Ohamacare’s Robin Hood Scheme and the Socioeconomics of Health

Robin Hood was a mythical figure from 12th Century England whose legend became famous for stealing from the rich to help the poor. His legend wasn’t lost on Obamacare proponents, who incorporated the idea into health plan regulations.  As I’ve explained in the past, the Affordable Care Act (ACA) had two primary goals. The first was to expand health coverage to the uninsured. The second goal was to force everyone into health plans where premiums could not rise or fall based on health status.  Purportedly, prior to Obamacare a small segment of the public could not find affordable coverage due to health concerns that made them unprofitable customers or their health plan rather costly. The number was relatively small, about 4 million individuals out of a society of 320 million by some estimates. Most could have gotten coverage, but not on terms they were willing to pay. Obama care was intended to “fix” that problem by banning discounts to favorable risks or people with healthy lifestyles.

Obamacare is a bad deal for most people by design. Most individuals have few health concerns. For instance, about half the population spends less than $500 annually on medical care. For a decade prior to the ACA I often heard liberal public health advocates chant the imbecilic phrase, “health coverage won’t be affordable until everyone has coverage.” What they meant by that was if insurers were required to cover money-losing customers at rates that did not reflect their costs, new regulations would have to force healthier individuals to purchase coverage that was overpriced compared to their health costs.  Thus, at its core Obamacare is a wealth redistribution scheme.  This is true not only because of taxpayer subsidies that decrease with income, but it’s also a function of health literacy and lifestyle. Uninsured households are more likely to be less educated and have lower incomes. Healthy behaviors and health literacy (that is: understanding what a healthy lifestyle is) tends to rise with income and education.  Obamacare regulations are designed to transfer some of the health (and wealth) of the healthier, better educated households to poorer, less healthy households.

Allow me to explain. The socioeconomics of health has to do with the study of so-called “health disparities.” An article in the policy journal, Health Affairs, explained the effects socioeconomics has on health status. Poorer people spend less on medical care. They may live in areas with more pollution, environmental hazards and often work riskier jobs.  Finally, poor people tend to engage in lifestyle behaviors (smoking and obesity being two) that are detrimental to their health. Basically, the poorer you are, the less educated you are, the greater the likelihood of health problems or behaviors that could lead to health problems.  Although they are loath to blame lifestyles, liberal health policy folks worry about health disparities. But the reality is most health disparities are due to behavior, not lack of health coverage. Indeed, about 60 percent of medical spending is on conditions linked to lifestyle. This includes diabetes, hypertension and high cholesterol.

Obesity (and diabetes) are more common among the poor. One theory is poor people tend to be fatter because food is a low-cost, enjoyable experience in a life lacking in many other pleasures. Poor people may also discount future benefits (and costs) at a much higher rate. That’s a roundabout way of saying someone may value smoking cigarettes or an extra helping of comfort food at every meal for the next 40 years (more than the health benefits of weighing 80 pounds less 40 years from now).

Some people discount future costs at rates most of us find illogical, and variations in healthy behaviors are quite rational even within the same income group. In simple terms: some people like to eat bonbons, while others like to jog.  Some people would rather buy a carton of cigarettes than spend a similar amount on a doctor visit. Some of those bonbon-eating cigarette smokers prefer to plop down in front of the television after work and down several beers. Many of them would probably benefit more by hitting the gym and spending their beer money on a daily regimen of generic antihypertensive medications and lipid-lowering drugs. But they choose not to.

Obamacare’s goal is to solve those perverse behaviors and poor lifestyle choices with mandatory health insurance that aims to beat those health disparities into shape with medical intervention. BlueCross of Texas, the BlueCross plan of New York — and a host of other insurers — report previously uninsured enrollees getting a volume of care that far exceeds the average. People who probably had not spent their own money on medical care in the past decade now have encouragement to get a decade’s worth of care the first year or two they are enrolled. As a result, everyone’s premiums are skyrocketing and the state and federal exchanges are descending into an adverse selection death spiral. The more costs escalate, the more healthy people drop out — causing a repeat cycle of healthy people fleeing Obamacare’s high costs.


Comments (86)

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  1. Ron Greiner says:

    Devon you know I know a lot about fat people. When a women has lost the feelings in her legs she is not going to spend more on health care because she will be dead soon. Your so-called healthy people will spend much more on healthcare between the ages of 70 and 95 when these costs are very expensive when the fat woman is already dead.

    The same holds true for smokers because they die younger, many times before Medicare age, so their lifetime cost of health care is much smaller than those who don’t smoke.

    I don’t think you can show me that a smoker spends more in healthcare with a lifespan of 65 years than a non-smoker will spend on healthcare with a lifespan of 80 years.

    I submit that some of these smokers healthcare costs are minimal because when they are dead after their heart attack before they reach the hospital – this can be very inexpensive.

    I think we should look at the cost of Medicaid if anybody knows how much it costs per person in the various states. Why isn’t there transparency in how much the taxpayers are paying? I have some figures from 2011 and in Florida an old person on Medicaid costs $8,000 a year and in New York it is 3 times more. Why would New York cost 3 times more? Why can’t we get current costs on billions and billions of taxpayer dollars? These smokers are spending their own money on healthcare when they die before 65-years-old. These Medicaid scams are spending our taxpayer money and we should put the spotlight on it to stop the crooks.


    • Devon Herrick says:

      I won’t dispute your assertions. Indeed, my point was that we need to stop using public policy in an attempt to browbeat people into acting in ways we think they should.

      I wasn’t looking at lifetime medical bills. Rather, I was looking at premiums — which are a function of medical bills at a point in time.

      There is little in the way of health disparities when young (with the possible exception of substance abuse). Medical costs begin to climb after decades of behavior. But once on Medicare, the problems become severe and many with unhealthy lifestyles don’t live into their 80s or 90s.

  2. Mythical? Mythical?!?!? Next you’ll be telling us Anne of Green Gables or Sherlock Holmes did not exist.

  3. Barry Carol says:

    I’ll offer a few thoughts on this.

    First, about 75% of healthcare costs are attributable to the management of chronic disease including CAD, CHF COPD, ESRD, diabetes, hypertension, asthma and depression. While personal behavior is a significant factor in the development of some of these diseases and conditions, genetics is as well. Some people have high cholesterol no matter how healthy their diet is. Some people gain weight much more easily than others even when they eat healthy food in moderation and exercise regularly.

    Environmental factors and socioeconomic status impact poor people. Their homes and apartments are more likely to have peeling lead paint that their kids ingest. Smoking can be a stress reducer in a chaotic and insecure life. Healthy food costs up to 12 times more on a per calorie basis than junk food which makes healthy food comparatively unaffordable if they can find it in the midst of a local food desert. Healthy behavior doesn’t offer full protection either as up to 15% of lung cancer cases strike people who never smoked.

    As Devon notes, risky behavior like smoking and being overweight or having high blood pressure or high cholesterol will be viewed by insurers as increasing the likelihood that such folks will incur above average healthcare costs during the period that the insurance is in force. That’s why they need to charge more if underwriting is allowed. If it’s not allowed, they need more healthy people to pay premiums that exceed their actuarial risk if they can’t charge the unhealthy people more than the healthy people. At the same time, Ron is correct in noting that unhealthy people don’t live as long. I’ve heard that, according to at least one study, smokers die seven years sooner on average than non-smokers. That implies that their lifetime costs are likely to be lower than for non-smokers because the smokers are less likely to live long enough to get Alzheimer’s or dementia both of which kill slowly but require years of expensive custodial care before the end finally comes. Old age also often brings frailty and the inability to perform some or all of the normal activities of daily living (ADL’s) which also means they need expensive custodial assistance but don’t have anything wrong with them that is life threatening in the near term.

