a field guide to health insurance

We're moving, so the Gardener is leaving her job, which means she needs health insurance. Grad school doesn't cover partner benefits (for anyone, not just for queer partners), so it's the private market. Have I ever mentioned how godawful it is to buy private health insurance? Even though we're both young and healthy - and thus privately insurable - it's a damn mess. There's no standard format for the policy description, so it's practically impossible to directly compare plans: ehealthinsurance is the closest I've found to something that will do that, but it's sometimes hard to interpret. For example: the Kaiser plan lists out of network services as "not covered." What that actually means, according to the Kaiser representative I called, is that only emergency and urgent care are covered out of network. Which is good, because insurance that doesn't cover you in an accident when you're out of town doesn't hedge your risk very effectively.

So this is a half-genius idea. Senator Jay Rockefeller (D-WV) wants to create some kind of guide to health insurance via a non-profit trust. The plan is to give letter grades in categories like adequacy of coverage, affordability, transparency, blah blah blah. Great idea. I'd love to have some real reputational data on the insurers I've been looking into. But even more than that, what I need is a standard format for the underlying coverage data. I need to be able to know exactly what I'm comparing to what. Kind of like a nutrition label, but with money.

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I've spent a lot of time on the phone researching this, so let me tell you how to pick your health insurance (on the off-chance that it's useful to one of this blog's 2 readers):

1. Look at the premium, then stop looking at the premium. This is the least useful piece of information available, except insofar as it rules out the plans that are far too expensive for you. More expensive plans are not always better.

2. The deductible. That's how much you have to pay, right off, if you get hospitalized/seriously ill/whatever. It should be an amount that will not destroy you financially, because in fact that's a major reason for having health insurance. But plan that if you get hit by a truck, you will be out this money right away. In fact, if you're the sort of person who keeps money around for emergencies, it would totally make sense to keep that money in your emergency cash account. If you have solid savings and usually use minimal medical care, it might make sense to have a high deductible plan; but you're making a bet that you won't need to pay the deductible.

3. But that's not all! What services have the deductible waived? Many plans waive the deductible for primary care or specialist visits, so if you have a suspicious mole and need to go to the dermatologist, you don't have to pay the full office fee yourself.

Some plans waive the deductible for only a certain number of visits: Anthem Blue Cross has a plan that's directly aimed at young healthy people and covers only 4 doctor visits/year. Basically, you can get a pap smear and go to the doctor to get your strep throat checked out, but anything chronic or weird or hard to diagnose is going to cost you the deductible. So if you take a plan like this, you're essentially betting that you're not going to develop a chronic or complicated health problem: it's good for catastrophic situations and preventive care, but not for things that are in between.

4. Still not all! What you really need to keep your eye on is the Out of Pocket Maximum. Even after you've paid the deductible, you're still responsible for co-insurance. Frankly, I don't really worry about the co-insurance percentage: you end up having to pay between 20% and 50% of your costs other than office visits once you've hit the deductible, but once you're in the hospital or getting surgery everything is so damn expensive that I figure I'll end up hitting the Out of Pocket Max if something like that happens. So. That's what I worry about. And here, you need to be careful. Sometimes the OOPM is listed as an additional amount after the deductible; sometimes it includes the deductible. I looked at an Aetna plan that listed the OOPM as $8000 in network or $12,500 out of network when you figure the deductible in. I figured that would mean the total OOPM - the amount I'd be liable for in a real health problem - would be $12,500, but I called to check and boy was I wrong. The in network and out of network costs rack up separately, so the real OOPM was $20,500.

The OOPM should also be an amount that will not destroy you financially, that you could come up with via credit cards or loans from family or a payment plan from the hospital, and that would not force you to declare bankruptcy. We looked for plans with an OOPM between $3000 and $5000. It would suck to come up with that, but I bet we could. $20,500? Not so much.

5. Lifetime maximum benefit does matter. If something really bad happens (cancer, etc), you can run through a low lifetime max in a couple of years. I would prefer to have a plan with no lifetime maximum benefit, and am actually a little worried about the fact that my grad school health insurance has a $400,000 lifetime max. If I had to choose a plan with a lifetime max, I'd rather have it be over $5 million.

