![\"Curly](\"https:\/\/i0.wp.com\/www.dougsbriefcase.com\/blog\/wp-content\/uploads\/2014\/01\/Credit-wondersinthedark.jpg\")
<\/a>Curly Howard did\u00adn\u2019t design our health\u00adcare sys\u00adtem, but his plumb\u00ading mis\u00adad\u00adven\u00adture helps explain why it\u2019s such a mess \u2014 before and after Oba\u00admacare. [Cred\u00adit: wondersinthedark.com]<\/p><\/div>Curly Howard didn\u2019t design the US<\/span> health\u00adcare sys\u00adtem. Or Oba\u00admacare. Or Repub\u00adli\u00adcan pro\u00adpos\u00adals to replace it. But he could have.\n Howard, the most cre\u00adative of the Three Stooges, set out to fix a leak\u00ading pipe. His solu\u00adtion: add a length of pipe. Each time he did, the flow of water was tem\u00adporar\u00adi\u00adly inter\u00adrupt\u00aded, only to resume, this time out of the pipe he\u2019d just added. Unde\u00adterred, he added anoth\u00ader length of pipe. By the end of the episode, a frus\u00adtrat\u00aded and sog\u00adgy Curly is enmeshed in pipes. And still the water flows.<\/p>\n So it is with health\u00adcare. The leak, in this case, is the basic premise of insur\u00adance \u2013 that risk is inevitable and its cost must show up some\u00adwhere. Curly\u2019s pipe is reg\u00adu\u00adla\u00adtion \u2013 the unceas\u00ading attempts by gov\u00adern\u00adment to divert and dis\u00adguise the cost of that risk. The sys\u00adtem that result\u00aded from per\u00adpet\u00adu\u00adal inter\u00adven\u00adtion resem\u00adbles the one Curly pro\u00adduced \u2013 cost\u00adly, cum\u00adber\u00adsome, inef\u00adfi\u00adcient and confusing.<\/p>\n Two papers by con\u00adser\u00adv\u00ada\u00adtive econ\u00ado\u00admists trace how the numer\u00adous flaws that ante\u00addat\u00aded Oba\u00admacare came about and help explain both why the pub\u00adlic has\u00adn\u2019t yet warmed to the new health care law and why efforts by Repub\u00adli\u00adcans to replace it would face a sim\u00adi\u00adlar\u00adly cool reception.<\/p>\n The Pacif\u00adic Research Insti\u00adtute this week reprint\u00aded a paper by Rit\u00adu\u00adpar\u00adnu Basu<\/a> called \u201cThe Bro\u00adken State of Amer\u00adi\u00adcan Health Insur\u00adance Pri\u00ador to the Afford\u00adable Care Act.\u201d<\/p>\n The paper argues that gov\u00adern\u00adment reg\u00adu\u00adla\u00adtion is to blame for the sor\u00adry state of health insur\u00adance well before Obamacare\u2019s intro\u00adduc\u00adtion. \u201cWe must be will\u00ading to enter\u00adtain the pos\u00adsi\u00adbil\u00adi\u00adty,\u201d she writes, \u201cthat \u2026 the patient\u2019s ill\u00adness stems not from too much free\u00addom but from too many con\u00adtrols\u201d (p. 4).<\/p>\n To make her point, Basu notes how the rise of employ\u00ader-spon\u00adsored health insur\u00adance cov\u00ader\u00adage, itself the result of World War II<\/span> wage and price con\u00adtrols, con\u00adtributed to the pre-exist\u00ading con\u00addi\u00adtion prob\u00adlem that Repub\u00adli\u00adcans and Democ\u00adrats alike aim to solve (p. 6). Because such ben\u00ade\u00adfits are not tax\u00adable to busi\u00adness\u00ades or work\u00aders, the work\u00adplace quick\u00adly became the pre\u00adferred source of cov\u00ader\u00adage for the vast major\u00adi\u00adty of Amer\u00adi\u00adcans. So when peo\u00adple lost their jobs or changed them, they