An Upside to Obama-care

So Mr Obama wants a national healthcare plan. The right opposes this and the left is doing it’s best to shut down debate and shunt discussion aside, because the objections are strong and many. However, the right might be using the wrong tactic. Perhaps the best tactic is to embrace the dark-side.

Mr Obama points out that with a National Healthcare plan that people like himself, i.e., the wealthy, would as he did for his grandmother still be able to pay for the care of their loved ones directly out of their pocket. Yet this is very problematic for his vision of nationalized healthcare. For it provides the essential loophole the rest of us need.

The rest of us, that is the normal working stiffs while on the first glance don’t have the wherewithall to have the ready cash to pay for emergency healthcare do in fact have the same. For, we are currently paying for all of our healthcare. The solution goes something like this:

  1. An enterprising group of ordinary middle class people, who realize they can’t pay for emergency medical care which isn’t or is poorly covered by government coverage (or for example to skip to the head of the queue like the wealthy will be doing) will do what free people have done from the start. They’ll organize (an activity oddly enough Contitutionally protected).
  2. By organizing in groups, collectively people can, uhm, spread their risk. Each will make monthly contributions to a collective pool, managed financially by a small number of administrators, who will figure costs, apportion and manage benefits, and invest funds. In fact there is a word for such organizations, they were formerly known and health care insurance companies. You might even find employers adding supplemental health care as a benefit to attract qualified, skilled, and attentive labor. I’d even go so far as to suggest that health care companies currently in place might jump at this market.
  3. Mr Obama suggested that you can keep your current insurance. But this is not in fact what will occur. Your current insurance will magically transmute itself to be just supplemental insurance. If Mr Obama and the left decides this is dirty pool, it will become black market dirty pool, and I for one see know reasonable argument for why a person could not participate in such a market. If Mr Obama can use his ready cash … any schmoe should be able to join a risk pool to effectively do the same.
  4. There is in fact a big fat plus to this plan. Supplemental insurance of this sort and in this market is completely (so far as I know) unregulated. It’s new unplowed ground. Unregulated health care markets are in fact exactly what Mr Obama thinks his plan is avoiding and also (not?) oddly enough exactly what I happen to think the health care market needs. Health care needs wild wooly unregulated markets to spur innovation. The unanticipated unregualted supplemental insurance market might provide at least a small sampling of this very thing.
  5. Thus perhaps the best thing for the right to do is cede the healthcare proposal but fight for realistic cost controls and appraisals. That the taxes for this boondogle will not get out of hand, which will in turn cause the government insurance to cover and provide for in actuallity very little in the way of health care in the absence of supplemental income. This is actually what the right argues for, very minimal bare coverage for all and abillity to pay provides the caps on health care for the rest.

So the only stumbling block for this argument is one I don’t see as of yet. Is there any argument that would prevent supplemental insurance from springing up? Realistically I don’t see any difference between Mr Obama paying for his grandmother’s care and a group of people, in free association, collecting to provide the same and spreading the risk.

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21 comments

  1. Boonton says:

    So the only stumbling block for this argument is one I don’t see as of yet.

    One stumbling block is that you are clearly unaware of any details of either the proposals for national healthcare or even how the current healthcare system works.

  2. Mark says:

    Boonton,
    Oh? Elucidate me. Be a little more specific.

  3. Boonton says:

    Elucidate me please, you’re the one whose supposedly knowledgeable about the various plans out there. What exactly are you talking about?

  4. Mark,

    You seem to be confused. National healthcare is about providing some minimum level of care to every citizen. Obviously if you’re rich and that minimum is not to your satisfaction, you are perfectly free to purchase private care, either through insurance companies or on your own. That’s not a “loophole” or some brilliant insight you just had. That’s how it works everywhere. You think they don’t have private health insurance in Canada and Great Britain?

    Incidentally, that’s why all the right-wing fear mongering on this issue is so ridiculous. The only downside of Obama’s plan is higher taxes. Yes, if you’re rich, you’ll probably have to pay a few more shekels so that the poor shmuck living on the poor side of town gets the lifesaving medical treatment he needs but cannot afford. But nobody’s going to make you see a doctor who works for the government or stop you from seeking private health care.

