About Stuart Levine

Science (Health Care)

November 26, 2008--Theodore Seto Explains Health Care

It is rare that in a few short paragraphs one can cut through multiple layers of cant about a public policy question. Theodore Seto on his blog Understanding Tax does exactly that with respect to the benefits necessity of pooled coverage in his posting "Understanding Health Insurance"here.

He explains:

In an individual policy, the insured's financial health risks are transferred to the insurer. This has three major cost implications. First, insurers must charge a premium for assuming the risk, based on its probability and size. Second, before issuing an individual policy, the insurer must assess the risk it is assuming. Finally, the insurer must thereafter manage its risk – for example, by terminating ill policyholders, as some insurers have been doing here in California.

Individual policy premiums must cover these costs. If the insurer’s risk assessment is accurate, each policyholder's rates should reflect his or her individual financial health risks plus the costs of assessing and managing those risks; individual coverage should not ultimately shift costs among policyholders.

In pooled coverage, by contrast, financial health risks are shared among members of the pool. If the pool is large enough, the insurer bears very little of the risk. In consequence, competitive insurers should not charge significant risk premiums, no risk assessment costs should be incurred before a new member can be admitted, and risk management costs should be low. As a result, the costs of pooled coverage should, on average, be substantially lower than the costs of individual coverage.

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Pooled coverage provides these cost benefits only if admission to the pool is not elective. Typically, we become eligible for employer-provided health insurance if and only if we work for that company. We can’t just opt in or out at will. Similarly, we become eligible for Medicare by getting older. The more elective admission to a pool becomes, the more the insurer must intervene to manage its risks and charge a premium for those risks.

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In other words, unlike markets for spaghetti, jeans, or apartments, health insurance markets cannot find the lowest cost solution without government intervention.

January 10, 2008

According to a study, summarized here, Ellen Nolte, Ph.D., and C. Martin McKee, M.D., D.Sc., both of the London School of Hygiene and Tropical Medicine, compared international rates of "amenable mortality"—that is, deaths from certain causes before age 75 that are potentially preventable with timely and effective health care. In addition to the U.S., the study included 14 Western European countries, Canada, Australia, New Zealand, and Japan. According to the authors, if the U.S. had been able reduce amenable mortality to the average rate achieved by the three top-performing countries, there would have been 101,000 fewer deaths annually by the end of the study period.

The chart that says it all is here:

American Healthcare Mortality

The full report requires a paid subscription to Health Affairs.

November 2, 2007--Rudy Dissembles

For a wonderful romp through the world of New Republican Knavery on health care, go here for an thorough analysis of Rudy Guiliani's bogus comparison of US and UK prostate cancer statistics.

Rudy Update--Joe Conason in Salon.com reports:

In the spring of 2000, when Giuliani learned that he had cancer and abruptly dropped out of the Senate race against Sen. Clinton, he was enrolled as a member of GHI, one of the two gigantic HMO groups that provide care for most city workers (the other is known as HIP). He underwent surgery and radiation at Mount Sinai Hospital, a prestigious institution that participates in the GHI plan, which means that his costs were largely underwritten by city taxpayers.

In other words, Rudy's excellent treatment was the result of a sorta socialized medical plan. See here.

changed November 27, 2008