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complexity, of course

I read the op-ed column Attention, Medicare Shoppers in this morning’s New York Times with the combination of outrage and skepticism that Gentle Readers have come to expect. In the piece, Lisa Doggett talks about helping her grandmother save $2,000 a year on her prescription drug costs under the new Medicare benefit. Dr. Doggett seems like her heart is in the right place (she is evidently active in Physicians for Social Responsibility and the People’s Community Clinic in Austin, and her old dad appears to be on the good side of the aisle), so I don’t want to make this about her, or even about her piece. But while she is warning people to do a little research and comparison shopping to save money on Medicare, she is (perhaps intentionally) exposing a system that is so utterly outrageous it takes my breath away.

Essentially, she says, if you have a near relative who is a doctor and is willing to spend an hour or so looking at your prescriptions and seeing what changes would save money but be “medically insignificant”, you will save money. Otherwise, you’re up the creek without the proverbial. Oh, she suggests that if you have Mad Google Skillz, or have a near relative with Mad Google Skillz, you could then present the results to your physician, who might approve the changes and then you would save the money. Since Dr. Doggett says that “overburdened physicians can't be expected to counsel each individual patient”, I’m not sure how much help you can actually expect your physician to be, when it comes to explaining whether you can switch a ‘preferred’ blood pressure medication, or whether that switch would interfere with the efficacy of the some other medication for some other chronic condition. But hey, I’ll use my Mad Google Skillz to help out my parents, sure. And heck, if I make an error of some kind, it’s just my mother’s health, abi gezunt.

But I didn’t really want to get into a long rant about the foolishness of this particular Medicare plan. You’ve heard that elsewhere, Gentle Reader, and if you haven’t, then you aren’t interested and don’t want to here it here. But what occurred to me about this set-up is that it is very similar, experientially I mean, to the 401k kind of thing, where the pensioner is responsible for directing his own investments.

Look, a hundred years ago, most people were not expected to choose between different complicated plans of any kind. There was a pension, and you paid into it. If your doctor prescribed something, you paid the druggist for it, and if you couldn’t afford it, you didn’t get it. If you had some sort of health insurance system, you paid into it, and they paid out, or they didn’t. You almost certainly didn’t choose between insurers, or between plans. Most people weren’t in the stock market at all. If you got a mortgage, the bank (or the wealthy guy down the street) told you the terms, and you could take it or leave it. Or, perhaps, you could choose between a twenty-year and a thirty-year note. Nothing too complicated.

Now, there’s a lot more choice for a lot more people. There’s also a lot more information available to a lot more people. Someone around the median income level can pretty likely get access to the web, develop Mad Search Engine Skillz, and find out in an hour an incredible level of detail about, well, pretty nearly anything. Do you want to choose between investment companies for your retirement account? You can find out the records of the various options, and even the records of the various funds within those companies, and the turnover rate of the fund managers, and so on. That would have been incredibly difficult two generations ago. When you didn’t need that information. Want to buy a refrigerator? You can find out safety information, owner satisfaction rates, energy ratings, how long they last, etc, etc. You are required to make more complex choices, and you have more information at hand to help you make those choices.

This is not an unmitigated positive, nor an unmitigated negative. It just is. The crazy Medicare system (which, I reiterate, is an outrage) is one example of a whole cultural trend that both forces and allows a greater range of choice. As we talked about in the comments to Stiles a while ago, it’s not clear that a greater range of choice is always good, but then it’s not clear that the choices aren’t better choices. Neither the Satisficer or the Maximizer have reliable strategies, I think, but both make useful decisions in their way.

My point, if I have one? It’s just that, well, I think this really is qualitatively different from our parents’ generation, and certainly from our grandparents’. I think, without having done any research, that the situation I describe is reaching across class lines in a way it didn’t, and is therefore affecting the culture in ways it didn’t before. I wonder how that plays out indirectly, in ways that our generation and the next accomplishes pattern-matching and story-telling. I wonder how that affects generational conversations and expectations. I wonder if that difference, the difference in comfort with complex plans and research into choices, is a useful frame to look at other social questions. I think it might be.

chazak, chazak, v’nitchazek,


The neat thing about 401k investing is that because it's a big free market, investment companies have a great incentive to meet the demand for simple solutions that ordinary people can understand. Vanguard and Fidelity, for example, have "targeted retirement funds", which buy a broad index of investments, and shift their balance of investments over the life of the fund as you grow older. You don't have to personally worry about when's the right time to shift from high-risk high-reward long-term investments to safe short-term ones; the fund manager does that for you. (There's a separate fund for each year, in five year increments, so the current mix in the Targeted Retirement 2010 fund is approximately what the mix will look like in twenty-five years in the Targeted Retirement 2035 fund.)

Anyway, point being that the market supplies both complexity and ways to reduce complexity. Medicare doesn't bother with the latter.

...and it couldn't possibly have been intentional that such comparisons would favor private sector solutions...

I'm confused, irilyth. How does having another choice, which may not be a better choice for everybody, reduce complexity? I mean, yes, I see that once you have chosen that particular option, you have effectively put your money in a blind trust (well, no, you still have, and I assume can exercise, the choice to transfer those funds later), but still the choice to put money in those funds is still a complex one. What the market provides is not a way to reduce the complexity, but a way to handle complex choices, by providing information (such as the information you provide for that fund). That's a good thing, of course, but it isn't simple.
And, of course, it's true that the Medicare program was deliberately set up to be difficult, time-consuming and inferior. The problem with the Medicare program isn't that it is not market-derived, it's that it was written by corrupt legislators and dictated by greedy pharmaceutical companies. The Medicare program itself appears to be largely satisfactory; had we simply added a prescription drug benefit to it, written to be similar to the language already there for doctor's visits, surgeries, etc, there would be much less range of choices (and those choices would be much less complex).

I think I was conflating "simplify the situation" and "make it easy for you to deal with the situation". If you have a thousand options, having an option labeled "this easy option does just what you want" doesn't mean you have fewer choices or less complexity, but it makes your decision easier, which I may have described as "simpler".

Some blogger recently mentioned the difference between being pro-*market* and being pro-*business*, noting that Republicans used to be more the former, but are now more the latter.

The market can help solve the medicare problem because an open and free market is, by definition, not corrupt. Politicans are not corrupt by definition, but they often seem to be by inclination. Given the choice between "solve this with an open and free market", or "solve this with politicians", which do you think is more likely to lead to a corrupt and bad outcome?

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