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Bush's Unhealthy Vote

Author: Sebastian Mallaby, Paul A. Volcker Senior Fellow for International Economics
October 1, 2007
Washington Post

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President Bush has spent six-plus years not using his veto. In 2005, he became the first president since John Quincy Adams to complete a term in the White House without once standing up to Congress; he has since paused to interrupt this doormat act on only three occasions. But now his patience is exhausted, and he is spoiling for a fight. Congress has had the temerity to propose expanding health care for poor children.

Politically, this is crazy. The bill that Bush is poised to veto has bipartisan backing, and two-thirds of the public say they like it. But in policy terms the veto looks a little crazy, too. The bill would extend the State Children’s Health Insurance Program, a successful initiative that Bush himself supports. A veto would be based on misleading statistics and an exaggerated faith in markets.

The president laid out the case for his veto at his Sept. 20 news conference. He asserted, to begin with, that the bill involves “taking a program meant to help poor children and turning it into one that covers children in households with incomes of up to $83,000 a year.” Up to is a weasel phrase; for nearly all the children covered by the bill, family incomes would be well below the $83,000 that the president cited. Fully 70 percent would come from families with incomes of less than $41,300, according to a careful study by the Urban Institute. Most of the rest would come from families earning less than $62,000.

Bush complained at his news conference that Congress’s proposal “would move millions of American children who now have private health insurance into government-run health care.” Actually, about two-thirds of the 10 million or so children who would be covered by the bill will have no insurance whatsoever if it is vetoed, and many in the other third will suffer gaps in coverage, according to an analysis by the Center on Budget and Policy Priorities. The president might want to consider that some schools receiving federal dollars under his No Child Left Behind initiative would have improved without the extra cash. Is that grounds for a veto?

But the most troubling aspect of the Bush veto is not statistical. It is, as he would say, “philosophical.” “What I’m describing here is a philosophical divide that exists in Washington over the best approach for health care,” Bush declared at his news conference. His real objection to Congress’s proposal is that it represents “an incremental step toward the goal of government-run health care.”

Leave aside the fact that the children’s health insurance program is government-financed, not “government-run.” Private insurers administer benefits, and private doctors and nurses deliver them; this is not, as Bush’s spokeswoman charged last week, “socialized-type medicine.” The larger point is that private markets in health care are not necessarily better than the government-run variety.

Given the shocking waste in U.S. health care, it’s embarrassing that Bush still fails to see this. The United States spends nearly twice as much per person on health care as “socialized” Sweden or France, yet Americans’ life expectancy is shorter. The profligate spending comes because doctors and patients make indulgent medical decisions while sticking third-party insurers with the cost. The lower life expectancy reflects not only social factors such as inequality but also the private system’s inability to focus on the prevention of conditions such as heart disease and diabetes.

Bush’s advisers hope that the private system can be made to work better. They see a shining city on a hill where third-party payers have been replaced by empowered consumers who pay for care out of their pockets — and so have an incentive to discipline spending. There are some discretionary procedures, such as Lasik eye surgery, for which this model can work well. But a large share of health spending comes when people face emergencies: when they are sick, scared and about as far from feeling “empowered” as they possibly could be. Moreover, emergencies involve huge hospital bills that consumers are not going to pay out of pocket, even in the Bush team’s shiniest scenario. Catastrophes will always have to be covered by insurers, so consumers’ incentive to control this important component of health-care costs will always be imperfect.

Because there are limits to the empowerment of consumers, there are limits to how well a private health market can function. And that’s before you get to the question of the uninsured, to which the free market has no answer. Some degree of government intervention in health care is therefore inevitable and desirable. It is ideological nonsense to suggest that this intervention displaces an otherwise efficient private market.

Bush the philosopher has one thing right: Human dignity is served when people make choices for themselves rather than being nannied by the government. But only simpletons suppose that this principle is absolute: Where unfettered private initiative produces evidently bad outcomes, most people prefer an alternative. This is why we have a police force, food safety regulation and public schools. Indeed, this is why we have a government.

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