Does Genetic Testing Doom Private Insurance?

Americans are concerned about how their genetic information might be used against them by insurers and employers. To address these fears, both the House and Senate have passed the Genetic Information Non-Discrimination Act (GINA) which outlaws such discrimination by health insurers and employers. The law does not apparently apply to long-term care and life insurers.

The idea of insurance is that people pool premiums together in order to cover unknown risks. What happens when individual risks are no longer unknown? Do better and more accurate genetic tests create the possibility of an adverse selection spiral? Perhaps. People who find that their genetic tests indicate that they have a much higher risk of a particularly debilitating illness, say Alzheimer's disease, might load up with gold-plated insurance. As more and more high-risk people buy insurance, insurers would have to raise their rates in order to pay for their medical care. Higher rates would then discourage relatively healthy people from buying insurance which then means insurers would have to raise their rates further and so forth until bankruptcy.

The prospect of such an adverse selection spiral is not displeasing to advocates of government-supplied health care. As the New York Times reports:

It may also give ammunition to those who argue for universal health care. “Ultimately unlocking all these genetic secrets will make the whole idea of private health insurance obsolete,” said Karen Pollitz, director of the Health Policy Institute at Georgetown University.

Will pervasive genetic testing ineluctably lead down the slippery slope to government medical care? I believe that one way to avoid that outcome may be mandatory private insurance based on community rating. No doubt about it, the dawning of the era of genetic diagnoses holds great promise for treating and preventing diseases but also clearly poses many policy conundrums.

Disclosure: Even before GINA passed, I sent my DNA into 23andMe for testing. Look for a future reason article in which I reveal all of my genetic flaws.

Comments

Neu Mejican | May 2, 2008, 10:16am | #

Mandates, that's the answer.

I predict Ron will get some shit for that suggestion.

Fluffy | May 2, 2008, 10:23am | #

The idea of insurance is that people pool premiums together in order to cover unknown risks.

Whoa, whoa, whoa, whoa.

Way to accept the premises of anti-libertarians, Ron.

The idea of insurance is not the pooling of risk.

The idea of insurance is the hedging of risk. You purchase insurance from someone who is well capitalized and who is betting that they can actuarily determine a premium price that offsets the risk that you will make a claim.

It makes economic sense for the person making those bets to make a large number of such bets, to diffuse their risk as widely as possible, but the "pooling" effect you describe arises from a series of individual decisions to offer and purchase insurance and is not the purpose of it.

Insurance existed before the widespread pooling of risk. I would refer to the history of the introduction of the very concept of insurance [in merchant shipping] during the commercial revolution of the late Middle Ages.

As soon as you accept the characterization made by some communitarians that the point of insurance is the pooling of risk, that opens the door to many unsavory arguments. "You're already paying for other people's health care!" being chief among them.

Ron Bailey | May 2, 2008, 10:28am | #

Fluffy: Good points. But what happens when there is asymmetric information about actual risks? Would that tend to lead to the kind of adverse selection spiral that would make insurance untenable?

MP | May 2, 2008, 10:30am | #

The general population of this country will never accept a moral situation whereby those that don't plan properly for health emergencies will be refused "life saving"(*) treatment. Even if they are 85 years old. So there will be always some form of governmental interventionism. The question libertarians must ask themselves is "Which form is least sub-optimal"? Ron's answer is at least reasonable in that context.

(*) Of course, "life saving" is in the eye of the beholder, and defining this is fraught with its own conflict.

P Brooks | May 2, 2008, 10:30am | #

I thought the function of insurance was to get smart people to subsidize the behavior of dumb people; is that wrong?

Fluffy | May 2, 2008, 10:37am | #

Ron:

I think that once you escape the premise that the purpose of insurance is the pooling of risk, the argument that genetic testing makes insurance untenable becomes...untenable.

The argument depends on the notion that the idea of insurance is undermined if insurers can more accurately predict their risks. But if the purpose of insurance is to hedge risk rather than to pool it, the fact that it is more expensive for some people with high levels of genetic risk to get insurance isn't a bug, it's a feature.

I think the "adverse selection spiral" you're talking about would result - in a free insurance market, which we currently don't have - in a small number of consumers being uninsurable and a much larger number of consumers experiencing lower rates.

There really is no "system" benefit to having information hidden from insurers. All of the benefit accrues to the people who are bad risks. It's a personal benefit for them, not a system benefit.

There is also a great likelihood that genetic testing will lower overall medical costs, by allowing for early intervention. Even among people who suffer higher premiums because a genetic predilection to, say, heart disease turns up in their test, it is possible they will experience lower costs over time because they are forewarned and can take corrective action earlier.

