Verdict: Follow-Up

This post is a follow-up to my previous post, "Verdict on 'The Public Option': Against." Specifically, it's a follow-up to Adam's excellent and in-depth comment on that post. I started to reply in my own comment, but that became even longer than the original comment, which seemed a bit excessive, so rather than showing some self discipline and cutting the sucker down, I decided to make it into a whole new post. So go read that first post, then read Adam's comment, and only then continue reading below. Otherwise, it may not make a whole lot of sense -- and you'll have no one to blame but yourself.

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I think that maybe the term "market" is getting in the way. Let me come at it from a little different angle: I think Jane is a grownup who should be able to make her own decisions about how to prioritize her own spending. It's not my business to "let" her spend or save more or less of her own money -- provided she's not asking me to foot the bill (see my earlier post on "Things That Are True About American Health Care"). A dual mandate -- everyone must have insurance, every insurance company must take every comer at a "reasonable" (TBD) rate -- takes care of that.

So if we've established that Jane has insurance to cover at least her catastrophic needs, the next question is: how should she pay for it?

1. She could pay a flat rate for an all-inclusive, comprehensive plan that covers everything with no deductible and no co-pays. There are lots of things in life that people pay for in this way, including some health plans. But I get my home phone service this way too. My parents like to take vacations this way. Generally, when things are "all-inclusive", customers tend to use a lot more of them, and vendors tend to pad the prices in exchange for the convenience and to make sure they don't lose out.

2. She could pay a mostly-all-inclusive rate with some kind of minimal out-of-pocket expense to discourage frivolous use. Lots of insurance plans work this way, with minimal deductibles and/or $5-20 co-pays. I talked to one doctor who told me that this kind of plan makes a big difference over the previous option: with even a $10 co-pay to consider, a mom with 3 kids will make appointments for each them when necessary; with no co-pay, any time one of them goes in, she'll ask for all of them all to be seen, as long as she's there anyway. It might not make her kids any healthier, but the cost is no skin off her nose, so why shouldn't she use the system that way? It's the tragedy of the commons.

3. She could pay almost everything out of pocket and use her insurance only for catastrophic costs. This will encourage even more discretion on her part -- but perhaps equally important, philosophically speaking, it will enable/encourage her to act as an empowered, independent adult.

A health savings account helps Jane increase the threshold of "almost everything." It's like a 401(k) for health care: you choose some amount of your income to defer into it, then when you need care, you pay for it from the account. (401(k) dollars can be borrowed for other purposes; I'm not sure whether health savings accounts typically work the same way, but they should.) It's like the "cafeteria"/flexible spending account many companies offer, but you don't have to guess how much money you'll spend ahead of time and the funds roll over indefinitely. The tax incentive plus automatic deductions from your paycheck make it easy to do the right thing by saving.

Then the account is paired with a high-deductible (a couple grand) standard health insurance plan to cover you if you don't have enough in the savings account or choose not to use it. Just like with a 401(k), many employers will deposit some additional funds in your account up to some level, which ensures that you'll nearly always have a certain minimum balance in the account. I have a family member with a plan like this -- her employer contributes enough to the plan to meet the deduction every year, so in terms of net funds out of pocket, it's no different than an all-inclusive plan -- except that if she saves money, she gets to keep those savings in your own account.

What's not to love? I'd take a plan like that if my employer offered it.

For all of the people telling me that we don't buy health care like we buy widgets (not just you, Adam :-]), a lot of times, we do. With the exception of negligent young men like us, most insured people get annual checkups. Many, if not most, people get semi-annual dental checkups. A large percentage of women use birth control that they have to buy again every month or every few months. Any time a couple has a baby, they have 9 months warning. These expenses are relatively low and very predictable, and insurance companies are clever enough to price them into the plans they offer and to make sure that they get their cut -- even if they're not-for-profit and that cut is just administrative overhead.

As for fire insurance or the fire department: it's an interesting analogy, but I don't think it holds. Neither pays for smoke detectors or their batteries. They don't pay for improved wiring for my home, or better insulation, or any other maintenance measure that might hypothetically reduce the risk of fire in the future. A fire or homeowner's policy (sold to me by a private company, and paid for with my after-tax dollars) only pays out if there's an actual fire; the rest I pay out of pocket at my discretion. I decide how much homeowner's/fire insurance I want, at what rate, what deductible I'm comfortable with, and so on.

You could make the argument that I would be better off if someone forced me to hire an electrician to inspect my wiring once a year or to buy a more comprehensive fire insurance policy with a lower deductible. But those choices have associated costs, and I'm not sure who's better able to decide which costs make sense for me than me. A case in point: just a couple of weeks ago, I went in to see my dentist. He gave me several recommendations; some of those were covered by my insurance and some weren't, and I chose to take his advice in some cases and to wait and see in others. I made a financial trade-off with respect to my health care, just like I do in every other part of my life.

My opinion: it's only just to mandate that I bear a certain cost if by not bearing that cost, I pass it on to other people. To beat the dead fire department horse a bit more, I'm required to have a certain gauge wiring in my home, and I'll probably get a break on my insurance premiums if I have a smoke detector and/or sprinkler system. I'm happy to apply the same standard to health care and mandate that everyone have a certain minimum level of insurance to cover emergency and/or catastrophic care. It might be a reasonable cost-saving measure to enhance that mandate with minimal-but-regular publicly funded checkups. But beyond that, I start to get a bit uncomfortable. Not panicked! Not worked up into a lather about the supposed evils of The "S" Word. But ... uncomfortable.