Covering The Uninsured

I've just read large chunks of Gruber's piece in the JEL (here is a previous draft).  He points out the interesting dynamics of the uninsured population.

In addition, there are important dynamics within the uninsured population that are missed by this point-in-time estimate. A problem with the CPS estimate is that it is a strange hybrid of a point-in-time estimate and a backwards look at the previous year. Other surveys that are less widely cited provide different perspectives on the uninsured, as reviewed in Congressional Budget Office (2007). The Congressional Budget Office finds that other surveys that ask about uninsurance at particular point in the year provide estimates very similar to the CPS. But they also find that estimates of uninsurance over an entire calendar year are only about one-half to two-thirds as large as point-intime estimates; correspondingly, estimates of the number of individuals uninsured at any point in the last year are on the order of 40–50 percent higher than point-in-time estimates. These findings highlight the dynamic nature of uninsurance.

And the heart of the matter can be found at the end of the piece.

Measures that are being discussed today under the guise of cost control are very modest. Initiatives such as medical electronic records, increased preventive and maintenance care, and reduced medical errors will at best reduce health care costs by only a few percentage points, and are just as likely to raise costs (with increasing quality). With health care costs rising at 7–10 percent per year, this is not enough. To fundamentally control health care costs we need to actually be willing to deny care that does little for health—but which consumers now want. This would be accomplished either through government technology policy, medical standards, or global provider budgets.

There remains considerable controversy, however, over the appropriate level of such government interventions—or whether they are necessary at all. Some argue that past health care spending advances are well justified by improvements in population health (Cutler 2004). Others argue that there are huge variations in health care practices across the United States with no tangible benefits (e.g., Jonathan S. Skinner, Douglas O. Staiger, and Elliott S. Fisher 2006). These two views are not mutually inconsistent: the first speaks to the average value of medical care over time, the second to the marginal value of additional health care at a point in time. But until we can resolve these discrepancies and understand more fully which health care spending is justified and which is not, we are not prepared to take on the American public on cost control. The fundamental insight of this round of reform is therefore to not hold the attainable goal (universal coverage) hostage to the (currently) unattainable goal, fundamental health care cost control.

This makes me very pessimistic about the prospects in the US, as we would not settle for government limitations on what we can spend privately. It seems difficult in the UK as well.

Patients “cannot, in one episode of treatment, be treated on the NHS and then allowed, as part of the same episode and the same treatment, to pay money for more drugs,” the health secretary, Alan Johnson, told Parliament, according to the Times. “That way lies the end of the founding principles of the NHS,” which is supposed to guarantee equal care to all, regardless of ability to pay.

Returning to the aforementioned Gruber piece Arnold Kling and a commenter make some useful observations:

He fails to mention the fact that the Massachusetts plan has been a disappointment. Nor does he mention his own deep involvement in the plan, which might affect his objectivity in the matter.

And the comments from Bob Goldberg point out:

Good pick on the Gruber piece.. Gruber also fails to mention that such programs simple replace private coverage and personal responsibility for payment with public assumption of the costs and risks. By about 50 percent. Talk about inefficiency. He should know since both he and David Cutler (one of the most thoughtful health care economists around and most substantial) wrote about a decade ago. (See, David M. Cutler and Jonathan Gruber, “Does Public Insurance Crowd Out Private Insurance?” The Quarterly Journal of Economics, Vol. 111, No. 2 (May 1996), pp. 391–430. And also, Jonathan Gruber and Kosali Simon, “Crowd-Out Ten Years Later: Have Recent Public Insurance Expansions Crowded Out Private Health Insurance?” NBER Working Paper No. w12858, January 2007, and Noelia Duchovny and Lyle Nelson, “The State Children’s Health Insurance Program,” Congressional Budget Office, May 2007. In turn, the underwriting models that would normally apply in insurance are tossed out the window. When you make the purchase of a good or service nearly risk free -- as with housing or home ownership -- guess what happens? Markets can't sustain the subsequent behavior without continued government expansion of subsidies, support and regulation and then costs at some point become prohibitive and lead to rationing.