And the Rest Is Just Noise

Can't we be both pleased with the positive changes of the reform bill and be dismayed that we'll still be spending twice the average of OECD countries? Nothing will be controlling copays, deductibles, annual and lifetime caps. More of us will be insured; more of us will be underinsured. With mandates to policies that have 60% actuarial values, many of us will still be vulnerable to bankruptcies driven by medical expenses. The biggest cause of excess expense and gaps in coverage is our crazy quilt of government programs and private for-profit insurance. A single, not-for-profit system to pay for our health care is the way to bring efficiency and rationality to our health care financing. Instead this reform strengthens the role of for-profit insurance, which will expand their political heft. At its core, this is not incremental change, but enshrining the basis of the status quo. States will even be forbidden to pursue waivers to create alternative funding systems, such as single payer, till 2017. I'm delighted that 30 million more of our fellow citizens will have some insurance, but this is not change I can believe in.

The Senate bill is a remarkably progressive accomplishment, especially considering that it required the support of all 60 in the Democratic caucus, many of whom certainly would not be described as progressive and who no doubt will suffer poltical fallout for that support. Whatever the shortcomings of Senate procedures, or more broadly, the make-up of the Senate as provided in the Constitution, those are the shortcomings in which the Senate operates and which had to overcome by the proponents of this legislation. Vocal critics of the legislation say it favors some over others. And it does, as does most all legislation. Most significantly, it may well produce hefty increases in the cost of individual health insurance policies for the nearly old (age 55 to 64) that are not offset by subsidies. But even if this potential shortcoming isn't remedied, those same nearly old will benefit enormously from the health insurance reforms, particularly those dealing with pre-existing conditions and annual and lifetime limits on coverage. In sum, this legislation does much more than make a few changes at the margin; it is a great leap forward in health care for Americans. And it deserves the support of every progressive.

"when employees start getting less compensation in the form of tax-free health care, and more in the form of taxable wages."

That'll be the day.

"Young people will have to pay for insurance that is, actuarially speaking, a bad deal, so that older and sicker people can get a good deal. That’s how insurance works. Fire insurance is a terrific deal for anybody whose home burns down and a bad deal for anybody whose doesn’t. The healthy and young who must overpay can be consoled by the knowledge that one day they may become the sick and old free-riders." Clearly, you do not understand insurance. Fire insurance is still a great deal for me, even though my house has not burned down. I have bought financial security related to the possibility of my house burning down. I have also protected the lender.

The vast majority of health care "insurance" is NOT insurance at all. It is a prepaid service agreement, like buying oil change coverage for your car in advance. Many health care expenses are not really insurance "risks" but are near certainties. For fire insurance, we do not know in advance which houses will burn down, but we do know that some houses are more likely to burn down (randomly) and can charge more premiums or refuse to insure them. The same should be true with health insurance. Only catastrophic coverage is insurance.

Health insurance cannot be a right because it is a service provided by others. Unless you are willing to impose unlimited transfer payments (theft by taxes) on the ever-decreasing percentage of people who pay taxes (and this abomination, or should I say "Obamanation") will impose another layer of taxes on those who are productive and pay their own way and/or enslave medical care providers, you cannot guarantee health care. There is no provision for wealth transfers in the Constitution; therefore, those who vote for Obamanation-Care (and those who voted for Medicare, etc.) are no more than uncommon criminals who have both violated their oaths of office and committed crimes against the Constitution and the taxpayers.

As far as efficiency of the system, you are at best being disingenuous. There are few if any examples of government making anything more efficient. There are and will be armies of politicians, government employees, and lobbyists who will attach themselves to the health care system like the parasites they are. How many of these scumbag Senators and Congressmen who created this disaster will become lobbyists for the health insurance industry and health care providers with 7 or 8 figure incomes?

The proposed system (and the current Medicare and Medicaid systems, not to mention Socialist Security and all social welfare programs) are both immoral and illegal. The Democrats and Obama (and most of the Republicans) are guilty of treason.

The passage of this merely incremental bill is not the "win" here. The "win" is in the concept now added to your list of benefits as a citizen: your benefits include civil rights for everyone that were once unbelievably in question; we also univeraslly agree that all children deserve an "education." We now have cemented the acceptance of the belief that everyone deserves access to health care they can afford. That wasn't written in stone or even cement before, it was written in chalk but erased by the opposition every day when the sun went down. The "if" and "why" questions are settled, let's move on to amending the "how." Clearly there are cracks to be filled, but they are now cracks, not the amorphous black hole they once were.

