An alternative to the current healthcare bill: part I

Tyler Cowen has a very excellent list of changes he would make to the current healthcare bill over at Marginal Revolution.  It’s not his ideal healthcare package – like me, he supports a move toward a more Singaporean healthcare system – but it’s better than what we’re getting.  I’m going to spend a couple posts dissecting his list.

1. Construct a path for federalizing Medicaid and put it on a sounder financial footing; call that the “second stimulus” while you’re at it.  It’s better and more incentive-compatible than bailing out state governments directly and the program never should have been done at the state level in the first place.

This is an excellent idea.  It ties right into the problem with the insurance industry being regulated state-by-state.  There is no sense in having 50 states with 50 different sets of rules, and no ability for consumers to purchase insurance over state lines.  It makes no economic sense and it has resulted in many regional monopolies and very poor bargaining power.  Likewise, chopping up Medicaid into 50 different programs is similarly silly.  It would be less expensive to administer nationally.  It would be easier and cheaper for doctors as well.  And with the proper tweaking it could insure the poor and working class.  Which leads to Cowen’s second point:

2. Take some of the money spent on subsidizing the mandate and put it in Medicaid, to produce a greater net increase in Medicaid than the current bill will do, while still saving money on net.  Do you people like the idea of a public plan?  We already have one!

The mandate is looking worse and worse.  Ross Douthat points to this post by the invaluable Keith Hennessy who provides us with a chart:

As you can see, after the House bill theoretically goes into effect, ten years down the line we’re still left with 23 million Americans uninsured – and 18 million of them paying a penalty “for the privilege” as Douthat puts it.  This is simply bad policy.  It is a symptom of trying to do too many things all at once, rather than the simple and elegant expansion and nationalization of Medicaid.  There are other important reforms we’ll get to in later posts that would need to happen alongside this expansion, but suffice to say this is a good first step.

2b. Make any “Medicare to Medicaid” $$ trade-offs you can, while recognizing this may end up being zero for political reasons.

You know the line – “Keep your government hands off of my Medicare!”  That’s the “political reasons” Cowen’s alluding to.

And that’s all for Part One.