    If you think the benefits of Obama’s plan aren’t worth the tax increases, you’re right to oppose it. If you think it’s some kind of socialist plan that’s going to bring down the entire medical establishment as well as forcing rich people to wait in lines, you’re just ill-informed.

  5. Obama’s health plan, by the way, is more like the current public education system if that system also provided full vouchers for private schools. It’s not at all like a system where even rich kids are forced to go to public schools and all private schools are against the law, as you seem to be imagining.

  6. Boonton says:

    You think they don’t have private health insurance in Canada and Great Britain?

    Actually I believe they don’t have it in Canada (unless you count the freedom to travel abroad and purchase healthcare outside the borders) but they do in the UK….although few people bother to buy it because it is very expensive.

  7. Boonton says:

    I think JA’s description/analogy is pretty good. Most of the versions out there are essentially like a everyone gets a voucher program for schools. The ‘left wing’ proposals also want public schools as an option to spend those vouchers on while the ‘centerists’ are crying that’s the end of the universe as we know it. The ‘left’ proposal (essentially all public schools) is hardly being considered at all.

    If Obama proposed a program like this for schools the right would consider it a dream come true. Why is it so bad then for healthcare?

  8. Mark Olson says:

    JA,
    You seem confident you know the contents of Mr Obama’s plan. Do you have a link? Have you read the plan? Oh, wait nothing really has been published. There is no “the plan”, which is just one of the ways that discussion is being shut down (a tactic you are using here apparently). Will this go just like Wax/Mark where the final bill gets rammed through adding 25% to the document in the wee hours of the morning and having no copies for review.

    Hope. Change. More and better open-ness in government. What a crock of lies.

    The versions I’ve seen are there is a government insurance which is out there. You don’t “have” to use it but oddly enough it is far cheaper than any other alternative and on paper has similar coverage, which means in a market it will soon be the only game in town. Unlike UK and Canada however, Mr Obama indicates you can privately pay for for care yourself, which means supplemental insurance as well as the government option will be available … and likely the universal choice for all but the formerly uninsured.

    My question is why would not everyone choose the free government coverage plus supplemental private insurance? That cannot be illegal if Mr Obama says what he said, which is that his grandmother’s care might be covered out of his own pocket if the government coverage didn’t pay for her care.

    Boonton,
    Because healthcare is really not very similar to education.

    Can I buy a car with my voucher?

  9. Boonton says:

    The versions I’ve seen are there is a government insurance which is out there. You don’t “have” to use it but oddly enough it is far cheaper than any other alternative and on paper has similar coverage, which means in a market it will soon be the only game in town.

    This would only be possible if the plan that passes is very expensive. Given that the more expensive the projections, the more support that will back away, it seems unlikely to be the ‘only game in town’ unless there was a sudden willingness to go very big. Even then you have a moving target, if Congress is willing to do a big subsidy today it doesn’t mean they will tomorrow which means that the prices of both the gov’t & private plans will float up and down.

    You seem confident you know the contents of Mr Obama’s plan. Do you have a link?

    Since when do the blog commentors have to do more work than the blogger?!

    My question is why would not everyone choose the free government coverage plus supplemental private insurance?

    It boils down to what’s in the ‘free plan’. Most people in the UK don’t opt to go beyond the gov’t plan, but the UK as a whole seems to be very stingy with healthcare. I suspect Americans perfer a highler level of insurance and would opt for private coverage. An example here might be Medicare. Many seniors opt for supplemental Medicare coverage from outfits like the AARP. If Medicare for seniors didn’t kill the private insurance market why would a public option for everyone else do so?

    Unlike UK and Canada however, Mr Obama indicates you can privately pay for for care yourself,

    You CAN pay privately in the UK for care. Just most UKers opt not too unless they are very wealthy.

    Because healthcare is really not very similar to education.

    Can I buy a car with my voucher?

    1. Not very enlightening. Healthcare is not a desert topping either. What are the relevant differences that make education vouchers cool but healthcare ones uncool?

    2. If we had car vouchers yes. The car market, though, does not suffer from the externality issues that the healthcare market does (such as adverse selection, asymetetrical information etc.) so anyone who wants to propose a car voucher program has an uphill argument to make.

