As Obamacare goes into effect, new criticisms leveled

[mheslep]

LOL. I never said government intervention couldn't break up a monopoly. I said that a monopoly can't exist in a free market to begin with, since there are no barriers to competition. That should be pretty self-evident.

If you'll allow me jump in Al - sure they can, monopolies have existed in free markets. Company A finds away to make or distribute a product in either a less expensive way than the competition or makes a superior product. Very rarely such a company could, in the right type of market, before anti-trust laws, come to completely dominate a market, but never for very long. The evidence is that, left to themselves without government cronyism to support them, they eventually rot, form blind spots to small fry competition and fall apart. Government action to break up monopolies must inevitably be subject to cronyism, corruption from the would be competition to the monopoly.

 

[nismaratwork]

If you'll allow me jump in Al - sure they can, monopolies have existed in free markets. Company A finds away to make or distribute a product in either a less expensive way than the competition or makes a superior product. Very rarely such a company could, in the right type of market, before anti-trust laws, come to completely dominate a market, but never for very long. The evidence is that, left to themselves without government cronyism to support them, they eventually rot, form blind spots to small fry competition and fall apart. Government action to break up monopolies must inevitably be subject to cronyism, corruption from the would be competition to the monopoly.

Really? You must tell the Carnegies, DuPonts, Rockefellers and so forth, they'll be crushed to learn that the massive wealth accrued is now... oh wait, it's still just as good.

Ooooh, and Bill Gates... and Comcast shareholders! Yep... anti-trust has sure done its job... no vertical monopolies with content providers "merging" with the content. I think the point, as we've seen, is that a monopoly doesn't have to last very long to make a group wealthy for generations, and to do great harm to many. You can't simply ignore the history which led to creation of anti-trust laws in the first place, and the Robber-Baron era.

 

[Al68]

Well you are definitely right, that is not what you said at all(monopolies). So, my bad. Actually, you could be right, maybe I am not aware of all the regulations that make it difficult for small businesses to develop and easy for large ones. Could you list some? That does seem important to the thread, maybe you already got into that earlier?

It's been discussed in other threads, but most government regulations, I think have that effect. But that belongs in a different thread, and I don't want to further hijack this one.

Making it one day unnaffordable no matter if it nationalized or not. That is a problem the mainstream fails to recognize. Even if that wasn't true, not everyone has health insurance, we are going to pay for them either way, since you can't be turned down at the emergency room. If those same people that haven't paid for insurance, or can't afford insurance did pay into the system it would mean lower costs for everyone. I am not sure how a counter argument on that can make any sense?

Well, that's mixing up two different issues. But purposely hiding that cost in the premiums of others only drives prices even higher. Hiding the cost of something, in general, prevents that cost from being lowered by innovation and efficiency.

The market price of a good or service serves a very important purpose in capitalism: it provides valuable information about supply and demand, quality, efficiency, etc. to everyone. That information results in better efficiency, innovation, competition where it is lacking, etc. Hiding the cost of one thing in the price of another completely undermines the value of that info. And that information is far more valuable than most people realize as it affects future costs. There is a reason the most regulated industries in the U.S. (health care, insurance, banking, finance, etc) are the ones that have the most problems.

And certainly the use of government coercion to sell a product, with other costs purposely hidden in the price, does even more damage, for the same reason. Not to mention the obvious unconstitutionality, and authoritarian anti-liberty aspects of the issue.

 

[Al68]

If you'll allow me jump in Al - sure they can, monopolies have existed in free markets. Company A finds away to make or distribute a product in either a less expensive way than the competition or makes a superior product. Very rarely such a company could, in the right type of market, before anti-trust laws, come to completely dominate a market, but never for very long.

Sure, but large, or even almost complete, market share isn't automatically a monopoly. It's only a monopoly if potential competitors can't enter the market, not if a single company is so cheap and efficient that others choose not to compete for that reason.

And in a free market, you're right, such a company could only maintain its market share as long as they stayed cheaper and more efficient than potential competitors.

 

[Al68]

You can't simply ignore the history which led to creation of anti-trust laws in the first place, and the Robber-Baron era.

You mean the history of government interference helping create monopolies? You're right, we shouldn't ignore that history, or allow it to be re-written by anti-free market authoritarians.

 

[nismaratwork]

Sure, but large, or even almost complete, market share isn't automatically a monopoly. It's only a monopoly if potential competitors can't enter the market, not if a single company is so cheap and efficient that others choose not to compete for that reason.