Isn't it ironic that anyone in there "right" mind would find dalefogden's argument ridiculous? I await his firey retort!

Dale says, "There is no provision for wealth transfers in the Constitution," and so "all social welfare programs" amount to "treason."

However, the Constitution does say that Congress shall have the power to lay and collect taxes to provide for the general welfare. This is captured in the following esoteric passage: "The Congress shall have Power To lay and collect Taxes ... to ... provide for the ... general Welfare ...."

Progressive income taxation, which taxes welathier indiviuals at a higher rate, is plainly a "wealth transfer" in the way you mean -- that is, it "redistributes wealth." Whenever we have had an income tax in this country, enacted pursuant to this constitutional authority, even the one under Lincoln, it has been progressive -- it's had brackets. And it has usually been far more progressive -- in the sense that the top bracket taxed top marginal income at a very high rate, as much as about 90% -- than it is today.

To believe that "wealth transfers" amount to treason, you'd have to believe that the progressive income tax -- which, by its nature, redistributes wealth -- is likewise treason, in which case you'd have to believe that almost every president and mainstream politician over about the past hundred years and more are traitors, for either actively or passively supporting a massive "theft" by taxes.

Dale, this is not plausible or sensible, as you must know. You can support a flat tax, as Steve Forbes did, or a national sales tax (which would still allow for some progressivity in the form proposed), without accusing everyone who disagrees with you of treason.

Meanwhile, I won't say it's treason, but it *is* really ugly to vigorously oppose anything that helps others on the sole ground that, as a matter of principle, "every last cent is mine, and you can't have it!" Nice Christmas spirit! It's also intellectually incoherent. You "own" stuff because your government guarantees your property rights. Corporations exist because governments charter them. As Barney Frank, whom you must regard as Satan himself, has said, "government is just another word for what we do together." It's not a threat to our way of life, our economic or personal liberty, or our economic system as a whole to do some things together. Indeed, all of those things depend on our doing quite a lot together.

dale....

What do you think INSURANCE is? Socialism, pure and simple. You take as much money as you can from the many in order to pay the expenses of the few. Any isurance program is predicated on the proposition that you have to collect as much money (premiums) from those least likely to need it (the young and healthy) in order to keep the cost (risk pool) as low as possible for the few who actually do use it.

Are you and your foul-mouthed minions who accuse anyone who disagrees with you of being "traitors" and "parasites" suggesting that insurance companies are treasonous institutions of socialism?

The armed forces that provide for the "common defense", all police, fire, emergency medical, municipal water and sanitation as well as the education and transportation infrastructure that allows businesses and citizens to function, thrive and profit are all socialistic in that they tax all in order to provide for all in a just, fair and cost-effective manner.

The purpose of health insurance is to prevent the average person from going bankrupt and becoming a ward of the state due to crushing medical expenses.

desertdog:

Take an econ/history course. Your understanding of insurance and basic econ is atrocious.

Insurance is a risk mgmt technique, a form of a hedge. Even you must be able to do a wikipedia search. Look it up. Has nothing to do with socialism. Been around for millenia in some form - starting with marine.

Provision of gov services that are paid for by private sector again has nothing to do with socialism. Your,causality is backwards. Private sector creates economic value first, then is able to pays taxes for Gov. services. And then about 20% of what is paid to public sector creates value,

However, I do agree with Chait. For the liberal parasites, this huge expansion of Gov. is indeed a great accomplishment. No coincidence that Dems biggest backers are trial lawyers, union members, public sector employees. More paracitic more likely to be Dems.

However, a clause in constitution 'no taxation without representation' has been triggered. Thank goodness I don't have to make my 6 figure tax payments anymore.

Mr. Rationale....

Again, you resort to childish name calling when you actually are the only clueless one here. I'm positive I have MUCH MUCH more economics and overall education than you do. Care to compare?

Don't make outrageous trash talk you cannot back up.

Let's include post-graduate history, political science, economics and business administration with the above list, too.

Whatcha got irrational.......