There's also a chance that genetic testing over time will produce such a superfluity of information that its effect on premium pricing will become negligible over time. If genetic testing starts to turn up a huge number of risk factors and positive factors for almost all consumers [which is probably likely] then it won't be the Pandora's Box it has been advertised be.

But even if neither of those "compensating factors" occurs, I still think that we need to vigorously dispute the idea that insurance is somehow "failing" conceptually if people have to pay for real risks. If information is the enemy of your concept of justness or fairness, there is something wrong with your concept of justice or fairness.

Other Matt | May 2, 2008, 10:38am | #

The general population of this country will never accept a moral situation whereby those that don't plan properly for health emergencies will be refused "life saving"(*) treatment.

That's a realistic assessment of the reality of the situation.

I thought the function of insurance was to get smart people to subsidize the behavior of dumb people; is that wrong?

Yes.

Lesbian Universal Healthcare Activist | May 2, 2008, 10:41am | #

I like me some GINA!

Fluffy | May 2, 2008, 10:41am | #

The question libertarians must ask themselves is "Which form is least sub-optimal"?

Personally, if I had to choose I would rather see a system where insurers could use this information, and if it produced a set of consumers who could not obtain insurance, those consumers were able to enter a system where the government paid for their health care on a means-tested basis.

Better to pay for the health care of the worst risks than to pay for it [and, of course, ration it as a result] for everyone.

Elemenope | May 2, 2008, 10:44am | #

The general population of this country will never accept a moral situation whereby those that don't plan properly for health emergencies will be refused "life saving"(*) treatment.

Because, oddly enough, most people don't think that letting someone die is an appropriate "object lesson".

I agree with them. The dead cannot learn from errors.

Guy Montag | May 2, 2008, 10:44am | #

What about that quaint notion that the right of an employer to hire and fire for whatever reason shall not be infringed?

Is there a libertarians website around someplace where at least some lipservice can be paid to this notion?

Fluffy, good job on explaining risk hedging.

Other Matt | May 2, 2008, 10:44am | #

There is also a great likelihood that genetic testing will lower overall medical costs, by allowing for early intervention. Even among people who suffer higher premiums because a genetic predilection to, say, heart disease turns up in their test, it is possible they will experience lower costs over time because they are forewarned and can take corrective action earlier.


This I disagree strongly with, unless you link it with some means to control exclusions. Otherwise, you'll reduce costs for those who have no genetic predisposition to any disease, and the remaining people won't have access to health care due to cost. The fact is that our current healthcare "insurance" system, at least the non group policies, are based on exclusionary risk management. If you base it on some community based risk profile, there will be "bad risks" (many of which don't have any particular behavior pattern which contributes to their branding, which offends many's sense of fairness, hence you'll lose a lot of people with your argument regardless of the logic) that will make out. However, it will shift competition from whom you can exclude, or how shitty your customer service can be, how shitty your claims processing might be so you don't actually pay the doctors, to a system where you're appropriately shifting competition to reduction of overhead. As someone said in another thread, it's basically a matter of making our current system function efficiently, as we're unwilling to have people die outside hospitals for lack of money.

MP | May 2, 2008, 10:47am | #

I agree with them. The dead cannot learn from errors.

It's not the "dead" (as you put it) who necessarily need to learn. It is the rest of the population observing the consequences onto others.

It's the same as incarceration. Prison doesn't teach the inmate a lesson. But it shows everyone else the consequences of disobeying the law.

Egosumabbas | May 2, 2008, 10:49am | #

Great. First Reason comes out in favor of a universal carbon tax, now it calls out for universal health insurance. Hooray for back-door socialism!

Guy Montag | May 2, 2008, 10:49am | #

Because, oddly enough, most people don't think that letting someone die is an appropriate "object lesson".

I agree with them. The dead cannot learn from errors.

Then start your own free clinic and stop messing up everybody else's insurance premiums.

Guy Montag | May 2, 2008, 10:50am | #

Hooray for back-door socialism!

Back-door? This is coming straight through the front from the Socialism Super Highway.

Other Matt | May 2, 2008, 10:50am | #

It's not the "dead" (as you put it) who necessarily need to learn. It is the rest of the population observing the consequences onto others.

It's the same as incarceration. Prison doesn't teach the inmate a lesson. But it shows everyone else the consequences of disobeying the law.

I think you're giving the general public too much credit, to learn from the mistakes of others. If that be the case, the Darwin Awards would have gone out of biz many moons ago.

I disagree on your comment on incarceration, though, but it's not material so we'll let it rest there.

Rhett | May 2, 2008, 10:50am | #

Thank you, Fluffy,

Your responses here are an excellent example of why I enjoy visiting this site. I've never really thought about insurance in a meaningful way; you've definitely given me something to think about.

Ron Bailey | May 2, 2008, 10:51am | #

Fluffy: I basically agree with your analysis, but now that GINA has passed, information will be hidden by law from insurers, thus making the adverse selection spiral much more likely, don't you think?