And in a free market, you're right, such a company could only maintain its market share as long as they stayed cheaper and more efficient than potential competitors.

...Or through influence peddling, abusive practices, and sheer market power.

"Алты́нного во́ра ве́шают, а полти́нного че́ствуют."

 

[nismaratwork]

You mean the history of government interference helping create monopolies? You're right, we shouldn't ignore that history, or allow it to be re-written by anti-free market authoritarians.

See: Influence peddling, bribery, and other "abusive practices". Of course, the government is involved with any sufficiently large enterprise; that is clearly not the point I was making or the lesson of that history. You're a conservative battleaxe, I'll give you that, so I don't expect to convince you of anything. "Пле́тью о́буха не перешибёш." = "Can't break an axe with a whip."

 

[Al68]

See: Influence peddling, bribery, and other "abusive practices".

I specifically said "in a free market", where there is no one to bribe or influence, since no one has any coercive power. Obviously those things contribute to monopolies in a regulated market, such as the U.S. currently.

You're a conservative battleaxe, I'll give you that, so I don't expect to convince you of anything.

LOL. Well you don't have to convince me of things I already know, like how the things you mention are very relevant in a regulated market, and can lead to monopolies, or reduced competition at least.

But I'll repeat, I was referring to a free market, ie one in which no one has any coercive power.

 

[nismaratwork]

I specifically said "in a free market", where there is no one to bribe or influence, since no one has any coercive power. Obviously those things contribute to monopolies in a regulated market, such as the U.S. currently.LOL. Well you don't have to convince me of things I already know, like how the things you mention are very relevant in a regulated market, and can lead to monopolies, or reduced competition at least.

But I'll repeat, I was referring to a free market, ie one in which no one has any coercive power.

How does a free market immunize people against bribery and influence? Where people can find a reason to cooperate, they can find a reason to influence people to and improve their environment.

If you can show me free markets that actually exist and function in that fashion, I'd be thrilled, but I'm not buying that this economy is it. As for bribery, the SEC snorting drugs off strippers with the people they were supposed to regulate doesn't count? Wow.

 

[Al68]

How does a free market immunize people against bribery and influence?

In a free market, there is no one with any coercive power to be bribed or influenced. That's what "free market" means.

If you can show me free markets that actually exist and function in that fashion, I'd be thrilled, but I'm not buying that this economy is it.

Of course this economy isn't it. Who said that? This is a regulated market, not a free market. Did you misunderstand my posts?

As for bribery, the SEC snorting drugs off strippers with the people they were supposed to regulate doesn't count?

It not only counts as bribery, it counts as me suddenly desiring a career with the SEC.

Seriously, that's my point. We can find countless examples of corruption in government regulated markets. And your example is a perfect one to illustrate how a regulated market is biased toward big companies against their smaller competition, who can't afford as much drugs and strippers. Did I mention I'm considering a career with the SEC?

 

[nismaratwork]

In a free market, there is no one with any coercive power to be bribed or influenced. That's what "free market" means.Of course this economy isn't it. Who said that? This is a regulated market, not a free market. Did you misunderstand my posts?It not only counts as bribery, it counts as me suddenly desiring a career with the SEC.

I understand, but the kind of free market you're describing naturally gives rise to groups designed to protect mutual interests. Those groups then try to regulate and even the playing field, and bam... you're back at regulation, only now the inmates are running it. When you add the complete lack of attachment that many multinational corporations have with a given nation, the interests of a free market such as you decide would be unacceptably fluid.

In addition, without regulation of some kind, external or internally based... investors will be wary of fraud, Ponzi Schemes, and the other ills regulation REDUCES.

Seriously, that's my point. We can find countless examples of corruption in government regulated markets. And your example is a perfect one to illustrate how a regulated market is biased toward big companies against their smaller competition, who can't afford as much drugs and strippers. Did I mention I'm considering a career with the SEC?

No, I understand that the US is a regulated market, but by the same token... if not the SEC than an industry group. I don't see how your vision of a market can be, without cabals and internal forces which seek to change the nature of the market and exert influence.

I don't disagree that in the ideal model you propose, that what you said would be true... it's the existence or even POSSIBLE existence or practicality of such a market that I question.

 

[Al68]

I understand, but the kind of free market you're describing naturally gives rise to groups designed to protect mutual interests. Those groups then try to regulate and even the playing field, and bam... you're back at regulation

Not if no one has coercive power. And preventing that is the legitimate function of government in a free market.

only now the inmates are running it.