6. How much do you hate referrals? If you really hate them - if they keep you from going to specialists because you hate them so much - get a PPO instead of an HMO. Otherwise, I wouldn't worry that much about the distinction (unless you have a particular doctor/specialist you really need to see).

7. Here's my theory on mental health coverage: if you need it, because you have a mental health condition that requires ongoing management, worry about mental health coverage, but worry about prescription coverage more. I basically think bad therapy is useless, and that it's hard enough to find a good therapist that even if your insurance covers therapy, there's a good chance you'll end up paying out of pocket anyway. If you're the kind of person who sometimes likes to see a therapist to talk about your family, get advice about transitions, etc, don't bother worrying about mental health coverage. (All of this, of course, is for people who have a fairly clear handle on their own mental states: sometimes these change, and you suddenly need more treatment than you used to. And if you have kids, it probably really is worth worrying about mental health coverage, because you never know how they're going to turn out.)

8. Speaking of prescriptions, I found several plans that cover only generic drugs. This doesn't really make sense to me, because it leaves you exposed to substantial risk of very expensive medical bills.

9. Try calling the insurer to ask questions. If the person you reach isn't helpful, they're not going to get any more helpful once you've bought the insurance.

10. Insurance is more expensive for women. I don't really have anything to say about this, other than that it sucks and is dumb.

the perils of data

When this article ran in the NYT magazine, several months ago, I had a whole post planned out about one particular thread. Joe Nocera describes the evolution of Value at Risk - VaR - which was a system JPMorgan developed for measuring risk. It became the financial industry standard for measuring risk for a number of reasons: it gave a single number for the primary riskiness, JPMorgan developed it and then gave it away, and it gave bank regulators a simple thing to look at to figure out if banks were taking on too much risk.

Nassim Nicholas Taleb points out that there's a whole set of events out beyond the 99% of normal variation that VaR covered which, over time, became very significant; there were also several critiques of Nocera's article which pointed out that VaR assumed that prices essentially varied randomly, and couldn't account for real-world events that affected risk. I've lost the links to those articles, or I'd link to them - they were by actual economists who actually know things.

But here's what's more interesting to me than the near-collapse of the financial system: it's a problem that Nocera does cover, by summarizing what Till Guldimann, a former JPMorgan banker involved in creating VaR, told him:

"The big problem was that it turned out that VaR could be gamed. That is what happened when banks began reporting their VaRs. To motivate managers, the banks began to compensate them not just for making big profits but also for making profits with low risks. That sounds good in principle, but managers began to manipulate the VaR by loading up on what Guldimann calls 'asymmetric risk positions.' These are products or contracts that, in general, generate small gains and very rarely have losses. But when they do have losses, they are huge. These positions made a manager’s VaR look good because VaR ignored the slim likelihood of giant losses, which could only come about in the event of a true catastrophe."

In other words, the people who created the policy environment built incentive structures around a particular data point. So the people operating in the policy environment privileged that data point over all others. Turns out that credit default swaps look very good in a VaR model; turns out they also create huge systemic risks by entangling many financial actors into any particular problem.

Can anyone think of any other time this has happened? Like maybe in higher education, with a set of rankings? Or how about in K-12 education? Oh that's right, it's called "accountability." It's what NCLB would be doing, if it had more teeth.

We live in an age where people are very interested in data, and in a lot of ways that's great. We should try to figure out how to measure things: the same NYT article mentions a situation in which a recurring data point tripped some managers' attention at Goldman Sachs, and as a result they met, discussed the mortgage market, and decided to take on less risk. That's a good use of data. But blindly privileging any particular data point will leave any system vulnerable to being gamed. I guarantee you that there are schools out there that are figuring out how to game - not cheat, but game - the testing system. Some of those schools are also doing a good job on other things; others are focusing on specific tests, at a real cost to their students. My school tried to game the test by setting up a special academy for students they thought might make 'proficient,' and having higher behavior and academic standards for that academy. It may or may not have helped those students; it certainly didn't help anyone else.

