19 March 2010

Why I think congress should not pass the health care bill

This is out of place, but I am going to weigh in on the issue nonetheless. I believe that the current health care bill facing Congress should not be passed for the following reasons:

1) It mistakes the fundamental problem with American health care. The problem with health care in America is not that people don't have insurance, it is the very insurance system itself. Just as one would not expect to use one's car insurance to cover routine maintenance on one's vehicle, the fact that we use insurance to pay for routine preventative health care creates a massive inefficiency in the American health system. Health insurance should only be allowed to cover major expenses; as a matter of economic fact this will force down prices for routine procedures. Instead, by putting even more money into the picture, the bill will necessarily drive up health care prices.

2) The rhetoric with which the current legislation is being pushed suggests that the insurance companies are some sort of evil force. While I think ideally health insurance should be severely curtailed or abolished, the rhetoric is misplaced populism of the most dangerous variety: the average profit margin range for a large insurance company is somewhere between 3.8 (Aetna) to 7.3 (Wellpoint). These are not unreasonably large profits; consider that in the case of Aetna a relatively small increase in expenses could easily turn the profit into a loss. The biggest problem with the rhetoric is that it blinds the public to the truth of the matter, which is that the bill simply cannot do anything to drive down insurance premiums. Again, this is a matter of economic fact - if we increase the demand for health care services by some 30 million persons without instantaneously increasing the supply (impossible given the lengthy schooling doctors require), the result must be either an increase in price or a shortage of health care.

3) The bill's proposed 3.8% investment income "medicare" tax is ill-conceived. First of all, it is not actually a medicare tax; it is instead compensating for the fact that the bill is raiding the already underfunded medicare fund to decrease its overall effect on the federal deficit. Secondly, the price will encourage persons subject to the tax (higher-income taxpayers) to invest and save less, which is precisely the opposite of what the government should be doing to encourage job growth. In my view it would be much better for the economy if they raised taxes on ordinary income instead of on capital gains and dividends.

4) The bill requires all taxpayers to purchase health insurance. Something about the federal government requiring all citizens to give money to private corporations does not seem right to me. I'm not really sure where in the constitution we can detect this right; and while I'm hardly a strict constructionist, I do not think it is a good precedent to be setting. Consider how completely new it is - while the government necessarily spends tax proceeds to purchase services from private entities, it has never required its citizenry to patronize some particular class of business.

For these reasons, I do not believe that the health care bill should pass congress. It does not address the actual problem (the perpetually rising cost of health care); in fact, by throwing more money at the problem it is explicitly exacerbating the problem since it is removing the incentive for anyone to find a cheaper way of doing things. While it seems increasingly likely that it will pass, I do not think even five years from now anyone will think it was a very good idea.


Der Wolfanwalt said...

Just as a point of curiosity, how do you think that prescription drugs should be handled?

I should say that I agree with the vast majority of what you are explicating here. The idea of having to have insurance to cover a physical is somewhat ludicrous to me. However, there are certain things that do come up as expensive that might be categorized as routine medical care. Drugs, due to the R&D costs associated with finding a viable chemical that can be safely brought to market, are one of these, and it seems like there should be a separate way to address them.

Sebastian said...

There is no easy way to deal with the issue of prescription medication. However, drug costs only end up being about 10% or so of overall health care spending, so we may just have to accept that this area will be expensive and try and make cuts where such cuts will be effective. It may be worthwhile to do some work at the FDA in terms of streamlining drug approval and allowing terminally ill patients to voluntarily opt-in on untested experimental drugs that might save their lives (such trials are difficult to run now for legal reasons).

Clipstock said...

Those damn legal reasons...