Problem II—High Costs = Poor Access
Health-care policy debates resemble the parable of the blind scholars and the elephant: Each touches a different body part and comes to a different conclusion about the animal before them.
Liberals note the tragedy of tens of millions lacking health insurance, driving many of them to get care only sporadically (leaving many chronic conditions untreated), and in the most expensive way: hospital emergency rooms. Liberals often define health reform solely as improving access to care. Generally, they wish to replace the employer-based system at least partially with taxpayer-subsidized insurance. This was the core of Obamacare.
Conservatives note the metastatic growth in health costs that has obliged employers to devote all new labor dollars to benefits and none to wages. This has stopped the economic progress of the middle class in its tracks and aggravated income inequality. Even more worrisome for the future, company funds spent on rising benefits (especially, for an aging workforce) are unavailable for investments that maintain competitiveness. So, America’s health system has become a severe handicap to U.S. companies competing in world markets. Some industries are so weighed down by health benefit costs that their companies’ CEOs—hardly statists— have publicly endorsed a larger government role as a competitive imperative to offload company health costs.
With larger market share for government has come expanded mandates as to what constitutes minimally “acceptable” coverage. Requirements that insurers cover contraceptives, mental health treatment, and gender reassignment surgery have become part of the policy agenda, first at the state level, and now in federal legislation such as the Affordable Care Act. Requirements that procedures be covered, and paid for by premiums, have long been a problem at the state level: in 2010, 2,156 mandates were in state laws. Over the past generation, the most coherent policy prescriptions, and most of the enacted reform legislation, has come from liberals: conservatives have mostly fought a losing retrograde campaign against expanding government intervention. (Some of the premises of the conservative position are factually wrong, as discussed in the next chapter.)
Rarely is the logical relationship between liberal and conservative positions acknowledged. Expanded coverage mandates aggravate the health access challenge by making insurance more expensive. Many lower and even middle-income workers have no need for the mandated services, but they are obliged to subsidize them through their insurance premiums. Young and healthy workers often opt out of health insurance, which raises the insured population’s risk level, requiring escalating premiums. So well-intentioned political efforts to make insurance more generous for those who have it prices those who don’t out of the market.
Expanded government-funded health “insurance” that goes far beyond traditional insurance functions almost guarantees high prices: because patients are not spending their own money; and because mandates can spark an insurance “death spiral,” where insurers’ price increases push less risky patients out of the insurance pool, raising costs (and therefore premiums) for those who remain.
Many liberal health reforms may aggravate rather than solve America’s health system crisis. An expanded government financing role such as “single payer” simply duplicates, and magnifies, the third party payer problems mentioned in the previous chapter. Increased subsidies may extend “access”—coverage—to many previously uninsured: about 10 million have been newly covered under Obamacare (ignoring those previously insured who switched to subsidized insurance). But instead of controlling costs, more coverage without system changes will only aggravate health inflation. And with an expanded government role, more health decisions will be made by legislatures and thus be political, not medical.
The conservative response—less government and more competition— omits some important realities, however correct it is in theory. That is the subject of the next chapter.