Arnold Kling  

Tyrone Posts on Health Care

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Jonathan Zasloff writes

Bush plans to pay for [his proposed health insurance deduction] not by efficiencies, but rather by restricting the benefit packages of the already insured, through the deductibility cap.

Paying for something with efficiencies is nothing but a scoundrel's refuge for policymakers. It's like saying you're going to balance the budget by getting rid of waste, fraud, and abuse. Of all the criticisms one could make of the Bush health plan, this is the least persuasive.

I got the pointer from Tyler Cowen, who writes,

My feelings are mixed, but my view is closest to Zasloff.

I think that Tyrone is loose again. Tyrone is Tyler's evil twin, capable of arguing any position, and who once endorsed single-payer health care.

Tyler (or Tyrone) writes,

But I cannot side with Arnold Kling's view that third-party payment lies at the root of America's health care problem. Our tolerance for anxiety is sufficiently low that I expect the future to bring more and more insurance of many kinds, whether from the private sector or from government. The cost of this insurance, in terms of induced inefficiencies, will be high but a secure health care situation is one of the things in life that alone can make a difference between happiness and misery.

I am not proposing to outlaw health plans that insulate consumers from costs. However, I am suggesting that the public policy case for treating health insurance as a "merit good" (something for government to subsidize) stops with catastrophic health insurance. If consumers want to go further and get pre-paid health plans that relieve them of having to calculate costs and benefits of individual medical decisions, then so be it. You can pay for the luxury of insulation, just as you can pay for a fancy sports car.

I hope that I never use the locution "America's health care problem." America has health care policy problems. The number one policy problem is that Medicare, if left unchanged, is likely to require large enough tax increases to threaten economic growth. The number two policy problem is that American's extravagant use of medical procedures with high costs and low benefits is paid for in part by government subsidies. Remove the subsidies, and I don't care how Americans handle their health care, just as I don't care how they buy cars.

UPDATE: See also Stuart Butler and Nina Owcharenko from the Heritage Foundation.

Comments and Sharing

COMMENTS (4 to date)
Matt C writes:

Hear, hear. You are hitting them out of the park.

I would be interested, sometime, to hear about what you think WILL happen in the health care market as opposed to what you think SHOULD happen. What is most likely to happen, and what is the best we can reasonably hope for. (I don't mean to be pessimistic but I think the recommendations in CoA ain't happening.)

Buzzcut writes:

One of the nasty little urban myths amongst the intelligensia (call it "the liberal's creationist myth") is that Medicare's low administrative costs:

1) indicate that the program is superior to private health insurance

2) would allow the program to cover more people at less cost if it were expanded to cover a population larger than just retirees.

This is of course absurd. Medicare has low administrative costs because it doesn't restrict care in any way. It gives doctors a free hand, with which they rip the system off to no end.

Nathan Smith writes:

Let me throw out an argument in favor of the Medicare prescription drug bill (not of Medicare as a whole) to this hostile crowd and see whether/how they tear it to shreds.

First, a premise: there's no nice, neat way to handle the issue of intellectual property. Intellectual property rights are recognized to be a second-best, since, assuming the cost of reproducing ideas is zero, any costs artificially imposed which induce some users not to make use of a new idea are sub-optimal.

The theoretical first-best solution is for the state to finance idea-creation and make ideas available to the public for free. But of course it's not plausible that the state would actually be competent at figuring out which ideas would be sufficiently value-creating to justify the research costs. The market is most effective at processing diffuse information.

So: is it possible to marry public financing of knowledge-creation to the market's information-processing powers?

Maybe the prescription drug program is a bid to do just that. Seniors are out there buying drugs, signalling which drugs they find useful, and these signals are communicated back to Big Pharma in the form of profits, or lack thereof. Because seniors pay some of the money themselves, they have a somewhat reduced but still real incentive to make careful judgments about which drugs are worth it and which are not. But since they are only paying part of the cost, they are willing to purchase more drugs than if they had to pay for it all themselves. This stimulates more drug research, with ultimate spillover benefits to the whole world as patents expire, or maybe in foreign countries where governments allow generics to mimic successful drugs.

Randy writes:

Matt C,

Interesting question, what is the best we can reasonably hope for. I'd say the best we can hope for is that the plan, whatever it is, will be voluntary. I wouldn't have a problem with any entitlement plan that I could drop out of if it was no longer a good deal. Nor do I have a problem with 50 or 150 million people getting together voluntarily to form a group medical plan - not even if it is government sponsered - and not even if it contains a reasonable degree of taxpayer funding.

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