Health Care & Growthology Mantra for Summer '09

Our friend and economist-blogger-in-arms, Arnold Kling, has an interesting take on how to fix health care in The American, the online magazine of AEI. He writes that,

One illusion about healthcare reform is that the only problem we have to tackle is the uninsured. The larger problem is that those of us with insurance have too much coverage, so that neither patients nor doctors have to pay attention to costs when making decisions. That is going to have to change. 

Such an injection of cost into the market would serve as a signal to would be innovators who can drive down costs. (For more see Paul Howard's "Health Care's New Entrepreneurs," in City Journal.)

You might remember that Kling was a participant in this February's Economics Bloggers Forum. (Kling blogs at EconLog, a popular economics blog.) During one of the panel discussions, Kling was skeptical that one of the barriers to entrepreneurship is lack of health care. He and Bob Litan argued about it, so it comes as some surprise that one of the problems with employer-provided health insurance is "job lock," something of a hobbyhorse of the Kauffman Foundation. Kling writes,

Workers who are concerned about the availability of health insurance may suffer from “job lock.” They might wish to leave their job for self-employment, pursuit of formal education, an opportunity with a smaller firm, or early retirement, but the potential loss of health insurance is a deterrent.

I haven't had the chance to talk with Bob about this, or Carl Schramm -- point being that both know more about health care policy than my doctor and I combined -- but I am torn about the upcoming battle over healthcare reform. Whatever the bill pays for, I am likely to distrust its impact on market incentives, but how it pays may turn me into a full-throated Obamaite (Obamacon?  What are they called?). The WaPo has a great article today about Dem infighting over the revenue plan for healthcare. Growthology mantra for the summer: Taxing employer-provided health insurance is not just a way to pay for reform, it is health care reform. Every entrepreneur knows this is the key to levelling the playing field. Let's hope it happens.

Comments

[Vance]

Great points. It will be interesting to see what comes about.

[Charles C. Johnson]

Forgive me for being a conspiracy theory nut because I am not one, but I have an idea about how health care might be paid for but I confess it leaves a bad taste in my mouth.

The Obama administration is insistent on prevention, instead of treatment. That's the right focus, but it might mean sin taxes on everything from soft drinks, to fatty burgers, to everything in between. Proponents could argue that these taxes are Pigovian. Given that these demand curves are no doubt highly inelastic (people are addicted), it might just hurt people who pay for it without actually accomplishing Pigovian solutions.

This seems to be the direction the debate is going on. Witness the public support for the FDA becoming a regulator of cigarettes. Can this soda tax to pay for health care really be that far off? http://american.com/archive/2009/june/a-fat-tax-that2019s-hard-to-swallow

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