My Cognitive Surplus

Nobody Really Wants Employer Sponsored Health Insurance

Most employers have no special expertise in managing health care and no compelling reason to develop it as a competitive advantage.  According to the Kaiser Family Foundation, employers pay around 10% of payroll costs to fund health care for employees who get employer-sponsored insurance.  That's a lot of money for something that has nothing to do with your business objectives.

Losing that insurance because you change jobs or the firm elects to stop offering it is a major source of stress to most people.  When asked if they are satisfied with their insurance, 69% say 'yes', but there is an implied 'right now' in the answer.  The better question is "Are you happy getting the insurance you have from your employer, or would you prefer the same insurance at the same cost to you provided by the government?"   I'm guessing the latter would win.  And if you asked the employers if they would be just as happy to be out of the insurance buying business they would probably answer with a resounding 'hell, yeah.'

Health Insurance, Oligopoly Pricing and the Public Option

Josh Marshall has been all over the point that the strongest opposition to the public option comes from Senators representing states with little or no competition.  That the health insurance companies in those states are resistant to the public option should come as no surprise.

Firms produce to the point where their marginal cost is equal to the price.  This assumes that total cost rises as a firm gets close to capacity and that it maximizes profit by selling up to the point where it makes no money on the last unit it sells.  Under perfect competition, this happens at a higher quantity and lower price than under a monopoly-dominated market.  Under an oligopoly (where a few firms dominate) the equilibrium point will be somewhere in the middle, but definitely less 'output' and higher cost in perfect competition.

Oligopoly pricing is complicated and it depends on whether firms try to drive a price level or a quantity level.  It seems to me that in health insurance firms set the quantity of output (Cournot competition), and in a future item I'm going to look at the implications of that.  The important point here is that insurance companies in states with limited competition don't operate in the kind of competition that we think of when someone says 'free-market.'  They produce less, either by insuring fewer people or by delivering worse service (recision, anyone?).  Ironically, the current model of state-sized markets, while allowing greater local control over regulation and preventing the race to the bottom we seen in corporate charter regulation, has created markets so small that they tend to oligopoly if not outright monopoly.

The right kind of public option would be an entity that would produce at a point that looks more like a business in perfect competition.  This would offer a price that would drive the price down and force competitors to produce more and price lower.    Additionally, there would be national regulation and national competition.  The bigger markets would tend to more competition with the public option as a backstop. This is a much less congenial environment for insurers to play in.  Bluntly:

Senators who come from states where there is limited competition and who oppose the public option are unambiguously taking the side of the insurance executives and shareholders against their constituents. Period.

There are a bunch of questions that need to be answered in terms of how to set up the public option, what the subsidies and incentives should be, but at the end of the day the worst model is these state-by-state monopoly / oligopoly markets.

Why torture? The answer is found in six words.

"Bin Laden Determined to Strike in U.S"

Section head from the August 6, 1001 Presidential Daily Briefing

As soon as 9/11 started, the last administration knew that it had been warned and that it blew it.  The next eight years were spent trying to find a justification or an alibi.  Why did we need to strike at Iraq?  Because the Bush administration needed to change the whole world to cover their mistake.

When they tortured in Iraq, the WMDs gave up pride of place to the links between Al Qaieda and Iraq - or as they personalized it, Bin Laden and Saddam.  It couldn't have been  just one guy in Afghanistan (about whom they had been warned). It had to have been a global conspiracy (echoes of a "A conspiracy so vast...").

Josh Marshall said this past week:

In any case, for all the puffed up chests these folks always had a certain air of needing confirmation or perhaps better to say validation about them. The desire was intense. And now, seeing it all together, you can just see Cheney -- who was really one of these guys -- having a few of these 'high value' guys in his grasp and just not stopping the waterboarding until they admitted it was true.

That's because they were desperate.  And they were desperate because they knew they failed.  They knew the Clinton guys were right.  The reality of the what they had let happen drove them around the bend.

We're an empire now, and when we act, we create our own reality.

When you realize how desperate they were, that quote from 2002 takes on a whole new meaning.

Thoreau and the Modern Conservative Movement

I was listening to the BBC radio program(me) In Our Time, hosted by Melvyn Bragg, about Henry David Thoreau. What struck me was that Thoreau was in many ways truly conservative. He was anti-modern, in favor of individual rights, an entrepreneur and an advocate of self-reliance.

He was also a Unitarian and against foreign wars. Which means he would be instantly outcast from the modern conservative movement. So here we have a movement that requires you to sign up for one of your crazier, religious movements, a crazy foreign policy or a be willing to pay lip service because you believe that a rich, white man can't catch a break in America.

I don't really expect the Republican party to go away, but at some point it is possible to use up the tremendous advantage of being on party in a two-party world.

Health Care: The Public Option

According to a Harvard study (pdf) ("Health Care Delivery Covered Lives - Summary of Findings"; John F. Kennedy School of Government),in 2007 Medicare and Medicaid insured about 15% of the population, slightly less than the overall uninsured population. 

 

One of the easiest ways to get to Universal Health Care is to expand Medicare by letting people either buy-in or extending eligibility. It also sets a floor offering that keeps the other players honest.

Another approach, a voucher system for health care  seems to make intuitive sense and would make it easier for individuals to buy into supplemental coverage if they want it.  If you created coverage plans that included higher funding for diagnosed conditions (AIDS, Diabetes, etc) on top of a base actuarially appropriate rate, people could go to existing insurers and buy coverage.  Also, the insurers could put their money where the mouth is on incentive and disease management programs.