S-Chip is Not Insurance-- it's Welfare

(If you want to cut to the chase, then skip to the last bullet point at the end.)

I'm all for providing health care for kids. Everyone's kids. As long as we're at it, let's get health care for everyone. Period. Even the adults. Old people, vets, the indigent, the disabled and now kids are all included, which leaves only adults being uncovered by government programs. So why not cover all adults as well? Universal health care is certainly a worthwhile endeavor, and before I'm asked to pay for able-bodied middle class parents' kids, I'll ask to be included myself. Short of that, I'll vote no on middle class kids' being on the dole, because that is definitely what the expansion of S-Chip is when it includes those families living at 300% of the poverty level.

Seniors have paid their Medicare payroll taxes so they deserve the benefits as contracted. Likewise for vets. The indigent and disabled need care as part of our social moral imperative. But families living at 300% of the poverty level should be responsible for their own kids' health care expenses. That's my opinion. If we want to expand the program to middle class kids, then let's just go to Nationalized Health Care altogether, for everyone.

I know the responses:

1. The Practical Approach. “The cigarette tax pays for it.” The proposed increase of $35 billion dollars over five years in this S-Chip entitlement is designed to come from a cigarette tax. Tax those dirty smokers and our kids will get free health care! It's a win-win! Yeah! But if we have resolve to tax smokers, and maybe we should, then why give the revenue to middle class families, many of whom already have insurance? The phenomenon of “crowd out” is when the initiation or expansion of a government benefit leads to the substitution of private payers for the said government program. Additionally, sin taxes such as this often result in lower than expected revenues as the sinners change their behaviors and engage in bootlegging untaxed contraband. Furthermore the increased need for law enforcement against bootleggers adds external costs thus depleting net revenue available. (I realize this was accounted for in the CBO Report.)

2. The Emotional Plea. “Yea but, it's fer da kidz.” The problem I see with S-Chip as designed is that it provides no limits to the number of kids covered. Ten kids, no problem. Sure, it's not the kids' fault and they shouldn't suffer. The current S-Chip grant covers “da kidz”, all of them, up to 200% of poverty. That's enough. If private donors want to cover middle class families, then go for it.

3. The Fiscal Responsibility Appeal. “Covering kids' health is cost-effective.” Providing routine care for kids saves society money in the long run. I would point out that the same argument is used for people in every age group: health maintenance is cost effective for all of us, so why give kids preferential treatment over adults? Especially kids whose parents are able to provide the insurance themselves.
   
   

Peter Drucker, the venerable economist and management expert, spent his life dissecting all manner of industries and determining the market forces involved. Macro forces as well as micro forces, labor issues, corporate governance, government interventions-- nothing was not examined. He was the author of 38 books, including many textbooks, was a contributor to and editor of numerous economic journals as well as the Wall Street Journal. In other words, he knew his shit. When asked about medical economics, however, Drucker was at a loss. The allocation of medical resources is made difficult by competing market forces and incentives (will a surgeon always recommend surgery?) and compounded by the asymmetry of market information (but the ads on CBS News say I need treatment for Restless Leg Syndrome and Toenail Fungus Disorder), the difficulty of assessing quality and the economic stresses of the employer-based insurance model (“I'll give you a raise if you opt out of the costly health insurance benefit.”) None of these problems have simple solutions.

As an anonymous commenter to the last entry has pointed out (although they failed to provide references), other economists such as Ken Arrow and more recently Uwe Reinhardt have also attempted to understand the health care morass. Reinhardt, with whose work I am quite familiar, has written extensively on the single-payer system and has written a Primer which compared the two Presidential candidates' plans in 2004. European nations and Canada have a greater percentage of health costs paid by the government versus the US, and a greater number of citizens covered by either governmental or private health insurance, and the Institute of Medicine has intimated that US quality of care is poor even though we pay a much greater percentage of our GDP on health care. Many folks much smarter than I am have devoted their careers to medical economics and I certainly don't pretend to know the answers.

