Reply to Yglesias
Last week I did a post that discussed a recent NYT article on the Dutch health care system. The quotation I provided claimed that the Dutch health insurance industry is entirely private, with nothing like our Medicare, Medicaid, and VA plans. I noted that conservatives would probably prefer this approach, even with universal health insurance coverage, to what we are likely to have 5 years from now. Matt Yglesias commented on my post as follows:
The Obama plan is, in my view, sort of loosely modeled on the Swiss and Dutch systems. And it’s attracted no support whatsoever from conservative politicians. But the GOP leadership did release a health care plan, focused on deregulation of health insurance companies, that would do nothing to reduce the number of uninsured people. I think it’s perfectly fair to say that universal coverage is the issue separating the left and right. When I see conservative politicians getting behind some version of universal coverage””even something like Martin Feldstein’s plan to give everyone catastrophic coverage””then I’ll stop saying conservatives don’t care about helping the uninsured.
As far as I know Obama is not proposing that we abolish Medicare and Medicaid, so Yglesias ignored the observation that had motivated my post. I’m not saying that his appraisal of right-wing politicians is necessarily wrong (he knows much more about politics than I do.) But the clear implication of my post was that if you presented conservatives with a Dutch-style plan, i.e. universal coverage but no public health insurance at all, they might jump for it. The fact that conservatives oppose a massive increase in the role of government on top of a system that is already 50% socialized, certainly doesn’t disprove my observation.
Some conservative/libertarian bloggers have touted the Singapore plan, which has universal coverage and government subsidies for the poor. So at least among conservative intellectuals the problem doesn’t seem to be so much the universal nature of these plans, or even their subsidies, but rather the fact that proposals coming from the left in the US don’t seem to utilize market-oriented incentives to hold down costs. Of course conservative politicians are a different story from conservative intellectuals. Indeed politicians in both parties are so afraid of the powerful health care industry that any sort of sensible reforms are unlikely at this point.
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15. November 2009 at 11:44
If you’re willing to grant Yglesias authority over what conservative politicians would say about Dutch-style plans, and we’re willing to give you first person authority over what at least one conservative outside of politics thinks, can’t we reach a consensus (at least on the sociological question)? Given that conservative politicians would oppose such a plan, why does the meta-question of whether conservative non-politicians might support it matter? Why not just advocate the plan, if you support it? Perhaps (if you had started earlier) you might have gotten some liberal politicians to listen to you.
15. November 2009 at 11:53
Yglesias makes the false assumption that people without insurance want to be helped.
Some of them qualify for Medicare/Medicaid but do not enroll. Some of them can afford insurance, but choose not to pay.
He is also wrong in just waiving away the thought that deregulation wouldn’t decrease the number of people without insurance.
15. November 2009 at 12:07
Just this past week I found out that a Canadian friend of mine is in Mayo Clinic being treated for a life threatening illness. He’s there because his ‘universal coverage’ meant a six week wait for a doctor appointment in Ontario.
He was well aware of what his options were because his father had faced the same thing a few years earlier; he couldn’t keep any food down. The Canadians put him on a waiting list for tests. Fortunately, they could afford to get him down to Minnesota where he was tested one day–and diagnosed with stomach cancer–and operated on the next.
That’s what ‘universal coverage’ means. You pay taxes all your life, being told it’s for medical care when needed. Just hope you don’t need it.
15. November 2009 at 13:41
I think the difference in broad outlines between the Singapore health system and the current US reform proposals is actually quite limited – the fact that libertarians approve of the Singapore model suggests that they should support the current reform as steps in the right direction, even if the steps are not big enough.
Singapore has required savings dedicated to health care, and you can use your required savings to buy health insurance – most do. The difference between that and an individual insurance mandate is limited.
In Singapore, insurance programs are approved by the Government and then put in a single marketplace for everyone to buy from. This sounds like the health-insurance exchanges being proposed. These exchanges are a critical market-based mechanism for holding down costs, opening up national insurance competition on the exchanges.
In the Singapore exchange, there is a Government-run insurance plan, similar to the “public option” proposed for the US exchanges.
If you cannot afford the insurance plans from your mandatory savings, you are subsidised by the government until you can afford it. This sounds very much like the subsidies in the current proposals.
