Aaron,

Since when did the KTM say "health insurance doesn't work"? What do you mean by "work"?

Pray tell, what does "work" mean to you?

KTM,

You wrote the following:

"The KTM is however very interested in the issue of healthcare costs and he doesn't believe that healthcare insurance is going to the solution to rising healthcare costs going forward."

I don't think I paraphrased you incorrectly when I say that

"With rising healthcare costs, something has to be done. Some people have suggested that health insurance doesn't work ... it is the ignorance of the economics of health insurance that leads one to conclude that health insurance is not a workable solution"

If there is any disagreement on my explanation of the economics behind health insurance, I recommend that you read up what I've cited. Perhaps the economics guru Bart can chip in to clarify too.

Aaron

I thought that KTM was saying not that insurance doesn't work simpliciter but that in addressing the issue of "our looming healthcare costs", the "reasonable approach" is "not simply a matter of increasing healthcare insurance coverage or getting more people to sign up for healthcare insurance."

But all that may be a real distraction: presumably you don't think (right?) that government regulated but privately provided health insurance is the one and only way to tackle rising healthcare costs.

It would also be helpful if we have a better sense of just how much and in what areas have healthcare costs risen.

Actually, I don't quite see your point.

If I am right you are saying in your second part that if overall health care costs is reduced by targeting preventable diseases, insurance could reduce their premium level. Hence, people pay less and will be happy?

Does this not contradict your first part about how ability for insurers to "price-target" make it bad for the 'market'?

That part can understand. If I am insurer I am more than happy to give discounts to people who quit smoking, go for runs, lower weight - pass those costs to those who are 'fatter', 'smoke more' etc - and they will be less willing to take insurance (lucky me - those unfit people) - if there is a proven scientific link of course. In that case, cost will reduce for people who stay fit and increase for lazy bums.

Isn't that price-targeting?

So are you saying price-targeting is a 'problem' in your first part and then arguing for it later on?

Or that price targeting is okay if people go for jogs, but not okay if people are born genetically healthier?

I might sound as if I am sarcastic. hehe. But i really don't understand.

I must say I fail to see how this is an article on health insurance. The criticisms you make (imperfect information, adverse selection and moral hazard) are equally applicable to many forms of insurance (eg. car insurance)

There are some characteristics of healthcare that make it particularly difficult to apply insurance to, but I don't think you've identified them.

Hui Chieh,

It would certainly be helpful if more information is available on what costs are actually rising. However, I think that rising cost is a natural phenomenon and it might not exactly be that easy for the government to cut that down.

Therefore, as I've opined, the best solution is for the government to regulate the insurance industry but let private insurers provide insurance cover for the average folk. It is beyond the ability of the government to provide anything more than the very basic health care for everyone. If the government wishes to step in, they should step in only for extreme cases where insurance companies cannot be persuaded to provide cover.

Ben,

Price targeting is a possible loophole that naturally works against the favour of the ordinary Joe but it can be worked to the person's favour in certain cases, especially for preventable diseases. As for those diseases that cannot reasonably be prevented, the question is whether is it fair to the average Joe for insurance companies to employ means to "discriminate" against him, such as using medical advances to find out more about his medical history.

Siu Taur,

Perhaps the same criticisms are applicable in other cases. I believe that there might be other sticky issues in healthcare but my interest lies in explaining the fundamental issues that you mentioned in an easy to understand way. As for the other issues, I would appreciate an industry expert explaining the finer issues.

I think that we need more data on exactly just how much and in what areas have healthcare costs risen because it is entirely possible that most of the increases are in non-essentials, or more elaborate end-of-life options, or really expensive new procedures with low chances of success, etc., while at the same time, costs of the more run of the mill items have either not increase much or even decreased (taking into account general inflation). Possible--not that I have any proof. Without the crucial information, it's hard to see the exact nature of the problem.

Under such circumstances, proposing solutions seems too much like shooting at a moving target in the dark. At the very least, we need a firmer grasp on whether the cost increase is due to the fact that it now costs more to get the same treatment, or because new treatments that cost more are now available.

Other than that, the only firm data point is that the population is aging--whether we like it or not, most of us are going to end up living longer than our parents' generation. That in inself imposes healthcare implications--not necessarily because the cost of treatment (taking inflation into account) have risen per se, but because there are many more years in which we might need various treatments (those treatments being themselves the cause of our increased longevity).

Other than that, I am actually in agreement with you that there is definitely more scope for privately provided health insurance in Singapore--though, like Siu Taur, I believe that the considerations you raised are not unique to healthcare.

