Diet Healthcare Reform

The big news of the day, at least according to Drudge, is that Team Obama is laying the groundwork for removing the public option from their health care plan. This would be part of a larger strategy shift, which has seen Obama rephrase “health care reform” as “health insurance reform” after his personal popularity and public support for health reform diminished as the debate soured.

While I do support a strong public option, I agree with Ezra Klein that it isn’t the most important part of reform. Without the freedom to opt into it, most Americans would not have any new option even with the public option, anyway.  Universal coverage is the most important part of health care reform because it will actually save thousands of people’s lives.  The rest is just about money.  Universal coverage doesn’t necessarily have anything to do with the public option either.  Massachusetts does it through a mandate and subsidies and so would a national plan.

That said, the other, slightly less, important part is still vital, because its not just about money, it’s about a lot of money - both to individuals who have their lives ruined when they get sick and to the government, which will have to pay for huge new obligations. That last part is probably what has the public worried now: we are spending so much money and the economy is so bad that it’s hard to write another huge check.

However, It frustrates me is that no one talks about how expensive doing nothing is. Medicare is a $36 trillon dollar unfunded liability over the next 75 years because the costs of medical care keep going up.  Just to give some context, that is about two and a half times the total economy of the country in a year.

Furthermore, the American economy, the paradigm of the free market, has a health care system that creates economic inefficiencies.  Instead of free insurance markets, consumers have to use their employer’s plan, creating mini-monopolies (plus many states have single insurance companies that control super-majorities of the insurance market, which are not so mini-monopolies).  Consumers also don’t get to make decisions at the margin, comparing costs and benefits of additional care, because most of the costs of health care are hidden from consumers.  This encourages over-consumption.  Rather than encouraging the free flow of labor and low barriers to entry for entrepreneurs, our system punishes employees who leave their coverage, and business owners miss out on the tax exclusion loophole that only the employed enjoy.  Even the vary basis of the market system itself, a guarantee of services for fees, is undermined by insurance companies using pre-existing conditions to deny coverage when you actually need them.

This bill will go a long way towards fixing these inefficiencies.  It will stop insurance companies from denying coverage for pre-existing conditions. The health exchange with its co-opts (if not a public option) and tax breaks will encourage small businesses ownership and self-employment by making health insurance affordable.  A health board that analyzes what works and taxes extravagant health benefits will encourage rational marginal decision making. Unfortunately, this bill will not end the monopolistic employer based system, though Wyden Bennet would.  Still, the American economy would work better, people would have more choices, and it would save lives.  If it takes jettisoning the public option to make that happen, then so be it.

Comments

[Christopher Carr]

While market inefficiencies certainly drive up the cost of health care, isn't the real culprit the general unhealthy lifestyles of most Americans? As an asthmatic, were I to live in the US at home in Boston, I would most likely be paying between $200 and $400 dollars a month for health insurance plus $45 dollars a month for prescription medication. As it is, I live in Japan, pay $50 dollars a month for health insurance and $13 dollars a month for medication that is actually imported from the US. The economic and philosophical justification for insurance is that it spreads risk throughout society (or a particular insurance pool), thereby eliminating the financial ruin that would theoretically occur were one to succumb to a debilitating disease. This becomes null and void when two-thirds of the population is overweight and one-third obese. Isn't the real reason insurance is so expensive in the US because we haven't been taking care of ourselves? There're simply not enough healthy people around to pay for the unhealthy ones.

[joebenaiah]

So you say that it isn't market inefficiencies that drive up the price of health care, then you give an example of pure market comparison. You have two identical products, produced in the U.S., yet the one purchased in America is 300-400% as expensive. What does your unhealthy lifestyle have to do with why you pay so much more for the same medicine here?

As for the thinking that Americans are just far less healthy than their other first world counterparts, there is some contradicting evidence. Lower smoking rates in this country should offset our heavier population, yet because there are so many uninsured and no focus on preventative medicine our costs are astronomically higher and we get worse results. The risk pools you talk about are such a terrible justification for our system, basically privileging a flawed business model over a system that actually tries to have a healthier population. Insurance companies don't encourage preventative care because they think that benefits will only accrue in the long run and they won't have those customers anymore. This is called the tragedy of the commons in game theory; if all insurance providers cooperated and stressed prevention then the risk pool would improve and everyone would benefit. Instead they all "cheat" and instead focus on providing as little care as possible and then take your coverage away if anything ever goes wrong.

Should Americans try to lose weight, absolutely, but to blame all of the horrible failures in our system on that is just silly.