Medieval barons ruled by the edge of the sword; Chinese emperors by the mandate of heaven. In modern America, power goes to those with the greatest capacity to endure boredom.
Right now, Congress is haggling furiously over the final shape of a health reform proposal. Unimaginably huge amounts of money are at stake: your money. You may gain or lose hundreds of thousands of dollars over your lifetime depending on the outcome of the next few weeks. And yet you probably have only the vaguest idea of how your life, health, and money will be affected. Congress’ work is obscured from public view not by secrecy, but by the mind-crushing tedium of the detail necessary to understand who will get what.
It’s exciting to accuse your political opponents of scheming to murder the elderly. But the real question before the Congress is the design of a new system of healthcare marketplaces, called healthcare exchanges. What will be offered? Who will be allowed to purchase? How much will those purchases be subsidized?
The details are technical. Yet the big choices before us can be reduced to plain English. Here are just three:
1) How much should the young subsidize their elders?
Should the new coverage charge the same price to all comers, whether 25 or 55? Or should the young get a discount and the middle-aged pay more?
“Community rating,” the technical term for the one-price concept, offers a handsome windfall to 50-somethings. The windfall is even more handsome since today’s 50-somethings were allowed to take advantage of the cheaper 20-something price when they were young. Today’s 20-somethings on the other hand will face dramatically increased insurance costs. These are the same 20-somethings who face the worst job market for young workers since the Great Depression.
On the other hand, 50-somethings vote in congressional elections—like 2010—and 20-somethings don’t. The only recourse that 20-somethings have is to drop coverage altogether—which is why community rating will probably have to be backed by a mandate to compel everyone to buy insurance like it or not, and an array of subsidies to support that mandate.
The windfall for some carries a very considerable price for others.
2) How competitive should insurance exchanges be?
Conservatives want the new exchanges to offer the widest possible selection of policies, including very low-cost policies that cover major heath care expenditures only.
Liberals would require all the plans on the exchange to offer more or less the same coverage: no cheap substitutes allowed.
Under the conservative approach, health insurance companies would be forced to compete for customers on price. They would have to learn to act like Wal-Mart, ruthlessly pursuing efficiency.
Under the liberal approach, health insurance would come to look like the cable TV industry, with every provider lobbying government to include his service in the compulsory basic package.
The conservative approach could leave customers who guessed wrong dissatisfied with their bargains. The liberal approach is a formula for corruption and an endlessly expanding government role. How to decide? It depends—which are you more afraid of? Ever growing government and greedy interest groups? Or the likelihood that some individuals will choose badly, and suffer for their choice?
3) What do citizens owe aliens?
It’s hoped that the exchanges can extend coverage to the tens of millions of uninsured. To achieve that, the coverage offered by the exchanges will be subsidized by government. How far-reaching should those subsidies be?
About one in four of the uninsured is foreign-born. Some are legal residents, some naturalized citizens, but regardless of current status, they originally migrated to the U.S. with skill levels insufficient to earn a wage that enables them to afford America’s high insurance costs.
The Obama policies would extend coverage to these newcomers by allowing them to buy subsidized care for themselves through the new exchanges. Those subsidies will have to be paid by somebody, however, which implies higher taxes down the road for native-born taxpayers. At the same time, the Obama administration is proposing an immigration reform that will legalize illegal aliens (thus qualifying them for subsidized insurance)—and continue the migration of waves of low-wage workers into the United States.
Health reform puts a dollar value on the previously hidden cost of these migration policies. How high? Like all the other provisions of this legislation, that’s up to you: You pays your money and you takes your choice. Only with public policy, there’s a very real risk that others will take advantage of your tedium and inattention to take that choice for you.
Originally published October 8, 2009, in The Week.
26 responses so far
1 SpartacusIsNotDead // Oct 8, 2009 at 11:33 pm
Frum wrote: “Only with public policy, there’s a very real risk that others will take advantage of your tedium and inattention to take that choice for you.”
That’s usually the way representative government works.
On a more substantive point, once again Frum mischaracterizes the “liberal” approach to insurance exchanges. First of all, there is no liberal approach to the current healthcare reform debate, unfortuantely. Otherwise, we would be having an honest discussion of the advantages and disadvantages of a single-payer system.
