More Musings on the Health Care Debate

An attempt at explaining where I am coming from on in the health care discussion.

It is fair to ask where I am coming from in regards to the health care debate, so let me clarify a few issues.

There are a variety of things that could be said and approaches that could be taken, but let me focus simply on the issues of politics and policy.

In this context I mean by “politics” the question of public opinion and its relationship to elections and therefore to the behavior of those in government (specifically Congress) and what can, and cannot, be accomplished.  In short, it is about what is feasible within the realm of representative democratic governance within the institutional structures of the US.*

In terms of “policy” I mean what the government actually does (or chooses not to do, as the case may be).  A simple example:  does Medicare continue in some form as a single payer system or as a voucher program?  Further, how are these things paid for, etc.

Ok, having established basic definitions, let me be direct on a couple of issues:

1.  The Politics of the Ryan Plan. My most fundamental point in my post yesterday was that the reason that the Ryan Plan is losing public support is not because of poor marketing of the Plan by the GOP or because of media coverage.  No, as the public learns more about the details of the Plan, the less they like it.  This should not be a surprise.  The notion that it might be unpopular to take a relatively straight-forward universal program wherein the government acts as the insurer into a system wherein senior citizens are given a voucher and are then asked to figure out their insurance for themselves is not, on its face, a shocking outcome.

As I noted in my post, such a plan sounds great to true believers, but was destined to spark opposition by pretty much everyone else.

Now, I would note, that just because a proposal is not politically viable does not mean that the policy is a bad one.  Likewise, political support does not mean that a policy is good.  However, there is no doubt that one has to consider political viability when assessing the potential success or failure of a given proposal.

As such, it is possible, I would argue, to (as I pretty much have from the beginning) consider the Ryan Plan DOA from the start on solely political grounds.

2.  The Difficulties of Health Care Policy. Of course, we are still left with the fundamental problems of health care policy.  I will readily agree that Medicare as currently constituted requires reform.

However, there is a key issue that I think has to be addressed in the debate over actual policy (and it is an area where I do think that the Ryan Plan fails):  the assumption that health care should be thought of in market terms (or as a consumer good) and that, somehow, more market mechanisms will drive costs down in a substantial fashion.

This is problematic for a variety of reasons, but I think the most fundamental are that despite rhetoric to the contrary, we a)  have not had a free market in health care for some time, and b) do not actually want a free market in health care.  I am going to focus here on the most fundamental aspect of this fact, rather than try to engage in a longer argument.

In regards to point a:  at a minimum, there has not been a free market in health care since the introduction of Medicare and Medicaid—policies that are now over four decades old and likely predate most of the readers of this blog (indeed, predate me by a few years).  One could further argue that since the tax code was written to incentivize employers to provide health insurance as part of compensation packages (a policy that dates to the post WWII era, if memory serves) that we have not had a free market, since most of us did not shop for insurance and therefore did not approach health care as a consumer product.

Indeed, the era of pure fee for services medicine dates back to a period that we would not recognize as one of modern medicine:  i.e., an era without most modern pharmaceuticals and medical technology and when US males usually did not live past their early 60s.

Even the Ryan Plan would not be a fully free market, I would note.

In regards to point b:  if we had a true free market in health care, that would mean rationing wholly by price.  Or, more accurately, the wealthy and healthy would do the best in such a system while the poor and sick would do the worst (with various combinations of wealth and health/lack thereof navigating the system as well as they could).  This would function the same way that, say, the market for automobiles or smartphones work.

As such, if one is born into a poor family and one has diabetes or asthma (or leukemia or whatever) then one suffers one’s fate.  If one is a poor 70 year-old without a family to take care of you who suffers from any number of the ravages of age, then one has to deal with the cold facts of the market.  If you can’t afford it, so be it.

While there may be individuals who find this to be an acceptable situation for whatever reason, the fact of the matter is that most do not.  As such, we have long ago decided that we do not want a pure market in health care.  So, since we know that we not going to have a true market in health care, the question becomes how much intervention (and what form) there is going to be into the situation.

But really, my more basic point is that the notion of even thinking of health care in market terms is a problem.  For an excellent rundown of why this is the case, I would refer you to the blog of an ER Doctor and the post Why Patients are Not Consumers.  I very much recommend the piece—I was going to excerpt it, but it really needs to be read in its entirety.

