Point Counterpoint

Jimmy Carter 2, Richard Nixon 0

Jim says: From back in the 1970s, three public-private actions stand out in my mind. In the first case, the Nixon Administration “saved” passenger trains by creating Amtrak. It came into being on 01 May 1971. All of its preferred shares are owned by the U.S. government. Its board of directors is appointed by the President of the United States and confirmed by the U.S. Senate.

Amtrak has required continual infusions of taxpayer dollars from the beginning. The service is abysmal and unreliable, despite decades of promises of improvements. Every few years there is a threat to put it out of business or vastly improve service. Neither happens. It just goes on and on as a drain on the taxpayers.

In 1971, Amtrak received USD 40 million in direct aid, USD 100 million in federally insured loans. Richard Nixon promised us that Amtrak would be either in private hands or shut down by 1974. He must have been distracted by Watergate and forgotten this promise.

On 16 October 2008, President George W. Bush signed the “Rail Safety Improvement Act of 2008,” which provides USD 2.6 billion per year in Amtrak funding through 2013. My guess is Amtrak will be back before 2013 asking for more.

During Jimmy Carter’s otherwise lackluster administration, two great bills were passed. The first of these was the Airline Deregulation Act of 1978. Senator Ted Kennedy had taken the lead, in cooperation with President Gerald Ford, in starting this process in 1975. As a result, airline fares in the United States today are lower than they were in 1978, when measured in constant dollars. Safety has improved, also, for the Federal Aviation Administration is still in charge of safety.

The regular bankruptcy of airlines should be good news for consumers, for this phenomenon reflects the reality that airlines operate on the brink financially and do not gouge us on prices. We haven’t seen any airline executives “frog-walked” in front of Congress to explain their outrageous bonuses because airlines can’t afford them.

The only miserable part of the air transportation experience (and the reason I often avoid it) is the airports. Operated by quasigovernmental entities, they are nearly universally the epitome of inefficiency. A large part of the problem is the security system provided by the government (essentially the same system that failed to detect the hijackers on 9/11). Ironically, the “reward” for failure to catch the hijackers has been an unprecedented expansion in federal control of security.

The second Jimmy Carter success was the deregulation of the trucking industry. The Motor Carrier Act of 1980 was signed into law by Carter on 01 July 1980. It ended 45 years of government-controlled motor carrier freight rates. By 1990, the number of licensed carriers increased to 40,000—double the number in 1980. Intermodal carriage expanded 70% between 1980 and 1986 alone. This change allowed manufacturers to reduce inventories, which also reduced costs to consumers. The deregulation of trucking has been a huge benefit to consumers.

Now, the federal government wants to “fix” health insurance, not by following the examples of Jimmy Carter, but by following the Amtrak model of Richard Nixon. My fear is it will be about as successful as Amtrak. In my view, health care has three things wrong with it and providing solutions to these three matters will fix the problem:

1. Unnecessary regulation. There are regulations limiting the number of hospital beds in a community on a per capita basis. In fact, every time a hospital in our community wants to expand, all the others rise up and file objections. Why not deregulate this aspect of health care? More beds will lower prices.

2. Unnecessary litigation. Suing doctors and hospitals has become an art form. Doctors and hospitals make mistakes, but not all of them are egregious ones. I have agreed sometimes to binding arbitration when being signed into a hospital. Binding arbitration should be the law for all malpractice disputes. This is a regulation we can live with.

3. Mandatory insurance. We are required to have insurance to drive an automobile, why should we not be required to have (private) insurance to operate a human body? Consequences if you don’t have it? If you show up in a hospital needing services and do not have insurance, you should be required to pay the back premiums and fined with the collection powers possessed by the IRS (they have the power to ignore bankruptcy). After all, people willingly sign up for Homeowners Association Covenants that can cause their house to be subject to a lien if their grass is not properly cut or is the wrong color in winter; why not put this kind of power behind the lack of health insurance?

Number 3 is often cited as the reason for government intervention--people with pre-existing conditions can not get insurance. I have gotten insurance with pre-existing conditions—cancer. I would say look at auto insurance. The TV is filled with ads for auto insurance and promises to insure drivers with terrible safety records.

I would suggest that the real reason people don’t have health insurance is that when the choice is the latest edition of “Guitar Hero” or health insurance, they make a lousy choice. Even now, health insurance for a single young adult is about the price of one Starbucks’ latte per day. Make adult decisions.

Speaking of TV ads, I find it interesting that back when cigarette commercials were allowed on TV and ads for prescription medicines and lawyers were not, health care costs seemed to be just fine—no one was complaining. I am not suggesting that we should bring back cigarette commercials, but I will contend that ads for medicines and lawyers are not merely a casual coincidence when it comes to our current health care cost concerns. Advertising is on the front line of cultural changes and probably reveals more here than anyone has considered.

