UNINTENDED HEALTH CARE

February 03, 2008
by: jovial_cynic

image: Maternity ward pt. 5 (cc) roxeteer

There are a few things that I think governments should make sure citizens can have or afford -- things like food, shelter, clothing, and health care. When citizens of a country are starving, homeless, sick, and freezing to death on the streets, I think there's a systemic problem that can't be fixed by simply applying the "lack of personal responsibility" label on the situation. However, poverty and health care are complex issues, and complex problems can't be solved with simple solutions.

Alex Tabarrok from Marginal Revolution wrote up a fascinating definition of the law of unintended consequences that drives this point home:

The law of unintended consequences is what happens when a simple system tries to regulate a complex system. The political system is simple, it operates with limited information (rational ignorance), short time horizons, low feedback, and poor and misaligned incentives. Society in contrast is a complex, evolving, high-feedback, incentive-driven system. When a simple system tries to regulate a complex system you often get unintended consequences.

As stated before, the problem of poverty is complex. When specifically addressing the issue of universal health care, Clinton's proposal to garnish wages seems like a wide-brush solution that's rife with potential negative unintended consequences.

Democrat Hillary Rodham Clinton said Sunday she might be willing to garnish the wages of workers who refuse to buy health insurance to achieve coverage for all Americans.

... when pressed on ABC's "This Week," she said: "I think there are a number of mechanisms" that are possible, including "going after people's wages, automatic enrollment."

This is not a solution to the health care problem. This is a band-aid for the financial challenge of a universal health care program. Having health care for everybody should be viewed positively -- reducing an individual's burden of potential illness or injury (and that's what insurance is) benefits society. But when it's forcibly applied by garnishing wages, this is hardly positive. And as risk-aversion is likely to decrease with a universal health care system in place, does anybody really think that having wages garnished is going to make people want to *decrease* high-risk behavior?

The opposite is probably true. There's an unintended consequence for you.

COMMENTS for UNINTENDED HEALTH CARE

The Conservative Manifesto said:
This from a woman who claims to be "pro-choice".

=)
February 04, 2008

The Conservative Manifesto said:
p.s. Just a point of clarification: America already has universal health care. What Hillary seeks, is universal health insurance.
February 05, 2008

jovial_cynic said:
In technical terms, you are correct. However, when people say "universal health care," I think they are referring to the affordability of health care. Health insurance is meant to mitigate the individuals cost, which makes health care more reasonable.

But we're picking nits, here.
February 05, 2008

Wonder said:
"risk-aversion is likely to decrease with a universal health care system in place"

malfunction. need input. does not compute.

I don't know anybody who takes risks with their health & safety because they have good health insurance.

most people aren't that stupid.

but, just to entertain ourselves, let's toss some risky behaviors out there, and speculate how they might be effected positively or negatively by the presence of health coverage.

1. neglecting preventive/diagnostic care:
will people be more or less likely to seek out and receive, say, routine exams, cancer screenings, cholesterol/glucose tests, etc if they know that not only will the testing be paid for (those exams are EXPENSIVE out-of-pocket) but so will treatment, if the result is bad? bear in mind most illnesses are easier (and less expensive) to treat, the earlier they are caught.

2. smoking.
a deadly (and expensive) addiction many people need medical help to kick. many health plans (both private and public) refuse to pay for smoking cessation treatment.

3. nutrition: it's not just a cliche that many americans are choosing between decent food and needed medications, even now with the medicare Rx plans. the "donut hole" leaves lots of people able to only afford donuts for breakfast, and those are the ones who HAVE coverage.

just a few thoughts.
February 12, 2008

jovial_cynic said:
My statement about health care and risk aversion stems from the research that shows that people who are willing to buy insurance are more likely to be risk averse, whereas people who choose (or cannot) buy insurance are less risk averse.

That is, people who want to avoid risk pay for insurance; it's generally a win for the insurance industry, as it's favorable to underwrite low-risk policies. Financial risk aversion and medical risk aversion tend to go hand-in-hand, so when you remove the financial risk via universally shared burden, those who were previously found to have less risk aversion are now also insured. Therefore, risk-aversion, in terms of the common pool, decreases.

I wasn't saying that having universal health care will *make* people engage in more risky behavior.
February 12, 2008

wonder said:
There's a huge logical blunder in lumping together people who choose not to buy insurance, and people who don't have the opportunity or the means to.

Many of the risks people "choose" to take aren't really chosen, but a matter of circumstance.

Just to get overly personal, a few years ago, I "chose" to postpone seeing a doctor about a very disturbing health issue until the insurance from my new job took effect, a three-month delay that, could have been dangerous, considering the specifics of the problem.

Was that wise? no. Was it entirely motivated by economics? no. fear was a huge factor. But as soon as that coverage went into effect, I scheduled that Dr's appointment (went with the PPO, so I didn't have to get referral for a specialist)

Much bloodwork, an EEG, MRI, and ECG later, I still didn't know exactly what was wrong, but at least I knew I wasn't gonna die from it anytime soon.

did wonders for my productivity at work. one less thing to stress about.

oh, yeah, stress. another one of those risk factors they keep telling us all to avoid.
February 12, 2008

jovial_cynic said:
I get what you're saying. I guess I'm looking at the situation from an underwriting perspective. I work for an insurance company, after all. :)

And while yes, individual circumstances play a role, the raw numbers are what drives an insurance company to underwrite the way it does. And since I'm fiscally conservative, the whole piece about risk aversion was really just about the costs involved. The cost of insurance is lower when people who are (for whatever reason) less risk averse are not (for whatever reason) insured. I'm personally interested in the why of this discussion, but my post wasn't addressing that. I was simply stating that Clinton's proposal would effectively increase the cost of health insurance across the board (matching price to risk), and that the frustration of garnished wages might exacerbate the situation.

