In another episode of There’s No Such Thing as a Free Lunch, we will quickly explore universal coverage legislation, which, though politically popular, is terribly expensive.

In the recent discussions for passing a national universal coverage plan, the president has noted correctly that any large health care system could reduce costs in numerous ways. For instance, a government system could rate the efficacy of different treatments to determine whether they are cost-effective. A government plan could also reduce costs by denying expensive treatments that only extend life by a few months. Also, paying doctors for outcomes, rather than services, (paying for the output, rather than the input) could reduce costs and potentially improve care. Finally, the size of any government plan gives the government great negotiating power to bargain down prices from pharmaceutical companies, hospitals and doctors.

Many of these items sound like health care rationing. In fact, they are, but as with any other limited resource, we can only afford as much health care as we’re willing to pay through tax hikes.

The New York Times recently carried an interesting op-ed advocating rationing.  The article poses some good questions that will have philosophers and ethicists arguing from their armchairs.  For instance,

You have advanced kidney cancer. It will kill you, probably in the next year or two. A drug called Sutent slows the spread of the cancer and may give you an extra six months, but at a cost of $54,000. Is a few more months worth that much?

Furthermore, does it matter if the patient is 85-years-old or 16-years old?  Some will immediately see a problem with a policy that makes distinctions like this in choosing to withhold care.  Ethically, many (I’m especially looking at you, Immanuel Kant) would be outraged that we would make such distinctions— or even any distinction— to choose to ration care.  One life is as equally worthy as another, they would say.  A rich country cannot issue a death sentence simply because care is deemed “not worth it,” they might add.

A utilitarian view would probably side with any budget analyst or any health agency head suffering from budget constraints.  Whatever provides the greatest overall benefit (to society as a whole) for the least cost is the ideal policy.  An extra month of life for an elderly person may not offset the additional tax burden (or commensurate government service reductions) to cover the cost.

However, if you’re the one being denied care under this policy, you probably won’t have much sympathy for the utilitarian view.  After all, you paid taxes to support this system and the entire pretext for this costly government program was to ensure that people wouldn’t suffer unnecessarily because of cost.

Once the program is grouped with other so-called entitlements, people will view it as, well, an entitlement.

Enough philosophy.  The reason the current reform proposals are doomed is that they will require too many sacrifices from too many powerful interest groups.  First, after years of scolding employers who provide little or no coverage for their employees, those employers who do provide superb coverage may now face a tax for doing the right thing.  Now, some in the House are proposing a tax hike on those making more than $280,000 annually.  The main problem with this, of course, is that many small businesses are sole proprietorships and the companies’ incomes are reported on the tax returns of their owners.  A tax hike on “the rich” will also hike taxes on many small-business owners.  A business tax hike, especially in this economy, could discourage small businesses from hiring.  A tough sell when the unemployment rate just topped 10%.

Furthermore, for true reform to actually reduce costs, any government plan will have to reduce payments to doctors and hospitals, who have both profited nicely from our current arrangement.  Massachusetts, with its universal coverage plan, is continuing to suffer escalating health care costs.  The commonwealth is now considering cutting payments to doctors and hospitals.  Opposition from the health lobby is muted for now:

Representatives of [health care] groups joined in a unanimous commission vote for the recommendations. But they made clear that their continued support might depend on devilish details, the kind that will determine whether their members are net losers and, if so, by how much.

Opposition will likely build as the costs become more evident.

On the national scene, the head of the Congressional Budget Office, the non-partisan Congressional agency tasked with calculating the costs of proposed legislation, testified that neither the House nor Senate bills impose the measures necessary for reducing costs.  The Post writes,

Although the House plan to cover the uninsured, for example, would add more than $1 trillion to federal health spending over the next decade, according to the CBO, it would trim about $500 billion from existing programs — increasing federal health spending overall.

Some provisions of the bill have the potential to trim spending further, [CBO head] Elmendorf said, but “the changes that we have looked at so far do not represent the sort of fundamental change, the order of magnitude that would be necessary, to offset the direct increase in federal health costs that would result from the insurance coverage proposals.”

That is because the fundamental change would require a politically impossible degree of arm-twisting from various interest groups, including doctors, pharmaceuticals, hospitals, private insurers, patients, and taxpayers.