I gave a talk at Hoover, encouraging those of us who are less than fans to speak up and outline the alternative to Obamacare. Podcast here.
Repeal and status quo is not enough. We need to listen, and point out how a radically freed and competitive system will address the genuine concerns that motivate many to support the law despite its flaws -- preexisting conditions, health care for the poor, outrageous cost and so forth.
The essay "After the ACA" lays it out in some detail. The talk is a lighter discussion of where we are, but emphasizes how sitting back and letting the ACA unravel will just lead to an even more expensive and incorherent system. Stand up and state the alternative.
Most excellent podcast!
ReplyDeleteAll policies being individual and portable with any tax incentive attached to the individual solves many problems. Such portable individual policies need to be available in a wide variety of designs without restrictions or edicts from above hence giving individuals the freedom to choose based on their particular time and circumstance.
The supply side restrictions need removed and robust competition based on price needs to evolve after the restrictions are removed. All price needs to be posted or estimated, in all cases, such as shopping at a department store, discounter or auto repair shop. Price must be posted and known so it can function as a signal.
The AMA, another supply side restrictor [most successful union ever in the U.S. according to Milton Friedman] needs exposed for what they are so that Jane and James Goodfellow understand exactly how the AMA is contributing to the price paid by Jane and James Goodfellow.
Technology needs to drive the price down, not up. Durable good deflation of the past several decades due to technology needs to occur in health-care as well. Hospital, clinics and other health-care providers need restrictions and past practices ended that disallow scale.
The bottom line being: politicos through the mechanism of government and their special interest minions need to end their legislative/regulatory tinkering in health-care [their supposed ultraistic endeavors] disguised as wonderful “fixes” for the benefit of the public. The tinkering being no more than a self-interested exercise that drives price up for the many, at the benefit of the few, and no so incidentally for the benefit of the politico.
I think you should expand more on your assertion regarding adverse selection not being a problem. Your whole argument is a house built on this foundation. Another issue is this: you say in your essay "sick people will pay more". But the problem with this is sickness, unemployment, poverty and lack of education are all cointegrated. Another problem is it's fundamentally unfair to ask sick people to pay more. It's similar to taxing taller people more simply because height correlates with earnings
ReplyDeleteI expanded more -- a lot more -- on both issues in "After the ACA" "Health status insurance" and more essays, all here
Deletehttp://faculty.chicagobooth.edu/john.cochrane/research/news.htm#health
Great... But why was not this something you cared about before obama?
Delete“Time-Consistent Health Insurance” Journal of Political Economy, 103 (June 1995) 445-47. I suppose now you'll complain that Clinton was president then.
Deletesorry, but where exactly in any of these do you provide any actual evidence for the hypothesis that adverse selection is not a problem ?
DeleteAnd I read "Time Consistent Health Insurance" in 1995, and was therefore pleased when you decided to blog. I just read "After the ACA", a tour de force, and I know, one hell of a lot of work.
ReplyDeleteFirst, I agree with and applaud your efforts for proposing alternatives to government health care. But I fear the battle has long been lost. The real issue is fundamental scope and powers of the state. Once you grant the state the power to improve the “general welfare” the institutional constraints weaken and self-interested players chip away at the economy increasing their market share. The question isn’t how to reform healthcare, it’s how to stop the growth of the state.
ReplyDeletep.s. Great MOOC thanks for putting the information out there.
"The question isn’t how to reform healthcare, it’s how to stop the growth of the state."
DeletePersonally I am agnostic about the correct size of government. I care about the overall well being of the populace. Restricting the size of government as some sort of goal in and of itself does not appeal to me.
The states regulate health care services. It seems to be perfectly open to those States who's politicians oppose ObamaCare (formerly known as RomneyCare and before that known as the Right's proposed alternative to single payer) to significantly reform medical services as they effect the citizens of the state. The states cannot change Medicare but the ACA is not really about Medicare so that does not matter.
Professor Cochrane should be targeting the States who have refused to expand Medicaid with his ideas of how the medical system can be improved. If those right wing / libertarian bastions are not receptive to his ideas then no one is.
Any takers?
