MSAs were expanded into HSAs in 2003. As of now there are some 8 million enrollees.
IMO the most interesting effect of the spread of HSAs is the emergence of clinics which forego the overhead of the insurance system altogether, dealing with patients directly in a more value-conscious way. These clinics tend to be both more available (longer appointments, weekend appointments) and more flexible (phone, chat, email communications w/ the doctor). They also tend to use technology to reduce overhead. Hello Health doesn't need any support staff for their doctors, rather than the 4-5/doctor average, because they use an online system for managing appointments, communications & billing.
I'm pretty excited about the spread of this system - in a month or two, Hello Health will be opening up their web platform to doctors across the country, which will enable them to more easily transition their practices and also provide a facebook/amazon for medicine. They claim they've been contacted by thousands of interested doctors.
If you're interested, take a look at HSA/HDHP plans (http://hsainsider.com/), or if you're relying on your employer for care and they don't provide an HSA option, it's worth bringing up, as the HSA option can be much less expensive (http://blog.jayparkinsonmd.com/post/70104332/high-deductible...), so they should be amenable. Even if you don't have a cash-friendly doctor in your area already, I predict most will by the end of the year.
I am going to argue with you sideways. :-) I dont think Hello Health is an argument for HSA's so much as a streamlined reimbursement system with some kind or reasonable accountability for costs. The current structure optimizes for assembly line medicine rather than good patient care. Most people go with factory doctors, because of the small co-pay. You can go to a doctor outside your plan, but you typically get only 50% reimbursement. My doctor costs me $100 out of pocket instead of $25, but she is worth it because I get a one-hour appointment instead of 15 minutes.
On to Milton Friedman. He makes a very good case for single payer health insurance (11% of GDP vs 17%) and then comes to the opposite conclusion. He is drinking the perfect market koolaid. He assumes that, if people have to pay their own money, they are going to make rational economic decisions about health care purchases and will shop around for the best price. This is such utter crap that it is hard to believe that an open minded economist would utter it. Health purchases are not rationally economic. They are made on other considerations like trust in the doctor and increasingly on patient evaluations of treatment options. If you have a kid with a high fever, you dont start googling for the best price.
A part of the conservative economic fantasy is that consumers have negotiating power in the market. Yes, I by drugs at Costco because they are cheaper, but that is because Costco has negotiating advantage, not me. A single payer would have a huge advantage in negotiating drug prices. There is a reason that drug prices in the US are the highest in the world.
Health care reform in the US is hugely complicated and a simplistic approach is not going to cut it, even a single payer system isnt enough. Drug costs need to be cut. Defensive medicine needs to be brought in line. (Practice to the patients needs not the doctors.) On and on. Hello Health looks to be a good start in the microcosm.
You don't think people respond to prices? Consumers are not perfectly rational, but that's a bit of a straw man argument. On average, in the aggregate, they do respond to incentives. On average, in the aggregate, a first-party consumer payer is more likely to be price sensitive than a consumer purchasing medical care by way of a third-party employer health plan. The fact that most consumers don't fit some perfect model doesn't seem particularly relevant.
Finally you say:
"Health purchases are not rationally economic. They are made on other considerations like trust in the doctor and increasingly on patient evaluations of treatment options."
Purchasing based on quality is not "rationally economic"? Have you studied any economics at all? That's just ignorant. You don't know the meaning of the words you are using.
This is why I stopped arguing with people on the internet.
Edit: Yes, this is a little mean and not within the style guidelines of Hacker News, but you will have to excuse me if I am not impressed by yet another person "disproving" the entire discipline of economics with the pseudo-intellectual observation that people make decisions on considerations other than price, as if that fact had been overlooked by every economist for the last three centuries.
Health insurance is a difficult thing to price. Do you know the probabilities that you will need treatment for any particular condition? Can judge how much more you should pay for a policy with a million dollar limit on total reimbursement than one with a $500,000 limit? Unlike most goods, we don't get lots of chances to evaluate the quality of the product and then switch providers if we're not satisfied. Once you realize your health insurance isn't good enough, you're probably already in trouble. There are a lot of factors required to ensure the proper performance of a free market, and health insurance fails to satisfy many of them.