Ultimately, I am arguing that thinking about health care as a consumer good is misguided (unless you are going to argue that fixing your child’s broken arm is the same as buying a new flatscreen or getting chemo or not for your wife’s cancer is the same as choosing to buy a Mercedes instead of Hyundai).  Rather, health care has to be thought of in terms of a public good.  And yes, it is an expensive public good.

And, of course, the money is the rub of it all—meaning that really much of the public debate is less about health care itself, than it is tax policy masquerading as a health care debate.

I am not opposed to the notion, by the way, that it might be possible to introduce some market-based reforms into the system.  However, I would still argue that the real costs that continue to skyrocket are in areas wholly insensitive to market forces.  To quote the ER doc’s post noted above:

The driver of cost is the small fraction of people who have serious medical conditions.

[…]

To emphasize, HALF of all health care costs in the US is concentrated in only 5% of the population, and 80% of costs are accounted for by the top quintile! (source: Kaiser Foundation PDF)

So the effect here is that with such a concentration of costs in such a small segment of the population, the ability of the larger population to move the market is highly restricted. You can make 80% of consumers highly price sensitive, but they can only affect a tiny fraction of healthcare spending. And for the generally well, their costs are probably those which are least responsible for the spiraling inflation. They’re not getting $30,000 stents or prolonged ICU stays, or needing complex chronic disease management.

Conversely, those who are high consumers of health care simply cannot be made more price sensitive, since their costs are probably well beyond what they could pay in any event, and for most are well beyond the limits of even a catastrophic health insurance policy.

And the most fundamental point:

For most, when they are confronted with a major or life-threatening illness, their entire focus shifts to survival, and they could care less about the cost.

Such facts are why market logics aren’t going to solve the problems we are dealing with here.

Quite honestly, I think that most (but by no means all, I will allow) hardcore proponents of the market-based approach are relatively young individuals with good jobs (and therefore good insurance).

3.  Conclusion.  One of the things that should be obvious is that due to the nature of the political, policy is often created in a way that is far from a given set of ideal preferences.

The only people who steadfastly cling to a policy preference in the face of overwhelming political opposition and empirical evidence that contradicts that preference are ideologues.

Ultimately, all I want is some honesty in the public discourse on these issues, starting with three facts:

a.  Yes, Medicare needs reforming,

b.  Magical thinking about market forces is not going to work.**  I have simply come to the point in thinking about all of this that I believe this assertion to be a dead end.

c.  If all other OECD countries do a better job than we do in terms of cost and service, then perhaps we need to be realistic about that fact and look outside for viable models.***

By the way, I don’t pretend to have the answers to this conundrum, but I do think that the debate had to take place within logical parameters that address the actual situation at hand.

—-

*This includes, but is not limited to, the complexity of bicameralism and separation of powers, but also things like the filibuster rule in the Senate, the election calendar, and the exigencies of the electoral system itself (such as the existence of numerous safe districts, the unlikelihood of third party victories and so forth).

**Understand:  there was once a time when I, too, believed that markets in all things was the way to go.  Empirical observation, and recognition of the reality around me, has altered my view on this.  I still fundamentally believe in markets, but recognize that one size does not fit all.

***This is something else I have changed my view on over time.  Indeed, I am not alone.  See, for example, the following post from Reason‘s editor-in-chief, Matt Welch:  Why I Prefer French Health Care (and yes, the libertarian magazine, Reason).

FILED UNDER: Health Care, US Politics
Steven L. Taylor
About Steven L. Taylor
Steven L. Taylor is a Professor of Political Science and a College of Arts and Sciences Dean. His main areas of expertise include parties, elections, and the institutional design of democracies. His most recent book is the co-authored A Different Democracy: American Government in a 31-Country Perspective. He earned his Ph.D. from the University of Texas and his BA from the University of California, Irvine. He has been blogging since 2003 (originally at the now defunct Poliblog). Follow Steven on Twitter

Comments

  1. john personna says:

    This would function the same way that, say, the market for automobiles or smartphones work.

    Just to note that neither of those are free markets ;-). Autos would be cheaper without safety equipment (and smog controls!). And cell phones would be impossible without bandwidth allocation by government.

  2. john personna says:

    (Oh, and of course(!) autos would be less useful without roads.)

  3. @JP:

    Points taken. Indeed, there is nothing that fully functions as a totally free market.

    Of course, my fundamental point would be that cars come closer than does health care.

