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Don't assume that mandates are cheaper
Remember Milton Friedman's arguments that a volunteer army is more cost effective than a draft? That is true even though a volunteer army has a higher budgetary cost. Paul Krugman today does not deny those arguments, but he elides them. When it comes to mandates he clearly refers to budgetary costs rather than social costs but of course it is the job of the economist to stress that social costs are what matters, not to offer up to the public a comparison of budgetary costs alone. There are lots of things we could do "more cheaply" with mandates but most of them (not all) are bad ideas. Today Arnold Kling makes the same point. Of course Friedman was persuasive on the draft so the argument can be made successfully in a public setting. Elsewhere Megan McArdle writes:
Now that you are braced for the shock, here it is: comprehensive health care program costs much, much more than the government anticipated.
If you wish to compare notes, here is Krugman's response. The piece he links to tells us: "So the “$400 million” isn’t all unanticipated and isn’t all coming from state taxpayers."
Posted by Tyler Cowen on February 4, 2008 at 09:45 AM in Medicine | Permalink
Comments
The draft thing and the medical care thing hinge on the same basic problem - our inability to reconcile taxing and spending.
Is a volunteer army less expensive? Ok, fine. Does that mean you'll actually pay for it?
Posted by: odograph at Feb 4, 2008 9:58:15 AM
BTW, has anyone put a dollar amount on the projected reduction in defense spending which would result from a universal medical plan?
It is cost shifting, yes, but it also changes the cost structure of the military when past and future medical benefits go off their books.
(They would right, you'd send everyone from the VA over to Kaiser with a voucher.)
Posted by: odograph at Feb 4, 2008 10:02:09 AM
Everyone seems to miss the bottom line: whether one has health insurance is irrelevant to the determination that they will get health care.
Providing health care is a moral obligation that our society has taken on. Let's address that issue first. If you do not accept the principle, please explain how it is moral to deny care to someone who is, for example, hurt in an accident, but does not have the money to pay for care. Perhaps we should provide the care on credit, and keep the person in hoc for the rest of his life....
As a country, we can provide health care for everyone. But do we want to?
Posted by: Allan at Feb 4, 2008 11:35:08 AM
Odograph,
Are you really assuming the money that the military currently uses for its health care benefit would end up back in the federal budget and not, as is more much likely, redirected towards more hardware procurement or increasing the number of personnel? Do you really believe the military would so easily let go of that money?
Posted by: Shaun M. at Feb 4, 2008 11:37:14 AM
"Perhaps we should provide the care on credit, and keep the person in hoc for the rest of his life...."
Actually, I'd consider that fair. You only have to pay if they keep you alive (and healthy enough to work).
But yes. Part of my Kaiser premium now goes to caring for the uninsured. (They were caught "dumping" the poor on Skid Row and told that they had to care for them.) That's ok with me, but it is a curious route to universal coverage.
Posted by: odograph at Feb 4, 2008 11:40:03 AM
Shaun, I expect everyone that now stands with their hat in their hand, in Washington, to keep their hats. They won't give them up willingly. But, as regards my first comment, and taxes vs spending, doesn't something have to give?
And I try to see the silver lining. The reason we've gone to this crazy "contractor's war" (there are no more cooks in the Army?) is that having a mere cook burdens them with too much long term benefits (including, primarily, as I understand it medical).
So with universal health care wouldn't the Army (and GM) have easier marginal decisions for employment?
Posted by: odograph at Feb 4, 2008 11:44:49 AM
I don't think Megan was talking as much as the shortfall of revenue, but a more relevant point of expenditures. It's not a matter of whether the money is going to be there (with the Borrowing Power of the Federal Government, this isn't a 'problem'), it's a matter of whether costs can be contained and cost-estimates in the long-run are accurate.
I think Krugman and Megan are talking past each other it seems. Megan seems to be concerned about the cost overrun, while Mr. Krugman is glad to point out that most of the cost-increase will be supplemented by federal taxes, as opposed to state funds.
It's cost anticipation that is concerning, because we know the money has to be taken from somewhere to pay for the programs.
Posted by: Lance at Feb 4, 2008 12:16:00 PM
Tyler-
Who would expect PK to examine Hillarity's bargain health care plan more closely? He might realize that the cheaper cost comes at the expense of drafting more subscribers into her plan. Additional subscribers who may rationally have decided that the cost of insurance was significantly greater than their expected benefit. He isn't an economist, is he?
Posted by: Rich Berger at Feb 4, 2008 12:20:05 PM
No matter the plan, do not expect the Veterans Administration to be absorbed - sacred cows of this magnitude are rarely slaughtered in Washington. And the military system is likely to stay intact (possibel exception, some dependent care).
Krugman's commentary on health care seems to be overwhelmed by his intense support of Hillary over Obama, so should we pay much attention to what he says?
And besides he is a trade economist, why should we care about his health care commentary anyway?
Posted by: save_the_rustbelt at Feb 4, 2008 12:30:01 PM
If you do not accept the principle, please explain how it is moral to deny care to someone who is, for example, hurt in an accident, but does not have the money to pay for care.
