Paul Krugman explains why tax haters love Bush's plan to tax 'gold-plated' health plans

[BurtWorm]

This is from a supplement to Krugman's Jan. 22 column, "Gold-Plated Indifference":


http://economistsview.typepad.com/economistsview/2007/01/paul_krugman_ad.html


...

What conservatives in the "consumer-directed" health movement believe, however, is that the big problem is "moral hazard" - people consume too much medical care, because someone else pays for it.

Now, this isn't entirely wrong. People probably do undergo expensive surgery with questionable effectiveness, and so on, because it's not out of pocket. Curbing that was supposed to be the point of managed care. But managed care didn't deliver, because people - rightly - don't trust private HMOs to make life and death decisions on their behalf. Successful managed care only takes place in institutions like the VA where there's more trust in the institution's motives.

The whole consumer-directed thing is, in my view, just an attempt to avoid facing up to that failure. Rather than admit that private-sector institutions aren't any good at rationing, conservatives now say that patients should be induced to ration their own care by being forced to pay more out of pocket. And that's where Bush's attack on gold-plating comes from: reduce the tax advantage of employer-based care, and deductibles and co-pays might go up.

The trouble is that the big money is in stuff like heart operations - areas where (a) people can't pay out of pocket in any case - they must have insurance or go untreated - and (b) people really aren't sufficiently well-informed to make the decisions. Yet the whole focus of consumer-directed doctrine is on things like routine visits to doctors' offices and annual dental checkups. It's going where the money isn't - because the advocates just can't believe that markets aren't always the answer.

Now here's the thing: in the name of consumer-directed health care theory, Bush is proposing changes that would essentially encourage people to move into the individual market - which wastes a lot of money, and doesn't and can't work for those most in need - while undermining the employer-based system, which isn't wonderful but is still essential. In particular, healthy high-income people would be encouraged to drop out of employment-based plans, leaving behind a sicker risk pool, driving up rates, and pushing employer-based care in the direction of an adverse selection death spiral. The plan we're supposed to learn about tomorrow doesn't sound big enough to have catastrophic effects, but it's a step in the wrong direction.

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[ThomCat]

1. He said what I was thinking.

Though he definitely said it better. :)

This plan is one more obvious attempt to force poor people to do without healthcare, and call it a choice rather than a consequence of poverty.

It's also an attempt to drive out people with disabilities and chronic health problems. The assumption is that we choose to "over-consume" medical care, so we need to be given a financial incentive (actually a penalty) to make us stop consuming. The fact that this would kill many of us goes unstated.

Anyone who works for a small company would quickly see insurance plans disappear. No small company would be able to afford insurance. So that would undermine the whole concept of employer based insurance.

So once insurance becomes something that only rich people and large corporations can get, what's the outcome for all the rest of us?

[EC]

4. We'll get sick and infect them....

that's the nature of allowing one segment of society to get sick...that's how plagues are started, that's what was the downfall of the Roman empire (who did have socialized med. until they put so much money into the armies that there was nothing left for health and infrastructure)

[Captain Hilts]

2. Insurance companies still have the right to refuse to insure people.

THAT's a problem.

[ThomCat]

5. True. If I ever lose my employer-based health insurance

I'll never find a company willing to give me private insurance. As a person with a disability and an extensive medical history I'd be screwed.

[NoAmericanTaliban]

3. Part of the War against the upper middle class

* social security plan would have reduced the benefits for upper middle income folks by as much as 66% in order to pay for the privatization. Now he wants to add a health care tax on their backs.
The irony is that a lot of those folks still support * even when he is trying to screw them big time.