Intellectual masturbation on health-care reform

(Titled thus because, who am I kidding?  A foul-mouthed vitriolic blogger with a five-digit Technorati ranking isn’t going to influence the health-care debate to any noticeable, let alone meaningful, degree.  And besides, looking over the history of HCR has impressed upon me that lowering expectations is of vital importance.)

In an earlier post I suggested that, if one wanted a Pigovian tax to curb “unnecessary” health-care procedures, a small insurance-exempt surtax based on the cost of the procedure should do quite nicely:

Since “unnecessary care” is the culprit here, wouldn’t a more effective Pigovian tax be some sort of surcharge on each procedure?  As DC’s bag tax demonstrates, Pigovian taxes don’t have to be huge to have a significant effect, so we needn’t price poor people out of necessary health care with some sort of modern-day poll tax.  If the perceived price of that unnecessary prescription is zero (or rather, “Oh, my insurance will cover that!”) now, then maybe a 2% surtax (“Eight bucks?  But that’s a whole six-pack!”) would do the job.  Revenues could go towards, say, Medicaid benefits for people with no demonstrable income.

The more I think about this, the more I like it.  It seems like a great way to get some of the benefits of tort reform for free: “I deserve eleventy-billion dollars in damages because that incompetent doctor didn’t order an MRI after Billy bumped his head, and then he died of an intracranial bleed!” becomes “When the doctor suggested an MRI for Billy’s head injury, I didn’t go for it because, hey, the surtax is like a whole carton of smokes and, I mean, fuck it, right?”  At the same time, the numbers we’re talking about are far from horrifyingly high: just pulling a few of them out of my ass, at a 2% surtax a $20,000 medical emergency comes to $400.  Remember that this is a Pigovian tax for people with first-dollar health coverage: I’m not suggesting that John Q. Uninsured-And-Barely-Scraping-By be asked to shell out the same.  If you can afford that kind of health coverage (or more likely, if you have a job that provides that kind of health coverage), you can probably find four hundred bucks worth of room on the VISA for Billy’s emergency neurosurgery.  (It’s also way lower than the $750/yr figure Ezra Klein cites as too trivial a penalty for opting out of the Congressional bill’s individual mandate, from way back when.)

So what might this tax accomplish?  Well, some people might see the word “tax”, flinch away uncontrollably, and sign up for high-deductible or catastrophic insurance instead.  These folks would presumably, like Coyote and Megan McArdle, think harder before signing on for potentially-unnecessary treatment: mission accomplished!  Of the folks who stick with first-dollar insurance, I figure maybe a third* would significantly change their usage patterns: again, mission accomplished!  I don’t think it’s reasonable to expect a Pigovian tax to do any better than that, and the rest will be more directly controlling the Medicaid cost explosion.  Sounds like a winner to me!

Of course, it doesn’t matter what I think.  (See also: the title of this post.)  Austin Frakt points out that only feasible policy proposals are relevant, and this one ain’t feasible.  As Ms. McArdle notes, people go utterly apeshit when you suggest that they pay for the health-care equivalent of an oil change or a new air filter.  Even when it makes sense:

What first dollar coverage for the affluent does is drive costs.  Take the recent kerfuffle over mammograms. Mammograms are very uncomfortable, and of course, you don’t want to shoot any more radiation into yourself than necessary, so women should have been excited by the news that you probably don’t need one until you’re fifty.  Instead they were outraged.  Since this was about spending other peoples’ money, naturally we want the right to spend as much of it as possible, even if it’s not very useful.

(Spending other people’s money?  Where have I heard that before?)

Of course, Ms. McArdle has her own attractive but irrelevant proposal for health-care reform, which I’m coming to like more and more:

I think that the argument for catastrophic coverage is much stronger for a variety of reasons, which is why I’d like to see the government pick up the tab for expenses that total more than 15% or 20% of annual income.  There’s certainly also a case for providing basic care and treatment for certain chronic conditions to the poor, though even in that case, I’d like to see us at least try to handle the problem with a combination of catastrophic insurance, and better income supports.  But if that failed–and it might–I’d absolutely support public provisions of those sorts of treatments to lower income Americans, along with no-brainers like prenatal and infant care.

But for the vast swathes of the middle classes? No, I really don’t think that having extraordinarily generous benefits that insulate them from almost all the cost of their medical treatments is improving either our health, or the nation’s financial condition. In fact, I think it’s the very reason that ordinary treatments are so inflated that they’ve become “unaffordable”.  Call me cynical, or an ideologue.  But I think we’d be better off with markets in every day care, and insurance for the catastrophic stuff that individuals really can’t afford.

(As I mentioned in my earlier post, I think that tort law and malpractice lawsuits are also driving the superinflation of health care costs, particularly when they intersect programmes like Medicare: doctors are compelled to order “defensive medicine” procedures for which Medicare won’t pay, because the potential cost of a malpractice lawsuit outweighs the actual cost of someone — generally the hospital, I think — paying for the procedure.  But as I also mentioned in my earlier post, I have no particularly credible basis for this opinion.)

Hey, building castles in the clouds is fun! I should’ve been an Arts major.

Update: Oops, I forgot the most important part: Now tell me why I’m wrong.


* Yes, I pulled that right out of my ass.

5 Responses to “Intellectual masturbation on health-care reform”

  1. February 17, 2010 at 07:20

    thanks for the information, your blog is very interesting, I like it

  2. February 17, 2010 at 10:07

    Don’t see where you’re wrong. A buddy of mine relates the story of “premium” health care plan for his employees, and yet they were going to the emergency room for treatment, since that was 100% paid, office visits required a $15.00 co-pay.

    He ended health coverage at the end of the year.

  3. February 17, 2010 at 21:27

    The why not:

    1) Because government does not do risk management well. The canyons throughout Los Angeles County are chock-full of examples of why this is so: people build in burn areas, refuse to clear brush properly — and *still* get bailed out? People build homes right in the middle of a hurricane zone in the Gulf Coast, right next to the water, and demand they get recompense for their plainly stupid decisions? Government will make politically popular decisions, not ones driven by economics.

    2) We have these things called “insurance companies” which are designed to deal with risk pools. They do not manage first-dollar medicine well, which is why we have the current mess. This is a feature of all third-party-pays systems.

    3) There’s little evidence that malpractice insurance costs are driving up the cost of medicine (see the New Yorker article on McAllen, TX, which has the highest per-capita costs for medical care in the country despite Texas having a very strict malpractice law).

    See David Goldhill’s excellent article “How American Health Care Killed My Father” in The Atlantic for more details, and some potential solutions.

    Hopefully the links and formatting come out.

    • February 17, 2010 at 21:47

      Bolded your links, as my theme — which I’m too cheap to pay to customize — doesn’t like underlined text in comments.

      On the substance of your comments: (1) and (2) are preaching to the choir; part of my intent is to give individuals more incentive to care about their insurance, rather than simply defer to what their insurance plans will pay for. For (3) I need to look into further but (admittedly without looking) I’m skeptical of a New Yorker article on anything.

      I’ve read Goldhill’s article already, but perhaps it’s time to read it again.

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