By Kevin D. Williamson
Tuesday, December 22, 2020
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I have for years
argued that most people would be reflexive free-market capitalists if not for
their experiences with a handful of businesses: airlines, banks, cable and
Internet providers, etc. At the very top of this list is insurance companies.
“The trouble with socialism is socialism,” as Willi Schlamm famously put it.
“The trouble with capitalism is capitalists.” These [baroquely ornate string of
expletives deleted] insurance monkeys are the capitalists Willi Schlamm warned
us about.
Congress, responding to years of outcry against
“surprise” medical bills, is about to do what Congress does, which is make
things somewhat worse by giving the people what they are clamoring for.
Medical bills and medical insurance can be perplexing and
exasperating. They often are random-seeming. My mother’s last stay in the
hospital lasted several weeks, some of them in cardiac intensive care. The bill
that came was absolutely staggering, about ten times the annual salary she’d
earned at the end of her working life. But she spent the last part of that
working life employed by the state, so she had excellent insurance at
practically no cost, and so instead of being saddled with a ruinous bill she
could never hope to pay, she received a check equal to about a year’s pay. It
was a welcome outcome, but an absurd one. I have more stories of that kind, as
I am sure many of you do. I suppose I am the kind of sucker insurance companies
like: I have a high-deductible plan in case I get hit by a cement truck, but if
I need a COVID test or an eye exam, I generally use the insurance card that
says “American Express” on the front of it, sparing myself the Kafkaesque
horror of engaging with the insurance bureaucracy.
Surprise medical bills most often come to people who have
received medical services under the impression that these were covered by their
insurance only to find out that some portion of the tab — or all of it — is
landing on them. The New York Times: “Patients go to a hospital that
accepts their insurance, for example, but get treated there by an emergency
room physician who doesn’t.” People coming into emergency rooms often are not
at that particular moment very much inclined to carefully scrutinize paperwork
of any kind.
What’s worse, as the Times reports, is that in
such situations “doctors often bill those patients for large fees, far higher
than what health plans typically pay.” Note that this is the opposite of the
experience of many patients who choose “concierge” medical care, “concierge”
being what the boys down in marketing came up with as a substitute for “cash up
front.” Many (though by no means all) medical services provided on a cash basis
are offered at a lower price than the one quoted to insurers, in part because
medical practices that simply will not look at insurance cards need not employ
an expensive staff of clerks to look at insurance cards (and manage insurance
records and have long stupid maddening extended telephone conversations with
insurance people) and pass along some of this savings to their patients — who,
because they are paying out of pocket, have an opportunity and incentive to
comparison shop.
That “concierge” model — a functional market with lots of
buyers and sellers and competition — is, in most cases, the ideal way medical
care should function, and the presence of such a functional market is one of
the reasons so many Americans have much better experiences with cash-only
dermatologists, cosmetic surgeons, etc., than they do when they have a heart
attack or cancer. That latter category of care — care for severe injuries and
serious or chronic disease — provides a basis of skepticism for the
market-oriented approach to health care. Patients in those situations, the
argument goes, have no negotiating power as buyers — faced with a choice of
paying or dying, they will pay (or at least agree to pay) whatever is asked.
And so, that argument goes, either prices must be set by a third party such as
government, or payment must fall to and be negotiated by a third party, such as
government or an insurance company. Much of the debate about health-care policy
in the United States ignores the problems of third-party payments and instead
turns its attention to the question of which third party should make the
payments: insurance companies or government.
There are times when third-party payments for medical
care are appropriate. Health insurance, properly understood, is not a medical
product but a financial product, a hedge in which patients pay a premium to
manage certain financial risks associated with medical need. Risk management is
a benefit worth paying for: The wise man who dies at 100 without ever having
had to file a hospitalization claim understands that his premiums were money well
spent; the foolish man thinks he got ripped off. Paying for insurance is
something like saving for retirement: It is a way of redirecting a portion of
income from the prospering times, when it is not acutely needed, to the hard
times, when it is acutely needed.
“Social insurance,” the traditional liberal model for
providing publicly supported medical benefits, applies the insurance model to
society at large, with the state acting as insurer. This is a model
fundamentally different from the state-monopoly model of British and Canadian
experience (in spite of what our ignorant progressives claim, most of Western
Europe does not rely on national single-payer systems), and it has some
virtues apparent even to such committed free-market thinkers as F. A. Hayek,
whose libertarianism made room for government programs “providing for those
common hazards of life against which few can make adequate provision.” The
social-insurance model as practiced in high-tax Scandinavia is a way for young,
healthy, working you to make provision for elderly, sick, unemployed you.
The United States is, judging by the actions of political
leaders in both parties, utterly committed to maintaining a
worst-of-both-worlds situation. The Left talks up the state-monopoly model, but
no politician of the Left, including Bernie Sanders, the socialist from Vermont
from Brooklyn, has put forward a serious proposal to pay for such a thing.
