| Matt threw down the gauntlet yesterday with his support of the Senate bill's excise tax on high-end insurance plans:
My friend Jay Stevens wrote a while ago that his problem with the excise tax was that it penalized spending on healthcare and that we should be happy to encourage people to spend more on healthcare. If healthcare actually improved health, I'd be inclined to agree that it is worth subsidizing. But the correlations are relatively weak (and the odds that hospitalization can hurt or kill you are unfortunately high). Under these circumstances, reducing healthcare spending and allowing ourselves to spend more money on other things (perhaps sporting equipment or healthy local food, both of which can be expensive but would do more in general to improve health than more heart surgeons) would be a good thing.
I wrote a lengthy post on this subject before, but some of its essential points are worth repeating.
Insurance companies have for years sought to discourage policy holders from seeing their doctors by using low-end policies with high deductibles and higher out-of-pocket costs associated with preliminary doctor vists. The premise -- and Matt gets at this, too -- is that consumers, if allowed, would opt for expensive and unnecessary medical procedures, driving up the cost for their treatment. Insurance companies, by throwing road blocks between consumers and their doctors, goes the theory, cuts down on wasteful healthcare spending.
This is one of Ezra Klein's favorite lines of reasoning: because people don't understand how much their insurance actually costs -- employers a large portion of the costs -- they are less likely to consume rationally. And while that's true for, say, selecting prescription medicine, it's actually an illogical argument because people aren't rational consumers of healthcare to begin with.
Simply put, we don't like to visit the doctor. Giving people an economic incentive to avoid seeing their doctor only gives them permission to do so. Minor illnesses turn serious, and expensive. Malcolm Gladwell eviscerated this argument years ago in his piece, "The Moral Hazard Myth," which is well worth a read.
The problem, of course, isn't consumers. We're not choosing unnecessary procedures. We do what our doctor tells us. Our doctors, on the other hand, have a distinct economic incentive to give us procedures instead of care -- and Atul Gawande already covered this in his New Yorker piece, "The Cost Conundrum." Doctors get paid by what treatments they give to patients. Therefore, they give lots of treatments.
The answer is twofold: easy access for consumers to their doctors, and a payment system that pays doctors for seeing patients, not treating them. Good, affordable insurance and salaried doctors, say.
So, yeah, I'm not crazy about an excise tax on benefits. We've been down the road of discouraging patients from seeing their doctors, and it's only helped drive healthcare costs higher.