When Numbers Fail

I'm about as pro-numbers as you can get, but even I have to draw the line when and where math fails to solve problems. Healthcare is good example. A lot of the rhetoric coming from White House economists--Orzsag in particular--emphasizes how various methods of technocratic control like comparative effectiveness research can dramatically cut costs without any impact on care. The idea is that government scientists trained in fancy new behavioral methods can figure out "what works" and what doesn't. American healthcare is so expensive because we do too much of the stuff that doesn't work, relative to Europe.

My suspicion is that instead of clear walls between things which "work" and don't, things are more complicated and difficult for the government to figure out. There's a great piece in the New York Review of Books which details how comparative effectiveness studies don't have a great history, partly due to biases of the investigators themselves:

With other experts, I performed a "meta-analysis," i.e., a study bringing together data from multiple clinical trials. We concluded that erythropoietin significantly improved the health of cancer patients and we recommended it to them as their default option. But our analysis and guidelines were wrong. The benefits ultimately were shown to be minor and the risks of treatment sometimes severe, including stroke and heart attack.^[4]

After this failure, I came to realize that I had suffered from a "Pygmalion complex." I had fallen in love with my own work and analytical skills. In behavioral economics, this is called "overconfidence bias," by which we overestimate our ability to analyze information, make accurate estimates, and project outcomes. Experts become intoxicated with their past success and fail to be sufficiently self-critical.

It closes with:

The care of patients is complex, and choices about treatments involve difficult tradeoffs. That the uncertainties can be erased by mandates from experts is a misconceived panacea, a "focusing illusion."

Well worth reading. The departures from a perfect world of rational economic agents are real; but they don't have unambiguous lessons for the optimal balance between markets and government.

Federalize Healthcare?

In light of the possible failure to build healthcare reform at the national level, there are growing pressures to federalize healthcare and turn it into a States issue. This is something Scott Brown is behind as well--he supported Romney's universal healthcare proposal while opposing the (similar) national healthcare plan. But Ezra Klein disagrees:

Size matters. Just as Wal-Mart lowers prices by using their size to demand savings, in other countries, governments wield their massive size and market share to bargain down the costs of health care. America doesn't. It's very simple, and very well understood...

So on average, we overpay by 60 to 70 percent for pharmaceuticals, largely because we, unlike every other country, don't bargain down the costs. We're in fact subsidizing their discounts, as the pharmaceutical companies can raise our prices to lower theirs. In a nationalized system, that would change. In a system with 50 states all on their own, it wouldn't

Well, look at those European countries which have better healthcare due to "scale" issues. Switzerland has fewer than eight million residents. Denmark has fewer than six million. Yet both countries, along with even smaller European countries, manage cheap and well run healthcare systems. The Swiss system is even more free-market than the one America has.

America of course fails to use its scale in curbing health costs, in large part due to regulatory capture. Ezra has no solution to this problem. But moving healthcare into the responsibility of European-sized American states might just induce them to figure out European-style solutions. More importantly, it allows different states to figure out whatever basket of public and private provision best suits their needs.

Yet I'm increasingly worried that this whole healthcare debate has gone nowhere chasing the chimera of "inefficient spending" on healthcare. Yes, Europe spends less on healthcare. But Europe spends less on everything. It spends less on education, and gets better results. Should we revamp our education system along European lines because we are so certain that 20% of health spending is wasted?

Mankiw had a great link up on Baumol's cost disease. The idea is that greater income induces greater spending in sectors which don't benefit from greater efficiency--mainly those which are human-intensive. Like healthcare. In this view, it's no surprise that America spends 30% more or whatever on healthcare--America is 30% richer than everyone else.

This overstates the issue a bit. People tend to over-consume healthcare because they don't pay for it and aren't aware of the costs, which are immediately born by tax-free insurance premiums and government programs, but which ultimately result in lower wages. But the health plan under consideration doesn't really target this issue, except for the (now, all but scuttled) tax on Cadillac insurance plans. Whatever cuts are present would have been needed anyway to stave off looming deficits--now we'll have to figure out how to cut even more "fat" from health spending on a larger base of Welfare State entitlees.

