Health Care Reform, the Uninsured, and Decision 2008

Last night's Democratic Presidential debate featured a 15 minute opening segment on health care. Senators Clinton and Obama went back on forth on their respective plans. Clinton contended that adverse selection necessitates the use of insurance mandates in order to achieve universal coverage without gross increases in costs. Obama, on the other hand, argued that subsidies would be more effective that mandates, especially among those who are too poor to afford insurance.

Both Senators' policies are broader and more proactive (especially from the government involvement standpoint) than what the Republican candidates are peddling. And, for the first time in at least 15 years, the Democratic universal coverage type-schemes appear to be politically feasible, though recent experiences with exploding costs in Massachusetts, as well as the legislative failure of a similarly-themed program in California, may get in the way of this.

But will these policies work as intended? And more fundamentally, what is the anatomy of the uninsured problem in the United States? Who are the uninsured and why aren't they covered?

An excellent working paper by Jonathan Gruber attempts to shed light on each of these questions. Gruber, an MIT economist, begins by characterizing the problem in its scope, and then proceeds to get into the nitty-gritty of whos and whys. He then moves on simulation models looking at putative effects of various policies, including those very close to variants proposed by the Republican and Democratic presidential candidates.

Gruber ends with an interesting discussion of the uninsured problem in the context of the other oft discussed health policy issue: increasing costs. He makes the following points, which I tend to agree with:

1) "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% 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."

2) "...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 is a great, thought-provoking read. I highly encourage this paper if health care is an important issue for you in the coming election.