Tuesday, February 20, 2007

More Thoughts on National Healthcare

OK, yesterday Mr. Tweedy published a response to my last response clearing up several things. It seems (if I've read this right) that he's not necessarily advocating a European-style "comprehensive" national health insurance plan, but more just an expansion of the current system to cover more people and more types of treatment. I get the impression he would agree that the current system is not as well planned as it could be and probably needs to be cleaned up.

More importantly, his argument seems to place more emphasis on the fact that our spending priorities are in the wrong place rather than the idea that we need to expand the overall size of the federal government so as to include a national health insurance plan:

Being able to afford the Iraq war (or rather being able to swing it) isn't a justification for believing we can afford an equivalent health care increase every five years. But it does mean that we can afford a significant fraction of it. Throw in everything else that this country should be spending less money on, and eventually I'm convinced that the amount would add up to a significant health care budget.

In principle I have no problem with this. As a Libertarian, of course I would prefer to just jettison the welfare state and let markets handle funding for basic needs. But if we must have a welfare state, then I suppose funding for healthcare makes more sense than a lot of other places we could be spending our money.

But I said "in principle." In practice it's hard to see how merely shuffling money around in the federal budget will "add up to a significant health care budget."

Now, as I've discovered this morning, tracking down readable numbers on where federal spending goes is a little difficult - becuase you get radically different pictures depending on your source. As a case in point, first take a look at the charts on Mr. Tweedy's page. This one - for FY 2007 - shows the defense spending at 8% higher than combined healthcare spending (which is nevertheless the second-largest item on the budget). And this one shows Medicare in fourth place (behind Social Security, Defense and Debt Service). However, combined healthcare spending is actually the biggest item on this chart - as "Health" accounts for an addition 10.4% of the budget on top of "Medicare." But then this one wants to show that National Defense is a full 57% of the budget! (!!!) Of course, there's also one on this page that shows "Social Security, Medicare and Medicaid" as 40% of the budget compared with Defense's 20%. Naturally, I don't know how much of 40% is Social Security, but it seems reasonable that Medicare/Medicaid comes out higher. And then, I hate to cite Lew Rockwell on anything, but this column of his contains a 2007 outlays pie chart that shows Medicare/Medicaid as the largest single item at 25% to Defense's 16%. (It should be noted that Rockwell includes this only as an example of "official figures." He goes on to "conclude" that Defense spending is much, much higher in reality.) My overall point is that I can't really find a clear source to back up my earlier claim that Medicare/Medicaid is the largest single portion of the federal budget. The numbers for federal spending are available in great detail, of course, but neither I nor, I suspect, Mr. Tweedy really has the time to go through them with a fine-tooth comb. I think it's safe to say that Medicare/Medicaid is currently a hugely expensive portion of the federal budget. Whether or not it's number one I can no longer say, but taken as a whole all these charts show that it's at least in the top three.

That being the case, it's hard to see how simply shuffling money around is going to provide us with enough to fund the kind of healthcare system Mr. Tweedy wants. The specific things he names in particular:

(i) the cost of convening to discuss dozens of nitpicky issues that are nowhere within the constitutional right of the government to legislate

Yes, but this cost can't be that high, really. We're talking money in the tens of millions, which is peanuts compared to the roughly $1trillion we would need to fund any kind of comprehensive healthcare system. Ditto this next item:

(ii) welfare hand-outs after only assessing employment status, rather than evaluating their actual willingness to work

Again, Welfare isn't really that expensive, relatively speaking - at least, not compared to Medicare/Medicaid. Food and housing are cheap.

(iii) saturation of schools with standardized testing and other controls that just make our educational system even less efficient and drives away otherwise willing and able teachers... basically the whole "no child left behind" crock

This one's definitely a non-starter. Taking Mr. Tweedy's own charts as a guide, spending on education is only roughly 4% of national income. It's hard to believe that standardized testing accounts for most of that.

I'm not saying these aren't good ideas - I'm just saying that national healtcare systems positively DWARF these things in terms of cost. In order to pay for one by just shuffling money around, we'd end up having to make significant cuts to Defense spending and Social Security spending. And these are touchy sorts of things!

Now, I'm all for just junking Social Security. It was always a dumb idea. And if we've decided to throw more money at healthcare, probably we can agree that Social Security has become less of a priority (since most old people have taken care of their housing and day-to-day expense problems by that point in their lives - it's medical bills that crush their household budgets). But of course, there are obvious reasons why we can't "just junk it" out of hat - the main one being that some people are actually counting on it. And they paid the money in in payroll taxes when they were younger, after all.

