There is a big health care vote in the House today. From what I hear, the way the procedural stuff is set up, passage in the House pretty much paves the way for making the health care reform package law. What really caught my attention today was some ranting about how the Constitution will die today – this from people who did not bat an eye at warrantless wiretaps and suspension of habeas corpus for individuals designated by the executive branch as “enemy combatants.” To repeat: Tapping phones and suspending habeas corpus? No problem. Health care for the poor and uninsured? Constitutional crisis!
So, on to the substance. Do I think this bill is well designed? No. Not really. But I’m convinced that a well designed system can’t pass Congress. And, given the political capital spent on this bill, there will not be another effort made for at least another 15-20 years. So, the choices are the status quo or this. The status quo is simply unsustainable. We are spending 16% of our considerable GDP on health care already. We spend twice as much per person on health care as other countries. We already pay for something like 45% of those costs from public funds. And costs are increasing. (And no, despite what you may have heard, medical malpractice lawsuits aren’t the prime or even substantial cause of these increases.) Despite spending half as much, those other countries have health care results that are comparable or, in some cases, superior to the U.S.
To date, nobody has been able to direct my attention to an example of a successful market-based system of health care; leading me to be skeptical of whether such a thing can exist. One country that sometimes comes up in this context is Singapore. However, while its system makes use of private insurance, it also ensures affordability largely through compulsory savings and price controls.
Singapore’s system uses a combination of compulsory savings from payroll deductions (funded by both employers and workers) a nationalized catastrophic health insurance plan, and government subsidies, as well as “actively regulating the supply and prices of healthcare services in the country” to keep costs in check[.]
Markets are very good at allocating resources. However, to function properly, it seems to me that buyers need to have good information and the ability to walk away from a transaction. That’s a problem in health care negotiations. Health care decisions involve analysis of medical information that’s generally beyond the understanding of most people. And, even if you can rely on your doctor or otherwise master the medical end of the decision making process, medical pricing is often ridiculously opaque. Try calling up half a dozen hospitals and trying to get the actual price of a hip replacement. Even if they’re willing to tell you, there are likely to be an array of prices depending on who’s asking. And those will be qualified prices because any number of contingencies can affect the price, even in the middle of the surgery. Then you have the problem of getting an insurer to be clear, up front, about the terms of the insuring contract and then honoring those terms after the fact. The insurer operates from a position of strength, collecting premiums for years when there are no significant health issues, then being able to withhold a determination of whether it’s going to pay for a procedure until after the procedure is complete. Finally, any negotiating options you have in the ordinary situation pretty much go out the window once you’re in an emergency situation. It’s like negotiating with a gun to your head.
Politically, the pundits like to tell Democrats they are doomed if they vote for this thing. That may or may not be. I think it’s a certainty that they’re doomed if they vote against this bill. A political wind pretty much always blows against the party in power. It’s just easier to criticize than it is to govern. But, pretty much regardless of the substance, that wind will turn into a maelstrom if they are unable to pass legislation during tough times. During good times, the electorate will pretty much ignore ineffectual dithering as leaving well enough alone. However, during bad times, “strong and wrong” seems more comforting to people than weak and either right or wrong. Of course, “strong and right” is best of all. When asked about particular policies in the legislation, folks are generally on board. When asked about the bill or the legislative process as an abstract entity, that’s when public opinion goes negative. Once the law is passed, a lot of the negativity about procedure will probably evaporate pretty quickly. When the armageddon predicted by the bill’s detractors never materializes, they will be discredited and a lot of that negativity will evaporate as well. So, politically, the best option for Democrats is going to be voting for this bill. If the bill fails, there will never be anything concrete for the electorate to judge. Instead, the health care bill will always be the inchoate monstrosity built up by its detractors. Anyone associated with that monstrosity will be judged harshly – even if a particular lawmaker only dithered about supporting the monster and even if the monster never existed in reality.
Now, it’s all over except the shouting. And the voting.
Spot-on, except for the “they will be discredited” part. Just look at the guest list on Meet the Press on any given weekend.
So you’re saying that since Bush & co may have done some shady/unconstitutional things its ok for the Democrats to do shady/unconstitutional things as well? Is this the logic? Sure sounds like it.
“Politically, the pundits like to tell Democrats they are doomed if they vote for this thing. That may or may not be. I think it’s a certainty that they’re doomed if they vote against this bill.”
