Ponnuru on Universal Coverage

This morning Rannesh Ponnuru has an op-ed in the New York Times in which he considers the issue of universal healthcare coverage. I believe he does a pretty fair job of laying out and critiquing the practical case:

The practical case is that uninsured people raise premiums for everyone else. But such cost shifting raises premiums by 1.7 percent at most, according to a 2008 study published in the journal Health Affairs. Reforms that increase the number of people with health insurance, while stopping short of universal coverage, would presumably make that small percentage even smaller.

the moral case:

The moral case for universal coverage is that we have an obligation to see to it that the poor and the near-poor have access to good health care. But universal coverage is only one way of realizing that goal, and not necessarily the best one. For people with pre-existing health problems, for example, direct subsidies would probably be more efficient than rigging insurance markets to make sure they are covered.

and the political case for universal coverage:

The political case for universal coverage is based on the assumption that voters want it. But people’s preference for universal coverage is not as great as their desire to reduce health care costs, a Kaiser Family Foundation poll found in late 2007. So it’s not clear that people would accept higher taxes, mandates or the prospect of rationing health care one day just to make sure that every individual is covered.

Consistent with the poll found above while I agree that our healthcare system has fundamental structural problems I believe that the primary symptom of which people complain is its high cost. And high insurance costs follow from high healthcare costs they aren’t the primary cause of high healthcare costs. If insurance costs were the primary consideration in high healthcare costs our total expenditures for healthcare would be 15% lower, the difference between our insurance burden as a percentage of healthcare costs and Canada’s. But we don’t pay 15% more for healthcare than other industrialized countries we pay 300% more.

Defensive medicine, malpractice insurance costs, and litigation costs are all tempting explanations for our high healthcare costs but they’re not large enough either individually or in combination to explain our high costs.

The sad truth is that our healthcare providers make 300% of what their French (for example) counterparts do and salaries are the main component of healthcare costs. Unless you believe that American healthcare providers will take a voluntary paycut neither universal coverage nor Mr. Ponnuru’s preferred market solutions will make a damned bit of difference.

That’s why my own preferred solution to the problems of our healthcare system is a dramatic increase in the supply of healthcare, particularly in primary care. I don’t see any other alternative that will produce the desired results.

5 comments… add one
  • In other words, don’t blame the greedy lawyers — blame the greedy doctors! I agree with and endorse this post unequivocally.

  • Brett Link

    One of my major problems with Ponnuru’s column is his comment at the end about how citizens wouldn’t be required to buy health coverage, but that’d be their freedom to do so.

    Yes – but unfortunately, it would be our burden, because of laws that require that hospitals not turn away emergency patients for lack of ability to pay. Since they’d end up as our burden regardless of their choice, we might as well go whole-hog and require them to either buy health insurance or jump on a public plan.

    Reforms that increase the number of people with health insurance, while stopping short of universal coverage, would presumably make that small percentage even smaller.

    One thing to keep in mind is that it is not just the uninsured that are a problem – the underinsured are also a major problem, but much less talked about. There was a study a while back (back in 2001 or 2002, I think) which pointed out that out of all medical-related bankruptcies, over 75% of the people who declared them had had health insurance at the time of getting sick.

    That’s another one of my major concerns with Ponnuru’s argument. He wants to cut regulations on what has to be covered, while slashing the incentives for group plans, which reduce per-unit coverage. I think that will lead to a perverse set of circumstances where a lot more people end up buying crappy and/or inadequate health care plans. Particularly if the tax credit only goes up to a certain amount that doesn’t equal the cost of an adequate plan.

    For people with pre-existing health problems, for example, direct subsidies would probably be more efficient than rigging insurance markets to make sure they are covered.

    But would it be more expensive? That really depends on what the market decides the premiums for these people would be, or whether insurers even offer plans for them. What if, for example, you had cancer at one point in your life, and there’s a 75% chance of relapse in the next 10 years?

    That’s why my own preferred solution to the problems of our healthcare system is a dramatic increase in the supply of healthcare, particularly in primary care.

    But how would you do something like that, though? We really need to know more of what the incentives are for going into the medical field. Money is an obvious one, but how much do the “entry costs” (such as medical tuition ) matter? Could you get a ton more doctors by footing the bill for all medical tuition costs?

  • Could you get a ton more doctors by footing the bill for all medical tuition costs?

    Simply said, no, you couldn’t. The number of billets in medical schools in the United States hasn’t changed in 25 years. We produce roughly the same number of doctors annually that we did then.

    The number of doctors graduated does not respond to supply and demand: it’s regulated by the medical cartel and has been for a century. Additionally, it doesn’t appear to be generally known but Medicare kicks in $80,000 per year for every medical resident in the country. We’re already footing the bill for a good chunk of medical education—that’s the price we paid to increase the number of billets in medical school from the number existed in 1965 to what we have now.

    BTW, my take on the cost of medical education is that it’s high because doctors receive high pay. Not the other way around as is suggested in your comment.

  • superdestroyer Link

    I believe that the government no longer funds medical residency programs. That is why so many universities have spun off their teaching hospitals. AS an example, Northwestern University spun off their teaching hospitals.

  • Medicare funding of medical residents is still functioning.

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