March 24, 2005

CAP Tackles Health Care

The Center for American Progress has just put out a spanking new proposal for a new national health care system. Kudos to them on getting this out there. But looking it over, it's the sort of mostly-modest thing I once believed in—i.e. rejigger the current system by expanding Medicaid and offering tax credits to individuals, who can then purchase private insurance under an imposed community rating system (here, the FEHB).

Unfortunately, the CAP wants to keep employer-based coverage as well. If we're really going to think big about health care, then employer-based coverage should probably just be nuked, since a) it isn't all that portable and b) the tax subsidies required to finance employer-based insurance are breathtakingly regressive. Now I suspect that, over time, the CAP system would just induce employers to scale back their coverage for workers, and let their employees get tax credits to pay for health insurance on their own. That seems fine in theory, though in practice the transition will get very messy. (CAP proposes reinsurance to cover the cost of the transition; for instance if all the healthy people left IBM's plan, leaving the company holding the bag for the sick and decrepit.)

Anyway, as I said, I once believed in this sort of "save the private insurance market" type of system. But a month ago, in a long broadside against Richard Posner for suggesting a (somewhat) similarly-structured proposal, I kind of changed my mind. My newer stance was that I don't think you can realistically get private insurance companies to compress their rates and make the premiums "fair" to everyone. Even more crucially, I don't think the government can possibly require everyone to purchase insurance—the youngest and healthiest are always going to try their damndest to weasel out of the whole thing, and as is the case with auto insurance, a large number of them will probably succeed, thus screwing over everyone else.

So I'm not convinced that you can control costs by letting individuals buy health insurance in the open market, no matter how you approach it. More to the point, I'm not sure it's a good idea even to try to ratchet down health care costs. (If Americans want better care, why not pay for it?) As David Cutler has tried to convince us, "paying for performance" may well be the better way to go, though I'm not sure Cutler has exactly the right approach here. In the end, though, more and more I'm thinking that single-payer is the only way to do this. My socialist urgings get the better of me. "Third way" solutions are nice, and there are some benefits of a private insurance market that might be worth preserving if we can, but it doesn't look like we can. Anyway, I'm sort of rambling. I'll look over the proposal in more depth and try to get some more coherent thoughts down on paper.

UPDATE: Criticisms aside, I'm very pleased that CAP notices that here in America we have three distinct "big problems" as far as health care goes: covering the uninsured, managing health care costs, and improving the quality of our care. (See here for an earlier post on this point.) Most proposals out there just take a stab at controlling costs, or just aim to cover the uninsured, but in reality you have to run around all the bases or it's not a homerun.
-- Brad Plumer 3:03 AM || ||