As for Defense spending, that's an even bigger can of worms. Interestingly - defense spending and medicaid spending are two things frequently flagged by the GAO for being "danger spending." Which is to say, the GAO believes that overly large portions of spending on these things gets eaten up by corruption - politicians in charge of the spending overpay their friends in the private sector to supply various things, etc. We've all read press reports on this. So it might be that we can reclaim significant amounts of federal budget money just by waging an anti-corrpution campaign. And I guess Mr. Tweedy would agree with me that this is something we should, in fact, do. But aside from that - when you talk about cutting defense spending what you're really doing is raising questions about America's role in the world and what you think it should be. If we're going to maintain the kind of presence we have in the world today, it's pretty clear that we need big guns to back it up. Of course, it's a perfectly respectable opinion to say that we should withdraw from the world; I'm a big believer in that, in fact. I wouldn't mind cutting our defense budget roughly in half and simply removing all military presence (and foreign aid money) outside our borders and outposts. But that's obviously the kind of thing that can't be done overnight and without a radical shift in policy priorities. Furthermore, I definitely would NOT support such a move just so that we can fund free healthcare for people! It's only worthwhile to me if it ends up allowing us to drastically lower everyone's taxes - especially corporate taxes - as a side bonus.

So the overall point should be clear. It's not so easy to simply shift spending priorities and magically produce the money needed to fund comprehensive healthcare. In all likelihood, any healthcare system we end adopting will involve large tax increases. So while I can agree in principle that healthcare funding should be a higher priority (if we must have a welfare state at all, I mean), in practice it doesn't seem very likely that it will turn out to be merely a matter of rearranging priorities. After all, if the charts above show nothing else, what they all agree on is that healthcare already IS a huge national funding priority. Whether it's top of a given individual list or not, it's prominently in the top three on all the sources linked. It should be obvious that a national healthcare program - even of the kind Mr. Tweedy is talking about - would be an ENORMOUS expense. Essentially, what the "make it a priority" argument boils down to is an argument that it should be the number one spending priority of the American government. But that's hugely inappropriate because governments are, in the end, mainly supposed to be the police and the military.

What Mr. Tweedy actually says is:

But I can see a fraction of that amount succeeding in subsidizing care for individuals in slightly higher income brackets than those currently eligible for Medicaid in order to do exactly what it's not doing now: encourage people to stay on their feet.

It seems to me that this only pushes the problem up an income notch. OK, fine - we expand Medicaid to include not just the poor but also the lower middle class. Now people in the middle middle class have the same disincentive to produce more wealth than the lower middle class used to. I guess after that we'd want to notch it up to include parts of the middle class too, but this just shifts the disincentive yet again. Granted, at some point in the curve the financial rewards of pricing yourself out of elligibility would be great enough that it would stay worth it (probably, if I had to guess, around the $100+k/yr range). But by that point, of course, you'd essentially have a European-style system: guaranteed healthcare for all but the very wealthy. Not to mention, "free" or even subsidized access to healthcare services stimulates demand for those services - so this behemoth will just keep getting costlier. Of course, we could add a layer of oversight as to how people are spending their money - to make sure we're not funding "nonessential" services. But there you go again getting the government involved in our daily decision-making. Finally, all this interference distorts the economy in the end. Once the government is the biggest payer for medical services (which, if I'm not mistaken, it currently is), it gets to demand all sorts of things. Whether or not it actively seeks to influence prices, that is, in effect, what it will end up doing. And so we end up with a situation, as has happened so many times in history before, where the government's fantasies about what things should cost and how much of various items there should be ends up motivating production rather than the real measure of demand that a free economy provides. Worse still, this kind of government payment actually crowds out private insurance - which provides more generous coverage than the federal government, and also more choice. The more we go allowing for people in "slightly higher" income brackets to jump on the gravy train, the less private insurance, personal choice, and ready availability of services there is.

Where do you draw the line? When does it stop? When do we stop providing coverage for "slightly higher income brackets" than the ones we cover today? I appreciate that your intention is not to create a European-style socialized medical system, but over time that is exactly what will happen (is already happening).

I think if we're concerned about providing affordable healthcare for people what we need to do instead is privatize the mixed system we have. The government is already too involved in the system, and this is why people have trouble getting affordable coverage.

But alright - in principle I have no problem with saying that healthcare should be a bigger priority, given the existence of the welfare state. What's clear to me is that this isn't what Obama, Hillary et al are selling. It's nice to dream of a government that will just expand Medicaid into a nice system that continues to involve total personal choice and all the supply advantages of the free-market system in a completely reasonable way. But this isn't what the Democrats are going to give you with their proposals for national healthcare. That simply isn't the kind of healthcare plan they're talking about, and that will become abundantly clear over the course of the next year as we hear about it in the campaign. They want a single-payer system like the one that mismanages healthcare in Canada. They won't call it that, but they'll certainly talk about "guaranteed coverage" for all Americans - which will amount to more or less the same thing. I admit I haven't seen the details of Obama's healtcare plan, but something tells me it isn't going to be at all like the fairly reasonable cushion system that Mr. Tweedy is advocating.

Of course, I guess we'll have to wait and see to know for sure.


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