Secondly, the Democratic approach to exchanges is to provide a robust public option that would compete with private insurers without the use of taxpayer funds in fashion very similar to the public option for workers compensation insurance in California. There is ample evidence in the U.S. as well as in other Western countries that a public option (or similar mechanism) is very effective at containing costs. Equally compelling is the lack of evidence that any of the conservative approaches will have any meaningful positive effect on costs.
Lastly, Frum’s reference to Obama policies that would extend coverage to “newcomers” implies that conservative approaches to healthcare reform would not extend such coverage. Yet Frum acknowledges that some of these “newcomers” are actually naturalized citizens. Do conservatives advocate healthcare policies that would discriminate among U.S. citizens based upon their country of birth? If so, conservatives do not deserve a seat at the debate table. In addition to this approach being reprehensible, it would also violate the U.S. constitution.
2 rbottoms // Oct 8, 2009 at 11:35 pm
Moan. Wail.
If only we had control of all three branches of government, then we’d show them a real conservative approach to health reform. Wait a minute…
3 greg_barton // Oct 9, 2009 at 12:54 am
Exactly.
“We’ll do the right thing…THIS TIME…”
Riiiiiiiiiiight.
4 balconesfault // Oct 9, 2009 at 4:37 am
Under the conservative approach, health insurance companies would be forced to compete for customers on price. They would have to learn to act like Wal-Mart, ruthlessly pursuing efficiency.
…
The conservative approach could leave customers who guessed wrong dissatisfied with their bargains.
Because ending up with the wrong health insurance policy when serious health problems strike your family is really a lot like buying a tent from Wal-Mart instead of REI, right?
Hmm – maybe that is a good analogue. For the 10 consumers who buy that tent, 3 or 4 will leave it sitting unused on their shelf in the garage – so they’re better served with the bargain. Another 3 or 4 will use it to go camping on nice sunny weekends where the shelter from the sun and privacy the high end tent and low end tent provide are indistinguishable – so they’re arguably better off with the bargain as well.
But 2 or 3 will either go camping in inclement weather, or THINK they’re headed out on a sunny weekend and suddenly find themself in the middle of a surprise storm … and suddenly the fact that one tent has a floor that quickly soaks through, has seams that drip, drip, drip as the rain pounds the roof, and possibly even collapses altogether when a strong burst of wind comes up … makes a really big difference.
Good thing for society that a family finding itself underserved by their insurance package has no worse ramifacations than coming home with everything soaked after a campout at the lake.
(can you tell I’ve been a Scoutmaster?
5 balconesfault // Oct 9, 2009 at 4:44 am
Sparticus: First of all, there is no liberal approach to the current healthcare reform debate, unfortuantely. Otherwise, we would be having an honest discussion of the advantages and disadvantages of a single-payer system.
Yep – the unstated fact in this debate – as with the stimulus bill (where hefty tax cuts were inserted from the beginning to replace federally directed spending) the Dems led off this discussion with a compromise from the truly liberal position.
A public option that people can buy into is already a centrist approach, serving a lot more as a cost-control mechanism (pressuring insurance companies to compete on price) in order to balance increased federal spending and mandated public spending on healthcare that will be used to move towards universality.
The public option is not necessary to guarantee universal coverage … rather, the public option is necessary to guarantee that any move towards universal coverage doesn’t just turn into a massive financial bonanza for the insurance industry that will be beavily subsizided by the public trough.
That may, as some argue, be a move towards increased socialism. But it’s also a move towards fiscal conservatism.
6 sinz54 // Oct 9, 2009 at 9:51 am
spartacusisnotdead:
Name some.
Name some countries where a public option has existed alongside private insurance plans for years in the same market, without driving the latter out of business.
7 sinz54 // Oct 9, 2009 at 10:00 am
balconesfault:
How much more can NON-PROFIT private insurers like Kaiser Permanente do, to compete on price with a government agency that enjoys the instant name recognition of the United States Government?
KP has a 30 billion dollar market. You’ve brought up reducing advertising and marketing costs, but that’s a drop in the bucket compared to the claims of such a huge market.
Besides, if you force KP to slash its advertising and marketing budgets, aren’t you making it much more difficult for KP to compete with anybody? How can any private company compete without advertising and marketing?