  10. Mark Olson says:

    Boonton,
    On car vouchers. No. “I” wanted to by a car with my healthcare voucher. You see, “I’m” not concerned about my health and don’t want expensive catastrophic care, just a few painkillers and my trusty .45. “I” want the car more than that healthcare. Why must you make my choice for me? By what right?

    If Medicare for seniors didn’t kill the private insurance market why would a public option for everyone else do so?

    That’s exactly my post’s point. That supplemental insurance would be the de facto replacement for all insurance (and that for obvious cost reasons the government non-supplemental insurance would cover very little).

    More work?! Hmmm. I just thought that y’all being able to so definitively state my post “wasn’t the plan” meant that you had ready information as to what “the” plan was.

    You CAN pay privately in the UK for care. Just most UKers opt not too unless they are very wealthy.

    Then why can’t I get private insurance? Collectivism and incorporation are illegal?

    I haven’t thought about healthcare vouchers. Oddly enough I haven’t heard anyone else talking about them either. Where did you hear that the Obama healthcare plan was a voucher program?

  11. Boonton says:

    On car vouchers. No. “I” wanted to by a car with my healthcare voucher.

    Odd, my town has like a dozen cops watching out that I don’t speed, don’t forget to register my car, don’t catch a red light too quickly…..I would like to have 1/3 less police protection and use that $500 or so per year to go out to eat more. On the other hand, society has decided no matter what elections I’ve made, when I dial 911 and say someone is breaking into my house cops will come regardless. Society has not decided that I get wheels no matter what decisions I’ve made. If I spend my money on other things, I don’t get wheels.

    That’s exactly my post’s point. That supplemental insurance would be the de facto replacement for all insurance (and that for obvious cost reasons the government non-supplemental insurance would cover very little).

    You are free not to use Medicare. Some doctors, usually very exclusive ones, do not take any insurance and their patients pay fully out of pocket. Why does AARP not have an insurance plan for seniors who don’t want Medicare? Probably because no one wants such a plan (although I suppose a health savings account plan could be used).

    Then why can’t I get private insurance? Collectivism and incorporation are illegal?

    From what I understand of the UK you can get private insurance. Most people simply don’t but it is legal and it actually does exist for those who buy it.

    I haven’t thought about healthcare vouchers. Oddly enough I haven’t heard anyone else talking about them either. Where did you hear that the Obama healthcare plan was a voucher program?

    Essentially programs that mandate the purchase of private insurance with a subsidy based on income are essentially a voucher program. The Medicare part D program (the drug portion of Medicare) basically lets you go to a web site, put in the drugs you take and you see a list of plans with associated premiums. This is effectively a voucher, the premiums you see are what’s left after the voucher is deducted from the cost. The companies on the other side of the web site offer their various policies with the understanding that they get so much from the gov’t for the patient opting for them and are allowed to charge the difference via the Social Security system. Why is it not called a voucher? Well cosmetically its a bit different. You don’t get a piece of paper that says something like “$3.5K per year”. Perhaps also it was a political call since associating it with educational vouchers might have turned off those who oppose educational vouchers.

  12. Mark,

    Then why can’t I get private insurance? Collectivism and incorporation are illegal?

    Where are you getting this stuff?? Who said you can’t get private insurance?

    Where did you hear that the Obama healthcare plan was a voucher program?

    That was an analogy. The point is that the government is spending the money if you have public insurance, as it is with public education, yet it’s like having a voucher, because you aren’t limited to public doctors but may use your public insurance anywhere.

    You seem confident you know the contents of Mr Obama’s plan.

    Obviously the plan does not formally exist yet. However, from statements of Obama’s and his advisers that have been consistent, it’s clear that he is not proposing certain things like mandates and single-payer. I’ve directed you to Ezra Klein before. If you’re actually interested in what Democrats in power are proposing, you can start reading him and follow his links. Start with Health Care Reform for Beginners: The Many Flavors of the Public Plan.

    If you want to rail against things Obama’s not proposing that’s your right, but it’s just stupid to pretend that’s what “Obamacare” would entail unless you’re going to at least explain why you think that what you’re afraid of is going to happen when really nobody’s even suggesting it.

    Thinking that you found a “loophole” that would let you get private insurance under Obama’s plan reveals that you don’t have the faintest CLUE what you’re talking about.

    Funny, isn’t it, that you’re against it without even knowing what “it” is.