As opposed to what?

In addition, without regulation of some kind, external or internally based... investors will be wary of fraud, Ponzi Schemes, and the other ills regulation REDUCES.

The word "regulation" isn't typically used to mean anti-fraud laws. Anti-fraud laws, and law and order in general to protect liberty, is essential to a free market. Free doesn't mean free from laws, it means free to conduct honest business. I was using the word "regulation" to refer to restrictions on honest business, not laws against fraud, etc.

A free market isn't anarchy.

I don't disagree that in the ideal model you propose, that what you said would be true... it's the existence or even POSSIBLE existence or practicality of such a market that I question.

It, like many things, has never existed in an ideal sense, but the U.S. was fairly close prior to early last century. The same period of time that we went from literally nothing to the greatest economic power in history.

And people can decry "robber barons" all they want, the important point is the increased standard of living of poor and working people. That tremendous and fantastic result of (almost) free market capitalism was even acknowledged by Marx.

That is what raised the standard of living of most people from working hard and dying young just to get to eat on days they were lucky, to most people getting to eat every day, to a situation in which we use the word "poverty" to describe people with a higher standard of living than 99.999% of humans who ever lived.

That's what's at stake here. Far too many people just don't understand the dynamics at work that result in orders of magnitude differences in the standard of living of people over time. That's the kind of progress that government regulation stands in the way of.

Some have said that if the world had always been free (economically), our current standard of living would have been common thousands of years ago, and our standard of living today would be beyond our imagination. I don't think that's much of an exaggeration.

 

[CAC1001]

My personal philosophy is that a market economy needs, overall, light and efficient regulation. Regulation is not any panecea and too much of it just hamstrings the economy and let's big corporations dominate the economy. But a total complete lack of regulation I wouldn't want either. I look at regulation like government, both necessary evils that you want in a limited manner, as in excessive amounts they are bad.

Some have said that if the world had always been free (economically), our current standard of living would have been common thousands of years ago, and our standard of living today would be beyond our imagination. I don't think that's much of an exaggeration.

I think it's a little more complex than that though. I would modify the statement to be more along the lines of: "If modern liberal democracy and market capitalism had been known as the best means to organize society thousands of years ago, than our current standard of living would have existed back then and our standard of living today would be beyond our imagination."

Remember also, we have WAR to thank for a lot of stuff we have today: a lot of the technologies that modern consumer electronics and computers are based off of, were developed with funding from DARPA. The Internet was originally started by the military. The Global Positioning System, also was started by the military (and the space program to launch the satellites into space was government too).

With a lack of the money from defense, one could probably expect that these would all eventually have been developed by the private-sector, but it likely would have taken a lot longer.

In general though, I agree fully that if a society has a market economy and liberal democracy for government, and the government keeps a fairly hands-off policy regarding the economy, then the collective imagination of the people will result in phenomenal levels of creativity that lead to a very high standard of living for the people.

 

[WhoWee]

Presidential hopeful, Mitch Daniels, weighed in on healthcare:
http://www.theindychannel.com/news/26774576/detail.html

""Unless you're in favor of a fully nationalized health-care system, the president's health-care reform law is a massive mistake," Daniels wrote. "It will amplify all the big drivers of overconsumption and excessive pricing."


In the column, Daniels claims the health care law "will add trillions to the federal deficit," and will amount to a government takeover of health care."

He went on to discuss the mandated cost to his state.

 

[ParticleGrl]

Market based healthcare solutions are based on a myth- there is no market for healthcare. The demand for life-saving care is completely inelastic. Information is completely asymmetric between doctor and patient, and in an emergency, patients can't chose which state, hospital, provider, etc, they end up with.

Without state support (medicare), the insurance model would be completely broken. Over a long enough time scale, everyone becomes incredibly risky. Hence, Daniels' arguments are broken. More privatization = more inefficiency in this case. Insurers have a huge layer to evaluate risk, which the government does not need.

Further, he ignores the best part of Obama's bill- the focus on evidence based medicine. A planned push for empirically successful treatments is the only way to bring down costs AND improve outcomes.

 

[WhoWee]

Market based healthcare solutions are based on a myth- there is no market for healthcare. The demand for life-saving care is completely inelastic. Information is completely asymmetric between doctor and patient, and in an emergency, patients can't chose which state, hospital, provider, etc, they end up with.

