a public option. Even if otherwise there is no national health plan. 
     

    In the case of most diseases and certainly of  life threatening ones the patient is in effect dealing with a monopoly .You only have one bite at the cherry, or at least you think that.

     If there were a Government operated medical system operating at break-even you'd have a standard of comparison..

    Just arm waving,,suppose we combined the VA medical service with  the defense department's ,and  augmented  it with recently graduated doctors working off their loans and with experienced docs willing to participate at least part time for compassionate reasons . And publish the prices.

    Then let the users decide whether they are willing to pay a multiple of 20+ in the private market. If nothing else, that multiple will shrink.

    Michael Foot's biography of Nye Bevan describes the process by which he concluded  to allow practitioners in the National Health to have a private practice on the side.  It worked.The Good Old Market Economy works and the docs in private practice  don't charge  a multiple of 20 . And  overall medical costs per capita are perhaps a third of ours. 

     

     

     

     


    by Flavius on Sat, 01/14/2012 - 8:52am

    The $8000 figure is interesting, as it comes close to the Ryan voucher.

    Personally, I'd take the Ryan voucher plan, if they'd let me bring my voucher down to the nearest VA facility and sign up.

    We know how to produce top shelf outcomes for half the cost--it's called the VA.

    We will need more M.D.'s of course.

    Fully nationalize medicaid, expand it to 800% of the poverty cut off, forgive 95% of medical school debt for doctors who accept medicaid patients, open branches of the Ben Nelson Autobody Repair and Medical Academy in each state.


    by jollyroger on Sat, 01/14/2012 - 11:40pm

    I’m trying to read the damn thing and when I do you’ll get the "benefit" of my effort.  Don’t hold your breath.  I doubt if there's much danger of that.

    Don't be too sure about that. So far in this post, you've done a pretty good job of picking out some very clarifying points from what you've read, ones that make the same old same old arguments fall flat on their face. That $8,000 per person figure is the kind of point people need to start to see the real light through all the agitprop, to start to understand what the real problems are.


    by artappraiser on Sat, 01/14/2012 - 1:34pm

    Yes, the $8000/person idea was a good one. Unfortunately ,not mine. It was used by NPR in their report on the release of the data.

    I'm probably not going to utter about the  Kenneth Arrow analysis for some weeks.It's 35 pages of dense stuff which I intend to wade through on a long train trip.

    First appeared in the Dec  1963 edition of The American Economic Review. There are a number of interviews with Eagle on the web, some of which  referring  to that paper in such a way as to indicate that there has been no successful rebuttal. Arrow is Larry Summers uncle. He got his Nobel at 51 making him the youngest winner,at least for economics/

     


    by Flavius on Sun, 01/15/2012 - 8:34am

    I've had 0 medical costs in 35 years. Okay, $500 for a doc examination when I broke my collarbone. (there wasn't anything to do, and his lousy sling was going to lose my arm, so I threw it away and treated myself with tequila rather than addictive pain relievers. Fixed in 3 weeks.) And when I burned my arm severely, I just covered it with aloe and Vitamin E and changed the wrappings regularly. Again, fixed in about 3 weeks).

    So I want all my insurance money back. Not $4200. Why should I pay for other people's problems?

    My wife had these birth complications plus cancer - ha, that'll teach her, all that effort at healthy living and exercise - and then the baby needed like a few months of hospitalization, and a whole buttload of therapies and equipment. And my mother's brain operation and treatment for her shaking, and my father's Alzheimers. Why should that be on my charge? I've always been healthy. I'm way below the $8000/year. I calculate less than $20, and I paid it out of pocket.

    If we just cut off those 5% or 50% that are monopolizing the system, the healthy of us would have nothing to worry about.

    And then I want to talk about car insurance.... 1 fender bender in 35 years - even with a van that was belching smoke and had its suspension completely out of whack so it would weave from side to side -  they should be paying me for how safe I drive....

    Occupy Insurance. And by the way, how come all the other countries by half per person what we do? Are we doing something wrong?


    by PeraclesPlease (not verified) on Sun, 01/15/2012 - 2:09am

    Of course we aren't doing something wrong,are you a commie or something?

    What did you say your address is? There are some people  who want to have a little chat with you.

    Bring your bathing suit.

