red/blue dialogue on health care part n+1

Don's latest post is here. Sorry for the delay in response -- I've been on the road, and I'm only now catching up.

I agree with you, Don, that this has been a very good dialogue. I've come to understand not only the perspective of those who oppose the President's plan, but also what the ZOPA (zone of possible agreement) is for this area. While I may be personally comfortable with some of the ideas proposed, such as a public option, it's clearer to me why others are not, and that has helped to moderate some of my ambitions for what could be achieved with health care reform.

Let me begin by saying that I disagree with what I understand Michael Moore says about capitalism in his new movie. I haven't seen it, but I've read in reviews that he portrays capitalism as somehow inherently "evil" -- I completely disagree. As I've said several times, I am a pro-business Democrat... I believe capitalism is the engine that drives the majority of human progress. Is it capable of negative effects? Absolutely. That's why I believe the appropriate role of government is to adjust incentives so as to minimize negative market effects (such as the tragedy of the commons, the free rider problem, and other well documented challenges.)

I am completely opposed to tyranny, but (as you note) I think the US is as far away from tyranny as any developed country in the world. I believe we must be eternally vigilant about monitoring "government creep" -- the tendency of government to overreach and regulate things it has no business regulating. But I also think there is a clear and compelling case for government intervention in very proscribed and constrained ways to achieve certain socially beneficial objectives. So in that respect, I disagree with Reagan's assertion that "government is the problem" - just like capitalism, government can generate both good and bad outcomes. I believe in good government, and that it is shortsighted to adopt the cynical view that all politics and politicians are rotten with corruption and so riddled with self interest they cannot work in the public interest.

Now let me focus on where we disagree. I disagree that "using one case of government exceeding its authority to justify a bigger excess will eventually lead to tyranny." I think slippery slope arguments like that are a bit too facile. As I said, I've learned how powerfully this country resists government intrusion -- how could it be that passing modest health care reform could change the character of this country so much that everyone would somehow roll over and automatically agree to further intrusions? The vigilance of American citizens will always be a powerful bulwark to the overreaching of government, and if anything this reform has reinforced that vigilance, not weakened it. I do not believe our government has incrementally exceeded the limits described in the Constitution -- our society is much less regulated and government controlled right now than it has been for the last century. By many objective measures the US remains the most free and lightly regulated society in the developed world. Taxes are low, regulations are extremely light, and everyone can pretty much do as they please. I just got back from Europe, where governments operate with a much heavier hand than in the US, and those societies aren't anywhere near tyranny either. The major crises that have affected us as of late (e.g. security vulnerabilities, Katrina, the financial meltdown) are much more due to lax regulation than excessive regulation. But I think even to think about regulation as a single metric -- more vs. less -- is to miss the reality. We may need (for example) less regulation in copyright and patent law and more regulation in health care provision. It's not a single knob we turn one way or the other.

Now, specifically on health care, this may surprise you, but I agree with every pretty much every goal you state (I don't understand why support should be short term for people unable to work, but that's a minor detail.) I'd only add two more:

1. Everyone should be able to get some form of basic health insurance, regardless of their financial or health condition.
2. People should be able to switch their health insurance as they like without financial penalties or excessive administrative burdens.

I think your proposal is 95% in sync with what's being discussed. I don't see how a public option and/or the co-op option undermines your points at all -- it would just be another option under #3. The notion that the government provided option would put all the other ones out of business is silly -- government has no profit motive, they want to focus on the neediest and provide basic coverage. Anyone who could afford an alternative would definitely go for the alternative. But businesses will only provide service if there's a chance to make a profit, and some people are unlikely to generate profit... so that's why some sort of public or co-op option makes sense, to cover the folks that are likely to require more funds to be cared for than they're going to put into the pool. You tackle this when you discuss pre-existing conditions, but you argue for insurance companies shifting financial liability based on risk-prediction models when high-risk individuals move around. I'm suggesting that insurance companies still be given the right to deny coverage, presuming they do so in a transparent and reasonable way, assuming that those individuals who are a likely source of losses can get adequate coverage through non-profit or public channels.

I absolutely agree with the need for competition. I'm a huge fan of competition. I'm urging government involvement to aid competition -- I want rules to be set that improve the functioning of the market, not impede it. I agree that the market leads to the optimal allocation of resources, presuming it's designed correctly. I disagree that "pure" (unregulated) markets work best -- if all the participants agree to divide up the demand and charge huge penalties for changing suppliers, that's a bad market. Government should come in and change those rules to get the market moving again. Hence my recommendations for health care. It's not excessive regulation that's hobbling our health care system... there are some bad rules we need to change, but we need to put some smart rules in place. For instance, I totally agree that we should allow people to purchase insurance nationwide -- that's a bad rule that's currently in place. But we also need to prevent insurers from denying coverage based on technicalities or spurious prior conditions (as you describe as "non-material reasons")-- that's a rule we need to put in place, as you note. Transparency, as you call for it (which I agree with) can only be achieved through new regulation. I also agree price caps are an inefficient way to run a market -- price transparency is much more preferable.

The pre-tax dollar idea you suggest does exist -- FlexiSpending accounts do enable individuals to pay medical bills with pre-tax dollars. But they're worked through employers, and there are rules that make them inefficient (such as surrendering unused balance at the end of the year) but I agree that your proposal is fundamentally sound. I do worry, though, that people are not very good at managing their own risk, and they will under-save for medical crises. Hence the prominence of the insurance model. We can't all balance our risk of medical calamity on an individual basis, because the cost of one calamity is so enormous.

