Obamacare Coverage is Worse than Nothing for Many People

Most left-leaning health policy wonks assume everyone needs health coverage. I’ve never understood that. Insurance is a way to protect assets for people with assets to protect. Economists also sometimes describe health insurance as income protection in the event of an illness, since medical care costs money. An alternative view is that health coverage is the ability to buy highly subsidized medical care in the event of an illness. Families’ health risks, aversion to risk and family finances differs so arguments that everyone needs the same type of protection against medical bills is not particularly convincing. To cloud the issue even further, the aforementioned left-leaning policy advocates often are guilty of believing that any system that requires reaching for one’s wallet during a medical encounter is unethical, since not everyone has a wallet of the same thickness. Again, this makes no sense since the poor would benefit more than the wealthy from the savings by forgoing costly health coverage.  Unfortuantely, Obamacare has caused more people to reach for their wallets after a medical encounter — not less.

Because advocates think health coverage is something that everyone should have, one of the primary goals of the Affordable Care Act (ACA) was to expand coverage to the uninsured. Their thinking was that some of the uninsured could not afford health coverage because their incomes were not sufficient, while others could not afford coverage because of health concerns that made medical underwriting costly. What difference did it make? Obamacare made it worse for many people. A few weeks ago I wrote how under the ACA, people with health coverage can rack up huge medical bills despite having insurance. Basically, Obamacare destroyed their insurance — at least the kind of coverage they once had. The only coverage many people can now afford are plans with excessively high premiums in return for excessively high deductibles — leaving few funds left over to pay for medical bills out of pocket or fund a health savings account.

Earlier this year a report from the University of Pennsylvania (gated but discussion here) found all but the most heavily subsidized Obamacare enrollees would generally be better off financially if they forgo coverage and pay for their own medical care out of pocket. The group whose incomes fall between 1.38 and 1.75 times the poverty level will spend about three times the amount on premiums for a Silver plan as their out of pocket health care spending had they remained uninsured. For those earning more than 250 percent of poverty, most will be worse off financially compared to having remained uninsured. By design Obamacare is a bad deal for most people! Basically, except for the unlucky few who experience catastrophic health complaints, the vast majority of Obamacare enrollees would be better off uninsured.

From an efficiency standpoint, paying for routine medical bills out of pocket costs less than paying bills through an insurer who is, in turn, funds medical claims from premiums. In the process of trying to make medical care cheaper for those with pre-existing conditions, Obamacare has made most enrollees worse off than prior to the Affordable Care Act. Paradoxically, they are even worse off than being uninsured.

Indeed, deductibles in the exchange have risen to the point that most enrollees will pay virtually all their routine medical needs out of pocket. With deductibles of $5,000 or more becoming common, Obamacare is becoming little more than a sickness fund tax on people who don’t expect to reach their deductibles. It’s an unofficial tax most enrollees pay to subsidize insurers and offset some of the costs of insuring the few people with health conditions. yet, that is not an efficient way to subsidize their medical care.

I’ve talked to people who say they’ve made the conscious decision to forgo Obamacare and just pay the penalty and pay cash for medical care. A few even think they can get out of the penalty. One lady I talked to suggested she’d be far better off just taking the money she would have spent on largely worthless insurance coverage and using it… (hold on to your hats, this is controversial!) on actual medical care. She is paying out of pocket for her physician visits. She is using a discount pharmacy card for her prescription drugs. She is paying for laboratory testing out of pocket. She’s even considering having some procedures done that her insurance would never have covered even if she met her deductible (procedures like lasik).

There are arguably other benefits to Americans revolting against the Obamacare sickness tax, throwing it overboard and ditching health insurance. The Rand Health Insurance Experiment of the 1970s found when people were exposed to significant cost-sharing, they consumed about 30 percent less medical services on average (without affecting their health). More recently, research by the Kaiser Family Foundation found the uninsured consume only about half the care of those with coverage ($2,443 vs. $4, 876).  Most would be fine without insurance. Those who are net beneficiaries of insurance cross-subsidies would likely also benefit from conditions where providers actively compete for their patronage — rather than seek to maximize insurance billings.  You certainly do not make health care more efficient (or cheaper) when you boost the subsidies available to fund other peoples medical care. You force efficiency by encouraging, coercing or forcing uncomfortable  questions like Doc, what’s that going to cost? Do I need that? Is there a payment plan?

It’s rather sad when you realize the Affordable Care Act had the opposite effect of making health care affordable, and it made the formerly-insured better off with no coverage. As I’ve already explained, it’s would be far cheaper for most to just pay bills out of pocket with the money they saved by going bare. Obamacare is hardly a legacy to celebrate.

A version of this Health Alert appeared in Town Hall.

Comments (53)

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  1. The Big ham says:

    good job Devon,
    What the government will never understand and why Obamacare is going down the drain regardless of who wins the next election. People buy Insurance to protect assets. if people have to pay even $10 a month when they don’t have any assets to protect most will forgo the purchased. what’s the difference between a $5,000 bankruptcy and a $250,000 one?

