To Felix:

So if the government had allowed a best possible free market to develop, insurers would never deny the claims of legitimately sick people?

Of course not. Mistakes will be made in both directions all the time. The question is not “which system is mistake-free?” or “which system makes all its mistakes in one direction only?”; the question is “which system minimizes the the total cost of all mistakes in both directions?”.

To RL:

Yes, the commenter did misuse the phrase “moral hazard” but no harm was done because it was clear what he meant. To other readers: “Moral hazard” refers specifically to the act of behaving more recklessly because you’ve got insurance; it does not refer to other forms of socially unproductive behavior, and it need not carry the implication of “immoral”.

Three responses:

First, I am not well educated about the details of government run health insurance programs in other countries. It would be better if I were, but I’m not.

Second: We are trying to predict how a public option would play out under the American political system. There are two kinds of experience that might be relevant to that question: How have public insurance programs played out in other countries, and how have public programs other than insurance played out in the United States? As I said, I have no detailed knowledge of the first, but I have plenty of detailed knowledge of the second, and I suspect that it’s the second that’s more relevant. Our system invites politicians to intervene on behalf of vocal well-organized interest groups and pass on the bills to other people, usually to people who are less well off. This is something I think I *do* know something about, and there gazillions of examples, of which General Motors (see the paragraph about this in the original post) is just one recent example.

Third, it would be rash to assume that other countries provide health care more cheaply than we do just because that’s how it looks on the books. A lot of expenses might be being passed off to taxpayers in ways that are very far from transparent. That, in fact, is what I’d expect to be the case—but again, I have no numbers at my fingertips.

Your argument against a public health insurance option that requires congressmen to subscribe is that it would some how give them greater influence on the coverage or other aspects of its workings. And then your second formulation includes any public option for the same reason; special interests, through legislators, would have greater control over the care provided.

Are you suggesting that an influential congressman who subscribes to BCBS is powerless to call them up and make suggestions? Healthcare insurance is presently one of the most regulated industries around.

But even if the congressman did drive up the coverage and the price of the public option, how does that keep people from moving to a policy offered by a competing private company?

Imagine if all roads were privately owned. Could interstate transit function effectively without a government regulation of maximum speeds, unified signal types, bridge and tunnel quality standards, etc.?

And if there was an isolated town that no private company thought important enough to build a road to, wouldn’t the public sector have an obligation to fill in the gap left by the private road industry?

If I got into an car accident today and didn’t have car insurance, would you back legislation forcing auto-insurers to sell me insurance tomorrow to cover the accident I had today? Of course not because it’s absurd and would bankrupt insurance companies or force ridiculously high premiums.

Also, all the problems you point out will GET WORSE under government controlled medical insurance. Of course there are problems associated with privately provided insurance plans. Some people are just schmucks and think nothing of stealing money from their customers. The problem with the government is schmucks are protected by a labrynth of byzantine red tape.

At least with insurance companies there is always fraud court and insurance companies are not popular. This threat protects consumers better than any regulator ever could and politicians generally insulate themselves from legal actions.

And you are wrong that we can just vote politicians out of office. The democrats and republicans and their lawyers, in collusion with incumbent politicians, have made it all but illegal to run any sort of political opponent against incumbents in elections. Every elections cycle there are dozens, if not hundreds, of news stories taht I read about where legal action is taken against a political upstart because they failed to fill out form 2d from regulation 301(1)(c) (<- made up by the way for effect) or filled out the paperwork improperly.

“At least with the current situation, an insurer may choose to not pay for a procedure, but they cannot deny the procedure outright.”

Experimental procedures aren’t paid for. Which creates an incentive to call as many procedures experimental as possible.’

I think Jeff’s point needs to be emphasized (at least to my news outlets) more strenuously. An insurer never denies a procedure. They only deny paying for a procedure. You’ve missed this point completely. Experimental procedures aren’t covered by insurance, and few people can afford to pay for expensive treatment out of their own pocket. But that creates a HUGE incentive for the treatment providers to legitimize the procedure. Even if there isn’t enough data to support it.

Let’s remember how for-profit insurance works for a minute. A group of people (the insured) get together and all pay into a pot of money. In exchange, they are assured that if they need procedures X, Y, or Z, (which cost $x, $y, and $z respectively) then they will get those procedures provided at zero marginal cost. The ‘pot’ (the insurer) has some fancy (or simple, depending on your level of omniscience) calculations to do, and decides how much money each of the insured needs to put into the pot on a daily basis to cover the cost of the required procedures that come up at random on yearly basis. I.e. multiply (the risk of needing procedure P in one year) * (# of people in group) * (cost, $p) to get the total needed, then divide that over all of the people in the group. The division doesn’t have to be even, but if you have no reason to suspect that one person is higher risk than another, then even division seems fair enough, and even makes the math easier! Now sum that over the procedures p={x, y, z} and you have your premiums. (For profit, add a bit, but not so much that anyone would walk away from the deal, any way you can. Even better for you if you can get ‘discriminatory pricing!’)

You might object to this characterization because the insured would really rather join to get coverage for ‘conditions’ (getting sick) rather than for ‘procedures’ (getting well by prescribed methods), but I laid it out this way to emphasize a point.

The point is that it is really unfair to the insurance companies to have them set the prices *first* then pass laws which mandate which new procedures (especially expensive ones) they must now pay for. Unsurprisingly, premiums will rise to cover the new procedures. So it is pretty hypocritical to complain that insurance rates are rising!

In a free market, I’d expect (being a layperson) a variety of insurance plans, to cater to different people’s taste in medicine. Some plans might be very detailed about which procedures are covered, and some might included as yet to be discovered, ‘experimental’ treatments. You’d expect some price variation, just like different varieties of tomatoes at the grocery store.

Felix, you complain about ‘experimental treatments’ being excluded. But the way I laid it out, the experimental treatments were excluded by the insured, not the insurer, when they picked their insurance plan. Now they cry crocodile tears that their insurance company is evil and wants them to die. I don’t buy it. They should have bought better insurance. Too expensive for them? Why is it any different for the insurance company? It might just be too expensive for them, as well. Or perhaps their employer chose the insurance plans available, and left this one out as too expensive.

Now, I support the idea of the government providing for medical treatment (I’ve experienced some of the UK’s medical treatment, and it was great). But I support for the reasons I support public education. Just think: we provide (in the US) a basic level of education. I think this ‘pays for itself’ because giving the gift of education to millions of children provides them with opportunities to get higher paying jobs later in life. Which the government then taxes. I think saving lives through medicine can be thought of in exactly this same way. Some other public infrastructure, like roads, railways, fire and police protection, etc provide other workable mental models for understanding this.

There is a huge caveat! I am aware that road quality varies greatly from neighborhood to neighborhood. Ditto schools (!). I am aware that people pave their own driveways, and pay for extra schooling (either tutoring during elementary/secondary school or university level). By supporting a basic level of ‘universal coverage’ I’d expect analogous things to happen in medicine. I’m ok with that, yet I’m unsurprised if other, reasonable, people disagree with me.

But I don’t see reasonable arguments being made for or against changes to the medical system made very often. Complaining about the incentive for insurance companies to limit coverage expansion is not (in my opinion) a reasonable objection.

Many countries manage health care through a public system. In general, those countries have cheaper, better healthcare than we do. Why?