Losing the Practical Case for Healthcare Reform

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You can think about the healthcare bill as two overarching principles. The first is moral: Extending care to those who can't afford it; and keeping insurance companies from denying based on preexisting conditions or rescinding care when costs run high. The second is about fiscally practical: Making this year's bill deficit-neutral over ten years and limiting health care inflation in the years that follow. I think the moral argument is probably the better case for the public (it's much easier to tune out statistics than inspiring rhetoric laced with moral maxims) but recently I've been thinking more about the cost controls: Will they work? Which ones should we support? And will there be rationing?

As we gird our loins for Washington's September healthcare smackdown, I wanted to highlight and comment on this rich-for-thought paragraph from Mickey Kaus. His thoughts are indented.

This discussion of long-term "game changers" was almost entirely gratuitous, policy-wise. 1) They're unproven. Maybe they'll work--i.e. cut costs without affecting care. Maybe they won't. It's irresponsible to make speculative efforts to control long term health costs, something that hasn't been done in this country, the centerpiece of an attempt to extend care;

Yes, yes, and yes. Here's some background. The plan to make the healthcare bill deficit neutral involves cutting $500 billion from Medicare over the next ten years. That money will come from a couple places: $120 billion from private insurers in Medicare Advantage; $150 billion from hospital payments; raised prices on prescription drugs for richer seniors; and a hodgepodge of other "inefficiencies." Maybe we can make those cuts without anything resembling rationing. But maybe we can't. Same goes for budget director Peter Orszag's independent counsel on Medicare (IMAC), which the administration hopes will make tough decisions to cut fat from Medicare in the next few generations. Maybe the medical system will absorb those suggestions, and healthcare will get better because of comparative research and improved end-of-life care. But it's also possible that IMAC's big changes will create a lobbyist fusillade with doctors' and hospitals' groups screaming to their Congressmen about unacceptably thin profit margins, and the counsel will be pressured to avoid making radical, or truly effective, medical mandates.

2) They're long term! There's plenty of time to institute whatever curve-bending changes in medical practice between now and 2019, as eminently respectable policy person Uwe Reinhardt notes.

I don't see eye to eye with Kaus here. I hear the argument that it's important to pass a bill this year to demonstrate to foreign investors that we have the political will to control our deficit, and set the stage for further health reform legislation (Ezra Klein's made this point before). The reason Obama wants to fit as much as he can into this bill is simple and understandable: He'll might never have this combination of Democratic majority and political capital ever again.

3) Cutting health care costs isn't the only responsible way to control the deficit. You could also cut other costs (e.g., Social Security) or raise taxes; 

Kaus is right that raising taxes, whether or not they're used to pay for healthcare reform, is a good and necessary idea. After all, merely extending the Bush tax cuts for households making under $250K is going to cost the country more than health care reform. But reforming Social Security to fix the deficit is like getting an ER patient to brush her teeth. Yes, dental hygiene should never be overlooked. But she's in the ER! The CBO deficit report (pdf!) was pretty clear about this: Social Security faces a long-term problem. Health care spending faces a long-term crisis. Here's the relevant graph.

570 socialsecuritymedicare.png

4) It was intellectually misleading to argue that spending a trillion dollars to extend health care coverage (and add demand to the system) was somehow the way to control long term costs, which was the essence of Obama's appeal in his address to Congress. Maybe expanded coverage would give the government more monopsony leverage--a not-unscary prospect in iitself, especiallyif [sic] you are "suspicious of centralized government," as Brooks says we Americans are--but basically the two issues seem separable. If you want to control long term costs and shift to a different treatment model you could start doing that independent of efforts to broaden coverage (which, indeed, Orszag proposes doing). There's no clear policy reason--certainly no reason we've been given--that the two have to be linked.

I think this is mostly right. To return to my first point, there are two issues here. One is the moral case to extend and improve health care. Two is the practical case to control health care costs. The Venn diagrams overlap sometimes (e.g. a universal mandate would force more healthy young people to pay into the system; comparative research might lower health spending and also make it better). But we could also cut $500 billion from Medicare spending, impose a surtax on the top one percent, and institute an independent counsel to regulate Medicare, and these things might be good ideas even whether or not they were a part of a bill extending Medicaid to cover millions of uninsured families.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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