Buy More Pay Less? I Think That Only Works For Old Shoes...

Posted by Patricia Benson on March 10, 2017

The following is a response I wrote to a discussion thread with a fellow health policy Masters student. I haven't sought permission to reprint the point I am responding to, but the gist of it is that some people need to pay more for insurance (the young, healthy) so that we can all pay less in the end.

Former directors of the White House National Economic Council Al Hubbard and Keith Hennessey wrote an interesting article in the Wall Street Journal not too long ago with former HHS Secretary Michael Levitt about this very issue ("Health 'Reform' is Income Redistribution," Hubbard, Hennessey, Leavitt). It seems to me, however, that what we are suggesting here would serve to increase the cost of health insurance, not lower it, whether those higher charges are inflicted via fines (on top of a lack of insurance) for non-compliance or higher premiums for the cross-subsidization of risk along age demographics, more Community rating combined with guaranteed issue serves the two-fold purpose of providing an incentive for insurers to avoid the sick while also providing an incentive for people to wait until they are sick to purchase insurance. This isn't an outcome anyone would want.

Your point that if "America is ever going to be able to offer 'universal' insurance someone is going to have to pay more now than they currently are," is also interesting. If we are talking about comprehensive, cradle to grave coverage insulating one from the costs of all medical procedures large (heart transplants) and small (hair transplants) combined with unrestricted access to the system, then it will certainly cost more, much more. If, on the other hand, we are talking about coverage that is less inclusive but geared more towards protecting patients from the costs of financially catastrophic episodes of care, the things that can really bankrupt a person, and not the relatively trivial front-end services that we can all expect to use, then real health reform should cost less, not more. This thinking however runs directly counter to one of the fundamental principles in many of the health systems we have been discussing: care should be free at the point of service. Are we ready to abandon that? What would a departure from that do to demand? The answers to those questions, I think, should be at the forefront of any discussion over health reform.

As to your last point, I wouldn't go so far to say that both the Medicare and Social Security programs are universally popular. Medicare in particular is notorious for having spotty, insufficient coverage, which is the reason that many seniors have Medigap or some other supplemental insurance coverage. This is compounded by the fact that Medicare pays on average just 70% of what private payers do, forcing hospitals and physicians to cross-subsidize, driving costs up even more for private payers. This also puts into jeopardy access to care for the elderly, as fewer doctors accept new Medicare patients. Further, the Medicare plans with some of the highest approval ratings are the privately administered Medicare Advantage plans that grew out of Part C over just the last decade or so and were set to be cut under both the Senate and House legislation. It should also be pointed out that, despite the popularity among some 10 million seniors, costs for Medicare Advantage have been higher than projections.

Even if all these problems were ignored, I'm still not so sure that Medicare or Social Security are programs to be emulated: they are both going broke!