Taxes, Spending and Healthcare

The quote from Kevin Drum that James quoted in this post caught my attention, and I thought it deserved a bit more attention.

As Bill Kristol knows all too well, social spending programs, once they get started, tend to be pretty popular. The odds of deep sixing, for example, national healthcare after it’s up and running is essentially zero. And once it’s up and running, taxes will follow because most Americans would rather see their taxes go up than their healthcare services go down.

Of course, this mostly applies to broad-based programs. Smaller ones are still hard to get rid of, but not impossible. It’s the bigger ones that become third rails. Both Obama and the GOP are smart enough to know this, which is why Obama wants to swing for the fences and congressional Republicans want to become the Party of Nyet. If they don’t stop him now, they never will.

What struck me was that Kevin ignores another possibility: healthcare services go down and taxes go up. Right now healthcare spending is going up at an astonishing rate. The following graph shows what happens when you have two growth rates that are different,

If we assume Kevin is right that the program is impossible to get rid off, and people would rather see their taxes go up, but if we also factor in that people are still going to want to eat, have a roof over their heads, clothes, and so forth, then there will be but one option: reduce both the quantity and quality of healthcare services.

We see this problem in England and Canada. In Canada it is against the law to pay for eggs for fertility treatments. England has instituted mandantory wait times. Then there is this story of a man who smokes wont get treatment for his ankle. Or this story about the man in England who had to pull his own tooth with a pair of pliers. Even the French might soon be facing this problem.

And lets also keep in mind that Medicare may have very will been one of the reasons for the high growth rates for healthcare spending. Expanding government healthcare programs to cover the entire public will likely add fuel to the fire with the end result quite possibly being both lowered quality and quantity of care.

FILED UNDER: Economics and Business, Government, Health, ,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. Drew says:

    As anyone with a brain knows.

    When you are traveling on an expense account, Morton’s Steak House is on the potential list. With your own money……not so much.

    When health care is “free”……….

    Well, you get the point. Unless you are a dopey Democrat.

  2. sam says:

    OK, suppose we accept, arguendo, what you claim. What happens, though, in the case where there is no national health and many, many people (millions) cannot get health insurance? I know this is brought up all the time as the counter argument, but I’ve not yet seen the argument engaged on OTB. How are these folks to be cared for–are they to be cared for? I’d like to really hear how you would address this problem, or if you even think it is a problem.

  3. Michael says:

    Drew,
    Democrats get that just fine. The problem we see is that McDonalds costs just as much as Morton’s, and you have to have an expensive license to legally cook for yourself or your friends (which you happen to be ethically barred from doing).

    Basically, it’s now too expensive in this country to eat anything, anywhere, without an expense account. Democrats are trying to get everyone on the government’s account, Republicans are trying to make private expense accounts more affordable.

    Some of us just want to have cheaper food.

  4. Michael says:

    OK, suppose we accept, arguendo, what you claim. What happens, though, in the case where there is no national health and many, many people (millions) cannot get health insurance?

    At some point, we have to be willing to accept a reasonable level of pain, sickness, and death. Our society right now views those as things that must be avoided, at nearly any cost.

    How are these folks to be cared for–are they to be cared for?

    Most of them can be cared for by family, friends, or their community. Again, I’m talking care, not correction. If someone is bound to a wheelchair because of pain in their hip, they can be cared for in a wheelchair, it isn’t always necessary for them to have their hip replaced.

  5. sam says:

    At some point, we have to be willing to accept a reasonable level of pain, sickness, and death

    Well, then, you owe us an account of what’s “reasonable” in this context.

  6. Drew says:

    “Some of us just want to have cheaper food.”

    Reintroduce price, and ye shall reintroduce order.

  7. Steve Verdon says:

    What happens, though, in the case where there is no national health and many, many people (millions) cannot get health insurance?

    My God, the world comes to an end. Klaatu barada nikto!

    The argument has been engaged and I get the same dopey answer: nobody wants a triple by-pass!

    Well no shit sherlock. Thing is we also cover lots and lots of other stuff like fertility treatments, eye-glasses, pregnancy, annual check-ups, and so forth. We have health insulation not health insurance.

    Well, then, you owe us an account of what’s “reasonable” in this context.