As for the future, I believe that innovative modern biomedicine will make medical care cheaper eventually as more effective early interventions are discovered. For example, if anti-aging treatments work they could substantially delay the onset of cardiovascular diseases and cancer. But we need to get there from here. I fear that if government supplied medicine is imposed on us all, the incentives for innovation will be largely destroyed.

P Brooks | May 2, 2008, 10:51am | #

I still think that we need to vigorously dispute the idea that insurance is somehow "failing" conceptually if people have to pay for real risks. If information is the enemy of your concept of justness or fairness, there is something wrong with your concept of justice or fairness.

Nicely stated; thanks.

Christopher Monnier | May 2, 2008, 10:52am | #

Personally, if I had to choose I would rather see a system where insurers could use this information, and if it produced a set of consumers who could not obtain insurance, those consumers were able to enter a system where the government paid for their health care on a means-tested basis.

That sounds good, but you would probably have to also cover (on a means-tested basis) people who were technically insurable but who couldn't afford the premiums.

Other Matt | May 2, 2008, 10:52am | #

Then start your own free clinic and stop messing up everybody else's insurance premiums.

Already have those, they're called "Emergency Rooms", and they still mess up everyone else's insurance premiums. They'd mess up less if they were routine care centers, as you'd catch stuff when it was far less serious and less costly, but someone has to be near death before it triggers our built in societal preservation instincts to help them.

Hate to break it to you, but that's the reality and will continue to be so.

Elemenope | May 2, 2008, 10:54am | #

Then start your own free clinic and stop messing up everybody else's insurance premiums.

I agree. That's why I'm more in support of public hospital's emergency rooms being required to provide emergency care regardless of coverage, rather than mandating everyone be covered by insurance. Free clinics to handle catastrophic injury and acute care are also a good substitute for health insurance mandates.

In my opinion, insurance best hedges risk against the potential for chronic conditions (which, incidentally, the care of which tends to be the most expensive because care is perpetual).

Other Matt | May 2, 2008, 10:55am | #

I still think that we need to vigorously dispute the idea that insurance is somehow "failing" conceptually if people have to pay for real risks. If information is the enemy of your concept of justness or fairness, there is something wrong with your concept of justice or fairness.

People are crossing the streams between "insurance" and "health care". Routine health care is too expensive, which makes insurance a functional necessity for health care, which in turn makes insurance necessary, which causes the two to be intimately connected in people's minds. You're picking at semantics, but it's probably important to point out without belaboring.

Ron Bailey | May 2, 2008, 10:55am | #

Elemenops:

The dead cannot learn from errors.

True. But as my buddy health care analyst Tom Miller once said something like: "If people saw the bodies of the uninsured piling up outside the doors of emergency rooms, they might begin to think that just maybe they should look into buying insurance instead of a new car or a flat screen TV."

Tingh Wah | May 2, 2008, 10:56am | #

Ron-

23andMe only tests common variants in the genome. Your worst flaws would require whole genome sequencing, which as you know will not be affordable for a few years yet.

Elemenope | May 2, 2008, 10:57am | #

now that GINA has passed, information will be hidden by law from insurers, thus making the adverse selection spiral much more likely, don't you think?

This is the Gattaca paradigm. What will most likely result is that despite it being technically illegal to use such data, it will eventually be used anyway. Once everyone does it, the rule becomes unenforceable.

Guy Montag | May 2, 2008, 10:57am | #

How about we get the governments out of the shorts of the insurance industry, other than making sure they actually pay off when they lose their bargain, of course?

If you want an indigent healthcare system, please stop calling it insurance (speaking to others not yet on this thread) and call it something like The Department of Public Health or something. Don't we have a few of those already? What the heck are they doing now if we need yet another system to do what they are supposed to be doing already?

Geotpf | May 2, 2008, 10:58am | #

The whole problem with privately run medical care is that the costs are completely capricious. That is, with some exceptions (you are a smoker, etc.), whether or not you get extremely sick is not your fault and is basically random, so your total health care costs are also random.

While somebody can plan to buy a car, or a house, or for retirement, you can't really plan for needing heart surgery. Some people live until they are 90 without ever seeing a doctor, and some people are very sickly starting at a very young age.

And, private insurance, or a private-public combo (like we have in the US), is less efficient than government medical care partly because of this. It is in the insurance provider's best interest to attempt to weasel out of paying any particular bill and/or drop the policies of those who are sick. So, this causes excessive paperwork, excessive bureauacy, unneccessary tests, etc.-things that wouldn't occur in a government-run single payer system, assuming the government's goal is simply to provide medical care for all it's citizens.