Don't get me wrong - I want universal health care. But if we don't address the systemic problem within the medical industry first (ie., the real reason for high costs), the infrastructure for a universal health care system won't be in place, and I think it'll get worse with a mandated program. Right now, a universal health care system would be a patch over a currently broken system. We don't need a patch. We need an overhaul.
February 12, 2008

The Conservative Manifesto said:
"There are a few things that I think governments should make sure citizens can have or afford -- things like food, shelter, clothing, and health care."

That statement has been bothering me for days now.

If our Founding Fathers believed providing health insurance for all citizens should be the responsibility of the government, don't you think they would have included some language concerning the issue in the Bill of Rights? While we obviously need to provide for the general welfare of society and should, as a compassionate society, care for those in poverty who cannot afford health insurance plans, it certainly isn't the constitutional jurisdiction of the gov't to provide health insurance.

The purpose of the government is to protect our rights as citizens... not become the source of those rights.

A universal (aka socialist) form of health insurance would surely lead to price controls, reduced innovation, lack of incentive, and rationing (i.e. longer wait periods, etc.).

I have a cousin who is a surgeon and doesn't care for politics one bit. He does, however, know that he could not vote Democrat solely because he understands what a socialist-style health system would do to our country.
February 18, 2008

jovial_cynic said:
Our founding fathers put together a document meant to (among other things) "insure domestic tranquility," and "promote the general welfare." While they didn't mention health insurance, I think that the added complexity of society created some necessary rules in order to maintain that tranquility and general welfare.

For instance, that people should be required to carry liability auto insurance if they drive is fantastic, and I fully support that legislation. Yes, I work for an insurance company, but even if I didn't, the load-balancing that happens with group-insurance decreases the individual risk across all parties involved, and I think this benefits society.

The purpose of the government is to protect our rights as citizens... not become the source of those rights.

I think the purpose of the government is also to protect the citizens themselves, which for me includes some level of food, shelter, clothing, and health care. I understand the good of the free market regarding these things -- don't get me wrong. I don't want any setbacks on innovation and incentives either. But I think there's a balance. I think that the current system is broken, and needs to be rebuilt, and that while it gets rebuilt, people need to be able to get affordable health insurance if they need it.
February 19, 2008

The Conservative Manifesto said:
"For instance, that people should be required to carry liability auto insurance if they drive is fantastic, and I fully support that legislation."

When debating universal health insurance, the "auto insurance" analogy is a weak one:

1) Obtaining auto insurance is a hoop citizens must jump through if they want to take advantage of the privilege that is driving a vehicle. There is no right to drive a vehicle, therefor stipulations exist to which one must adhere when applying for the privilege of driving a vehicle.

2) One of the main reasons auto insurance is mandatory is to protect others on the road. Mandatory health insurance does no such thing. It's a mandatory system imposed on citizens for simply existing.
February 19, 2008

jovial_cynic said:
I think you're ripping that quote out of context a bit. My quote immediately followed this statement:

I think that the added complexity of society created some necessary rules in order to maintain that tranquility and general welfare.

The connection is the added complexity of a couple of hundred-years worth of society.

I understand that driving is not a right. The auto insurance bit is about protecting the lives of citizens from other drivers; that it's compulsory was done to protect citizens. Protecting citizens is the crux of my argument.

As I re-read your comment, I think I understand how you interpreted my auto insurance statement. You are correct that mandatory auto insurance is nothing like mandatory health insurance... and while I'm in favor of mandatory auto, I'm not in favor of mandatory health. Again -- that's not what I was doing with the auto insurance comparison. My position is that health care must be affordable and accessible.

Being fiscally conservative, I don't believe that the answer is to simply subsidize the cost of health care or health insurance. The high costs are largely the result of secondary costs (to cover litigation), which hurts everybody (except the trial lawyers). I don't think that the principles of the free-market can solve this problem; it's not like more trial lawyers are going to show up to offer less damages and lower payout.

I think that intervention is necessary, and that a temporary "let's make sure everybody is covered while we fix this mess" policy is a good idea.
February 19, 2008

pete said:
the purpose of the government, ladies and gentlemen, is to protect the minority of the opulent against the majority.

protect our rights as citizens? the past 8 years have seen an evisceration of the bill of rights--suspension of habeus corpus in the name of fighting terrorism? wiretapping without warrants? you've got to be joking.

protect the citizens? how about protecting the landed and moneyed interests? these are james madison's own words, mind you.

the founding fathers represented the same elite class that still exists today--sprung from the colonial interests of the 'old world'. barack obama and hillary clinton represent the very same interests. business as usual.

antidote? think outside the context of democrat and republican. free yourself from the bonds of religion. evolve!
March 06, 2008

jovial_cynic said:
Pete - I see you're an idealistic libertarian. As much as I'd love to live out in the woods in a hut and grow my own food and be off the grid and not have any sort of government system in place, I think that laws (and therefore, law enforcement) that are agreed upon by the people serve better to protect our interests, those being home, family, livelihood, etc. And the management of those laws, naturally, creates a bureaucratic environment which cannot be avoided.

I think it's possible to have a class system in place, and at the same time, to curb corruption and have a reasonable system. I think that pure libertarianism (or anarchy; take your pick) is great if you have only yourself to look after. As for me, I like that laws serve as a deterrent from thieves, vandals, and other such folk, as I have a family to care for.
March 06, 2008

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