It may not be very long before we are faced with large numbers of patients whose lives could be saved by advanced technologies, such as artificial organs, which could easily cost a million dollars a patient. Construing medical care as a human right could conceivably cause that cost to exceed the entire GDP.
Car accident victims are the easy case because they're dramatic and relatively uncommon - lots of brownie points at relatively little expense. Sixty year olds with congestive heart failure aren't so easy. Where, exactly, would YOU draw the line in refusing care?
Posted by: Tony at Feb 4, 2008 12:52:36 PM
"It may not be very long before we are faced with large numbers of patients whose lives could be saved by advanced technologies, such as artificial organs, which could easily cost a million dollars a patient. Construing medical care as a human right could conceivably cause that cost to exceed the entire GDP."
You need a multi tier system. There needs to be lots of political cover for one, but thats what we have now and thats what the majority want. Right now, the bottom tier is frequently no medical care. I think you also need insurance companies in the mix to say no. For medium to large companies, most employees have no idea that their employer pays is 'self insured' regarding costs and only uses insurers as plan administrators. A brilliant outsourcing of a job that would cause companies to be despised by their employees.
Posted by: Zigurrat at Feb 4, 2008 1:04:03 PM
There are two elephants in the room. One is casually mentioned in the article:
"Government-funded costs of another part of the insurance initiative - expansion of the state's Medicaid program, called MassHealth - are also projected to grow significantly. The state is also seeking federal reimbursement for half of those expenses."
The real "crisis" in MA before the Plan was initiated was that Medicaid costs were exploding (something like doubling over a 3 or 4 year period prior to 2006) and there were no plans to do anything about this.
The second elephant is that the MA plan relies on a substantial federal subsidy (even without the cost overruns) to make it work - and a fairly sizable subsidy at that. MA also has fewer uninsured than most other states, and is generally healthier than most other states. So if this plan were to be adopted in any meaningful form at the national level, where would the "subsidy" come from? And it is not simply a matter of extrapolating MA costs, it will cost much more per person at the national level due to the different demographics.
Posted by: wintercow20 at Feb 4, 2008 1:06:34 PM
The Mass health care plan is just coming into existence and is just starting to make payments.
The reason it is more expensive then planned is that enrollment has massively exceeded projections.
This implies that the uninsured population in Mass, one of our wealthier states,
is much larger then generally believed.
So the budget problem may just be a signal that uninsured health care problem may be much larger in the US than the opponents would have us believe.
Posted by: spencer at Feb 4, 2008 1:09:39 PM
Spencer-
I don't think the Boston Globe article supports your argument -
"Even with federal backing, the state may not be able to afford the insurance initiative as designed, because the law did not make any attempt to trim wasteful health spending, said Alan Sager, a Boston University professor who specializes in healthcare costs.
Currently, 169,000 people have enrolled in the program, which is expected to cost $618 million in the fiscal year ending June 30. When it authorized the program in 2006, the Legislature estimated that about 215,000 people would eventually be enrolled at a cost of $725 million. State officials in late 2006 reduced that estimate to between 140,000 and 160,000 - a number that was surpassed last year.
"We're paying the price of our own success," said Widmer."
I think they are paying the price for low-balling the estimates. They have 169,000 enrolled, according to the article, which did not exceed the first estimates.
Posted by: Rich Berger at Feb 4, 2008 1:18:29 PM
Tyler;
I don't understand your argument at all. People are not going to regard the social costs here as costs, because they are paternalists. Enrolling people who otherwise would not enroll in health care is the whole POINT of the thing. It's not like military service. I feel like I'm missing something. Obviously I oppose mandates, but the position that 'the state has no obligation to treat those who cannot afford to pay for treatment' is not a popular one. In the network of alternatives, this seems relatively benign, given that we've already lost this battle to the paternalists. It works within the existing infrastructure and acts as a gigantic subsidy to the insurance companies. I've seen worse.
Posted by: Wilson at Feb 4, 2008 2:27:52 PM
There are social costs associated with the large number of people who cannot afford medical care. Their babies die more often, they're sick more than they should be, and they die sooner. They contribute less to the economy both as workers and as consumers. Why isn't this factored into the equation?
Posted by: Stan at Feb 4, 2008 4:23:34 PM
Wilson,
Take the State out of it.
Do we as a society have an obligation to treat those who cannot afford to pay for treatment? those who could have afforded insurance, but chose not to get it?
If the answer is no. I guess it is the end of the discussion.
If the answer is yes, how do you propose it be done (nonpaternalistically, that is)?
Posted by: Allan at Feb 4, 2008 4:29:35 PM
Why isn't this factored into the equation?
because it doesn't support their ideology.
Posted by: a person at Feb 4, 2008 5:02:54 PM
Those figures would far outstrip the original plans for the Commonwealth Care program, largely because state officials underestimated the number of uninsured residents.
Talk about perverse incentives. Unless they are very careful, there will be lots of uninsured people from elsewhere wanting to get in on the action as well. Like parents who barely speak English but who have young children who can benefit from the health care. Parents are weird that way, prepared to sacrifice lots for their kids.
Posted by: Loki on the run at Feb 5, 2008 1:06:19 PM