(Avoiding such difficult discussions is the reason for all that umbrageous
moralistic talk about health care as a “right.”) And it is impossible to
imagine such a thing’s being intelligently administered by the federal
apparatus: Consider that the U.S. government already is laboring under more
than $50 trillion in unfunded liabilities for Medicare alone, or about
2.5 times GDP.
Republicans still talk about free markets and consumer
choice, but under the influence of populism they cower at the prospect of
reforming the entitlement programs and align themselves with Barack Obama et
al. on the matter of “preexisting conditions,” which they insist that we cover
with insurance even though such a thing is a logical impossibility. (Insuring
against preexisting conditions is the equivalent of making a bet today on the
1984 Super Bowl, but Washington is convinced that it can monkey with the odds
and the terms of the wager in such a way as to make that a sensible
proposition.) They understand that third-party payments are a problem (your
insurance company and your doctor both have economic incentives that are
different from yours) and that the health-insurance market itself has a
layered-on third-party problem because it has for so long been shaped by
employer-based plans (your insurance company and your employer both have
economic incentives that are different from yours). Most Americans who have
insurance still get it from employer-based plans, and that is something that
could be addressed — but Republicans will not touch it, because doing so would
mean getting rid of a tax subsidy dear to middle-class people and upending the
current health-insurance arrangements of a lot of Republican voters.
The grievously misnamed Affordable Care Act was in part
inspired by the excellent Swiss system of health insurance, but with a
characteristically dysfunctional American twist: without proper enforcement,
without credible financial commitment, and with administration that might be
described as anything but Swiss. But the ACA was in some sense almost
inevitable: Democrats, frustrated by the persistent post–Great Society failure
of their efforts to sell Americans on big, expensive new social programs, have
in recent decades leaned on regulation instead — using employer mandates and
the like to in effect create new welfare programs within employers. (This
really kicked off in earnest in 1973 with Senator Ted Kennedy’s HMO Act.) The
politics of this approach are attractive for obvious reasons, beginning with
official cowardice: Congress or the state governments could create programs to
supplement the incomes of low-wage workers, but simply mandating a higher
minimum wage and mandating certain benefits allows them to do much the same
thing without taxing anybody to pay for it or accounting for the expenditures.
In that model, employers are both the welfare office and the tax office.
One of the long-term problems with that approach is that
it does little for the unemployed poor or the marginally employed poor, whose
standard of living has diverged sharply from that of the middle class. (Here,
economics and mode of living are closely linked: The median income for a
married couple with children is about $100,000, and the overwhelming majority
of households in the top 20 percent of incomes are two-earner couples,
generally married.) For reasons having to do with the parochialism and
small-mindedness of the American intellectual classes, we spend a great deal of
time talking about the shocking net worths of Silicon Valley billionaires and the
big bonuses of Wall Street sharks, as though the poor were poor because Jeff
Bezos is rich. In fact, the benevolence of the affluent professionals who
dominate the country politically and staff its major institutions is directed
largely at themselves, which is why we are debating writing off the debts of
Harvard-educated lawyers rather than talking about the social and economic
failures of, say, Milwaukee, and how these affect poor people, who rarely write
New York Times guest columns or testify before congressional
subcommittees.
To return to the beginning: The “surprise” medical-bill
rule is one more little bit of effort to use business regulation to service the
interests and demands of the politically important classes. And, as often is
the case, those interests will be served by making the health-care system a
little bit worse than it already is. Here, that will happen by forbidding
doctors, hospitals, and certain other providers from billing patients at all in
these situations, obliging them instead to charge insurers. This will have the
effect of reinforcing still further the centrality of insurance to the medical
system. As the Times reports, a Congressional Budget Office study finds
that the new law will reduce the incomes of doctors and other providers, in
part by imposing a mandatory arbitration regime on them. The loss of bargaining
power and income “would happen to providers that both do and do not send
surprise bills, because taking away the option would reduce their leverage in
negotiating contracts with health insurers.” Which is to say, a law that
purportedly was meant to bring insurers to heel has in fact strengthened their
economic position.
What the United States needs is not a British
monopoly-style system or a libertarian free-market fantasy or the Democratic
dream of Scandinavia on the cheap, but instead a more multipolar system than
the one we already have. Ideally, this would include health insurance that
functions as insurance, i.e., as a financial product for risk
mitigation, not as a dues-collecting membership club for medical care; an
intelligently designed and administered form of social insurance that would see
to the interests of those who cannot see to their own, including poorly
provided-for children, the disabled, and others; and, perhaps most important,
functional, consumer-driven markets for both health insurance and for health
care per se, with most non-emergency care purchased out of pocket, the
same way Americans pay for cars or mobile phones or Netflix rentals. There are
some obvious challenges to getting that done: our generally incompetent public
administration; bad political incentives; complicating economic realities
(including the fact that such a large share of health-care spending happens at
the end of life and for patients with chronic conditions); inertia;
stubbornness; and the surprising stupidity, alternating with piggish
intelligence, of American corporate management.
Or, we could pass another dumb law every time somebody
complains about something.
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