The Central Paradox of Health Care Reform
The big problem, politically speaking, with health care is that you basically have people on the left arguing both sides of the question. On the one hand, insofar as your plan is “big government” that’s left-wing. But insofar as your plan is expensive, that’s also left-wing. Which is because people normally think of big government programs as expensive. But when it comes to health care, heavy-handed government intervention is actually way cheaper than private sector alternatives. Consequently, every time you try to make the plan more “moderate” by, for example, curbing the influence of a public option you actually wind up making the plan more “left wing” by needing to raise more taxes. And if you want to make the plan cheaper, while still actually achieving its goals, then you need to make it more left-wing not more moderate. But in the United States, ideological correctness and special interest politics prevents us from admitting this.
When the Lewin Group looked at various health proposals last year, it turned out that the one that did the best at controlling costs was Pete Stark’s bill:
Creates a new public health insurance program administered by the federal government to provide everyone with multiple choices for health coverage. Under the Stark bill (H.R. 1841), employers would either offer their employees coverage or pay into a fund to cover their employees through the new public program.
Needless to say, that kind of reform is off the table. “Political reality” and all that.
40 Responses to “The Central Paradox of Health Care Reform”
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June 18th, 2009 at 10:08 am
Nobody is going to believe anything the left has to offer around healthcare until Medicare and Medicaid is fixed. Those programs are testimony to the inability of Government to do such things well.
June 18th, 2009 at 10:17 am
There isn’t anything particularly “left-wing” about big government; you are talking about modern liberalism, not leftism.
June 18th, 2009 at 10:19 am
we are ruled by idiots.
June 18th, 2009 at 10:27 am
I second onceler- totally craven idiots.
June 18th, 2009 at 10:30 am
Gonna go out on a limb and venture way outside the political consensus into something approaching the world we actually live in:
Why is it a “problem” that health care is “expensive” and is one of the largest and fastest growing parts of the economy?
I get that it’s a problem that some people don’t have access to health care.
I get that it’s a problem that our outcomes are not as good as other countries in terms of infant mortality, cancer survivability etc. These are real problems.
But cost? Yes, health care is a big chunk of our economy. But how does saying it’s too big make more sense than saying the software industry is too big, or the auto industry is too big (well, in that case there is some overcapacity . . .) The core of the argument seems to be that spending such a large chunk of GDP on health care, we will have fewer resources to make and consume consumer products and services, like big screen TVs, diet coke and new cars.
But here’s a question for you – So what? I’d rather be healthy and live a long time than have a bunch of consumer junk and die of preventable causes. The goal here should be universal coverage and high quality. If half of our economy ends up being health care, it doesn’t really bother me. It’s the most important thing to spend money on, or at least tied with housing. The health sector creates many new jobs. So why complain if it’s too big a slice of our national GDP pie? Now if we shift gears and complain that we’re not getting enough benefit for our money, that seems like a more valid complaint. But count me as a (lone) voice for better quality, research driven practice, and improved outcomes, cost be damned. Americans have too much consumer crap anyway. Wouldn’t you rather live longer than have a shiny new iPhone?
June 18th, 2009 at 10:35 am
But when it comes to health care, heavy-handed government intervention is actually way cheaper than private sector alternatives.
Hey, the Left Wing Laffer Curve again! Spending money is really saving money! Up is down! Day is night!
June 18th, 2009 at 10:42 am
Matthew, I think you do a bit of a disservice arguing that “when it comes to health care, heavy-handed government intervention is actually way cheaper than private sector alternatives.” We already have heavy-handed government intervention, in the form of regulations that fundamentally shape the American health system to be largely a for-profit business in which many of the players (insurance companies, medical specialists, pharmaceutical companies, etc.) have significant market power that allows them to extract substantial rents. So the accurate statement is that “heavy-handed government intervention that serves to limit the rents of market participants who have substantial market power is way cheaper than heavy-handed government intervention that enhances those rents.”
June 18th, 2009 at 10:49 am
If we don’t quickly get as efficient and effective with health care as the Europeans and Asians, they’ll bury us economically. Our businesses and communities will continue to decline, while our doctors spend more and more time on vacation in London, Paris, and Zurich.
June 18th, 2009 at 11:00 am
Al: There’s nothing wrong with the Laffer curve as a theoretical construct. Of course sometimes raising taxes lowers revenue, and sometimes it raises it. Life is nonlinear. The problem is only when people are too optimistic about what side of the curve we’re on. (And fail to acknowledge that the real Laffer curve is not a smooth simple curve.)
However, the premise behind why single-payer is cheaper is a different issue. Single payer would probably increase government spending, but the graph Yglesias links to is about total spending on health care. The whole point of Single payer is that it shifts spending from the private sector to the public sector, with the overall effect being more efficient.
