In yesterday’s post, I worried about whether California Governor Arnold Schwarzenegger would follow through on his promise to veto a single-payer health care bill in that state. It now appears that he will do so. That’s good news for the people of California. But the fact that the nation’s largest state came so close to a government-run health care system should serve as a wake up call. Unless health care is reformed in a free market direction, a government takeover is only a matter of time.
Cato at Liberty
Cato at Liberty
Email Signup
Sign up to have blog posts delivered straight to your inbox!
Topics
Health Care
California Single-Payer?
It’s been largely under the media radar screen, but California may be on the verge of establishing a single-payer health care system. Late last month, the California Assembly passed legislation establishing a Canadian-style, government-run health care system. The legislation had earlier passed the California Senate, and while there are small differences that will have to be reconciled, there is no doubt that the bill will be sent to Governor Schwarzenegger. The question now is whether Schwarzenegger will veto the bill. In the past he has said he would, but it’s an election year and he is under big pressure from unions and others to sign it. Schwarzenegger has caved in other issues recently, from prescription drug price controls for MediCal to vehicle emission controls to state budgeting. If he signs this bill it will be bad news for Californians and a terrible precedent for the nation.
Under the bill:
- Private health insurance would be abolished. The state would become the sole payer for all health care services. The bill does not specifically prohibit paying for a procedure “out of pocket,” although it states several times that its intent is to have “a single payer.” We will probably have to wait to see how this would be interpreted by the commission established to oversee the new program, and later by the courts. The bill does, however, require that doctors take all patients and in the order that they apply for service. Thus, you couldn’t jump the queue by paying cash. Nor could a doctor set up a cash-only practice.
- The bill establishes global budgets for health spending in the state. If the budget is exceeded the state could cut reimbursements to providers or prohibit capital expenditures. The latter would impact the quality of health care nationwide, limiting research and development and undermining many of the nation’s top hospitals.
- The bill contains no funding mechanism (beyond using federal Medicare, Medicaid, SCHIP, and VA funding). Earlier versions of the bill proposed funding the proposal with a 3 percent income tax hike and a job-killing 8 percent hike in the payroll tax. The latest version would have a commission decide how to pay for it.
Interestingly, the Assembly amended the bill to strike out the words “health care consumer” wherever they appeared and replaced them with “patient.”
Related Tags
Much Ado about Crisis of Abundance
The American Prospect’s Ezra Klein and Berkeley’s Brad DeLong have each weighed in on Cato’s book forum for Arnold Kling’s new health policy book, Crisis of Abundance (Cato Institute, 2006).
Kling notes that we had invited The New York Times’ Paul Krugman to speak. I was disappointed that Krugman had to decline. I would have loved to see that matchup, as I have for some time thought of Kling as The Anti-Krugman.
Now comes word that Harvard’s Greg Mankiw recommends the webcast of the book forum.
Related Tags
All Snark, No Substance
Brad DeLong endorses Ezra Klein’s comments (see my earlier post) about Cato’s recent forum for my book Crisis of Abundance. The event was really a health care symposium, with New York University’s Jason Furman offering comments and the Washington Post’s Sebastian Mallaby offering comments on the book.
Concerning the latter commenter, DeLong offers the following:
I challenge the classification of Sebastian Mallaby as a “professional domestic policy thinker.” It would seem to me that it would be more accurate to call him a lazy hack journamalist [sic].
…
Memo to Cato: putting Sebastian Mallaby on a panel as a health care “expert” gains you brownie points among the journamalists [sic] of the Washington Post. It doesn’t boost your reputation among the reality-based community.
Memo to DeLong: I’ll debate anyone of your choice. I understand that Cato tried really hard to get Krugman, and I am willing to travel to Princeton. At least Jason Furman (or is he just another hack?) and Sebastian Mallaby were willing to engage.
Read the rest of this post →Related Tags
Mass Health Plan: I Told You So
Supporters of Governor Romney’s Massachusetts health care plan scoffed when I warned that it “opens the door to widespread regulation of the health care industry and political interference in personal health care decisions. The result will be a slow but steady spiral downward toward a government-run, national health care system.” Recent events, alas, suggest that I was right.
When the plan was passed I said, “special interests representing various health care providers and disease constituencies can certainly be expected to lobby for the inclusion of additional services or coverage under any mandated benefits package.” Now it appears that my only mistake was in not realizing just how fast the special interests would move. Already the state has been forced to delay implementation of some aspects of the plan because of a bitter battle over issues such as whether dental benefits should be included in the basic plan that residents must buy.
Fortunately, however, members of the State Health Care Connector, which is designing the plans, say that the legislature didn’t really mean it when it passed a law setting the deadline. Of course, one might wonder what other aspects of the law they will feel free to ignore.
And, now the Boston Globe reports that Christian Scientists are lobbying hard to change the definition of health care under the law so as to include faith healers. Such are the perils of having the government design the products you must buy.
I also warned that as costs increased there would be increased pressure to increase subsidies or cap insurance premiums. This week, the Globe reported that State Senator Richard T. Moore, a key architect of the law, is complaining that health insurance premiums are too high. He is demanding that either premiums or subsidies be adjusted so that no one earning less than 300 percent of the poverty level ($58,000 for a family of four) will have to pay more than 5 percent of their income for insurance.
The plan is less than five months old and already the wheels are coming off. It would be sad if it had not all been so predictable.
Related Tags
Fear of Freedom in Health Care
From there, we part. Kling’s other solution relies on a massive increase in the amount of health costs that come out of pocket. The “very poor” would be subsidized, as would the “very sick” (neither term is defined in his book), but everyone else would be paying for their own care. This makes sense in a very specific sort of world — one in which you believe consumers have the capacity to make rational health care decisions — and to a very specific sort of person — one who believes those who make mistakes with their health care should simply pay the costs, be they financial ruin or death.
I am not that sort of person, and I am highly dubious of that world. I see no evidence for the claim that a gas station manager in Bakersfield, California, will be able to second- or third-guess his cardiologist’s recommendation of an angioplasty. Will he have the money to get a second opinion? A fourth? Or will Kling’s system convince him to foolishly underestimate his risk? Economists, after all, have shown time and again that we overestimate the pain of financial loss — that, when it comes to money, we are not nearly so rational as one might hope.
In the simulation of my proposals in the chapter on matching funding to needs, I define poor as below the poverty line and I define very sick as having annual expenses over $5000 for the non-elderly and over $20,000 for the elderly. I think that one can, and should, come up with better definitions, but the terms are not left undefined.
How should consumers make decisions about their health care? Let me define a “good” decision as one that is optimal in terms of expected benefits relative to expected costs. A different decision is a “mistake.”
I propose making more consumers more accountable for more of their own health care spending. Let me describe this as a system where consumers make their own mistakes.
What is the alternative to a system where consumers make their own mistakes? The opponents of consumer choice would have you believe that the alternative is a system where no mistakes are made, and instead we simply see good decisions. But that is not the alternative that we observe. In fact, no one would say that the medical decision-making process is mistake-free in America today.
The realistic alternative to having consumers make their own mistakes is to have mistakes made on their behalf by doctors, insurance companies, and government.
Related Tags
Consumers for High Taxes
In a story on people without health insurance, NPR interviewed a spokesman for a “consumer advocacy group” who warned that we shouldn’t get rid of the estate tax (so we can spend more tax dollars on health care). Yeah, that’s what consumers think — except for the 68 percent of them who do want to repeal it.