Your argument just doesn’t make sense. You’re demanding that private insurers hold down costs–yet you admit that running a private company is INHERENTLY more costly than running a government agency that doesn’t need to spend money on advertising, marketing, etc. Hence in the long run, how can any private company compete with that government agency?
There’s only one way: If that government agency screws up and drives away customers. That’s what happened with the Postal Service. Despite 40 years of costly litigation by the Postal Service to drive UPS out of business, they never succeeded.
Whether that will happen with this “public option” is unknown at this point.
8 SpartacusIsNotDead // Oct 9, 2009 at 10:52 am
Sinz wrote: “Name some countries where a public option has existed alongside private insurance plans for years in the same market, without driving the latter out of business.”
The Netherlands
Singapore
France
And, of course, there is the PO in the massive California Workers Comp insurance market that is self-funded, has existed for many years and has helped contain costs.
9 oldgal // Oct 9, 2009 at 11:03 am
If a public option could offer the breadth of coverage and quality of health care that Kaiser Permanente does, and that drives out private insurers, what is the problem? Why is it assumed that the public option would outperform KP when KP can be selective about it’s markets? Isn’t the cost of delivering equal care to rural communities higher than the cost of marketing and advertising?
10 hormelmeatco // Oct 9, 2009 at 11:59 am
Sinz: France. 80+% of French citizens buy private supplemental insurnace plans.
11 balconesfault // Oct 9, 2009 at 2:48 pm
sinz: Hence in the long run, how can any private company compete with that government agency?
By innovation and greater efficiency – isn’t that the primary reason for wanting to keep the private insurance providers around?
If they can’t provide better, cheaper service than the government, then why should we have government subsidize them both directly (via vouchers, tax credits, deductions, etc) and indirectly (via a mandate)?
12 derZornGottes // Oct 9, 2009 at 3:12 pm
Why is this argument set in the binary of liberal vs. conservative? Can’t we get some names behind the ideas? Or is David Frum just being lazy, not doing any journalism and just using straw man arguments to try to make a point?
13 sinz54 // Oct 10, 2009 at 9:38 am
spartacusisnotdead:
The Dutch health care system uses private insurers to provide a standardized basic package of benefits. They don’t have a government program to provide that basic package.
In fact, the Dutch health care system sounds more like the Baucus bill.
14 sinz54 // Oct 10, 2009 at 9:49 am
balconesfault:
You need to learn something about economics.
How do you suppose Fannie Mae and Freddie Mac grew so big? Because there was always this wink-wink, nudge-nudge agreement that if those GSEs got into financial trouble, the Government would bail them out. And guess what, they did, in 2008.
A government-run public option for health care will always carry with it the implicit promise of Government subsidies to hold down premiums. No private insurer can ever compete with that. Every American will know that the public option’s premiums will never rise sharply because you liberals will not allow that, no matter how much Government money it takes.
That’s exactly the situation in the package delivery business. FedEx and UPS have made tremendous investments in computerized routing and other innovations. But they can NEVER compete successfully against the Postal Service. Because the Postal Service is subsidized by its LEGAL monopoly on first-class letters, and now even by direct subsidies. As a result, the Postal Service can still offer package delivery rates that are cheaper than UPS or FedEx. In a free market, the Postal Service would have collapsed a long time ago–and the job of delivering first-class letters would have been taken over by UPS.
The bottom line is that we conservatives just don’t trust you liberals. Once you get the public option in place, you’re going to start heavily subsidizing it, driving down its premiums so as to drive the private insurers out of business. You will NEVER allow the public option to fail, or even to be less than fully successful, no matter how many trillions of dollars you’ll pour into it.
15 sinz54 // Oct 10, 2009 at 9:52 am
oldgal:
Because then the public option becomes a monopoly, controlling the market. It can then stagnate without fear of competition.
A monopoly doesn’t have to innovate. It doesn’t have to treat its customers well. It knows it’s the only game in town. It will degenerate into the same crappy service we have come to expect from other government agencies. (Would you be happy if UPS and FedEx went out of business, and you were forced to relying on the Postal Service again?)
It’s interesting how liberals like you hate private companies that become monopolies–and demand that they be broken up under the antitrust laws. But you think it’s cool that government agencies can have monopolistic power. Why is that?
16 balconesfault // Oct 10, 2009 at 3:57 pm
Sinz: A government-run public option for health care will always carry with it the implicit promise of Government subsidies to hold down premiums.
