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Greg Mankiw writes,


Almost all sweeping health reform proposals involve higher taxes on the rich to provide benefits for those farther down the economic ladder. The redistribution, rather than health reform, is sometimes the main objective.

To judge whether my conjecture is correct, ask your favorite pundit of the left the following: What health reform would you favor if the reform were required to be distribution-neutral? That is, you can change the rules of the health system but you cannot change the distribution of economic resources between rich and poor. My guess is that your favorite pundit would either object to the question or would answer by retreating to more modest reforms.


This is a good point, particularly when it comes to the proposals coming from the Democratic Presidential candidates. They do not want to rock the boat by reforming the health care system. Just as most people hate Congress but vote to re-elect their own representatives, most people think there is something wrong with our health care system but don't want to see any changes to their own health plans. So real health care reform is a political loser. Instead, what is being marketed as health care reform is taxing the rich to pay for more benefits for the middle class (the poor already have Medicaid).

Grading the candidates of both parties on health care reform, John Goodman writes,


Most Radical: McCain by a long shot. He would completely replace our arbitrary, regressive, wasteful system of tax subsidies for private health insurance with a $2,500 refundable tax credit for everybody ($5,000 for couples). By contrast, the leading Democrats would not repeal a single existing subsidy; they just add new ones. (That is why their plans are so costly.)

In general, it is those of us on the right who are most willing to reform the health care system. We see it as creating too many incentives for people to undergo procedures with high costs and low benefits. We are the radicals on health care reform, and those on the Left are protecting the status quo.

If the Left's idea is really income redistribution, it somehow seems appropriate to bring up this point made by David Leonhardt.


The Democratic presidential candidates, meanwhile, are promising to pay for their new programs in part by getting rid of some of Mr. Bush’s tax cuts. But those tax cuts are already scheduled to expire under current law. The official budget numbers have already taken their demise into account.

What is odd is that the biggest obstacles to redistribution are the Democrats' favorite programs, Medicare and Social Security. Those programs are going to soak up all of the tax increases the Democrats can dream up, and then some. Having spent the last six years denying that there is a problem, they are going to spend Hillary Clinton's first term watching these non-problems drain tens of billions of dollars from the Treasury, leaving them very little room to maneuver on redistributionary spending.


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COMMENTS (20 to date)
Punditus Maximus writes:

I'm sorry, but that last paragraph is disingenuous. Medicare and Social Security have problems on entirely different scales.

Barkley Rosser writes:

P.M. is right. You should know better than to buy into the third rate projections and propaganda being handed out about social security. Those who look at it most carefully conclude that indeed social security is much more likely to run a surplus forever if left alone than to ever run a deficit. Its problems have been wildly exaggerated.

OTOH, medicare and medicaid suffer from serious financing problems and projections.

John Ford writes:

"To judge whether my conjecture is correct, ask your favorite pundit of the left the following: What health reform would you favor if the reform were required to be distribution-neutral? That is, you can change the rules of the health system but you cannot change the distribution of economic resources between rich and poor. My guess is that your favorite pundit would either object to the question or would answer by retreating to more modest reforms."

As much as I abhor the collectivist perspective, I don't think this is as much of a gotcha as it appears. IF you embraced a very liberal approach to healthcare reform, you'd be quite correct in criticizing this is an unfair question. A liberal could plausibly argue that true healthcare improvement won't occur UNLESS income is redistributed. He'd argue that to do anything less is merely a bandaid measure.

John

Ray writes:

Of all of the plans, I think Sen. Gravel's is the best. Written by Laurence Kotlikoff at BU, the Gravel plan eliminates Medicaid, Medicare, and all government subsidies for employer provided insurance. Instead each year every person will receive a voucher to purchase private health insurance. The amount that the voucher pays is determined by one's prexisting conditions. If an insurance company decides to accept these vouchers, they must offer a certain minimum package and they can't discriminate. Nothing stops them from having copays and charging for extra services.

The initial cost of the program is estimated to be about 10% more than current government expenditure on healthcare (ie medicare + medicaid + schip + tax breaks). The amount that can be spent will be capped as a % of GDP. This stops the program from growing at an unmanageable pace.

Mt57 writes:

If McCain's proposal would "completely replace" a "regressive" system, isn't it redistributional as well?