  4. hey norm says:

    SLT – nice piece.
    I agree completely with your conclusions a, b, and the first part of c – other OCED countries get a better health care result for less money. The second part- do we look outside for solutions? Meh.
    The US is a unique country. Denmark is unique and what has worked well in Denmark might not work well here. Sweden is unique and what has worked in Sweden may not work here. Etc.
    The founding fathers looked at a bunch of models and philosophies and ideas and created a new form of government that was unique to their new country and fit it – well for the sake of argument lets say perfectly. So can we use that model and sit down and create a new system of health care? Unfortunately – probably not given a political atmosphere where defeating an arch-enemy engenders partisan rancor. Also – I don’t think Paul Ryan is in any danger of being compared to a founding father.
    But look – let’s not forget that we have already passed health care reform. A conservative CBO analysis says it will reduce the debt and health care costs, which are the root of the Medicare problem. In addition there are many parts to the ACA that are experimental and so were not scored by the CBO. Will they pan out? Who knows? We will see what works and what doesn’t. But at it’s heart it is a Republican program (except for not getting any republican votes) and so in a sensible world it should be a viable bi-partisan way of going forward. It works within the established, traditional delivery system. Sure – It needs tinkering. What new program doesn’t?
    I would argue that tinkering around the edges of the already enacted ACA legislation, along with some tinkering to Medicare, Medicaid, and SS is the prudent, conservative, direction forward.

  5. . The founding fathers looked at a bunch of models and philosophies and ideas and created a new form of government that was unique to their new country and fit it – well for the sake of argument lets say perfectly.

    Without getting into the question of whether anything in politics ever has been perfect, all I am suggesting is that we have plenty of actual cases to look at to use as models for developing a new approach here. I am not necessarily arguing for wholesale adoption of a given program.

  6. tom p says:

    all I am suggesting is that we have plenty of actual cases to look at to use as models for developing a new approach here.

    Steven, that is soooo old-europe!

  7. john personna says:

    Personally, I find “we are not Denmark, and so deserve our doom” to be one of the most amazing memes in existence.

    The core meaning of that argument is that what we have is determined by our nature, and cannot change. Never mind that, you know, the US has gone through several pretty major transformations since 1776.

    Heck, how could we revolt? We were not Scots!

  8. jwest says:

    Steven,

    Here are the answers you’ve been looking for.

    Market forces are the optimum way to deal with non-insurable risks, such as everyday medical expenses. Checkups, colds, broken arms, uncomplicated births, that nasty rash you have – all part of life and fully capable of being handled through health savings accounts (either self funded or subsidized for the poor).

    As you note, the problem lies with the 5% that is chewing up 50% of the money. Drawing on memory from the HillaryCare days, the vast majority of that figure (in the 85 – 90% range) was spent in the last year of life. The balance was for younger people with critical diseases or accident victims. Clearly, the bulk of healthcare dollars are being spent on extraordinary efforts to extend the life of people who will die within a short period of time regardless of treatment.

    Now that the problem is established, the solution should be obvious. Death Panels.

    All socialized medicine in other countries is predicated on death panels of one sort or another, although they tend to shy away from the title. By delaying procedures based on a variety of demographic and logistical factors, they solve the unnecessary treatment problem by making the patient wait. This is a cruel deception practiced on people who should be given the dignity of knowing that they will not receive the heart-lung transplant they want, simply because it is not cost effective.

    For insurable risks – those that ordinary people couldn’t reasonably foresee or that the cost is such that individuals would be unable to make provisions to pay themselves – the best method of dealing with the administration is a government-run, single-payer system. Some liberals mistakenly believe this is counter to everything conservatives stand for, but as with most things liberals believe, that would be wrong. As F.A. Hayek writes on the subject:

    “Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance – where, in short, we deal with genuinely insurable risks – the case for the state’s helping to organize a comprehensive system of social insurance is very strong.”
    The strongest case for a federally run system for catastrophic healthcare is the authority and credibility of the state along with the absence of liability and force of law that it alone holds. This power establishes the acceptability and the very morality of the Death Panel. By establishing guidelines of what will and (more importantly) will not be treated based on numerous factors, the base problem of national healthcare is solved.

    To summarize, individual Health Savings Accounts – used for direct payment to providers in a market driven system – coupled with a government-run, single-payer system with a Death Panel for catastrophic illness.

  9. Andy says:

    The problem is ultimately political. I think a single-payer system could work, but only if something is done about the ability of providers to capture the process and set their own prices (as we see with Medicare). That will be difficult to do given Constitutional constraints.

