Against This Med Reform

Obama will to try to save his med reform effort by getting more involved; he won’t leave it all to Congress anymore.  Some encourage him to stand tough for a public option (i.e., a cheap widely available government run insurance plan), while others say:

Obama still has a chance with his speech on Wednesday to wrest control of this monster, but he’ll have to return to his original mission of lowering costs and making insurance portable and fair (no preexisting condition disqualification).

But while most controversy has been on the public option, it is probably time for me to explain my opposition to that less controversial no-pre-existing-condition reform.  My basic complaint is that I’m pretty skeptical about the health value of medicine, at least at the usual spending margin, and I’d like more people to become skeptics.  But this reform would take away the huge financial reward for seeing the light and being a skeptic, because this reform would take a huge step toward nationalizing the med industry.  Let me explain.

At the moment US folks have their med plan tied to their employer, and so are only insured over the timescale of their job.  If they have a medical condition when they switch jobs, they are no longer covered for that “pre-existing” condition under their new insurance.  This is a real problem.  The best solution is to break the employer-insurance tie and then encourage longer term insurance contracts, but that is said to be politically infeasible now.  So instead the Dems propose to make it illegal for insurance companies to raise prices or exclude coverage based on pre-exisiting conditions.

But by itself that rule would tempt people to skip med insurance, or only get very cheap insurance, and wait to buy generous insurance only when they have a serious medical problem.  After all, the new rule on pre-existing conditions would make their insurance just as cheap even after their problem appeared.

To avoid this behavior, the Dems also propose to require that everyone get insurance.  But that won’t really work if there are really cheap no-frills plans available – then people would just buy cheap plans while waiting for a problem to appear.  So the Dem’s fix is to specify in some detail just what all med plans have to cover, and to not allow prices to vary much.  Yes this avoids the wait-to-insure problem, but at the cost having the government decide which are the good treatments, and then make everyone buy them; skeptics could no longer opt out of tossing their money down the med money pit.

Here are some quotes from the July 14 med reform bill passed by the US House:

A qualified health benefits plan may not impose any pre-existing condition exclusion … or otherwise impose any limit or condition on the coverage under the plan with respect to an individual or dependent based on any health status-related factors. …

An Exchange-participating health benefits plan …. is required … to provide specified levels of benefits … A qualified health benefits plan may not impose any restriction (other than cost-sharing) unrelated to clinical appropriateness on the coverage of the health care items and services. …

The premium rate charged for an insured qualified health benefits plan may not vary except as follows: … By age (within such age categories as the Commissioner shall specify) so long as the ratio of the highest such premium to the lowest such premium does not exceed the ratio of 2 to 1. … By premium rating [geographic] area … By family enrollment (such as variations within categories and compositions of families) …

Minimum Services To Be Covered: ..
(1) Hospitalization.
(2) Outpatient hospital and outpatient clinic services, including emergency department services.
(3) Professional services of physicians and other health professionals.
(4) Such services, equipment, and supplies incident to the services of a physician’s or a health professional’s delivery of care in institutional settings, physician offices, patients’ homes or place of residence, or other settings, as appropriate.
(5) Prescription drugs.
(6) Rehabilitative and habilitative services.
(7) Mental health and substance use disorder services.
(8) Preventive services. ..
(9) Maternity care.
(10) Well baby and well child care and oral health, vision, and hearing services, equipment, and supplies at least for children under 21 years of age. 20
The Health Benefits Advisory Committee shall recommend to the Secretary of Health and Human Services … benefit standards… and periodic updates to such standards.

Yes these rules appear to let plans exclude treatments that are “clinically inappropriate,” but since 46% of treatments are of “unknown effectiveness”, clearly they can’t let plans exclude such treatments, or their whole strategy would collapses.  Yes they might do more effectiveness research, but there are too many treatments to make more than a dent and the political pressures against excluding treatments would be enormous; so the reality will be that unless someone proved that a treatment doesn’t work, everyone will be required to buy that treatment.  Which would be a pretty sad situation if we med skeptics are right that on the margin med mostly doesn’t work.

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  • George

    Even here in Australia, the first reaction of people is that employer-provided health insurance would be great idea (cos anything that comes free from your employer is great bonus). And it takes quite a bit of an effort to explain the problem with pre-existing conditions and changing jobs. If Australia didn’t have mostly government-funded health care, I’m sure employers would take the opportunity to offer health insurance honey traps to employees.

    • Dan

      Are people really that stupid? Don’t they have see the total Cost of employment”? It’s not “free”. The “Medical Aid/Fund” (any type of “insurance” is banned in my country) is clearly visible, I get less money at the end of the month…

      • http://yudkowsky.net/ Eliezer Yudkowsky

        Yes, people really are that stupid.

  • http://intellectual-detox.com Devin Finbarr

    We have the mandate in Massachusetts and it is awful for exactly the reasons you cite. The other day I was talking to a single woman of age 40 who worked as a freelancer. She has to pay ~$750 in insurance payments. The healthcare interests in Massachusetts have lobbied to get everything and the chicken sink care covered by the mandate. I just got a notice in the mail the other day that full mental healthcare coverage has just been added. This is despite the fact that studies show Prozac cannot even beat out a placebo. The mandate is simply a transfer of money from my pocket to the pockets of the healthcare industry. It’s shocking that so many progressives support such a policy.

    • kevin

      I suspect this has to do with the recent gov. mandate for “mental health parity” which was enacted with TARP. Naturally, my medieval-style guild the American Psychological Association, lobbied heavily for this windfall.

    • http://yudkowsky.net/ Eliezer Yudkowsky

      Why, yes, progressives really are that stupid.

  • Jeff

    Why do you think that medicine is, on the margin, ineffective, when the study you cite says that of known effectiveness, treatments are currently 2-1 helpful to ineffective, and of that 1, half are a trade-off between harms and benefits, implying that they do have benefits (and that future refinements of the technique, or new techniques based on the idea of the mechanism, might be able to minimize the harm)

    I know about the RAND study. It was one study, and this is one study. This appears to take more types of outcomes into account than the RAND study.

    • http://hanson.gmu.edu Robin Hanson

      If you followed the link I gave you would see lots of other studies cited. It make no sense to repeat all my arguments in every post I make on medicine.

      • Jeff

        Okay, that’s fair enough. Except that the citation you’re using today seems to directly contradict your claim that half of medicine is worthless, and you haven’t responded to that contradiction anywhere I’ve seen.

      • http://hanson.gmu.edu Robin Hanson

        I don’t have to literally and exaclty believe the results of the BMJ ratings.

      • Jeff

        Maybe the BMJ ratings aren’t right, but it seems dishonest to: a) cite the source, b) say you don’t trust the source, and c) not say why you don’t trust the source, all in the same post.

  • http://robertwiblin.wordpress.com Robert Wiblin

    Why isn’t it politically feasible to just dump the tax distortions that make it desirable to tie employment with health insurance? It is such a pernicious quirk in the US healthcare system. Surely it can’t be that hard to separate the two?

    Am I right thinking that the link originated in price controls and tax incentives during and after WWII?

    • Doug S.

      Well, basically, it comes across as “they want to take away your health insurance.” 🙁

    • http://yudkowsky.net/ Eliezer Yudkowsky

      “Surely it can’t be that hard to separate the two?”

      Yes, it can be that hard – if you’re crazy, and other people are crazy.

      Sorry for all these comments here, I just want to show the sheer ubiquity of “Can people really be that crazy?” and how often the correct answer is just “Yes, they really are that crazy.”

    • Doug S.

      Let me elaborate:

      1) Because of the existing tax distortion, the easiest way to become part of a group insurance plan is to work for an employer that offers the opportunity to do so.

      2) If you take away the tax advantage, many people fear that their employer will no longer let them buy into a group plan.

      3) The individual health insurance market in the U.S. is completely fucked up. If you can’t buy into a group plan, your chances of getting the insurance you need at a price you can pay is extremely poor. People don’t trust the insurance companies, with good reason, and insurance companies face adverse selection issues.

      4) Therefore, people – quite reasonably – fear that losing the tax advantage will result in them losing their insurance.

  • RJB

    I am looking forward to your next post, in which you describe the system you do want to see. After all, with the status quo and all proposals currently in circulation presenting obvious problems, today’s post on what you don’t want is just the easy part.

    • http://hanson.gmu.edu Robin Hanson

      Look here and here.

      • Jess Riedel

        That first link has an extra “http://”, so it breaks.

  • Matt

    Has anyone tried to figure out or make an educated guess about how many people would use the gov’t health plan for drug seeking? Anecdotally, I have seen or heard of a lot of people who go to the doctor just to get pain medication or something like Prozac or Riddilen when they clearly don’t need it. They often use an old injury or back problems to get medicine from doctors. Psychiatrists are pretentious and can be fooled by a small amount of acting. I’m not sure if the number is or will be significant, but I bet the number skyrockets if this legislation is passed.

  • Sean C.

    I think it’s tough for someone to really be a skeptic when the chips are down.

    So someone who chose to be a skeptic and not buy insurance will often have a change of heart after a serious diagnosis.

    Then they go burden the public system; community hospitals and so forth.

    Better to force people to pay in somehow.

    • http://hanson.gmu.edu Robin Hanson

      Imagine using this same argument about religion: we should make people go to church because on their deathbed they’ll be glad they did – few are atheists then.

