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Cut Medicare first

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"Social Security offers cash benefits, whereas Medicare is an in-kind benefit, in the form of health care (which in turn is distinct from health, itself another in-kind benefit)," writes Tyler Cowen. "Therefore always cut Medicare first."

I agree. This is a point I made in my column against Social Security cuts: Social Security is a program of cash transfers to America's elderly. Its administrative costs are less than 1 percent. For every dollar that goes into the program, in other words, we're getting pretty much a full dollar in value on the other side.

Medicare -- to pick just one example -- is a program that purchases health-care services on behalf of America's elderly. Those health-care services are supposed to buy health. We know that many of them don't. We also know we pay more for them than people in other countries do, and without better results. In other words, for every dollar we put into the program, it's not at all clear that we're getting a full dollar in value out of the program.

We should be reducing spending in places where we're overpaying relative to the value we're getting back. Social Security is not one of those places. Social Security is also not a primary contributor to our fiscal problem -- it requires a one-time upward adjustment in revenues because the baby boomers didn't have that many kids. The right reason to cut Social Security -- which will replace about 31 percent of the average retiree's income -- is because you think the elderly should have smaller pensions.

Medicare, by contrast, is one of those places. It's also the primary contributor to our fiscal problem (though really, the entire health-care sector is). Washington doesn't want to face up to this reality because it's still exhausted from 2010's health-care reform fight, which focused mainly on coverage and contented itself with making a start on costs, but what the budget requires is yet more health-care reform. We're not done.

Unfortunately, the party that professes to care about balancing the budget is mainly interested in repealing the few laws we've made to control health-care costs. Which gets to the reality of this discussion: We're not really talking about balancing the budget, at least not most of the time. Some people want to cut Social Security, and the deficit gives them a reason to do that. Some people want to roll back the health-care law, and they don't care if they're rolling back provisions that would reduce the deficit. Some people want to extend the Bush tax cuts, deficits be damned. In Washington, the deficit's value is that it's a broad problem that allows politicians to do what they already wanted to do, and it is ignored when it doesn't serve that purpose.

By Ezra Klein  | September 22, 2010; 12:00 PM ET
Categories:  Budget  
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Comments

Isn't Paul Ryan's voucher proposal basically designed to transform Medicare into a cash transfer benefit instead of an in-kind benefit?

Posted by: bgmma50 | September 22, 2010 12:09 PM | Report abuse

For that matter, isn't Obamacare essentially an in-kind benefit as opposed to a cash transfer benefit, and likewise subject to the criticisms you accurately make about Medicare?

At least Medicare's beneficiaries have been paying into the program for decades in return for their benefits. The same can't be said for the subsidized beneficiaries of Obamacare. However, Obamacare might be much better if it was designed as a cash transfer or voucher program, as the consumer would be motivated to search for value and put downward pressure on costs.

Posted by: bgmma50 | September 22, 2010 12:15 PM | Report abuse

How many parents are going to search for value when their two-year old's life is at stake?

Posted by: QuiteAlarmed | September 22, 2010 12:38 PM | Report abuse

The problem with this analysis is that US health -- at least, life expectancy -- is as good as Europe's after age 65.

Where we get worse health for more dollars is in the younger years where the private insurance companies predominate.

Posted by: F_L_Palmer | September 22, 2010 1:13 PM | Report abuse

Something like Paul Ryan's voucher program and health savings accounts are the only way that Medicare\Medicaid costs will ever be brought under control. Deposit a constrained amount of money every month into each enrollees Health Savings account and then let them spend it on buying a high deductible insurance policy and keeping the rest in a health savings account to pay for the deductibles and routine medical expenses. This would allow market forces to bring down health care costs.
I have a high deductible policy and a health savings account and my costs have come down drastically. Two weeks ago I nearly cut my finger off in a plumbing accident. I went to the emergency room and the doctor who saw me said that before he stitched me up he wanted to get an x-ray of my finger. I asked him why I needed an x-ray. He said that I may have cut into the bone. I asked him that even if I did cut into the bone, how would the treatment vary. He said that he did not know because if the bone was nicked he would send me to an orthopedic surgeon. I asked what treatment, other than natural healing, could possibly be prescribed for a nicked finger bone. He said that he could not think of any, so I told him I did not want to get an x-ray and I did not want to seed an orthopedic surgeon. He shrugged his shoulders and said ok. I got seven stitches and saved myself a lot of money. If someone else was paying for it I would not have hesitated for a second to get his recomended x-ray. Now that I am paying for the first $6,000 of my medical expenses every year, I have the same attitude towards doctors as I do to car mechanics. I question all of their recommendations. I have a wife and two kids and dozens of examples of how I have saved money now that it is my own. If every Medicare enrollee had similar insurance, the deficit problem would be solved.

Posted by: cummije5 | September 22, 2010 1:28 PM | Report abuse

"How many parents are going to search for value when their two-year old's life is at stake?" Posted by: QuiteAlarmed

What percentage of health care decision making falls into that category?