Incidentally, Tim Hartford's book actually has a rather positive evaluation of Singapore's healthcare system. He seems to think that our "key-hole" and pragmatic approach approaches his ideal. Any thoughts on that part of his book?

Lets not delve into data first.

The economic principle must be sound to begin with, which I am afraid Aaron's piece is not. Firstly, Aaron's argument of not allowing insurers to price-target is too simplistic. It is a well known result that such a move might cause the insurance market to close down due to the adverse selection problems.

The argument MOH turn price-targeting to favour common folks is completely beyond me. What Aaron is saying is that everyone should behave properly, take care of health, and claim less, so that we all can have lower premiums. Is this reality or fantasy? If I can expect others to pay for my treatment, why should I take care of myself? It is an argument with the tail chasing the dog (sorry for being harsh here).

Health insurance can work, but it might require state intervention. The state, through is powers of compulsion, can achieve some outcomes that private sector insurers cannot.

Bart,

I'm not saying that we disallow price targeting. What I'm saying is that the extent of price targeting has to be regulated else those who really need insurance will not be insured.

I am not saying that the government is able to regulate such that people will take care of their health. What I'm saying is that the government can use incentives to achieve this effect. You are right in saying that if one can expect others to pay for their treatment, there is no incentive for them to take care of themselves. The question now is how much incentive (or disincentive) will it take to get people to take care of themselves?

By the way, I'm interested to know the kinds of state intervention you advocate.

A little from the left-field: this Business Week article seems related for those who are interested. Excerpt:

For employees at Clarian Health, feeling the burn of trying to lose weight will take on new meaning.

In late June, the Indianapolis-based hospital system announced that starting in 2009, it will fine employees $10 per paycheck if their body mass index (BMI, a ratio of height to weight that measures body fat) is over 30. If their cholesterol, blood pressure, and glucose levels are too high, they'll be charged $5 for each standard they don't meet. Ditto if they smoke: Starting next year, they'll be charged another $5 in each check.

Clarian has been making headlines for its aggressive and unusual approach to covering escalating health-care costs. Rather than taking the more common step of giving employees incentives for merely participating in its wellness programs, such as joining a smoking cessation group or using a health coach, Clarian is actually measuring outcomes. And unlike most employers, it is penalizing workers for poor health instead of rewarding them for taking healthy steps.

"The question now is how much incentive (or disincentive) will it take to get people to take care of themselves?"

You seen cigarette prices lately?

Aaron,

I am not advocating state intervention, please.

I said that some outcomes can be achieved by the state but not the private sector. Britain's NHS is one such example. Every person is a participant in the national health insurance. The insurer (state) does care about the medical history of a person since every one is in. The insured person too does not need to need to know his own medical condition since he cannot opt out. Adverse selection is remove by design, this is akin to the "ignorance" that you mentioned since any knowledge of a person's medical history does not change the outcome.

The state can do so only because it can force every one to be in, something the private sector cannot. The price is a massive bureaucratic intervention from the state. I posted the same comments over at KTM. The society would have to weigh whether this price is worth it.

Once again, I apologise for being harsh, but to write a piece like this requires some deeper knowledge of the issue.

"to write a piece like this requires some deeper knowledge of the issue."

You got the principles right, but the axioms and assumptions are all over the place. Dont want to sound rude, but you should really stick to the light non academic issues. There are not many people in the net who can pull these type topics off, not even Bart or for that matter YB. Only maybe Eli or the brotherhood folks, but even they wouldnt take a bite at this fish too many bones.

Pls take this a constructive feedback. I mean well. I really do.

Dr K,

You are spot on. Healthcare economics is a field that requires specialist knowledge, years of research and understanding. Other than speaking in some general principles, it is not a topic I dare to write about.

Dr K,

Do you mean elaborating when you state," axioms and assumptions are all over the place." for this article?

Thanks,

Bart,

Do you not think Aaron is speaking in some general principle? If not, how so?

Dr K,

Even if Aaron does not "pull this article off" , I do think he has a point of view, and obviously, others who comments on his articles are not necessarily healthcare experts and also have their own point of view.

What deeper knowledge do you think someone who write this should have?

Thanks,

Nice post. I really enjoy your style. BTW, I run a Health Insurance Article Directory and if you have some articles for distribution, you are very welcome to post them.

From a textbook (Canada Health Law and Policey, Downie, Caulfield, and Flood, Lexis Nexis 2002.)

"The concept of life, disability and supplemental health insurance operates on a principle of equity by separating and pooling individuals by degree of risk. The cost of insurance is then based on the sharing of risks among a class of insured based on acturial data related to lifestyle, family histories, medical data and demographics.