The same thing is happening with Clemson University in the Inside Higher Ed article: some of the reforms they're making are good for their students, others are attempts to game the system, but none of them proceed from an honest evaluation of what would make Clemson a better university. It's schmality instead of quality, and I wish the data evangelists would be honest about the way a laser-like focus on data makes the pursuit of schmality worse.

something short about education

The Economix blog at the NYT recently posted, describing the comparative inefficiency of the US educational system. Which, if you look at the graph, is true. But it's more complicated than that. (I posted a chunk of this as a comment on that blog.)

Two major issues: spending per student in the US is in fact very split between wealthy and poor districts. Philadelphia spends $11,000 per student per year, almost $10,000 less than nearby Lower Merion, and is constantly short of funds. Not that there isn’t waste in Philly’s system, but money certainly isn’t easy to come by for teachers.

Second, the other countries which do well tend to have strong, generous social support networks. My guess (as a former teacher) is that schools there don’t have to provide health care, counseling, food, etc to students who have trouble getting them at home. One huge difference between my experience going to school and my experience teaching was that, by and large, the kids I went to school with got glasses when they needed them, and if they fell way behind in reading or math, their parents noticed (were equipped to notice by their own educational success) and got them tutoring or other assistance (because they had either time or money with which to provide those things).

There are still huge problems within our educational system that are matters of educational policy rather than social policy more broadly defined: we lack a unified set of national standards, the standards we do have (especially in math, though this may also be true in other subjects where I know the debates less well) are less rigorous and more connected to rote memorization than the standards in other countries, and teachers have far less prep and development time than teachers in, for example, Japan.

I’m routinely astonished, though, by the number of non-educators (and sometimes educators) who think that failing students is somehow the key. This always, always comes up in comments on articles about education, and usually some version of this will also come up in a professional development workshop. Yes, students need accountability, and yes, it makes your job a lot harder when students don't know the earlier material. But making them repeat the same material in the same context without additional supports doesn’t help - it just leads to a bored, frustrated kid who thinks he or she has already learned this (and has, in the sense of having sat in a classroom while it was being taught). The evidence also just doesn't support a claim that making students repeat a grade improves their achievement - mostly it makes them more likely to drop out, and lowers over-all achievement. You can’t just keep doing the same thing and expect different results.

with minimal comment

Hilzoy is right. As usual.

A couple of years ago, it would have been hyperbole to suggest that we would all be better off if the senior executives at all our major financial firms were people picked entirely at random out of the phone book. Now, it's arguably true. People picked at random would, admittedly, be likely not to have been to business school. They might not know a lot about futures or derivatives or put options. But so what? At least they might have been more likely to know that they were clueless, and a few of them might have had the common sense to ask questions like: will housing prices really go up indefinitely?

In any case, what's the worst they could have done? Bankrupted their companies with ludicrously risky gambles that fell apart once markets went south? Destroyed trillions of dollars in value? Brought the world financial system to the brink of collapse? Left taxpayers across the globe on the hook for trillions of dollars? Bankrupted entire countries?

Oh, right.

"Getting it" means understanding that the entire story that some people on Wall Street have told themselves about why they got such obscene levels of compensation is false. As a group, they were not uniquely talented. They did not make a lot more money for their company than they earned, at least not in the long run. Their salaries were not fair compensation for the value they produced. It would not have been worse if they had been replaced by people chosen at random.

And really? We would probably still be better off, because at least people picked at random out of a phone book wouldn't have highly negotiated contracts allowing them to loot their companies - which are not in bankruptcy today only because we, the people who pay taxes, gave them billions of dollars - via bonuses, insider trades, etc. I read something a while ago, maybe the article I linked to about how hard it is to live on half a million in Manhattan, in which a banker argued that if he creates $30 million in value for a company, he should get a chunk of that. Which I'm all for, as long as he shares the risk when things go badly. If you are responsible for the good times, you've got to take responsibility for the bad times; and no one arguing on Wall Street's side in the media has given the slightest indication that they realize that. (This is also why I find James Kwak's argument that we should blame Greenspan so compelling.)

economic crisis perspective

Yikes.

