Friday, December 25, 2009

Health Bill

Paul Krugman criticizes those who are unhappy about the Senate's passage of health care. In the spirit of the holidays he updates Dickens:
It begins with sad news: young Timothy Cratchit, a k a Tiny Tim, is sick. And his treatment will cost far more than his parents can pay out of pocket.

Fortunately, our story is set in 2014, and the Cratchits have health insurance. Not from their employer: Ebenezer Scrooge doesn’t do employee benefits. And just a few years earlier they wouldn’t have been able to buy insurance on their own because Tiny Tim has a pre-existing condition, and, anyway, the premiums would have been out of their reach.

But reform legislation enacted in 2010 banned insurance discrimination on the basis of medical history and also created a system of subsidies to help families pay for coverage. Even so, insurance doesn’t come cheap — but the Cratchits do have it, and they’re grateful. God bless us, everyone.

Of course, one might also note that somebody must pay for the increased coverage. Perhaps as the tale proceeds, Cratchit loses his job as Scrooge goes out of business.

Krugman does not consider that because he has his own straw men to consider. He divides opposition to the health bill to three groups: irrational tea baggers; "Bah Humbug" fiscal scolds; and disappointed progressives. Obviously the only sensible reason to be unhappy is if you are disappointed that we are not enacting a single payer system, but you have to be realistic.

There are reasons to be unhappy with the bill that does not fall into his three categories. The fiscal impact of the bill that Krugman is so happy about depends on Congress carrying out commitments that all know they won't follow. Even supporters like Ezra Klein believe that the individual mandate in this bill is a sweetheart deal. The penalty for not buying insurance is so small that for many the best option will be to just pay the penalty and sign up for insurance only after you need it. But someone will have to pay the cost of this, will they not?

The most pressing problem, perhaps, is that the bill does not allow competition across state lines. Krugman never discusses this issue. The exchanges are set up on a state level, and private insurers cannot compete. Given that the bill limits administrative costs, small insurers will likely go out of business -- they cannot spread the fixed costs sufficiently -- so in some states the number of options will decrease under this bill. As Richard Epstein argues, the current bill turns health insurance into a regulated public utility.

I suppose that Krugman really approves of this but he never discusses it. He cannot. This argument does not fall into any of his straw man categories.

No comments: