If the real problem with implementing something like this in healthcare is regulatory barriers, then how about trying it for car care? Car care is a lot simpler than healthcare, but similar in that you are maintaining a complex system where the customer doesn't know exactly what's necessary. Let a company offer "car life insurance" policies that pay out when the car is a write-off (or something like that). Then the insurance company can pay for regular maintenance and repairs, provided that it postpones the policy payout by enough. The insurance company can determine which mechanics are cheapest and most reliable, and pay the customer for their time to take the car there.
Of course, I can think of some problems with this, such as insurance fraud. Also how do you know how much car life insurance to get? We might see similar problems if we tried it with health care.
Another problem with it would be that what you're really doing is *transferring* the financial incentive to keep the car running, from the car owner to the insurance company. The total amount of incentive is conserved. So now the insurance company is incentivized to maintain the car optimally, but the car owner no longer has as much incentive to treat the car well (e.g. via gentle braking and acceleration, or by reporting issues promptly). Because if the car breaks then he gets a payout.
There would be the same problem, to a lesser extent, with life-insurance based healthcare.
In general, if a good thing is of value to somebody, we ideally would desire to relocate the incentive to maximize that good thing, from the person to whom it is of value, to the people who have the greatest *ability* to maximize it. This transfer of incentives is at the core of your health care insurance idea, and it is very interesting to me, but in practice it is a challenge to say the least. Who is most able to care for a person's health? Doctors, maybe, insurance companies, maybe, but also the person themselves. So ideally the incentives should be somehow split between different parties in such a way that each person is incentivized to optimize the part they have most control over. That's tricky.
My first thought on this was "pay people to work out", specifically walking for 1 hour a day. Back of the napkin math says that if you paid $20 an hour, for every day, for 40 years (the length of a career), it would cost $292,000.
This has long been my favorite of your policy proposals. In fact I'd much rather use something like this as an ingredient in a government system than idea futures.
Thus the cynic in me isn't surprised it's gotten so little traction.
Asymmetric information; the customers are not competent to determine which policy is actually best and cheapest for their needs.
Everything about the cost of healthcare is obfuscated, where you never know what insurance will pay for until you've already received the service. And accurate knowledge about the benefit of specific healthcare procedures is only available to medically and statistically knowledgeable people willing and able to stay up to date on the applicable research. So the customer doesn't know how much it will cost him, nor does he know how much benefit there will be. So there can be no effective competition.
Regulatory barriers discourage innovation and price competition. Is there some other margin where that industry remains competitive? Maybe I am too cynical.
1. 5-10 is some US other countries used 2m or less.
2. this value should be split to QALYs. so the yearly value is much lower. and stick people usually have not many QALYs left anyway.
the idea that a life is worth 10m even with 1 day life expectancy come from some railroad criteria for safety measures. no rational logical source AFAIK. but I might be ignorant
I read that QJE paper a couple years ago. If I recall, there was no underlying theory model and it seemed to me that some of the ideas didn't add up upon closer inspection. Unfortunately, it's been too long to remember the details.
Another obstacle is that for an insurance company to explain why this is a good idea to their customers, they'd have to admit that they weren't previously motivated to maximize customer healthspan. The leadership won't be willing to humble themselves or disparage their industry in that way. All their other messaging and the messaging of their competitors is about how they're already so caring and helpful.
Also, most customers would rather blindly trust an authority with a marketing image of being caring and helpful, rather than take a hard look at that authority's real motives. That's why insurance advertising works.
I think the only solution to align insurance company profits with customer health, is government intervention. The government can set requirements to operate a health care policy that include a certain amount of bundled life insurance. Private industry won't do it due to the egos of management and the unwillingness of most people to think critically about their trusted leaders.
If the real problem with implementing something like this in healthcare is regulatory barriers, then how about trying it for car care? Car care is a lot simpler than healthcare, but similar in that you are maintaining a complex system where the customer doesn't know exactly what's necessary. Let a company offer "car life insurance" policies that pay out when the car is a write-off (or something like that). Then the insurance company can pay for regular maintenance and repairs, provided that it postpones the policy payout by enough. The insurance company can determine which mechanics are cheapest and most reliable, and pay the customer for their time to take the car there.
Of course, I can think of some problems with this, such as insurance fraud. Also how do you know how much car life insurance to get? We might see similar problems if we tried it with health care.
A reasonable suggestion.
Another problem with it would be that what you're really doing is *transferring* the financial incentive to keep the car running, from the car owner to the insurance company. The total amount of incentive is conserved. So now the insurance company is incentivized to maintain the car optimally, but the car owner no longer has as much incentive to treat the car well (e.g. via gentle braking and acceleration, or by reporting issues promptly). Because if the car breaks then he gets a payout.
There would be the same problem, to a lesser extent, with life-insurance based healthcare.
In general, if a good thing is of value to somebody, we ideally would desire to relocate the incentive to maximize that good thing, from the person to whom it is of value, to the people who have the greatest *ability* to maximize it. This transfer of incentives is at the core of your health care insurance idea, and it is very interesting to me, but in practice it is a challenge to say the least. Who is most able to care for a person's health? Doctors, maybe, insurance companies, maybe, but also the person themselves. So ideally the incentives should be somehow split between different parties in such a way that each person is incentivized to optimize the part they have most control over. That's tricky.
My more detailed proposal transfers that risk to a third party, so the two main parties each have strong incentives.
My first thought on this was "pay people to work out", specifically walking for 1 hour a day. Back of the napkin math says that if you paid $20 an hour, for every day, for 40 years (the length of a career), it would cost $292,000.
This has long been my favorite of your policy proposals. In fact I'd much rather use something like this as an ingredient in a government system than idea futures.
Thus the cynic in me isn't surprised it's gotten so little traction.
Very clever idea! What a shock that our government regulatory system makes such innovation impossible.
This would be a spectacular competitive advantage, if competition mattered in the insurance industry.
And why doesn't competition matter there?
Asymmetric information; the customers are not competent to determine which policy is actually best and cheapest for their needs.
Everything about the cost of healthcare is obfuscated, where you never know what insurance will pay for until you've already received the service. And accurate knowledge about the benefit of specific healthcare procedures is only available to medically and statistically knowledgeable people willing and able to stay up to date on the applicable research. So the customer doesn't know how much it will cost him, nor does he know how much benefit there will be. So there can be no effective competition.
Regulatory barriers discourage innovation and price competition. Is there some other margin where that industry remains competitive? Maybe I am too cynical.
value is life is likely much lower.
1. 5-10 is some US other countries used 2m or less.
2. this value should be split to QALYs. so the yearly value is much lower. and stick people usually have not many QALYs left anyway.
the idea that a life is worth 10m even with 1 day life expectancy come from some railroad criteria for safety measures. no rational logical source AFAIK. but I might be ignorant
Here at the southern tip of Africa we have a company, Discovery, doing just that and doing rather well out of it. Maybe they read your paper.
I read that QJE paper a couple years ago. If I recall, there was no underlying theory model and it seemed to me that some of the ideas didn't add up upon closer inspection. Unfortunately, it's been too long to remember the details.
Another obstacle is that for an insurance company to explain why this is a good idea to their customers, they'd have to admit that they weren't previously motivated to maximize customer healthspan. The leadership won't be willing to humble themselves or disparage their industry in that way. All their other messaging and the messaging of their competitors is about how they're already so caring and helpful.
Also, most customers would rather blindly trust an authority with a marketing image of being caring and helpful, rather than take a hard look at that authority's real motives. That's why insurance advertising works.
I think the only solution to align insurance company profits with customer health, is government intervention. The government can set requirements to operate a health care policy that include a certain amount of bundled life insurance. Private industry won't do it due to the egos of management and the unwillingness of most people to think critically about their trusted leaders.