Health Reform Without Side Effects: Making Markets Work for Individual Health Insurance (Hoover Institution Press Publication) - Hardcover

Mark V. Pauly holds the position of Bendheim Professor in the Department of Health Care Systems at the Wharton School of the University of Pennsylvania. He received a PhD in economics from the University of Virginia. He is a professor of health-care systems, insurance and risk management, and business and public policy at the Wharton School and professor of economics in the School of Arts and Sciences at the University of Pennsylvania. Professor Pauly is a former commissioner on the Physician Payment Review Commission and an active member of the Institute of Medicine.

One of the nation’s leading health economists, Pauly has made significant contributions to the fields of medical economics and health insurance. His classic study on the economics of moral hazard was the first to point out how health insurance coverage may affect patients’ use of medical services. Subsequent work, both theoretical and empirical, has explored the effect of conventional insurance coverage on preventive care, on outpatient care, and on prescription drug use in managed care. He is currently studying the effect of poor health on worker productivity. In addition, he has explored the influences that determine whether insurance coverage is available and, through several cost-effectiveness studies, the influence of medical care and health practices on health outcomes and cost. His work in health policy deals with the appropriate design for Medicare in a budget-constrained environment and the ways to reduce the number of uninsured through tax credits for public and private insurance.

Pauly is co-editor in chief of the International Journal of Health Care, Finance, and Economics and associate editor of the Journal of Risk and Uncertainty. He has served on the Institute of Medicine panels on improving the financing of vaccines and on public accountability for health insurers under Medicare. He is an appointed member of the U.S. Department of Health and Human Services National Advisory Committee to the Agency for Healthcare Research and Quality.

As overall health insurance premiums for given coverage have continued to rise and consumer incomes have been near stagnant, consumers are reluctant to spend it on health insurance with a rapidly growing price. Most Americans are still getting good insurance protection for good medical care, but for a sizable fraction things are getting worse; not everything is broken, but some things for some people definitely are.

In Health Reform without Side Effects, Mark V. Pauly offers a detailed look at the individual insurance market in the United States. He explains how it works, suggests approaches to improvement that build on what currently works well, and provides a realistic assessment of how much improvement we can demand and expect. Pauly concludes that, although there are some serious deficiencies in today s individual insurance market, the current criticisms are overly harsh, often based on anecdote and speculation rather than fact, and ignorant of some important advantages in this market that should be preserved. He suggests approaches to change that take into account current strengths of the individual market and can yield much higher net benefits with much greater confidence.

Mark V. Pauly is the Bendheim Professor in the Department of Health Care Systems at the Wharton School of the University of Pennsylvania.

Most people are offered health insurance through their jobs, and most still take it. But increasingly large numbers of workers have jobs in which coverage is not offered or where the terms under which it is offered do not induce them to take it. There is, however, an alternative to job-based insurance in which consumers could buy health insurance in the same way as they buy other kinds of insurances: voluntarily, as individual consumers, from private insurance firms. Because many of the uninsured appear to be permanent dropouts from the employment-based system, attention has turned to developing an improved individual insurance scheme.

In Health Reform without Side Effects, Mark V. Pauly provides some alternatives to the reforms currently proposed by Congress. The legislation in progress, he asserts, is far from ideal and stands a good chance of making things worse rather than better. It runs the real risk of increasing the number of uninsured, stifling innovation in health insurance at a time when it is most needed, and creating dysfunctional incentives for both consumers and insurance companies. Reform that uses rather than abuses market forces, says the author, would be preferable.

Pauly explains that the optimal government intervention provides appropriate subsidies to those who need them, a basic but limited regulatory framework, a large number of different qualified sources of insurance for profit and nonprofit, public and private and then permits consumers to make their own choices.. Should additional subsidies and regulations be required, they could more easily be added when needed than withdrawn if not needed.

Competitive markets have their strongest rationale in settings in which the amount of knowledge a planner has or could have is incomplete, and, the author concludes, the individual health insurance market is a prime candidate for such a setting. Although there are some serious trade-offs among different policy features, the model of open, neutral competitive markets seems best suited to making those trade-offs under our current conditions.