Tuesday, December 8, 2009
A little whle back, Bob Hockett helpfully offered a spirited defense of the proposed health care legislation favored by most congressional Democrats against Charles Krauthammer's scathing criticisms. James Capretta, a health care policy specialist at the Ethics and Public Policy Center and a former Associate Director of the United States Office of Management and Budget, defends Dr. K. against Bob's criticisms. Bob and Mr. Capretta know a great deal more about this very important subject than I do, so I'm grateful to both of them for their efforts to inform the rest of us. Disagreement on a subject this complex and difficult, even among people who share the same goal of insuring the uninsured while maintaining the quality of healthcare, honoring the principle of subsidiarity, and eliminating inefficiencies and other factors that unnecessarily boost costs, is anything but surprising. The fact that it is a debate about means, rather than ends, makes it, in principle, less intractable than some of the other issues we discuss on MoJ, though its unavoidable complexity and the necessarily speculative nature of some of the economic and sociological judgments that end up determining one's position make it unlikely that a consensus will emerge.
A Response to Robert Hockett
December 7, 2009
First, Hockett objects to Krauthammer’s accusation that the bills are sprawling, inelegant, 2,000-plus page behemoths. Hockett argues that this is the norm whenever Congress attempts a large-scale reform of a complex sector of American society. To condemn the current health-care bills on this score would be to suggest that no health reform legislation should be considered — because any credible one would look equally unwieldy once the congressional sausage-making process got a hold of it.
But Hockett misses Krauthammer’s larger point. Yes, the bills under development in Congress are unwieldy messes partly because the subject is health-care. But the bills are much more unwieldy, complex, and bureaucratic because the authors start from the premise that the federal government has the capacity to centrally plan one-sixth of the American economy from
Krauthammer is also right that, if enacted, all of this complexity would create perverse incentives and unintended consequences. For instance, as this paper from the Heritage Foundation demonstrates, the Senate bill would create powerful financial incentives for employers to discriminate against low-wage workers from low-income households. Employers that hired teenagers from poor neighborhoods could face penalties for not complying with the government’s new health insurance requirements, but they would face no such penalties if they hired teenagers from more well-to-do families.
Moreover, the bills would create massive inequities by treating households with identical incomes very differently depending on where they got their health insurance. At a recent session at the American Enterprise Institute, Eugene Steuerle of the Urban Institute presented data which shows that a family of four with $42,000 in compensation from an employer in 2016 would get $7000 more in governmental subsidization if they got their insurance through an “exchange” instead of at the workplace. This massive disparity is created by the complex rules in the bill which were written into it to artificially hold down costs. But, if enacted, it would only be a matter of time before Congress greatly increased the cost to the government by giving the same subsidy to everyone with the same income.
Krauthammer is also correct that many of the fines and fees are arbitrary. For instance, the fine for not obtaining health insurance is set at $750 in the Senate bill. Was this picked because it was found to optimize coverage at the lowest possible amount? No. As Jon Gabel explains in this Health Affairs blog post, no effort has been made to calibrate where the fine should be set to induce robust participation without being overly punitive. What’s happened instead is that Congress picked an arbitrary number for the fine and crossed their fingers that it would result in favorable budget and coverage numbers. There wasn’t any sophisticated modeling of the effectiveness of the $750 fee. It’s a guess, and nothing more.
Finally, there is the issue of what Krauthammer proposes as an alternative. For starters, Hockett says that savings from tort reform are overblown, but the Congressional Budget Office disagrees. CBO’s latest estimate shows the federal government alone would save $54 billion over ten years from a serious reform plan. Private costs would fall even more. In addition, Krauthammer’s proposal to convert today’s tax preference for job-based insurance into something that is fair, uniform, and limited — a proposal also suggested by Senator John McCain in his presidential campaign last year — would have dramatic implications in the health sector. All American households would have access to an equal level of insurance subsidization, thus solving the uninsured problem. In addition, there would much more pressure for decentralized efforts to control costs, without any need for clumsy governmental efforts which always lead to queues and lower-quality care. Yes, such a reform would be difficult to pass. But mainly because President Obama and his allies oppose it. They want a reform that is centered on full governmental control of health care. That’s why the bill is 2,000 pages and filled to the brim with governmental micro-management of every corner of the health sector. It doesn’t have to be so.