Bacon's Rebellion

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Quote of the Day: John H. Cochrane

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by

James A. Bacon
in ,

John H. Cochrane

PeterG. often belittles me for scabbing material from the Cato Institute, which, in fact, I almost never do. (Just search “Cato” on this blog to see for yourself — all “Cato” references originate with my old Wonk Salon squibs or PeterG, accusing me of something I don’t do!) Thus, it is with some trepidation that I reproduce a quote from John H. Cochrane, a University of Chicago finance professor who actually is an adjunct scholar at the Cato Institute.

This column in today’s Wall Street Journal, “What to Do on the Day after Obamacare,” addresses an issue frequently discussed in the comments relating to health care (my bold face):

Most pathologies in the current system are creatures of previous laws and regulations. Solicitor General Donald Verrilli explained as much in his opening statement to the Supreme Court: “The individual market does not provide affordable health insurance,” he noted, “because the multibillion dollar subsidies that are available” for the “employer market are not available in the individual market.”

Start with the tax deduction employers can take for their contributions to group health-insurance policies—but which they cannot take for making contributions to employees for individual, portable insurance policies. This is why you have insurance only so long as you stay with one employer, and why you face pre-existing conditions exclusions if you change jobs.

Continue with the endless mandates (both state and federal) on insurance companies to provide all sorts of benefits people would otherwise not choose to buy. It sounds great to “make insurance companies pay” for acupuncture. But that raises the premiums, and then people choose not to buy the insurance. Instead of these mandates, at least allow people to buy insurance that only covers the big expenses. …

If we had a deregulated, competitive market in individual catastrophic insurance, that market would be so much cheaper than what’s offered today that we would likely not even need the mandate.

— JAB

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  1. Richard Avatar
    Richard

    Really good points! I look forward to the Romney, Boehner, Cantor, Ryan, OR McConnell proposal to eliminate the employer’s tax deduction for health insurance. And their proposal to eliminate state regulation of health insurance.

    1. James A. Bacon Avatar
      James A. Bacon

      Chuckle. Chuckle. I’d like *anyone* to make those proposals. But no one, of either party, has the cajones. (Ryan might — but he’s the only one. And he’s bitten off more than he can chew, as it is. So I doubt he will.)

      1. Richard Avatar
        Richard

        I agree.

        We should vote out all the cowards who are more interested in their committee assignments, government pensions, and post-service lobbying gigs than in facing facts, telling the truth and working out a solution. Perhaps Ryan is not one of these despicable politicians, but I’ll withhold judgment until he tells us which tax loopholes he’s going to eliminate in order to bring the highest incremental tax rates down to 25%.

  2. Peter Galuszka Avatar
    Peter Galuszka

    Dream on, Cato Boy!

  3. larryg Avatar
    larryg

    or offer anyone who buys insurance on the private market the same tax break that folks get on employer-provided insurance!

    there are quite a few possible variations of this but this goes to show you what the GOP and Ryan are not thinking and really don’t give a rat’s butt about.

    The GOP really does not care about health insurance at all. That’s for the “little people” to worry about.

    It takes the American people FOREVER to figure out how feckless the GOP is on issues like this. The right wing echo chamber works overtime to convince the bumper-sticker crowd of the righteousness of the GOP’s positions and to give credit where credit is due – the GOP is good at fooling the independent voters and are, in fact, winning this battle.

    Obama screwed up. Instead of a penalty, he should have offered refundable credits for those who buy their own health insurance!

  4. Hydra Avatar
    Hydra

    This is why you have insurance only so long as you stay with one employer, and why you face pre-existing conditions exclusions if you change jobs.

    =============================================

    The history of employer provided health insurance is that it was a benefit used after the war to entice employees to come to (and stay with) a company. The reasonyou have insurance only so long as you stay with one employer, and why you face pre-existing conditions exclusions if you change jobs, is that employers want it that way.

    Employers are more likely to support the Republican side of the aisle, and I imagine if youlook back to find out how we got this way there are as many Republican votes as not.

    For Republicans to now say “It’s that damn government that screwed up the market.”, is just laughable.

  5. Hydra Avatar
    Hydra

    The Ryan plan would require all Americans to pay taxes (mandated participation), and then give money (Single Payer) in the form of tax credits, which individuals could fool themselves into thinking they are spending of their own free will, (as long as they spend it on health insurance). Those that do not buy insurance would pay a penealty (taxes paid and no tax credit back).

    This is neither philosophically nor economically differet from Obamacare, except Ryan is not a black president and his plan is not enacted as law.

  6. Hydra Avatar
    Hydra

    “….all sorts of benefits people would otherwise not choose to buy.”

    ==================================================

    I doubt these benefits got mandated because people did not want to have them. More likely they had to be mandated to get insurors to offer them, precisely because they were so popular that they would be money losers for the companies.

  7. Hydra Avatar
    Hydra

    Instead of these mandates, at least allow people to buy insurance that only covers the big expenses. …

    ==============================================

    This is an error in logic at the systems level. If insurance only covers the big expenses that means all the other ones will be paid by the (partially) insured. since they will now pay the retail rte for those services, instead of the discounted rates paid by insurors. As a result the total costs to the insured will be higher, and it is likely the costs of the entire system will be higher.

    Not the least because people who are paying for their own “small things” will probably forego them until they become “big things”.

    What we will find from thos catastrophic policies will be similar to what we saw with hurricanes : “Your housw wasn’t blown away, it was washed away, so we do not have to pay.” Never mind the homes were washed away by water that would not be there except for the proximate cause, which was wind.

    This is going to be, “Oh, we only cover heart failure, We don’t cover heart failure cause by clogged arteries.”

    Those “big things” are pretty rare, so buying insurance against them is like buying a lotto ticket: good luck with that. The complaint agaqinst the mandate is that people do not want to be forced into paying premiums they beleive will be paid out to others, but for those that have catastrophic health plans the result will be more of that, not less.

    You will wind up buying insurance that you get nothing for, in all probability, and you get to pay for your health care at retail rates as well.

    Finally, those “big things” tend to happen near the end of life, when intervention will do little. But, More importantly (to the insurors) is the time value of money.

    For the same amount paid in and paid out, the insurors are far better off if they keep the money longer before they pay out, so they are perfectly happy to stick you with the smaller health issues, and pay out for th ebig ones later: if you make it to the hospital.

  8. larryg Avatar
    larryg

    the basic problem is that no matter what incentives you offer to try to get people to get insurance and be part of the insurance pool – the ones that don’t have it and have pre-existing conditions cannot get it.

    There is much ballyhoo about the “constitutionality” of the individual mandate but the thing that is worrying the hell out of the insurance companies is the provision that’s not being contested – and likely will stand and that is the provision that people cannot be denied insurance.

    What does the GOP have to say about this? Precious little other than blathering about “free market” solutions. Well folks, the “free market” does not offer insurance to those who have health conditions. End of story.

    the only way to deal with people who have health problems is insurance pools.

    The states handle insurance and they’ve chosen to handle this aspect of auto insurance by “assigned risk” as well as uninsured motorist fees on everyone.

    The states, COULD handle health insurance in the same way but other than Mass and a few others, states like Va have basically run away from the problem except to oppose Federal efforts to deal with it.

  9. Hydra Avatar
    Hydra

    The real fraud on this is that you can have a minor, controlled, chronic condition, and that minor condition can prevent you from getting insurance for major problems.

    If you have a dent in your car, you can still by comprehensive insurance, but if you have a chronic, skin condition you cannot get your heart insured.

  10. Hydra Avatar
    Hydra

    the ones that don’t have it and have pre-existing conditions cannot get it.

    =================================================

    Not quite true. You can get it by joining a large corporation, as I did, that offers health isnurance, if you are lucky enough to have the skills they need. Insurors don’t have a problem with insuring you as long as you are healthy enough to work.

    Thanks a bunch.

    But, other than that option, I would have beeen out of luck, and probably bankrupt long ago. Otherwise, I probably would have started my own business, and I do not understand why the GOP has not figured out that mandatory health insurance will be the biggest boon ever to small busineness start ups, that they (wrongly in my opinion) tout as the engine of job growth.

  11. Hydra Avatar
    Hydra

    Read the story in the NY Times about the young pregenant woman struck by a car. Her husband is a machinist who works for a small comapnay that offers no health insurance. Fortunately, she had purchased insurance through a california plan designed to help young mothers and their children.

    The baby survived the accident and was born via emergency cesarian. The woman also survived, but as a quadriplegic, paralyzed from the chest down.

    The plan she was insured under expires 90 days after the child is born, so her emergency treatement was covered, but her long term care will not be, and with a (now, sudden) pre-existing condition she will be able to buy none.

    Without her income the family will be slightly above the poverty level, but still within the limit that makes her elegible for Medicare. that is the good news.

    The bad news is that under that plan the family is prohibited from ever accumulating anything (as if they had much of a chance to, under the circumstances they face). Aside from their car and home the total of their other assets must reman below around $3500. They cannot save for education or retirement, be cause those assets would count under the asset limitation. If they inherit anything the state will take it to compensate for the care given, and they cannot leave anything to their children, until after the state expenses are covered.

    Hi, I’m from the (state) government, I am here to help you.

    Their only hope for any kind of future, altered though it is, lies in Obamacare not being found unconstitutional or repealed.

    1. James A. Bacon Avatar
      James A. Bacon

      Tragic story.

      Question: Why weren’t the woman’s medical expenses covered by automobile insurance, either his or that of the person who hit her? If the other driver was at fault, can she not sue?

  12. Hydra Avatar
    Hydra

    If we had a deregulated, competitive market in individual catastrophic insurance, that market would be so much cheaper than what’s offered today that we would likely not even need the mandate.

    =================================================

    Well, there is an objective truth out there.

    Let the GOP put this plan into effect, with the proviso that it expires and Obamacare replaces it, when the desired results are proven not to happen, say within five years.

  13. Hydra Avatar
    Hydra

    If the other driver was at fault, can she not sue?

    I went through that drill when my wife was hit. The driver was uninsured, but my wife had her own uninsured motorists insurance. She had to sue her own insurance company and it took eight years to collect. She got $25k worth of surgery and he got a $45 fine, then flipped her the bird on the way out of court.

    Lawsuits work well if you have a lot of money to start with.

  14. Hydra Avatar
    Hydra

    Remember, Tort reform is part of the conservative plan. Even if she could sue, she may not be able to for long, or get much if she does.

    The tragic part of that story is that it shows the fallacy of a user pays philosophy of government. Imagine being her husband. Not only has he got to care for his wife and child, but no matter what he does (practically speaking) he will never get more than $3500 ahead. Everything else goes back to the government. Unless the pre-existing condition limitations are eliminated, there will be no way for him to get off the state medicare plan that will keep him poor.

    Unless he emigrates to a civilized country.

    1. James A. Bacon Avatar
      James A. Bacon

      Check back in about 10 years, when the “civilized” countries have gone the way of Greece. Let’s see what their social safety net looks like then.

  15. larryg Avatar
    larryg

    every single industrialized country in the world INCLUDING Singapore and Hong Kong have universal coverage. German has had it since 1900.

    Are you expecting every single country in the world with universal coverage to “fail” or have you been sucking on Heritage/CATO tea bags for too long?

    1. James A. Bacon Avatar
      James A. Bacon

      Probably just the Europeans. Hong Kong and Singapore may have universal medical coverage but they don’t have the same lavish welfare states and heavy regulatory regimes.

  16. larryg Avatar
    larryg

    The Conservative/GOP/libertarian non-progressive/liberal view in the US about health care is often packaged in the twin beliefs that govt-involved systems are inevitably doomed to fail and that the only truly sustainable systems are ones operated by the unfettered private sector.

    For the most part, they do not accept that govt involvement in health care can be successful because the govt will not keep costs under control.
    ( this often allied with the belief that govt is incapable of keeping virtually ANY costs under control and that the less involved govt is with things that cost money – the better).

    At one time Conservatives believed in the individual mandate but now they believe the govt cannot “mandate” personal responsibility so if you are not personally responsible, the govt is not going to make you. Forget the fact that we have all manner of things in our life like traffic signals and mandatory car insurance… and voter registration laws… etc…

    If the GOP had their way – the health care issue would go away and stop bothering them and making them think hard about the purpose and responsibilities of governance in a world they believe should be run a much as possible by the private sector.

    Anyone in the GOP to the LEFT of this position are called in to have RINO stamped on their forehead and summarily booted out to live out their lives in political purgatory.

    The only problem is that a good number, perhaps a very large number of American people are not buying this guano pie of political poo… and the Conservatives know it so they play political propaganda footsy and fallacious feather dancing to keep the gullible public as stupid as possible.

    And… it IS WORKING! When you go to an AARP meeting about Medicare and protecting it for Seniors (as I did) and seniors themselves stand up to accuse ObamaCare as a dire threat to THEIR Medicare, you know the right has succeeded in flocking the environment with fun and foul foolishness.

  17. larryg Avatar
    larryg

    re: “just the Europeans”.

    Australia, New Zealand, Japan, Singapore?

    are you saying that SOME govt-run health care systems DO WORK?

  18. James A. Bacon Avatar
    James A. Bacon

    Oh, yeah, Japan is doomed, too.

    Otherwise, I’m saying that some countries may have government run health care but they don’t have the same insanely generous pension programs, the same job-killing work rules, the same productivity-killing regulations or the same level of deficits. Australia, New Zealand, Singapore and Hong Kong … and even Canada have freer economies and greater fiscal discipline.

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