lost their health cov\u00ader\u00adage as well. If they\u2019d devel\u00adoped med\u00adical prob\u00adlems in the mean\u00adtime, insur\u00aders in the indi\u00advid\u00adual mar\u00adket had lit\u00adtle choice but to charge them high pre\u00admi\u00adums, exclude cov\u00ader\u00adage of their pre-exist\u00ading con\u00addi\u00adtions, or shun them entire\u00adly. As with Curly\u2019s plumb\u00ading, a seem\u00ading\u00adly benign gov\u00adern\u00adment inter\u00adven\u00adtion (exempt\u00ading employ\u00ader-based health ben\u00ade\u00adfits from tax\u00ada\u00adtion) cre\u00adat\u00aded an expen\u00adsive sys\u00adtem (an esti\u00admat\u00aded $213 bil\u00adlion<\/a> this year) that ren\u00addered health insur\u00adance less afford\u00adable and more dif\u00adfi\u00adcult to obtain for mil\u00adlions of people.<\/p>\n Basu also showed how state laws designed to de-link pre\u00admi\u00adum from risk led to high\u00ader pre\u00admi\u00adums for the sick and healthy alike (pp. 7ff). Restric\u00adtions on under\u00adwrit\u00ading \u2013 a process insur\u00aders use to esti\u00admate the risk pre\u00adsent\u00aded by a poten\u00adtial cus\u00adtomer \u2013 required insur\u00aders to charge high\u00ader rates, mak\u00ading their prod\u00aducts less attrac\u00adtive to peo\u00adple in rel\u00ada\u00adtive\u00adly good health, dri\u00adving pre\u00admi\u00adums ever higher.<\/p>\n Then there are man\u00addat\u00aded ben\u00ade\u00adfits, require\u00adments that all insur\u00adance poli\u00adcies cov\u00ader cer\u00adtain ser\u00advices or class\u00ades of provider (pp. 10ff). The first such man\u00addates were passed in Penn\u00adsyl\u00adva\u00adnia in 1949, oblig\u00ading insur\u00aders to cov\u00ader osteopa\u00adthy and den\u00adtistry (p. 10). By 2013, there were 2,000 such man\u00addates in state-reg\u00adu\u00adlat\u00aded poli\u00adcies, rang\u00ading from the rou\u00adtine to the cost\u00adly. Those man\u00addates were polit\u00adi\u00adcal\u00adly pop\u00adu\u00adlar and pricey, dri\u00adving up pre\u00admi\u00adums by an esti\u00admat\u00aded 15 per\u00adcent or more (p. 11). They also were polit\u00adi\u00adcal\u00adly pop\u00adu\u00adlar. Basu quotes econ\u00ado\u00admist Greg Scan\u00addlen as say\u00ading impos\u00ading such man\u00addates gave state leg\u00adis\u00adla\u00adtors the oppor\u00adtu\u00adni\u00adty \u201cto enact social pol\u00adi\u00adcy on the cheap \u2013 at no direct cost to the tax\u00adpay\u00aders\u201d (p. 10).<\/p>\n \u201c<\/span>Health insur\u00adance in Amer\u00adi\u00adca,\u201d Basu con\u00adcludes, \u201chas not been a remote\u00adly free, mar\u00adket-based indus\u00adtry for decades. Gov\u00adern\u00adment manip\u00adu\u00adla\u00adtion thor\u00adough\u00adly per\u00advades the whole process\u201d (p. 12).<\/p>\n An old\u00ader paper by Scan\u00addlen<\/a> argues that gov\u00adern\u00adment reg\u00adu\u00adla\u00adtion has been dis\u00adtort\u00ading the health insur\u00adance mar\u00adket\u00adplace for more than a cen\u00adtu\u00adry. Like Curly\u2019s plumb\u00ading, the accre\u00adtion of reg\u00adu\u00adla\u00adtion has pro\u00adduced \u201can indus\u00adtry that is too expen\u00adsive, too bureau\u00adcrat\u00adic, and too indif\u00adfer\u00adent to the needs and desires of con\u00adsumers\u201d (p. 1).