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Checking in on the Healthcare Debate

December 15th, 2009 · 34 Comments

I have enough of my own issues to pay attention to, so I’ve been doing my best to scrupulously ignore the running health reform debate, but in this town there are limits to what can be blocked out.  As I understand the current state of play, we will still have a mandate and a “non-discrimination” rule, which more or less abandons any pretense that insurance is about managing risk (which is to say, that it’s actually insurance).  So we’re eliminating the rationale for the role private insurance companies play in our system, but insisting that it continue to revolve around them and, even better, handing them an enormous subsidy.  What we’ve eliminated is the counterweight designed to check costs, because that part, according to a logic I completely fail to fathom, is especially socialist.

What’s remarkable about this is how naked and brazen it is. That is, I can’t come up with any remotely coherent pretext for thinking this particular policy combination makes sense on any set of background assumptions or values. (Which isn’t to say the same system with the public option was much more coherent.)  Contemplate how extraordinary that is: There’s almost always at least some fig leaf of an ideological principle or an economic argument strung up in front of even the most naked interest group grab.  But nobody seems to be even pretending this compromise amounts to anything but an open bribe to the very insurers whose existence it renders unjustifiable. I understand, and am sympathetic to, the argument for moving toward a more genuinely marketlike system.  I understand the argument for single payer. I understand the arguments for different kinds of hybrids—baseline public provision with private coverage as a supplement.  I don’t understand this at all, and I don’t understand who (but an insurance company) could be happy with it.  Progressives and conservatives are both obviously unsatisfied, but you’d at least expect that the part progressives are pissed about would count as a victory for conservatives—a move that concedes some important value to them.  Yet I can’t see any way that it is: The plan sans public option is not one whit more “free-market,” and arguably less so, to the extent one can make such judgments at such a distance from the genuine article. It just shifts some of the subsidy from the government to profit-seeking firms that can hire lobbyists.  Awesome.

This is what I think is missing from my colleague Michael Cannon’s tiff with Ezra Klein.  Michael is right that it’s a gross slander to imply that anyone who opposed some particular health reform bill must just be callously indifferent to the terrible human costs of inaction—the consequences of alternative policies are precisely the crux of debate.  But Ezra is right that this justification doesn’t work very well for Joe Lieberman, who does not appear to have some alternative reform in mind, and who does not generally seem to hold the kind of economic views that would render his opposition intelligible as a principled stand.

I admitted at the outset that I have not been paying incredibly close attention here.  Still, given how many of my friends are pundits or reporters focusing almost exclusively on this issue, I’ve probably absorbed as much information about the debate by osmosis over beers as normal people outside D.C. who are trying to pay attention. If there’s a coherent defense that could  be made of this particular Frankenstein—that is, a policy defense, not the obvious realpolitik explanation—I’d be curious to hear it.

Tags: Economics · Horse Race Politics



34 responses so far ↓

  • 1 silentbeep // Dec 15, 2009 at 5:55 pm

    “If there’s a coherent defense that could be made of this particular Frankenstein—that is, a policy defense, not the obvious realpolitik explanation—I’d be curious to hear it.”

    There isn’t a coherent policy defense of this sausage of a bill – sausage making (i.e. realpolitik) is ugly, and this is what we got out of that process.

  • 2 Reverse Stone Soup Saves Lives! // Dec 15, 2009 at 6:40 pm

    […] Sanchez finds the sausage unpalatable: As I understand the current state of play, we willstill have a mandate and a […]

  • 3 digamma // Dec 15, 2009 at 7:01 pm

    Klein’s position as I understand it is that as awful as this bill is it will save thousands of human lives every year. So this horrible bill is better than no bill at all.

  • 4 Julian Sanchez // Dec 15, 2009 at 7:14 pm

    I doubt he seriously believes that. I think the real argument for passing this bill is just that as long as you pass *something*, you can fix it more easily later, whereas failure to pass something makes reform a dead letter for another decade.

  • 5 Matters of Life and Death - Ross Douthat Blog - NYTimes.com // Dec 15, 2009 at 8:55 pm

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  • 6 Anderson // Dec 15, 2009 at 9:19 pm

    You seem to be assuming that Lieberman agrees with Klein (as, apparently, do you) that not passing the bill, and not passing an alternative, will have “terrible human costs.” I doubt that Lieberman does believe that. I certainly don’t believe it.

  • 7 LarryM // Dec 15, 2009 at 9:25 pm

    Another subtext is that failure to pass any bill would mean massive electoral losses for the dems. Which would be a montrously repugnant argument (as opposed to a merely repugnant argument) if the prospect of giving power to one of the most repugnant ideologies of the past century (movement conservatism) wasn’t so horrid.

