Randy Ellis’s recent paper in the International Journal of Health Care Finance and Economics is titled “Five questions for health economists“. But that’s misleading, there are many more than five questions in it. Counting the implicit ones, there are scores of them, such as this:
At this point you can easily see the disconnect between our demand models and our own behavior as consumers, since as individuals we would almost unanimously agree that if we were to suffer a serious accident or misfortune, we would want to be in a generous plan, not a stingy plan that imposes serious ﬁnancial burdens. Our paradigm for thinking about how to measure welfare losses is contrary to the way we behave in our own choices and health plan preferences, as well as our expectations of what is a reasonable response when someone faces a serious accident, a surprise attack of multiple sclerosis or some other major chronic illness.
In the context of insurance, whether public or private, health care spending presents a classic collective action problem. If I’m helping to pay the bill, it’s only rational that I only want you to receive necessary care and that I want your physicians to practice judicious care. Likewise, if you’re paying the bill, it is only rational that I want you to “mind your own business” and pay for whatever care I and my doctors want. My care is useful and appropriate. Yours is wasteful, even counterproductive. Stop it!
Of course, if we share an insurance product or program, we are both receiving care funded from the same pool. The only way to manage that pool consistently is to agree in advance how to assess what care is and is not reimbursable. Nobody likes constraints, but nobody likes his money wasted either. My guess is that we can all agree that there is an awful lot of the latter going on in health care. We can’t all be free of guilt and responsibility for that fact. It’s more likely true that we all receive, even demand, some care that is not as valuable as its price.
Here’s an unrelated quote from Ellis’s paper that caught my attention:
Michelle Miller (2012) (one of my own Ph.D. graduates now at Rutgers) has a terriﬁc working paper on bankruptcy ﬁlings which is also a chapter in her dissertation. She notes, “In 2010, over 1.5 million households ﬁled for bankruptcy, discharging more than $459 billion in debt and rivaling Medicare as one of the country’s largest transfer of wealth programs.” That is an astonishingly large number.
Yes it is. Honestly, I had no idea the number was that large.
Two other papers in the same issue by Mark Pauly and Steve Parente are well worth reading. I’ll quote from them in subsequent posts.