Wednesday, August 26, 2009
Sunday, August 23, 2009
So let’s go back to the first installment of “Trouble Indemnity” to analyze this.
Because we can not draft complete contracts in health insurance, any health insurance system will have some aspects of what can be called rationing. The only question is how that happens, and what types of procedures are more likely to be rationed.
To restate: I can sign an almost completely defined contract on my car. I can sign a contract such that, if a limb falls on my car and destroys it, I will be reimbursed for original purchase price, current fair marker value, or replacement cost. The associated premiums will vary accordingly. The second concept, “current fair market value,” leaves the most room for post-event negotiation, but even the most generous contract, full replacement value, has a pretty-well defined bound (adjusted for inflation or not, which can be a part of the contract). The existence of deductibles will give me more of an incentive not to park under slash-pines during a tropical storm.
The problem is that no insurance system, private, non-profit, or government, can sign a contract that says “we will cure you of cancer [lupus, MS, ALS, etc.]”.
In an indemnity system, I agree to a multi-part rationing system that typically starts with the requirement that my proposed treatment has to be approved by a physician, and then includes something like a lifetime maximum benefit. Because this creates a third-party payer problem in terms of my incentives and my physician’s incentives, indemnity systems also ration with deductibles and co-pays. A second phase of rationing occurs when the system has to deal with the adverse selection problem (again, see the previous installment of “Trouble Indemnity”).
At the other extreme are single payer government plans, in which rationing is carried out through the political process. For example in Britain, this is called NICE (for a good explanation and defense of single-payer health care rationing ---although not of NICE--- see this link in the Times).
HMOs are a hybrid in which customers, typically in return for lower deductibles and higher lifetime maximums, agree to a rationing system that over-arches the patient-physician relationship.
However, a key difference is whether the rationing system is disciplined by competition, as it is in the largely private automobile insurance market. There is usually the least customer choice in government single payer systems (although in Britain private care is an option, and Canadians have the safety valve of the USA private system just a few minutes drive away).
Is there a difference in the pattern of rationing of the kind that is the subject of the current debate over “throwing Grandma under the bus?” In my reading, there is no doubt that the NICE system in Britain adopts a rationing scheme that tends to favor younger and otherwise healthier patients at the expense of the less healthy and the elderly.
By way of full disclosure, my Mother was diagnosed with lung cancer at about age 72. She refused the offer of lung cancer surgery, and settled on palliative measures only. She lived about 3 ½ years, probably not as long as had the surgery gone well, probably longer than if she had suffered complications from the surgery. A few years earlier, she had almost died from a nose-bleed because of what must have been an inherited blood-clotting condition. She didn’t want to go through something like that again. I not only supported her decision, I used my power as her health-care power of attorney to insure that, in the last few weeks of her life, she wasn’t put into an ambulance for transport to an imaging facility. Instead, we just increased her pain medication. The point is that this was all her decision. If she had been 52, and had not had real fears of the side effects of surgery, I might have tried to argue her out of it. In any case, it was not the decision of NICE or anything like it.
Currently, in the United States, we have a hybrid system that favors the very poor (Medicaid), the elderly (Medicare), those who have a job with a company that offers a group policy (the majority of us), and everyone else who is healthy enough to obtain reasonably-priced private coverage. The least advantaged U.S. citizens are probably working people who have just too much income and too many assets to qualify for Medicaid, who lose or do not have employer-based health insurance, and who find individual health insurance policies prohibitively expensive, perhaps because they have existing illnesses, perhaps because they have the misfortune to live in states where government regulations drive up the costs of basic personal policies. (I’m setting aside the more difficult question of health care for people who are in the country illegally.)
The point is, because we are dealing with sickness and inherent contracting problems, any system is going to have rationing of something that is beneficial. If I were writing a health care plan, I would try to rely more on lower cost, readily available health care plans. If I were really in a “what-the-heck” mood, I would talk about Christian denominations re-establishing the charity hospitals that they ran for decades before they joined the current health care establishment. These approaches are no less oriented to the “least of” our society than the single-payer government plans being so fervently promoted by the leaders of the mainline Protestant denominations.
