Friday, March 12, 2010

Again: A Primer on Effective Health Insurance Reform

Under the heading "Things SWNID Will Never Get Used To," the first item will be, "People don't learn something the first time SWNID enlightens them."

So yet again, we offer a link to something that aptly describes what really ails health insurance in our Republic. Today it is Joseph Rago's review of Health Care Turning Point by Cornell Professor Emeritus of Economics Roger Battistella. Like everyone SWNID has linked with approval (e.g., Whole Foods CEO John Mackey, Harvard Med School chief Jeffrey Flier, Atlantic contributor David Goldhill, Atlantic economics editor Meg McArdle, Senators Wyden [D-Oregon] and Bennett [R-Utah]), author Battistella and reviewer Rago know that the best monitors of health care quality are patients and the best way to empower patients is by having them, not a third party, make the choice of insurance plans and pay the first-dollar costs.

So with the standard imperative (seldom obeyed?) to read the entire review, we offer some choice quotations:

"Because most consumers of health care are largely insulated from directly paying for the services they use, health care is generally perceived as an unlimited free good. . . . Wants and needs become insatiable when care is believed to be free." . . .

Mr. Battistella begins with the original sin of modern American health care: the government's World War II-era decision that gave businesses tax incentives to sponsor insurance for their workers but that did not extend the same dispensation to individuals. Since third parties were paying most of the bills--employers at first and eventually, with the creation of Medicare in 1965, the government as well-- no one had any reason to be assiduous about controlling the cost of care. Patients always seemed to be spending someone else's money. . . .

The solution, Mr. Battistella argues, is the "hidden pragmatism of market competition." In a competitive environment, he says, the "prosperity and survival" of caregivers would depend on "outperforming one's rivals." Meanwhile buyers--that is, patients--would be motivated to inform themselves and to "obtain the best service at the lowest price." It sounds elementary, except that in American health care it has never been tried. What would it look like? Mr. Battistella imagines individuals free to buy a wide variety of insurance coverage and choosing providers on the basis of transparent data about price, quality and value. There would be a transition, but it could be as smooth as the shift from defined-benefit pensions to 401(k)s. . . .

Mr. Battistella discounts the many ways in which our mix of private- and government-paid health insurance suits members of the political class: They always have a handy villain to blame (e.g., private insurance companies) when something goes wrong—even if the government is already calling most of the shots (e.g., archaic regulations) and even if the actual source of the trouble is the same central planning that distorts single-payer systems (e.g., Medicare's price controls).

Meanwhile, the Democratic leadership now believes that it can pass the Senate bill in the House without the Stupak twelve, even though with Stupak's anti-abortion votes they could only pass a previous bill by five votes, and some from their margin are now dead or resigned. Of course, doing the math on this issue has never been the strong suit of Obama/Pelosi/Reid.

Also the deadline for this vital legislative process has been moved back for the gazillionth time, delaying BHO's trip to Indonesia. Like after fifteen months an extra three days will do the trick. We've supervised thesis students with the same concept of time as an unlimited resource. Today, they don't have master's degrees.

Enough ink has been spilled on the chess metaphor of "endgame" to provide a different metaphor: stalemate. As gentle readers who play the Game of Kings know, "endgame" refers to that portion of the game (following the mysteriously named "opening" and "middle game") when, with few pieces on the board, one player presses the other toward checkmate. However, in a game played more or less evenly, the endgame can yield stalemate, in which neither player has enough of an advantage to bring the other to defeat or, more embarrassingly, the player with the superior and sufficient power misplays his pieces so as to allow no legal moves by his opponent or simply dithers away with pointless moves until the limits of identical board positions or game timing are reached.

Stalemate is a tie, but a moral victory for the weaker player and a defeat for the stronger. In the highest levels of chess, if one plays with the black pieces, which have the disadvantage of moving second, and plays to stalemate (or a draw, both players agreeing that the game will likely end in stalemate), one has scored the equivalent of a victory.

Democrats started with a massive political advantage, like playing white and black not having a queen on the board. Since then, they've blown all their advantages with incautious, over-aggressive tactics and now sit at a board where they have only a king and a knight while the Republicans have only a king. By definition, that's stalemate: the Dems have more material but not enough to deliver checkmate. But the Dems, blind to reality, insist on moving their pieces forever, hoping to find a miraculous way to check the black king even though they have insufficient material to do so.

In an actual chess tournament, the game would be called and the board reset, with the Rs taking the white pieces. In a democratic republic, we have elections that often do the same thing.


Tom_KY said...

As usual, the sage of the SWNID has highlighted some great commentary. When I read Goldhill's piece in the Atlantic a few months ago, I forwarded it to my two senators and six congressman.

Which of the 8 have taken up the cause? That would be a big, fat zero.

Consumers are a problem, as well as lack of transparency in the marketplace. Those are the two biggest and there isn't even a close third.

As a candidate, how do you walk that tightrope? "You (the voter) are partly to blame and I would also like to blame an industry that could raise an unlimited amount of money against me."

It's easy to point a finger at government, but the private insurer does have to take some of the blame. I repeat my argument from a previous post, the government wouldn't be trying to regulate health care if it worked in a competitive market. Insurers don't want to be in a competitive market, the barriers to entry are high and they want to keep them that way.

Certainly the Dems have problems shepherding legislation, while at the same time, proving Will Rogers to be more and more prescient with each passing year. However, the Republicans are just as much a cancer on the process, using procedural maneuvers to obstruct the Dems at every turn. They have filibustered more legislation in the past year than was done between 1950 and 1970. If the bill is that bad, let it pass, and the chips will certainly fall to the right of the table come November. And then I look forward to the Republicans making price transparency and consumer use a central part of their reform of insurance.

Forward the Goldhill piece to everyone you know.

Jon A. Alfred E. Michael J. Wile E. SWNID said...

All those who forward the Goldhill piece should do so with the full knowledge that it describes what could best be termed the opposite of ObamaCare.

Price transparency, we note again, only matters if the patient cares about the price, and the patient doesn't if the patient expects the insurance company to pay. Those sectors of health care in which patients do pay the bills--lasik surgery and cosmetic surgery, for instance--have price transparency and price competition. There's no supply of transparency where there's no demand. Empower consumers by letting them pay their own bills, and they'll shop for price and go where they find transparency. Ask anyone with an HSA.

Of course many insurance companies would love to be treated as public utilities and receive the $330 billion in federal payments that ObamaCare would offer. Government-business cronyism is nothing new. At the same time, blaming insurance companies for profits that amount to 2.2% is nothing more than demagoguery. Doesn't help the hapless public make up its mind.

Standing aside to let the bill pass is hardly a political strategy, inasmuch as repealing it would require either a similarly protean move of statesmanship on the part of the Democrats-in-a-minority or a consensus-building exercise of the kind that we haven't seen from this White House.

Maybe there's more filibustering because there's more garbage to filibuster. We've certainly seen our share. At the same time, the WH has had no problem getting bipartisan support for things that are genuinely bipartisan, like war funding and such.

Back to this legislation. From the get-go, this thing has been disingenuous. Wyden and Bennett have been working for years to get something done. But because their bill did what any decent bill ought to do--eliminate the tax incentives for employer-provided health insurance--it was ruled out by the Ds' labor interests (in a world without tax preference for fringe benefits, labor unions lose significant influence). So no hearing on such matters, just as Dubya's proposal to tax expensive employer plans and offer a tax credit for individual plans was scuttled in 2005.

This has been the occasion of a second bit of demagoguery: accusing all those who offer such plans of trying to "destroy America's employer-based healthcare system." We thought that was the idea!

Christine said...

"Maybe there's more filibustering because there's more garbage to filibuster."

Exactly! I only wish the snows in Washington could have lasted through 2012.

Tom said...

The insurance company should pay, because I AM paying for that service. Every month, like clockwork, whether I am sick or not. The amount that I pay is greater than my mortgage and I can't even get my wife a simple test, because my insurance won't pay for it. It's not that government is between me and my doctor - there isn't enough room - because my insurer is between me and my doctor.

Thus, there has to be reform. I am not advocating the president's position - never have - I am advocating free market reforms.

There is price transparency in the fields you mentioned because health insurance doesn't cover them. There's another side to that. The best and the brightest are going into those fields, because they don't have to deal with insurers.

Thus, there has to be reform. I am not advocating the president's position - never have - I am advocating free market reforms.

There are other firms and industries that have tight profit margins - if insurers don't like making money, they can get out of the business and let someone else work it.

Rob said...

Tom, I wish you'd stop advocating the president's position so much and start advocating free market solutions instead...sheesh.

Jon A. Alfred E. Michael J. Wile E. SWNID said...

Tom, we think you're more William Jennings Bryan than Milton Friedman now.