    Mind you, I wouldn’t vote for it on that basis, but it is a subtext, and one that isn’t merely a matter of grubby thirst for power. Though of course it is that in part.

  • 8 LarryM // Dec 15, 2009 at 9:30 pm


    The point is that Lieberman (unlike you) ostensibly supports the bill (sans any sort of public option). He’s willing to kill it if it means adding a public option – which makes no sense from his particular ideological perspective. He’s no libertarian, and certainly no principled of big government benefits problem.

    And if we do get a bill it will be, pace Julian, the worst of all worlds, in large measure because of Lieberman.

  • 9 Anderson // Dec 15, 2009 at 10:28 pm


    The fact that Lieberman “ostensibly” supports the bill does not mean he believes that failure to pass it would have terrible human costs.

  • 10 Blar // Dec 15, 2009 at 10:36 pm

    If you want a principled argument for why this bill is better than other possible bills, that’s hard to do. A principled argument for why passing this bill is better than nothing is easier. Compared to the status quo policy, a bunch more people will have insurance (which is good for their health & financial security) and a bunch of changes will make the health care system somewhat more efficient. Plus, we are more likely to get future improvements to the health care system if this bill passes than if it fails.

  • 11 Anderson // Dec 15, 2009 at 11:04 pm

    Then that’s a bad principled argument, because the case that passing the bill would improve the health & financial security of a bunch more people and make the health care system more efficient is weak. And the case that those benefits would outweigh the bill’s costs is even weaker.

  • 12 southpaw // Dec 16, 2009 at 12:31 am

    Anderson, arguing by baseless assertion is fun, eh? In fact, even the cussed Lieberman does not take the position that health care reform is unneeded or unlikely to be effective.

  • 13 Anderson // Dec 16, 2009 at 2:35 am


    If you think there is a good case that passing the bill would improve the health & financial security of a bunch more people, please make it. You might want to look at the Michael Cannon post Julian refers to before you try.

  • 14 LarryM // Dec 16, 2009 at 10:10 am


    So let’s see – we have two possibilities. Either Lieberman belives failure to pass the law is going to have dire health consequences, or he supports an expensive and freedom decreasing bill that he believes will be ineffective. I’m not sure that the cyncism of the latter is a very good defense to the former. Could be true though; Lieberman is one of the least principled members of the senate, and that’s saying a LOT.

  • 15 Stuart Armstrong // Dec 16, 2009 at 11:44 am

    >That is, I can’t come up with any remotely coherent pretext for thinking this particular policy combination makes sense on any set of background assumptions or values.

    Strange – because the reasons seem to pop up time and time again in the sites I visit. Anyway, here is a condensed version:

    1) Pure market-based health insurance is broken on the theoretical grounds of partial information (used car dealerships are the closest analogy, most econ textbooks will cover those). The issue is partially solved by insurance companies, at the expense of a brutally large amount of bureacucracy.

    2) Much more importantly, the pure market approach makes the costs fall the most on the sick and the elderly. There is a moral case to get rid of this. If one accepts the moral case, most of the rest flows).

    3) Competition is good. If the element of competition can be diverted away from point 2), and the insurance companies compete only on service and premiums, this would be better than government fiat.

    4) Thus it must be made impossible for insurance companies to differentiate between customers (point 2), hence the various requirements on them.

    5) Similarly, it must be made impossible for individuals to differentiate themselves from others (point 1) and 2)), hence the mandate. 4) and 5) are parts of the same coin – one without the other makes little sense.

    6) Since some individuals are poor and 5) might be tricky for them, these get subsidies.

    You might agree or disagree, but it’s entirely coherent. It’s pretty much the only way of doing “everyone must be insured, at reasonable costs, while preserving the other advantages of the market system”. Switzerland and the Netherlands have similar systems, that work very well – these ideas did not appear out of a hat. The public option and similar issues are entirely tangential to the basic model.

    As to whether insurance companies should continue to be called insurance companies, that’s purely semantics – call them lead-lined spatulas if you feel like it.

  • 16 Julian Sanchez // Dec 16, 2009 at 12:41 pm

    Right, I understand all those points—I guess my issue, oddly enough, is with (3). At the point where you’ve decided everyone needs to get basic care as a matter of public policy, I don’t see the benefit to sticking competitive for-profit enterprises in the middle to skim off the payment pool. You’re so far from a real market that you get the corrupting influence on politics of corporate involvement without any of the actual benefits of market competition.

  • 17 Julian Sanchez // Dec 16, 2009 at 12:48 pm

    Put another way: If the beef against the public option was that it would eventually put private insurers out of business, I guess my question is… so what? What useful function are they providing at this point?

