Wednesday, March 17, 2010

Why Healthcare Reform Matters

This graph, from the Center on Budget and Policy Priorities, shows about as clearly as possible why it is healthcare that is the biggest challenge to future fiscal stability. Whether the current bill has enough cost saving measures to make a serious dent is an open question, but it is a start.  [HT: David Leonhardt]

But it is also important to note that the current healthcare reform debate has two main pillars that are often conflated and confused.  The first is what the graph above references: healthcare costs are soaring and becoming a serious fiscal issue for the United States and we have to do something about it.  To this part of the debate economists have a lot to say and contribute.  The second pillar is different.  This part of the debate is more of a moral and social argument: should a society be responsible for the health and welfare of its own citizens?  To this, economists have little to contribute other than mentioning the cost of providing critical care to the uninsured versus more comprehensive coverage.  This is the limit of economics - economics can help in determining the best way to achieve a social policy objective, but it is mostly silent on what those objectives should be.


Ralph said...

I don't think there is any question of whether or not it is in the best interest of a society to have a healthy populace. Or, that the welfare of each person in a society is important. Does society equal the federal government? That is a vital question in this debate.

Does increasing the size and power of the federal government provide the needed services? I'm unsure.

I've watched trillions of dollars thrown to financial institutions that turned around and gave out billions in bonuses while on the government dole. I'm suspicious.

Our federal government is growing bigger by the minute. Just look how the federal government is bating the hook on education. States started jumping out of the water in "racing to the top" and taking federal monies for promising of meeting federal goals.

As you might guess, I'd like to see stronger state governments. If the state builds the systems for a healthy populace, human capital will grow, and the state will prosper. Let's get more investment into local free clinics so we can keep people out of the emergency rooms. A fine place to start in my book.

Thomas Jerry said...

It is good to see someone identify the limits of economics. The line might be blurred a little because moral obligations have costs which have to be considered in determining what moral obligations we accept.
It appears to me that the graph tells us not that healthcare is threatening to bankrupt the federal budget, but rather that medicare and medicaid are doing so. I guess the assumption is that those programs are untouchable and unammendable?
Medicare and medicaid are at least partly a single payor system. This graph appears to have important information about whether single payor is viable in the long term.

Patrick Emerson said...


I am referring to the overall budget savings of the senate bill as evaluated by the CBO []. The CBO suggests that a lot of this savings comes from Medicare:

"Other provisions affecting direct spending save $478 billion, on net—mostly in Medicare—and other provisions affecting revenues reduce the deficit by $264 billion, on net. Thus, the net effect on deficits of the bill as a whole equals $624 billion less $478 billion less $264 billion, or a reduction of $118 billion over the 2010-2019 period."

Patrick Emerson said...

Oh and yes, economists can do a good job evaluating the costs and benefits of a social program but whether to enact a new program to, say, alleviate poverty is not just about money but about what role society has (especially a market based one) in correcting unequal distributional outcomes.

People In The River said...

The only solution is that, we should not pay that much to a doctor and pharmacy store. since more and more people join the medical industry and business, and they all wanna be paid promisingly, the only solution is the expanding of consumer's overall spending on medicare. And a lot of industrial regulation provides facility to this trend.