The Enlightened Despot

One irritating feature of public discourse on the state of our healthcare system is the near ubiquity of lumping private and public spending together. How much our society spends on healthcare as whole is certainly a useful piece of information, but for many, if not most, policy questions, combining the two is absurd. This is especially true when our system is being compared to that of other countries, most of which have far more government control over healthcare. Take, for instance, the ever-widening gap between the US and the rest of the world in healthcare spending per capita:

Socialized healthcare advocates are often pointing out that our spending is spiraling out of control, while that of other countries’ increases steadily and manageably. And since our results aren’t any better, a lot of this money is being spent very inefficiently.

But it’s important to ask by whom this money is being spent. Public spending on healthcare is also spiraling out of control, which is certainly very bad and needs to be addressed. But for the part of this gap that is made up by private spending, one needs to know a lot more to conclude that rapid acceleration and alleged inefficiency are problems at all. So this chart - which got a lot of play from the left - isn’t very helpful.

Spending lots of money trying to extend the lives of the very old and/or sick is a notoriously expensive proposition. If you are evaluating a public health program, it makes a lot of sense to look at the high costs of these efforts and the relatively small gains in lifespan they achieve and conclude that they are inefficient. On the other hand, when we consider the spending of people who are rich, sick, and old, the calculation is very different. It no longer makes much sense to measure the efficiency of caring for these folks against other sorts of healthcare, because we aren’t deciding how this money gets spent - if it didn’t go toward marginal increases in the life expectancy of the wealthy, it would go towards, say, marginal increases in the yacht-sizes of the wealthy. When individuals choose to spend lots of their own money trying to stay alive, the statistics people keep throwing around make our system look more costly and inefficient, but this spending isn’t doing anyone any harm, even though, as the chart below shows, it’s ultimately a losing proposition:

UPDATE: Just to be clear, I’m not suggesting that rising private sector spending on healthcare is never problematic, merely that it isn’t all problematic, and that the some of the arguments like the one above really only work for public sector spending, so it makes sense to seperate the two far more often than is actually done. Lumping them together always makes the numbers look scarier, but is not usually informative. See (slightly) more in the comments.

Regina Herzlinger, a former adviser to John McCain, has a terrific* post up at the Atlantic urging Republicans to put together their own universal healthcare plan:

The time for universal health insurance coverage has come. Everybody seems to know that — except for the Republicans, all too many of whom cling to traditional denunciations of universal coverage as socialism. Senate Finance Committee Chairman Max Baucus has been holding talks with Republican lawmakers over the past week, and all signs point to opposition from the GOP.

…

There’s a massive constituency behind the policy. Buffeted by the recession and the threat of losing their employer-provided health insurance, the American people want universal coverage. Much of the US business community wants it too. CEOs rarely say “Know what I love about my job? Buying health care.” The chore is so unrewarding — corporate buyers have failed to create effective cost or quality improvements — that many small business CEOs simply skip it. As a result, millions distort the efficient allocation of labor in our economy by opting for jobs in dying, big companies that offer health insurance, rather than productive ones in small companies that do not. Furthermore, our employer-based health insurance system forces American businesses to pack our massive health care costs — about 70 percent greater as a share of GDP than other countries’ — into the cost of their exports, a huge albatross in a globally competitive economy.

The Republicans can do a Nixon-goes-to-China by offering a better version of universal coverage. There is, after all, substantial concern about the Democrats’ reliance on universal coverage through a government-controlled system like Medicare.

Strategically speaking, this is exactly right. Refusing to participate seriously in the legislative process over the bailout and, especially, the budget has not done anything good for Republicans’ image. As Herzlinger says, the momentum for some sort of universal healthcare plan is unstoppable at this point. Democrats will go into the midterm elections able to say that they have taken concrete steps toward comprehensive healthcare reform, even if much remains to be done. Republicans will be much better off if they can plausibly claim to have had an impact on that reform. That won’t be easy to do if they sulk on the sidelines as a purely Democratic bill passes on another party-line vote.

But it also makes sense ideologically for conservatives to put together their own universal healthcare plan. There is a tendency on both the left and the right to pretend that something like a free market in healthcare is the status quo. This, obviously, is nonsense. Government is already deeply involved in the healthcare market, and whatever you think of the product, it is a fiscal disaster. While it is probably true that under any universal healthcare plan worthy of the name, the government would take on an even larger role, that simply cannot be the decisive criterion, given how involved they are already, no matter what your ideology. In evaluating two alternative public programs, even the most radical libertarian has to weigh not merely how much the government is doing, but also how much good or harm it is doing in the process. So conservatives shouldn’t be ruling out the possibility that a universal healthcare plan could be more in keeping with their own political philosophy than the system we have.

