Newsflash: Health insurance is expensive. OK, so that's not news to anyone. But what may be news to you is why insurance premiums are so high. A common explanation is that insurance and drug companies are greedy. This narrative is used to justify more intervention in healthcare markets by both state and federal governments. Some familiar voices are even calling for a socialized system like Cuba's. Hilary Clinton's recently announced individual mandate plan doesn't go quite that far, but looks like a cross between Massachusetts' Mittcare and European socialism.Borders goes on to discuss three "major health insurance pathologies"; here's quotes about two of them:
Likewise, the well-respected AMA is urging us to "cover America's uninsured." But how? Socializing medicine is a good idea if you want to wait three months to mend your broken leg, get your healthcare from the physician's equivalent of the DMV, and have your taxes go through the roof.
- Employer's Choice Problem
Question: You can get insurance through your employer and get big tax benefits from doing so; or, you can buy it on the individual market and get no tax benefits at all—which do you choose? Most rational people opt for employer benefits. And that's exactly how the tax code stacks the deck against individual insurers and consumers. That means you not only have far fewer choices, but your insurance isn't portable if you change jobs. Companies like the Big Blues (BCBS) or Anthem dominate the market within a state because - not only can they avoid out-of-state competition - but they don't really have to compete for your dollar directly. Instead, they invest largely in attracting your employer's business. But again: lack of competition means higher premiums and fewer consumer choices.
- The Expense Account Effect
When you dine out on the company card, do you order the $9 chicken with rice pilaf or the $19 filet mignon? If someone else is paying, you'd be silly not to take the steak. But this kind of over-consumption pervades our healthcare system. The incentive structure we operate within makes us rather like teenagers who leave the lights on because they've never had to pay the power bill. In other words, people are far more likely to go to an MD for sniffles if they are shielded from the total costs of the bill. Or what might otherwise be an out-of-pocket purchase of Viagra gets dinged to the insurance pool. Why should anyone behave otherwise? We've created a system that isn't insurance at all: Claiming a throat culture on your insurance would be like claiming an oil change with Geico. Costs skyrocket—particularly since many of the new treatments we want are astronomical, whether or not they're necessary.
People fail to recognize trade-offs. For example, Brownlee writes (p. 10),Read the whole thing--both articles."in politics, overtreatment is routinely left out of any discussion of health care reform. That's partly because getting rid of it smacks of rationing. But rationing is when you deny patients health care that could potentially help them...Rationing is when you limit the number of MRI machines in order to discourage doctors from ordering an MRI test for a patient. But getting rid of overtreatment, care that's useless and potentially harmful? That isn't rationing; that's improving the quality of medicine."It's also hindsight bias. We do not know ahead of time whether that "unnecessary" MRI is going to discover a malignant tumor and save a patient's life. Such was the case in an example that I used as an anecdote in my book, Crisis of Abundance, in order to illustrate the dilemmas and trade-offs in modern medicine.As I write this, my mother-in-law just underwent knee replacement surgery. This could turn out to be "useless and potentially harmful," or it could enable her to use the toilet herself and thereby postpone the day when she needs to be in a nursing home.There is a great deal in Brownlee's book that is insightful, and I plan to return to it in future essays. But its value is diminished because of pervasive hindsight bias. She writes as if the errors of overtreatment can be avoided at no cost. In fact, there are a number of potential costs. The cost might involve undertreatment for some patients. Or it could involve putting significant resources into medical decision-making.
It is fair to say that the biggest challenge for health care policy is to make the best trade-off among these costs -- the cost of overtreatment, the cost of undertreatment, and the cost of resources used in the decision-making process. Hindsight bias instead makes it appear as if such a trade-off does not exist, and that only ignorance and greed are preventing better outcomes.