  10. Dave Schuler says:

    A few odds and ends. First, I would argue that we haven’t had a free market in healthcare since the Pure Food and Drug Act was enacted a century ago. That’s what gave physicians their gatekeeper role on pharmaceuticals. The list of reasons that we wouldn’t want a truly free market in healthdare is legion. Just go back and look at the history that lead up to enacting the Pure Food and Drug Act.

    Second, you’re using the term of art “public good” incorrectly or at least in an accidentally misleading fashion. A public good is a good that is non-rivalrous and non-excludable. Healthcare is not a public good.

    That doesn’t mean that we shouldn’t have public health policy, that the government should never pay for healthcare, or anything of the sort. It just means that healthcare is rivalrous and excludable.

    The Ryan Plan solves the federal government’s healthcare problem at the expense of state and local governments. Reducing funding for Medicare won’t ipso facto reduce healthcare costs. It just makes it more likely that senior will qualify for Medicaid.

    The key point here is that no minimal set of reforms are going to fix our healthcare system’s problem. Moving the problem around doesn’t help. As Uwe Reinhardt succinctly put it: it’s the prices, stupid!

  11. Socrates says:

    This is an excellent, thoughtful post. Thank you.

    If only more conservatives and/or Republicans were this thoughtful about health care policy.

    Alas…

  12. hey norm says:

    @ SLT 11:55…I think that’s a great idea, I’m not against that at all. In fact I would personally prefer a single payer system of some sort based on a number of those models. I just think the political realities preclude it. Look at the struggle to get the ACA passed. And as I said – that’s a Republican program.

  13. Steve Verdon says:

    1. Health care is generally not a refusable or elective service.

    Neither is food or water (or some form of liquid).

    2. There is an asymmetry of information

    This is true of many goods people buy.

    3. Purchasing power is concentrated in the hands of a very small number of “consumers”

    Another word for this is monopsony or near monopsony, it does not render consumers “not-consumers” it just means the market is distorted.

    This doesn’t mean that there aren’t serious distortions in the health care market and that moving to a more market based allocation of health care would be good, desirable, or would help control costs. But the idea that a patient is not consuming health care is not true.

  14. Dave Schuler says:

    Following up on Steve V.’s corrective comment, as I see it the problem isn’t that patients aren’t consumers but that they aren’t only consumers and that it’s very difficult for them to be rational optimizers.

  15. Steve Verdon says:

    That doesn’t mean that we shouldn’t have public health policy, that the government should never pay for healthcare, or anything of the sort. It just means that healthcare is rivalrous and excludable.

    Subsidizing a public good is (most likely) reasonable public policy since typically under supplied. Subsidizing private goods like health care on the other hand is less clear cut since it is not clear that the specific good in question is under-supplied and given that we have an issue with prices (which is what is driving up costs), it may very well be that scaling back the subsidies is the correct policy (at least for controlling costs–i.e. the fiscal aspect of the problem, the costs may still remain but take the form of untreated medical conditions…but those don’t show up on the governments ledger).

  16. But the idea that a patient is not consuming health care is not true.

    But it is the case that it is not a consumer good in the same way that we typically think of consumer goods.

    I don’t die, for example, if I don’t get the latest iPhone. My child will not lose the ability to walk if he doesn’t get a truck.

    This decision-making process is radically different.

    And you are correct about food. The rather major difference is that one can get enough food to survive on a rather meager wage. The same is not true about a kidney transplant or even diabetes medication.

  17. Steve Verdon says:

    Following up on Steve V.’s corrective comment, as I see it the problem isn’t that patients aren’t consumers but that they aren’t only consumers and that it’s very difficult for them to be rational optimizers.

    Oh I’d say it is quite rational to want a life saving procedure. Thing is we’ve removed the budget constraint for the consumer. If they need life saving procedure X they get it. Even if you really feel you need a car, but don’t have the money….you don’t get the car.

    I’d also say the doctors are being rational, it is just that their objective function is not the same as what you’d find with your typical firm in economics…they aren’t maximizing profits, they are trying to save the patients life.

    But once you realize these things you can see why we are in the problem we are in and if we were to shift to a solely market based supply of health care there would indeed be people who needed treatment and were refused, even life saving treatment. Yes in many cases charities might be able to fill the gap, but in others they may not be able too. Either they don’t have the funding or there just isn’t time to secure the funding. And in any event it doesn’t really solve the problem it just re-arranges the deck chairs on the Titanic if charity is able to fill the gap entirely.