Don't lecture me on "risk management strategies", Mr Clueless. I am employed as a professional risk and emergency manager at a 5,000 person organization. Have been since 1981. Earn in the high 80s and pay all my taxes. Post-graduate degrees from highly regarded Jesuit universities. I am well-versed in world history, economics, political science and business administration.

Dr. Jekyll/ Mr.Rationalize

Cat got your tongue?

Where is he hiding? Did he run away?

Looks like the dog has a Ph.D from the Universitas Argumentum ad Verecundiam...

Honestly, Francisco, I am not an expert on economics, nor do I claim that my educational or professional history makes me one. My personal resume is not relevant to this discussion. I apologize for allowing Mr. Rationalize to push my buttons.

This whole discussion actually started on another TNR thread about free-market economics two days ago. A better choice of words on my part would have been "socialistic" rather than "socialism" when talking about the general characteristics of insurance, public education or public-sector infrastructure. Socialism is a stronger, more specific term that refers to the public/government ownership of all the means of production in a society. I'm getting chippy over the conservative's misuse of the term surrounding the health care debate (as well as other political issues) over the past months.

desert, no need to apologize, Mr. Rationales view point is basically summed up as Gummint bad, no gummint good. I read that other thread as well and the guy is genuinely loopy. And now we also have dalefogden, honestly, I have no idea how these people even manage to find TNR and am sure they would be much happier at Vdare or Confederateyankee, with all of the other slack jawed inbred yokels. While I agree with jhildners reply, I think it is also useless, akin to trying to teach physics to a monkey. Really, how can you possibly get through to someone who writes: There are few if any examples of government making anything more efficient. I suppose dale flies like superman through the air avoiding all public roads. Kind of reminds me of that great sketch in the life of Brian where the Judean people's front (or is that the People's front of Judea) rail against the Roman empire: Reg: All right, but apart from the sanitation, medicine, education, wine, public order, irrigation, roads, the fresh water system and public health, what have the Romans ever done for us?
Attendee: Brought peace?
Reg: Oh, peace - shut up!

This bill is the biggest snow job in the history of the Republic. It does nothing to control cost and provides new customers to the industry that are the second leading reason for personal bankruptcies.

...Earn in the high 80s...

Pehaps tmi?

But since you said it, you sound underpaid for all your described education and job responsibility.

Or am I missing a figure, as in five figures compared say to six figures or to seven figures or whatever?

I would like to take on the oft-heard belief that only the private sector creates wealth.

For example, governments invest in scientific research and development. Governments use tax dollars to support this important activity. Sometimes government directly organizes the research using its own employees and labs and sometimes it awards contracts to the private sector to do the research.

Sometimes government research is successful and creates the technology allowing for the Internet, for example.

Government research certainly produced a high value technology. In any sense of the word, government has produced wealth.

The idea that only the private sector creates wealth seems to be more an ideological belief than an economic fact.

LawrenceGulotta: "Sometimes government research is successful and creates the technology allowing for the Internet, for example"

If this is your best example...you gotta be kidding.

The government created the internet by PAYING private industry to implement a VISION. The VISION was "connect all the disparate systems together". The industry responded to the "request for quotation" with design proposals, and the government the paid the PRIVATE CONTRACTORS to implement the proposal.

It's not much better with drugs. Some government-paid researcher will discover a molecule, and through some simplistic testing, determine there may be applicability to XYZ. PRIVATE research may study public this, tweak it and optimize it. And one out of a thousand times, they may realize there's potential. But then there is billions more that must be spent to PRODUCTIZE it. And that is where the heavy lifting come in.

Make no mistake, government delivers a very, very poor ROI for innovation. It's about the worst way you can spent your money if you want to create wealth.

Chait: " It is the most significant American legislative triumph in at least four decades."

It is indeed a legislative triumph. Unfortunately, it's just that. It's legislating for the sake of legislating.

This will NOT significantly move the ball ahead in a cost effective manner.

Prior to this legislation, all we had to hear about was America spends 2X other countries, not everyone is covered, and we don't live as long.

This legislation doesn't solve these problems. Costs will rise faster than before, just as Medicare rises faster than private insurance. We will improve our coverage primarily by forcing people to buy insurance ("To those making under $200,000, your taxes will not increase. Not one dime!"), and our longevity will continue to world leading for those that have good longevity genes (eg western european and asian descent) and don't smoke.