We’ll see. It all depends on how it turns out. If the economy rebounds people will forgive and forget. If not, in the words of James Carville, “Its the economy stupid.” Only this time, if the economy still sucks in November, the Right will say “see I told you so,” and it will be 1994 to an extreme. It will be interesting to see how it all plays out.
Mike Kole says
Doug, you can’t point to an effective 100% private care system in the world, because none exists. You know that full well.
Hope you are right that there will be no catastrophic consequences, should this pass. I’d like to see improvements, but this seems to have become much more about political power than it has about health.
I’m not sure anyone can point to a ‘successful … system of health care’, market-based or not, given that so many folks interpret that as one that will let them live forever, in perfect health, for free (free to them, anyway).
I don’t think our current system is really ‘market-based’, either, given the scope of government involvement. Maybe it was market-based before WWII, but not since. I wish I knew whether that is part of the problem or part of the solution…
Mike Kole says
It is interesting to note that elective health care that is not insured, and has no government mandates over it, such as Lasik, has seen quality improve and costs go down over time, just like markets for electronics of food have worked.
Kurt M. Weber says
Mike, while I agree with your general argument and position, I’m not sure LASIK is the best example, precisely because it is elective. If it is so expensive that it is not worth the price, people will simply opt out.
You compare this to the market for food, something which certainly is not elective; but I’m not sure the comparison applies to non-elective medical processes like it does for non-elective eating. While eating food is a prerequisite for anyone who wishes to live, food production can benefit from the advantages of mass production and easy entry to the market; and if worst comes to worst, one can grow his own food. I’m not sure a “mass appendectomy” is something I’d want to be a part of, and the training needed to safely perform appendectomies constitutes a very high barrier to entry–and I certainly cannot remove my own appendix.
Dwight Schrute’s explanation of why he tipped his urologist but not the sandwich delivery boy is, I think, germane to this: “I am not capable of pulverizing my own kidney stones.”
This leads me to believe that a private system probably isn’t a viable or effective solution.
No, I’m saying that a prerequisite to protesting the notion that this health care bill is unconstitutional (as opposed to merely a bad idea) is having spoken up when the Bush administration was doing much more Constitutionally problematic things. Otherwise, purported concerns about the Constitution are most likely a pretext.
eric schansberg says
Markets are very good at allocating resources. However, to function properly, it seems to me that buyers need to have good information and the ability to walk away from a transaction.
That’s a problem in health care negotiations.
–> currently, yes…
Health care decisions involve analysis of medical information that’s generally beyond the understanding of most people.
–> common in many markets
And, even if you can rely on your doctor or otherwise master the medical end of the decision making process, medical pricing is often ridiculously opaque. Try calling up half a dozen hospitals and trying to get the actual price of a hip replacement.
–> true, under the current system– but few have has an incentive to seek such info, and thus, no one has an incentive to provide it. In non-insured areas of health care or related areas, pricing (as in normal markets) is quite transparent.
Not sure how this plays out politically, but probably a net loss for the Dems. Then again, what would the GOP do with power again?
Kenn Gividen says
I’ve always been amused at the tendency of the left to swat flies with shot-gun blasts.
Granted, no free market system is flawless. But nearly all are more efficient than gov’t controlled alternatives. Consider the dismal record of Britain’s National Health Service or Australia’s Medicare. Were it not for American inovation they would be even more inefficient.
Keep in mind Obama-Care doesn’t promise health care — it promises health insurance. What good is health insurance if health care is unavailable?
Gov’t controlled health care is not about health care. It’s about gov’t control.
eric schansberg says
Kenn, the Right uses shotguns too– also, funny/sad and some combination of ignorant and political.
There are no free market systems for health care. Singapore has done quite well with the closest proximity to that in a developed country.
The U.S. already has a strong mix of govt and markets– from responsibility for more than 1/2 of the spending to a wide array of market-numbing regulations and subsidies. Beyond that, it is quite easy to make the case that govt involvement is the cause of the vast bulk of our current problems (although it takes some time and is more complex than the facile arguments to expand govt activism).
Will some people be better off with the new legislation? Sure, that’s the nature of government activism.