  13. Mark says:

    JA,
    All the talk from was an either or situation. Either you have public insurance or private. Not public + private a supplemental.

    From your piece, “Medicare holds costs down better than any private insurance!?” That’s because Medicare pays 50 cents on the dollar. Can your insurance plan do that, contract to pay 500 bucks for a procedure and then welsh and pay 250? No. Because they are bound by laws that the state is not.

    Like this

    That would give it a massive competitive advantage over private insurers, and would probably result in tens of millions of Americans dropping their current coverage and entering the public plan to save money.

    Not a supplemental plan.

    Boonton,
    And you see no difference between the public making your decisions on healthcare and them making decisions about levels of police staffing? Odd that.

    Medicare doesn’t pay. A good doctors can insist he doesn’t take medicare because medicare doesn’t pay what it promises. In Indiana Medicare pays doctors 50 cents on the dollar billed. They did this because, they didn’t have the funds. I can see why a doctor might not want to take Medicare. Will doctors have the choice not to take public insurance plans? I doubt it.

  14. All the talk from was an either or situation. Either you have public insurance or private. Not public + private a supplemental.

    Has anyone anywhere suggested that supplemental would not be allowed? Why wouldn’t it be?

    That’s because Medicare pays 50 cents on the dollar.

    Cite?

  15. Boonton says:

    Can your insurance plan do that, contract to pay 500 bucks for a procedure and then welsh and pay 250? No. Because they are bound by laws that the state is not.

    Well actually yes they can if they structure their contracts properly (notice how your credit card ‘terms and conditions’ essentially say ‘we can do whatever we want to you’?) and I’m not sure I buy that Medicare does this. But Medicare is bound by the market. If doctors won’t do the procedure for $250 they will stop taking Medicare.

    And you see no difference between the public making your decisions on healthcare and them making decisions about levels of police staffing?

    Actually the public makes no such decisions on either healthcare or policing. If I feel I need more police protection than is offered by the town I will buy it. I’m free to hire body guards, security, alarm services and so on. Most people don’t because these things are expensive and for most people having 911 and an occassional drive by from the local beat cop is more than enough protection.

    Police and health are similiar in that we have made a decision as a society not to allow people to below a certain threshold. If I’m bleeding in the street I will be taken to a hospital and treated. If I call 911 the cops will respond. Unlike your example with cars, though, if I blow all my money on other stuff I will not get a car to use for free. I will have to walk.

    Medicare doesn’t pay. A good doctors can insist he doesn’t take medicare because medicare doesn’t pay what it promises. In Indiana Medicare pays doctors 50 cents on the dollar billed.

    I would take the ‘billing’ with a grain of salt. My impression is this billing is what the doctor would charge you if you walked in off the street with a fist full of $100 bills. Even private insurance does not pay this rate but usually demands a discount and 50% off is not all that unusual.

    JA
    Has anyone anywhere suggested that supplemental would not be allowed? Why wouldn’t it be?

    I think Mark is trying to say that you don’t get a choice to opt for your own plan. In other words, to use the example of Medicare, you get Medicare and then choose to buy ‘supplemental’ but you don’t actually get to decide a substitute in place of Medicare for your ‘basic insurance’. By analogy the town doesn’t give you a voucher to buy your own bodyguards and security posse. You take the police protection as your ‘basic’ package and then opt to supplement.

    Mark’s thinking, I think, is that since the ‘basic package’ is so comprehensive and so relatively cheap few could afford or desire to opt for anything supplemental making private packages a rare bird.

  16. I think Mark is trying to say that you don’t get a choice to opt for your own plan.

    Why would he say that? Nobody’s suggesting such a system!

    Mark’s thinking, I think, is that since the ‘basic package’ is so comprehensive and so relatively cheap few could afford or desire to opt for anything supplemental making private packages a rare bird.

    If nobody desires to opt out, there’s not really a problem, is there? 🙂

  17. Boonton says:

    I think the case is different with policing in that for a relatively small amount of money, the gov’t can cheaply provide a very effective ‘basic package’ of policing that the vast majority of people are happy with. ‘Private policing’ then remains the domain of the very rich and services that piggy back on the ‘basic package’ as supplements (like alarm services that call 911 for you).