  • 18 Drew // Dec 16, 2009 at 1:23 pm

    Stuart Armstrong: the problem is that when we talk about insurance companies “competing on service and premiums” we’re talking about them keeping premiums low largely by denying claims and not accepting people who are already expected to be high cost.

    That’s basically HOW insurance companies keep premiums low, after all. And yet that’s exactly what’s least popular about private insurance companies: when they were at their most competitive, they really were pretty good at keeping costs down… and the public HATED THEM FOR IT.

    This was the basic theoretical problem with the public option. Either it was going to look like any old additional insurance company, in which case there was no point, or it was either going to approve more claims (in which case premiums would be higher, not lower) or less (in which case it would be a crappier plan. Plus = rationing! Oh no!)

  • 19 stephen // Dec 16, 2009 at 1:54 pm

    If the beef against the public option was that it would eventually put private insurers out of business, I guess my question is… so what?

    You don’t see a problem with people in private insurance pools having to subsidize a public insurance pool (with no reciprocation), only to have the public pool put the other ones out of business precisely because of the subsidy?

    Why not vouchers? Yes someone will still be skimming off of the top, but that doesn’t seem to bother us when it comes to other voucher systems.

  • 20 Will // Dec 16, 2009 at 4:02 pm

    “As I understand the current state of play, we will still have a mandate and a “non-discrimination” rule, which more or less abandons any pretense that insurance is about managing risk (which is to say, that it’s actually insurance).”
    As I understand it, the mandate tries to remedy what we all know about “health” v. “my health”: namely that *in general*, there is no way of knowing whether you’re going to get sick or not, or get hit by a car on your bike or not, but *specifically* to each of us, it’s more “oh, I’ll be fine, I don’t get sick,” and “I ride safely on my bicycle, nobody will hit me.” With the mandate, we can’t any longer claim to be invincible personally, even though we know that we have heart disease in the family and a propensity to run red lights on the bike. So it’s not really the dismantling of insurance, per se, but rather the enforcement of insurance against a risk that we all face. Some get sick, and we all get old, but if we all insure ourselves against the costs of these issues from an early age, we should have more than enough money put aside (in the form of premiums) to cover us. In fact, we should all have to pay a little less if everyone is paying into the pool: just because everyone is insured doesn’t mean that more people will get sick or require medical attention in some way or another.
    As for non-discrimination, I agree with S. Armstrong’s 2nd point that it is a valuable moral good for us as a society to take some of the burden of cost off of the sick (those with “pre-existing conditions” and the elderly), and that we should pay a little more for this moral good. But I’d imagine that all of the healthy people paying into the system (via the mandate) will more than compensate for the non-discrimination clause. I don’t know, though. Is that plausible?

  • 21 Julian Sanchez // Dec 16, 2009 at 5:04 pm

    Sorry, again: I understand the economic argument for why you have to have a mandate if you’re going to have a non-discrimination rule. The confusing part is that, having accepted those principles, you’d split hairs about further interventions, or about having the government just perform the function itself. There’s a point past which insisting on leaving some pantomime of a market in place just becomes ridiculous.

  • 22 links for 2009-12-16 « Overton’s Arrow // Dec 16, 2009 at 8:36 pm

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  • 24 Murder, He Lied » Postmodern Conservative | A First Things Blog // Dec 17, 2009 at 10:01 am

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  • 25 DavidS // Dec 17, 2009 at 1:42 pm

    Julian, isn’t this the same as the situation that would exist with school vouchers? Every parent is mandated to obtain an education for their child, parents with low income or unusual needs are subsidized, and we would have a market to compete in providing that education.

    It is true that insurance agencies will not be able to compete on their ability to forecast medical costs accurately (and, as you point out, should therefore not be called insurers). However, they still might be able to compete on convenience of filing paperwork, internal efficiencies, ability to recommend useful specialists …
    If you really think that government bureaucracies are uniquely unpleasant, I could see claiming that this was the best plan.

  • 26 stephen // Dec 17, 2009 at 1:55 pm

    Sorry about my earlier comment, upon further reflection I think you are right.

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  • 28 Will // Dec 17, 2009 at 3:52 pm

    I see your point, but I don’t think that a mandate precludes competition. For example, in California (at least) you need to have car insurance if you have a car, and there seems to be a robust market for car insurance (full disclosure: I don’t own a car, but I sure do see/hear a lot of car insurance ads, all fighting to say that they have the lowest prices, etc). I think what is most important for maintaining competition is adding new entries to the game (e.g. the now-dead public option, or other private outfits); you need companies to start worrying about their market share if you want them to start competing for said market share. Perhaps a good plan would involve making it easier to set up new insurance companies, so we avoid a calcification in number of products offered and quality of products offered. I suppose you could draw a parallel to the mobile phone industry, too: MetroPCS seems to have the best plans (no mandatory 2-year contracts for decent plans, low per-minute pricing, high perks), but everyone knows that they have a terrible network, so Verizon, Sprint, ATT, and TMobile gobble up the market share with similar customer-gouging plans. Maybe the gov. should get involved to make sure that the MetroPCSs of the health insurance industry get a chance to gain a legitimate position against the bigger companies.