Without state support (medicare), the insurance model would be completely broken. Over a long enough time scale, everyone becomes incredibly risky. Hence, Daniels' arguments are broken. More privatization = more inefficiency in this case. Insurers have a huge layer to evaluate risk, which the government does not need.

Further, he ignores the best part of Obama's bill- the focus on evidence based medicine. A planned push for empirically successful treatments is the only way to bring down costs AND improve outcomes.

Care to support any of your comments - or is it all opinion?

I'm especially interested in your statement "Without state support (medicare), the insurance model would be completely broken." Do you care to elaborate?

 

[ParticleGrl]

Care to support any of your comments - or is it all opinion?

Most of what I listed are basic facts of the system. i.e. no consumer choice in an emergency- for obvious reasons you go to the nearest treatment center. Completely inelastic demand for life saving care- people want to live, the price is not an object. Changing the price in no way changes demand. Asymmetrical information- Doctors are highly trained professionals with much specific knowledge. Any discussion of treatment will always be asymmetrical between Doctor and patient (unless the patient themselves is a Doctor). This is all basic, obvious stuff. The healthcare sector has none of the requirements needed for an actual,efficent market.

I'm especially interested in your statement "Without state support (medicare), the insurance model would be completely broken." Do you care to elaborate?

On a long enough time scale, everyone's risk of catastrophic health failure goes to 1. How do you manage your risk in such a situation? Insurance companies will be forced to extract more from a person over their lifetime than they put out in costs, so what's the point of insurance?

 

[Proton Soup]

Further, he ignores the best part of Obama's bill- the focus on evidence based medicine. A planned push for empirically successful treatments is the only way to bring down costs AND improve outcomes.

don't we already have empirically based medicine? don't injury lawsuits lead to development of protocols?

 

[WhoWee]

I'm not trying to challenge everything you've posted.

But, when you posted
"Without state support (medicare), the insurance model would be completely broken."

It was not obvious what you were trying to say. Now to clarify, you've stated:

On a long enough time scale, everyone's risk of catastrophic health failure goes to 1. How do you manage your risk in such a situation? Insurance companies will be forced to extract more from a person over their lifetime than they put out in costs, so what's the point of insurance?

I'm still not connecting how Medicare - a Federal Government program - prevents the insurance model from being broken? As for the insurance model itself - I'm not certain insurance was ever intended to pay all of the costs of health care. Insurance doesn't work that way in any other industry - does it?

Does your car insurance pay for tune-ups, oil changes, brake jobs, and tire rotation? Does your homeowners insurance pay for light bulbs, paint, and lawn care?

Why should anyone expect their health insurance to pay for doctor visits, blood work, and prescriptions?

Insurance is typically purchased to guard against catastrophic loss - that is the insurance model.

As for consumer choice, you (or your employer) typically choose an insurance plan based upon network - each with doctor and hospital choices.

 

[ParticleGrl]

I'm still not connecting how Medicare - a Federal Government program - prevents the insurance model from being broken? As for the insurance model itself - I'm not certain insurance was ever intended to pay all of the costs of health care. Insurance doesn't work that way in any other industry - does it?

You are missing the point, this isn't an issue of a deductible. Insurance works by spreading the risk of catastrophic payment over many people. However, as we get older, our risk of catastrophic failure heads to 1. IF every single person insured will have a catastrophic failure at some point, than the insurance company cannot hedge that risk. The only way to turn a profit is to extract from every person enough money to pay for that catastrophic health failure (at which point, why be insured?). The alternative is to simply not insure the elderly. However, the elderly are the biggest consumers of actual medical services, if they weren't insured and couldn't afford treatment, the healthcare industry would collapse.

What does medicare do? It removes the elderly from the risk pool. Since the majority of people will have their catastrophic health care costs late in life, the risk of catastrophic failure amongst the remaining pool is much lower.

As for consumer choice, you (or your employer) typically choose an insurance plan based upon network - each with doctor and hospital choices.

Yes, but this small amount of choice, far removed from the actual product (health care procedures) does not make for an efficient market. Before people advocate market remedies, they need to ask themselves "is there actually a market?"

don't we already have empirically based medicine? don't injury lawsuits lead to development of protocols?

Most of the US medical data is disjoint and hard to put together. By creating a national medical database, the health care bill will create a massive amount of data. A large database of treatments and outcomes will give us a chance to do empirical medicine on an incredible scale, which will drive down costs.