Posted by: bgmma50 | September 22, 2010 1:36 PM | Report abuse

A huge portion of our health care dollars are spent on treating chronic (and, incidentally, preventable) conditions like type II diabetes. Is it too much to ask that people who overeat themselves into a lifelong disease be expected to shop around a little for their treatment?

Posted by: bgmma50 | September 22, 2010 1:42 PM | Report abuse

Maybe even eat a few veggies and take walks after dinner instead of upping their meds?

Posted by: bgmma50 | September 22, 2010 1:44 PM | Report abuse

"Unfortunately, the party that professes to care about balancing the budget is mainly interested in repealing the few laws we've made to control health-care costs."

Maybe its because those laws have failed.

Posted by: krazen1211 | September 22, 2010 1:45 PM | Report abuse

"How many parents are going to search for value when their two-year old's life is at stake?"

This is a rare event when costs do not matter. Far more common is a two year old with an ear infection. Does a parent take the kid to an emergency room (cost $2,000) or go to an urgent care clinic (cost $100)? If they are on medicaid and the U.S. taxpayer is on the hook the parent will go to the most convenient place. If the parent has a high deductible policy and has to pay out of their own pocket, they go to the urgent care facility EVERY time.

Posted by: cummije5 | September 22, 2010 1:51 PM | Report abuse

"The problem with this analysis is that US health -- at least, life expectancy -- is as good as Europe's after age 65.

Where we get worse health for more dollars is in the younger years where the private insurance companies predominate."

Is health insurance status really the only variable for life expectancy? Why did life expectancy rise so rapidly before health insurance was widely available?

Don't other factors (diet, exercise, accidents, murders) matter quite a bit? Is it possible that those over 65 in the U.S. have less baggage from some of those cultural effects, and the increased quality of medical services takes over?

Posted by: justin84 | September 22, 2010 1:59 PM | Report abuse

RE bgmma50:

I would hazard to guess that a large portion of the most expensive health care choices involve life-and-death decisions that are not amenable to economically rational decision making. I would also guess that many of the most cost-effective ways to reduce health care costs (such as life style changes) involve immediate expenses for hidden or future benefits. I don't have data to support my guesses though. Any chance that you researched the question before proposing a market-driven solution to health care costs which relies on consumers to make rational choices?

Posted by: QuiteAlarmed | September 22, 2010 2:08 PM | Report abuse

If you want to cut Medicare, Ezra, then you should support Paul Ryan's proposal to voucherize Medicare. The Committee for a Responsible Federal Budget estimates that it would save $120 billion over the next 8-10 years.

Posted by: nathanpunwani | September 22, 2010 2:08 PM | Report abuse

"How many parents are going to search for value when their two-year old's life is at stake?"

Many won't but some will. Everyone is different. Many parents feed their kids garbage. I've ever heard cases of people getting a DUI with a kid in the car. I'm sure many of these same people would decide that the cheaper provider's quality is good enough. All it takes are a handful of price sensitive people to get the ball rollinig.

It is an iterative process. Going to the highest priced provider for your kid, and getting a mediocre experience, you'll probably complain to your friends and neighbors that he wasn't worth the money. Likewise, if you go with a lower cost provider that does a bang up job for your kid, word gets out that this guy does well.

It's not as if quality is high across the board under the status quo. With "free" health care, some people will still end up taking their kid to the lousy providers, but there is no competitive pressure on price and we pay more (via higher prices and utilization).

Look at cosmetic surgery or LASIK. Costs here have come down, and while it might not be life and death, don't you think a lot of people might pause before risking their eye sight or appearance for a cheaper price? People apparently do, because prices have come down here. People also go to India for surgery, because it is much cheaper there.

We have lacked a true market in health care services so long that people can't even imagine what it would be like.

Posted by: justin84 | September 22, 2010 2:12 PM | Report abuse

Also, if you want to cut Medicare since its an in-kind benefit, why not end the tax exclusion on employer provided health care benefits? The Cadillac tax is too oblique a maneuver to control health care costs and not coupled to a system where employees can opt out of employer coverage and instead buy cheaper insurance on their own.

Posted by: nathanpunwani | September 22, 2010 2:16 PM | Report abuse

If Paul Ryan wanted to voucherize Medicare, he would have voted for the ACA. Voucherizing Medicare is much more possible starting from that baseline than from the status quo.

Posted by: windshouter | September 22, 2010 2:22 PM | Report abuse

to cummije5: And I certainly hope you are not going to sue the doctor who stiched you up if something goes wrong with your finger.

to bgmma: 'What portion of the health care expenses fall into that (life or death) category?" I would major most of expenses, although certainly not most medical encounters. The kinds of things you can dicker on to save 5-10 or even 50 percent of costs are not going to save the system much money. Would you suggest that I should have dickered with Inova Fairax over it's $8000 charge for 20 1-minute doses of radiation therapy for my metastasized skin cancer? Would you have?

