More thoughts on the healthcare debate
If you follow this blog at all, you’ll know that healthcare policy is a big interest of mine. Given that this was the focus of President Obama’s most recent address (and that this blog is my personal soapbox) I thought I’d chip in three thoughts to the blogosphere “marketplace of ideas” on the topic.
The first is that I’ve been very impressed with President Obama’s efforts. This may come as a shock to my more liberal friends who have been reading my Google Reader shares on the subject, many of which have been critical of Obama’s plans. But, as someone who was not terribly impressed with Hillary Clinton’s efforts in healthcare in the 1990s, I have been pleasantly surprised by the different strategy that Obama has taken. At least from this blogger’s perspective, Obama’s process has been much more open, allowing the plan to receive input and win support from the numerous groups which need to be won over (i.e. pharmaceutical companies, doctors and nurses, insurance companies, hospitals, etc), and much more driven by Congress rather than force-fed from the Executive Branch.
The result? In my opinion, a much more nuanced policy than what I’m used to hearing from pie-in-the-sky single-payer advocates and market fundamentalists with a promising focus on addressing access and cost concerns with a combination of regulatory/government directives and market-based methods.
The second is around the balance between using government initiatives and using private markets to solve the US’s healthcare problems. I tend to be biased towards the latter, given my lack of faith in the ability of central organizations to solve the coordination, innovation, pricing, and customization challenges which markets are more adept at solving. With that said, anyone who is not a free-market fundamentalist is probably also aware of the coordination challenges that markets face (i.e. one of the reasons why we don’t trust the market to be entirely responsible for national defense or international treaties) and the blindness to equality/access concerns that markets can have.
From that perspective, I think the Obama plan does a relatively good job of balancing the two. After all, I can list at least two “market failures” that are abound in the American healthcare system:
- One can probably assign blame for many of our current complaints about American healthcare to the fact that there is a very poor market for health insurance (David Leonhardt at the NYTimes does). After all, why would insurance providers increase quality while lowering cost when most US healthcare coverage decisions are made by employers who don’t have the incentive or the information to shop around between plans and the fact that, in many markets, there are very few insurance companies who a consumer can choose between.
- Holding concerns of access aside, not enough people get health insurance. This is true for three reasons. First, people oftentimes underestimate the “safety net” that they may actually need to deal with sudden illnesses and accidents. Without the bargaining power of a large health insurance company on your side, the costs of seeing a doctor and obtaining treatment are astronomical – something which many uninsured find out when they suddenly need treatment. Second, the fact that the uninsured are able to still get government-funded care or emergency room care, while morally praiseworthy, means that extra costs are added to our healthcare system (and hence our insurance premiums and copays) which could be avoided had those individuals originally been covered. Finally, there are a number of conditions (e.g. breast cancer) which are more easily and cheaply dealt with if detected and treated earlier. Individuals without health insurance oftentimes are less likely to find and treat these conditions early on, resulting in greater costs and more difficult problems for doctors to treat.
That Obama is pushing for a regulated “insurance exchange” and a requirement that all individuals have health coverage is, to me, a step in the right direction to addressing these two issues. The devil is of course in the details, but the fact that Obama is leaning towards these provisions is very encouraging.
I am much less enthusiastic about the “public option” that has been thrown around because I don’t believe it manages the public/private divide very well. The theory is that the government will step in and provide coverage to individuals who are not happy with any of the options on the table with the hope that this “public option” will help “keep the insurance companies honest.” While the theory is appealing on the level that everyone would like to have an extra safety net which helps to prevent market failures, I think the “public option” idea is based on a flawed premise.
There are three possibilities that I can envision for the public option. The first is a world where the initiatives that Obama is proposing create a strong market for insurance. In that case, in the same way that the low prices in the used car market cause a self-fulfilling doom loop where they attract only bad cars (the “lemon problem”), the public option will doom itself to be a high cost, inefficient solution that attracts all the patients which insurance companies don’t want to cover (e.g. those with difficult pre-existing medical conditions).
The second and third possibility that I can see have the same outcome. Either Obama’s market initiatives fail to create a strong market for insurance or the a strong market is created, but to bolster the public option, the government heavily subsidizes the public option and protects it from competition from the private sector. In both cases, the result is that insurance companies are unable to compete with the government plan, resulting in the market for insurance becoming even less robust than it is today, effectively converting the health insurance market into a single-payer model whereby the government takes on all health care. I’ve discussed many reasons why this would be undesirable, but the two biggest ones that come to mind are governments being generally bad at innovation (due to central planning being notoriously bad at allocating resources between different uncertain technologies) and the politicization of the rationing of healthcare rather than relying on medical and personal factors.
In all three cases, the public option not only leads to undesirable costs, but distracts the government from the solution which should be implemented: creating a strong insurance market with good options for consumers and using subsidies/regulations to expand coverage. That’s the only solution that provides the coverage, the level of cost, and quality of care that we want.
The final thought that I had revolved around additional steps which I hope the Obama plan will eventually take. I outlined them in a previous post I made on healthcare policy, but they include two things:
- Universal coverage for children – Morally and practically (as there’s no better way to improve the long-term health of the country by making sure that children at an early age are vaccinated, have routine checkups, and are taught good health habits), I see no reason why every child should get quality healthcare coverage.
- Making health insurance actually act like insurance – “Health insurance” is only insurance in name, not practice. You don’t expect your car insurance to pay for every tune-up and every time you fill up at the gas station. Why should you expect your health insurance to pay for every drug and every visit to the doctor’s office? The fact that so much of this payment is handled by someone else means that individuals don’t need to control their own healthcare costs, which makes insurance premiums higher for everyone. This fact also means that insurance ceases to be the “safety net” that protects you from catastrophic losses that its supposed to be, but instead becomes a significant drag on your earnings potential.
It is certainly an exciting time for anyone interested in healthcare policy, and hopefully, we leave this process with a set of initiatives and proposals which make us all better off.
(Image credit – Dr. Obama) (Image credit – Flag + stethoscope) (Image credit – Public Option pin)