What a Free Market in Healthcare Looks Like

From the WSJ:

Dr. Shetty, who entered the limelight in the early 1990s as Mother Teresa's cardiac surgeon, offers cutting-edge medical care in India at a fraction of what it costs elsewhere in the world. His flagship heart hospital charges $2,000, on average, for open-heart surgery, compared with hospitals in the U.S. that are paid between $20,000 and $100,000, depending on the complexity of the surgery.

The approach has transformed health care in India through a simple premise that works in other industries: economies of scale. By driving huge volumes, even of procedures as sophisticated, delicate and dangerous as heart surgery, Dr. Shetty has managed to drive down the cost of health care in his nation of one billion...

Mr. Parashivappa says he can't himself pay for the surgery, but it is covered by a farmers' insurance plan that Dr. Shetty began several years ago in partnership with the state of Karnataka, which includes Bangalore.

Nearly one third of the hospital's patients are enrolled in this insurance plan, which costs $3 a year per person and reimburses the hospital $1,200 for each cardiac surgery.

That is about $300 below the hospital's break-even cost of $1,500 per surgery.

The hospital makes up the difference by charging $2,400 to the 40% of its patients in the general ward who aren't enrolled in the plan. An additional 30% who opt for private or semi-private rooms pay as much as $5,000.

You can complain about purchase price parity here. But the costs faced by a private hospital--wages for skilled doctors and medical equipment--are more comparable to US prices.

Capretta on Obamacare

Here he is:

For months, the president and his team argued that stepped-up investments in health information technology, comparative effectiveness research, and prevention and wellness programs could “bend the cost-curve,” thus making an expansion of coverage affordable for taxpayers. But the Congressional Budget Office, along with a chorus of independent skeptics, said those steps would never be up to the task of reliable cost control without more fundamental changes in the financial incentives facing consumers and providers of services.

Unfazed, the administration argued that it had other ways to control costs waiting in the wings. The conversation turned to “delivery system reform,” with the administration and its allies in Congress suggesting that new ways of paying health-care providers in Medicare could spur a wholesale shift in how doctors and hospitals cared for patients. As White House Budget Director Peter Orszag put it, “Medicare and Medicaid are big enough to change the way medicine is practiced.” The implication was that the new team was working on ways to painlessly root out wasteful spending by compensating providers for their services differently than they are paid today.

But no such proposals were ever forthcoming (except for relatively minor adjustments related to payments for hospitals with high readmission rates, and some baby steps toward more “bundling” of payments for a full episode of care). What the White House did eventually propose was a commission that would have the authority to change the way Medicare pays for services without further approval by Congress. So instead of offering a serious plan to “bend the cost-curve,” the administration offered a commission that would come up with a serious plan to “bend the cost-curve.” Quite predictably, many in Congress have not been so keen on this idea, as it would hand off to an unelected commission the power to rewrite Medicare’s provider-payment regulations. The administration’s commission idea is not in the House-passed bill.

Not to worry! The administration has another favorite cost-cutting tool. The idea is to tax so-called “Cadillac” health insurance plans, thus forcing both the insurers and the plan enrollees to find ways to economize to avoid the tax. But there’s a little problem with this idea too. President Obama was against it before he was for it. Recall that Republican presidential candidate John McCain proposed to convert today’s preferential tax treatment of employer-paid insurance premiums into a refundable credit. In October 2008, the Obama-Biden campaign excoriated this idea in scores of ads because it would tax health benefits “for the first time ever.” Now, the president wants to do just that — but, again not surprisingly, the populist revolt he stoked against it in 2008 was still smoldering when he endorsed it in 2009. It turns out that taxing high-cost insurance plans will actually hit many middle-class households, especially those with union members enrolled in collectively-bargained plans. House Democrats wouldn’t go near the idea, and reports indicate that the version of the high-cost insurance tax in the Senate Finance Committee bill is getting watered down by the day. If some version of it survives at all, it is highly unlikely to pinch enough to generate meaningful cost control.

