Over Stated

OVER STATED….Ezra Klein has a piece in the current issue of the Washington Monthly about (surprise!) universal healthcare. But this one’s a little different. Massachusetts recently passed a universal healthcare law and California is seriously thinking about one, and this has provided liberals with the hope that maybe by starting at the state level they can eventually build a consensus for a full-blown national healthcare system. But Ezra suggests this is a fool’s errand:

The idea of giving universal health care a little more time in the laboratories of democracy may sound tempting to certain cautious, bipartisanship-loving Beltway observers. But letting states continue to take the lead would be disastrous, for one very simple reason: providing health care for all citizens is one of those tasks, like national defense, that the states are simply unequipped to manage on their own. The history of state health reform initiatives (and there’s quite a history) is a tale of false hopes and great disappointments….Universal care advocates must be realistic about that, and think hard about how to convert the energy in the states into a national solution before the current crop of novel experiments fail — because fail they almost certainly will.

The rest of the piece explains what happened when Washington, Hawaii, Tennessee, and Oregon tried implementing universal healthcare plans in the early 90s (they all fizzled) and suggests that this failure is inherent in anything done at the state level.

This strikes me as correct. The Massachusetts and California plans are politically helpful because they’re the brainchildren of Republican governors, which makes it harder for Republicans to demonize the concept itself. The danger, though, is that failures do nothing but set back the cause, and the problems with state level plans are unfortunately pretty numerous. For starters, they’re almost inevitably cut back during recessions when costs grow (because more people are out of work) and state finances are strapped (because tax receipts are lower) — and the cutbacks usually provoke a death spiral that’s irreversible. State plans also attract the chronically ill in disproportionate numbers, a version of adverse selection that prompts death spirals every bit as effectively as recessions. Finally, most states don’t have the clout to make the necessary regulations work. Insurers can simply pick up their ball and go elsewhere — and they do.

None of these problems affect a national program. The federal government can run deficits during recessions; there’s no adverse selection because the entire country comprises the risk pool; and insurers have no choice but to play by the rules. There’s nowhere else for them to run off to.

The state programs currently underway or under consideration might provide useful data points for a future federal program. But the odds are heavily stacked against genuine success. Caveat emptor.