Arnold Kling  

Ezra Klein Won't Take My Medicine

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He seems to accept my diagnosis.


The average health-care coverage for the average family now costs $13,375, according to Kaiser...

About 160 million Americans receive health coverage through their employers. In general, the employer picks up 73 percent of the tab. This seems like a good deal. In reality, that money comes out of wages. ..

Virtually no one cuts a $13,375 check for health care. Most pay 27 percent of it, or even less. The surest way to cut health-care spending would be to make people shoulder more of the burden directly, as opposed to hiding it in taxes and lost wages.

The last sentence is my book, Crisis of Abundance, standing on one foot. But Ezra goes on to say that nothing like what I propose is politically feasible, so the best thing we can do is hand health care policy over to wonks who will do a few central-planning type things to try to cut costs. Basically, to paraphrase Mencken, the people seem to like socialized health systems, and we need to give the people what they want, good and hard.


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COMMENTS (5 to date)
mgroves writes:

But isn't there some way to do that without also giving it to ME, good and hard? I guess it wouldn't that wouldn't be socialized by definition...

David writes:

Not politically feasible? How about consumer directed health plans? In the worst case my CDHP is saving me over $6,000 a year. Kaiser says workers covered by CDHP plans has doubled to 22% in the last three years.

If you want more people covered, get rid of small groups and individual markets and make one big national pool. I did some analysis of my old HMO and found that my small group premiums were 1.8x the average revenue per member.

Small group rates are approved by the states; they're all in cahoots. Make one national pool and allow interstate competition. It's not just the sick that are priced out of insurance, it's the young and healthy working for small business as well. The larger the pool, the less of an individual impact the sick have. Tax free HSAs and high deductible plans incentivize the young and healthy to join in. We should be working to make that easier.

In a country where a majority have high deductibles, for any non-emergent care people will want to know the cost at point of service. We already know what the price mechanism can do to spur competition and entrepreneurship. Maybe if the current healthcare bills fail we'll get over 50% in a few years and find out.

fundamentalist writes:

"The surest way to cut health-care spending would be to make people shoulder more of the burden directly, as opposed to hiding it in taxes and lost wages."

Exactly! Most people are very happy with the current state of health care spending because they think it costs them merely the 27% of the premiums that they pay. Naturally they don't want to see anything change. They don't care that health care costs rise 12% a year, as long as the employer picks up the cost. They see this as sticking it to the man. So until Congress can tax the company contributions to premiums, nothing will change, and Klein is write that that won't happen for a long time. The next best step would be to prevent companies from deducting from taxes their portion of the premiums.

My predictions? Congress will destroy what little power insurance and HMO's have left to restrain the growth in costs. This is a repeat of the HMO wars of the early 1990's. As a result, medical costs will start rising by 15-20% per year. With sky rocketing costs and more baby boomers joing Medicare, the feds will be foreced to implement wage and price controls, as the Europeans have.

Mike Rulle writes:

It is difficult to understand "thinkers" like Ezra. Of course people do not like to pay more for something than they are used to paying. But this does not mean uselful changes can't be made. We get paid partially in health care units which are not taxed, when we have employer provided insurance. This is not "free" healthcare. It is non-transparent healthcare.

But if given the choice between various plans (HSAs for example) while not tax penalizing the purchaser of private insurance, we can create greater transparency---leading to greater choice. So many more policies can be enacted before we start taxing employee provided health care (a non-starter; like the mortgage deduction) that it is a red herring to state we need or want "socialized" health care.

Dan Weber writes:

Klein points out, correctly, that Obama painted himself into a corner by talking about fixing the system, but also promising that nothing will change.

One thing that might be politically possible: slowly shift people from Medicare into practices run by salaried doctors. A state government could run it and hire the doctors, or they could buy into existing private plans (such as Kaiser's or Cleveland Clinic's), or they could buy into VHA's system.

One thing we need is for the Republicans to not have a fit at such a suggestion that the government spend its money more wisely, because the Democrats seem too cowardly to stand up to them. And I blame them both for their respective actions.

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