      • magfrump

        It seems to me a fundamental difference here is that all medical treatment comes from hospitals (setting herbalists and acupuncturist and chiropractors, etc. aside). Even chiropractic and meditation in recent years have been recommended by medical professionals. Unlike in religion, where there are hundreds of wildly different worldviews which have significant institutions (atheism included–church could be substituted for by a museum visit discussing material history), which in turn would require a very difficult and biased licensing system for religious ceremony, across the first world there are much larger similarities between medical treatment ideologies.

      • Jess Riedel

        magfrump: The difference you identify between medicine and religion doesn’t seem relevant to Robin Hanson’s point: just because people later tend to change their minds under duress doesn’t mean their initial choice should be overturned by the government.

      • RJB

        If religion cost hundreds of thousands of dollars at the end of life, and almost everyone demanded it for themselves or even for others (because it was viewed as reprehensible to withhold it), then yes, I think it would make sense to treat religion like health care.

  • http://www.transhumangoodness.blogspot.com Roko

    skeptics could no longer opt out of tossing their money down the med money pit.

    When you live on a planet full of barely-evolved apes who spend 6 orders of magnitude more money on cancer-sticks than on immortality, you should refrain from acting all surprised when they force you to participate in their ritual sacrifices to the signalling Gods!

    Though, I suppose that you are probably not surprised. You are trying to convince the monkeys, by talking at them, to see the wisdom of rationally analyzing the problem.

    I tried that last time I was at the zoo, and no matter how much I talked at the monkeys, they kept doing the same thing…

  • magfrump

    It seems to me that ideally a mandatory buy-in simply takes the form of a tax, and generally a tax that is progressive both in terms of “rich people will spend more” and in that non-skeptics will spend more.

    The problems mentioned from Massachusetts, of the mandatory coverage being expanded by health insurance companies for the sake of making more money, is essentially THE argument for the public option. If we are imposing a tax, that money should be given to the government, which at least ostensibly serves voter interest and isn’t just out to make a buck.

    Even assuming that the private companies will use the money more efficiently, they will have a bigger stake in increasing mandates, which will have a large effect on the poor. The purpose of getting everyone insured is, quoting Obama: “Nobody should go bankrupt just because they got sick.”(sic)
    That sentiment is designed, at a basic level, to make certain undesirable characteristics (such as poor health or poverty) mean less, thus meaning that different and desirable characteristics (i.e. hard work, ingenuity) are more important.

    To me there’s less of a connection to forced church and more to forced plastic surgery for the ugly–it’s designed to make negative characteristics have less impact, and whether or not it’s misguided it can have that effect.

    • Floccina

      “Nobody should go bankrupt just because they got sick.”

      People who go bankrupt just because they got sick mostly have insurance but do not have enough savings to hold them over while they are unable to work. So insurance will solve some of this but not much.

  • jonathan

    If I read this correctly, you call yourself a skeptic – because a percentage of medical treatments are relatively ineffective – and that really means you don’t want to buy health insurance or that you want to buy less coverage.

    I find your argument odd and somewhat circular. You say, for example, that relatively healthy people would opt out so they “need” to be included – for cost reasons because they bring $$ into the system – and that then means they buy insurance that includes more than they need, if they need any. So it sounds like you’re saying “screw the rest of you; I’m relatively healthy and don’t need insurance so bugger off, but I’ll take the option of buying insurance when I get sick.”

    How exactly does your argument fit into civil society? Do you object to paying for roads and bridges that you don’t use? The troops in Afghanistan are fighting to prevent a terror attack here that has teeny tiny odds of every affecting you directly, so aren’t you a skeptic about paying for that?

    You speak often of moral choices. Your argument seems bluntly selfish: I don’t need insurance and thus I say I don’t want to pay into the system because for now – key words “for now” – I don’t need the coverage and don’t want my money to go toward paying for coverage for people who need it now. And then when I get sick, I’d love the option of buying insurance then. Huh?

    I often ask this question and have never received an answer: under what moral system is this ok? Are you a Christian? If you choose not to support insurance coverage for all citizens, then you choose to inflict harm on others. Most bankruptcies are apparently caused by health costs and most of those people had health insurance, so coverage matters. People die. People suffer. Your choice to inflict that is attenuated but it’s real, just as real as the pro-life people’s arguments about society choosing to murder or our society’s decision to tolerate drunk driving (to the tune of 20k+ deaths a year).

    So you’re a skeptic about medical procedures. Any sensible person is, including every doctor I’ve ever known. The best treatment for most bad backs is rest and exercise, but we spend a lot on stuff that either doesn’t work as well or is no better. Are you arguing that your personal vision of the importance of efficiency should allow you to decide what’s right? I assume you realize that arguing for efficiency in anything is idiotic, on the order of believing you can stop the tides. You’re in academia and thus every day demonstrates the fallacy of that belief.