  18. they aren’t maximizing profits, they are trying to save the patients life. But once you realize these things you can see why we are in the problem we are in and if we were to shift to a solely market based supply of health care there would indeed be people who needed treatment and were refused, even life saving treatment.

    This is my fundamental point, yes.

  19. Steve Verdon says:

    But it is the case that it is not a consumer good in the same way that we typically think of consumer goods.

    It is, it is just that if we ration it via the same mechanism, the market, it yields a result you don’t like.

    I don’t die, for example, if I don’t get the latest iPhone.

    You will if you don’t get enough food or water, but those are not nationalized. And if you consume any private good another cannot…and the same is true of health care.

    This decision-making process is radically different.

    All of your objections have been studied by economists. There are ways to deal with all of those problems, the issue isn’t that the market can’t work, it is that people don’t like the outcomes of such a market–i.e. if you can’t pay your don’t get treated.

    We’ve decided that we don’t like prices working as the rationing mechanism for health care. But we really haven’t put into place mechanisms that work at keeping things on a sustainable path. So, until you crack that problem we will remain on the unsustainable path until we do crack it or things reach a point where they can no longer be sustained. I’m betting on the latter myself.

  20. . There are ways to deal with all of those problems, the issue isn’t that the market can’t work, it is that people don’t like the outcomes of such a market–i.e. if you can’t pay your don’t get treated. We’ve decided that we don’t like prices working as the rationing mechanism for health care. But we really haven’t put into place mechanisms that work at keeping things on a sustainable path

    We are not in fundamental disagreement. I concur that health care can work as a market if we, as a society, are willing to let people die as a result of said market.

    However, a) I don’t think that we are willing to do so as a society, and b) we do know that there are alternatives.

  21. You will if you don’t get enough food or water, but those are not nationalized.

    Well, again, the cost factor is rather significant in this area.

    And we do subsidize those who cannot afford enough food and would likely do so as well for water if it was sufficiently difficult to acquire.

  22. Steve Verdon says:

    This is my fundamental point, yes.

    But your claims of patients not being consumers, and so forth are still false, it is just that we wont like the market based solution. It is too cruel. So we try to circumvent it, but in the process we’ve ended up with policies that when taken as a whole result in an unsustainable path for health care expenses.

    Even means testing Medicare doesn’t address the problem in that it merely shifts some of the spending from the government/public sector to the private sector unless you have to have less consumption–i.e. certain medical conditions are not treated.

    One of Dave’s solutions, drafting doctors, would address the problem. You basically nationalize the medical profession.

    “Hi, you’re a doctor? I’m from the government and you now work for us. Quitting is not an option and we are going to re-evaluate your salary and set it at the government mandated level. If you refuse to work as a doctor we’ve opened a new facility next to the one in Guantanamo we are using for the terrorists. Oh, by the way, how’s your day been?”

  23. @Steve:

    Except, of course, nationalizing health care (a la the BHS) is not the only option.

  24. @Dave:

    Actually, I think you can conceive of public health as a public good is if it universally provided in the same way we treat roads and public education as public goods.

  25. Steve Verdon says:

    Except, of course, nationalizing health care (a la the BHS) is not the only option.

    I don’t know, the prospects look pretty grim.

    Thus, absent some miracle – for example, that bundled payments per episode of illness to so-called Accountable Health Organizations will actually serve to bend down the future time path of health spending noticeably – the nation is likely to rely in the years ahead on rationing more and more of health care by income class.

    Perhaps this is what the legendary “median voter” now wants.–Uwe Reinhardt

  26. Stan says:

    For roughly the last 50 years we’ve had a experiment on methods of paying for medical treatment. In the rest of the developed world either the government employs most health care providers or they’re compensated out of an insurance fund or funds either run by the government or, if nongovernmental, tightly regulated by the government. Our medical care costs twice as much on a per capita basis. We don’t insure everybody. Our infant mortality is greater than in other developed countries and our life expectancy at birth is lower. In certain diseases our survival statistics are superior, but the treatments for these diseases is largely paid for by the government through Medicare. In view of these facts, reading Steve Verdon’s strange posts is like hearing an agent of the Inquisition tell Galileo that the heliocentric theory of the solar system is wrong. Don’t conservatives pay ANY attention to the real world?