As an example, there is currently no statistical evidence that spinal fusions alleviate back pain, but we've been doing them for decades. That is a lot of waste.

 

[WhoWee]

You are missing the point, this isn't an issue of a deductible. Insurance works by spreading the risk of catastrophic payment over many people. However, as we get older, our risk of catastrophic failure heads to 1. IF every single person insured will have a catastrophic failure at some point, than the insurance company cannot hedge that risk. The only way to turn a profit is to extract from every person enough money to pay for that catastrophic health failure (at which point, why be insured?). The alternative is to simply not insure the elderly. However, the elderly are the biggest consumers of actual medical services, if they weren't insured and couldn't afford treatment, the healthcare industry would collapse.

What does medicare do? It removes the elderly from the risk pool. Since the majority of people will have their catastrophic health care costs late in life, the risk of catastrophic failure amongst the remaining pool is much lower.

Every single person does not have a catastrophic failure and subsequent health care insurance claim - do they? Some people die in accidents, others have strokes or heart attacks and die instantly, some people never get sick and die of old age - don't they?
With Medicare, it's not that simple. First, Part A is funded through payroll deductions over a worker's life. Part B has a premium - for 2010 enrollees it's $110.50 per month unless income exceeds $85,000. Part D is the prescription benefit and Part C is Medicare Advantage (MA). The MA combines A & B, and can include Part D (MAPD). Medigap is the insurance that (basically) is designed to pay the 20% cost share that Medicare leaves behind (no prescriptions - need a Part D). Worth mentioning, Medicare covers only the first 100 days in a Skilled Nursing Facility.

If a beneficiary needs to be placed in a nursing home - they are on their own. Once their assets are depleted (house and savings/investments) most are dependent on Medicaid - a funded by Federal and State contributions. The insurance designed to cover is named Long Term Care Insurance. LTC protects assets.

Then, we need to consider the reality of death, some people purchase life insurance - as everyone dies (either natural or un-natural causes) - that is certain.

 

[ParticleGrl]

Every single person does not have a catastrophic failure and subsequent health care insurance claim - do they?

No, but the risk heads to 1, because nearly everyone does. For this argument, the details of medicare aren't important- what is important is that medicare reduces the risk to insurance companies to manageable levels.

Then, we need to consider the reality of death, some people purchase life insurance - as everyone dies (either natural or un-natural causes) - that is certain.

Thats why many life insurance policies are term- they don't last for life. Similarly, many whole life policies are accidental death and won't cover natural causes. This reduces the risk, and creates a pool of premiums that can help pay the cost of whole policies. Even still, the premium on a whole policy escalates rapidly in the later years.

 

[mheslep]

This is all basic, obvious stuff.

No, it's just stuff. Are you really so convinced that health care is so singular? Consider that other fields have asymmetric information and critical needs challenges, yet have been long served by markets and been studied ad nauseum in the economics literature. Your posts in this line suggest none of this is true without reference, though you've been asked for backup.

 

[WhoWee]

No, but the risk heads to 1, because nearly everyone does. For this argument, the details of medicare aren't important- what is important is that medicare reduces the risk to insurance companies to manageable levels.

Thats why many life insurance policies are term- they don't last for life. Similarly, many whole life policies are accidental death and won't cover natural causes. This reduces the risk, and creates a pool of premiums that can help pay the cost of whole policies. Even still, the premium on a whole policy escalates rapidly in the later years.

Before we go any further, I'm going to disclose (again) that I'm very active in the insurance industry. I have substantial industry experience and familiar with all forms of life, variable annuity, accident, and health policies. I have extensive Medicare/Medicaid experience.

Medicare really doesn't reduce the risk to the insurance company. A Medigap plan covers the 20% that Medicare doesn't pay - the risk exposure to the insurance company remains 20% regardless of the claim amout. If a beneficiary pays $100 per month for a Plan F and incurrs $5 million in bills - the Medigap insurance company will pay $1,000,000 - Medicare doesn't cover a penny of this 20%.

A Medicare Advantage plan pays INSTEAD of Medicare. Medicare pays a fixed amount (last figure I saw was $849.95) per month - about $10,000 per year - to the insurance company. The insurance company is responsible for all of the costs as per their Summary of Benefits that describes the beneficiaries co-pay and cost sharing requirements. The beneficiary (has typically already paid for Part A through payroll deductions) pays a Part B premium (new enrollees $110.50 per month) to Medicare.

