Saturday, April 01, 2017
What to do about health care reform?
Economist Veronique de Rugy of the Mercatus Center points out how badly flawed the AHCA was, and also how foolish it would be to give up now on health care reform (as some have suggested) after only a couple weeks of frenzied and thoughtless effort. As she points out, the AHCA did not constitute a serious reform. It certainly didn't repeal ACA, and it did nothing to stop the rapid increases in insurance premiums. As she correctly points out, [AHCA] "failed because it was a bad bill. It wouldn't have reformed many of the Affordable Care Act's regulations, and it would have done little to control rising health care insurance premiums. It also doubled down on the misguided idea that the government and insurers, rather than consumers, should pay for a large number of Americans' non-catastrophic health care needs. This, among other things, contributes to the rise of health care costs. Adding insult to injury, it was a political bill that failed the long-term stated policy goal of repealing Obamacare." Real reform will repeal ACA, open a free market in health care, and shrik Medicare and Medicaid.
Law professor Charles Silver of University of Texas-Austin points out, correctly, that health insurance is the fundamental driver of spiraling medical costs, and that nothing short of eliminating most insurance will solve the problems and make health care increasingly accessible. As he writes,
"In healthcare, the collective action dilemma stems from the fact that comprehensive coverage—by which I mean all forms of third-party payment, including Medicare and Medicaid, as well as private insurance—is the main driver of the healthcare cost spiral that gone unchecked since the mid-1900s.
The problem is a vicious circle.
1. The more insurance a person has, the less the cost of health care figures in individual decision making.
2. The less costs matter, the more willing people are to use healthcare, especially healthcare that is expensive.
3. The more people consume, the more society spends and the pricier healthcare becomes.
4. As healthcare costs increase, the more people want insurance and the more they want insurance that covers everything.
5. Return to step #1.
In short, third-party payment got the healthcare cost spiral going and has fed off it ever since."
The solution is made more complicated by the perfidy of politicians of both parties; "In the short run, the education program is the most urgently needed. Republicans will have to teach fearful Americans that healthcare is expensive because it is insured. This will be hard to do. Democrats, most of whom want universal insurance coverage for everything and all of whom want to kick the Republicans out of office, will do what they can to stoke voters’ fears. Health care businesses will too. They know that private insurance, Medicare, and Medicaid are their cash-cows, so they will say and do what they must to protect them.
Worst of all, Republicans have undermined their ability to teach anyone anything by cultivating a reputation for being stupid, dishonest, and corrupt."
So what to do? In my favorite piece of the three, aerospace engineer, futurist, and author Robert Zubrin considers simply outlawing health insurance (this would work!), but -- recognizing the risk of catastrophic costs from low-probability events -- suggests getting rid of most insurance, mandating and enforcing price transparency in health care, and... providing a universal catastrophic policy. "[R]epeal Obamacare, with all of its mandates, as well as all prior incentives for employer-provided health-insurance plans. It would provide raises for federal employees, replacing their health-insurance policies with cash and encouraging state, local, and private employers to do the same. It would create a regime of enforced transparency, including published prices and hospital-cost ratings calculated by government statisticians, so that the public knew where health-care bargains were to be found. It would include regulations forbidding the uninsured from being charged more than the insured, and laws sharply limiting the maximum punitive damages obtainable from medical-malpractice lawsuits...And it would create a universal system of catastrophic health insurance, administered either through the federal government, the states, or employers."
He also notes, "The last item on the bill’s list could stick in the craw of conservatives, because a universal system of catastrophic health insurance might have to be single-payer to pass Congress with bipartisan support. But they should reflect: Such insurance would be very cheap, both because catastrophic insurance is in general cheap and because the free-market principles enshrined in the rest of the bill would drive down health-care costs across the board."
He's right. I have often thought this. In crop insurance, the USDA offers a CAT policy (catastrophic risk protection) that -- for a nominal fee -- protects the insured from a total financial disaster in the case of a 50% or worse crop failure. It's cheap insurance for unusual events; it does not generate market distortions and it's not a source of taxpayer loss. A similar health insurance would deflate almost all of the opposition to a free market in health care...or at least the opposition that's honest and well-meaning.
As Zubrin puts it, "[t]he last item on the bill’s list could stick in the craw of conservatives, because a universal system of catastrophic health insurance might have to be single-payer to pass Congress with bipartisan support. But they should reflect: Such insurance would be very cheap, both because catastrophic insurance is in general cheap and because the free-market principles enshrined in the rest of the bill would drive down health-care costs across the board. Besides which, unless there is serious reform along the lines described above, the ultimate result of Obamacare’s ongoing failure will be an enormously costly single-payer health-care system of the European variety. A system combining free-market principles that dramatically reduce costs with single-payer catastrophic insurance and a safety net for those who need it would certainly be a much better outcome."
All three of these articles should be read in their entirety. They are not too long, and they say much. Veronique de Rugy, Charles Silver, and Robert Zubrin should be on the team that designs the real Obamacare repeal!