Monday, March 10, 2014

Goodman Plan

John Goodman has an excellent health-care piece at National Review Online. You don't have to subscribe to every element of his "plan" to appreciate many of his trenchant observations of coming Obamacare disasters. (Any "plan" that advertises it is crafted to meet perceived political constraints is bound to be less than perfect as a matter of economics.)

The slight weak point: he keeps community rating and guaranteed issue, but talks about how people need to sign up immediately or lose that benefit as they do in Medicare. I'm not sure just how he wants to do that or if that's realistic. But the big picture is right on: deregulated, individual, portable insurance.

Transferability between plans is a nice point:  "if an expensive-to-treat patient moves from Plan A to Plan B, the former has to compensate the latter for any above-average expected costs — just the way Medicare compensates private plans."

But read it for the mess we're in now. Lots of looming problems have not made headlines. Yet.


  1. I agree that he outlines some of the known and future problems problems but his solution is dubious.

    I am always leery (perhaps frightened would be a better word) of policy statements that use the word "should" and "fair" in the same context, e.g., "Fairness. Everyone at the same income level should get the same help from government when obtaining private insurance." These are dangerous words when used in a socioeconomic context and usually entail some form of socialism at the least, and occasionally incite revolutions. And I dread getting into the specifics of what's "fair". Will we use gross income or AGI? Is it "fair" that a family of four living on $50,000/year gets the same subsidy as a single person making the same amount?

    Goodman freely admits that this is a wealth transfer. I would not dismiss it out of hand, however, since what we must seek on a practical basis is reconciliation of two conflicting socioeconomic theories: (1) the socialist goal of universal health care (like it or not, this is what's coming) and (2) the pricing efficiency of a free market.

    This could be a reasonable compromise in the sense that even with a 90% subsidized system the remaining 10% cost is sufficiently high to provide incentive for most people to shop for the best price point.

    However, this is not universal health care; it is universal insurance coverage. Depending on the structure of the policy many people will still be what I call "functionally uninsured". A $5,000 deductible puts a lot of health care out of reach in a society where the median income is about $50,000. Deductibles and co-pays keep rising for employer-provided plans as well.

    I agree with portability, choice, and severing the relationship between employment and health insurance. His discussion of "universality" is interesting as he talks about "safety net" institutions, not realizing that one way to game the system is to not buy insurance and then rely on the "safety net" institutions, although who and what these "institutions" will be is not defined. Will we have a "primary care" safety net institution?

    I would love to be a fly on the wall while two insurance companies argue about the cost of the transfer of a high-risk policyholder. You'd need a new arbitration entity to handle the flood of disputes. This wouldn't be necessary if insurance companies could charge according to actuarial risk. And while they fight what happens to the patient hanging in insurance limbo?

    If we could keep it simple with just a 90% subsidy, period, and then the rest is free market it has a chance. But this is the government and the FIRE sector, so the final product will be distorted beyond recognition. Mr. Goodman has already proposed new messes to supplant the old ones. To borrow from Bastiat, the messes may differ but the messer-uppers are all alike.

  2. Goodman has a lot of good ideas, but dodges the big issue. is impolite to say it, but no health care system will work (except expensively) unless we commit to euthanasia...and if you think this is easy, look up Terri Schiavo on Wikipedia and the GOP holding a special session of Congress to keep her "alive."

    Obamacare is a flop and still doesn't talk about euthanasia, although the death panels are a step in the right direction.

    In free market, we would have better and cheaper health care, but also euthanasia. If it costs $4,850 a day to keep Grandma "alive" for two months before she dies, most families would accept opiates and euthanasia.

    Euthanasia would be a disturbing reality of free markets and health care for some. But unless euthanasia is addressed, expect health care in the USA to consume about double the GDP is does in other advanced nations.

    With our demographics, why this discussion is not being had is a mystery to me.

  3. "Any "plan" that advertises it is crafted to meet perceived political constraints is bound to be less than perfect as a matter of economics."

    And any plan that is crafted ignoring political constraints is mere self-indulgence and the preparation of it a waste of resources.

    1. I disagree. "Political constraints" often melt away, as people wake up and smell the roses -- it does happen -- or as alliances shift. The once unthinkable suddenly becomes possible, and then it's mighty helpful to have thought ahead of time of what might be vaguely reasonable, and not just politically expedient, policy. For example, welfare reform was "politically impossible" for generations. Until it wasn't.

    2. The irony here is that ObamaCare is a conservative plan implemented by a Democratic President as a sop to political constraints. But for political constraints I expect he would have gone for single payer.

      As you say, things that were unthinkable can become thinkable. In my view the status quo ante was unsustainable. The choice for the right is to make ObamaCare work or accept single payer.

    3. Or, heaven forbid, try a vaguely free market.

    4. You might be able to reduce the cost of some services with some regulatory changes. However, the market is not going to solve the problem of the poor and those with pre-existing conditions not being able to afford health care. Any solution that provides health care to the poor and to those with pre-existing conditions is going to involve a degree of state intervention which would be anathema to the libertarian / nihilist mind set.

    5. Visibly markets reduce the (true) price of goods and services and/or increase availability across the board, compared with government run or price fixed alternatives. This makes the harder problems of the poor tractable, i.e. markets don't "solve" those hard problems but make them solvable.

  4. Falstaff - In every market there is a need for some regulation. If you think that there should be no regulation then you should consider buying any pharmaceuticals you need over the Internet from China. The real debate is: what is the optimal level of regulation of the market?; combined with: how do the poor and the sick get health care (or do we just let them die as a warning/incentive to 12 year old children to make good choices)?


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