Big structural change comes with some consequences.
“Medicare for All” plans,
such as those proposed by Bernie Sanders and Elizabeth Warren, qualify as “big
structural change,” to use Warren’s phrase. The elimination of private health insurance in favor of
“free” government health coverage is certainly change that’s big and
structural. Same goes for the all the tax increases and the payment of much
lower rates to physicians and hospitals.
But those are the known
big structural changes, or BSCs — at least the ones mentioned in candidate
plans. But what about other BSCs that may be less obvious? Would, say, overriding drug patents affect the type of early-stage
development done by biotech firms and funded by venture capital? Undercutting
that innovation mechanism would qualify as a BSC.
Or how about this: The
Washington Post points out that economists “have projected as many as 2 million jobs could be lost
under a Medicare-for-all system that eliminated all private coverage.” That
also qualifies as BSC. When a reporter recently asked Warren about the job loss
issue, the senator responded, “So I agree. I think this is part of the cost
issue and should be part of a cost plan.”
It’s unlikely that the
nearly 400,000 folks employed by health insurance carriers last year think of
their jobs as “part of the cost issue.” Nor are they likely to think of
the elimination of their jobs as a feature rather than a bug. Even from a macro
perspective, they have a point. As my AEI colleague Ben Ippolito noted in a podcast Q&A with me earlier this year:
So you really have to
understand that especially over the last 20 years or so, health care has been a
huge jobs creator. … Even through the Great Recession, all of 2008, all of
2009, 2010, there was never a decrease in any quarter in the number of people
employed in health care. And so what that says is that there are a lot of
people for whom these costs that we’re talking about is their income. And it is
a Herculean task to think about every hospital in every district and all the
people that rely on it for their incomes and to start talking about cutting
[reimbursement] rates by half.Advertisement
As Ippolito explains, the
employment issue isn’t just about the private insurance industry. It just as
importantly concerns how Medicare pays significantly lower rates to physicians
and hospitals than private insurers do. A universal shift to those lower
payment rates could, even Vox points out, “lead to widespread hospital closures and
physician bankruptcies.” More BSC.
Now that Washington Post
story on the job loss issue also quotes economists who make the comparison to
farmers and automation. Most American workers used to work in agriculture. Now
only a tiny sliver of them do. The efficient use of capital and labor often
requires a dynamic reallocation of those factors, and we’re better for it.
Maybe the same would be the case with “Medicare for All” over the long
run.
But the short-term pain
might well be intense. Said one health policy expert in the Post piece, “It is
a mistake to assume everyone who loses their job in the insurance industry is
going to be unemployed. But it is also a mistake to assume everyone in the
insurance industry who become [sic] unemployed is going to be
employed in another industry in a reasonable amount of time.” Maybe we should
hear more about this BSC from the candidates.
This article first appeared at The American Enterprise Institute.
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