Discuss.

shockingly similar to us!

So apparently, if you want medical care in Romania, you need to pay bribes - to the doctor, the medical orderly, the nurse, etc. And the New York Times runs an article about this SHOCKING practice, and how the low salaries Romanian doctors make contribute to its prevalence, and includes the usual array of horror stories about people being denied care.

Because that would never happen in the US. Not to that kid who died of sepsis because no one would fix his abscessed tooth, not to someone with kidney failure whose sister is a health policy advocate, not to THOUSANDS UPON THOUSANDS of uninsured and underinsured people IN THE UNITED STATES who can't afford the preventive care they need and therefore get worse or die. Not to African Americans in Mississippi, who have an infant mortality rate about the same as that in Sri Lanka, Albania, and Colombia.

Seriously, what are they smoking? Yeah, there are some differences between not getting care unless you can bribe medical providers and not getting care unless you can pay medical providers (some gain in transparency, and some ability to subsidize care for people who can't afford bribes payments), but to get all high and mighty about this terrible terrible problem when it's not that different from what's happening ALL AROUND THEM?

(Sorry for all the caps. They, ah, express my sentiments toward the health care system.)

clusterfuck

Well, I guess we're not moving to Iceland. Contra the previous plan.

Actually, that story mostly tells me that I don't want to invest money in stocks or corporations. Don't worry, Iceland. We're still cool.

skewer

Republicans are claiming that a 'partisan' speech by Nancy Pelosi (puh-leeze - read the speech yourself here and tell me what you think) made them not vote for the bail-out bill. Barney Frank counter-offers: "Give me the names of those 12 people and I will go talk uncharacteristically nicely to them and tell them what wonderful people they are and maybe they'll think about the country."

tangible reasons the credit crisis matters

Farmers generally harvest on credit - no credit means they can't pay their employees or run their machines and, the year after record food prices, the harvest is at some non-negligible risk from the financial markets.

Which, by the way, is a time-sensitive issue. Warren Buffet also sounds worried, which always makes me nervous. I've also been thinking about what Obama should have said about how a potential bail-out package would affect spending priorities (**cough**Keynes**cough**) - Lawrence Summers mentions the case for Keynesian stimulus about two-thirds of the way through this article.

sentences you're not expecting

"Mainland China’s stock markets in Shanghai and Shenzhen are closed this week as part of a national holiday marking the establishment of China as a Communist country in 1949."
(Article here.)

disconnected thoughts on campaigns and bailouts

McCain suspending his campaign seems kind of desperate to me: "I campaign and campaign, but people don't want to vote for me! If I stop campaigning, maybe they'll like me better?" Also kind of pathetic. Not to mention dishonest, since he's claiming he doesn't have time for the debate but he does have time to tape an interview with Katie Couric.

$700 billion is about $2,293 per resident of the United States. In case you were wondering what the bailout plan had to do with you. Zephyr Teachout (whoa 2004 flashback) has some more examples of what $700 billion actually means. I'm pretty appalled by the idea of giving any member of the Bush executive branch a blank check for that much cash.

It doesn't look like I'll have much time to volunteer for the Obama campaign, and I feel like I'm shirking my civic duty.

McCain Watch: Taxes

McCain's tax plan is, ahem, bad.

Here's a handy graph (stolen from The Reality-Based Community showing the benefits to each income quintile of the McCain and Obama tax plans.

The benefits from Obama's plan are in blue, the benefits from McCain's are in red, and if it costs a quintile something that appears as a downward bar. It's clear that Obama's plan benefits lower- and middle- income taxpayers while costing the top 1% and top 0.1% quite a bit (all this is measured relative to 'current policy' - i.e. extending the Bush tax cuts - rather than 'current law,' which includes a sunset for the Bush tax cuts.) McCain's plan give everyone a little bit, but gives the top 20% more (and the top 1% and top 0.1% do even better); Obama actually costs the top quintile something, but is superior for everyone else. In addition, Obama's plan increases revenue (again, relative to current policy rather than current law) by 2%, while McCain loses 2% (not to mention his non-tax policy of maintaining troops in Iraq indefinitely, which will be very expensive and contribute to large deficits). The Tax Policy Center, which is a center-left, definitely academic, generally reliable entity (partnership of Brookings and the Urban Institute, gives this analysis of economic effects:

