It is reassuring that in a country which produced HL Mencken, Homer Simpson and Mark Twain, reports of death of satire have been grossly exaggerated.
Recently, the faculty at Harvard were up in arms because their new health plan involves copayments and deductibles. With ninety cents to the dollar covered, the plan is generous by national standards, and would be rated “platinum” in Obamacare’s exchanges. It’s not as if the professors were placed on Medicaid to show solidarity with the poor.
Increased out-of-pocket contribution is the trend post health care reform. That same reform which many Harvard professors supported and some designed. This is why their revolt, an Orwellian political satire, has spread schadenfreude amongst conservatives who are enjoying Gore Vidal’s favorite words in the English Language: “I told you so.”
I can say with confidence that the present day Jacobins won’t be storming the Bastille, if cost sharing is involved. Lest the political right gets positively tumescent with schadenfreude, they should not forget “Hands off my Medicare.” That was written on a placard at a protest against Obamacare organized by the Tea Party. Said differently: “government, hands off my government,” or “you and your government, stay away from me and my government.” That’s one way of limiting government.
Satire is the most reliably bipartisan element in American politics. As well as the fact that any reform of healthcare will disappoint both Republicans and Democrats. This is the root of Obamacare’s problem: its attempt at a Pareto improvement. Named after Italian economist Vilfredo Pareto, this is policy which makes some people better off without making others worse off. A Pareto improvement was promised by the president at the launch of his signature reform. “If you like your doctor, you can keep your doctor”, he assured.
Not so. To lower costs, i.e. make health insurance more affordable, insurers limit the physicians in their network. Unlike other markets, in healthcare it is often restriction, not choice, which reduces costs. Forbidding insurers from denying coverage or raising premiums to those with known disease, and mandating free preventative services are, no doubt, humane. But someone must pick up the tab. Which means healthy professors in the Liberal Arts will pay more than if the insurers were cherry picking.
Insurance is, by definition, redistribution. Remarkably, this truism eludes many. For insurance to be meaningful, that is not have a ridiculously low ceiling of $50, 000 which can be crossed by a single air rescue or treatment of a rattlesnake bite, insurers must raise premiums.
This means that Joe will pay more. This won’t be a Pareto improvement for Joe unless he gets bitten by a snake and ruptures his spleen in a car crash. That is unless Joe gets shafted by fate he won’t get his money’s worth from insurance. What a twisted calculus.
It is important to repeatedly emphasize that insurance is not a Pareto improvement for the many that will never need it. Of course, we don’t know who will or won’t need insurance. If we did, it wouldn’t be insurance.
The cost structure of healthcare is complex, arbitrary, illogical and feral. Price of medical imaging, for example, varies by several factors between two hospitals in the same town for no better reason than “just so”. Medicare, a single payer for a large segment of the population, does not act as a monopsony (large buyer) and dictate the prices of drugs and medical devices. That would conflict with the ethos of limited government; a small step to National Socialism, according to the (il)logic of some.
The leviathanic costs of healthcare have been partly fueled by third party payers. The high costs justify high insurance premiums. High premiums sustain the high costs. Breaking this interdependence will be painful for many, in the short run.
Imposing out-of-pocket obligation on consumers does, however, lower the price and use of services of marginal need such as advanced medical imaging. Americans face a catch-22. They will be punished by the grotesque costs of healthcare. The costs can be tamed if consumers have greater financial skin in the game. This means to solve the cost disease in the long run some must bear greater fiscal pain in the short term. The questions in the short run are who bears the pain, who gains and who votes?
Someone from Harvard remarked that cost sharing is a “tax on the sick.” Indeed it is. Cost sharing disproportionately affects the sick. It is supposed to. By design. You could redistribute those costs to the well. Then the healthy will complain that they are being taxed for prudence and keeping fit. Both the sick and healthy have a point. That is the Tragedy of Commons. Everyone has a point.
In the 2012 presidential elections Democrats accused Paul Ryan of throwing granny off the cliff with his Medicare Premium Support Plan. Ryan accused Democrats of stealing from Medicare to pay for Obamacare. Both the political right and left fought to prove they can be most trusted with a government entitlement. How cute!
(BTW, the cackle you heard was Karl Marx laughing in his grave)
Recently, the Democrat governor of Vermont, the most liberal state, rejected single payer. Single payer system, such as Britain’s National Health Service, is the holy grail of progressives. Pareto struck again. The governor wanted all Vermonters to enjoy Cadillac insurance. But the governor did not wish to raise taxes. Perhaps he recalled the fate of Bush Senior who famously renegaded on his promise “read my lips, no new taxes.” If a liberal governor cannot trust progressives at the ballot to support economic patriotism, I mean raised taxes, who can he trust?
Arithmetic refused to help Vermonters. In healthcare arithmetic is elegantly simple. Between equality, choice, access, premiums and cost sharing something must submit. Harvard professors have discovered that talk is cheap. Compassion eventually catches up with personal finances.
As Republicans think of alternatives to Obamacare they would do well to read my lips. Let me parse slowly. There is no Pareto optimal healthcare reform. None. Never. Someone will be worse off. Always.
The American public deserves better than recycled Disneyland economics. Honesty, not Pareto, is the best policy.
Saurabh Jha is a radiologist who believes in the pedagogic benefits of arguing. Follow him on Twitter @RogueRad.