Indeed, in many ways Singapore is more “left” than the US would be post-reform. There the government has at least as strong direct price-controls as there are here. Also, in Singapore about half of the hospitals are directly owned by the Government.
I think that if you could offer the Democrats the Singapore system without any political backlash for the radical nature of the change, they would generally jump at the opportunity. Most of the limitations of the current reform and differences from the Singapore plan – keeping an employer-centric insurance model instead of moving everyone to the exchange, refusing to reform Medicaid and Medicare and the public option at once so that everyone could buy into a general government plan, a Medicare-option-for-all – is a result of fear of backlash from forcing people to change insurance. If Republican politicians were willing to join the Democrats in a bipartisan plan based on Singapore, so that all politicians had political cover for forcing a strong change, I think it would do well.
But of course there is no such political will, and so we have a marginal reform proposal that commentators recognising the need for strong change are disappointed with. But if you want to move towards Singapore, there seems to be a strong argument that you should support the Democratic reform-proposals.
15. November 2009 at 13:48
beamish, I never mentioned conservative politicians in my post, nor is that my interest. That’s what Yglesias is interested in, not me. Conservative politicians respond to three things; one is special interest groups, another is voters, and the other is conservative intellectuals.
And I am certainly not willing to give Yglesias authority over what conservative politicians believe, nor did I say anything of the kind. I said his political views were not necessarily wrong. But his political judgment is not very useful if he doesn’t even understand the argument I was making. I wish people would read what I write, not what they think or wish that I had written.
My post was an obvious retort to Krugman’s argument that conservatives who oppose Medicare and Medicaid are Neanderthals. Ok, so what about Holland? Why do people on the left think we need Medicare and Medicaid? Yglesias never addressed the issue raised in my post. Indeed Yglesias gave his readers a very misleading impression of what my post was all about. My political conclusions seemed odd without the context of the Medicare/Medicaid discussion, which Yglesias never mentioned.
Yglesias says Obama’s plan is similar to the Dutch plan. Fine, shall we go all the way and eliminate Medicare and Medicaid? Somehow I think he’d be horrified with the thought. I doubt he’d view that outcome as “similar” to the Obama plan. Indeed the left in this country does not really support EU-style health care. That would mean 50 separate plans in 50 separate states, just as the EU has 27 plans in its 27 members. That’s what I’d like to see, EU-style health care, i.e. decentralization.
If we are going to have an intelligent conversation about health care we need to consider the more free market-oriented plans in Holland, Switzerland and especially Singapore. I see no evidence that the left is even willing to think about these approaches. Sure, conservative politicians are often clueless, but that comes with the territory of being a politician, it has little to do with them being conservative.
Chris, I agree.
Patrick, I recently had dinner with a British professor who had an absolutely hair-raising story about his wife’s suffering under the NHS. She experienced months of severe pain and nearly died. Something that would have easily been taken care of in this country. The point isn’t that we don’t also have horror stories, the point is that the horror stories that liberals point to with US insurance failures don’t prove anything. There are horror stories in every country. The real failure of our system is not quality, it is cost, which is far too high.
15. November 2009 at 14:29
beamish, I never mentioned conservative politicians in my post, nor is that my interest. That’s what Yglesias is interested in, not me. Conservative politicians respond to three things; one is special interest groups, another is voters, and the other is conservative intellectuals.
Right. You’re talking about what conservative intellectuals and Dutch conservative politicians think, and Yglesias is talking about what American conservative politicians think. Thus, the two of you are talking at cross-purposes. I hope at this point that you and I aren’t talking at cross-purposes.
Thanks for telling me what your plan would be. If the point is federalism here is for the sake of experimenting to find the best policy, why not just use foreign examples as our laboratories?
(Ross Perot in the 1992 presidential debate: “We’ve got the most expensive health care system in the world. It ranks behind 15 other nations when we come to life expectancy and 22 other nations when we come to infant mortality. So we don’t have the best. Pretty simple, folks, if you’re paying more and you don’t have the best, if all else fails go copy the people who have the best who spend less, right?”)
