Is universal health insurance possible without socialism?

In an entry yesterday, I wrote that Scott Brown “wants something done about making insurance available to everyone without having the government take it over. But how is such a thing possible?”

In this entry, readers offer substantive answers to that question.

Rick U. writes:

My point has less to do with Scott Brown himself than what the victory means as a political matter. This is a real opportunity to turn a near defeat completely around.

The short answer to your question is- no, but even a government takeover of the system does not and cannot provide access to everyone. While, in theory, everyone might by government mandate, have health coverage there will always be shortfalls in a delivery system that involves 300 million people. That’s the point, it is liberal fantasyland to think otherwise. Whether by rationing, shortage of providers, equipment or what have you, there will be shortcomings. So, it’s a false choice, set up by liberals who say they (the government) can do it better than a market, and imperfections go away because of the words one uses.

Republicans need to frame the argument better by illustrating this false choice, and the recklessness of the liberal government takeover of the health care market that the Democrats have been pushing. By pointing out the reality of imperfections in any large system, the Republicans can use the momentum of the Brown victory to initiate “common sense” changes to improve the best health care system in the world (and they need to defend it just that way). This, I think, is the opportunity the Brown victory on Tuesday has presented to conservatives. Some examples might be: Use the Commerce Clause in the Constitution to eliminate state laws which mandate coverage for various conditions and thereby allow access to insurance across state lines; Propose that no bill offered to “reform” health care exceed 100 pages, and no off subject amendments may be attached to any bill; Reform the tort laws as they pertain to medical services and cap damage awards; Offer tax incentives for doctors and hospitals to write off treatment and services for people who can’t afford them; and offer insurance companies tax incentives to insure people with pre-existing conditions. I am sure there are many more good ideas out there, but Republicans have to take the lead and resist the government mandate impulse, i.e., offer a conservative approach. Small, short, readable bills which address the real problems in the health care market are where the Republican “leaders” should drive the debate. If that ends up being bi-partisan that’s fine.

If the Democrats thwart or resist these “common sense” measures, (and they will), call them on it, and mock the hypocrisy of their empty calls for “bi-partisanship.” Remind the voters of the hubris Democrats used last year to push through a monstrous and fraudulent revenue neutral government takeover of health care. Lament the back-room deals and legislative trickery that they attempted. Done correctly, this can turn the debate away from the liberal lexicon and their imagined health care utopia as the fantasy it represents. This is what the Democrats fear most, and it’s precisely why they now claim they want to work with Republicans. If Republicans go along, they will squander the only real bi-partisan solution possible.

Kristor writes:

You write:

Scott Brown himself is one of the Republicans calling for new health care bill written along bi-partisan lines; and I think that’s been his position all along. He wants something done about making insurance available to everyone without having the government take it over. But how is such a thing possible?

Vouchers. The government takes over health care funding without taking over health insurance or health care. The government would not intervene in the health care industry any more than it already does, except that it would act as a clearing house for payments in much the same way that the Federal Reserve acts as a clearing house for checks. Here’s how it would work.

• Impose a new federal health insurance payroll tax equal to total health insurance premiums of all kinds (including Medicare premiums and Medicare payroll taxes, which the new health insurance payroll tax would replace) collected from or for people of your age cohort in your county of residence, divided by the total number of insureds in your county of residence. So the payroll tax per capita per cohort is roughly equivalent to the cost of insurance per capita per cohort, in your area. Health insurance companies already charge by the county and cohort, so this is doable. The data has already been collected by insurers, all that is needed is for the government to collect it from the insurers and collate it.

• Issue health insurance vouchers to all citizens equal to the per capita health insurance payroll tax for their age cohort in their county.

• Vouchers are cashed in by insurers; the way you use your voucher is you apply for health insurance, and the insurer sends the feds a bill; the feds send the insurer the voucher amount. The voucher amount less the premium, if any, goes to the insured as a rebate. If the premium is greater than the voucher, the insured pays the difference.

