Tag: health insurance

‘Health Status Insurance’ Provides Real Alternative to Universal Care

So screams the headline of John Cochrane’s oped in today’s Investor’s Business Daily.  An excerpt:

Markets can provide long-term, secure health insurance while enhancing choice and competition. Given the chance, they will…

This is not pie in the sky. The market for individual health insurance is already innovating to provide better long-term insurance. Well before it was required by law, insurance companies started offering “guaranteed renewable” policies.

Once you buy in, you have the right to continue coverage even if you get sick, and your premiums do not rise if you get sick.

UnitedHealth Group recently announced a product that gives customers the right to buy medical insurance in the future, at a premium that depends only on their current health status.

For a small premium, you can protect yourself against the risk that your health premiums will escalate. This is only a small step away from full health-status insurance.

The oped is based on Cochrane’s recent Cato policy analysis, “Health-Status Insurance: How Markets Can Provide Health Security.”

You can also hear Cochrane and Johns Hopkins University health economist Brad Herring discussing health-status insurance at this Cato policy forum, held today.

Events This Week

Tuesday, March 31, 2009

POLICY FORUM - Can the Market Provide Choice and Secure Health Coverage Even for High-Cost Illnesses?

12:00 PM (Luncheon to Follow)

In a study recently published by the Cato Institute, economist John Cochrane argues that the market can solve a huge piece of the health care puzzle: providing secure, life-long health insurance and a choice of health plans to even the sickest patients. The key, Cochrane explains, is to eliminate government policies that force the healthy to subsidize the sick, such as the tax preference for employer-sponsored coverage and other attempts to impose price controls on health insurance premiums.

Featuring John H. Cochrane, Myron S. Scholes Professor of Finance, University of Chicago Booth School of Business Research Associate, National Bureau of Economic Research; Bradley Herring, Assistant Professor, Johns Hopkins Bloomberg School of Public Health; moderated by Michael F. Cannon, Director of Health Policy Studies, Cato Institute.

Please register to attend this event, or watch free online.

Friday, April 3, 2009

PglennOLICY FORUM - Drug Decriminalization in Portugal

12:00 PM (Luncheon to Follow)

In 2001, Portugal began a remarkable policy experiment, decriminalizing all drugs, including cocaine and heroin.

In a new paper for the Cato Institute, attorney and author Glenn Greenwald closely examines the Portugal experiment and concludes that the doomsayers were wrong. There is now a widespread consensus in Portugal that decriminalization has been a success. The debate in Portugal has shifted rather dramatically to minor adjustments in the existing arrangement. There is no real debate about whether drugs should once again be criminalized. Join us for a discussion about Glenn Greenwald’s field research in Portugal and what lessons his findings may hold for drug policies in other countries.

Featuring Glenn Greenwald, Attorney and Best-selling Author; with comments by Peter Reuter, Department of Criminology, University of Maryland; moderated by Tim Lynch, Director, Project on Criminal Justice, Cato Institute.

Please register to attend this event, or watch free online.


What ‘Universal Coverage’ Really Means: Higher Taxes, Government Rationing

An editorial in today’s Wall Street Journal earns that page a membership in the Anti-Universal Coverage Club.

The editors explain that the universal-coverage scheme Massachusetts enacted in 2006 is a perfect microcosm of what congressional Democrats are trying to foist on the rest of the nation: compel universal coverage now, worry about the costs later.

Massachusetts is three years into that strategy, thus its experience shows us where that strategy leads.  Much as my colleague Mike Tanner predicted (repeatedly), it leads to higher taxes and government rationing.  The WSJ editors write:

The state’s overall costs on health programs have increased by 42% (!) since 2006.

Like gamblers doubling down on their losses, Democrats have already hiked the fines for people who don’t obtain insurance under the “individual mandate,” already increased business penalties, taxed insurers and hospitals, raised premiums, and pumped up the state tobacco levy. That’s still not enough money.

So earlier this year, [Gov. Deval] Patrick appointed a state commission to figure out how to control costs and preserve “this grand experiment”…

The Patrick panel is considering one option to “exclude coverage of services of low priority/low value.” Another would “limit coverage to services that produce the highest value when considering both clinical effectiveness and cost.” (Guess who would determine what is high or low value? Not patients or doctors.) Yet another is “a limitation on the total amount of money available for health care services,” i.e., an overall spending cap…

[Patrick] reportedly told insurers and hospitals at a closed meeting this month that if they didn’t take steps to hold down the rate of medical inflation, he would.

