Wednesday, July 26, 2017

The Long Path to Universal Coverage

by Michael Dorf

The legislative free-for-all currently unfolding in the Senate will test the proposition that it is impossible for a small-d democratic government to repeal a major entitlement program. Conservatives who opposed the Affordable Care Act fought so hard to block it in the courts before it went into effect and then before it became too entrenched because they believed--as did progressives who defended the ACA--that what psychologists call the endowment effect would protect the ACA. The endowment effect makes people value something they already have more highly than something they don't. That psychology certainly operates among the public, with polls showing that there is much greater support for retaining the ACA than for any of the GOP proposals to repeal or repeal-and-replace.

If Congress nonetheless manages to repeal or, more likely, weaken, the ACA, that will not be a refutation of the existence of the endowment effect. It will merely be a demonstration of the undemocratic features of our national government--especially the grossly disproportionate representation given to small states in the Senate and gerrymandering in the House. Even then, passage of an unpopular repeal (skinny or otherwise) or repeal-and-replace would not necessarily stand as a condemnation of American democracy unless and until Republican Senators and House members fail to pay a price at the polls.

Meanwhile, however, most of the attention currently being paid to the congressional drama overlooks the endowment effect in reverse. When asked whether it is a good idea to strip 22 or 23 million people of their health insurance, most Americans have the good sense to say no. The unasked question is whether it is also a good idea not to provide health insurance to the 26 million Americans who still lack it.

To be sure, that question is not entirely unasked. Sen. Bernie Sanders and the network he created during his 2016 presidential campaign have been using the debate over Obamacare repeal as an occasion to call for universal coverage.

To the right of this text you can view an example that arrived in my inbox a couple of weeks ago. Meanwhile, under the rules of the current Senate debate, all Senators are permitted to offer amendments to the ACA repeal bill. Expect Sanders or another progressive Senator to offer Medicare for All or some other version of universal coverage during the vote-a-rama phase of the current Senate circus.

Will it work? That depends on what "work" means.  Although there undoubtedly are members of Congress who favor universal coverage, the immediate goal of the floor amendments is to put Republicans on record as voting against it. That may be an important political goal. It may even ultimately advance the cause of universal coverage if, as a result of voting against universal coverage, some Republican House members and Senators lose their seats. But the long run is pretty far off.

Why? Because of the converse of the endowment effect. If we already had universal coverage and the Republicans were trying to take it away--even to get us to the level of coverage we currently have--the move would be extremely unpopular. But because we don't currently have universal coverage, the failure to enact it does not trigger the same resistance as its repeal would.

Nonetheless, over the last several months, some progressives (and even conservatives) have argued that a shift in the the terms of debate will lead to universal coverage. Freedom Caucusing libertarians and their supporters in the punditocracy want to repeal the ACA because they believe that health insurance should be unregulated and thus be provided--or not--like any other good or service, through the magic of the free market. However, because most Americans are not health-insurance libertarians the GOP's anti-ACA talking points over the last seven years have not made the libertarian argument. Instead, Republican politicians have criticized Obamacare on the ground that premiums and deductibles are too high--tacitly but unmistakably accepting the progressive view that everyone ought to have health insurance. Much of the rhetoric has been dishonest or obfuscatory, with Republicans touting "access" to health insurance as a way to mislead people into thinking that they will provide actual coverage as opposed to the theoretical possibility of purchasing an unaffordable policy. But hypocrisy being the tribute vice pays to virtue, dishonest GOP anti-Obamacare agit-prop is a tribute to universal coverage.

That said, don't count on mere logic to lead to universal coverage, despite the sheer illogic of our current care system. The main components of our civilian health care system are: Medicare for the old; Medicaid for the poor; the VA for veterans; employer-based health insurance for the reasonably well employed; the individual marketplace for others with some means; and the tender mercies of ER doctors, bankruptcy judges, and undertakers for the uninsured.

No rational person would have designed this "system," and none did. It arose piecemeal. Yet path-dependence is a powerful force that can give rise to long-lived arrangements. Does it make any sense that one branch of our military--the Air Force--operates planes that launch from land, while another branch--the Navy--operates planes that launch from aircraft carriers? Or that in a world with technology that integrates across operating environments we maintain five branches of the armed forces (not even counting reserve units separately)? Yet despite the numerous disadvantages of interbranch rivalry in the military, it persists through a combination of inertia, path-dependence, and the endowment effect. Likewise, the Rube Goldberg quality of our health insurance system will not doom it any time soon.

Ah, but what about the supposed triumph of the principle of universal coverage in the Obamacare repeal debate? That could, I admit, lead to positive change, but not necessarily any time soon. The People can accept a principle even while tolerating the contradiction of that principle in the law and in their lives.