Plus, a public system is more "fair". A private system basically says, if you get sick and are poor, you deserve to die. Now, libertarians have no compassion for the poor in general, so I don't really expect any here on this point.

Egosumabbas | May 2, 2008, 10:59am | #

Also I'd like to add why do we *need* universal health insurance as a specific policy tool to account for genetic testing? Also, I think Fluffy's description of the true purpose of insurance can be expanded: we don't really have health insurance, we have "managed care". The companies that provide care don't really provide indemnity, they basically choose for you how to care for your own body.

I'd much rather prefer the older system, in which the rich have private doctors, the middle classes have insurance against maladies and catastrophe and hire doctors for specific tasks, and if you're down and out, there's always charity care. This system actually breeds competition and lower prices.

The current system, expanded unto a compulsory or universal health insurance system would suck donkey balls. It's also a basic infringement on liberty--what if you DON'T want insurance? What if for religious reasons you would prefer the care of your personal witch doctor every once in a while? What if you don't want health care at all and want to take care of yourself?

Guy Montag | May 2, 2008, 10:59am | #

That's why I'm more in support of public hospital's emergency rooms being required to provide emergency care regardless of coverage, rather than mandating everyone be covered by insurance.

What the Other Matt said right after you posted that.

Andrew G. | May 2, 2008, 11:00am | #

There's also a risk that people who find out via testing that they *aren't* at risk for anything will avoid insurance. Why pay for insurance if you're not predisposed to anything major? Just get enough to cover accidents.

The result may be that healthy people, knowing that they are going to be healthy for life, avoid buying insurance while unhealthy people run out to buy it.

Ron Bailey | May 2, 2008, 11:00am | #

Matt & Elemnope: The ER stuff is penny ante. Off the top of my head, uncompensated medical care in the U.S. is in the range of $50 to $60 billion out of a total health care spending of $2.3 trillion in 2007.

Guy Montag | May 2, 2008, 11:01am | #

Your worst flaws would require whole genome sequencing, which as you know will not be affordable for a few years yet.

It is probably nothing compared to the price of the Scotch he likes to drink :)

Elemenope | May 2, 2008, 11:01am | #

they might begin to think that just maybe they should look into buying insurance instead of a new car or a flat screen TV.

Yeah, but if people stop consuming new cars and flat screen TVs, what will happen to our economy?!

/snark

I agree, but I think that a basically natural defect in human risk assessment, the inability to assess the cost/risk ratio accurately, shouldn't be penalized *terminally* if it is reasonably possible to prevent such death. Financial liability *after the fact* for life-saving care isn't right out, but denying care *before the fact* is ethically suspect.

Elemenope | May 2, 2008, 11:03am | #

The ER stuff is penny ante.

Agreed. Chronic care, esp. pharmaceutical care, is more important financially speaking, and also a better area at which insurance is a hedge against risk.

But for catastrophic care, "we'll save your life and bill you later" isn't a terrible approach.

jtuf | May 2, 2008, 11:04am | #

First, We already have a mild adverse selection spiral. Most of the people who choose to not buy health insurance are young adults. Second, even if we knew the disease risk of every gene on the genome, there would still be a place for private health insurance. Couples could buy policies before conception, when their children's genes are still unkown. Once people are a adults might want medical savings accounts plus a high deductable insurance policy (for those unpredictable lightning strikes).

MP | May 2, 2008, 11:06am | #

I think you're giving the general public too much credit, to learn from the mistakes of others. If that be the case, the Darwin Awards would have gone out of biz many moons ago.

Generally people learn lessons from reviewing the consequences of others. There are always outliers.

Other Matt | May 2, 2008, 11:10am | #

Matt & Elemnope: The ER stuff is penny ante. Off the top of my head, uncompensated medical care in the U.S. is in the range of $50 to $60 billion out of a total health care spending of $2.3 trillion in 2007.

Well, you know, a couple billion here, couple billion there...

If you screen to "uncompensated", is that to mean that $X were billed, adn $X-U (where $U is Uncompensated) were paid? Or, is it X events happened, and Y events were unpaid? Huge difference here, as most of the time they get something, but the disparity between what they get an normal rates is large. Further, are you saying that that $50-60B wouldn't be, say, $30-40B if it were caught by routine coverage? I don't know the number, but conceptually I believe it would be hard to argue that E room costs for stuff that isn't life threatening are much higher.

Geotpf | May 2, 2008, 11:10am | #

Fluffy | May 2, 2008, 10:41am | #

The question libertarians must ask themselves is "Which form is least sub-optimal"?

Personally, if I had to choose I would rather see a system where insurers could use this information, and if it produced a set of consumers who could not obtain insurance, those consumers were able to enter a system where the government paid for their health care on a means-tested basis.

Better to pay for the health care of the worst risks than to pay for it [and, of course, ration it as a result] for everyone.

