• Coming clean on catastrophic

    In an email exchange with Jed Graham about his post, I wrote,

    I suppose if the catastrophic premium were low enough, the deductible is almost irrelevant. I mean, yeah, people may not be able to afford it, but in a case of a real catastrophe, at least the liability (whether the patient’s or, ultimately, the providers’ if the patient can’t pay) is limited.

    It argues for universal catastrophic (with income-sensitive subsidies, both for the premium and the deductible), which I would support. Of course, some may want to fill in below that, which I wouldn’t object to either. But they should do that with their own funds.

    I figured I ought to share this with readers since many seem to think I’m anti-catastrophic. Clearly, I’m not. It is probably fair to say that, once upon a time, I hadn’t thought things through enough to be sure how I felt about something like a universal catastrophic scheme. It’s also fair to say that John Goodman’s book deserves some credit (or he does, really) for helping me do that thinking. Although, to be totally fair, I deserve a lot of credit for wading through the heap of absurdities I found in his book before extracting the few nuggets I think have merit. And, finally, he also deserves credit for taking licks like “heap of absurdities” in stride. Say what you will about John, but he’s a good sport.

    But enough with the Goodman love fest. I’ll conclude by noting two things. First, a pro-skin-in-the-game (to the extent  affordable, in some sense) position is not the same thing as a pro-repeal-Obamacare position. Far from it. These are reconciled by the recognition of political constraints and realities. (Where’s the coalition for a replacement?)

    Second, employer-sponsored insurance is gradually moving toward higher deductibles anyway. I think this is inevitable. The big question is the extent to which other publicly subsidized programs from Medicare to Obamacare will be modified to follow and support this evolution, and even help it work better.

    I’ll quit now and take my abuse in the comments. Let’s see just how thick my skin is.

    @afrakt 

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    • “since many seem to think I’m anti-catastrophic. Clearly, I’m not.”

      Catastrophic insurance is a high deductible and probably should be a lot higher than many might believe as demonstrated by the complaints we see against the relatively low deductibles seen today. Milton Friedman defined what he considered to be a catastrophic deductible 25% of income though he reduced that amount in the year 2,000 to $4000 to $5,000 which would be a lot higher today.
      http://www.hoover.org/multimedia/uncommon-knowledge/26956 (useful thoughts in both video and text.)

      Maybe catastrophic deductible’s should be even higher and last for 3 years so the usual medical catastrophe is almost always over.

      As far as John Goodman goes, he is mellow when faced by criticism and doesn’t always respond when the criticism itself is inadequate or requires pages of response to each item where the book already explained these things. One has to recognize that despite similar jeering he is known as the ‘father’ of HSA’s one of the only solutions, if not the only solution that actually worked the way intended.

      “Second, employer-sponsored insurance is gradually moving toward higher deductibles anyway. I think this is inevitable.”

      Of course it is. Eventually the market must be reckoned with.

      I think the video/text provides a methodology of a way things should be done, and as usual the witty Friedman answers the problems raised by the host and says “That’s why I am not a politician”.

    • Coming clean on catastrophic…..

      brought to you by The Onion

      (just dont tell us you are having Betsy McCaughey over dinner tonight)

      🙂

      • Next week I’ll write a similar post about single payer. 😉

        (Actually, single payer and catastrophic are not mutually exclusive. Again, Singapore, if we can call that “catastrophic.”)

    • So, I think there is a case to be made that health expenses fall into two categories. There are very predictable, expected costs — I am going to get a flu shot every year, a colonoscopy every five years, a cholesterol check every six months — and then there are the unpredictable, unbudgetable costs — a car accident or a stroke.

      Right now, we try and cover both kinds of costs through the same mechanism. That may be OK, but I think it is not silly to ask whether we want to lump both expenses together, or to treat them separately.

      High deductable, “catastrophic” coverage kinda sorta distinguishes between these costs, but not very well.

    • So, free yourself from “political restraints and realities” for a moment and describe the system you would want. Is it Singapore?

