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How the Problem of Health Care Undermines the Legitimacy of the Market-State

[digg-reddit-me]Philip Bobbitt and other use the term “market-state” to describe the next (and to some extent current) role of the state – in contrast to its previous historical roles. While throughout most of the 20th century, the state’s role was to provide basic services and goods to its people, by the turn of the century – starting in the late 1970s and early 1980s, the state’s role had evolved to providing opportunities to its citizens. The United States has been on the leading edge of this evolution – from Jimmy Carter’s first steps towards deregulation to the Ronald Reagan’s riding of this zeitgeist to power – as he ushered in an era of increasing deregulation and privatisation, and a reduction of all government interventions in the economy. In proposing that “Government is not the solution to our problem – government is the problem!” Reagan placed the Republican Party at the head of this evolution in the government’s role – making Democrats who opposed this seem out-of-touch.

But if a market-state’s success is judged by the extent to which it maximizes opportunities for its citizens – the problems of global warming and health care now threaten to undermine the legitimacy of America’s market-state. The problem in each case began long before the transition to the market-state – but in both, this transition escalated the scale of the problem and made it harder to manage. However, for this post, I’m only focusing on health care.

Coinciding with the deregulation of various industries and other market-state reforms that began in the early 1980s, health care costs began to grow substantially faster than other products and services in America (though without providing better results.) This growth in the costs of health care has created three problems that undermine America’s market-state:

  1. Given the government and state insurance plans for the poor and elderly, this growth undermined the fiscal solvency of the government overall.
  2. The rapid rise in costs has undermined the faith of many citizens in the market.
  3. The business model private health insurance companies have adopted creates extreme insecurity for citizens – thus dampening economic growth and the entrepreneurial spirit needed for a market-state to thrive. Paul Waldman describes the perversity of this model in The American Prospect:
  4. [T]he central pathology of our deeply pathological health-care system is that most of us have no choice but to get health coverage from an entity whose sole reason for being is to take our money and then try to avoid paying for our care when we get sick.

With prices increasing so rapidly and with people feeling less secure in their coverage and the government deficit exploding in the next fifty years, the sense of an impending crisis is palpable. The crisis in health care thus undermines the entire market-state model.

To date, most Repbulicans and right-wingers do not seem to have realized the scope of this problem – the extent to which it undermines the very legitimacy of the type of state they have been promoting. The best proposals that have been made from the right have focused on the ideology of anti-governmentism rather than a focus on the market-state expansion of citizen opportunity that was the true core of Reagan’s success. For example, John McCain, in a bold move, sought to overthrow the system of health care insurance as we know it – and to place the responsibility for paying for health care squarely on the shoulders of individual citizens – instead of the collective pools that spread out such risk, whether organized by employers or the government. This would hold down health care costs – because individuals would be constrained from making health decisions by the amount of money they had to spend. The theory behind this was that the increasing costs of health care stemmed directly from the fact that consumers were going to the doctor or hospital or otherwise using health care more because they did not bear the direct consequences of their decisions. Of course, being out of power and with their ideas generally unpopular with the public, Republicans have instead merely sought to minimize or deny the clear problems with health care and simply be obstructionist.

Alternately, liberals, progressives, Democrats describe health care as a place in which the market has simply failed. As Paul Krugman has recently pointed out, health care economists have long maintained that:

[T]he standard competitive market model just doesn’t work for health care: adverse selection and moral hazard are so central to the enterprise that nobody, nobody expects free-market principles to be enough.

Their are various solutions being worked out by the Democrats – to create regulations that prevent health insurance firms from maintaining their exploitative business model; to create a competitor to these firms that will operate on a different model to keep them honest; to link payment of health care to outcomes instead of time and services.

The great irony is that if the Democrats are successful in reforming health care, they will have legitimized the market-state which many on the left are suspicious of – but they will have done so by firmly rejecting the Republican dogma that the government is always the problem. As Bill Kristol wrote in his famous 1993 memo on Bill Clinton’s attempt at health care reform:

[T]he long-term political effects of a successful Clinton health care bill will be … worse … It will revive the reputation of the party that spends and regulates, the Democrats, as the generous protector of middle-class interests. And it will at the same time strike a punishing blow against Republican claims to defend the middle-class by restraining the growth of government.

Today,  it is only the Democrats who will be able to preserve the legitimacy of the market-state in the midst of this crisis.

[Image by FoxTongue licensed under Creative Commons.]

19 replies on “How the Problem of Health Care Undermines the Legitimacy of the Market-State”

Of course, the entire analysis supposes that health care is a right of the citizenry rather than a commodity – which feeds into the republican mantra: ‘the more rights we have, the more freedom we give up.’ The more simplistic analysis (one that would be too short for a profitable book) goes like this: the increased availability of healthcare by virtue of a public option increases, not decreases, moral hazard which in turn will add cost, not lower it.

