I have written before on the topic of offering "alternatives" to Democrat initiatives, and have generally been opposed to such practices (""Doing Something" Revisited", "Who Is To Blame?", "The Difficulty of Principle"), but after reading Matt Patterson's TH article on the GOP alternative to Democrat health care plans, I am struck by the fact that, unlike most such alternatives, it is not damaging, nor is it an outright concession to the left, but, for the most part, is simply ineffective.

Let me start by saying that, given the choice between the GOP plan and any of the various Democrat plans, clearly I would prefer the GOP plan. However, as we also have the option of choosing nothing, I think that may be the best alternative, for reasons I will explain later. Now, allow me to explain why I think the GOP plan will be largely ineffective, especially as the issues it addresses (interstate competition and tort reform) have always been high on the GOP agenda, and are blamed for much of the cost of health care.

I suppose I should start by saying that it won't be wholly ineffective, but rather, it will not have the dramatic effect many are expecting. Interstate competition, for example, will obviously allow those from high cost states to buy cheaper insurance. On the other hand, it opens up a whole new can of worms. For instance, if New York mandates all insurers doing business in the state must cover a procedure, will a company based in Wyoming be forced to cover those procedures if selling to New Yorkers*? If so, that will clearly drive up prices. If not, then many may find their cheaper insurance also covers less. In addition, as the cheaper states pick up more and more customers, their risk pools may change. Some states have cheap insurance precisely because of a youn ger, healthier demographic on average. If they get out of state customers, that demographic may change and drive up prices. Finally, let us not forget there are still barriers to entry in each state, so opening up interstate sales will not end each state's cartel, simply make the market open to a slightly larger cartel.

All of which is a lengthy way of saying there will be some savings, but probably a lot less than anticipated, and, in some cases, there may be  a price increase for some buyers, especially if risk pools change, or mandates can be forced on out of state insurers.

But that pales in comparison to the disappointment tort reform will bring.

Both right and left have touted tort reform, though the Democrats seem unlikely to actually act on it, rather than just pay lip service. But, as a practical matter, I think most will be disappointed in the actual results of any reform**. The reason is simple. Just look at areas of medicine not traditionally covered by insurance, such as plastic surgery. While costs have been constant or rising in insured areas of medicine, they have fallen in those uninsured fields. ("Cosmetic Surgery, Lasik, Dentistry and Health Care Reform ") How is that possible if torts are driving prices?*** Plastic surgeons are as subject to torts as any other area of medicine, yet they have been lowering prices for some time. That alone suggests that tort reform is not the single magic bullet.

And then there are the specifics. I went into this a little in "The Problem With Tort Reform" and "Red Herring". The present bill caps non-economic damages, which sounds like a good start, but in practice, I think it will not stand. First, there are always associated suits. Intentional infliction of emotional distress, loss of consortium, and so on. Whether or not they fall under the law is largely up to judges not legislators. And as we have seen, judges can be very good at reading laws to mean something other than what they appear to mean.

In addition, the calculation of what is and isn't economic is very open ended. When estimating lost wages or what future support needs will be, the courts have a lot of room to play. In addition, doubtless if it actually passed, at some future time, punitive damages would reenter the picture, after a single very public case of egregious misconduct, and with that little loophole, the whole system would fall apart.

But even if tort reform could be made to work, and work as intended, I really doubt it would solve most of the problem. As I argued in "High Cost of Medical Care" and elsewhere, the real reasons for high costs are much more basic. Torts lead to some of the costs, but not most. Most of our costs come from government interference and from our defective insurance model. Until we address those root issues, all the other reforms will be almost meaningless.

And that is why I oppose this bill. While the two changes it will enact may be slightly beneficial, and, in the case of tort reform, a first step in the right direction, I am still opposed. The reason is simple. By not addressing the basic issue, by pretending these changes will fix our system, we tacitly admit that our insurance model, and our regulatory regime, is sound, and that is something we should not do. In addition, by enacting our own "alternative" to the Democrat proposals, we also seem to admit that there is a health care crisis, and that it is something the government should solve. And those clearly are points we should not concede.

No, what we should do is what many other Republicans are doing, oppose the Democrat plans. We should also point out why we are in the state we are in, and try to scale back government involvement wherever possible, but for now I know of no Republican bold enough to take on those final steps. Then again, as Obama's popularity falters, maybe some will. If so, then perhaps something good will come out of the election of 2008 after all.

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* I have not read the text of the plan, so this may be covered in the bill. On the other hand, no matter how well it is covered in the bill, I would not put it past states to try to find ways to force out of state insurers to abide by state mandates. Maybe by taking on the doctors who accept the insurance, rather than insurers. Or by modifying state income tax law to encourage compliance to get tax benefits. There is certainly some way a clever politician can find to circumvent unwelcome legislation. So, even if the bill does address ths, it is still a problem which might arise in the future should interstate sales become reality.

** Do not take this to mean I am opposed to reforming liability laws. Liability law is a major drain on our economy and destroys the ability to engage in predictable economic transactions. My argument is simply that, in the field of medicine, harmful as liability suits might be, they pale in comparison to the costs of regulation and the lack of competitive pressures. If we were to reform tort law in one system, and then remove government involvement and the present insurance model in the other, I believe the second would show much lower prices.  However, that does not mean tort suits are without cost and should be ignored. It just means, within medicine, they are something I would wait to reform until we fix other parts of the system.

*** Doubtless, were we free of liability costs, these industries would see even more dramatic declines in cost, but my point is, the actual rise in costs we see in insured fields of medicine must be due to a force stronger than liability, and one not present in the uninsured fields, as otherwise we would be seeing rising prices for other fields as well.

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POSTSCRIPT

A list of my writing on health care can be found in the postscript to "A Different Look at "Health Care Reform"".