  27. Steve Verdon says:

    Actually, I think you can conceive of public health as a public good is if it universally provided in the same way we treat roads and public education as public goods.

    Laffont starts is categorizing of various goods with exhuastibility, that is is the good exhausted by consumption. If you have 10 people who need a pill for a health care problem, but only 1 pill how many people are going to consume the pill? One. That pill is exhaustible. Any good that is not exhausted when one person consumes it is a public good. The excludability is then another factor in determining the nature of the good and how it can be provided. For example a good that is non-excludable will likely need tax revenues. Goods that excludable could have some of their costs covered by fees. So street lights would likely have to be covered via government tax revenues and a public pool could have at least some of its costs covered by an entrance fee.

    Health care is, for the most part, exhaustible and as a result is a private good. There may be parts of health care that provide positive external benefits such as vaccinations, and we may very well want to subsidize those. And as I’ve noted we may not like a market allocation for health care so we might select a different mechanism for providing/rationing health care as well. Problem is so far we’ve selected bad alternatives and I have little hope that we’ll get out of this mess via smart public policy. It is an issue too easy to demagogue.

  28. Steve Verdon says:

    Be quiet Stan the adults are having a discussion, the kids dinner table is that way.

    ——->

  29. Stan says:

    Verdon, don’t be silly. I cited facts everybody knows about health care. You can’t refute them, and I notice you didn’t even try. I repeat, do conservatives pay any attention to the real world?

  30. tom p says:

    Be quiet Stan the adults are having a discussion, the kids dinner table is that way.

    ——->

    Steve, I have been reading your arguments for years. Never once have you grappled with the fact that Europe does a hell of a lot better job than we do in dealing with this problem. Stan offered several points. All you say is “But they are not perfect!” I take that back…. you say “go away.”

    Some are trying to have an adult conversation. Others (me) are trying to listen to an adult conversation. The kids dinner table is…. over at Reason. If you can not answer peoples arguements, go to the echo chamber.

  31. @Steve:

    I am fairly certain that Stan is an adult…

  32. anjin-san says:

    Be quiet Stan the adults are having a discussion, the kids dinner table is that way.

    This would be weak in an AOL chat room…

  33. Rob Prather says:

    Steven,

    I don’t think health care qualifies as a public good, strictly speaking (I’d have to dig out an econ book to be sure). Nevertheless, as a matter of policy, I would prefer that we extend Medicare to everybody.

    The reason that health care doesn’t function as a typical market is that most of it is paid by third parties, and it isn’t clear to me that insurance companies are any better than the government at this.

    Also, a realization that I’ve come to in recent years is something you mentioned above with flat screen TVs: I have no problem telling someone that they’ll have to have a smaller TV or simply do without. I’m not willing to say the same with health care.

    There are dangers associated with extending Medicare to everybody, namely the notion of variable costs. If the Medicare people act like chest-thumping morons, they could kill investment in new drugs and new medical devices.

    If a pharmaceutical company spends hundreds of millions developing a drug and needs to charge $2 per pill and Medicare will only pay $1 per pill, that will affect future investment decisions. All costs are variable in the long run. Medicare has them over a barrel once they’ve spent the money, but it can affect future decisions.

    Even so, I think extending Medicare to everybody is the best way to get a fair outcome and to control costs.

  34. @Robert:

    That may well be the case, but as you know, one of the advantages of the academy is the ability to argue for redefinition 😉

    In all seriousness, I am not sure that health care is necessarily different from education and we treat education as a public good, yes?

  35. Rob Prather says:

    Steven,

    OK, yes we do and I suppose there are positive externalities associated with health care; presumably fewer dead people and healthier people. 🙂

    Health care is both rival and excludable. That’s what I was talking about. See here.

    Even so, whether I’m right or not, I think we agree more than we disagree.

  36. @Rob,

    I expect you are correct about the agreeing vice disagreeing. This piece CEO the Economist’s Democracy in America well represents where I am coming from: click

  37. Steve Verdon says:

    Stan,

    Verdon, don’t be silly. I cited facts everybody knows about health care. You can’t refute them, and I notice you didn’t even try.

    See, the problem is you don’t understand what I’m saying and last night I couldn’t be arsed to explain it in further detail. I’m the following:

    1. That there is problem with health care (this one should be obvious).
    2. That a market in health care can work, but that we (i.e. most Americans) would not like the outcomes.
    3. That we have done a crap job at managing costs given that we’ve used methods other than the market to allocate health care resources.

