Ezra Klein has written a thought-provoking post:
If you make health-care insurance cheaper and make it harder for insurance companies to deny people coverage, then a certain number of people who would like to leave the labor force but can’t afford or access health-care insurance without their job will stop working.
What exactly do we mean when we say we’re making health-care insurance cheaper? We could subsidize expensive coverage, thus lowering the price of insurance coverage at the point of sale. Or we can reduce the underlying cost of providing high-quality medical care. We could, of course, do both, but these strategies aren’t always compatible.
The core argument advanced by conservative critics of PPACA, like James Capretta among many others, is that the strategy the president and his allies have embraced doe the former much more than the latter. In contrast, many of us on the right advocate a different strategy, which Capretta outlines in a short post titled “The Heart of the Matter“:
Bending the cost curve is not a matter of simply paying less for a service. What’s needed is real and continuous productivity improvement in the health sector. Doctors, hospitals, nursing homes, labs, clinics and others finding better ways to deliver higher quality care at less cost. Because if productivity in the health sector does not rise, then payment-rate reductions will simply drive willing suppliers of services out of the marketplace. And that’s exactly what would happen under Obamacare. Providers of medical services aren’t going to take payments for services that don’t cover what it costs to care for patients.
The point of transforming Medicare into a limited defined contribution towards the purchase of health insurance isn’t to impose an unrealistic hard cap. Rather, it is to incentivize the decentralized business model innovation that will drive real health system reform:
The Ryan-Rivlin plan is entirely different because it is based on empowering consumers to find the best value possible for their defined contribution payment. This is the way to unleash a productivity revolution in health care. The administration says it wants everyone to have access to low-cost, high-quality models, such as the Geisinger Health Plan. The way to bring that about is with a dynamic consumer marketplace in which those kinds of plans are rewarded financially for being more efficient and higher quality. And the way to bring that about is by giving people the control and financial incentive to become active, cost-conscious consumers both of the insurance they select and the delivery system by which they get their care.
This leads us back to employment levels. If medical care becomes cheaper and more accessible, yes, some people will work less. But it makes a difference if medical care becomes cheaper and more accessible because the medical sector has become more productive than if it has become cheaper and more accessible at the point of sale due to subsidies. The latter scenario means that we’re either increasing the current tax burden or the future tax burden to buy this outcome. And if that is indeed the case, we can expect this higher tax burden to dampen growth, job creation, and other things we like. In the more productivity scenario, we’ll also see a world in which lots of people will find more congenial work. Wages will be higher, which means that people won’t depend on transfers to live well in retirement. The more productivity scenario is pretty different from the more subsidies scenario in lots of important respects.
Ezra’s post asks “Do Republicans really oppose making health-care insurance cheaper?” I can’t speak on behalf of all Republicans, but my sense is that the answer is “It depends on how.”