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Oct 21 2009

Catastrophic insurance is not going to work

Posted at 11:03 pm under Economic,Everything Else,Opinion

  • People do not have enough information to make health care choice. You cannot expect a person to shop around for a blood test lab or an MRI the same way a person shops for groceries.
  • There is no dichotomy between catastrophic and other types of health conditions; one leads to the other, both for individuals, their families, and the rest of society.
  • There would be no incentive for people to pay attention to preventative care. Preventative care could catch incipient problems early on, at a much smaller cost, before they turn into catastrophic problems, costing a fortune.
  • There’s a possibility that only people who know they are going to require high cost care, because they anticipate a catastrophic condition down the road. would purchase such insurance. Such people are highly likely to then actually fall ill. This insurance system is therefore going to be very poor at spreading liability because only high risk people are in the pool.
  • Average costs of living vary significantly within the country. You cannot design a system replying simply on using a percentage figure of the wages earned to define a catastrophic condition.

    • I have quoted the last point almost verbatim from commentator “Hank Van den Berg” and I find it the most convincing and

    [Source]: Points derived in large part from the NYT thread “The Catastrophic Option”

    [Update]: Tim Hartford, in the FT blog post titled “A brilliant (and doomed) template for healthcare reform“, proposes (at least) considering a system where we pay for medical services the same way we pay for our cars or our food or a roof over our heads

    He believes that the high cost of health care is because the users are disassociated from the actual bill of the services rendered. Since people never bear the actual cost of the services and never see the actual bill they never have to wonder about whether a procedure was worth the price. He then goes on to say “I never had to ask myself whether my doctors and I were treading the path of cost-effectiveness, straying off into wasteful indulgence, or indulging in dangerous penny-pinching. Someone else always picked up the bill.“

    To tackle catastrophic events then he suggests that it is perfectly possible to design a system where redistribution, forced saving and “real” insurance – that is, against unexpected and very costly events – address these concerns without whisking away every bill before the patient sees it.

    And finally, to refute my first point,

    it is true that patients do not today have the information they need to make sensible decisions about buying their own healthcare. But then, why would they, given the current systems? I recall the local press in the US being full of articles along the lines of “the city’s 50 best dermatologists”. Value for money was never mentioned, but ask patients to buy their own treatment and you can be sure that such articles would soon be supplemented by the medical equivalent of “cheap eats” reviews.


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