Distributism and Health Care Reform V
Economics, Politics — Posted by David W. Cooney on October 25, 2010 4:17 AM(Continued from Part I, Part II, Part III, and Part IV)
The problem of those with pre-existing conditions
Before addressing the problem itself, I think it’s important to remember that the nature of insurance is a gambling institution. Demands that insurance companies take on people with pre-existing conditions are nothing less then forcing them to take a bet that they know they have already lost. After all, why would anyone bet that you won’t get sick if they know you already are sick? It is basically like saying, “I have a condition that’s going to cost you a million dollars in payments. You have to cover this for a compensation of a few thousand dollars a year.”
The real problem with pre-existing conditions is why people with them are applying for new insurance coverage. In some cases they simply couldn’t afford it. Fixing the barriers to charitable medical treatment would go a long way for most of these people. In other cases, they simply chose not to get insurance even though they could have afforded it. Charitable services could also address the needs of these people when they are in dire need, but charity also requires that we hold them accountable for their own choices. It is fundamentally unjust for those who can afford it to use up the resources people establish to help those who cannot.
However, I believe the largest group impacted by pre-existing conditions are those who get their medical insurance through their employer. Because the policy is with the employer, rather than with the employee, the loss or change of job forces the loss or change of insurance. If insurance policies were required to be directly with the insured, rather than with the employer, the loss or change of job would not force the loss or change of insurance policy. This change would not eliminate the reduction of costs through group policies. Insurance companies could still make deals with employers to offer package deals for employees. Such offers are given in order to increase the number of people who have policies. Having the policy be with the employee increases the chances that the insurance company will keep a policy holder even if he does change jobs. What insurance company would not like that? At the same time, it would increase competition because, when an employee changes jobs, the insurance company working through that new employer would want to offer a better package or lower premium to entice the new employee to switch to their company. This would also give the current insurance company incentive to keep their premiums low so that the customer won’t switch insurance when changing employers.
Unfortunately, that change alone will not completely address the problem of pre-existing conditions because it does not address the problem of people losing their insurance when it comes time for renewal. Many people think that renewing their policy is simply extending their existing contract. Actually, it is establishing a new contract, even if it has the same terms, for a new time period. Therefore, other solutions need to be offered. Just as we require other gambling institutions to guarantee that there will be winners, the insurance gambling institutions need to guarantee options that will provide continued coverage in extreme situations. Such guarantees could be allowing, or requiring, options for insurance that only covers maternity (when applicable), major illnesses, and emergencies with options for long term or lifetime insurance plans. This could reduce the cost of health insurance by not forcing insurance companies to cover the cost of non-critical services. The point is that people are often limited in what policy options they have. They will be even more limited under Obamacare. Lifetime policies would resolve the issue of people who get dropped when it’s time to renew an existing policy.
I believe that, in a truly competitive market, an insurance policy that only had to provide for maternity, emergencies and major illnesses would have a fairly low premium even if it were a lifetime policy that could only be canceled for failure to pay. You could even throw in regular check-ups and still keep the costs down. Remember that we are discussing gambling here. The average person does not get a major illness, which means the house (the insurance company) will win the bet the vast majority of the time. When they do lose, they will have to pay out big, but that cost will be more than offset by the income from all of the other policy holders that don’t get a major illness.
In conclusion
There are undoubtedly other factors that should be listed and addressed. They can also be addressed by applying distributist principles.
By revoking or changing laws that effectively establish barriers to greater competition in the medical market within states, and those that establish barriers or drive up the cost of medical schooling, treatment, research, and equipment, Distributism would help to increase the number of medical providers and bring the cost of medical care down through greater competition.
By revoking or changing laws that allow extreme awards and drive up the cost of insurance in general, and by allowing doctors to establish cooperative associations to establish or obtain insurance at a lower cost and assist new entrants with medical training, Distributism would help reduce the cost of the medical business itself, which, combined with competition, would help reduce the cost of medical care.