15. November 2009 at 17:09
beamish, Actually the point of federalism isn’t just to find the best policy, there is also better governance at the local level. The Dutch tend to broadly agree about what type of system they want, although obviously they squabble over details. America has huge ideological gulfs between states like Texas and New York. It seems to me that this results in sensible reforms being blocked by various special interest groups, and a jerry-built system gradually emerges that nobody likes. It is worse than a free market, but also worse than a well–run Northern European social insurance model. 16% of GDP, and 45 million uninsured. If we fill in all the gaps, and everyone gets insurance, we’ll have European-style taxes with far inferior services.
The analogy is our Acela “fast train.” It only goes 60 mph because special interests keep us from emulating what the Europeans have achieved–straight railroad tracks. That’s what I fear about health care reform. We’ll get the worst features of the European system without the best features (low cost.)
KTM1, I don’t see the systems as being at all similar, but I’m no expert on health care so I’ll just address a few broad issues. My understanding is that the Singapore government spends about 1.2% of GDP on health care, and our government spends at least 6% of GDP, maybe more. If the left agreed to the Singapore system I’d be glad to let them set it up anyway they wanted, with whatever insurance system they wanted (private or government) as long as:
1. Our government spent less than 3% of GDP on health care (presuambly it would be for insurance subsidies for the poor (I realize we could never hit their 1.2%, we’re too inept.)
2. People could opt out of everything except catastrophic insurance via HSAs (as in Singapore.)
3. No special tax breaks for employer insurance.
The reason I don’t care how health insurance is set up is because I don’t like anything other than catastrophic insurance anyway.
15. November 2009 at 19:04
Prof. Sumner,
I’m not sure if your reply to me was supposed to hang together as a single argument, but if it was, I don’t think it does. The relative superiority of European and Japanese trains is mostly explained by the greater amount of money that their governments put into trains, not by the inefficiency of the federal government. (Right?)
Even if the federal government is worse at administering social programs that the typical government of the typical developed nation, it doesn’t follow that the government of Texas would do a better job than the government of the United States. Surely this is an empirical question, and not an a priori one.
We agree, I think, that most European, Japanese, and Singaporean public health care policies are better than the present U.S. policies. (I think we agree that even if recent congressional proposals are passed that will still be the case.) Our system is more decentralized than any of theirs. Everyone else carries out government health care administration at the level of the nation-state, while we leave a lot of health policy to the states. Isn’t that evidence against your recommended solution?
15. November 2009 at 19:53
Robin Hanson gives evidence that we should prefer local government.
16. November 2009 at 06:17
beamish, You said;
“I’m not sure if your reply to me was supposed to hang together as a single argument, but if it was, I don’t think it does. The relative superiority of European and Japanese trains is mostly explained by the greater amount of money that their governments put into trains, not by the inefficiency of the federal government. (Right?)”
Completely wrong. There is no way that you could build a straight track from Boston to NYC, powerful special interest groups would block it. We have a very different political system from the French. Without a straight track, double-tracked and electrified, you can’t do fast trains. Try ramming that through the backyards of upscale Connecticut homes, and also woodlands and marshes. Both the environmentalists and the rich would be opposed. That’s a powerful combination. And don’t say the tracks can go around these things, they must go straight to be fast.
There is lots of empirical research that decentralized governments provide services more efficiently than large centralized governments. I just saw a very respected study that looked at Italy, for instance.
Your last point about the nation-state is a non sequitor. The reason decentralization works well is that the governmnets are smaller, not because there are more units within any given nation state. There are few health care systems centralized as Medicare and Medicaid. They are far bigger than the three countries I cited. Singapore is a very small place, equivalent to a US state. That’s one reason they are more efficient. In addition, even the private parts of our system are massively distorted by the tax break for employer health insurance. And that is a federal policy. It encourages people to buy health care through company plans, not out of pocket or out of HSAs.
TGGP, Thanks.
16. November 2009 at 07:23
Completely wrong. There is no way that you could build a straight track from Boston to NYC, powerful special interest groups would block it. We have a very different political system from the French. Without a straight track, double-tracked and electrified, you can’t do fast trains. Try ramming that through the backyards of upscale Connecticut homes, and also woodlands and marshes. Both the environmentalists and the rich would be opposed. That’s a powerful combination. And don’t say the tracks can go around these things, they must go straight to be fast.
But:
1. Just because there are good reasons and corresponding interests to oppose high speed rail doesn’t mean that something’s gone wrong with American governance.