Car insurance is simpler than health insurance. There are fewer types of covered conditions, and it's easier to make direct comparisons. Health conditions are more numerous and vary more depending on the individual in question. It's also easier for car insurance companies to make predictions about the expected costs for a customer. People buying health insurance individually face increased costs because of an assumption that those seeking coverage are more likely to need it. In general, this is an area in which the conditions required for an efficient free market do not exist. And, this is one reason why, as Friedman notes, those countries with universal single payer systems spend less than the United States, which is closer to a market system (however imperfectly).
I find it hard to believe that the government can make a decision that is better on any metric than the consumer whom it directly affects.
There is a fundamental problem with medical insurance though. Insurance only works because of uncertainty about the future. As information about individuals' medical conditions becomes more detailed, this uncertainty is reduced. For that reason, it seems like, ultimately, this has to lead to the distasteful prospect of some kind of universal insurance that people acquire at birth. As knowledge increases, every condition becomes a preexisting one. (Except for injuries due to accidents)
You put the word disproving in quotes, but the parent post did not use that word or claim to be disproving the entire discipline of economics. Your knee-jerk reaction here typifies why so many avoid studying the subject at all.
Also, that "psuedo-intellectual observation" won Herbert Simon a Nobel Prize (in Economics) in 1978. I don't see how it's far-fetched or "ignorant" to suggest that healthcare decisions are made by boundedly rational satisficers rather than perfectly rational optimizers.
Actually my degree is in economics. When I got it, the arguments were in terms of "utiles" instead of dollars. A utile would encompass quality, but was such a nebulous concept that it was of very little practical use. So when I said "rationally economic" I was speaking in terms of dollars, which you can measure and not utiles or feelies which you cannot. I dont think that giving everyone an HSA is going to give Friedman's desired result of lowering health care costs, because it depends on people making dollar based decisions. I think improvements in the cost structure will be made the monopolistic components of health care, including drug pricing, and reactions to insurance optimizations like factory medicine.
I made the decision to switch from economics to programming a long time ago, pretty much for the reasons I gave above. I WAS expecting a scientific approach and pretty much got mumbo jumbo like Friedman's essay. And if you think things are very much better, how come Greenspan and the quants and politicians lead us into this economic disaster we have now. I will admit that my attention to theories economic since then have been superficial, and great strides in understanding may have been made, but I dont see it yet.
"A single payer would have a huge advantage in negotiating drug prices."
If that single payer is the US Government, expect the same US Government pattern. The system will be gamed to maximize cashflow from US tax dollars to crony corporations. That's the rationale behind Medicare today and that's the rationale behind downsizing the military and hiring back the soldiers we just downsized as mercenaries. That's the rationale behind corn ethanol subsidies.
So drug prices (to the government) go up, but drug prices (to the consumer) drop to some arbitrary low level. What do you think will happen then? People will use more prescription drugs. Now the cost to society is even higher, because the inflated subsidies (which in more honest terms might be called "kickbacks") by the government combined with the total lack of spending discipline on the part of the consumer result in an even higher increase to the tax burden and the federal deficit. Which must be dealt with in some way (taxation or inflation) that makes us all a bit poorer.
It is a fallacy to assume that individuals make perfectly rational economic decisions on behalf of themselves, but it's closer to the truth than supposing that governments make perfectly rational economic decisions on behalf of the people at large.
He assumes that, if people have to pay their own money, they are going to make rational economic decisions about health care purchases and will shop around for the best price. This is such utter crap that it is hard to believe that an open minded economist would utter it. Health purchases are not rationally economic. They are made on other considerations like trust in the doctor and increasingly on patient evaluations of treatment options. If you have a kid with a high fever, you dont start googling for the best price.
You could reasonably compress "rational economic decisions" to be ones considering two factors: price and quality. It sounds like you're arguing that people are often willing to pay a lot for high quality healthcare. I think you're correct that people seek high quality healthcare, especially for their children, but I disagree that this implies the consumer isn't making a rational economic decision. The economic term you're looking for is elasticity. It sounds like you're claiming that demand for high-quality healthcare is inelastic. Inelasticity is a well-understood concept, not one that destroys economic analysis.
