The American health care system desperately needs reform. But there are certain inescapable truths that would-be reformers would do well to heed; otherwise they risk making things worse for everyone, and particularly for the poor. Here are a few of those truths.
1. Insurance is not part of the solution; it’s part of the problem. Many people—and especially poor people— get too little health care in this country. That’s largely because many other people—and especially rich people—are overinsured. People with insurance demand more health care, which drives up prices. More insurance coverage will make this problem worse, not better.
There are good alternatives to insurance. For example, as David Goldhill points out in a magnificent Atlantic Monthly article called “How American Health Care Killed My Father”, we could take, say, half of what’s currently being spent on insurance and Medicare and use it to give each American family close to a million dollars to put in a health savings account. We’d probably want to couple that with insurance for catastrophic events that cost more than, say, $50,000.
Or, less radically (and therefore less effectively, but at least it’s a start) we could restructure medical insurance to look more like car insurance—where nobody asks how you spend your claim check. If you’re diagnosed with colon cancer, then instead of paying $X million to doctors and hospitals, the insurance company would pay $X million directly to you. That way, at least some of us would shop around for better prices and forgo treatments we don’t think we need—lowering demand and making medical resources easier for everyone else to afford.
The last thing we need is more of the inefficient sort of coverage we’ve got now. The very last thing we need is to make that coverage universal.
2. Somebody has to say no. Nobody would want to live in a world where we all get unlimited health care, because in that world, health care would be all we could afford. That means we despearately need someone to say “no” from time to time. In a world of health savings accounts, we’d tell *ourselves* “no”; in the world we live in, our insurance companies do it for us.
We all know horror stories of claims delayed and claims denied, and many of those stories are true. They have to be, because no system is free of mistakes. Sometimes insurers say “yes” when they ought to say “no” and sometimes they say “no” when they ought to say “yes”.
Now, we could always opt for insurers who err more on the side of “yes”—in exchange, of course, for higher premiums. But almost nobody wants that. I know this because I believe that insurers are consumed by greed, and would therefore happily offer any product as long as consumers were willing to cover the cost. Auto insurers compete on exactly this basis: Some companies hand out claims more easily than others, and their premiums reflect this. But when it comes to health insurance, it appears that the market is pretty satisfied with what we’ve got.
When your health insurer denies a claim, it’s performing a valuable public service. If health care is going to stay affordable for anyone, somebody has to sometimes say no. And as much as we bitch and moan (sometimes rightfully, because some of those denials really are unwarranted), we really wouldn’t prefer it any other way.
3. A public option can only make things worse. A government run insurance system can only do one of two things: Mimic the private insurers, or do something different. If it mimics the private insurers, it serves no purpose. If it does anything different, it can only be worse.
After all, what can it do different? Approve more claims? But where will the money come from? Higher premiums? But we’ve already agreed that if people wanted that kind of insurance it would already be offered. A more efficient bureaucracy? But if there were a way to save money by streamlining the bureacracy, why wouldn’t all those greedy private insurers have adopted it already? Does anyone believe that the major insurance companies are too lackadaisical to make an easy extra buck?
You might say that the private insurers, unlike the government, won’t always pass cost savings on to the consumer. But that too underestimates the greed of the insurers—and their willingness to undercut each others’ prices in the endless competition for customers.
So if public insurance is going to provide anything that private insurance doesn’t already provide, it will to have to do it by dipping into general tax revenues—maybe not at first, but surely soon. And that way lies madness.
Once those general revenues get tapped, all discipline goes out the window. With all that cash at hand, it becomes harder and harder to deny a claim. Nobody’s saying no, and the cost of health care spirals out of control.
Eventually you’re left with the health-care equivalent of Fanny Mae or Freddie Mac—an institution with dual mandates to earn a profit (or at least break even) and to serve the public—and therefore an excuse to fail on all fronts. When it loses money, well, that’s because it was trying to serve the public. When it fails to serve the public, well, that’s because it was trying to be financially responsible. Nothing counts as failure and nobody’s responsible. It was Larry Summers who first (and most eloquently) made this observation about the inevitable fate of dual-purpose institutions; once upon a time, he was a very wise man.
I know, I know—the proponents of the public option insist that it will be self-financing. I don’t believe them. What happens the first time a powerful congressman demands that his constituent’s claims be treated more respectfully? And the second time, and the third? Where does the money come from? But even if you *could* somehow resist that kind of political pressure, what are you left with? A high-claim-approval high-premium option that nobody wants? What’s the point of that?
4. It’s always the poor who get screwed. Expanded insurance coverage means higher health care prices; universal coverage means higher prices still; universal coverage with a public option blows the roof off. That’s bad for almost everyone, but it’s hardest on the poor.
Now you might say that we could make up for that by spending lots and lots of public money to buy health care for poor people. The problem with that is that every dollar you spend on health care is a dollar that’s unavailable to help poor people in other ways.
When you’re poor, it’s hard to buy health care. It’s also hard to buy schooling, housing, and groceries. It’s a false compassion that tries to alleviate one hardship by exacerbating others. If we make it unnecessarily expensive to help poor people buy health care, we handicap our ability to help them buy milk and eggs.
Consider the disaster that is Medicare. It’s easy to fool yourself into thinking that Medicare is working because it provides a lot of medical care. But it does so at a titanic cost that crowds out social programs large and small, some of which might have made a real difference in the lives of struggling people. Without drastic reform, the burden of Medicare will crush the next generation. Tack on a publicly run insurance system with its eyes on the Treasury, and you’ve made that burden all the harder to shed.
I do not know how much we should be collectively spending to help the poor. I do know that whatever we spend should be spent as helpfully as possible. I also know that the way to accomplish that is not to drive the cost of health care through the roof and then spend a fortune trying to help poor people afford it.
It’s also worth remembering that political institutions are not notorious for their responsiveness to poor people. When Congressman Smith comes around demanding better service for his favored constituent, odds are that constituent is a person with the means to make considerable campaign contributions. When you move institutions from the private to the public sector, you skew their responsiveness more toward the politically powerful, which usually means the rich.
The answer is less insurance, not more, and private insurance, not public. In the long run, those health savings accounts are probably the best solution. In the interim, the single most effective way to cut health care costs in a hurry would be to eliminate the tax deduction for employer supplied health insurance. That deduction leads to immense overuse of health care resources, especially by rich people. That’s one good reason to eliminate the deduction, and here’s another: People would start shopping for insurance on their own instead of taking whatever their employers offer, which would make the insurance companies more responsive to consumer demands.
It saddens me that support for universal coverage and a public option has become, in many circles, a sort of litmus test for compassion and caring about the poor. It particularly saddens me to hear the president say that “What we face is a moral issue; at stake are not just the details of policy, but fundamental principles.” It’s the details of policy that change people’s lives. The moral imperative is to get them right.