Well that's weird by mattsteinglass
August 25, 2009, 6:05 am
Filed under: Uncategorized

Having looked over Megan McArdle’s proposal for health care reform, I think I agree with its basic outlines. I agree with scrapping the tax break for employer-provided health insurance. I disagree with the idea of scrapping community rating and guaranteed access. When Megan notes at the end of her post that she might support a universal mandate, for example, I don’t understand how it’s even possible to have a universal mandate without guaranteed access. How can you demand that sick people buy insurance when private insurers are allowed to refuse to cover them?

Megan’s solution for the problem of unaffordable health care premiums for people who are sick, or likely to become so, is a reinsurance system that would reimburse insurers for customers whose costs rise above a certain level, perhaps $50,000 or $100,000, or 10-20% of annual income (lower for lower incomes). This would make it attractive for insurers to insure even people who are likely to get very sick, since their liability will be limited. Presumably when Megan says a “reinsurance system” she means a government-funded reinsurance system, since this is obviously a loss-making enterprise. Alternatively, it might be a mandatory kitty that all insurance companies need to pay into, but that would raise the cost of premiums and be effectively indistinguishable from a community rating system, which Megan says she doesn’t want because it pushes up premiums. Anyway, I would be curious to see the numbers. How much would it cost for the government to cover all health care costs that go above a lifetime $50,000 or $100,000 limit, or over 10-20% of annual income? Megan says this would be cheaper than the current reform proposal. I have no idea whether that’s true; it does not seem at all self-evident.

The other reason for confusion about this proposal is that Megan says she opposes health insurance reform because she is afraid that once government spending tops 50% of all spending, cost controls on drugs and technology are inevitable, and that will retard innovation. But without an estimate of how much the government would end up spending on her reinsurance program, there is no way to assess whether it wouldn’t have the same effect she decries in the Obama proposal.

Megan also says she would means-test Medicare. (And Medicaid, but I don’t know what that means; Medicaid is already means-tested.) I’m fine with this in principle but I think it works poorly in practice; means-testing is hard to do, requires more bureaucracy, and creates perverse incentives for the elderly to dump their assets. If you’re looking for egalitarian impact, it’s more efficient and has roughly the same effect to just raise Medicare taxes on wealthy people, including the wealthy elderly. Essentially you just charge the wealthy more for the service rather than deny them the service. But this isn’t a very big objection.

I think the basic thing I’m confused about is: what does Megan see as the goal of her proposed changes? Does she want to make sure everyone has insurance? Is she trying to save costs? Or what?


3 Comments so far
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Best question yet. What are health insurance reform opponents goals and values?

Call me cynical, but I see the opponents breaking down into two often-overlapping camps:

People that would do anything to put Barack Obama down. They actively wish for horrible things to happen that might make the President look bad, or actively work to deny any progress that might credit him.

Then there are those who are so in love with their precious, precious ideas that they’ll turn themselves all in a knot trying to prove the rightness and righteousness of their ideology.

The former are slippery, evil liars, while the latter are simply disingenuous or misguided.

Comment by acurry

The auto and casualty insurance reinsurance facility seems to work well enough. All insurers pay into a pool to cover the high risk drivers or the unusual damage from a hurricane like storm. The high risk insured also pay more but can still afford insurance and everyone else pays a little extra in premium dollars to fund the pool. We need for these types of questions to be debated nationally not “death panels” and other GOP lies and deceptions.

Comment by fleetlee

The very core of your writing while sounding agreeable initially, did not work well with me personally after some time. Somewhere within the sentences you managed to make me a believer but only for a very short while. I nevertheless have got a problem with your jumps in logic and one might do nicely to help fill in all those gaps. In the event you can accomplish that, I will undoubtedly end up being fascinated.

Comment by Removalists Templestowe

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