Bankruptcy and Medical Costs or, Why Not a Single-Payer Income Insurance Plan?


A new study splashed across the interwebs today will doubtless add fuel to arguments about how desperately we need to switch to a "free" health care system if the United States is ever to become a world-class country/save us all from economic ruination/win the World Cup in soccer/etc.

The study surveyed over 2,700 bankruptcy filers in 2007 and found that about 62 percent cited medical costs as the main reason for their going under.

Most of those bankrupted by medical problems were "solidly middle class" before they suffered financial disaster—two-thirds were homeowners and three-fifths had gone to college. In many cases, these people were hit at the same time by high medical bills and loss of income as illness forced breadwinners to take time off work. It was common for illness to lead to job loss and the disappearance of work-based health insurance.

The study also found that well-insured families often had to cope with high out-of-pocket medical costs for co-payments, deductibles and uncovered services. Medical bills for medically bankrupt families with private insurance averaged $17,749, compared to $26,971 for the uninsured and $22,568 for those who initially had private coverage but lost it during their illness.

The highest average costs were incurred by people with diabetes ($26,971) and neurological disorders ($34,167), the researchers found….

The co-author of the study told the press, "Only single-payer national health insurance can make universal, comprehensive coverage affordable by saving the hundreds of billions we now waste on insurance overhead and bureaucracy."

There's no question that a) it would be great to actually reform health care root and branch, including the delivery of services (break the MD cartel already!) and insurance; b) that it is inconceivable that the government will do a better job of minimizing bureaucracy and patient failure; and c) that's likely exactly how Congress and Barack Obama are going to go on this issue. The supposed containment of health care costs in Canada and the U.K. (where patients routinely do whatever they can to exit the public system) is due to rationing, not due to the streamlining of service provision. Just telling people no, you can't have that procedure is one definite way to keep costs down; it seems remarkably unwise, especially in an age of blossoming individualized services for consumers.

To go back to the study: There's simply no reason to conclude anything from extreme cases (which bankruptcies are by defintion), and there's certainly no reason to base general policy on extreme cases. In any case, it seems like the problem described above could be addressed via changes in longterm disability insurance. Indeed, why not simply lobby the government to guarantee incomes for disabled workers, forever and ever?

I haven't read the study but from the descriptions above, the costs are less daunting than they seem at first. One would expect to see bankrupt people filing heavier-than-average costs pretty much across the board. In 2007, health care accounted for less than 6 percent of a household's direct cash outlays, far below housing (33 percent), transportation (18 percent), and food (13 percent); insurance and pension costs, some of which goes to health care in the form of premiums, came in at 11 percent. According to government data, the average household directly spent about $2,700 on health care (actual totals are skewed, with younger people spending far less and seniors far more).

Is it really that hard to bring the health care debate out of the stinky old swamp of single-payer vs. something like what we have now, only marginally more expensive to individuals?

Any sort of serious reform of the health care question really has to start with definitional questions: What exactly is health care? And what is its relation to health insurance? Why can we draw that simple distinction when it comes to, say, cars and car insurance but we hopelessly conflate the two when it comes to health care? To claim that "only single-payer" can save us all is simply intellectually unserious.

I'm all for severing the tie between the workplace and health insurance. I know that my employer has better things to do than be some sort of half-assed insurance broker and I'm guessing that I could do a better job picking plans based on my family's needs. But I'm guessing that the plans emanating from Congress in the dog days of this summer won't be heading in that direction.

Update: Via Alan Vanneman comes this relevant blog post from former Reason editor Virginia Postrel, who comments on a Council of Economic Advisers report that concludes "Nearly 30 percent of Medicare's costs could be saved without adverse health consequences." Writes Postrel:

Think about this for a moment. Medicare is a huge, single-payer, government-run program. It ought to provide the perfect environment for experimentation. If more-efficient government management can slash health-care costs….why not start with Medicare? Let's see what "better management" looks like applied to Medicare before we roll it out to the rest of the country.

This is not a completely cynical suggestion. Medicare is, for instance, a logical place to start to design better electronic records systems and the incentives to use them. But you do have to wonder why a report that claims that Medicare is wasting 30 percent of its spending thinks it's making a case for making the rest of the health care system more like Medicare.

Whole post here.