Lord writes:

As the poor aren't in a position to afford healthcare under any circumstances, any reform without redistribution would be a joke as much as medicaid is a joke. I agree there are a lot of procedures with high costs and low benefits and the best approach would seem to be a universal core covering basic, chronic, and catastrophic care with individuals providing their own elective, experimental, and premium care. The problem is knowing where to draw the line, but govt is in the best position to do so. We have only to drop to our knees and be thankful those billions will not be available for more escapades of foreign wars.

8 writes:

Social Security surpluses start declining in 2009 and evaporate by 2017. Since Congress already spends all of the surplus, taxes will have to be raised or spending cut beginning with the first budget of the new President, and this will happen with every budget, every year, for the next 50 years, unless a long-term solution is passed.

wafranklin writes:

Thanks to prescriptions for indefinite lassez faire and ignoring antitrust, the health insurers, really part of the financial communities, have concocted cartels which have to be destroyed or reduced to government owned or controlled utilities. It is from their demise one can project initial savings with which to address the health care problem. The obvious answer is single payer, universal health care with premiums as part of taxes, ensuring that the risk pool is as great as possible.

Obvious answers to the taxes problem, which economists and right wingers have made toxic to discusss, are to (1) reverse all of the Bush tax giveaways, (2) put stiff excess profits on corporations and eliminate their capabilities to export profits tax free, and (3) reverse all of the subsidies made to businesses of every stripe and size forthwith. And that is for a start. Cut the Defense budget by one-half. Review every contract which was let speciously (most of them) over the past 7 years and squeeze the excess from their obviously fat profits and negligible oversight.

If that is redistributionist, so be it. And if it is not distributionist enough, plow on. Business and the rightwing do not understand that removing health care as a busines variable will stand them in better stead than any other thing that can be done. But, then who said corporations had squat for brains.

jb writes:

wafranklin - your argument re:nationalizing insurance agencies would be more interesting if you could provide numbers to demonstrate the validity of this claim.

As for the rest: how would you define "excess profits"? A committee of highly intelligent people, people who, alas, are corruptible and would be clear targets for bribes, blackmail and other felonies?

"Reverse the Bush tax giveaways" - which ones are the giveaways. Numbers, please.

"Cut defense spending in half" - no quibble here
"Remove corporate subsidies" - no quibble here either.

"squeeze excess profits from contracts" - again, using the corruptible committee to decide what "excess" means?

Lastly "Removing health care as a variable will stand them in better stead than anything else that can be done." - honestly, I think you're making this up - you have no way of actually knowing this one way or the other - this is just you parroting the narrow-minded dogma of your religion.

Lord writes:

SS surpluses disappearing are the solution, not the problem.

Mankiw is hilarious, particularly the part about advocates of reform exaggerating the problem. Since medicare is no real problem then, SS is obviously not either. So funny. Should do standup.

Justin Rietz writes:

I believe there is a major pro- free market reform that has not been mentioned: take away the AMA's government-granted power to regulate the number of students admitted to medical schools.

Greater supply, lower prices.

Tracy W writes:

To judge whether my conjecture is correct, ask your favorite pundit of the left the following: What health reform would you favor if the reform were required to be distribution-neutral?

What a weird question. Most of the people on the left are there because they care, or think they care about the poor (this doesn't mean that people on the right don't care about the poor, just that people on the left do tend to argue that government action can improve the lot of the poor).
Why does Mankiw think they would support something that was distribution-neutral?

Of course there are some areas of health that I think everyone, right and left, could support reform in that is distribution-normal - for example reducing the rate of hospital-acquired infections. Given a bit of time to think about it, I'm sure that a left-leaning pundit could come up with some other health-reforms that are distribution-neutral. But it's hardly their main objective.

Floccina writes:

I think that some of the posters are ignoring the fact that the best way to redistribute money from the rich to the poor is not with healthcare but by taking cash from the rich and handing it out to the poor.

wafranklin writes:

TO: JB

I scrutinized other writings on this site and did not see many, if any, layouts of numbers to buttress assertions. Oh, but now it is clear, anything which departs from the liturgies presented here need proof, whereas justifications of accepted worship don't.