Posted by: guesswhosue | September 22, 2010 2:51 PM | Report abuse

Absolutely right, Ezra. Few, if any, legislators really care about the deficit. Or at least, they don't care about it as their primary issue.

krazen1211, the laws Ezra's referring to were part of the ACA and haven't come into effect yet.

But just you watch, conservatives. Your legislators will talk a big game at tea party events about repealing the ACA. They may even ride that to a majority in one or both houses in January. When the rubber hits the road though, they'll do what they always do: cut some spending on small programs that don't affect many people and repeal the revenue measures that everyone hates. It'll be the worst of all possible worlds. Big spending and no revenue. Who knows? Maybe they'll get another tax cut through.

Posted by: MosBen | September 22, 2010 2:58 PM | Report abuse

And to justin84: So you are saying you would take the advice of parents who feed their kid garbage and drive drunk while the kids are in the car - or in other words, parent who don't give a damn about their kids - as to where you should take them for medical care, esp. if it is a life and death situation?

I suspect you don't have kids; if you do, I'm sorry; if you don't, I sure hope you never do.

Posted by: guesswhosue | September 22, 2010 3:11 PM | Report abuse

The chart shows both Medicare and Medicaid combined. How much of the projected growth is actually due to Medicare alone? Remember that the recent health care legislation vastly expanded Medicaid, not Medicare.

I agree that some sort of personal accountability for expenses in Medicare and Medicaid would be a good thing. I don't know the best way to do that for a population that will often put off seeing the doc due to a $10 copay (thereby letting a small problem tun into a big expensive problem).

Posted by: Beagle1 | September 22, 2010 3:16 PM | Report abuse

"krazen1211, the laws Ezra's referring to were part of the ACA and haven't come into effect yet."


Ok, fine. Let's not claim that those provisions are actually controlling health care costs, then, because they aren't.

Thus far, numerous sources have estimated HIGHER premiums thanks to Obamacare. Team Obama itself admits that us health care spending is going up. Insurance companies are dropping child only policies.

You got your bill. Time to eat it.

Posted by: krazen1211 | September 22, 2010 3:20 PM | Report abuse

guesswhosue - I also had skin cancer and it is another example of how I negotiated with the doctor to save money. I had gone to my dermatologist to remove a growth that turned out to be squamous cell carcinoma. The doctor told me that I had actinic keratoses (rough, scaly skins patches) that needed to be treated or they would probably progress into cancerous cells. She recommended a treatment that she told me my insurance would probably pay for without saying how much it costs. When I told her that I had a high deductible policy with a health savings account, and that I would be paying for it out of my own account, she completely changed her tune. She gave me four different treatment options. She gave me literature outlining the risk and benefits of each one. She also quoted me a price for each and told me to take my time reviewing them and to let her know what I wanted to do. I was my own death panel! the treatment that she originally recommended was the most expensive one. I chose the second most expensive one and saved $1,000.00.

In your case, did you inquire if there was any other treatment options? Did you go to another dermatologist to get a second opinion and price quote? Probably not if the money did not come directly out of your own pocket.

Posted by: cummije5 | September 22, 2010 3:35 PM | Report abuse

"Any chance that you researched the question before proposing a market-driven solution to health care costs which relies on consumers to make rational choices?" Posted by: QuiteAlarmed

Type 2 Diabetes has been a pet peeve of man as regards Obamacare for quite some time, so I've read quite a bit about it. Here is but one example for you:

"The cost of treating type 2 diabetes has soared in recent years, according to new research. Medical expenditures for diabetes in the United States nearly doubled between 2001 and 2007, and the country now devotes about one out of every 10 health care dollars to treating the disease. Nearly 24 million Americans now have diabetes, according to government statistics. Rising levels of obesity mean the situation is only going to get worse in the coming years, and it is already taking a big financial toll. Research from Stanford and the University of Chicago finds that type 2 diabetes costs have nearly doubled in recent years; rising from $6.7 billion in 2001 to $12.5 billion in 2007. In part, the sharp increase is due to the way diabetes is treated. Patients are given newer, more expensive drugs such as Actos or Avandia. More patients are also treated with multiple medications. In 1994, 82 percent of patients were prescribed a single drug, compared with 47 percent in 2007. The costs add up. A person with diabetes has twice the medical costs as someone without the disease. Experts say the news should be extra incentive for those with pre-diabetes, an estimated 57 million Americans, to improve their diet and exercise habits so that they can avoid developing the full-blown disorder."
posted at http://www.wwaytv3.com/cost_of_treating_type_2_diabetes_rising/10/2008

Posted by: bgmma50 | September 22, 2010 3:42 PM | Report abuse

"Would you suggest that I should have dickered with Inova Fairax over it's $8000 charge for 20 1-minute doses of radiation therapy for my metastasized skin cancer? Would you have?" Posted by: guesswhosue

I'm suggesting that you and I both would carefully investigate value for money if we had some skin in the game, and that if this was true across the board, Inova Fairax would probably be charging a lot less than $8000 for 20 1-minute doses of radiation therapy.

