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.
 e.g. Hello Health in Brooklyn (http://hellohealth.com/), Qliance in Seattle (http://qliance.com/)
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.
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.
For more information, see, for example: http://www.americanprogressaction.org/issues/2009/03/adminis...
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)
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.
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.
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.
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.
(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.
I commend to you a lot of time with a textbook: http://www.daviddfriedman.com/Academic/Price_Theory/PThy_ToC...
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.)
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.)
That is, providers offer them to the adamant, but don't do much to spread the word otherwise.
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.
a) Gather historical data where $MEASURE was attempted and see whether $GOAL was reached. This can give results like "$MEASURE is positively correlated with achieving $GOAL".
b) Test it on a smaller scale. Instead of reforming the entire health-care system, search for something small but similar to reform.
c) simulate. Build a simulation of economic subjects and, before simulating the Friedman health-care reform, test it on past scenarios whose outcome is known.
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.
I liked A Mind Forever Voyaging, though, which is about an attempt to do c) properly.
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 mean specifically articles about politics/economics, things which people hold strong opinions about, and are of interest to pretty much everyone.
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.
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.
Would be wonderful to get at least the basics in place.
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.
There's no "also" to it. Reproduction of those already inside the US is below replacement rates. Immigration is our only source of population growth.
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.
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.
Compare litigation awards in the US and the rest of the world, or just Canda, and you'll see a huge difference.
This leads to much, much higher health care costs, and the practice of defensive medicine, and most perversely HMOs which can not be sued for denial of care.
That by the way is the only way HMOs can exists at all, by being put entirely out of the legal system.
I am not suggesting that tort reform is the ONLY way to fix health care in America, but it should at least be part of any discussion on the topic.
Conventional wisdom is wrong here. It's true that it increases costs, but this doesn't amount to a significant amount of what we pay.
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?
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.
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.
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.
1) built a massive interstate highway system that made it cheaper to live in the burbs where mass transit was not needed.
2) because our government wages oil wars that essentially subsidize the price of petroleum.
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.
I said "CAFE regulations in the '70s killed the family station wagon, but exempted cars"
What I meant was "CAFE regulations in the '70s killed the family station wagon, but exempted trucks"
This would be unlikely, if ANY company were allowed to fail catastrophically.
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
Some would rather pass it on to their children, you know.
Besides, why should we be so scared of death?
Avoiding death is the one goal that's clearly built in. Why should we want to change it?
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.