The Free Thinker

Mickey Kaus:

Lots of talk on the Sunday chat shows about how the uncertainty over health care reform is discouraging businesses from hiring, since they don't know what sort of taxes, etc. they'll be facing. But if what business wants is certainty ... well, at this point the fastest way to get certainty is for the Dems to pass a bill quickly, no?

Well, that sort of makes sense. But (a) if businesses don't want to hire because they think health care reform will saddle them with new costs-- probably true-- passing the bill will presumably just get some of them to permanently cancel, rather than merely postponing, hiring plans. (b) It will probably take business a long time to figure just how much of a burden health care reform is and what the optimal response to it is in terms of employment, so the "certainty" Kaus wants would be a long time coming. (c) If some businesses are playing "wait and see" whether to hire, other businesses may be playing "wait and see" whether to fire employees who aren't worth keeping if they have to pay for their health care. In that case passing the bill would trigger more lay-offs. (d) Given how unpopular health care reform is, passing it might not be a political equilibrium and might not remove uncertainty. Business might still be just as uncertain-- or more so-- as they waited to see how the implementation-amidst-backlash plays out.

The real way to give business certainty is for health care reform to die. But the current Democratic Congress might not be able to credibly commit to killing it. So the pickup in hiring might have to wait till November 2010.

Health care reform makes for an interesting comparison to Social Security reform. Both were pursued at a time when one party controlled all branches of government. As a consequence, they were drafted in a way that was skewed too far in the direction of one party's preferences. Meanwhile the opposition had no stake in the legislation, and was in a position to expoit opportunistically the public's fears of change. It's too bad because, while the 2005 SS reform was on balance good and the 2009 health care reform on balance bad, both Social Security and health care need reform. The lesson may be that complex legislation has to be carried out in a bipartisan way, both to ensure that it's close enough to the median voter to get political traction, and because the public looks to the political class for signals about the quality of legislation and needs to see bipartisan support to overcome its suspicions about change. The 1996 welfare reform-- which may explain the late-1990s prosperity-- is the model to follow.

Health Insurance is a Dumb Idea

At a time when unemployment is over 10% and underemployment 17%, I feel rather fortunate to have just landed a reasonably well-compensated job.  As I was signing the papers for it today, however, I found myself irritated to see that health insurance comes with the job.  Why don't they just pay me the extra cash?

Of course, part of my irritation is that since I'm pretty young and healthy I'm probably cross-subsidizing other people whose outside option for health insurance would be worse.  If I'm to cross-subsidize anyone, I'd rather the money went to African orphans.  Another thing that's annoying is that I can now visit doctors with negligible co-pays.  If I don't take advantage of that, I'll feel like a sucker.  If I do I'll be wasting society's resources.  And of course, someone else probably is taking advantage of that, making doctor's appointments they wouldn't waste time with if they had to pay the full cost out of pocket.  And that raises my new employer's labor costs without putting a dime in my pocket.

One of the smarter positions on health care is that people should get catastrophic insurance and pay for non-catastrophic expenses, up to $3,000, say, out of pocket.  That would certainly be much better.  Since I'm on the hook for hundreds to thousands of dollars of car repairs at any moment I have to keep large cash balances on hand anyway, so it wouldn't be any special problem to be prepared for substantial health expenses as well.

Yet I'd go even further.  Why have even catastrophic coverage?  Of course one doesn't want to die if the costs of an unexpected illness exceed one's net worth, but what I really need is not someone committed to pay for catastrophic health care, but merely someone to provide a credit line.  I could (probably) pay them back later (and prepayments and/or interest rates could compensate them for some risk of my defaulting).  After all I've been through the idea of running a small risk of ending up in tens of thousands of dollars of debt through no fault of my own is not so terribly scary.  No scarier than the IRS.  Couldn't I just pay some company $50/month in return for standing ready to lend me up to $200,000 in the event of a catastrophic illness, and then, as long as that doesn't happen, just handle health expenses as private, one-off transactions?  It would be less bother, and I'd feel virtuous for not being cross-subsidized by anyone else, and I wouldn't have the sense of being a sucker-victim for involuntarily or semi-voluntarily cross-subsidizing other quite non-needy people who game the system better than I do.