Monday, March 28, 2011

The Clear Choice Between Helping People and Protecting Health Insurers

-- Posted by Neil H. Buchanan

In the new, know-nothing era of hysteria about budget deficits and government spending, a literary sub-genre has emerged. Those who decry the nation's supposed fiscal recklessness describe the dire consequences that surely lie in our future, accompanied by a plea to act before it is too late. An ideal distillation of this new literary form appeared in yesterday's Sunday Business section of The New York Times, in the form of N. Gregory Mankiw's quadriweekly opinion column. The column provides an especially clear summary of the arguments and assumptions necessary to conclude that people must be made to suffer now, in the name of fiscal rectitude. Pitched as a hypothetical Presidential address to the nation in 2026, in which the unnamed chief executive reluctantly announces immediate and painful austerity measures in response to a bond crisis, the column is a study in false choices and rationalizations for protecting the health insurance industry.

Mankiw is, roughly speaking, what David Brooks would be if he were an economist. That is, Mankiw is capable of saying profoundly reactionary things, but to do so in a way that is so matter-of-fact that the unwitting reader might find himself nodding in agreement. Some of Mankiw's more outrageous columns, of course, have been broadly provocative. For example, the public reaction to his claim that increased taxes on the rich would lead him to stop writing his column included extensive ridicule from Stephen Colbert. Still, Mankiw's stock-in-trade as an op-ed writer is to make it sound as though there really is no alternative to his sober-minded, grim assessments. And so it was with yesterday's column.

The most revealing move in the column is the claim that "[w]e must now acknowledge that rising [health care] costs are driven largely by technological advances in saving lives." This is obviously a response to the claims by Paul Krugman and others that pessimistic long-run deficit projections are driven almost entirely by health care inflation. Mankiw's response is essentially that there is nothing we can do about health care costs, so we might as well admit it and start cutting everything else. It is, in other words, supposedly a fact of nature that health care costs will devour the economy. This has the advantage of sounding like an inconvenient truth, along the lines of the old "natural rate of unemployment" rhetoric that Mankiw's ideological allies have long used to justify completely unnatural levels of unemployment. Fortunately, it is not true.

If medical technology simply requires us to divert so much of our economy to pay for health care, then what are we to make of the uniquely high levels of U.S. health care spending, relative to every country to which we might want to compare ourselves? France has the second highest health care spending in the world, as a percentage of GDP, yet its level is not much more than half of ours. Canada, the UK, Germany, and all the rest are lower still. Are doctors in those countries not using advanced technology? Are they allowing their patients to die, to save money? Of course not. Their health care outcomes are uniformly better than ours, at much lower cost. Even if the rates of medical care inflation in those countries are (and continue to be) similar to ours -- certainly contestable assumptions -- the difference between starting from their levels of health care spending and ours is the luxury of waiting decades before making the supposedly inevitable choices that the US is said to face in the relatively near future.

The Republicans' insistent rejection of any policies that might allow us to slow down medical cost inflation ("death panels!!"), therefore, is an explicit decision to hasten the day when widespread pain must be inflicted on the American people in the pursuit of fiscal righteousness.

More to the point, the choice to protect the existing medico-industrial complex becomes even more morally repugnant. Consider some of Mankiw's parade of horribles:

-- Cutting Social Security so deeply that it "will still keep the elderly out of poverty, but just barely."

-- Cutting Medicare and Medicaid so deeply that they "will no longer cover many expensive treatments. Individuals will have to pay for these treatments on their own or, sadly, do without."

-- Making health insurance "less a right of citizenship and more a personal responsibility."

-- Eliminating "inessential government functions, like subsidies for farming, ethanol production, public broadcasting, energy conservation and trade promotion."

-- Increasing "taxes on all but the poorest Americans. ... primarily by broadening the tax base, eliminating deductions for mortgage interest and state and local taxes. Employer-provided health insurance will hereafter be taxable compensation."

-- Imposing a $2 per gallon tax on gasoline, which will "not only increase revenue, but will also address various social ills, from global climate change to local traffic congestion."

Despite his attempts to sound reasonable by, for example, allowing that taxes would not be raised on "the poorest Americans" (a usefully vague description), or appealing to liberal sensibilities to justify a gas tax, Mankiw cannot stop himself from describing as "inessential" something as essential to a sustainable future as energy conservation programs. Moreover, his attempt to distance himself from the extreme anti-tax zealots ("If we had chosen to tax ourselves to pay for this spending, our current problems could have been avoided.") is offset by the immediate admonition that raising taxes is bad, anyway. ("Taxes ... distort incentives and reduce economic growth.") In the end, therefore, it is all about spending -- but not health care spending, because that cannot be changed.

Of course, all of that is wrong. What Mankiw's column really provides is an admission of the costs that defenders of our corporate health care providers are willing to inflict on this society. To defend a system that is a complete accident of history -- health care financed by private insurance, available primarily through employer-provided plans -- they are willing to tell us that we must accept more expensive and dangerous medical care, or to "do without." They are telling us that we must accept insecure retirements, higher taxes, and the elimination of any government program that can be called "inessential." The only way to stop that from happening in spades in 2026, moreover, is to start doing all of that today, with slightly less ferocity.

By ruling out even consideration of fundamental health care reform, in other words, the Republicans and President Obama (joined by large numbers of Democrats) have -- according to Mankiw's analysis -- said that everyone must accept lower standards of living, including giving up the romantic notion that people have a right to health care. While I believe that there are probably ways to save large amounts of money on health care, even within the inherently flawed system in which we are mired, there is no getting around Mankiw's implicit admission that our decision to protect health insurance companies unnecessarily impoverishes nearly all of us. If we cannot change that, then the future -- fiscal and otherwise -- really will be bleak.