How should we deal with the “uncompensated care” issue discussed in Tuesday’s Supreme Court oral argument on the Affordable Care Act? One potential answer is a 2,700 page health care bill that imposes an individual mandate to buy health insurance or face stiff penalties.
An alternative answer would be that these costs should be paid by the receiver of care or be the responsibility of individual hospitals and healthcare providers who treat those who show up to receive services but can’t or won’t pay. Leaving aside the former, one could argue that the latter should have to internalize those costs if they are willing to treat the uninsured and those unable/unwilling to pay. However, this really means that providers will charge higher costs for those who do pay and/or take a hit in the form of lower profits or reducing the costs of service (by lowering the quality of care and the pay/benefits of those who work at such institutions). The “internalization of cost” answer is clearly not a great one.
Yet those of us who would face a higher cost for going to providers who service uncompensated care patients could theoretically go to providers who do not and thus can offer less expensive care. This would put market pressure on providers to stop servicing patients who won’t/can’t pay. So now we’d have a lot less medical care for the “can’t/won’t pay” population (with some of these people making the trade-off to purchase insurance) – unless providers (such as non-profits) chose to provide care anyway and find a way to make it work in a market populated with both do-gooders and do-wellers. Some individuals might even choose to pay more for care knowing that they would be subsidizing the charitable works of their do-gooder provider. However, a lot of people would be far more price sensitive and abandon those providers – making it harder for those places to survive. So I’m not sure this is a live option even in theory.
More importantly, it isn’t an option in reality. Indeed, such discussion is moot because Congress has essentially forced hospitals to provide uncompensated care – so one government intervention begets the rationale for another (the ACA)!
This brings us to the receiver of care and how providers ought to deal with those who can’t/won’t pay. I would argue that part of the problem of uncompensated care could be handled by health care providers being more vigilant about collecting fees even if this means being a lot more stern (even “nasty”) with those who don’t/can’t pay. For example, the hospital could be more serious at the point of service about discussing the social costs and immorality of not paying for services rendered. Perhaps shame might push some people who probably could pay (but who don’t want to trade-off other goods in their lives) into the do pay category. And there are a lot of folks out there who could pay if they were willing to allocate more resources to health care and less to other goods they enjoy. Case in point: an acquaintance of mine in graduate school sought ER care and refused to pay. He was neither truly poor nor unable to pay but simply took advantage of the system so as to avoid trading off other things in his life. A pointed stare might have shamed him into taking his responsibilities more seriously. Or…
If moral suasion doesn’t work, it should be possible to garnish the future wages of uninsured patients or otherwise seek compensation for services rendered. There is no free lunch in the world and this would serve to make those who receive care pay….eventually (and incentivize health insurance purchase before the need to seek care). This won’t work for the homeless or those permanently out of work, but these people likely represent such a small part of the problem that it would be far less expensive to the rest of us to subsidize them through higher insurance premiums than to do so through the tax system as ObamaCare does. If there are some legal barriers to such efforts as wage garnishing, these should be eased.
Wouldn’t such moves and others like them incentivize people to purchase health insurance without coercion or at least make them face the need to pay the costs of their decision? And isn’t that what we ultimately want?
Of course, the healthcare system would work a heck of a lot better if we actually had a relatively free market in which hospitals and other health care providers could compete freely on the basis of price and quality of service, advertise this, compete across state lines, and so forth — thus also making insurance less expensive.
I’d rather try a freer market approach or the one we have with real teeth for failure to pay than successive attempts to rationalize a system with massive government intervention. And yes, I do realize that there will be people who truly cannot provide for themselves and who are not simply making bad decisions or externalizing the costs of their choices re: trade-offs. For these people, charity and even government assistance will probably be necessary. But there is way too much moral hazard and disincentivizing proper behavior in this realm.
PILEUS 
Here’s where I come down on this: we, as a society, have decided that no one will be refused emergency medical care regardless of their ability to pay. Thus, until we decide we’re willing to stand aside and watch people suffer and die, the real question to ask has nothing to do with freedom or liberty (unfortunately), but how we’re going to pay for it.
