Thursday 28th June 2012

A little while ago the US Supreme Court upheld President Obama’s healthcare reforms, officially named the Patient Protection and Affordable Care Act, but called Obamacare by everyone else. The latter takes less time to type, so that’s what I’m gonna call it for the rest of this post… Anyway, rather predictably the reaction seems to be fairly mixed. One group thinks judging the individual mandate (I’ll come to it in a minute) constitutional is a grave mistake and, ahem, “un-American”. The other group seems to largely think that the first group is nutty, and that Obamacare is a Very Good Thing Indeed. My reaction was to realise that I don’t really know what Obamacare is all about, and to try to find out.

So I’ve spent a little bit of time doing that. I’m still not entirely sure I’ve got all of it, so I might’ve missed things out or misunderstood them, but from what I can ascertain here are some of the key features of the reforms.

Firstly, they’ve introduced an individual health insurance mandate. This says that individuals who do not receive public health insurance (Medicare or Medicaid) or private insurance through their employer, must purchase an approved private insurance policy, or otherwise pay a penalty. This is the basis of the question of constitutionality; because it essentially requires individuals to purchase a service from a private company, whether they want to or not. I kind of have some sympathy with this; it is a restriction of freedom, even if it is relatively trivial in comparison to other types of restrictions. I believe that the motivation for introducing this change is that uninsured patients cost more money, because they don’t get problems looked at until they’re severe enough to take them to A&E, where (presumably) someone else picks up the tab.

So that is a trade-off between individual liberty and overall utility. Personally, I can see both sides of that argument, and I think that either opinion is a respectable one to hold. As it turns out, I think that the Supreme Court ruled that the individual mandate is unconstitutional, but that the penalty you must pay if you don’t want to have insurance is actually a kind of tax, and it is constitutional for the government to impose such a tax. Interesting argument. Mostly I reckon that this basically highlights one of the key problems with having a constitution, but that’s something for another day.

Another effect of the reforms is to impose more stringent restrictions on the providers of health insurance. Insurers can no longer stop offering coverage to people who get sick. Insurers are also required to offer the same rates to applicants of the same age or who live in the same location. So they can’t hike up someone’s rates because they have a history of poor health, or are recovering from illness.

I can understand why some people might be upset at these changes. Insurers might end up losing money on some policies, and people who are always healthy might have to pay more for their policy to subsidise the loss-leading policies of people who are ill. But really, these are pretty poor arguments. If you get ill, that’s a shitty situation in itself. Being ill and then being told you have to pay more insurance – or that it’s being dropped entirely – is a bit of a kick in the teeth. It seems to me to be a good thing to try to stop that from happening.

Another restriction has been the banning of coverage caps. Previously, many (most? all?) insurance policies had clauses which capped the amount they’d pay out for healthcare, either on an annual or a lifetime basis. So someone might get ill, have a load of expensive healthcare, and then get to a point where they’d reach their coverage cap and their insurance provider would stop paying for treatment. Again, this seems to be a pretty shitty practice, so it’s probably good that they’ve banned it.

The reforms also see changes to Medicare and Medicaid, as well as the introduction of subsidies to help people pay for private insurance. Medicare and Medicaid are publicly-funded health insurance schemes, for the elderly and the poor. They’ve been expanded, so more people can access them. Subsidies are for those who earn too much to qualify for public health insurance, but earn less than a certain threshold. Taxes on high earners (over $500,000pa) have been raised to help fund these programmes. I suppose this makes sense; if you’re gonna mandate that people have health insurance, at least help them out a little. But it does highlight one of the problems of the scheme, which I’ll come back to later on.

The American right think this is all a terrible idea, and keep banging on about “socialised healthcare” and mentioning communism. From what I can gather, it isn’t socialised medicine at all. It’s an expansion of socialised healthcare insurance with the expansion of the base for Medicare and Medicaid, but it’s an expansion of private health insurance too. One of the problems with the scheme – the thing they’ve used to try to get it reversed in the courts – is that it requires people to pay money for private health insurance whether they want to or not. You can’t get upset about that whilst also claiming that the plans introduce communism into American healthcare. The two positions are contradictory.

The scheme is an expansion of health insurance to try to get 100% coverage; it’s also an attempt to try to ensure better healthcare by reining in some of the weird behaviours of private insurers (coverage caps etc). Judged purely on the basis of “how to make a good healthcare system”, it actually seems like a fairly decent idea. We know that public health insurance with private health provision can work well; that’s what they have in much of Europe, and those systems generally outperform other forms of healthcare system. It seems like the reforms fix some of what is wrong with American medicine – the lack of access – to try to move it closer to those types of European health systems. This seems to me to be a good idea.

What I find fascinating is that so many people in Britain are so supportive of these plans. The British Government is trying to introduce a health system that is sort of a hybrid between socialised medicine (i.e. provided by the state, what we have now, doesn’t work very well) and what Obama has just introduced. If the British Government went the whole hog and introduced the changes that Obama is making, there would be uproar. Why are these changes good in America, but bad in Britain?

Some other thoughts. These changes might make the health system better, but they’re also likely to cost a lot of money. The increased taxation (on individuals, and on business) will reduce economic growth, as will the imposition of more regulation on employers and individuals. I also don’t really understand why the government has increased taxes on medical supplies; ostensibly it must be to pay for these changes, but the cost will surely get transferred back to those who pay for treatment. To put it another way, the tax they’ve introduced to pay for more medical treatment will increase the cost of medical treatment. Doesn’t seem clever to me.

In the past few years, the key problem that’s faced every government has been how to deal with the economy; that’s what every world leader should be laser-focussed on. Instead, Obama spent a lot of time and effort trying to pass these reforms. But not only did he get distracted by them, the changes he’s made have actively made it harder for the economy to recover. Now, the reforms might be great; they might make healthcare in America much better, and perhaps that justifies it all. But the fact that he let this distract him from the economy – the major concern of our time, and most likely the fundamental issue of his presidency – surely calls his judgement into question.

