Taking Care of Our Unlimited Wants

In a recent post, I criticized conservative pundits who've portrayed the administration’s health care reform proposal as a move toward "socialized medicine." Opponents of the so-called "public option" seem to be among the most eager to frame these reforms as a wholesale government takeover of the health care industry.

As I've said, I believe this is a false argument. But underneath this bit of conservative sophistry is a fundamental truth about the nature of our health care dilemma.

The debate over national heath care is really a debate over social priorities. For many opponents of the Obama plan – most of whom legitimately fear that the public option is a backdoor to single-payer – the central question in this debate is whether those who have health insurance should be compelled through the tax system to financially support those who lack insurance. Progressives tend to see this as a no-brainer – health care is, after all, a "basic right" – but the issue becomes increasingly complicated when we begin to consider expensive medical innovations that are available to only the wealthiest citizens.

If every American is entitled to health care, what level of care should be provided to each American? Should every citizen be afforded access to the most cutting edge medical technology? I think most progressives would agree that we cannot provide every citizen with the best possible care – the cost would be far too high. So how do we decide which illnesses should take precedence, and which procedures should be funded?

The Obama administration’s push to address these difficult questions through comparative effectiveness research not only oversimplifies an extremely complex problem – it also ignores the moral dimensions of the problem. Those who criticize the inequity and inefficiency of the market must describe what they believe are the best – and most ethical – ways to prioritize treatment through the government.

These are not simply scientific questions; they are questions that involve serious moral judgment. We live in a country with limited resources and unlimited wants – this is the fundamental economic problem that all societies face. If the market is no longer rationing health care resources, the government must. But so far, those who advocate broader government control of the health care industry have been hesitant to acknowledge this point – or to explain their moral priorities.

It’s true that the government will not be taking over the health care system, but if we do move toward single-payer – as many progressives would like – the government may be purchasing most people's care. Even with their enormous bargaining power, the feds simply cannot afford to fund our unlimited wants.

There will have to be tradeoffs, and those who support a single-payer system should be honest about those tradeoffs.

The Right Decision in Ricci v. DeStefano

In a 5-4 decision, the Supreme Court ruled in favor of the New Haven firefighters.

Justice Ginsburg wrote the dissent, arguing that there was "substantial evidence of multiple flaws in the tests New Haven used."

The problem with this argument is that the City of New Haven refused a technical review of the exam by IOS (the company that designed the test), and moved to strike evidence of test validity when it was originally presented by the Petitioner in district court. The City contended that "[e]vidence of pre-examination planning and test validity is . . . irrelevant because the issue is not whether the tests were valid." [See Petitioner's Reply Brief - Footnote 18]

Even if Ginsburg believes that the test was invalid, this was not the reason why the city vacated the results. City officials vacated the results because of an imbalanced racial outcome, which they feared would lead to lawsuit.

How Do We Value Mental Health?

Another example of how international health care comparisons often oversimplify things (via Tyler Cowen):

Researchers from the Peninsula Medical School, the University of Cambridge and the University of Michigan have carried out the first international comparison of cognitive function in nationally representative samples of older adults in the US and England and discovered that US seniors performed significantly better that their English counterparts . . . .

Two researchers from the Peninsula Medical School worked on the study, Dr Iain Lang and Dr David Llewellyn. Dr Iain Lang commented: "While we in England may not like the results of this study, there are important lessons to be gleaned regarding the differences in lifestyle and the treatment of cardiovascular diseases between the US and England. Given the good results achieved by the American oldest-old, we can hypothesise that the more aggressive diagnosis and treatment of hypertension and possibly other cardiovascular risks that occurs in the US, may lead to less cognitive decline. US citizens tend to retire later than those in England, and this too can have an effect on cognitive performance – there may be a connection between early retirement and the early onset of cognitive decline."

Dr David Llewellyn added: "It is possible that the results of this study could lead to other research designed to improve cognitive performance for older people in England. Certainly, with the population of the world ageing at a rapid rate future cross-national studies regarding medical and social factors and ageing can only make significant contributions to the quality and delivery of public health – not least in providing possible savings for health and social care providers such as the NHS."

I think most people would agree that mental health is an essential component of our overall quality of life. Any comparison between the United States' health care system and international health care systems should certainly take this into account.

Is the Public Option a Backdoor to Single-Payer?

Greg Mankiw offers his take on the public option in tomorrow's New York Times:

An important question about any public provider of health insurance is whether it would have access to taxpayer funds. If not, the public plan would have to stand on its own financially, as private plans do, covering all expenses with premiums from those who signed up for it.

But if such a plan were desirable and feasible, nothing would stop someone from setting it up right now. In essence, a public plan without taxpayer support would be yet another nonprofit company offering health insurance. The fundamental viability of the enterprise does not depend on whether the employees are called “nonprofit administrators” or “civil servants.”

