Wednesday, July 29, 2009

Health Insurance And The Problem Of Compliance Costs

I've been following the discussions of health care and health insurance reform. One possible reform that's being discussed is opening up the market for insurance policies across state lines. Overall I think this is a good idea, but the devil is in the details. I believe it is possible that, done wrong, this could create a health care nightmare instead of a free market paradise.

The problem with allowing health insurance to be bought across state lines is one of transaction costs. You think it's confusing now when your doctor's office has to find out what your insurance plan does and does not cover? You think it's expensive now when a private medical practice has to hire half a dozen people just to bill insurance? Think how it'd be if your doctor's office had to know what 1300 different insurance companies' various products covered. The high cost of keeping up with paperwork from so many insurance companies is, in my opinion, the most cogent argument in favor of a single payer system. To keep costs down, doctors will probably do what they already do-- only accept certain insurance policies to keep down their billing costs. It's a rational choice, but this would work against a free market in insurance.

Let me explain. If the health insurance market were merely opened overnight, sure you could now go on the internet and buy a policy from a firm in, say, Kansas. But when you need to go to the doctor, you'd find that your Utah doctor's office hasn't heard of this obscure Kansas company and doesn't accept their insurance. All of a sudden you have an access problem: you might as well not have had insurance at all, and you're probably locked in to your policy for some extended period of time to boot. This is not a good thing. Now in theory when you were buying this policy from Kansas, you might have bothered to check whether your favorite doctor accepted this insurance. Theory and reality are two entirely different things. Sooner or later, of course, you'd just get a new policy and this time you'd check, and the free market will have done its job. But we have to remember that Average Joe is still leery of this free market insurance stuff, and incidents like this will serve to put him off it. He'll hear a horror story about how somebody died because they were on the phone trying to find out if this ER took their insurance, and even if it was their own damn fault for trying to work out the billing before going to the ER in a life-threatening emergency, it'll still serve as ammunition against a free market in insurance. And then there's the problem that Average Joe doesn't have large amounts of free time just begging to be spent researching various health insurance plans. Average Joe probably would prefer to spend his free time riding ATVs with his family or catching the game on TV or doing whatever he does to relax. Like most of us he'd probably resent having to look for another insurance plan. Simmering resentment is not a good thing; it tends to boil over unexpectedly.

Eventually, if allowed, the insurance market would sort itself out. A software product might be developed to aid insurance billing. An exchange might be created to help Average Joe find a good plan for him with little effort. Smaller companies with niche products might be bought up by larger companies. But all this would take years, and likely it would not be allowed to sort itself out. Confusion and Delay, the cardinal sins of the Island of Sodor, would serve to turn public opinion against free-market health reforms. In no time at all, people would be clamoring for change-- demanding that health providers be forced to accept all plans, etc. Over the long term, people might become averse to buying policies across state lines, which rather defeats the purpose of opening up the market. And it would tend to funnel the interstate insurance business toward a small number of large companies, which is one of the arguments against the House bill's proposed insurance exchange, even if it's not the main argument against it.

I think the best way to go about it would be to make sure the infrastructure to support all this insurance billing is in place before opening up the floodgates. If the federal government can work with the insurance companies to, say, create at least one billing software product that can make billing 1300 insurance companies practical for doctor's offices, or give the smaller companies time to join with other small companies to negotiate mutual provider networks and standardize their products, that would make the transition to a free insurance market a lot easier.

I firmly believe that this can be done, and if it's done right the American public will immediately be sold on the liberties and virtues of the free market. But if it's done wrong, we may end up selling socialism.

Tuesday, July 28, 2009

The Crazy Guy On The Bus Has A Plan

When I was in college I had no car, so I'd ride the bus. You meet all kinds of... interesting people on the bus. One time I met this man who started to tell me all about his plan to bring free electricity to everybody in the country. We would take all the pennies out of circulation and make them into wire, because they're made of copper just like wire is. And then we could use the wire to bring electricity to everyone, and it would be FREE because it would be paid for by the pennies.

For some reason this reminds me of the currently proposed health care plan. We're going to save money by implementing savings, and then we're going to buy more health care with it-- and it'll be FREE because it's paid for by the savings! But even though there'll be things we're not getting as part of the savings, we'll still be able to get everything we had before!

I wish the people proposing this would get back on the bus and finish the ride to the mental hospital.

Friday, July 17, 2009

Wacky Hermit on Mandates

I am in favor of mandates, especially ones with FH. Health care mandates aren't very good ones though; you're better off with a traditional dinner-and-a-movie mandate. If money is tight, a walk in the park makes a nice mandate.

Aren't all straight women and gay men in favor of mandates? ;)

Friday, July 03, 2009

I Made A Nifty

Our refrigerator has a water and ice dispenser on the front. The dispenser has a little catch-tray (it's way too shallow to be a catch-basin) which is supposed to hold drips. Well, the designers of this catch-tray figured without my kids. One ice cube gets dropped there, and bam, it's full to overflowing with water... which then drips down the front of the fridge. And I don't have time to keep on policing the water dispenser and wiping down the fridge.

So I made myself something nifty: a little absorbent pad to go there in the catch-tray.

I got the idea from the cool-ties we made for our adopted soldier. We put in each of them about a teaspoon of these polyacrylamide crystals. When they get wet, they swell up like fat sausages, and when they slowly dry out, they go back to the way they were before. And they will absorb a heck of a lot of water. So I thought, maybe I should make a little pillow and put a spoonful of those in it. Then instead of flowing down the front of the fridge, the water will get absorbed and then slowly evaporate away.

So I picked out a tasteful cotton print that would blend in unobtrusively with our fridge, and made a little half-moon shaped pillow containing polyacrylamide crystals, and set it in the catch-tray. And lo and behold, it WORKS! You can melt an ice cube on it, and it doesn't let a single drop go! And better yet, it doesn't look like crap like the catch-tray does after our hard water's been evaporating in it for a little while.