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Just When we Centralize… the UK …

posted by Scot McKnight

Did you see this report in the NYTimes? The UK is beginning to decentralize its National Health Service … just as the USA is passing legislation to make health care better and cheaper by centralizing.

Here are a few clips:

Practical details of the plan are still sketchy. But its aim is clear: to shift control of England’s $160 billion annual health budget from a centralized bureaucracy to doctors at the local level. Under the plan, $100 billion to $125 billion a year would be meted out to general practitioners, who would use the money to buy services from hospitals and other health care providers.

The plan would also shrink the bureaucratic apparatus, in keeping with the government’s goal to effect $30 billion in “efficiency savings” in the health budget by 2014 and to reduce administrative costs by 45 percent. Tens of thousands of jobs would be lost because layers of bureaucracy would be abolished….

The health secretary, Andrew Lansley, also promised to put more power in the hands of patients. Currently, how and where patients are treated, and by whom, is largely determined by decisions made by 150 entities known as primary care trusts — all of which would be abolished under the plan, with some of those choices going to patients. It would also abolish many current government-set targets, like limits on how long patients have to wait for treatment.


Not all are convinced.

David Furness, head of strategic development at the Social Market Foundation, a study group, said that under the plan, every general practitioner in London would, in effect, be responsible for a $3.4 million budget.

“It’s like getting your waiter to manage a restaurant,” Mr. Furness said. “The government is saying that G.P.’s know what the patient wants, just the way a waiter knows what you want to eat. But a waiter isn’t necessarily any good at ordering stock, managing the premises, talking to the chef — why would they be? They’re waiters.”



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Fish

posted July 27, 2010 at 2:50 pm


I applaud any system that continues to try and improve itself. For our government to reduce the cost of care, we’d have to take on the health insurance companies and the industrial medicine complex. Which will never happen since lobbyists run our government.
We could cut costs 20% tomorrow by eliminating for-profit insurance, but it is more important to have protect the profits of those companies than it is to lower costs for you and I.
On the doctor side, my cousin is an oncologist, which is definitely God’s work. But he lives in at least a $5M home and pays $20,000 a month in child support for two kids to his first wife without even missing it. She is in court to get more.
He is easily making several million a year but does his value to society exceed that of, say, an engineer who builds bridges that don’t fall down, or a General Practioner making $200K a year?



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John F

posted July 27, 2010 at 3:00 pm


…the USA is passing legislation to make health care better and cheaper by centralizing.
Wow, Scot. Way to load the discussion with a widely ungranted assumption. You just put that in there like it’s soooo obvious that it will be better and cheaper. I don’t think most of your audience is just going to give you that one.



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Allan R. Bevere

posted July 27, 2010 at 3:02 pm


I find Furness’ analogy to be strained. When I go to my doctor, it is not a matter of what I want. I tell him my symptoms and he suggests a course of action. It is much different than what I’m going to order off a menu for dinner.
How strange?



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DRT

posted July 27, 2010 at 5:03 pm


In my MBA program from the ancient times, the prof’s would advocate re-organizing as a tool to help manifest strategic imperatives in the organization so as to get make it obvious what people need to be concentrating on doing well. My career tells me this is sage advice.
And now, my spiritual pursuits tell me that much to the dismay of religion, the bible tells of change as being quite good, except the bible justifies change=good from an idolatry=bad point of view.
In both cases it points to the fact that corporations, governments and religions are better off changing their structure to suit the dynamic nature of people and the world. An organizational design is never good forever, only as a transition to another organizational design. Idolatry really is a problem and the only way to stop it is to keep the people moving.
I think this plays into our other conversation in the weekly meanderings where I was advocating that the conservatives like predictability and centralization in government can make things unpredictable due to the concentration of power. I want to take that one step further and say that I support centralized government, and decentralized government, as long as it is changing…..



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Christine

posted July 27, 2010 at 5:48 pm


Yes, I am happy to read this! Having spent six weeks as a patient in an English orthopedic hospital, I applaud this move. There is a reason that England is doing this, and we would do well to pay attention.