I don't subscribe to the fact that government run health care needs to be rationed. Now, taxes should be high enough to pay for coverage.

Basically, the conflict here is this:

Do we want sick people to pay more (potentially, much, much, much more) for their health care than healthy people, even if they are sick through no fault of their own?

Libertarians are in favor of sick people bankrupting themselves because they happened to get sick, frequently through no fault of their own, as opposed to having healthy people pay a little more to pay for them.

Also, I believe that the extra paperwork and unneeded tests and the like that private insurance forces doctors to do increases costs for everybody, healthy or sick.

Your plan has a real-world problem, in that healthy people, if they are not part of the governmental system, might not want their taxes to pay for the sick people if they are not also part of the system. Plus, there is still the whole excess-tests-and-paperwork problem, as private insurers do their best to dump the most expensive, sick patients on the government and keep the cheap, healthy ones.

Don Mynack | May 2, 2008, 11:10am | #

While somebody can plan to buy a car, or a house, or for retirement, you can't really plan for needing heart surgery.

Exactly the point of insurance - to cover for unplanned events and to hedge risk. I should be able to opt out of paying into a huge gov't mananged car plan, just like I should be able to opt out of paying into a terrible huge gov't retirement plan. Of course, I can't opt out of the latter - I'll do my best to never have to participate in the former.

Guy Montag | May 2, 2008, 11:14am | #

Andrew G.,

There's also a risk that people who find out via testing that they *aren't* at risk for anything will avoid insurance. Why pay for insurance if you're not predisposed to anything major? Just get enough to cover accidents.

The result may be that healthy people, knowing that they are going to be healthy for life, avoid buying insurance while unhealthy people run out to buy it.

A sort-of-example in real life would be me. If my civilian employer did not provide almost-free-to-me insurance (my opt-out amounts are really low, not really worth checking the blocks) I would not have any, by choice.

Well, okay, I get to find out what great health I am in by extensive, government provided, physicals. Ron and I exchanged some e-mail about my latest adventure. I now know that my heart is perfectly fine, I am just sloppy and out of shape, need to take fish oil and asprin, exercise, lose some weight. Otherwise, there is not really anything that can be done to improve my health. Probably got over-tested by a panicky flight surgeon, but no biggie to me.

Oh, I am on the verge of blindness and have to wear glasses to correct my bat-like 20/40 vision to 20/20, but knew that before the physical.

If the physicals, a requirement by the government for my services as an Aviator, were not provided in that bargain, I could just pay for my own physicals periodically and come out well ahead of paying insurance premiums.

One problem with that strategy would be if a condition was found, then it would be too late to get insurance due to a pre-existing condition, but that could open a whole new market of health industry products, couldn't it? Like surgery credit cards, or mortgages or something.

MP | May 2, 2008, 11:14am | #

Personally, if I had to choose I would rather see a system where insurers could use this information, and if it produced a set of consumers who could not obtain insurance, those consumers were able to enter a system where the government paid for their health care on a means-tested basis.

This is similar to an idea tossed out by Arnold Kling in his excellent review of our current healthcare clusterfuck.

Fluffy | May 2, 2008, 11:15am | #

Otherwise, you'll reduce costs for those who have no genetic predisposition to any disease, and the remaining people won't have access to health care due to cost.

The reason I think this is not true is because there have always been bad insurance risks, but people have still been able to purchase insurance.

I think it is very likely that genetic testing will produce such a wide range of information that just about everyone will be shown to be "genetically predisposed" to some disorder or other. Basically, your argument would require the insurance agency to voluntarily shut down. Actuaries would have to throw up their hands and say, "Everyone is such a terrible risk that we can't afford to insure everyone!" And of course, that is silly. At current premium levels across the system as a whole [I'm not pooling here, just doing a little macro analysis] there is enough money to pay claims and allow the industry to profit. To me that would indicate that the insurance industry would not need to exclude every last potential customer other than some small handful of genetically perfect supermen; it would just have to use risk-based pricing and charge a range of premiums on a sliding scale. The total premium burden would not change; it would simply be more justly distributed.

I enjoyed the movie Gattaca but I thought it didn't really portray actual human behavior in the milieu it created. People make trade offs in their decision making all the time. The guy with a genetic predisposition to heart failure would not find all avenues of advancement world-wide closed to him; he'd just have to perform better in some area than his least-genetically-perfect competitor - better enough that someone would bet on him anyway. Maybe you wouldn't get to be an astronaut to Jupiter if your genetic tests red-flagged something, but there are tests we have now that exclude people from extremely select and desirable positions and no one bitches about them.

Other Matt | May 2, 2008, 11:15am | #

Generally people learn lessons from reviewing the consequences of others. There are always outliers.

