The WellPoint Anthem Blue Cross premium increase in California, which we first flagged here in a post back on February 10, is turning into a big national issue, with the Wall Street Journal weighing in yesterday and, today, the New York Times coming in with both an editorial and a Paul Krugman column making the point that the increase shows why national health reform is necessary. The Times echoes the White House, which calls the increases "huge" and "outrageous." The Times editorial calls the increases "huge" and says customers were "understandably furious." The Krugman column also uses the word "huge" -- twice, actually -- and concludes, "inaction isn't an option. Congress and the president need to make reform happen — now."
Meanwhile, as we've noted, from 1999 to 2009 the cover price of a single copy of the New York Times on a weekday in New York City has jumped 333%, to $2 from 60 cents, an increase that far outpaces the increase in health insurance premiums over the same period. And the Times is getting ready to sock users of its Web site, who currently consume the newspaper free of charge, with new fees that, in percentage terms, will be impossible to calculate. At Princeton University, where Mr. Krugman teaches economics when he isn't writing his New York Times column, the costs for an undergraduate to attend have increased to $50,620 for 2009-2010 from $37,960 in 2002-2003. That's a 33% increase in seven years, nothing to sneeze at. Some argue that the tuition increases themselves are driven in part by increases in government aid; the universities just raise the tuition by the amount of the government aid, leaving the costs to students the same. Health insurers might do the same if the government subsidizes premiums under ObamaCare. Similarly, some say that the tax-deductibility of student loan interest contributes to tuition inflation in much the same way that the tax-deductibility of home mortgage interest contributed to the housing bubble and the tax deductibility of health insurance for employers contributes to health-care cost inflation.
At least health insurance customers are getting more advanced treatment than they were 10 years ago, with newly invented medicines, devices, and diagnostic techniques. Is there more, better news in the Times than there was 10 years ago? Is David Brooks's column worth 333% more than William Safire's was? Is the education at Princeton 33% better than it was seven years ago? Is Mr. Krugman 33% smarter than he was when he was teaching the same course seven years ago?
The broader point, though, beyond the hypocrisy of the press, is that in both the markets for news and for education, prices, consumers, and producers have all managed to find a way of adjusting without federal laws forcing everyone to buy a newspaper or get a college education. Now, fair enough, the newspaper market and the education market are not exactly the same as the health care market. You could argue that in both markets, a "public option" serves to keep prices down. If the Times changed its online and print cover price to $1 million a copy, a lot of people would decide to start reading it for free at the public library. And if Princeton changed its tuition to $1 million a year, a lot of people would start deciding that maybe it wouldn't be such a bad idea to send their children to Rutgers, New Jersey's state university, where in-state tuition, fees, room, and board is $22,262. And granted, too, that every single-copy buyer of the Times and every Princeton undergraduate costs the university pretty much the same amount; it's not like an insurance company, whose costs for a healthy 23-year-old and a sick 60-year-old are going to be quite different. And not to mention that if you don't have good health care, you can die, while if you don't go to Princeton or read the New York Times, the consequences are less dire.
But there are market-based ways in which people and institutions adjust to rising prices. There can be new entrants -- as the Times raised its cover price, Metro, AM New York, and the New York Sun all started to compete with the Times, trying to lure readers at a lower price. There can be new technology -- people can read the news free on the Web rather than paying to do so on newsprint. There can be charity to help the poor or middle class pay for expensive goods -- Princeton raises lots of money from wealthy alumni so that it can offer scholarships to those who can't afford the tuition. Consumers adust their behavior -- as prices rise for college education and financial aid increases, some middle class families have stopped saving for college because they'd rather get the financial aid. And institutions compete -- one Ivy League institution after another has announced it is changing its financial aid mix away from loans and toward grants, to try to make themselves more attractive to students.
The point is just that there are ways other than ObamaCare to respond to increasing health insurance premium costs. Some people may switch to high-deductible plans and end up consuming less health care. Someone motivated by either profit or altruism may see an opportunity and figure out a way to offer health insurance or health care cheaper and better. My free market friends and even some regular readers of this site may find this surpising, but personally I'm not inalterably opposed to the idea of either a public option or an individual mandate. But it's a long, long logical leap from the fact that health insurance premiums are going up to the conclusion that a nationwide individual mandate and a public option, along with government redistribution through subsidies, are all necessary. By far the better way to handle it would be by letting the states experiment and see what works.
