A SALES PITCH DIVIDED AGAINST ITSELF...:

ObamaCare's Contradictions: The President does both sides now on his health insurance plan. (WSJ, 8/20/09)

So no bureaucrats, no bean-counters. Mr. Obama merely wants to create "a panel of experts, health experts, doctors, who can provide guidelines to doctors and patients about what procedures work best in what situations, and find ways to reduce, for example, the number of tests that people take" (New Hampshire, again). Oh, and your health-care plan? You can keep it, as long your insurance company or employer can meet all the new regulations Mr. Obama favors. His choice of verbs, in Montana, provides a clue about what that will mean: "will be prohibited," "will no longer be able," "we'll require" . . .

Maybe you're starting to fret about all those bureaucrats and bean-counters again. You shouldn't, according to Mr. Obama. "The only thing I would point is, is that Medicare is a government program that works really well for our seniors," he noted in Colorado. After all, as he said in New Hampshire, "If we're able to get something right like Medicare, then there should be a little more confidence that maybe the government can have a role—not the dominant role, but a role—in making sure the people are treated fairly when it comes to insurance."

The government didn't get Medicare right, though: Just ask the President. The entitlement is "going broke" (Colorado) and "unsustainable" and "running out of money" (New Hampshire). And it's "in deep trouble if we don't do something, because as you said, money doesn't grow on trees" (Montana).

Let us take the President at his word and accept that he would like to do three things: (1) make it so that everyone has some sort of set health care coverage; (2) reduce the costs of the overall health care system; and (3) make the system by which health care is provided more fair.

Now, here are the realities of the current health care system that need to shape how we think about achieving these ends. First, people are not denied health care services just because they don't have coverage. Instead, we tend to treat them, gratis, in emergency rooms and the like. We, somewhat perversely, provide extremely expensive forms of care to precisely those who can't pay for it. For the Left, this means recognizing that there is not some crisis of the untreated ill in America. For the Right, it means accepting that we aren't saving money or achieving efficiencies by not having some variant of universal coverage.

Second, health care is just another consumer good these days. The enormous amount we spend on it as a society is not a function of our actual health nor of the effectiveness or expense of treatments. The proportion of the health care sector of the economy that might be considered to consist of basic human necessities is rather small. The bulk is stuff we just want, regardless of whether we need it or not.

And yet, thanks to comprehensive insurance plans, our decisions about what and how much to consume have come untethered from normal market disciplines, like cost and quality. If your employer was paying for your groceries, do you think you'd spend the same amount or less per year on food, or would you spend much more? And this in a society where we already consume so many calories that obesity is, for the first time in human history, our biggest nutrition problem. Even without "free" food we're gluttonous--imagine how much worse we'd be if we weren't footing the bills? In a system that lacks any incentives not to spend money on "health" you are never going to get a handle on costs and expanding the number of undisciplined consumers can only drive costs higher.

Third, the idea of fairness when it comes to the realm of health care, is too amorphous to have much meaning. If a poor person who was shot in a mugging was left to die in the street because they didn't have insurance, we could all accept that there was something unfair in that. Or if the poor had no access to vaccines because they couldn't afford them. Or if any number of truly basic health care treatments were being denied to people. But the fact is they aren't.

So, if by fairness we mean that employer-provided comprehensive health insurance is better than other sorts of coverage or than the lack of coverage, then the only way to make things truly fair would be to give everyone such gold-plated plans, which even the Left doesn't propose to do. And, as a culture, we don't insist on such perfect parity as the measure of fairness. We tolerate, even embrace, wide disparities, so long as we perceive that everyone has similar opportunities to achieve the best.

So the fairness we try to effect via health reform should be something rather less than full equality of health care. Instead, we may wish to think of fairness as just the universal certainty that when you have (or your child has) a significant health problem, you can get it treated as a matter of routine public policy, rather than depending on a hospital not to turn you away. As a matter of human dignity, there is a world of difference between showing up to have an illness treated and being able to show a card or provide a number that obligates the provider to treat you and showing up empty-handed and dependent on their largesse.

Now, if we combine the President's wishes with our realities and what we know about economics, it seems apparent that there is one reform that makes an awful lot of sense. Indeed, Whole Foods CEO, John Mackey, described it in the pages of the Journal, though he didn't go as far as President Obama could:

The combination of high-deductible health insurance and HSAs is one solution that could solve many of our health-care problems. For example, Whole Foods Market pays 100% of the premiums for all our team members who work 30 hours or more per week (about 89% of all team members) for our high-deductible health-insurance plan. We also provide up to $1,800 per year in additional health-care dollars through deposits into employees' Personal Wellness Accounts to spend as they choose on their own health and wellness.

Money not spent in one year rolls over to the next and grows over time. Our team members therefore spend their own health-care dollars until the annual deductible is covered (about $2,500) and the insurance plan kicks in. This creates incentives to spend the first $2,500 more carefully. Our plan's costs are much lower than typical health insurance, while providing a very high degree of worker satisfaction.

By making such a combination universal, we would guarantee that everyone has at least some basic coverage, would restore market mechanisms to the health care business, would even get some of the egalitarian sort of fairness, and, best of all--though not a central concern of the President and his allies--turn the policy of providing health care into a means for building up savings and wealth.

Are there downsides to such a reform for both sides of the political aisle? Sure. The Right would have to accept: that the modern social welfare net is going to include universal health coverage, some mandates on employers and individuals who can afford to provide these accounts for their employees or themselves, and penalties (at least tax code disfavor) on plans that are more comprehensive. The Left would be stuck with accepting that the best way to control costs is via First Way forces rather than Second Way controls and with the prospect of the poor being empowered and enriched by the plan's savings accounts. But perhaps the respective side's oxes would be gored equally enough that President Obama could deliver a truly bipartisan compromise, one that would reflect a genuine public consensus and have strong support. If nothing else, such a plan has the advantage on being internally coherent, with its moving parts working in tandem, rather than against each other. The Mackey pitch above is simple and sensible: illness is covered, incentives for savings are created, those so covered are satisfied, and the plan costs less than most alternatives. It's as close to the Goldilocks plan as we're ever going to get.

MORE:
Hey, Big Spender: Controlling costs by spending more? (Alan Reynolds, 08.19.09, Forbes)

A recent New York Times editorial sermonized on the need to fight health care inflation. It declared that the Obama Administration "seems headed in the right direction to finally slow the rate of growth in health care spending." That is nonsense.

Health care spending equals the sum of public and private spending on health care. The Obama Administration hopes to spend an additional trillion dollars on subsidized health insurance over the next decade. The only way such added federal spending could possibly "slow the rate of growth in health care spending" would be for private spending to fall by $1 trillion.

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Posted by Orrin Judd at August 20, 2009 8:09 AM