    The bottom line, though, is that if we want to kill the ACA and go back to medical underwriting so healthy people can buy cheap coverage that more accurately reflects their low actuarial risk, we better have a mechanism to insure the unhealthy and already sick for a premium they can afford. That most likely means heavily subsidized high risk pools, which politicians have been unwilling to adequately fund in the past. Maybe that will change in the future. I hope so.

    • Al says:

      In reality we should thank people that smoke. They pay very high taxes on their cigarettes. They lose out on a lot of Medicare and Social Security benefits. This leaves more for the rest of us.

      However, just comparing costs based upon an age bracket their costs are significantly higher.

      Fruits and vegetables are expensive, but one can buy seasonal fruits and vegetables at a less expensive price. The cokes, instant dinner etc. cost a lot more than fruits and vegetables carefully purchased.

  4. Sue says:

    @Barry Carol: Yes, we need a national high risk pool to replace all the high-risk state pools that were destroyed in the wake of Obamacare. Regarding “food deserts”, please please stop all talk about the mythical food desert. It is a matter of choice. Give a kid lunch money and he’ll buy the pizza or fries. “How you eat is due as much to cultural preferences as to how far away a supermarket is.”
    http://www.nydailynews.com/opinion/food-desert-myth-article-1.1065165 and this http://inthesetimes.com/rural-america/entry/18348/busting-the-myth-of-the-food-desert-a-farmers-market-in-milwaukee-sautes-st

    • Devon Herrick says:

      I’ve read articles about the amount of “healthy” food thrown away by kids in school lunch programs. I talked to someone last month whose daughter works for a program and much of the food is wasted.

      • John Fembup says:

        Devon, have you also read how much healthy food is thrown away by the schools themselves?

        Or for that matter, by company and other institutional cafeterias and commercial restaurants?

        It’s the law. It’s still staggering.

        • Devon Herrick says:

          The following is a link to a news report about school lunch waste.

          I forget where, but I heard another anecdote that claimed at one school the trash bin was not far from the lunch line and some of the healthy items didn’t stay on the tray but a few seconds until they were tossed.

    • Devon Herrick says:

      Oddly enough, you hardly ever hear about “beer deserts” in urban areas that don’t have zoning laws against such. For the most part there are no “fast food deserts” in economically-depressed areas.

      The following example is a textbook case of why economists like ex post facto data instead of survey data. Many of the big fast food chains rolled out healthy salads and low-calorie options because people said in surveys they wanted these options. But nobody actually bought them. What people say and what they do are not the same thing. If convenience stores could sell salads they’d stock salads. Many do stock perishable food items since grocery stores are not everywhere.

      • John Fembup says:

        Mmmmm. Beer deserts.

        • Devon Herrick says:

          There are some so-called “dry counties” in the Bible Belt. But I don’t think anyone has thought about calling them “beer deserts” — although the name is quite accurate on multiple levels!

  5. Jimbino says:

    Smart people also have the good sense to avoid insurance and other such gambling and to cross the border to Mexico for good cheap health care and over-the-counter pharmaceuticals.

    Regardless of whether they are in the country or not, they are forced to participate in Obamacare, so as not to disrupt the wealth- and income-transfer program of our socialist leaders.

    You may sail around the world for two years or spend 6 months flying to Mars, but you won’t escape Obamacare’s wealth-transfer premiums or penalties! You will have a very limited “network” of healthcare providers. Your only hope for avoiding this nonsense is to die during the voyage.

  6. Don Levit says:

    Instead of a Nstional high risk pool to insure all the costs of the high cost claimants
    We need several stop loss insurers to assume the risk of all participants healthy and not so healthy

  7. Jimbino says:

    “everyone’s premiums are skyrocketing and the state and federal exchanges are descending into an adverse selection death spiral.”

    Try as I might, I can’t see an Obamacare death spiral as anything but our best friend.

  8. Don Levit says:

    The risk could start at $25,000 and above

  9. charlie bond says:

    Hi Devon,

    Your article makes the point I have been advocating for years: Health care reform begins with each of us as individuals. We can reform health care from the grass roots up, not the top down, by first assuming personal responsibility for our own well-being. Individual responsibility is a key component that has been left out of virtually all reform measures.

    As we know, however, changing peoples’ behavior is difficult. Wellness incentives have proven effective in the workplace for over a decade and have been adopted by many health plans. We simply need to democratize such programs to make such incentives available to all, regardless of employment or insurance status. Studies repeatedly show that wellness programs lower the cost of care. Likewise, studies show that if patients are incentivized to follow doctors’ orders, especially in dealing with the chronic diseases, their behaviors change and costs go down.

    If we are really going to change health care in America, we have to focus on the individual. Indeed, the main thing left out of the Affordable Care Act is the patient. Yet patients are the greatest driver of costs and the largest predictor of outcomes.

    How do we change peoples’ behaviors? Again, studies show that direct incentives work. By rewarding individual responsiblity for one’s own health, we can create a health system rather than a sick system.

    (Parenthetically, patient incentives can help align patients’ interests with the cost saving goals of ACO’s.However nowhere in the ACO structure, as currently designed, is there any provision for passing savings on to patients. Patients are left completely out of participation in the ACO’s main goal of lowering costs through gainsharing. A system of patient incentives would rectify this omission and greatly enhance the viability of ACO’s.)

    Many would argue that lower premiums should be a sufficient “incentive” to achieve patient behaviorial changes. Employer-based insurance plans and government-paid programs like Medicare and Medicaid make the effects of lower premiums too indirect for the average person to feel. However, when patients receive a direct reward for taking care of themselves or following doctor’s orders, they are more likely to respond.

    To address the point of your article, a patient incentive system would allow the government to achieve its “goal” of universal uniform underwriting, but would reward those who actively take care of themselves and help lower costs. And, as employers have found out, incentives need not necessarily be cash payments.

    So rather than engaging in ideological debate, let’s simply acknowledge that people who take care of themselves and thereby lower the cost of care should be rewarded. Only by incentivizing patients to take individual responsibility for their well-being can we begin to bend the cost curve. More fundamentally, by reinstilling individual responsibility, we can begin to change Americans’ reliance on Big Government and/or Big Health and get back to relying on ourselves instead.

  10. John Fembup says:

    “Individual responsibility”

    Charlie I agree with you but, then again, I’m over 70 years old and have always accepted Individual responsibility. So maybe I have a blind spot on this.

    That is, I wonder if we still have a culture of “individual responsibility” in the USA. I don’t mean to suggest no one takes responsibility any more; but that it seems fewer do and so many of those who do, are uncomfortably near my age.

    Tipping point sounds trite – but what if we are nearing one?

    • Devon Herrick says:

      @Charlie and John
      Over the years in my travel to conferences and speaking engagements, I’ve had discussions with speakers and policy analysts who were left of center in their policy views. One thing everyone seemed to agree on was the need for more individual responsibility. But opinions about hypothetical people that these analysts expressed in small groups and gatherings never seems to hold when it comes to policy proposals.

  11. The big ham says:

    The health care problem is getting worse because us boomers are getting fat, old and sick.
    There were actually a total of 76 million births in the United States from 1946 to 1964, the 19 years usually called the “baby boom.” Of the 76 million baby boomers born, nearly 11 million had died by 2012, leaving some 65.2 million survivors. However, when immigrants are included (the number of people coming into the United States from other countries, minus those moving the other way), the number grows to an estimated 76.4 million because immigrants outweighed the number of baby-boomer deaths. The flow of immigrants greatly increased after passage of the Immigration Act of 1965, just as the baby boom was ending.