    You come waltzing in and point out that Europe, which is, by and large, also on an unsustainable path just not rushing towards disaster as fast as the U.S. and I’m supposed to do what? Ignore the points I’ve been making. My points are more technical and to help people understand the problem we are in. For example, we don’t want to treat private goods as public goods, it is a recipe for disaster in terms of trying to get back to a sustainable path for health care. We must understand this. We cannot make health care a pubic good simply be declaration anymore than I can make you a rhinoceros by declaration.

    Steven,

    I am fairly certain that Stan is an adult…

    It would help then if he worked on his reading comprehension skills then.

    tom p,

    Steve, I have been reading your arguments for years. Never once have you grappled with the fact that Europe does a hell of a lot better job than we do in dealing with this problem.

    Actually I have, but I also always point out that they are also unsustainable. Granted we are leading the pack, but that doesn’t mean they don’t have a problem either. Also, I’ve pointed to European countries and Singapore as places to look for possible methods for slowing down our headlong rush into disaster.

    Some are trying to have an adult conversation. Others (me) are trying to listen to an adult conversation. The kids dinner table is…. over at Reason. If you can not answer peoples arguements, go to the echo chamber.

    But he isn’t trying to understand my comments. He thinks he knows and comes up with some toss away Bravo Sierra such as life expectancy which is a piss poor measure of health care delivery (hint: if an 18 wheeler runs you over, no matter how good our health care is you are still probably going to die, and if we have more of those deaths per capita in this country than in Europe for various technical, institutional, etc. reasons, then our life expectancies will be different and it will have f–k all to do with health care). There is no argument there, just an insult, and now his feelings are hurt because I responded in kind, too bad.

    Robert,

    The reason that health care doesn’t function as a typical market is that most of it is paid by third parties, and it isn’t clear to me that insurance companies are any better than the government at this.

    Sigh

    I seem to be running around the web responding to this one alot.

    This is true of any and all insurance. Insurance markets generally tend to work. With health care though we have instituted policies that make it hard for that market to work in a sustainable way.

    1. Ability to pay is not a factor in life saving care.
    2. Heroic measures are often rendered even in cases where there is little hope of recovery/success.

    Contrast this with car insurance where if your car is trashed the insurance company writes you a check for its value. I’m not saying we should do this with health care, but these policies make it hard for the health care insurance market to work like other insurance markets.

    Also, a realization that I’ve come to in recent years is something you mentioned above with flat screen TVs: I have no problem telling someone that they’ll have to have a smaller TV or simply do without. I’m not willing to say the same with health care.

    This is what is causing the health care market to not function properly. This kind of a policy, while humane and a good thing morally pretty much ensures that the health insurance market is going to run amok. On the one hand you acknowledge the scarcity of resources on the other you are unwilling to come up with a rationing mechanism…and I don’t blame you I can’t come up with a mechanism that is going to make everyone happy and ensure everyone gets all the treatment they need.

    If a pharmaceutical company spends hundreds of millions developing a drug and needs to charge $2 per pill and Medicare will only pay $1 per pill, that will affect future investment decisions. All costs are variable in the long run. Medicare has them over a barrel once they’ve spent the money, but it can affect future decisions.

    Isn’t this just a round-about way of saying, “You have to make do with a smaller television set or even without”? Seems that way to me. In the end, about the only place we are going slow the growth in costs is to reduce the quantity of health care, a point shared by Uwe Reinhardt. If we don’t health care will become something that is decided mainly by income and wealth. Reinhardt also argues that the only place to do that is in the private sector. As such moving everyone to Medicare would be a disaster for this country.

  38. steve says:

    Hmm. I read Reinhardt as saying that private insurance is the primary cost driver. That if we want to address medical cost inflation, it must be done in private insurance first. If we were all in Medicare, that cost driver would be gone. Costs might or might not then rise just as fast, but it would be possible to make a coherent response rather than the fragmented, catering to special interests groups model we now have.

    Steve

  39. Dr. Taylor, I can’t address it as well as Steve Verdon, but I will also note that at no time do any of the proponents of nationalizing hea,th care, or anything leaning strongly in that direction, address the simple fact that if you premise the delivery of health care primarily on need you will find the well of needs bottomless. And it will be unexpected!

