post by Bill Gardner
Brendan Saloner has a great post about federalism and social policy. He discusses whether all Americans should have similar protection, or whether states should have increased discretion about devising a local safety net. The Republican Governors resisting Obamacare would, presumably prefer the latter. The director of Health and Human Services for South Carolina argues that
South Carolina is not Massachusetts or Vermont no matter how desperately the think tank crowd would want it to be. We have wildly different rates of poverty, educational attainment, racial mix and economic bases which are the primary drivers of health. Massachusetts was 93% insured prior to their reforms because of their wealth; they weren’t wealthy because they were 93% insured.
Letting states evolve their own solutions to social welfare is attractive, just because that's a more democratic way to proceed. A future world in which big countries devolve into smaller, loosely affiliated countries might be a better place than a future of increased centralization (i.e., East Asia, Eurasia, and Oceana). In addition, decentralization of socialized health insurance is feasible: Each Canadian province has its own health insurance plan, supported by provincial taxes.
There are, however, several practical problems, all related to scale. First, insurance works better when you have a larger pool of beneficiaries. Second, information technology systems have high fixed capital costs. It's not that expensive to purchase a system that just cuts checks, but if you plan to measure health care quality, monitor population health, or in any way manage care, you are into serious money, and small states will not be able to afford it. Finally, many people suggest that having the individual states experiment with social programs will allow us to learn what works. But having 50 states self-select health care policies is not an optimal experimental design. You'd learn much more from experiments reached across the whole country and randomized by county, or by whether a Medicare participant's social security number was odd or even. In addition, having 50 individual health insurance systems means you largely lose the ability to pool national data to study a problem -- this is a major limitation of the Canadian system.
So there is no clear answer to whether the US should have 50 independent health insurance systems. But the question will be coming up repeatedly in the next few decades.