"We must start somewhere" people say. Sure, and a great start would be to bump medicaid thresholds up and concurrently demonstrate how to "bend the curve" on existing programs. And if that can be demonstrated over the next few years, then move to a larger program.

But that's a 2 page bill. And not as exciting. I guess.

I have seen everyone comment on the "Mayo Clinic" model, yet any physician who actually has had patients go through there needs to be skeptical. My suspicion is that fancy accounting is in place there, possible looking at costs only in Rochester, and subsidized by out-of-state patients. The battery of tests and number of physicians seen is just amazing - a recent patient evaluated there had 5 MRIs, a battery of lab tests that cost over $20,000, a whole bunch of esoteric and non-validated interventional tests ("autonomic testing looking at heart rate variation with breath holding"), and over 20 physician encounters in 3 days. This is not an isolated case, but the "Mayo model." I work at a "highly acclaimed" academic institution, not quite the paragon of health care efficiency or cost-consciousness, but nowhere near as wasteful, and frankly, irresponsible as the Mayo.

Dear Seattle Engineer:

"The government created the internet by PAYING private industry to implement a VISION."

Why didn't the private sector have the Vision?

It is apple-pie naivete to conclude that the unaided efforts of private enterprise could address the pressing economic and social requirements of a Great Nation.

The notion that only the private sector creates wealth is a triumph of mythology over reality. Without government investment in infrastructure and transportation, internet, scientific research, education, law enforcement, national security & defense, medicine, drugs, safety net, space exploration, atomic science, energy, public services, housing, the private sector's ROI would be pissing in the wind.

It's land, labor, capital and government that makes the nation achieve greatness. Make no mistake about it. Go back and read your Alexander Hamilton. Your Jeffersonian simple-mindedness and Ayn Randian delusions obscure the realities of the economic system.

Every successful economy on earth is a mixed economy where government actively intervenes in the market to do the necessary heavy lifting which ROI can not accomplish by itself.

The term of art is "Request for Proposal (RFP)," and without the government's RFPs, from colonial times to today, there would be no National Greatness.

Well said, Jhilder. But I would go even further. Even a flat tax is a wealth tranfer -- it requires wealthier persons to pay more in absolute dollars than less wealthy persons. Indeed, even if every taxpayer were taxed at the same dollar amount across the board, the tax would create a wealth transfer to the extent some taxpayers consume more government services than others.

The two most important words in this essay; "technocratic reform." Please let's keep in mind the unintended consequences, complete failure to rein in costs, and vast increases in consumer dissatisfaction engendered by the last "bipartisan technocratic reforms" to the health care system, pushed by politicians as saviors to the system; the development of HMOs, PPOs , etc.

There is nothing liberal or progressive, moderate or conservative in this "technocratic" approach to "reforming" our health care system. Instead, its studied disdain for political complexity leads to a failure to fully respect the complexity of, and fully comprehend the unavoidably competing interests within, the consumer market for health care. One result is that much needed consumer reforms rely, too often, on reforming the consumer rather than the system, and too much emphasis is placed on achieving political objectives that have nothing to do with providing better, more affordable, more accessible care. Finally, this approach places too much faith in and dependence on technocratic theory untested in the real world. Technocrats are most interested in "getting something done," most especially in terms of solving political and budget problems.

But the American people don't approach health care as ideologues, we approach it as consumers. Reform will succeed or fail at the consumer level, based on how well it serves the pragmatic needs of many very different types of consumers. To date, technocratic reforms have proven less than successful.

Let me add something here, Mr. Chiat; technocrats fault those who criticize their ideas as "ideologues." This is a cop out that allows them to dismiss pragmatic criticisms rather than address them. But, as I said above, no one really, on the left, right or in the middle, judges their health care and insurance coverage as an ideologue (nor as a technocrat) -- they judge them as consumers. It's not the "left" or the "right" or the "middle" (there are no "moderates" when the diagnosis is cancer, for instance) who need to be convinced of, or will provide the judgement on, the brilliance of these reforms, it is consumers.

Tried to post this a couple of days ago but the TNR system went down for maintenance in the middle. Fortunately for me, I managed to capture it.

Happy New Year to the Staff and loyal Posters.

