Yuval Levin and Ramesh Ponnuru respond to a few of my recent thoughts on healthcare in America. I’m really grateful for their engagement. Here’s one basic thing on which we already agree: before the ACA, we did not have a free market in healthcare. We had, as I rather crudely put it, “the most fucked-up, inefficient and inhumane socialized system on the planet.” What is encouraging about their work is that they are actually proposing something that might make that socialized system less perverse and more amenable to the power of market decisions, as well as being humane. The ACA does all that, as well, but its market mechanisms are embedded within a more elaborate government-organized scheme.
They propose a system based on the catastrophic insurance model. Let’s call it Catastrophic Plus:
We are not proposing a regime of universal catastrophic-only policies, with perhaps some supplementary coverage packages on top of that. (There have been some proposals of that sort by others.) We propose, rather, to build on today’s insurance market, in which most people get tax-preferred coverage through an employer while other people get non-tax-preferred coverage on their own, by allowing those other people to have the same benefit provided through a credit they could use to help them buy insurance.
The credit would be sufficient to pay the premium of catastrophic-coverage policies (more or less by default; if you put a huge amount of money on the table in, say, $5,000 increments that can only be used for insurance, insurers will rush to offer coverage with $5,000 premiums and adjust co-pays and deductibles accordingly). So people who now pay no premium costs and therefore have no insurance could pay no premium costs and have catastrophic coverage. Nobody would have any economic reason to forgo such coverage, while the economic reason to pursue it (to gain some protection from extreme unexpected costs) would remain in force. Protection from catastrophic costs is the core benefit that health insurance offers, and this would be a way to make it available to all. But people who now buy more comprehensive coverage in the individual market, or who would like to, would see its cost to them decline by the amount of the credit, and so could purchase it far more easily, while most people would presumably continue to receive employer-provided coverage as they do now.
What this does is retain government subsidies for healthcare insurance but equalize them for employment-based insurance and individual insurance. That’s something I would happily get behind. But one of my core worries is that these catastrophic policies would not allow for routine, preventive care – and so end up as a false economy. Here’s their response to that point:
There is no clear reason to think people would skimp on preventive care in such a system. People tend to value preventive care, and we’re just saying they should be better enabled to choose insurance options that provide what they value, and that this should be done in a way that encourages insurers and providers to seek the most efficient and appealing means of running a health care and insurance system.
The clear reason, I’d counter, is that people cannot afford it. If they only have Catastrophic Plus, the kind of care that would lower costs by preventing, say, cancer by early screening and detection, would be beyond their means. Of course, a huge amount depends on how much of a subsidy individuals could get. What’s positive about L&P’s proposal for high-risk pools for those with pre-existing conditions in the individual market is that they are not squeamish about the cost. (Here’s their model in one iteration.) But at some point, if it’s significant enough, the ACA seems preferable for the solvency of the system as a whole because of its clear minimum provisions for preventive care.
The deeper trouble, it seems to me, is that insurance as a model is a guard against low-probability but high-impact events. And yet healthcare cannot be seen simply in that way – because part of it has to be non-catastrophic. This has only gotten worse over time. As medicine has moved past the relatively inexpensive prevention or cure of terrible illness toward the much more expensive and open-ended maintenance of health and longevity, insurance remains a terribly unsatisfactory model. Except for all the others. And denying someone a treatment that could save or transform their life is qualitatively and morally different than denying them a new PS4 or iPhone.
I also totally get L&P’s desire to find some way to connect the price of this good with demand. Someone has to pay for it – and the market is a much better mechanism for figuring the best price out – and making it visible to people – than a government central plan. My problem is that this is one market where experts really do know better.
Patients-as-consumers are in a terribly weak position when it comes to knowing what goods to purchase or which ones might actually work for them at a reasonable price. And so in healthcare, consumers are very different animals than in many other sectors. There are many instances in which consumers in this market are not price-sensitive at all. What price can be put on the ability to breathe right, or survive cancer or HIV infection?
I’d add one other thought. The bigger the pool for insurance, the more robust and efficient it is. This is not an argument for socialism or collectivism; it’s a reflection on the nature of insurance itself. The advantage of the ACA’s individual mandate is that everyone gets into the same pool. The patchwork nature of L&P’s approach would not replicate that. It would have to create high-risk pools for around only four million people that are much less stable. There are, in other words, obvious economies of scale here which L&P cannot take advantage of in the same way fully national systems – for all their flaws – can.
As for restraining costs, I’d like to press them on end-of-life issues. A huge amount of the cost of healthcare is consumed in the last days of people’s lives. A nudge toward living wills could make a huge difference, and if some on the right could face down the “death panels” canard, it would be a mitzvah. Ditto on apparently small things like co-pays as a percentage of costs rather than a flat fee. What say they?
But the R&P model is definitely a serious start for an alternative if the ACA collapses under its own clunky beginning. At some point, someone in the actual Republican party is going to need to hone something like this proposal. Then we can have a more constructive debate about addressing these problems rather than a zero-sum war on the only practical reform on the table.