Paying for What We Get

Andrew Sullivan writes today that healthcare costs are skyrocketing and there are basically two ways to rein them in:

If we want to reduce this giant suck from the rest of the working economy, there are two options: have a government body decide which treatments can be afforded and which cannot; or have patients ration themselves by price….My own view is that central government diktat on these things is more likely to provoke anger and even more heated debates and paralysis than now.

I think half of this is right, but the other half betrays a fundamental (though common) misconception about how politics actually works. First the misconception.

It’s true that national healthcare systems usually rely on some kind of expert panel that decides what procedures will be covered and how much doctors will be reimbursed for them. But in a democracy, these panels are merely advisory. The real battles happen in national legislatures, either directly (i.e., overturning the panels on specific issues) or in fights over funding levels, which is what constrains the decisions of the panels in the first place. And those battles in national legislatures are, obviously, mirrors of what the public itself wants. If they want higher funding and more procedures covered, then over time that’s what happens. If not, it doesn’t.

So it’s not really the panels that ultimately decide these things, nor is it central government diktat. It’s the voters. But what Andrew is right about is that these decisions are likely to provoke a lot of anger and endlessly heated debates. The problem is that he says this as if it’s a bad thing. It’s not. This is how healthcare costs get reined in. In a national healthcare system, taxpayers who are footing the bill have to make decisions continuously about how much they’re willing to pay for healthcare. They’re guided in this by the opinions of experts, but in the end, it’s their money and they decide. And unlike in our jury-rigged employer-based healthcare system, where costs are largely invisible, this decision is explicit: tax rates are directly tied to how much healthcare the system provides. The British, for example, are fairly stingy and end up with waiting lists. The French are more generous and don’t. That’s because the taxpayers of both countries have made their own decisions about how much healthcare they’re willing to fund.

The fact that these debates are angry and heated is unsurprising, but it’s also healthy. These tradeoffs should be explicit and difficult. The big difference here isn’t in whether healthcare is rationed, but in how the rationing is done. Patients are rationing themselves in both systems, but a system that rations via taxes is relatively friendly to the poor while a system that rations on price is friendlier to the wealthy. Knowing that, you can take your pick.

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