Corruptible groups: Yes, relatively uncorruptible groups can be generated - for periods of time - and when tainted, changed. I know that is against all the conventional wisdom, but then I cannot say that the conventional wisdom has gotten us very far.

As for "making it up", yes if that is another way of saying I made and still make an assertion, which I think is one way in which discussions proceed. No I do not think this is a religious view, as opposed to what passes for ecomonic and political wisdom in this demented day. If one is to rectify the health care system, I "assert" that big moves are needed, not incremental meandering subject to derailing by embedded interests. If several big moves were to happen: (1) neutering insurers and (2) movement to Medicare for all (including competed drugs), then the structure might be defended once consolidated. For I can imagine the assault the financial community will make on this arrangement. And, there are studies (pardon me for not quoting) which attribute from 10-25% of health costs today to administriva based on a business whose only function is reject customers. In what bleeding political or economic model does that fit -- and to reject paying customers after they have paid.

Your points are taken. Point me to the numbers and equations and cites in this blog - I could not readily find them, but then this may be a function of pedigree. As to religion, I plead total agnosticism, not believing too much of any one thing for very long.

As corruptibility, I am peruaded that most groups or committees which are formed should have 51% common folks, selected like juries without voir dire. I can refer you to James Surowiecki's "The Wisdom of Crowds" about how common wisdom often sees and says things the so-called experts do not. And, yes, I have read the reviews, which I saw mostly came from communities of self-styled experts.

Floccina writes:

BTW I have begun to think that a scheme could be designed that would push insurance companies to pay out the way that Arnold has proposed. That is where they payout a fixed amount of money on diagnosis. One might have $200,000 cancer policy and $100,000 heart disease policy and $100,000 diabetes policy.

Here is the idea, if the government would start to put middle class and rich people on Medicaid if they were turned down for health insurance by a few companies. This might encourage insurance companies to drop people after diagnosis which might lead to customer demand for lump sum payouts.

Its just a preliminary idea. The biggest problem that I see is false diagnosis.

Heather writes:

I would really like to see a basic tax credit put in place to cover some level of medical care. I'm not sure McCain's level is right, but the reason I like it is that it is most likely to succeed.

While other approaches might arguably be "better," the approach of a tax credit is the one most likely to pass. Insurance companies, which have a significant lobbying force, are not put out of business; doctors are not forced to take paycuts specifically; and the customer finds out exactly how much their health care costs, the first step to reducing prices. There is also the added bonus of an ability to calculate the maximum amount it will cost taxpayers. Employers could still offer insurance, but it would be catastrophic coverage, which is more like car insurance or home insurance is today.

celo writes:

What a funny point. I guess you could ask Mankiw and other right wingers if they would be willing to support extensive health care reform if the redistribution wasn't neutral. Their negative response would then be proof that they only want to increase regressive tax policies, not pass any real health care reform.

You can't have a meaningful discussion about policy reform if you don't include the other side of the equation: how to pay for it. You can argue ideology all you want, but in the end, it matters how you pay for it. Ignoring the redistribution effects of the cost of health reform is silly.

But I suspect that the current strategy is to convince everyone that taxes have to remain the same, and then find a way to do something (probably the minimum politically) to change health care. The Liberals seem to want to improve the sad health care system first and foremost, and are willing to have the multi-billionares pay for it, which is a societal choice.

Floccina writes:

celo Gov. in the USA already spends more on healthcare per capita than the Gov. of France spends. It is possible that the US Gov. could cover everyone and not raise taxes.

Mike Feehan writes:

jb

you said ""Remove corporate subsidies" - no quibble here either."

I'm behind in the conversation and would like very much if you would kindly explain what a "corporate subsidy" is? And illustrate how exactly a corporation would pay more if the "subsidy" were eliminated?

Thanks.

Jay Livingston writes:

"most people . . . don't want to see any changes to their own health plans."

Did the sample in this survey (I assume you are basing your statement on some kind of survey data) include a representation of the 35 million or more Americans who have no health plan? I also wonder whether any specific changes were offered as choices. Or did they just ask people if they wanted it changed? If you'd asked car owners in 1940 (or any other year) if they wanted any changes in their cars, most would have said no. But if you had described such things as automatic shift, anti-lock brakes, and cup holders, the response might have been different.

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