* * *

There is a decent chance that costs will spiral out of control as a result of this bill. One can argue that there are measures to control costs, but they are weak at best and not what we really need, which is a set or protocols and prices for what will be paid under what clinical conditions -- whether the payer is public or private. As long as insurance companies get to make money by withholding care, they will. As long as providers can assure their incomes by providing as much care as possible, efficacious or not, they will. The market cannot serve to restrain these practices, and it has not done so. Only appropriate regulatory control can do so and we are not yet at a point where such control is politically possible.

If the costs spiral out of control, that is still to the good, because there was no other possibility for achieving near universal coverage than the somewhat Rube Goldberg compromise reached. Once that coverage is in place, however, the chance that it can ever be repealed is nil. Thus, if the costs do continue to grow without bound, and if the share of our economy devoted to medical care does continue to place us at an increasing disadvantage relative to other industrial nations, the political will to deal with medical insurers and providers may ultimately emerge -- will ultimately emerge. Obama will accomplish in two steps what was impossible politically to achieve in one.

It is a brilliant achievement by Obama, overcoming the enormous obstacles placed in his path and putting us irrevocably on the path to a sane system, if only just across the threshold of that path. The Democrats tried for significant cost control; the Republicans cynically resisted, dragging right-wing Dems with them, all the while complaining that the bill was unaffordable. Their hypocrisy knows no bounds. Best case, the system created by the bill will prove affordable. Worst case, the Republicans will ultimately have no choice but to agree to the restraints they have thus far opposed.

The idea that we should refrain from starting down this path until we have a law that really works in all respects was and is the path to no place. With that constraint, there is no possibility today, and perhaps for many decades, of achieving universal, cost-effective health care. For those who believe this rhetoric, it is a lovely but useless ideal. For the rest, the argument is the worst sort of cynicism.

roidubouloi --

We "started down this path" in 1973 with the very same claims to solve the very same problems (affordability, a growing number of uninsured, etc.). In 1973, before those "bipartisan technocratic reforms" kicked in, we had 24 million uninsured. Now we have many more. Before those "bipartisan technocratic reforms" affordability was a problem, now it much, much more of a problem.

But, of course, today, as a result of those "bipartisan technocratic reforms" the insurers are much richer and more powerful than they were in '73, and play a central role in rationing care (something theydidn't do in '73).

Nothing being proposed in this round of "bipartisan technocratic reform" is designed to challenge the failed results of those original "reforms" -- only to build on them.

This is no brilliant achievement. It is just kicking the failed status quo ball down the court.

Roid

While I hope your right, I'm not 100% convinced that a major barrier has been broken. An optimist will point to previous programs such as social security that were further strengthened somewhat from the original legislation that led to the program's inception as evidence that this health care bill can lead to something better in the future. If costs continue to climb while private coverage continues to gouge consumers, it's possible that a real "public option" with some actual teeth could be born if introduced by itself in legislation without the rest of the variables for special interests to crank up the fear machine smokescreen that helped stall the reform effort this time around. But with most of the "reforms" in the House and Senate versions not due to take place until 2014, "possible" doesn't mean much to those that can't get decent care now and in the distant future.

Having access to coverage isn't even close to securing decent quality care. Go to any free health care fair and it's not at all uncommon to find that 50% to 75% of patients hoping to receive treatment have "insurance" with draconian premiums that render it virtually useless. If whatever emerges from the merging conferences knocks that number drastically down years from now, perhaps then Obama will have been deemed as having achieved a victory. I'd say at best, he and the Democrats at best avoided repeating the total disaster of 1993 where Republicans obstructed absolutely any legislative bill from even getting to a vote and eventually depressed the Dem base in the '94 mid-terms. To achieve that end, the leadership basically let Senators such as Lieberman and Lincoln, two of the biggest recipients of money from special interests against health care reform with awful approval ratings from Democratic voters in their home states, do the Republicans' dirty work for them. Allowing Ben Nelson to fleece the taxpayers in the rest of the country to subsidize Nebraska voters' free ride on the Medicaid gravy train while attempting to further impede women's reproductive rights in the process is viewed with utter contempt among many that comprise the activist base that is vital to getting out the vote in crucial races for Democrats in 2010.