    A perfect example of someone I tried to help last open enrollment. his insurance cost $219 a month. His tax credit was $218. HIs cost of insurance $1 a month. He also qualified for the lower out of pockets $0 Deductible $400 max out of pocket for the year. (healthcare.gov still said it was HSA qualified but that’s a whole other problem).

    Client said, where do I come up with the $1? I don’t have a checking or savings account”. I said I have no idea how about go shake a cup on the corner.
    I cant figure out why he didn’t enroll>

    • Allan (formally Al), but due to the lefts propensity to disrespectfully and disruptively alter facts I will now refer to myself as Allan and the former Al Baun can keep his newest name. says:

      That guy falls into the category of the uninsured so the collectivists can claim we need socialized medicine. We have had that same thing happen in the hospital (Medical Economics story many years ago). Not one question came from the family about cost though this elderly man spent months in the hospital including the ICU with consultants galore and many procedures. How he survived probably shocked every professional working on him, but he did. The patient had lost weight and he now was going to be given solid food. Because of the patient’s weight loss his dentures had to be refitted by a dentist who was not covered by Medicare. The fee was $50 or less. When the family was told they suddenly became interested in the price and said they were unwilling to pay for the dentist.

      • The Big ham says:

        let him eat cake

        • Bill says:

          He can’t, because his family values its own lousy $50.00 over Dad’s ability to eat.

          If it were the public’s $50.00? Well, price is no object! Nothing but the best for Dear Old Dad!

          • Devon Herrick says:

            That is one thing about OPM — other peoples’ money — that results in a perverse outcome. Society expects, and medical ethicists demand, that no cost is too high for a medical treatment that is funded collectively.

            Yet, families are much quicker to pull the plug when it involves their own money. Even the individuals afflicted seem resigned to the fact there are limits to how much of their own money to spend when care is futile.

            If our society was more honest about the need for there to be some agreed upon limits to societal resources, we would not see as many extremely costly therapies and drugs that are only marginal improvements in survival. By that I mean, say, a $250,000 lung cancer treatment that extends life by a very miserable four weeks. Some of these therapies might still exist, but they wouldn’t be priced at $250,000.

            On another note, the greatest therapies in the world are not much good if our standards of living deteriorates to where we can afford nothing else but extreme medical intervention in old age.

            • The big ham says:

              On the flip side unfortunately I will be utilizing health care this month. I have two kids both going in for surgory. My 24 year old is getting his tonsils out. Ouch. And my 15 year old need tommy John surgory. The surgeon. Looked at me like I was,crazy when I said maybe his career should just be over vs cutting open a 15 year old arm. With that said. My family deductible and out of pockets will be met early this year so what else can we get done. Anyone need any moles removed? Once there is no skin in the game for anyone it becomes other people’s money .i can’t wait to see the bills for the two surgeries I see sure yhey will be ore than the cost of my first house.

              • Devon Herrick says:

                I got my tonsils out many years ago. I was uninsured at the time. My father merely paid the doctor and hospital bills with a check. I don’t recall how much it cost, but I sort of remember my father saying it was quite a bit less than $1,000 for the two day hospital stay.

                • Allan (formally Al), but due to the lefts propensity to disrespectfully and disruptively alter facts I will now refer to myself as Allan and the former Al Baun can keep his newest name. says:

                  That is right because a lot of problems are solved when there is a willing buyer and willing seller.

                  The alternative is what we have today. We are so worried that we may not be insured and therefore not get care for cancer or some other malady that we buy health insurance that cost too much. There isn’t anything left to pay the deductibles and copays to treat a strep throat, so we are essentially in the same boat as before, but instead of a few suffering souls most of the nation suffers.

  2. Barry Carol says:

    One of the most important lessons I learned in the money management business when it comes to assessing risk is the need to understand the consequences of being wrong. Sometimes those consequences can be quite severe.

    So, the issue of whether to have health insurance that will at least cover most of the cost of a catastrophic or very expensive event shouldn’t depend on whether or not you have assets to protect. It should be based on whether or not you can reasonably expect to receive care and treatment when it’s clear at the outset that you can’t pay. While EMTALA requires hospital emergency departments to provide care to at least stabilize the patient whether you can pay or not, it’s a different story if you need cancer treatment, expensive specialty drugs or certain surgeries for non-life threatening conditions. Anyone can be badly hurt in an accident from breaking a leg skiing to fracturing a hip by slipping on the ice or a wet floor. Even young people are sometimes diagnosed with cancer or heart disease or kidney failure.

    I also think one of the sadder aspects of our culture is that people think it’s perfectly fine to game the system to maximize their own financial well-being even if it means stiffing their fellow citizens by expecting to receive healthcare when they can’t pay but didn’t buy even high deductible health insurance when they could afford to.