In practice, however, if a public option is available, it will probably enjoy taxpayer subsidies. Indeed, even if the initial legislation rejected them, such subsidies would be hard to avoid in the long run. Fannie Mae and Freddie Mac, the mortgage giants created by federal law, were once private companies. Yet many investors believed — correctly, as it turned out — that the federal government would stand behind Fannie’s and Freddie’s debts, and this perception gave these companies access to cheap credit. Similarly, a public health insurance plan would enjoy the presumption of a government backstop.

Such explicit or implicit subsidies would prevent a public plan from providing honest competition for private suppliers of health insurance. Instead, the public plan would likely undercut private firms and get an undue share of the market.

President Obama might not be disappointed if that turned out to be the case. During the presidential campaign, he said, “If I were designing a system from scratch, I would probably go ahead with a single-payer system.”

Of course, we are not starting from scratch. Because many Americans are happy with their current health care, moving immediately to a single-payer system is too radical a change to be politically tenable. But for those who see single-payer as the ideal, a public option that uses taxpayer funds to tilt the playing field may be an attractive second best. If the subsidies are big enough, over time more and more consumers will be induced to switch.

I think this is the point that some progressives are willfully evading. Ezra Klein recently described one possible version of the public option that "would have no special advantages over private insurers. It couldn't use the low rates that Medicare sets or access taxpayer subsidies. It couldn't force its way into networks. It would simply be another insurer, albeit with different incentives than traditional insurers."

If the president and his supporters truly believe that a public option would have no advantage over private plans, why are they pushing for it? Proponents of the public option seem to be arguing that simply taking the profit motive out of health insurance could generate lower prices. But there are already many nonprofit health care organizations, and their rates are comparable to other private health insurance companies.

So what's the real purpose of the public option? Is it, as the doubters claim, simply a backdoor to single-payer?

Health Care Deception

The debate over a public health care option has seen a number of seductive but false claims arising from both sides of the political arena. I thought I’d take a few minutes to address what I think are some of the most wrongheaded and deceptive arguments in the discussion over national health care.

1) A public option is socialized medicine. This is patently false. Ezra Klein has pointed out that socialized medicine is "a system in which the government owns the means of providing medicine." The National Health Service in the United Kingdom an example of socialized medicine; a public option is not socialized medicine. There are no proposals on the table for socialized medicine or even single-payer. Even those who believe that a public option is simply a "backdoor" to single-payer are misusing the term socialized medicine to describe what should more accurately be called a government "monopsony." There are many reasonable criticisms of the public option, but those who cry that a public option constitutes socialized medicine are being wildly unfair and, in my view, deliberately anti-intellectual.

2) Medicare has much lower administrative costs than private insurance companies. A number of liberal economists, most notably Paul Krugman, have argued that because "Medicare has much lower administrative costs than private insurance companies . . . [t]here’s every reason to believe that a public option could achieve similar savings." The comparison is totally unfair. First, the Social Security Administration determines eligibility and collects premium payments for Medicare beneficiaries; CMS does not do this. Second, Medicare outsources much of its administrative management to private insurance companies. My grandmother, for example, used to have her Medicare Advantage benefits administered through a private fee for service plan. Third, as John Calfee stated in his recent WSJ article, "what 'insurance' firms actually sell to large employers – which account for the single largest segment of the entire health-care market – is usually administrative services, not actual insurance. (Large companies are not insured; they pay benefits directly.)" Medicare does not do this. In fact, it generally takes advantage of these private services. Fourth, Medicare is a federally subsidized entitlement program which is available to virtually everyone over the age of 65. Most seniors are automatically enrolled in Medicare. Entitlement programs do not typically compete for market share and, thus, do not have to incur the cost of advertising.

3) Other countries pay less for health care and have better health care outcomes. Greg Mankiw explained in a recent blog post that in order "[t]o make comparisons in health outcomes, you need to control for other variables. Without such controls, the simple correlations have little meaning." When you take cultural factors into account, the comparisons with other countries become much murkier. There are many reasons why Americans have poorer health outcomes, but those reasons have much more to do with cultural habits and lifestyle choices than how we pay for care. International comparisons do not take into account rates of obesity, homicide, vehicle collisions, teenage pregnancies, or any other cultural factors that could skew the data. This makes them deceptive, at best.

The question of whether a public option – or, for that matter, a single-payer system – could dramatically lower per capita health care costs while expanding coverage and keeping America’s health care innovation machine intact is extremely complex. Reasonable people can disagree over the proper structure of our health care system and the best way to achieve cost reduction while simultaneously increasing coverage.

Pundits on the right need to stop attacking every plan that involves government participation as "socialism," while offering limited, impractical, or downright silly alternatives. Those on the left must stop accusing conservatives of callous indifference to the plight of the uninsured, while putting forth deceptive arguments that rely on incomplete or misleading facts and comparisons.

The only way to construct a workable health care plan for all Americans is to have an honest discussion about our cultural priorities that begins with a fair accounting of the costs and benefits as they apply to our health care delivery system.

(Bonus reading: Robert Reich’s endorsement of the public option.)