Exciting Times

That’s how Jonathan Gruber PhD a professor of economics at MIT views the domestic scene in the US today in a Perspective piece in the NEJM. What he’s excited about are the good prospects for the passage by the congress of universal health care coverage. Professor Gruber rejects the view that adding universal health care is a luxury we can’t afford during this difficult financial period. Instead he thinks that this coverage is just what our ailing economy needs.

The reason he offers for this view starts with a good point. Our longest long term fiscal challenge is escalating health care costs. Then things get problematic. He first wants to send additional resources to the states (more than the huge amounts already sent to them by the federal government). He wants to maintain and expand public insurance programs. As most states have balanced budget laws pumping more money into them will allow them to divert money they are already spending on medical care to other programs that have grown beyond the imaginings of simpler times. Money as the economists like to say is fungible. Fungible in this case means for every dollar the feds give the states the latter will find a way to spend two.

Gruber says that giving lower income people more subsidized health care will free up more money for them to spend on other consumer goods. His previous work suggests that these families will spend about $800 a year on these goods. So having the government provide a $5,000 health insurance policy will generate $800 more for other items – sounds like too good a deal to ignore. It also sounds just like something only the government would love to run.

Gruber is silent about the details of how a national health insurance scheme would work. My guess is that these details are too horrifying to contemplate. He does believe it will generate a vast new computer infrastructure. Professor Gruber obviously has no experience with computerized medical records. They are incredibly difficult to establish and maintain. Such an infrastructure will generate new jobs. Most of these jobs will be needed to maintain the systems that control the records. It will likely require about one IT person for every four medical professionals. But we all want more jobs, so this is not an objection to spending more money since money now seems available in limitless amounts. Think carefully though before you entrust your medical records to Microsoft. Talk to any doctor who has gone to electronic medical records and ask him about the transition from paper to code. Also ask him how he likes his new electronic system. Putting the whole thing on a national grid is a hacker’s dream and guaranteed employment for anyone who knows that to turn off a computer you press the start key.

This part of his article requires an exact quotation: “Moreover, making coverage universal will necessitate expanding the medical sector to meet the needs of a larger population. If this expansion were done right it could be a huge jobs program.” He’s not advocating a temporary stimulus to the economy, though temporary usually means permanent, he’s proposing spending in perpetuity to make ourselves rich and healthy or maybe just over medicated.

But forget about those temporal distinctions – focus on “right”. Why do economists (not all of them) and politicians (all of them) think that a system of virtually infinite complexity can be managed effectively by a handful of tinkerers no matter how bright or how powerful? This confidence in massive government intervention into anything requires that government both know what is needed and be able to do it in the face of all the pressures that attend anything it does. Look at the bloated economic stimulus package now before the congress to see how potent the pressures to do something wrong are.

The point is that while expansion of our already swollen medical system is possible doing it right is not. The congress will pass laws. The special interests will manipulate the law making. Here it’s necessary to point out that we are a nation of special interests. Every citizen belongs to at least 10 special interest groups. They’re all going to lobby the congress over every comma in the bill. The right to lobby is guaranteed in the first amendment. When the bill is passed it will be handed over to the federal bureaucracy which will mandate rules which will take up thousands of pages in the Federal Register. No one will understand even a tiny part of these rules.

Then these rules and regulations and the vast sums which accompany them will be given to the states where the whole process will start all over again. And from this Gruber and his like minded colleagues believe will come order in place of chaos.  Having gone this far he gets so enthusiastic that he verges on the inchoate. He says that the financial future of the country is imperiled by the unfunded liabilities of Medicare and Social security. No problem so far, but then he says. “That the primary driver of this burden is not the aging of our society or the specifics of eligibility for these entitlements, but rather the unconstrained underlying growth in health care costs.” What does growth in health care costs have to do with Social Security? Social Security is a pension plan funded by a Ponzi scheme. It’s easy to solve future costs. Increase retirement age and decrease cost of living increases which will inflate away the real cost of the program. Health care cannot be so easily and cynically dealt with. It’s costs are real. The demand for medical care is inexhaustible. Limits of some sort will have to be put on it. Government does not do very well with limits.

If you’re really serious about about providing health insurance for all Americans you have to think seriously about the issue. To begin with all Americans don’t want it. If you’re young and healthy it’s a good gamble to go without insurance. To be forced to buy it, either through taxes or premiums is an imposition on your liberty. Of course if you don’t buy it and get sick you should bear the full cost of your medical care. Next medical providers should not be sheltered from market forces. This shelter allows them to endlessly inflate their costs with none of the usual brakes that operate on other vital systems. And if you must have a national plan give the money to the people in the form of health insurance coupons and let them buy their own policies. This would create a market and the ensuing competition among insurance companies would hold down costs as has happened with the federal drug plan. It would also curtail the enormous bureaucracy which otherwise would metastasize across the body politic like an aggressive sarcoma.

Gruber thinks implementing his reforms will require an herculean effort on the part of US policy makers. I think “herculean” in this case means impossible. But Gruber thinks we can get the job done by “having everyone pulling in the same direction.” What direction might that be? And when will we all start pulling in that direction? Neither Big Brother nor Stalin could accomplish this feat. A democratic society demands that we all pull in every possible direction. Exhortation is not policy. And men are not angels. And Gruber is hoplessly naive.

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