    Now let’s compare this to a different public good, education. Here we see a different picture. Most people are content with the ‘basic package’ of k-12 public schools but most people also opt for a ‘private supplement’ of college or secondary education that they pay with their own money. While it is small, there is also a healthy private business where people bypass the ‘basic package’ entirely and purchase a substitute.

    Now for an even bigger extreme, look at drinking water. There’s ‘free’ drinking fountains in many gov’t buildings, public parks etc. Yet most people use this heavily subsidized good rarely and most water they drink they purchase on their own. While people could, in theory, drink their full for free daily…most people buy bottled water, flavored water (aka soda, coffee, tea etc.) or drink from their own tap.

    So here we have three goods provided by gov’t but three very different extremes in how they are utilized and how much displacement there is of private providers.

    Much – police
    +

    Med. – school

    *
    Little – water

    In the case of medical insurance I suspect it would be somewhere between school and water. The public is not willing to accept the pricetag of a plan that would be around the + mark so it will end up closer to the *.

  18. Mark says:

    JA,
    My thinking is that the basic package will likely have a number of features. It will be cheap. It will be relatively comprehensive. But it will be substandard, i.e., there will be long waits and lines for care. What I haven’t seen is the suggestion that people can get (for free) the public option and supplement that with their private insurance.

    To follow Boonton’s schooling analogy it would be sending your kid to public school (subsidized) and also sending him to private school in the evening to supplement his sub-standard education.

    Supplemental insurance works for a lot of dual income families in which both employers offer health care in that there is then a primary insurer providing most coverage and the secondary (spouses) insurance then picks up the co-pay too.

    Boonton,

    I would take the ‘billing’ with a grain of salt. My impression is this billing is what the doctor would charge you if you walked in off the street with a fist full of $100 bills. Even private insurance does not pay this rate but usually demands a discount and 50% off is not all that unusual.

    Actually that’s not the situation as I understood it as told to me by a doctor friend. Medicare (and private insurance companies) set amounts they will pay for set services. Medicare for example decides a colonoscopy should cost $X dollars as the going rate which in general is in a similar ballpark to private insurers going payout on this. However after a few years and cost overruns for Medicare at some point, the Indiana (or Illinois .. I forget this doctor is close to the border and gets patients from both states) decided it could not afford to pay the money originally negotiated. They welshed, and now pay half. This will likely follow with the public healthcare option if it is an aggressive size/scope is selected … which is likely. Do you not expect the morons in the beltway to promise more than can be reasonably delivered?

    Actually the “private policing” is less a thing of the rich than you suspect. Every “closed” housing project uses that, restricting access and so on. This is very middle class thing in many developments.

    Mark’s thinking, I think, is that since the ‘basic package’ is so comprehensive and so relatively cheap few could afford or desire to opt for anything supplemental making private packages a rare bird.

    No. My thinking is that the discussions I’ve seen pose public vs private insurance as an either/or alternative. I was pointing out that the supplemental option cannot be rationally or legally excluded if a rich person like Mr Obama can use his own cash resources to supplement.

  19. Mark:

    My thinking is that the basic package will likely have a number of features. It will be cheap. It will be relatively comprehensive. But it will be substandard, i.e., there will be long waits and lines for care.

    Why would there be long waits and lines? You just take your public insurance to the doctor of your choice.

    To follow Boonton’s schooling analogy it would be sending your kid to public school (subsidized) and also sending him to private school in the evening to supplement his sub-standard education.

    …which is 100% legal. Tens of millions of people supplement public school with private religious schooling, for example.

    What I haven’t seen is the suggestion that people can get (for free) the public option and supplement that with their private insurance.

    Obviously you could do that. Why wouldn’t you be allowed to? It’s like you just invented this bogeyman for no reason whatsoever and you’re letting it terrify you. Nobody’s going to stop you from getting supplemental insurance. Why would they? Who would care? How could it possibly be illegal?

  20. Boonton says:

    My thinking is that the basic package will likely have a number of features. It will be cheap. It will be relatively comprehensive. But it will be substandard, i.e., there will be long waits and lines for care.

    Then its not exactly ‘full of features’. Diluting quality (long lines) can keep things cheaper but going the Wal-Mart or McDonald’s route only takes you so far. In effect if the public plan isn’t all that great then people will turn to private plans in great enough numbers to keep many in business.

    To follow Boonton’s schooling analogy it would be sending your kid to public school (subsidized) and also sending him to private school in the evening to supplement his sub-standard education.

    The analogy breaks down a bit here in that you don’t usually purchase education in tiny units. You can visit a doctor as a one-off for a cold or broken bone but education is more of a long term relationship purchase. Even taking a single college class involves committing some serious time.

    However after a few years and cost overruns for Medicare at some point, the Indiana (or Illinois .. I forget this doctor is close to the border and gets patients from both states) decided it could not afford to pay the money originally negotiated. They welshed, and now pay half

    I think you’re thinking of Medicaid which the states pay part and the Fed. gov’t does a match. Services and reimbursement rates vary since different states opt for different mixes of covering. From what I understand private insurance plays a similiar game where they take extra long to cut checks, scrutinize billings for minor errors in order to deny payment etc.

    This is can basically be reduced to a lower reimbursement rate for simplicity. It’s like saying one HMO will pay $150 for a visit but make you wait 4 months to get it and scrutinize your paperwork while another will do $75 but be prompt about it and won’t give you a hassel.

    No. My thinking is that the discussions I’ve seen pose public vs private insurance as an either/or alternative. I was pointing out that the supplemental option cannot be rationally or legally excluded if a rich person like Mr Obama can use his own cash resources to supplement.

    This would be a ‘single payer’ option where the doctor basically is not allowed to take any money from anyone other than the gov’t. This would apply to Canada (although I’m sure they have exceptions) but to my knowledge no such program is on the table here.

    Actually the “private policing” is less a thing of the rich than you suspect. Every “closed” housing project uses that, restricting access and so on.

    Well if you want to push it I suppose even locksmiths and car alarms are a type of ‘private policing’….

  21. Boonton says:

    A rough sketch of the ideas floating around-

    this is just a rough sketch, I haven’t followed any specific bills closely but these are some general ideas that have weight in the US…..

    Medicare D – Basically this model starts with a ‘gateway’ for patients to shop for coverage. To sell policies on the ‘gateway’, companies must offer a basic package. They can sell additional services or benefits as well. A public option does exist here, sort of. If the private plans do not produce a certain amount of cost savings, a gov’t plan is offered for sale as a failsafe on the ‘gateway’. In the debate on whether a ‘public plan’ should be offered, what is often missed is that Medicare D already has a public plan provision, it just hasn’t been triggered since the private plans selling to the gateway have been able to control prices.

    MA’s Universal Coverage – MA achieved near universal coverage through two tools. The first was a mandate that everyone cover themselves either through insurance from their employer, privately purchased coverage or by buying coverage through a similiar ‘gateway’. The second was ‘pay or play’. Companies either have to offer coverage or pay. The payments go to subsidize coverage for those who can’t afford to buy insurance. This also prevents companies from dropping coverage in order to take advantage of the subsidies.

    Taxing benefits – Another way to pay for some of this is to tax benefits that employers provide that are far above average. McCain proposed a variation on this (he, I believe, wanted to tax all benefits….beforehand Bush proposed taxing extravagent benefits). The reasoning behind this is that highly paid individuals are always seeking (along with their employers) to avoid taxes. Paying an executive with a super medical policy that costs and extra $10,000 a year yields no taxes for either the company or executive whereas a straight extra $10K of salary would. This levels the playing field somewhat.

    I think there’s an instinct here to talk about Canada and the UK when the model that’s more likely to emerge is probably going to be much closer to the Dutch, Swiss and French that have a private mandate system combined with a public option. The debate over whether or not to include a ‘public plan’ is rather amusing when you consider of the $7000 or so spent per person on healthcare, about $3,000 is public spending already. That is pretty close to what Canada spends per person on their ‘public only’ system. We’ve managed to spend what Canada spends per person but only provide coverage to those over 65 or those who are very poor.

    But a single payer plan would carry with it a high price tag which is why I think Mark mistakes Obama’s incentives and motivations here. Mark thinks Obama wants a program to drive out private insurance. I think private insurance is an advantage for Obama. The more that people keep private coverage, the less expensive will be a plan to cover the gap. The problem is how do you cover the gap without setting up an incentive for companies to start dumping workers into the gap….hence we deal with more complicated proposals than the relatively simple UK or Canadian models.