Basically, Medicare has collected Part A payments over time and continues to collect Part B premiums - then re-insures under Part C.

As for life insurance - I'm not sure what your point is -term coverage typically has a lower premium.

 

[nismaratwork]

No, it's just stuff.

What does that mean?

 

[mugaliens]

A Medicare Advantage plan pays INSTEAD of Medicare[/B]. Medicare pays a fixed amount (last figure I saw was $849.95) per month - about $10,000 per year - to the insurance company.

Interestingly, that's almost identical to what my brother pays for his family medical insurance (him, his wife, his son). Is that Medicare Advantage plan for one person, or a family?

 

[WhoWee]

Interestingly, that's almost identical to what my brother pays for his family medical insurance (him, his wife, his son). Is that Medicare Advantage plan for one person, or a family?

All Medicare plans are individual. The premium could exceed that amount - it's an average. To clarify a bit, if the amount of the insurance contract with Medicare exceeds the amount Medicare agrees to pay - the beneficiary would pay the difference. For instance, if the monthly contract premium is $870 and Medicare agrees to pay $850 - the premium requirement for the beneficiary would be $20 - the amount can be deducted from the Social Security check or billed via coupon book (typically). These Medicare Advantage (MA) plans can offer hospital A and medical B or they can include Part D and be labeled "MAPD". The premiums on MAPD's typically range from $0 to $100 per month - varies by county. Some plans will actually reduce the Part B premium up to the full amount. This means the beneficiary would receive more money in their Social Security check. Other plans might cost more than $200 per month - again, it varies by location.

If $10,000 sounds expensive - it actually tracks from the groups approaching retirement age with comparable coverage.

 

[ParticleGrl]

Consider that other fields have asymmetric information and critical needs challenges, yet have been long served by markets and been studied ad nauseum in the economics literature.

Please, give references to well functioning markets with little consumer choice,large asymmetric information, etc. All of the economics papers I've read (largely theory papers) suggest these are impediments to market efficiency. In the extreme case, the market ends up a market for lemons, and the bad drives out the good (see Akerlof's famous paper).

Before we go any further, I'm going to disclose (again) that I'm very active in the insurance industry. I have substantial industry experience and familiar with all forms of life, variable annuity, accident, and health policies. I have extensive Medicare/Medicaid experience.

Thats fine, but let's not bog this down by too many details, and make it simple. Surely you agree that elderly are extremely risky to insure? Surely, you agree that the state's agreement (via medicare) to cover 80% mitigates this risk?

With your insurance experience, if you had to underwrite a (non-state subsidized) plan for an average 65 year old (say an 80/20 plan, to be concrete), what premium would you have to charge? How quickly would the premium have to grow, year by year, to eat the risk?

 

[nismaratwork]

I'm enjoying this very much, but if I might ask for the sake of clarification: WhoWee has a background in Health care/Insurance.

@Particlegrl: You sound like you're coming from the macroeconomic theory angle? I'm curious, not because I'm questioning credentials or anything like that, but it's rare to see two people with serious knowledge of this kind of subject... one practice, one theory. I just want to be sure that's the case, and I'm not missing even more than I know I already am.

 

[WhoWee]

Surely you agree that elderly are extremely risky to insure? Surely, you agree that the state's agreement (via medicare) to cover 80% mitigates this risk?

With your insurance experience, if you had to underwrite a (non-state subsidized) plan for an average 65 year old (say an 80/20 plan, to be concrete), what premium would you have to charge? How quickly would the premium have to grow, year by year, to eat the risk?

It does cost more to cover an elderly person. I should have been more descriptive when I posted that premiums track to this level as people reach retirement age.

What I meant was a relatively health non-smoking male, age 64, taking no meds and with comparable deductibles and co-pays would expect to pay between $600 and $800 per month. Worth mentioning, many of the MAPD plans include prescription coverage.

I think the details are important and I did a quick comparison to post.

Accordingly, I just went onto a (competitive) major carrier site and entered these same details. To stay out of trouble on marketing rules and disclosures, I won't name the carrier or the location AND I must stipulate this is NOT to be considered an offer to sell insurance.
The 80/20 (In-network - 60/40 out of network) plans offered consistent $35 primary/$50 specialist co-pays and a range of deductibles: from $0 to $1,000 on prescriptions and from $1,000 to $6,000 on medical.

