January 24, 2010 12:07 AM UTC

Health Care and the Theory of the Second Best

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• by: JO

Or: Whence from Here?

One of the theories widely circulating about what Democrats should do about health care goes roughly like this: OK, the Senate bill isn’t perfect, but it’s better than nothing, so the House should pass the Senate version to get around the filibuster and leave fixing imperfections ’til later. For now, something is better than nothing.

This approach is appealing to those who subscribe to two other approaches: Moderation in all things is best, and Compromise makes the best outcome. For more on the latter subject, see “The Value of Compromise,” at http://www.steveharveyforcolor…

There is, on the other hand, an economics theory called The Theory of Second Best. A fuller explanation is here: http://stats.oecd.org/glossary…

To avoid getting too deep into an overly academic discussion, I’ll summarize the theory this way: IF the “best” solution (to a problem in the economy) is unachievable, it’s unclear whether a slight alteration (“compromise”) is, in fact, the second-best solution. The relevance to the health care reform debate and bill(s) is this: Given that the Senate and House bills are both dogs’ breakfasts, watered down or grotesquely modified to satisfy the narrow interests of a handful of politicians (let’s let NE’s NElson stand as a symbol), it’s by no means obvious or clear that these bills are preferable to (a) no bill at all or (b) an entirely new bill representing an entirely new approach.

Not having read through either bill, I can’t pretend to be an expert, or even wholly knowledgeable about the details of how the Senate bill would actually work in the end. Nor do I think this is the question at hand.

My impression is that the question Democrats are really wrestling with in the wake of the Massachusetts Massacre is this: how do we save our political butts from fate similar to that of La Coakley, 9-1/2 months from now? It is also my impression that The Electorate understands this and is fed up with playing political games with something as basic and important as health care. Result: the majority of people polled are opposed to the bill being shoved through by means of some too-clever-by-half parliamentary maneuver.

A Better Approach. The health care reform effort of 2009 was derailed from the very start by the backroom deal between Big Pharma and the White House, the essence of which was: don’t disturb our gold mine and we won’t stand in the way of anything else you do. That left health insurers next in line to defend their interests, and people like L. of CT (whose name I still can’t bring myself to type!) to threaten their own filibusters.

In this process, President Obama made a fundamental miscalculation–no, let’s call it Mistake–which was to plump for “health care reform” without saying just what he meant by that. The appearance was that if only he could crow, in advance of the mid-term elections, “we enacted health care reform,” no one would much care about the details. This was a miscalculation on three grounds: first, he failed to exert strong leadership, leaving details up to Congress; he failed to define what was wanted and needed and how it would be achieved; and he failed to recognize the application Theory of the Second Best, i.e. he accepted the notion that compromises that made a few fixes was the way to go–the politician’s version of Second Best.

What’s needed: Rather that starting with a series of fixes to a fundamentally flawed system, Step One needs to be a fundamental redefinition of health care as a social right. No one (or very few) rail against “socialized education” in talking about public schools. I’ve never heard complaints about “socialized transportation” when discussing public streets, roads, places, lanes, and highways. Are we concerned about “socialized defense” in talking about the military? Or “socialized fire protection” in discussing fire departments funded by tax dollars?

Of course not, and neither should such nonsense affect medical care, which in the first place needs to be redefined as a social right alongside the right to get help in buying food and a government-run retirement fund.

Second, the bill now floundering contains one key element: mandatory purchase of insurance. If I am required by law to pay for something, that sounds a whole lot like a tax! And so it should be. Health care, like police protection, education, fire, roads, Social Security, etc. etc. etc. should be funded by taxes levied on employers and individuals. Ooooh, I know, no one wants to pay taxes, but we love to pay insurance premiums! The argument is absurd on its face.

What I’m describing, of course, is the French system: government acts as “insurance company” by collecting “premiums” (aka taxes) and then reimbursing private health care providers on a schedule that allows the providers a reasonable return while also controlling runaway costs, redundant care (e.g. multiple tests, unnecessary procedures, etc.).

This system leaves health care providers, and the choice of which provider any individual chooses, in the private sector, while promoting health care as a social right.

Left out in the cold: insurance companies.

Lest anyone think this is overly revolutionary, this is fundamentally the system already in place in the United States under the name Medicare. The structure needed to run it is already in place; decades of experience, etc. etc.

Medicare for Everyone (a) achieves the principle goal, which is to assure that everyone is able to access needed medical care; while simultaneously (b) leaving the care itself in private hands, allowing patients to choose freely among providers and encouraging providers to vye among each other while simultaneously seeking more efficient means of providing care for set prices paid by the One Payer, viz. the government.

Nothing new here that you haven’t read elsewhere. What is needed is for the president to stand up and state the goal and the means of achieving it, and encouraging the Congress to start afresh with a much simpler piece of legislation: extend eligibility for Medicare to every resident and to impose taxes in lieu of medical insurance premiums to pay for it.

I dare say such a bill could be written in well under 100 pages, easily understood by all, and become a compelling campaign issue for November ’10.

Anything less falls afoul of the Theory of Second Best and ain’t gonna fly.