I disagree. Smokers, as one off the top of the head example. I don't care if they want to smoke or not, but to say that they learn from watching others on oxygen, getting cut to pieces, hacking up black crap, etc, is ridiculous. Smokers quit when it personally fits them, not because of external stimuli. We could go on to bicycle people wearing/not wearing helmets, a guy next to them turning his skull into pudding becomes someone who "doesn't know how to fall". Let's go to seat belts, "Gee, I'm glad I got thrown out of the car...law of what, momentum? Hey, what's my car doing following me down the hill?".

Hmm..How about speeders? Drunk drivers?

People don't generally learn from other's mistakes, they rationalize that it won't happen to them. This phenomena is much worse in the set that is uninsured, because either their poor, and need to rationalize away their real fears, or they're the type that rationalizes away any risk anyway.

Guy Montag | May 2, 2008, 11:19am | #

Hmm..How about speeders?

I fail to see the mistake there, other than the one made by the government putting laughably low limit numbers on the big white rectangular signs.

Other Matt | May 2, 2008, 11:20am | #

Actuaries would have to throw up their hands and say, "Everyone is such a terrible risk that we can't afford to insure everyone!" And of course, that is silly.

No, it's not, it will be exactly the rationale used to jack the rates for no financially justifiable reason. If you disbelieve this, look at the "home inspection" market, it was created out of nothing, and every house had some measure of defects, new or old. Suddenly, you had these "home inspections" (what a racket these be), which told you that basically any place was a complete piece of shit to live and would fall down in a week. Of course, everyone involved knows this is bull, but it's invariably used to put the major f-s on the seller, beating them down in price.

Insurance companies will do the same thing, "But Mr Fluffy, you have a genetic predisposition for kneecap cancer, that's terrible, at least another $200/mo and thank the gods it wasn't appendix inflammation"

MP | May 2, 2008, 11:21am | #

People don't generally learn from other's mistakes, they rationalize that it won't happen to them.

They rationalize that for them, the risk/reward calculation, using their personal risk tolerance, favors the reward. It's not an act of denial.

Consequences affect the aggregate risk tolerance of society. More severe consequences will increase aggregate risk.

Fluffy | May 2, 2008, 11:23am | #

I don't subscribe to the fact that government run health care needs to be rationed. Now, taxes should be high enough to pay for coverage.

So basically you believe that people consume the same amount of any particular good regardless of its direct cost to them?

Do we want sick people to pay more (potentially, much, much, much more) for their health care than healthy people, even if they are sick through no fault of their own?

Do we want people who buy ten cars to pay much, much, much more for cars than people who buy no car and ride the bus?

I think the question of "fault" is an interesting one, also.

If a genetic test accurately reveals that a person is a much greater risk, is it fair or unfair for people to treat them as if they are a much greater risk?

That's a fundamental question. To support GINA, you basically have to say that it's not fair for people to measure you as a risk using accurate information about you. You have to define "fair" as "I get to force someone to make a risk judgment about me after information is deliberately withheld from them". Would it be fair to pass a law that said that employers could not ask if you went to college? Would it be fair to pass a law that said that lenders could not check your credit before deciding whether to loan you money?

Other Matt | May 2, 2008, 11:23am | #

I fail to see the mistake there, other than the one made by the government putting laughably low limit numbers on the big white rectangular signs.

Sorry, I was unclear. I don't have a link handy to a picture of a high speed accident where the car comes apart, but assume I do, and read my comment in that light. Seeing what happens when excessively speeding and losing control should cause people to drive slower. They don't, they say "Poor bastard" and speed up.

Other Matt | May 2, 2008, 11:25am | #

They rationalize that for them, the risk/reward calculation, using their personal risk tolerance, favors the reward. It's not an act of denial.


I don't buy that. You're talking about the general populace. They don't even stop to consider it might happen to them. There is no calculation involved, it's pure denial.

Fluffy | May 2, 2008, 11:28am | #

No, it's not, it will be exactly the rationale used to jack the rates for no financially justifiable reason.

Does anyone care to give Matt the basic economics education he needs to understand that in a free market it's absurd to state that the providers of a good or service are completely free to set prices wherever they want? I've been monopolizing the thread.

Other Matt | May 2, 2008, 11:37am | #

Does anyone care to give Matt the basic economics education he needs to understand that in a free market it's absurd to state that the providers of a good or service are completely free to set prices wherever they want? I've been monopolizing the thread.

::Sigh:: Fluffy, you're not understanding. I don't know what your background is in econ, but trust me, I probably have more formal education than 95% of the people in the USA on it.

Whether they are free or not to charge what they want is immaterial to my comment. My comment is that this data will be used as justification to increase rates individually, creating the big bugaboo of described (but undefined) potential risk vs undescribed (but also undefined) potential risk. Economically, there is no justification which can be supported by underlying mathematics, there is no greater risk profile than previously. However, now that we see that this is described, it becomes a justification to be alarmist for those who don't do the math.