2. Even if it did, this wouldn’t show that rail should be left to the state governments, since the same interests would be in play.
3. Even if it did show that rail should be left to the state governments, that wouldn’t show that health care should be left to the state governments, since rail is different from health care. State governments should do some things and the federal government should do others.
There is lots of empirical research that decentralized governments provide services more efficiently than large centralized governments. I just saw a very respected study that looked at Italy, for instance.
I’ll grant the relevance of the study of Italy, if you grant the relevance of the Italian health care system. if you are committed to the view that Italy is like an American state, you could revise your view and say that you think both Italian and American health care policy should be under the control of cities and towns.
Your last point about the nation-state is a non sequitor. The reason decentralization works well is that the governmnets are smaller, not because there are more units within any given nation state.
Maybe there’s an optimum population for these things and maybe the important thing is sovereignty. If there is an ideal population, about where is it? Is Germany (pop. 81 million), too big? Is Cyprus (pop. 790,000), too small? Is California (pop. 37 million), too big? Is Wyoming (pop. 530,000), too small? Or is the important thing just that you don’t go over 100 million?
Anyway, it’s wrong to leave this at the level of rhetorical questions and I grant that some parts of health care policy ought to be left to the state and local level, and I don’t really know which parts. I also think that abolishing Medicare and hoping that the states fill in the gap is a recipe for death and disaster.
I do like the ‘Perot plan’ of examining different health care systems in different countries, picking the one that works best, and adapting that to the American scene. Maybe it’s Singapore, maybe it’s the Netherlands, and maybe the adoption of those systems to the US will require a lot of decentralization. But the basic framework ought to be set up at the highest governmental level or (I think) the policies and the powers of the Federal government will get in the way and nothing will get done quickly or right.
There are few health care systems centralized as Medicare and Medicaid. They are far bigger than the three countries I cited. Singapore is a very small place, equivalent to a US state. That’s one reason they are more efficient.
Medicaid isn’t a centralized system. It’s run by the states. Would comparing the relative efficiency and popularity of Medicare and Medicaid count as evidence for you?
In addition, even the private parts of our system are massively distorted by the tax break for employer health insurance. And that is a federal policy. It encourages people to buy health care through company plans, not out of pocket or out of HSAs.
Well, right. But that’s just a mistake that the federal government made and doesn’t really show anything about the level at which health policy should be made. (One piece of health care policy that ought to be made at the federal level: abolish the tax break for employer health insurance.) Most nation states don’t make that mistake. Indeed, I would bet that most governmental groupings over population 100 million don’t make that mistake.
Eh. I don’t really feel like arguing. You can ignore all this if you like. It’s not offered in a hostile spirit. The point of my initial comment was that you and Yglesias weren’t really disagreeing. I don’t think you’ve got really well developed views about what should be done about health care in the US, and that’s fine.
16. November 2009 at 11:50
The whole public option debate seems to me to be a red herring. There are some serious problems with the U.S. health care debate that no one is addressing. The employer-centric nature of insurance makes coverage spotty and dependent on an arbitrary condition – employment. Tax deductibility of insurance but not health care means we get cover-everything insurance plans. The FDA cripples drug innovation and their high fees raise the price of prescription drugs (see: http://www.fdareview.org/). I would actually prefer a universal coverage scheme, but keep market incentives as intact as possible. I’m young and healthy so I don’t care much about current health care, but I want health care to be good in 30 years. That means lots of innovation and competition. I think that medical tourism is a very good thing, and as more countries develop good health care systems, people will move around to be treated. The intersystem competition may serve to incentivize countries to develop good systems.
16. November 2009 at 19:51
beamish, The rail example was just an analogy, not an argument. You are right, it would not be a persuasive argument for decentralization. My point is that many liberals seem to have a blind faith in the fact that socialized medicine will work here just because it works in Europe. But it won’t work here, indeed Obama has no serious proposal to reduce health care costs from 16% of GDP to 10%, so there isn’t even an expectation that the plan will work. It’s just a bandaid on a deep wound (another bad analogy.)
By the way, I am well aware of the fact that we couldn’t get a sensible plan through Congress.
