“The economic issue [of health care] is that some people need subsidies to get health care, especially to get the sort of insulation that we call health insurance. Some people need subsidies because they are poor. Others need subsidies because they are obviously high risk. You can give subsidies in the form of vouchers. You could subsidize poor people with vouchers based on income. You could subsidize high-risk people with vouchers for pre-existing conditions. A public plan is one vehicle for providing a subsidy, but it is by no means the only vehicle.
The purpose of the public health insurance plan is political. The idea is to drive away Republican support by threatening the private health insurance industry. … [T]he real issue is health care costs, driven by over-use of services with high costs and low benefits.
Getting people to reduce their use of medical services is the spinach of health care reform. Expanding insurance coverage is the dessert. The Democrats want to enact dessert now, and worry about spinach later. For the dessert part, they want no Republicans involved. Down the road, when they are ready to tackle the spinach part, they will press for bipartisan cooperation and statesmanship from Republicans.
My suggestion … is that the Republicans not fall on their swords to defend private health insurance. Yes, many people like their insurance. But many of us hate the claims process. In our household, the phrase "going postal" has been replaced by "going health insurance." My guess is that sticking up for private health insurance is a political loser. Moreover, real health care reform would require radical innovation in health insurance, so it is counterproductive to try to entrench for the existing system.
If I were a Republican, I would support a public health insurance plan that provides real health insurance. That is, it would have low premiums, but extremely high deductibles and co-payments--beyond anything we see today. People on the plan would, on average, pay more than 50 percent of their health expenses out of pocket. Only people at the very high end of expenses would get insurance payments. Even their co-payments would not drop to zero.
There are various reasons why such plans do not exist today. Many of these reasons are regulatory. I am not sure how such a plan would fare in a free market. But that is the kind of public plan I could get behind.”
Arnold Kling, “The Purpose of the Public Health Insurance Plan”, Econlog (9 June 2009). Original text corrected.
http://econlog.econlib.org/archives/2009/06/the_purpose_of.html
Arnold Kling is a noted economist who has worked for the Federal government for many years in different capacities and as a professor at several universities. He is a founder and co-editor of EconLog, a popular economics blog that reflects Libertarian thinking.
The basic problem of government financed health care, either as single-payer or any other subsidized arrangement, is controlling costs. Simply stated, if you allow people to have unlimited access to medical care without paying for it, they will use it without limit, and doctors and patients will demand medical procedures with high costs and low benefits. Every procedure the doctor can think of will be ordered to avoid liability in the event of an unforeseen problem. With “free” medical care, if Little Johnny scrapes his knee Mommy will take him to the doc to put a simple band-aid on it, rather than treating him at home or, at most, asking the local pharmacist what antiseptic to apply. Every little medical problem, from a runny nose to an “I just don’t feel well” [which really means, “I just don’t want to go to work and face the boss today”], will be used as an excuse to see a doctor. With free or low-cost access to medical services, demand will expand greatly and costs will skyrocket correspondingly. For this reason, any government-subsidized program, whether it is acknowledged or not, will have to limit access through rationing or supply constraints.
A problem that arises when trying to ration health care is there is no such thing as “health care” as we use the term in public policy debates. Rather, there are thousands of different procedures associated with tens of thousands of different conditions and diseases involving hundreds of millions of Americans of different ages, genders, and medical conditions and problems. Given the diversity of the population to be treated, even when the same underlying medical problem is involved, it is not possible to design a single set of rules to be applied to all people. For this reason, the element of discretion and the denial of treatment will remain part of any reformed health care system we adopt. The only thing that will change is who makes that decision and whether a patient has the right to seek and pay for care on this own account. Allowing people to pay for their own health care when the government-mandated system denies it destroys the argument reformers make that everyone should be treated the same.
In this post, Dr. Kling offers a good idea to consider in the reform debate: Provide full health insurance coverage through a plan that has low premiums and high deductibles and shifts much of the costs of medical care to the people who directly benefit from the care. Those that have this kind of policy would be encouraged to “bargain” with providers and resist absurdly high fees and needless procedures. People satisfied with their present plans could continue to have them. Those, like Dr. Kling and me, who would prefer health insurance that focused on catastrophic conditions, could lower our health insurance costs. The poor and those with pre-existing conditions can be covered by vouchers tailored to their circumstances, with varying deductibles and subsidies.
The costs of health care are inordinately high and rising. The argument that universal health care or some variant thereof will lower costs is not supported by our experience with Medicare and Medicaid, which are already single-payer systems, yet they have shown themselves to be unsustainable. If advocates of health care reform want to expand care and excess, they will have to address seriously the question of cost control.
The Administration is attempting to markedly reform the American health care system in a rush. This is a matter of such importance that a full discussion of the alternatives is necessary. Dr. Kling’s proposal is only one of many good ideas that need to be explored. We should take our time and think long and hard about what we want to do in this area.
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