October 01, 2007

Ezra Klein had a well written op-ed in the Los Angeles Times on Sunday explaining why (for him, at least) the health care plans offered by Democratic presidential candidates are superior to those offered by Republicans. In a nutshell, Democrats think we have too little health insurance, Republicans think we have too much health care.

The plans offered by the Democrats differ in details and ambition but diagnose the problem in basically the same way: Not enough people have health insurance, and the fragmented, patchwork nature of our system for obtaining coverage leaves us to the not-so-tender mercies of insurers that have their best interests, rather than ours, foremost in mind.

The reforms flow naturally from that point. Clinton and John Edwards both propose an "individual mandate" to ensure universal coverage. Under their systems, every American would have to purchase health coverage, and a system of subsidies and tax credits would be constructed to make sure coverage was affordable. Barack Obama would channel healthcare through employers to the employed, but he doesn't build in mechanisms to ensure that adults outside the labor force are covered.

The (read: heartless) Republicans, on the other hand,

Their plans all proceed from the assumption that the problem in healthcare is that costs are skyrocketing because Americans overuse their doctors. This theory postulates that because Americans don't feel the cost of every individual treatment (because it is being paid by insurers and the premiums are being paid by employers), they demand more treatment than they actually need, spending too much and lifting the price of healthcare. The answer to this problem is simple: Make us pay for care directly rather than for premiums.

The hope is that this will give more Americans an incentive to buy their own healthcare, and in order to keep the maximum amount of the tax benefit (which is, remember, fixed), they will purchase cheaper plans that offer lower premiums and higher deductibles -- and thus introduce more price sensitivity. In other words, Giuliani proposes to fix healthcare by setting up a system to encourage Americans to buy less of it.

Actually, conservative policy wonks don't disagree that America's current system is expensive, fragmented, and, in many ways, regressive (for instance, America's employer tax deduction for health insurance gives bigger benefits to higher earners).

Of course, Klein's description of Republican plans is a bit of a caricature, because conservatives want more price sensitivity for routine health care costs to enourage competition and innovation - which presumably Klein wants too.

Klein must also know that "comprehensive" health insurance is a bit of a misnomer; no pricing system (that of the market or single payer) can give all things to all people. While private insurance rations by price, single-payer plans ration through waiting lists and other invisible mechanisms - as they do, for instance, in Canada and the U.K.

What is the response of consumers in these systems? Where they can afford it, they buy more health services on the "black market" (in Canada), travel abroad, or buy supplementary private insurance policies that allow them to "jump the queue".

In other words, the problems and challenges in health care are pretty universal. At the end of the day, conservatives think competition and choice in health care plans will drive innovation and help keep costs low. Targeted safety nets for low-income Americans (think vouchers) can help them buy affordable private plans. This is a "comprehensive" version of universal health care - just a market-driven one.

Ironically, all of the "serious" health care plans Klein likes play lip service to private insurance markets - even though, at heart, they yearn for a single payer system.

Posted by Paul Howard at October 1, 2007 03:18 PM

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