Tuesday, August 18, 2009
Nevertheless, the President asks an important question. When can private and government services of charity or compassion coexist? This deserves an empirical and not an ideological answer.
The critics of Obamacare might reference the well-documented process through which the federal government “crowded out” private religious expenditures on charity and compassion starting during the Great Depression. Fanny Mae and Freddie Mac (remember them) used their portfolios of implicit government guarantees and regulatory advantages to gain huge market dominance in the mortgage industry. (Technically, Fannie and Freddie were “Frankenfirms”: some weird hybrid of being investor-owned yet quasi- government corporation). Amtrak (pretty much by design) displaced virtually all private rail travel in the United States. Again, Fannie Mae and Amtrak may not be the most effective advertisements for government-run health programs.
However, I can think, from close personal experience, one industry in which government and private (essentially non-profit) organizations seem to coexist: research-based higher education. Our list of exclusive research universities certainly includes many private institutions, but think about the rankings of programs at Georgia Tech, The University of Virginia, many of the UC schools, the University of Texas (sorry, Dad) and the University of Michigan. On the other hand, we have a tremendously healthy system of private universities even though in most, but not all, cases the state tuition subsidies are not transferable to private universities. Granted, many of the public schools receive beaucoup federal dollars, but they are still remarkably independent. Here are some hypotheses (not yet proven theorems) about this situation. It would be a good exercise to ask what this model would mean for health insurance reform, so I’ll try at the end.
1 ) Whether we like to think about it or not, the public schools are essentially vouchered and thus are forced into intense competition with one another. We take for granted that K-12 schools are organized by “districts” or “attendance areas”: proposals for school choice are all about breaking up those geographical monopolies. But those of us who teach at state universities are all too aware that no such in-state monopoly protection exists for us. We at Florida State must compete for the best and the brightest students from Miami to Pensacola. I conjecture that the quality of public universities would be much lower if Florida, Texas, Oklahoma, Virginia and so forth drew attendance boundaries for their universities, taking away the dramatic disciplining power of competition.
2 ) On the other hand, the operators of the subsidized public university systems, the states, exercise very little regulatory control over their rivals: private universities. Except for such basic items as fire safety in the buildings and so forth, the State of Texas has essentially zero control of the day to day curriculum, hiring, and other academic policies at Rice, Baylor, SMU, TCU, and so forth.
3 ) In part because of # 2 ) above, and also in part because of strong cultural norms, we as a society accept that different people will want, be able to afford, and ultimately receive very different experiences in higher education. I personally think that the massive extra dollars spent by parents who think that their offspring have to go any private university rather than any public university are, in many cases, a joke…if you are talking about the actual quality of undergraduate classroom instruction. However, there are other factors. At one point in time, an undergraduate student at Georgetown entered into a unique religious environment. And, many parents (rightly or wrongly) may believe that they are paying for more lifetime networking at Leland Stanford Jr., University compared to, for example, the University of Arizona. The point is: we as a society accept the heterogeneity of outcomes as legitimate.
If my model is correct, then compare this to the ideas of a federal public option floating around in the current House bill. First, the federal government will compete with no other public entity. Secondly, the bill pretty clearly expands, not reduces, federal control over the operational choices of its rivals, private health insurance. Finally, I conjecture that there will be a tendency to discredit, rather than honor, heterogeneous outcomes. Whether there is another approach in which public/private coexistence is possible is a question for further consideration.
But I want to make one final observation about the university example. Unfortunately, over the past decades many, many private universities founded by religious communities have forfeited their religious heritage in order to "compete" in the educational marketplace. That’s an issue for discussion in a future blog, but it’s a serious concern to me regarding the future of Christian health missions if forced to compete with a “public option.”
Monday, August 17, 2009
Mark and I ran into a similar question when beginning the Economics and Compassion course. Early on in America churches were the primary vehicle for social welfare expenditures. In order to accurately depict our history and understand future possibilities we found it necessary to discuss this history and some current organizations that are doing good work. I believe we walked that fine line between offering a historical background that included Christianity without indoctrination, which is certainly the concern amongst the non-religious or other religions that wonder how well this can be done.
That also leads me to another point since we have stopped at that line. Mark and I would like to go further with the class than we are currently able. So, we have entered discussion about a possible "Wise as Serpents Forum" which is similar in many ways to the Economics and Compassion class, but, which allows us to more freely incorporate our faith. Keep on the look out for the time and place of those forums.
Monday, August 10, 2009
Because Doug and I continue to work in the areas of Christianity, economics, and issues of social justice (see especially his recent post on
In this light, I am interested in the economic regulations of the books of Moses and the Prophets critique of the divided kingdoms. The Law Codes are probably the one place in the Bible where we see economic policy discussed in some specifics. Some of the examples are requirements for leaving crops for the poor to glean, regulations against usury and loan-sharking abuse, requirements for prompt wage payments, prohibitions against unfair scales, fair land title rules, and an elaborate system of what we would today call bankruptcy rules.
We see in reading the prophets that the Law was known, but the extent to which its economics rules and regulations were followed is unclear. The prophets' charges against the kingdoms clearly covered economic abuse of the poor (Ezekial , Micah ), but often in broad judgments and not law-code-style specifics (see Isaiah , Amos 2:7, Malachi 3:5). Also, the kingdoms had other specific sins. So, for example, Jeremiah and Hosea are filled with condemnations of worship of pagan gods and goddess and cultic sexual misconduct.
In addition, many of the economic charges against the kingdoms emphasize what economists might call “public choice” or “rent-seeking” issues. That is, the sins are not the sins of private individuals but ways in which the rich and powerful abuse the poor precisely because the rich and powerful pervert the government. (See Jeremiah 5:28, Amos 5:12, Habakkuk 1:4)
But there is a historical bridge between the two periods: the period of the Judges. Separate from the issue at hand, I find the book of Judges to be one of the most overlooked and fascinating books of the Bible. It ought to be at the top of the list for an HBO or Showtime summer series: Ehud uses his left-handedness to skewer a Jabba-the-Hutt look-alike in Moab; Jael seduces a bad guy only so she can drive a tent peg through his skull; Abimelech becomes "warlord" by killing seventy of his brothers, but is killed by an irritated housewife who throws a kitchen-tool at him; and, of course, there were the always famous Samson and Delilah. One story could be an episode from Dexter.
Behind all of this is a condemnation of
I was hoping that in re-reading this historical narrative of a more decentralized society, I might find out more about the economic sins of the everyday people, and not merely of the rent-seeking sins of the courts of the King. In fact, I was surprised. There is almost no mention of the social justice sins of the Israelites and almost an exclusive emphasis on the worship of idols, Baal, fertility goddesses and all upon kinds of violence and sexual sins (I said HBO and Showtime, not the USA Network). The root sin of the Israelites was that they did not, as the Lord demanded, drive out the various Canaanite tribes from the conquered land. The Lord promised the Israelites that because they did not drive out the pagans, “They will be a thorn in your sides and their gods will be a snare to you.”
Indeed they were. I cannot believe that in this society snared by false gods that these people, doing evil in the Lord’s eyes, faithfully carried out the social justice requirements of the Mosaic law. But, unlike in the books of the prophets, this is almost never raised in Judges. Why is there such a difference? I have an idea, but I want to do more reading and will report in Part 2. If any reader has an insight, please feel free to comment.
Thursday, August 6, 2009
1 ) People respond to incentives. If the government decides to borrow (or print) money to pay people to trade in old cars, people will change their behavior and start trading in old cars.
