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About Me
- Scott Schaefer
- I'm an economist with interests in Management, Strategy, Human Resources, Finance, Organization, etc, etc. More than just supply and demand here (although you'll get some of that too...)
I use this blog to stay in touch with former students, and also to try to make economics a little more understandable for regular Utahns.
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5 comments:
Can we take this one stop further? When insurance companies are required to cover all who apply (i.e., not deny those with preexisting conditions, etc.), is it possible that providing health insurance for all may become unprofitable for the insurance companies? If so, perhaps then the insurance companies will just get out of the health insurance business altogether and we can move to a single-payer system, which is what we need. It would be nice if we could speed up this process (perform major surgery on the health insurance industry rather than apply bandaid therapy) and just enact a single-payer system to begin with. Thanks for listening. I remain interested in your opinion.
Reva Rosenband
Logan, Utah
Scott,
Thanks for your Op-Ed piece in this morning's Tribune. I have been looking for someone to help me understand economics, and your blog seems to be just the right answer. I am currently reading Paul Krugman's book, "Conscience of a Liberal," and intend to become a follower of your blog. Thanks for making yourself available!
Reva asks why not just go to single payer.
I've blogged some thoughts on this before, so I'll just link to it
I think I'll light the fire of discussion. Been a while since I checked for a new post. The reasons in the Op-ed are good. It's what I would expect from Prof. Schaefer.
Reason 1, while it's only 1.5% of our expenditures, that's still a lot of money. We're still talking $450MM. I'd like to know how many people were treated with that $450MM each year. Would it have been cheaper for everyone had those people had insurance? I don't know. I think this is factored into Reason 4.
Reason 2, totally agree. With auto insurance, you don't have to drive a car. You have other options. With health insurance, no other option is available.
Reason 3, I don't know enough about the results of the MA health plan. Is it actually working? Were costs actually lowered? Did service improve?
Reason 4, this is something you taught in your class that I remember. It is the risk that insurance companies take. But, health insurance companies have access to the Medical Information Board (MIB) to check on the accuracy of the information you provide. Insurance companies know more than you think.
Generally, the reason for the higher cost for small employers is that there are fewer people to spread the risk. The rates are set based on age of the oldest person in the family that is insured. I believe that's standard on all plans. But depending on the number of employees, the insurance companies have the option to "rate up" the standard rate charged to all employees of the plan.
Generally, if you go with individual insurance, it costs less because you can be denied by the insurance company. With small employer plans of 2 or more participants, they have to be acceptted. So, if there are 3 employees, and a couple of them have a history of medical problems, the insurance company cannot deny them. But, the insurance company can "rate up" the plan by up to an additional 85%. That was a figure I learned about 2 years ago. Don't know if that's changed.
So, it's not an issue of the person not being able to get insurance. It becomes an issue of the person affording the insurance. If the standard family rate of a plan is $500 a month, but you're on a plan that is "rated up" 85%, you'd be looking at $925 a month. Most individuals with small employers don't want to pay that.
So, does an individual mandate make sense? From a discussion standpoint, it depends. From a personal standpoint, I say no. Insurance is a business. It should operate as such. If people have the opportunity to have insurance, but choose not to, let them reap the consequences or the benefits. But it shouldn't be something that is forced.
@Reva,
Scott's article is good. I do not like a single payer system (SPS) for the same reason I don't like monopolies. In both, the consumer loses. They lose in the quality of the product along with the cost.
If the insurance companies got out of the health care business, who would be there to run the business? There are "infrastructure" costs. In a SPS what would be the incentive to keep the costs down? You could say they could be mandated but I don't think it would happen. If you cut payments to doctors and hospitals, those doctors and hospitals can choose to not be part of the SPS.
Most hospitals operate as non-profits. That's part of the reason why they're struggling. If an SPS administration reduced payments to hospitals for services, you would see more hospitals close. While costs may not go up because the hospitals close, you might see an increase in service time. From an operations perspective, you have a bottleneck based on hospital beds and doctors. It makes things work.
But for those doctors that choose not to be part of the system, it'll go right back to basic capitalism. Those that don't want to be apart can charge what they want. Those that are frustrated with the SPS will pay the higher price. An "insurance" plan will be developed to mitigate costs. Doctors get more patients and more business, costs will come back down again. Those frustrated with the SPS will weigh the reduced cost of SPS against the long wait times to get service.
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