      • Me:

        Singapore’s system is a lot like universal, mid-range deductible Medicare with a mandatory health savings account (HSA) plus Medicaid for the poor.

        I would be comfortable with that.

    • The praise for Singapore illustrates a point that I have mullling over for several years…………….

      namely, that every modern health care system requires some type of legal or financial coercion if it is going to be available to all.

      Singapore appears to force everyone to pay taxes for catastrophic care, sort of a Medicare for all Part A;

      and then Singapore appears to one step further and force everyone to save in an HSA.

      (this is not the first time that a growing nation has used forced savings to improve the nation).

      The American liberals who support the ACA are willing to use force
      (albeit in very modest doses) to force people to buy private health insurance.

      American libertarians who frequent Goodman’s interesting blog seem to pretend that force will not be needed,

      Of course, they say nothing about hospitals who use force in effect to collect medical bills from the underinsured.

      The appeal to me of a Canadian-like system is that the force is not disguised. It is right up front as a tax on all citizens.

      This might be a concept to keep in mind, Aaron. Thanks for all your work.

    • I have always been open to the idea of universal catastrophic insurance, but the details matter. Where do you set the deductible? Do you do it as a percentage of income or in absolute dollars? How does this work for younger people having children?

      Steve

      • Agreed. Where people misunderstand me is that I do not decide on an ideal system and then defend it at all costs. I’m open to many reforms, but reserve the right to evaluate each on specific details and pick and choose what I like and don’t. Above all, I’m more interested in a full evaluation, in light of evidence. Everything has both strengths and limitations.

    • I’m not sure whether I was complimented by Austin, or not — but I won’t dwell on that.

      Only thing I would add to this discussion is that I really hate to see the focus be on whether the expense is large (catastrophic) or small. Some cosmetic procedures are very expensive. Some cancer care drugs are cheap.

      The question is: when is it appropriate for patients to make their own decisions, spending their own money, and when do the other members of an insurance pool have a legitimate interest in those decisions? In the former case, we don’t need deductibles at all. We can carve out entire areas of care that will be within the domain of individual choice.

      I don’t want to be the only one thinking this way. I wish we could engage many others.

      • John, I’m with you on this. And I was complimenting you. I still don’t agree on many other views you hold, but they don’t seem central.

      • We have already done that to a large extent. Insurance does not cover cosmetic care or much of anything that is completely elective. I also think that you are avoiding the cost/money issue. There are plenty of people sympathetic to the concept, but you need to show how it can and will work. You need real numbers.

        Steve

    • Dr Goodman is right that we should carve out entire areas of medicine and leave them up to consumer choice.

      The challenge then is that the areas which are ‘left over’ for collective responsibility will in general be the expensive ones.

      Let me apply this standard to the Medicare population.

      Let us say that office visits, diagnostic testing, and generic drugs were removed from the standard Medicare package. Whether this is done by altering Plan B, or by imposing a $5,000 deductible, is an important issue but too big to tackle in this little paragraph.

      Medicare would be left to cover inpatient surgery and post-hospital rehabilitation. Chemotherapy and dialysis would be covered also even though they are not always performed in hospitals.

      This would still require about two thirds of Medicare’s current spending, or about $380-$400 billion a year. So not cheap, although less than we are paying now

      The comparable numbers for those under 65 would be calculated a little differently. I would hazard a rough guess that catastrophic care for those under 65 would cost about 20% of what a comprehensive policy for all would cost.

      In an online article for The Atlantic last year, Avik Roy said that he would back a social insurance program for what he called the 20 per cent of care that is truly non-discretionary.

      I think that is great. It is something that liberals and conservatives could unite behind.

      However, Mr Roy would have to agree to some sort of new tax to fund this benefit. Maybe the way to phrase this is that a new tax for ‘catastrophic social insurance’ will be less than the taxes coming from the ACA.

      But it is still a new tax. That is a potent political barrier.

      Bob Hertz, The Health Care Crusade