Thursday morning I woke up to a text from a friend informing me of the surprise decision by the Supreme Court to uphold the Patient Protection and Affordable Care Act (PPACA). I proceeded to spend the rest of the morning enjoying all the wonderful articles, memes, tweets, and posts celebrating the momentous decision. As you may know, I studied these issues in depth during my time at Stanford, so I have lots of commentary. What follows is my explanation of the issue, as well as some great finds (both comedic and serious) from the Internet on the decision.
The basic argument when it comes to health insurance is essentially the same as any political argument in America–should the government regulate the industry or not, and if so how much? The increasingly popular view when it comes to health insurance (both here and especially internationally) is that health insurance as a field needs to be regulated. This is in contrast to the Enthovian model (named after health economist Alain Enthoven, of my own alma mater) which attempts to put the free-market capitalist system in place for health care. With all respect to Enthoven (who I had the extreme privilege of listening to as a guest in a seminar this past fall), and all belief in capitalism in general, the system doesn’t seem to work very easily within the field of health. This is because capitalism aims to reach efficiency through the optimization of capital. Incentives get put in place so that “rational” human beings (I’m assuming their friends with the loch ness monster and big foot) can optimize their own health and create an efficient and inexpensive health care system.
The major problem with the Enthovian model is two-fold. One, human beings aren’t rational, and even if they are they would be optimizing capital, not health. Behavioral economists will tell you again and again, human beings are happiness optimizers, not health optimizers. This first issue is augmented by the second: in an unregulated market private insurers don’t have incentives to keep their clients healthy. If human beings are healthy and no longer require medical procedures, then the insurance companies aren’t making any more money (or, at least, they’re making the minimum, because you’ll pay for the insurance, but no premiums).
With this in mind, many liberals and conservatives alike have come to a near consensus that the only way to fix the health insurance crisis (as well as all the other related health system crises) is to create a universal, single-payer system. The idea is that everyone should have access to health care as a basic human right, and that it should be paid for by a single payer (i.e., the United States government). The single-payer component is necessary to make health care universal. Insurance was created essentially as a theory in risk-management, and the theory relies on both high-risk and low-risk individuals being in the same pot and paying similar amounts.
Even conservatives in Europe and the rest of the world tend to agree with this thinking. It’s really only in America, where we equate socialism and welfare with Satan, where political opposition arises. This is why the individual mandate (which legally requires every American to have public or private insurance or pay a fine) is at the center of the debate. Whether or not you believe in government mandates as a philosophical concept, the problem is that single-payer, universal system can’t happen unless everybody is in the pot. Universal coverage keeps the high-risk patients in the pool, and individual mandate keeps the low-risk patients in. If you’ll remember, we need both in order for insurance to work. Philosophy aside, the individual mandate is necessary. Besides, it’s not like we don’t already have government mandates in this country (as I understand it in most states we mandate that, for example, all car owners and home owners have those possessions insured).
For more information on this problem I’ve added, at the end of this post, a book review of T.R. Reid’s The Healing of America. I also can’t recommend highly enough Atul Gawande’s opinion piece on PPACA and the reason the struggle continues. Finally, there’s a great source floating around the Internet with an explanation of the provisions of the Affordable Care Act explained as if you were a five year old. You can find that here. If you don’t want to read the whole article, I’ve highlighted some of the changes cited there that I personally see as being great steps forward:
- Allows the FDA to approve more generic drugs (this is essential for price control)
- Establishes a non-profit group, Patient-Centered Outcomes Research Institutie (PCORI), to determine the efficacy and cost-efficiency of different medical procedures
- Requires insurance companies to use 80% of funds towards actual medical interventions
- Requires chain restaurants to display calories
- Creates a 10% tax on indoor tanning salons
- Abolishes the life time limit (insurance companies can’t cut people off for using too much medical care)
- Kids can stay on their parents health insurance until age 26
- Insurance can’t charge more for pre-existing conditions (especially in children)
- Insurance companies can’t drop people from their plans once they get sick
- New website with information about health care and insurance
- More support of preventative care
- Businesses with over 50 employees are required to provide health benefits. Smaller businesses can get tax credits for providing them.
- A new tax on pharmaceutical companies.
- Doctors pay will become based on quality of care, not simply the number of people they treat.
The following is a brief review I wrote of T.R. Reid’s The Healing of America, a book I read for my International Health Policy class last spring (taught by visiting professor Donald Light of Princeton University). I included the review essentially as a recommendation for a quick and highly readable intro to health policy. I encourage you to check it out.
This is a great introduction to health policy, particularly for people who have no background in the field. Reid looks at a number of different (fairly) successful health care systems (mostly in Europe) and uses them as case studies for what to do–and what not to do–in order to make an equitable, efficacious, and cost-effective health system. The rest of the book is framed around the United States, and attempts to apply lessons from these countries to problems in our own system, while staying true to our democratic and capitalistic ideals. This book was actually assigned to me in one of my health policy classes, but I recommend it to anyone who is even remotely interested in the current state of health care.
The book also has a really helpful afterword that briefly explains the changes to our health (insurance) system under obamacare.
I recommend this to anyone who wants to know about healthcare, and anyone who’s beliefs around healthcare are only informed by traditional economic policy and study.