    A long time ago, I had a colleague who was proud of himself for skipping out of an apartment in the middle of the night to avoid paying rent. The same mentality seems to be at work here. If you can game the system and stiff others in the process, go for it. Maybe if you find that you need treatment but can’t get it because you can’t pay and don’t have insurance, your fellow citizens will tell you what goes around comes around. Everything in life involves tradeoffs and choices have consequences both good and bad.

    • Devon Herrick says:

      There are two issues here as I see it. One is whether you can get care. The other is whether you can get care at a fair price. I can reasonably expect to pay for about anything that might occur. However, what is different from when I was growing up (uninsured) is that it wasn’t difficult to pay for most doctor and hospital bills out of pocket back then. Today, the same tonsillectomy that my father paid less than $1,000 for when I was 7 would have cost him the equivalent of a new car if he had to pay the list price today. Yet, it’s the same surgery.

      More people would have coverage if: 1) they realistically could not access medical care without it. And: 2) if the premiums were not so high — in an attempt to offset the cost of caring for all the other entities who game the system (by “entities” I mean both patients and hospitals).

      Most people would be better off taking the risk and accepting a high-deductible coverage with limited benefits. Most would not exceed their benefit limits in any given year. However, a few would find they have a problem. But the solution to getting our health care system to be more efficient IS NOT to force the 98% who would not exceed limited benefits to carry more comprehensive coverage. That just encourages the health care system to be inefficient.

      • Allan (formally Al), but due to the lefts propensity to disrespectfully and disruptively alter facts I will now refer to myself as Allan and the former Al Baun can keep his newest name. says:

        You hit the nail on the head. The collectivist mindset uses the 2% issue to convince the nation that socialized medicine is the only solution when it is a very bad one. Because healthcare to many pushes so many anxiety buttons many otherwise normally conservative people fall for the trap that only government can prevent cancer.

      • Cathy Wentz says:

        One of the few free market options these days are ambulatory surgery centers that charge a small fraction of hospital cost. Many of them also publish their bundled prices online and may actually cost even less than the hospital with travel costs thrown in.

      • Barry Carol says:

        I agree, at least for the most part. I think more people would have insurance if young people could buy it at a premium that reflected their actuarial risk meaning probably a 6 to 1 age rating band instead of 3 to 1, could access an even higher deductible than the current ACA limit and could buy a plan with a 50% actuarial rating instead of the 60% minimum set by the ACA. That would probably increase the need for subsidies to take care of the older folks and to eliminate the current income ceiling of 400% of the FPL to be eligible for a subsidy.

        With respect to the 2% of the population that incur very high healthcare costs, they are not the same people from one year to the next. So, over a 15-20 year period, a given individual who thinks he’s healthy today, could have a 15%-20% chance of incurring very high costs in at least one year over the next 15-20. That’s why I think people need catastrophic health insurance coverage whether they have assets to protect or not.

        • Allan (formally Al), but due to the lefts propensity to disrespectfully and disruptively alter facts I will now refer to myself as Allan and the former Al Baun can keep his newest name. says:

          Even an improved 6:1 number lacks the understanding of what traditional insurance is and what it is supposed to do. The idea of taxing an individual for a socially responsible act (carrying insurance) teaches the wrong lessons and results in actions that then require new legislation to correct.

          …And what fear do we see in the second paragraph above? “So, over a 15-20 year period, a given individual who thinks he’s healthy today, could have a 15%-20% chance of incurring very high costs in at least one year over the next 15-20. That’s why I think people need catastrophic health insurance coverage whether they have assets to protect or not.”

          You are trying to convince young people that think they are invincible to carry health insurance and be responsible, but your legislation taxes them for doing so because the person that needs the health insurance the most and is most likely to buy it is given a tax break while the person needing it the least is punished.

          That doesn’t make long term sense.

          • Barry Carol says:

            “but your legislation taxes them for doing so because the person that needs the health insurance the most and is most likely to buy it is given a tax break while the person needing it the least is punished.”

            Allan — If all these young invincible people and all others who don’t have access to employer sponsored health insurance could suddenly use pretax dollars or age-based tax credits to purchase coverage, are you saying they would now sign up in droves? Maybe there would be a marginal increase in the number of purchasers but I don’t think it would be a substantive number.

            It’s another issue that I think is a distraction so maybe we should just give them their tax credit and add the cost to the deficit rather than make somebody somewhere pay higher taxes to offset the revenue loss from a further erosion of the tax base. Then we could run up more debt for our kids and grandkids to pay off.

            • Allan (formally Al), but due to the lefts propensity to disrespectfully and disruptively alter facts I will now refer to myself as Allan and the former Al Baun can keep his newest name. says:

              Barry, the idea is to get people to buy health insurance and voluntarily accept that social responsibility. You don’t do that by providing something where they are taxed and no one else is.

              You have a tendency to say that all these changes are just marginal because you think or wish that to be so. You are wrong because when you add up these so called “marginal changes” they become very powerful and when they exist year after year they gain even more power.

