Is the healthcare law good policy?

Now that the Supreme Court's handed down its decision on the health care law and decided that it didn't have the heart to strike down the biggest piece of domestic policy legislation since the Great Society, the debate should shift to the crux of the issue-- whether the Affordable Care Act is actually good policy.  Before I get into the crux of the problem, the main piece of outrage from the right seems to be that President Obama lied when he declared that the shared responsibility payment (penalty) wasn't a tax.  Which is a completely inane, foolish talking point.  Because whether the penalty is a tax or a penalty or a payment or a gift is completely beyond the point.  Everyone knew that there was a payment attached to those who forego getting insurance.  Everyone knew what that payment was-- that it was in the bill, and the amount attached to it.  What you CALL the payment is completely superfluous.  It's like someone saying that they don't like fruit but they do like tomatoes, and then being told that tomatoes are a fruit.  Whether you call a tomato a fruit or a vegetable is irrelevant so long as you know exactly what the tomato is.  In evaluating that argument, Chief Justice Roberts did what every lawyer is trained to do-- he looked at what makes a payment LEGALLY a tax, determined that the payment fit those criteria (he cited the manner in which it was collected, its size, and whether there was a scienter requirement, among other characteristics, to distinguish it from a penalty), and called it a tax.  So legally, it's a tax.  But that doesn't change what it is-- it's always been the same piece of policy; all that's changed is the label.

Now on to the crux of the issue.  The proper question to ask isn't whether the ACA is perfect or whether it's the Platonic ideal of what a health care system should look like-- legislation isn't made in a vacuum; it's a messy process that involves coalition-building that makes for good politics but not great policy.  And a lot of times the perfect is the worst enemy of the good, in the sense that real life doesn't look much like the ideal.  If you put together the 50 best health care economists and managers and asked them to design an ideal health care system, implementing that system from the ground up would be a nightmare.  It would require you to displace tens of constituencies, create tens of others from the ground up, all while continuing to provide essential services to essentially the entire population.  The transition, in short, would be a nightmare.  So an improved health care system almost has to be built on the shoulders of the one we have; useless appendages should be removed, parts that don't work should be phased out, and new structures should be integrated with existing ones.

So the question now is whether we would be better off from a social policy perspective with the health care law or without it.  I think the answer is that this is clearly better than both doing nothing, and than anything that Republicans have proposed to date (I'm somewhat conflicted over whether this is better policy than a single-payer system, but no one is proposing that).  The best way to determine that the bill is good policy is to look at the arguments that are made against the policy.  The attacks on the health care bill are, to put it simply, a mix of misleading and mind-numbingly stupid.  I'll break them down into a few.

First, the argument is made that the bill is "too long" and "too complex" and "we should do health care reform piece by piece".  These are all repackaged versions of the same argument.  The first is made by the Tea Party types, while the last is made by the faux-sophisticated George Will types.  It's a terrible argument in either case.  Plainly, yes, the ACA is long.  Yes, the ACA is complicated.  There's a good reason for that.  The US health care system is big.  The US health care system is complicated.  The US health care system has thousands of moving parts, hundreds of constituencies, hundreds of millions of patients, and trillions of dollars (15% of GDP in 2008; that comes out to over $2 TRILLION).  A 30-page bill or a 100-page bill that tries to tackle a $2 trillion problem isn't going to scratch the surface.  And the claim that this is because it should be done piecemeal is equally inane.  The health care system isn't $2 trillion worth of disparate parts-- the pieces are all interconnected; they reinforce each other and come into conflict in thousands of different loci.  Insurance intersects with pharmaceuticals and health care providers and hospitals... and that's just the beginning.  It's a complex system.  Fixing one piece reverberates in other places.  A holistic system needs a holistic fix (precisely because the way the system is constructed now is rife with inefficiencies that only a holistic fix can address).  This bleeds directly into the next argument.