...

From the perspective of the insurance companies it could be argue that data from genetic testing is merely an expansion of the existing data used to classify individuals according to risk. Furthermore, those in the insurance industry fear that the system as a while, which is based on a level playing field of information, would suffer if individuals would not required to submit the results of genetic testing. There is, they claim, a danger of "adverse selection."
...
The unequal knowledge distribution would skew the bargaining relationship ... would reduce the capacity of insurance companies to keep costs down by spreading risks."
(p. 453, footnotes omitted)

I still don't see your point. If price targeting work in your second half to "reduce costs" it is going to work in your objection to the first half...

Besides, I think the MOH and insurers are just fine tuning existing "discrimination" based on lifestyle in order that the insured will keep to the side of their bargain.

And on the writing about issues part, I think one can write on an issue on any level.

K and Bart, with all due respects, this is not a journal, specialist or generalist, but a group blog with bloggers hankering after reason, gosh, saying that for the second time in so many days. Come on, don't start flashing or asking people to display credentials and expertise here. It is bordering on bad taste. Every issue, bony fish or not, is open to the scrutiny of public opinion, however amateur. So let's focus on the issue and the arguments and the gaps, not the person.

"K and Bart, with all due respects, this is not a journal, specialist or generalist, but a group blog with bloggers hankering after reason, gosh, saying that for the second time in so many days. Come on, don't start flashing or asking people to display credentials and expertise here. It is bordering on bad taste."

I beg to disagree. Bart has a valid point and Dr K concurred with him. And just bc they do, it is in "bad taste."?????????

Health Management is a not called a science for nothing. Even medical practioners think thrice abt trying to gobble down this topic bc of its complexity - qualitative and quantitative.

IMO, bordering. And not because Bart has a valid point and K concurred with him, because they and you are practically asking him to NOT write on this topic, silencing him, if he is not trained in 'health management'. Well, bring the professional policing somewhere else, because this is a blog not a journal. Everything we write here has a SCIENCE behind it, but we write as amateurs and whack each other as amateurs. Whack Aaron's arguments all you want, and please do, as I am learning a lot from the exchange. What is particularly distractive and destructive is when folks start flashing or calling for credentials, and the debate degenerates into whether Aaron is 'qualified' to speak in the first place or not. You are interrupting my learning. Bart, please, you started this whole rubbish about expertise, would you get back on the subject matter and kill this bony red herring?

ben,

I think it is probably my fault for not making clear that the first part is not my objection to 'price-targeting'. I was just explaining that insurers will engage in 'price-targeting' because it is rational to do so. However in the process of doing so, several disadvantaged groups end up not being able to get insured.

My real opinion comes in the second part where I opine that while 'price-targeting' is something negative, it is perhaps possible to mitigate or even try and work it to the favour of the insured. Hope that this explanation makes things a little clearer.

Bart,

Thanks for the information on the NHS. As you said, I do not have specialist knowledge and what I've written is based on the general principle of asymmetrical information. I hardly think that I went beyond that general principle. I may have not understood the finer details as well as you have because I don't have your extensive background in economics but I think that shouldn't be a reason to stop people from commenting.

What you are saying now is about the same as what Goh Chok Tong said to Catherine Lim years back. I don't think that you need to be a politician to discuss politics, and by the same token, I don't think you need to be an economist to discuss economics. If we systematically bar people who are not "specialists" (I deliberately put in the quotation marks because the definition of specialist can be highly contentious too) from commenting, I think that will create a very dysfunctional society.

Hehe... Thanks for clarifying.

"My real opinion comes in the second part where I opine that while 'price-targeting' is something negative, it is perhaps possible to mitigate or even try and work it to the favour of the insured. Hope that this explanation makes things a little clearer."

Perhaps one can make a good case for that. But let me try to explain why I don't see that logic.

From how I understand it, insurers are inefficient because they know less about people than people know themselves.

People can have results to medical tests, pick up smoking, have risky hobbies - without insurers knowing. They can also know that their parents have cancer, and that they are predisposed to it. The more information an insurer has of my risks, the less "beneficial" it is for me to take insurance. It is good for the insurer if "my knowledge" is freely available to them.

To ask my question perhaps more clearly : How then does "price-targeting" benefit me? I still don't see how "price-targeting" can be turned on its head to benefit the insured...

ben,

You can also furnish your insurer with information, such as your IPPT Gold award, BMI data, excellent yearly medical check-up results, or even the number of times you consulted a physician in a year and what did you consult the physician for. If the insurer has reason to believe that you are actually quite healthy and is very unlikely to make claims, it is likely that they will give you some form of "reward" because it is not in their interest to have you fail IPPT, have atrocious BMI data etc. In fact, the longer you provide evidence of good health, the more willing insurers should be to give you some incentives to keep it that way.

