How much would health care costs dropped if we abolished insurance?

[puddleglum]

@Lemur866

In other words, health insurance. It doesn’t stop being health insurance just because you call it by a different name.

If people can and should join a health organization that includes benefits such as ER trips, what happens when a homeless guy shows up at the ER with a stab wound? Does he get sent away? Or do the docs treat him?

If we say that the docs should treat him, then we’ve decided that nobody can ethically be turned away from the ER, no matter how much they pay. But the services at the ER aren’t free, they have to be paid for in some way. And since the ER is by definition emergency treatment, it’s impossible for patients to negotiate for a better price. And so the argument for public funding of emergency services makes itself. Everybody pays to keep the ER open, even if you never use the ER.

And then there are things like public health. Everyone benefits if the poor aren’t riddled with HIV and cholera and malaria. And so public funding of public health makes sense, we can’t rely on the homeless guy to pay for his own whooping cough vaccine, because he won’t do it. So because we don’t want a whooping cough epidemic we just pay for everyone to get immunized against whooping cough, because everyone benefits when everyone is immunized. Everyone benefits from sewer systems that treat human waste. Everyone benefits from clean food and water and air.

So what’s left? Your everyday checkups where the doctor tells you to quit smoking and lose a few pounds. And the day when you go for a checkup and your doctor tells you that you’ve got cancer.

It certainly is true that if your insurance company is going to pay for your chemotherapy you don’t have much incentive to hunt for the lowest cost course of treatment. On the other hand, if you have to pay out of pocket most people don’t have tens of thousands of dollars sitting in the back waiting for a medical emergency. Cost wise, this sort of thing is in the same bucket as emergency treatment, in the sense that it is unplanned, not routine. Even if you aren’t literally rushed to the ER to get your chemotherapy you still need to be treated in a timely manner, the sooner the better. And as a patient you are totally unqualified to choose between treatments. Oh, you wanna go with the budget chemotherapy? Or save even more money by trying apricot pits?

The bottom line is that health care by nature results in huge information asymmetries. It’s one thing when the use car salesman knows more about that 2009 Subaru than you do. But how is a patient supposed to decide on a course of treatment for lung cancer?

Noting that elective procedures haven’t gone up in cost compared to mandatory procedures tells us nothing. There are thousands of types of elective procedures that haven’t seen significant cost reduction either. You can’t negotiate the price of your cancer treatment. You either pay the price or die in the gutter. Is the price higher than it could be? Yes it is, but this is not due to third party payments, nobody consumes extra chemotherapy just because they don’t pay for chemotherapy out of pocket. Will people take extra pills? Maybe, but we shouldn’t let people take extra pills even if they’re willing to pay for them. So the moral hazard arguments don’t exist. We’ve all heard of rich hypochondriacs that get medical treatments they don’t need. But health care providers have a different ethical obligation than caviar salesmen. It’s fine if a rich person spends too much money on caviar and champagne and fast cars. But doctors and nurses shouldn’t perform unnecessary procedures on rich idiots just because the rich idiot is willing to pay for it.

And so the free market model for health care breaks down completely. We have to provide health care for people who can’t afford it, we have to deny some procedures even for people who can afford it. We can’t ethically have a completely free market health care system, so pretending that we can is just silly. Can some cost savings be achieved by providing incentives for patients to use the health care system less? Sure. But you can’t just decide that everyone should pay out of pocket and let the market decide, because we’ll end up with people literally dying in the streets.

Is AAA auto insurance? Not exactly. I have no problem with medical insurance as long as it is actual insurance.
It is not impossible to negotiate for emergency care, it is possible to do so before the emergency. This is what insurance companies are for, if people actually bought insurance themselves they could negotiate as to which ER to go to and how much to pay beforehand.
In a free market healthcare system there would be nothing stopping either the government or private charities to pay for homeless people with stab wounds.
Since it is in the public’s best interest as well as the individuals best interest and insurance company’s best interest, there is no reason to suppose that private markets could not supply as many or more vaccines.
Information Asymmetries are are part of many markets. As you point out the classic textbook example of market breakdown caused by information asymetry is the used car market. Yet more than 3 million used cars are sold in the US each month. This is because there are markets for information and it turns out that the information asymmetries are not as big as theorized. There is lots of good information about health care and what works and does not work.You don’t need to become an expert you just need to be able to get information from one.
You can’t negotiate your price for dinner either, you either pay the price or starve in the street. That makes as much sense as what you say for chemotherapy. As long as there is a competitor down the street offering less then the price will go down. No every shopper needs to have the same marginal price for competition to work. As long as there are price sensitive shoppers then price competition will happen.
As long as you shield consumers from the price of their choices there is no way to get prices down. As long as prices go up fewer poor people will be able to afford healthcare. Government shielding people from prices is causing the problem it is trying to solve.

[Voyager]

@puddleglum

Is AAA auto insurance? Not exactly. I have no problem with medical insurance as long as it is actual insurance.

Not auto insurance (they sell that separately) but certainly it can be considered as towing insurance. Which is the example you gave.

It is not impossible to negotiate for emergency care, it is possible to do so before the emergency. This is what insurance companies are for, if people actually bought insurance themselves they could negotiate as to which ER to go to and how much to pay beforehand.

People can always buy insurance themselves - but it is more expensive by yourself than if bought with others. And you had better negotiate with a whole bunch of ERs, since if your emergency happens away from your preferred one you are SOL. Which, as you say, is what insurance companies do and what we can’t do as individuals.
The more people in your pool the better you can predict costs, which allows you to make money with a smaller mark-up to cover unexpected spikes in costs. Bigger is more competitive.

Information Asymmetries are are part of many markets. As you point out the classic textbook example of market breakdown caused by information asymetry is the used car market. Yet more than 3 million used cars are sold in the US each month.

Yet companies are making money providing background information on cars, and the standard advice is to bring a used car to an independent mechanic. So there is information asymmetry, but also ways of working around it.

As long as you shield consumers from the price of their choices there is no way to get prices down. As long as prices go up fewer poor people will be able to afford healthcare. Government shielding people from prices is causing the problem it is trying to solve.

Since when has government prevented medical providers from publishing prices? Government has finally started publishing comparative prices for a small subset of procedures, which is going to help, but why would providers publish prices in a free market, when you can attract customers with great doctors and the promise that they will live to walk out the door? I hear dozens of medical ads and none talk about price. And they are clearer going after patients not locked in by their insurance company.

[PatrickLondon]

@puddleglum

As long as you shield consumers from the price of their choices there is no way to get prices down.

But this is to assume consumers are in a position to make a rational choice. Pain, sickness and fear trump economic “rationality” any time.

[Boyo_Jim]

@DigitalC

No, i think he is suggesting just leaving everyone to fend for themselves. I assume costs would drop a whole lot, also a whole lot of people would die and many more be driven into financial ruin.

Since the OP hasn’t returned to clarify the situation, I have to agree with this interpretation.

So, a lot more people would die a lot younger, and there would be some benefits. For instance, probably lower unemployment because of a smaller labor pool. Possibly lower real estate prices. Almost certainly, fewer cranky old people annoying me. However, I am now about the right age to be a cranky old person, so I’ll keep my insurance, thank you, and get off my lawn!

[Clothahump]

FWIW - my rheumatologist stopped taking insurance about 9 years ago. He was able to lay off the two full-time people he need to process insurance claims and lower his rates, which have not changed since.