The Non-Debate Over Non-Reform

Arnold Kling: The Democrats’ Health-Care Proposals Promise To Entrench The Status Quo

(National Review Online)  Arnold Kling is the author of Crisis of Abundance: Rethinking How We Pay for Health Care,. He writes for econlog.econlib.org.

---

As the discussion of health-care policy unfolds, what we are seeing is a non-debate over non-reform. The Democratic proposals promise to entrench the status quo, which does not fit with the principles of personal responsibility and fails to allocate resources sensibly.

To show what I mean, hold up ten fingers. Each finger represents 10 percent of health-care spending in the United States. Five fingers - half - represent what is paid for by government programs, such as Medicare and Medicaid. Four of the remaining fingers represent what is paid for by private health insurance. One finger represents what individuals pay out of their own pockets.

To move in the direction of personal responsibility, we have to make more of our health-care system look like the one finger - as was the case as recently as 1960, when the share of medical expenses paid for by individuals out of pocket was 50 percent. This is a radical idea for reform, and neither political party is talking about it. Instead, the Democrats are trying to incrementally make the system look more like the five fingers now represented by government. And in opposing the Democrats’ reforms, the Republicans risk being put in the position of trying to protect the four fingers of private health insurance.

Our health-care system is wasteful. We spend far too much money with relatively little to show for it. That would be of little concern if individuals were wasting their own money. However, because close to 90 percent of personal health-care spending is paid for by third parties, we are wasting each other’s money. This approach has its attractions; as individuals, we all want unlimited access to medical services without having to pay for them.

However, this is not sustainable. Employer-provided health insurance is unraveling, as workers are getting less take-home pay while employers are shelling out more to compensate workers in the form of health care. Medicare is even less viable. It faces tens of trillions of dollars in unfunded liabilities, meaning the gap between what future beneficiaries have been promised and the taxes that we expect to collect to fund those promises. Rather than make hard choices to restrain costs, the political mechanism works to satisfy existing constituencies now and pass the liability on to future generations.

Some form of restraint in our choice of medical procedures is going to be necessary. The debate we should be having is over whether restraint in our use of medical services should be initiated by government officials or left to consumers. The Democrats want to avoid that debate. Instead, they make it sound as if they can make excess health-care spending disappear by magic. But even if we were to stipulate for the sake of argument that all of the supposed savings from preventive care, electronic medical records, and eliminating the waste and greed supposedly inflicted by insurance companies and doctors will actually materialize, the excessive use of medical procedures would still be the main problem with our health-care system.

Both government rationing and consumer cost-sharing seem unpleasant. The debate between the two approaches would not be one-sided. But until Democrats are willing to stand up toe-to-toe and have that debate, we will not see any move toward cost-effective health-care reform.

Assuming such a debate took place, how might one advocate consumer-driven health care within it? I believe we need to do three things.

First, government assistance should take the form of vouchers, given to people based on need. Government must end the practice of reimbursing health-care providers for services. Instead, consumers with low incomes or expensive pre-existing conditions should be given vouchers that compensate for their disadvantages. Consumers can then decide which health-care services best meet their needs, based on what they can afford given their own resources and the vouchers.

Second, Medicare should be phased out - by gradually raising the age of eligibility - in favor of a system that encourages people to save for the health coverage they will need in their old age. This is the only way to fund health care for the elderly on a sustainable basis. People should be given savings targets and tax credits that help them meet those targets.

And third, private health insurance should be deregulated. Affordable health insurance requires radical changes to the way health-insurance policies are designed today. In order to get there, we need less regulation of health insurance, not more. My hope is that the industry would come up with plans that pay claims to only those who fall within the top 2 or 3 percent in terms of health-care needs; those who need basic care would pay out of pocket. Health insurance would look like fire insurance. Few of us would make claims, and premiums would be affordable.

I am under no illusion that my ideas for health-care policy are going to play a role in the debate this year. However, by the same token, the public ought to be under no illusion that what the politicians are calling health-care reform offers any hope for a real solution to the compounding cost of American health care.

[imnho]

This idea is so wacked that I don't know where to start. If we deregulate the the medical insurance industry we are sure to hav another saving & loan scandal. That maybe good for the robber barrons but it is bad for the public.

Geting rid of medicare means a much higher mortality rate for senior citzens. Saving money by putting people on fixed income in a situation where they cann't get healthcare is wacked. It is not realistic to think that they can save enought money to cover the cost a major illness or mutiple health problems.

Of course if youdon't care if the die it may not bother you. You remind me of scourge.

[sjc_1]

I think that is the idea, you put out an article that is SO out there, that the opposition is just stunned that it was ever said at all, let alone such a complete collection of drivel. Call it the stupid bomb, they put together a bunch of non sense and it will throw reason completely off balance.

[creeper00]

It's important to remember when reading stories like this that the word "reform" is poli-speak for "cuts".