I have some other posts on decentralization, before this crisis there was quite a bit of evidence coming in that smaller countries did better than bigger countries. The big European countries like Germany, France, Italy, and the UK were gradually being passed in per capita income by some of the smaller countries. Admittedly the crisis set back Ireland and Iceland, so I think it is still and open question.
Yes, I’d say Wyoming is far better governed than California. Elsewhere I arged that New Hampshire is the most successful state, even adjusting for demographics.
I’m not quite sure about what your asking about Italy, but I probably wouldn’t be able to give you a very satisfactory answer in any case. I’ve advocated breaking the US up into 50 countries, and forming an “American Union” like the EU. Things like the income tax would be set at the local level. this would lead to what those on the left call a “race to the bottom” but I prefer to call a “race to the top.” We’d have a much simpler tax system tilted toward consumption taxes. States could decide on what health care system works best. Say what you want about our health care system in Massachusetts, but far more blacks and hispanics choose to move to Houston than Boston, as the same liberalism that results in relatively good social indicators makes it far too expensive for low income people to actually live here. I think it is an open question as which system is best.
Regarding Medicaid, true decentralization means that you raise the taxes at the local level, and make decisions on coverage at the local level. As long as there is a large federal role in Medicaid, it is not a truly decentralized system. I know little about health care, but I’d guess there are more complaints about Medicaid. States would have an incentive to cut benefits since they pay part of the cost. Is that right?
If we have to have a federal system, and you are probably right that it is inevitable in the short run, then there is merit in the Perot approach.
You said;
“Eh. I don’t really feel like arguing. You can ignore all this if you like. It’s not offered in a hostile spirit. The point of my initial comment was that you and Yglesias weren’t really disagreeing. I don’t think you’ve got really well developed views about what should be done about health care in the US, and that’s fine.”
That’s true, I have a few broad principles, such as that I’d prefer to pay out of pocket and not argue with insurance companies, or pay their salaries. But I’m a monetary economist, not a health economist. I think we actually agree on many points, such as the desirability of getting rid of the employer tax break.
azmyth, A compromise might be a Federal single payer catastrophic plan, financed by taxes. Then give individuals the choice between HSAs and medical insurance for the smaller expenses. Perhaps with some subsidies for those too poor to pay even smaller expenses.
18. November 2009 at 18:21
As a matter of accurate reporting, Obama doesn’t really have a proposal beyond “insure everyone, reduce medical expenditures and make it all revenue neutral.”
How Yglesias sees that as similar to any country’s plan I don’t know.
18. November 2009 at 18:53
Bababooey, I suppose he’s referring to the plans being kicked around in Congress, but I agree with you. If Holland has no governmnet insurance–not even Medicare and Medicaid–that doesn’t sound very much like where we are going.
20. November 2009 at 13:39
Scott — I think this is the craziest thing you’ve ever written: “But the clear implication of my post was that if you presented conservatives with a Dutch-style plan, i.e. universal coverage but no public health insurance at all, they might jump for it.”
No, they would not. Not the conservatives in the Congress. They have been completely unhelpful of any movement toward universal.
Back to monetary policy…
20. November 2009 at 13:40
Remember, Congressional Republicans are saying they are opposed to any reductions in the growth of Medicare spending… so, in fact, I think you are more wrong on this than you know…
26. November 2009 at 06:32
Thorstein, I was thinking of conservative intellectuals, not Congressmen. Congressman of both parties will do what they think is required to get re-elected.
But I do think that if Dems decided to replace Medicare and Medicaid with a private plan, the Republicans would go along. Recall that they tried to “gut” Medicare under Gingrich. Their current support for M&M is just political posturing, not their true feelings.
30. November 2009 at 01:20
The main problem with government health care right now is that we are in a recession. This plan will increase taxes while putting several huge health insurance companies out of business. So in an economy that is falling we are adding more taxes while putting millions more out of work. Not a good idea.
1. December 2009 at 12:47
“The main problem with government health care right now is that we are in a recession. This plan will increase taxes while putting several huge health insurance companies out of business. So in an economy that is falling we are adding more taxes while putting millions more out of work. Not a good idea.”
It’s not a good idea at all, though the government has rarely been apt when it comes to the prioritization of their spending have they? I’ve come to expect disappointment and frustration when it comes to this.