Health Care Spending
In the comments to this post (of all things about the spectacle that is Paris Hilton going to serve 40 days) commenter Anderson pointed to this post by Kevin Drum. It is a short post and quoting only a part of it would likely not do justice to the post, so here it is in its entirety,
THE REAL PROBLEM….What Ezra says. Medicare isn’t the problem. Healthcare is the problem. If we don’t figure out a way to contain the overall rise of medical spending, it really doesn’t matter much exactly how those dollars get spent.
Needless to say, I think the only serious opportunity to rein in those costs without a revolt of the middle class comes from a universal system regulated by the feds. The liberal argument for this is that it provides decent healthcare to everyone and allows greater freedom of choice for consumers. The conservative argument is that it makes medical costs more transparent. Right now, consumers have essentially no say in the cost of health insurance. They just pay whatever their employer makes them pay and then use as much medical care as they want. A national system, however, is limited by how much people are willing to pay in taxes. That provides a stronger motivation for cost control than anything we have now.
Yes and no. Yes health care spending is the problem, but I think it is unrealistic to pretend that government policies are not in some way playing a role in the growth rate of spending, and further more that we need to be pretty darned careful in how we go about providing universal health care (if that is indeed the right answer–and even if it isn’t it seems to be the way everybody wants to go–who cares if it turns into a financial blackhole).
For example, government policy to exempt health care benefits provided by employers form taxation has resulted in a distortion that favors expenditures on health care as well as expanding benefits to cover more and more things. At least until costs started to rise drastically and employers are no looking at cutting back on said benefits. Whoops. Possibly a dumb policy by the boys in D.C.?
Then there is the massive subsidies provided to one of the segments of the population that consumes huge amounts of health care and usually at the end of such consumption they up and die anyways–i.e. the elderly. Medicare, as with all subsidies, increases the demand for health care and that will increase prices. This isn’t rocket science here, this is just simply supply and demand. Increase the demand, ceterus paribus and you get an increase in prices. Whoops, possibly a dumb policy by the boys in D.C.?
Another example is the Elderly Prescription Drug Program which Drum himself has pointed out is going to end up costing far more than initial estimates indicated. As with Medicare this policy is basically a subsidy as well, and with increased demand you will get increased prices as well. Another brilliant policy by the boys in D.C.?
The larger point to all of this is that, perhaps government isn’t all that great at coming up with policies that try to manage a problem in an active way. That is, I’m not necessarily opposed to government policies in regards to health care, but that the role government plays is a much more limited one than we have seen in the past.
If you look at places like England and Canada which have government controlled health care you find that in both places the health care expenditures are on the verge of becoming financial black holes. Don’t take my word for it, consider what Max Gammon has written about health care spending in the U.K.,
Bureaucratic monsters arising among organisations whose survival depends upon their persuading customers to buy their products are sooner or later destroyed or dismembered by their competitors. However, in a protected environment, shielded from competition, a bureaucracy will grow indefinitely and approach ever more closely the black hole state, in which externally supplied resources are entirely consumed by its furious internal activity. And this is what is happening in the NHS.
I know, I know, it is clearly crazy talk. Health care services in the U.K. are just wonderful, why those mandantory wait times were not instituted for financial reasons, no not at all. And the lack of MRIs and CT in Canada is actually based on a sound medical rationale and not based on budgetary issues. And despite their health care system, obesity is also on the rise in Canada as well. My point isn’t that health care in Canada and the U.K. is worse than the U.S., but that an ill-considered policy on health care can lead to undesirable outcomes. Simply moving to univerals health care, no matter what the details, could be worse than sticking with what we currently have (which is indeed a mess).
So Kevin is partly right, but also partly wrong. Further, where he goes wrong is probably the greater problem. More government is probably not the answer here.