Priceless: Preface (1)

I’m blogging my way through Priceless: Curing the Healthcare Crisis, by John Goodman. All posts in the series will be found under the Priceless tag. I’ve already received a lot of feedback on Goodman’s book. Please keep it coming, preferably in the comments to my posts (and Aaron’s). I might round some of them up for a “reader response” post (maybe more than one) later. Or, I might not.

This post pertains to the book’s preface and, mostly, to one reference therein. In the preface, John refers to a 1995 Health Affairs paper he co-authored with Mark Pauly (ungated PDF).* Though I’ve encouraged you (and still encourage you) to read the whole paper, here’s the gist:

In this paper we propose tax credits for the purchase of combinations of catastrophic coverage and MSAs [medical savings accounts]. Instead of abolishing the current tax advantages, we propose to make a new system available to individuals and groups as a voluntarily chosen substitute for the existing tax treatment of health insurance.

What John, Mark, and I all agree on is that tax policy ought to be neutral (or more neutral) with respect to how individuals obtain health insurance (through an employer or otherwise) and across goods and services, including types of health insurance (e.g., managed care, consumer-directed, etc.). One step toward achieving this is to eliminate the tax exclusion of employer-sponsored health plans.

Due to politics, this is not going to happen, or not all at once anyway. Under current law something like it will happen, but in a rather convoluted, delayed, and slow manner. Well, you can’t have everything, and, in my view, the Cadillac (excise) tax is better than nothing on this front. That’s an argument in favor of the Affordable Care Act (ACA) — or one element of it — even acknowledging its imperfection(s). Naturally, people can disagree about this, and maybe John and/or Mark do. (I don’t know specifically, but it is possible.)

Do you see what just happened? I began with something I believe John, Mark, and I all agree with and ended up with something highly correlated but about which we may differ (though I’m not certain we do). This is fairly typical. A lot of policy arguments among health economists turn on the way in which an ideal on which they concur is (very) imperfectly implemented in law. It’s silly, and I’m guilty of some of the silliness. Law is not likely to ever adhere to health economists’ ideal. To exist as law it must pass the political gauntlet and, therefore, satisfy far more constraints than those cherished by economists. To a large extent, this is as it should be. To insist otherwise is tilting at windmills anyway.

There are a few other issues raised by the Health Affairs paper I want to highlight. First, consider these two quotes:

  1. “[B]eyond encouraging access to a basic level of medical care, public policy should be …”
  2. “One approach is to use tax policy to direct citizens toward types of care or insurance that have already been determined, by experts or by politicians, to be socially appropriate. We specifically reject this approach …”

The first admits that there is a role for government in setting a minimum standard of access to care. (Later in the paper the authors note that income-sensitive limits on the size of out-of-pocket exposure to medical care cost might be entertained.) I see no reason why this cannot include a required minimum level of health insurance (or the demonstration of the equivalent for wealthy individuals who want to self-insure). That is, there’s nothing in point 1 that rules out the kind of insurance mandate in the ACA or any number of alternatives that have been proposed. There is nothing in point 1 or elsewhere in the paper that explains how to determine what that “basic level of medical care” is. My guess is that any reasonable way to do it would involve the consultation by politicians of experts. How else do you establish law and regulations to achieve what is suggested in point 1? Of course it won’t be perfect! (See above.)

And yet, point 2 seems to reject something we might infer from point 1. I raise this not to charge hypocrisy. My point is that John and Mark are drawing a line. They want policy to rule out (or in) some things (point 1) but not go too far in some directions (point 2). My point is that where this precise line is drawn — and actually, it is many lines because there are many different dimensions of health care that can be each regulated independently — is a value judgement. Once you say there should be some basic minimum, you can’t claim your notion of what it is is unique. You have to allow that my “basic” may differ from your “basic.” We have to fight out which “basic” will rule with the only process we have for resolving such a dispute, the political process. Of course the outcome won’t be perfect! (See above.)

As this post is getting long, I will just quote a few other passages of the Health Affairs paper and then come back to other issues in the book’s preface in another post.

From the point of view of risk-averse consumers, there is a demand for insurance against the unpredictable cost of medical care.

Yes, yes, 1,000 times yes! Insurance (public or private) is a response to consumer demand. If insurance didn’t exist, that itself would be a market failure, an example of an incomplete market. Of course one can debate the ways in which the insurance market should be regulated or public programs structured, but John, Mark, and I all agree that insurance should exist.

[I]t probably would not be desirable to permit a lower-income family to select a policy with a very high deductible and put their entire life savings into an MSA, since fear of wiping out their assets may deter them from seeking beneficial care.

Agreed. And the risk of this becomes significant well before one puts one’s entire life savings on the line.

One thing we learned from the roiling debate on health care reform is that there are no magic bullets to solve the health care problem.

I’m glad to see the authors admit this. There is more than one way to skin the cat.

My next post, also about the preface, will appear on Friday.

* At least in the Kindle version, there is an end-note numbering problem. The reference is made to end-note 5, but it is really number 4.


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