     

     


    by Flavius on Sun, 01/15/2012 - 8:38am

    And my own board?


    by PeraclesPlease (not verified) on Sun, 01/15/2012 - 10:37am

    Or we'll sell you one. 

    Help us meet Panetta's target.

    The happiest man I've ever met was the supply officer in my battalion.He'd crashed  a plane in the closing weeks of WW2 and in a fit of economic discipline the Army convicted of him of negligence and forced him to sign a " Statement of Charges" for $247,000.

    Since he didn't have $247,000 he was required to stay in the Army ,which he loved , until it was  paid it off. Which was going to be  never. 

    We called him Pappy and he wore nonregulation slippers in the supply office. May still be there.

     

     


    by Flavius on Sun, 01/15/2012 - 9:34pm

    I don't believe in GOMEs (or gnomes). I love that acronym!


    by Verified Atheist on Sun, 01/15/2012 - 10:02am

    So you're really an agnostic?


    by Flavius on Sun, 01/15/2012 - 10:35am

    OK, I'll take it a step further: not only do I not believe in GOMEs, I believe in the absence of GOMEs! wink


    by Verified Atheist on Sun, 01/15/2012 - 11:01am

    OM?  !


    by Flavius on Sun, 01/15/2012 - 9:36pm

    Here ya go ...

    For those who wish to wade through Kenneth Arrow's paper from December 1963. It is an incredible piece of work

    http://www.who.int/bulletin/volumes/82/2/PHCBP.pdf

    Also: An additional author to read on the subject of the Public Option is Jacob S. Hacker who authored The Case for Public Plan Choice in National Health Reform in Dec 2008.

    http://institute.ourfuture.org/files/Jacob_Hacker_Public_Plan_Choice.pdf

    I have read all of these papers and more until my eyes bleed.

    Until there is a government backed option included within the planned exchanges of the current ACA the work cannot be considered finished. And beyond that, until there is a Medicare style system for all, then our "Greatest Nation on Earth" will remain the laughing stock of those nations throughout the world who provide national health care and thereby morally favor there citizenary as their most important assets..

    ~OGD~


    by oldenGoldenDecoy on Sun, 01/15/2012 - 11:43pm

    So ok , ok  OGD, I've started to read the damn thing. You may find Arrow's an incredible piece of work, I find it hard sledding. But I'm doing this and will waste some more space here in a day or two with my maunderings. 

    But in the interim, it doesn't take even me too long to grasp the fact that whatever its virtues the GOME doesn't work when the commodity being priced is the avoidance of death. In Arrow's words "Health care isn't marketable" by which he means, its distribution can't be left up to the market place. 

    A friend always deprecates  the concept of a National Health System because  there's an unsatisfiable demand for the product, and society can't afford to finance that. Equally Arrow would  say that society can't afford to pay what the medical profession . if it were left up to it, would charge its patients ,and therefore society , as they inevitably  try and satisfy that, for them, individually , unsatisfiable demand.

    To which  , Margaret Thatcher would respond  "There's no such thing as Society".

    To which Flavius would  say: she would say that wouldn't she.

    Seems to me it's equally arguable that there's no more appropriate  activity for a Government than to obtain for its citizens something that is obtainable but not for them individually:  protection against avoidable premature death and ill health.

     

     


    by Flavius on Mon, 01/16/2012 - 5:00pm

    Flavius...

    Thanks for the reply.

    I agree. Arrows work is a tough read. As I said, I've read it until my eyes bleed. In so doing. it has become more relevent in today's state of affairs in relationship to the free market attitudes in health coverage and health care services.

    As Jacob Hacker wrote in his book, Shared Responsibility, Shared Risk:
    Government, Markets and Social Policy in the Twenty-First Century.    ..

    Some years ago the Nobel economist Kenneth Arrow explained that missing and incomplete markets for risk represented one of capitalism's greatest failings. "Perhaps one of the strongest criticisms of a system of freely competitive markets," he (Arrow) wrote in a 1970 article with Robert Lind, "is that the inherent difficulty in establishing certain markets for insurance brings about a suboptimal allocation of resources." Elsewhere Arrow suggested that it was up to the government to take up the slack, to "undertake insurance in those cases where [a private market for insurance], for whatever reason, has failed to emerge.

    Anyhoo... I look forward to your future posts on Arrow's work.

    ~OGD~

     


    by oldenGoldenDecoy on Mon, 01/16/2012 - 5:47pm

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