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.)

Sotomayor and the Second Amendment

Over the past few days, I’ve been reading some of Sonia Sotomayor’s legal decisions, trying to get a sense of her judicial philosophy. Like many conservative commentators, I am very uncomfortable with the Second Circuit Court’s panel decision in Ricci v. DeStefano – mainly because Sotomayor and her fellow justices overlooked or ignored a number of important constitutional considerations when they delivered their six-sentence ruling.

But there’s another of Sotomayor’s decisions that really bothers me. The case is Maloney v. Cuomo.

Here’s a bit of background: James Maloney, the plaintiff-appellant in the case, filed suit against the NYPD for arresting him in his home on charges of “chuka stick” possession. When his action was defeated in the lower courts, Maloney appealed to the United States Court of Appeals for the Second Circuit, arguing that New York’s statutory ban on chuka sticks violates “the Second Amendment because it infringes on his right to keep and bear arms.”

In a per curium decision, the Second Circuit Court upheld the New York weapons ban, and argued that the Second Amendment does not apply to the states. The court cited only the 1886 precedent in Presser v. Illinois to justify its ruling.

As a strong proponent of mechanical incorporation, I’m appalled at this decision. I have always found the notion of selective incorporation – the idea that the Due Process Clause applies only certain amendments in the Bill of Rights to state and local governments – quite alarming. But far more alarming, in my view, is the fact that Sotomayor and her fellow justices felt little need to clarify such an illogical reading of the Constitution.

The Ninth Circuit Court recently did incorporate the Second Amendment against all of the states within its jurisdiction – and offered a consistent, reasoned explanation for its decision. So, at the moment, the Second Amendment applies to certain states, but not others.

Even if you’re not a strong supporter of the Second Amendment, you should really be dismayed by the idea that constitutional protections need not be uniform across state lines – and that justices can arbitrarily choose which amendments should apply to the states.

In truth, I think I would find the concept of an “implied” right to privacy that extends to all of the states through the Due Process Clause much easier to swallow if the courts would finally incorporate the explicitly enumerated right to bear arms.

Roe v. Wade

I've long believed that the decision in Roe v. Wade was an example of judicial overreach that did very little to secure women's rights and ultimately helped to empowered the pro-life movement. Whether you agree with that position or not, I think it's pretty hard to argue that Roe was fairly decided. Aside from some of the practical issues that complicated the case -- like the fact that Jane Roe (whose real name is Norma McCorvey) now admits she committed perjury when she claimed that her pregnancy was the result of rape -- there are a number of moral and legal question which I believe the Court overlooked or oversimplified in rendering its final decision. Still, there's one thing that keeps bugging me . . .

The debate over Roe usually centers around two main arguments. Supporters of the decision maintain that there is a Constitutionally-implied right to privacy (established by the Supreme Court in Griswold v. Connecticut), which safeguards a woman's right to control her own body. Opponents, on the other hand, contend that states have a "compelling interest" in preserving potential life (at whatever stage of development), and that this interest may supersede the right of a mother to arbitrarily terminate her pregnancy.

I happen to think the notion that an implied "right to privacy" further implies a right to unlimited legal abortion within the first trimester is a bit of a logical leap. But the question that's been really been nagging at me is this: If the Supreme Court doesn't recognize an unborn child as having any compelling right to life (at least within the first trimester), how can our legal system hold abusive husbands responsible when their actions lead to miscarriage or death of the child? Why, for example, was someone like Scott Peterson charged with second degree murder in the killing his unborn child? If Laci Peterson had been earlier along in her pregnancy, would this charge have stuck?

Any thoughts?

Blame game

Megan McArdle has a must-read post on the widespread mental deficiency that caused the housing crisis. The upshot:

What we need, fundamentally, is not simply stricter regulation or less greedy bankers. What we need is better economic theory of how these things play out, so that the regulators have better tools to assess and prevent systemic risk. But that's not how we're thinking right now. What we're looking for is not better tools, but someone to blame.

Because, after all, we know that it wasn't us who was at fault. We're just the victim of broad market forces outside our control.

The one culprit I think she left out is the credit rating agencies -- like Fitch, Moody's and Standard & Poors -- who were giving what we now know were extremely risky CDOs awfully high investment grades. I still don't understand how these companies' risk formulas managed to hit so dangerously off the mark. Some of these CDOs were given the same AAA rating that U.S. Treasury bonds receive.

