From: platt@watson.ibm.com (Daniel E. Platt)
Subject: Re: Deficit - can it be corrected?
Date: Mon, 05 Oct 1992 19:46:09 GMT
Disclaimer: This posting represents the poster's views, not necessarily those of IBM
Organization: IBM T.J. Watson Research Center

In article <1992Oct5.175155.17506@magnus.acs.ohio-state.edu>, cthorne@magnus.acs.ohio-state.edu (Charles E Thorne) writes:
|> In article <92279.092606DGS4@psuvm.psu.edu> <DGS4@psuvm.psu.edu> writes:
|> >In article <1992Oct5.085151.11751@lmpsbbs.comm.mot.com>, markr@mot.com (Mark)
|> >says:
|> 
|> >>In article <1992Oct02.141437.160192@watson.ibm.com> platt@watson.ibm.com      l
|> >>(Danie
|> >>E. Platt) writes:
|> 
|> >>>If you go to a hospital, it becomes obvious why costs are so high.  There
|> >>>is no incentive to keep costs down.  People can go get health care at any
|> >>>institution regardless of the rates charged.  Most people never really
|> >>>have to look at their bills; that's all handled for them by the hospital,
|> >>>who bills the insurance companies directly.  Medical costs are hard to
|> >>>control because there is effectively no market.
|> 
|> >>This one could be tackled this way : Allow only 90% of medical costs to be
|> >>insured, while 10% MUST be paid by the patient.  Of course, with a cap
|> >>of, say 20%, of ones income, so as not to bankrupt the patient, but to make
|> >>it painful enough that the patient will be inclined to seek out less expensive
|> >>medical care.
|> 
|> >This describes quite well the system we already have, except for the income
|> >cap.  The typical American worker with a family paid $720 towards his/her
|> >health insurance premiums in 1988.  Twenty-three percent had a deductible
|> >of $200 or more; 76% had a deductible of $100 or more.  Only 5% had no
|> >deductible.  86% had coinsurance of 20%, 5% had 15 percent, 6% had
|> >coinsurance of 10%.  The only difference is that out-of-pcoket limits were
|> >not adjusted for income.  49% had a maximum OOP expenses of $4,000 ore more;
|> >81% had a maximum OOP expenses of 2,000 ore more.
|> 
|> Unfortunately, one of the problems with Health Care costs is that the
|> government share of the approx. $600 billion total is the more important
|> part of the puzzle.  If you divide the amount paid by federal funds by
|> the number of people this covers, the factors are in the $4,000 per person
|> range (the average for $600 billion/200 million covered persons is $3,000
|> per person).  Unfortunately also, the people who are covered by federal
|> funds care even less about what the charges are.  This group also covers
|> people who are older or generally less healthy, but the fact that they aren't
|> paying the bill, even indiretly, is a seriouos cause of this part of the
|> federal deficit.
|> 

I agree.  However, the $3,000 bill on the average does not represent individual
costs.  Some people take far more, and most people take less.  

Even so, there's no incentive (we all seem to agree to that).  The issue is how
to encourage people to apply market forces...  Two ideas I've seen suggested
(one I'd heard from a relative that I liked, and another on the net):

	1)	Pay people money out front, and encourage medical institutions
		to compete for the money by posting charges for procedures
		up front (patients get to keep anything they saved; if they
		spend too much, it comes out of their pockets);

	2)	Making people pay for more of their health care up front.

I like 1) because it could reduce the load on the government, and allow the
debt to be paid off without reducing services (may actually increase
services while decreasing charges).

There's an analogous problem with welfare housing (another component to the
entitlements).

A third item is social security payments to people who are living very
comfortably from their securities and investments.

The reason I'm targeting these is that they represent a significant fraction
of the payments we are making.  The other high item is the service charges on
the debt.  We need to start paying it off (amortizing the debt and paying it
off over time).  The only way to do that is to have net income rather than to
run a deficit.  But then, anyone paying off a house knows this...

Dan