DeleteProfessor,
ReplyDeleteI agree on your economics, but the politics is of interest. Republicans would gain credibility if their repeal votes were coupled with a replace plan. But are their any odds of the phants gaining the presidency, a filibuster proof majority in the senate and holding the house in 2016 (honestly, the thought terrifies me because we might get Krugman's war on aliens). If we except that won't happen and bipartisan support for a repeal and replace is not a viable option for a democrat (seems like political suicide), should we consider within ACA improvements. As you've pointed out countless times, the ACA is really the availability of insurance (or prepaid health care payment plans) act . While I hate it, it is the law of the land.
From your after the ACA work, we need actual CARE reform. Many of your care suggestions, whether with or without the ACA, are very good reforms. Can we relax government regulation on what qualifies as an insurance plan, allow shopping across state lines, remove the employer credit (or a dumber more implementable goal just create an equivalent personal one), go after certificates of need, increase doctor residencies (specialist spots are insanely limited by the federal government which maintains the talent and wage divide between specialists and GPs), reform malpractice, allow outsourcing (xrays can be read in India) and downsourcing (how's that for a term to allow nurses and PAs to do doctor work?), remove non profit status for firms that bear no resemblance to a non profit, support concierge medicine and cash only hospitals, force uniform (non-discriminatory) pricing ...
Is this the life long debate between first best and marginal improvements? We want a free market system, but if we accept that's not a reality (without perhaps an actual revolution), should we as economists strive to make marginal improvements on a bad system? While the roll out has been a disaster, by delaying the fine enforcement and the employer mandate, and because the subsidies pick up the entire spread between (what you "can" pay and cost), will voters revolt against it and ever support a full fledged repeal? Will voters notice their employer covered plans doubling in premiums if they're deducted from their paychecks without their approval? I am left feeling like a politician i despise who says, "sure I want to help society, but not if my opponent gets the credit".
Parth
Wow, I wish I could edit a post. *Are *Accept
Delete"Republicans would gain credibility if their repeal votes were coupled with a replace plan."
DeleteThey have no "replace" plan. The Republicans say that ObamaCare is a critically important issue that some of them were prepared to shut the government down over and they have no serious alternative to offer.
The analysis from "Freeing the market ..." seems to be headed in the right direction for fixing markets not already swallowed whole by government health programs. But I fear it gives to little recognition to the weight of the health cost problems caused by Medicare. My reading of the essay is an acknowledgement that Medicare has problems, but a strong suggestion that those problems are parallel to, perhaps separable from, those of the rest of healthcare (employer based, independent).
ReplyDeleteI think US passed that point sometime ago, as now Medicare drives the rest of the system with its one billion claims per year. Fixing HSA's, the tax laws, torts, etc are all needed, but I fear they will amount to tinkering around the edges with this elephant in the room.
See, e.g. AEI health care expert James Capretta's talk on the subject last year which illustrates the weight of Medicare on the rest of healthcare.
http://www.youtube.com/watch?v=wHMncaP6oQA
Health care and free markets do not mix very well. If they did, we would not need any reform at all. The primary reasons are the uniqueness of the health care business and corruption. For a person seriously ill treatment expenses are secondary. The most important thing is to get well. Health care providers know that and take full advantage of it. A medium-size for profit hospital CEO often makes more than the President. Because of corruption, we will never have "free markets", especially in health care business, where there is serious money to be made. One way to limit corruption is heavy regulations. In "After the ACA" you do not address corruption at all. I believe corruption distorts markets even more than Government regulations. Even in a first order approximation you cannot neglect corruption. Example: there were reports a few months ago about American Medical Association board exaggerating physicians' time spent on different procedures (basis for doctors' fees) by a factor of two (WashPost 07/20/2013). Therefore, your idea of freeing the markets will not work very well. There is no guarantee that the providers will compete instead of fixing the prices. My plan would be different. The Democrats should try to win the House and to keep the Senate next year. Then, they should extend Medicare to everybody on a voluntary basis (get rid of filibuster rule in the Senate, if necessary). This will allow the Government to control prices and provide universal insurance. Medicaid should go away. Health care is expensive. Therefore people need to start paying for their future care as early as possible. Since Medicare works for people 65 year old and older, there is no reason to worry that it will not work for younger individuals. I believe most people would join medicare, instead of buying private insurance. Some insurance companies will survive and sell supplemental policies and insurance for those who decided to opt out of Medicare. The current Medicare tax for older people should remain unaffected. The others, who join would pay higher taxes.