  • 29 Charles // Dec 21, 2009 at 3:57 am

    The reason insurance companies need to be preserved is simply because there are more than one of them. It is Economics 101 that competition produces a better product, and that it is in everyone’s best interest that individuals be allowed to take their business elsewhere if they are unsatisfied with the product they receive. For all its faults (and there are many) the current bill at least preserves this feature of the market.

    The reason the public option is as odious as it it, is because rather than offering more “choice,” as proponents usually argue, the public option would quickly overrun the market by offering consumers (allegedly) the same care for unrealistically low prices due to the government’s ability to use tax revenues to hide the cost. Eventually private insurers would find themselves unable to compete and inevitably close down thus sending their customers into the arms of the government. The best possible outcome of this scenario is that private insurance becomes equivalent to private school, IE something only the rich or the desperate even consider purchasing. At worst, this will lead to the complete decimation of the insurance industry and a government monopoly on health insurance. This is something the far left is openly hoping for, and that is the reason the public option is so toxic for conservatives and centrists.

    This, of course, does not mean I support the bill as is. I lean towards the mainstream conservative view that what we need is tort reform and deregulation in order to bring costs down, although I break from the right in that I could be convinced to accept subsidies for catastrophic coverage.

  • 30 Barry // Dec 21, 2009 at 11:17 am

    Julian, some comments on your article.

    First, the evidence is very clear, than some form of publicly-funded universal health care does better than the current US system. There are a lot of different forms in a lot of different countries, and they all work better, except for (say) the top 10% of earners, who have the sheer buying power to afford big ticket items. This is supported by the complaints used against them: e.g., that many Canadians come to the US for treatment. I’ve seen people gasp(!?!?!?!) at waiting times for hip replacements which both ignored those who don’t get them in the US, or show no concept of normal US waiting times (I waited 7 months for mine, and I’ve got gold-level health insurance).

    Second, a big problem is that the US system, in both medicine and politics, is shockingly corrupt. We’re seeing it with healthcare reform, and in the Wall St meltdown – the US political elites have happily mainstreamed the idea that $700 billion in cash payments + $1-2 trillion $ in special Fed loans on junk assets is no reason to get all communist and break up the current system. From what I’ve gathered, it’s likely that the UK will break up/reign in The City before the US does jack to Wall St. Note – I’m not saying that the US is the most corrupt country on Earth, nor even in the top few, but we’re far higher than we like to think. The difference is that we define ‘bribe’ as less than $1 million/year to a politician, and so deliberately ignore the mass of bribery in the USA.

    Interwined in this US corruption is the US system – note that the Democratic Party not only has the Presidency, but also has taken a larger share of Congress than any party has in 40 year, on top of the failure and discrediting of the opposition party. But Obama is both not able to act like that, and is also internally constrained (note that he’s a Harvard/Chicago guy, with a White House full of the guilty economists and Wall St tools who got us into this mess).

    One result of numerous chokepoints in the political process is that many things don’t get done. Another is that to get things done, many odious payoffs need to be made (unless a particular item of business is itself an odious payoff).

    A final comment – Julian, you’re using ‘conservative’ again. What conservatives are there? The ones who supported Bush II for 8 years, and then went 47% to 53% for McCain? Now, right-wingers we’ve got plenty of, and they looooooove things which help elites make more money (like insurance companies) from the government. It’s only when the government might do something socialistic like help the non-rich that the right descovers what they call principles.

  • 31 Rationing? Did he say Rationing?! « Exile on Mainstream // Feb 3, 2010 at 4:53 pm

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  • 32 m65 // Feb 16, 2010 at 6:54 am

    good read thanks for the share. i really like the way the article is written and also the design of the website

  • 33 john diver // Mar 7, 2010 at 10:34 am

    The problem with health care in U.S. is that most of our current public servants are more interested in serving themselves than serving their constituents. There is no need to pretend to have to re-invent the wheel here. Simply model the U.S. health care system after the ones in Canada, and U.K., and Japan, and Germany! Thank you.

  • 34 Jack Spuck // Jun 22, 2012 at 6:29 am

    Hello.This article was extremely fascinating, especially since I was looking for thoughts on this topic last Friday.