Reinhardt on Why the Government Will Need More of Your Money
Uwe Reinhardt has an interesting post, pointing out something we have often referenced at this blog:
- Health care costs are rising faster than our incomes.
- The average premium (at $5,884 for individuals and $16,351 for families) is already out of reach for low-income families and will become out-of reach for more and more families over time.
- So therefore we must…What?
Uwe’s answer:
This central political dilemma in American health policy — leave health care to those who can afford it or increase tax revenues to broaden coverage — will continue as far as the eye can see. A good part of the current shouting match over the Affordable Care Act expresses anger over this dilemma, and it will not subside even after the act has been fully put in place.
Of course neither choice will be possible once health care consumes all of GDP.
Ah, but are those really the only two choices today? One thing Uwe neglects to mention: the typical private health insurance plan allows you to see just about any doctor and enter just about any hospital and has all of the inefficiencies that third-party payment is able to generate. But new enrollees to Medicaid (where there are fewer choices and there is rationing by waiting) are expected to cost half of the numbers given above. And, we have previously seen powerful evidence that when patients control the marginal dollars instead of third-party payers, costs begin to plunge ― quickly.
The structure of health care financing is designed to remove discretion. When discretion is lost, so is choice and control. The choices are: either allow consumers to control more health care dollars for good or ill. Or cede control to a single-payer bureaucracy that decides what patients are allowed to have.
Ceding discretion is extremely harmful, and not only in healthcare. It is sripping away the advantage of choice our free-market economy has achieved.
Absolutely. Laissez Faire
“stagnating incomes for millions of American households will put American health care as we have come to know it out of their financial reach, unless they receive substantial help from households in the upper third or so of the household income distribution.”
Stagnation will be the inevitable downfall of our country as a super power.
“stagnating incomes for millions of American households will put American health care as we have come to know it out of their financial reach, unless they receive substantial help from households in the upper third or so of the household income distribution.”
To some extent stagnating wages are the result of rising employee health plan premiums. Much of the increase in productivity over the past few decades has been absorbed in higher employee health insurance premiums.
Workers get health coverage as a portion of their employee compensation. They don’t always notice when health benefits gradually become a bigger proportion of their employee compensation; they merely notice their take home pay hasn’t increased like they thought it should.
If you continue to rob Peter to pay Paul, eventually Peter will run out of money.
With all of the brilliant minds in this country it is apalling that we can’t come up with a reasonable market system for health care that will allow and require responsibility from the patient (consumer), and create a competetive environment for the health care dollar. There is otherwise no incentive for things to change from the consumer or the provider standpoint.
The government wants the providers to
be in charge of encouraging less utilization, but does not give relief from the potential liability of not providing optimal care.
Couldn’t agree with you more, Perry. We continue to take steps to implement more policy. This is the wrong direction. We need to be allowing the market to determine what prices can be charged.
My impression is that the current administration wanted to leave a legacy that was not obtained in the Clinton Administration.
Unfortunately, in the zeal to get something passed, we got a real train wreck.
Random thought: Should we rely on an employer to have a healthcare plan for its employee’s? Why not let corporations do what they do best, conduct business, and stop putting this burden of healthcare costs on their shoulders. There surely could be healthcare companies that would ‘fill the gap’ of offering healthcare plans as a third-party firm.
The risk associated with individuals even getting any form of healthcare at that point might drive up prices for everyone else due to negligence.
I like this. The NYT should hire you to critique all of Reinhardt’s posts.
It would make the “news” more interesting if they featured “economist battles”.