"In fact, the longer you provide evidence of good health, the more willing insurers should be to give you some incentives to keep it that way."

You are saying price-targeting works for ME when I am healthy and I don't have to care about the rest of the people. Granted. But lets say I stop getting IPPT gold how?

Aaron and all,

I apologise again for ripping Aaron on this, I agree I might have caused offence. But I do value sound and rational discourse. Even as we talk in general principles, we need to be sound in the logic.

Aaron asked for people to behave themselves, take care of their health, make less claims, so that premium can fall, and all can afford insurance. Is this a realistic assumption?

Aaron said that ignorance on the part of insurer and insured would make the system more viable. It is almost like asking consumers and insurers to pretend they are naive when buying insurance, so that buyers are willing to buy and sellers are willing to sell. Let's all pretend we do not know our health risk, and the problem of asymmetric information and insurability will disappear.

I understand this is not a journal. Even at this level of generality, I hope you can agree with me the two basic lines of reasoning are highly flawed.

I fully appreciate Aaron's good intentions in raising the issue. I am sorry for being harsh.

Sorry for the short comment above - probably misleading:

What I am trying to say is that this means I cannot engage in some risky behaviors without my insurance knowing - its only when i can engage in risky behaviour that insurance benefits me - what i am doing will be to benefit him.... if i give him my BMI, IPPT score...

So how does price-targeting "benefit" me in that instance?
It only "benefit" me if I am super healthy, keep to the "straight" life. Is that a benefit?

But what I think we usually mean by benefit ("free rider") - isn't that taking risks without the insurer knowing?

ben,

If it can potentially work for you, it should be able to potentially work for most people.

If you stop furnish evidence of good health, then it's up to the insurers whether they think that there's an increased probability of paying a huge claim when you stop getting IPPT gold and start having passes instead. Maybe you might be end up qualifying for a lesser incentive relative to those who still get IPPT gold but you will definitely have more incentive than one who always go RT.

However, as a caveat, I think that to determine probability would require alot more information and perhaps some modelling, and that is honestly beyond me.

Hehe

So fast. Is that a benefit really different from price-targeting by putting me in a different risk group?

And it works very well for the insurers - not for the insured - I think....

It is price-targeting ain't it?

Bart,

Don't worry about it. I'm not exactly offended, just a little bewildered. Perhaps I might have made some pretty strong statements giving the illusion of expertise on the matter, and I apologise for that.

And to take on both your points, firstly, I think people will be willing to take care of their health if there are incentives to do so. The question is what kind of incentives and what is the cost of doing so. I never ASSUMED that people are naturally going to take care of their health. I said that we should consider how to encourage Singaporeans to take care of their health.

Secondly, I am only saying that mutual ignorance is the ideal case. However, I never advocated that insurers and insured to pretend to be ignorant. This is not possible in reality, so I said that the next best solution would be to explore ways of encouraging people to take care of their own health so that insurance can become more affordable if the insured are less likely to make expensive claims.

I hope the clarification helps. And, I appreciate you taking the time to comment as well. I have learned quite a bit by reading your articles and comments.

Hi all,

Just to add some thought to the discussion. In my current scientific work in computational biology and genetics, we are currently generating a lot of data which are trying to map the association of a type of cancer using methods from genetics (genome sequencing of human and population studies).

I foresee that in the next few years, we may be able to provide a robust probability estimate on a patient's susceptibility to a disease based on his genetic data. That means that the insurance companies will have more information and hence it will impact the way how a patient is insured and have implications to how insurance will work in the future.

I recalled listening to the science podcast recently, that the US legislators have set up some legislation on Genetic Discrimination in Health Insurance.

Thought it may be good to add this information to the discussion.

ben,

You are right that it works much better for the insurer. I am unable to think of another way to make health care insurance work better for the insured, aside from legislation, or perhaps, cooperatives like NTUC Income. Either of the two alternatives probably have flaws too, so there's really no good solution. The final solution probably depends on who is better at marketing. :D

Hui-Chieh,

Sorry for responding late. Your link to the Business Week article is indeed interesting. I do not know if it is THE solution but it does help drive down health care costs. Of course, the stick driven approach might not sit down well with Americans, but in Singapore, I think it might work. After all, we are a FINE city. :-)

Bernard,

Thanks for the link. I wonder if Singapore is contemplating regulations on the use (or misuse) of genetic information. That's perhaps out of the scope of this entry but it might make a good topic to explore in another entry. I foresee alot of socio-political issues coming into the fray.