By revoking the tax barriers that discourage the charitable contribution of time, money, and resources to organizations that offer medical treatment to those in need, Distributism would help to address the medical needs of those who cannot afford the cost of medical care or insurance.
By allowing, or even funding, research on the comparative effectiveness of alternate treatments and medicines with “advanced” treatments and medicines, Distributism would help provide greater access to affordable and still effective health care.
By establishing laws that allow individuals and families to keep their insurance policies when they change jobs, and by requiring options for long term and even life time policies, Distributism would help alleviate the problem of people losing their insurance for pre-existing conditions when they change jobs or have to renew their policy.
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20 Comments
It’s this kind of article that really makes me want to warm up to distributism. The whole political ideal of distributism still feels too liberal for me, but I like this article a lot and it shows my ideas coincide with things on DR a lot.
Thanks, Joe. Distributism allows for a greater role of government than the prevailing view of today’s capitalists and libertarians. However, it allows far less of a role than liberals. Check out the articles on subsidiarity for more details on this. The basic thing to remember is that we believe the basic unit of society is the family and that all other levels of society ultimately exist to serve that level – with a view to the common good – in accomplishing only those things that cannot be accomplished by a lower level. The higher level of government – the more narrow its scope of authority.
“The basic thing to remember is that we believe the basic unit of society is the family and that all other levels of society ultimately exist to serve that level – with a view to the common good”
And that’s the big thing I agree on. My preferred method however, is more economically libertarian, but I’ll definitely keep reading up on this topic. My reversion to the Churh has forced me to reconsider all this :)
“The average person does not get a major illness, which means the house (the insurance company) will win the bet the vast majority of the time. When they do lose, they will have to pay out big, but that cost will be more than offset by the income from all of the other policy holders that don’t get a major illness.”
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If an insurance company wins the vast majority of the time and even when someone gets sick that loss is more than offset by income from other policy holders, then that company is always making a profit. But I think the following policy you advocate would really be enough:
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“By revoking or changing laws that effectively establish barriers to greater competition in the medical market within states, and those that establish barriers or drive up the cost of medical schooling, treatment, research, and equipment, ”
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If we had greater competition then people will enter into the insurance industry and gradually compete with each other by providing cheaper and/or more comprehensive policies until whatever excessive profits insurance companies had before are erased.
I hear you bro-
The first guy I ever heard in the media speaking out for family values, against abortion, gun control, socialism and big government was Rush.
For a long time I bought his view of things until we parted ways over Malwart. He stayed with his theory, but I saw the theory play out in fact; I saw Malwart use it’s size to bully smaller guys they did business with and to deliberatly run smaller stores out of business. (they open two small stores a good distance apart and run all the locals out of business then they close the two smaller stores and put one big store in the middle and raise their prices)
I realized that
1 many big companies were in practice doing all the things we dislike in monopolies and
2 If a big company runs everything then that is only marginally better than a big government running everything, and the time might come that it is worse.
Rush never altered from the capitalist idea, but he didn’t see that as the capitalist idea plays out it always becomes socialism in a democracy.
I came to the conclusion that the only true safety for liberty was in being a nation of small businesses.
Within a few years I found distributism and the fact that most of the objections had been worked out by people who had taken papal teachings that I had never heard of and updated them for modern circumstances with co-operative large manufacturing and so forth.
I knew I could never go back to being a “right-wing conservative” because I rejected the underlying premise of the left to right game based on the undeniable results.
As to social libertarianism it hurts the family and creates the need for the government to step in when the family is destroyed. “Sexual freedom” is always being regulated in “family court”
I don’t have insurance, so I don’t get sick very often. On the odd occasion that I do, I have a family doctor who doesn’t handle insurance, but instead treats me for a reasonable fee – far less than the cost of insurance.
Greater competition does not necessarily reduce prices. In some situations what we get is more choice, or features. Health care is an unusual market sector and does not compare well to, say the music sales market, or grocery stores. People know what kinds of apples they like, and what singers, genres, etc that they like, so they look for the best price.
The market asymmetry in health care is enormous and insurmountable. The “customer” doesn’t really know if they are getting the best care or not. Anecdotes are not proof of good care. That’s why quacks can make so much money off of the sick. If healthy people do not participate in the system, it will go broke. So if workers are given the option, many may not choose to spend their money on health care.
What most countries where health care costs are lower and outcomes are higher have done is that they have taken the “gamble” out of the system by requiring that everyone be covered and that payment be progressive where the wealthiest citizens help subsidize the costs for the poorest citizens. To some this may seem unfair, but to others it represents the truest form of patriotism. For the vast arc of the history of human civilization, the rich have been the greatest oppressors of the rest of their human brethren. Over the past 60 years or so, humane societies have decided maybe we could reduce some of this oppression. Not take all the wealth away from the rich, but certainly even out some of the injustice by requiring everyone to contribute to the common good according to their ability to pay.
That’s what is really at question here: a moral justification for a return to the same old oligarchy that has made the lives of most humans miserable for millennia.
That is well and good for now but, if the federal government wins its pending case in court, you will no longer have that option. The government will fine you for having no insurance and ultimately force you to get a policy; either with a private company or with the public option that is inevitable under Obamacare.
http://distributistreview.com/mag/2010/10/let-freedom-ring/
“Greater competition does not necessarily reduce prices. In some situations what we get is more choice, or features”
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Um, as I said, greater competition will provide “cheaper and/or more comprehensive policies”. For a the current level of care, competition will drive down prices. Alternatively, we will have better care for the same cost with greater competition.
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“What most countries where health care costs are lower and outcomes are higher have done is that they have taken the “gamble” out of the system by requiring that everyone be covered ”
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Why not force everyone to take homeowners and auto insurance while we’re at it? That way, we can subsidize people building their homes in areas likely to be flooded and for recklessly driving expensive cars. We don’t want people losing jobs either so why not force everyone to pay into unemployment insurance. I’m sure people won’t abuse that right?
Jordan, thought just about every state DID require drivers to have auto insurance? And in most wage jobs, at least, everyone does pay unemployment insurance, tho granted, it’s by the employer, not the employee. Of course, there’s the question of whether we should have these compulsory insurances. Homeowners’ and other building insurance have a moral risk, auto ins. seems to cause more reckless driving (as do seat belts and motorcycle helmets), and unemployment insurance may lead employers to try less hard to keep employees.
I wanted to say something about David’s original piece. David, you said that only a minority of us get a major illness. But other than victims of accidents, homicides, and suicides, it seems to me that everyone has one final major illness at least. I’ve read that about half of the average person’s health care bill is his/her last year on this Earth. Of course, most of these folks will have paid considerably into their medical insurance prior to passing on.
Tom
“it’s by the employer, not the employee” Actually, it’s always by the employee. While I disagree with some of Rush Limbaugh’s views, he is at least honest enough to present this reality to the public. The “employer” contributions are never taken out of the profits, dividends, or management pay. Instead, the money comes from higher prices or funds the employer would have used to provide more pay to each employee or to open up new positions for other employees. This is the problem with such ideas; they are always presented as “making the rich pay their fair share,” but they are always ultimately paid by the poor and middle classes on whom the rich pass on as much of the added expense as they can get away with.
As you say, by the time you are in the last year of your life, you have paid heavily into the insurance program. Believe me, if the insurance companies didn’t come out ahead on the deal, they wouldn’t offer the plans. The lifetime limits on benefits, increasing rates, high rates applied to other demographic groups, and other such things are all accounted for in making sure they make a profit.
Well I know that Washington State requires auto insurance at least. And certainly State and Federal Unemployment taxes in addition to Social Security and Medicare are assessed nationally on the employer side with some of these partially paid by the employee. So you are right that mandatory insurance is fairly widespread.