Of course, the fact that we don’t have a free market in healthcare doesn’t mean we couldn’t. One could argue, as Ramesh Ponnuru has, that while our system clearly needs reform, that reform should move us in the direction of a free market, rather than toward a universal system. This is all well and good as an intellectual exercise, and it may even be right, but it is more or less irrelevant at this point. Perhaps if George Bush and Congressional Republicans had made reform of this sort a priority eight years ago, it would have been possible. They didn’t. With Democrats in control of the White House and Congress, this simply isn’t going to happen. If this sort of plan is all that Republicans are willing to fight for, they will simply be spinning their wheels again. If, on the other hand, they acknowledge that universal healthcare is coming, they could have a major impact on what form it takes. There is no possibility of bringing about the system they would wish for, but there is an opportunity for them to support a plan they like better than what we have now. This is the sort of approach that a reformed GOP, one capable of being nationally competitive again, will have to take. Unfortunately, I suspect they aren’t ready to come out of time out just yet.

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* Terrific on the politics, anyway. I am nowhere near knowledgeable enough to assess her specific policy ideas. The Swiss model she advocates certainly sounds good, but that isn’t much of an endorsement. One thing I’d love to see Republicans push for is what some are now calling ‘lifestyle rationing’, though I don’t care for the name. Basically, the idea is that people who, for example, smoke shouldn’t receive government help when they get lung cancer. I’ve written about this before, but I don’t know whether it’s technically or politically feasible. It’s a very appealing idea, though, and it would play to the current Republican strength of screaming about how we’re all paying for the mistakes of jerks.

This exciting feature is back, courtesy of Jonah Goldberg:

A Question I Wish Someone Asked Tonight [Jonah Goldberg]

From a reader:

Jonah; I have never seen this point made:  all of Europe, which has nationalized health care already, is also experiencing the current economic crisis.  Why does Obama believe that bringing national health care here will in any way save us a similar economic crisis in the future? He keeps repeating that only if we get health care costs under control will we have “real” prosperity, but the countries that have already “tackled” this problem in the past were not spared their own economic meltdowns.

The answer is that he doesn’t. Jonah and his reader are conflating two very different issues. No one is pretending (so far as I know, anyway) that healthcare reform will end the business cycle, or even that it will do much to stabilize it, though, of course, the recession here - but not in those European countries - means fewer people can afford healthcare. What Obama does think healthcare reform can help with over the long haul is the deficit. It is not particularly controversial that one of the major reasons our fiscal situation looks so terrible is that Medicare costs are rising very rapidly. Proponents of healthcare reform claim that their proposals would stabilize these costs, thus making the federal government’s balance sheet a little less scary, and our economy much healthier. I’m not wonked out enough on this issue to have a firm opinion about whether this is true, but there is nothing mysterious here, nor is there any merit to the point about Europe.

Senator Clinton has been appointed to head one of three Senate working groups on health care reform by Ted Kennedy. This might strike people as a bit odd, considering everyone is certain that she is about to resign from the senate to become Secretary of State. Ben Smith concludes his article on the subject thus: “It looks, however, like Kennedy may need a new chair for his insurance working group.”

This, to me, is a strange thing for Smith to say. Kennedy made this announcement today. I don’t think it’s too insulting to Politico’s sources to say that Kennedy (who endorsed Obama in his run against Clinton, fwiw) is in at least as good a position to know what’s going on with Obama’s appointments. Either this move was purely for show, or the deal isn’t as done as has been reported; Ted Kennedy is unlikely to read about the SoS speculation this afternoon and say “Oh, shit! Guess it’s back to the drawing board…”

The evidence that Hillary is headed for Foggy Bottom is certainly mounting, but there is still plenty of reason to be skeptical. The move still doesn’t make any sense for either Obama or Hillary (in my not-so-humble opinion), no one has named a source in reporting the story, some generally well informed reporters aren’t able to confirm the deal, and now a senior Democratic senator is announcing that she will be doing something about health care - which has always been her issue - which she couldn’t possibly do if the story were accurate.

I may well be wrong about this, and if it turns out that I am, I’ll apologize. But, for now, I’m still not convinced.

UPDATE: Some water thrown on the Secretary Clinton fire by, uh, Ben Smith:

“A lot of the speculation and reporting is out ahead of the facts here,” said the person, who requested anonymity. “She is still weighing this, independent of President Clinton’s work.”

Clinton, the person said, remains deeply “torn” between the possibility of serving in Obama’s cabinet and remaining in the Senate to “help pass health care and work on a broad range of domestic issues.”

That comment jibes with what others close to Clinton have been saying since the Secretary of State chatter began last week: that Clinton is conflicted and the deal far from done, despite screaming headlines in outlets including the U.K.’s Guardian newspaper claiming the offer was made and accepted.

If this is what people close to Clinton have been saying all along, I would expect that to come through a little clearer in Smith’s and others’ reporting on the subject.