Brad DeLong’s health care plan is outed

by on June 8, 2007 at 5:01 pm in Medicine | Permalink

It is described as utopian, read it here, excerpt:

20% Deductible/Out of Pocket Cap: The IRS snarfs
20% of your family economic income and uses it to pay your family
health bills. If your expenses in a year are less than 15% of your
family economic income, the balance is returned to you with your tax
refund check (or stuffed into your IRA).

Single-Payer for the Rest: All family health bills
greater than 20% of your family economic income are paid by the federal
government out of the 5% not returned (and perhaps, someday general
revenues). The main point, after all, is insurance: if you fall
seriously sick, you want right then and there to be treated whether or
not your wallet biopsy is positive.

Sin Taxes: on Tobacco, Gorgonzola, Three-Liter Bottles of
Liquid High-Fructose Corn Syrup, Tanning Clinics (Melanoma), et cetera:

Sin taxes (and, perhaps, someday general revenues) pay for an army of
barefoot doctors and nurses and mobile treatment vans roaming the
country and knocking on doors: Let me examine your prostate. Mind if I
check your refrigerator and tell you how to eat healthier? Have you
exercised today? I’m a Pilates instructor, and we could do a session
now? Are you up on your immunizations? Anybody here have a fever and
need antibiotics? Come on out to the van and I’ll clean your teeth."
The idea is to make the preventive care cheaper-than-free, to insure
that nothing with a high long-run benefit/cost ratio gets left undone
because people would rather get a bigger check the next April to use to
buy an HDTV.

A Lot of Serious Research on Best Public-Health, Chronic-Disease, and Hospital Practices

That’s it. No deduction for employer-paid health expenses. No insurance companies.

There is plenty of further rationale given, do read the whole post.  But I have to say, those rubber gloves have me worried… 

1 Chris June 8, 2007 at 5:35 pm

Every single one of these plans to “fix” healthcare reminds me why I should just be happy with what I have.

2 Person June 8, 2007 at 5:47 pm

If your expenses in a year are less than 15% of your family economic income, the balance is returned to you with your tax refund check

What if you get the refund electronically?

OH!!! I see, he’s dumbing it down for people who can’t understand the concept of receiving money from the government other than as a paper check.

3 Sigivald June 8, 2007 at 5:58 pm

I could buy insurance for a lot less than 20% of my gross.

And how’s the inevitable rationing going to be handled? Too bad he doesn’t mention that.

(Inevitable because, well, even all that money is very much finite, and someone has to decide when to stop paying for grandpa’s hopeless only-delaying-the-inevitable-at-great-expense cancer treatments, or hip replacements for people in very ill health anyway, etc.

When people are spending their own money, or the benefits of insurance they contracted for, it’s nobody else’s business if they spend it on things like that; hell, fight for every last moment of breath – it’s your dime and your life.

But when the State takes everyone’s money and pays it out to everyone that “needs” it, someone has to define “need” and “enough”. Not because someone hates sick or poor people, but because there’s never enough money to pay for everything – even if the easiest kind of money to spend if “somebody else’s”.)

4 James R Ament June 8, 2007 at 6:01 pm

I seem to have trouble with everyone’s health care plan… long on plans; little on problem identification. Exactly which specific problem is Mr. DeLong’s solution trying to solve?

5 Timothy June 8, 2007 at 6:14 pm

20% of my gross income is a fat load to pay in addition to my current tax burden. That’d raise my effective tax rate to basically 50%, considering that my health insurance costs me 3.25% of my gross income now and covers pretty much anything with a $700 deductible, I’d be getting pretty awfully screwed over under DeLong’s plan. Even if I got it back, I’m still lending the government 15% of my income, interest free, for a year. No thanks.

6 jack June 8, 2007 at 7:10 pm

From looking at DeLongs photo, clearly he cant make good decisions about
his own lifestyle. Do you want this guy and his minions telling you
how to exercise. Give me a break.
Commenterlein, darling, Ive seen you defend DeLong before, from your
trust-funded perch in Cambridge MA. While I understand
defending DeLong is a very unenviable position, perhaps you could offer some
substantive insights yourself, rather than a characteristic cheapshot.