ReplyDelete"Health care and free markets do not mix very well" This is oft repeated, though I wonder how anyone could know this to be true. It seems to me we should try market based reforms first before we draw any conclusions.
DeleteCertainly no corruption when the government controls health care. LOL
DeleteHealth care and free markets don't mix well because in order to enforce the "right" to health care you have to trample the rights of others, such as the right to own your own labor as a doctor and charge what the market will bear.
DeleteThat is an easy choice: let's merrily trample the rights of the doctors to charge as much as they see fit.
DeleteWhere have you been for the past 25 years? It's been done. Are you merry yet?
DeleteDo more people have access to treatment? Has it reigned in health care expenditures? No, the fee cuts don't go to the public. They go to the insurance company.
"Health care and free markets do not mix very well. If they did, we would not need any reform at all. The primary reasons are the uniqueness of the health care business and corruption."
DeleteHC services are not unique to markets. Its treatment *by government* may be unique; i.e. the employer's tax exemption, the colossal entitlement Medicare, etc. Corruption certainly is not unique. These objections are covered at length in Cochrane's paper. See in particular "Shopping Paternalism" on page 21
"One way to limit corruption is heavy regulations." I would say, one way to increase corruption is heavy regulation - by adding the corruption of the State.
DeleteIt would cost less than Ocare to simply give each man, woman and child an annual deposit of $3,000 to a health saving account. Money to be spent on health care first, but any accumulation over the cost of major medical type policy and money to meet the deductible could be used for education and retirement. Each individual to shop for his own policy from nationwide market place.
ReplyDeletehttp://docs4patientcare.org/issues. Read their position papers.
ReplyDeleteMaybe we should start with reforming the most communistic part of our entire health care system, and it is huge: The federal VA.
ReplyDeleteThe VA is federally funded, federally staffed, federally housed and federally administered health care for former federal employees. The VA employs more than 300,000 and has a $150 billion budget, rapidly growing btw.
My guess is that there is a bust of Lenin in VA HQ. The Hammer & Sickle flag is on the pole outside. What is crazy is that the GOP salutes that flag every day.
Seriously, if the right-wing has principles, then Job 1 would be to give vets vouchers and eliminate the VA, thus relieving taxpayers of the need to pay 300,000 federal employees.
Right now, the message from the right-wing is that socialized medicine is a bad idea, but communism at the VA is great!
So...do we adopt the VA model for America? If it works for vets, why not for people who foot the VA bill---the income-ttax payers?
This is why it's hard to take the right seriously - Reagan created the VA. Why is it ok to have single payer socialized medicine for the veterans but not for everyone else?
DeleteYou're confusing government administered medicine (VA) with government paid, i.e. single payer. Medicare and Medicaid are largely single payer, so that a third or so of the US health system already operates as single payer. And no none of them (Medicare, Medicaid, VA) are "ok".
DeleteFunny, sitting here in Canada and just sitting through an "Understanding Your Benefits" lunch and learn at the office - i'm struck at what an afterthought healthcare is under a single payer. Its really nice, you guys should try it (instead of this endless bloviation about the power of the market)
ReplyDeleteYou are so smart, so why do you live in a barren cold wasteland with man-eating bears?
Delete"Funny, sitting here in Canada [smugly]... i'm struck at what an afterthought healthcare is under a single payer."
DeleteFunny, I had dinner a while back with some friends from Canada they were visiting the US for medical reasons. Apparently they given healthcare more than afterthought and found the average wait for a procedure of 17 weeks was not so nice. Perhaps they had read the Canadian physician who recently said, "This is a country in which dogs can get a hip replacement in under a week and in which humans can wait two to three years.""
Nice strawman, Falstaff. You can buy private supplemental insurance in Canada and have no wait times.
Delete"You can buy private supplemental insurance in Canada and have no wait times."
DeleteYes of course, which shows the absurdity of claims, such as yours, that it is "single payer" systems that make healthcare "nice" and an "afterthought" so that "you guys should try it".