Reviewing this legislative landscape, it’s suddenly dawning on all concerned that the bills moving in Congress won’t come close to “bending the curve” after all. That’s the thrust of a piece today in the New York Times, as well as one from last week in the Washington Post. Of course, even as House members and Senators shy away from tough decisions, they are not nearly as reticent about extending new health entitlement commitments. Thus, it is now abundantly clear that if anything is produced by this legislative process, it will be a bill that piles more unaffordable entitlement commitments on top of the unreformed ones already on the books.

The complete spinelessness of Congress is now a fairly entrenched trend. Going back to Social Security reform; the Medicare prescription drug plan; etc.--it's very hard to write sweeping legislative changes these days. Every President going back to at least Reagan came to Washington and at the very least was forced to substantially roll back their agenda. Past Presidents may have left a broader impact in other countries, through their foreign policy, than domestically through their legislative agenda. Obama's majorities, his legislative background, and legislative staff may make a difference. But it seems very unlikely that any of their major bills--on healthcare, climate, or what have you--will be seen as very worthwhile on the merits.

And then you have Jonathan Gruber's logic, in which health care reform is a Pascal's wager; and increased coverage will make cost-cutting possible. This is a little like saying "Sure, eat another cheescake; there will be far greater pressure for you to diet once you're heavier, so there's no way you can get morbidly obese." Aside from the on-face absurdity, this does not match the experience of state governments testing variants of reforms under consideration, nor of any other countries as far as I can tell. Yet the idea that Congress will spontaneously grow a conscience before health costs engulf the economy is the best hope any of us have.

Going Dutch

All industrialized countries other than the US offer universal health care, but they do in different ways. England has an entirely government-run system. But several countries manage to cover everyone with a more market-oriented system. Here's what the Dutch have to say:

Between meetings, Mr. Klink sat down with The New York Times. The Dutch are in the midst of a significant health overhaul to inject greater competition into the nation’s insurance and hospital markets, but Mr. Klink also offered some pointed observations of the health system in the United States.

His first official visit to the United States as health minister came in 2007, and he came with the usual European preconceptions that this country had a wide open and fiercely competitive health insurance market with a myriad choices.

“And what struck me,” he said, “is actually the lack of competition you have.”

Mr. Klink pointed out that nearly 40 percent of the nation’s population gets care fromMedicare, Medicaid and Veterans Affairs, all of which have significant restrictions on the choices available to patients. “We don’t have these kind of public insurance groups in our country,” he said.

And even among those in the United States who get insurance from their work, he went on, “it’s the employer who is making the choices of the health plans from which you can choose.”

The Swiss have a similar system. Singapore has one that's even more free market--people have health savings accounts to pay for most routine care--and they also spend the least out of any industrialized country on Healthcare as a percent of GDP. What's common across all three is that subsidies are targeted through means-tested vouchers, rather than with a public plan, Medicaid, or Medicare.

Yet somehow we get caught in a debate where one side yells at the other for throwing people at the mercy of markets; and the other refuses to tinker with the system. Ensuring Universal Coverage should be the premise of the health care debate, and there are a range of options both to the left and the right on how to get there. Yelling at John Mackey for expanding health coverage and cutting costs isn't going to help; there are issues here beyond the purely moral.

The McCain Health Plan, Again

I noticed about a year ago that McCain actually had a decent health plan. It called for taxing premiums for insurance to pay for coverage for those without. The idea is that the tax-exclusion privileges wage compensation that comes in the form of health benefits, encouraging a general rise in healthcare costs. At the same time, the fact that this benefit only applies to employer-provided insurance contributes to a world in which millions of people without employer-coverage can't get health insurance. I noticed how prominent Obama economists had in fact called for exactly such a plan to reign in out-of-control healthcare spending while expanding coverage.

Obama was very opposed to the idea at the time. He denounced it as a new tax, and spent millions on ads convincing people it was a bad idea. The wonkish liberal blogosphere joined in attacking the plan. Here is Matt Yglesias:

One issue that hasn’t gotten nearly the widespread attention it deserves is that in the context of John McCain’s overall policy for steep tax cuts for high-income Americans he’s also proposing a very significant tax increase on the broad group of people who receive health insurance through their employers

As a result of that kind of fear-mongering, Democrats have found it very hard to impose any kind of tax on health care plans in current bills. The bills they plan cement the link between employment and health insurance and do little to tackle the fundamental drivers of escalating health costs. Well, here's Yglesias now:

by artificially subsidizing health care consumption by the relatively prosperous, [the tax exclusion] drives prices up for everyone, including the not-so-prosperous. And because it’s a tax-side subsidy, the subsidy does little-to-nothing for the poor.So scrapping or curbing the subsidy makes sense in general. And it especially makes sense as a way of raising money to finance progressive policy like ensuring that health care is affordable for the poor and the lower-middle class.

You can argue about whether McCain's plan for redistributing the revenue from the tax--in the form of a refundable tax credit--was the best way to expand coverage. A lot of the criticism there said something like "poor people don't pay taxes, so they won't benefit." But a refundable tax credit will effectively act as a subsidy for people who don't pay much in taxes. In fact, Wikipedia tells me that some conservatives and libertarians oppose such credits exactly for this reason.

But instead of having a debate about the particulars, we effectively shelved one of the best tools for health reform off the table about a year ago. In a world in which the financial crisis hit a few months later--say the Bush team decided to save Lehman--McCain would probably have been elected President. It's intriguing to imagine if McCain could have teamed up with Wyden-Bennett to produce a bipartisan health plan by now. One suspects not, but everyone is entitled to their own counterfactuals.

Healthcare Reform

Most of the healthcare reform bills being considered entrench the status quo, which is unsustainable. What would a better plan look like? Here's my cut:

1) Health Savings Accounts
The "use it or lose it" penalty for health savings accounts would no longer apply--put money in, tax free, into a health savings account; and you can use it whenever you want. The money would also be invested and interest accumulates in your account (if you don't like stocks, they can be put in inflation-protected Treasuries). Once you get old, you have the chance to move some of this money into your retirement account.

2) Mandatory Release of Costs for Hospital Procedures
Put them on the internet, nail them to churches, print them on the back of driver licences, burn them into the backs of people's retnas for all I care. It's insane that people will drive for miles to shave off a penny per gallon of gas but don't--and can't--know how much an MRI costs.

3) A Public Plan
The public plan would only offer catastrophic coverage (ie, severe emergency room care only) with high deductibles. Under the government plan, you, by default, put in ten percent of your salary into a Health Savings Account to handle most health spending. Preventative care is covered.

4) Guaranteed issue, community rating, and mandatory coverage
Everyone needs to buy health insurance. You can buy the government plan, or a private one. No insurer can turn down anyone who wants care, and can only charge premiums based on age.

5) Insurance Exchanges
All insurers must provide a "basic" plan that offers similar catastrophic care as the public option, as well as a more traditional package. Benefits are standardized across the two levels to allow easy comparison shopping. These exchanges are set up on a national level. All insurance spending (but not health account savings) is taxed.

That's it. The left should love the plan because it eliminates (or greatly reduces) the uninsured population while allowing people with pre-existing conditions to purchase insurance. The public option keeps insurers "honest." The right should love the plan because it increases competition--instead of insurance companies making their money by refusing care, they now make money by holding costs down. Young people should love it because they can purchase the public option cheaply. And everyone should love the plan because it reduces healthcare costs: the more people are accountable for their own spending, the more costs go down.

In the long-run, Medicare and Medicaid would be obsolete. People will start entering retirement with lots of money to pay for their own care; those (young or old) who can't afford care will be given subsidies to buy their own insurance (paid out of taxing insurance coverage). This will stave off the government's looming fiscal collapse.

Naturally, we're not going to see anything like this plan.

Healthcare and Technocrats

I've been growing increasingly worried as I look deeper into how healthcare technocrats think. Here's a piece from CAP:

When Texas capped non economic medical malpractice damages to $250,000 in 2003, most conservatives argued that the reform would free doctors from having to prescribe unnecessary treatment. It didn’t happen. According to the Dartmouth research on disparities in health care spending, many Texan doctors are still prescribing aggressive treatments that don’t improve outcomes. In fact, as of 2006, Texas was still at the top of the list of high-spending states.