The $0 deductible prescription plan with $1,000 medical deductible priced at $967.68/mos and the $0 deductible prescription plan with $2,500 med deductible was priced at $637.28

By comparison, the $500 deductible prescription plan with a $3,500 medical deductible is priced at $495.47 per month.
The "most affordable" plan was the $1,000 prescription deductible (6 office visits per year max) and a $6,000 medical deductible is priced at $349.99 per month.


Next, I checked the same carrier for a Medicare plan in the same zip code.
Premiums ranged from $61 to $291 per month and included prescription coverage. The medical deductibles are $0, but the hospital deductible on both the $61 plan and the $291 plan mirror original Medicare at $1,132 for days 1-60, then $283 per day from days 61-91, and $566 per day from day 91-150 (under original Medicare beneficiary pays 100% days 151 and beyond). Both of these plans also have a $310 prescription deductible. Doctors are 20% same as orig Medicare.

The $71 premium plan featured a hospital co-pay of $220 per day for days 1-8, a $15 primary doctor co-pay and $35 for a specialist.


Last, I pulled a Medigap Plan F (different carrier with a competitive rate) in the same zip code and no prescription coverage - only the 20% that Medicare doesn't pay - along with the hospital coverage. Plan F is the most comprehensive of the supplement plans. The premium would be $144.55 per month.

--------------
To answer you question - these are real costs - concrete.

Now, we also have to remember that Medicare sets the reimbursement rates and has to approve every aspect of these plans before they can be offered. These plans are also subject to state regulation.

Does Medicare mitigate the risk?
To the insurance carrier - NO
To the beneficiary - YES

As for premium increases - it varies. My best guess is about $25/month average across the board from 2010 to 2011 plans.

The next level of details to consider would delve deeper into the particulars of coverage. Many MAPD's include health club memberships, some dental, and some vision. Then, quite a few dual eligible plans (people with both Medicare and Medicaid) include transportation and very low drug costs ($1.10 to $6.50) with no "donut hole".

 

[mheslep]

Please, give references to well functioning markets with little consumer choice, large asymmetric information, etc.

As to examples of markets with asymmetric information, where to begin? Car maintenance and repair - the asymmetry between the consumer and the mechanic. Financial investments: buying and selling of securities and the like - the asymmetric between you and the pros. Yes the asymmetries in these situations present challenges to the market, but consumers have found multitudes of solutions to deal with them - financial advisors, warranties, word of mouth in the community. I don't accept the notion that the public has little choice with respect to doctors and hospitals. Emergency needs are a small portion of national health expenditures.

All of the economics papers I've read (largely theory papers) suggest these are impediments to market efficiency. In the extreme case, the market ends up a market for lemons, and the bad drives out the good (see Akerlof's famous paper).

Yes conditions as described by Arrow and Akerlof no doubt create challenges for the market, though Akerlof is http://resources.metapress.com/pdf-preview.axd?code=h3h8530156276515&size=largest":

It is shown that the economic literature is divided on whether a lemons market actually exists in used vehicles.

In any case it certainly does not follow from Arrow/Akerlof that working markets under such conditions simply can not exist as asserted above as a matter of fact:

Market based healthcare solutions are based on a myth- there is no market for healthcare. The demand for life-saving care is completely inelastic. Information is completely asymmetric between doctor and patient, and in an emergency, patients can't chose which state, hospital, provider, etc, they end up with.
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Most of what I listed are basic facts of the system.
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Changing the price in no way changes demand

Also: I grant insurance doesn't make sense in all situations especially for chronic illnesses, and the market based reforms on the table recently all prefer risk pools over insurance for those cases. But I can't fathom how one can be aware of and cite the case of life insurance on the one hand where the eventual end is certain, and then imagine that somehow insurance can't deal with high risk illnesses in the case of health care.

 

[ParticleGrl]

Car maintenance and repair - the asymmetry between the consumer and the mechanic.

A market that historically has been ripe with fraud and inefficiency. Everyone knows the anecdotes of shady mechanics. What empirical studies demonstrate this market is actually efficient? Also, its different in a key way- health care is the only thing I know of where the demand is so inelastic. This breaks important market principles.

Financial investments: buying and selling of securities and the like - the asymmetric between you and the pros.

There is a huge difference here. The biggest participants in the market are professionals. Hence, the symmetry of information between the largest players sets the price for everyone.

Even still, some have argued that asymmetrical information (between major players like Goldman and AIG) and fraud in the derivatives market has been largely responsible for the present financial crisis. See anything recent by Galbraith. I'm not sure I buy it, but at the same time, it seems crazy that AIG took the market position it did with swaps.