Posted by: bgmma50 | September 22, 2010 3:47 PM | Report abuse

Forget the two year-old life threatening question, how about having a baby? Our first baby cost 25k and the last one was 15k. I nearly lost our first child and required weekly monitoring for the first trimester, hence the larger number. The second was a normal pregnancy. I post these numbers to point out to the "You can save money if you shop around" crowd to point out that even something as basic as having a kid is expensive. Could I have dickered with the doctor and lower the cost a couple of grand? Maybe. But whoopee-freaking do. Knock the cost down to what 20k? I have a six-figured income and I can tell you that getting handed a 20k would have been difficult to cover. Band-aid methods such as health care accounts work great if you are healthy and do not experience anything that can't be treated in one or two doctor visits.


justin84:
"Look at cosmetic surgery or LASIK. Costs here have come down, ....."

These are OPTIONAL procedures. You are not gonna die if you don't get LASIK or a boob job.

Posted by: atomicleo | September 22, 2010 4:29 PM | Report abuse

cummije5's healthcare plan:
Go to medical school.

Posted by: zosima | September 22, 2010 4:29 PM | Report abuse

zosima - when you go to get your oil changed on your car and the guy comes out with a long list of things that need to be replaced, do you just agree to all of the suggestions and then pay the huge bill? Are the only people qualified to turn down the extra stuff qualified engine mechanics? You do not have to be a doctor to question a doctor.

Why do you trust your doctor more than you trust the guy who changes your oil? They both have a profit motive to make you agree on as many services as possible.

Posted by: cummije5 | September 22, 2010 4:37 PM | Report abuse

To bgmma50: Would be helpful if you would define "value for money." The issue at hand was that the radiation was predicted to increase my chances of being around in five years to play a part in my grandchildren's lives from about 50% to about 90%? So your theory is that if it were coming out of my pocket I might not have elected to do it unless they cut the price to $5000?

Look, I'm not a dummy, I know what your point is, but my point is that your point is ridiculous. You are positing an individual solution to a systemic problem. I had no way of knowing if the radiation was 'worth it' because I had no independent way of evaluating whether it in fact would increase my chance of survival. I looked carefully into the background of the radiation oncologist to whom I had been referred by surgeon; his credentials were steriling. I assume if I had spent the time and effort to research the treatment, I would have found that the literature supported the information he was giving me. If I did not trust him enough believe his advice was accurate, why would I have trusted him to handle my treatment? And in fact, neither of us will ever know if the treatment 'worked'; if I am still here 4 1/2 years from now, there is no way to show that the radiation saved me, and if I croak before then, I won't know whether it is because the radiation fail or because my cancer was too aggressive to be halted. And as I said, the part of the medical system which accounts for the bulk of the expenses is far more likely to consists of cases such as my radiation treatment then the costs of items which conceivably might lend themselves to comparative shopping, such as the cost of a routine office visit. Systemic changes, such as the development of protocols for evidence-based treatment, are the only things that are going to get overall costs under control. And there is also the issue of the insanity of the pricing system, which is only ever going to be brought under control by a single payer system. My radiation treatments would have been $13,000, not $8000 if I had paid out of pocket; the hospital bill for my surgery, $23,000 paid out of pocket instead of the $4000 the insurance company actually paid. I don't think indivdual negotiations are ever going to deal with these kinds of nutty pricing issues.

Posted by: guesswhosue | September 22, 2010 4:48 PM | Report abuse

atomicleo - having a baby is another example of the lack of market forces driving up the costs of health care. C- section births are double here in America than in any other industrial country. Why? It is because doctors enjoy the convenience and higher profit margin of C-sections. Other countries have a better success rate for live births than we do, so you can not argue that C-sections are the medical necessities that Doctors say they are. If more women would paid for births out of health savings accounts, C-sections would go way down and the price of giving birth would go down as well.

Posted by: cummije5 | September 22, 2010 4:49 PM | Report abuse

guesswhosue - You do not understand how high deductible insurance coupled with a health savings account works. You still have insurance and you will never have to pay more for any procedure or hospital visit than your insurance company would of paid. The bill goes through the insurance company first before it comes to you. The big advantage is that you have the freedom to choose how much health care you get and from whom. You just have to pay out of pocket for the majority of it up until some threshold (such as $6,000 per year)

Posted by: cummije5 | September 22, 2010 5:00 PM | Report abuse

Why are we talking about long-term budget control? It's just the Democrats arguing among themselves. Until the Republicans show serious interest in dealing with the budget challenge -- either offering serious proposals for controlling spending or for increasing taxes -- I refuse to take it seriously.

Is it a real problem? Sure it is. But I'm willing to play chicken with the Republicans here. As long as they refuse to raise taxes, I refuse to cut any spending. Social Security? Fine shape! Medicare? Couldn't be better!