Second, another common line of attack says that most people don't support the ACA.  This is true, but in a very misleading way.  Strictly speaking, most people say they don't support the ACA.  But break it down further, and they contradict themselves.  By even bigger margins, most people DO support just about all of the ACA's individual provisions.  The least popular of those provisions? The mandate.  Now, this is where the "too long" argument really collapses.  Conservatives can claim they want it done piece by piece.  So let's say Congress wants to pass two overwhelmingly popular provisions from the ACA-- the requirement that people with pre-existing conditions be able to obtain insurance without paying exorbitant rates.  People love that, and with good reason.  Now let's imagine Congress enacts that on its own.  Tomorrow, health insurance premiums will skyrocket.  People who don't consume health care services regularly will drop out of the market en masse because there's no reason to carry insurance when... you can just buy insurance once you get sick.  Which defeats the entire point of insurance in the first place.  In an insurance policy, those who don't suffer from the insured event subsidize those who do.  When people only carry insurance when they're sick, insurers have to charge exorbitant rates that no one can afford.  The only ones carrying insurance are the ones who need it.  This concept isn't new-- it's been pretty well-documented ever since Nobel Prize-winning economist George Akerlof published his famous article on the market for lemons (lemons in the figurative rather than literal sense here).  Goodbye, health insurance.  So how do we make sure that people don't hold off on buying insurance until they need treatment? Well, by requiring them to carry insurance.  That or the government insuring everyone out of tax revenue.  Which means single payer.  So the real choice isn't all these provisions everyone likes and not a mandate-- it's a mandate and all these provisions everyone likes.  The brunt of the Republican attack is comprised of horrific mischaracterizations of the bill (death panels! skyrocketing costs!) and populist appeals.

Third, the argument goes that government involvement in the sector stifles the free market.  Which is an ironic argument because those who are most vocal about free markets are always those who have no idea how a free market works.  Economists, of course, have recognized that health care is a prime example of market failure for a good half century, ever since another Nobelist, Kenneth Arrow, published his seminal paper.  In a functional market, scarce goods are allocated to those who can purchase them through the pricing mechanism.  Buyers and sellers with perfect information bargain until an efficient price level is reached for products.  Now, this perfect market is almost never achieved.  But in plenty of cases, it's close enough.  The couch and television markets come close.  Health care doesn't approach close.

Those assumptions are so far off base that the entire suggestion that what we need in health care is more markets is laughable.  For one, it's not a market that's allocating a scarce resource according to demand.  The reason is simple-- we believe that, in a decent country, we don't let people lying on the street die of their injuries or illnesses.  We treat them first and ask questions later.  There's a pretty good reason we can reach the police, the fire department, or the EMTs when we call 911-- it's because we believe that we're all entitled to those services.  Two of those services are provided municipally or by volunteers.  The other is more complex.  Since health care is expensive and is provided to everyone, the mechanism for allocating it isn't who can pay the most for a service-- it's how to provide that service effectively and efficiently to as many people as possible.  Preferably, everyone.  We don't believe that everyone is entitled to a couch.  We do believe that everyone is entitled to health care when they're hit by a car.  For another, health care is riddled with more asymmetries of information than just about any market.  As a third Nobelist, Joseph Stiglitz, points out in his seminal 1976 paper with Michael Rothschild, even small information asymmetries can throw markets off of equilibrium for extended periods.  And no relationship is more asymmetric than the doctor-patient relationship, in which patients not only have no clue whether what the doctor is doing is proper, but also cannot know in hindsight whether doctors mitigated or exacerbated their problems.  Consequently, shopping among doctors looks nothing like shopping among furniture or electronics stores-- it's an exercise in futility that the market is incapable of correcting.


What that leaves us with is a system with two major problems-- skyrocketing costs and tens of millions of uninsured whose treatment is subsidized by those who are insured.  These problems are somewhat related, but rather distinct.  If the right has a response to the problem of the uninsured, they're doing a great job of keeping it secret-- I haven't read a single remotely plausible argument for how the uninsured can be covered.  And "unleash the market" is not a mechanism for putting the uninsured to work, for reasons I pointed out in the last paragraph.  The cost argument is even less persuasive.  At heart, a major reason we pay too much for health care is the incentives built into the health care system.  Doctors are largely paid for doing procedures.  And the more the procedure costs, the more they get paid.  This results in lots of expensive procedures, but not much in the way of good results.  