Hehe...

To add a gloss to Bernard's comment, on the european side, one might google European Convention on Human Rights and Biomedicine

http://conventions.coe.int/Treaty/Commun/QueVoulezVous.asp?NT=164&CL=ENG

Apparently, I disagree with the prevailing tendencies and I support the Canada approach, and I think Aaron does talk about that idea some what, where at least one commenter argues that "standards of accuracy and scientific validity regarding the probabilistic nature of genetic testing needs to be developed"

As long as its accurate and 'fair' - I don't mind.

Thanks for the discussion, I think I understand price targeting more. Hehe.

Maybe that is why after quiting smoking, and starting to run, buying insurance just sounds a sad joke to me...

Aaron,

Thanks for taking the courage to write on a broad-yet-specialised and potentially divisive topic. Your contribution has prompted me to revisit an issue which I had pondered on a few years ago (before Mr K took over).

I'd also encourage all readers to take a look at KTM's post for a similarly well-considered counter-argument. The basic thrust of Aaron's post seems to be that health insurance is sustainable with modifications; KTM is more concerned that it may not be sustainable due to rising healthcare costs.

Indeed the moral hazard issue looms large when it comes to insurance, and especially more so in the case of health/medical insurance. I am fascinated and frankly baffled by how some of my peers regularly fall ill once a month (these are males btw, lol) or otherwise declare a sick day simply because someone else is paying for the GP's consultation fee -- still it happens, and I'm not one who insists on knowing why everything happens the way it does; that it does happen is sufficient knowledge for me.

Recent events regarding health insurance claims have tipped the scale towards encroachment of one's privacy almost, imho, which may yet provide a good balance to the moral hazard issue. However, perhaps a movement towards a no-claim discount premium structure a la motor insurance may be more feasible and certainly more carrot-like.

Having said that, it should be noted that the responsbility for one's health lies squarely with oneself. After all, one may be forgiven for thinking that in this island-state, cars are more valuable in real terms than the human body, going by how some fawn over their vehicles these days ;-)

The establishment should not be expected to baby-sit the populace on such matters. That it does indicates one of two things: 1) the establishment does not feel ready to allow citizens to fend for themselves, and somehow feels responsible for over-espousing the work ethic at the expense of one's family, health and friends (more on happiness another time!), or 2) it doesn't really have much to do other than tinker and has a need to be seen to be making an effort to irritate/placate citizens in turn.

That healthcare costs will rise is almost a given. What matters more imho is how to avoid paying these costs as far as possible i.e. prevention is better than cure. While it seems that precious little has been done in this aspect, I'm afraid that it's because little can indeed be done by forces outside the individual. With utmost respect, doctors do not encourage patients to be healthy because they are not paid for such work.

Which brings me to the issue of subsidising of healthcare costs. Ideally it would be based solely on one's condition and not socio-economic status. Yet such an approach would probably mean that the disadvantaged in our society would be left uninsured, and eventually the establishment would have to pick up the tab. Hence the existing Class system. I believe that in the absence of a motivated populace, such a system would be necessary in the short-term, and that any attempt to modify it through reforms such as means-testing would be, shall we say, dimly viewed. In the medium-to-long term, persisting with the status quo without any reform is simply unsustainable.

The writing is on the wall, stay healthy -- because it is worth it in the long term...

Aaron - I have a hard time understanding your main argument. Do you mind summarizing your point of view in the article if you have the time? Thanks!

Aaron,

Again, I apologise for sounding harsh. Hope you don't hold it against an old (pedantic) man like me.

Dear Bart,

You are not old at all! If you are, in a few more years, I will have to call myself an old (pedantic) man too. :D

Sze Meng,

I really should have summed up things in my lead paragraph before proceeding with the rest of the entry. That way, I would not have confused so many people.

Essentially, I think private insurance is a viable solution for address the issue of increasing healthcare costs. The problem with this approach is that private insurance companies, being profit seeking, will attempt to maximise profit (and one of the ways they do it is through price-targeting). The net result is that those who need insurance most won't be able to afford it.

I was thinking that since insurance companies are profit seeking, they will be more than happy if the insured actually takes active steps to lower the probability of making claims. If the number of expensive claims can be lowered substantially, the cost of insurance would probably go down. The argument then here is that policy makers can explore ways to provide incentives or disincentives (see Hui-Chieh's link) to encourage people to stay in shape. Ultimately, the root of the problem isn't exactly spiraling health care cost but rather, people are not taking care of themselves (as I mentioned in the article, many of the top 10 causes of death in Singapore can be prevented). So, we have to attempt to address the root of the issue.