My impression is that people are cost-conscious when purchasing healthcare. I myself have shopped around for various services. A friend of mine shopped between services in Panama and India for surrogate pregnancy services, and cost was a factor. I've heard that there is a lot of traffic across the Mexico-USA border, and the Canada-USA border, of people seeking cheaper prices. My decisions to purchase from online pharmacies have been driven by price comparisons, and online pharmacies are very popular so I doubt I'm unusual.
These things indicate that cost is a factor at least for some people, when considering healthcare expenditures. I think that Milton Friedman's perception of cost-conscious health consumers was correct.
Your understanding of the points you are arguing against is so terrible and flawed that you need to start over from scratch.
(Note the difference between that statement and "the points you are arguing against are correct".)
"He assumes that, if people have to pay their own money, they are going to make rational economic decisions about health care purchases and will shop around for the best price. This is such utter crap that it is hard to believe that an open minded economist would utter it."
The idea that people don't take prices into account is such crap I can't believe anyone could believe it. You argue:
"They are made on other considerations like trust in the doctor and increasingly on patient evaluations of treatment options."
Which betrays a profound misunderstanding of how economics work. Those considerations are indeed weighed... all in a context of how much it costs! If you can't understand it in an emotional arena like health care, consider buying a house. Price isn't the only concern. How much you like it factors in to your final decision. But if you don't consider price at all, you're going to make a very bad decision by any measure, both conventional (you're going to run out of money) and economic utility.
"Yes, I by drugs at Costco because they are cheaper, but that is because Costco has negotiating advantage, not me."
Time for some 5 Whys: Why does Costco have a negotiating advantage? Because they are big? Well, why are they big? You can dance around all you like, but you're going to have to come back to "Because they have you and many other people as customers, and Costco can aggregate your bargaining power together." If Costco screws up and alienates enough customers, they will have no more bargaining power. This is a critical aspect of economic theory. Your conception of Costco as a sort of platonic ideal of a large company, with this fact disconnected from the input of the rest of the economy, is very wrong. Costco's bargaining power is an effect, not just a cause.
And I remind, it is not necessarily because "economic theory" must be right... it is because it is objectively true that you don't understand it. Perhaps if you do, you will find you opinion of it changes. (Even if you don't entirely agree with it, it would be weird if moving past a strawman didn't change your opinion.)
The unnecessarily personal tone of this comment distracts from the substantive points. These statements only detract:
Your understanding of the points you are arguing against is so terrible and flawed that you need to start over from scratch.
...betrays a profound misunderstanding...
I commend to you a lot of time with a textbook...
...it is objectively true that you don't understand [economic theory].
The grandparent-poster reports having a degree in economics; his points may be be wrong, but a denigratory and lecturing tone won't convince him or others.
(Edit: I initially flagged the 'idea... is such crap' line as problematic too, but then realized it was just a mirror of russell's own language. Still, it was shoddy name-calling by him initially; mirroring it back is understandable in response or to call attention to it, but doesn't lift the tone any.)
Across a variety of my employers, none (via health providers) have offered HSAs/HDHPs. I can maintain one externally, but the extra tax paperwork to see the same tax-free employer health dollars is painful. My assumption is either most employers are ignorant and/or providers lose dollars when offering them in a stable of employee options.
That is, providers offer them to the adamant, but don't do much to spread the word otherwise.
This article is a pretty clear demonstration of what I dislike about popular economics (liberal and conservative) compared to hard science. Conclusions are drawn up based on ideological assumptions, then evidence is gathered, then public policy is changed. In any given case, several explanations are possible, but rarely is empirical testing done to prove that one is more feasible than the other. Instead they coexist as equals, gaining support based on random political futures. Perhaps this is a fundamental weakness in economics and cannot be overcome, but it seems to me that not enough pressure is being put on the field to make the ideas fully testable. As a engineer and numbers guy, I want to see my tax dollars spent (or not spent) only on ideas that have been rigorously examined and tested to be the most productive for society.