7 Bernard Guerrero June 8, 2007 at 9:15 pm

Jack, to be fair he did come back and note that there had been a substantive objection. Or rather, an apparently substantial gap in DeLong’s thinking.

8 nelziq June 8, 2007 at 9:49 pm

I think you guys are focusing on the single payer part and missing out on the first, and most important part: up to the 20% of income deductible the health care system will be strictly capitalist pay-to-play. This idea is great because it has all the important economic effects of a free market system: consumer price pressure, competition, etc. while at the same time the plan gets rid of health insurance bureaucracy and market failures, shields individuals from catastrophic expenses, and provides public health initiatives for services that have exceptionally high cost to benefit ratios (i.e. immunization, birth control, preventative care).

9 fustercluck June 8, 2007 at 11:29 pm

I’d be willing to consider a reasonable deductible, but 20%?

Non-starter.

10 John Pertz June 9, 2007 at 1:26 am

Commenterlein:

Look, Im sure that you were not a fan of my original post. However, how exactly does Delong’s plan not amount to a GIGANTIC exploitation of the healthy by the unhealthy. The only winners in this plan are the terminally sick or the elderly. Everyone else is a loser. What about all of those people in this country whose health care budgets do not consume more than 5 percent of their annual incomes? You dont see any moral hazard implications with this program? How about the evolution of health care technologies that will allow the younger generations to consume scarce health care resources much more efficiently? How, exactly do you square up with a healthy person who has clearly paid more into the system than drawn out of it? Or do you simply just say thats social justice, hope you enjoy?

11 Ted June 9, 2007 at 10:37 am

The disturbing thing is all the Kossacks in DeLong’s comments section criticizing him for not being redistributionist enough.

I don’t have a problem with sin taxes as preferable to taxes on productive activities (though tobacco usage likely reduces government expenditures over a lifecycle), but having government-funded nannies rummage through my refrigerator is appalling.

The bureaucracy required to be attached to the IRS to determine if the holistic crystal shaman is a legitimate medical expense is also something to fear.

12 mkayser June 9, 2007 at 2:32 pm

Unless you force overweight people to eat better and exercise more, then Americans are just going to be as unhealthy as ever.

Well, Delong did pose the idea of sin taxes on things that are bad for you (HFCS, hydrogenated oils, etc.). We could certainly calculate an “expected health care cost” associated with such behaviors, and internalize the externality. Of course more-at-risk people should get a greater share of the externalities, but that is hard to do.

Similarly, you could subsidize gym memberships, yoga, etc. in proportion to how much they are estimated to reduce health care costs.

No one’s proposing a command-and-control policy forcing people to exercise.

In fact, the army of barefoot doctors isn’t forcing anything either. It’s just making things very accessible (OK, and sometimes annoying.) I don’t think that part of the idea is terrible although it may not be very helpful overall.

13 mkayser June 9, 2007 at 4:18 pm

I like James Ament’s suggestion that we nail down what problem we are trying to solve first.

It might be a reasonable thought experiment to start from a “blank slate” of completely unregulated health care, and then step through each of the shortcomings that needs to be addressed.

One that I can think of is equity: many people would not be able to afford unregulated health care (whether because they have a condition that is inherently too expensive to treat, or because they are simply poor, or both). For many of us, this is A Bad Thing. Some people don’t particularly care.

I guess the question is, on what principle do we base the idea that this situation needs redistribution? Well, one is simple utilitarianism — basic health care is an important need. The marginal benefit of basic care for some poor dude is higher than the marginal benefit of a 4th Hummer for some rich dude, even though they may cost the same amount of money. So under this theory, the government is justified in redistributing some money in order to maximize aggregate utility. One question that comes out of this is, are we sure that redistribution specifically targeting *health care* is more helpful than plain-old redistribution to poor people? I would say yes, it is more important, because “poor sick people” have more severe disutilities than “poor people”.

Another traditional government-intervention rationale is market failure. I am not sure to what degree an unregulated health care market would exhibit market failure. Some people might say “moral hazard”, but I’m not sure whether it qualifies.

There is a lot more ground to cover that I won’t try to touch on, but this sort of blank slate analysis would be helpful to see more often, I think.

