Sunday, July 12, 2009

I've been reading a lot---too much---about health insurance reform. My current thoughts are that (1) right now, the easiest way to help the uninsured poor is to expand Medicaid eligibility to all poor adults (as defined by the poverty line), not just poor children and their parents (and the disabled). (Vouchers would be better, but the political winds aren't blowing that way.) Once the poor are covered, the case for "universal coverage" loses all moral urgency.

(2) The current system can't control costs. (Here's a shorter article making the same point.) The practice paying doctors and hospitals for actions instead of outcomes is corrupting and bloating the health care industry.

(3) The political system is not capable of significantly curtailing costs in the short-term or medium-term (by which I mean about ten years).

(4) However, a bureaucracy may very well be created that in the long-term does incrementally make the hard choices needed to cut health care costs. The coming fiscal train wreck will force large benefit cuts or large tax-increases, and the politicians don't want to touch this dilemma with a ten-foot pool. Better to let the bureaucrats become objects of public hatred.

(5) The cost explosion eventually also will force private insurers (and their customers) to make hard choices (if the government doesn't drive them out of business first). In a better world, we would listen to Arnold Kling; we would significantly deregulate health insurance markets to allow competition to find the most palatable ways of controlling cost. (The plurality of "ways" is essential here; consumers have diverse preferences.) Our more likely future is that a lumbering bureaucracy will find a suboptimal, mostly uniform way to control cost.

(6) What will happen to medical innovation after the party ends and serious cost controls come to America? I don't know,but there is certainly reason to worry.

(7) Arguments about reducing administrative costs (really through economy of scale) are not a compelling reason to move toward single-payer health care.


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