I am not sure if the root cause of the problem of unaffordable health care now is because people does not take care of themselves. Why?

Point A. You argue that the cost of medical insurance does not fully reflect "bad" behaviors because of adverse selection and asymmetrical information problem.
and
Point B. A larger percentage of human beings are more short term than long term thinking with regards to health - i.e. eating the big juicy steak now at the expense of heart attack down the road

So your point B has always remain constant throughout history.

I proposed because expectation of healthcare has risen significantly in the past 100 years in the developed economies. This is the crux of the issue of spiraling health costs, and what HAS really changed in the past decades.

Therefore management the expectation of healthcare is the key focus. However, this is extremely hard if you are telling someone to sustain a lower quality of life because the treatment which is available is too expensive for the insurer or the state to pay for you, especially in the developed economies.

Sze Meng,

You are right in saying that expectation probably has a major role to play as well. I didn't think of that. Better medical technologies have perhaps increased our health care expections. At the same time though, I would think that our transition into a developed economy has resulted in certain types of lifestyle diseases that were previously less prevalent some 40-50 years ago. I think we also cannot discount the probability that better medical technology has somewhat lulled some people into complacency, making them think that medical technology can replace the good old exercise and watching of one's diet.

Hi Spursfan,

Thanks for taking the time to write a long, well-thought out response.

I don't think the government should babysit Singaporeans when it comes to health care but it would benefit the country (not just in terms of lower insurance premiums) if people can be somehow goaded into being more active about managing their own health. At least theoretically, there is likely to be less MCs in the workplace, less waiting times at clinics and hospitals etc. Of course, we must also consider the "chao-keng" factor. :D

At the end of the day, I suppose it's all a matter of priorities. The government deems babies as being important, so we have a generous Baby Bonus package. If one day, the government thinks that health is more important, who knows, we might have a Health Bonus package! :D

Aaron - also, my hypothesis is that at least 80% of the cost paid out by insurance goes to at most 20% of its patient pool who seek long term expensive medical care for long term illness. No data points to support this exactly, but 80/20 principle works very often.

You are right that two drivers in developed economies are 1) better and more costly medical procedures and technology 2)sedentary lifestyle with unhealthy diets.

I think if the axiom of the argument that people are short term in terms of health has always been consistent over history, then the key to determine what is different now (increasing healthcare cost) is to assess what HAS change or what is different over time (aka - drivers 1 and 2).

In my opinion, the problem with health insurance has little do with insurance and a lot to do with health.

As history has progressed, life expectancy has improved through medical science. This is the single biggest reason why cancer is now a major cause of death in industrialised nations. We've beat back dysentry, smallpox and malaria.

People no longer die of "cheap" diseases. They survive and become afflicted with problems that cost more to research and treat. When faced with a threat to one's life, cost-benefit analysis often goes out of the window. You pick solutions where the marginal benefit (to society) is less than the cost. And then dollars are (in some sense subotimally) allocated.

This is why health insurance is a difficult nut to crack. Because on top of the usual adverse selection and moral hazard, you also have the unusual vicious cycle where improved healtcare leads to more expensive healthcare.

Sze Meng,

I understand your point of view, but I'm going to disagree with it from a philosophical standpoint -- just because something is perceived to have 'always remain constant throughout history' doesn't mean that 1) it necessarily is the case, and 2) we ought to do nothing to stop it, while distracting ourselves by attempting to resolve other issues that are mere symptoms of the root cause.

The human race was not always geared towards a sedentary lifestyle; we have many gifts within us that remain dormant, perhaps throughout our lives, due to 'priorities' as the pragmatic phrase goes. Money did not always exist, yet I'm sure that we know of people who seem to be slaves to it. Companies did not always exist; they evolved from the Royal Charter which specified that once the corporation's goals were accomplished, *its tenure would end*. Yet today we witness sloth, greed and waste manifest themselves in each of the respective cases mentioned. These are further accentuated by the tools of modernity i.e. the healthcare system, financial markets, and the unlimited lifespan of the virtual corporate citizen.

It is not so much the structures/institutions that are the monsters to be subdued; rather it is the demons within ourselves that each of us must face and overcome.

To your health ;-)

spursfan - thanks for sharing.

I believe it is the "demons within ourselves" that drive the "structures/institutions that are the monsters to be subdued".

