“House Republicans Unveil Plan to Replace Health Law” (nytimes) describes a plan for a redesigned river of tax dollars directed at America’s health care industry. Let’s call the new plan “RepubliCare”.
Is there any way to look at this other than as a proposal to subsidize an industry that is demonstrably one of America’s least efficient and least competitive?
First, let’s look at whether it is fair to characterize America’s health care system as the equivalent of a 1930s steel mill.
A local family with some European connections has a relative who needed some stent work. With no insurance, the relative was quoted $125,000 for this project here in Boston, $40,000 in Switzerland, and $10,000 in Ukraine. “It was the exact same state-of-the-art Dutch stent for all of these,” explained my source. (The procedure was ultimately done in Ukraine by a top cardiologist there.)
Based on the higher cost to get the exact same thing done, I conclude that this is not one of our competitive industries and that, in a free market, it would mostly not exist (e.g., absent a health insurer willing to pay an insane local price, a typical American who needed work quoted at $125,000 would get it done by traveling to another state or another country).
Second, what about the specifics of this plan? It seems that health care for lower-income Americans would continue to be handled by 51 separate state bureaucracies:
Medicaid recipients’ open-ended entitlement to health care would be replaced by a per-person allotment to the states.
Ordinarily letting the states, some of which are much larger than the typical country, run stuff seems like a good idea. But here, a state government would have an incentive to favor local businesses even if health care could be provided with lower cost and higher quality in a neighboring state.
The health care industry, in addition to all of their profits from monopolization and collusion (helped by barriers to entry set up by state licensing boards and insurance commissions), will get direct federal tax subsidies in the form of tax credits:
Under the House Republican plan, the income-based tax credits provided under the Affordable Care Act would be replaced with credits that would rise with age as older people generally require more health care. In a late change, the plan reduces the tax credits for individuals with annual incomes over $75,000 and married couples with incomes over $150,000.
Why not just lower taxes on people who earn less than $75,000 per year and let the health care industry compete on a level laying field for their new higher purchasing power? (If the answer is that you don’t want people running up a $1 million bill from a catastrophic problem and ultimately sticking the rest of society with the invoices, roll an automatic catastrophic insurance policy (maybe with treatment done by the lowest high-quality bidder within 500 miles) into Medicaid/Medicare.)
Readers: Is there any reason for people interested in a market economy to be excited about this proposal? To my casual eye it looks like a slightly tweaked version of the same general idea: more favoritism through tax subsidies for an industry that has gotten fat off these since World War II.
Perhaps the strong resemblance between the hated old and the celebrated new is an illustration of what Tyler Cowen is saying in The Complacent Class: The Self-Defeating Quest for the American Dream:
an ever-increasing percentage of the federal budget is on autopilot, with only about 20 percent available to be freely allocated, and that number is slated to fall to 10 percent by 2022. In 1962, about two-thirds of the federal budget had not been locked in and could be allocated freely. Today, however, it is harder to have a meaningful debate about how the money should be spent because most of the money is already spoken for, and that is a big reason why problems of polarization—which have always been present—have become harder to solve.5 This change in the nature of the federal budget, and this quest for ever more guarantees, is one of many ways in which America’s pioneer spirit has been replaced by a kind of passivity. In the meantime, politics becomes shrill and symbolic rather than about solving problems or making decisions.
For the most part, American politics does not change and most voters have to be content—or not—with the delivery of symbolic goods rather than actual useful outcomes
So there will be a debate about transgender bathroom policy, but there won’t be any about the nearly 20 percent of GDP that is flushed down the health care toilet.
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