The fundamental problem with economics is physics envy. Its nickname is the dismal science. The goal of economics has been the predictive power of the natural sciences. Well it aint going to happen. First, it is very difficult to run repeatable experiments. You cant have a double blind test to see if HSA's are better than single payer insurance. Friedman looked at the two and concluded that HSA's were better. I looked at his article and my experience with an HSA and concluded the opposite. Second, it appears to me that economics has a lot more in common with chaos theory than Newtonian physics. There are so many variables that it is probably impossible to determine what the initial conditions are. Third, economics is not rational. It has way more in common with psychology and politics than it does with physics, even if money is a nice quantum measurement.
So what's to be done. Look at other attempts and see what works and what doesnt, England and Canada for example. Be conservative. Even though out system is a train wreak, transform it, dont throw it completely away. Make a series of transformations. Assume people are going to game the system in ways that you dont anticipate and make adjustments along the way. It is impossible to design a perfect system; dont even bother to try. Throw away anything that doesnt work.
These usually just result in people picking holes in the dataset/experiment/simulation -- and rightly so; circumstances change too quickly for historical data to be much use, simulations necessarily have some severe assumptions, and small-scale tests don't simulate macroeconomic effects very well.
This is the reason that I've long classified macroeconomics in with religion: they're both very influential ideas, but neither are really based on any evidence.
First use historical statistics and if possible, historical examples of the ideas being implemented. What the article presented was not much more than circumstantial (costs are going up, we have these programs, therefore these programs are causing costs to go up). If the evidence seems sound by an independent advisory board, have a pilot program put in place at one hospital, one city, or one county and carefully monitor the results. If proven successful in those trials, expand further.
There is certainly an epistemological flaw in predictive economics. On the one hand, economic history gives us plenty of data on the behavior of economic systems. Unfortunately, each new economic system is essentially novel. That's why I don't give much credence to economic predictions that are overly precise, and I am skeptical of lessons drawn from long-ago events applied to today's issues.
This is where I think Austrian Economics has diagnosed the problem correctly, although its solution (an escape into extreme deductive logic) doesn't appeal to me as a reliable method to discover truths about the world.
I'll be the sacrificial lamb and remind people that if we start posting this sort of article, there will be a whole lot more like it, from reason.com, Krugman, Thoma, Cowen, and so on and so forth. They may be interesting and stimulating, but because of their ability to stimulate heated debate, they will eventually crowd out other things unless they are controlled.
I mean specifically articles about politics/economics, things which people hold strong opinions about, and are of interest to pretty much everyone.
Yes, bureaucracy is a terrible thing. But universal health care paid by employer and administered by the state is a proven and mature technology. In a lot of countries it works without much noise. And health care and basic education free for everybody is something I absolutely want.
People with low income are still motivated to work for food, clothes or a home. Threatening them with illness or death is not a more effective incentive, and has the colateral effect of upsetting people. and lowering general health conditions that could cause epidemies.
Agreed. People who rave about government--provided healthcare seem to be mostly talking about routine care: colds, broken bones, pregnancy.
My aunt is an oncology nurse. She has told me that she sees a lot of patients from Canada seeking treatment in the US that they can't get in Canada under their healthcare system. Of course, it's only those who have money who can afford to do this, if you're not rich you're just out of luck.
The fact that it works in many other countries doesn't mean it will in the United States. Agreed that it successful in many other countries like Canada, UK and France but if you look closer there are a lot of factors that will work against universal health care being successful in the United States. To see if this will work you also need to look at failures. Take India for example government health care in India is awful for the obvious reason, population.
United States population is growing at almost the same rate as India. We also have a new immigrant population every year. We also have the most expensive form of health care thanks to the system that rewards bad doctors. Given this if one were to start universal health care for everybody it would just mean a lot more taxes for all of us. Which is fine with me if I knew that it would work but these issues that I stated above cannot be solved by throwing in more money. There need to be a change in attitude of health care providers towards the business. It might be rewarding them for now but in the long run it is self destructive.
HSA like the earlier comment made on the thread is step in the right direction but it is mostly optimal for younger people. Also even in places like India people have come up with novel ways to solve this problem (http://iaimtomisbehave.org/2009/06/04/healthcare-doctors/). There are alternatives out there we should consider before taking this big step towards universal health care.
