Comments on: Health Care and Tribalism

By: Edgardo

Edgardo — Sat, 03 Feb 2007 19:02:14 +0000

Indeed, as we teach in microeconomics, moral hazard and adverse selection are not mutually exclusive problems. DeLong, however, may be right that the debate about health care reform has led to two groups, each one emphasizing one of the two problems. Then you focus on moral hazard as if we were dealing with an insurance problem. With Arnold Kling I believe that the US current system is not an insurance scheme but what he calls "insulation" plan. Here in Chile we have a system that appears to be different from yours but it is also an "insulation" scheme: employees and retirees are required to contribute 7% of their income to fund a plan of their choice (there are several alternatives but the information is terrible so you never know ex ante what you have chosen). Each plan promises to pay for some "routine maintenance", "emergency" and "collision" expenditures but actual payments are arbitrarily determined by the managers of regulated companies or the government agency. Thus, we are "insulated" but not "insured". Actually, we can buy "additional" insurance to cover expenditures not paid by the official system, and this is really insurance because you never know what you are going to be paid. Therefore, the application of the concept of moral hazard to health care system in the US and Chile is misleading. Although I'm a research economist, my assessment of how the Chilean system works is based on my personal experience with the system.

By: Steve Verdon

Steve Verdon — Sat, 03 Feb 2007 17:57:50 +0000

I agree Dave, but for you to make the case that private sector bureaucracy is a significant part of the problem I'd like to see evidence supporting Gammon's Law without serious government intervention. For example, how about auto insurance? Is it at work there?

By: Dave Schuler

Dave Schuler — Sat, 03 Feb 2007 17:19:45 +0000

One more amplification: government isn't the only source of bureaucracy. Big companies including medical conglomerates have enormous bureaucracies, too, indeed, I think that once any organization reaches a certain size the development of a bureacracy is inevitable.

So size matters as well as government involvement.

By: World and Global Politics Blog

World and Global Politics Blog — Wed, 31 Dec 1969 18:00:00 +0000

Edwards wants to have access to their medical histories. No major inconsistency there. And while Edwards sounds the usual platitudes about cutting costs by cutting private insurance overhead there is no mention of Gammon’s Law (see here and here). This problem is one we’d more likely find with government provided health care (e.g. Medicare and Medicaid). The problem here is that there seems to be law that as a bureaucratic institution grows more and more of its resources go into