Tuesday, January 17, 2006

Krugman on Health Care

Paul Krugman's latest column sums up Bush's new health care ideas as more of what got us into the trouble in the first place. He uses the example of diabetes, and points out that it makes a lot more sense to cover 150 dollar charges for podiatric care, to stop the need for foot or leg amputations later on than it is to cover only the 30,000 dollar amputations. Yet it is the latter policy which appeals to the administration which is considering making insurance only really available for big charges like amputations. This discourages preventative care, of course, and causes more suffering. It also leaves people without coverage for any more routine care, but the Bush administration has a plan for that, too: just save the money:

To encourage insurance companies not to pay for podiatrists, the administration has turned to its favorite tool: tax breaks. The 2003 Medicare bill, although mainly concerned with prescription drugs, also allowed people who buy high-deductible health insurance policies - policies that cover only extreme expenses - to deposit money, tax-free, into health savings accounts that can be used to pay medical bills. Since then the administration has floated proposals to make the tax breaks bigger and wider, and these proposals may resurface in the State of the Union.

Critics of health savings accounts have mostly focused on two features of the accounts Mr. Bush won't mention. First, such accounts mainly benefit people with high incomes. Second, they encourage wealthy corporate employees to opt out of company health plans, further undermining the already fraying system of employment-based health insurance.

But the case of diabetes and other evidence suggest that a third problem with health savings accounts may be even more important: in practice, people who are forced to pay for medical care out of pocket don't have the ability to make good decisions about what care to purchase. "Consumer driven" is a nice slogan, but it turns out that buying health care isn't at all like buying clothing.

The focus on savings accounts also completely distracts us from the real problem which has to do with health insurance. Savings are not insurance. The reason why we have insurance is because it would be impossibly expensive or impractical for people to save enough for all future unanticipated health care costs, just as it is impossibly expensive and impractical to keep enough money in the bank to replace your house if it burns down.

The problems of health insurance are tough ones to understand or to explain in a short post like this, and one reason is the fact that "buying health care isn't at all like buying clothing". When you don't even know if you need a particular operation and you don't know how to judge it's quality, how do you know if the price is right? It doesn't make any sense. Compare that to buying, say, a new shirt. Most adults know when they need to buy a new one, and many also can judge the quality of the material and the construction. Then we can try the shirt on to see if it fits. All this before we commit to buying it. An emergency appendectomy isn't bought like that. On top of that, we don't ask the sales clerks whether we should buy a shirt or not, but that is exactly what we do when it comes to appendectomies.

For all these reasons and many, many more, the health care markets (in the sense wingnuts use the term "markets", as something wild and wooly) just don't work very well in keeping quality high and prices low, and consumer vigilance is not a good cost-containment tool. We need regulation and oversight, and we have always needed that.