*Catastrophic Care*: Chapter 11 (which shocked me)

Chapter 11 of  Catastrophic Care shocked me. Really. I could not believe what I was reading. Two passages will serve to make my point.

The first is about TruCat, the mandated, massively catastrophic insurance product. Goldhill conjures it as a non-profit, but its structure and methods of operation would obviously be established by Congress. To me, it sounds a lot like catastrophic-only (very high deductible) Medicare that makes episode-based, reference-priced payments to integrated service providers under a global budget.

Already you can feel the rules and regulations, can’t you? I bet they’d stack tens of thousands of pages high before TruCat paid a single claim. It doesn’t matter how simple it all sounds in a rough overview. This would be the equivalent of a massive, government run program forced on the American people. That may not be a bad thing! But let’s call it what it is.

This really surprised me. I did not expect Goldhill to advocate for such a thing. Not after spending at least half the book excoriating Medicare for its massive, misguided, top-down, ham-handed takeover of the health care system. Here are a few details about TruCat to give you a flavor:

To find treatment, Becky and her primary physician check the TruCat Corp.’s beneficiary website and enter her diagnosis. She finds that TruCat Corp. will pay a fixed $100,000 treatment benefit (subject to her deductible) to cover her particular stage of cancer. Becky also enters her zip code and finds that five provider groups near her home will accept the benefit as payment for full treatment. Under TruCat Corp.’s rules, all five must accept Becky as a patient at that price if she chooses them.

Each year, the trustees of TruCat Corp. are responsible for matching the total payouts under TruCat policies with the total premiums paid in. On a regular basis, TruCat Corp. updates its diagnosis-benefit schedule to reflect trends in diagnosis and treatment. It will pay benefits only to those providers who can fully treat a disease and who will charge no more than the TruCat benefit. […]

Let’s add another feature to TruCat Crop.’s structure to control costs: premiums will increase each year by no more than inflation.

Since TruCat is a very high deductible, catastrophic product, it won’t control the entirety of health spending. However, if one believes that today’s Medicare exerts too large an influence on the system, warping it toward the program’s perverse incentives, how can one argue TruCat would not do the same? After all, it would cover everyone, not just the elderly and disabled. And, how will it set all those prices? You can’t dismiss administrative price setting and then not explain how the monopoly TruCat does something else. There’s no market here. This is central planning.

Turning to what happens in the deductible range of health spending, before TruCat would kick in, Goldhill reminds us that if one’s Health Account ran dry, one could get a loan.

Health Loans would be payable only from Health Accounts, not from personal funds. So the availability of these loans allows for the smoothing out of uneven expenditures on care, without affecting a borrower’s other choices and priorities. The loans are another reason we need a Health Account contribution mandate; the required contribution allows for the Health Account itself to be collateral for a loan.

Of course, some share of society’s subsidy of care for the less well off, or the very ill, will take the form of loan forgiveness. Any American with a loan balance in excess of, say, ten years of expected payback can write the balance down to that amount. And any American who dies with a health loan balance greater than his Health Account balance could have the excess loan forgiven.

This sounds like an endless bowl of soup. Why would I stop eating? My total debt is capped at 10 years of expected payback, but if I die before I pay it all back, the residual is forgiven. Meanwhile, what I am permitted to pay back is segregated from the rest of my personal funds. My nest egg can’t be touched. That may sound good to lots of people. But it doesn’t sound like an arrangement that is going to motivate me to make any hard choices. I’ll use all the health care I want and keep my mansion too! With no pesky insurer in the middle to tell me no (not that they do that very much for most of us), how will spending go down and efficiency up?

Please tell me where I have misunderstood. I did not intend to be so hard on Goldhill, and this is not in any way personal. I commend him, and anyone, for attempting to take on as big and challenging a task as remaking the entire health system from scratch and publicly. I would not attempt it myself. I am merely trying to understand how one could possibly find so much fault with the current system (about which I largely agree with Goldhill) and then offer something that can’t possibly do much better. What am I missing? Perhaps the author will explain in the comments to this post.

Chapter 11 is the final numbered one. The book includes an Afterward, which I will read, but I may not blog about it. The rest of my posts about the book are here.


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