• Solve the portability problem by a regulation that health-insurance policies must be guaranteed issue, except for costs already incurred. The argument against this has been that younger healthier people would forgo premium payments until they actually got sick, destroying insurance companies. But with their premiums already being collected via a tax they cannot avoid, this temptation to the healthy is eliminated; since they are paying the cost of the insurance anyway via the payroll tax, they might as well sign up for the coverage. The motivation to do so will be provided by the proviso that they cannot obtain insurance for costs already incurred; thus if they get hit by a car while uninsured, they will be able to obtain insurance coverage of costs for their ongoing care in the future, but not for the cost of the ER care, the ambulance, etc. Everyone who is not mentally incompetent will sign up, pronto.

• Health insurers and health care providers can still compete on prices and benefits. The competition would be a lot stiffer than it is now, because the guaranteed issue provision would mean that we could switch insurers as easily as we now switch banks.

• If competition drives premiums below the voucher amount, the insured can pocket the rebate, or invest it tax-free in a Health Savings Account (HSA)(these analogs to IRAs already exist).

• Likewise, if the insured buys a high-deductible, thus less expensive policy, that costs less than the voucher amount, he may pocket the rebate or invest it tax-free in an HSA.

• Make the health insurance payroll tax a non-taxable item, the way employer-paid group health insurance premiums already are. For most workers, the health insurance payroll tax is going to be something like the sum of the Medicare tax they now pay and the health insurance premium their employer now pays. They won’t notice much of a difference.

• Receipt of rebates by insureds would be taxable to them as income (increasing their motivation to use HSA’s, which would increase the rate of capital formation).

• Taxpayers who opt for Cadillac plans, the cost of which exceeds their voucher amount, would have to make up the difference from their own pockets—a negative rebate, as it were.

• Negative rebates need not be tax-deductible, although the trend in federal tax policy with respect to employer benefits under ERISA has been to provide ways that employees can pay all their medical expenses with before-tax dollars. The idea is that health care expenditures should not be taxed at all, so as to increase the net motivation of taxpayers to take good care of themselves.

• The health care, pharmaceutical and insurance industries remain unchanged, and in private hands. The only thing that changes is that insurers collect most of their premiums from their customers via the federal premium collection agency.

• Regulation of insurers could remain in state hands, although federalizing insurer regulation would create a national market, which has a lot to be said for it: increased competition, consolidation of inefficient carriers, increased efficiencies and lower overhead, etc. Plus insurers operating in many states could slash their budget for regulatory compliance.

• Employers may still provide health insurance as a benefit. If effect, they would be providing vouchers of their own. But my guess is that with the payroll tax in place, and the insurability and portability problems solved, most employers would elect to drop their group plans and allocate the savings to increases in employee compensation.

• What about the indigent? Won’t premiums, and thus the payroll tax, go up when they are covered, even though they are not employed? No; in practice, all those people are covered already, and the cost of their care is already paid for by the premiums and taxes already paid by the employed.

• What about Medicare beneficiaries? Ditto. This reform would enable us to get the federal government out of the health insurance industry.

This model could be extended to all health, education and welfare benefits.

Mick writes:

You wrote:

He [Brown] wants something done about making insurance available to everyone without having the government take it over. But how is such a thing possible?

I assume it is a rhetorical question and you in fact believe it is not possible.

If so then even one counter-example must make you re-examine. Germany has virtually totally private health care system available to everyone at half American prices.

From my bit of experience with German system, I would guess that in routine care may be 20-30 percent of Germans get better care than their counterparts in the USA and for complex and advanced care may be five percent Americans are better off. All of it at half U.S. price.

A huge downside of it, the German doctors make unacceptably low wages, 100-200 percent of those of engineers, accountants, etc, versus 300-500 percent in the USA. My heart goes out to them. Also, allied medical professionals, nurses, technicians, therapists, etc make significantly less than their counterparts in the USA.

Pharma industry has to negotiate drug prices per country basis, so drugs cost quite a bit less. My heart goes out to Pharma industry that easily gives in to Germans and just have to recoup virtually all drug R&D costs by ripping-off Americans. As everyone knows it is written in Constitution that Americans must pay for defense of Europe and pay for new drugs research for the entire world.

And at half price Germans live one year longer than Americans, 79.26 vs. 78.11. Considering whites only does not change things much, 78.3 for white Americans. I don’t believe crime affects life expectancy of whites in the USA much.