  40. Stan says:

    Assuming that this thread is still alive, I’d like to address Verdon’s argument by again saying
    1) per capita health care costs in Europe are around half of ours, 2) per capita health care costs are rising more rapidly here than in Europe, see

    http://www.imf.org/external/pubs/ft/fandd/2011/03/Clements.htm

    despite the fact that our population is younger than Europe’s, 3) Europeans consume more health care than we do but pay less because the unit cost of their health care is lower than ours (see articles by Uwe Reinhardt and others in Health Affairs), 4) the reason that the cost of health care is lower in Europe than here is that the payers (the National Health Plan in the UK, the single payer system in France, the sickness societies in the Bismarck countries) have more clout than our insurance companies when it comes to negotiating with medical providers (again according to Reinhardt), and 5) doctors and hospitals in Europe have to accept the lower prices because they have no other alternative than going Galt (again according to Reinhardt).

    In regard to Ryan’s contention that medical inflation will decrease if patients pay more out of pocket for their expenses, I don’t have any authorities to cite but I have a strong suspicion that patients will skimp on care when it comes to minor ailments but not when it comes to the treatment of major diseases. Here I don’t know the answer. A poor woman in her 70’s might well decide to accept hospice care for breast cancer rather than fight it in order not to impoverish her family. I suppose this could be considered as a triumph for Ryan’s plan.

    I’d like to add that I’m capable of following Verdon’s argument but that I’m refraining from responding to it directly because he and I are arguing about values and we’re not going to change each other’s minds.

  41. @Stan:

    FYI: at least in theory, yes, the thread lives (just so you know that someone did read the comment).

  42. Steve Verdon says:

    Hmm. I read Reinhardt as saying that private insurance is the primary cost driver. That if we want to address medical cost inflation, it must be done in private insurance first.

    Read it again, he argued that we can’t mess with the public side of the equation for the following reasons:

    1. Political–messing with Medicare to reduce cost growth is political suicide so it is very unlikely.
    2. If you move people from Medicare to private health care you are just shifting the costs.
    3. Capping Medicare “prices” his hugely unpopular–which is why Congress votes not to do it year after year.

    So that leave just the private side in which to effect change. Thus there isn’t much room there.

    Stan,

    1) per capita health care costs in Europe are around half of ours, 2) per capita health care costs are rising more rapidly here than in Europe, see

    Okay. Not that I indicated this was not the case, whatever.

    despite the fact that our population is younger than Europe’s, 3) Europeans consume more health care than we do but pay less because the unit cost of their health care is lower than ours (see articles by Uwe Reinhardt and others in Health Affairs), 4) the reason that the cost of health care is lower in Europe than here is that the payers (the National Health Plan in the UK, the single payer system in France, the sickness societies in the Bismarck countries) have more clout than our insurance companies when it comes to negotiating with medical providers (again according to Reinhardt), and 5) doctors and hospitals in Europe have to accept the lower prices because they have no other alternative than going Galt (again according to Reinhardt).

    Yes, dollar costs are lower. I’d argue that total costs (i.e. social costs not represented in dollar figures) may not be lower. This one is hard to pin down though.

    In regard to Ryan’s contention that medical inflation will decrease if patients pay more out of pocket for their expenses, I don’t have any authorities to cite but I have a strong suspicion that patients will skimp on care when it comes to minor ailments but not when it comes to the treatment of major diseases. Here I don’t know the answer. A poor woman in her 70′s might well decide to accept hospice care for breast cancer rather than fight it in order not to impoverish her family. I suppose this could be considered as a triumph for Ryan’s plan.

    Absolutely, this is what I was saying about social costs. If you make people wait longer for health care and some of them die, and you end up spending less, in dollar terms you’ve reduced costs. In terms of social costs you’ve merely moved the costs from being visible (or internal as most economists would describe it) to being invisible (or external). Measuring these effects is hard.

    (Note I’m not endorsing this plan, just merely applying some basic logic to the plan.)

    And a word on life expectancy: it is a shit measure of health care efficacy. Okay? Here is why:

    Stan is run over by a bus. Stan dies. How exactly does this reflect on our health care system? Stan is shot when caught in a gang land drive by and dies. Again, this says our health care system is bad because it doesn’t deflect bullets? Stan drowns in his swimming pool. Our health care system is bad because it didn’t throw Stan a life preserver?

    If you want to compare the efficacy of health care systems at least remove murders, car accident fatalities, and probably a couple of other accidental death categories first for God’s sake.