Consider the Declaration's "all men are created equal" coexisting with slavery. True, enshrining that principle in a founding document played some role in the eventual unraveling of slavery, but the unraveling took the better part of a century and a bloody civil war. If the GOP's tacit acceptance of universal coverage leads to such universal coverage only after a second civil war ending in 2106, I suppose some of our great-grandchildren and great-great-grandchildren will look upon that result as a victory, but it is hardly cause for celebration now.

The bottom line is simple enough: If you favor universal coverage because you think (as, it should be obvious, I think) that it is among the package of minimal services that a prosperous, society should offer its People as a matter of basic decency, don't count on the hidden (if unassailable) logic of Republican Senators and House members to deliver it. Organize, agitate, and vote for representatives who feel as you do.

Technical Postscript: In the foregoing, I have used the term "endowment effect" somewhat loosely. In the leading studies, the endowment effect was shown to apply to anything one had in one's possession, even for just a short time. (The pen/mug experiment of Kahneman, Knetsch, and Thaler is most frequently cited.) Political economy reinforces the psychological phenomenon by creating constituencies that contest the removal of a benefit more strongly than they might lobby for the creation of one.


David Ricardo said...

The ‘we are the prisoners of our past’ argument and explanation by Mr. Dorf for the problems with our existing health care system is exactly on point. And the idea that a nation as wealthy as our does not have universal coverage is absurd. But the difficulty of getting there is made impossible by the nature of our health care system. A system characterized by fee-for-service pricing/payment through insurance/relatively unregulated pricing cannot provide universal coverage which is why no other nation has our system and why every other wealthy nation has health care costs nearly 50% or more below ours.

In a fee for service system the incentives are to increase costs, not lower them. In our system ‘costs to the patient = income to the providers’. Similarly ‘waste and inefficiencies = income to the providers’. The system produces economic rewards for higher costs, not for more efficient, more effective health care and prevention. The insurance component means that (1) patient costs are largely fixed costs and (2) there is a third party, the insurance company between doctor and patient so that the patient not only has little incentive to seek cost efficient care but also lacks the resources, knowledge and incentives to do so. Finally, that the system is unregulated and provides for near monopoly power to provider organizations and for actual monopoly power to drug companies means the market cannot work to lower costs and hence make health care more affordable and available. A system that allows drug companies to charge tens of thousands of dollars and sometimes hundreds of thousands is cruel, heartless and insane.

If government subsidized universal care were ever introduced the costs to the government would be so high and rising so quickly with our existing fee-for-service pricing that such a system would not be politically viable. We already hear the argument against maintaining Medicaid as-is by politicians saying that it cannot continue because of costs, when in fact Medicaid is a relatively small percentage of total federal spending and an even smaller percentage of national income.

So in order to move to universal coverage the system itself must be changed. And as Mr. Dorf points out, this is very difficult to do for an entrenched system. If the horrors of slavery and government sanctioned bigotry against African Americans took centuries to resolve, imagine how long it will take to change the system to one that provides economic rewards for keeping people healthy rather than treating their illnesses. So until the system changes the dream of universal coverage is just that, a dream.

Before we can have politicians legislate a new payments system we need them to legislate a new structural system. But they and the vast majority of American don’t even know they need to do that. You cannot start to solve the problem until you know you have the problem and start to understand it. We are not even close.

Joe said...

The "all man created equal" principle as to slavery didn't need to wait until 1865 for it to have some bite. That was the completion of a continual process that did include the end slavery in various areas while putting pressure to go further.

So, the great-grandchildren weren't the only ones who benefited. And, the barriers might be less hard to overcome this time around. I do think ACA was an opening wedge and if universal coverage comes in the 2020s or 2030s, I would not be surprised.

Anyway, the desire to keep what you have is already having effect. Republicans run Congress. They treated ACA [or "Obamacare"] as the devil's seed for the better part of a decade. But, darn if they are having a hard to time knocking it down. Even if they succeed in passing something, some parts of it -- which alone would have been a step forward -- will be detained. Surely, the result will still be bad, especially long term. Like the courts, Democrats will have that much more hard work just to get back to the imperfect place we were in 2016.

Still, best to look at things from a distance too.

Eric Charles said...

"If you favor universal coverage because you think (as, it should be obvious, I think) that it is among the package of minimal services that a prosperous, society should offer its People as a matter of BASIC DECENCY"

How about food, transportation, and housing for all?

I can't help think of one of the great Milton Friedman quotes:

"One of the great mistakes is to judge policies and programs by their intentions rather than their results".

Michael C. Dorf said...

Thanks to David Ricardo and Joe for their perspectives. Thanks to wolf larson for the red-bating. The short answer is that yes, of course, food and housing are basic necessities that any decent society ought to ensure all its people have. (As for transportation, it depends on what you mean. A government-provided car for everyone? Of course not. Ambulances in medical emergencies, yes.) Note that nowhere in my post did I say HOW universal coverage should be achieved. Advanced countries in the rest of the world use a variety of mechanisms, including government programs and market-based programs. There are competing strengths and weaknesses of these approaches. None of the countries that provide better health care, more cheaply, than the US does is a communist dictatorship, except Cuba.

