Shannon Love has an interesting post up about The Dangers of Decompartmentalized Health Care Spending over at ChicagoBoyz.net (HT Instapundit).
Her point is simple,
Right now we compartmentalize government health-care spending. We have one program for the poor (Medicaid) and one for the elderly (Medicare). Each is paid for by a separate flat tax on wages. The government doesn’t spend any money on health care for the middle class. This means that if the government spends more money on health care for the poor it doesn’t automatically mean they spend less on the elderly. More importantly, it means that when the government spends more on the poor or elderly it doesn’t directly mean middle-class families have less spent on them. Middle-class families might see their payroll taxes go up but they can compensate by trimming spending in all of their budget areas. Those taxes don’t come directly out of their health-care budgets. With the current system, health-care spending is a nonzero-sum game, i.e., spending more on one compartment does not automatically mean spending less on another compartment. …
The elderly consume 70% of all health-care spending. That means that when it comes to cost control they will bear the brunt of the burden. If we don’t cut spending on the elderly we can’t reduce costs without simply denying care for everyone else. When it comes down to a choice between spending on old people and children, the elderly know full well who we are going to pick. …
We should think long and hard before we set up a political dynamic that pits the interests of the productive and powerful against the interests of the non-productive and powerless. It is unwise to make people choose between care for their own children and care for their parents and poor strangers. The current compartmentalization, flawed at it is, at least protects the most vulnerable people from this fate. We can pay for medical care for the poor and elderly, without compromising the level of care for our children or reducing any other government function.
Her point is simple, and she illustrates a central problem with the politicalization of health-care spending, but she, like a great many observers, misses a central point: All government spending is zero-sum.
Dollars are fungible and increased spending on Medicare or Medicaid necessarily means that taxpayers (present or future) have less to spend on their own health-care. There is no real sense in which taxes are taken from some part of a household budget and not other parts. Separating Medicare and Medicaid out into distinct budgetary entities allows us to track expenditures and surely allows us to prioritize spending and allocate our dollars, but that “compartmentalization” is a matter of accounting, nothing more.
Ms. Love is correct that the elderly will bear the brunt of any effort to constrain government health care spending, but that’s true regardless of whether or not the expenses are “commingled” in a budget line-item. The dangers she cites are as relevant under the current system as they are under the proposed (whichever variant you pick) system.
She says that it’s “unwise to make people choose between care for their own children and care for their parents and poor strangers.” But that’s nonsense. Our capacity, both as individuals and collectively, is limited. We do not have infinite reserves of money or capital or wealth, we must choose how to spend our money and when it comes to health care. If our reserves fall and costs rise then we must–and we do–choose between care for our children, care for ourselves, and care for strangers. Just as we choose between care for our children and a new car.
The only reason this doesn’t appear to most of us in our personal lives is that we don’t usually perceive personal comparative choices as being undue burdens or necessarily sacrificial. I don’t see the premium I pay for health insurance in terms of lost vacation days because I choose that expenditure and approve of its use. I like having health insurance more than I like vacation days.
But what if I am no longer the arbiter of those personal decisions? What if the ability to decide between vacation days and health care is taken away from me? What if that decision becomes politicized? Then I’m faced with a scenario where someone else, for reasons that have no bearing on my family’s welfare (but are far too often predicated on vote maximization) decides that it would be better for them if I had more vacation and less health care. Or more likely, that supporting poor strangers is a better use of my income than my vacation–or the health of my own parents, or my own children.
The problem is not that we have to make decisions about where to spend our money, the problem lies in who has the power to make those decisions. So long as we cede that intimate authority to government, then decisions regarding who merits what level of care is a political decision, and all political decisions are zero-sum.
This doesn’t necessarily mean that society can’t reasonably afford some degree of social insurance, although it does mean that whatever form that social insurance takes, the decisions about how that insurance is distributed will be made according to a political calculus that operates under its own rules for its own benefit. The greater the reach and scope of that social insurance, the more severe those political choices become.