Gov. Schwarzenegger’s Universal Healthcare Plan

This morning’s Wall Street Journal reports on California governor Arnold Schwarzenegger’s plan to provide insurance to the 19.4% of California residents who are uninsured. The plan would be funded by a tax (“dividend”) of 2% on doctors’ revenue and 4% on hospitals’.

Strange politics will attend the implementation of this plan. For example, Blue Cross Blue Shield of California is supporting it – because it currently pays for the uninsured through higher prices on insured patients?

Issues raised by this plan, off the top of my head:

  • Lower profits attract less investment. Hospitals and clinics will have less incentive for capital investments, and fewer new establishments will be opened.
  • Higher prices. To recover their margins, doctors and hospitals raise prices. Demand for health care presumably increases as the previously uninsured take advantage of previously unattainable levels of care.
  • Portable intellectual capital will flee. Doctors may chose to move to other locations rather than at the 2% tax to their high marginal rates and malpractice premiums. Expect lots of lobbying over who qualifies as a doctor: chiropracters? psychologists? What about doctors working for temporary staffing firms, some of whom (if non-Califonia residents) may count as interstate commerce? Can taxation based on occupation be justified?
  • Insult added to injury. The plan implicitly accuses doctors and hospitals of gouging, and takes the politically expedient route of sticking it to them. Who wants to work in a state like this?

One can imagine a two-tiered health care system: heavily regulated states like Massachussetts and California provide low-quality universal health care with long waits while health care resorts for the wealthy spring up in free market states like Nevada and Delaware. I’d be interested in how Marginal Revoluion, Aysmetrical Information, and Tigerhawk react to this plan.

UPDATE: Captain Ed has additional thoughts.

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