In Search of the “Politically Realistic”

I was going to answer Kling’s original response — and still plan on doing so, shortly. But I just have to jump in and comment quickly on his reply to Holt. I’ll let Holt explain why the vision Kling paints of technocrats secretly cooking up medical guidelines is grossly misleading. Instead, I am curious about this line in Kling’s piece:

Finally, Holt’s version of single-payer is politically unacceptable. He wants to reduce the power of physicians, not only in the political process but in day-to-day decision-making about medicine. That is going to meet resistance not just from the medical profession but from the typical consumer.

Whoa, when did political reality enter the situation? One of the things I appreciated about Kling’s original essay (and book) was its frank acknowledgment that his ideas for reforming health care were at odds with the desires of most Americans, who had become accustomed to “premium medicine” at low cost. In other words, he was proposing a reform — but he recognized that it was not one that most Americans would embrace, at least initially.

But if he’s going to dismiss single-payer as politically unrealistic, then I have to ask him: Does he think his vision politically realistic?

Kevin Drum, who writes the “Political Animal” blog on the Washington Monthly site, had a great entry the other day — responding to our exchange here — in which he pointed out just how unappealing the idea of turning medical care into a giant marketplace really might seem to many patients. Here’s the money quote: Kling, Drum says,

thinks the healthcare biz need less insurance and more free market capitalism in order to drive down costs and force people to buy only the care they need. I doubt it. More likely it would result in what I saw today: medical offices becoming more like Turkish bazaars (or used car dealerships), filled with distraught patients trying to decide whether they can afford a crown today or if they should wait and run the risk of needing a root canal later. No thanks.

Drum’s story is pure anecdote, I know. And I’m sure there are some people who really would be prefer a more consumerist model (which is why, within reason, I’m willing to give people at least an option of having it – if it’s within the context of a universal health care system). But there’s actually research to show that people prefer security, even if it means earning less money, to risk, even if it includes the possibility of making more money.

I’ll be talking more about that research shortly; I have to go back and read up on it again in Jacob Hacker’s book — which, reminds me, I have some issues with Kling’s characterization of Hacker’s work, too. But before I do that, I want to offer my best evidence that Kling’s vision is not politically viable (at least, not more so than single-payer). That’s the experience of two other countries.

One is Singapore, a country the advocates of Kling’s consumerist approach often tout as proof that Health Savings Accounts work. Singapore has universal health care, but not of the traditional sort. It offers just catastrophic coverage; then it gives people special savings accounts, which they can fill and then use to cover routine medical expenses. In effect, it’s just like HSAs here.

But guess what’s happened? Affluent people ran out and bought private supplemental insurance to cover what the catastrophic insurance didn’t. It turns out that, when faced with a choice, they really did prefer to have more insulation and less risk.

The same thing happened in France. It will boggle the minds of conservative Euro-bashers, I know, but some time ago the French decided to increase cost-sharing in their national health insurance plans — imposing up to 30 percent co-payments — for outpatient services. And what did the affluent French promptly do? Exactly what their counterparts in Singapore did. They ran out and got supplemental insurance, which is why very few people in the French middle class actually face high cost-sharing now.

You may have noticed that, in both cases, I referred specifically to the affluent (by which I mean the middle class as well as the poor). That’s because the poor couldn’t afford the supplemental coverage. In France, the government decided to subsidize supplemental insurance for low-income people, which is why you don’t have serious financial barriers to care in that country. In Singapore, they’ve been less successful at solving the problem. (Singapore, to its credit, does have an extensive public clinic network that helps provide routine care, particularly to the poor. So that helps offset the effect of the high-cost sharing on poor people who can’t afford the supplemental insurance. But I don’t gather that the advocates of consumerism here would support a scheme to develop a similarly massive network of government-run medical clinics.)

Truth be told, part of me hopes that conservatives keep promoting this. It only makes universal health care seem that much better by comparison.

Also from This Issue

Lead Essay

  • Insulation vs. Insurance by Arnold Kling

    In this month’s lead essay, Cato Institute adjunct scholar Arnold Kling draws from his book, Crisis of Abundance, to argue that the health coverage most Americans enjoy is not insurance at all, but what he calls “insulation.” “The problem with insulation,” Kling argues, “is that it is not a sustainable form of health care finance… Insulation leads people to over-consume health care services. Americans make extravagant use of services that have high costs and low benefits.” Kling explains how real health insurance would work, and how it would help solve the crisis in health care, and explores how we could transistion to a system over time institutionally and culturally in order to resolve the inconsistent demand for insulation and affordable, effective care.

Response Essays

  • Abundance Is Insulated from a Crisis—For Now by Matthew Holt

    According to health care strategist Matthew Holt, Arnold Kling is correct that consumer insulation from the costs of “premium medicine” is partly responsible for the rising cost of health care, but Holt dissents from Kling’s solution. Holt examines what he takes to be the three main strategies for dealing with “the insulation and overuse of medical care in the U.S.”: a nationalized “single payer system; a system of “managed competition”; and “individual consumer control of spending at the point of service.” Holt argues that the latter two options face deep problems, and that a nationalized single-payer system “is the likeliest outcome in perhaps a decade or so,” even it is not politically feasible at present. “Kling has provided a decent analysis,” Holt argues, “but has proposed a solution that both ignores the political and cultural realities of the health care system, and probably wouldn’t even work in theory.”

  • Unhealthy Subsidies by Clark C. Havighurst

    Clark C. Havighurst agrees with Kling’s “diagnosis of what’s wrong with health care” in the U.S. “as far as it goes.” Havighurst goes further and digs into the reasons the U.S. health system “has evolved into an entitlement program under which everyone expects nothing less than the very best that ‘modern medicine’ has to offer.” Havighurst lays the blame at the feet of the government’s choice to subsidize the purchase of health care by “excluding the cost of employer-sponsored coverage from employees’ taxable wages and income” and lucidly details three different mechanisms by which the tax subsidy insulates workers, consumers, and voters from the costs of health care. Havighurst proposes that “something approaching [liberals’] goal of universal health coverage could be achieved by ending the current tax subsidy and offering refundable tax credits of, say, $6000 to families that spend at least that amount in health plan premiums or contributions to a health savings account.”

  • Yes, We Need Real Insurance … Real Social Insurance by Jonathan Cohn

    Jonathan Cohn, a senior editor at the New Republic, agrees with Kling that our current health care system doesn’t function according to the widely understood principles of individual insurance, but he doubts we’d do better at fighting rising costs and maintaining quality if citizens with “real” insurance were free to take price into account in their choice of care. “We have precious little evidence to believe that people can distinguish good care from bad care,” Cohn writes. And the notion that consumer choices will improve over time is, according to Cohn, “a lovely idea, but one that seems highly dubious.” Cohn argues that we need a broader notion of insurance — social insurance — to shield people not only against unexpected illness and harm, but against “genetic and economic bad luck.” Cohn argues that many nations do just fine in managing the cost/quality tradeoffs inherent in a state-controlled system of universal coverage, and that Americans would be happy with such a system “if only they knew how those systems really worked.”

The Conversation