<\/p>\n Scandlen\u2019s tale begins in the ear\u00adly twen\u00adti\u00adeth cen\u00adtu\u00adry, when the Amer\u00adi\u00adcan Med\u00adical Asso\u00adci\u00ada\u00adtion (AMA<\/span>) effec\u00adtive\u00adly seized con\u00adtrol of state licens\u00ading laws and med\u00adical edu\u00adca\u00adtion. The result was to reduce the num\u00adber of med\u00adical schools by half and elim\u00adi\u00adnate five of the sev\u00aden schools that pri\u00admar\u00adi\u00adly trained African-Amer\u00adi\u00adcan physi\u00adcians, simul\u00adta\u00adne\u00adous\u00adly reduc\u00ading the sup\u00adply of physi\u00adcians and increas\u00ading their aver\u00adage income (pp. 2\u20133).<\/p>\n A few decades lat\u00ader, it was the hos\u00adpi\u00adtals\u2019 turn to improve their finan\u00adcial stand\u00ading. The Great Depres\u00adsion had sub\u00adstan\u00adtial\u00adly reduced med\u00adical spend\u00ading and, with it, their rev\u00adenues. In 1929, Bay\u00adlor Hos\u00adpi\u00adtal in Dal\u00adlas began the pro\u00adto\u00adtype Blue Cross plan, pro\u00advid\u00ading school teach\u00aders with cov\u00ader\u00adage for 21 days of inpa\u00adtient care for $6 per year (p. 4). The spread of these \u201cpre\u00adpaid hos\u00adpi\u00adtal ser\u00advice orga\u00adni\u00adza\u00adtions\u201d con\u00adsti\u00adtut\u00aded a \u201ccol\u00adlab\u00ado\u00adra\u00adtive effort of hos\u00adpi\u00adtals to ensure their own rev\u00adenue\u201d (p. 5), help\u00ading fuel increas\u00ades in health care spending.<\/p>\n Next came the IRS<\/span> deci\u00adsion dur\u00ading the 1940s to exempt employ\u00ader-spon\u00adsored cov\u00ader\u00adage from tax\u00ada\u00adtion, fol\u00adlowed quick\u00adly by fed\u00ader\u00adal seed mon\u00adey for hos\u00adpi\u00adtal con\u00adstruc\u00adtion, an antitrust exemp\u00adtion for the health insur\u00adance indus\u00adtry, and the Taft-Hart\u00adley Act, which spread employ\u00adment-based cov\u00ader\u00adage to new cat\u00ade\u00adgories of work\u00aders (pp. 6\u20137). While each devel\u00adop\u00adment had its mer\u00adits, they cumu\u00adla\u00adtive\u00adly \u201ccre\u00adat\u00aded a sys\u00adtem of high-tech, high-cost employ\u00ader-financed health care, which great\u00adly dis\u00adad\u00advan\u00adtaged peo\u00adple not con\u00adnect\u00aded to an employ\u00ader,\u201d Scan\u00addlen writes. \u201cNot only were these groups left out of the sub\u00adsi\u00addies avail\u00adable to employ\u00ader-based groups, but the upward pres\u00adsure on costs and the empha\u00adsis on expen\u00adsive insti\u00adtu\u00adtion\u00adal care made health care more dif\u00adfi\u00adcult for them to afford\u201d [p. 8].<\/p>\n The cre\u00adation of Medicare and Med\u00adic\u00adaid in 1965, Scan\u00addlen writes, \u201cresult\u00aded in an unprece\u00addent\u00aded surge of new spend\u00ading on health care.\u201d That spend\u00ading surge, in turn, pro\u00advoked a series of reg\u00adu\u00adla\u00adto\u00adry adven\u00adtures by the Nixon Admin\u00adis\u00adtra\u00adtion, includ\u00ading wage and price con\u00adtrols, the Fed\u00ader\u00adal HMO<\/span> Act, and the Nation\u00adal Health Plan\u00adning and Resources Devel\u00adop\u00adment Act, which required hos\u00adpi\u00adtals and oth\u00ader facil\u00adi\u00adties to obtain gov\u00adern\u00adment approval before mak\u00ading cap\u00adi\u00adtal out\u00adlays (p. 10). Per\u00adhaps the great\u00adest dis\u00adtor\u00adtions result\u00aded from the enact\u00adment of the Employ\u00adment Retire\u00adment Income Secu\u00adri\u00adty Act (ERISA<\/span>), which fur\u00adther dis\u00adtanced larg\u00ader employ\u00aders from state-reg\u00adu\u00adlat\u00aded health insur\u00adance mar\u00adkets (p. 10).