Posted by: robbins2 | September 22, 2010 5:18 PM | Report abuse

"Forget the two year-old life threatening question, how about having a baby? Our first baby cost 25k and the last one was 15k. I nearly lost our first child and required weekly monitoring for the first trimester, hence the larger number. The second was a normal pregnancy. I post these numbers to point out to the "You can save money if you shop around" crowd to point out that even something as basic as having a kid is expensive. Could I have dickered with the doctor and lower the cost a couple of grand? Maybe. But whoopee-freaking do. Knock the cost down to what 20k? I have a six-figured income and I can tell you that getting handed a 20k would have been difficult to cover. Band-aid methods such as health care accounts work great if you are healthy and do not experience anything that can't be treated in one or two doctor visits."

The government and the nation spends over 20% of its budget on healthcare. Why can't you?

Posted by: krazen1211 | September 22, 2010 5:48 PM | Report abuse

To cummije55: Yes, I undestand fully how high deductible policies with health care savings account work. And I have thought it through enough to realize that under these policies, consumers would have no reason to give a rat's patottie about costs once the deductible is met. So unless you think the bulk of health care costs are caused by procedures which cost less than the average deductible, there is no reason why such policies would result in significant reductions in overall healthcare costs.

For the record, I am fanatically careful about health care costs that I control. I spend hours during open season every year examining by alternatives, I use an HMO instead of a far more convenient fee for service policy, I always get generics when possible for myself, and also monitor my boneheaded husband's medications to make sure he is getting the most cost effective medicines possible, since he refuses to learn anyting about how our insurance policy works. But I can't do a darn thing about a hospital which would be willing to hound me for $23,000 to pay for services which they are willing to provide for $4000 if they get the check from a company, instead of from me. The only thing that can cure that is single payer. I understand that the State of Maryland sets costs that hospitals are allowed to charged, BASED ON THE COST OF THEIR INPUTS. I visit the Bay State frequently, and I haven't noted any dead bodies lying on the streets, so I have to assume that this is not ruining their health care system, and I understand their hospital costs are 20% below national averages, even though a good part of the population lives in high cost areas in the DC suburbs. National single payer would have the same salutory effect. Is their some reason we are so d_mn different from the rest of the industrialized world that it would not work for us?

Posted by: exgovgirl | September 22, 2010 6:13 PM | Report abuse

"I know what your point is, but my point is that your point is ridiculous" posted by guesswhoseus

Actually, my point was specifically and explicitly made about chronic diseases like type 2 diabetes, but you wanted to change the subject to your radiation treatments. Your dialogue about what your insurance company paid proves my point that costs are always negotiable, and I doubt very much that you know what the costs to you would actually have been had you paid the bill yourself, all you know is what the sticker price is.

Posted by: bgmma50 | September 22, 2010 6:16 PM | Report abuse

"Could I have dickered with the doctor and lower the cost a couple of grand?' posted by atomicleo

If you were spending your own money, and knew that your pregnancy was normal, you might very well have chosen to use the services of a nurse midwife. Lots of other people do, anyway.

Posted by: bgmma50 | September 22, 2010 6:24 PM | Report abuse

"Is their some reason we are so d_mn different from the rest of the industrialized world that it would not work for us?"

Yep. Its called our government.

Posted by: krazen1211 | September 22, 2010 6:27 PM | Report abuse

"But I can't do a darn thing about a hospital which would be willing to hound me for $23,000 to pay for services which they are willing to provide for $4000 if they get the check from a company, instead of from me." posted by exgovgirl

How do you know that the hospital wouldn't have been willing to provide those services to you for $4000, if you had that much money in an HSA and were willing to negotiate the fee?


Posted by: bgmma50 | September 22, 2010 6:28 PM | Report abuse

I actually suspect that, not too many years hence, we will all be more experienced negotiating fees with physicians, because many of the good ones will begin to offer discounted prices to cash paying patients, and even refusing all Medicare, Medicaid, and Obamacare patients altogether.

Posted by: bgmma50 | September 22, 2010 6:33 PM | Report abuse

Mr. Klein of course speaks as a childfree twentysomething with a nice jobs, access to corporate health benefits, no significant health problems and who is presumably not caring for aging parents. Come back in 25 years Ezra and let us know how you feel about chopping Medicare.

sPh

Posted by: sphealey | September 22, 2010 6:59 PM | Report abuse

I've been on Medicaid for nearly 20 years. I've watched the quality of care go down to the basement because it has been privatized.

I don't know about anyone else, but I get real tired of going to doctors, especially doctors who seem to blame ME for the fact they aren't getting paid well.
I also don't know too many people who get surgery or anything else for THE FUN OF IT.
Everybody seems to act like it's the patient's fault, when, many times I get bad advice so the doc can make more money off the little there is left after the HMOs have taken their big cut.

THAT'S what ruining these programs, not people doing stuff they don't need.

They always tell us to be informed medical consumers, but if I question a doctor, he usually gets mad. And I don't really want someone cutting on me or working on my teeth who has ego issues.

Such a stupid and soulless way to think of your fellow Americans that they will scam if they can, when it's the corporations who do most of it.