It might be a victory in some abstract sense, but on the heels of bailing out Wall Street and big banks to the tune of trillions of dollars as a gift for crippling our economy, many voters who helped get Obama over the top in November of '08 were already skeptical that he'd really bring the "change" that he talked about nearly every time he opened his mouth on his campaign. I doubt anything in this bill changes that perception with them. If anything, it may risk cementing their despondency even further.

Roi --

I am sure I speak for many in welcoming you back to the TNR blogs. I learned much from you about economics in light of the economic crisis, and have enjoyed occasionally sparring with you on other issues.

I am generally persuaded by your most recent post here, but here is what I continue to not understand: When we say the new legislation will "cover" an additional 30 million people, we mean that 30 million people who currently do not have insurance (either because they cannot pay for it or choose not to purchase it even if they can pay for it) will be compelled to purchase insurance from private insurers. That will mean hundreds of billions in new revenue for private insurers. I have no problem with that per se, as long as the insurance that people are compelled to purchase is actually affordable and provides sufficient coverage that it will not end up imposing additional financial burdens on policyholders. Federal subsidies of insurance premiums purport to address that issue, but even with the subsidies, the cost of premiums, copays, deductibles and non-covered medical services could nevertheless impose substantial burdens on middle and lower middle class families. And -- without regulatory limits on premiums, a public option and/or a repeal of the antitrust exemption -- I don't understand what prevents private insurers from simply raising premiums to absorb the subsidies. Any insights?

dhurtado, very kind of you. I haven't been totally gone, just partaking sparingly. I had been studying graduate economics but finally decided to matriculate to a doctoral program. I have simply been too busy to over-indulge in TNR. Right now, I am between semesters so my addictive behavior is starting to crank up again.

It particular customers are subsidized, it increases demand for the "product" and, to some extent, one could expect a price/premium increase, at least initially. However, as insurance is a paper product (relatively little physical capacity other than clerical require), there is little obstacle to increasing supply. Hence, if, and it is quite an if, insurance markets are competitive, it should not be possible for the insurers to gobble the subsidy, particuarly since the subsidized will still be a minority of the marketplace. 30 million is a lot of people, to be sure, but only 10% of the population.

esmense,
I really have no idea what you are referring to when you say we started down this road in 1973. With what? Can you enlighten?

fultimr,
It is unclear how much of the cost that the federal government will incur actually represents transfer payments amongst taxpayers with respect to current medical expenditures -- and hence is a more or less neutral phenomenon for the economy as a whole -- and how much represents aggregate new expense for care not formerly rendered. But we can take a guess. We have a $14 trillion economy and it is commonly stated that 16% of GDP is medical care. The most that 30 million additional insureds could represent would be an 11% increase, ignoring the possibility that there is a dramatic difference in the health of the uninsured (probably worse) than the currently insured. Okay, make it 15% to account for that. 15% of 16% of $14 trillion is $336 billion. The uninsured cannot be getting no health care at present, so I am going to guess that this represents an increase in demand for services of 2/3 of this, about $225 billion per year. That is not necessarily a deadweight on the economy. Indeed, per one article here in TNR, there is reason to believe that we have too much medical capacity which is supported by paying caregivers for unnecessary services. If we can manage to utilized existing capacity more effectively (which is at least part of what the bill is designed to do), then we could be paying existing capacity to provide useful services to the currently uninsured rather than paying them to provide needless services to the insured. Knock the figure back to $125 billion. $125 billion of additional demand for services that, for the most part, cannot be imported is probably a net gain for the economy.

Everyone is right to focus on the fact that the medical care financing system is more broken than medical care itelf, although we definitely have quality of care problems too. The ultimate solution is to recognize that we do not want medical care to be a function of supply and demand; we want everyone to receive appropriate care. This means setting standards as to what must be paid for and what will not be paid for -- national standards based on good science. If we did that, allowed any boob to pay for excessive care out of their own pockets (including via premium insurance), and increased competition amongst insurers, say with federal charters so that we would have more options in each state, insurers would become simply payment agencies, not medical care managers, and things would work out.

Gotta get on a plane.

But that is precisely my question Roi. In the absence a public option and/or a repeal of the antitrust exemption, how is it that the insurance industry will be a competitve market so that insurance will be affordable to those who could not afford it up until now?

Compared to a single, not for profit system, what value do for profit insurers add?

BSemple, assume for a moment that insurers add zero value. How much do you believe their profits drive up the cost of health care?