    So one can use the figure 76.4 million (or round it down to 76 million) to approximate the number of baby boomers living in the U.S. today. But keep in mind that of the 76 million babies were born in the United States during the baby-boom years (1946 to 1964), only 65.2 million of those babies were still alive in 2012, and the baby-boom age group (ages 50 to 68 in 2014) stood at 76.4 million in 2012 with immigrants included in the count.

    These 76.4 million baby boomers represent close to one-quarter of the estimated 2012 U.S. population of 314 million. The choices they make about whether to retire or continue to work will have profound implications for job openings and Social Security spending. According to American Community Survey data, about 68 percent of baby boomers were still in the labor force (including Armed Forces) in 2012.

    The Census Bureau currently projects that the baby-boom population will total 61.3 million in 2029, when the youngest boomers reach age 65. By 2031, when the youngest baby boomers reach age 67 (the age at which persons born in 1964 can receive full Social Security benefits), the baby-boom population is projected to be even lower, at 58.2 million.

    The aging of the baby boomers is creating a dramatic shift in the age composition of the U.S. population. Projections of the entire older population (which includes the pre-baby-boom cohorts born before 1946) suggest that 71.4 million people will be age 65 or older in 2029. This means that the elderly ages 65 and older will make up about 20 percent of the U.S. population by 2029, up from almost 14 percent in 2012.

  12. Jmitch says:

    What? “about half the population spends less than $500 annually on medical care.” Are you saying that almost 160 million Americans spend less than $500/year on their health care? Does that include dental, vision, DME, prescriptions? Reference, please.

    And are you saying that premiums should be based primarily on a person’s health status, so that healthy people wouldn’t have to subsidize those who had poor health? You surely don’t believe that health status is static, do you, as if someone who is healthy today will remain that way forever?

    • John Fembup says:

      Jmitch, Devon can comment on where he got his data, or what year(s) such data represent, but the $500 he cites as average annual spending per person up to the 50th percentile sounds about right to me.

      For example, a 2-minute search returned this:

      “In contrast, the 50 percent of the population with the lowest expenses accounted for only 3 percent of overall U.S. medical spending, with annual medical spending below $664 per person.”


      If the link does not take you directly to the AHRQ site, click on the first link returned,

      It can be very surprising to learn about the actual distribution of US medical care costs by person. The costs are highly concentrated above the 50th percentile. And it stands to reason – for one thing, all the so-called “catastrophic” expenses – however one defines them- are above the 50th percentile,

    • Devon Herrick says:


      Yes, as John said half the population hardly spends anything on medical care each year. Some of those people should spend more. (And most of those who spend much more should spend less.) That’s also why I’ve been shifting more of my focus to people with health problems. We will never get a handle on health costs until we reduce spending on the sickest 20% of the population who consume 80% of all health care expenditures.

      • Al says:

        “We will never get a handle on health costs until we reduce spending on the sickest 20% of the population who consume 80% of all health care expenditures.”

        Interesting Devon, but that means deductibles and copays have little effect on the expenditures of this population group unless we change the way we insure. Unfortunately that cannot occur with present government controls over insurers, near monopoly insurance companies and a lack of limits on total expenditures.

        • Devon Herrick says:

          That is correct. I was on a panel with an academic from Stanford and he asked why we were so enamored with HSAs and high deductibles? After all, that’s not where the money is spent. It’s spent on people who have long blown through the deductible. I realized he was correct. We need to use reference pricing to make people price sensitive at the margin.

          • Ron Greiner says:

            A problem for the tax-free HSA is that people say high deductible when they are described. When in reality smart people don’t spend the money that is growing tax-free but instead keep a record of the qualifying payment for a later tax-free withdrawal.

            If Medicare had a 1% payment by the old then some old women would not go see the handsome doctor today just because they need some company.

            So Devon, this Stanford guy says why worry about the deductible because once it is reached people don’t care how much they spend of other peoples’ money? AND — you think this is correct?

            Selling you on goofy ideas is like taking candy from a baby, a blind baby.

            In sales it is the same way Devon, 80% of the sales are done by 20% of the sales people. I wonder what this Stanford guy would want to do with the lower 80% of sales people.

            • Devon Herrick says:

              The Stanford professor was not suggesting high deductibles are of no value. Quite the contrary. His point was that deductibles make people price sensitive below the deductible (which is good). But more needs to be done to make people care about price once they’ve met their deductible. IN the CalPERS experiment, reference pricing gave enrollees an element of price sensitivity above the deductible.

          • Al says:

            The was my argument against the over optimistic view of HSA’s when MSA’s first came out though both pointed us in the right direction and offered some relief in costs that were affecting the lower dollar amounts.

            The only way we end up with such high bills for the sickest is because so many of these bills are paid exclusively by insurance. Thus the insurance model for these high expenditures has to be adjusted and that means more insurer control and less government involvement.

            From experience many of my patients would have given up on expensive treatments that were questionable if there was a small advantage to them and many would have given up on insuring themselves for expensive diseases that frequently lead to end of life.

        • John Fembup says:

          “unless we change the way we insure.”

          That’s a useful supply-management point of view (supply of money – via insurance). Yet experience suggests it can’t by itself solve the problem of high medical costs,

          I think it would be a mistake to overlook or give up on demand-management (reducing demand for medical care in the first place via a healthier population).

          For example, people are resistant to changing behaviors that adversely affect their health. How much longer can the nation afford to pay so little real attention to the deteriorating public health – or responding to it primarily by footing less and less of the bill?

          Meanwhile, it’s also necessary to continue looking for ways to reduce inefficiencies within the delivery system itself.

          • Al says:

            John, I answered Devon before reading your comment and pretty much repeated my call that the way we insure needs to change. I don’t know what experience of the past you saw proves differently. Quite the contrary my experience as a physician tells me that a lot of costs incurred by my patients would never have been incurred, but for the insurance payment mechanism we have seen for years.

            AS far as the demand side goes I agree we need to pay attention to it, but much of that demand is created by insurance. Healthy attitudes should prevail but take note at the health of our youngest generations despite the affluence and information that is easily available.

            • John Fembup says:

              AI aren’t we saying about the same thing? You’re saying the way we insure needs to change. I’m saying the way we insure simply by trying to manage the supply of money, has not solved our problems and we must do something more, something different.

              I’m not trying to prove that insurance need not change; I’m not even suggesting it; in fact I don’t remember even thinking it.

              In addition, I’m expressing my wish that we not overlook or give up on demand management. I don’t see much serious discussion of that concept.

              Just curious – what kinds of costs incurred by your patients would never have been incurred, but for insurance?

              • Al says:

                John I got the wrong impression from your quote of the fundamental point of my statement. “unless we change the way we insure.” by your statement “Yet experience suggests it can’t by itself solve the problem of high medical costs” But no matter since your explanation makes what you said much clearer.

                One example: Understandably people in pain can be impatient, but a lot of time the diagnostic testing need not be done unless in the rare case the pain persists. If the patient had to pay we would find a lot waiting longer than they would have it the fee were covered.