So yes, Milton Friedman is right. The results of the U.S. health system--measured against those in other advanced democracies--should be judged a failure.

Eric Charles said...

Kudos for acknowledging that efficient "universal coverage" can consist of a market based approach (no one on the left or right to my understanding supports the status quo). That being said, I would avoid articles that rely on life expectancy as a meaningful gauge or infant mortality for that matter.

“Life expectancy in the United States fares poorly in international comparisons, primarily because of high mortality rates above age 50. Its low ranking is often blamed on a poor performance by the health care system rather than on behavioral or social factors. This paper presents evidence on the relative performance of the US health care system using death avoidance as the sole criterion. We find that, by standards of OECD countries, the US does well in terms of screening for cancer, survival rates from cancer, survival rates after heart attacks and strokes, and medication of individuals with high levels of blood pressure or cholesterol.

We consider in greater depth mortality from prostate cancer and breast cancer, diseases for which effective methods of identification and treatment have been developed and where behavioral factors do not play a dominant role. We show that the US has had significantly faster declines in mortality from these two diseases than comparison countries. We conclude that the low longevity ranking of the United States is not likely to be a result of a poorly functioning health care system.”

Shag from Brookline said...

A couple of weeks ago, the NewYorker Radio Hour featured Jill LePore on single-payer, universal healthcare. She mentioned the effort by Pres. Truman and CA Gov. Earl Warren to provide for such and how it failed. I recalled FDR's "New Bill of Rights" talk shortly before his demise that included healthcare. There followed some tax policy changes that brought about healthcare insurance via employment for some, a popular development. Medicare came along. Then Medicaid. Even George W's presecriptions benefits this century. And then ACA. All this took place over the past 70+ years. Like much of the progressive movement, it's two steps forward, one step back. So we're getting closer. Is there any doubt that a healthier America makes America stronger domestically and in foreign affairs? Trump's voter base of the Forgotten is being forgotten by President Trump and the Republican Congress in many ways, particularly healthcare.

And by the way, the medical community has to change for reasons noted by others.

Joe said...

"How about food, transportation, and housing for all?"

Universal coverage (and there are numerous voices out there who intelligently discuss the issues here) of health care is a basic matter of human decency as well as important for a good productive society. It is, e.g., important for a healthy economy.

Decency and good society also means not leaving people to starve or be homeless either. The means used to deal with that, including being more local in nature in various respects (as compared to 1/6 of interstate commerce etc.) might be different. As to transportation, e.g., you could have a public transportation system. In fact, to my understanding, some cities do have a free transportation system paid by taxes etc.

As to intent, that's a good judge up to a point, and the Democrats v. Republicans here in that respect is telling. At some point, that is problem not the best approach, since intent is hard to determine and you should judge by effects and maybe objective purpose. This comes up in law too, such as discrimination law.

Eric Charles said...

We can all agree that it would be ideal if everyone in society had housing, transportation, food, health care, etc. The question is what is the best way of achieving those results. The fact is most politicians are completely unaware of Public Choice dynamics and government failure that results from such collective decision making. The mantra "health care is a right" assumes the way those dynamics and it based entirely on wishful thinking or economic ignorance to be frank.

Joe said...

If we can all agree, let's not spend time of bland stuff. It creates strawpersons.

Government collectively does a variety of things. The criticism of politicians (and implicitly many more involved in the creation of public policy) is overblown. But, at some point, it would eat up government itself, leading to a call for anarchy (in the theoretical sense at least).

Health care as well as other things aren't merely "ideals" but real things that a good and productive society should have. This is where "right" comes in, including the legal authority and duty for the government to have a role in protecting it. There are various ways to do that, but the government is going to be involved by the nature of the animal if nothing else.

Eric Charles said...

Joe- the only question I see from an economic stand point is whether health care is a public good subject to market failure equal to something like national defense. The fact that government does a bunch of things inefficiently is not an argument for those things (rent seeking is easily explainable).

Joe said...

I don't want to talk in technical economic jargon here.

Health care is a "public good" in the sense that it is necessary for the public good and the government is going to be involved in it for pragmatic and humane purposes in numerous ways. It always was and will continue to be. People are not going to be left on the street to die, even if they can't pay.

The reality there is that this involves some requirement to care and government funding. etc. This beyond it being important for a healthy economy and so forth. How exactly the government will handle this is as everyone here is saying is open to debate. There isn't one way.

Health care is correctly cited as a right. You haven't refuted anything Dorf et. al. has said.

Eric Charles said...

Joe- all you have said is that health care is a right, therefore government must be involved. Zzzzz.

Joe said...

Well, that was a nice surprise.

To be continued.

Shag from Brookline said...

Query: Is the free market's invisible hand giving Americans the invisible finger on healthcare?