              Why is the ACA failing? Because the young and healthy see no benefit in such insurance and most are being penalized when the do the socially responsible thing (insure or have the ability to pay for their own needs). They need to buy insurance that is based upon risk and they need the coverage to meet their needs not the needs of the 2% that you wish to cover.

              The 2% do not get decent healthcare unless the other 98% are in an environment that provides them with decent healthcare.

  3. Bob Hertz says:

    This provocative post has one big misfire — i.e. of course most insureds in any coverage never benefit from their premiums. My elderly parents paid for fire insurance for seventy years and never even burned their leaves in the fall, much less have a catastrophic fire. They still wanted the insurance and did not regret the loss of each year’s premium dollars.

    However the article does raise a real question. Some people are just too sick and too close to a catastrophe for any sane insurance company to want to cover them.

    The ACA solution to this real problem is to “mainstream” these people into the entire individual market. This has the effect of raising premiums for everyone else in the individual market.

    Meanwhile, the highly paid federal bureaucrat pays nothing toward this problem, other than the relatively puny $63 a year assesssment put onto employer plans by the ACA.
    When we solve problems by taxation, well off people pay more. When we solve problems by ‘mainstreaming’, the other members of the middle class closest to the problem are the ones who pay moore.

    if this sounds like the same way that liberals tried to solve the problem of unequal black schools, or that educators try to solve the problem of children, be not surprised.

  4. Bob Hertz says:

    last sentence:

    “or the way that educators try to solve the problem of hyperactive and disturbed children……….”

  5. Devon Herrick says:

    Bob, my problem is that cross subsidies of this type never solve anything to reduce the cost of healthcare. It is too high. It’s too high because economist generally think cross subsidies are inefficient in that they never provide an incentive to improve. We need a mechanism to encourage healthcare providers to compete on price and quality. Otherwise, we will have what we have now which is runaway cost. We need a system that works for the sickest people. But it will probably have to require them to adhere to some very specific medical protocols that holder cost down or require them to pay more.

    • Allan (formally Al), but due to the lefts propensity to disrespectfully and disruptively alter facts I will now refer to myself as Allan and the former Al Baun can keep his newest name. says:

      Shouldn’t the end product be to use a free marketplace where it works and subsidize need? In other words use a method that least interferes with the free market.

  6. Bob Hertz says:

    I totally agree that most health care procedures would be cheaper if they were paid out-of-pocket.
    To illustrate this, I have attached an actual doctor’s fee schedule from a major health insurer in California. This was posted by a renegade doc named David Belk……..


    Based on this schedule, it becomes apparent that the real purpose of health insurance is to pay for the hospital.
    And hospitals play a vicious game, too, in the under age 65 market. They have their ‘chargemaster’ in reserve, like a weapon of mass destruction, and the public understandably buys health insurance to be protected from the chargemaster.

    Health insurance becomes more or less a protection racket.
    The insurance company says, in effect, pay us $500 a month and we will protect you from a $50,000 ludicrous bill.

    • Allan (formally Al), but due to the lefts propensity to disrespectfully and disruptively alter facts I will now refer to myself as Allan and the former Al Baun can keep his newest name. says:

      Bob, it seems you are getting rave reviews for your characterization of hospital pricing. Those views are justified. How else does one negotiate a $20,000 bill down to $3,000 with $50 per month for 5 years no interest when the standard insurer pays $2,500 in total? The same thing occurred with pharmacy benefits in the past where sometimes the costs were completely covered by the copay while the insurer and pharmacy split the profits.

      This has been happening for decades wherever the government has been involved. The same thing happened when Medicare made physicians accept Medicare payment. If they were charging $40 for a set of X-rays $8 would come from the patient. The hospital OP copay was originally exempt from this arrangement so the hospital would bill the patient $400 and earn $40 from Medicare plus $80 from the patient.

      That is about the same time doctors opened up X-ray centers where the patient ended up paying the standard $8 copay and hospitals lost business. That is when the Stark Laws went after Internist run outpatient X-ray centers and caused that model to close down shifting profits back to hospitals. The OP clinics then reopened with radiologists in charge instead of them being hired by a group of physicians that had pooled resources. (think of what the ACO is trying to do…pool resources, but in this case we see the deals existing for other reasons such as denial of expensive necessary care)

      Anyone who thinks government is giving the little guy a free ride is a bit foolish because it is the government in collusion with parts of private industry that is running the show. In the case of the ACA government is in collusion with the insurers and as Bob Hertz concludes “Health insurance becomes more or less a protection racket.” We need to push insurers back into the free marketplace so they can insure patients at the best possible price.

  7. Devon Herrick says:

    Bob, that is an interesting way of looking at hospital pricing. I have always assumed that very few people actually pay the list price. But there are benefits to maintaining a high price as a way to scare others into protecting themselves against it. That argument makes a lot of sense.

    By its nature, insurance is a protection racket. In this case there are two parties working independently to achieve the same goal — to promote insurance.

