The Jungle

Last night on OTB Radio I made the point that the U. S. Senate had entered the sausage-making phase of healthcare reform legislation. That was a reference to John Godfrey Saxe’s famous quip (frequently mis-attributed to Bismarck), that like sausage law ceases to inspire when you see it being made. The same image apparently has occurred to the editors of the Washington Post:

THE ONLY THING more unsettling than watching legislative sausage being made is watching it being made on the fly. The 11th-hour “compromise” on health-care reform and the public option supposedly includes an expansion of Medicare to let people ages 55 to 64 buy into the program. This is an idea dating to at least the Clinton administration, and Senate Finance Committee Chairman Max Baucus (D-Mont.) originally proposed allowing the buy-in as a temporary measure before the new insurance exchanges get underway. However, the last-minute introduction of this idea within the broader context of health reform raises numerous questions — not least of which is whether this proposal is a far more dramatic step toward a single-payer system than lawmakers on either side realize.

I can only conclude that the editors must be kidding. A single-payer system has obviously been on the agenda of the progressive wing of the Democratic Party for decades and must surely be the policy preference of the Senate’s Democratic leadership.

When I consider the horrific adulterants going into healthcare reform legislation as it makes its way through the Senate, the equivalents of sawdust or chalk, I can only suppose that we need a Food and Drug Administration for law. Medicare is out of balance from an actuarial standpoint to the tune of $50 trillion to $100 trillion, depending on your assumptions and how you do the calculation. The high price tag of a Medicare “buy-in”, something like $7,300 annually, insures that those who elect this alternative will be those with pre-existing conditions which render private insurance either unavailable or extremely expensive, those who expect to pay more than $7,300 out of pocket. The spill-over effects of insuring this additional group under Medicare will raise the costs of private insurance, already expected to grow in double digits, possibly by 20% or more. Or it will throw Medicare even farther out of balance, hastening the flywheel spinning off.

The mandatory “insurance exchanges” being proposed are no better:

In addition, the insurance exchanges proposal is being increasingly sliced and diced in ways that could narrow its effectiveness. Remember, the overall concept is to group together enough people to spread the risk and obtain better rates. But so-called “young invincibles” — the under-30 crowd — would already be allowed to opt out of the regular exchange plans and purchase high-deductible catastrophic coverage. Those with incomes under 133 percent of the poverty level would be covered by Medicaid. The exchanges risk becoming less effective the more they are Balkanized this way.

If you genuinely want to provide healthcare for more people, there is only one way to do it: make healthcare more affordable, lower healthcare costs. The approach the Senate is taking may look like healthcare reform but it has no nutritional value.

9 comments… add one
  • steve Link

    There is existing evidence that this will not cost as much as you might think. The first year of Medicare expenditures are currently very high. People without insurance wait to have stuff done once they get Medicare. I am betting that they missed some underinsured here also. I strongly suspect, but the studies are hard to do, that many in their late 50s early 60s are not nearly as productive as they might be absent health care, si there may be some indirect positive effects also.

    I cannot quantify what percentage of people on the left want single payer. I do think that many of the wonks would like to have a unified system. Our current system’s fragmentation makes it too easy to play groups off against one another. Amongst the knowledgeable, I think that a French style system might be preferred. Just guessing.


  • Drew Link

    “Our current system’s fragmentation makes it too easy to play groups off against one another.”

    This is a drive by, so I apologize in advance if I have misinterpreted……….but “fragmentation” is competition. Unitization is monoply. The notion that monopoly is the road to cost minimization is bizarre.

  • PD Shaw Link

    Dave, do you have a basis for the $7,300 figure? I thought insurance premiums for people just before Medicare eligibility were in the neighborhood of almost $12,000 per year. If you add in the added benefit of no exemption for previous conditions, you would expect the cost to go up.

    Anyway, high deductible, catastrophic insurance coverage is essentially a partial escape from the insurance mandate, which is not good for cost shifting, but offers intergenerational fairness.

  • That’s the figure that’s been widely cited in the news coverage.

    steve, given the relative inelasticity of the supply of healthcare, increased utilization will most certainly cause healthcare costs to rise. The experience when Medicare was initiated is that after that initial period of increased utilization a new, higher cost basis for healthcare was realized.

    I see no reason whatever to believe that we’ll have different experience by expanding Medicare than we did when it was started. Medicare spending is already unsustainably high. Increasing it is no solution.

  • steve Link

    Drew-I was referring to Medicare, VA, Military Medicine, Medicare, Private insurances. In most (all?) other first world countries, everyone belongs to the same system. Having all of the old people in Medicare and younger people in another system(s) makes the politics of achieving any cost cutting very difficult.

    Dave- I think there is evidence, I cited one piece above, that some of what we will do is just move the same care up earlier, that only about half of the projected increase will be spending that would not have occurred without this proposed program.

    I do see a chicken and egg problem here that I do not remember seeing you address. Say we expand our number of providers and facilities now. How will they get paid? Be specific as you can as I sign our checks. (We are adding a med school at my hospital, so we are doing our part.)


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