What is the conservative plan on health care?

With the Iowa caucuses 48 hours away, poor Ted Cruz just can’t catch a break. His debate performance was lame, his campaign got caught playing Big Brother with voters, and now he – rather than any of his competitors – had to field the killer question on Obamacare.

An Iowa voter confronted him at a town hall and told  the story of the voter’s wife’s brother,  a hard-working self-employed barber who couldn’t afford health insurance until the ACA came along. Then he felt sick, went in for a check-up, and was diagnosed with inoperable late-stage cancer. The voter’s question was straightforward: if you repeal Obamacare, what replaces it for people like my wife’s brother? (Left unspoken: if ACA had passed earlier, the brother-in-law might have lived.)

Cruz expressed ritual sympathy and immediately pivoted to his health-care talking points. The voter pressed for a real answer, but Cruz didn’t have one for him, just as none of his competitors would have had one. No Republican has proposed any actual substitute for the ACA formula of affordable health insurance for everyone who wants it.

Now, there’s an honest conservative/libertarian answer to that voter’s question; I’ve heard it from friends on that side of  the aisle. It goes more or less like this:

I’m really, really sorry to hear your sad story. It’s awful when people die, especially when they could have been saved. But health care isn’t the only important thing in the world, and we have to make sure it doesn’t keep consuming a growing share of economic output.

As a moral matter, your brother-in-law had a right to whatever health care or health insurance he could afford, or that someone else was willing  to give him. But he had no right to the uncompensated (or price-controlled) services of health care providers, any more than he had the right to drive a car he didn’t want to pay for. And he had no right to have other people forced to contribute to his health care through the tax system or a mandatory insurance system with redistributive cross-subsidies built in.

The more important quality health care is, the more damaging it is to do anything to interfere with market processes that lead to technological gains and cost reductions. As a practical matter, any attempt to prevent price-gouging by pharmaceutical companies or other health-care vendors would tend to impede innovation and damage quality.

A government big enough to give you everything you want is big enough to take from you everything you have. So while it’s too bad your brother-in-law died, I oppose any law that would try to prevent such losses by interfering with the operations of the free market.

Of course, this is the sort of thing that can get said in private, or at seminars, or in libertarian think-tanks, or even in right-leaning punditry. No politician who wants to get elected and re-elected would say it out loud. In a way, that’s too bad, because some of it is true: there is value in controlling health-car costs, and there are trade-offs among cost control, access, and incentives for innovation.

Being an unreconstructed liberal, I’d argue for spending tax money to encourage innovation, for example by offering prizes rather than patents for the development of new drugs and by having an arm of HHS buy the rights to promising drugs from innovators, spend the money needed to get them through the
FDA process, and then license production to generic drug manufacturers. I’d also argue for utilization controls as a substitute for price-rationing for expensive drugs and procedures, and some narrowing of the residency pipelines that keep pumping out specialists in expensive invasive procedures, and the application of federal muscle to force the adoption of cost-saving innovations such as a universally portable electronic medical record and ACA-style disincentives for expensive medical mistakes.

On top of all of this, I would liberalize the import of medical services and resources: immigration by health-care professionals, “medical tourism” for procedures expensive enough to cover the air-fare to overseas medical centers, and pharmaceuticals from abroad.

I think the result could be an increased rate of innovation, reduced financial insecurity among health-care consumers, and fewer people dying for lack of treatment that could have saved them, at some cost in higher taxes on people above twice the median family income (which includes many families earning below $250K/yr.) and some denial of coverage for high-cost, low-value interventions, though I think the overall rate of growth in health-care expenditure would be lower under my plan than under either the conservative plan or the existing kludge.

Of course, I’d say all that because I don’t have to run for office, either, and therefore don’t have to worry about PAC money from Big Pharma or the hospital chains or the AMA, or about being accused of advocating “socialism” or favoring “death panels.” In an honest debate between the real liberal position on health care and the real conservative position, I’m not sure which side would get a majority of the votes. What I’m sure of is that neither side is willing to say out loud what it’s really for, leaving the voters mostly in the dark.



Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: Markarkleiman-at-gmail.com

14 thoughts on “What is the conservative plan on health care?”

  1. I'd say you nicely described my position, and it's a crying shame that your side has demagogued the subject so thoroughly that it's not politically safe to state it that clearly.

    I'd say that, at this point, it's probably too late to move to the status quo ante, and that is no accident. I doubt the ACA was seriously meant to work, rather than just destroy the existing system in order to open the way for single payer. Like burning your house to the ground because your spouse won't agree to move, all those people who liked their existing coverage had to lose it. That it would produce the death spiral we're presently seeing, with exchange after exchange collapsing, was patently obvious from the start. The penalty for not carrying insurance would have to have been much higher, far beyond political feasibility, to prevent it.

    So, moving forward, something has to replace it, and not just a repeal of the ACA, as might have been feasible a few years earlier.

    Probably the biggest distortion to the health care financing system, is the way health insurance has been tied to employment. As you're doubtless aware, this dates back to the wage controls of WWII, where employers had to compete for employees by offering benefits on the side, instead of just paying them more. It's currently enforced by the fact that health insurance obtained through your employer, and not from any other source, has a special tax status.

    Thus people lose their health insurance when they change jobs, and so have lost a lot of mobility, and became subject to the whole problem of pre-existing conditions.

    My main proposal is to make health insurance obtained from any source have the same tax status. Employers would pay their employees in nice, fungible money, and employees could get insurance anywhere.