  8. Barry Carol says:

    I like Bob’s characterization of hospital pricing as well. Chargemaster rates actually still have some relevance with respect to the formula that CMS uses to determine outlier payments for the more complicated cases that cost hospitals significantly more than the regular DRG reimbursement rate will pay them. So, they have an incentive to make them as high as they think they can get away with.

    Overall, though, I think hospitals are the biggest part of the healthcare system’s cost problem. I often joke, only half in jest, that when hospitals aren’t killing us with infections, they’re killing us financially.

  9. Bob Hertz says:

    I believe that the state of Maryland has more or less dispensed with chargemasters, due to an all payer rate system for hospitals.

    This is a great achievement in one sense, in that it takes away some of the grotesque indignities and terrible anxiety that hospital bills can cause to a person with skinny insurance or no insurance.

    However, I do not believe that the cost of health insurance in Maryland has fallen by a nickel. The approved fees are probably high enough to keep all the hospitals from losing money.

    • Barry Carol says:

      Bob – You’re correct about Maryland’s all payer system protecting the uninsured and underinsured from being ripped off by ludicrous hospital chargemaster rates.

      Unfortunately, MD’s payment system, which only applies to hospitals, has not materially slowed the growth of healthcare costs in that state nor does MD have unusually low total healthcare spending per capita as compared to other states.

      It’s also worth noting that their all payer system is sensitive to hospital costs. So, an academic medical center like Johns Hopkins will be paid more for the same service, test or procedure compared to a local community hospital. Hospitals in the relatively high cost Baltimore – Washington D.C. corridor will be paid more than hospitals in lower cost Western MD.

      There are also convoluted things that happen. As a Baltimore based senior radiologist explained on another blog a few years back, a hospital could build a new imaging center in a separate facility on its existing campus and have it designated as “unregulated space” which means the all payer system doesn’t apply and they can charge as much as they can get away with or negotiate with private insurers. So, you then have the ridiculous spectacle of a hospital inpatient being transported maybe 100 yards by ambulance to the stand-alone imaging center so he can get his MRI in unregulated space and then be transported 100 yards by ambulance back to his hospital bed.

      It’s pretty clear to me that an all payer system for hospital payments is not the answer and single payer isn’t either but for different reasons. The good news is that there is a long term secular trend away from the need for hospital beds as surgical procedures get better and less invasive, there are fewer hospital acquired infections, and better drugs help to keep people out of the hospital in the first place. A more sensible approach to end of life care, which seems to be happening as palliative care programs proliferate and more people choose hospice care sooner at the end of life, will continue to shrink the number of hospital inpatient beds per 1,000 of population. Just after World War II, that number was 10. Now it’s about three and the long term trend is down. That’s a good thing.

  10. The big ham says:

    As my brother At this minute is having a$100,000 gamma knife radiation therapy it occurs to me the only way to get costs under control is to remove the third party payer . My brother could not pay $100,000 out of his pocket so how much could he spend to save his life? Would the doctors and hospitals lower there price to something he can afforded?

    Without a third party payer they would have to Le else not get a new client.

    Maybe doctors and hospitals should just bypass the insurance industry and charges fixed $ amount per client per month for unlimited services.

  11. Bob Hertz says:

    Note to Big Ham:

    I am not sure I agree with you here. If no one had insurance, then the top surgeons would just operate on rich Americans and Saudi princes, and charge them $100,000 apiece in cash.

    For all its faults, health insurance (i.e. shared savings) is the only way that middle class persons will receive expensive care.

    When it comes to hospital costs and charges, I generally favor a strengthening of third party payors. For example, I favor mandatory assignment, which in my definition would mean this:

    If an insurer paid $5,000 for a procedure, then the hospital (and any doctor operating inside the hospital) could not bill a nickel more to the patient.

    This kind of protection has existed in Medicare for a long time, and it is gradually being spread in the progressive states (NY, Cal, Co) to emergency room care.

    I would impose it tomorrow on the whole country. (The insurer in my law would have to pay at least as much as Medicare does.)

    I cannot remember the exact cite, but the two Harvard profs who wrote a major tome on health care competition (Porter and Teisberg?) actually favored a law just like mine….and these two writers were quite conservative in all respects.

    • Devon Herrick says:

      I think Big Ham’s argument is valid. The $100,000 gamma knife would not cost $100,000 if his brother were paying for it out of pocket. Granted, the gamma knife might not exist at all. The influx of money from third party payment drives technological advances — and tremendous waste (including technologies that are only marginal improvements but are priced as a multiple of the technologies they improved upon).

      However, absent insurance the best surgeons would not operate only on the richest Americans and Saudi princes. That market is not large enough. We assume $500,000 per year is the cut off for income where physician subspecialties will stop working. It is not. Keep in mind that if we didn’t have as much third party payment, we would probably not have as much regulation that third party payment brought with it. With lower medical school tuition, lower student loans, lower overhead and more price competition, the going rate for the gamma knife would be much lower. Who knows, the technology might be much better and cheaper.