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Chloe

posted July 27, 2010 at 6:20 pm


As a Brit, I find it really strange that you folk drag us into your health care arguments. Two countries of completely different sizes and systems… People against Mr. Obama’s health care plans can easily find Brits who have had a bad experience of the NHS and people who support your president can easily find people who think the NHS is the best thing that ever happened to the UK. It really reminds me of those sects that end up building an entire religion round selected passages of the bible. Or perhaps certain atheists who use one or two verses out of context to “prove” that Christianity must be wrong.
The people who work in the NHS are for the msot part wonderful, compassionate people. The system has flaws and I am really interested to see what the new government will do with it. But in general it works pretty well. It is always sad to hear people dismiss it because they, or someone they know, had a bad experience. Bear in mind that this is the system that treats everyone in the entire UK for every ailment, from a cold to major surgery. I for one am happy to pay a bit more in tax in order for everyone to get the same access to health care, rather than be content with some people getting a rough deal as long as I’m alright. (And of course if you have the money you can get private healthcare in Britain…)
I think decentralized healthcare is a great thing, as long as you’ve had the centralization right in the first place! I think what we’re trying to puzzle out is how to avoid a postcode lottery. (I guess you might call it a zipcode lottery? Do you have that phrase?)



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kevin s.

posted July 27, 2010 at 6:56 pm


@fish
“We could cut costs 20% tomorrow by eliminating for-profit insurance, but it is more important to have protect the profits of those companies than it is to lower costs for you and I.”
20%? On what basis do you assert this figure? Insurance profit margins average out at about 3%. Are you really arguing that a government program is going to introduce a 17% efficiency?
“He is easily making several million a year but does his value to society exceed that of, say, an engineer who builds bridges that don’t fall down, or a General Practioner making $200K a year?”
Yes. In addition to being among the best and brightest doctors, their training goes far beyond that of a general practitioner, which in turn goes far beyond that of an engineer.
That said, on average, an oncologist does not make that much more than a general practitioner. If your cousin makes several million per year, it is because his patients have outstanding five year survival rates. An oncologist has a higher salary ceiling, which is why doctors put in the extra training, do the harder work, and pay higher malpractice insurance rates.
Are you sure that he makes several million per year? Someone who makes $600,000 can afford a $5M house.
@chloe
“As a Brit, I find it really strange that you folk drag us into your health care arguments.”
Agreed. The United States is a large nation comprised of 50 states, large rural areas, very poor urban areas, extraordinary ethnic diversity. There is not comparison.
That said, if Britain is de-centralizing, that bodes poorly for centralizing here, doesn’t it?



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Ethan Magness

posted July 27, 2010 at 8:09 pm


Hey John F,
That line worried me as well. I am assuming that Scot meant, ” the Us is passing legislation with the goal of making health care better….”
I think his use of “to” was to imply intent not consequence. At least that is what I am assuming right now.
Peace.



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Nathan

posted July 27, 2010 at 8:26 pm


de-centralizing is not “off-loading”. A managerial re-org is not a refutation of national health care. It’s a key nuance that seems lost on some people.
Furthermore, it’s not just a matter of dragging the UK system into our discussions, it’s the myth that somehow there is a 1 to 1 correspondence between UK Tories and American Republicans/Libertarians. They ain’t the same thing…and often this is the unspoken assumption/claim when we start citing these things…
Anyone trying to “make hay” out of this as some sort of indicator about our process/needs/debate here is reaching…at best.
It’s funny how Europe is soooooo awful and socialist and blah, blah, blah, blah, blah, when it serves certain arguments. But then all of sudden, without any regard to what’s really happening, we’re supposed to see what happens in Europe as evidentiary of, well, whatever it is people need it to be.
On a more feisty day, I’d say that’s lazy and dishonest, but it’s not one of those days for me. ;)



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kevin s.

posted July 27, 2010 at 8:41 pm


“It’s funny how Europe is soooooo awful and socialist and blah, blah, blah, blah, blah, when it serves certain arguments.”
I don’t hear Britain lumped in with the more socialist leaning nations all that often. What I have heard is that Britain is an example of the private/public hybrid Democrats seem to want, and that people aren’t all that happy with it.
This would seem to prove that hypothesis.
At minimum, one could just as easily point out that liberals have looked to Europe as a sort of health care utopia. This is clearly a counterexample, and you can be certain that those same liberals will run from this.
“On a more feisty day, I’d say that’s lazy and dishonest, but it’s not one of those days for me.”
I am feisty, and I think it is lazy to engage the post in this manner. It is worth exploring why Britain is opting to decentralize, especially since we are in the process of re-shaping our own health care system.



