Sunday, February 21, 2010

Public option and/or Medicare expansion

Medicare expansion may not be so much an alternative to the "public option" as a stalking horse for it. It seemed that this idea might actually have been part of the Senate plan were it not for Joe Lieberman and Ben Nelson, while the public option never seemed to have much of a chance in the Senate in spite of its popular appeal. I personally think that the precedent of being able to "buy in" to Medicare before retirement may actually be a more promising step toward a strong public option than the ponderous and highly restrictive Democratic plan that has been going by that name. In spite of dis-information to the contrary, Medicare is a highly popular plan and is quite efficient in delivering healthcare while controlling costs -- certainly much better than for-profit health insurers. Unfortunately, these are issues where the facts seem to fall before the falsehoods of the PTR and its masters in the insurance industry.

It is important to remember that, underneath the obstructionism of the Chamber of Commerce and other pro-business groups, most businesses -- especially manufacturing businesses such as the automakers -- favor strong healthcare reform because it will help make them more competitive if it can remove healthcare premiums from their expenses. All of their foreign competitors, in fact, have strong single-payer or other highly regulated, efficient and successful plans. As we should all know, workers in the other highly-industrialized countries with which we compete are happier, healthier and enjoy longer life-spans and higher standards of living than our own workers. For all the defects of the Democrats, they do want our workers to enjoy these benefits, while the PTR would favor the status quo. That's one of the major reasons the PTR constantly bashes the Canadians and the Europeans (especially the French).

1 comment:

  1. I have to disagree with you on one note, namely that international competitiveness is a decent argument for health care reform. Health care reform will give a short-term jolt to international competitiveness, but it doesn't really matter in the long-run.

    Equilibrium compensation is determined by one thing - the supply and demand of labor. Fringe benefits like health insurance are just internalized in compensation and given preference over wages because of our tax structure - workers exchange lower wages in exchange for more fringe benefits. If the government creates a public health insurance or finds a mechanism to decrease the cost of premiums on employers (or at least slow the growth of premiums) it is entirely irrelevant in the long-term. In the short term, because wages are sticky and contracts are set over periods, there is a short-term gain in competitiveness since the cost of labor is reduced. But once the bargaining rounds start up again and the wages "unstick" compensation will simply re-adjust to the market-clearing level and firms will shift the cost into wages. So, in the end, there is no gain in international competitiveness. While I'm not quite naive enough to believe in this idealized textbook model because of labor market imperfections, imperfect substitution of wages and benefits, maybe even consumer myopia etc. But there is still significant empirical evidence that a large shifting in wages from benefits does occur when firm-wided insurance costs are reduced so the textbook model does seem to hold reasonably well.

    So, I just don't really think health reform does anything noticeable for international competitiveness. It should be done for other reasons, but that's not really one of them.

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