Letter to David Brooks — Any Reform is Good Reform

I wrote this in response to this column by David Brooks.

The argument in your column today is based on the assumption that a “bad bill” — one that does not address the fundamental incentive problem — is worse than no bill.  Moderate conservatives argued from a similar assumption in justifying their opposition to the cap and trade bill.

This assumption is false.  It neglects the benefits of any bill that jostles the system.  More specifically, it fails to account for the fact that the current system’s stability is part of what makes it difficult to change.

The current system is failing for two reasons.
1. The incentives for health care provision are perverse — they encourage expensive treatment with minimal health improvement effects
2. The incentives for health care system advocacy are perverse — they encourage providers, drug companies, and insurers to defend the status quo.

Most people recognize that #2 influences #1:  the provision incentives are locked in place because if the advocacy incentives don’t recommend change.  Less obvious is the way that the advocacy incentives are influenced by the provision incentives.  Specifically, because the provision incentives are locked in place, the advocates all know exactly what behaviors and policies are best for them given these incentives.  Thus, they have a strong incentive to organize around and advocate to keep the system as it is.  They resist reform because they know precisely what reforms they don’t like and why.

If providers and insurers were less certain, and more confused, about how to exploit the system to their own advantage, they would be both less likely to engage in such exploitation and less likely to invest themselves in blocking changes to a system they no longer know how to exploit.

Certainly, a “good bill,” one that appropriately re-aligned incentives, would be much better than a “bad bill” which arbitrarily screwed them up.  But a bad bill that creates confusion is better than no bill which, implicitly, increases the investment in what we know does not and will never work.

A bad bill will, almost certainly, send the country into a tizzy over health care.  And it should.  In one year we might have a real debate, and a substantive discussion, about how to fix a system that everyone knows isn’t working and no one can be certain how to fix, rather than the phony debate we’ve had about a system that no one believes is working but too many know how much they stand to lose if it were fixed.