There are other factors (DNA, diet, perhaps climate, etc) that may affect life expectancy, but there is no simple measure of health care quality in a country. So religious believers in superiority of U.S. health care have a difficult task of explaining how cut-price German system delivers longer life for Germans.

Felicie C. writes:

I have a question for your correspondent, Mick, who writes: “A huge downside of it, the German doctors make unacceptably low wages, 100-200 percent of those of engineers, accountants, etc, versus 300-500 percent in the USA. My heart goes out to them.”

And why should doctors make 3-5 times more than engineers? How is it commensurate with their relative skills or talent? You actually have to be smart to become a competent engineer or computer programmer, which is not necessarily the case for doctors. A person smart enough to be an engineer is smart enough to be a doctor. The opposite does not have to be true.

Do German medical students have to take huge study loans and later, when they become doctors, pay huge sums for malpractice insurance? If not then I don’t see why very high salaries would be justified for them.

January 22

M. Jose writes:

One reform that I would make would be to add the option of Medicare paying out on a “results” basis. I wouldn’t change all of Medicare over to that, but give the option to hospitals. There are a few hospitals that are trying that, (one of the Mayo Clinics, I believe), but they are facing difficulty because a lot of the compensation regimes are not designed to work with that.

If other hospitals have other cost-saving ideas that they want to pursue, we should tailor additional Medicare options for them. If we are going to have Medicare, let it work with the hospitals rather than trying to dictate what they do.

If these ideas work well, maybe they can expand.

Randy writes:

Delivering health care is no different from any other service. How long would one live without food? Farms are still “for profit” industries. The arguments made regarding health care are the same arguments made during the airline deregulation debate. Before deregulation, flying on airlines was not affordable to the middle class. The pilots’ union (ALPA) was very powerful. In the late 1960s they went on strike and shut down the entire system. Unionized airline employees’ wages were ridiculously high. The critics of deregulation said the profit motive would lead to shoddy maintenance and airplanes would be falling out of the sky. We all now know the benefits of allowing the free market to reign without government involvement. Airplanes did not fall out of the sky. Think about Southwest Airlines, Jet Blue, and flying LA to New York for $99. Airline wages are more in line with the skills it takes to perform those jobs (I have a pilot’s and an A&P license). Whle there still needs to be adjustments in the industry no one can argue that we need to go back to regulated airlines.

The same appies to health care. The free market always delivers services and goods with the greatest efficiency. Profit generates competition which, in turn, fosters efficiency. This is why we “had” the economy we did until the weight of the welfare state and government involvement strangled it to death (lawyer friendly tort laws, Community Reinvestment Act, OSHA, etc).

I would suggest the following. Congress should pass a law that REQUIRES all health care providers to be for profit. Why? Because profit means competition and CONTROL OF COST. This eliminates waste, inefficiency, and unaccountable management which is the trade mark of government run “enterprise” like FANNIE MAE and the Post Office. There is no basis to say “for profit” health care will lead to shoddy health care any more than the fact that companies that make drugs and and medical equipment produce low quality products because they are “for profit.” The rise in health care cost is the result of government involvement. Government already delivers 50 percent of health care via medicare and medicaid.

Andrew E. writes:

This is a terrific entry with many high quality contributions from VFR readers. I agree with Rick U. that the Republicans have a genuine opportunity to do something meaningful towards improving a health care system that already does a pretty good job. I also realize that a model like the one Kristor outlines is almost certainly a better short- or medium-term goal than what I think we should ultimately strive for which is a much more radical free-market paradigm, something like Randy also seems to have in mind. But in answer to your question, yes I think it is possible to have near-universal health care coverage at affordable prices, available to all but the most indigent. Think of it this way, virtually all American citizens are able to afford a car and a cell phone, I don’t think medical care is that different. In fact, many in the lower classes, as of the turn of the 20th century got their medical care through the voluntary fraternal organizations they belonged to. Part of the dues the members paid in went to keep particular doctors on retainer who made house calls to the organizations’ meeting places. Actually, this worked so well that doctor salaries were low enough to spur them to organize and lobby the government to restrict these kinds of arrangements in order raise doctors’ wages. This is also how medical licensing came to be standard practice which goes towards Felicie’s point about why doctors should make so much money; a big part of the reason is that licensing regulations restricts the supply of doctors on the market.