  13. Paul Nelson says:

    If you lined-up every person by the cost of their health from lowest to highest, all 320 million (on the x axis) AND the cost scale (for the y axis) was 1-10-100-1000-10000-100000-1000000-10000000 (a log scale), 50% of the healthcare dollar would be spent by the last 32,000,000 citizens. By aging alone, many citizens move from the lowest to the highest cost-segments of the graph. Even without aging, there are citizens that annually shift up and then back down the cost-spectrum by the following year. My point is this: what are we doing with our healthcare system to reduce the number of citizens jumping to a higher cost level or to reduce the time they spend there, IN ADVANCE? Furthermore, once they return to a lower cost segment, what are we doing in advance to keep them there? On a community by community process throughout our nation, the answer is NOthin. There is no amount of tinkering with the payor issue unless there is FIRST a solution to the problems caused by the inadequacy of enhanced Primary Healthcare that is equitably available to and culturally accessible by EACH citizen. We can’t suddenly decide to do comprehensive healthcare when a person becomes diabetic, if we haven’t been doing it beforehand. Ultimately, this is the only strategy that must be in place to solve our nation’s annually worsening maternal mortality ratio AND to reduce the cost of our nation’s healthcare BY $800 Billion annually.
    We will not survive our nation’s impending bankruptcy without this level of change. Tinkering with payor issues, although necessary, will not serve our obligations to our mothers and veterans. The institutional neglect of these citizens is profound. We have a history of times with profound national commitment: the Declaration of Independence, the Bill of Rights for our Constitution, the Constitutional 13th Amendment our, commitment to WWII, the Cold War, 9-11, etc. We need again a broadly supported renewal of a “Shoot the moon” strategy for healthcare reform. I like the Cooperative Extension Service as a model. In case you didn’t know, our nation produces more food with resources applied than any other nation of the world — by a wide margin.
    The cost of our healthcare for our national economy has gone from 6.0% before 1965, then with Medicare/Medicaid, eventually to 18% in 2015. It represents a worst case scenario of Parkinson’s Law. It is so bad that all of the other developed nation’s spend 12% or less of their nation’s economy on healthcare. The excess cost for our nation’s healthcare represented 60% of our nation’s debt in 2015.
    The solution to all of this can be found in the Design Principles proposed by Nobel Prize winner Elinor Ostrom for the use of collective action to stabilize access to a common-pool resource, as in our nation’s economy. Come on folks, its time to seek out known and well-defined strategies to solve the unjust efficiency and low effectiveness of our nation’s healthcare industry. In 2013, with nearly 4 million live births, there were at least 400 women, all citizens, who died as a result of a pregnancy just because they lived in the wrong nation. Just think of the down-stream effects of this for their families and our nation’s economy: arguably $1 million each. — pjn

    • John Fembup says:

      During the period 2000-2011, the average annual growth rate in US medical care expenditures, per capita, was 3.0%.

      Australia’s was 2.7%. New Zealand 3.8%. Canada 3.0%. Germany 2.1%. Denmark 2.7%. France 1.8%. Netherlands 4.7%. Sweden 3.1%. Italy 1.2%. Japan 3.0%. Norway 2.4%. Switzerland 1.8%. A few countries have managed the rate of increase more effectively than others. But many countries, even those with so-called nationalized or single-payer financing schemes, have done no better than others I.e., US.

      Meanwhile, over the past, oh, 50 years, the US public has heard little about why medical spending in some countries is less than ours, why their rate of increase in spending is less than ours, and what are the tradeoffs, if any, involved in our achieving similar rates of spending. We’ve heard it’s because of single-payer, but if that elephant were in the refrigerator, wouldn’t we see it’s footprints be in the jello? But the resfigures above don’t seem to show those ts

    • Devon Herrick says:

      I find it interesting that Elinor Ostrom’s work is respected by both Progressives and Libertarians. Some of the principles of her work are: 1) clearly defined resources, 2) clearly defined beneficiaries; 3) gatekeepers, 4) effective monitoring and 5) the ability to control utilization and exclude those who do not qualify and sanction those who abuse. Unfortunately, our current political system seems to lack the will to abide by her design principles.

      • Ron Greiner says:

        “As long as a single center has a monopoly on the use of coercion, one has a state rather than a self-governed society.”
        ― Elinor Ostrom, Governing the Commons

      • Paul Nelson says:

        The combined nations of Austria, Denmark, Finland, Germany, Italy, Japan, The Netherlands, Norway, Portugal, Spain, Sweden and the United Kingdom in 2012 had a Fire-arm related Death Rate of “1.1” per 100,000 citizens. During the same, Death Rate for the United States men was “18.4”. (JAMA 2-9-2016) I am not a fan of any strategy that attempts to correct this without a strategy based in the community. It is just as true with healthcare.

        As described by Devon, the Design Principles for the successful preservation of a “commons,” (as in the cost of our nation’s healthcare as a portion of our nation’s economy) can be found at [ http://www.cooperationcommons.com ].

        • Devon Herrick says:

          A discussion of such a system could make for an interesting thought experiment. Since communal resources are not infinite, it would have to be a defined benefit. Unlike our current system, the communal benefits would probably have to be defined both at the national level and at the family level. This also suggests society would necessarily have the right to say no to therapies that cost societal resources beyond what is considered prudent for the community as a whole (which would be akin to overgrazing in a communal grazing land.) Individuals and families would have to exercise some responsibility. Ostrom also discussed that beneficiaries have some degree of property rights, but that right is not absolute (i.e. they could not sell the commons). Coase’s theorems recognize assigning property rights can lead to beneficial bargaining to lessen negative externalities. As is the case with communal resources in pastoral societies, equality would not be guaranteed, but rules, regulations and property rights would need to protect the community members from the power of the Head Man and his cronies/clan.

  14. Angel Guevara says:

    From your point of view I agree with you. What I can explain is our system in Euskadi, The Basque Land, Spain, probably the best in Spain, where there is a universal coverage paid by the state that runs on 1549 euro per inhabitant, last 2015. Just see the results.
    Of course there is redistribution from generation to generation, but this is just the basics of the State.

  15. Barry Carol says:

    I think it’s interesting to note that most of the countries in Western Europe already have 20% of their population older than 65 vs. 13% or so in the U.S. In Japan, I think the number is 23% yet even Japan only spends about 10% of GDP on healthcare though I wonder if there are any differences in the definition of what the components of healthcare spending are from one country to the next.

    At any rate, I’m more of an optimist about the long term future of the potential to bend the healthcare cost growth curve over time. The big hitters contributing to costs, especially of hospital based care, are heart disease and cancer and both of these are big money makers for hospitals. For heart disease, there are many inexpensive generic drugs from beta blockers to ace inhibitors to calcium channel blockers to blood thinners and statin drugs to help manage the condition. I’ve had heart disease for 17 years now with three of those years being expensive when I needed a high tech intervention and the other 14 being pretty inexpensive – less than a couple of thousand dollars each. High tech interventions include CABG, DES, ICD and pacemaker implantation, valve replacement, ablation, LVAD, and, in the extreme case, a heart transplant. All of those are expensive.

    For cancer treatment, it’s mainly very expensive specialty drugs. However, even there, the drugs will either drive the disease into remission thereby reducing costs significantly in the future for that patient or they won’t work and the patient will die sooner rather than later at which point, healthcare costs cease.

    There have also been advances in technology both large and small that have made it possible for people to live independently in their own homes longer than in the past. If driverless cars are perfected, that will be another advance making it possible for more people to live in their homes for a longer period. The number of people living in skilled nursing and assisted living facilities as a percentage of the elderly population has been declining on a secular basis for decades.

    If we ever develop a cure for Alzheimer’s or at least a drug that can postpone its worst effects for years, that would be the holy grail of drug development. In the meantime, insurance companies working with providers are developing better approaches to work with the most expensive patients who have conditions like congestive heart failure (CHF) and mental illness to keep them out of the hospital and on their medications.