      I doubt if Apple would have invented the iPhone and iPad with the millions of apps if the regulatory regime was as intense as it is for medical devices and if Apple had to convince third party payers to reimburse for rather than convincing consumers.

  12. Barry Carol says:

    wrote a major tome on health care competition (Porter and Teisberg?)

    Bob — Yes, Porter and Teisberg. The book is “Redefining Healthcare” and was published in 2006. It’s a good read.

    Regarding your post, please note that Medicare overpays for some services, tests and procedures and underpays for others. It’s widely thought to underpay for primary care, for example mainly because the RUC which determines reimbursement rates is dominated by specialists. I wouldn’t want to lock that mispricing rigidity into the whole system.

    • Devon Herrick says:

      Porter and Teisberg’s work is a great example. It basically said that the perverse incentives from third party payment resulted in the wrong kind of competition. They said the stakeholders in the current system competes by shifting costs, increasing bargaining power, capturing patients, restricting choices and restricting services. None of these forms of competition increases value for patients.

      • Barry Carol says:

        Devon — If we had an effective mechanism to allow both doctors and patients to identify the most cost-effective high quality providers in real time, those providers should be rewarded with more patients even if a third party payer system covers most of the bills. No? Of course, Medicare and Medicaid will continue to use administered (dictated) prices as long as those programs remain in existence. Also, defining and measuring quality in healthcare remains a significant challenge.

  13. The big ham says:

    I disagree, once someone hits there out of pocket max or cap and a third party is responsible for payment then we have left the free and open market. The best doctors in the world will always rise to the top and charge more because they are the best and can. However by process of elimination someone is the worst doctor in the world and is still called Doctor. If a third party payer was not involved would a three hour gamma treatment have cost $100,000 yesterday? No they would charged what the market would bare.

    Let’s think outside the box. What would our healthcare system look like today if insurance, Medicare and Medicaid didn’t exist in healthcare today?

    There is about 320 million people in the U.S.and they spend about $3 trillion a year on healthcare. That’s about $900 a person. Would it not be cheaper for the gov. To just give $1000 a year per person to the hospital system and do away with pricing and insurance industry?

    Why are we trying to save a broken system?

  14. Barry Carol says:

    Big Ham — In Canada, no money is exchanged at the point of service and hospitals have to operate within budgets. They have to ration care to make it work. People will go to the doctor at the drop of a hat if they don’t have to pay any money rather than give their issue a few days to resolve itself. Conversely, I was told by a doctor who used to practice in Canada that patients often think nothing of canceling an appointment at the last minute leaving the doctor with unexpected open time slots on his schedule as there is no financial penalty to the patient for the late cancellation.

    There is obviously a lot of room for improvement in our healthcare system but I don’t think your idea is workable.

    For the record, hospital costs, including outpatient services, account for 31% of total U.S. healthcare costs and Medicare Part A services, which include hospice care and some nursing home care, account for 41% of Medicare’s costs. Part B services account for 37% of Medicare costs and Part D prescription drugs account for 23% of costs. Data is off by 1% due to rounding.

  15. The big ham says:

    Ya I know my numbers were off by a zero. Who would have thought a zero could make that much difference? Really we average $9,000 a year per person on health care a year. That’s $9,000 a year per person. That’s $9,000 per person per year! Yes $9000 a year.

    This might be excessive?

    What else in the world,costs $9,000 per person per year? Housing? Transportation, food?

  16. Allan (formally Al), but due to the lefts propensity to disrespectfully and disruptively alter facts I will now refer to myself as Allan and the former Al Baun can keep his newest name. says:

    “If no one had insurance, then the top surgeons would just operate on rich Americans and Saudi princes”

    1) A big complaint decades ago was that physician charges were in part frequently based upon ability to pay. The amount of free care or partial payment of care to physicians was awesome even after one takes into account the average amount actually billed and paid.

    2) Should the best specialist in the world be paid the same as the person out of Medical school with no experience and no specialty?

  17. Barry Carol says:

    “A big complaint decades ago was that physician charges were in part frequently based upon ability to pay. The amount of free care or partial payment of care to physicians was awesome even after one takes into account the average amount actually billed and paid.”

    I don’t like the ability to pay model for physician charges just as I don’t like it for pricing prescription drugs differently from one country to the next based on per capita GDP. Supermarkets don’t deeply discount their products for poor people. Instead, we give them food stamps if they qualify based on income. Maybe we should give poor people healthcare stamps denominated in Medicare’s resource based relative value units that could be used for basic primary care.

    I used to hear stories from the 1950’s where a doctor might charge a wealthy banker $250 for a particular procedure but charge a low income elderly widow $10 or even nothing at all. Charity clinics that offer care on a sliding scale basis from full price to free are fine by me but I don’t think it’s an acceptable model for the whole healthcare system.