Fix these three things and costs will go down drastically without further governmental regulation or intrusion. High quality health care will be available for all legal citizens of the United States. Such a reformation will help United States’ businesses compete in the world. The cost of the current health care system, or one similar to those seen in Europe or Canada, will continue to make us uncompetitive (not to mention the loss of lives as people wait for service). If the inflation in Amtrak funding is comparable to what may happen in a public health care system, a USD 650 billion price tag now will be USD 42 trillion by 2046. The three examples from the 1970s clearly show us which way to go.

Travis says: As a country, the United States gets a terrible return for its health care spending. We spend more per capita and as a percentage of GDP than any other industrialized democracy, but our health, in terms of life expectancy, infant mortality, and other measures is significantly worse than our peer-group countries (Health at a Glance 2007, OECD Publishing).

Deregulation, malpractice reform, and an insurance mandate are all good starting points, but I doubt that any of these ideas would significantly decrease costs. Certificate of need rules, such as the hospital-bed limits that you refer to, do seem anticompetitive. Lawmakers should modify or abolish these rules which, as you say, primarily serve the interest of entrenched providers.

That said, regulators did not institute certificate of need in bad faith; the idea was to improve access and decrease costs by not building unnecessary facilities and encouraging rural providers.

I would be interested in deregulation of a different sort, allowing nurses, physician’s assistants, and other non-doctors to perform more procedures and run more clinics. But deregulation has limits, the current banking crisis being a recent and spectacular example. Malpractice reform is a laudable goal.

The Cato Institute (http://www.cato.org/pubs/handbook/hb111/hb111-15.pdf) suggests new “freedom to contract” rules that allow patients and providers to make case-by-case contracts that determine recourse for medical errors. Such contracts could drive costs down by giving providers more cost certainty for some of their work. This idea has promise, but only if providers share cost savings with patients, true negligence remains punishable, and new malpractice laws protect the vulnerable (the poor and/or poorly informed).

On balance, I would support an insurance mandate, but only if consumers also had the choice of a public option. The current system of employee-based coverage encourages some workers to stay in dead-end jobs simply because they cannot afford to give up their health benefits. If Medicare or a similar public program were an insurer of last resort that anyone could buy into, workers would have more flexibility to change jobs and take more entrepreneurial risk.

Jim Thompson may be able to afford coverage in the private market with his preexisting conditions, but Jim Thompson’s experience is not necessarily typical. People make dumb personal financial decisions all the time (present company included), but some folks have to make extremely difficult decisions, like choosing between filling a prescription and feeding their children. I can imagine your reply, “A) A public option is step one on a slippery slope towards 'socialized medicine' and B) If Medicaid is statutorily mandated to accept all comers and offer affordable premiums, the sickest citizens will sign up, and government will be stuck with an ever rising bill.”

The specter of socialized medicine does not bother me; Canada, the United Kingdom, France, and other countries with nationalized systems get better gross outcomes at significantly lower costs. I know there are heartbreaking stories of individual Canadians or Brits that had treatment withheld or delayed, but plenty of Americans (including some that have health insurance) have similar tales of woe.

As to the selection effects of a public option, the surest way to control costs is to ration care. As you have written before, philosophical arguments aside, human life is not priceless. As such, once we decide how much we want to spend on public health as a society, we should then allocate those dollars in the most efficient manner possible. Peter Singer, the controversial ethicist, writes on the topic of health care rationing in the July 19 New York Times Magazine (http://www.nytimes.com/2009/07/19/magazine/19healthcare-t.html) and suggests ways to divvy scarce funds.

My preferred American health care system would provide some level of coverage to every American through a public plan. The public plan would be relatively bare-bones – covering vaccination, nutrition, trauma care, and other treatments that have a strong benefit-cost ratio. The public plan would not cover fertility treatments, astronomically expensive cancer drugs, and the like.

On top of the national plan, those who could afford extra coverage could purchase supplemental insurance for interventions outside of the basic plan. Such a system would preserve choice, expand coverage, and provide cost stability.

Airline deregulation works because the Federal Aviation Administration makes sure that airlines maintain safety standards; trucking deregulation works because of enormous public expenditure on road infrastructure; Amtrak fails because we invest too little in rail, not too much.

Deregulation would not be a panacea for health care in the United States because health has no close substitutes, markets do not account for positive externalities to health, and significant information asymmetries exist between providers and consumers. What we really need is to honestly assess our priorities and to accept a level of public health care rationing as the tradeoff for pursuing other social goals (education, adequate housing, environmental preservation, etc.). Sadly, I do not trust many of our elected officials to make such an honest assessment or to make the necessary sacrifices.

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