    • http://hanson.gmu.edu Robin Hanson

      How can you possibly read me as saying I don’t want insurance because I’m healthy? Sure I’ll pay for roads, because I can see they work, but I would balk at being required to pay for magic carpets if I didn’t think they worked.

      • jonathan

        Because, as others have noted, your words rather than your subjective interpretation of them say that you would purchase a limited package of insurance benefits – or none – because you don’t want to pay for additional benefits that you believe aren’t worth the money. Others believe those benefits are worth the money and want them – or they wouldn’t be included – and still others aren’t aware of them or don’t care or don’t think about them. So you’ve set up two possibilities: that you don’t want to pay for whole areas of coverage (because of waste / inefficiency) or you somehow want an unworkable discount because you might like orthopedic care but you don’t want to pay for the part of orthopedic care that you think is worthless. That means you’d have to choose a lesser coverage policy; it’s simply impossible to say “I want to pay less for orthopedic care because when I need the services I only want the ones that work and baked into the total cost is a lot of crap.” Then when you or your child gets sick, you want to expand your coverage because now you need more insurance and who the bleep would then care about the waste built into the coverages you then need.

        In other words, you take your skepticism about medical procedures and take it unwittingly to a selfish place.

  • Lord

    Sounds like you will still be able to opt out. A penalty of $750 would make that the cheapest “insurance” of all. Probably have a lot of those.

  • Matt

    As someone has already implied, your stance is completely disengenuous. The minute you have a serious medical condition, you’ll seek treatment–and if not insured, pass along the costs to the public budget or to those who do pay for insurance.

    • http://yudkowsky.net/ Eliezer Yudkowsky

      Are you just in from Marginal Revolution or something? Robin is neither stupid nor that kind of selfish.

      Robin believes that in general, health care is less effective than people think – whether you yourself are healthy or sick. Robin wants, in general, to pay for less health care (in both “healthy” and “sick” conditions) than other people would, because of extensive evidence that marginal medicine is ineffective.

      Robin wants to be able to make a commitment to get less health care later in exchange for lower premiums now. His ideal system would let him buy “Rational Health Insurance”, which would – among other things – be purely catastrophic, and either have a standard list of excluded procedures and drugs based on Evidence-Based Medicine showing that they are not relatively cost-effective, or let Robin go down a list and check off particular procedures and medications that he doesn’t want to have covered, in exchange for a discount.

      Robin, correct me if any of this is mistaken.

      • http://hanson.gmu.edu Robin Hanson

        No mistakes.

  • Diana

    I personally really, really wish I could chose not to pay for the various foreign wars that our government likes to get into. But since I’m not given the choice, I pay my taxes, and the military contractors take my money.

    Personally I can’t see why it is so hard to turn Medicare or even Medicaid into a public option system. I’d be delighted to pay some $100 a month for the right to see a doctor or go to a hospital which otherwise saw only Medicaid patients, precisely because I do believe — as Robin does — that the vast majority of our most expensive treatments are of dubious utility. Let us divide medicine into bare-bones treatments for those of us who are sceptics and expensive, high-premium service for people who like to visit doctors. Right now I’m signed up for the highest-deductible plan I can find, but my gynecologist – whom I need to see simply to get birth control – sent me a certified letter saying she won’t see me any longer because she believes that I must get a mammogram every year while I believe that I do not want my breasts irradiated every year for the rest of my life. (BTW I also agree with Cass Sunstein’s proposal that adult individuals should be able to opt out of the medical mal tort law system.)

    But we need a public option to create this kind of bare-bones approach. The only reason I purchase health insurance at all is so that I don’t lose my apartment and all my savings because I get cancer.

  • http://www.theseedofreason.typepad.com Barnaby Dawson

    In the UK we deal with the issue of special interest campaigning (and health care triage) by a quango called NICE. NICE calculates quality of life year gains from all available treatments and only funds those that exceed a set threshold. That threshold can go up or down but applies to all treatments (there may be some exceptions but I think they are rare).

    Despite all the negative press in the US (and to some extent in the UK) the NHS offers, in my opinion, much greater value for money for the most important medicine (that which has a greater impact on life expectancy and quality of life) than the US health care system. The US spends a lot more money than the UK (both on a per capita and a GDP basis) but does worse in some areas. Like any state institution the NHS gets a lot of flack from the press but this is not really representative of the actual quality of the system.

    There is a problem with the a ban on preexisting claims disqualification. And the solution is less than ideal, but leaving 1 in 6 Americans with essentially no health care coverage is clearly much worse.

    And another point: Patients aren’t necessarily knowledgable or rational in their choice of health care coverage. And furthermore their decisions in the US create a health care system that maximises treatments that rich people desire rather than treatments that benefit the population as a whole.