Is Paul Ryan's world view a place we want to live? We're about to find out.
In the current debate over the Affordable Care Act’s repeal and replacement, we are watching the collision of two world views. While partisans on both sides are likely to disagree, here’s my mini sketch of each of those views:
- Health care is a right. Everyone, regardless of ability to pay, has the right to whatever the rest of us have access to.
- The main cause of the high cost of health care is profiteering by health care companies, whether providers, pharmaceutical manufacturers, or insurance companies. If profit was eliminated and health care made a utility, it would be affordable for the average American.
- The influence of the free market should be minimized in health care, since that’s the source of that unreasonable profit in the first place. Lots of entities have made lots of money trying to avoid getting people necessary care, instead of providing it when it’s needed. That’s just wrong.
- Bigger insurance pools are better, because they are more stable, have economies of scale, and it’s easier to pay for new stuff when you can spread the cost over lots of people. The best insurance pool would be one big national pool with everyone in it. This is called a single payer solution.
- Government systems are less expensive and fairer than private systems, because there isn’t a profit in government enterprises. All that running away from expensive people that private insurances do? Government aren’t allowed to do that.
- Health care is a right, but it comes with responsibility, too. You should get access to care if you participate in the system. It’s your individual responsibility to take care of yourself so that you’re not needlessly draining our shared resources. This includes working to the degree possible so that you’re paying your own way as much as you can.
- The main cause of high cost in health care is overregulation and litigation. If health care weren’t so burdened by trying to prevent things that are almost never happen in the first place, and provide services you didn’t ask for, the cost would be much lower. That overregulation also stifles innovation and competition, which is what makes goods and services in this country affordable for the average person in most other industries.
- The road to restoring affordability is to unleash the power of the free market. First, make people spend more of their own money using Health Savings Accounts. Then they’ll care about the price of medical stuff, which they don’t right now because insurance pays for most of the cost. And people will only shop effectively if they’re spending their own money, not somebody else’s.
- If you truly can’t contribute to your own health care cost, we’ll give you the money to do it through refundable tax credits, and then you can shop for your own care. After all, who can shop for you better than you? Inevitably when government shops for you, they do a bad job and load a bunch of requirements and benefits in there that don’t address your individual circumstance. That’s waste, and it’s expensive.
- Private insurance is the best vehicle to cover everybody where possible. This is because private vendors respond to customer needs much more quickly and nimbly than governments can. Yes, there is profit in health care, and there should be. Why else would anyone redesign a system to make it more efficient, if they didn’t get profit as a reward? Price controls simply create more friction and waste in the market, as people will find a way to get what they want one way or another.
Who is right about this? Which world view is most true to reality? I think there are elements of truth to both points of view. But there are also a few inconvenient truths that neither side wants to acknowledge:
- For progressives, the profit in health care is a problem, but mostly they talk about that profit in drug/device companies and insurers. In fact, most of the profit in health care is in providers. For example, where are we more different from western Europe, the amount of stuff we use, or the prices of that stuff? It turns out that it’s the prices of the stuff that account for most of the cost variance. When you look at the amount of stuff we use like hospital days or doctor visits, we actually look pretty competitive vs. western Europe. This was the source of Uwe Reinhardt’s Health Affairs article in 2003 entitled, “It’s the Prices, Stupid”. Providers in our systems, whether doctors, nurses, or hospital administrators make much more than their counterparts in other countries, and that’s all loaded into the cost of insurance.
- For conservatives, the evidence that markets in health care operate like other goods is quite limited. Some will say: “Look at Lasik! Look at cosmetic surgery! You can’t tell me that medical services are that different.” They’re right, Lasik and cosmetic surgery in particular are a lot like other discretionary goods, say, the eyeglasses and make up they replace. You get to elect to use those goods or not, and you can shop for them by comparing prices for a standard, understandable service or set of services. But much of the rest of medicine isn’t that kind of shoppable service. Rolling into an emergency room, nobody comparison shops and asks to be taken to the next emergency room because of price. Then, after you start treatment, a lot of your purchasing decisions are made by your doctor, using your Mastercard liberally in the form of insurance. Not the price-regulating market proponents would like to see. Try this sometime: ask your doctor what a particular procedure or drug costs. Mostly you’ll get blank looks, or a reassurance that your insurance will pay for it. But actual prices, not so much.
- For everybody, the rapidly increasing cost of health care has a lot to do with our rapidly increasing ability to actually stave off death and cure stuff with technology in ways that are downright miraculous, in addition to insurance company profit and filling out forms for burdensome regulations. Stuff like being able to cure cancer or hepatitis C, or turn AIDS into a chronic disease. Would we be willing to forego such miracles to lower the cost of health care overall? If you look at where the eye-popping drug costs are these days, they’re associated with just these kinds of miracles. The adult conversation we haven’t gotten to is how much of our GDP we should devote to such miracles that will benefit an unknown few of us who could be any of us, versus broad-based benefit for the many, like improving education.
It should therefore not be surprising that there is a royal disagreement in DC these days about whether/ how to repeal and replace the ACA. The ACA is founded on a progressive worldview, and the replacement will be founded on a conservative one. And conveniently, by arguing about whose view is right, we can pretend we don’t see any of the difficult issues above, and blame continuing price increases on flaws in the other guy’s theory. But if we are to get to coherent public policy, we will have to face those truths and make hard decisions as a society. Anybody on the left or the right who claims otherwise is probably overlooking some of these inconvenient truths.