Ignore the bit on malpractice; just look at the bit on Texas as a high-spending state. But high spending in this context really refers to high Medicare spending; and Medicare funds substitute for other health dollars. Overall, it's not clear that Texas is spending "too little" or "too much" on healthcare.

But suppose it, and all other "high spending" areas, were overall high spenders. What would that mean? If you check out the link, you'll see what the Dartmouth people call "high spending" areas. By and large, these are urban areas with lots of poor people, and large huge health needs.

Just consider how silly this exercise would be if we looked at any other profession. What if we found that lawyers cost more in New York than Albany. Does all that extra New York spending reflect "waste" that we can costlessly cut through bureaucrats? Or is it just that the cost of items varies; and that cities in particular have high costs due to high costs of living, etc.?

It's even worse for healthcare because different populations and people will respond differently to medicine. You need to do a far more detailed analysis on the subgroups involved, etc. to get an idea of how medical dollars are being spent. But the Dartmouth group doesn't do this; they're convinced that 30% of healthcare spending is waste, and any difference in costs or outcomes around the country can be attributed to that.

It is probably true that a lot of health spending is wasted or unneccessary, for any number of reasons, some government related. But I doubt these problems can be easily fixed by cutting health spending for poor urban areas. In the past, when Medicare has cut reimbursements, doctors have responded by increasing the number of billed operations, and increasing the total cost. So top-down economizing could even have perverse results.

This is a tough issue, and clearly reform--particularly of Medicare--is necessary. But I have an instinctive fear of overly-ambitious policy wonks and technocrats. We'll see what kind of difference they make to policy.

Obama's Healthcare Speech

Some thoughts on the speech:

I think it's interesting that two of the proposals that Obama outlined--mandates and taxing employer-provided care--were signature issues on the campaign trail as well. Mandates were one of the few big policy differences between him and Clinton--and he was opposed to them. Then Obama put out many, nasty ads against McCain because he wanted to tax healthcare. It's true, as many people say, that Obama's focus on healthcare was a defining characteristic of his campaign, and attracted many voters. But his actual policy stances have turned a full-180. Bizarrely, no one seems to have noticed, but I suspect that this is one reason why the issue is proving so intractable.

And stop blaming Republicans. Democrats, just a couple of years ago, showed no willingness to go forward with Social Security reform, and that's going to cost all of us who are young hundreds of thousands of dollars. Opposition parties sometimes behave as if they're in opposition, deal. If you have a majority in both Houses, just pass a bill.

I also see that one of the ridiculed conservative ideas on healthcare would be to "turn Medicare into a privatized voucher program." But that would be amazing! That forces people to be more responsible about their spending, while still funding it for people who don't have it. Note that countries with universal private insurance mandates--like Switzerland or the Netherlands--give out exactly these types of subsidies for people who can't afford care.

Obama apparently wants to cut Medicare Advantage. See Marginal Revolution for a run-down of these plans; basically they are plans which allow seniors to purchase additional care. So while people under 65 would be forced to purchase healthcare; people over 65 would be limited in their ability to purchase healthcare.

Also check out this great interview with a hematologist criticizing the "Dartmouth" approach to healthcare, which is convinced that 30% of healthcare costs as the result of waste and fraud, and can be cut through technocratic means. The counterpoint is that areas of high Medicare spending spend a lot for a reason. Atul Gawande singled out McAllen, for instance, as an area of high Medicare spending. But it's also a poor area with many health problems and little private insurance; the system overbills Medicare to sustain itself, but overall it's not a high cost area. Other analysis suggests that higher health spending is, in fact, related to better outcomes.

