The new Bush health care plan

Jonathan Zasloff writes:

Bush plans to pay for it not by efficiencies, but rather by restricting the benefit packages of the already insured, through the deductibility cap.  I’m sure that there are some extraordinarily lavish plans out there, but is there any serious policy justification for this way to go?  If anything, this seems to be a recipe for business to delete coverage, and throwing more people into the individual market.

Paul Krugman is very negative.  Arnold Kling loves the plan.  Greg Mankiw isn’t complaining.  Ezra Klein says it is better than nothing.

My feelings are mixed, but my view is closest to Zasloff.  In the short run the plan gives more coverage to the people who need it most, while avoiding the mistakes of recent state-level plans.  That doesn’t sound so bad.  (By the way, has anyone serious done a study of subsidy incidence for health insurance tax credits?)

But I cannot side with Arnold Kling’s view that third-party payment lies at the root of America’s health care problem.  Our tolerance for anxiety is sufficiently low that I expect the future to bring more and more insurance of many kinds, whether from the private sector or from government.  The cost of this insurance, in terms of induced inefficiencies, will be high but a secure health care situation is one of the things in life that alone can make a difference between happiness and misery. 

Furthermore given our "political irrationality" (my apologies to many readers, such as Matt and Ezra, but I am referring to your tendency, yes yours, to want national health insurance), there is a positive external benefit attached to private health insurance, above and beyond the gains to the insured.  How far would the Democratic health care agenda get without "45 million uninsured"?

The goal is to get (virtually) everyone insured and keep them insured for as long as possible, and yes I know that eventually means health care at 20 percent of gdp and lots of people getting screwed out of just claims for reimbursement.  It is simply the best we can do, and for that reason I don’t want to tax private health plans.

The ambitious long-run program should be to restructure the insurance industry –through a judicious mix of regulation and deregulation — to encourage competition across service quality rather than competition across cost-shifting.  Frankly I have no idea how to do that but no one has ever convinced me it is impossible or utopian.  We simply need better incentives for evaluating the performance of our insurance companies, and better ways of evaluating the performance of our doctors and hospitals.  I’m not going to call that small potatoes, but compared to how health care has evolved since say 1920 it is not asking for the moon.  That is one reason why I don’t want to lock into total government control of the health care market for the next five generations or more.

In the shorter run, I expect medical tourism to continue to grow in importance, including possibly cruise ships. 

Last week I had my first physical in twenty years, and it seemed no different from visiting a witch doctor who makes you feel better by shaking the rattle.


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