LawrenceGullatta write: "Why didn't the private sector have the Vision?"

The private sector always has the vision. They have too many visions in fact :). The government serves to focus by being a large paying customer, often at a time when the private sector cannot find a customer.

GPS is one of the great engineering achievements of our time. It was dreamed up by private engineers and proposed to the military, who decided it'd be great to know the location of everything with such precision.

The government's role in this case is standing there with a large check, long before anyone else would stand there with a large check. That is their role with the internet too. If you want to call that the great enabler, then by all means, you can.

But don't confuse their ability to pay with their ability to innovate. To totally separate things. They do one really well, they suck at the other.

dhurtado,

I'm traveling abroad so not quite on top of this.

The short intuitive answer is that the health insurance industry cannot capture the subsidy unless it sells insurance to the people who are subsidized, and that is not everyone, only those at the lower end of the economic scale. If it raises prices to capture the whole subsidy, it cannot sell these people any insurance, as it does not today. Assume the industry is a pure monopoly. It would then, by definition, already be selling at the highest price it can without reducing its profits by reducing its sales. If cannot profitably raise prices any further. If it does not then sell to the newly subsidized, it gains nothing.

A more technical analysis suggests to me that the price will rise somewhat due to the subsidy as the demand curve shifts upward, but the insurance industry cannot capture all of the subsidy; some will be pocketed by consumers in need and the quantity of insurance sold will increase toward what it would be in a purely competitive industry.

Regardless, it is in our collective interest to have as much competition as possible in the industry so that the supply curve gets as flat as possible -- the supply is as elastic as possible and price rises as little as possible with increased demand. However, this does not address a deeper issue, the ability of insurance companies to profit by denying care and payment. We have to eliminate the ability of health insurers to do this if we are every going to have a decent system. The insurers add very little value -- the value comes from administration; the profit comes mostly from dipping (grossly improperly in my view but certainly unproductively) into the pool of funds that should be paying for care. If we eliminate the ability to dip, via a variety of devies, into funds that should go to care then health insurers can only profit by being efficient administrators. There may be some modest advantage in this over single-payer ONCE AND ONLY if the ability to deny care or payment or coverage is eliminated with universal protocols that set minimum standards for all insurers as to these matters.

Thanks for your response Roi. I agree with your last paragraph. As to insurers' ability to raise premiums to absorb part or all of the subsidies, your analogy illustrates my concern. The point at which it would become unprofitable for a pure insurance monopoly to raise its premiums would be very high indeed where, as here, consumers are compelled by law to purchase insurance. (Moreover, consumers could not "pocket" the subsidy because, as I understand it, the subsidy would be in the form of a tax credit or voucher, not cash.) There indeed may be a point at which consumers (subsidized or otherwise) might opt to take the hit of a tax penalty rather than purchase overly expensive insurance, but that seems to me a highly undesirable result -- millions of people will be overly burdened with medical insurance and medical care expenses, or will continue to be without insurance but with the burden of substantial tax penalties. I am just not grasping how putting 30 million new insurance consumers into the market -- who are legally compelled to purchase insurance -- will not result in a substantial spike in premiums and/or reduction in the scope of coverage. Particularly where, though not a pure monopoly, the medical insurance industry has many of the features of a monopoly and is not subject to antitrust laws.

Don't get me wrong. I think the bill will create enormous problems because of the conspicuous failure to regulate the health insurance companies both to control costs of care and the portion of the health care revenue stream glommed by insurers which further increases the costs. I opened by saying there is a pretty good chance of costs spiraling out of control. However, this will, I believe, finally create irresistable pressure for cost control, the thing that the corporatist senate would not permit today. From a policy standpoint, it might have made more sense to go at cost control first and then universal availability. Politically, this was impossible as "conservatives" will not tolerate regulation. But once the base is expanded, this may finally become possible.

My only point on prices is that insurers are a quasi monopoly and likely already pricing as high as they can for maximum revenues. The subsidies would have to enable others to join the pool at current prices.

You raise a good point about the mandate. If it results in significant further increases in the price of insurance to those already insured, which would surface as bigger profits as no additional cost is entailed, the pressure to control them will be that much greater.

The thing I want to be clear about is that 80% of our problems are due to the structure of health insurance; only 20% to the way we deliver health care.