Personally, I favor a mandatory national insurance program that would provide an extremely basic level of care that could take the place of emergency room vists. Ultimately, it would likely be cheaper than the current system (lower state and local taxes, cheaper medical care generally), and we could then focus on how to make the rest of the market more competitive.
To those who would argue that it’s not fair to make them pay for someone else’s medical care through a national insurance program, guess what? You already do. It’s just a lot more complex and expensive than it needs to be. It would be a lot better for all of us if the costs of “uncompensated care” we’re plainly spelled out as a line item on your paycheck or tax return instead of the current system we have where no one really seems to know how much anything actually costs.
I think I’m with ritterjcat on this one. If we are going to have a catastrophic safety net mandated by the government, it is the government, through the taxing power, that should be paying for it. Our tax system may not be terribly fair, but it is far more fair than the system system in ObamaCare where an arbitrary slice of the population is forced fund the safety net through a back-door.
We have a system for providing subsistence level food to those than cannot afford it (however flawed that system may be), I don’t see why we cannot come up with a system for providing essential (read: catastrophic) health insurance to those unable to pay. We would have to screen out those that are unwilling, yet able, to pay, probably by a scheme of wage liens or garnishment.
While we’re at it can we also rescind government imposed mandatory care such as birth control, wellness visits, or what have you?
You don’t use a shotgun to kill a gnat. Given that uncompensated care adds only about $200 a year to the average family’s insurance premiums (http://www.factcheck.org/2009/06/obamas-health-care-claims/), I tend to think the less formal mechanisms GC proposes here make more sense than a new nationwide program, which is to bound to become expensive regardless of the authors’ intentions.
I wish to second Prof. Sorens. The question you have to ask about the free rider problem is when does the free riding become so acute the federal government has to step in. To answer that you have to look at the numbers and compare to how other industries deal with the problem.
The free rider problem for healthcare providers is not that acute, 40 to 50 billion in unpaid receivables in a market totaling one and a half trillion in revenue. That’s a loss ration of only about three percent. Many industries would be envious of such a low loss ratio. Software providers lose ten times that amount in pirated software, retailer lose more, fast food more, grocers and farmers more in spoilage alone, banks and credit card companies write off more in the best of times. Few industries experience smaller loss ratios. Sorry, no crisis there.
The Software Industry hurts more than most for unpaid goods and services rendered. Software too is a most unique market. Will we be forced to buy an operating system even if we don’t own a computer, because everyone buys a computer eventually.
Well, those facts cause me to take back my suggestion. Free riders are not a significant enough problem that requires a broad, universal solution. Although, I still like going after, financially, the folks that are able but unwilling to pay.
Can I still have my request to eliminate all the frivolous mandated medical coverage stuff?
Absolutely! 🙂 (There are a few states that now offer mandate-free or mandate-light health insurance for individuals. Unfortunately, they will be another casualty of Obamacare.)
In supporting Prof. Sorens I would add to Jardinero1’s position, and in direct opposition to ritterjcat and leap, that government tends toward broadening powers assigned it. Thus, the goal to have a government run program of insurance which limits coverage to an “extremely basic level” is wishful thinking, as determination of this level will be left to committees and politicians, and their influencers. The perfect example of how this ideal will fail came only weeks after the passage of HHS, with the clamour over the recommendation by the U S Preventative Services Task Force to reduce the number of recommended mammograms – scientific analysis loses, political manipulation wins.
Uncompensated care in today’s health care market is no surprise. Two factors create this situation:
1. The assumption that medical care is too expensive for normal people to afford without insurance. This is central to the health care reform efforts — those without health insurance are forced to the emergency room because they obvious couldn’t afford to visit a doctor otherwise. Thus there are people who will willingly pay a $1000 auto repair bill or vet bill for their cat who would never think of paying $200 for an annual physical.
2. The uninsured who do try to pay for their care are stuck paying more than everybody else. An emergency room visit might result in a $1000 bill. The insurance company’s contract will reduce this to $300, so those with insurance pay much less (between copays and insurance payments) than those paying cash. I recently saw a $93,000 hospital bill which insurance discounted to under $16,000.
If hospitals started by only billing the amount they’d get from an insurance company, they’d probably have a lot more people willing to pay the bill. On the other hand, why pay the bill if you don’t have to.