    • Devon Herrick says:

      Price discrimination is common — although I agree it’s annoying when I’m the target of it. I suspect there are some big firms paying more for legal fees than the same work would cost a small firm that drives a harder bargain. As Alain Enthoven pointed out in a piece NCPA published a decade ago, bargaining power is the ability to say “no” and walk away from a deal and deprive a supplier of your business. Offering the poor family a cheap physician visit doesn’t cost you extra unless you allow the physician to do so.

      I like the idea of Health Stamps. Tom Saving at Texas A&M has written about the idea. I don’t favor creating another entitlement. But I’d certainly trade Food Stamps for Health Stamps, since most recipients of the SNAP program probably need health care more than they need more food.

    • Allan (formally Al), but due to the lefts propensity to disrespectfully and disruptively alter facts I will now refer to myself as Allan and the former Al Baun can keep his newest name. says:

      Barry, the two different scenarios you mention are completely different.

      I often would lower my price to someone in need especially if they were a patient of mine and suddenly came upon hard times. I even let some of them keep the insurance money until the bad times passed. I was almost always paid back in full by that latter group. If they didn’t pay that was my problem, not yours.

      What is wrong with a physician and patient dealing in an honest manner and caring about others.?

      Barry, you don’t like the idea, but you don’t have to see me as a physician. You can see someone else. I’m not asking anyone to repay me for my services that were underpaid or not paid at all. What right do you have to even think about preventing me from doing so? (“I don’t like *the ability* to pay…”) Why do you feel you have a right to interfere with a willing poor (buyer) and a doctor (seller) if the doctor wants to help the buyer out?

      Every step of the way it appears you wish to control my actions, prices and everything else all so that you can envision what you consider an equality among everyone. I believe charity starts from the ground up, not top down and I wish everyone else not willing to help stay out of my business.

      • Barry Carol says:

        “What is wrong with a physician and patient dealing in an honest manner and caring about others?”

        Allan — Here’s how I think about this. Suppose you establish a normal billing rate of $400 per hour which would translate to $100 for a 15 minute office visit. If all of your patients paid that rate, let’s say you would net $300,000 per year after practice overhead. If you find that you have to significantly reduce that rate or even waive it altogether to accommodate your lower income patients or those who fell on hard times, you would only net $200,000 after overhead expenses. If the full paying patient pays $400 per hour either way, it’s perfectly fine to cut or waive your rate for patients who are struggling financially if you’re willing to accept the reduction in income.

        On the other hand, if you have a small percentage of patients, maybe 5%, that you know are wealthy or at least well off and decide to bill them at $800 an hour for the same services to offset some or all of the income lost to discounting and pro bono work, that’s more problematic.

        While you could argue that if the rich patient agrees to pay double your normal rate there’s nothing wrong with it, you’re, in effect, penalizing him for being financially successful and making him offset some or all of the cost of your charitable impulses toward the less fortunate. It doesn’t feel right to me. On the other hand, if the rich person wants to contribute to help fund the non-profit charity clinic across town, that’s great.

        • Allan (formally Al), but due to the lefts propensity to disrespectfully and disruptively alter facts I will now refer to myself as Allan and the former Al Baun can keep his newest name. says:

          Barry, I don’t have to carry a special nearly meaningless IRS tax status to be charitable. If I want to net that $300,000 and the only way to do it is to raise my prices to those that can afford the fee then that is my choice. Who are you to tell me otherwise? You can see someone else and maybe I’ll only earn $200,000. That would be my problem not yours except in a collectivist world where we are all told how to act.

          By the way, I gave more time to some patients and less to others. Was that unfair too? I gave valuable samples to some patients and not to others was that also something I should have stopped doing? Some people needed more time and needed samples just like some people needed help in paying their bills.

          All this seems so unfair to you, but I didn’t pick you. You picked me so if you are rich and you don’t like my fee go somewhere else. If you are charitable and rich and want me please come. I like to practice medicine on people that respect my abilities. If you want to belong to an HMO go elsewhere. I don’t practice that type of medicine.

          • Barry Carol says:

            You can charge whatever you want, spend more time with some patients than others and give free samples to some patients but not others. You can treat some patients or free or at a sharply discounted fee. None of that is a problem.

            All I’m saying is make the basic fee schedule known so patients who can pay will pay the same rate whether they’re Warren Buffett, Bill Gates or a reasonably successful middle manager.

            Just because you have money doesn’t mean you should pay more than the next person at the supermarket or restaurant or auto dealership or whatever for the same product or service.

            I think we’re just talking past each other on this.

            • Allan (formally Al), but due to the lefts propensity to disrespectfully and disruptively alter facts I will now refer to myself as Allan and the former Al Baun can keep his newest name. says:

              “All I’m saying is make the basic fee schedule known”

              You are saying more than that. You wish to control my actions and the transactions that occur between a willing buyer and a willing seller. You even said “Charity clinics that offer care on a sliding scale basis from full price to free are fine by me but I don’t think it’s an acceptable model…”. Why not if it is based upon an event that occurs in a private office between a willing buyer and willing seller? Do you really believe that only the government can help the poor?