This is one of my arguments against a national health plan in the US. I can't think of a single thing in this country that has been made better by the government being in charge of it. Anyone who has had to deal with the IRS, the VA, or any number of other government agencies knows what that is like.
I don't get it. Friedman points out that while the U.S. government spends less on health care than almost any other OECD country, the country as a whole spends much more. And yet his solution is less government spending on health care? He points out a number of factors which allow a single-payer system to control costs, and yet argues against it. The conclusions don't follow from the facts.
"Spending on medical care provides a reasonably good measure of input, but, unfortunately, there is no remotely satisfactory objective measure of output."
Seriously? An economist, of all people, is trying to convince me that we can't estimate the effectiveness of a health care system? At the same time he thinks he can estimate the effectiveness of a theoretical economic model for paying for a health care system? I call B.S.
His comment about Physicians earning much less in Canada than in the U.S. is also disingenuous. Canadian doctors spend the vast majority of their 40-hour workweek being doctors. In the U.S. doctors have to deal with both patients and insurance companies equally, raising the time they spend working and lowering the overall efficiency of providing care.
Besides, lawyers also make much less in Canada than in the U.S., as do senior executives. Is this also because of the health care system?
I like his thesis. I find it elegant and simple. It's too bad that any time he approached presenting a real fact in the article he did so dishonestly.
Mr. Freidman discounts a little too quickly the incredible changes and advances in technology in the past 60 years. If you consider per capita technology spending in the last 60 years, I suspect there might be a suprising correlation to health care spending.
In 1946, oxygen administration was considered "advanced". Penicillin and sulfa antibiotics were just begining regular use in World War II. Before that people died from infections like pneumonia very frequently. Diseases like polio, smallpox, measles, tetanus, mumps, were devastating and crippling diseases. We rarely see those any more. Advances in microbioligy and pharmacology have greatly reduced morbidity and mortality. It's harder than it used to be to die from an infectuous disease in a country with modern healthcare.
But, people in the US now have a cultural expectation that medicine can dramatically fix or cure a lot of diseases, like we did with microbial diseases. But, the diseases that we are left with tend to be chronic and a lot harder to cure: heart disease, diabetes, cancer. Low hanging fruit are easiest to pick.
15 years ago, when I started my nursing career the state of the art in emergency heart attack treatment was a $1000 single dose of a clot busting medication. 1 out of 20 people bled to death from that cure. So, $300,000 emergency heart catheterization and angioplasty was developed to limit the 5% mortality rate.
One of the big focuses in the US medicine is technological innovation and critical care, because that's what our insurance pays for. The focus in many other developed nations is primary care, prevention and cost effective treatments.
Also, other areas of technological innovation benefit from exponential decrease in costs because of Moore's law. Medical and biological technology have the inherit limitation of the human body. That's going to influence cost structures dramatically in comparison to other technologies.
Some initial Googling finds one article putting malpractice claims at about half a percent of the total cost of health care in the U.S. ("The cost of defending U.S. malpractice claims is estimated at $6.5 billion in 2001, only 0.46 percent of total health spending." ). On the face of it, that doesn't sound like a place to look for serious improvements. Is there something non-obvious that makes it more significant than it sounds?
Risk preference? Individual doctors are exposed to a risk of many times their annual salary if something goes wrong and a patient gets a lawyer. If they have the choice between an operation costing $X with a 10% chance of failure, and one costing 50*$X with a 1% chance of failure, they may choose the latter so they don't need to worry so much about getting sued.
He comes out on the side of Medical Savings Accounts (MSAs) as a political expedient alternative to the elimination of Medicare, Medicaid, and the repeal of tax exemptions for employer-provided health care.
I can't see how this would help control costs. Sure, it might reduce the individual cost of healthcare (pre-tax vs post-tax), but in aggregate the supply of available funds would increase (at general tax-payer expense) and push the demand curve out, raising prices overall. What happens to supply in all this?
One place a savings might be found is in reduction of tests done just to protect the physician from liability.