    The bottom line is that our economic system is incredibly resilient and has a way of figuring out ways to mitigate and cope with seemingly intractable problems though it can take some time. At some point, a tipping point is reached, there is increased focus on the problem, and solutions evolve. In the case of healthcare, I’ve said many times that there is no single silver bullet to fix the system but lots of silver pebbles. Healthcare spending as a percentage of GDP was 17.3% in 2009. In 2014, the last year for which data is available, it was 17.5% though there were estimates in 2009 that it would approach 20% of GDP by 2015. We’re already making pretty good progress with more to come.

    • Al says:

      Our “incredibly resilient” economic system was due to our economic system which has become less free in recent years. Therefore I think your statement “The bottom line is that our economic system is incredibly resilient and has a way of figuring out ways to mitigate and cope with seemingly intractable problems ” is at odds with some of the collectivist political philosophy you have advocated here at least with regard to healthcare concerns.

  16. Jack Towarnicky says:

    Don Levit has it right – unfortunately, too many insurers see stop loss as a profit center and they strongly resisted health reforms as we proposed back in 2008 (coupling versions of CoverTN with proposals by Frist/Kerry.

    Here’s the right structure, as proposed in 2008:

    Individuals – At risk and responsible for preventive care and perhaps the first $3,000 or so of acute care expenses (approximately 10% of median wage income). With the risk exposure comes tax incentives to save, starting early, for the time when expenses will be incurred (variants of today’s Health Savings Accounts),

    Employers, State Medicaid for unemployed, Medicare for retirees – At risk and responsible for care between $3,000 and stop loss attachment point (no more than $50,000). Level of cost sharing to be determined by employers, state or Congress (Medicare). Part of rewards program (employers), or funded by taxpayers (Medicaid, Medicare) positioned at levels to encourage employment, discourage welfare.

    Federal government – Costs at and above attachment point, through partnership with private reinsurers. Apply Medicare cost controls (RBRVS, DRG, etc.) and balance billing limits – where the tradeoff is providers receive modest reimbursements. Funded by employers (cost sharing to be determined by employer), or taxpayers (medicaid, Medicare) to gain access to the reinsurance/stop loss protection. Employer plans (Medicaid for unemployed, Medicare for retirees) can offer supplemental coverage with regard to balance billing amounts.

    The bottom line is that individuals should bear responsibility for medical costs to the extent reasonable. Employers should not bear risks that they cannot afford, or afford to insure. Chronic care and catastrophic care costs can only be born by society, here the federal government and its taxpayers.

  17. Ron Greiner says:

    Jack, why do you think some uninformed employer or politician should decide what insurance is best for an employee’s child? The parents love the child and the employer doesn’t know the child’s name.

    YOU write, “With the risk exposure comes tax incentives to save, starting early, for the time when expenses will be incurred (variants of today’s Health Savings Accounts).”

    What could this possibly mean?

    YOU write, “Chronic care and catastrophic care costs can only be born by society, here the federal government and its taxpayers.”

    What could this possibly mean?

    Chronic care can only be born by society so that the variant HSA balance is dedicated to what?

    Why should society pay for Donald Trump’s catastrophic care?

    Jack, what are you talking about?

    • Jack Towarnicky says:

      To answer:

      Nothing wrong with a parent deciding on health coverage for themselves or their child. You can self insure, or buy insurance if you prefer/if it is available. And, OK to reject employer plan, Medicaid, Medicare too.

      Too many people live payday to payday. So, they tend to over insure. We need greater accountability. We won’t solve health care cost challenge if people believe someone else can be taxed or charged to pay. Learned long ago, you can quote me, most American’s want the best health care coverage YOUR money will buy.

      The cost of chronic care and catastrophic care is beyond the means of individuals, and, most employers (where coverage is part of the rewards package). Very few incur such expense, and often it is not predictable. So, the layered approach is consistent with Pareto concepts, over time – that ~20% incur ~80% of spend, and those in the 20% often change from year to year.

      The HSA monies are accumulating over time to meet preventive, and other out of pocket costs.

      Donald should shoulder his proportional share of society’s burden, and, no reason to exclude him from what his taxes paid for/qualified for.

      I’m offering a reasonable structure to replace PPACA -that will more appropriately apportion the burden of health care costs.

      No surprise that folks aren’t interested – given the mess that’s been created.

      • Ron Greiner says:

        OK, is that a fact Jack? Your offering a reasonable structure for ACA replacement?

        Who told you that chronic care is beyond the means of individuals?

        Jack, are you the one that decides everybody’s proportional share of society’s burdens?

        • Jack Towarnicky says:

          Chronic care cost – personal xperience.

          Allocation of societal burdens – society, through their elected reps.

          Why are you so heated and critical? Just confirm you prefer a different option, show me the facts why I am certainly wrong, and dismiss my concept same as D’s and R’s in the past.

  18. Barry Carol says:

    If we could cover the roughly 200 million people who do not currently have Medicare or Medicaid with the equivalent of a decent Medicare Advantage plan for $6,000 each that would cost $1.2 trillion. I would like to know what it would cost to buy reinsurance beyond a $50,000 attachment cost that would presumably be paid for with federal tax dollars. I suspect that the cost would be significantly higher than most people think since in any given year, the sickest 1% of people account for 20% of medical claims, the sickest 5% account for 50% of claims and the sickest 10% account for 60%-65% of claims. Conversely, even within Medicare, the healthiest 50% of that population accounts for only 4% of claims but, of course, they are not the same people from one year to the next.

    If it turns out that aggregate claims beyond $50,000 in one year for an individual would equal 25%-33% of total claims, it would cost $300 – $400 billion per year in federal taxes to cover them. How exactly are we supposed to pay for that on top of the taxes we are already paying?

    Any alternative health insurance approach, including one that replaced Medicaid coverage, would have to carve out long term custodial care to be covered on a means tested basis as it is today under Medicaid. If it isn’t means tested, people would come out of the woodwork possibly by the millions and at least by the hundreds of thousands to claim benefits to pay for skilled nursing or assisted living facilities.

  19. L. Brody, M. D. says:

    ASIDE from re-distributive taxation and medicalization, the creation of massive bureaucracies will also prove very costly and hard to disband. Many people I have talked to are happy about Obamacare. I think like all insurances, you don’t know what you have until you put in a claim, and see if you get care. Time will tell if this massive bureaucracy can be changed. As a doctor I noticed while in training that many people don’t care about day to day health and just go to a hospital when then get ill. They may have little to care about and don’t treasure their life. They will take what is given and not question it.
    I once talked to a person in Canada about what would they do if they had cancer and couldn’t get immediately to a specialist. They said they accepted that risk in exchange for what was perceived as “standard access to care.” They didn’t seem to mind, they accepted what government mandated for them.

  20. The big ham says:

    TWO questions I have for the NCPA.

    Does the NCPA advocate eliminating employer based insurance?

    Under current law is a STM plan a viable alternative for people who can qualify?


    • Ron Greiner says:

      The big ham, trust me, in a year from now the PHDs at the NCPA will be saying that age-based tax credits and the total cataclysmic collapse of employer-based health insurance was their idea! I hope this answers your 1st question.

      Your second question is a big secret in America. I find it interesting that not one Governor in America has come out and told their uninsured population that they can purchase Short-Term-Medical all year long. So, the NCPA can’t mention STM because it’s a secret.

      The big ham, I have a question for you. How much did Medicaid cost per person in each of the States last year (2015)? How much does Medicaid cost for a family of 4 in New York?

      Governor Jeb Bush said he trusts the people in State Government to get all of the Medicaid money. All of the Governors running for President just love Medicaid money. While you are at it look up how much the Children’s Health Insurance Plan costs in each of the States. In Florida a “Full Pay” kid costs $299 a month. Imagine how much it would be in New York. ($1,000?)