<\/p>\n The parade of reg\u00adu\u00adla\u00adto\u00adry defor\u00adma\u00adtions con\u00adtin\u00adued through the 1980s and 1990s, bear\u00ading acronyms like COBRA<\/span>, HIPAA<\/span> and CHIP<\/span>. With each inter\u00adven\u00adtion came new costs, new bur\u00addens, new com\u00adpli\u00adca\u00adtions, new sources of con\u00adfu\u00adsion for con\u00adsumers and busi\u00adness\u00ades alike. Gov\u00adern\u00adment and pri\u00advate spend\u00ading on health care grew; pre\u00admi\u00adums and the num\u00adber of unin\u00adsured grew with it.<\/p>\n \u201c<\/span>If the health care sys\u00adtem doesn\u2019t work like a well-oiled mar\u00adket\u00adplace, it is due to the financ\u00ading sys\u00adtem we devel\u00adoped, and that in turn is due to mis\u00adguid\u00aded, short\u00adsight\u00aded, and often inad\u00adver\u00adtent attempts by the gov\u00adern\u00adment to con\u00adtrol the mar\u00adket,\u201d Scan\u00addlen con\u00adclud\u00aded [p. 18].<\/p>\n We have, in short, built a sys\u00adtem that recre\u00adates Curly\u2019s plumb\u00ading project.<\/p>\n Then came Oba\u00admacare. Its tsuna\u00admi of reg\u00adu\u00adla\u00adtion \u2013 thou\u00adsands of pages of leg\u00adisla\u00adtive lan\u00adguage backed by tens of thou\u00adsands of pages of admin\u00adis\u00adtra\u00adtive inter\u00adpre\u00adta\u00adtions, waivers, exemp\u00adtions, delays, out\u00adright rewrit\u00ading of the statute and rough\u00adly $2 tril\u00adlion in new spend\u00ading, which comes with its own require\u00adments and stip\u00adu\u00adla\u00adtions \u2013 aims to make health insur\u00adance more afford\u00adable and unin\u00adsur\u00adance less preva\u00adlent. Ear\u00adly returns are mixed. Poli\u00adcies sold through the exchanges gen\u00ader\u00adal\u00adly car\u00adry high\u00ader pre\u00admi\u00adums, more bur\u00adden\u00adsome cost-shar\u00ading and nar\u00adrow provider net\u00adworks. Few\u00ader peo\u00adple have so far signed up than pro\u00adject\u00aded and most that have enrolled tend to be old\u00ader and pre\u00advi\u00adous\u00adly insured, Oba\u00admacare hav\u00ading required can\u00adcel\u00adla\u00adtion of their pri\u00ador coverage.<\/p>\n In the unlike\u00adly event that Oba\u00admacare fails, Repub\u00adli\u00adcans hope to replace it. Their most recent entry, a bill<\/a> spon\u00adsored by Richard Burr (R\u2011NC<\/span>), Tom Coburn (R\u2011OK<\/span>) and Orrin Hatch (R\u2011UT<\/span>), is called the Patient Choice, Afford\u00adabil\u00adi\u00adty, Respon\u00adsi\u00adbil\u00adi\u00adty and Empow\u00ader\u00adment Act (CARE<\/span> Act). It begins with a repeal of Oba\u00admacare. It pro\u00adceeds to rein\u00adstate some of its more pop\u00adu\u00adlar pro\u00advi\u00adsions \u2013 pre\u00advent\u00ading insur\u00aders from impos\u00ading life\u00adtime lim\u00adits on ben\u00ade\u00adfits, rescind\u00ading cov\u00ader\u00adage or refus\u00ading to renew it, as well as let\u00adting kids stay on their par\u00adents\u2019 poli\u00adcies through age 26 \u2013 while extin\u00adguish\u00ading such things as healthcare.gov, health insur\u00adance exchanges and the indi\u00advid\u00adual mandate.