Monday, July 06, 2009

We Can Do It!

Or so Paul Krugman thinks, "it" being the offering of health care coverage to everyone:

Let me start by pointing out something serious health economists have known all along: on general principles, universal health insurance should be eminently affordable.

After all, every other advanced country offers universal coverage, while spending much less on health care than we do. For example, the French health care system covers everyone, offers excellent care and costs barely more than half as much per person as our system.

And even if we didn't have this international evidence to reassure us, a look at the U.S. numbers makes it clear that insuring the uninsured shouldn't cost all that much, for two reasons.

First, the uninsured are disproportionately young adults, whose medical costs tend to be relatively low. The big spending is mainly on the elderly, who are already covered by Medicare.

Second, even now the uninsured receive a considerable (though inadequate) amount of "uncompensated" care, whose costs are passed on to the rest of the population. So the net cost of giving the uninsured explicit coverage is substantially less than it might seem.

He is right, I think. When Medicare began in the 1960s health care costs went up a lot, but that was because the elderly are the main users of health care funds. Adding today's uninsured wouldn't cost anywhere that much.

Krugman makes another important observation:

Now, about those specifics: The HELP plan achieves near-universal coverage through a combination of regulation and subsidies. Insurance companies would be required to offer the same coverage to everyone, regardless of medical history; on the other side, everyone except the poor and near-poor would be obliged to buy insurance, with the aid of subsidies that would limit premiums as a share of income.

These are two very important aspects of any successful reform. I know that the idea of forcing people to buy coverage is not a pleasant one, but think about what would happen if this wasn't required.

Individuals who are fairly healthy now might just not buy coverage at all. This has two consequences: First, their payments wouldn't be there to fund the care in general. Second, should they suddenly need care they'd be still uninsured and either would have to be covered by others or left to suffer without coverage.

There's a more subtle consequence, too: If the healthy and young are allowed to opt out of insurance altogether, the average expenses per insured will have to rise. This makes more people want to opt out (some of the other healthy people, say) and the average expenses will keep on rising, and then even more people find the coverage too expensive. And so it goes. That's why requiring insurance is an important part of the plan.

Requiring the insurers to accept everyone is an equally important part, because in the absence of that requirement firms would want to cherry pick: to avoid potentially expensive cases and to gear their advertising and recruitment towards the young and healthy.