The $317,000 Question

With the rollout of Obamacare being such an epic fiasco that using the term risks libeling epic fiascos, it's easy to lose sight of the problems Obamacare was meant to address in the first place.

Perhaps that is too generous.  That the healthcare system in the US is a shambolic contraption is an assertion that can probably be made without fear of contradiction, even on the internet.  But nothing I read in the run-up to Obamacare's passage, or since, has seemed to this glorified heavy equipment operator of even coming close to properly conceiving the problem, never mind the inherent tradeoffs in any conceivable "solution".  

(In the following, I am going to make notional assertions, most of which I'm not going to source, as a basis to conceptualize what is in play.  Which is kind of like saying I'm making it all up; keep in mind that since my argument is conceptual, it does not rely upon numerical exactitude.)

In the developed world, 21st Century edition, almost everybody dies from disease or decrepitude, rather than misadventure. To simplify things, assume that everyone dies from illness or old age.  To simplify even further, so far as healthcare goes, the difference between the two is without distinction.

As a first approximation, all people have, from the point of view of the health care system, a bathtub shaped lifecycle:  significant involvement in the beginning, quickly dropping to very little involvement, until shortly before the end, roughly two years, when the demand for health care resources quickly rises.

Oddly, that healthcare lifecycle cost doesn't vary a heck of a lot with lifespan: it is the sides of the bathtub that matter, not how wide it is.  The proximate cause of our ultimate demise isn't particularly germane to its cost.  Non-smokers live longer than smokers, but they die no more cheaply.

Time for a hard fact: on average, the lifecycle cost to the healthcare system of a human is $317,000.

Already, the first conceptual hurdle is staring us in the face:  anyone using the words "health" and "insurance" next to each other is to demonstrate for all to see a comprehensive inability to grasp what insurance is about.  To wit, insurance pools risk.  A great many homeowners buy fire insurance, very few of them have their homes go up in smoke.  But if all houses were built knowing in advance that they would eventually burn down, there would be nobody around to take the other side of that bet.  As David Cohen, a longtime member of the PJA, memorably put it, the fire insurance market consists of bets by homeowners that their houses will burn down, and counter bets by insurance companies that they won't.  

Clearly, when it comes to healthcare costs, that doesn't apply, because all the houses, or near enough as makes no difference, burn down.  So what healthcare "coverage" really amounts to is cost shifting.

That is what poses the question at the top of this post.  Assume everyone lives to 75, and the average per-capita lifecycle cost is $317,000.  The simplest answer to that $317,000 question is to leave it up to the individual.  Ignoring troublesome things like inflation and interest return, all good libertarians will start self-funding their own life cycle costs from the git-go, to the tune of $4300 per year.  

That doesn't sound like much, except that for a good libertarian family of four that ends up at close as darnnit to $17,000 a year.  For some of us libertarians, while that is indeed a chunk o' cash, it is manageable.  However, not everyone is above average, and $17,000 per year would go some considerable way towards crowding out some of the luxuries in life. Like food and clothing.  

To make an expensive problem worse, healthcare is not merely a commodity. If my neighbor's house burns down, and they neglected to bet that it would, tough.  In my travels, I have been places (socialist, oddly enough) where that is apparently the attitude to the physically afflicted.  That simply isn't on the cards here in the US.  We will not tolerate the prospect of people with gaping, oozing, chest wounds panhandling.  

Looking at this problem from a life-cycle cost point of view has already led to a couple inescapable conclusions.  Paying for healthcare requires cost-shifting from the healthy to the sick, from the young to the old.  

Viewed through the prism of an insurance bet, it makes sense for a healthy mid-20s male to forego health care "insurance" altogether, or go with a high deductible catastrophic policy and self-insure up to the deductible.  Similarly, it doesn't seem to make much sense for me, having some time ago undergone that special operation, to nonetheless be required to pay for maternity coverage. 