Also, the cost of keeping up medical billing companies is high enough that there might be a good savings if the local clinics and doctor offices didn't have to run all the paperwork for every checkup and infection.
Milton Friedman scares me almost as much as this article. Friedman's ideas have failed the proof is 60% of the shares of GM is in the hands of US Government, and a mega zillion tax dollars spent in buying the banking system, all for the lack of regulation. Free markets degenerate into speculative short sighted machines of stealing dollars. It's time to find the sweet spot between free market and communism. And the US will either do that or lose relevance once and for all
This stands in stark contrast to the political alternative. In our democracy, politicians are committed public servants who universally put the long-range well-being of the republic ahead of their own political interest. In this way we benefit from their wisdom, shown time and again to be superior to that of conventional public opinion, having carefully weighed and integrated the best ideas from leaders in every field.
Seriously, do you think that the US today is a free market? I challenge you to show me one area of endeavor that's not subject to government regulation.
The history of health insurance is completely dependent on government meddling. In the past, people were not dependent on their employers or any public assistance for healthcare. It was generally funded by the patients themselves, with help from mutual-aid organizations like churches and unions.
It was FDR's socialist wage freezes that forced companies to find other ways to compete for the most talented employees (the market always finds a way, despite government interference). The way the income tax worked, offering healthcare benefits was advantageous. Thus, the government warped the existing market and changed the expectations of people. Now employees gripe that employees are greedy by not paying more and more for medical coverage -- but their offering any coverage at all is a very recent development.
 This is pretty much always true. Why do people drive gas-sucking SUVs today? Because CAFE regulations in the '70s killed the family station wagon, but exempted cars. People want big vehicles, and found a way around the regulations. And the work-around was worse than what we had initially.
Why do people drive gas-sucking SUVs today? Because CAFE regulations in the '70s killed the family station wagon, but exempted cars. People want big vehicles, and found a way around the regulations. And the work-around was worse than what we had initially.
In that case, the problem is that the CAFE regulations weren't broad enough-- not that someone tried to regulate the market. "Government meddling" is necessary, and desirable.
True, but it doesn't have to. The root of the problem is the vast number of cars on the road. Much of the emissions from a car come from the manufacture of the car, not just the use of it.
When you think of the wisdom behind millions of cars sitting in rush hour gridlock (on government designed roads), emitting smoke and chemicals into the environment and wasting hours of drivers' valuable time, think of the grand purpose -- so that people can live in the suburbs at an artificially low price.
That's exactly my point, because for example if the US banking system collapses, it would mean the end of the US dollar based economy, so... certain companies can't fail, so democrats and republicans spend tons of money to keep the US powerful and relevant.
And the choice is reasonable, left to its own devices the free markets would have shifted power away from the US thus free markets would have failed the US.
The key is to regulate the minimum amount that will keep them honest yet not preventing innovation.
Because if friedmanomics are to be feared that's nothing compared to the powers that would raise if the US fall.
What everyone seems to miss in this is that maybe healthcare shoudl be an increasing percentage of spending. If your basics like food and entertainment are getting cheaper, spending on your health is a good investment (other than simply saving - which you want to eventually spend somewhere anyway before you die).
Would you pay all your life savings to live another five years? most people would.
Or put another way, would you work 20 and give 99 percent of earnings after tax/food/basic living to live another 5 or 10 years? at age 20 you might say no, but on yor deathbed you sure wish you had.
According to this scenario then, a government funded system would be better (a 20 year old would make poor choices thinking death is far away), but should in fact be increasing spending to far higher levels, maybe 50 percent or 80 percent of budget so that we can extend healthy lifespans
If you're 25, sure, but 80? When the choice is between spending down a lifetime's accumulation of resources, or handing said resources off to the next generation? I think evolution would have favored the latter.
Most retirees don't have much in the way of savings anyway, and their adult children tend to earn their own way through life. It's not necessary to "pass on your lands" as is done less industrialized countries. (Warren Buffet intends to give almost none of his wealth to his children).
The question could also be rephrased as would you move from your 2000 dollar mortgage home to a 1000 dollar rent apartment if it meant you live 5 or 10 more healthy years, much of consumer spending is on housing.