      Here at the NCPA we can tell you how much was spent last month on hospital construction but we can’t tell you how much Medicaid costs for a family of 4 in LA where over 1/3 of the population in on Medicaid.

      • Devon Herrick says:

        StateHealthFacts.org at the Kaiser Family Foundation has Medicaid spending by state broken down by a variety of services.

  21. Bob Hertz says:

    Note to Barry:

    You correctly ask what a federal reinsurance policy starting at $50,000 in claims would actually cost the taxpayers.

    There might actually be a rough answer to your question.

    For the last 3 years, the government has been covering a percent of all claims between (I think) $45,000 and $250,000 for qualified ACA plans.

    ACA plans total ten million plus, if you count both on and off exchange contracts. If we extrapolated the cost of this limited reinsurance to the rest of the USA, we might approach your excellent question.

  22. Don Levit says:

    $50,000 deductible reduces a low deductible policy by 70 percent
    If a person had $50,000 in his HSA would a $50,000 deductible still satisfy the maximum out of pocket around $13,000 this year?

    • Barry Carol says:

      Bob – If Don’s data is correct that a $50K deductible would cost 70% less than a low deductible plan and I’ve estimated that it would cost an average of $6K each to provide a policy roughly equivalent to FFS Medicare or Medicare Advantage to the roundly 200 million people that don’t already have Medicare or Medicaid, it implies that taxpayer liability for picking up all claims beyond a $50K attachment point would cost taxpayers $360 billion per year (200 million people x $6K each for Medicare or MA x 0.3 for costs beyond the $50K attachment point) which is 2.0% of current GDP.

      If that cost were financed by a European style VAT, the tax rate would have to be about 5%. If it were financed by a payroll tax on all wages plus investment income above $250K of adjusted gross income, the tax rate would probably have to be about 3.5%. Remember that the current Medicare payroll tax of 2.9% of all wages plus an additional 0.9% on investment income for those with AGI of more than $250K for joint filers ($200K for single filers) only finances Part A which accounts for about 45% of Medicare spending and Medicare only covers about 54 million people though they cost twice as much per person to cover than those below age 65 and not disabled.

      Also remember that insurers tell us over and over that in any given year, the sickest 1% of members account for 20% of medical claims, the sickest 5% account for 50% of claims and the sickest 10% account for 60%-65% of claims. The healthiest 50% account for 3%-4% of claims even with Medicare (4%). Of course, they are not the same people from one year to the next.

      Ideas like this sound good when you say them quickly but if you’re a congressman or senator consulting with health policy and budget experts to run the numbers, it turns out to be a pretty tough vote that most of your constituents probably won’t support. This is why I suspect that the proposed funding of the high risk pool provision in H.R. 2300 sponsored by Congressman Tom Price, M.D. will prove to be grossly inadequate. It’s the weakest part of the ACA replacement legislation in my opinion.

      • Al says:

        “I’ve estimated that it would cost an average of $6K each to provide a policy roughly equivalent to FFS Medicare or Medicare Advantage to the roundly 200 million people that don’t already have Medicare or Medicaid, – See more at: http://healthblog.ncpa.org/ohamacares-robin-hood-scheme-and-the-socioeconomics-of-health/#sthash.CJBecRpP.dpuf

        Can you provide how those calculations were done?

        • Barry Carol says:

          Al — Calculations were based on the following: First,I’ve read in the past that the Medicare population consumes about twice as much healthcare per person on average than the under 65 non-disabled population. Since Medicare spending per capita is about $12,000 now, half of that is $6,000. Second, most large employers that I’m aware of spend between $5,000 and $6,000 per covered life to provide their employees and their families with health insurance. Third, Bob Hertz on a recent blog post said that in MN, coverage the state offers for lower income people who make a bit too much to qualify for Medicaid costs about $5K-$6K per year. Fourth, the Sanders campaign estimates the cost of his Medicare for all approach for those not already on Medicare would cost $1.35 trillion in the first year. My $6,000 per person figure would imply a total first year cost for his program of $1.56 trillion which I think is closer to the mark than his campaign’s estimate.

          • Al says:


            “First,I’ve read in the past that the Medicare population consumes about twice as much healthcare per person on average than the under 65 non-disabled population.”

            Does anyone know if that is a true number? Does that number include those very sick individual taken from the under 65 group and placed in the over 65 group? That would make a difference. Does that include all dialysis patients? Does that include services that younger patients generally don’t require? How many younger people need wheel chairs?

            “I’m aware of” is anecdotal.

            Bob Hertz’s number is open to selection errors.

            Sanders is politically motivated and picks numbers and anecdotes that meets his needs.

            • Devon Herrick says:

              Personal health care spending according to CMS (2010 so dated).

              0-18 $3,628
              19-44 $4,422
              45-64 $8,374
              65-84 $15,857
              85+ $34,783


              • Barry Carol says:

                Devon – Thanks for the data. While I don’t know, I believe the numbers for the two older groups are skewed by Medicaid’s annual $100 billion plus bill for long term custodial care which, for the most part, Medicare and commercial insurance don’t cover except under very limited circumstances in the case of Medicare. I also think the data for children is heavily influenced by the cost healthcare for infants between 0 and 1 year old, especially low birth weight premature babies. I read some years ago that healthcare for children from 0 to 1 in Canada accounted for 3% of that country’s healthcare costs even though they’re only a bit over 1% of the population. I suspect that the cost of providing healthcare for children between 1 and 18 years old may be closer to $1,500-$2,000 annually.

                • Ron Greiner says:

                  We get terrible information. Devon has to use figures from 2010 to tell us average healthcare spending in the US. But he can tell you how much was spent last month on hospital construction. I have been asking him for years to list how much Medicaid costs in each state but he won’t list it. I wonder how much we are being scammed when it is such a secret that nobody has the right to know.

                  I’m like George Carlin, I don’t believe anything the government tells us. That includes the media because the media must be controlled by the government here in the land of the free.

                  I’m amazed that the NCPA has not discussed how to fix Obamacare. I thought that was one of the reasons for the NCPA. I guess trying to get grants and donors really ties your hands.

                • Al says:

                  Barry, your number was $6,000. I assumed you were leaving out the 1-18 group so your number came out pretty close. If my calculations are correct then from 19-64 was $6,630 which I consider close enough.

                  That is somewhat higher than I would have guessed, but then again I believe we could quickly reduce costs by at least ⅓rd to ½ if a reasonably free market was permitted. In that case the number would have been $4,400 -$3,300.

    • Jack Towarnicky says:

      Don, I assume you mean the non-single out of pocket limit of $13,700 (remember that the single out of pocket expense maximum of $6,850 is embedded – meaning that 100% coverage kicks in for any individual once they hit $6,850).

      The answer to your question is no. The out of pocket expense maximum requirement is not satisfied by assets held in HSA accounts. The maximum deductible would have to be set at $6,850/$13,700, and if you wanted to contribute to a HSA, you would have to reduce it further to $6,550/$13,100.

  23. Bob Hertz says:

    Interesting calculations, quick comments:

    1. The atate of MN has a tight managed care plan for persons who make too much money for Medicaid but not enough for the ACA.

    And what do you know, that plan costs between $5K and 6K every year.

    So your cost estimates for universal Medicare are on track.

    2. Assuming that a high deductible federal plan must raise $360 billion a year, I wonder if your tax estimates are too low.

    All taxable wages add up to about $6 trillion last time I researched this.

    Investment income over $250K would not exceed $1 trillion I think.

    So you might need a payroll tax of 5%, not 3.5%.

