Some thoughts on health care
I had prepared a post on health care for the ongoing WSJ.com on-line debate, but the topic was changed to fiscal policy. Here is what I had in mind:
Most plans for greater government involvement cite the large number of uninsured Americans, over 40 million at last count. The number is taken out of context, as many of these individuals are otherwise covered, choose not to purchase insurance, or are recent immigrants; read more here.
I doubt if insurance will disappear as the dominant means of payment in the health care industry. The risks are too high and the anxieties too great. So we need to improve the workings of private health insurance. It remains a mystery, why private health insurance has performed badly in holding down costs. Companies compete fiercely to shed costly patients but they do less to invest in reputations for reliability and trustworthiness. Similarly, it is a puzzle why HMOs don’t do more to invest in good reputations; lately Kaiser has moved in this direction.
Nobody has a truly good health care plan at this point. But we do know that competition for quality service has been the driving force behind the benefits of modernity. We need to figure out how to bring this to bear on health insurance. In the meantime we need to control Medicare; I suggest means-testing, here is another worthwhile proposal.
Bush’s plan encourages health savings accounts (HSA). HSAs give you a tax-free account for medical expenses but requires purchase of a high-deductible health care plan (above $1000 for individuals and $2000 for families, in most cases). And when age 65 comes, you can use the money for Medicare premiums or simply pull it out and pay standard rates of taxation. The accounts are now rising in popularity, although they remain small in absolute terms.
The plan has some admirable economic elements. It provides a tax-free vehicle for savings; most economists agree that capital income should not be taxed. But it is less of a health care plan. Most of the potential beneficiaries from HSAs already receive excellent levels of care. In sum, I like the idea of market incentives, but do not believe that HSAs will do much to make us healthier.