Universal Health Care Insurance

Conservative policy wonk Avik Roy has made the argument that universal healthcare is a desirable good. Conservatives tend to be skeptical of this argument, since it has a whiff of the concept of positive rights. Conservatives are big believers in negative rights, the idea that certain personal freedoms are protected from infringement by others, especially the government. Freedom of the press, and of speech, of religion, from unreasonable search and seizure, these are all negative rights--freedoms that are protected from interference. Positive rights, such as freedom from hunger, disease, poverty, or homelessness, work differently. They require that the government act in order to provide them.

Conservatives are skeptical of positive rights for several reasons. One is purely philosophical: anything that must be given to you is not a right. Rights do not come from the government--they're natural, God-given. Any right which comes from the government is one which can be taken away by the government. Government cannot provide everything. No government has been successful in eliminating poverty, or disease, or hunger. Government is not actually capable of providing these rights. Sure, they can sometimes do so, for some people, but not for everyone, everywhere. So to pretend that it's a right, and not to be able to provide it, inevitably leads to more and more coercive means being used in the attempt to provide it. Coercion is the tool the government uses to achieve its goals. The government can't provide anything without taking from someone else. Thus taxation. Most people agree that some level of taxation is reasonable, but how high are we willing for it to go, how complex and overbearing and intrusive of a tax code will we put up with? A lot of the complexity of the tax code is due to the government using the coercive power of taxation to try to change people's behavior.

All that said, conservatives can come around to the idea of health care as a public good, like highways and utilities. The problem is that health care is also expensive, and providing health care to everyone only exacerbates the main thing that makes it so expensive: the third-party payer problem. In general, people don't pay for their own health care, someone else does, either their insurance provider or the government. Thus they have no motivation to keep their health care costs low by shopping around and looking for better deals, and hospitals and doctors have no motivation to provide better deals. Providing free health care to everyone removes what little motivation there is to spend wisely, and so people will ask for more medical care than they need, while government, now on the hook to pay for it, looks for ways to reduce costs, which leads to shortages and rationing. The great thing about pricing is that, at its most basic, it balances supply and demand. The more people who demand something, the more expensive it is, which both encourages more people to provide it and more consumers to consume less, which drives the price down. This balance is why the free market system is so good at distributing goods at reasonable prices. The freedom of prices to adapt to the circumstances influences both supply and demand to a reasonable balance. Ideally, this could be applied to medicine as well.

The problem is that applying it to medicine is hard. Too many people see medical care as a right, not something you can put a price on. Most companies supply health insurance to their employees, partially subsidized by government tax incentives, and since people are terrified of going without health insurance, that leads to them feeling reluctant to leave their jobs. And when people are without insurance, medical problems can go untreated, and trying to get treatment can bankrupt them. What I'd like to see is a way to cushion the problem of going without insurance, while addressing the third-party payer problem. My proposed solution would provide single-payer, government run health insurance, not health care.

1. Health insurance, not health care

The idea of insurance is not that it covers all the costs of routine maintenance, but that it provides help in case of catastrophes. If the costs become more than you could handle on your own, your insurance steps in. Modern health insurance isn't like that--it covers a lot of routine medical treatment long before deductibles become an issue. That's less like insurance and more like a health care plan. What I'd propose that the government provide is something very different. It's similar to what Megan McArdle proposed in this article, but I had already been thinking about it before reading her idea, and have a slightly different spin.

The principle idea is that the government doesn't pay anything, not one dime, to your health care unless you exceed a certain percentage of your income. As long as your costs are less than that, you pay for it yourself. If you exceed that percentage, then the government would cover the entire costs beyond that percentage.

What that percentage should be is something I'm not sure about--my initial idea is 25%, McArdle proposed 15-20%. I think that the actual amount is open to debate, as long as it is a relatively large proportion of your income. The idea is to make sure that you have an incentive to manage the costs of your own health care, and for that you need to feel that if you hit the limit, then it's costing you too much. Thus you're motivated to seek competitive pricing and moderate your level of consumption. If it were small enough that you'd always hit the limit, then you no longer have the motivation to manage your cost, and it doesn't work.

Most people would not hit the limit most years, but in the case of a catastrophe, they're protected from ruinous losses. Illnesses that prevent you from working would also lower your income, and thus also lower your limit.

You may think that this may work for the middle class, who can absorb a large expense for a year or two, but what about the poor, who have difficulty giving up even 1% of their income, much less 25%? I think it's reasonable that the percentage for poorer people can be significantly lower, possibly gradated to be 20%, 15%, 10%, even as low as 5%, depending on their income in comparison to the poverty level. I wouldn't favor bringing it all the way down to 0%--I think everyone should have some motivation to manage prices. Ultimately, it would be up to Congress to decide on the exact percentages, and I expect there to be negotiations and debate as to what exact percentages work best.

2. Transparent cost

So how do you pay for this? Simple, with a tax, but more importantly, with a simple tax. A straight percentage, that everyone pays, similar to Social Security or Medicare, that is by law required to be sufficient to pay for the program. Everyone pays in, everyone benefits. And since the cost is transparent and obvious, any proposals to change the program to be more or less generous have immediate effects that everyone feels. I suspect that the actual tax would be pretty small, as the program is not very generous--most people, most years, will not hit the limit that they have to hit for the government to pay anything.

3. Insurance companies

Wouldn't insurance companies oppose this? That's what killed Hillarycare, and Obamacare only won them over by bribing them with the individual mandate and subsidies.

This plan doesn't make health insurance obsolete, however. Most people don't want to risk paying up to 25% of their income for health care. They want a health care plan, not just insurance. Insurance companies can market to them, businesses can still use health care plans to entice workers.

In addition, the percentage limit would apply to insurance companies as well. When someone with insurance ended up with health care costs exceeding a set percentage of their income, the insurance company would also be reimbursed by the government. Now, it may be helpful if the costs are tweaked, perhaps so insurance companies are on the hook for 35% instead of 25%, or don't see their limits gradated for lower incomes, but overall the idea is that there's a significant gap between fully covered and not covered at all that insurance companies can fill. And since their risks are lower, their premiums can be commensurately lower. And since their risk is even lower for lower income people, it's certainly fair and expected for them to base their premium on people's income.

I still think there would be some opposition from insurance companies. With this sort of safety net, more people would feel free to go without insurance, which is not a bug but a feature of the plan--people without insurance have even greater motivation to manage their own health care costs. And I doubt insurance companies would like that.

4. Transparent payments

Encouraging people to shop around for their own health care is one part of the equation for reducing the third-party payer problem. But another part of the problem is the lack of transparency of health care costs. Hospital and doctor billing, tied up as it is with health insurance and government-provided health spending such as Medicare and Medicaid, is unconscionably opaque--no two people pay the same, and it's those who pay for their medical care themselves tend to pay the most, since insurance companies can use their clout to negotiate lower prices. How do we overcome that problem?

I propose that any hospital or doctor that takes any federal money, including money from any insurance company that accepts reimbursement from the government, be required to publish a schedule of prices, clearly stating how much they charge for treatment, whether that's counted in the treatment itself or at an hourly rate for the doctor's or nurse's time. And if they charge different amounts for different insurance companies, then they should publish that as well. Now this billing will probably be fairly complex for most people to figure out, but any publishing beforehand gives people an opportunity to measure the cost before going to the hospital, to look for cheaper alternatives, and to dispute the bill. And if trial lawyers want to sue hospitals for deceptive billing practices, I'm open to allowing that. I believe in tort reform for medical malpractice, but I also think that hospital billing can be one of the most deceptive practices in modern medicine, so a little bit of legal correction might be very helpful. I also think that doctors and hospitals will quickly find that giving clear pricing, where individuals pay nearly the same as insurance companies, will be a draw for customers, and that eventually most places will respond to that incentive

Would it work? 

So will all this work? I think that's it's a reasonable approach, but nothing is guaranteed to work. I am fond of it because it is insurance, rather than a health care plan, costs are fairly low--most people, most years won't take advantage of it--while it prevents catastrophic health care costs from leading to bankruptcies. If it does work, it could very well replace Medicaid and Medicare (which may require scaling for the elderly in the same way it scales for the poor to ease people into it). There would also be less call for the market distorting tax advantages for employer provided health care.  These things would tend to balance out the costs. Most importantly, it tries to address the third-party payer problem, which would hopefully lower costs. There's the difficulty in actually passing something like this, and whether people invested in the current system would agree to it. As far as I know, no one's seriously considering a plan like this aside from me and Megan McArdle, so that's probably the biggest issue right there. And while I think it would work, my background's not in economics, and definitely not in health care economics. I'd be interested to hear what a real expert thinks of something like this.

Regulations and sunset provisions

I haven't posted on something like this in a while, but I figure folks may be getting tired of the clothing posts, and it's something that's been on my mind lately, so I thought I'd share. The US Constitution was designed with the idea that laws should be hard to pass--that's why they have to go through both houses of the legislature and the president before they're enacted.  The system of regulations bypasses this safeguard.  Regulations aren't passed by Congress.  Instead Congress authorizes the executive branch to make the rules that it then enforces.  Now, aside from the question of whether that blurring of the Constitutional division is problematic in itself, there's the problem that all the incentive in these regulatory agencies is to create regulations, not limit them.

As Tyler Cowen puts it in his New York Times column:

Many regulations, when initially presented, can sound desirable. The problem is that, taken in their entirety, excess rules divert attention from pressing issues like the need for innovation and new jobs.

Michael Mandel, an economist at the Progressive Policy Institute, compares many regulations to “pebbles in a stream.” Individually, they may not have a big impact. But if there are too many pebbles, a river’s flow can be thwarted. Similarly, too many regulations can limit business activity. When the number of rules mounts, it can become hard for a business to know whether it is operating within the law’s confines. The issue is all the more problematic when federal, state and local constraints all apply.
...
What we need today is the selective pruning of bad regulations. Cost-benefit studies are a good idea, but they tend to be done when we have the worst possible information about the effects of regulations — namely, before the regulations are passed. Furthermore, cost-benefit studies may look only at some of the largest regulations, and not the general problem of regulatory accretion over time.

Better bureaucratic incentives are needed. Agencies are now motivated to generate regulation after regulation, because those are the formal assignments set before them. One possible step forward would be to require agencies to submit plans for retiring some fraction of their regulations over the next few years, and to reward these agencies for seeing this process through.

While that's a good idea, I'm wondering if something more drastic isn't needed. Perhaps what we need is a requirement that all regulations come with a sunset provision, so that they will expire in a number of years.  Such a sunset provision could be applied retroactively by law--all current regulations expire 15 years from their start or 5 years from the date of the sunset law's passage, whichever comes later.  That will give regulatory agencies time to propose and implement new regulations as the old ones expire, which will require them to review their rules and decide which ones they should keep.

In addition, any new regulations must have a sunset provision of no more than 2-5 years (personally, I prefer two, but it may be that five is more workable).  This is too short on its own, which is where we put Congress back in the loop.  Congress can extend the sunset provision on any regulation by ten years, but not by more than ten years, so that any existing regulation will have to come up for review every ten years.  I imagine this will happen in an omnibus bill of all the regulations proposed by the regulatory agencies.  Most of the regulations will pass, but there will always be some that will be removed, or changed, in the amendment process. That's as it should be. The advantage here will still go to the regulatory agencies, since it's harder to remove and change regulations than to put them all in the proposed bill in the first place, but at least Congress will have some say, which will make regulatory agencies more accountable to the elected representatives of the people.

What's needed is some way to prevent regulatory agencies from just reinstating the same regulations as soon as they expire, and thus bypassing Congress.  A provision that a new regulation substantially the same as an expired regulation cannot be instituted for at least five years might help with that.  It can be left to the courts to decide what qualifies as substantially the same. Or some measures could be spelled out in law: for example, the same rules, just with different, or even stricter, numbers, is not substantially different.

So, would this work? Would this help clear away some of the old, ossified regulation while making sure that Congress has more of a say in the rules that do apply?  Or would it be an unworkable mess? Is it politically feasible, or would the groups interested in preserving the current regulatory regime quickly overpower the movement for such a law?  Certainly, I don't think the regulatory agencies themselves are looking for more Congressional oversight, and I'm not sure that any president would agree with allowing Congress to take away much of his influence.

On Alienated Young Men

There's been a lot of talk recently about what motivated the Marathon bombers.  The assumption is that they were following the dictates of a radical form of Islam, but a lot of people think that it was their sense of alienation that drove them toward that belief system.   A lot of people are wondering what we can do to prevent young men, especially immigrants, from feeling like outsiders.

This is the wrong question.

There are always going to be alienated young men (and women).  Young people often feel like outsiders.  For many of us, it's simply a phase we go through.  I went through a couple of  years of feeling pretty isolated myself, where I lived alone and had a work-from-home job, and barely got out of the house.  I suspect that this was a more extreme form of alienation, a combination of my innate shyness and lack of impetus to get out, than most people ever experience.  It was a very lonely time for me, a time when I would sometimes feel like my life wasn't going anywhere.  And yet, it never occurred to me to lash out.

Some of this was just my nature.  Setbacks don't generally cause me to react with anger or depression.  Which is not to say that I was driven to overcome them.  My most common reaction to setbacks is to do my best to ignore them, using television, video games, and/or books.

But another large component is simply that it would be wrong.  My own belief system is quite emphatic that hurting people is wrong, so my mind is trained not to work that way.

And I wonder if this is part of the problem that we see in the case of not just the Marathon bombers, but others who commit horrific crimes--Sandy Hook, the Aurora movie theater shootings, and others.  The dominant philosophy today is one of postmodernism, that all beliefs are equally valid (or equally invalid).  However, a philosophy like that doesn't carry much weight when you need to decide what's right and what's wrong.  So people turn to other philosophies, ones that have clear lines and a strong code.  But since there's no guidance on how to choose a philosophy, nihilism is just as valid as theism or Platonism or Essentialism.

And when it comes to moral conduct, not all philosophies are created equal.  The problem is that our society wants to enforce moral conduct not with a solid grounding of any belief system, but an appeal to emotion and self-esteem.

This is not to say that there's only one belief system that a society can operate on.  Societies have successfully operated on many different belief systems.  But not all belief systems have successfully been a basis for a society.  And a society based explicitly on a refusal to acknowledge the truth of any belief system seems destined for difficulties.

The problem is that I'm not sure there's a good solution to this problem, not one that would be acceptable in a pluralistic society.

Voting time

If you live in Massachusetts, don't forget there's a special election today for the Senate seat.

Voting woes

I moved from Waltham to Everett, two towns in Massachusetts just outside of Boston, on January 1st. When I did so, I changed my address with all the necessary bureaucracies and, because Massachusetts law requires it, sent in a new voter registration form with my new address. In retrospect, that may have been a mistake.

At issue are two Massachusetts laws. The first is that you must register at least 20 days before the election. If you do the math, you can see that it was physically impossible for me to register with my new address once I'd actually moved here and still vote on the much talked about special election on January 19th. It didn't occur to me to register here before I moved--I'm not sure that's even possible. But, if you move away from an area, the second law allows you to still vote there for up to 6 months after. However, if my new registration has caused my old precinct to purge me from the rolls, then I may not be able to vote there either. I was not aware of this law until I inquired, else I would not have sent in a new registration until after the special election.

So what am I going to do? Since I couldn't find specific contact information for the city of Waltham's election commision, the only option I can think of is to show up at the polling station on January 19th and see if I'm on the roll. We'll see.

A Prediction for the Massachusetts election

So let me make a prediction. If Scott Brown wins the Massachusetts special election (which, while possible, still isn't very likely), health care reform will not pass. I say this not because Senator Brown would vote against cloture on it--he's promised to, but if the Democrats have anything to say about it, the bill will be voted on by the Senate before he gets there. But, if Brown wins in very liberal Massachusetts, I predict that Democratic Senators and Representatives will panic. If the bill is so unpopular that Massachusetts elects a Republican to the Kennedy Senate seat just to stop it, Democrats will desert the bill in droves. It won't have the votes to get cloture in the Senate. It won't even get a majority in the House. The same could happen even if Brown loses, depending on how close it is.

This vote is largely seen as a referendum on the health care bill, and a Brown win will be seen as a popular, and perhaps more importantly, election-deciding, rejection of it.