What Reihan Said

I intend to write more about Singapore's approach to healthcare in the near future. I'll just make a simple observation: many on the left emphasize the virtues of the National Health Service, most strikingly the fact that health expenditures in the UK amount to roughly 8.4 percent of GDP, slightly more than half of what the public and private sectors spend on health in the United States. But Singapore, which has a system built around catastrophic insurance coverage and health savings accounts, spends less than 4 percent of GDP. And according to the World Health Organization, Singapore has the world's sixth best healthcare system, miles ahead of Britain or the United States. Rowan Callick wrote a brief and useful summary of the virtues of Singapore's approach in The American last spring.

To grossly oversimplify, Singapore relies on a mix of mandatory savings and universal catastrophic coverage. David Goldhill has proposed something similar for the U.S. in The Atlantic. So has Brad DeLong. Ross and I backed a similar approach in Grand New Party. And Ron Bailey made the case in Reason back in 2004.[link]

Health Care and Orszagism

You're probably tired of hearing about health care at this point, but there's an excellent article on the subject at the Atlantic:

A wasteful insurance system; distorted incentives; a bias toward treatment; moral hazard; hidden costs and a lack of transparency; curbed competition; service to the wrong customer. These are the problems at the foundation of our health-care system, resulting in a slow rot and requiring more and more money just to keep the system from collapsing.

Health care doesn't work because it's not a market, and lacks the prices, cost-cutting, and consumer focus that dominate most markets (and even the more consumer-directed parts of the healthcare system, like elective surgery or vet care).

So how do the reforms being considered in Congress stack up? These are dominated by the "Orszag" principle--the idea that technocrats, on their own, can use the powers of modern statistics to identify and trim fat, at minimal political cost. This way, we can afford to give everyone full health coverage.

Maybe. But even if the entire cost-cutting brigade knew how to do their job, it's not clear that they could combat the various established interests and Congress and actually do so. People like to talk about cost cutting in theory, but become much more wary in practice. The "death panels" meme is obviously over the top; but they raise a point that any government plan will have to face--at what point do you say no to treatment?

Nor is it clear that government-mandated cost cutting could work even if it were politically possible. In the past, when Medicare has cut reimbursements, doctors responded by increasing the number of procedures and raising overall costs. As long as the entire healthcare system remains a bureaucratic mire, it's not clear how further government meddling with solve the problem.

So what should we do? Whenever faced with any public policy problem, my default response is to ask: What would Mitch Daniels do? He's expanded Health Savings Accounts to cut costs while expanding catastrophic coverage.

Why Care about the Uninsured?

You hear a lot of comments like this one on healthcare:

But the British system is extremely cheap. Uncommonly cheap. Weirdly cheap. About 41 cents for every dollar we spend per capita cheap.

Now it’s definitely true that to an extent the Brits are getting what they pay for here. If you look it up, the research shows that British health care is not especially effective by international standards. That said, the difference is subtle enough that you actually do need to look up the research. It’s not as if people in the UK are just dropping dead of the plague all the time. To the casual observer, it all looks about fine, and the 59 cents on the dollar they’re saving is quite a lot. The fact of the matter is that health care is not an especially important determinant of health outcomes. Genetic predisposition is hugely important, and we can’t do anything about it. The biggest issue is “behavioral patterns” which are hard to change. But even “social circumstances” and “environmental exposure” (which is really a kind of social circumstance) swamp health care as a factor.

So--the British NHS delivers substandard care, but at a much cheaper price. But, since health services don't actually matter that much for "health", we could just cut all sorts of costs, and spend the rest of the money on various paternalistic method to stop people from injuring themselves.

But if you take this data seriously, it's hard to get worked up over the plight of the uninsured. They don't get access to healthcare; but healthcare doesn't matter anyway, and forcing them to pay for insurance may make them worse off. In fact, there's no reason to stop at British-level care. Britain could probably cut bills by half, and not lose too much in terms of life expectancy. What's the problem with that?

The standard liberal rationale for reform is a little bizarre. On one hand, we need to cover the uninsured, because that's a moral necessity. But we also need to cut costs, because medical spending is wasteful and unhelpful--but then why do we want to give it to everyone?