Perhaps Canada's single payer heath system can come up with a cure for the chronic inferiority complex of Canadians, because it is effective at nothing else.
well, that's the point isn't it. Everyone in Canada can get access to reasonable quality care for a low price, but they may have to wait etc. But if they want to pay more and not wait, they can. seems exactly how it should be - single payer for simple stuff, and private for bells and whistles
DeleteSmart enough to live in the part of Canada that is neither cold nor rife with man-eating bears. Though if a bear did get a hold of me (always a chance), at least I wouldn't have to worry about my medical bills.
ReplyDeleteProf,
ReplyDeleteIt dawned on me that at the start of your lecture you were mocking the recommendation to enroll by phone or paper if the web site didn't work for the wrong reason. It's not that those are antiquated methods, it's that even if you go those routes the final common pathway is that someone has to enter that info via - wait for it - the web portal.
What Obamacare is? An income-transfer plan. Higher taxes on the healthier/wealthier will fund new health benefits for ordinary people. And that's how it should be.
ReplyDeleteIs there any other solution? Or we should just leave the sick and poor behind?
Maybe I shouldn't link a NYT column here, but some people here would really benefited reading it: http://www.nytimes.com/2011/03/26/opinion/26herbert.html?_r=0
One more thing: Does Professor Cochrane have any study about income inequality, poverty, etc? I've never seen a post about it, with exception of one mentioning a mistaken ridden study by Mankiw.
Regards
I know academics are not policy analysts, but shouldn't there be a dose of practical relevance in what they are saying. Are there economists writing articles titled "Retirement Savings after we repeal Social Security". At the end of the day, the Affordable Care Act is here to stay and people should be taking about policies within that system. The debate is over.
ReplyDeleteThat being said, I don't understand why some of the things the author proposed (that are good ideas) can not be incorporated into the current health care system; such as making it easier to set up a new hospital or specialized units; easing licensing; etc.
Also, I think a certain dose of honesty is here. I think , what Cochrane does not admit, is that much of the anger from conservative economists and their backers, wealthy financiers and billionaires, over Obamacare has nothing to do with these stated issues. It comes down to one word; redistribution. Obamacare is financed by higher taxes on the rich and giving the money to poor people. And this is something they don't like for ideological reasons.
Bad news. http://pjparlapiano.blogspot.com/2012/08/nursing-home-cartel-nursing-homes.html no longer exists. I tried some obvious key words in google and got nowhere. Any help?
ReplyDeleteWhooo Boy!
ReplyDeletehttp://krugman.blogs.nytimes.com/2013/12/01/inflationistas-at-bayes/
I know you hate Paul Krugman Dr. Cochrane, but I just thought I should give you a heads up!
What about the excess rents taken via pharmaceutical patents? Government-granted monopoly distorts the Rx market. And why not import doctors and nurses from other countries? I'd love to see these protectionist and harmful government regulations fall. But can we expect to see regulations that oversee public health be put back into the marketplace, when it failed so awfully before (as exposed by Upton Sinclair)? There will be regulations, the question is which ones and, importantly, who benefits?
ReplyDeleteThe president of Kaiser Family Foundation says ACA has likely induced downward pressure on costs. http://kff.org/health-reform/perspective/how-obamacare-may-be-holding-down-costs/
A proper response is obligated Dr. Cochrane http://krugman.blogs.nytimes.com/2013/12/01/inflationistas-at-bayes/
ReplyDeleteA proper response -- in all senses of the word "proper" will be provided.
DeleteThere's a typo in the last sentence of the second paragraph of After the ACA:
ReplyDelete“A market based alternative does exist, and it is realistic.”
Love your blog. A short question: When you look at Certificate of Need laws, certificates are required in some states and not required in others. Is there any analysis that statistically links higher costs to the states that have these regulations? I ask because this should be one of the "easy" changes to health care. With enough pressure it seems reasonable to eliminate this anti-competitive practice. (Yes I'm a starry eyed dreamer)
ReplyDeleteExcellent analysis and points! (I actually listened to it when you first sent the email, but I just now thought to email Chicago Tonight and suggest they have you do a segment on it. I think you could explain the core points in ten minutes or so [especially if they don't saddle you with any rude co-panelists].)
ReplyDelete