Are health insurance co-payments a bad idea?

A mostly political Weblog.
Aug. 29 2005 5:26 PM

Able Danger Mystery Solved?

Bloggers may have figured it out.

Spotty: Andrew Krepinevich's "oil spot" strategy may or may not be a good way to fight the war in Iraq. But Eduwonk thinks it's a good way to pursue education reform:

Instead of just supporting often isolated politicians who are constantly under attack or fighting hopeless guerilla warfare inside bureaucracies, establishing some oil spots in big cities, winning victories, and establishing some proof points ...

Wasn't that what Milwaukee was supposed to be--the "proof point" for school choice? ... In truth, I'm not sure the oil spot strategy works that well when you are confronting geographically pervasive, deeply entrenched bureaucratic interests, as opposed to mere armed insurgents. In manufacturing, for example, the "proof point" that relaxed work rules could produce high quality American goods was supposed to be GM's Saturn subdivision in Tennessee. In fact, Saturn succeeded. But the result wasn't that the Saturn model spread to other GM (or Ford) plants. The result was that the rest of GM--union and management--mobilized to make sure that Saturn got killed off as quickly as possible, a project they've almost completed. ... Similarly, the most successful welfare reform effort of the 1990s was Wisconsin's W-2 plan, with its public jobs component. Have other jurisdictions rushed to emulate W-2--as I, for one, expected? Not that I've noticed (with the exception of Guiliani's New York). ... 2:13 P.M.

Cheap Dates at The New Yorker: Does Malcolm Gladwell believe that all health care copayments are a bad idea--an inappropriate invocation of the theory of "moral hazard" (i.e. the idea that if you have health insurance you'll consume more health care)? Should we all have first-dollar, no-copay plans like some UAW workers? If so--and Gladwell criticizes copayments as low as a $20 copay for a doctor visit--isn't he making more than an argument in favor of universal health care coverage? He would seem to be making an argument against many, perhaps most, of the universal health care coverage systems that have been proposed, which rely on copayments and deductibles to hold down the cost--including (I'm pretty sure) Hillary Clinton's plan. Gladwell might have a) explained this to his readers and b) either pointed out that this means universal health insurance will cost much more than people currently think, or else described an alternative means of cost control. Plus, even if copayments do discourage people from seeking benefiicial care, shouldn't Democrats be happy to settle for a cheaper universal health system with copays, at least as a start? ... 

On the other hand, why burden New Yorker readers with these complexities when you can just bash Bush's Health Savings Account plan?

P.S.: I'm willing to be convinced that copays discourage necessary care along with unnecessary care. But the assumption that they discourage mainly unnecessary care is not "plainly absurd," the position attributed to John Nyman, the University of Minnesota economist whose book Gladwell is discussing.** If people "go to the doctor grudgingly, because we're sick"--i.e. because we conclude we're sick--you'd think we could also conclude rationally when we're more sick and when we're less sick, when we really need of a doctor's visit (and never mind the copay) and when we have a cold we'll get over soon enough (so let's save the $20).  The anti-copay argument is hardly proven by pointing out that people with full insurance don't spend all their time at the hospital, or that --as Uwe Reinhardt puts it in Gladwell's article, "Moral hazard is overblown." "Overblown" isn't the same thing as "nonexistent." ... 

P.P.S.: Like many New Yorker policy articles, Gladwell's reads like a lecture to an isolated, ill-informed and somewhat gullible group of highly literate children. They are cheap dates. They won't think of the obvious objections. They won't demand that you "play Notre Dame," as my boss Charles Peters used to say, and take on the best arguments for the other side. They just need to be given a bit of intellectual entertainment and pointed off in a comforting anti-Bush direction. [Like highbrow sheep?--ed You said that.]

Supplemental reading: Here are excerpts from a Nyman article that indeed seems to be an argument against any copayment in many circumstances. Nyman also sketches some alternative cost-reduction strategies--including "global budgeting" to "slow the expansion of health care services down to levels closer to inflation and growth of the GDP." Global budgeting, at least as practiced in Canada, was trenchantly criticized in a 1992 WaPo article by ... Malcolm Gladwell. (See "Why Canada's Health Plan is No Remedy for America," Washington Post, March 22, 1992) ... .See also Gladwell's forceful, occasionally quirky defense of the American health care system  in 2000. ("I don't know that young men need health insurance.") [Thanks to Dr. M]

**--Has Nyman never heard of a "gomer"? 

Late hit: This is the second Gladwell article I've read that enthusiastically promotes the ideas in a book without grappling with even the obvious possible criticisms. (The other author given similar treatment was Judith Rich Harris). He's becoming the Cousin Brucie of the bien pensants! 9:59 P.M. link