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Steve D

posted July 27, 2010 at 9:34 pm


@Kevin S
“20%? On what basis do you assert this figure? Insurance profit margins average out at about 3%. Are you really arguing that a government program is going to introduce a 17% efficiency?”
If you look at strictly at premiums to profits 3% is correct. However, hidden within for profit insurance is a lot of overhead including salaries for execs. If you look at a different metric premiums vs payouts, there’s a big difference.
According to an article in the New York Times health insurance companies spend between 35 to 45% in overhead including marketing costs, broker commissions and other expenses. So, only 55 to 65% is spent on actual health care costs. Kevin, hose are the costs that need to be trimmed. That is where the savings comes from.



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kevin s.

posted July 27, 2010 at 9:55 pm


@Steve D
All of those costs exist in the government sector. Adjusting for education and other factors, government employees have higher compensation than private employees.
You could probably shave some marketing costs (and the jobs with them), since the government will have an effective monopoly. But when you have an effective monopoly, quality for the consumer decreases.
Add to this the fact that government enacts a lot of policies out of concern for special interests.
If the government is so efficient at delivering services, why can’t the Post Office compete with private delivery services? Why is our public education system completely incompetent to educate our children? How do you explain FEMA generally?
You do not introduce government into a market to decrease costs. You introduce government as a last resort when all other options are unworkable (think military, police force, parks etc…)



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Andy Halpin

posted July 28, 2010 at 2:15 am


“It is worth exploring why Britain is opting to decentralize, especially since we are in the process of re-shaping our own health care system”.
Yes, but you should bear in mind the distinct possibility that this decentralisation in Britain is motivated by political dogma, rather than being a carefully thought-out management strategy. The real issue is whether it works, and it will take years to see that. In the meantime, I would reserve judgement. Here in Ireland, we have been burdened for several years with an incredibly expensive, inefficient and poorly thought-out programme of decentralisation (in all areas of government), which was motivated purely by doctrinaire right-wing politics. The kind of thing that gives socialists a bad name, really – only in this case it came from the other side!



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Andy Mills

posted July 28, 2010 at 4:38 am


The root of the re-organization in the UK is much more about cutting bureaucracy than political motivations. Most doctors and nurses that I have talked to would say that the imposed paperwork produced by more and more administrators in the NHS is the problem and they long to be freed up to help treat people. What these changes will hopefully do is sweep away the middle layer of admin for admins sake and make things more cost effective.
So maybe the lesson to learn in the US is get the infa-structure and admin staffing right the the system will work!



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Steve D

posted July 28, 2010 at 6:08 am


@Kevin S
“All of those costs exist in the government sector. Adjusting for education and other factors, government employees have higher compensation than private employees.”
Government does not have the marketing costs which are relatively high. Nor do they have the level of executive pay that the private sector has. It’s interesting that Medicare has a 3% overhead while private industry has 10-20 times that percentage.
It’s interesting that people always talk about the post office as being inefficient. Consider that you can send one ounce of mail anywhere in the US for under 50 cents. It usually takes 6 days max to make that trip. However, if you attempted to send the same amount via UPS or Fed Ex for the exact same service level it would cost $3-$5.
Kevin, you make sweeping generalizations about public education and FEMA. I really can’t speak about FEMA since I don’t know much personally. However, public education gets a bad rap. The vast majority of public school students get good education. I could mention say BP as an example of how corporations cut corners as well. But I thought we were talking about health care.



