Friday, June 29, 2012

Health Care Predictions

Yesterday the Supreme Court upheld the Affordable Care Act.

On a meta-level, the decision made me happy-- it shows that at least one of the Supreme Court justices thinks for himself and doesn't always fit into the "Conservative" pigeon-hole that the media likes to put people into.

And I think the decision makes sense on a common-sense level; if it looks like a tax, smells like a tax, and sounds like a tax... then it is a tax.  Even if they decide to avoid the "t-word" and call it a "mandate."

But... I don't think the Affordable Care Act will succeed in making health care more affordable.

If you've read this blog for a while you know I like to calibrate my thinking by making testable predictions. I have a terrible memory, and by writing down what I think will happen then comparing it to what actually happens I teach myself that I'm not as smart as I think.

So besides not making health care more affordable, what do I think will happen in the next 10 years?

Well, I don't think the Republicans will actually repeal the Affordable Care Act, no matter what they say right now.  If Romney becomes president (I'm not even going to try to predict that, I have no clue) they'll repeal some little part of it and declare victory.  If he loses then there will be a huge, noisy debate in Congress that ultimately accomplishes nothing.

After 2014 I predict a whole lot of healthy people will figure out that dropping their insurance coverage and paying the no-insurance-penalty (tax!) is, financially, the best thing to do. After all, if you get seriously sick you can always buy insurance then (no denying coverage for pre-existing conditions, remember?).

If nothing changes, I'd expect a year or two after that lots of small employers decide that paying the penalty to their healthy employees and dropping their coverage is also the smart thing to do.

So in 2018 or so I'd expect there to be a health insurance industry crisis that, in typical Washington "We need Another Law to Fix This Law that We Passed Back Then" fashion, prompts Congress to first try to make it illegal for employers to drop health plans and increase employee's compensation.

When that doesn't work, they'll increase the no-health-insurance-tax so it is more expensive than the least expensive health plan you can buy.

But health insurance costs will continue to ratchet up every year, the IRS will spend ever-increasing money tracking down people who cheat on their no-insurance taxes (there will be laws passed requiring health insurers to report on who has purchased insurance, so the IRS doesn't have to rely on possibly forged documents from taxpayers), and the whole cobbled-together system will be obviously falling apart again in 10 years.

What happens then, I have no idea.  If the Democrats are in power, maybe we'll get a "Medicare for All" single-payer system.

If the Republicans are in power.... I have no idea what they'll do, they don't seem to have a coherent vision for what to do.

If I were King, I'd implement something like this for a national health care plan (inspired by a Megan McArdle proposal that I can't find right now):

1. De-regulate medicine as much as possible. At the very least, make doctor's and nurse's licenses portable across state and national lines and allow nurses to do much more routine health care. If I really were King I'd replace government medical licensing with private licensing, and give people the freedom to legally visit really crappy unlicensed doctors if they were willing to take the risk.

2. Eliminate tax breaks for the World-War-II-wage-controls-inspired "your employee buys your health insurance for you" system that most people are using now to get coverage. Every economist in the world agrees it is a stupid way to pay for health care.

3. Phase out Medicaid and Medicare. Replace them with a single, national, means-tested catastrophic health insurance plan that is simply something like "The US government pays for any health care costs that exceed X% of your adjusted gross income.

We could argue about what X is-- I don't think it should be zero because then people have no incentive to shop around for health care or weigh the costs and benefits of visiting the chiropractor twice a week (that's my problem with single-payer solutions).  Somewhere around 10% feels right to me; you pay out-of-pocket for day-to-day health care expenses, but if you are unlucky and get seriously sick and either lose your job  or have huge medical bills then we'll all chip in and pay for it.  (this is where my libertarian friends disown me as a rotten-stinking Statist)

A system like that should have the right incentives to actually make health care more affordable.


Clare Bertrand said...

You lost me at " allow private licenses and let people visit crappy doctors"
Sounds like a bigs step backwards.
Single payer, I'd agree. But getting there will be a slow slog.

Gavin Andresen said...

I kinda thought I'd lose people at the "eliminate ALL regulations and Let Freedom Ring" bit.

I DO think that would be better (I'd trust Consumer Reports to do a better job rating doctors than a state licensing agency), but I think any loosening of regulations would help costs come down and be a step in the right direction.

As for single-payer: Set X to zero in "government pays for costs above X% of your adjusted gross income" and you've got a single-payer scheme. We'd need to decide what counts as a legitimate health care cost, though, which is where stuff gets messy (plastic surgery? homeopathy? massage therapy? psychic surgery?)

Anonymous said...

Wouldn't X be zero for unemployed people, who would then then go to the chiropractor twice a week?

Means-testing can create some pretty perverse invcentives. I'd rather have a basic insurance voucher system, so I can manage my own risk of catastrophic costs. This would require we watch in horror when people who made poor choices don't get enough care, though.

Gavin Andresen said...

RE: unemployed people: I dunno, do unemployment benefits count towards AGI? What is the AGI of the average unemployed person?

The vast majority of people believe it is not OK to just watch in horror as people who made poor decision suffer. That's the reason I think Libertopian dreams of able-bodied people being responsible and paying for their own insurance, with private charities taking care of the deserving non-able-bodied people, will never happen.

Anonymous said...

Then why not make the "poor" decisions constantly? If I'm already spending over X%, why not spend infinite more for top notch treatment since the taxpayer covers it? This only stops >healthy< people from seeing chiropractors twice a week, and discourages ever buying insurance.

As a libertopian, I watch in horror as people die all the time - instead of one old man dying a year early, it's a thousand dying a month early because their savings were taxed. Oh how kind of us.

Gavin Andresen said...


Good point, government paying for ANYTHING brings in the "Is a legitimate medical expense or not?"

There would have to be some bureaucracy (call it a "Death Panel" if you're on the right, a "Benefit Eligibility Panel" if you're on the left) deciding what is appropriate, necessary, passes-some-cost/benefit-analysis treatment and what is taxpayer-money-wasting boondoggle.

So if you're above X% you don't get to count free trips to the local bordello as "mental health therapy."