Policy

Health Care Is Too Expensive, He Says, While Touting A Requirement That Makes Health Insurance More Expensive

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So you're saying that if it costs more, it costs more?

From USA Today's play-by-play summary of President Obama's health care question-and-answer session earlier today:

Obama notes that a provision coming online tomorrow will allow children to stay on their parents' insurance plans until the age of 26. He expresses frustration that he hasn't been able to explain better to Americans the wasteful costs of the heath care system. [bold added]

Which is funny considering that the young adult-coverage provision Obama starts by boasting about won't be used by everyone—but is expected to drive up the average cost of health insurance by about 1 percent.

That's a small hike, for sure, but the point is that it's a step in the wrong direction. Now, it's probably true that there's a lot of waste in the health care system. The going estimate these days is that about 30 percent of medical spending is wasteful. A few years ago, George Mason economics professor Robin Hanson suggested in a provocative Cato Unbound essay that the figure might be as high as 50 percent. But here's the problem: Even if we accept the basic argument, we don't know with any certainty which 30 percent is wasteful. And all that potentially wasteful medical spending is currently going to someone's paycheck—frequently someone with a lobbyist (or a whole bunch of them). That's a recipe for a lot of bitter political squabbling, but not for efficiency and waste-reduction. To further complicate matters, care that may be ineffective for one individual may be quite effective for another, which makes it very, very difficult to make cuts through centralized planning or quality-blind across-the-board rate cuts. And given that new health insurance mandates frequently drive up the cost of insurance premiums—sometimes by not very much, sometimes by as much as 50 percent—adding mandates doesn't exactly seem like the best way to address the issue.