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kevin s.

posted July 28, 2010 at 1:55 pm


@Steve
“Government does not have the marketing costs which are relatively high. Nor do they have the level of executive pay that the private sector has. It’s interesting that Medicare has a 3% overhead while private industry has 10-20 times that percentage.”
Government absolutely has marketing costs. Heck, the stimulus plan has already spent $20 million on marketing.
Government ad expenditures tend to be lower because there are no competitors. In a monopoly, the lack of competition offsets any cost benefit to the consumer that can be achieved by slashing the marketing budget.
Not sure what you mean by “relatively high”. I don’t think insurers spend more on marketing than do other industries, and marketing budgets are always a small percentage of operating costs.
Medicare does not function as an insurer. It essentially facilitates the acquisition of health care. For Medicare recipients, the health care itself tends to be very expensive. If the cost of facilitating payment is equal for each unit of health care received, more expensive units are going to see a lower percentage devoted to overhead.
Further, Medicare is much more vulnerable to fraud, which does not figure into the overhead/premium calculation, but functions as an expense nonetheless.
“It’s interesting that people always talk about the post office as being inefficient.”
Flirting with bankruptcy will get people talking.
“Consider that you can send one ounce of mail anywhere in the US for under 50 cents. It usually takes 6 days max to make that trip. However, if you attempted to send the same amount via UPS or Fed Ex for the exact same service level it would cost $3-$5.”
The post office (which, btw, has a pretty big marketing budget) can do so cheaply because it is backed by the government. It was able to establish itself as the only choice for postal shipping because the government shut down competitors and funded it directly until the 1980s. As such, FedEx and UPS have no apparatus for delivering high volumes of low weight postage.
Now that it is no longer funded by the government, it is more or less bankrupt. It is also more expensive for shipping boxes, as the system was never adapted to accommodate that particular need, especially for business.
“Kevin, you make sweeping generalizations about public education and FEMA. I really can’t speak about FEMA since I don’t know much personally.”
In essence, it is ill-suited to contending with localized disasters. It has failed spectacularly at least once under our past four presidents.
“However, public education gets a bad rap. The vast majority of public school students get good education.”
Not at all. Our public school system is one of the most expensive in the world, and we achieve some of the worst results. That’s before you factor in federal spending (via the wholly unnecessary DOE and the ineffective NCLB). Our health care is expensive, but it is also phenomenal at keeping alive a nation that does its able best to kill itself.
That said, the SSA is a more efficient organization than public schools. Try convincing an assistant principal from D.C. schools to tolerate accommodations similar those at the SSA Baltimore HQ, much less contend with the commute.
Nationalizing health care will almost certainly create an entirely new bureaucracy, which will be staffed by employees with greater demands.
“I could mention say BP as an example of how corporations cut corners as well. But I thought we were talking about health care.”
I didn’t say anything about cutting corners. Your entire argument is based on the idea that we can cut corners.
“Yes, but you should bear in mind the distinct possibility that this decentralisation in Britain is motivated by political dogma, rather than being a carefully thought-out management strategy.”
Of course it is. Every decision by politicians is the product of political dogma. But these particular politicians were put in office by citizens who were unhappy with the status quo.
Are Brits, in general, in favor of these reforms? Or is this an example of a party riding a wave generated by wholly unrelated issues in order to achieve a longstanding goal? We had that happen here, recently :)



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Bob Porter

posted July 28, 2010 at 2:33 pm


I agree with John @ 2 and Ethan @ 8 that it is a blind leap of faith to think that our recent health reform will improve anything. The goal was social engineering and the costs will be massive.
I also agree with Allen @ 3 that the analogy used was very inappropriate. A better analogy would be the chef managing the restaurant, which happens all of the time.



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Nathan

posted July 28, 2010 at 5:42 pm


@kevin s.
You don’t like the fact that i take issue with people spinning a managerial re-org in the UK NHS to be somehow a refutation of taxpayer financed healthcare?
Cuz that’s my point.
Isn’t a taxpayer financed healthcare system tantamount to the loss of all freedom of and the birth of godless socialism in this country?
Sorry if I seem snarky, but that really is the argument and rhetoric used about it.
It might seem lazy for me to take issue with the way this is spun to you, but I do think the coloring of the “significance” of what amounts to a managerial system change in a context nothing like ours for political points here is dishonest and pretty craven.
The Tories proposed re-org is not a refutation or repeal of “national health care”.
THAT’s my point. For people to claim otherwise is, again, dishonest.
This isn’t about the merits of tax payer funded healthcare to me, it’s about rhetoric.
For the record, I don’t want a system like NHS her is USofA, but that’s hardly the point.
The point to me is people shouldn’t try to make hay out of it.