And those subsidies would be extraordinarily transparent, and subject to Congressional budget processes.
That said – do you oppose Government intervention in the insurance market designed to hold down premiums (or at least, the economic impact of premiums on families)?
17 balconesfault // Oct 10, 2009 at 3:59 pm
you think it’s cool that government agencies can have monopolistic power. Why is that?
Certainly not in all parts of the economy. Only in places where the service being provided can legitimately be labelled a public good. And what constitutes a public good will always be subject to debate in a healthy society.
18 sinz54 // Oct 10, 2009 at 8:48 pm
balconesfault:
Price controls don’t work. Any attempt to hold down prices below the natural market rate will simply result in shortages–and then rationing.
Take Medicare for example. Medicare’s reimbursement rates are so low that doctors are faced with either refusing to take Medicare patients (which a quarter of U.S. doctors now do), or cost-shifting by charging higher rates for patients with private insurance.
If the public option’s reimbursement rate is only 5% above Medicare’s rates (as liberals are demanding), the public option’s premiums will be so low that private insurers will go out of business. No matter how efficient a private insurer is, they can’t compete with a rate set artificially way below market rates. That’s why private old age medical insurance went out of business decades ago–it couldn’t compete with Medicare.
With the public option having morphed into an effective single-payer system paying only 5% above Medicare rates, we will have effectively capped doctors’ salaries and hospitals’ incomes. They won’t be able to cost-shift because private insurers won’t exist anymore. You might as well discourage tens of thousands of medical students from pursuing a career in medicine–and discourage hospitals from expansion.
Of course I want to hold down health care costs. But the only realistic way to do that is to deal with the problem of how medicine is delivered in this country. And I’ve discussed that issue many times. Not to tell doctors that they’re going to have to take pay cuts from now on, or to tell Americans that “Surprise! We’ve set the reimbursement rate for the public option so low that Blue Cross is going out of business!”
Your proposal makes no sense to anyone who understands Economics 101. It is the concoction of liberals who think they can make economics produce arbitrary results by passing laws. They should have learned a lesson from the collapse of command eonomies in the 20th century: Don’t try that again.
19 sinz54 // Oct 10, 2009 at 8:52 pm
balconesfault:
OK, give me some examples of services that CANNOT legitimately be labeled “public goods.”
Airlines? Oh, wait, European governments owned their own airlines.
Automobiles? Oh, wait, the U.S. Government owns General Motors now.
Basic materials? Oh, wait, Truman took over the steel mills once.
I would LOVE you liberals to tell us once and for all which parts of the private sector you absolutely guarantee you will never, ever nationalize.
I doubt you will though.
My guess is that you reserve the right to nationalize anything and everything if you feel the circumstances are right. No holds barred.
To you, the private sector exists only on your sufferance. Not as an economic right.
20 balconesfault // Oct 10, 2009 at 11:53 pm
sinz: Medicare’s reimbursement rates are so low that doctors are faced with either refusing to take Medicare patients (which a quarter of U.S. doctors now do), or cost-shifting by charging higher rates for patients with private insurance.
See – that’s not what I hear. I actually hear that there are many doctors who prefer doing business with Medicare – because they know that as long as they fill the form correctly, they’re going to get paid. No iterative fights with the insurer over payment that both tie up your cash flow AND require additional administration costs – it appears that there is a substantial additional overhead to private insurance, in the costs that physicians must bear dealing with a system where a main method of increasing profit is to deny coverage … often after treatment is already complete.
You might as well discourage tens of thousands of medical students from pursuing a career in medicine–and discourage hospitals from expansion.
Hospitals – perhaps. As someone else noted, it is odd that in America we’ve evolved to a system where virtually all patients demand private rooms, but that’s what the free market demands and thus provides, no matter how cost inefficient.
Students? I truly don’t believe this – I think that there is no shortage of extraordinarily talented young men and women who will continue to enter the medical profession. It is quite possible that we have created a situation via the promise of super high salaries that some of those students were crowded out of the limited number of Med School slots by others who really did choose the profession simply because of the promise of $350K/year for certain specialties.
Personally, I believe that a student with 5% lower MCAT scores and a 3.4 college GPA instead of a 3.7 – but who really wants to be a doctor because they really want to practice medicine … and not because they truly want to own an extra home in the Hamptons – has the possibility of being a much much better doctor.