The editors conclude:

The real lesson of Massachusetts is that reform proponents won’t tell Americans the truth about what “universal” coverage really means: Runaway costs followed by price controls and bureaucratic rationing.

To Reform Health Care, Obama Must First Convince His Advisers

In The New Republic, Jonathan Cohn makes some interesting observations about how Barack Obama’s campaign and administration approach policy issues, particularly health care.

In early January, most of Barack Obama’s senior staff assembled with the president-elect … It was a pivotal moment in Obama’s transformation from candidate to commander-in-chief. Obama’s advisers had taken all of his campaign pledges, factored in his promise to reduce the deficit, and put together a provisional blueprint for governing. For the first time, Obama would get a sense of how his proposals fit together in the real world.

Does Cohn suggest that candidate Obama just threw out proposals without considering their cumulative, real-world impact?  That Obama launched a new administration with insufficient planning??  Perish the thought.

Obama … said he was mostly happy with what his advisers had produced. Investments in energy and education, plus real progress on reducing the deficit–it was all in there, Obama noted. But then the president-elect turned to his one major concern: a key item that was not, in his opinion, sufficiently funded. “Here’s my guidance to you,” one participant recalls Obama saying to the group. “Protect health care.”

It wasn’t the first time that health care had seemed to get short shrift from Obama’s advisers. Nor would it be the last. Indeed, there were moments during the transition and the early weeks of the administration when it appeared that the push for comprehensive health care reform might collapse before it had even begun. During this time, a debate raged inside the administration, with some senior officials arguing that the new president should wade into health care gingerly–or even postpone it altogether–because it would cost too much, distract from other priorities, and carry huge political risks.

Ultimately, however, these arguments failed to carry the day, and health care reform, against what occasionally seemed like long odds, managed to find a sizeable place in Obama’s budget…

The divide among Obama’s counselors was never over whether to pursue health care reform or even what it should look like in the end … What divided Obama’s team was the question of how to pursue reform–in particular, how quickly.

That tension stretched back to the campaign, when Obama’s political strategists advised him to soft-pedal the topic. One of them was David Axelrod. Although personally acquainted with the flaws in our health care system because of his disabled daughter, he also understood public opinion: The middle-class voters whose support politicians covet were worried about the cost of insurance, but their enthusiasm for universal coverage seemed shallow. Obama, though, always insisted on keeping health care prominent in the election.

Why so much dissension in the ranks? Partly because the nation faces much more immediate problems.

Axelrod’s anxiety hadn’t dissipated since the election. And now he had a new ally in Larry Summers, whom Obama had appointed to head the National Economic Council. One concern for Summers was the diversion of presidential and staff attention from other issues, like the economy.

But the dissension is also because Obama’s advisers understand just how difficult it will be to achieve universal coverage.

Mostly, though, Summers worried about money. Experts generally believe it will take years before better use of information technology, more preventive care, and other reforms start to yield serious savings. At least in the short run, health care reform is therefore likely to add to the government’s financial burden–during a time of rising deficits. This made Summers uncomfortable.

How bad was the dissension?

Particularly in Obama’s absence, the voices of the skeptics often predominated. “It was scaring the hell out of the rest of us,” says one of the advisers who favored more aggressive action.

Ultimately, Obama insisted on putting $634 billion in his budget to fund health care reform.  But Cohn acknowledges that Obama may be over-reaching.

At a time when the economy is collapsing, perhaps Obama can’t afford the distraction of such a major policy effort; at a time when the government is pumping out so much money for other priorities, perhaps it’s foolish to incur a new obligation that, if carried out by the book, still may not pay for itself in under ten years. And, even if it makes sense to seek health care reform this year, Obama’s decision to allocate health care money now could make the budget tougher to pass–inviting an extra political fight that might make reform even harder to achieve.

Nice thing about Cohn: he may be a high priest in the Church of Universal Coverage.  But he’s a darned good journalist.

More on that Massachusetts ‘Model’

Amid reports that the Obama administration, congress, and some conservative groups still consider Massachusetts to be a model for health care reform, the New York Times reveals that despite assessing insurers and hospitals, raising the penalty on noncompliant businesses, increasing premiums and co-payments for consumers, and raising the state tobacco tax, the program’s financing remains unsustainable.

Massachusetts has significantly reduced the number of people in the state who lack health insurance. However, it has not achieved, nor does it expect to reach, universal coverage. (The best estimates suggest that more than 200,000 state residents remain uninsured). And, significantly, roughly 60 percent of newly insured state residents are receiving subsidized coverage, suggesting that the increase in insurance coverage has more to do with increased subsidies (the state now provides subsidies for those earning up to 300 percent of the poverty level or $66,150 for a family of four) than with the mandate.

The cost of those subsidies in the face of predictably rising health care costs has led to program costs far higher than originally predicted. Spending for the Commonwealth Care subsidized program has doubled, from $630 million in 2007 to an estimated $1.3 billion for 2009.

Now the state is turning to a variety of gimmicks to try to hold down costs, including possibly cutting payments to physicians and hospitals by 3-5 percent. However, the Times quotes health reform experts who have studied the Massachusetts system as warning “the state and federal governments may need to place actual limits on health spending, which could lead to rationing of care.”

The more one looks at the Massachusetts “model,” the stronger the argument for keeping the government out of health care.

More Praise for Cochrane’s ‘Health-Status Insurance’

This time, it’s coming from Reihan Salam at Forbes.com:

Choice and Security: Professor John Cochrane’s advice to President Obama

Last week, at a White House forum on reforming health care, President Obama issued a challenge to advocates of less government control of the medical marketplace.

“If there is a way of getting this done [i.e., reforming health care] where we’re driving down costs and people are getting health insurance at an affordable rate and have choice of doctor, have flexibility in terms of their plans, and we could do that entirely through the market, I’d be happy to do it that way.”

More to the point, Obama added that he’d be just as happy to pursue an approach that involved more government control as well, and that seems to be the tack he’s taking…

Congressional Republicans have criticized Obama’s approach, and they’ve been particularly hostile to the idea of a new public insurance plan. They argue that Obama’s reforms will eventually lead to a nationalized health care system. But as of yet they’ve failed to offer an alternative that meets Obama’s criteria for a successful health care reform.

Enter John Cochrane, an economist at the University of Chicago Booth School of Business. Professor Cochrane has long advocated a proposal he calls “health-status insurance,” an approach that could guarantee long-term health security while also freeing medical insurers to compete for customers. To most health care reformers, this sounds like a contradiction in terms.

Cochrane’s paper is, “Health-Status Insurance: How Markets Can Provide Health Security.”

“Fascinating ‘Outside-of-the-Box’ Thinking on Health Insurance Reform”

At Reason Online, Ronald Bailey reviews John Cochrane’s recent Cato Policy Analysis, “Health-Status Insurance: How Markets Can Provide Health Security.”

Writing in advance of last week’s health care summit held by President Obama, Bailey explains:

Summit attendees will break into various working groups that are supposed to engage in “outside-of-the-box” thinking. As it happens, they now have some fascinating “outside-of-the-box” thinking on health insurance reform to draw on. Earlier this month, University of Chicago economist John Cochrane published an intriguing policy analysis for the libertarian Cato Institute that looked at how “health-status insurance” can provide health security for Americans. Cochrane claims that with health-status insurance, free markets can solve the vexing problem of how to insure people with pre-existing medical conditions and “provide life-long, portable health security, while enhancing consumer choice and competition.”…

Creating and selling separate health-status insurance policies would mean that medical insurance companies would no longer have an incentive to offload sick people. Instead, because those with pre-existing conditions would have the funds to pay higher premiums, insurers would compete for their business. “Constant competition for every consumer will have the same dramatic effects on cost, quality, and innovation in health care as it does in every other industry,” argues Cochrane.

Health-status insurance also helps delink medical insurance from employment because…a worker diagnosed with diabetes…can switch jobs without worrying about whether or not he can obtain medical insurance…

While Cochrane acknowledges that his proposal is not a comprehensive health care reform program, adopting it would go a long way toward satisfying President Obama’s eight health care reform principles, especially affordability, aiming toward universality, portability, and choice, and being fiscally sustainable. “Health-status insurance can simultaneously give us complete and portable long-term insurance, great individual choice, and cost-containment beyond the dreams of any health policy planner,” concludes Cochrane. Asked if he has been invited to the president’s health care reform summit this week, Cochrane said no, but quickly added, “If I got the phone call, I would definitely be there.” Mr. President, there’s still time for your summiteers to hear about this outside-of-the-box thinking.