[Note: askblog had an existence prior to the virus crisis. I still schedule occasional posts like this one.]
David A. Hyman and Charles Silver write,
Since Medicaid and Medicare were enacted in the mid-1960s, the United States has spent trillions paying for defined benefits on terms dictated by the health care sector. The results have been decidedly unimpressive. Our proposal to convert Medicaid and Medicare into defined-contribution/cash-transfer programs modeled on Social Security recognizes that people generally know how to help themselves better than health care providers do. We should be giving money to Medicaid and Medicare beneficiaries and let them decide how to spend it.
While we are at it, we could take away the tax advantage of employer-provided health insurance, so that workers receive larger paychecks instead.
The challenges with doing this sort of thing, which the authors recognize, include:
1. Some people have very expensive medical conditions, so that they benefit more from health coverage than from an average cash benefit.
2. There is a major public choice problem, in that health care providers benefit from the current system.
These are the problems that present themselves when one tries to substitute a UBI or existing transfer programs. For the first problem, I recommend turning the problem of special circumstances over to local governments and charities that are closer to the people in need. For the second problem, I do not have a brilliant solution.
“For the first problem, I recommend turning the problem of special circumstances over to local governments and charities that are closer to the people in need.”
What if the local government or charity doesn’t provide whatever the people with special needs feel they need?
Well, they will likely lobby a higher level of government to get what they feel they need.
Is that not how Obamacare worked? There were plenty of red states that didn’t support it, so the people within those states that wanted it allied themselves with a national Democratic Party and got it passed at the national level.
Ultimately, people who stand to gain a lot from free healthcare have a very strong incentive to lobby for free healthcare. People who don’t stand to gain a lot have smaller incentives to fight it. After all, the cost to them is spread out over the whole population, and they themselves never know when they might get sick and benefit from the situation.
Unless you are willing to let people in tough medical straights die from lack of care (for whatever reasons), and you believe you have a political coalition that can enforce that, the state of affairs we see is inevitable.
“Unless you are willing to let people in tough medical straights die from lack of care (for whatever reasons), and you believe you have a political coalition that can enforce that, the state of affairs we see is inevitable.”
Exactly. This is the key to the issue. The world we live in is not willing to let people die for lack of medical care, thus we are forced to socialize medical expenses. The rest of the debate becomes how are we to spread these expenses.
The other thing that these types of proposals ignore, which is to say all of them, is the supply side. There is essentially no cash and carry market. It would be akin to salaried workers being told they could buy any car so long as it was an audi or an acura.
Hyman and Silver are excellent, I study their work carefully.
But they are probably incorrect to say that “The results are decidedly unimpressive” for all the spending on Medicare.
I do not have time right now, but given enough time I could find a vast treasure trove of statistics to show that seniors live longer, and live healthier, and live with more physical freedom and vigor due to Medicare.
Anyone who is my age (72) and had older relatives can remember how most of them lived (and died) before 1965. Just take a piece of paper and write down their health vs. the health of seniors today. The contrast is huge.
2. There is a major public choice problem, in that health care providers benefit from the current system.
For the second problem, I do not have a brilliant solution.
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The virus, but it is not too brilliant.
Off topic, my apologies. Could you write an explanation of the financial / economic logic behind stock buybacks, vs. lowering debt and/or paying out dividends?
The stock market allows firms to buy and sell their stock to adjust capital flows. It has lower transaction costs then regulated debt.
Stock buybacks are taxed at the capital gains rate, assuming the stock has been held for one year, otherwise taxed as ordinary income. Dividends are usually taxed at a different, often higher rate.
There’s also some structural reasons. Stock buybacks can be a one-time thing, while dividends are expected to be paid out on a regular schedule with a consistent amount. So a company might want to keep its dividend low and predictable, and return variable excess money above that with a buyback.
Finally, a shareholder doesn’t have to participate in the buyback. They can keep all their shares, holding on to them until they become eligible for capital gains tax. But their share of the company implicitly increases because there are fewer shares, and the amount of dividends/buyback they receive in the future will be higher.
Ronald Reagan tried turning mental health care over to local organizations just as you are proposing. The local organization did virtually nothing and the mental health patients were turned into the streets. Before that people living on the the streets was so rare that the Bowery in New York was an actual tourist destination. Why should I expect your proposal to have a better outcome?
Why not propose that Medicare/Medicaid move to, or at least offer the option of (perhaps in select test areas to begin), an HSA/HDHP insurance format, with $x pre-funded by gov’t for means-tested & financially-qualified individuals/families? Which could be either income based or wealth based – or a combination? Or make the HSA funding like a UBI – a set amount for everyone, but with spending restricted to health services?
Either of those would provide folks with “up to $x” funds to be used for the routine, expected health care events, like dental prophylaxis visits and annual checkups, with $x coverage for the extraordinary/unanticipated events.
Put the “normal” routine spending choices and responsibility on the individual, but have a safety-net for the unexpected health events that someone who is financially strapped does not have the savings to absorb without adverse impact on “need” v “want” expenses.
I forgot to add that putting HSA funds & greater choice of care-provider in the hands of individuals would also forge a more competitive, market-based industry, at least that part of it providing “normal” routine health care.
Maybe instead of “Medicare for all” one could have “Medicare rates for all”
That is, you don’t have to sign up to, or get the benefits of, the whole program. It’s just that if you chose to buy a particular health care good or service, you can get it from any Medicare provider, at the medicare rate.
Solving for equilibrium might lead to fewer medicare providers, with long lines to effectively ration care like some countries do, and zero frills to cut costs to the bone.
also allow providers to charge less than the medicare rate. I don’t know if this is still the case but you cannot accept medicare reimbursements unless it is less you charge non-medicare patients more. Generally this probably isn’t an issue but in rural areas this may actually be the difference between having a viable practice or not.
This is pretty much all Greek to me, but maybe you can decipher it and translate into words of one syllable?
https://www.medicareinteractive.org/get-answers/medicare-covered-services/outpatient-provider-services/participating-non-participating-and-opt-out-providers
Sorry for the re-post. Hopefully this ends up directly under the original blog post.
You seem to want to let people decide how to spend the cash equivalent of a health benefit but I’m skeptical.
Employed people don’t decide. Coverage is bundled with a particular job. For the insurer there is adverse selection risk if people get to decide. This risk is mitigated because they know that somebody is in a plan because they have the skills to work for company X at wage Y and that’s uncorrelated with their health risks. For the buyer that gets to decide there is complexity and a lack of interest or may be some people are just not smart enough to avoid getting ripped off. Insurance shopping is not an attractive way for people to spend their time. Conservatives with close families can help younger people choose and avoid bad choices like no coverage at all or selecting a rip off plan. Some people don’t have close people or experienced people to help them decide and may be they don’t have a good understanding of the medical histories of their family. May be they are immigrants and their parents came from a different system.
If Medicaid/Medicare were a cash benefit you have the same problems.
42% of Americans are obese. Why do you think people are going to make good choices with a health benefit as cash.