    3. Given the public desire to cut payroll tax, not raise them, I agree this would be a tough sell.

    Just curious though — if a person making $50,000 had to pay an extra $1750 or so in payroll taxes, would their health insurance premiums go down by $1750 since private insurers could sell plans with a $50,000 maximum benefit? Could be.

  24. Barry Carol says:

    Bob – Thanks for the information about MN’s managed care plan for those who make a little too much to qualify for Medicaid.

    According to the CBO, payroll taxes raised about $1.07 trillion in fiscal 2015 of which about 80% was attributable to social security and 20% to Medicare including the new additional 0.9% on both wages and investment income above $250K for joint filers and $200K for single filers. The social security portion of the tax is 12.4% of which half is nominally paid by the employer. In the 1980’s, social security taxes applied to 90% of all wages but now it’s closer to 85%. Sorting all that out, it suggests the total wage base is $8.1 trillion. Add in your $1 trillion estimate for investment income earned by the high income group and perhaps close to another trillion earned by the remaining taxpayers and you have a total taxable income base of about $10 trillion to which a payroll tax rate increase or a higher marginal income tax rate could be applied. That means that each one percentage point of tax rate applied to the entire base could raise $100 billion per year. That’s how I came up with my 3.5% number though it could be closer to 4%. I don’t think it needs to be 5% but even at 3.5%, it would be a tough sell indeed for politicians to vote for.

    Any major change in the current system, especially the employer related portion of it, needs to replace close to $1 trillion in non-Medicare and non-Medicaid premiums that insurers are taking in plus, hopefully, find a way to cover most of the remaining uninsured except illegal immigrants. I think the total bill, assuming both Medicare and Medicaid remain in place, would be about $1.2 trillion.

    As I’ve noted before, if we go back to medical underwriting so healthy people can buy coverage cheaply, it would require an enormous amount of money to cover the unhealthy through heavily subsidized high risk pools or reinsurance with a $50K attachment point.

  25. Bob Hertz says:

    Behind all our arguments is a philosophical debate about health care and government.

    Namely, what parts of health care are a right of citizenship, and what treatments are something you have to buy (

  26. Bob Hertz says:

    Start again, sorry.

    This debate was much easier in the 1940’s or 1950’s. Read the early charter of the British National Health Service, when the universal services included crutches and hearing aids.

    Today, those who want to make every treatment a right of citizenship (i.e. Peter Shumlin, Bernie Sanders) run into impossible costs. The health plans which have complete PPO choice and no deductibles and generous payments to providers are the ones up in Cadillac premium territory.
    Medicare does give seniors the right to all forms of care, but at a staggering cost and there is little willingness to pay for Medicare at all ages.

    My own inclination is to make emergency care for accidents, injuries, and contagious illnesses into a right of citizenship. I would provide federal funding for emergency rooms so that they are more like police or fire departments, with an annual budget and no major reliance on user fees.

    I would also make children’s health care a right of citizenship. We are not too far from that right now, with Medicaid and SCHIP et al.

    My foundation for doing this is the Golden Rule. I want guaranteed treatment for my broken arm or my child’s virus, and I am willing to pay taxes so that my neighbor gets the same thing.

    Now, if my neighbor (or me) lives on red meat and whiskey for 40 years and gets cancer, or if risky behavior gets him hepatitis I am less eager to pay for a wildly expensive cure.

    Obviously my preferences do not easily translate into public policy. I only raise them to encourage us to ask the philosophical questions more often.

    • Devon Herrick says:

      Bob, last week there was a comment about applying Elinor Ostrom’s principles of how beneficiaries can successfully manage common pool resources to health care. It’s an interesting thought experiment. That’s the subject of tomorrow’s health alert.

      Ostrom’s principles would move away from pesky moral issues like ‘how do you deprive someone of $1 million in life-saving care.’ Instead I believe it would look at how many resources should be public, how much should be private; how much maintenance should people be required to invest into the common pool; and how do you maximize the benefits to the community.

      We will pick that up tomorrow.

    • Jack Towarnicky says:

      You state: “The health plans which have complete PPO choice and no deductibles and generous payments to providers are the ones up in Cadillac premium territory.” No, not exactly. My experience in advising clients on avoiding the tax showed that only a small subset of plans end up in Cadillac premium territory because of generous or rich or Cadillac design.

      Based on 35+ years of corporate employee benefits experience, including 5+ years of cadillac tax preparation, most plans that arrive at Cadillac premium levels will do so because of utilization, antiselection, unhealthy populations, and simply bad luck.

  27. Barry Carol says:

    “I believe we could quickly reduce costs by at least ⅓ to ½ if a reasonably free market was permitted”

    Al – You keep saying that but it’s hard for me to accept it because I haven’t seen it demonstrated anywhere even on a small pilot basis.

    I believe the Amish people in PA and OH generally pay cash for their healthcare and so would make for an interesting study of healthcare costs for that population. However, even there, the results would be muddled by the following factors: (1) they’re mostly all farmers which means they get plenty of exercise and have relatively low rates of obesity, (2) they eat more natural, unprocessed food than most of the population, (3) they don’t smoke or drink, and (4) providers may be more willing to cut them a break out of charity because they know they’re getting paid by some form of insurance for most of their other patients.

    For the record, my estimate of what it would cost to cover the non-Medicare eligible population did, in fact, include the children. Nationwide, the Medicaid program costs about $8,000 per person even though over half of the beneficiaries are children. Long term custodial care in skilled nursing and assisted living facilities is the big ticket cost item for that program. People coming on to Medicaid as a result of the ACA are generally younger and healthier but even their costs are averaging about $4,500 each. Large employers spend $5,000 – $6,000 per covered life which includes employees’ children and public sector employers and large unionized health plans have gold plated benefits which cost considerably more.

    • Al says:

      “Al – You keep saying that but it’s hard for me to accept it because I haven’t seen it demonstrated anywhere even on a small pilot basis.”

      I’m not the one to ask for such statistics, but I noted especially earlier in my career that patients with less insurance cost less to treat. I am amazed at how much money my patients end up spending only to do precisely what was suggested at the start and these issues weren’t even life threatening. I had this same problem with my own father who spent tens of thousands of dollars until all the specialists told him they could do nothing more. It was only then he followed my original advice and though it wasn’t perfect he admitted to being 75% better. Maybe Linda Gorman is reading this and can comment with some statistics or maybe Devon or John can.

      I think empirically we can draw such conclusions or draw them looking at how a capitalistic system compares to a socialized one. I don’t think you will accept anything other than proof with millions of people in a study you know cannot be performed because in the healthcare sector you seem wedded to a socialist model.

      I would like a study of the Amish people and I don’t think that your factors would have as much effect as a potential genetic differences that insular group might have.

      You assume costs of a certain level, but the HSA studies demonstrated significant savings when HSA’s were used and they just added a tad of the marketplace. Our system over the years has seen to it that whatever we do in healthcare is most likely to be of the expensive variety even when the less expensive variety works just as well.

  28. Barry Carol says:

    Bob – I suppose, in theory, we could figure out a way to pay hospitals a budgeted amount out of general revenue to cover the cost of emergency room care but hospitals would need the ability to triage non-emergency cases to an urgent care center which would have to be covered by traditional insurance or paid for out of pocket. I note that Switzerland pays approximately one-third of the cost of operating its hospitals out of general revenue.

    In Germany, children are insured by the state out of general revenue instead of through the sickness funds (insurers) on the ground that children are a national treasure. That would probably be a tougher sell in this country.

