Sep 13 2005
Health Insurance Cost Predicament
Aug. 29 issue, by Malcolm Gladwell
Read the article online.
Based on a Harvard research publication: Uninsured in America, by Susan Starr Sered, et al.
1. America has between 40-50 million uninsured.
2. The article quoted quite a few graphic and painful cases how the uninsured live, e.g. woman learned to speak without opening her mouth because of bad teeth. Factor worker rather had a disformed hand than paying for operation.
3. The sorry state of America’s healthcare:
a. We pay 2.4 times for hc than industrialized world’s mean.
b. But we actually visited doctors less, stayed in hospitals less.
c. American life expectancy is lower than the Western average. So is Childhood-immunization rate. Higher infant-mortality rate.
d. We have fewer doctors, CT, MRI machines than other developed countries.
e. We spend more than $1000 per capita per year on paperwork, admin, $700 more than Canadians.
Question: Why we are stuck with this inefficient institution?
Answer: The fear of “Moral Hazard”
Permise: A wider safety net induces more reckless behavior. E.g. if there is a sudden cure of AIDs, fewer people will follow safe sex
Result: Co-pay, deductables, No national insurance, and Bush admin’s Health Savings Accounts
Mark Pauly, Juhn Nyman argued against this theory.
RAND did an extensive study on the question in the 1970s. Concluded “cost sharing is a blunt instrument”.
Social Political Implication:
Social Insurance vs. Actuarial Model.
SI: risk sharing, e.g. national healthcare coverage nations, Medicare, etc. Communal insurance fund.
AM: behavior coaching, e.g. car insurance.
“The main effect of putting more of it on the consumer is to reduce the social redistributive element of insurance” Victor Fuchs, a Standford economist.
NYT article 2005/10/17: “General Motors and Union Reach Agreement on Health Care Costs”
Summary:
G.M., which is one of the biggest providers of health insurance outside of the federal government, said it would reduce its health care liabilities by about $15 billion, or 25 percent, under the deal with the U.A.W. The company’s annual expense for providing medical care for 750,000 employees, retirees and their family members would decrease by $3 billion before taxes.
The company has been losing market share to foreign rivals that operate at lower costs, partly because Japan, Germany and other governments provide universal health care for all their citizens.