Posted by: KassandraTroy | September 22, 2010 7:17 PM | Report abuse

exgovgirl - You say that you understand how high deductible insurance plans with a health savings account work, but I am sorry to say that apparently you do not. You said "But I can't do a darn thing about a hospital which would be willing to hound me for $23,000 to pay for services which they are willing to provide for $4000 if they get the check from a company, instead of from me." That would never happen. The way it works is this way : 1) the hospital would send the $23,000 dollar bill to the insurance company. 2) The insurance company would reject all but $4,000 of the bill 3) The insurance company would send you a statement letting you know what they agreed on with the hospital. 4) The hospital sends you a bill for $4,000.

Exgovgirl, being a diligent overseer of your health care expenses, you would do well to get one of these plans. Open season for most places is next month, why don't you try it? You could always switch back next year. You would probably save a lot of money and it would open your eyes to the best hope we have as a country to solving our Medicare/Medicaid crisis.

Posted by: cummije5 | September 22, 2010 7:23 PM | Report abuse

"And to justin84: So you are saying you would take the advice of parents who feed their kid garbage and drive drunk while the kids are in the car - or in other words, parent who don't give a damn about their kids - as to where you should take them for medical care, esp. if it is a life and death situation?

I suspect you don't have kids; if you do, I'm sorry; if you don't, I sure hope you never do."

guesswhoseus,

Let me spell it out clearly to avoid having to watch you take down another straw man, though quite a tackle it was:

Not-everyone-is-exactly-the-same. People-are-more-cost-conscious-when-they-are-spending-their-own-money.

It's a wide spectrum. The parents who drive drunk with their kids in the car are just one end of the spectrum. The purpose of mentioning it was to demonstrate that some people are going to shop for value - certainly the same ones who couldn't be bothered to find a DD when their kid was with them. The value shopping almost certainly extends to parents who care a little bit more about their kids. I didn't say anyone *should* follow the advice of people who drive drunk with their kids in the car. Only that under market conditions *some* people are going to be price sensitive and that allows us to have a competitive market.

If you had decided to read on, you might have taken that in conjuction with my comments regarding LASIK and cosmetic surgery. People care a lot about their eyes and apperance, and yet they are apparently willing to bargain when it's their own dime as prices have indeed fallen in real terms. Heck, people travel to third world countries for more serious surgeries *to save money*.

There are pretty much two ways to hold down prices - by government fiat or by market forces. Government price controls have a long and storied history of negative effects. Right now, we largely have neither method of price control in place.

Posted by: justin84 | September 22, 2010 7:56 PM | Report abuse

to cummije: Yeah, I could save a lot of money - unless my cancer recurs, in which case I would be out $6000 vs, the $1000 in copays I spent on my $28,000 of treatment this year ( which was billed by the insurance companies at over $100,000). You assume your cancer won't come back - I assume I need to protect my family's dwindling assets (dwindling thanks to Republithug raping of the economy, not any profligacy on my part) against the possibility that it does. I guess that is why high deductible plans and other Republithug cr_p appeals so much more to men then it does to women - men just 'assume' everything is going to turn out right, and then look around for a woman to clean up the mess when it all goes to h_ll.

Posted by: guesswhosue | September 22, 2010 8:05 PM | Report abuse

"These are OPTIONAL procedures. You are not gonna die if you don't get LASIK or a boob job."

atomicleo,

But you could easily die of a botched surgery. Or merely look hideous. Or in LASIK's case your eyesight is at risk.

Yet some people decided that the extra risk was worth the money and shoppped for value, as prices have come down.

Eating food isn't optional, but the market handles that one pretty well. It's not whether or not an activity is optional, it's whether or not one has skin the game and alternative options.

While food is cheap and it sounds like a silly comparison, food would not be cheap under a single payer food system. Everyone would try to eat as much of the nicest foods as possible at the nicest restaurants. Food insurance premimums might be $3,000/mo for a family of four. It would be declared unaffordable, and we'd have to have subsidies on a sliding scale so the poor could have access to food, perhaps FoodAid for the very poor. Those wily free market types would be attacked for wanting to turn FoodAid into a voucher system called Food Stamps so the poor could buy food on their own and grocers would have incentive to offer value for money.

Posted by: justin84 | September 22, 2010 8:11 PM | Report abuse

"Forget the two year-old life threatening question, how about having a baby? Our first baby cost 25k and the last one was 15k."

You do realize that you actually did pay both of these bills, right? You just had a middle man do it for you, for a fee, and you didn't shop around for the price.

The average family paid $88,935 for health insurance in the 2000s. It will probably be something like $190,000 for this decade.

http://www.usatoday.com/money/industries/health/2009-09-15-insurance-costs_N.htm

Most couples have children. It isn't really an insurable risk. It sounds nice to have 'the insurance company' pay those big bills, but in reality if it happens to most people, then most people are paying. Maybe some sort of insurance could be applied to unusual circumstances, but covering normal childbirth isn't insurance, it is pure cost insulation.

"I nearly lost our first child and required weekly monitoring for the first trimester, hence the larger number. The second was a normal pregnancy. I post these numbers to point out to the "You can save money if you shop around" crowd to point out that even something as basic as having a kid is expensive. Could I have dickered with the doctor and lower the cost a couple of grand? Maybe. But whoopee-freaking do. Knock the cost down to what 20k?"

