Matthew Holt

Health “reform”: Lest we forget…

6a00d8341c909d53ef0105371fd47b970b-320wi There’s been a lot of hand-wringing and b.s. discussed about the comparatively minor health reform that’s snaking its way through Congress. And when I say comparatively minor I mean it. Mostly because there’s lots this legislation doesn’t do.

1) There’s no significant reform of how we pay for health care—even though Orszag, Obama et al want it, and maybe Rockerfeller will inject the “MedPAC as Federal Health Board” into the end result….but I doubt it.

2) There’s no significant change in how we raise money for health care. Employment-based insurance stays as it is. Medicare and Medicaid basically stay as they are. Even if there are NO revenue sources for extending care to the uninsured, it’s still only a roughly a 5% increase in the cost of health care. If you hadn’t noticed we get that increase every year anyway! (By the way CBO actually scores the economics as being significantly better than that).

3) There’s no significant tax increase. Well the apologists say so, but the proposed tax increase on very high earners is trivial compared to how well they’ve done in the last twenty years. The chart below shows the share of overall earnings since the 1980s.

Note that those in the top 1% have done by far the best and it’s those in the top 0.1% responsible for most of that gain!(Note: I’ve lost the great blog post from which I stole this—can someone tell me where it comes from?) Margalit tells me it comes from here, but the exact chart I'm using comes from a different post by the same author at Afferent Input and the one I use is relative income distribution instead of absolute relative growth. But the message is the same.


Can anyone say with a straight face that there’s a) no money in that top 1% to pay for greater social equity, or b) that economic redistribution hasn’t gone the other way in the last thirty years? I will grant that the pay or play tax on employers may be a trifle more problematic, but I don’t hear much bleating about that. And anyway, it’s only a levelling of the playing field between businesses that provide health care now and those that don’t.

So what does this legislation do?

1) It basically reforms the individual and small group insurance “markets” so that the general dysfunction for the poor suckers forced to buy their care there and the abuses inflicted upon many of them will (I hope) be eradicated.

2) It gives subsidies so that the uninsured can potentially afford it when they are forced to buy in. (I view the public plan option fight as a big distraction and at least a couple of smart people agree with me)

Commonwealth reminds us this morning why that matters. 73% of people trying to buy an individual policy couldn’t or didn’t buy one. Longtime THCB readers won’t need a lecture from me about what’s wrong with the individual and small group market.  But the only really significant part of health reform so far for me is that AHIP has been pressured into agreeing to give up its current model for that market in exchange for getting tens of millions of more customers. And of course there need to be subsidies (that’s the $100 billion) so that people who don’t get health benefits from their employers, can afford it. And I worry greatly that those subsidies will not be enough. But for what is a minor reform of the health care system—and far less than we need—this is not a bad outcome.

Of course we’ll be back here in a few years because the fundamental problems of the health care system—employment-based insurance & fee-for-service medicine—will remain whatever happens this summer. And they continue to be a recipe for disaster. Although of course it’s a disaster that has lots of supporters.