Wednesday, March 24, 2010

What's next in healthcare, part 2

So the question now is how the government will respond to the various problems ObamaCare will create.
Hopefully the government will realize the adverse selection mess they're causing in short order, and raise penalties for not getting insurance. The cadillac tax will probably be raised to a higher threshold as insurance costs go up significantly.
There are two directions in which the government can respond to a shortage of doctors (I don't believe that the government will notice or care about a reduction in medical R+D, though in my opinion, that's the most tragic part of this whole mess):
The first option is that it can follow the time-tested path of deregulation. It'll slowly unwind a lot of the bureaucracy put into place by Obamacare and replace it with a more constructive, better thought-out bipartisan plan (the unfortunate part of ObamaCare is that it's happening at a time when the public has a significant distrust in free markets, but the alternative has always proved worse - something that is not in the collective public consciousness. If this happened 3 years ago, we may have seen a much better bill. China's fraudulent "miracle" isn't helping matters.)
I agree that vouchering for catastrophic care may be an option; if the Republicans have enough power to overwhelm the Democratic fostering of their union constituents, we may actually see something like Wyden-Bennett (a bipartisan healthcare bill better than what was passed - by every (educated) account on both the left and right - but crushed by unions) with a version of vouchering for catastrophic care. This still falls under the deregulation banner; instead of the government functionally dictating the way your plan works for you, individuals have the chance to choose the plan that's right for them. You'd need some sort of disclosure agency to ensure consumers are given the information they need to make the decision and avoid extraneous information, but that's a far less top-down program than Obamacare.
The other option is the "Pelosi Pipedream" of government-provided healthcare and a government-run medical system. Doctors would probably have to undergo less training in order to have an equilibrium with sufficient doctors receiving (functionally) federally determined pay. The quality of people entering the industry lowers, meaning the quality of care for specialized or rare diseases decreases. As with most bureaucracy, inefficiency reigns and R+D stops entirely.
I'd like to think that by then, America will have gotten over the financial crisis-induced fear of deregulation, and the US will repeat the deregulation of the early 80s. We finally snap out of a period of reduced growth, and hopefully big government fiscal progressivism dies for good (though it's not entirely clear how much more, fiscally, there even is for the government to do, unless it intends taking over provision of housing or food in the name of equality - and the USSR is still fresh enough in people's memories that it's hard to see that happening any time soon).
I would hope that at some point, as the quality of care degrades and price goes up, that people would look at better methods of reimbursement. Hard to know.
Moral hazard becomes somewhat more of an issue, as well - you have fewer reasons to not be fat if you know you have insurance. It's probably a smaller effect than the far right makes it out to be, and definitely a bigger one than the "it's not a problem" left. If so, you'll probably see some degree of pigouvian taxation, or perhaps the government would let insurance companies be a little bit more actuarially fair.
R+D may slow down for good. The US fiscal situation is another post for another day. And it's possible that the US could try and "reclaim" some of the assets of people who leave - a thoroughly socialist thing to do, but we just half-socialized healthcare, and that's a lot less unpopular.
You may see greater protectionism as companies increasingly offshore labor, or politicized tax breaks for businesses to hire here in industries housed in states with key politicians.
We probably have another massive healthcare bill debate in 15 years to try and clean up the mess caused by this one (and hopefully that one will happen with Republicans in Congress, so we can actually get some useful features like tort reform that were left out of the bill at Democratic constituents' request).

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