    It's still very useful to have large pools, for evening out the statistics, and for negotiation. But ideally any organization could serve that purpose, in place of employers: Costco, the NRA, the YMCA, you name it. Organizations you don't need to part company with when you change jobs.

    Insurance companies don't have to worry about adverse selection if you're going to stay in the same risk pool your entire life. As a long term, two way relationship, both sides benefit from the continuity.

    This isn't a complete proposal, just an element of one. But it's a way the current system could be improved from a free market, rather than Bernie Sanders style socialist, perspective.

    1. Brett, please look up "adverse selection," and come back when and if you're ready to have a serious discussion based on the realities.

    2. " … the death spiral we're presently seeing, with exchange after exchange collapsing .."
      [link to real world missing]

    3. i want so very much to make a substantive response to your remarkable comment above, yet every time i am stopped by your second paragraph and i alternate between saying to myself "god what a liar!" and saying to myself "i wonder what the weather looks like on HIS planet." at which point substance immediately becomes irrelevant because you've wished it away in a puff of rhetoric.

  2. Donald Trump was yammering this morning about the terrible ACA, but enthusing about how much he cared for people by describing that he would never let someone die in the street.

    A generous interpretation might be some sort of catastrophic coverage subsidy. But that leaves out – among other issues – the bankrupting price of medical bills and pre-existing conditions. Lest voters forget, you used to simply *not be able to get coverage* (i.e. not quite dying in the street but maybe on a couch somewhere). This was a HUGE bargaining chip with the insurance companies.

    Personally, my employee coverage is terrible, the 50% employer contribution coming out of a very over-priced offering. I purchase from the exchange despite not qualifying for a subsidy.

  3. It's still very useful to have large pools, for evening out the statistics, and for negotiation. But ideally any organization could serve that purpose, in place of employers: Costco, the NRA, the YMCA, you name it. Organizations you don't need to part company with when you change jobs.

    Of course you would see a death spiral. Suppose you get sick, and your "free-market" insurance rates go through the roof. No problem. Join the NRA, or the American Society for Whatever. Nice group rates, as long as they last, which won't be long.

    The reason employer plans don't suffer from this is that employers tend to hire people whose health is random, hence average, or maybe even better since very sick people tend to be unemployed.

    A fundamental problem with health insurance is that it really needs to be a lifelong arrangement, without any escapes by the insurer like charging $10,000/mo. I don't think you can do that without government involvement.

    Here is Mark's statement of the libertarian argument you like so much:

    The more important quality health care is, the more damaging it is to do anything to interfere with market processes that lead to technological gains and cost reductions. As a practical matter, any attempt to prevent price-gouging by pharmaceutical companies or other health-care vendors would tend to impede innovation and damage quality.

    There is a ton wrong with this, starting with the lack of definition of the word "quality." It's more of a religious creed than an argument.

    1. I used to a member of a freelancers' organization that qualified for group health insurance. Rates were horrific, coverage was terrible. Because what kind of person is going to join (and stay with) a freelancers' group that qualifies for group health insurance. Eventually the individual market was better.

      And health insurance also need to be a lifelong arrangment to avoid escape by the subscriber — there's a fair amount of data on unwillingness of insurance companies to invest in programs that improve longterm costs, because the odds are some other company will reap the beenfits.

      1. In fact, my understanding is that "association plans," as they are called, once were fairly common, but died out for the reasons being discussed.

        Your point about escape by the subscriber makes sense.

  4. A thought experiment. Take a world in which houses are frequently struck by lightning. Householders all take out lightning insurance. The insures have no knowledge beyond the average rate and cost of lightning strikes, and all households pay the same rate for the policy. Then the insurers develop some nifty software from huge silos of meteorological and geographical data that allows them to identify with high reliability the small fraction of houses at high risk that account for 80% of the strikes. They split the market, and now sell cheap low-risk and expensive high-risk policies. As the software improves, they differentiate more and more. The upshot is that lightning insurance is sold to people who are not in fact at risk of suffering lightning strikes, and those who are at risk can't afford it. If the problem is seen as "insuring the population of houses against lightning risk" , an efficient profit-seeking insurance market will find a way not to solve it. Similarly for health.

    Brett: all real markets fail, all the time, everywhere. (Stiglitz & Greenwald, 1987). Externalities, information and power asymmetries, economies of scale, oligopoly, risk externalising, deceptive marketing, bubbles and regulatory capture are pervasive, not accidental blemishes. The "free market" is no more a description of a feasible economic system than perfect communism. What is available is market capitalism, a very effective but extremely dangerous monster. It may well be better than state socialism or a Fabian mixed economy, but it's a Hobson's choice.

    You seem to approve of the US Constitution, designed to limit abuses of power in the political sphere by checks and balances. The same reasoning applies to abuses of economic power. Frederick the Great's Prussian army had sergeants marching behind every file of conscript fusiliers, to shoot them if they ran away. Behind every corporation the state needs ruthless sergeants to keep it half-way honest.

    1. James, I would love to have a conversation with you about this. *If Mark would permit it.*

      1. Brett, Mark has permitted a lot from you. What he is countering is your near 100% lack of facts, and your terrible logic.

        I can understand that to you it looks like he's censoring you, but that's because you can not and will not have an honest argument.

    2. Don't need to do the thought experiment. That segmentation has long been the case for earthquake insurance, not quite as long for flood insurance. Flood insurance is a good example because in the past 10-15 years companies have gotten really good at modeling down to the house-by-house level, so that if the local contours are a particular way your neighbor might be quoted double (or half) your premium.

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