In the best-case, cooked-data scenario, we end up with a government that now feels entitled to tell its subjects what they can put into their bodies and what they can’t; what they can seek treatment for, and what is too expensive; which lives are more valuable than others. A somewhat more intermediate scenario adds to that long waits for basic care. One man in Britain, which has dramatically fewer patients to look after, waited so long for a dentist that he crazy glued his tooth back in. And finally, the worse case scenario is we have no way to pay for any of this, and our currency collapses which effectively bankrupts the nation.

Sounds like a no-win to me.

@O’Neil –

The problem with complaints about “paying for this” is that without some form of reform, we we cannot afford our current commitments. With health care costs escalating, something needs to be done. We need to either a) bend the curve – and reduce the growth rate; and b) stop providing any health care as a gov’t. What Obama is proposing is to “bend the curve” – are you suggesting eliminating Medicare and Medicaid?

This analysis does not presuppose this right to health care – it presupposes that people expect to be able to obtain health care. I don’t get into the moral sense of the majority that no one should be denied treatment because they are not rich enough. But that is another factor favoring some sort of collective system of health insurance.

Re. moral hazard and health care. It’s not clear that moral hazard applies in the same way to health care decisions as to other economic areas because people already tend not to enjoy going to the doctor or hospital – and so avoid it. At the same time, once they find a problem, they are generally not concerned with how much it costs to save their life – and are willing to part with as much as is necessary. Yet, if people went to the doctor more often it could actually within a few years reduce the overall health care costs – as preventive care had an effect and diseases were caught earlier and treated more cheaply.

And while the story of a guy in Britain is amusing – there are more than a few horror stories of America’s system has decimated people’s lives.

What you describe as the best or intermediate scenario is actually a just a list of the worse-case scenarios – and they seem to focus on a single-payer system rather than the amendments to our current system that Obama proposes.

or, c) focus on eliminating the over $60 billion worth of fraud (in medicare alone) each year that the government seems too lazy to stamp out. That would go a long way towards making the current system more manageable. Instead I have to listen to Barney Frank tell me we’re going to stop making F-22 Raptor jets to help cover the cost of health care reform. Thanks Barney, that should save us $400 million if we stop making those. Now can you tell me where we’re going to get the other $960,000,000,000 every year for the next ten years to cover the added cost?

It’s disingenuous for democrats to suggest we’re going to make room in the budget for this. With Obama, every pile of money has come with the explanation “we’ve got to do this NOW” (while the democrats are in power, and midterm elections are still far off). That’s not acceptable when we’re talking about projects costing in the trillions of dollars, and it leaves me to conclude that Obama and the far-left are just giving everyone the finger and pushing an agenda they know is unpopular while they have the power to do so.

First – health care reform is extremely popular. The more progressive, the more popular in fact. The public option is supported by most Americans.

Second – the problem of costs is systematic. Something needs to be done to stop the costs from rising so quickly – this is the real problem. If a trillion now can shave of 0.15% (meaning under 1%) of the growth in health care costs, it will save multiple trillions within 15 years…

Sure, 72% of people polled support a gov’t backed healthcare plan that would “compete” with private insurers (a.k.a. the private insurers will find a way to transfer bad risks to the public pool – happens all the time – just look at the NFIP for a ripe example of what happens when the gov’t “competes” with private insurers).

But they don’t stop there! No, turns out “most” americans would even be willing to pay “higher taxes” so that “everyone” could have health insurance – how generous! One teensy weensy problem: health care currently costs $2.5 trillion per year. How are those “higher taxes” going to look once we add another $1 trillion to that every year to expand coverage? I’m thinking it’s going to look a bit less palpable. Unless, of course, we just make China loan us the $ or inflate our currency further, which in turn will make everything, INCLUDING HEALTHCARE, more expensive.

The truth is we’re entering a period where we’re going to have to make tough choices about which services (marginally useful MRIs, etc) are going to get cut – not how we’re going to publicly subsidize healthcare for the uninsured.

The other problem is that many of Obama’s cost-cutting plans are long term ways to reduce payments to pharmaceutical companies and doctors/nurses. The problem with that of course is that simple economics tells you if you pay less for products & services, you’ll get less of those products & services. That means less drug innovations to combat illnesses. Less skilled physicians choosing to spend 7 or more years of their life to hone the craft. Less qualified nurses.

In short, the economics bear out that the spike in short term costs (leading to inflation) coupled with the long term cost-cutting measures means we’ll end up paying more money for less service.

A few issues – health care costs wouldn’t balloon by the amount the government would be paying. It is already illegal to deny emergency treatment – there just isn’t a way to pay for this. And non-emergency treatment is generally cheaper.

In terms of cost-cutting plans – a huge percentage of the costs now go to the health insurance companies rather than to doctors. I don’t have the stats – but I’m sure pay for doctors and other medical services and professionals hasn’t gone up nearly as much as health care costs have.

Are we talking about health care or disease care? Have we identified the root cause? And is there an agreed upon goal? Have we really come at this without accommodating the elephants in the room so that we can evolve and create a system with the well-being of the people and the country as the primary goal and not big pharma and insurance companies? What if the system is collapsing because of the weight of the elephants and it’s simply time to do something from a higher consciousness? How many are really addressing this vs. parroting rhetoric?

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