What’s the opposite of a fisking? An affirmation? That’s largely what I’m going to do with David Brooks’s column this morning.
What we really need is systemic healthcare reform:
The longer the health care debate goes on, the more I become convinced that the American system needs fundamental reform. We need to transition away from a fee-for-service system to one that directs incentives toward better care, not more procedures. We need to move away from the employer-based system, which is eroding year by year. We need to move toward a more transparent system, in which people see the consequences of their choices.
I think it’s going to be very difficult to achieve the degree of reform that we need without abandoning the fee-for-service model. And abandoning the fee-for-service model is politically impossible.
The best approach for achieving something that approaches systemic healthcare reform that’s been proposed in the Congress so far is Wyden-Bennett:
I’ve also become convinced that the approach championed by Senator Ron Wyden, Democrat of Oregon, is the best vehicle for this sort of change. The Wyden approach — first introduced in a bill with Robert F. Bennett, Republican of Utah, and now pared down to an amendment to the current bills—would combine choice with universal coverage.
Although it would undoubtedly be better than the monstrosity, based on the Baucus approach, that will eventually be enacted into law, Wyden-Bennett is politically impossible for reasons I’ve discussed here before, primarily union opposition:
But barring a legislative miracle, the Wyden approach was effectively killed in committee last week. The business and union lobbies worked furiously against it. They want to control their employees’ and members’ benefit packages. Many politicians support it in principle but oppose it in practice. They fear that if they try to fundamentally reform the system, voters will revolt.
The Baucus bill , rather than reforrming healthcare enshrines the institutions that are already failing and, worse, centralizes the process of reform:
The Baucus bill centralizes power, in contrast to the free choice approach, which decentralizes it. The Baucus approach aims to reduce costs, expand coverage and improve efficiency by empowering regulators to write a better set of rules. It aims to rationalize the current system from the top down.
This approach has many weaknesses. It entrenches a flawed system. It creates greater uniformity and rigidity. It redistributes income from the politically disorganized young to the politically organized old. It squeezes people into a Rube Goldberg complex of bureaucracies based on their income level. It will impose huge costs on people as they rise up the income ladder, distorting the whole economy.
The worst problem with the Baucus bill is not, as David Brooks would have it, that it stifles innovation:
The biggest problem is that it will retard innovation. Top-down systems just don’t innovate well, no matter how many Innovation Centers you put in the Department of Health and Human Services. The bill will retard innovation by using monopoly power to squeeze costs. It will also retard innovation by directing resources toward current care (and current voters) and away from future technologies and future beneficiaries.
The worst problems are twofold. First, it cannot work. The work of Kydland and Prescott demonstrates one of the many reasons why that is.
Second, it doesn’t solve the most serious problem that we have. Being deficit neutral while extending healthcare insurance to an additional 9% of the people is not a sufficient goal . Even saving the paltry $8 billion dollars a year that the Baucus plan will save is not enough. We have a healthcare commitment measured in the trillions to pay off and at Medicare’s current balance sheet status time has run out. We need to resolve it now or it will absorb the entirety of the budget or force us to borrow at rising rates, stunting any hope of recovery in other sectors of the economy.
Democrats are going to go home to face reelection soon and many will be in for the fights of their political lives. Some will lose their races. The idea that they’ll return to Washington flushed with victory and ready to fight another fight over healthcare reform defies credulity. We’re only going to get one bite at the healthcare reform apple and the Baucus bill simply isn’t enough.
I honestly have no idea how you would even start transitioning over to a non-fee-for-service system if much of the coverage is still privately paid for. You’d have to make some seriously fine-tuned adjustments to the incentives in the market, and it would run into a wall of opposition at every step (for one thing, many doctors are quite happy with fee-for-service, and not eager to end up in a Mayo-style Clinic).
Brett,
Yes, which is why what ever reform we get will almost surely be bad. It will do as Brooks has noted, further entrench our currently flawed system, it will move more towards as a one size fits all, and if it doesn’t fit we’ll pound the square peg into the round hole, it will likely result in increasing costs, and then possibly curtailment of health care to combat said rise in costs (if you die of cancer you cost nothing, treating you on the other hand is very expensive, so hurry the f*ck up and die already, thank you).
You know, I read that and it makes me laugh. It makes me laugh because you are but one teeny tiny step from the same conclusions of people like James Buchanan, Gordon Tulluck, and so forth (but you’ll never take that last step because your world view would likely have to change too much). Yes, they will be damned up happy with it…so they will fight it. Tooth and nail. They’ll even be willing to spend vast amounts of money to do so. All to protect their income and damn the rest of the system.
In fact, I laugh becuase I hear people moan and groan about evil CEO’s making large salaries, financial shenanigans, and so forth. But when special interst groups do the same thing, looting when you get right down to it, there is much much less complaints.
Take the union oppostion Dave notes. How is this different than say Bernie Madoff? I’d argue it could be even worse in that it could cost us trillions, not just billions. But the outrage? Meh, who cares. In fact, the Obamassiah is in bed with these looters. He has lunch with them, laughs with them, and benefits from this despicable behavior. But he’s the agent for change.
P.S. The above should not be read in anyway as saying that the Republicans are any better. I loathe both parties equally. I see them as does Robert Higgs, as two wings of the an oppressive statis/corpratist system.
I’m simply pointing it out as an potential obstacle, not saying that I don’t think you need to fight some of those interest groups (although on a side-note I like the fee-for-service model – the other model introduces some of its own perverse incentives).
So you fight them. It has happened before, and in other countries as well (read up on the opposition to universal health care in Canada when the system was being assembled at the federal level).
Are you trying to ascribe those views to me?
On a slight side-note, I’ve always seen the insane CEO compensation as being a symptom of the current corporate culture and environment. They get insane salaries, packages, and severance packages because of an extremely competitive environment that drives companies in a search for top-level talent, a very short-term profit horizon, and (from the CEO’s perspective) the high chances that they won’t stay at that company for more than a couple of years at best.
As Gordon Tullock pointed out then you merely waste 2x the amount of revenues over rent-seeking, at best. If we look to Mancur Olson, he’d argue that those on the losing end of the stick have it really tough since they are likely a disparate group and getting them together to fight is very difficult. So you either fight and waste even more resources, or you can’t and the inefficiecies and looting continues. But, hey, there is something magical about democracy and voting.
Do you fret about a CEO making $50 million but don’t seem to notice that unions set in motion a scheme that could end up costing $200 billion? If so, then yeah it applies to you.
Competition isn’t the problem, bad incentives (short term horizons, etc.). I’d also point to the inc