As I said, look at the functional workings of the "House inspection" racket, or the "Credit rating" racket. Neither have done a thing for the housing industry, there is no value added by either, they're arbitrary and do nothing but name potential risks as opposed to leave them as unnamed potential risks. The potential risks remain potential, but the mere description causes someone to increase costs. Theoretically this shouldn't happen, I would agree wholeheartedly, but it does. Theoretically, your insurers would create tables based on risks, and charge accordingly, but they won't, and your insurance will further dick up all of our health care system.

Anyway, I have to run now and wont' be back till Sunday, so y'all have a good weekend.

P Brooks | May 2, 2008, 11:40am | #

the providers of a good or service are completely free to set prices wherever they want

only if the government is standing behind them with a gun, forcing people to buy their product. See: "mandatory automobile insurance."

Guy Montag | May 2, 2008, 11:44am | #

No, it's not, it will be exactly the rationale used to jack the rates for no financially justifiable reason.

Sounds like a darn good reason to "allow" more competition, primarily by getting the governments out of the way.

Guy Montag | May 2, 2008, 11:45am | #

the providers of a good or service are completely free to set prices wherever they want

In one of the most over regulated industries in America? BAHAHAHAHA!!!!! Good one!

P Brooks | May 2, 2008, 11:46am | #

Economically, there is no justification which can be supported by underlying mathematics, there is no greater risk profile than previously.

Am I the only one who hasn't a clue what that means?

Guy Montag | May 2, 2008, 11:46am | #

Ooops, read that out of context. My bad.

dutchpancake | May 2, 2008, 12:14pm | #

Just my 2 cents, but I suspect that regardless of the GINA law, there will be private insurance agencies which open up which encourage people to voluntarily submit to a DNA test, and base their insurance premiums off that (unless the law explicitly bans people from releasing thier information voluntarily). These insurance agencies will compete with the current agencies, and the disaster you are talking about will be averted...and eventually, that ridiculous law repealed.

Fairness? Since when is that word in any
libertarian's vocabulary?

Guy Montag | May 2, 2008, 12:28pm | #

and eventually, that ridiculous law repealed expanded.

Fixed :)

cynical bastard | May 2, 2008, 12:29pm | #

Ron - who the hell illustrated your post? Left handed DNA again.

To all the shooters out there: DNA molecule twists to the right, just like the rifling in modern firearms. On the other hand, there is a handful of weird DNA molecules that do twist to the left, just like there is a handful of rifles with left handed twist.

...teaching biology to a bunch of kids who seems to spend a lot more time chasing deer in the woods than hitting the books sure does make you think this way.

icarus | May 2, 2008, 12:31pm | #

Geotpf said:
"I don't subscribe to the fact that government run health care needs to be rationed. Now, taxes should be high enough to pay for coverage."

don't subcribe to facts... right there with you: I don't subscribe to the fact of gravity. for some reason, though, I'm still unable to fly.

how is nonsubscription to reality working for you?

Elemenope | May 2, 2008, 12:33pm | #

I don't subscribe to the fact of gravity. for some reason, though, I'm still unable to fly.

Conflating a natural law with a political one is a few neurons shy of retarded.

Guy Montag | May 2, 2008, 12:43pm | #

You must be new here,

To all the shooters out there: DNA molecule twists to the right, just like the rifling in modern firearms. On the other hand, there is a handful of weird DNA molecules that do twist to the left, just like there is a handful of rifles with left handed twist.

It is a Libertarian DNA molecule, free to twist whatever way it likes.

R C Dean | May 2, 2008, 1:12pm | #

If people saw the bodies of the uninsured piling up outside the doors of emergency rooms, they might begin to think that just maybe they should look into buying insurance instead of a new car or a flat screen TV.

We see a hell of a lot of people walk out of our hospital without paying for much of anything and get into late-model cars and trucks. You can't afford to pay for health care, but you can afford a $40,000 vehicle?

I have recommended that any uninsured patient be required to give us a lien on their vehicle (they practically never own a house). Even if its a second lien and worth next to nothing, knowing we can take their precious hoopty would give us good leverage in negotiating their payment plan.

Guy Montag | May 2, 2008, 1:21pm | #

RCD,

Man, Man! Not the hoopty plan! The Hoopty plan is the most evil ever by da Man!

Jennifer | May 2, 2008, 1:39pm | #

We see a hell of a lot of people walk out of our hospital without paying for much of anything and get into late-model cars and trucks. You can't afford to pay for health care, but you can afford a $40,000 vehicle?

As someone else mentioned above, don't confuse "insurance" with "health care," and for God's sake don't think our current health insurance system has ANYTHING to do with the free market.