I'm sorry to hear about that.

It's hard to imagine a market working when you're stuck in the cost insulation system. If most people had first dollar coverage for food insurance, it would be hard to find a nice meal for a good price too. The only choice would be to funnel more and more and more money into food insurance.

"I have a six-figured income and I can tell you that getting handed a 20k would have been difficult to cover."

Again, you probably 'covered' $90,000 worth of health care spending before your out of pocket costs last decade. A good deal more if you were in a high cost area.

The $2.5 trillion we spend on health care each year doesn't come from the money tree. It comes from all of us. It is given to a third party, who adds a fee and then gives it to a provider who doesn't have to worry about a price sensitive customer.

Posted by: justin84 | September 22, 2010 8:28 PM | Report abuse

To justin84: Yes obviously, the money we spend on health care, to the extent that it is paid through insurance, is obviously money that comes from all of us. We pay an affordable amount at regular intervals so that when we encounter an expense that is unaffordable, it will be covered. Riddle me this, justin84: if you only pay into the system the amount need to cover your actual care each year, then where would the money from come to pay for your care when you encountered an expense which exceeded your deductible. That is the problems with the Republithug 'ownership' socieity - individuals get to keep all of the upside of their 'own' efforts ( and their success, of course, has nothing to do with the fact that they live in what at least used to be an advance, wealthy society with stability and vast infrastructure resourses) - however, once something goes wrong, society is supposed to cover the downside. This is the essence of the argument about insurance about the insurance 'mandate' - I have no problem with people not having insurance as long as they get a tattoo in a prominent place saying that they don't have insurance (or only have it for costs over $6000, if they have a high deductible policy and should therefore not receive medical treatment until the provider has verified that they have enough money to pay what they will owe out of pocket. But that's not the way it works, is it?

And if government price controls have " a long and storied history of negative effects", then why do countries which have these controls spend as much as 50% less than we do on medical care as a percentage of GDP, with better overall results? Oh yeah, I remember, they might have to wait a few weeks for a hip replacement. That's a fate that's certainly worth 8% of GDP to avoid!

Posted by: guesswhosue | September 22, 2010 8:58 PM | Report abuse

I've had both a high-deductible HSA and a regular policy, as I'm sure the other HSAers have.

My (kind of) counterexample to you, cummije5, is that I tore my calf muscle a few years ago, and, given that I was unsure of the treatment options and my money was relatively tight, I decided to forego more aggressive treatments to see if it would heal on its own. It didn't. Not fully. It healed somewhat, but it's now a recurring injury.

So in hindsight, I should have, and probably would have, gotten more aggressive treatment. I absolutely would have done with a plain, vanilla policy.

Of course, that's the result of erring on the cheap side. If I had perfect information, I would have gone for the more aggressive treatment even with my HSA, but I didn't.

I will say that having the HSA, forced me to be *far* more cognizant overall of the treatment costs involved for everything. I don't know if this was better for me, personally, but I think it was a net gain for the rest of you out there who would otherwise have had to help pay for my costs.

Others have made the valid point that these plans really don't help hold down expenses in cases that are higher than the deductible. I'm not sure how the math works out, but I imagine the bulk of health care costs is for catastrophic events that would not be helped by even these high-deductible plans. However, that also doesn't mean they are worthless.

Even I, a Republican-hating socialist, agree that some sort of combination of "skin in the game," along with other remedies and a responsible safety net, are what we need.

Posted by: dpurp | September 22, 2010 9:27 PM | Report abuse

"And if government price controls have " a long and storied history of negative effects", then why do countries which have these controls spend as much as 50% less than we do on medical care as a percentage of GDP, with better overall results?"

Singapore spends 60% less as a percentage of GDP than Europe, and gets more or less better results. It also includes a large 'skin in the game' portion, though it also has a lot of coercive measures that improve health that don't jive well with me personally though I can't dispute the effectiveness.

http://www.healthbeatblog.org/2008/07/health-care-in.html

The primary driver for the 'low cost / good result' disparity is that health outcomes are mostly determined by things other than health insurance: exercise, diet, accidents, murders, smoking, basic sanitation, etc. European countries are often better on a lot of this dimensions particularly exercise, diet and fatal injuries. Health care spending is quite often ineffective and in some cases downright harmful.

http://www.rand.org/health/projects/hie/

Where health care spending might be effective, there is evidence that the U.S. system is actually fairly good in terms of results.

http://papers.nber.org/papers/w15213#fromrss

Why does the U.S. spend so much? Well, the U.S. has the same cost insulation problems as the Europeans but far less political will to keep a lid on costs by fiat. This allows greater utilization of services (good, bad and ineffective), at greater unit prices.

