Tuesday, December 12, 2006

Too Much Health Insurance?

I have said before that I think the problem in the US is that altogether we have too much health insurance. Health insurance is like a big SUV on the road. It’s safer for the diver of the SUV but more dangerous for everyone else. For each individual its better to be clad inside of a tough truck, but if we all go out and spend money on big trucks we are collectively no safer?

Why?

Because congestion is just as much of an issue in the examination room as it is on the highway. The more doctor time we take up, the more lab time we take up, the less there is for everyone else. For most commodities this doesn’t matter because each person pays a little extra when he or she buys the good. When you buy a box of cereal for example there is one less box for everyone else.

Yet, you paid the full cost of that box, so you have an incentive not to buy more boxes than you need. With health insurance few of us pay the full cost of our treatment, so we have an incentive to get more treatment than we need. In fact, our doctors, if they are good doctors, have an incentive to prescribe more treatment than we need.

Every doctor wants their patient to have the best chance at good health. If prescribing one more test or one more drug doesn’t cost the patient that must a doctor would be remiss not to go the extra mile.

All of this means that an exam room resembles a highway lane more than it does a supermarket aisle. We all are driven to grab more of the medical pie than we need and this leaves less and less for those who are not fortunate to have insurance.

Similarly we are driven to drive bigger cars than we need and wind up making life more dangerous for those who cannot afford big SUVs. The solution is not to get everyone a big SUV but to stop buying big SUVs ourselves. This means less insurance and more of this


More people are heading to their local drug store instead of their family doctor for medical checkups. Establishments like MinuteClinic, Take Care and RediCare are taking up more space in major retail stores to diagnose, treat and write prescriptions for patients with common illnesses. . .
The clinics are typically small, with one or two exam rooms, and are staffed by board-certified nurse practitioners and/or physician assistants, but usually have a physician's oversight. . . .

Patients know ahead of time what they’ll pay for their treatment since prices are posted outside each center. . . those paying cash or credit card are charged between $49 and $59 per treatment. That compares favorably that to a standard doctor’s visit, which could cost over $100.

4 comments:

Peter said...

Interesting blog.

I disagree with your comparison of health care to SUVs on the road. There are several problems. People without insurance actually create the "congestion" in hospitals, because they are unable to pay for their treatments. Since hospitals are required by law to treat anybody who walks into an emergency room, hospitals (even the one at UNC) lose millions of dollars a year to non-paying patients. This lack of insurance therefore decreases the ability of hospitals to hire more staff, buy more equipment and treat more patients.

There are many ways to fix the health care system, but suggesting that people give up their insurance is a sure way to make it collapse.

Your last point about small clinics run by nurse practitioners is a good one. This is one way of dropping costs of healthcare and increasing health-outcomes. It has been used effectively in the UK as part of their national health-care system and was greated enthusiastically by patients. They take less time to visit and cost less to run than hospitals.

Peter said...

Interesting blog.

I disagree with your comparison of health care to SUVs on the road. There are several problems. People without insurance actually create the "congestion" in hospitals, because they are unable to pay for their treatments. Since hospitals are required by law to treat anybody who walks into an emergency room, hospitals (even the one at UNC) lose millions of dollars a year to non-paying patients. This lack of insurance therefore decreases the ability of hospitals to hire more staff, buy more equipment and treat more patients.

There are many ways to fix the health care system, but suggesting that people give up their insurance is a sure way to make it collapse.

Your last point about small clinics run by nurse practitioners is a good one. This is one way of dropping costs of healthcare and increasing health-outcomes. It has been used effectively in the UK as part of their national health-care system and was greated enthusiastically by patients. They take less time to visit and cost less to run than hospitals.

ab said...

well traditional insurance theory sees moral hazard as inefficient and welfare reducing.
however, i recently came across John Nymans paper that argues that moral hazard is welfare increasing.

http://content.healthaffairs.org/cgi/search?ck=nck&andorexactfulltext=and&resourcetype=1&disp_type=&author1=&fulltext=moral+hazard&pubdate_year=&volume=&firstpage=

GistOut said...

"Health insurance is like a big SUV....."

Cited as quotable metaphors-analogies in Metaphor-Analogy Archive".
Thank you.
http://gistout.com