The inevitable claim is that this is all because of lawyers.  The claim is that all we need to control costs is tort reform-- if patients can't frivolously sue doctors, doctors won't practice defensive medicine and overmedicate people and costs will plummet.  Never mind that Texas passed a draconian tort reform law in the early 2000s.  The result was... a rapid decline in lawsuits.  And no change in skyrocketing health care costs.  All of this is detailed in Atul Gawande's brilliant New Yorker piece from three years ago.  The reason, of course, is pretty simple.  Contrary to the myth, winning a medical malpractice suit isn't easy-- juries aren't desperate to make doctors pay out of their noses, and lawyers representing plaintiffs in malpractice claims are hardly the most popular folks in the world.  And, since tort lawyers work on contingency anyway, odds are they aren't going to represent your pissed-off friend Chuck who thinks he'll extort 7 figures from the doctor's malpractice insurance with a phony claim he'll sell to a jury.  This isn't hard to figure out if you think about it.  If doctors are paid more for doing more expensive procedures, and they make a profit on each procedure they do, they'll do a whole lot of procedures, whether they are, strictly speaking, necessary or not.  And the evidence supports that-- integrated service providers like the Mayo Clinic and Kaiser, which keep doctors on salary, not only control costs many times better than the traditional pay-for-service systems: they also get better results.


Luckily, the ACA takes steps to improve information-gathering about patients and procedures.  If we have a good idea of what works, we can encourage doctors to do what works instead of doing more procedures.  Following convention is already a complete defense to medical malpractice claims in court-- the trick is to make sure that the convention is actually the most effective way to provide a particular service.  That requires information-gathering and the right incentives.  The ACA is a good step in the right direction in that regard.


So what we've got is a complex bill that makes an effort to tackle complex issues of coverage and cost.  And on the other side, we've got... tort reform and something about unleashing the free market into a failed market.  The choice... isn't very close.  And doing nothing isn't an option either-- our system as is is broken.  Our costs are rising in an unsustainable way, and we still don't get very good results.  What this should tell us is that, while we should undoubtedly make efforts to improve our health care system, the ACA is a positive step, and repeal would be a disaster.  Now, I'm not going to come out and say that the call to "replace" it is wrong-- I'm always open to better suggestions for our health care system.  But replacing comprehensive health care reform with... a punitive attack on tort lawyers and nothing else is dangerously harebrained.  So if you believe the US should be a country that doesn't leave its wounded citizens to die on the street, and you believe in controlling health care costs, the ACA is a big victory for you.

The Supreme Court does health care

Today, the Supreme Court issued its long-awaited decision on health care.  The opinions, combined, added up to almost 200 pages, which I finally managed to get through.  So a few smaller thoughts, and a big thought (on the controlling opinion by Chief Justice Roberts).  First the smaller issues:

First, it seems quite clear that Roberts changed his mind at the last possible moment (that or Justice Scalia's hired some exceptionally sloppy clerks this term)-- Scalia's dissent reads like a majority decision (complete with reference to "Justice Ginsburg's dissent" and "the dissent"; Ginsburg did dissent in part, but as is, her partial dissent was one of three dissents (Scalia's and Justice Thomas's being the others).  As is, he left in wording that makes it appear that Scalia had the rug pulled out from under him by Justice Roberts.