<\/p>\n In its place, the pro\u00adpos\u00adal would guar\u00adan\u00adtee cov\u00ader\u00adage for peo\u00adple who are \u201ccon\u00adtin\u00adu\u00adous\u00adly insured.\u201d A work\u00ader who lost her cov\u00ader\u00adage because she changed jobs, for exam\u00adple, could not be denied an indi\u00advid\u00adual pol\u00adi\u00adcy, would have her pre-exist\u00ading con\u00addi\u00adtions cov\u00adered and could not be med\u00adical\u00adly under\u00adwrit\u00adten. There also are sub\u00adsi\u00addies for peo\u00adple with incomes under 300 per\u00adcent of the fed\u00ader\u00adal pover\u00adty line (around $35,000<\/a> for an indi\u00advid\u00adual). Cur\u00adrent law pro\u00advides sub\u00adsi\u00addies to those with incomes up to 400 per\u00adcent (around $46,700) of FPL<\/span>. The pro\u00adpos\u00adal also would pro\u00advide fed\u00ader\u00adal mon\u00adey to states that oper\u00adate high risk pools and reform their med\u00adical lia\u00adbil\u00adi\u00adty systems.<\/p>\n As with any inter\u00adven\u00adtion into the tan\u00adgled world of health care, the CARE<\/span> Act would cre\u00adate some losers. Among them would be some who have employ\u00ader-spon\u00adsored cov\u00ader\u00adage. Accord\u00ading to a one-page descrip\u00adtion<\/a> released by Sen\u00ada\u00adtor Coburn\u2019s office, employ\u00ader con\u00adtri\u00adbu\u00adtions to health insur\u00adance pre\u00admi\u00adums would no longer be entire\u00adly exclud\u00aded from tax\u00ada\u00adtion. Instead, those con\u00adtri\u00adbu\u00adtions would be tax\u00adable to the work\u00ader to the extent that the cost of the cov\u00ader\u00adage exceed\u00aded \u201c65 per\u00adcent of the aver\u00adage mar\u00adket price for an expen\u00adsive high-option plan.\u201d So if the aver\u00adage mar\u00adket price for such a plan was $5,000, the employ\u00adee would have to pay a tax on any employ\u00ader con\u00adtri\u00adbu\u00adtion to his pre\u00admi\u00adum in excess of $3,250 (65 per\u00adcent of $5,000).<\/p>\n Because it would repeal Oba\u00admacare, the pro\u00adpos\u00adal also would repeal its Med\u00adic\u00adaid expan\u00adsion. So those liv\u00ading in states that extend\u00aded Med\u00adic\u00adaid cov\u00ader\u00adage to sin\u00adgle adults below 138 per\u00adcent of the fed\u00ader\u00adal pover\u00adty line (FPL<\/span>) would lose that cov\u00ader\u00adage but would instead receive a tax cred\u00adit to help pay for pri\u00advate insur\u00adance. Med\u00adic\u00adaid also would be restruc\u00adtured, with the fed\u00ader\u00adal gov\u00adern\u00adment pro\u00advid\u00ading states with a fixed amount of mon\u00adey that they would use to assist eli\u00adgi\u00adble populations.<\/p>\n The pro\u00adpos\u00adal, in short, is less ambi\u00adtious than Oba\u00admacare, but also less intru\u00adsive. It would elim\u00adi\u00adnate some of Obamacare\u2019s least attrac\u00adtive fea\u00adtures, along with some that ben\u00ade\u00adfit mil\u00adlions. Although it has yet to be offi\u00adcial\u00adly ana\u00adlyzed by the Con\u00adgres\u00adsion\u00adal Bud\u00adget Office, it like\u00adly would require the gov\u00adern\u00adment to spend less, but would insure few\u00ader peo\u00adple. It would, how\u00adev\u00ader, make it pos\u00adsi\u00adble for peo\u00adple with pre-exist\u00ading med\u00adical con\u00addi\u00adtions to find afford\u00adable cov\u00ader\u00adage with\u00adout levy\u00ading a tax on the unin\u00adsured or cre\u00adat\u00ading addi\u00adtion\u00adal cum\u00adber\u00adsome reg\u00adu\u00adla\u00adto\u00adry superstructures.