Thursday, July 16, 2009

Health Care Stat of the Day

The National Academy of Sciences (in a 2004 report) says:
Lack of health insurance causes roughly 18,000 unnecessary deaths every year in the United States. Although America leads the world in spending on health care, it is the only wealthy, industrialized nation that does not ensure that all citizens have coverage.
18,000 unnecessary deaths every year is a pretty crazy number if you think about it. I feel like we always hear from the media about the 40-50 million uninsured (which is also a scandal), but not this stat, which lays out the stakes for health care reform pretty clearly. 18,000 unnecessary deaths.

I've also been idly mulling about in my head about why exactly the 'free market' fails so spectacularly in this case. In theory, it is supposed to work out that some enterprising young entrepreneur will look at those 40-50 million people and see an opportunity to profit by selling them a lean, mean insurance plan. But of course it doesn't work out like that -- there is apparently no money to be made off the pool of currently uninsured people (or someone would have made it already).

Nate Silver suggests part of the reason it doesn't work this way is because the insurance game is largely about volume.
The reason the insurers are staying in business, though, is because barriers to entry in the health insurance industry are in practice quite high. Insurers benefit from pooling risk. The larger the pool, the better in terms of the insurer's ability to hedge its risk and build negotiating leverage with its providers. That makes it very difficult for a Five Guys or a JetBlue type of start-up to compete: they'll have trouble getting together enough customers to pool their risk adequately, and even if they do, they won't have as much negotiating leverage as the big guys.
Interesting! But a lack of competition means that there is no real penalty for dumping sick or otherwise unprofitable patients by any means necessary. (Read this article by Jonathan Cohn if you want to get really really angry about the inhumanity of the current system.) Which is a roundabout way of saying: we need a public option in the health care bill in order to reinject some needed competition into the market.


Keith said...

Right I'm catching up on your blog, Tim. I think at some point you're going to move to California but I haven't got there yet. In the meantime, this post reminded me of a lovely concept we talk about in the UK: excess winter deaths. The government calculates how many old people die each year because they don't heat their homes properly, usually because they don't think they can afford to. In 2007/08, there were 23,500 and yet the government programme to insulate older people's properties is still underfunded. And of course as a percentage of the total population this is even bigger than the deaths from lack of health care in America. And ostensibly we have a government that is committed to tackling both climate change and fuel poverty. And yet, and yet... Okay, getting depressed now about how futile my job is. Hope you're well!

Tim said...

Hey Keith - yup, we're in Cali!

That is indeed depressing about the excess winter deaths, although at least the UK government recognizes there is a problem and that they can try to solve it somehow - which is more than I can say for many American politicians.

What is your job these days?