Monday, March 3, 2008

Action on health care

I'm running up the old red flag today to mark the first installment of a series I call Sensible Things Congress Won't Do.

Back when I taught economics, I liked to present my students with this conundrum: when there are necessary services that the private sector won't provide because they're not profitable, government steps in to provide them. If they should happen to become profitable, government hands them over to the private sector. That's called privatization.

So it follows that anything government does must lose money -- with the costs coming out of our taxes. Well, think about this: wouldn't it make sense for government to get involved in a few things that make money, to offset its losses? That way our taxes wouldn't have to be so high.

My students always thought that sounded like a pretty good idea. "Then," I would ask, "why don't we do it?"

As usual, I would have to answer my own question: "Because that would be socialism!"

Now, what about health care? A clear majority of Americans support the idea of a government run, single-payer health insurance system -- erroneously called socialized medicine by its opponents. It's not socialized medicine, of course, it's just socialized insurance -- and we already have that. It's called Medicare.

Ideologues on the right would love to eliminate Medicare, but there's a good reason Lyndon Johnson was allowed to sign it into law. The elderly and the disabled have a nasty habit of needing medical treatment a lot more often than other Americans. Private insurers are not in business to pay out benefits; they're in business to collect premiums. They don't want to insure the elderly and the disabled -- except for those able to pay vast sums for the privilege.

So, in keeping with our national custom of privatizing profits and socializing losses, the government stepped in -- and something amazing happened. Medicare developed into an extremely efficient and effective enterprise. Its biggest problem is a client pool of people who need far more medical care than the general population.

To me, the answer is simple. Despite the red flag flying at the top of this post, I sincerely believe in competition. I just think it has to be real competition, not some oligopolistic division of the spoils. In keeping with that belief, I believe Medicare should have a chance to compete in the marketplace with private insurers.

The first step is to allow large private employers to buy into Medicare to provide their workers with health insurance. Not burdened with advertising costs, mammoth executive salaries, or stockholders demanding dividend checks, Medicare should be able to offer employers significant savings over private insurers while still collecting more in premiums than it pays out in benefits. On average, the pool of participants would become younger and healthier, so average per-person benefits paid would be reduced.

Gradually, smaller employers also could be included, as well as various kinds of affinity groups -- including groups for uninsured individuals and families that could be organized by state governments or by non-profit social welfare agencies. Each time the pool of Medicare clients expanded to include more of the young and healthy, profit margins would improve -- and the payroll taxes that currently support Medicare could be reduced. Also, each time Medicare expanded, its bargaining power with the health care industry would be strengthened, further reducing costs.

Private insurers, of course, would be encouraged to compete by offering better benefits or (far less likely) lower premiums. Private supplementary plans, similar to those purchased by many current Medicare recipients, undoubtedly would be quite popular. Insurers who were unable to compete successfully would go out of business. After all, that's capitalism.

None of this is in conflict with the Obama or Clinton proposals for health care reform. If employers and individuals are to be required to purchase health insurance, there's no reason that insurance shouldn't be Medicare. If we're going to subsidize uninsured individuals and families, there's no reason those subsidies shouldn't go right back into government coffers instead of into corporate accounts.

The key to all this is that it presents us with more choice -- Americans would be able to choose either a government program or one of many private insurance plans. If the critics of big government are right, and government never does anything as well as the private sector, then the private sector will triumph. The super-salaried CEOs will prove their worth, and Medicare will shrink back to where it began -- or wither away entirely. On the other hand, Medicare just might prove itself a more robust competitor than the private insurers, and evolve into the single-payer system most of have wanted all along.

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