The Conundrums in Health Care Reform
The political furor over health care reform, and especially the media coverage, may be triggered by right-wing agitprop; but the cynical distortions – death panels! – fed by hard Republican partisans are not responsible for eroding public support. Health care reform will always be a tough sale. Three-quarters of Americans believe we need serious reform; yet two-thirds of those who voted in 2008 have insurance and say they’re satisfied with it. If the President is going to win this fight, he and his people have to unravel this conundrum – and economic logic can help.
People have plenty of complaints about their health care. They don’t like the waits they face to see their doctors, they really don’t like paying the world’s highest insurance premiums and co-payments, and they’re not insensitive to the plight of 50 million uninsured — and the possibility they someday might join them. Yet most of us are deeply risk-adverse about real changes in these arrangements, and the reasons are as basic as they get: We naturally place infinite value on recovering from some terrible, future illness or injury, and so far the current arrangements have kept most of us and our children alive and even reasonably well. So, if the critics’ outlandish claims contain even a small kernel of truth, many of us can (and will) imagine that under the right circumstances, it could cost us the care we might desperately need.
There’s another, equally powerful factor at work here. Health care places most people in the uncomfortable position that economists call “radical information asymmetry,†which means that one party knows much more than the other about something important to both. We feel sick but we don’t know what’s causing it or what to do about it – so we go to a doctor or hospital staffed with people who do have the precious knowledge and skills necessary to make us well again. This genuine sense of ignorance about a matter of potentially life and death importance greatly intensifies our risk adverseness about changing the arrangements under which those all-knowing doctors and hospitals now take care of us. And since we all know that some illness or injury will eventually threaten or end our lives, it’s not a hypothetical concern.
This information asymmetry complicates health care reform in other ways. We can’t shop for the best medical deal or make independent judgments about whether we need one procedure or two, so we have to depend on doctors we know, who have obvious incentives to “sell†us as many expensive services as their Hippocratic oath allows. That’s why proposals to end the tax deductibility of employer-provided insurance probably wouldn’t much affect rising costs: Even with greater incentives to shop for less expensive care, we still lack the knowledge to make intelligent choices.
The policy conundrum for the President is that unless he can reform these arrangements, the pressures that have been driving up health care costs for decades will end up denying care for many more of us. But there’s little reason for most people to support cutting health-care costs, since people know that cutting costs in most areas usually means getting less – and in this case, getting less could cost them their health.
That’s why the action has been shifting from health care reform to insurance reform, by which Washington means new guarantees that insurers must maintain coverage for any serious condition any of us might face, and set premiums without reference to people’s current or past health. Most insurers are willing to go along, so long as Washington also requires all of us to buy their coverage. But their caveat presents another political obstacle ripe for demagoguery, since somebody would have to pay for the subsidies that tens of millions of us will need to afford that coverage.
Insurance reform may be the only change that almost everyone would welcome. But it also will increase costs further, which will eat away at coverage. Moreover, it does nothing about the major forces most responsible for driving up costs – the inexorable aging of the boomers, and the proliferation of new, very costly medical technologies to treat the common conditions that mostly befall older people, especially cancers and heart disease.
It’s obvious by now that there just aren’t any easy answers. The “public option†would probably force insurers to squeeze more efficiencies out of the ways they conduct their business, as could private, non-profit insurance cooperatives. But those efficiency savings would be one-shot deals that can only give us a few years of breathing room – like the shifts to HMOs and PPOs did in the 1990s – before the same problems reemerge.
As to the larger forces, we can’t do anything about the aging of the population, and the only way to control the costs of new technologies is to limit people’s access to them or slow down their advances. And no one is prepared to suggest that, since we all can imagine someday needing a recent breakthrough to preserve our health.
There is another option: Accept that we place unlimited value on gold-plated health care and be prepared to pay for it. Eventually, that will drive us to new, broad-based taxes to finance that gold-plated care for everybody. Since that’s not a topic which our politics can handle today, it looks like we all have to prepare ourselves for many more years of debates over health care reform.