McCain's reduced individual and corporate rates would improve economic efficiency and increase domestic investment, but the larger deficits he would incur to do so would reduce and could completely offset any positive effect. In contrast, Senator Obama's proposed new tax credits could encourage desirable behavior, particularly if the childless EITC and payroll tax rebate encourage additional labor supply among childless low-income individuals. However, he would also direct new subsidies at an already favored group - seniors - and an already favored activity - borrowing for housing-which could probably be better directed elsewhere.

I think it's worth pointing out that it is not pro-business to cut taxes and increase deficits, which McCain is essentially inevitably proposing.

Obama does not get a pass here from me. Subsidizing home equity borrowing has been way overdone, and, like the Tax Policy Center, I think there are better ways to use that money. However, his proposals are far more fiscally responsible than McCain's 'cut taxes on the rich in war-time' plan.

The bottom line is that McCain isn't even good for business interests, just for (maybe) the top 1% who benefit so dramatically from his tax plans that it offsets the damage to the overall economy. And in fact his plan is so skewed that Obama's plan is prima facie better for the bottom 80% of the income distribution. If, as economists like to believe, we are all constantly making economically rational choices, I expect to see an 80 - 20 vote split this November.

half right

California is denying water permits to development projects that don't have an adequate water supply, which turns out to be quite a few of them. While this NYT article, as usual, omits some important information (where are most of the permits being denied?) and is a short newspaper article so you don't get much background (have I told you to read Cadillac Desert? I'll tell you again), it's still pretty interesting. Adequate water supply in this case means meeting a 2001 rule that you need a 20-year water supply: California already relies heavily on water imported from the Colorado basin, so it's not clear where any new water is going to come from, especially since climate-change predictions have the Colorado basin and California both getting dryer.

The problem, as the article does mention, is that agriculture - mostly though not entirely heavily subsidized, environmentally devastating, corporate agriculture - uses much more water than residential and office uses. So the water boards are absolutely right to prevent developments - especially developments with golf courses! which should never exist west of the 100th meridian! - that lack an adequate water supply, but at some point agriculture will have to pay too. It's a sign of the lunacy of our agricultural system that we have dammed rivers and exterminated salmon in order to grow and heavily subsidize crops that destroy the topsoil, pump chemicals into the Pacific, and end up with land whose inadequate drainage concentrates selenium and other heavy metals and chemicals in swamps that then kill migratory birds and are essentially permanently unusable. And then we have to refrigerator-truck those crops across the country, exacerbating global climate change and further reducing the available water for California.

Smart.

more inherent problems with poverty

While I was home last weekend - digression: it was so great - a friend saw the post about stress causing asthma and pointed me to this Financial Times article which discusses the effects of stress via low social status on developing brains. Quick summary: it's bad. This suggests to me that if Teach for American and other education policy people are interested in eliminating the gap between rich and poor in educational attainment, they're going to have to eliminate (or at least dramatically reduce) the low social status and stress associated with poverty.

This also suggests one possible source of the Scandinavian 'bumblebee economy' (discussed, very briefly, in the Iceland article - basically, high taxes and high growth!): the Scandinavian states - with their excellent social services, low inequality, and strong safety net - more efficiently use and develop the increasingly valuable mental capacity of their citizens. This could also explain some of the findings on Sweden that Lane Kenworthy recently discussed.

As an aside, he writes about school choice in Sweden being a surprise for the left - I'd argue that Sweden in this situation doesn't hold lessons for the US, because inequality is so much lower that the risks of school choice are correspondingly lower. My concern about school choice is that it will leave low-income/low-status students stranded in schools that get worse and worse; if there is less social inequality, I would similarly expect less inequality in educational options.

