Seven plus Seven Bits of Unsolicited Observations for the Young Invincibles on the Subject of Health Insurance

We are about halfway through the enrollment period for insurance under the Affordable Care Act [1] and as a slightly belated Yule gift, this Boomer [2] will provide some observations relevant to all you “young invincibles” contemplating whether you should sign on.

Yeah, right.

Exactly want you want, eh?  Right up there with those Christmas/holiday/Yule gifts that included a fruitcake with a “sell-by” date older than that sofa you scavenged from a curbside [3], bottles of alcoholic beverages you could never imagine consuming, and articles of clothing you could only imagine wearing to a Halloween party, but probably not even that. Yeah, Boomers.

So, like, hey, it’s just my experience, okay? Whatever.

Background: Personal

As it happens, I’ve had a fair amount of experience with the U.S. medical system. And as I’m going to be making some arguably less than sympathetic observations, let us be clear that these views are not those of some grieving widower flailing away at outrageous fortune. My late wife—let us call her “Misty”, as that was her name—received excellent care, and while she died at the relatively young age of 50, she resisted cancer for almost eleven years, living to somewhere in the 95th to 98th percentile for someone with her configuration of the disease—the numbers get rather vague that far out on the tails of the distribution. I cannot recall a single time when the insurance plan of the University of Kansas did not cover needed procedures, albeit sometimes following a bit of persuasion, and if you find yourself with cancer [4], I can heartily recommend the services provided at the University of Kansas Cancer Center. The system, while highly inefficient, pretty much works, or at least it did for us. [5] 

But we had insurance.

Background: Institutional

Let’s speculate here on just how badly we could design a health care delivery system. Maybe, in fact, that’s what they mean by “Obamacare”: Obama, sitting down in his secret Bunker of Evil [6] plotting with Hillary Clinton, representatives of the Trilateral Commission, and the Knights Templar to devise a hideous design to foist on the unsuspecting American public. At the core, arrange things so that if you don’t have health insurance, you pay anything from twice to twenty times what someone with health insurance pays, and if you can’t pay—and with outrageously high fees, you won’t be able to—thuggish collection agencies will hound you into bankruptcy. The economy will be burdened with costs twice those of other industrialized democracies, with outcomes at best comparable, and probably far worse,  and with avoidable errors causing deaths equivalent to a 9/11 attack every three to six weeks, year in, year out. Now that would indeed be an impeachable offense!

Oh, wait, that’s the existing system, pre-Obama. Oops.

So while there is a ludicrously modest IRS “penalty” for not signing up for an ACA-approved insurance plan, that’s not the real threat. The real threat is ending up in the existing system without insurance. When you’ve looked at as many hospital bills as I have, you quickly notice the dramatic difference between what is billed to uninsured individuals—an amount that the hospitals simply make up—and the “negotiated rate” that your insurance company will pay, which probably something closer to a true cost. Without the big, bad insurance company to protect you, you are hopelessly screwed. That’s not a threat; that’s a promise.

Seven observations on the existing system

1. Been there, done that

Let’s start with the fact that the ACA is not yet another Boomer conspiracy to make your lives miserable under the “Do as I say, not as I do/did” principle. Yes, there are plenty of those, but this is not one of them. Most people are covered under large, more or less compulsory group health programs (I was for my entire life life until about six months ago [19]) and in all of those, the young and relatively healthy subsidize the old and ill. That’s how insurance works. But you knew that, and are merely attempting to game the system.[8] Which is also okay except that downsides are considerably higher than you probably think. To the extent that you are thinking.

2. It could happen to you. Really

The likelihood that a medical situation could arise that would destroy you financially or kill you is higher than you think. I can make this statement confidently because we have a huge body of evidence indicating that people are really bad at estimating these sorts of probabilities: see the usual “forecasters quartet” here, here, here and here. The odds of this happening to you are substantially lower than the odds of it happening to me, of course, but massively higher than the various apocalyptic scenarios of the goldbugs, survivalists, and end-of-time fundamentalists [9] that occupy so much popular attention.

