I'm a Stein's Law Guy Living in a Stein's Law World
The strongest argument against health reform, in my estimation, is the argument from cost. The expansion of coverage to 40 million people is a concrete expense. The cost controls are entirely speculative. There's a not insignificant possibility that the expected increase in spending will manifest and the promised cost controls will not. Fred Hiatt makes this argument on the op-ed page today. Tyler Cowen has made it in the past. I'm sympathetic to it. But it leaves me with one question: Do you believe in Stein's Law?
Stein's Law is the dictum named for the economist Herbert Stein. If something cannot go on forever, he's reported to have said, it will stop. Look at the graph atop this post. It cannot be the case that we will let health-care spending literally consume 100 percent of America's gross domestic product before the end of the century. Health-care spending cannot continue to increase at this rate. Thus, it will stop.
The question, in a Stein's Law world where the day of reckoning is inevitable, is whether it matters if the cost controls promised in this iteration of health-care reform fail. In 2006, the health-care system spent $2.2 trillion. Adding $100 billion per year to that sum -- which will be roughly the number if health reforms end up costing $1 trillion over 10 years and aren't able to save a dime -- is a very small increase. Its primary impact would be to move the inevitable day of reckoning forward in time. Maybe we would have finally dealt with cost in 2031, but now we address it in 2022. Why is that a problem?
Indeed, I'd argue it's preferable. The system is currently biased toward the worst form of cost control: rationing by income. Every year, we contain costs by quietly letting 2 million or so more people fall into the ranks of the uninsured. And why not? It does not require an act of Congress. It does not require a war with a powerful interest group. The same cannot be said for cutting provider payments, implementing comparative effectiveness research, founding a public plan or bargaining with pharmaceutical companies. And so the system, which prefers to avoid conflict, prefers letting people lose their coverage to changing how providers practice medicine, because letting people lose their coverage does not require conflict. It's government. As Tom Geoghegan has said, it likes the quiet life.
In a Stein's Law world, we admit that the day of reckoning is imminent. The question is how we'd like it to look. And I'd prefer that the system not be quietly biased toward saving money on the backs of individual people as opposed to providers. Our incentives have gotten a bit insane when you need 60 votes in the Senate to let Medicare bargain down prescription drug prices but no one ever needs to approve a 10 million rise in the ranks of the uninsured. If we agree that hard choices are imminent, we should also be able to agree that there's a utility in setting up incentives for Congress to make them well.
(Graph credit: The Congressional Budget Office.)
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