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Economists Fix the Health System

By February 19, 2020Commentary

The American Society of Health Economists met recently and members were surveyed on steps that might improve the health system.   (NYT Article)   Here are some of the proposals that they did and did not like.  89% said the ACA should not be repealed.  Since that law was an amalgam of every possible idea for fixing things, except ones likely to actually work, it is hard to know what specific provisions they like and if there are any they don’t.  They were also strongly in favor of keeping the individual mandate, but since the penalty actually was repealed a couple of years ago, it doesn’t appear that the exchange markets worsened.  I don’t understand either the economic rationale or fairness of forcing everyone to buy insurance so the health costs of a few people can be paid for.  It introduces massive administrative spending and it decouples people’s spending from their health behaviors.  And that is exactly what we see because of the Medicaid program; if you pay all of someone’s health expenses they have no incentive to stop smoking, drinking, using drugs, eat properly or exercise, or even see health care professionals regularly.  But all those smart health economists can’t be wrong.  Although they do think it is okay to charge more for people who smoke, with 69% favoring that.  So if that is okay, why don’t they support making people fully financially responsible for their health behaviors.  That would be a lot fairer to everyone.

Two other positions demonstrate the lack of logic of these smart people.  71% oppose income testing Medicare.  Again, if people can afford to pay the cost of their own health care or health insurance, why should other people’s money be used for that purpose?  61% oppose voucherizing Medicare, that is, giving people a fixed payment they could use to purchase health plan coverage.  Since Medicare Advantage does this, has been very popular, provides better quality than fee-for-service Medicare and delivers extra benefits, what the heck could the downside possibly be.  Only 28% favor raising the age of eligibility for Medicare.  But 52% think we should raise taxes to keep the program solvent.  Uhh, last time I checked raising taxes generally doesn’t promote economic growth or personal welfare.  It is clearly a worse alternative than making wealthy people pay the full cost of Medicare, putting everyone in MA or raising the eligibility age.  77% say work requirements should not be part of Medicaid.  Only a warped notion of social fairness could possibly support this.  If people are capable of work, and in today’s economy there are jobs for everyone, social responsibility and accountability should require that they do work or get no public program benefits of any type.

Now here are a couple of ideas I do agree with them on.  Only 14% support the current tax treatment of employer-provided health insurance.  Repealing the tax exclusion would make the cost more transparent to employees and might result in more efforts to tamp down prices and inappropriate care.  And I certainly agree that drug company margins are too high, as 48% of the economists believe, and that those high margins aren’t necessary to incent innovation.  Overall, I am always impressed with the lack of logic and common sense reflected in some of the public policy positions some health economists favor, but then again, economics is sometimes as much art as science.

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