3. Absolutely no way in hell you can pay for it

Though “living hell” is precisely where you will be at this point. The rate at which medical expenses accumulate is astonishing and absolutely swamps any other imaginable contingency short of crashing your car through a Tiffany display of Fabergé eggs. [10] Just browse the web and get the horror stories: They are absolutely everywhere, and are anything but exaggerated: again, I’ve looked at hundreds of medical bills. Anything that is at all complicated and—usually without any knowledge or control of the total until the bills come at the end of treatment—you are on the hook for tens or hundreds of thousands of dollars.

4. So you will be ruined financially

An accident, an infection, or a tumor and suddenly you are $200,000 in debt?: say good-bye to any hopes of the normal financial accomplishments of early adulthood: a decent car, a house, matching furniture, beginning to save for retirement and your children’s education. You will probably end up in bankruptcy—contrary to popular perceptions, medical bills, not reckless spending binges, are the primary reasons for bankruptcy, a situation unheard of outside the U.S.—and will eventually get back on track, though probably a good ten years behind your peers.

Though even in bankruptcy, you will still have to re-pay those student loans. [11]

5. Or end up as a ward of the state

Which is what happens if things go badly. The Economist noted in a recent article on helmet laws:

[Survivors of motorcycle accidents] typically run up $1.3m in direct medical costs. Fewer than a third work again. A study of helmet-shunning bikers admitted to one large hospital, cited by the Centres for Disease Control (CDC), found that taxpayers paid for 63% of their care.

Yeah, that’s a real statement of libertarian independence and autonomy, yesiree bob! Given the prevailing U.S. penchant for aiming budget cuts at the disenfranchised and vulnerable—that will be you—the care for the 66% who never work again, I suspect, will not be of the quality that would have been provided had you been insured. You may remain in this state for quite a long time…

6. Unless you die prematurely

Which can happen easily enough. At one point well before she died—maybe eighteen months or so—Misty acquired a potentially lethal infection, a rather common “side-effect” of chemotherapy, which could only be treated with a very expensive intravenous antibiotic. [12] It may have been vancomycin, which is notoriously expensive ($500 a dose is not uncommon, and a week or so of treatment is required), though I’m not sure about this, but I distinctly remember that the difference between the non-insured and insurance price was a factor of twenty. The treatment worked, and she lived another year or so. In the absence of that treatment, she almost certainly would have died from the infection, and I very much doubt that any law required her to receive it.

In point of fact, physician-assisted suicide is already available not just in Oregon, but in all fifty states and the District of Columbia: you simply need to acquire a life-threatening condition and walk into a hospital without insurance.

7. Miserably.

One of my first insights that the U.S. system was less than humane came very early, when I saw the cost of Misty’s anti-nausea medicine as she was undergoing chemotherapy. These drugs are very effective with most people [13] and have dramatically changed the experience but at the time—the drug was still under patent protection; thankfully there are now inexpensive generic versions—they cost $75 per pill. “So here’s the deal: you pay me $75 a dose, or your loved one goes through hell. What will it be, eh?” The people who came up with that pricing scheme  presumably will end up sharing space in the afterlife with the folks peddling bogus open access journals.

Near the end, when Misty was dealing with massive bone metastases—these are notoriously painful—I ran into our [independent] pharmacist in a shopping center parking lot. He said that he’d just been on the phone with the narcotics control people in Topeka, and explained the situation, and Misty was cleared for whatever drugs she needed to control the pain (and that was a lot of narcotics). I’d like to think that anyone would get this sort of service, but I sort of doubt that you’d get this at an over-subscribed charity clinic. [14]

The Upshot

I’m not suggesting this system resulted from an active conspiracy. [7] Rather it evolved haphazardly through some combination of legalized (and otherwise) corruption, self-interest and neglect, though surely people in the health care industry are constantly pinching themselves and saying “Wow, we take money from widows and orphans and let people die solely for profit, and year after year they let us get away with this??” Again, the threat to your physical and financial well-being is not some little $100 penalty: the threat is the status quo. But if you’ve got insurance, the system can in fact work pretty well in terms of outcome, if not efficiency.

Where We Are Right Now?