But the question is how do we get from here to there given the way things work today? Something like Kristor’s model may have to come first before we can go further but I think it’s still helpful to outline what the big picture could look like. One of the essential pieces to this puzzle is restoring a sound monetary regime, some kind of commodity money standard. Doing this alone is fraught with enormous difficulties because the system we have now is so incredibly unstable, like a house of cards. But accomplishing that would restore the American citizen’s ability to save and bring back large scale capital accumulation which is the source of all material prosperity. With the purchasing power of people’s money increasing over time rather than decreasing as it does today, providing for our old age would be a very manageable task, even for the lower classes. We could bring back the annuity. This would allow us to phase out over a generation or two, Medicare and Social Security. Of course, as is said over and over at VFR because it is so true, everything is connected to everything else. To that end, conservatives need to keep advocating for a return to traditional morality to restore the family as the focal point of society rather than the individual (and hence, government) if this is to really work.

Abolishing licensing restrictions and barriers to competition for medical insurance companies are relatively straightforward to enact. Congress could also pass legislation to give employees the choice to receive, tax free, the wages they and their employers would have contributed to their employer-provided health care plans. This would allow employees the freedom to opt out for cheaper plans if they choose and allow independent insurance plans to compete on a level playing field with employer-provided plans (assuming restrictions on insurance pooling and interstate or even international competition were lowered).

I have a number of friends who are doctors (all liberals) and they all tell me that tort reform is absolutely essential. Having Congress pass caps on rewards will almost certainly improve the system but to me it’s always seemed somewhat arbitrary. Reduce the caps to what level? What’s fair? Here I think something to think about is privatizing the medical tort system where privately run courts could build reputations on fairness and expediency.

Moving towards private hospitals would also be part of the big picture. Hospitals in America, as recently as 100 years ago I believe, were almost all (~80 percent) privately run. Such a structure allows hospitals to compete for patients by providing good service and medical care at reasonable prices.

I’m less familiar with how the pharmaceutical industry works but I know it’s absurd that Canada has access to generic versions of products from U.S. drug companies whereas U.S. citizens do not, in effect forcing U.S. citizens to subsidize a big portion of Canada’s health care system.

All that said, some level of government involvement will likely be permanent but at a small fraction of where it is today.

Amelia writes:

In all the discussions about health care, I keep looking for someone to bring up the point that in order to think about whether it’s a right or how it can be made available, we first must define the terms, and so must come up with a definition of “health” and what constitutes “health care.” This is becoming more difficult to do as we consider the technologies that “correct” and “enhance” what we come to perceive as errors or deficiencies in our bodies and minds. For example, if somehow we come to see a certain body shape to be ideal, or a certain level of “sexual performance” to be ideal, then are variations from the ideal to be considered unhealthy and therefore in need of, and deserving of “care”? How much of what tends to fall into the category of health care (because it is dealt with by health care professionals or covered by health insurance) depends on what we think would make us “more perfect” according to some standard created by Madison Avenue or the media or our own personal imagination?

The problem is, perhaps, easier to think about with the case of mental illness. There may still be some consensus about certain individual cases of behavior or thinking that can be called “disordered”—but increasingly, we see that one man’s lunatic is another man’s role model of creativity. (I’m thinking specifically about the controversies over autism-spectrum and sexual orientation, for example.)

Many of these issues involve surgical intervention as well. Some cases of deafness can now be corrected by surgery, but there are advocates and parents who insist that deafness is not actually a defect, but a way of being that can be considered a gift. Early on, the idea of sex-change surgery was rather shocking, but now it seems to be covered by health insurance policies and I have even seen reports of the state providing this as health care to prison inmates. If a man believes that his birth in a male body was a devastating mistake and causes him constant distress—perhaps to the extreme of causing the asocial behavior for which he has been incarcerated, how can it be denied that this affects his own health and that of society as well?