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I don’t really have too much problem with the moral hazard aspect of insurance except that it’s hard to gauge the costs of these moral hazards when insurance is compulsory.
David, something seemed wrong with your analysis, and it finally occurred to me as to what it is: you’re remarkably trusting about bosses! Yes, while bosses nominally pay all the unemployment and half the Social Security insurance, it’s based on the workers’ wages, salaries, and commissions, so one could say that the workers really pay it. (Btw, i’ll use “bosses” and “workers” to avoid confusion between “employers” and “employees”, even tho it’s not quite as precise.) But David, stockholder and managerial compensation is based on what is left after other costs, including workers’ pay, are deducted. And who can be sure what labor would get without these insurance programs? Not every bit of the insurance payments would otherwise necessarily go to the workers, and so it’s not at all clear to me that some of it at least isn’t in fact taken out of profits and managerial pay.
Viking
Of course the insurance companies wouldn’t take the risk if it wasn’t in their financial interest. I just thought that it was rather imprecise the way you put it, implying that most of us don’t get a major illness. The truth is, we almost all do, just not all in the same year, that’s all.
Viking
Looked it up, Jordan, and it seems that only Tennessee and Wisconsin do not require auto insurance of drivers. (My source said that both states had bills making it mandatory for 2009, so apparently this was a bit outdated.) So it seems fair to surmise that a vast majority of American drivers are legally obligated to have such insurance.
The moral hazard aspect does bother me more than you, apparently. Along with those i mentioned, there seems to be a strong tendency towards what earlier generations would have called “improvidence” since Social Security came into the picture. To clarify, people are less likely to save for the future, believing the government will take care of rainy days and old age for them. Also for the sake of clarity, building insurance’s chief moral hazard is that of arson on unprofitable buildings to collect the insurance payoff. Even more sinister are the black widows and widowers who kill victims for their life insurance, but that at least is not compulsory, as far as i know.
Viking
Vi King, Thank you for pointing out my unintended contradiction. It is not true that employers “never” pay these additional costs. The more accurate statement is at the end of my comment, they “pass on as much of the added expense as they can get away with.”
I don’t understand how you could come to the conclusion that I am very trusting of bosses – at least under Capitalism. I think we better clarify the terms even more. Bosses=Owners. Managers=”those whose work in the company is to make management decisions” (Managers can be owners or employees. When they are employees, they represent the interests of the bosses.) Workers=”those whose work in the company is not to make management decisions” (Workers can be owners or employees.) Employees=”Non-owner workers” (Even share holders can be considered employees if their share of ownership is so insignificant as to render their vote meaningless.) Under Distributism, the majority of workers would be owners with a significant enough voice in the decisions that they would not be considered employees – therefore, they are also bosses along with management. Under Capitalism, we usually have a Boss vs. Employee relationship that usually results in injustice toward the employee.
I disagree that we “almost all” get a major illness. Those whose health in the last year of their life require medical treatment certainly tend to meet the criteria of “major illness.” However, you are only taking into account the insurance industry’s claims. A lot of people die peacefully and don’t require extreme medical treatment in the last year of their life. A lot of people die as the result of catastrophic accidents and don’t survive long enough to receive expensive medical treatment. Any premiums these people pay to insurance companies offset the costs of those who need greater medical care. Remember, that insurance companies look at the overall balance of all their customers, not just at the balance of each person individually. However, we are entering into an interesting scenario for the insurance industry. Up to now, they could count on the majority of their policy holders being younger and healthier than the rest and not requiring as much medical care. (Many younger people never even go in for check-ups and only go to the doctor when they are really sick.) With the decline in birth rates, the insurance companies won’t have as large a ratio of younger policy holders to offset the more expensive care of their older customers.
Vi King,
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Let me just clarify that I think that the moral hazards of insurance are significant. It’s just that the compulsory aspect really exacerbates that problem. I mean, imagine if everyone had to have million dollar life insurance policies …