From: tcox@ssrl01.slac.stanford.edu (Tony Cox - (415)926-3105)
Newsgroups: talk.politics.medicine
Subject: Re: HIAA and Reform
Date: 11 Dec 92 15:37:02 -0800
Organization: SSRL, Stanford Synchrotron Radiation Lab
NNTP-Posting-Host: ssrl01.slac.stanford.edu

In article <92344.115628DGS4@psuvm.psu.edu>, DGS4@psuvm.psu.edu writes:
> In article <1992Dec8.171033.1@ssrl01.slac.stanford.edu>,
> tcox@ssrl01.slac.stanford.edu (Tony Cox - (415)926-3105) says:
> 
>>   If you were to choose 2, as I would hope, you may end up
>>   concluding that a free market is the most effective means of
>>   providing the diversity required.
> 
> This presumes, of course, that a free and profitable market for
> health insurance will continue to exist.  Several major insurers
> have simply exited the health insurance market and are no longer
> selling group or individual health insurance.  The average underwriting
> result in individual health insurance has been negative for
> the last 13 years. In group health insurance it has been negative 7 of
> the last 10 years and 11 of the last 14.  The health insurance
> industry is concluding, as Canadian insurers did, that the private
> market as it is currently constructed cannot work.

   Continue to exist eh? It doesn't exist now. Off the top of my head,
   here are four factors which pervert the market from any semblance
   of being `free'. 

   o - Medical Licensing.
   o - Legal framework preventing disclaiming liability for injury,
   forcing participants to play the medical malpractice lottery when
   all they want is health care.
   o - Drug licensing, FDA, etc. etc.
   o - Sugar daddy financing, including tax breaks for employer
   provided health care.

   Dennis, you have used that phrase `private market' again. I'm
   really not sure what you mean by it. The existing US health care
   market does have a substantial government funding component -
   Medicare.

> 
> Most Americans are covered under "self-insured" plans, in any
> case.  The more appropriate name for "self-insurance" is going bare.
> While the individual workers' risks are pooled, the employer is bare.
> A single catastophic event requires radical changes, even termination
> of the plan (witness McGann, the recent AIDS case in the Supreme Court.)
> As a result, workers have to wonder whether or not they really have
> insurance.  They don't.

   Well, clearly, not in this case. I think such schemes are playing
   on peoples warm feelings when they hear the word "Insurance".
   People should get in the habit of reading the fine print.

> 
> Given the current state of the market for private health insurance, I
> think the burden of proof is on those who believe that a private health
> insurance market can work.  It sure is doing a damn good imitation of
> market failure right now.

   What do you mean by market failure? Seems to me like the market is
   responding in classic textbook fashion to the constraints placed
   upon it.

   o - Doctors, through the medical licensing boards, control the
   qualifications and so indirectly the _number_ of new doctors
   entering the field. This, and the state granted monopoly that they
   enjoy, has generated salaries around 6x the average wage. (Cf.
   Canada 4x and UK 2x, neither free markets BTW, but clearly such
   practices never _decrease_ salaries).

   o - The legal system in the US encourages law suits, and doctors
   cannot escape liability for presumed `malpractice'. They are
   therefore virtually compelled to purchase insurance at great
   expense.

   o - Drug laws, and the FDA approval system have vastly inflated the
   cost of development of new drugs, and lengthened their time to
   market. A Black market has developed in `unapproved' medical drugs
   (similar to street drugs). Those close to the Mexican border
   frequently cross over for cheaper drugs, becoming criminals when
   they bring the goodies back for their friends.

   o - A financing system which encourages _employers_ to provide HC
   rather than those who directly benefit has produced plans which
   in part restrict employment mobility, and caused tax-free dollars to
   go chasing services causing fiscal irresponsibility.

   Now, you may not _like_ the fact that health care is outrageously
   expensive, tied to employment, showing increasing signs of black
   market, etc. etc., but this isn't a _breakdown_ of the market. This
   is just the market responding to constraints placed upon it.

   To show me that a free market system cannot deliver the goods,
   first give me a free market. Otherwise you should perhaps drag your
   ailing straw man somewhere else.

Tony Cox, Stanford, CA.