Some people fall through the cracks in other countries (the wait times you cite can be many months or even a year, depending). So if a Canadian waits 9 months for a hip replacement surgery, sure they won't die but it sure is painful waiting, isn't it? The UK's NICE believes it is cost effective to let some patients go blind (well mostly blind - one has to go, and the other needs to be on its way). It also says no to a cancer drug for advanced kidney cancer patients because, hey, whats an extra couple months of life when it costs 'the system' too much? 8% of GDP sounds great until the system leaves you blind against your will or tells you that instead of 5 months to life you have 2. And maybe 2 months of life would have been the choice you would have made anyway, but you didn't get to make the choice.

http://www.timesonline.co.uk/tol/life_and_style/health/article1929339.ece

http://www.independent.co.uk/life-style/health-and-families/health-news/nhs-denies-effective-cancer-drugs-due-to-cost-888385.html

Posted by: justin84 | September 23, 2010 1:09 AM | Report abuse

"Yes obviously, the money we spend on health care, to the extent that it is paid through insurance, is obviously money that comes from all of us. We pay an affordable amount at regular intervals so that when we encounter an expense that is unaffordable, it will be covered."

We go far beyond this. Much of our health care expenditures are prepaid expenses rather than insurance.

"Riddle me this, justin84: if you only pay into the system the amount need to cover your actual care each year, then where would the money from come to pay for your care when you encountered an expense which exceeded your deductible."

The average American family paid $90,000 for insurance in the 2000s. If the American family paid for a real catastrophic policy (either event based or super high deductibles), it could have put something like $60-70,000 into savings during this decade, and most would have had tens of thousands left in their savings accounts at the end of the decade, ready to grow more. Using event based insurance (I'm really not sure if this is feasible, but don't worry I wouldn't force it on anyone), a large lump sum paid up diagnosis would allow individuals to bargain with doctors even on very expensive treatments.

http://www.techcentralstation.com/article.aspx?id=092804C

This guy makes a pretty persuasive case that not controlling our health care dollars is a huge problem. He calculates that a 22 year old today (or a year ago) will have $1.77 million spent on his and his family's behalf over the rest of his life - if health care cost growth is contained.

There is always the worry voiced that people won't get enough 'preventative' care if they have to pay for it. This raises the question of why anyone should pay for something for another person that they are unwilling to pay for themselves? The saddest part is that people actually ARE paying for their preventative care, but they pay their insurance company for the privilege of receiving more expensive care. But the point is we don't necessarily want people thinking they need to choose between preventative care or none, but to be able to shop between providers based on price, quality, references, location, hours, etc.

http://www.theatlantic.com/magazine/archive/2009/09/how-american-health-care-killed-my-father/7617/

On top of all of this, we have already seen that the primary determinant of health isn't health insurance. However, we do know that Americans (and people in general) put a whole lot of faith in medicine, more than is probably warranted. Decreasing cost insulation would help offset that. If medicine is more expensive, more people who are really worried about their health might cut down on the Pepsi and eat more vegetables and sign up at the gym. If they don't, that's fine it is their choice, but their choice isn't subsidized by other people.

Posted by: justin84 | September 23, 2010 1:28 AM | Report abuse

yes it is very true that major brands always give out free samples on health products check out http://bit.ly/dry4WG tell your friends also

Posted by: chadwick23 | September 23, 2010 3:43 AM | Report abuse

Ezra, if the only thing that mattered to the citizenry was the federal deficit then cutting Medicare would be "good". But really, the people care about "health" and the cheapest provider of "health" via health insurance is Medicare (or maybe the VA medical system). Employer provided health insurance provides "health" at a higher cost (if the pool is risk adjusted). Private health insurance is about providing "insurance", not about providing "health". Private insurance plans try to exclude the potentially unhealthy from coverage by cherry picking on intake or rescission when a major cost claim arrives.

Could you PLEASE run another post to highlight efficiency in providing the "health" benefit and what you would cut to most efficiently allocate the resources of the US (government and personal income) to provide "health" for the citizenry?

Posted by: grooft | September 23, 2010 8:21 AM | Report abuse

Paul Ryan's proposal to provide a voucher is will only save the federal government money by forcing individuals to pay more or not get health care. It will be much more wasteful than Medicare in providing healthy outcomes. People will die (earlier) due to inability to come up with cash to get medical services.

Posted by: grooft | September 23, 2010 8:25 AM | Report abuse

But of course, if everyone had a high deductible policy, the costs of those who chose Pepsi over vegetables and trips to the gym WOULD be paid be everyone else, since coronary bypasses, hip and knee replacements, foot amputations for diabetes, etc., would almost certainly be above the deductible, and therefore mostly paid for by insurance. Yeah, they would have to pay the $10 every three months at Walmart for their own blood pressure meds, but that isn't going to make much of a dent in the overall cost of medical care.

Posted by: guesswhosue | September 23, 2010 9:15 AM | Report abuse

On the other hand, if they have to feel the pain of paying for their daily meds and testing supplies, they'll do something about their diet and exercise and obviate the necessity for coronary bypass, hip and knee replacements, foot amputation, etc.

Posted by: bgmma50 | September 23, 2010 1:41 PM | Report abuse

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