Second, Justice Ginsburg's concurrence is a gem.  Probably the best opinion of hers I've read-- the argument is airtight, and she pauses to take what seems like a pretty thinly veiled shot across her friend Scalia's bow, pointing out that his dissent just kind of contradicts his own jurisprudence when she writes:

The Necessary and Proper Clause “empowers Congress to enact laws in effectuation of its [commerce] powe[r] that are not within its authority to enact in isolation.” Raich, 545 U. S., at 39 (Scalia, J., concurring in judgment). Hence, “[a] complex regulatory program . . . can survive a Commerce Clause challenge without a showing that every single facet of the program is independently and directly related to a valid congressional goal.” Indiana, 452 U. S., at 329, n. 17. “It is enough that the challenged provisions are an integral part of the regulatory program and that the regulatory scheme when considered as a whole satisfies this test.” Ibid. (collecting cases). See also Raich, 545 U. S., at 24–25 (A challenged statutory provision fits within Congress’ commerce authority if it is an “essential par[t] of a larger regulation of economic activity,” such that, in the absence of the provision, “the regulatory scheme could be undercut.” (quoting Lopez, 514 U. S., at 561)); Raich, 545 U. S., at 37 (Scalia, J., concurring in judgment) (“Congress may regulate even noneconomic local activity if that regulation is a necessary part of a more general regulation of interstate commerce. The relevant question is simply whether the means chosen are ‘reasonably adapted’ to the attainment of a legitimate end under the commerce power.”

Third, Justice Thomas writes another classic dissent.  It covers all of 5 sentences.  Not pages, sentences.  He cites three different opinions.  Two are concurrences.  One is a dissent.  Meaning that none of the three is controlling.  All are written by... Justice Thomas.  You kind of have to admire someone who doesn't even pretend to care what the legal profession thinks.  And no one cares less than Justice Thomas.

But my major thought, after reading the opinion, is that it's a plainly mediocre piece of legal reasoning, notwithstanding the Right's rush to brand Roberts a regular Judas and the Left's coronation, I just wasn't impressed with the opinion itself..  The way Roberts comes out on the Medicaid issue is troubling, and needs another post to be fleshed out, but, on the mandate, Ginsburg more or less eviscerates his case on the precedent.  Roberts trots out the tired line that people like George Will (who walks and talks like a smart person until you read what he actually says) adhere to-- that buying insurance is an act of commerce and someone choosing not to buy insurance is not.

This distinction is, for practical purposes, nonsense.  Here's why.  It's true that buying insurance is an act of commerce.  But carrying insurance is a commercial activity.  Congress plainly has the power to regulate insurance that I already carry under the Commerce Clause.  The missing piece is that, even if you haven't bought insurance, you're carrying health insurance all the time, whether you pay for it or not.  This is because not having insurance is a risk transfer from you to society.  Your health care is constantly being insured by everyone else.  And, even if you don't use any health care services for 5 years, you're STILL carrying health insurance because you constantly carry that insurance, in the same way that you still have car insurance even if you go 5 years without crashing your car.  The fact that the risk of injury is constantly transferred to others means that, unless your net worth is into 8 figures, you're constantly transferring risk to others, and so are carrying insurance.  And regulation of who bears that risk is pretty clearly a regulation of interstate commerce.  

It may well be that health care is unique in this regard-- the tired broccoli non-sequitur... is still a non-sequitur.  Participation is voluntary, predictable, and affordable and, more importantly, no one is compelled to feed people who are starving.  It's a good thing to buy a starving person on the street a cheeseburger.  It's compulsory for a hospital to treat someone who's been hit by a car, whether they're Bill Gates or have $6.50 to their name.  That's not the case in any other market I can think of.

Now, this could all be meaningless going forward-- while Roberts has drawn a pretty sharp line in the sand on the commerce clause, there aren't any other markets I can think of in which the government might seek to mandate purchase of a product because everyone is involved in the market, and the market is one in which participation is both irregular and expensive.  But then the founders couldn't have contemplated the health care market turning into the albatross it's become, so the precedent is troublesome for future generations in that regard.

But I'll take the outcome.  For public policy reasons, partisan score-keeping aside, a bill that seeks to make health care affordable for everyone, limit costs, and mitigate distortions in the health care market isn't just acceptable under the Constitution-- it's also a morally good thing.