I also agree with your assertions on tort reform. I'm a dispute resolution guy, so you're singing my song here. While I may disagree with going so far as to hold lawyers responsible for the legal costs of defense -- that would have such a chilling effect as to deny representation to many worthy clients -- I do agree the system is rife with abuse, and we need to rein it in. I'd suggest more arbitration of malpractice cases, with expert impartial evaluators drawn from the medical field who can best decide reasonable awards, and do so in months instead of years. But we could discuss the how later, we agree on the principle. I also like the idea of state-by-state experimentation to come up with the best ideas. Government can innovate as well, we shouldn't lock states into a system mandated from above that stifles innovation. That's true in the public sector as much as it is in the private sector.

When I read this: "America is a compassionate nation, and we don't let people die in the streets for lack of medical attention. But I think that we can make the safety net more cost effective. Subsidizing basic private insurance based on genuine need is better than using ERs as a distribution system for indigent care." I think, I could have written that! I disagree that advanceable tax credits are the best way to achieve this, but again, we agree on the principle. I also agree that we cannot increase the deficit any more. There's a lot of hand waving around "reducing waste" etc. -- but that won't generate the savings necessary to pay for this plan in and of itself. What we need to see is more efficiency in the overall system, better preventative care, fewer people falling into the safety net that requires 100% of costs to be covered by tax dollars. If we can do that, we can constrain the growth of health care entitlements over the next couple decades, and this reform will more than pay for itself.

I love the idea of every community taking care of itself, but it's unrealistic -- I disagree that sending money to the federal level is less valuable than spending it locally. We don't want every metropolitan area buying its own fighter jets, or designing its own air traffic control systems, or monitoring its produce for fruit fly infestations. You may not see first hand the good the money you pay to the federal government does, but it's clear to anyone who does any looking. Yes, there's waste -- but I bet there's less waste at the federal level than there is in many states. We live in a globalized society, we need to invest authority and resources in the level that can represent our interests at that level. Europe was the seat of world power for centuries, but we surpassed them because we were able to coordinate ourselves far more effectively. Now we're confronted with far larger nations (China, India) who are learning to coordinate themselves, largely with the help of information technology. We need to maintain our national unity to be able to respond effectively at the global level, and disseminating all the power and authority out to 50 state legislatures or 1000s of local decision makers is a recipe for chaos. Yes, every issue should be dealt with at the appropriate level -- local decisions made locally, national decisions made nationally -- but I disagree with a broad principle that states all "decisions made closer to the affected people are better than centralized control."

As to Obama and his grandma filling out forms, I'm sure he was very present in her life, and he helped as much as he could. It seems a little ad hominem to suggest he was focused on his personal successes at the expense of her quality of life. But I think of my own mother, back in Dallas, getting older and having to navigate this bewildering range of health care choices and options -- I love her as much as anyone could love their mother, but does that mean I should move back to Dallas, give up my job, and take care of her? That's unrealistic, and she would be totally resistant to that. It's not that simple. We need to respond to the complexities of this problem with a solution that is sophisticated enough to account for them -- we might want a simple solution because it's easier to debate and comprehend, but if it doesn't match the problem appropriately, we are likely to do more harm than good. That's why it's so satisfying for me to talk through this issue with you in such depth. Facebook is good for status updates, but it would never enable a conversation like this.


Don, you're right - I misread your point. I agree for people who can work support should be short term.
As to the subsidies, why can't they just pay less for the insurance coverage in the first place? The subsidies should go direct to the insurers from the government. Seems to me the "refundable advanceable tax credits" would be an administrative nightmare. If someone is found to qualify for subsidized insurance, they just pay reduced premiums and the government covers the unfunded liabilities for the subsidized insurer directly. That's pretty much how Medicare (and, from the patient perspective, private insurance) works now.
Diane, I agree that malpractice settlements are not what's driving the cost of health care. But with doctors paying up to $200k a year for insurance, they're going to order more tests than are needed just to protect themselves -- and that's a huge social cost. And it's growing -- television advertisements trolling for medical malpractice lawsuits increased from about 10,150 ads in 2004 to more than 156,000 ads in 2008 — nearly a 1,400 percent increase in four years, according to a new study released by Campaign Media Analysis Group. Plus the average jury award for medical malpractice is more than $1m -- and juries routinely award multi-million dollar awards against physicians. I'm not arguing that these situations aren't tragic; they are. I'm just saying that trial-by-jury may not be the best way to determine liability in these situations, because the horror of the outcome can't be adequately paired with monetary redress in the minds of the jury. And the potential for these huge awards creates an incentive for deep-pocketed firms to self-fund speculative suits and to drag the trials on interminably. I think having an expedited process, administered transparently -- with decisions rendered by legal, medical, and ethics experts -- would be a better way for justice to be served. Then (for example) in the case of a medical error, the patient will get justice and the career of the individual practitioner won't be ruined because of one unintentional mistake.

The money would go from the government straight to the insurance company. It would also have to be reported on a tax return at the end of the year as a receipt and a credit, canceling each other out. The point is to be able to map every recipient of an insurance subsidy to a tax return, which helps to identify cases of fraud.

Colin, how do you propose that the subsidies be implemented? I like the idea of using refundable advanceable tax credits because it should help to reduce fraud by connecting each person's subsidy to a tax return. That provides more ways to verify that real, legally eligible people who are paying their taxes are getting the subsidy.

Excellent! BTW, I think you misread the part about short term assistance. I said that for most people who are able to work, it should be short-term.

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