    I don’t know how much hospital based care must be delivered under emergency conditions rather than scheduled in advance. It’s care that must be delivered under emergency conditions for which price shopping is impossible by definition and patients generally have no role in choosing the doctors who treat them. I’ve read that, on average, about half of hospital inpatient admissions come through the ER. What I don’t know is how easy it would be to transfer most of those cases somewhere else if the patient or family wanted to do that for cost considerations or for other reasons.

  29. Bob Hertz says:

    Barry makes a very good point. Suppose that the ER is free to the patient, but the ER admission is due to a heart attack, and the patient needs a week of hospitalization after the ER has stabilized them.

    Pretty soon the government would be covering the entire hospital budget, and America’s hospital budgets are in the high hundreds of billions so this is impractical.

    It is also politically impossible to pick out diseases that will be covered (because they strike somewhat randomly), vs. diseases like lung cancer which are in most cases the patient’s “own damn fault.”

    My own ideas are therefore not fully formed, and I have been thinking about these subjects for 20 years. That is not a ringing endorsement for me, I guess.

  30. Ron Greiner says:

    You people have a very bad case of the Bern, Bernie Sanders that is. You think you can come up with how much the government should pay for everybody’s Socialized Medicine yet you have no idea how much the government is currently spending. See how crazy that sounds?

    The Medicaid cost per person is from 2011 and that my friends is 5 years ago. Your stats say that in Florida a child has a cost of $1,700 per year but last October the cost for “FULL PAY”, people over 200% of poverty, was increased to $3,588 or over 100% more than you states from 2011. In 2011 a disabled New York Medicaid person was $33,000 per year so what is it now, $70,000 per year?

    I suppose if King George died and left you Governor of these States then maybe you might plan how to spend everybody’s money but that didn’t happen. Then you say goofy stuff like the government should pay unless you brought the condition on yourself, like smoking. Plus, now children are a national treasure like German children.

    I don’t hear anybody running for President in the Republican field that is talking like you people. Even Hillary says that Bernie is crazy with his grand ideas of Socialism. But it looks like you have sold Devon so I guess there is a sucker born every minute.

    Devon, you need some ant-BERN lotion, bad.

  31. Bob Hertz says:

    If the government cannot pay for everything for everyone, then by definition there must be some form of rationing. Or at least some form of price ceilings.

    Devon, you have advocated consumer choice even on expensive forms of care. This would essentially amount to self-rationing. I am skeptical about this but am willing to listen.

    The British and Canadian approach is to refuse to pay for wildly expensive treatments. I am not sure how this approach would survive the American media circus…e.g. the Terri Shaivo case.

    The Japanese and German approach is for government to set prices low enough so that what we call expensive things are
    not actually that expensive. Hepatitis drugs cost $1000 in Egypt, what can’t they cost that much here? You need a heck of a lot less rationing when something costs $1000 vs $84,000.

    Personally I go for the Japs and German approach, but like Uwe Reinhardt I am not sure that a US Congress dependent on big donors could pull it off.

    • Barry Carol says:

      Gilead Sciences deliberately priced both Sovaldi and Harvoni based on its perception of each country’s ability to pay and used per capita GDP as its proxy for ability to pay. With presumably very low marginal production costs, it chose to price Sovaldi at $10 per pill in Egypt vs. $1,000 in the U.S. Even pricing in the developed countries of Western Europe, Canada, Japan and Australia vary based on per capita GDP. I know of no other product or service that is priced this way.

      • John Fembup says:

        Barry, maybe I misunderstand your point – but it seems to me government services are priced somewhat according to individuals’ ability to pay. It also seems to me there is growing popular support for making the price of government services even more closely related to individuals’ ability to pay (except for the bottom 50th percentile I mean).

        • Barry Carol says:

          John — I was referring to commercial products and services sold in different countries. Boeing, Caterpillar and GE don’t vary their price for a given product based on per capita GDP though they may vary it based on something legitimate like the cost to serve a particular customer.

          Government tax structures are a different animal altogether. The IRMAA surcharge for Medicare Part B and Part D benefits is based on ability to pay and is basically another tax that extracts more money from higher income people for the same services that lower income people get for less money or even for free (Medicaid eligible beneficiaries).

  32. Ron Greiner says:

    YOU can’t talk people out out of Socialism, it’s impossible. Just because Socialism has never worked that makes no difference. The people that want Socialism will just say that nobody ever installed Socialism that knew what they were doing. We can have welfare Socialism and it will be better than Corporatism and employer-based health insurance.

    Stop sending the Ford plants to Mexico City and enact age-based tax credits and Republican Healthcare Reform!

    It really is the age-based tax credit and tax-free HSAs VS Socialized Medicine. I say give me Liberty or give me death! Socialism is for suckers.

  33. Al says:

    Barry writes: “Gilead Sciences deliberately priced both Sovaldi and Harvoni based on its perception of each country’s ability to pay and used per capita GDP as its proxy for ability to pay.”

    One has to think about how Gilead sciences can sell a product in Egypt for $10 while charging an American $1,000. Apple doesn’t sell its $2,000 Macbook Pro for $20 in Egypt. Porsche doesn’t sell its $80,000 car in Egypt for $800.

    The answer to the question of how Gilead can do it is simple, because we let them. If we let them what can we expect in the future? More of the same until we become a third world nation.

    I am not suggesting more government or any government. I am suggesting that under these conditions we be permitted to easily purchase these medications from anywhere in the world without any government interference. I am also suggesting that we and government consider what happens when taxpayer money is used to pay prices not paid anywhere else. A well functioning business independent of government would never put themselves in that position.

    • Barry Carol says:

      The issue is how can patients be assured that the foreign drugs are safe and not counterfeit or otherwise unsafe. Importing from Canada may be one thing. Importing from China or third world countries is something else. Drug companies would need to be insulated from lawsuits if the imported drugs turned out to be counterfeit or unsafe. If Americans are prepared to accept those ground rules, I would have no problem with drug importation if we can save a lot of money in the process or force prices down in the U.S. Too many of us want to have our cake and eat it too. We would still expect to be able to sue if we want to.

  34. Al says:

    Barry, do you realize that many of our generics now come from India and the rest of Asia? How can you be sure they are safe. At least one of the companies had loads of problems and no we don’t have the personal to make the needed inspections etc. I consider those drugs to be of greater danger than those made in the US, Canada, Israel etc. so when I fill my prescriptions I ask for the brands that come from these western nations and a few others.

    I’m tired of hearing you tell us that we need more government intervention for our own good. Let people make their own decisions. They do so all the time today and do so without prescriptions. Just search for Viagra.

    I also don’t need to insulate pharmaceutical companies from lawsuits. Is Gucci insulated from lawsuits against those that illegally copy their product? For every problem you seem to have a ready answer…more government.

  35. Barry Carol says:

    “Is Gucci insulated from lawsuits against those that illegally copy their product?”

    I’ve never heard of Gucci being sued because somebody bought a fake product, at least not successfully sued. The liability belongs to the seller of the fake. Good luck suing them.

    You keep telling me that some government regulation of healthcare is appropriate and necessary but every time I bring it up, you say we don’t need it and all I want is government control of everything which couldn’t be further from the truth.

  36. Al says:

    Barry, this was your comment: “Drug companies would need to be insulated from lawsuits if the imported drugs turned out to be counterfeit or unsafe.”

    You brought up how drug companies needed to be insulated from lawsuits. I can’t see why they would be any more liable than Gucci for counterfeit products sold under their name by people unassociated with them.

    The way you seem to want to direct government regulation is to pile on more and more of it to solve every problem. I don’t mind a few government regulations to maintain a level playing field and perhaps even a few more, but trying to regulate risk out of the equation only ups the price and creates another type of risk along with the problem of unaffordability.