As shown by the sky high bonuses and salaries for the players in our financial system … and the culpability of those players in nearly bringing the US economy to the ground last year due to a particular form of incompetence properly labelled “blind greed” … the lure of super-high salaries doesn’t always bring the best performers to a profession.
21 balconesfault // Oct 11, 2009 at 12:00 am
OK, give me some examples of services that CANNOT legitimately be labeled “public goods.”
After I wrote this, I wished for an edit function. Because I would have used the term “essential public goods”.
There are most certainly parts of the economy where the public interest would not be served by nationalization, just as there are parts where our public interest virtually demands that the service is provided by the public sector (though that does not always mean nationalization – such as fire departments).
If you truly believe that liberals want to have a nationalized auto industry, it is hard to have a sensible discussion on this. Personally, I believe that were the economy not already tottering on the edge of collapse, and the multiplicative effects of a GM collapse not possibly being the last thing needed to send us into depression, the decision would likely have been different. But I guess you’ll continue to argue that it was payoff to the unions, and we have no further common ground for discussion on that point – neither of us will cede to the other’s basic premise.
22 SpartacusIsNotDead // Oct 11, 2009 at 12:05 am
Sinz:
The Dutch system only recently switched to a system wherein private insurers provide basic coverage. For decades before that the Dutch offered a PO alongside private insurers. Therefore, my original contention that there are examples in the U.S. and throughout the world where a PO did not drive private insurers out of business remains true. If anything, the Dutch conversion to this new model only undermines your argument that a PO would drive private insurers out of business.
Equally important, you consistently ignore the example of the CA workers comp PO, which is probably the model that would resemble a healthcare PO the most. The CA WC PO is not subsidized by taxpayer money, it has not driven private insurers out of business and it has kept premiums down by serving as a true competitor. Consequently, it directly refutes every single argument you’ve made against a PO.
23 ProfNickD // Oct 11, 2009 at 2:50 am
On the issue of medical providers no longer taking Medicare — the Mayo Clinic is no longer accepting Medicare because its reimbursement rates are too low. Just Google “no longer taking Medicare” or “not accepting Medicare.” You’ll find an astounding, and perfectly understandable, number of providers tired of receiving a $325 reimbursement for gall bladder surgeries, etc.
Once again: you cannot give “free” (or, essentially free) medical service to everyone and keep the same level of care. The providers simply will simply go on strike against it.
http://www.azcentral.com/business/articles/2009/10/09/20091009biz-mayoclinic1009.html
24 SpartacusIsNotDead // Oct 11, 2009 at 11:55 am
profnickd,
Doesn’t the fact that some providers refuse to take Medicare because reimbursement rates are low only prove that the presence of a large govt program such as Medicare is not ruining the private market?
No provider is required to take Medicare; they are free to contract only with private insurers. If enough of them find they cannot operate profitably on Medicare rates Medicare will either have to raise its rates or it won’t have any providers to offer services.
25 sinz54 // Oct 13, 2009 at 10:06 am
balconesfault:
I’m still waiting for you to name some.
Like I said, you liberals consider the private sector to exist only as long as you can’t think of a good reason to take it over. Each part of the private sector exists in limbo, waiting to find out whether you can think of a good reason to take it over.
That’s your model of the U.S. economy, isn’t it?
26 sinz54 // Oct 13, 2009 at 10:11 am
spartacusisnotdead:
No. All it proves is that your liberal schemes were as yet incomplete .
The public option demanded by liberals will be mandatory on all providers. Unlike Medicare, which had that loophole allowing providers to opt out, no doctor or hospital will be able to refuse a patient’s public option card. And as originally put forward by liberals, the public option’s reimbursement rates were to be pegged at only 5% above Medicare rates.
So the Mayo Clinic wouldn’t be able to opt out of that one.
The fact that the Mayo Clinic, one of the top 10 hospitals in America, refuses to take Medicare should tell you right there that top-quality health care is more expensive than you liberals care to admit.
The obvious conclusion is that you’re quite prepared to trade off quality in health care for numbers: Give millions more Americans some health care, even if those of us with complex life-threatening illnesses that demand the best possible care will be stymied.
That’s the same tradeoff the British NHS made.
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