14 Brad DeLong June 9, 2007 at 4:54 pm

Well, as I see it there are three problems:

–an enormous share of health care is under no pressure at all to become less wasteful. You try to solve that by having households buy what they want in a competitive market (up to out-of-pocket costs of 20% of income)

–an enormous share of households simply aren’t in the health care system, and so get insufficient and inefficient emergency-room care only. You try to solve that via the Iron Claw of the state: IRS, barefoot doctors, et cetera.

–insurance companies have little incentive to treat the sick and enormous incentives to ration-by-hassle. You solve that by making the government the single-payer for catastrophic care.

If you’re in the health-care reform business, you have to solve these three problems, and they are in considerable tension.

15 mkayser June 9, 2007 at 5:50 pm

Sorry, (A) is a fundamental problem.

16 mtc June 9, 2007 at 6:10 pm

Wild Pegasus wins the thread.

17 anon June 9, 2007 at 6:47 pm

A special table for mtc:

Type of government
U.S.: constitution-based federal republic
Costa Rica: democratic republic

GDP per person
U.S. $43,500
Costa Rica $12,000

Annual healthcare spending as percentage of GDP
U.S 15.4%
Costa Rica 6.6%

Annual healthcare spending per person
U.S. $6,096
Costa Rica $592

Longevity at birth for males
U.S 75.3
Costa Rica 75.3

Longevity at birth for females
U.S 80.4
Costa Rica 79.5

Sources:
https://www.cia.gov/library/publications/the-world-factbook/geos/cs.html
https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
http://www.who.int/countries/cri/en/
http://www.who.int/countries/usa/en/
http://www.who.int/whosis/en/
http://www.who.int/whosis/database/life_tables/life_tables.cfm
http://www.who.int/whosis/database/core/core_select_process.cfm?countries=all&indicators=nha

18 fustercluck June 10, 2007 at 10:13 am

Just curious how high that 20% might actually go should the open borders wingnuts ever get their wish.

19 anon June 10, 2007 at 5:32 pm

A special table for liberty:

Longevity at 60 for males in 2004 (1):
U.S: 20.8
Cuba: 20.3

Longevity at 60 for females in 2004 (1):
U.S: 24.0
Cuba: 22.6

Physicians per 1000 in 2002 (2):
U.S.: 2.56
Cuba: 5.91

Probability of dying under age five, per 1000 live births (3, 4):
U.S.: 8
Cuba: 7

Infant mortality rate, per 1000 live births, 2007 est. (5, 6):
U.S.: 6.37
Cuba: 6.04

Sources:
1. http://www.who.int/whosis/database/life_tables/life_tables.cfm
2. http://www.who.int/whosis/database/core/core_select_process.cfm?countri es=all&indicators=healthpersonnel
3. http://www.who.int/countries/usa/en/
4. http://www.who.int/countries/cub/en/
5. https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
6. https://www.cia.gov/library/publications/the-world-factbook/geos/cu.html

20 Noah Yetter June 11, 2007 at 1:06 pm

If a government doctor ever knocks on my door I will kill them where they stand.

21 nelziq June 11, 2007 at 7:11 pm

I am repeatedly amazed by the ability of doctrinaire libertarians to blindly ignore both imperical facts and political realities when it comes to the health care debate.
First, our current system is clearly disfunctional. The statistics that anon posted above attest to the fact: virtually every other idustrialized country (and some non-industrialized ones, i.e. cuba) spends far less on health care as both a percentage of GDP and in absolute amounts and almost all have equal if not superior health outcomes. Clearly, health care policy in the US needs to change.
Second, there is no constituency outside the libertarian blogosphere that would support a wholesale overnight deregulation of the healthcare industry. Even within the libertarian blogosphere I doubt you could get a majority to buy into such a plan. If we as libertarians want to be taken seriously we need to propose plans that would both improve the current system and pave the way for a freer and more effective health care system.
This plan is easily more libertarian in its effect, although not in its intention, than the status quo. Therefore I would support it as interim solution until a better plan is introduced.

22 Tibia Gold December 31, 2008 at 1:08 am

Please come to Tibia money, we will give you a great surprise.

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