1. Each of us can choose not to go for the super expensive long term medical treatment to improve our quality of life (if necessary) to a certain extent, and save the entire system quite a fair bit of money to be distribute to others for cheaper shorter term medical treatments. However, more individuals will choose to go for that expensive treatment.

2. Each of us can choose to take care of our health by eating right, exercise a lot, and stay healthy. However, more people will rather enjoy themselves now than later, and be less healthy and exert pressure on the healthcare system.

The self-interest that drive our capitalist system always has the double-edged component - which is why government may have to step in IF necessary.

Have a great day! Cheers

What do you all think about this article?

Better red than dead
Healthcare pressures may cause the trend towards free-market capitalism to reverse, with a large chunk of the economy reverting to a socialist system.

http://commentisfree.guardian.co.uk/kenneth_rogoff/2007/08/better_red_than_dead.html

Better red than dead? Seems like not all people who actually live with socialized medical regimes agree: "The Ugly Truth About Canadian Health Care".

Better read & depends,

The two articles are an interesting read, but let's bring the issue closer to home...

Sze Meng,

On your latest points:-

1. I'm not sure if the assumption that more individuals (I'm taking this to mean Singaporeans) will choose to go for that expensive treatment necessarily holds true -- the first question that arises being the quintessential "Why pay more?" If my experience being a Singaporean is anything to go by, the question could even be shortened to "Why pay?" lol...

Which is why private insurance holds its appeal because if one does the sums correctly, a lifetime coverage of $200k for critical illness and disability can be attained with an outlay of about $50k over 20 years, roughly translated to 10% of discretionary income or thereabouts. That the establishment is willing to subsidise for such events is laudable, though arguably unsustainable if one doesn't consider external forces. I believe most people would be loath to go for procedures uninsured for e.g. dental/elective surgery unless they have the means (or credit) necessary for such items. And if their finances fail them, let the banks and financial institutions gobble them up; it's their just reward imho...

2. What concerns me more is the second point -- those not responsible enough to care for their health/employability/family, expect others to pick up the tab, yet not bother to have more than the minimal statutory-required insurance. Sure the establishment would likely subsidise this group more, for motivations alluded to in my earlier comments.

To this extent the establishment has already stepped in, not to mention that to date I have yet to hear of any non-private hospital that is actually profit-making. Without an external element, this could be one battle the establishment cannot hope to win.

Which is why medical tourism offers a ray of hope in the gloom that ageing baby-boomers are fighting tooth and nail to avoid. We have an opportunity to brand ourselves as a place where everything glamourous about healthcare can be provided for -- though it shouldn't be for citizens to enjoy, and with good reason. First, we don't need it. Second, we won't be able to afford it. Third, we'd better find a sustainable solution to take care of those who forsake their health for temporal pleasures (or less pleasurable pursuits such as working overtime).

So come on in, the rest of the world. We have the best healthcare you can experience, at reasonable rates. Splash as much cash as you will; we will take care of you, and when you're feeling better we'll throw in a visit to the zoo absolutely free...:p

I'm banking on this intervention to solve our impending healthcare crisis. Hopefully the establishment shares a similar view, and bears in mind the welfare of the citizens it serves, (yes, even the irresponsible ones) as it embarks on this brave new adventure. Otherwise this well-intentioned project will fall by the wayside, etched in Singaporeans' psyche as yet another waste of taxpayers' hard-earned money, however inaccurately-perceived (or not...lol).

I think we are ignoring/missing Bart's point about state intervention (above) - which I think is very valid for cost cutting and making private insurance work.

He also said on KTM'b blog, as "ideas" for state compulsion

"(1) Everyone must participate, compulsory. It allows the government to get the average health risk of the population and not suffer from adverse selection. Private insurers do not have this power.

(2) Hold a check list of what treatment is covered and what is not. If a patient gets cancer, prescribe exactly what kinds of treatments are allowed. Just allow treatment that works for 90 per cent of the people 90 per cent of the time. The super exotic and expensive procedures are ruled out. I apologise here for not placing a value to life."

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The trouble is the (2) point and who to decide what diseases should be in or out. This is quite controversial when say something "popular" like diabetes might actually be out but some rarer but cheaper and easier to treat disease might be in..

According to this article,

http://www.cmaj.ca/cgi/content/full/164/11/1583

"The most important lesson from the Oregon experience for Canada, or any other industrialized democracy, is that explicit delisting of services is unlikely to produce substantial savings. Governments seeking such savings by opening public debate on what services their health systems should exclude are likely, we contend, to be disappointed. The political paradox of rationing, as we term it, is that the more public the decisions about priority setting and rationing, the harder it is to ration services to control costs. Paradoxically, more discussion about setting substantial limits on medicare's benefit package could actually increase costs, as it did in Oregon, because legislators and health ministers are placed in the precarious position of confronting public pressures not to cut services, as well as to include future services."