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Andy Halpin

posted July 28, 2010 at 5:43 pm


@ Kevin S.
I know this is off-topic, and I apologise for that – but you really can’t argue that the Tories are “riding a wave” on this (or any other issue, for that matter). Their performance in the election was actually pretty poor, considering that it should have been a gimme for them, and they only got into government by doing a deal with the Lib Dems.
That’s not to deny that a lot of people in Britain wanted change, but I don’t think the NHS was by any means the main focus of that desire for change. It was as much about a change of faces, after 13 years of Labour government, as anything else. And my impression is that while a lot of Brits would like to see the NHS improved, and functioning more efficiently, there are very few who want to do away with it.



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kevin s.

posted July 28, 2010 at 6:22 pm


“Isn’t a taxpayer financed healthcare system tantamount to the loss of all freedom of and the birth of godless socialism in this country?
Sorry if I seem snarky, but that really is the argument and rhetoric used about it.”
It is an argument, I suppose, but hardly the best. The best argument is that we cannot institute a single-payer health care system while maintaining the present level of care. We have to make some sacrifices, and none of the reform advocates are being honest about what those might be.



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Steve D

posted July 28, 2010 at 7:55 pm


@ Kevin S
“The best argument is that we cannot institute a single-payer health care system while maintaining the present level of care. We have to make some sacrifices, and none of the reform advocates are being honest about what those might be.”
Actually, for what we pay we don’t get the best care. We pay the most something like $7,400 per capita, in some cases 2 times what other countries pay for better results. However, we rank somewhere below 10th in the world.
One problem, in my opinion, is that for profit corporations are legally obligated to make the most profit for their shareholders. While one solution would be to have a single payer health plan. Another would be to set up non-profit insurance companies. At one time Blue Cross/Blue Shield was a non-profit association and it worked. Insurance companies need to be obligated to their rate payers more than their stockholders.
Captcha overdosed for



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kevin s.

posted July 28, 2010 at 9:46 pm


“Actually, for what we pay we don’t get the best care. We pay the most something like $7,400 per capita, in some cases 2 times what other countries pay for better results. However, we rank somewhere below 10th in the world.”
I disagree that we rank outside of the top ten. Our health care system serves an extremely diverse clientele, whose only common bond is an unwillingness to take care of itself.
Even if you adjust for only ethnicity, is there any evidence that there are ten other countries who have better health outcomes?
“One problem, in my opinion, is that for profit corporations are legally obligated to make the most profit for their shareholders.”
Again, the profit margin averages out to 3%. Ideally, a government plan will be obligated to break even, though it is more likely that it will continue to go into debt, which will also be at our expense.



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Lee Corder

posted July 28, 2010 at 10:14 pm


Despite the denials in other comments about not trying to compare UK and US health care or picking selective bad news stories in UK health care to empower US opponents of US Government health care, let me share some reality. As a supervisor of an international movement with the privilege of working with a number of very gifted and faithful UK staff. In the current year, two of those staff have experienced significant medical issues that need significant medical attention. In one case, a young woman had serious digestive tract surgery with a temporary colostomy that was to be removed once surgery was fully healed. Now over a year later, she is still waiting for the follow up surgery that should have happened two months after surgery. In the other circumstance, we have a marvelous worker in Northern Ireland who is suffering daily from a back condition that looks like it can be dealt with effectively by corrective surgery. Unfortunately, he is still on the list to be seen by a orthopedic surgeon but is now passing 6 months without any appointment.
Given these very frustrating situations we were gratified to hear of the revisions being considered in the UK. And as a prostate cancer surgery patient who discovered that the cancer was more advanced then doctors first anticipated I am profoundly grateful that in our current system I was able to get attention immediately. Under other national government run programs, I would still be waiting for attention.
Sincerely,
Lee



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Steve D

posted July 29, 2010 at 6:04 am


@Kevin S
“I disagree that we rank outside of the top ten. Our health care system serves an extremely diverse clientele, whose only common bond is an unwillingness to take care of itself.
Even if you adjust for only ethnicity, is there any evidence that there are ten other countries who have better health outcomes?”
Disagree or agree the World Health Organization study ranks us relatively low on the list. For what we spend, we should be the top or near the top. We’re roughly 15th. Criticize the study all you want, but our mortality rate is not where it should be. We spend nearly twice what other countries spend and we just don’t get the results.
“Again, the profit margin averages out to 3%. Ideally, a government plan will be obligated to break even, though it is more likely that it will continue to go into debt, which will also be at our expense.”
It doesn’t make any difference what the profit margin is. ANY for profit corporation’s first obligation is not to their customers but to their shareholders. Hence, decisions made by the company will always be in the favor of the shareholders. That’s a major problem in a for profit health care system.