But that is making the mistake of parsing a lifecycle into discreet events, then not checking to see if the sums add. Virtually all women have children, virtually all men become fathers, and essentially everyone living in the high-clover that precedes middle age will find themselves elderly.

Thus far, it sounds like I am making an argument for a single-payer system.  That is the seemingly obvious solution.  After all, if lifecycle costs are largely invariant, and are too high for the less well off, then those considerations pose a powerful moral argument for a system of redistributive taxation and cost shifting.

Unfortunately, single payer systems suffer the same problems to which socialist solutions seem prone: rationing, and pervasive shabbiness.  Moreover, single-payer systems free ride on the US healthcare market for innovation.

Instead, we first need to look at the US healthcare system posing two problems:  cost and affordability.  

Obamacare's fundamental problem, leaving aside the rampant fraud required for its passage, and then the staggering effort to first find, then harness, all the universe's incompetence for its implementation, was in taking a fiendishly difficult problem and trying to solve it all at once (as opposed to the GOP, which, SFAIK, has been entirely missing in action on this).

Instead, the better approach would have been to first address cost.  A great deal of the healthcare we consume does no good.  What is useful is almost always (except in more competitive realms such as elective plastic surgery and orthodontia) far more expensive than other activities that seemingly require similar skills and resources.  Even though healthcare isn't simply a commodity, it isn't immune from supply and demand; healthcare policies seem designed to shield the consumer from cost, leading to overconsumption.  The medical profession is decades behind aviation in adopting standardized procedures; inevitably there are more medical errors, more litigation, and less defense against litigation due to the absence of standards.  End defensive medicine.  The scope of healthcare is (thanks to some truly goofy court decisions) far too wide; infertility isn't fair, and I am sure that to some it comes as a crushing disappointment, but that may not be, to others, sufficient cause for having their wallets lightened.  None of this requires a massive federal bureaucracy, or thousands of pages of incomprehensible legislations, or truckloads of regulations to implement legislation.

Oh, and end the tax code's insane preference for employer purchased healthcare (Full disclosure:  this is an admission against interest.)

Yet even if we managed all that, and entered that nirvana where we purchased only what was useful, and its cost stood nearish to reality, it would still be too expensive for many to find affordable.  

Which is where the nut gets really hard to crack.  No one, not even the Rethuglicans and Teahadists, (who, as we all know, are eternally disappointed because we don't have enough poor people, and the ones we do have don't suffer nearly enough) is the least bit interested in people foregoing useful medical treatment due to lack of money.  Yet it is just as clear that given the scope of modern medicine, the cost of delivery will never be low enough for the affordability problem to disappear.

What then?  

IMHO, the least worst option is something akin to the Earned Income Tax Credit.  A per capita amount that is deemed (note the passive voice here -- it hides a great deal) sufficient to purchase adequate health coverage.  Obviously, this would require increasing taxes on the well off, but this amounts to making explicit that which is already the case -- cost shifting to those with extensive coverage.  Then I would pair that with a Health Savings Account that would be allowed to accrue indefinitely.  The consequence would be allowing more people over time to effectively self-insure, while exposing providers to price sensitivity.

By failing, for whatever reasons, to outline the problem President Obama certainly sold a bill of goods to Americans, and may well have done so to himself, as well.  He squandered an opportunity to make a systematic approach to a fiendishly difficult problem, instead succumbing to the curse of Progressives: a fetish for process and bureaucracy.  The result in the short term, has been a website that makes the Costa Concordia seem brilliant, and, in the long term, an adverse selection problem that will leave Obamacare with a far bigger hole below the water line.

Unfortunately, the Republican contribution to dealing with this ongoing sucking chest wound has proceeded no further than blank stares and slack, drooling, jaws.

The choice between Obamacare and [crickets], gives new meaning to the phrase "Stuck between the devil and the deep blue sea."

[Apologies for any disorganized thinking and writing, or offenses against grammar and clarity.  There is no time left for any of that high-falutin proof reading stuff.]