Health care will be the defining issue of the next few election cycles. The consciousness being raised over the S-Chip expansion and the subsequent Bush veto is the beginning of a long overdue national discussion about health care coverage. My aspiration is that this leads to some type of universal health coverage and not just some lousy expansion of Medicaid, which is really what S-Chip is. My random observations about the current system:

1. Means-testing needs to be revamped. Why do we only look at income? Conceivably an individual or family that has considerable property wealth but has a median income could qualify for welfare type benefits. This is not as much a problem when using 100% or 200% of the poverty level for income, but at an income of 60-70K, such as engendered in the proposed S-Chip expansion, the abuse potential increases since many of these families may have earned significant incomes and accumulated uncounted wealth. As I mentioned in the previous post, MiChild in Michigan relies on self-reported income, which is inadequate. Also, father's and even grandparents' income should be included in any means calculation, regardless of marital or co-habitation status.

2. The risk pool needs to be expanded. Of the 44 million Americans who are not covered by health insurance at any given time, many of them are working and some are quite well-off. Often, healthy individuals will opt out of coverage to save money and then opt in when they are older or acquire an illness. This defeats the idea of a risk pool. Health insurance should be mandatory just like auto insurance. Doctors and Emergency Departments cannot “opt out” of treating a sick or injured person depending on their odds of getting paid, so every member of society has a moral obligation to be covered for such a liability. Even the poorer folks who are under-employed and have no employer benefits should be compelled to pay something-- either in the form of a payroll tax and/or a consumption tax-- and then be covered by a basic, government subsidized policy, or even better, with a universal health care plan. Nationalized health in some form, however unlikely to be popular among Bushies, would fulfill all these requirements.

3. We are a rich country. Most people on Medicaid and S-Chip benefit greatly from these programs and deserve coverage. It's a very generous program. I don't mean to sound shrill about “kicking all the bums off welfare” and such because these programs are very necessary. I do find it odd, however, the numbers of folks I see who have hundreds of dollars of tattoos and nicer cell phones than I do, while they assume little of the responsibility for their necessities. We live in a very wealthy society and the dividends of such wealth and excess are obviously enjoyed by all socio-economic strata. One could argue that the poorest person in 21^st Century America is better off than the English nobility of a mere century or two ago. We live longer, drink cleaner water, have vaccines and lower infant mortality, etc. This enormous wealth could be used much more effectively to provide for even more people.

4. S-Chip pays Medicaid wages. Let's be clear on this. S-Chip is NOT insurance. Of the 35 Ob/Gyns in this county, only a handful accept Medicaid and S-Chip coverage. Why? Because the reimbursement is about 18 cents on the dollar-- not enough to cover overhead expenses. Medicaid and S-Chip may be called “insurance”, but they are actually welfare programs and health care providers only agree to see such patients as a service to the community. Physicians literally lose money for every Medicaid patient they see in the office, and if that patient number increases significantly and detracts from the numbers of privately insured patients, ie, "crowd out", then the pressures on primary care providers will mount. Even Uwe Reinhardt, the proponent for a single payer system, has recognized that such draconian discrepancies in reimbursement are unwarranted and harmful to the health of the system. Dr. Reinhardt (page 16) says:

My own reservation about these two public programs has been that the fees they pay providers tend to be unreasonably low, often not even covering the providers' costs. Not surprisingly, many physicians simply refuse to accept Medicaid patients, an option, however, that is not practical for hospitals.

I would agree with the erudite Dr. Reinhardt and I would go one step further. I feel that physicians taking care of the indigent should be paid more, like combat pay, than those taking care of the more wealthy. (Yeah, I'm a dreamer.) If we want to raise an additional cigarette tax, or any other consumption tax, then why not put that revenue toward proper reimbursement for providers who currently care for the truly indigent?

So the next time someone refers to S-Chip and its proposed expansion as insurance, please feel free to correct them of their delusion. And then ask yourself if a family at 300% of the poverty level and untold other assets should qualify.