<\/p>\n Its chances of seri\u00adous Con\u00adgres\u00adsion\u00adal con\u00adsid\u00ader\u00ada\u00adtion depend on whether Oba\u00admacare sur\u00advives its sea\u00adson of tur\u00adbu\u00adlence. Most impor\u00adtant\u00adly, insur\u00aders show no sign of bail\u00ading from the pro\u00adgram, rely\u00ading on the Administration\u2019s largesse of cor\u00adpo\u00adrate wel\u00adfare<\/a> to pad their bot\u00adtom lines and cush\u00adion their loss\u00ades. If insur\u00aders change their minds and pull out of the exchanges, Oba\u00admacare will fal\u00adter and some\u00adthing will be sought to replace it. The CARE<\/span> Act is a seri\u00adous candidate.<\/p>\n What almost cer\u00adtain\u00adly won\u2019t hap\u00adpen is the emer\u00adgence of tru\u00adly mar\u00adket-based sys\u00adtem. Reg\u00adu\u00adla\u00adtions and dis\u00adtor\u00adtions that have accrued over more than a cen\u00adtu\u00adry are impos\u00adsi\u00adble to break through. They frus\u00adtrate the Left, which prefers a pure\u00adly gov\u00adern\u00adment-run sys\u00adtem, and the Right, which seeks a mar\u00adket free of reg\u00adu\u00adla\u00adto\u00adry distortion.<\/p>\n The US<\/span> seems per\u00adma\u00adnent\u00adly stuck some\u00adwhere between, with a sys\u00adtem that pre\u00adserves some fea\u00adtures of a mar\u00adket obscured by a thick fog of reg\u00adu\u00adla\u00adtion. It is, in some ways, the worst of both worlds. But behind each reg\u00adu\u00adla\u00adtion, each dis\u00adtor\u00adtion, is an indus\u00adtry or group of peo\u00adple that would be worse off with\u00adout it. In Oba\u00admacare, it was the can\u00adcel\u00adla\u00adtion of cov\u00ader\u00adage for indi\u00advid\u00adu\u00adals and small busi\u00adness\u00ades, a pro\u00advi\u00adsion that was nec\u00ades\u00adsary to reward insur\u00aders that sell through the exchanges with mil\u00adlions of new cus\u00adtomers. Should the CARE<\/span> Act ever receive seri\u00adous con\u00adsid\u00ader\u00ada\u00adtion, those with employ\u00ader-spon\u00adsored cov\u00ader\u00adage will like\u00adly object to its restric\u00adtions on deductibil\u00adi\u00adty, which are nec\u00ades\u00adsary to fund the proposal\u2019s tax cred\u00adits and risk pools.<\/p>\n The result is that every effort to reform our cost\u00adly and inef\u00adfi\u00adcient sys\u00adtem inevitably involves the intro\u00adduc\u00adtion of new costs and inef\u00adfi\u00adcien\u00adcies. Reforms can improve our health sys\u00adtem but nev\u00ader tru\u00adly repair it.<\/p>\n It\u2019s so dis\u00adtort\u00aded and com\u00adpli\u00adcat\u00aded that even Curly couldn\u2019t fix it.<\/p>\n","protected":false},"excerpt":{"rendered":" Curly Howard didn\u2019t design the US<\/span> health\u00adcare sys\u00adtem. Or Oba\u00admacare. Or Repub\u00adli\u00adcan pro\u00adpos\u00adals to replace it. But he could have. Howard, the most cre\u00adative of the Three Stooges, set out to fix a leak\u00ading pipe. His solu\u00adtion: add a length of \u2026 Con\u00adtin\u00adue read\u00ading