McCain: Let's do for health care what we've done for banking.

In a feature article in the Sep/Oct 2008 issue of Contingencies, the Journal of the American Academy of Actuaries, McCain makes a somewhat plausible case for replacing the current health care system with one funded by tax credits. His proposal deserves a place in the discussion of the future of health care.

What McCain ignores is that his plan will encourage the young and healthy to forgo health care insurance thereby crippling the system. There are a number of other significant difficulties with it that deserve more space for discussion.

The point here, though, is that McCain thinks that markets cure all ills. Here's how he put it (page 30, top of the second column) when comparing his health-care proposal to the deregulation of the banking industry.

Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, [emphasis added] would provide more choices of innovative products less burdened by the worst excesses of state-based regulation.

Actions of this sort almost always have unintended consequences—as we have learned from our experience in deregulating the banking industry. With the banking industry we were just playing with the world's economy. In health care, we are playing with people's lives. McCain apparently thinks that's fine. A few deaths will be a prod to the market to get itself in shape. That's the way markets work. If enough people die, the companies responsible will lose market share.

Although that's theoretically true (but see below), it's ceratainly not the way to structure a system as important as health care. But McCain is apparently too dense or too much in the thrall of his rich buddies to understand that.

Furthermore, given the power of advertising and self-promotion, failed companies manage to sell themselves anyway, and market mechanisms often don't work the way they should. After all, look who's now in charge of the Treasury of the United States: the man who ran a company that was one of the primary culprits in selling trash mortgage backed securities. Yet has Mr. Paulson taken any (any!) responsibility for what he and his company have done? Not as far as I know. Not only has he not taken any responsibility, he is now asking the US taxpayer to give him unlimited authority to bail out his former company (in which he probably still have a significant ownership interest) and the companies of his equally guilty buddies.

McCain is also insisting that the bailout not be accompanied by salary caps because — get this — we need the skill and wisdom of high priced executives. Is anyone stupid enough to buy that? (I'm sure McCain is. I'll bet Palin is also.) The best that greed can buy created this mess. So now McCain is arguing that we use the same incentives to hire the next batch of executives. Isn't he capable of learning anything?