Maybe the broader lesson here is that we shouldn't expect mathematical certainty when we're assessing human activity . . .

Above the law

I don't understand why Charlie Rangel isn't in jail yet. This isn't his first "mistake." And, as chairman of the House Ways and Means Committee, shouldn't he know a bit more about the tax code than, say, anybody else in the country?

He's been breaking the law a bit too much for his own good lately. . .

Andrew Sullivan's Palin bias?

I tend to agree with Ross Douthat that Andrew Sullivan is being unfair to the Alaskan governor, but I don't think he's being inconsistent. Palin is clearly unqualified for office. It's not outrageous or sexist to suggest that she was selected for reasons other than her management experience. And if Palin was an "affirmative action" pick, as seems likely, her being on the ticket isn't the victory for feminism that Ross seems to think it is. Sullivan puts it best:

[H]ow many Republican vice-presidential picks have lauded Hillary Clinton and Geraldine Ferraro in their acceptance speech? It wasn't even subtle. I find this kind of attitude to be about condescension, not feminism; about tokenism, not post-gender meritocracy.

Still, Sullivan definitely goes overboard. It's one thing to criticize McCain for such a blatant appeal to identity politics; it's quite another to imply that Palin is a vapid airhead. Whatever Palin's shortcomings, stupidity is certainly not among them. She wouldn't have been chosen if McCain didn't believe she could stand up against Joe Biden in a debate.

I have a good feeling she'll surprise everyone . . .

What is sound tax policy?

A must-read response to Ezra Klein's post on tax policy. If you're in favor of raising marginal rates, at least consider Megan McArdle's counterarguments.

Meat Sandwich?

I've always been turned off by the hysterics that seem to dominate the debate over animal liberation, but perhaps that's because I can't fully grasp the moral complexity of the issue.

To me, it's pretty simple. I don't value animals in anything like the same way that I value humans, and I don't think that animal life carries any significant moral weight. Thus, I'm against giving animals considerable legal protections. And while I can understand the impulse to try to limit animal suffering--by enacting basic animal cruelty statutes, for example--I don't get the attempts to preserve animal life.

Having said that, I realize that values are subjective, and that animal rights advocates will actively try to prevent me from eating meat. This is fine, as long as it's done within the confines of the law--by lobbying for greater restrictions on meat products, promoting discussion, and staging public relations campaigns with scantily clad pornstars. Obviously, I will oppose and mock all of these efforts, while I slowly develop heart disease and die from eating too much red meat.

In general, animal rights organizations focus their arguments around animal suffering rather than sanctity of life issues, but the slaughter of animals is what seems to cause the most controversy. This, I think, is why we'll never be able to reach any sort of compromise on this issue. Clearly, animal liberation groups would still oppose killing animals if it could be done without causing suffering. If we slaughtered chickens with pentobarbital or if we could magically remove a cow's nociceptors, it wouldn't make any difference to animal rights campaigners. It would still be "wrong."

So, what's the real issue here? As much as animal rights advocates would love to find some objective standards to cling to, it seems to me that this is always going to be a question of personal morality. If logic played a factor here, it may be worth debating. But how can we adjudicate between competing value systems?

As an old professor of mine once said--when you start framing an issue in moral terms, you might as well take it off the table.

Obama v. McCain

This is a pretty interesting election for me. I have two candidates who I really respect.

I appreciate that both Obama and McCain tend toward the center, even if they've both advanced policies with which I strongly disagree. I know that Obama and McCain are both men of integrity, even though they've done things that are out of character. And I trust that both Obama and McCain have the best interest of the country in mind, even if they've been willing to make some ridiculous statements--or run some unfortunate ad campaigns--along the way.

Having said that, I know that I'm too fiscally conservative to ever fully support Obama's economic agenda. While it's true that I have decidedly mixed feelings about universal health care, on almost every other economic issue, I think Obama is too far left.

But I am also very socially liberal. I care about issues like gay equality and warrantless wiretapping. And though I'm almost certain the Democrats will win large majorities this November, I'm still deeply concerned about Supreme Court nominations.

So, for me, this election really comes down to two questions:

1) Which candidate is most competent to run the country?

2) Which set of issues am I, at this stage in my life, most concerned with?

When I look at the election this way, Obama is the clear choice.