GOP Confusions on Paying for Health Care

By Mike Koetting    May 24, 2017

You knew I’d get to health care sooner or later.  Today’s post is the first of two on the Republicans’ approach to health care—and paying for it.  It is focused on core philosophical issues rather than specific legislation.

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The American Health Care Act (AHCA) passed the House and now sits in the Senate.  This post will not address the specific problems with that bill.  There are plenty of other analyses and the specifics are virtually certain to change.  Besides, this is a blog post, not a book.  Instead, this post addresses two fundamental Republican misunderstandings that keep them making the same mistakes over and over.  They understand neither the nature of health insurance nor the cause of disease.  There are other problems, including extreme partisanship and their reckless desire to cut taxes, but those are for another day.

The Nature of Insurance

Republicans keep wanting to bring “market solutions” into the discussion.  This sounds plausible; markets are very effective at many things.  The problem arises because not all “market efficient” outcomes are in fact socially desirable.  Generally speaking, markets are not unlike nuclear power.  They work so well and so powerfully that if they aren’t carefully regulated, society winds up with a huge mess, possibly even catastrophic.

Health care may be particularly ill suited to market applications.  The fundamental problem is this:  80% of all costs are incurred on behalf of 20% of the population.  And when high costs are incurred, they are likely to be really high.

Distrib of Hlth Costs

                              Source:  HHS, Medical Expenditure Panel Survey, 2014                                     Data interpolated from Berk & Fang, Health Affairs, April 2017

It is not the distribution itself that is unique.  The distribution of Porsche ownership is probably even more severe.  But in that case the market still works because if someone doesn’t have the money to buy a Porsche, they don’t get one.  In health care, unless we expect the 20% to pay all of their costs themselves—morally dubious and economically implausible—it is inevitable that there will be a lot of transfer payments. Paul Ryan said, right before the vote on the AHCA, that the problem with the ACA is that it “makes the people who are healthy pay for the people who are sick.”  For better or worse, the core nature of health care is that it simply can’t be financed without making the people who are healthy pay a lot for the people who are sick if they are in fact going to get health care.  In truth, while individual financial contributions are necessary, ultimately health care is more like a public good.

Statements such as “People should have to buy only the insurance they need” or “People should have skin in the game” are reduced to empty platitudes in the face of how health care actually plays out.  Are we really willing to let accident victims bleed out in the ER because they can’t pay their deductibles, let a kid go without services because his parents didn’t choose a package with autism services, or make a stroke victim forego rehab because she has reached her life-time limit?  Presumably not.  So it is unclear why some people are so confident there are “market solutions.”

The Cause of Disease

Not unrelated, Republicans apparently believe that bad health status is due to individual failing.  Two different veteran lobbyists told me they were actually shocked at the indifference of Republican Representatives to the plight of people on Medicaid.  As one of them put it, “Their attitude appeared to be that people on Medicaid live unhealthy lives and giving them health care is a waste.”  Representative Mo Brooks (an Alabama Republican) was fairly explicit when he said on CNN that he supported the AHCA because it “will allow insurance companies to require people who have higher health care costs to contribute more to the insurance pool. That helps offset all these costs, thereby reducing the cost to those people who lead good lives, they’re healthy, they’ve done the things to keep their bodies healthy.”

First, we should re-affirm the obvious.  Health is materially influenced by individual behaviors. The effect is not trivial; indeed, it is certainly a larger determinant of health than medical care.  Bad diets contribute to diabetes, smoking contributes to cancer, drugs usage can lead to substance abuse, and too many other examples to list.  It is also clear that many unhealthy behaviors increase as income goes down, which is frustrating to those who treat poor people.  It would be a good thing for many of these patients to change their behavior.

On the other hand:

  • Most health problems are not caused by individual behavior in any straight forward way
  • Individual actions are made in a societal context that influences choices, sometimes to the extent “choice” may barely be a possibility—it is exponentially more difficult for poor people to make many of the choices that come easily to those better off

Nevertheless, the Republicans have taken the “individual responsibility” mantra to an extreme by reducing or eliminating care to whole classes of people on the apparent basis that they did not “live good lives.”  It is not clear whether this is a cynical rationalization for what they otherwise want to do or they really believe that individual behavior plays such an overwhelming role in health outcomes as to justify the AHCA.  Hard to know which is worse.

There is yet another problem with the Republican approach.  It is counterproductive.  Imposing barriers to health care at the beginning of disease increases the likely cost of caring for the individual in the longer term.  There is absolutely no evidence that punishing people for their poor health has a salutary impact on their health.  Unless the Republicans are really proposing that we let more people die sooner because they made bad health care “choices”—which would put the discussion of “death panels” in an entirely new light–then they are shooting all of us in our collective fiscal feet.

It’s kind of hard not to think of Donald Trump at this junction:  “Pathetic!”

Author: mkbhhw

Mike Koetting’s career has been in health care policy and administration. But it has always been on the fringes of politics. His first job out of graduate school was conducting an evaluation of the Illinois Medicaid program for the Illinois Legislative Budget Office. In the following 40 years, he has been a health care provider, a researcher, a teacher, a regulator, a consultant and a payor. The biggest part of his career was 24 years as Vice President of Planning for the University of Chicago Medical Center. He retired from there in 2008, but in 2010 was asked to implement the ACA Medicaid expansion in Illinois, which kept him busy for another 5 years.

One thought on “GOP Confusions on Paying for Health Care”

  1. I saw a clip of Rep. Brooks making the remarks you quoted. Hard to know what was going on in his mind, but the most charitable explanation is that he really believes what he said. Any chance he’d support a change in Medicare that scrapped community rating?

    Like

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