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Dr. Saurabh Jha posted a very educational interview (part two) with Mark Pauly in which Pauly described what he regarded the root problem with the Affordable Care Act. Another noted health economist, Uwe Reinhardt, offered his criticism of Pauly's interview, and in doing so, offered a different vision for how health insurance should work in the US.

Dr. Saurabh Jha posted a very educational interview (part two) with Mark Pauly in which Pauly described what he regarded the root problem with the Affordable Care Act. Another noted health economist, Uwe Reinhardt, offered his criticism of Pauly's interview, and in doing so, offered a different vision for how health insurance should work in the US.

Both pieces are well-written and readable by non-economists. Pauly believes that the root of ACA's problems is that it makes the healthy population subsidize the unhealthy through community ratings (as opposed to allowing insurance companies to charge premiums based on individual health). Community ratings raise the price of insurance for the healthy, causing them to drop out, which in turn, causes the average cost of medical care of those who remain to rise. The cycle is thought to continue until insurers pull out of the marketplace, which some notable insurers have already done. Pauly points out that the government does not address the root of the problem and instead piles bad regulation to fix previous bad regulation. Pauly's recommendations seem to be to allow insurers to rate for actual risk (taking into account family health history), subsidize people who have chronic conditions and low-income from general taxation (not by requiring only the healthy to pay), and to even the field between employer-based insurance and individual insurance (e.g. allow people to take their employer-based plan with them when they leave their companies).

Reinhardt seems like he would be amenable with Pauly's recommendations in theory, but believe that they are light on the details and seems to suggest that they would likely fail in practice. Reinhardt's vision is to either strengthen the individual mandate (similar to how Social Security collects its revenue) or to allow individuals to opt out of the cost and benefits of insurance. The second option seems politically untenable: if someone chooses to forgo insurance and suffers a tragic accident and needs emergency medical care and cannot pay for it, will society simply allow that person to die? Probably not.

Pauly's recommendations resonate with me on some level, but having been denied insurance after leaving a job, it seems that there are too few insurers for the market to have sufficient competitive pressure to care about individuals who have pre-existing conditions. While it might be the case that in some world, the market will right itself in the absence of stifling government regulation, people live in the here and now and might not be able to weather the intervening years or decades. It also seems that one of the roles of government should be to reduce transaction costs, and universal access (for example, as implemented in the ACA) achieves that. It would be nice if the same tax incentives that are available to employers were also available to individuals buying their own insurance.

Time published an article about someone needing a knee replacement and ending up going to Surgery Center of Oklahoma for treatment. The patient shopped around and found that the surgery center that he ended up going to offered an all-inclusive cash price that was about half of what a local hospital quoted him.

Time published an article about someone needing a knee replacement and ending up going to Surgery Center of Oklahoma for treatment. The patient shopped around and found that the surgery center that he ended up going to offered an all-inclusive cash price that was about half of what a local hospital quoted him.

Years ago, media had already noted how the surgery center is unusual in how it posts all-inclusive cash prices (in comparison to many other medical practices and hospitals where it can be a lot of work to find such pricing). What I haven't seen noted about the operation is that by requiring cash payments, the surgery center is able to offer low costs to patients while still making a profit by forgoing a large number of administrators. For years now, insurance companies have found ways of trying to save money. As time went on, doctors often allege that the rules to get paid became more and more complicated, requiring specialized office staff (which represent an additional expense). It would be interesting to know what fraction of a medical practice's expense is due to insurance requirements, and whether the industry as a whole could find significant savings by retooling the provider-payer relationship.

High-deductible plans have been growing more and more popular as a way of combating rising premiums. In exchange for reducing a known expense (premiums), people who have high-deductible plans run the risk (but not certainty) of paying more if medical issues arise. Marketplace published an interesting article about one doctor choosing a high-deductible plan for his family. The doctor recounts the dilemma he faced after experiencing a racing heart. Should he go to the emergency room, where he should expect to pay $2,000 or more, or should he rest and risk a heart attack? Despite being a doctor himself, it was a difficult call to make. How much more difficult would it be for patients without clinical training?

High-deductible plans have been growing more and more popular as a way of combating rising premiums. In exchange for reducing a known expense (premiums), people who have high-deductible plans run the risk (but not certainty) of paying more if medical issues arise. Marketplace published an interesting article about one doctor choosing a high-deductible plan for his family. The doctor recounts the dilemma he faced after experiencing a racing heart. Should he go to the emergency room, where he should expect to pay $2,000 or more, or should he rest and risk a heart attack? Despite being a doctor himself, it was a difficult call to make. How much more difficult would it be for patients without clinical training?

High-deductible plans clearly are not a silver bullet for every patient and for every situation. In non-urgent situations, high-deductible plans can be one effective way of imposing market discipline if there is competition and free flow of adequate information. The article notes that higher-income earners did not really shop for health care efficiently, even when they could compare prices. Prices are, of course, only one piece of information; quality is another piece of crucial information. Without either price or quality information, it would be difficult for consumers to make an informed decision about value. Until such information becomes more widely available, high-deductible plans remain crippled in terms of their intended usefulness.

The New Yorker published another piece of Dr. Atul Gawande. In the piece, Dr. Gawande covers a number of related topics, and of particular interest to me was the importance of relationships in health care. Dr. Gawande lists some evidence showing that populations that have better access to primary care tend to have better health, and he then raises the question of why: what benefit does a primary care physician offer over direct consultations with specialists? By observing a primary clinic in action and talking with its staff, Dr. Gawande comes to the conclusion that the core advantage comes down to long-term relationships. While specialists theoretically should be able to more accurately diagnose and treat patients who have ailments in their own areas of expertise, primary care physicians have recurring contact with patients over long periods of time. Among other benefits, this exposure allows primary care physicians to make small adjustments tailored to the patient's progress and to follow up and investigate puzzling questions. After laying out this context, Dr. Gawande forecasts how health care can be different in the country, including why primary care physicians should be compensated more for their time.

The New Yorker published another piece of Dr. Atul Gawande. In the piece, Dr. Gawande covers a number of related topics, and of particular interest to me was the importance of relationships in health care. Dr. Gawande lists some evidence showing that populations that have better access to primary care tend to have better health, and he then raises the question of why: what benefit does a primary care physician offer over direct consultations with specialists? By observing a primary clinic in action and talking with its staff, Dr. Gawande comes to the conclusion that the core advantage comes down to long-term relationships. While specialists theoretically should be able to more accurately diagnose and treat patients who have ailments in their own areas of expertise, primary care physicians have recurring contact with patients over long periods of time. Among other benefits, this exposure allows primary care physicians to make small adjustments tailored to the patient's progress and to follow up and investigate puzzling questions. After laying out this context, Dr. Gawande forecasts how health care can be different in the country, including why primary care physicians should be compensated more for their time.

An interesting implication of this analysis is that rapport with one's primary care doctor might be unexpectedly important. The physician might have all of the necessary credentials and then some, but if the patient does not feel comfortable disclosing relevant information and engaging in the process, the patient might be forgoing the main benefit of having a primary care doctor.

The Kaiser Family Foundation released results from a survey conducted last month. The survey found that respondents viewed lowering out-of-pocket health costs as the top priority, with more respondents (67%) considering it as a top priority than any other issue listed. Interestingly, survey respondents listed the issue as a top priority regardless of political affiliation (among those who identified as Republicans, slightly more respondents listed decreasing out-of-pocket health costs as a top priority than those who listed repealing the Affordable Care Act). People want to pay less for health care, although there is disagreement on how to go about doing so.

The Kaiser Family Foundation released results from a survey conducted last month. The survey found that respondents viewed lowering out-of-pocket health costs as the top priority, with more respondents (67%) considering it as a top priority than any other issue listed. Interestingly, survey respondents listed the issue as a top priority regardless of political affiliation (among those who identified as Republicans, slightly more respondents listed decreasing out-of-pocket health costs as a top priority than those who listed repealing the Affordable Care Act). People want to pay less for health care, although there is disagreement on how to go about doing so.

Others have pointed out the impossibility of offering lower deductibles, lower premiums, higher quality, and more choice all at the same time, making it difficult for Republicans to responsibly repeal the Affordable Care Act. Instead, some policies should focus on reducing the actual cost of care -- preferably not through price regulation, but rather through systemic efficiencies. Helping the general public select providers based on cost and quality is one of those ways.