By now you’ve probably read somewhere that the new healthcare bill will eventually mandate everybody to own insurance, and that for most middle class folks, the punishment for not doing so will be about 2.5% of your income. You may have also read that given that health insurance premiums will increase (they already have for many people just due to the legislation passing) that a health insurance contract will probably cost about $10,000 a year for a family. So, unless you’re making over $500k a year, it’s in your rational best interests to not purchase insurance, and simply wait until you get cancer, at which point you buy insurance. (Perhaps you keep cheap catastrophic coverage to handle the transition.) Under the new law, the insurance companies can’t deny you coverage, so this is undeniably the smartest thing to do. It’s not a moral issue; the government isn’t criminalizing not purchasing insurance, they are simply saying you are going to pay into the pool one way or another, either by buying insurance or paying the government. The only problem is that the fine hasn’t been set remotely intelligently; given the mandate to cover those with prior conditions, the true cost to society of somebody leaving the insurance pool is probably very close to the actual insurance premiums (minus a little bit to account for the fact that this person will not be using routine services while they are waiting for their catostrophic illness).
There is absolutely no flaw in this strategy, and I’m probably the millionth person to write about it. Therefore, the average consumer is likely to hear about it from somewhere, by the time the bill takes effect, and Americans aren’t a bunch that tend to miss a chance at free buffet. I’m pretty sure people will adopt this approach in significant enough numbers to cause a problem for the insurance companies. So, how the heck did such seemingly poorly designed legislation come to pass?
There are three plausible hypotheses out there, as far as I can tell: (a) The Democrats are fools, too enamored with their own savior complexes to bother to understand even the most simple manifestation of unintended consequences, (b) The Democrats are stupid like foxes, and know this will bankrupt our health insurance industry, and when that happens we will be forced to have the government step in with single-payer insurance, (c) The Democrats know the bill will be struck down by the courts as unconstitutional (you canâ€™t force private parties into contracts) well before the provisions set in, thereby paving the way for a single-payer system.
I think the first is, by far, the least likely of the three scenarios, and yet it is the assumption that seems to be made by the Republicans and everybody I know who is conservative or libertarian. I think itâ€™s very dangerous to assume your opponents are fools, and while Pelosi may make that very tempting at times, I think the way she got the bill passed shows that sheâ€™s a lot more shrewd than most people give her credit for. I think the Democrats know exactly what they are doing, and Iâ€™m not entirely convinced they arenâ€™t right for doing it.
The free market, for all the worship thrown at its feet, simply finds equilibrium points, nothing more, and sometimes less. Whether or not those points are places any of us really want to be is entirely a function of the constraints we put on the market in question. And in the case of health care our current system has some really unintelligent constraints that lead to us being forced to pay for a health care system where the market is too regulated to limit the introduction of new and expensive technology, and yet too free to cover everybody. Iâ€™m fairly libertarian, but I have to admit that if youâ€™re going to operate with the notion that unlimited access to a million dollar PET scan machine is a basic human right (and while I think it’s ridiculous to honestly consider it a right, it is certainly a worthy goal to have) then you really need to have a single-payer insurance system and rationed care, or else we’re going to bankrupt ourselves. Will quality of care suffer? Inevitably. But the system we have now may very well destroy the republic, so that’s wouldn’t be so good for quality of care, either.
If you’re liberal, you’re probably already in agreement with me. You can go back to reading The New Yorker now. If you’re libertarian or conservative, you’re probably saying “Well, isn’t the solution to having a health care market perverted by government regulation to just completely deregulate the market?” The problem is, the free market mechanisms that we normally happily exploit to give us things like cheap computers can yield some pretty unsavory things in the case of health care. For one, the free market would let poor people die on the side of the road. Same with old people, and anybody else who’s future economic output is less than the statistically expected cost of keeping them alive. That’s just the economically rational thing to do. That is only the case, however, because we’re very good at putting a positive price on things involving an exchange of goods, but we haven’t developed a way to price intangible things, like the cost most of us would implicitly ascribe to the outcome of having our fellow Americans dying in ditches. Were there a way to accurately impute a real monetary cost to the intangible (psychological?) cost of that happening, perhaps going with the free market would be a good idea. I’m not sure that’s advisable or even possible, but at any rate, we don’t currently do it. It is thus a simplistic and short-sighted adherance to half-baked economic theory that compels somebody to say we should let our health care be handled by the free market. We may find the market’s equilibrium point is optimizing a cost function we’re not proud of.
Economic theory, as it currently stands, is Â the last discipline we should entrust our lives to. In the future, we will look back on our current economic theories and realize that they were just the first steps in a thousand mile journey towards understanding how the world operates. Right now, microeconomics says a few vague things about equilibrium prices provided humans are rational and a million variables are rendered constant. It is more notable for what it doesn’t tell you than what it does. For example, it talks vaguely about the restoritive forces which tend to push down the price of a a good produced with surpluses. But does it say anything about how long that process will take? Does it take into account the “friction” of people avoiding the risk of switching production? The effects of human irrationality? People are just beginning the work of answering these questions with new disciplines like behavioral economics. But we’re a long, long way off from having economic theories on which one can auto-pilot policies affecting matters of life and death.
As things stand, we’ll just have to use the same method engineers use when they don’t have a complete theory of the underlying problem: intuition and trial-and-error. And what’s wrong with that? Our country started out as a big experiment? Since when did we stop seeing the US as a laboratory for good government? Why are people so freaked out by a single-payer system? Give it a shot. If it doesn’t work, we can go back to our current fantastic system, tweak it, or try another idea. And we probably won’t have wasted any more money than we do right now rebuilding Iraq for a month. Personally, I would try a single-payer system where people pay co-pays for each procedure determined as a fraction of their gross income. This would form a progressive tax to fund the system (the equanimity the Left wants and the Right wants but just not if the government does it), as well as motivation to not abuse the system (the efficiency the Right wants but the Left seems to think will happen automatically because bureaucrats always do such a good job). Hospitals should be given bonuses for good performance relative to expenditures. Adoption of medical advances should be subject to a hard limit on medical expenditures as a function of GDP, and decided by ranking effectiveness per unit of cost. Is there a perfect way to quantify results when ranking hospitals and technologies? Of course not, but the beauty of our current system is that it’s so bloody godawful that having a monkey spin a casino-style Health Care Policy Fruit Wheel could not possibly fail to improve things. Let not the perfect be the enemy of the slightly less shitty.
Whether or not you agree with my solution, I think it’s fair to say that trusting our health care industry to the precepts of current free market economic thinking is like building an airplane based on a 19th century understanding of aerodynamics and expecting it to fly. I think there’s archival footage of how well that worked out. Economic principles may be elegant, but that doesn’t mean they work in the real world. And here’s some bad news: if we ever do get economic theory to the point where we can let it dictate health care policy, that theory is probably going to be as ugly as the subject of that theory (i.e. us). In the meanwhile, there’s nothing libertarian about letting people croak so that we can adhere to some imagined Platonic form of government.