Thursday, December 29, 2016

Universal health insurance: A civilized society's single checkout line

This from Richard Mayhew triggered a flash image connected to a pet peeve:
Insurance (of any sort) has two major economic value propositions.  First, it pools risk so that unpayable costs become payable.  This encourages productive risk taking in the face of tail risk. Secondly, because of the pooling function, it reduces the variance faced by any individual in the pool.   Lower variance means more predictability which means less uncertainty.
The image is the single checkout line* in a New York Whole Foods, complete with lights signaling which of about 20 registers are free. That is, there's one line for all registers -- as at the post office, Barnes & Noble and elsewhere.

The pet peeve is large retail stores with lines at each register. There's a little anxiety cost for me in having to choose a line by eyeballing. It feels like defeat if someone in the line I've chosen asks to have the price of an item checked or uses a credit card that doesn't work.

The thought is that true universal health insurance is the unified checkout line of civilized life. What the single line does with customers' time, universal insurance does with money: spread the losses. More checkout counters equals a deeper risk pool. When there's twenty registers, the effect of one person's fifteen minute delay gets spread widely among the customers on the one line.  Ditto with one person's long-term kidney dialysis or diabetes management or multiple chemo rounds in a deep enough risk pool.

As waiting time gets spread evenly in the one-line checkout, so costs should have uniformity among the insured. That is, they should be capped at affordable levels and charged in affordable increments.

Complicating the analogy, what's affordable to one person is not to another, unless costs are uniformly very low. No one in the single checkout line gets a break because she's poorer in free time than those surrounding her.

In fact, in real life, our checkout lines in the U.S. in particular increasingly work the other way: the wealthy pay to cut the line -- in nauseating gradations, on an airplane, for example.

And that's pretty much what Republicans want to do to healthcare.

To truly smooth the line in healthcare delivery, you need uniform pricing at the checkout counter. If people's insurers (government or private) are paying different rates, they'll have access to different numbers of counters, with lots of people barred from the counters where you pay for better (or in any case more expensive) products. And different insurers paying different prices means different risk pools -- massive segmentation of the line.

Mayhew's broader point, btw, is that China, where most people essentially self-insure, has a massive savings rate -- everyone in effect creates their own line to the checkout counter and spends half their life (money) on it. Republicans would move the U.S. in that direction via their favorite health insurance vehicle, HSAs. While it's true that the U.S. savings rate could use some improvement, HSAs are not going to improve anyone's life. And their purported role in discouraging overutilization -- as opposed to needed care -- is very dubious.

* Originally, I called this the "express checkout line" without really thinking about it. On a reread, it occurred to me that "express checkout" usually refers to a 10-items-or-less option, or a line of privileged club members - the latter being the opposite of what's meant here. Also belatedly, I found and added the link to the NYT article, which has no term of art for Whole Foods' single line. So maybe there isn't one?

1 comment:

  1. Thanks for another terrific piece.

    What you say applies to more than just health care. For example, college education could be covered by taxpayers, as Bernie Sanders advocated, or it can depend on private savings.

    The choice between public goods and private provision rebounds all through our political economy. Perhaps we need a judicious mix of the two approaches.