June 18th, 2009 at 11:01 am
Since the gov’t is already responsible for 45% of healthcare expenditures, it already has the ability to leverage its size and administrative efficiencies in a way that would be sufficient to control costs.
Why does expanding the size to include 15% or so more of the population so critical to these efficiencies you’re convinced exist?
June 18th, 2009 at 11:21 am
Elwood,
Every objective study indicates we are not getting better outcomes than our peers (indeed, we might be getting somewhat worse outcomes) despite spending a lot more on health care.
Taking a step back, there is only so much spending on health care can do to affect outcomes. That is because health outcomes are also a function of things like genetics, lifestyle, luck, and so on. So there is a limit to how much can be spent on effective health care, meaning despite spending past that limit you aren’t going to be doing anything substantial to improve outcomes.
Combining these two points, it is likely we are already spending more than that limit. Which is not to say we couldn’t do some things to improve outcomes for some people, since we aren’t always spending that money wisely. But the overall spending level likely should be lower, at least once we are spending more wisely.
June 18th, 2009 at 11:24 am
“But when it comes to health care, heavy-handed government intervention is actually way cheaper than private sector alternatives.”
Cheaper in what way Matt? Any health care spending by the private sector, no matter how much that is, doesn’t add to the national debt. So how can government intervention, which it would do by spending money it does not have, be “cheaper” in any sense of the word?
June 18th, 2009 at 11:26 am
I do not want to see anything passed at this point. The mess that’s shaping up, especially without a real public option, is worse than doing nothing- it will just result in even more spending for little or no real gain. Forget the whole thing. By a few years from now the cost explosion engendered by the tragic blunder of allowing the profit motive to dominate the health care system will be so obviously unsustainable that REAL reform will finally become unstoppable.
June 18th, 2009 at 11:29 am
Who the fuck cares? It’s still money taken out of the economy that could have gone to more productive uses. This sudden obsession with the debt, by people who didn’t utter a peep during the Bush years, is as dishonest as it is stupid.
We have to reduce total spending on health care, regardless of whether it’s public or private. That’s the whole ballgame.
June 18th, 2009 at 11:32 am
The proper framing is not government vs private but rather single payer vs for profit competition. Insurance for a known group costs least when the costs are shared amongst that group and everyone is covered.
A not-for-profit, government sponsored entity could serve as well to eliminate duplicative administration costs, marketing costs and, of course, profit.
Fee for service is also a major cost-driver.
A single payer tasked to pay for the most effective care for the greatest number of people is what is needed.
June 18th, 2009 at 11:35 am
Any health care spending by the private sector, no matter how much that is, doesn’t add to the national debt.
You mean it can’t add to the federal government’s debt. It certainly can add to the total debt of the United States as a country, however.
And that is the real point. It doesn’t matter whether what we spend on health care is filtered through the federal government or not: our current track of spending on health care isn’t sustainable for our country.
June 18th, 2009 at 11:35 am
Where’s the evidence for massive efficiency gains? Well, we’re paying twice as much per capita on health care as the Europeans are paying, give or take. And the Europeans are getting better health outcomes. So, it sorta looks like emulating the best parts of the European systems might free up approximately an ocean of cash per year here in America.
June 18th, 2009 at 11:39 am
“But when it comes to health care, heavy-handed government intervention is actually way cheaper than private sector alternatives.”
I stopped here and say, great, then we won’t need the extra $1.6 trillion to pay for it. If we truly believed the left wing accounting system, then we should be able to take from private health care and distribute with public health car, having no net increase over time in health care spending.
But we would be fools to believe that a trillion in down payment now for future gains in efficiency from Washington DC. After all, the wage/price spiral we suffer right now from Washington’s expansion are enough to cast considerable doubt.
June 18th, 2009 at 11:47 am
For once I agree with you, on this specific point: that Obama’s plan as further watered down by Congress will result in large upfront costs but will never deliver the promised future savings. If people on both left and right can understand this, perhaps this turkey can be killed off.
I’ve always believed that we won’t have a sane (most likely, single-payer) system until the current mess simply collapses of its own weight and there is no choice but to scrap it completely (whether people like you like it or not). The comedy going on now has only strengthened that conviction.
June 18th, 2009 at 11:48 am
But we would be fools to believe that a trillion in down payment now for future gains in efficiency . . . .
Only a fool, a zealot, or someone rationalizing a pecuniary interest in the status quo would NOT believe the relevant premise. The evidence from other countries is simply overwhelming.
But it is true that the fools, the zealots, and the people rationalizing a pecuniary interest in the status quo may well successfully sabotage our efforts to move to one of the proven cost-saving models, as they have done repeatedly in the past.
June 18th, 2009 at 11:59 am
Al: There’s nothing wrong with the Laffer curve as a theoretical construct. Of course sometimes raising taxes lowers revenue, and sometimes it raises it. Life is nonlinear. The problem is only when people are too optimistic about what side of the curve we’re on. (And fail to acknowledge that the real Laffer curve is not a smooth simple curve.)
However, the premise behind why single-payer is cheaper is a different issue. Single payer would probably increase government spending, but the graph Yglesias links to is about total spending on health care. The whole point of Single payer is that it shifts spending from the private sector to the public sector, with the overall effect being more efficient.
Like with taxes and revenue, sometimes government provision of services would be more efficient and sometimes it would be less efficient. I’m all for single payer if you can show me that it is more efficient. Like conservatives who have a non-reality-based faith that lowering taxes increases revenues, I’d submit that liberals have a non-reality-based faith that increasing government involvement in healthcare increases efficiency. If this were true, then the government would not have to raise taxes to pay for the new healthcare – the government would just have to take the amounts that people were already paying for private healthcare and use that to pay for government healthcare (and the government could refund to everyone the amounts saved by the efficiency gains). So show me a single-payer plan that doesn’t require any revenues other than those that would be provided by the the amounts that people were already paying for private healthcare, and I’ll support it. I haven’t seen that plan.
June 18th, 2009 at 12:12 pm
If this were true, then the government would not have to raise taxes to pay for the new healthcare – the government would just have to take the amounts that people were already paying for private healthcare and use that to pay for government healthcare (and the government could refund to everyone the amounts saved by the efficiency gains).
Sure that would be possible, but this is only a desirable outcome if you assume the current distribution of premiums is actually a good one. In fact, the truth is that some people are not paying enough in premiums, whereas other people are paying too much.
So, in a rational single-payer system, some people would be paying more in premiums (to the government), and some people would be paying less in premiums (to all current providers of insurance), and in aggregate people would be paying less in premiums (to all current providers of insurance). But because the first category is all government, and the latter two categories are a mix, it shows up as a net increase in payments to the government.
June 18th, 2009 at 12:41 pm
Look at the bizarre counterincentives created by letting “fiscal conservatives” interfere in the creation of welfare. A dollar for dollar decrease in payments for recipients when they work? This is the sort of garbage that comes from appeasing those who aren’t interested in solving problems but are instead interested in ’saving money.’ That it creates the very dependency they then rail against marks them as hypocrites, but that’s never mentioned.
It is exactly the same with healthcare. Those who will water down the ideas already proven to save money will then rail against the wasteful spending their interference created. So the only reason MattYoung is right is that people like MattYoung will make sure that the system is broken from the start.
We live in a fucked up society when these people wreck the debate.
June 18th, 2009 at 12:55 pm
We live in a fucked up society when these people wreck the debate.
The “good” news is that to a certain extent Steve LaBonne is correct: it is inevitable that at some point in the not-too-distant future, these people will be overriden by the political process, because any other alternative will simply be impossible to sustain.
That said, I disagree with Steve LaBonne to the extent that he is certain that point is not now, or more precisely, not this fall. I don’t have much confidence in the current process (although you never know), but as I noted elsewhere, I think it is more likely than not that the “progressives” in the Senate will kill any overly compromised effort this summer, leading to a restart under budget reconciliation in the fall.
June 18th, 2009 at 1:00 pm
The House Progressive caucus has already promised to vote down any bill lacking a public option, so I think the first part of DTM’s prediction is spot-on. But I think the fall business is much too optimistic. It’s going to take the business lobby as a whole finally waking up and shouting down the health insurance lobby, PLUS public demand at virtually the marching-in-the-streets level, to get any serious done. That won’t happen until the current “system” is seen by everyone to be in a state of collapse. I give it a few more years until that point.
The bottom line here is that the- quite recent- experiment of allowing a large for-profit sector in both health care delivery and health insurance has been an unmitigated, disastrous failure. For-profit health care must go. But for now it’s too politically powerful to be taken down.
June 18th, 2009 at 1:39 pm
Steve LaBonne,
I guess we shall see.
June 18th, 2009 at 1:42 pm
God knows I’d dearly love to be wrong. But I’m not going to get my hopes up; they’ve been dashed way too many times over the years.
June 18th, 2009 at 1:53 pm
Why was Conyers-Kucinich not scored?
June 18th, 2009 at 2:05 pm
Re: Those programs are testimony to the inability of Government to do such things well.
