Deceptive Arguments Against Reform

Republicans have been vociferously opposing two key features of health care reform: universal coverage and public insurance alongside private options. Till recently they mainly combined backroom obstruction with shallow slogans like "socialized medicine" or "save taxpayers". Now they offer more detailed arguments, like in three articles appearing in major newspapers. Their objections may sound convincing but are deeply flawed.

The first of these articles is Ramesh Ponnuru's April 9 Op-Ed in The New York Times about "The Misguided Quest for Universal Coverage." He uses some clever phraseology and statistics to argue against guaranteed health coverage for all that are summarized (in italics) below, along with my comments:

• Universal coverage will not save money, but instead may cost more. The cost shifting effect of uninsured people raising premiums for everyone else is very little, and will likely be outweighed by money needed to extend proper health care to all. --- I agree with all this, but talk of a red herring. Reformers have never used this cost saving argument to push for universal coverage. Instead, they acknowledge it will take some additional resources but consider it very worthwhile on grounds of public benefit and moral responsibility. It's actually the health industry interests and their Republican allies who push this "cost-shifting" as one excuse to justify exorbitant US prices for treatment. Now, there arguably ARE two economic second order benefits of universal coverage that Ponnuru does not try to counter: (i) Timely care will avert some more serious problems, lost productivity and more costly emergency treatments. This creates some offsetting savings. (ii) A lot of waste and expense will be eliminated, associated with private insurers' trying to screen out sicker applicants, and providers trying to recover dues from uninsured patients.

• Universal coverage cannot be achieved using free market methods. It will require regulating private insurers, subsidizing them and/or introducing public insurance. --- Even if this is correct, so what? A "free market" however you define it should be a means to an end of greater prosperity and well being of the overall society. It makes no sense to bear huge burdens and inefficiencies just to maintain a convoluted concept of free market health care. And why should public insurance be banned from competing with private plans in a really free market? That said, the Dutch health care system is an example of (appropriately regulated) private insurers alone doing a good job of delivering universal care. Finally, the US already has public insurance in the form of Medicare for its senior citizens. Extending something like it for all Americans is not such a large conceptual leap.

• It's possible that money spent on universal coverage can be spent more efficiently or effectively on something else (e.g., clinics, reducing medical errors, nutrition, or even improving education.) --- No supporting facts or proof are offered that would indicate this. It's as ridiculous as saying you shouldn't treat patients in hospitals because the resources involved could just be better utilized for something else that you can't specify. Ponnuru raises other open-ended questions in his piece without offering any facts to establish the legitimacy of his concerns.

• Voters want lower health costs more than they want universal coverage. During the Democratic presidential primaries, Hillary Clinton repeatedly attacked Barack Obama’s health care plan for not covering everyone — and as you may have noticed, he survived. If Democratic primary voters are not wedded to universality, the larger public surely is not. --- First, as you may have also noticed, Obama roundly beat McCain who wanted the precise health care system advocated by Ponnuru & Co. Second, Obama was as much for universal coverage as Hillary was, and only differed on the way to achieve it. Hillary wanted to mandate that everyone had or bought coverage beforehand. Obama wanted to give people the option of obtaining it whenever they wanted it, even after falling sick. That is like being allowed to buy insurance and fix your car with it after having an accident. This of course went down very well with voters, and its problem is viability for the insurers. Third, given the economic uncertainties, even the covered Americans are fearful of losing their benefits. Most of them want the safety net of universal coverage that incidentally is already available in every developed country except for the US.

• The best way to go forward is to allow private insurers to offer any plan only to customers they want, so that they can lower prices of coverage. People with preexisting conditions or who develop chronic problems subsequently should be able to turn to the government or public funding for help. --- This is of course very convenient: private insurers cover healthy people profitably, and abandon others or make taxpayers pick their tab. It's part of the joke about Republicans wanting to privatize all gains while socializing all losses.

• People shouldn't be forced to have or buy health insurance in a free country. --- First, even in a free country you have and need laws to protect people from their own idiocy or neglect, like those requiring seat belt use in cars. Second, in humanitarian free societies the uninsured will likely still not be completely abandoned, so society and providers will incur expenses for their care in any case. For example, we have longstanding US laws requiring hospitals to provide emergency care to patients regardless of their ability to pay. So it's better and fairer to require coverage for all.

The other two Op-Eds appear in the Wall Street Journal, "The End of Private Health Insurance" of April 12, and Kerry Weem and Benjamin Sasse's "Is Government Health Insurance Cheap?" of April 14. Both make the case against public insurance being allowed to compete with private health insurers. Here's what they - and I - have to say:

• Democrats intend to game the system to precipitate -- or if need be, coerce -- an exodus to government from private insurance. Soon enough, that will be the only "option" left.
  As people gravitate to "free" or heavily subsidized care, the inevitably explosive costs will be covered in part with increased outlays to keep premiums artificially low or even offer extra benefits. --- There's no evidence at all of this sinister Democratic intent. In fact in the case of Medicare vs. the private Medicare Advantage plans, subsidies have been flowing the opposite way. Private insurers have been paid 12.4% more per member than what the government spends on its traditional Medicare patients. The Obama administration's move to simply level the payments is facing stiff opposition. And a public insurance plan can very well be like Medicare for all.

• Public insurance with its enormous buyer clout (monopsony) can force providers to accept much lower prices than private insurers and enjoy other scale economies. So private insurers cannot compete effectively, and will be squeezed out of a lot of business. --- This is correct, and only underscores the need for a strong buyer to counteract the pricing leverage of providers as a result of lack of competition and engineered scarcities (e.g., a shortage of doctors.) Whose interests should the lawmakers and government serve - its citizenry or industry interests? Why should Americans be prevented from signing up with a more efficient and cost effective public insurer just to enable costlier private insurers to retain more business? If the supply of providers is improved over time (something the lawmakers and administration should have addressed long ago) the private insurers should be able to do better.

• As more people switch to a public Medicare-type plan the providers will have to do more cost-shifting, making private plans more expensive. --- This argument is invalid for several reasons. First, providers voluntarily accept Medicare patients, and wouldn't do so if they were losing money on them. Second, Medicare payments are quite high compared to the rates in other developed countries. It's just that providers get away with charging even higher prices because of the frictions and scarcity-induced market distortions in US health care. Third, even Ponnuru acknowledges that any cost-shifting effect is minuscule - about 1.7% of private insurer premiums (I'd of course challenge even that number.)

• Public insurance will be wasteful and open to fraud, and so will actually cost more. --- These critics should make up their minds. First they attack public insurance as being too cost effective for private insurers to be able to compete. Here they say it will be so wasteful as to fritter away taxpayer dollars. Anyone seeing the numbers on Medicare vs. private Medicare Advantage will realize the public option costs less overall.

Obama seems to have rightly decided to go ahead with health reforms even if it involves bypassing a Republican filibuster though with Sen. Arlen Specter's defection that may not be necessary.