Sunday, January 24, 2010

Implement US health care reform at a state level

Slate asks how the Democrats can still implement healthcare reform. This was my response:

Consider the major points of the senate bill: state level exchanges, individual mandate, no refusal based on pre-existing conditions, and subsidies paid for by Cadillac insurance tax. Assuming the tax and subsidy is distributed equally, the benefits for any one state implementing this bill is not affected by how many other states implement this bill.

And since health insurance companies are not allowed, and would not be allowed, to operate in one state and insure someone in another, there is no issue of a loss in cost savings due to smaller pools being insured.

So if there is no advantage to implementing this nationwide, instead of in just the states that can pass it, why not just pass the bill at a state level in states where it can pass. A domestic coalition of the willing.

There is a non-zero sum game in game theory called stag hunt which has two defining characteristics: a single defector is able to lower the payoff of the co-operators, and the single defector lowers his own payoff by defecting (unless there is another defector). It is this situation that justifies modern democracy where the majority is able to enforce the co-operation of defectors (whose defection wouldn’t even be in the defector’s own self interest).

But this isn't stag hunt. A single defector, or many defectors, has almost no affect on those that co-operate. So implementing at a state level may even be more democratic in this case. After all, shouldn’t individual choice be preserved where possible.

There may be two migration issues to worry about in this strategy: those with pre-existing conditions moving into states that implement this bill, and healthcare providers moving out. However, there are lots of other ways that entitlements vary from state to state, so if migration isn’t already a strategy for those seeking extra entitlements there’s no reason to think this entitlement would be any different. And we’ve been told that this bill won’t hurt healthcare providers so there should be no reason for them to leave.

Finally, consider our healthcare in Canada. While we have broad laws at a federal level requiring single payer and transferable health insurance, healthcare itself is actually implemented at the provincial level. This is because (a) the provinces were considered too varied to manage all of healthcare from Ottawa and (b) it was thought that trying to manage the healthcare of 30 million people in a single institution is a task that only a crazy person would attempt. 300 million is a bit more.

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