Most people would agree that Medicare does what it’s designed to do quite well: provide old people with healthcare. The average Medicare patient has fewer complaints with his coverage than does the average person covered by private insurance. And while providers may complain about Medicare reimbursement rates, they also praise the program for paying them promptly, whereas private insurers can take endless months to pay.
Re: It’s the most important thing to spend money on, or at least tied with housing.
I’d stick education up there too.
Re: Hey, the Left Wing Laffer Curve again! Spending money is really saving money! Up is down! Day is night!
If it was dark in the day everywhere in the developed world the way public healthcare costs every other developed country less than our private system costs us, then day would indeed be night.
Re: It’s still money taken out of the economy that could have gone to more productive uses.
Huh? Do you think the healthcare providers gather at night in deserted places and hold a bonfire of the bucks, destroying each day’s monetary intake? No, healthcare does not “take money out of the economy”. Healthcare is part of the economy and money that goes into healthcare comes out of it at some other end: employees buy goods and services with their pay checks, vendors pay their own bills and employees, facilities get built, for-profit entities invest and pay out dividends, etc.
June 18th, 2009 at 2:09 pm
God knows I’d dearly love to be wrong. But I’m not going to get my hopes up; they’ve been dashed way too many times over the years.
A general skepticism is certainly reasonable in light of past events. The only real point I am making is that since the deal on budget reconciliation was struck, it has flipped the ordinary logic of the legislative process such that a lack of progress at this particular moment isn’t necessarily a bad thing for those wishing for a more “progressive” result. But, of course, I can’t offer any guarantees about what will happen this fall–it really just remains to be seen.
June 18th, 2009 at 2:09 pm
Wrong. For-profit healthcare takes massive quantities of money out of the economy in terms of frictional costs. The massive amount of time and money doctor’s offices have to spend dealing with red tape from multiple insurance companies, for example, pure waste, very much akin to lighting a pile of money on fire.
June 18th, 2009 at 2:18 pm
No, healthcare does not “take money out of the economy”. Healthcare is part of the economy and money that goes into healthcare comes out of it at some other end.
I think the better way of putting the point is that we are wasting resources on things which don’t contribute positively to total social welfare.
For example, marketing can contribute to social welfare to the extent it helps inform people about products they may benefit from buying but didn’t previously know about. But when we know in advance the right consumption level for a product is 100%, as is the case with basic health insurance, marketing no longer provides such a contribution, and instead just represents a waste of resources as firms compete for shares within this fixed marked.
So, a person who expends their labor on marketing basic health insurance, instead of doing something more productive with their time–including even just leisure–has just wasted a resource. And that is what the status quo is doing: wasting resources.
June 18th, 2009 at 2:26 pm
[...] Ezra observes that “None of them, so far as I know, are under serious consideration.” I complained about this phenomenon this morning already, so I won’t bore you again. But it makes me mad! This is important [...]
June 18th, 2009 at 4:29 pm
Here’s how to market it: Communist Healthcare Works (it actually does; then you can market Single Payer healthcare as the moderate, working alternative).
June 18th, 2009 at 5:00 pm
The nightmare scenario is that Obama decides he has to pass something, anything, so he caves to a Blue Dog / Republican plan with no public option. When it fails, the GOP blames Obama anyway, shades of NAFTA.
As Churchill noted, “Americans can be counted on to do the right thing, after exhausting all alternatives.” Unfortunately, I can see this happening with respect to our policies regarding the financial crisis as well.
June 18th, 2009 at 6:12 pm
Re: When it fails, the GOP blames Obama anyway, shades of NAFTA.
Huh? When did NAFTA fail, or for that matter when did the GOP decide it was a failure and blame the Democrats for it? The only rhetoric I have ever heard from the GOP on NAFTA is that it is a great bipartisan success (generally with mention that credit is really due Bush 41 who initiated it) and an all around great deal for the US.
June 18th, 2009 at 6:30 pm
The House Republicans won’t vote in significant numbers for anything Obama wants, and without them the House Progressives have enough votes to keep anything from passing. (I hope…)
June 18th, 2009 at 10:28 pm
I’d rather we get real reform before it is “absolutely necessary”. “Absolutely necessary” comes after legallizing organ sales to raise money for other treatments.
June 19th, 2009 at 12:36 am
I’d rather we get real reform before it is “absolutely necessary”.
I agree, which is why I put “good” in scare-quotes. As I would put it, every year we delay serious reform is another year in which we waste a lot of resources (and arguably get worse outcomes for it). So the sooner we get real reform the better.
June 19th, 2009 at 3:15 pm
[...] goods are supposed to be provided at their marginal costs. This is part of what Matt Yglesias calls “the central paradox of health care reform”: “On the one hand, insofar as your [...]