Every time they "reform" SS, it results in cuts somewhere. This is exactly what we will get when they "reform" health care. Americans want better health care for all. What we will get is worse and less health care. And if I were a gamblin' woman I'd wager that it will cost a heluva lot more than the current system while providing fewer benefits in the long run.

[sjc_1]

Reagan was going to reform and "simplify" your taxes. He took away the deductions for credit card and auto loan interest, which effectively was a tax increase. There you go, MUCH simpler.

[sjc_1]

"Medicare should be phased out..."

NRO has finally and totally lost it and there is the proof. These guys front for the wrong wing nuts and this is the best that they can do?

[creeper00]

Ain't it the truth? Every time this repentant Democrat considers the possibility that Republicans might not be so bad after all they prove to me they are.

[ianlou]

Let me get these ideas straight:
1. Vouchers for the poor and shiftless.
2. Make the middle class pay for their own healthcare by teaching them how to save for retirement. Great idea!! Do you suggest a 401K Program? Mine just tanked.
3. Deregulate the Health Insurance Industry. Why? Because we have all seen what wonderful results deregulation has had with the Mortgage, Investment and Banking Industries.

All these ideas will take us back to the happy days of, what year did this nitwit quote? 1965? When it cost a total of $10 bucks to be treated by a doctor and we paid 50% of the bill.

Perhaps more of Arnold Kling?s amazing ideas can get me back to 1965 when I was able to fill the tank of my minibike, buy a pack of smokes and an ice cream cone for a buck.

Is Arnold Kling getting paid to come up with this Garbage?
Where do I apply? And how much lead paint will I need to eat?

[bombadil4]

Good grief, this tripe might not have been surprising coming from some loopy right-wing blogger, but appearing as it does here shows the fatal flaw in the recent trend of mainstream news to uncritically and lazily present "both sides" of an issue regardless of how idiotic and divorced from any semblance of reality one side is.

[wogerwabbit]

Wow... the republicans really are a lost cause if they believe this BS. Talk about non-reform. They say private health insurance should be deregulated when about 72% of us want it drowned in the bathtub. How out of touch with your electorate can you get? Health insurance companies perform no useful function other than a greedy middlemen taking a big cut out of our premiums for putting profits over people... how much more deregulated can they get? Oh, I see... let them rip off people in all 50 states instead of just sucking our blood in only a few... that apparently makes sense if you're a republican. I really feel the republicans would have done their party and their country a much better turn if they'd have jumped on the Obama bandwagon and helped lead our recovery from the disastrous policies of the Bush administrations malfeasance (and we're so easily befuddled, they wouldn't even have to admitted culpability... a new positive attitude could have done wonders to their brand). Instead they defend the indefensible.

[sjc_1]

"how much more deregulated can they get?"

They are already exempt from some Anti Trust laws. Not only are they deregulated but they have special privileges that no other businesses have.

[CitizenMikeM]

A poster child for the present Republican Party. Do they all live sequestered is some mansion somewhere? Do they ever get out and see whats going on in this country? Or do they not just give a #$#@%^!

[imnho]

I think deregulating medicine will result in the same problems we got when we deregulated the banks and the S & L. The only difference is that instead of losing there shirt people will loose there life.

With the high cost of treatement it is absurd to think the elders can save enought to cover there medical contingencies

[stevador39]

This is the system the U.S. already has. We don't like. What part of that don't you get.

[skyk-2009]

Now comes the standard Right Wing LIES we have all heard for the last 60 years. Want to know what will happen if we allow these losers to "Reform" or Health Care? NOTHING! They are very serious in wanting YOU to be responsible for 50 of the cost. Just look back at the attacks when Hillary attempted to reform the system. LISTEN to what the same clowns who want to do NOTHING here were telling you THEN. NONE, I mean absolutely NONE of it was TRUTH and the FEAR? Well guess what? Yep it happened ANYWAY without the plan proposed. We have rationing NOW, we can not choose our doctors NOW, we are told what treatments we can or can not have NOW! In short they delivered EVERY SINGLE THING they told you to be afraid of AND it cost you and I more than any people on this planet. ANYONE freaky enough to buy into this Right Wing Rag and what they print, DESERVES to continue the slide into the Third World.

[imnho]

Let me get this stright. You want to abandon older people on fixed incomes in the hope that you get a few more dollars in your paycheck? How do you expect people to pay for things like cancer given the rising cost of health care? Do you expect people whop don't have a lot of money to die? I think you have a dog that won't hunt.

[iam4honesty]

Arnold Kling is not an expert in the health care realm. He is simply another neocon who has inserted himself into the debate. Notice that the main thrust of his 'ideas' is to: 1. Destroy medicare, and 2. Turn the blood-sucking insurance companies loose on the public.

It will never cease to amaze me how evil and greedy the average republican is.

[CitizenMikeM]

I read this article with my mouth incredulously hanging open. Is he nuts? Does anyone take him seriously?