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health and poverty

We usually think of poverty's contribution to ill health as being something to do with the ability to afford a particular diet or to get preventive care. Some new research, written up in the BBC suggests that stress during pregnancy increases the baby's risk of asthma, and amplifies the effect of other risk factors. Poverty is certainly a risk factor for asthma. Even absent the material stressors involved in being poor, having low social status relative to the people around you leads to stress; and poor people feel more pain, which is its own stressor. Here's poverty making people sick, not just preventing them from getting the material resources they need to be healthy.

Not like having more/better stuff wouldn't help. All the links along the side of the BBC article are to material factors that affect asthma risk, like pollution and breast-feeding (a time resource) and maternal diet.

enterpreneurship

I dislike large-scale capitalism, but small business is (often) rad. Which is why it's particularly depressing to me that the United States, idolator of the entrepreneur, makes it much harder than other post-industrial countries to start your own thing. Not only because small business owners and the self-employed have to buy their own health insurance, but also because if you sink your money into your business and it fails, you're tied to your debts more tightly than you would be in other countries. Not to mention that if your business fails because of a health problem, you'd be one of the more than half of all bankruptcy filers who got there because of their medical bills.

culture of poverty

Harry at Crooked Timber has a piece up about the deficit model of poverty. Which, more or less, is the idea that poor people have deficits that need to be fixed, and is, depending on who you are, either absolutely obvious or terribly offensive. There are some obvious ways in which poverty creates deficits: lack of time, money, knowledge of how to manipulate the system or what to say to get a response. Also, as Harry points out, poverty is a stressor, which makes it that much harder to adapt to situations effectively and make long-term plans. In addition, I would agree that, for example, inner-city African American culture has certain aspects which can disadvantage its members in terms of mainstream social success.

So yes. Deficits abound, and as far as I'm concerned it is foolhardy to ignore the problems in a culture simply because the group of people with that culture is oppressed. But it's the way this theory gets used, as well as the specific ways it gets promoted, that are troubling. For one thing, most cultures have significant deficits. My mainstream middle class culture sure has a lot of problems, but because we have social privilege, no one worries about those deficits. But glass houses and all that.

For another thing, when people talk about the problems with various cultures, they end up conflating problems with differences. As an example: current mainstream rap and hip hop promote a violent, supremely materialistic view of the world, but that's not all that rap and hip hop are, and it's not a problem with the style of music itself - in fact, I'd argue it's a problem with the record labels that choose that kind of content to promote. Another example: Amish culture values craft skills far more than academic skills; while this value disadvantages the Amish in terms of economic competitiveness, it's not a problem per se (especially since as far as the Amish are concerned, economic competitiveness is close to meaningless). The assumption that everyone should value the same thing is the road to cultural impoverishment, and also to something like the cultural equivalent of monoculture: a world in which, if conditions change, our culture collapses because it has become too specialized.

There's more to say, but I'm having trouble articulating it clearly. Something about the way people use irresponsibility, a quality present in all communities, to essentially wash their hands of the problems of poverty; and something about the way cultures develop, and the adaptive quality of certain cultural values in an environment under pressure. And maybe something about how if you're part of the oppressing group, you're probably not the best person to be telling the oppressed folks how they ought to act.

irritating hypocrisy

Stock prices are down, CEO compensation is up.

At least when people complain that teachers (average salary: $47,602) should get paid for performance, they can blame the unions. Maybe what teachers need instead is a board of directors.

the flexible economy

Mobility is down 27% year to year, likely due to the housing bust: people can't move if they can't sell their homes, and are much less likely to move if they can't get more for the homes than they owe. In economic hard times, it makes it even harder for people to get work.

Here's the thing. Constraints on mobility and innovation are also long-standing results of our health insurance system. Fear of being unable to get or afford health insurance is one of the biggest existing deterrents to starting a small business, free-lancing, or otherwise innovating in ways that free-market economic principles would seem to support. I don't understand why universal (preferably single-payer) health insurance isn't the single biggest issue for the Chamber of Commerce and every small-business organization out there, as well as for anyone who has ever considered starting a business or has free-lancing skills.

Big corporations should be in on it too, seeing as their competition throughout the industrialized world already gets the huge subsidy of paid-for employee health insurance. They have to pay taxes for it, yes, but, unlike health insurance, that's a predictable expense that grows fairly slowly.