Posted by
Mr. Right(wing) on Wednesday, February 04, 2009 6:22:00 PM
In 2000, the World Health Organization conducted a study that ranked health care within most of the world's developed nations. France ranked first. The United States ranked 37th. Now certainly, many would quarrel with that finding. It does rely on statistics that are frequently misrepresented by countries like Cuba, which systematically underreports infant deaths, to use an example.
But what is undeniable is, the US pays far and away the most for health care per capita, and we lack in several key areas, especially when it comes to access to treatment, relative to other developed nations. I have therefore begun to do some comparisons of the American system versus the top-ranked French system in order to try to find ways to improve what we currently have.
A major difference between France and the US is that in the US we pay insurance premiums on a per-person basis. In France it is a percentage of salary. So whether you are healthy or sick in France, your insurance costs depend on your ability to pay and not on the level of risk involved for the insurer. In the US you pay according to the likelihood (risk) that you will consume heath care services.
Our way is inherently more fair. In a perfect world, no-one would ever have to pay for another's medical treatments. After all, no matter how much money you make, it is not your fault if I have cancer. But, the public does not see it that way.
Instead, liberals are successfully advancing the notion that healthcare is a right, and that people should be guaranteed medical care, even if their inability to pay means that someone else must pay for them. And they are winning that debate by presenting an either/or argument: either we choose the status quo, with 15% of the population uninsured, or "universal coverage" which is another term for socialized medicine.
We must reject this false choice and present a better way. But how?
The first thing to consider is, can the free market do for us what we wish? The answer is: no.
A strictly market-based system, even were we to fix the tax bias towards employer-provided insurance, even if we did away with all the mandates, even if we eliminated malpractice suits entirely, is still going to leave large numbers without insurance. Insurers today (rightly) charge very high premiums for chronically ill or high-risk patients. And insurers also flat-out refuse to sell insurance to some high-risk patients. They are acting rationally, as profit-maximizing entities. But their behavior is a market failure, in that what benefits them as insurance companies out to earn a profit, and what benefits society as a whole, are not at all in synch.
Liberals see this market failure, and propose to simply do away with the entire notion of risk by basically banning the insurance companies and replacing them with the warm teat of the nanny state. We'll all pay what we can afford, and we'll all receive equal treatment. The problem is, nobody has any reason to temper consumption of health care services. When things are free, people demand a lot of them. This is why in Britain or Canada, and in the US with Medicare patients, usage of scarce resources must be rationed. Conservatives recognize that rationing care is not beneficial to society, and is not appreciably more fair as a means of allocating health treatment resources than is wealth.
So, we must find a third way to address the problem of the uninsured; one that can remedy the known market failure spelled out above, while not giving in to the fleeting allure of socialized medicine and what follows it; rationing. And this is what I proposed in my last post; a change in regulations governing the insurance markets that would reduce the number of uninsured while retaining or instituting free market incentives to keep costs under control.
Costs, of course, are going to be critical, no matter what form of reform we embrace. Liberals propose simply dictating terms to the providers. But this will result in a different form of rationing, as medical professionals will seek other occupations if their chosen field becomes less remunerative. Pharmaceutical companies will curtail important drug research if they face reduced profits when they develop useful treatments.
A better option is to embrace free market reform. And I touched on a couple of key means of cost control in a
recent post. These include: 1) elimination of state mandates for certain treatments by allowing consumers to evade the mandates by buying out-of-state policies; and 2) forcing consumers to take part in controlling costs by eliminating employers from buying decisions.
An additional and painless reform would be to allow reimportation of drugs from Canada, and other nations. Today, pharmaceutical companies cut deals to sell drugs in large volumes for far less overseas than they sell them for in the US. And then they make up those revenues by selling at FDA-protected inflated rates in the US. Allowing reimportation would eliminate this disparity over time, as large quantities of drugs sold for less overseas or in Canada will eventually find their way to Americans willing to pay more for them.
These free market reforms are not particularly controversial for conservatives. It is the deviation from free market ideology that is the hard-sell. But deviate we must.
Part of the reason there are so many uninsured in America is because of existing regulations. It is well known that the healthy and the wealthy are already supporting the sick and the poor via implicit subsidy. Insurance rates are higher for all as hospitals, forbidden by regulation from denying treatment to those who will not pay, must jack up rates to paying customers to cover the nonpaying ones. People paying for insurance, either directly or through an employer, therefore subsidize the uninsured.
This leads to a classic vicious cycle, whereby high insurance rates yield large numbers of people unable to afford insurance, which leads to more uninsured people needing health treatment, which leads to higher insurance rates, and then still more unable to afford insurance. And on and on it goes.
To break this cycle, we need more people to buy insurance. And the best way to get more people to buy insurance is by controlling the price of the policies to make them more affordable. Since the free market cannot do this by itself, we need to intervene in the market by instituting guaranteed-issue, and by capping rates insurers may charge.
And then, like France, we will need straight out cash transfers to allow the truly poor to buy a policy at all.
The net result of these policy changes will be that prices for people who had been previously "priced out" of the insurance market will be lowered to whatever we cap the rates at. People who were previously denied insurance will also be able to buy policies at the capped rate. Poor people will receive subsidies, and therefore be able to buy a policy at market rates.
The downside is that to make up this revenue shortfall, insurers will have to charge people at the bottom of the risk scale more for their insurance. Sort of like good drivers have to pay more for auto insurance to make up for the bad drivers. Not a lot more, as there are a lot of healthy people out there. But still... more is more, and that will rightly rankle some.
And so, what will we end up with? Well, unlike in France, those who can afford to pay the full price for a policy based on the risk they pose will have to (if they want insurance). And unlike the French system, wealthy people won't be paying an uncapped percentage of their income to pay for other people's illnesses. They too will have capped rates, and if they are healthy, they will pay as much as a healthy, middle-class person.
But, like France, we would end up with a system where, at least for those on the extremes-- the poor and the sick-- what one pays for health insurance is defined more by what one earns than by what one's health requires.
Is this totally fair? Absolutely not. Again, it's not your fault if I get sick. It's not your fault if I am old, or if I am poor. It is not fair to ask you to pay one cent for my health treatments.
But reform is coming, whether we like it or not. And "totally fair" is not one of the choices on the menu.
The alternatives we face are two. We can embrace policies that deliberately shift some of the payment burden, even if unfairly, such that the wealthy and the well subsidize the sick and the poor. Or we can embrace the more radical socialized medicine that liberals are proposing.
The choice, to me, is clear.