The roll-out of Healthcare.gov was, unquestionably, an avoidable disaster and all the more so given that the extremely high proportion of  failures in government computer efforts is well known in the information technology community. In his professional life, Obama surrounds himself with a tech-saavy crowd, though one should note that government procurement regulations aside (and they are impossible to set aside), he was in a no-win situation here: consider these headlines from an alternative universe: [15]

Obama Computer Cronies get Billions in Sweetheart Deals to Develop Web Site

and

Obamacare web site called “over-engineered”  following trouble-free roll out; Millions spent on unnecessary “stress testing” 

Still, the fact that Obama ignored these danger signs and assumed that everything was buzzing along just fine is inexcusable. But the past is not necessarily prologue:

Seven reasons the ACA is [eventually] going to work

1. You can incrementally fix a system like this: in fact that is pretty much the only way any complex organization ever does things. It’s not like a rocket launch or a D-Day invasion: it doesn’t have to work the first time.[20]

2. It is a plan developed by conservatives—the American Enterprise Institute with the original state-level implementation done by Republican Mitt Romney—but is being implemented by liberals. And this is typically how things related to social planning manage to get done in the US. Think the Clinton-era welfare reform. [16]

3. The insurance companies really want to see this thing work: it is a massive gift to them. They have a lot of money, and my sense is that they are waiting for the system to get just a little more settled before unleashing an onslaught of advertising. [17]

4. The infrastructure is in place: the existing system is fabulously inefficient, but fundamentally works provided a reasonable amount of money is available. It’s not like this is being implemented in Mali or Haiti.

5. This is an absolutely routine function in industrialized democracies: the US is the outlier in not having it. Furthermore the US government is already running several systems at varying levels of effectiveness: Medicare, the Veterans Administration system, various Department of Defense systems, Medicaid. While you would never know this from watching the right-wing bloviators, it is really hard to argue that conservative “US exceptionalism” fundamentally involves running probably the least efficient health care system in the industrialized world, or that this provides some sort of global comparative advantage. [18]

6. The existing system for allocating care sucks, and it isn’t entirely clear that even the employees of insurance companies (or the financial triage people in for-profit hospitals) enjoy deciding who will live and who will die in order to keep their hedge-fund investors happy.

7. The very fact that the existing system is hugely inefficient means that there is massive available slack: finding ways to improve is shooting fish in a barrel. It will be roughly as messy, and the barrel won’t look too good at the end either, but the issue most certainly not one of total resources, and the status quo certainly doesn’t pass any sort of utilitarian or Pareto optimality test.

This last point suggests that there will be substantial dislocations in the future—”one person’s bottleneck is another person’s job”—and the clear target of this, the lavishly compensated denizens of the rent-seeking “fee-for-service” model, already are said to spend half a billion per year on legalized bribery lobbying (and presumably many times that on advertising and public relations, all contributing to driving up the costs of the existing system), and they aren’t going to go quietly. But if the experience of Medicare is any indication, there will be as many winners as losers.

The past is past, and the future is, in all likelihood, one where the ACA will stagger, in a series of two steps forward, one back, into something reasonably effective.  Within ten years—quite possibly a lot sooner—it will be thoroughly entrenched and functioning with a level of service probably mid-range in the OECD, though—due to entrenched interests—probably still 50% more expensive. And in the dim light, after a few drinks, people will scare themselves with stories of the horrible days when the onset of a disease meant immediately having ones insurance dropped, followed by financial ruin, and people whose children acquired cancer were reduced to putting out jars at Quik-Trips to collect quarters.

Footnotes

[1] This is the new set of medical insurance regulations and opportunities that polls show people to be at least mildly interested in, particularly the new requirement that insurance companies cannot deny policies based on prior medical conditions. It is not to be confused with “Obamacare”: no one wants anything to do with Obamacare.

[2] Actually, according to this quiz, I’m a “mid-Boomer”: indeed, to me Elvis Presley was a bloated drug addict, not an edgy taboo-defying sex symbol. We also don’t use the word “edgy.”

[3] Though the sofa would be more palatable.

[4]  Meanwhile remember Molly Ivin’s comment about cancer: “First they poison you, then they cut you, then they burn you, then you die. And it does not build character.”

