Saturday, March 20, 2010

Correspondence

A reader asks two questions:
Thank you for explaining the impossible trinity and China. How does it work in Europe with the euro?

From the perspective of an individual country, like France of Germany, they have a fixed exchange rate with each other which is the euro. They therefore had to cede something else. Since the purpose of the EU is to allow goods and services, as well as capital to move freely, it ain't an open capital account. What they did sacrifice is independent monetary policy. There is a European Central Bank that sets policy for the eurozone. To us, looking from the outside, it appears that they have an independent monetary policy, but they only do at the union level, not individual country level.

You've expressed some skepticism about the health care plan. What would your ideal plan be?

It's a very complicated issue with a lot of moving pieces, but the key problem is that the costs don't come into play when the decision to do a medical procedure is made. For example, when I take Miss FLG to the doctor, I don't balk when the doctors says that they are going to run a strep throat test even though they are pretty sure she doesn't have strep throat. It just costs my copay either way. If I was paying myself, then whether that test cost $20 or $120 would play a factor. This would probably even concern the doctors then. Indeed, if I was paying out of pocket, then I'd probably care what Miss FLG's doctors charged for routine visits compared to other doctors or whether they recommended more treatment than average, but I don't because my copay is the same no matter what.

So, I'm in favor of tax-free health savings accounts, like an IRA or something, that would allow people to save money for paying routine health costs. Ideally, we'd have some sort of subsidy for low income people so that they can get preventive care and take care of things before they hit the emergency room.

Now, nobody can reasonably save enough money to deal with serious medical problems and the required treatment. There's an adverse selection problem (i.e. preexisting conditions, etc) that make this problematic to deal with through market mechanisms. Therefore, I'd be okay with even a single payer government system kicking in at some point to deal with things like this. Basically, it would be a government run system with a huge deductible that would come out of personal savings.

So, routine stuff paid for using health savings accounts under individual control and catastrophic coverage that could even be government run. The devil is, as always, in the details: Where does the coverage kick in? At what amount? What is then catastrophic? How do we control costs associated with what the government is insuring?

2 comments:

Anonymous said...

i seriously enjoy all your writing style, very charming.
don't quit and also keep penning due to the fact it simply good worth to read it.
impatient to browse much of your own stories, thanks ;)

Anonymous said...

Mark Perry thinks doc-in-a-box will kill Obamacare:

http://mjperry.blogspot.com/2010/03/why-obamacare-wont-work-it-will-be.html

I think he’s got a point. If my health care weren’t paid for by work, I’d think about going bare and then buying a policy if/when someone in my family got seriously sick. But, going on from that, if a lot of people DO go bare, they will be shopping on price and you may see real pushback from consumers, like you with the $120 strep test. dave.s.

 
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