    If you insist on dragging this into national level politics the answer will be determined politically. Hope you are ready for when the Republicans get back in charge and start cutting funding for things they don’t like. And I hope the Republicans are equally ready for the Democrats to fund things they don’t like. And God help us on those things the both agree should get funding.

    Reintroduce price, and ye shall reintroduce order.

    This is another way of answering sam’s question.

  8. Drew says:

    “Reintroduce price, and ye shall reintroduce order.”

    In the immortal words of David Byrne…………”same as it ever was…”

  9. odograph says:

    Drew, let’s give you a harder one. I know a guy who had a pacemaker put in when he was 14. Does he ever deserve affordable healthcare?

    I know some conservatives would take the puritan line that anyone flawed deserves their suffering, but I don’t think you’ll stoop that low.

    (In a fully private market, every profit seeking insurance company would rightly refuse my friend coverage, or charge him up the wazoo. It is their fiduciary responsibility to do so.)

  10. JohnG says:

    What happens when the government extends health care coverage to anyone but has no money to pay for it? At least we’ll all be covered on paper.

  11. Grewgills says:

    but if we also factor in that people are still going to want to eat, have a roof over their heads, clothes, and so forth, then there will be but one option: reduce both the quantity and quality of healthcare services.

    and that is different that the situation we are in now in what way? If prices continue to rise at that rate, then soon health care becomes the exclusive province of the ultra wealthy.

    We see this problem in England and Canada.

    That is perhaps and indication that we should not borrow the British or Canadian models of health care.
    Very few are arguing to use this model in America, so comparisons are not so relevant.

    And lets also keep in mind that Medicare may have very will been one of the reasons for the high growth rates for healthcare spending. Expanding government healthcare programs to cover the entire public will likely add fuel to the fire with the end result quite possibly being both lowered quality and quantity of care.

    Given the rates of growth of health care in every other industrialized nation, other than Luxembourg, I find that proposition highly unlikely. They all have some form of universal care and yet not only are their health expenses considerably lower, the rate of growth of their health care expenses are considerably lower (with the exception of Luxembourg). Given this near universal trend, why is it that only in America does a universal care scenario explode the rate of increase in health care expenses? Is it a case of American exceptionalism?

  12. Duracomm says:

    Grewgills,

    Three things allow foreign health plans to look like they perform better than the US.

    1. Demographics

    2. Free riding on US medical research

    3. Rationing

    Political tinkering with the US health care system runs the very real risk of stunting medical innovation.

    if I lived in New Zealand, I’d be dead.

    The American health-care system may be a crazy mess, but it is the prime mover in the global ecology of medical treatment, creating the world’s biggest market for new drugs and devices. Even as we argue about whether or how our health-care system should change, most Americans take for granted our access to the best available cancer treatments—including the one that arguably saved my life.

  13. anjin-san says:

    How long will the right cling to the “pulled his tooth with pliers” story?

    For God’s sake, how many people DIE in this country every year because they can’t get health care.

  14. odograph says:

    What happens when the government extends health care coverage to anyone but has no money to pay for it? At least we’ll all be covered on paper.

    The honest answer is that we have to ration care. I think Steve is agreeing to that, above.

    … and as anjin-san points out, we currently ration care, not always perfectly.

  15. sam says:

    “Some of us just want to have cheaper food.”

    Reintroduce price, and ye shall reintroduce order.

    Along that line:

    Doctors Seek Fees at Time Of Service

    When Nicole Atkinson, 29, of Baltimore scheduled the first obstetrics appointment of her pregnancy last year, she knew the experience would come with its share of surprises. But Atkinson wasn’t at all prepared for a financial one: a request to pay up her full deductible — $600 — before the doctor would see her for the exam.

    “So, I fired her,” says Atkinson, who then switched doctors to one who charged only a co-pay for each visit.

    But if Atkinson decides to have another baby, she may not be able to avoid that balloon payment.More and more physicians are asking for the patient’s share of that day’s medical fees, including any deductible set by the insurer, at the time of the visit.

    “It’s a paradigm shift from what most consumers are used to at their doctor’s office,” says Red Gillen, a San Francisco-based analyst with consulting firm Celent, who last month published a report on doctors seeking upfront payment from their patients. Gillen says that until recently, insurers paid so much of the cost of medical care that medical providers, including doctors, labs and hospitals, focused their fee recovery efforts on the companies. But in the past few years, Gillen says, employers and insurers have shifted more costs to consumers in the form of higher co-pays, higher co-insurance and higher deductibles, making those payments an increasingly large share of doctors’ incomes. According to Gillen, consumer out-of-pocket spending as a percentage of all health-care spending rose to 12 percent last year, and is expected to continue rising.