[5] “Us”?: your partner gets cancer, it’s a collective endeavor—ask anyone who has been through the process. That does not include Newt Gingrich.

[6] So called: Obama prefers to call it القبو الشر. Fox is planning a documentary on this in the near future, and Bill O’Reilly is writing a book on it. The bunker was originally installed by Dick Cheney, of course: he told Bush it was a wine cellar. Cheney and Obama actually get along great: the antagonism is just an act. Templars do that sort of thing.

[7] And who were the great rivals of the Templars? The Hospitallers! Coincidence?… that’s just what they want you to think.

[8] Though if that is an option, by all means stay on your parent['s][s'] insurance until you are 26. And why is 26 a magic number for insurance companies? As in you can’t rent a car until you are 25? Maybe this has something to do with the fact your prefrontal cortex, which is responsible for planning, isn’t fully connected until your mid-20s? Not stupid, insurance companies.

[9] Some advice from a good authority on that score: Acts 1:6-7.  That still won’t help with the various Mayan apocalypses.  Or Ragnarok.

[10] And Tiffany carries insurance: we are stipulating that you don’t.

[11] Boomers are guilty for ruining that one for you.

[12] What, you don’t have an antibiotic-resistant infection? Well, no problem, our hospital will be happy to provide you with one. And by the way, ever since we discovered that antibiotics can be used to fatten farm animals, we’ve done our best to use them indiscriminately and thus facilitate the evolution of antibiotic resistance: certainly inexpensive Chicken McNuggets are a vastly greater social good than relief from a life threatening infection.

[13] Though for others, marijuana, which is a heck of a lot less expensive, is just as effective. Misty generally responded well to the anti-nausea medications, though at one point she was having some problems and, quite unsolicited, a campus mail envelope appeared at my office with a Zip-Loc bag containing a green resinous substance. Kansans are like that.

[14] Nor, I suspect, from an employee of Walmart or CVS bound by a thick book of corporate regulations.

[15] Though while we’re in the alternative universe, here are a couple more

Trustee in coma; houses and cars vandalized following student riot in Paterno neighborhood
[Security experts question decision to fire Paterno in person]

and

NCAA gives unprecedented seven-year “death penalty” to Penn State football program
[Cites university dismissal of findings from investigation by former FBI director]

[16] Conversely, it is a testimony to Federalism how thoroughly the ACA can be stopped at the state level. Now, why anyone would want to move a business to such a state is beyond me.

[17] Whereas the anti-Obamacare advertising to date has demonstrated once again that when 80-something gadzillionaires get going on the topic of sex, the results are more than a little creepy.

[18] Keep in mind that the concept of a national system of social security was pioneered by Otto von Bismarck—not exactly a paragon of fuzzy-headed liberalism—and the European systems have been championed by the likes of Margaret Thatcher and Angela Merkel.

[19] I have private coverage now—do you think I’m insane??—at roughly the same cost.

[20] Yes, Normandy worked, particularly if you landed somewhere other than Omaha Beach and didn’t worry about the original time-tables. Norway, Anzio, Arnhem: not so good.

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2 Responses to Seven plus Seven Bits of Unsolicited Observations for the Young Invincibles on the Subject of Health Insurance

  1. womanstats says:

    This is a great post, Phil. Really, you missed your calling and I’m glad you finally found it. I will confess that when I clicked on the first link and saw Misty smiling and young and happy, my heart stopped . . . She was so alive; I have never met anyone so alive, and probably never will again. She is missed.

  2. rkmaknowles says:

    Hi Phil. This is right on, and this coming from someone whose wife died from cancer at the age of 46 (and by the way, she was an athlete, a non-smoker, a non-drinker, and health practitioner who knew a thing or two about how to stay alive). My family would be bankrupt many times over without insurance, and Obamacare, although imperfect, will save many, many thousands of families from bankruptcy before, during, and after they’ve already suffered through horrendous tragedy. But saving Americans from that fate, to hear the rhetoric, must somehow be unAmerican, apparently, at least in the eyes of those who really don’t have a clue how this works.

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