Yes the asymmetries in these situations present challenges to the market, but consumers have found multitudes of solutions to deal with them - financial advisors, warranties, word of mouth in the community. I don't accept the notion that the public has little choice with respect to doctors and hospitals.

Lets agree to disagree for now on the financial market (which I consider to be the purest market economist can study), and focus on car maintenance and repair- why should we believe this market is fair or efficient?

 

[mheslep]

...A market that historically has been ripe with fraud and inefficiency. Everyone knows the anecdotes of shady mechanics.

Yes it is in the nature of people that some of them are shady. Some economic approaches accept this as a given, others, not so wise in my view, attempt to anoint some of the same fallible people and put them in charge of the daily lives of the rest, because, well, they might be shady.

What empirical studies demonstrate this market is actually efficient?

The tactic of asking for references to disprove claims, while providing none, won't move the discussion along.

... and focus on car maintenance and repair- why should we believe this market is fair or efficient?

The useful question is compared to what? Government run car repair? Look at what the repair market, such as it is, currently does: repairs nearly any imaginable car problem, on over a thousand different make-model combinations, generally within a couple days, across the entirety of the US, from typically several hundred to a couple thousand dollars. Among the tens of thousands of mechanics, we'll have some combination of crooks and innocent incompetents ( I can say from being in the business as a teen that the problems are overwhelmingly due to incompetence). On top of that we have tens of thousands of auto parts stores for the do-it-yourselfer, fierce competition among vehicle manufacturers for the best warranties, and now in addition we have the internet, Craigs list, etc, etc.

 

[nismaratwork]

As to examples of markets with asymmetric information, where to begin? Car maintenance and repair - the asymmetry between the consumer and the mechanic. Financial investments: buying and selling of securities and the like - the asymmetric between you and the pros. Yes the asymmetries in these situations present challenges to the market, but consumers have found multitudes of solutions to deal with them - financial advisors, warranties, word of mouth in the community. I don't accept the notion that the public has little choice with respect to doctors and hospitals. Emergency needs are a small portion of national health expenditures. <Snip>

re bold especially: I have to agree with this, although I think consumers are generally still playing catch-up. I think airlines and hotels are an example we're not disgustingly familiar with thanks to William Shatner and a dozen other sites like the one he hocks. Those are a fine example of a way that consumers literally bypass the asymmetry and use it to utterly turn the tables. Some don't use this service, but it's not for lack of it being on offer.

Health-Care though... you're in a fairly unique situation with your health, don't you think? It may be that those inequalities can't be allowed to fester until consumers are allowed or figure how to "catch up". In addition, at this point, it doesn't seem as though the consumer can do much to effect the market... it is HAPPY to dump your sick tush. You're also very vulnerable when seriously ill, and this isn't a hotel or a sport... you take care of yourself or die early/live badly.

To be blunt, Health Care is unlike most markets in terms of impact on the individual and family, and life in general. Let's be blunt... it can be the difference between living or dying, and the quality of life. I'd like to see a comparison of the Q-TWIST say, of a given cancer patient on various types of health insurance, and none. Compare that to other consumer "choices", and I'm not sure it's something that's so easily grouped.

Health, Food, Shelter, Comfort, Company, etc... some measure of ALL this is needed if you want a decent life. When my car breaks down, it may ruin a lot of things, but it doesn't make me suffer and die.

 

[ParticleGrl]

The tactic of asking for references to disprove claims, while providing none, won't move the discussion along.

We both agree asymmetry of information is a difficulty for a market.

You suggested that in the specific case of car maintenance and repair, this problem is solved, I'd like some positive proof of this. I'd argue its not solved- some proportion of crooked dealerships stay in business.

The useful question is compared to what? Government run car repair?

Its not about comparing to the government. If we look at the main topic we are discussing (health care), the government is obviously more efficient because it does not have to evaluate risk (a large part of insurance). http://www.cbo.gov/ftpdocs/99xx/doc9924/12-18-KeyIssues.pdf.

Its about the efficiency of the specific market- over time do crooked dealers go out of business and honest dealers prosper? In an efficient market, this is what happens. In a market-for-lemons situation, the crooked dealers will thrive and drive out the honest dealers. You are making a positive claim- the market has solved the asymmetrical information problem inherent in car repair.

When I have time to type up some mathematics, I'll lay out the broader case for health insurance risk being dramatically reduced by medicare.