Aside from the Constitution . . .

Yesterday I set forth a series of educated guesses about what would happen to the two health care law suits. They are educated only to the tune of a law school career about 60% over, so take them with somewhere between a grain and the shaker of salt.

Today, however, I would ask whether the health care reform that passed is a good idea or not. I think that most have seen Atul Gawande's article in The New Yorker back in June of '09, which profiled the South Texas town of McAllen, which has the second-highest per-capita expenditures on health care in the country. That article really got me thinking about the entire system, which is hard to do. I have not been to the hospital in a long, long time. I have not bought a prescription drug since -- I can't even remember. Gawande's article did a good job giving me an introduction to the problem. But information out there is hard to find; there is no "health care systems for dummies" book that I have found.

Unbelievably, it is exceedingly hard to find a well-reasoned, thorough critique of the bill. The New York Times, naturally, gives policy a conclusory pat-on-the-back or kick-in-the-rump, with about as much thought-provocation as an episode of Family Guy. Redstate.com, of course, does the same thing -- just with a different conclusion and almost no coherence (although I must confess I enjoy that site for other reasons). But I finally did find a very thoughtful critique of the bill. The Becker-Posner blog has a tremendous post today on the merits of the new bill. Of course, both of the contributors have conservative leanings economically and legally. But while one may disagree with whatever their philosophical presuppositions might be, their conclusions come only after deliberation and reason.

Becker contends that really good, cost-cutting reform would seek to scale back the tax deductions that employers enjoy for providing plans, which would have the putative effect of forcing consumers to pay a higher deductible for medical care. Becker compares Americans' out-of-pocket expenses (12%) with Swiss citizens' out-of-pocket expenses (30%). Switzerland, he continues, spends a much lower percentage of their GDP on health care.

I would make two observations of this argument: (1) Raising the cost of procedures would surely deter a substantially greater portion of the population from undergoing that procedure; and (2) raising the cost of a good/service does not lower the cost of that good/service. In my mind, productive legislation would seek to spend less on health care. I supposed that, in the aggregate, a lower percentage of GDP would mean less per-capita spending on health care. I do not know, though, that it would make a particular health product any cheaper. Put another way -- is the goal of health care reform to keep the same level of service (roughly the same number of tests performed, same number of checkups, roughly the same prescription drugs, the same general sphere of coverage, etc.) and to make it cheaper? Or, is it simply to spend a smaller percentage of GDP on health care? Becker does not really answer that.

The Gawande article I mentioned above contends that over-prescription (of tests, drugs, specialists, etc.) has driven up costs. That makes sense: if the medical culture subscribes to needless over-testing, then it will of course incur costs. And because co-payments are so low, someone else foots about 85% of the bill. But who foots that bill? Obviously, those who pay the premiums -- peoples' employers, i.e. - corporate America. It would seem that premiums would go up year by year in response to a rampant exercise of the plan's options by its subscribers. And in America, corporations would eventually buck the increased cost of the health care they must provide. So what steps into stop that market equilibrium? Are we at the market equilibrium right now? Or are health care costs expected to rise?

This analysis, of course, raises the question why this bill was enacted, why this reform was pushed now. I can think of two reasons why Obama and the Democrats made this a priority. First, they thought that, for the services Americans were receiving, they should be paying less (in other words, health services was being inefficiently delivered). Second, too many people in this country did not have health insurance, and this was an unacceptable state of affairs from a policy/philosophy standpoint. Both of these reasons make sense as a causa actionis.

And the has definitely addressed the second reason: it has vastly expanded coverage. But in regard to the first reason, what has the bill done? As far as I can see, it has set up state health insurance exchanges. This idea, by the way, was put forward by the Heritage Foundation three years ago in several articles. This will enable consumers to see what other plans offer, and it should lead to a more efficient market. But if the market is at equilibrium now (no idea if it is), then consumers will not likely see much change in the value of the dollar that they spend on health care. Why? Think about the range of health care plans we have now. They range from covering little to covering everything and the kitchen sink (these are the infamous "Cadillac plans," upon which many heap plenty of blame for today's health care "crisis"). With disclosure, the market will find a happy median -- somewhere between the awful plans and the extravagant plans. Employers will converge on that. But if we are at market equilibrium, then plans will converge in terms of cost and coverage somewhere halfway between a mediocre plan and a cadillac plan. Qualitatively, I do not know how big a gap exists between two such plans -- but I would wager that the market will converge on the "average" health plan now. So is that what disclosure will ultimately do? Provide everyone with the average?

Now, perhaps in doing so, the market in the long term will force plans to raise deductibles and offer abridged coverage (not necessarily in a miserly way, just fewer options than a cadillac plan). Disclosure and information sharing worked the same way when the internet started selling goods and services: prices were cheaper online, but brick and mortar stores and the internet started to converge around the same market price for the same good. Thus, the exchanges may very well see modest reductions in price, but not an immediate cost-cutting that many Americans may well expect to see. It certainly will not warrant the fanfare of the twenty-two pens needed to sign the legislation. But it very well may help in the long run. Just don't expect too much.

Posner's critique, on the other hand, provides an outstanding analysis of the legislation. First, he contends that it will at least provide us data on how to run a health care system and what the cause of the problem is (not what its attendant circumstances are; much of the analysis and data I've seen merely give a post hoc, propter hoc type of analysis). Second, Posner contends that the bill will be expensive and that it will not save money. Judge Posner towers above the masses (in which I include myself) intellectually, but this prediction does not seem to come from Sinai, so to speak. There will be an increased demand for services, but no corresponding increase in funding? Oh -- looks like a financial shortfall. You do not have to be an economist at . . . well, the University of Chicago . . . to predict that.

So what will the bill do? If it subjects the nation to poor policy outcomes, it will sharpen our policy-making ability in the future. If it produces mediocre, modest results, it will have the same effect. Remember -- Americans like incremental policy change. We will have to wait to see whether the bill provides such an approach, but I think it does. Does it expand entitlements? Yes, of course it does -- but it does not engender a new way of thinking the way that the New Deal did. Now, business are expecting their costs to rise. While I hate to let corporate America dictate policy, they churn the economic engine, and their collective prospectus bears on us all. So, unfortunately, we must wait. But the plan is not catastrophic. The New Deal did not bankrupt us (though it more or less invented deficit spending), and this exceedingly more modest effort will not do the nation in, either -- at least in the short run.