              I explained to you how this was my personal way of doing business and that you had plenty of other choices of physicians, but you persisted. Now, you start on a new issue, transparency. I so happen to believe in transparency, but let us say I didn’t and didn’t care to expend much energy in being transparent. That is my business as well. It’s part (or a lack thereof) of my services. Again, if you are not happy go elsewhere. Stop trying to tell everyone else what they should do. Let the willing buyer and willing seller deal with those problems. People know how to work things out and government provides its best when it is seldom seen.

              As far as your anecdotes that incentivized you to support a lot of government intervention including the ACA, I advise you to put them away and deal with the real problems that exist 99.9% of the time.

              • Barry Carol says:

                “Let the willing buyer and willing seller deal with those problems.”

                In a Middle Eastern souk, the seller tries to size up the buyer and figure out how much he can squeeze out of that customer for whatever he is selling. If there is a meeting of the minds on price, you have a willing buyer and a willing seller. That’s not an acceptable model for healthcare, in my opinion. Are you suggesting it is?

                • Allan (formally Al), but due to the lefts propensity to disrespectfully and disruptively alter facts I will now refer to myself as Allan and the former Al Baun can keep his newest name. says:

                  “That’s not an acceptable model for healthcare, in my opinion. Are you suggesting it is?”

                  Absolutely! Do you know why home depot doesn’t raise its prices before a potential catastrophe like a hurricane or after a tornado? Because word of mouth spreads and people refuse to buy when they were previously hosed. When the plumber comes the only question is whether he is looking for a long term relationship or just a one time shot where no one in the area will hire him again. We used to live and die based upon reputation.

                  You think the seller is the only one in the arrangement trying to squeeze the other guy, but the other guy is trying to squeeze him just as hard and the other sellers are leading the way attempting in one way or another to underbid their competition. That is why prices fall in most markets after a product is introduced. If your thought process was true then prices would rise after a product is introduced.

  18. Barry Carol says:

    Devon — I can accept price discrimination within reason and when it has a sound basis. However, if the doctor’s regular price for the procedure in my example above is $100 and he would make a good living if everyone paid that amount, it does cost the wealthy banker $150 extra in order to finance nominally priced and pro bono care for lower income patients. In a more prosperous area with few lower income patients, all or virtually all patients, including the wealthy, might only need to pay $100.

    As for corporations, price discrimination works both ways. Wal-Mart or Home Depot, which can buy paint by the truck load will pay a lower price per gallon than the small hardware store that only needs a couple of cases. That price discrimination, however, is based on a lower cost to serve and therefore perfectly legitimate, in my view.

    Lawyers at large firms generally bill more per hour at every level from junior associate to senior partner than comparable lawyers from small firms away from the city center. The big firm will probably bill the big company and the small at the same hourly rate for the same work performed by lawyers of the same rank.

    • Allan (formally Al), but due to the lefts propensity to disrespectfully and disruptively alter facts I will now refer to myself as Allan and the former Al Baun can keep his newest name. says:

      Barry, just consider his price $150. That is precisely what he would receive if everyone were wealthy.

  19. JS says:

    There is a way to get out of Obamcare without a penalty. There is an allowance for those who join a faith based non-profit health sharing group. I’m a member of one called “Christian Healthcare Ministries.” It’s far cheaper than Obamacare and for me provides better coverage. There are a few other groups including “Liberty Healthshare” and Medi-Share. These groups may not be for everyone, but I think many would join if they knew about them. They all have excellent web sites and there are informative videos about them on YouTube.

    • Devon Herrick says:

      Another sharing ministry is Samaritan Ministries.

      Mutual aid societies are interesting case studies. I expect Christian health care sharing ministries to increase in membership. Even with the subsidies, exchange plans are a bad deal for most people. Obamacare premiums are rising and the deductibles are so high that enrollees pay for most of their day-to-day care out of pocket. Plus, Christian ministries can (hopefully) avoid some of the moral hazard from people pursing unhealthy lives.

      • JS says:

        Another advantage to the health sharing ministries is that there are no networks. The patient and health care provider make all decisions; there is no need to get approval from anyone. And yes, Samaritan Ministries is another good one that’s been around for a long time — as have most of them. Christian Healcare Ministries has been around for about 35 years and the top of the line membership costs an individual only $150 per month. Hopefully, more people will look into these groups.

  20. Bob Hertz says:

    The Ministry plans are terrific. By requiring that members attend church regularly, (this is done by attestation), they will attract an above-average number of non-smokers and non-drinkers, safe drivers, etc.

    I assume that these plans buy some form of reinsurance to cover a very large claim, one that even an appeal to other members would not be enough to pay.

    Leaves me wondering if the model of mutual aid could spread. Of course this model was actually the dominant form of life and health insurance in the 19th and early 20th centuries in the US.

    • JS says:

      You are correct. Most of these groups require members to be church going Christians. “Liberty Healthshare” does not. Anyone from any religion can join. They all require members to be nonsmokers and members can’t drink to excess. Of course, illegal drug use is prohibited.