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Nathan

posted July 29, 2010 at 9:11 am


@Lee,
Your example speaks of managerial efficiency at the patient level.
From what I understand the proposed UK re-org is an attempt to create better efficiency there, but, again, it is not a dissolution of the NHS.
Therefore, the move by the UK does not mean “evidence” for the “no national health care” position in the US.



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kevin s.

posted July 29, 2010 at 5:20 pm


“Disagree or agree the World Health Organization study ranks us relatively low on the list.”
That study doesn’t adjust for any factors at all. I highly doubt that New Zealand has worse health care than Colombia.
“Criticize the study all you want, but our mortality rate is not where it should be. We spend nearly twice what other countries spend and we just don’t get the results.”
Simply comparing mortality rates is an apples to oranges comparison. If we cut costs in our country, our mortality rate will increase.
“It doesn’t make any difference what the profit margin is. ANY for profit corporation’s first obligation is not to their customers but to their shareholders.”
And a government run system is beholden to taxpayers to break even,and to lobbyists generally. It’s the same motive, with the only difference being a 3% profit margin, which will introduce at least that level of inefficiency.
“Hence, decisions made by the company will always be in the favor of the shareholders. That’s a major problem in a for profit health care system.”
Not in a free market.



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Steve D

posted July 29, 2010 at 7:16 pm


@ Kevin S
“”Hence, decisions made by the company will always be in the favor of the shareholders. That’s a major problem in a for profit health care system.”
Not in a free market.”
Not so much. One of the major issues that is unique to health care is that by law companies are allowed to price fix and do all of those things that virtually every other company is barred from doing.
I know that this will set you off but free markets are not the solution to every problem. There are assumptions that bad actors will get punished by the market. After the past few years, I’m convinced that bad actors actually pollute the market.
My personal preference is a return to nonprofit medical insurance. I’ve found that non profits tend to perform better in certain circumstances. I bank at a mutual savings bank and my car/home insurance is with a mutual insurance company.



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kevin s.

posted July 29, 2010 at 8:38 pm


“One of the major issues that is unique to health care is that by law companies are allowed to price fix and do all of those things that virtually every other company is barred from doing.”
They are, to some degree, required to price fix. Insurers are forced to maintain premium to asset ratios. Pricing aside, an insurer could offer different plans for different people, but the incentives created by government effectively close off any room for a diverse offering.
“I know that this will set you off but free markets are not the solution to every problem.”
They are the solution to this one, or at least a solution that ought to be tried.
“There are assumptions that bad actors will get punished by the market. After the past few years, I’m convinced that bad actors actually pollute the market.”
The market doesn’t punish bad actors. Our laws do, when enforced. When government and insurance companies are as cozy as they are now, you cannot expect this sphere of accountability to work.



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Steve D

posted July 29, 2010 at 9:45 pm


“They are, to some degree, required to price fix. Insurers are forced to maintain premium to asset ratios. Pricing aside, an insurer could offer different plans for different people, but the incentives created by government effectively close off any room for a diverse offering.”
I don’t agree that they have to price fix. I think that they don’t want to compete. It’s easier, and hassle free. I live 2 miles from an entrance to an Interstate. There are 2 gas stations that virtually don’t compete with each other. They’ve got what could be called a gentlemen’s agreement not to compete.Hence, their prices are slightly higher than other stations.
“The market doesn’t punish bad actors. Our laws do, when enforced. When government and insurance companies are as cozy as they are now, you cannot expect this sphere of accountability to work.”
I thought you were more libertarian than that. I agree that our laws need to be enforced and updated. I don’t believe that health insurance companies should be allowed to price fix. I still say that there should be some competition introduced. I also feel that there is more to be saved than just 3%.



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