Health care policy in the US Notes for November 15

Main points

I am experiencing my own health moment. I spent the weekend curled up in a ball with a big box of kleenex and several bottles of ginger ale nearby. I’m still a bit woozy and probably contagious, so I thought everyone would be better off if I just stayed home today. But I can still kick in my $.02 without risk of infection through the internets.

The articles cover the history and projected future of health care policy in the US.

Blumenthal’s article is primarily about the private sector. He tries to explain why health insurance is primarily provided by employers in the US, how employers are dealing with the inflation of health care costs, and the prospects for employer-based health care in the future.

Stevens’s article focuses on the public sector. She describes the multiple ways that the federal government is involved in the health system. Those who fear a “government takeover” probably don’t know that the government is already responsible for about half the system!

Kotlikoff is also interested in the public sector. He claims that the finances of the federal Medicare and Medicaid programs are unsound and headed for disaster.

Remarks on Blumenthal

There is a lot of interesting material and I’m irritated that I won’t hear what the participants in the seminar said. Here’s what stuck me.

When I first read Blumenthal, the point about wage controls in WWII leading to employer-based insurance really stood out for me (p. 83). On the third time through, I’m picking up smaller things. For instance, the ERISA law, exempting companies that insure their own employees from mandatory benefits packages, really makes it hard for states to regulate health insurance (pp. 84–5). If California wants to require, say, coverage for AIDS in every health insurance policy, the ERISA law means that the employees in the biggest companies in California won’t be in the insurance pool governed by that mandate. That makes it much harder to require coverage while keeping insurance policies affordable.

Blumenthal also does a nice job of pointing to one of the central dilemmas in health policy. Only private interests like employers have strong motivations to improve the efficiency of our health system, meaning that it produces more health for less money. Public systems, by contrast, have not been as innovative. But private purchasers cannot dominate local markets for health services. And so they cannot have enough influence on prices to hold down the inflation of health care costs. This matters because people in the US pay much higher prices for health services than people in other countries do: it’s the major source of inefficiency in our health care system.** See Anderson, et. al. “It's The Prices, Stupid: Why The United States Is So Different From Other Countries,” Health Affairs 22 (2003).

Remarks on Stevens

I was struck by the general theme of the Stevens article. This is that the federal government’s increasing involvement in the health system has gone along with, and even driven, the erosion of the community hospital idea. Instead of general hospitals dedicated to serving the public welfare, we have increasingly specialized hospitals and clinics that are all assumed to be in business for the sake of profits. You might have expected that public financing would tend to favor institutions that see themselves as serving the public good rather than private interests.

Stevens also claims that Medicare spurred racial desegregation of hospitals (p. 471). I did not know that. Funny how money can change your outlook on things. Is that encouraging or depressing? Both?

Remarks on Kotlikoff

I’m too inexperienced in the kinds of long-term projections that Kotlikoff engages in to have a solid opinion about the bit we read from his book. It certainly sounds scary, but almost anything projected out twenty-five years does. Beyond waving my hands like that, I have two thoughts.

First, Kotlikoff might well have identified a source of some of the political events of the recent past. In particular, I can’t help noticing that older voters went heavily for the Republicans in the year after the Democrats passed a major health bill. Hmm. Are they worried that the costs of expanded coverage will come out of Medicare? I’ll say more about this later.

Second, it bugs me that he’s treating his demographic projections as set in stone. I don’t mean to question the social science behind them. I’m sure he’s right that the ratio of retired to working native-born Americans will increase and I’m willing to grant that this will pose a financial strain on our public pension and health care systems. But it does not follow that this must be the ratio between retirees and workers in America. Americans can magically increase the number of workers any time they want by simply allowing more people born in other countries to work here. We can lower that ratio to relieve the strain if we want to. And it might happen anyway, given the difficulty of regulating immigration into this country. In short, demographic projections that leave out immigration carry little weight with me.

A little history

Have you heard the line warning us that without vigilance, “you and I are going to spend our sunset years telling our children, and our children's children, what it once was like in America when men were free”?

Ronald Reagan speaks out against socialized medicineIf so, you might know that it is most famously associated with Ronald Reagan. But you probably don’t know the context. Reagan had been hired by the American Medical Association to warn against socialized medicine. Specifically, the target was, wait for it, Medicare. Thanks to the wonders of the internet, you can listen to it yourself.

Ah history. One generation’s threat to liberty is another’s untouchable entitlement. Of course, that was one of Reagan’s points.

You might have noticed that the Democrats were hammered in the last election: historic losses in the House and limited losses in the Senate only because the Republicans put up some extraordinarily bad candidates. The basic reason is clear enough: they held lots of seats in marginal districts with unemployment at about 10%.

But there was something else in there too that, I’ll wager, political scientists will suss out soon enough. The Democrats got clobbered among older voters. They also voted for a health care package that included planned cuts in Medicare. Inexplicably, this wasn’t a big deal in public discussion of the plan, though perhaps the nonsense about “death panels” should count as expressing the underlying worry. Anyway, it had to have played a role.

Yes, what I’m saying is that the Republicans won, in part, because they were seen as defenders of Medicare as it stands or, perhaps more accurately, because Democrats weren’t seen that way.

This page was written by Michael Green for Freedom, Markets, and Well-being, PPE 160, Fall 2010. It was posted November 15, 2010.
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