In Singapore, "forcing" people into private insurance (losing adverse selection in the meantime), delist costly insured services - might actually work because...of a "strong" government...

Personally I disagree with this approach... but I still think it is a valid point..

"What do you all think about this article?"
Posted by better red than dead /August 10, 2007 9:25 PM

As someone said here:

"we write as amateurs and whack each other as amateurs." Posted by dansong /August 9, 2007 10:50 PM

The key word here is 'amatuers.'

Trust me, you dont really want to know what I think. Bye Bye.

Thanks Ben for highlighting what I said. Insurance can work, but it may have to be done with massive state intervention. The price is a massive bureaucracy, which may in the end piss just about every body off (like NHS), since one way or other, some form of rationing is inevitable (to contain moral hazard).

Point (2) should be left to possibly an independent panel of experts (doctors, acturial accountants, community leaders, economists etc). Diabetes would probably be in since it is by no means an exotic disease (though exotic treatment would be ruled out). Only genetic drugs are given free, on-patent drugs would require top up payment from patients. But there you go, massive intervention already. Is this a price worth paying?

Ben,

On insurance I would maintain that too much has already been done by the establishment, what with CPF, Medishield and the like.

A Sunday Times feature article points out in stark terms the future faced by the baby-boomers should they run out of savings. It is evident that whatever nest-egg set aside through the authorities is hardly enough to sustain the lifestyle the 'boomers' are accustomed to have -- perhaps the establishment would rightfully claim credit for providing such a 'safety net'.

However, to further the extent of such intervention as mentioned by Bart would serve to perpetuate the myth that the people can only rely on the establishment or their appointed medical committees to care for them. Would attracting foreign investment via medical tourism as a source of funding healthcare work better?

Spursfan,

I don't mean to digress but perhaps the establishment has done too many things in a number of areas such that certain things have eventually become expectations. As the saying goes, the road to hell is paved with good intentions. :-)

Spursfan,

"However, to further the extent of such intervention as mentioned by Bart would serve to perpetuate the myth that the people can only rely on the establishment or their appointed medical committees to care for them. Would attracting foreign investment via medical tourism as a source of funding healthcare work better?"

You are right (and wrong). I think the establishment have been trying very hard and from what I googled, seems to be doing very well, with regards to what you are suggesting

http://en.wikipedia.org/wiki/SingaporeMedicine

http://www.biomed-singapore.com/bms/sg/en_uk/index/business_resources/business_spotlight/year_2006/singaporemedicine.html

However, these "profits" and "investments" will be enrich people who are involved and the country at large. How these will go towards funding health care will then depend on how much the government is going to budget. So this is very much about the enlargement of the coffers of the gahmen and the economy as a whole.

What I think is crucial too is that we should look at the side too - which is the reduction of costs of private insurance (if any) which I think is where Aaron and Bart have various suggestions and opinions of.

Why can't we have universal health insurance coverage that work like income tax while maintaining current hospital subsidy sys and allow more private hospital to operate?

For eg after deducting the subsidies, Medishield will not cover the 1st X amt that the patient incurred for a particular illness for eg cancer. It will cover onli 10% for the next Y amt so on and so fore. This can go on until say $20k for eg. afterwhich the insurance will pay for everything above the 20k that the patient had to pay.

Medisave can then be used to pay for the medical bill not covered by the insurance.

Granted that this will might drive up demand for expensive health, hence certain exotic procedure will not included. Treatment in private hospital will also not be included.

More hospitals might have to be built but given our aging pop that is unavoidable anyway.

Ben,

Thanks for sharing the links, which affirms my assumption that medical tourism is a ray of hope in terms of revenue generation in the healthcare sector.

I had neglected to mention another significant contributor to healthcare costs, other than insurance as described in the article -- medical technology. I must admit to having a somewhat dim view of the proliferation of MRIs and the like, which no doubt serve a purpose in terms of diagnostics, but have little to do with actual treatment. That diagnostic medicine is becoming an increasingly popular trend amongst Singaporeans seems to have eluded much of the discussion thus far, much less the non-medical factors (insurance coverage included) that are driving such a phenomenon.

While more seems to have been done by the establishment recently in the development of non-Western fields of medicine such as TCM, it is to be expected that the tendency would be towards 'mainstream' healthcare. I'm not sure whether a comparative study has been done on the relative cost of being