Health Care Debate

I've resisted weighing in on the health care debate because it's a super complicated issue about which I don't know a lot. But I've been listening and learning, and I have reached some conclusions, more about the debate itself than about any specific policy within it.

The first issue, I think, is how we characterize the problem. I don't generally quote communists or Chinese leaders, but Deng Xiaoping is widely credited with the quote "I don't care if it's a white cat or a black cat. It's a good cat so long as it catches mice." While the quote probably predates him, the point is good: we should not be caught up in ideological purity, we should worry about whether a given proposal "catches mice." Labeling the various proposals "socialist" is not helpful. Whether or not the proposals meet the bar of being "socialist," the label is an emotionally charged one and it puts the recipient on the defensive at a personal level, which eliminates any chance of a productive discussion on the issues.

Even the implied personal insult of "socialist", we forget that the reason that we typically do not like "socialist" things in this country is not because they are "socialist" per se, but rather because most socialist solutions to problems are far worse at "catching mice" than free-market/private enterprise-based alternatives, and usually with other negative consequences (such as government control of decisions that we view as our own.)

These are good reasons to be exceptionally skeptical of "socialist" programs. We should, however, remember two things. First, we have had a number of generally accepted "socialist" programs for decades already - social security and medicare come to mind as two prominent examples - and they haven't destroyed our country (their biggest problem, I would assert, is that they are huge and growing budget items). The second thing to remember is that these two "socialist" programs are also hugely popular, and that politicians view them as 3rd rails. Funny thing: as a country we hate socialism but love socialist programs.

But there's a third reason we should take the word "socialist" out of the debate. As I said above, when comparing socialist solutions to market-based solutions, market-based almost always perform markedly better, which is why "socialist" has become a shorthand for "grossly inferior to market based solutions." But alas, in healthcare the "free market" is quite distorted in many significant and fundamental ways, so it is not at all obvious that "socialist" would be worse the way it would be in other similar situations.

Anyhow, my point above is NOT to defend socialist solutions to our healthcare problems (heck, if we can find a way to fix the market, that strikes me as vastly preferable.) Rather, it is simply to argue that the name calling is not helpful, and far better would be to judge whether one model "catches mice" better than another model.

Alas, this leads to the next question: what does it mean to "catch mice?" I think a huge part of the gap between our leaders is that there is no real agreement on the problems to solve, on what "success" looks like. Broadly speaking (and at the risk of stating the obvious), many Republicans believe that the system is basically sound, but needs incremental improvements such as malpractice reform, better use of information technology, and such. And obviously, they want as little governmental role as possible. Many Democrats believe that the system is fundamentally broken and needs more structural changes, including a stronger role for government.

Since there isn't agreement on the problem, we're unlikely to find agreement on solutions.

My personal view, as is often the case, is somewhere in between - we need to fix what's broken, but I don't see any reason to upend the pieces of the system that do work. I think there are areas, such as uniform insurance regulations or requirements for everyone to have some sort of insurance, or portability, can only be done by the federal government. But I also do not welcome a huge new government bureaucracy managing health care, even if such a thing already exists with Medicare.

Many on the right have spent all their time trashing the various Democratic plans, which is a shame because frankly I'd like to better understand their own definition of the problem and their proposed solution. I suppose such is the lot of being in the minority.

But there are quite a few for whom it seems the best solution is "do nothing." I cannot support that position. We do have very good healthcare in this country, but it is not demonstrably better than in other countries, and yet we pay more per capita than other nations. This strongly suggests that something is wrong, and it shouldn't surprise anybody. Healthcare, after all, is a highly distorted market:

• Consumers (patients) do not weigh cost/benefits (as they would in any functioning market), and have no incentive to do so. (This is not necessarily a bad thing, after all - we want people to get the care they need.) If they have insurance, then that will pay for everything after a duductible or co-pay. And with or without insurance, this is people's health so they will make decisions not on the economic inputs but on whether they can get well.
  
• Doctors have few incentives to contain costs. First of all, most doctors are fee for service, so they get paid for doing more, not less procedures. But more to the point, our litigious environment strongly encourages the doctor to do everything possible to ensure that nothing gets missed.
• People without insurance make disproportionate use of emergency rooms, which is one of the most expensive ways to provide health care. People don't get denied care here, even if uninsured, so this cost gets absorbed into the system and ultimately gets paid for by insurance premiums of covered people.
  

(NPR's Planet Money podcast, by the way, has done some great stories recently specifically explaining the economics and incentive structure in our current healthcare system.)

As a result, nobody should be surprised that insurance rates have doubled in just a few years or that insurance companies deny coverage to customers that could cost them money. In fact, I believe that we should be seeking universal coverage not because it's a wonderful lofty "human right" goal as the left often portrays it (that's not a sufficient reason, laudable though it may be), but rather because (a) we're paying it anyway by covering the uninsured in emergency rooms, and (b) we're paying higher rates than we would need to if everyone - including healthy people who don't use a lot of services - is paying into the system. That's the purpose of insurance, after all, is to spread the risk around. (I've blogged about this previously.)

So we have a pseudo-free-market system. Once can try to remove these distortions and let the markets do their gloriously efficient thing. Or we can say that it's fundamentally not a market system and try government. My instincts are to try the former and only go to the latter as a last resort, but I reach the limits of my competency in this space when I try to suggest my own solutions, so I can only use these guidelines to judge proposals made by others.

I have come to a few conclusions, though:

• The status-quo is going to become ever more expensive. So while I cringe when I hear the huge price tags associated with the various proposals in congress, I remind myself that the right metric is NOT what the cost of the program is. Rather, the metric is how that cost compares with the cost to the economy of doing nothing.
• The "Rationing" scare is a red-herring. The fact is that we have rationing today, based on economic situation (which is acceptable in a functioning market, which is not what we have) and by insurance company bureaucrats. People are concerned about government bureaucrats making health care decisions based on cost, but does it really make any difference if that bureaucrat is paid by the government or by an insurance company? Black cat/white cat. In any case, unless one supports the idea that everybody should have unlimited access to unlimited healthcare regardless of cost (which I presume nobody actually supports), then one necessarily accepts "rationing" of some sort or another. So the question is not whether there is rationing, it's a question of finding the best mechanisms for doing that rationing.
  
• The fundamental issue is that treatment is and always will be more expensive than healthy maintenance. The best thing that we can do to lower the cost and improve the quality of health care in this country is to provide incentives for healthy living and disincentives for unhealthy living. Obviously someone falling and breaking an arm, or suffering from a genetic disease are not the results of lifestyle choices and thus it is not fair to penalize people for this. But when lifestyle choices - smoking and obesity are two obvious examples - put a burden on the system that do not come with corresponding economic consequences, there is yet another market distortion to correct. And correcting that can lead to vastly more efficient (by which I mean "high quality at low cost") health care.