Anyone who listens to the radio or surfs the Internet is bombarded by ads and reports of studies and infomercials urging us to think about what symptoms we might be suffering from and encouraging us to consider the likelihood that we have some disorder that should be ameliorated by treatment to make us more perfect—or, at least, that we could be entitled to compensation for this misfortune through litigation.

Is it a matter of health care that we should be able to take advantage of chemical or surgical enhancements to make our bodies and minds better than what we happen to be born with? What about treatment for conditions that we deliberately inflicted on ourselves? Should such issues be evaluated by health care boards made up of experts who would determine eligibility for care and treatment on a case by case basis? How could objective criteria be established so as to incorporate “fairness”?

My point is that if we cannot define “health,” how can we possibly define “health care” so as to make and enforce laws and regulations to manage it for the entire population? It’s hard enough for us to figure it out for ourselves and our own families. If we are to act on the premise that everyone has a right to health care, the first order of business must be a definition of terms, One of the reasons we find ourselves in this mess in the first place is that we have come to the awareness that virtually everything affects our health, at the same time we are losing the awareness of the limitations inherent in our humanity.

LA replies:

I have not had time to take in and respond to the earlier comments yet, but I just want to say that this is a great comment and it raises the ultimate philosophical and ethical problem of health care and how to pay for it. As the human technical capacity not only to treat diseases, but to make any kind of change in the body that anyone may desire (artificially enlarged breasts, erections that go on for hours, sex change operations), keeps increasing, the very existence and accessibility of these treatments and enhancements, combined with the modern idea of equality, combined with the modern idea that life is about realizing all our desires, and realizing them equally, combined with the modern omnicompetent state the job of which is to help people realize their desires to the maximum degree possible and to the maximum degree of equality possible, releases what is essentially infinite demand for health care, along with the corresponding increase in costs, which in turn result in the demand for further state subsidation as well as bureacractic rationing. Human nature, empowered by modern science, entitled by modern liberalism, and enflamed by modern life with all its goods and enticements, is pressing against the very limits of human capacity. It can’t go on. A sane society has to define limits—limits to our desires, limits to what is regarded as “health” and “health care.” And if this is to be done in freedom, not by the state, then there must be a principle within us higher than the desiring self, that guides the desiring self and sets limits on it. It could an Aristotelian ethical principle, it could be Jesus Christ, it could be Adonai, it could be Christian Science, it could be the Tao, it could be devotion to the well-being of a small homogeneous community, but we need a guiding ethical principle higher than our ordinary self if we are to solve this current crisis. And such an ethical principle is not operative in modern liberal society.

January 23

Rick U. writes:

Only at VFR can a discussion pivot like this.

You and Amelia ask some very important questions and make some astute observations to be sure. When politicians state, as a matter of fact, that health care costs are rising at some unsustainable number, we have to ask what that really means in order to make a rational assessment. Should a facelift for a facelift’s sake even be considered a health care cost? Breast enhancements? And so on.

Additionally, and I don’t have the stats right here, but it is my understanding that on average some 30-40 percent of health care costs are consumed in the final few years of an average life. Here is a Rand Corp white paper on the subject, and a graph depicting the “problem”:

[LA says: to my eye the graph shows the overwhelming majority, much more than 40 percent, of the expenditures concentrated in the last few years of life.]

What to do? Nobody wants to die. The greater our scientific prowess, the greater our impact on the natural order of life, and thus the greater the cost. Who’s to say how a person should allocate resources to live a longer and more comfortable life? Hip and knee replacements which are commonplace. Heart bypass operations are routine now. Cancer treatments are probably the most expensive of all. We could go on and on, but all of these procedures are very expensive, and yet they provide a great benefit to people as they age.

One thing that these ethical questions point too, is that any “reforms” should be small and circumspect in scope. I think the American people get that intuitively, which is why they came to oppose the Democrats complete takeover plan. Will the cost of these procedures themselves become the controlling factor in their use? We are already seeing a huge “home hospice industry” emerging to deal with end of life care, in order to control costs. So, will the market itself solve the ethical questions raised just as a function of scarcity (cost), without the government mandating limited resources? Or, will an ethical platform have to be developed that accepts death as the outcome before expensive treatments are undertaken?

Posted by Lawrence Auster at January 22, 2010 09:30 AM | Send