    A survey published by the Kaiser Family Foundation in September, found that 18 percent of people who responded were covered by insurance plans with deductibles of at least $1,000, up from 12 percent the year before. “Until now,” Gillen says, “insured patients would see a doctor, leave a co-pay and then watch a series of insurance and physician envelopes come through the mail over weeks to months, until finally one detailed the actual amount, if any, to be paid by the patient.” Now, largely through new software programs that assess both a patient’s insurance coverage and the day’s charges, those weeks to months are often collapsed into just minutes for an estimate, or even a full adjudication of the bill.

    There’s more in the story.

  16. Rick DeMent says:

    Can we at least be honest about this rationing stuff. We have rationing, based on ability to pay. Those who have the means get any and all care available. Those who don’t get only the level of care that will stableize them to get back out the door.

  17. Missy says:

    @SAM

    How are these folks to be cared for–are they to be cared for?

    How were they cared for prior to our current situation?

    Well, for one thing physicians were in a position to offer free or lower fees, something which the current contracts they have with medicare and private insurers bar them from doing without much fuss. If a doctor has a patient today, low on money or without money to pay for medical services, they cannot waive a copay, cannot simply say ‘that’s ok, we’ll reduce our fees for you’….if they want to reduce fees they have to fill out paperwork for approval to do that! How insane is that? If they do it without approval, they risk their contracts being null/void and the potential to lose reimbursements.

    A time not so long ago, physicians were free to barter, waive or reduce fees as they saw fit – that is no more…..unless they’re within the boutique model that gets railed as being greedy, when really all it is is they’ve opted out of the insurance system into a cash based business model, many doing that offer a percentage of their time to patients who need medical care but can’t afford it.

    IMO docs aren’t necessarily greedy, they have huge expenses they have to cover just to stay open. For example, did you know that an OB/GYN in Miami has to pay about $275,000 for malpractice insurance? That’s more than he can or will make in the same city as his salary!

    He can’t go without malpractice insurance – if he does he risks everything he works toward – his future!

  18. sam says:

    If a doctor has a patient today, low on money or without money to pay for medical services, they cannot waive a copay, cannot simply say ‘that’s ok, we’ll reduce our fees for you’….if they want to reduce fees they have to fill out paperwork for approval to do that! How insane is that? If they do it without approval, they risk their contracts being null/void and the potential to lose reimbursements.

    Missy, go two comments up and follow the link to the WaPo story for the latest trend in reimbursement. (Not to gainsay what you’re asserting, btw.)

  19. Michael says:

    Well, then, you owe us an account of what’s “reasonable” in this context.

    No I don’t. When we make health care affordable without insurance, then it is up to you to decide for yourself what is reasonable for you.

    I know a guy who had a pacemaker put in when he was 14. Does he ever deserve affordable healthcare?

    Course he deserves it. The wonderful thing about affordable healthcare, is that everybody gets it, because it’s affordable. Now, if you’re talking insurance, does he deserve affordable insurance? Well, that’s not what insurance is supposed to be.

    how many people DIE in this country every year because they can’t get health care.

    Not nearly as many as the number of people that die in this country every year despite having health care.

  20. Drew says:

    “Drew, let’s give you a harder one. I know a guy who had a pacemaker put in when he was 14. Does he ever deserve affordable healthcare?

    I know some conservatives would take the puritan line that anyone flawed deserves their suffering, but I don’t think you’ll stoop that low.”

    Pathetically stupid, odo. Just pathetic.

  21. odograph says:

    It may be stupid Drew, but I notice that both times I’ve asked (you and Dave), the answer has been studiously avoided.

    If you want me to think it isn’t some kind of conservative Darwinsim, tell me what people who rack up “preconditions” in their childhood are supposed to do?

    I really do think the mental model for conservatives is that preconditions must be acquired “by your own actions” so to speak, and so become “your own responsibility.”

  22. odograph says:

    (Either that or the conservative health care solution is based on fantasy, that everyone can get cheap market-based insurance – if the government would get out of the way.)