Mitt Romney can be a hard man to pin down. But there is one thing that he’s been clear about: if he becomes President, he will repeal Obamacare. That simple promise, more than any other that Romney has made, illuminates what is most at stake in this year’s election. The campaigns may spend most of their time talking about taxes and jobs. But health care is where the election’s outcome will have the most immediate and powerful impact on how Americans live.
Abolishing Obamacare would eliminate subsidies for people buying insurance and rescind regulations requiring insurance companies to guarantee coverage and benefits (for instance, to people with preëxisting conditions). Romney’s proposed alternative is to give individuals a tax break when they buy insurance and to push them toward high-deductible insurance plans, which he believes will make them more rigorous and price-conscious in choosing doctors and treatments. Romney also wants to reform Medicare by encouraging more competition among private insurers. The details are skimpy, but the core principle is that unleashing the power of the free market will bring down costs and raise quality.
This is an appealing vision. In most areas of the economy, free-market principles insure that products and services keep improving, and that consumers get better and better deals. But the free market, though it may be the best way of allocating new TVs and cars, falters when it comes to paying for bypass surgery or chemotherapy. The reasons for this were established nearly fifty years ago, by the economist Kenneth Arrow, in a classic article entitled “Uncertainty and the Welfare Economics of Medical Care.” Arrow showed that health care is distinctive in ways that limit the power of the market. Because people don’t have the expertise to evaluate doctors, hospitals, or treatments, it’s hard for them to comparison-shop. Because they can’t pay for major care out of pocket, they must rely on insurance, thereby often losing the final say in what to buy or how much to spend. More fundamentally, markets work only when consumers have the power to say no if the price isn’t right. Yet it’s very hard for people to say no in the case of things like end-of-life care or brain surgery.
The evidence for Arrow’s thesis is all around us. Take the idea that high deductibles will transform the health-care system. It’s certainly true that giving consumers more skin in the game can make them better shoppers. But Americans’ out-of-pocket health-care spending is already higher than it is in most developed countries, and our over-all costs still aren’t any lower. And while a well-known study called the Rand Health Insurance Experiment showed that higher co-pays can encourage people to forgo unnecessary care, the same study showed that higher co-pays also encourage sick people to forgo necessary care, which raises costs in the long run. Increasing co-pays sometimes makes sense, but it’s no magic bullet.
As for Medicare, it’s not clear why Romney believes that competition among insurers will bring down costs. In the wider market, after all, that competition already exists, and yet it has done little to reduce health-care costs. Indeed, over the past forty years, government-controlled Medicare has been better at holding down health-care inflation than the general market has. This shouldn’t come as a surprise. Every other developed country in the world has far more government involvement in health care than the U.S. does, and in every one of those countries health-care costs are much lower than ours and have risen more slowly over the past three decades—with medical outcomes that are as good as or better than ours. The economist Austin Frakt has demonstrated the close relationship between public-sector involvement and lower health-care costs, and calls the evidence “overwhelming.”
But the truth is that, despite the rhetoric, Romney’s main concern isn’t to bring down over-all health-care costs. In fact, he has regularly attacked one of the Affordable Care Act’s most aggressive cost-cutting measures—the independent board that can make binding recommendations on how to cut Medicare spending. What he wants is just to have the government less involved in health care. Insofar as his plans would lower federal health-care spending, it’s not because of the power of the free market; it’s because a Romney Administration would simply have the government do less. Romney would eliminate the Obamacare subsidies for health insurance. He would turn Medicaid into a block grant to the states and trim its annual budget, with the result that its funding would lag behind the rise in health-care costs. And, if he adopts his running mate Paul Ryan’s premium-support plan for Medicare, he would make Medicare recipients pay higher premiums. With these changes, the government would spend less, but only because it would provide less, and Americans would get less. It’s like saving on defense by protecting only two-thirds of the country.
Of course, plenty of people don’t think that guaranteeing affordable health insurance is a core responsibility of government. These days, Mitt Romney seems to be one of them (though things were very different back when he was the governor of Massachusetts). But plenty of people take the opposite view, and the premise of Obamacare is that health care is a collective good, like national defense—something that government has to help provide. The real issue, come November 6th, isn’t about who has the best ideas for controlling health-care costs. It’s about who has the right idea of what government should do.
Tuesday, October 23, 2012
Although Mitt Romney is as credible as a used-car salesman, there's at least one thing that we know is at stake Nov. 6
Mitt Romney has proven himself the "Etch-a-Sketch" candidate on any and every issue, but James Suroweicki @ The New Yorker explains at least one thing we can count on if this slippery character manages to hedge and edge his way into the White House: