American Elephants

Who Will Be Hurt Most by ObamaCare? by The Elephant's Child

John Goodman, of the National Center for Policy Analysis, asks an important question in today’s edition of his Health Policy Blog:

Who will be hurt the most by the health reform legislation Congress passed last year?

The answer is the most vulnerable segments of society — the poor, the elderly and the disabled.  Those who are left of center in Congress voted for a law that will significantly decrease access to care for the very people they claim to care most about.

There are two basic ways to reform health care.  One way, the way Congress chose, is top down.  The other is bottom up. The latter is the economic way of thinking which involves incentives.

The top down approach starts with a social goal, and tries to impose it with regulations and rules, mandates and constant tinkering and re-regulation to fix what doesn’t work.  Those who are left of center seem to be natural control freaks, and cannot resist telling people what to do.  Doctors, nurses, hospital administrators, pharmaceutical companies and insurance companies are all being told that they can no longer conduct their businesses and their lives the way they have, over many years, found to work most efficiently and most successfully.  A bunch of bureaucrats in Washington, who have no experience in any of these fields, are going to tell them how it all must be done.  The program depends for its success on keeping people from acting in their own self-interest.

The bottom up way to reform health care depends on incentives, or allowing people to pursue their own self interest.  And of course you don’t know exactly how it is going to turn out. Health saving saccounts are one example of positive incentives.  When it is to your advantage to spend less and use less health care, it is in your self-interest to spend and use efficiently. Employers who adopted health savings accounts and their employees were very satisfied with them.  Governor Mitch Daniels of Indiana initiated health savings accounts for low-income people and found that they too responded to incentives and liked the program.  ObamaCare has omitted health savings accounts.

Another example occurred in the Medicare drug benefit.  Your costs are significantly less when you use a generic rather than a name brand drug, though some new drugs have no generic version. When you reach a total expenditure of $2830, you reach what is called “the donut hole.” a point when you have to pay the full cost of your drugs, until you reach the next level, when all are paid except for a small co-pay. This has been an incentive tor people to request generics, and to use less expensive drugs when they work as effectively. That incentive worked efficiently to keep drug benefit costs far less than they were expected to be.  For those who could not afford to pay the full cost of drugs in the “donut hole” there was help available. The left, unable to grasp the idea of incentives, eliminated the donut hole in ObamaCare. Without incentives costs will rise sharply.

The bureaucrats are convinced that preventive care can keep people from getting sick and costing the health care system much more money.  Free tests to prevent people from becoming ill will be hugely expensive.  Doctors usually don’t order a test unless there is a symptom or a particular worry that indicates a test would be worthwhile.  The incentive here is to have lots of tests.  If everyone in America succeeds in getting all the recommend preventive services (no deductible and no co-pay) primary care doctors would have to spend more than 7 hours every day delivering services to healthy people.

The Left is so convinced of the collectivist vision of universal health care that they ignore incentives entirely.  It is an economic mistake.

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