Thursday, November 6, 2008

There's nothing more important for Obama to achieve than universal health care.

I strongly believe that health care is the most important thing. It is the most valuable thing that can be done when considering the probability distribution of its payoffs -- in non-mathematical-economics jargon, it is the most valuable when considering how much good it's likely to do.

Why is this?

Isn't there more potential to do good (or prevent bad) in combating global warming? Yes, but the best way to combat global warming is to pass a good universal health care program, or at least to move us greatly in that direction. The reason is that this would be so enormously good for people's lives, and for the economy, that it would generate a gigantic amount of gratitude and political capital for the Democrats, and that would allow them to push through far stronger anti-global warming legislation -- a lot more money for alternative energy, a lot greater conservation measures, etc. And it would also help Democrats in elections for decades to come, greatly decreasing the harm Republicans can do on so many issues (at least in the Republican party's present extreme, anti-thinking form).

There's nothing more important than passing a good universal health care program, and hopefully Obama won't falsely think it's too politically risky to push for this, because once we've had it, and Americans saw the reality of just how much better it made their lives, rather than the Republican false arguments and lies, it would be like the New Deal; it would generate enormous gratitude and political capital for decades; it would expose the falseness of the Republican arguments and lies, and the Republicans would never be able to get rid of it. Would the Republicans dare even to try to get rid of old age social security, medicare, or unemployment insurance? No, these are programs that the Republicans could never get rid of once enacted. Universal healthcare would be the same.

As Nobel Prize Winning Economist Paul Krugman wrote in his 2007 book, "The Conscience of a Liberal", "Health care reform is the natural centerpiece of a new New Deal. If liberals want to show that progressive policies can create a better, more just society, this is the place to start." (page 216), and, "The most dangerous government programs, from a movement conservative's point of view, are the one's that work the best and thereby legitimize the welfare state." (page 228), and finally, "Getting universal care should be the key domestic priority for modern liberals" (page 243).

The question, then, is how to best achieve universal health care, by pushing for it first, or by first passing a stimulus plan and other measures to deal with the recession and credit crisis, or by doing all of it more or less simultaneously in one big package?

I think it actually might be better to pass bills dealing with the recession and credit crisis first, and certainly with the extreme downward spiral, this must be done as soon as possible to stop and reverse this spiral before it leads to a demand decreasing, negative spending chain reaction that gets completely out of control. It's just do you do it separate of healthcare, or along with healthcare as part of the stimulus. If you push through quickly some good strong stimulus and pro-credit measures and regulation, separately of healthcare first, that could create valuable public approval for the Obama administration, and thus political capital and momentum for tackling the health care legislation next.

On the other hand, enacting universal health care, hopefully, or at least legislation that moves us greatly in that direction, would in fact also be a great fiscal stimulus to combat the current recession. It could in the first year add over $100 billion to spending, even though after the transition period it will not be far from cost neutral for the economy as a whole. Because of the efficiencies of a good universal health care program, we can cover everyone for close to the same amount as we currently spend with 50 million uninsured and 1/3 of adults between 18 and 65 spending some time over the last two years without health insurance.

Universal health care not only would be a strong fiscal stimulus, it could probably be sold as such, at least fairly well. A problem, though, is the campaign for it can then get bogged down in its fiscal and deficit virtues, rather than its long term benefits in per capita health care savings, and how much more secure and better it would make the lives of the middle class and the vast majority of Americans in general. These benefits are a much stronger selling point, so it really may be better, stronger politically, to just push through the deficit and credit market plans quickly, and then focus completely on the great importance and benefits of universal health care (I really hope), or at least a program which moves us greatly in that direction. Still, something crucial to keep in mind is that the political capital, urgency, and momentum from a strong electoral victory usually dissipates very quickly, so it can be very dangerous to wait even a short time before trying to pass universal healthcare.

Hard to say, though, what's the best strategy. It depends how you package and promote it; the main thing is to just do it. As Krugman wrote today, "The bottom line, then, is that Barack Obama shouldn’t listen to the people trying to scare him into being a do-nothing president. He has the political mandate; he has good economics on his side. You might say that the only thing he has to fear is fear itself."

By the way, here are some suggestions for at least moving us greatly in the direction of universal healthcare which would be highly attractive to the public and politically strong:

1) A very strong reinsurance program, like the government pays all "catastrophic" health care costs, with "catastrophic" defined as any and all costs over $50,000. This would obviously plummet health insurance premiums, and would be a huge step towards universal health care. You can pay for this with increased income taxes on earnings over $250,000, and with increased corporate taxes, especially given the huge savings corporations would realize in decreased health insurance costs.

2) Lower the age for medicare eligibility to 50. This would be hugely popular, especially after it was enacted -- try taking it away then! The 50 to 64 age group has by far the hardest problem with health insurance. They're in such danger here. Of those who don't already get universal healthcare through Medicare (Yes, we already have universal healthcare, and have had it for 40 years, it's just only people age 65 and older get it, and they love it.), they have the worst health, the greatest risks, the highest costs, and the most difficulty obtaining coverage. They have so much stress and worry about being ruined by illness, either because they don't have health insurance, or they might lose it, or the insurance they have doesn't end up paying for tens or hundreds of thousands of dollars of the costs of an illness. Senators who voted against lowering the age of Medicare to 50 could really get nailed to the wall on this in the next election. People over 50 vote heavily, and this is a huge deal for them. It's also a huge deal for people in their 40s, knowing that guaranteed coverage would be so close. And 40-somethings are another group which votes heavily. You can pay for this by raising the Medicare payroll tax only for income over $250,000.

With regard to any fears about the costs or short term deficits, if you think these programs provide too much stimulus, and thus too much in short term deficits, just increase taxes on the wealthy to ratchet down the deficit and stimulus effects, and certainly enact large tax increases now on the wealthy to begin phasing in after three years, when the recession should be over, so that the projected deficits after 2011 move quickly to surpluses. For details on this, please see my post, "We can fight the recession, make large high return government investments, and balance the budget, all three – over four years."

A reminder; in an earlier post I noted that Jonathan Chait claimed that a universal health care bill could be structured in such a way that it could not be filibustered. It would only require 50 votes in the senate (plus the vice-president's to break a tie). I'm not positive Chait is right, but there's strong evidence that he is. I certainly hope the Obama administration will consult with legal specialists on this.


kferrjac said...

I'm curious to hear more of your thoughts on health care from an economics perspective. I was thinking about this in a recent blog post of mine, & it seems like one of the difficulties in achieving universal health care is that we're trying to drive down the end-user price after it's already been established. Are there are efforts however to drive down the inherent value that goes into producing health care? For instance, making medical school training more accessible to students so that there's less of a demand for doctors? Or cutting back on drug regulations so that they're easier to market?

Anonymous said...

I totally agree with you on healthcare. Points to add are:

1) lowering the eligibility for Medicare age to 50 would cover a lot of people with festering medical conditions. I personally know people who forgo screening tests and miss out on more definitive diagnoses because they can't afford it. These are educated people who have jobs with inadequate insurance. This is a ticking time bomb for expensive treatments at age 65 as these conditions get worse. We are losing their productivity and failing to treat people humanely. Not only is it the right thing to do, but would save money in the long run.

Second, I've been telling anyone who will listen that we need a nationwide diversified risk pool for the higher cost and rarer conditions. We need to get away from these small pools where premiums are priced inefficiently so that premiums are too high and services are limited. A nationwide pool could be actuarially based and spread the risk of rare or expensive conditions. Your suggested trigger of $50,000 would go a long way toward this goal and avoid the burdensome costs that fall on the unlucky households while making the pricing more efficient for everyone.