Posted at 8:53 pm | Posted In: Politics Tagged:



Friday 29th June 2012, 4:00 pm

A not unrelated question: does the fact that the Chinese economy is one of the fastest growing in the world justify the fact that millions are subjected to slave labour, and what do they achieve from it?


Friday 29th June 2012, 4:07 pm

I see no evidence that ‘socialised medicine does not work very well’. If you look at this article you’ll see that actually the UK ranks first overall in a study of a number of developed nations including the US, Germany (another example of your preferred state-organised health insurance model of healthcare provision) and Canada on a wide range of scores within the broad categories of ‘quality, access, efficiency, equity, and healthy lives’. This was published five years ago – I found it with a fairly quick google search, so do let me know if there is more up to date evidence to the contrary. Sure, everyone has horror stories about the NHS not doing its job properly but by and large it provides adequate and functioning healthcare for the entire population, as opposed to other countries where great healthcare is provided to the few, and the rest of the populace take what they can get or afford.

Secondly, I’d love to see the evidence behind your claim that ‘We know that public health insurance with private health provision can work well; that’s what they have in much of Europe, and those systems generally outperform other forms of healthcare system‘ (my emboldening).

Thirdly I’m actually going away to Italy for the week so replies from this point may not be immediately forthcoming…


Friday 29th June 2012, 4:07 pm

(on which note, email me to notify me if you do reply so that I know about it? I know that’s probably desperately old-fashioned of me, but…).


Friday 29th June 2012, 7:36 pm

@ Lucy: Well no, it is quite unrelated, but anyway…

The Chinese economy is growing as a result of reforms to liberalise the economy. As a result, companies (foreign and domestic) have opened up factories in China. These factories have jobs which pay (comparatively) well, and therefore Chinese people are literally queuing for jobs in those factories. People are making the choice to work in those jobs – the opposite of slave labour – and that’s a good chunk of the cause of Chinese economic growth.

To come back to your question: does the fact that the Chinese economy is one of the fastest growing in the world – as a result of reforms to liberalise the economy – justify slave labour in other parts of the economy? No. It’s growing in spite of those illiberal practices. They should liberalise those bits of the economy too, and they’d possibly see even more growth.

It’s quite interesting to note how China is changing, partly (mostly?) because of the changes to its economy. If economic growth leads to more moderate politics, then that’s another good result really.

@ Jenny:

“as opposed to other countries where great healthcare is provided to the few, and the rest of the populace take what they can get or afford”

Okay. Other countries seem to have public health insurance schemes. I.e. everyone has access to healthcare, just as in the UK. The outlier – before Obamacare – was the United States. One of the aims of those reforms is to try to promote universal access to healthcare. No-one proposes that we copy the way the American healthcare worked before Obamacare, so this is a bit of a straw man. Universal access is important, and public health insurance would maintain that.

Anyway, here are some data points. Firstly, here’s an OECD report on hospital waiting times. Have a scroll through; waiting times in the UK are generally at the higher end of the scale. They pick out the US, Germany and France as having particularly low waiting times, and explain it thus:

“In all three countries all or most of the population is covered by public or private health insurance, there is high capacity in hospitals and day-surgery units and some or all providers are financially highly motivated to meet demand.”

Also had a quick look at cancer survival rates. I don’t have academic access so I can’t read certain journal articles that would be useful, but things like this suggest that in the UK, it’s generally lower than other Northern European countries. Like France, Germany, The Netherlands. Places that tend to have health insurance systems (and not always entirely nationalised ones).

Finally, there’s the Euro Health Consumer Index, which is compiled each year and compares waiting times, access to healthcare, quality etc. For 2012, Netherlands comes top. They have a dual system; state-controlled insurance for long-term treatments, obligatory private insurance for short-term ones. Also ahead of the UK is France (mixed public-private system) and Belgium (state funded, mostly private provision).

Interestingly there are countries with good state-run health systems. They’re generally smaller than the UK (e.g. Denmark and Sweden), and they all have systems that are way more localised than we have here (although having a quick look back at the OECD data, those places aren’t too great for waiting times. Whereas the places with private provision…). So I guess I have to concede that it can work to a degree, but for it to work here the NHS would still have to be completely reformed to make it more localised. And I still reckon that competition for health provision is the way to go, because I think that for a larger population it’s a more reliable way to deliver a good service (the OECD data hints that this is a fair assumption). Markets work, and I don’t see why a market in healthcare should be any different – in general.


Sunday 1st July 2012, 7:25 pm

It is related, actually. The question I was essentially asking was “Is it justifiable to improve an economy on the backs of those who are too impoverished (in any way) to benefit from it?”

In fairness, I don’t think you dispute that.


Monday 9th July 2012, 4:00 am

I still don’t really get how it’s related. For example, because of the poor economy, unemployment is high. Economic recovery is pretty intimately tied to increased job creation. So an improved economy will allow people who are currently unemployed, to find a job. I don’t understand why these people will be unable to benefit from an improved economy? Surely – and almost by definition – the people who are most likely to benefit are those who are currently impoverished?

The healthcare reforms will make things better for poorer people. The healthcare reforms will probably reduce growth, which will make things worse for everyone, including poorer people. It’s a trade-off.

And to be fair, I was pretty much only pointing that out; I wasn’t making the argument that it’ll reduce growth and therefore should be opposed. My point is that it’s possibly a bad time to introduce the reforms, but I think my reasoning there is more related to politics than it is to economics; Obamacare was a big fight that antagonised various people, and was it wise to antagonise those people now when you might need their support to solve more fundamental problems?

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