Economics, Entitlements

Do we really need healthcare reform at all?

Remember that line in How The Grinch Stole Christmas: “He hadn’t stopped Christmas from coming, it came! Somehow or other… it came just the same.”

Markets are kind of like that. Although the bureaucrats and regulators do their darndest to be Grinches, give markets just a little bit of breathing space and they’ll start to work their magic. Take healthcare for instance. The Obama White House considered healthcare reform such a priority that it turned its attention to Obamacare about thirty seconds after getting the stimulus passed in 2009. Yet the pace of healthcare spending increases actually has been cooling since 2002.

How did that happen? J.D. Kleinke, resident fellow at the American Enterprise Institute, credits innovation and choice. First, Americans started benefiting from some breakthrough drugs—such as Zocor for heart disease or Zyprexa for schizophrenia—many of which are now in generic form. Second, the decline of the HMO model meant those with insurance could again have healthcare their way—with a price. “Higher deductibles, new co-payments, Health Savings Accounts, ‘tiered’ drug plans—these were all rolling out between 2000 and 2004, the same years that healthcare inflation was starting to cool,” Kleinke notes in a recent op-ed.

Some pundits, however, look at the current state of healthcare and wonder what might have been had President Clinton been able to get his healthcare plan passed in the 1990s. Here’s liberal blogger Ezra Klein of The Washington Post:

The Clinton plan wasn’t perfect. It was, however, a start. It would have taken this mess that we call a health-care system, ironed out some of its worst inefficiencies, and created a structure for cost control. As time went on, some parts of the law would have worked and some others would have blown up in our faces. We could then have learned from those experiences and improved the law by doubling down on the successes and removing or reforming the failures. We could, in other words, have begun the messy, long, but necessary process of building a better health-care system.

But as Kleinke points out, healthcare has been reforming itself without the gentle pushing and prodding of the Washington central planners that the WaPo’s Klein admires:

These numbers are not the result of an insurance pricing cabal falling apart, nor a collective pre-emptive reaction to the coming of “Obamacare,” nor the result of any grand “disruptive” strategy by health care executives and entrepreneurs thinking they are implementing last year’s business school twaddle. This is health care simply self-correcting, slowly and tediously, nearly a decade after the failure of the great managed care experiment of the 1990s. Contrary to the perennial doomsaying of the health care technocracy – and the whining of an older generation of physicians and hospital administrators hit by the recent intrusions of accountability and computerization – the health care system is, almost in spite of itself, getting better.

Because of the myriad moving parts in the health care system – in particular the pitifully belated introduction of computers, data, and informatics – we cannot disaggregate these factors to determine which of these factors have actually helped or hindered this economic normalization, and to what to degree.  But the aggregate impact is clear, and the normalization of health spending is indeed good news – notwithstanding a false explanation by government economists with a political agenda to find a black lining in any silver cloud crossing the health care landscape.

Still, the answer to the question, “Do we really need healthcare reform at all?” is “Yes, we do—just not Obamacare.” We need to create an environment where markets can work better—or just work at all. For instance, we need to quickly move away from the unlimited tax break for employer-based health insurance—which encourages overconsumption of services—to a tax credit that would help workers purchase private plans. And given the distorting effects of fee-for-service Medicare, a premium-support plan that would inject competition into the social insurance system would be another huge, pro-market step forward. Perhaps the Supreme Court will help clear the decks and make it easier for Washington to follow up on the healthcare reform already happening in the private sector.

One thought on “Do we really need healthcare reform at all?

  1. I am a lawyer, a conservative, an opponent of obamacare, but also a realist (as a cancer patient).
    My problem with Obamacare is that ,like all government programs, it is fundamentally flawed in its approach. Obamacare chases costs, it doesn’t contain them. It also increases costs by requiring insurers to pay benefits for pre-existing conditions without establishing funding for those same benefits. The canard “take it out of profits” is simply insipid.
    On the other hand, as an attorney I see hundreds of families every year, even ones with insurance, being forced into bankruptcy. Health care is a financial “black hole” into which we are all drawn in eventually. The fattest “individual health account” in the world could not withstand one person’s cancer treatments. I have cancer. My wife is 65, and her health will inevitably decline too. At what point do I hog all the money and deny care to her? Or do I just die and let her take the money? Do you think that either of us would want to do that tothe other?
    There is other “dirty business” as well; for example: One local hospital was billing BCBS patients according to a fee schedule, yet the hospital had a second fee schedule with BCBS in which the costs were actually much lower. In other words, consumers were being deliberately overcharged. When providers know there is insurance, they raise prices to bilk consumers. Do not tell me otherwise because I have tried this issue in dozens of cases and have yet to lose.
    Frankly, if we are not all to be eaten up by the health industry, the health care system must be changed rather than insurance or financing. Maybe it is indeed time to make health care a public utility, just like water and electric. Structure health care providers just like utility companies. Let the health utility supply basic health care, and let people buy insurance for the big-ticket expenses.

    Another idea is a military-style “department of health” which would provide basic medical care by recruiting doctors for “hitches” (like joining the navy) at an officer’s pay-grade, plus student-loan forgiveness, and malpractice sovereign immunity while enlisted. Medicine could be purchased in bulk. We could merge Medicare, Medicaid, Tri-Care and all other redundant programs into this system. People using this service would be charged according to a fee schedule based on their income. Major or catastrophic care insurance would be purchased by the consumer on his or her own. People wouldalso be free to go to a private physician just as they do now.

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