The right liberal approach, I think, would be to expand the sorts of consumer directed care plans that expose people to the costs of their behavior and help generate prices and markets. The vet care/lasik surgery portion of the healthcare market works fine--if we made the rest of the healthcare system look like that, we could lower costs enough to provide catastrophic care for everyone. This is, by the way, what Milton Friedman has been arguing for decades.

Whole Foods and Healthcare

Whole Foods tends to be categorized as a part of the liberal-hippie-Birkenstock wearing-tree hugger constellation, but the CEO is actually pretty libertarian. See his latest op-ed:

While we clearly need health-care reform, the last thing our country needs is a massive new health-care entitlement that will create hundreds of billions of dollars of new unfunded deficits and move us much closer to a government takeover of our health-care system. Instead, we should be trying to achieve reforms by moving in the opposite direction—toward less government control and more individual empowerment. Here are eight reforms that would greatly lower the cost of health care for everyone:

• Remove the legal obstacles that slow the creation of high-deductible health insurance plans and health savings accounts (HSAs). The combination of high-deductible health insurance and HSAs is one solution that could solve many of our health-care problems. For example, Whole Foods Market pays 100% of the premiums for all our team members who work 30 hours or more per week (about 89% of all team members) for our high-deductible health-insurance plan. We also provide up to $1,800 per year in additional health-care dollars through deposits into employees' Personal Wellness Accounts to spend as they choose on their own health and wellness.

Money not spent in one year rolls over to the next and grows over time. Our team members therefore spend their own health-care dollars until the annual deductible is covered (about $2,500) and the insurance plan kicks in. This creates incentives to spend the first $2,500 more carefully. Our plan's costs are much lower than typical health insurance, while providing a very high degree of worker satisfaction.

• Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits. Now employer health insurance benefits are fully tax deductible, but individual health insurance is not. This is unfair.

• Repeal all state laws which prevent insurance companies from competing across state lines. We should all have the legal right to purchase health insurance from any insurance company in any state and we should be able use that insurance wherever we live. Health insurance should be portable.

• Repeal government mandates regarding what insurance companies must cover. These mandates have increased the cost of health insurance by billions of dollars. What is insured and what is not insured should be determined by individual customer preferences and not through special-interest lobbying.

• Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year. These costs are passed back to us through much higher prices for health care.

• Make costs transparent so that consumers understand what health-care treatments cost. How many people know the total cost of their last doctor's visit and how that total breaks down? What other goods or services do we buy without knowing how much they will cost us?

• Enact Medicare reform. We need to face up to the actuarial fact that Medicare is heading towards bankruptcy and enact reforms that create greater patient empowerment, choice and responsibility.

• Finally, revise tax forms to make it easier for individuals to make a voluntary, tax-deductible donation to help the millions of people who have no insurance and aren't covered by Medicare, Medicaid or the State Children's Health Insurance Program.

That all sounds good to me. By lowering healthcare costs and expanding coverage, liberals can get on board. By involving markets, increasing responsibility and transparency, conservatives can too. This is, by the way, how Singapore runs its entire healthcare system.

McCain's Healthcare Plan

I've mentioned before that though McCain's domestic policy is notable for its absence, his notion of ending the exclusive tax benefits of employer-provided healthcare and instead providing tax credits for people to buy their own policies is actually reasonable. But it's received a lot of criticism from various people, with the concern being that people will see their employer insurance cut.

But here's Obama economist Furman on the impact of ending the tax exclusion:

Virtually any way of replacing the health exclusion with tax credits or tax deductions is likely to increase coverage. The current exclusion provides an incentive to go from no insurance to some insurance and from some insurance to more insurance. A reformed system would eliminate the incentive to go from some insurance to more insurance, and put much or all of those dollars into increasing the incentive to go from no insurance to some insurance. The direct effects of the tax incentive would be reinforced by the indirect effects on health spending. Over time, these effects on health spending could be quite large – lowering premiums and further increasing the demand for health insurance.

Furman goes on to describe how other policy, such as pooling mechanisms, can combine with this one to fully insure everyone. Some of these policies are included in the Obama plan, and it seems to me that intersecting the two candidates' plans is better than either individually.