Are “we” worse off, overall, with the new legislation? The most interesting and hopeful answer is that in the long run, this is likely to mess things up a lot more, leading to some better outcomes. If/when that happens and if we don’t trash the economy in the meantime, we would finally end up at “true” (catastrophic and preventative) insurance, which would restore sanity to a govt-inspired mess.
Another interesting angle: this will continue to lengthen/deepen the ongoing recession– as Bush/Obama/Congress continue to screw around with the markets. This will continue to put the Federal govt in an increasingly precarious position with respect to avoiding debt and inflation. And it will continue to put state and local govts in an increasingly tight bind. This will probably lead to some amazing changes in the next decade.
Kenn Gividen says
I’m wondering if the shotgun analogy will prompt the NSA to visit Mr. Masson’s blog.
One thing that just struck me yesterday:
Since the health insurance companies were opposed to this bill, is there anything in there that prevents them from jacking up the rates for all existing users?
I wouldn’t put it beyond them to start raising the prices 2x-3x and say that they HAD to because the government rules will make the cost of doing business that much greater.
I would also expect this around October.
eric schansberg says
There are clearly a number of provisions which drive up the cost of insurance– and thus, will drive up premia, cause exit from the industry, etc. Beyond that, if we tried to legislate against increased premia, increasing costs will get rid of more (all?) private insurance options.
This has not been about insurance premia, but increasing insurance coverage. In fact, some of the new regs purposefully seek to increase costs and thus, premia. They could have embraced regs to decrease costs and premia– e.g., get rid of insurance mandates, allow more competition in insurance– but they’re ignorant of Econ101, they believe they can effectively blame the insurance companies, or they don’t care about that.
Mike Kole says
Doug- (I don’t know my HTML, so my quotes aren’t as pretty as yours. Sorry.)
“This leads me to believe that a private system probably isn’t a viable or effective solution.”
I think it certainly could be, but isn’t, because governments intervene, because it is popular for them to do so, in varying degrees in different countries. That isn’t the same as non-viability.
Charlie Averill says
The most secure I ever felt for my health care was when I was in the U.S. Navy. When ill, I just went to the dispensary and got the care I needed. Those who required surgery were simply sent to the hospital.
No insurance premiums to pay, no paperwork, no bills, the very best anyone could ask for………paid out of the U.S. Treasury.
Now that’s government run health care. Can’t beat it.
Kenn Gividen says
I recall Eric making an excellent point during his televised debate with Hill and Sodrell. He noted that we don’t use auto insurance for every minor flaw. So why do we do that with health insurance?
Seems to me that insuring ourselves against catastrophic health problems (as opposed to getting out teeth cleaned every six months) would considerably drive down insurance cost.
eric schansberg says
What was your wage during your admirable service to our country, Charlie? I think your analogy probably holds quite well.
Kenn, that’s the root problem. If we don’t fix that, we will continue to have (a wide array of) problems– whether govt runs 50% or 80% or 100%.
“Illinois Catholics call off keynote speech by Rep. Stupak after vote”(Head line from Chicago Tribune)
I feel bad for Bart Stupak.He is disgraced in purists’ eyes. Yet he himself was seen as a purist til he blinked. He made the wrong decision in an ideological world where truth is 100% and one’s action is dictated by a cadre of others. He most likely didn’t want to be the one who to kill health care over a very nuanced(my view) difference between House and Senate anti-abortion language.But everyone speculates about his motives,that’s the inevitable moral judgment..
I also know my catholic cathechism,but I too would hope that I would have voted on what I perceived as ‘the greater good’,even if that was also perceived as ‘ caving in to political power’. ( I’d probably go to Hell with all the Protestants..warning remembered from my youth). Sin and virtue depend on one single action,even one well-intentioned,and the believers never forget.That’s religious ideology and secular ideology.Politics is a mine field for ideologues.
Because auto insurance also does not cover things like your engine blowing up when you don’t change the oil.
eric schansberg says
Right…To deal with that, you have a private-sector warranty with a newer car. And with an older car, you’re talking about replacing it for a few thousand dollars– an event that is “self-insurable” and relatively modest compared to (catastrophic) accidents and the resulting damage.
In any case, are you suggesting auto insurance for engine blow-outs and oil changes– or just the former? Beyond that, are you suggesting that such insurance should be heavily subsidized– as we do with health insurance? And what would occur in that market if we had subsidized insurance like that?