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The Failure of Pragmatic Health Care

by Henry Oliner

The search for pragmatic health care solutions seems to only create bigger problems.  This is because pragmatism has gone amok; and totally rejected sound economic and political principles. Pragmatic approaches are one thing to address short term problems; but pragmatism without sound supporting principles is doomed.

Pragmatism in health care is failing because the ideology is wrong, and the economics is wrong.

The worst obstacle to health care and to tax reform as well is the atmosphere of constant change. Even the best solution will be neutered by the belief in the market that it will only last until the next election.  How can medical practices, health insurers, businesses and individuals plan when every year they are confronted with significant changes.

I do not know that any economic model considers the lack of faith in the permanence of the solution, and this may be the costliest part of any reform proposal. How can the OMB ‘score’ an issue that is not acknowledged?

Our health care problem is an accumulation of tax policies, mandates, cross subsidies, regulations, wishful thinking, social engineering. What is missing is sound economics and thoughtful policy.

The ‘right to health care’ is a meaningless myth.  Health is a market for drugs, doctors, diagnostics, devices.  The ‘right to health care’ means nothing without providing these services and products. It means nothing without discussing quality and access (service). To declare a right to health care is to totally ignore that it is an economic problem and requires economic solutions.

Combining the issue of health care cost and insurance confuses the issue. The applies to mixing the problems of cost and access.  Using insurance to pay or even file routine expenses to insurance only adds to cost.

Preferential tax treatment for business provided insurance removes consumer choice.

Mandating coverage for pre-existing conditions without holding the consumer responsible for maintaining coverage is just another cross-subsidy hike in premiums.

For decades, the market has been polluted by government meddling, laws, regulations, rules and mandates.  Yet when prices continue to rise the market is blamed.

The health insurance controversy is the pragmatic apex of sharply conflicting ideologies and both will not easily coexist. It will take more than the repeal of Obamacare to fix. Obamacare was just a bad response to a history of bad policies. Trying a different bad response will not fix the problem either.

It is time to stop the tinkering around the edges and address the ideological failures and the accumulation of bad solutions enacted under the guise of pragmatism.

Only if we fix the ideology will we be able to address the problem with the permanence it requires.  It’s a tough sale and it does not appear that either party is up to the task.

The Cruz Option

from Kevin Williamson at National Review,  Apartment Fires and Health Insurance

The problem for health insurance is the same as the problem for condominium sprinklers: The benefits are desirable, but they are not free, and many people, given a choice, would spend their money in a different fashion. In the matter of health insurance, Senator Ted Cruz has offered an amendment that would allow insurers to sell relatively low-cost plans that do not cover everything that must be covered under current ACA regulations. Critics, including Senator Susan Collins, have protested that these policies are too “skimpy,” that they do not include all of the coverage and benefits that we might like to see people have. But all the Cruz amendment does is give buyers a choice. The danger isn’t that insurance companies will fail to offer more expensive and comprehensive policies — of course they will offer them; those are more profitable — but that many Americans will prefer less expensive and less comprehensive health-insurance plans.

Mortality Increase Under the ACA

from The Georgia Public Policy Foundation Friday Facts 7/7/17

Food for thought: A total of 31 states and the District of Columbia expanded Medicaid under ObamaCare. Oren Cass of the Manhattan Institute reports that in 2015, age-adjusted mortality rose and life expectancy declined for the first time since the early 1990s and mortality rose more in Medicaid expansion states. “Despite implementation of the ACA, there were 80,000 more deaths in 2015 than had mortality continued to decline during 2014–15 at the same rate as during 2000–2013.” 

HKO

Just a correlation. Yet if I were to claim that the ACA killed 80,000 people my statement would have much better logic and statistical support than the claims from the regular assortment on the left that the Republican Health Plan is going to kill however many they make up for their talking points.

Tinkering with a Broken System

from George Will at The Washington Post, Why ‘repeal and replace’ will become ‘tweak and move on’

In 2009, President Barack Obama ignited a debate that has been, for many members of Congress and their constituents, embarrassingly clarifying. Back then, most people stoutly insisted that they did not want a “government-centered” health-care system. But even then, approximately half of every dollarspent on health care came from the government. Today, the 55 millionMedicare beneficiaries approximately equal the combined populations of 26 states; the 73 million Medicaid recipients approximately equal the combined populations of 29 states. Government’s 10 thumbs are all over health care.

Health care only relatively recently became worth fighting over. In 1900, Americans spent almost twice as much on funerals as on medicine. Most people were born at home and died at home, and medicine’s principal function was to make ill people as comfortable as possible while nature healed them or killed them. Hospitals often were lethal infection factories, hence the common report “The operation was successful, but the patient died.” In his “The Rise and Fall of American Growth,” Robert Gordon notes that “even victims of railroad, streetcar and horse cart accidents were largely taken to their homes rather than to hospitals.” In 1900, only 5 percent of American women gave birth in hospitals. And “a ‘degree’ in medicine could be obtained for between $5 and $10, its cost depending on the quality of the paper on which the diploma was printed.” Between 1890 and 1950, the great improvement in mortality rates owed much to social improvements (better hygiene, sanitation, food handling, etc.) and little to doctors, hospitals or drugs.

In 2009, there was no national consensus that insurance should be available to people with “preexisting conditions.” There now is such a consensus, partly because of the obfuscating phrase: Insuring people with “preexisting conditions” means insuring people who are already sick. Which means that what they are getting is not really insurance — protection against uncertain risk. The consensus might be right, but its logic makes the insurance model increasingly inapposite.

A market-driven health-care system with government at the periphery would implement the lesson of Social Security: Government is good at sending checks to identifiable cohorts. It should send support to those who need it for purchasing premiums, then get out of the way.

But Obama, who once said he preferred a single-payer system, flinched from the really radical reform we need — a move away from broad reliance (about 180 million Americans) on employer-provided health insurance, which, in an expensive fiction, is not taxed as what it obviously is: compensation. Partly because of this system, health-care consumers are not shoppers and market signals are weak and few.

Perhaps for policy reasons, and certainly for political reasons, it is impossible to unwind reliance on employer-provided insurance. But this fact, combined with the “preexisting conditions” consensus, means that henceforth the health-care debate will be about not whether there will be a thick fabric of government subsidies, mandates and regulations, but about which party will weave the fabric.

So, “repeal and replace” will be “tweak and move on.” And even if the tweaks constitute significant improvements, Obama will have been proved right when, last October, he compared the ACA to a “starter home.”

HKO

The real reform we need and an honesty about the costs are so politically toxic that we are doomed to only tinker at the edges of a dysfunctional system.

Thoughts on Health Care

  1. Health care is the epitome of many political solutions where the anointed wish to provide benefits (in exchange for votes) without paying for them. They create Rube Goldberg systems of cross subsidies, mandates, tax benefits and penalties, and regulation to hide the true costs, especially from themselves.
  2. Restricting supply and channeling vast sums into the market through policy, tax preferences, etc will almost scientifically increase costs including the stupid salaries of healthcare executives.
  3. The controversy is so strong IMO because this issue encompasses the core differences in economic and political ideologies.
  4. In the absence of true fundamental reform, which seems politically impossible (true insurance, individual ownership, consumer responsibility and pressure) we seemed doomed to tinker at the edges.  Regulation and mandates should be few and simple – community rating, pre-existing conditions….
  5. The real challenge for me comes when there are critical breakthroughs in diabetes, Alzheimers, cardiac, from advances in AI , genetics and other frontiers which will render much of our capacity unnecessary. In the first Act breakthroughs are hugely profitable and costs are high- by act three technology plummets in price and the features only the rich could afford become cheap and common place. The problem is that it is a very long first act and we risk the audience leaving before the end of the play.
  6. Baumol’s The Cost Disease adds some perspective to the health care inflation- largely due to the increase  in productivity from the industrial sectors.  One reason we spend more on health care is because we can.