2 ) This is Hayek's critique of central planning writ large. The federal government thought that it was choosing a price that would take months to burn through. They were completely wrong. The price they chose was so far above the actual market value of many of these cars that the original billion dollars or so lasted just a few days. The government guessed, and they guessed wrong. So, when the central planners tell you they know something about the "costs" to you of something five years down the road, be very, very careful
Monday, August 3, 2009
In many ways,
***Unfortunately, I do not have the data on the migration patterns into and away from
This information is an important part of our conversation about decentralized justice
In order to match those needs with abilities and resources means that at some point someone must share private information with someone else so that the resources can flow to the person in need. But, so many needs are very private and people feel ashamed to talk about them –in fact, we prefer they are kept confidential. But, as the Pastor at First Presbyterian Havana, Bill Bess, pointed out, “Jesus did not seem too concerned with confidentiality. In fact, he searched out the woman who touched his cloak and didn’t let her get off the hook.” We are not called to be a confidential people but we are called to share each other’s burdens. We are called to confess to each other so that others may pray for us, healing may happen, and perhaps material resources given.
Most astonishing from this exchange was the uneconomic conclusions gleaned from it. We don’t share our burdens with others because we fear we will be gossiped about. We do not share our burdens with others because we fear they will judge us. We fear they will judge us because they are not humble people with wisdom. And so on. It seemed that so much of the justice that could happen is stifled by our lack of belief in each other. If I can go out on a limb, it may even be true that by not putting on the clothing of God we are indeed stumbling blocks to the more wonderful outcomes that could happen if we possessed more humility, wisdom, and love.
I’m still learning a lot more about the community and this is only one facet of the conversation, but, I will post more on this conversation at First Presbyterian Havana in the future. Also, if you have any thoughts please comment.
Sunday, August 2, 2009
There were two verses that God pointed out to me Romans 12:2 and Isaiah 54:6. The presentation was fantastic and this will be the first part in talking about it.
The pattern of this world has been to outsource social justice from the church to the government.
Some regular readers of the blog may have heard me talk about the Gruber and Hungerman article on Faith Based Charities and crowd out. Crowd out means that when public expenditures on an activity increase that private expenditures towards that same activity decrease. For example, in their paper they found that when New Deal expenditures on social welfare programs increased, the church began to spend less on similar programs. While the introduction of New Deal spending caused an almost immediate drop, it caused an even greater downward trend in church social justice activities. That transfer of responsibility reminds me of a snowball rolling down a hillside picking up size.
The church recognized this transfer of authority to the government and moved to Washington to lobby. This action made complete sense at the time. Many other major organizations were organizing in similar fashions due to the high costs of long distance communication and high transporation costs. Among other organizational advantages it made sense for the church to move to Washington. This has had a part in solidifying the notion of pursuing justice through lobbying activity.
Moreover, this call to justice through the government inevitably leads our special clergy to support specific policies -policies which people in the congregation (even experts within the congregation) might disagree with. That has been the cause of some tension which leads the the congregation to withhold funds for financing these activities. The Washington office then responds by saying that the church is not capable of solving larger social problems. We elaborate more on these interactions in the paper.
One of the micro reasons I think we have also adopted this style of social justice is that it requires less from us. Maybe we prefer "justice with distance" because we know God desires us to pursue justice but trying to orchestrate just outcomes through government intervention seems easier than the alternatives that require more individual work than casting a vote.
Maybe the reason that God guided me to this verse was to express His desire for a more organic form of justice. He will call us back as though we were a wife deserted and distressed. The church rather than being a radical force that impacts the world through decentralized acts of love has become a divided house in many ways. I do not believe that anybody would object to any individual church doing more to minister the message of God's love for the world to those in need within the community.
We then talked about what could be done in Havana, FL which is more interesting even than this brief summary I've given here. More to come soon . . .