Ezra Klein: Health Care And Economic Security

October 17, 2007

Health Care And Economic Security

Lack of health insurance leads to worse health. The precise impact isn't clear--largely because it's difficult to separate causality and correlation. But most experts I know would agree it has some impact, likely a substantial one, by making access to medical care more difficult. Still, the health effects of uninsurance--and underinsurance--are secondary to the financial ones. In other words, universal health insurance is primarily an economic security issue. Individually, Americans face severe financial hardship if they end up with medical bills they can't pay. Collectively, we all bear the price of a system that distorts our labor markets and, more generally, costs more than it should given what we get from it. So if you're doing a cost-benefit analysis of universal health coverage, a big benefit--indeed, I would argue, the biggest benefit--is vastly improving economic security for low- and middle-income (and even a few upper-income) Americans.

Economic insecurity, as Jon notes, exist both on the micro and macro levels. On the micro level, a health crisis can leave you bankrupt if you lack insurance, have too little insurance, have too high a deductible, or your insurance decides not to cover the costs of your treatment. On the macro level, the spiraling cost of health care is a massive threat to our economy. Looking into the future, if we don't restrain the growth in health spending, effective GDP-per-person (i.e, what's left after health costs) will actually begin to go down (here's a graph!), and we'll all become poorer. And my hunch is that the only way to restrain health costs in a humane and politically palatable way will be through integrating the system, bargaining down prices, and rearranging consumer incentives so soft rationing -- i.e, ineffective drugs receive less reimbursement, and so aren't as often used -- becomes possible. The Right's strategy, vastly increase people's personal financial exposure so they can buy less health care or suffer worse consequences, both won't fly politically, and shouldn't fly morally.

October 17, 2007 in Health Care | Permalink

Comments

So if you're doing a cost-benefit analysis of universal health coverage, a big benefit--indeed, I would argue, the biggest benefit--is vastly improving economic security for low- and middle-income (and even a few upper-income) Americans.

Which is why it's so vehemently opposed. Mark Hemingway is not just an isolated dimwit NRO type: he likes the idea of wage slavery (albeit for other people). Economic insecurity is politically advantageous to the right.

Posted by: pseudonymous in nc | Oct 17, 2007 12:25:58 PM

On the macro level, the spiraling cost of health care is a massive threat to our economy. Looking into the future, if we don't restrain the growth in health spending, effective GDP-per-person (i.e, what's left after health costs) will actually begin to go down (here's a graph!), and we'll all become poorer.

Don't get too carried away with the numbers here: money is just a medium of exchange and at best an uncalibrated yard-stick. What matters are the goods and services the money represents. Of course, if we don't restrain health-care spending, individuals will have less money after paying for health care, but that's not really a macro picture, now, ain't it?

In the macro sense we'll be poorer if having to spend more resources on health care means they'll be fewer resources to provide us with food, shelter, internet connections and whatever else we need or want. But do we really live in such a zero sum world?

Of course, productivity growth is at some point unsustainable (ever hear of something called the environment?), but the macro question of whether we can afford health care is whether by diverting labor to support and to be doctors, nurses, medical equipment, drugs, etc., for everyone, we'll no longer be able to feed ourselves, clothe ourselves, house ourselves (and possibly other things, but remember Deutero-Isaiah's question: "why spend money on that which does not satisfy?").

If we have enough productivity to keep food on tables, make tables to keep food on and provide health care to all who need it, then there is no "spiraling cost of health care that is a massive threat to the economy" in the macro-sense, now is there? The money numbers are just misleading. There may be a cost crisis in terms of individuals affording health care/health insurance, but the extra capacity to provide it is there. The question is how do we match the supply of health care with the demand. The market doesn't seem to provide the best mechanism here, now does it? So maybe we need collective action (the government) to do the job ...

Posted by: DAS | Oct 17, 2007 3:05:36 PM

One small point that always annoys me: bankruptcy due to health problems is not entirely due to the cost of health care, but also due to the fact that sick people don't work. My nurse is currently having some financial trouble due to an unexpected health problem. As an employed person with HMO insurance and a routine medical problem, she isn't out more than $50 for a co-pay and some pain killers, but the lack of income for several weeks can be a big set back when you live on the edge of financial disaster. If you are out for a year with chemo, surgery, radiation, and consolidation chemo and are 60 years old to boot (as is one of my patients), you may be in a world of hurt when it comes to re-employment. Clinton's FMLA law helps, if you can fit your disease process into 12 weeks per calendar year, but income from disability insurance is pitiful at best.

Posted by: J Bean | Oct 17, 2007 3:58:50 PM

Isn’t quite hypocritical of the Democrats to complain that we are judging harshly the Frost family
based on their actions; when the entire Democrat S-CHIP funding mechanism is a judgment
against poor and middle class smokers, that they get what they deserve by having to pay the
tax on their dirty, disgusting lifestyles?
Did Keith Olbermann or anyone else in the leftists media bring on any of those poor smoking families to
discuss how they feel about being put upon and attacked by the liberals judging their choices?
Did we see any pictures of their families and discussion about what they will no longer be able to afford
thanks to the Democrats confiscating their money in taxes.
Of course the refrain from the left would be that the smokers can avoid the painful cost simply by
doing the responsible thing and making quitting a priority. But is that any different then the Right asking the
Frosts to do the responsible thing and make their childs health insurance a higher priority?

Posted by: Patton | Oct 17, 2007 5:02:29 PM

The real issue is the current health care is rationed based on ability to pay and reqrd for paying over time (ie.e buying insurance). If you nationalized healthcare, it will then be the federal government that does the rationing. Don't kid yourself that rationing won't occur, it is inevitable.

Senator Cardin had a good quote from a women who has gone onto S-CHIP. She stated she no longer has to even think about whether to take her kid to the doctor..ITS FREE, WHOOPEE! I can take him every time he gets the sniffles. Os soemthing to that affect.

Well, when the government controls it all, expect it to be more like the DMV, except the doctors will speak Farsi like in England and the American doctors that can will stay in private practice in back alleys to avoid the health care jack boots.

Posted by: Patton | Oct 17, 2007 5:12:01 PM

IMHO Economic reasons are the only reasons for socializing healthcare. If we socialize medicine, we should cap the per person spending at the level that the French spend. From what I read the Dutch set medical spending at 10% of GDP. We should Cap ours at 5% of GDP (the French spend 7% of GDP buy there GDP per capita is lower than ours) It will cost us very little in health and save us a lot of money. There is always Apollo healthcare.

Posted by: Floccina | Oct 17, 2007 8:04:08 PM

Ezra,

And my hunch is that the only way to restrain health costs in a humane and politically palatable way will be through integrating the system, bargaining down prices, and rearranging consumer incentives so soft rationing -- i.e, ineffective drugs receive less reimbursement, and so aren't as often used -- becomes possible.

Could you be a little more specific here on some of these terms?

Integrating the system-- you're using this one with increasing frequency. What exactly do you mean by this?

Bargaining down prices-- how would this actually work? Is it an actual negotiation? Or more like price controls? Interested in two scenarios: provider reimbursement and drug/device prices.

"Rearranging consumer incentives so soft rationing -- i.e, ineffective drugs receive less reimbursement" what does this mean? People pay higher co-pays for less effective drugs? Less reimbursement to whom?

Posted by: wisewon | Oct 17, 2007 8:42:49 PM

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