Why Obamacare 2.0 is Like Cap-and-Trade
This was the trick behind cap-and-trade: Politicians know that the only real way to reduce energy usage is to raise its price much higher. They also know that doing so would lose them their jobs, so instead of passing a simple carbon tax, they created a cap-and-trade system that would force private companies to be the bad guys. They then try to hide this basic fact with a lot of distracting arm-waving about green jobs and wind power.
The new Obama health proposal, which looks a heck of a lot like the old Obama health proposal (same basic features, same lack of detail) plays a similar game. Do you remember all that Obama talk about mysterious brilliant ways to reduce health care costs? Where did they all go? It turns out that the only real idea they had for reducing health care costs was to deny people care. They just try to hide this with a lot of distracting arm-waving about gold-plated insurance and electronic medical records.
This denial of service is unpopular. In fact, it is a great (and sad) irony that Obama is trying to harness anger at insurance companies that is caused mainly by denial of coverage for certain procedures with a system that will deny coverage for even more procedures. Just like carbon taxes, Obama has fixed on a scheme where once again he sets up private enterprises to be the bad guys to give himself some sort of quasi-plausible deniability. Obama is proposing artificial price caps on insurance premiums. The inevitable result:
For example, as I have written elsewhere, artificially limiting premium growth allows the government to curtail spending while leaving the dirty work of withholding medical care to private insurers: "Premium caps, which Massachusetts governor Deval Patrick is currently threatening to impose, force private insurers to manage care more tightly "” i.e., to deny coverage for more services." No doubt the Obama administration would lay the blame for coverage denials on private insurers and claim that such denials demonstrate the need for a so-called "public option."
Alan Reynolds has more. And Peter Suderman. And Phillip Klein points to an interesting anti-progressive angle:
Like the Senate bill, Obama's proposal doesn't include a strict employer mandate, but it does penalize businesses who do not offer insurance to workers who then get their insurance through the exchange. The Obama proposal provides more subsidies to small businesses, and helps mid-sized businesses by exempting the first 30 workers when calculating the tax, but large employers who do not offer coverage would face higher penalties under the Obama proposal. In the end, the tax will make it more expensive for large employers to hire lower income workers (who qualify for government subsidies), and thus exacerbate unemployment.
My read is that this all takes a hodge-podge mess and, uh, makes it even hodgier-podgier.
By the way, my take is that there is only one health care cost reduction proposal worth talking about, and that is making individuals more responsible for their own health care costs, not less, thus creating incentives to do the thing we do for every other purchase we make: shop around.
Cold Englishman:
Nothing like socialist health care, you aint seen nuthin yet! Try this for size:-
http://www.dailymail.co.uk/news/article-1253438/Mid-Staffordshire-NHS-hospital-routinely-neglected-patients.html
Enjoy, coming to a nice country like yours very soon
February 25, 2010, 5:34 amMark:
I have to say, the one year I was on a high detectability plan _ I had to cover the first $6000 of family medical expenses before the insurance would pick up. I would get a tax deduction on any portion of $6000 that I would put into an HSA (kinda like flex but it carries over from year to year)
When I had that plan, I became much more conscious about the medical services I was receiving, and would not go to things recommended that I thought pointless. There were still some problems - like the insurance still provided a fix rate, so I could not really shop doctors or pharmacies but I definitely became more aware of what I was spending. (If only the wife did the same)
I think High detectability insurance plans and tort reform will solve about 90% of the problem.
Should probably give VA members vouchers for medical service and dismantle the VA system too.
February 25, 2010, 6:49 amanon:
"Do you remember all that Obama talk about mysterious brilliant ways to reduce health care costs? Where did they all go? It turns out that the only real idea they had for reducing health care costs was to deny people care."
Obama has been trying to convince people that the laws of supply and demand can be suspended by the Obama magic. Health care reform will deliver more health care . . . at a lower price per unit of care. UFB that people eat this stuff up.
It is a shame that people are gullible enough to buy his BS.
"...artificial price caps on insurance premiums."
As seen througout history and around the world, price caps result in shortages, long lines, etc.
As Hugo Chavez (another fan of shortages caused by price caps) recently said, "Watch out Raul [Castro], Obama is going to end up to the left of us!" (paraphrased)
February 25, 2010, 8:02 ammorganovich:
potentially even more worrying is the idea that this is not, in fact, an attempt to force the private insurers to make the unpopular service denials but rather, an attempt to drive them out of business altogether.
price caps in conjunction with coverage requirements provide both hammer and anvil to crush a private insurer by making them all unprofitable.
then, when the system fails, they can call it a "failure of capitalism" and swoop in with single payer.
February 25, 2010, 9:27 amanon:
morganovich,
You are correct, that is the plan.
Incentives matter, and each politician's incentive is to increase the amount of rent-seeking that goes on so he/she can collect the rents for the campaign chest.
February 25, 2010, 10:36 amMethinks:
Morganovich,
I agree with anon. There is no doubt that this is the plan. The shifting of unpopular decisions to the private sector is simply the first step. By the time people figure out that the "public option" will deny treatment even more often, it's too late.
Coyote, this is a great post - even for you.
February 25, 2010, 11:40 amTom Nally:
Warren, I'm with you on the healthcare issue, but I usually characterize my own ideas as "heresy", in order to pump up the excitement level. Here's how I say it:
Congress should stop acting to make healthcare cheaper. They will fail. Then, upon realizing their failure, Congress will do more of the same and deepen their failure further.
Instead of attempting to make healthcare cheaper, Congress should make both healthcare buyers and sellers free. (Free from whom? Why, free from Congress and the Executive branch, of course!)
Once buyers and sellers are free, they will deploy their assets in imaginative ways in order to extract the most value from their own dollars, and their own labor.
That, my friends, is what will bring healthcare costs down.
---Tom Nally, New Orleans
February 25, 2010, 12:53 pmHenry Bowman:
Today I heard Obama say that his health care plan would put the market to work in reducing costs!! This statement regarding a plan that contains numerous price controls is truly breathtaking. I beginning to suspect that he has no idea what's in the plan.
February 25, 2010, 3:57 pmCharles:
"that is making individuals more responsible for their own health care costs, not less, thus creating incentives to do the thing we do for every other purchase we make: shop around."
I find the hope of abdicating this responsibility to the government with the expectation that we will save money and be happier with the outcome to be nothing short of astounding.
February 25, 2010, 6:07 pmNot Sure:
"I find the hope of abdicating this responsibility to the government with the expectation that we will save money and be happier with the outcome..."
-Charles
I know someone who abdicated his responsibility for arranging his finances such that he had options regarding where he might live as he got older. And now, he depends on the government for shelter. A less happy person would be tough to find.
February 25, 2010, 6:36 pm