Our current system is badly broken, and under our current system this anti-DNA discrimination law is, I think, sadly needed. Despite all the amazing advances in medical technology these past few decades, if I were to break my arm today--simple fracture, nothing complicated--getting my broken arm set would probably cost me more money, in inflation-adjusted dollars, than it would've cost 50 years ago. I say "probably" because it is impossible for anybody to know how much setting a broken arm actually costs. I can tell you what co-pay my insurance company would charge, just as you can tell me your co-pay, but it's impossible to call various doctors and say "Hi, I have a broken arm and need it set. How much will this cost me?"

One reason uninsured people can't afford health care is that if you have a problem, you can't shop around for the best price, or even know in advance how much you'll have to pay. You basically have to say "Okay, here's a blank check for the treatment I need; I'll have no idea what it costs until the work's been done and I get a bill for some outrageous amount."

Guy Montag | May 2, 2008, 1:47pm | #

getting my broken arm set would probably cost me more money, in inflation-adjusted dollars, than it would've cost 50 years ago.

Cost will be somewhere around an arm and a leg.

prolefeed | May 2, 2008, 2:10pm | #

What happens when individual risks are no longer unknown? Do better and more accurate genetic tests create the possibility of an adverse selection spiral?

I'm guessing Ronald Bailey has never been a health insurance underwriter, from the statements above, among others in the article.

Individual risks will probably in the future be somewhat more accurately predicted, in which case group insurance rates will reflect the more accurate risk profile, and individual policies will not be issued without first obtaining such screening, and raising rates or adding exclusions to coverage for insurable risks, and denying coverage for uninsurable risks.

An adverse selection spiral for individual coverage would only occur if the potential subscribers knew about their individualized risk profile, but the insurance companies did not. Are you somehow saying there will be this perpetual asymetric gap in knowledge favoring patients?

This is all manageable unless government rules and regulations screw things up and prevent insurance companies from making the necessary adjustments.

prolefeed | May 2, 2008, 2:18pm | #

You basically have to say "Okay, here's a blank check for the treatment I need; I'll have no idea what it costs until the work's been done and I get a bill for some outrageous amount."

Jennifer, I agree the government's subsidy of health insurance has screwed up a lot of market incentives, but basically the job of negotiating prices with doctors has been shifted from consumers to insurance companies. And, at least in Hawaii, the near-duopoly of Kaiser and HMSA has gotten the upper hand in the negotiations. The people who get screwed the most are those who try to purchase care on their own, since they get hit up with the full tab without the huge discounts insurance companies have negotiated.

prolefeed | May 2, 2008, 2:22pm | #

I believe that one way to avoid that outcome may be mandatory private insurance based on community rating.

Wow, a Reason staffer advocating for government mandates to buy insurance and another government mandate about how to rate that insurance.

Ron Bailey | May 2, 2008, 3:14pm | #

prolefeed:

This is all manageable unless government rules and regulations screw things up and prevent insurance companies from making the necessary adjustments.

GINA is just such a gov't reg. It passed 415 t0 1 in the House and 95 to 5 in the Senate. Rolling it back may be a bit difficult.

Those who make comments like:

Wow, a Reason staffer advocating for government mandates to buy insurance and another government mandate about how to rate that insurance.

I make this proposal ONLY because I can't think of any other politically viable way to stop the slide toward completely socialized medicine. In other words, it is a second best alternative.

If you have any good ideas on how to sell free market medicine to the American public and Congress, I'm all ears.

Ron Bailey | May 2, 2008, 3:16pm | #

cynical bastard: Can I help it if illustrators think that left-handed DNA looks prettier? ;-)

Guy Montag | May 2, 2008, 3:37pm | #

If you have any good ideas on how to sell free market medicine to the American public and Congress, I'm all ears.

How about just telling them the truth, to include the proper framing of all of these Soviet style Socialistic schemes that keep getting tossed about?

economist | May 2, 2008, 4:17pm | #

Geotpf seems not to have stated his opinion very clearly. When he says "taxes should already be high enough" does he mean that the government already brings in enough tax revenue to work Universal Healthcare into the budget or that the government should raise taxes to cover any ridiculous expense incurred by his favored system?

P Brooks | May 2, 2008, 6:40pm | #

Left handed DNA again.

Maybe it's from the southern hemisphere.

Canada life insurance | May 10, 2008, 9:43am | #

Genetics tests are here, if somebody likes it, or not. And no law can secure information leaks of results. Or some other ways for insurance companies could emerge. I am selling term life insurance and usually you get some bonus, when you prove your good health. It can be the same with genetic tests - you will get some incentives to provide your test. If you refuse, you will be considered (of course, internally only) as a "problematic". And no law will help
Lorn