More Health Care Than You Know What to Do With

Well not really. But, while a bit old, this is an interesting article about health care and Gammon’s Law.

The recent troubles at Walter Reed Army Medical Center in Washington, D.C., are putting the shortcomings of government-run health care on display.

Former Gov. Mitt Romney is finding that his not-yet-implemented plan for universal health care in Massachusetts is plagued by rising cost estimates, almost doubling the initial predicted premiums.

And David Walker of the Government Accountability Office has issued a dire warning about the future of our nation, destined to be sunk by the sheer weight of the behemoth Medicare system. Medicare responds by lowering its fees to the actual providers of health care.

But if we can get just the right policy, and just the right people, in just the right place…why everything will work out juuuuust fine.

Walter Reed demonstrates Gammon’s Law perfectly. The system has evolved whereby a soldier is required to file 22 documents with eight different commands, most off-post, to enter and exit the medical processing world. Sixteen different information systems are used to process the forms. The Army has amassed three different personnel databases that cannot communicate with each other. People with “safe” government jobs run the outpatient center, a rat- and roach-infested, filthy, moldy deteriorated building. Since “free” care is provided, the veterans are expected to shut up, hold their noses, and wait. One cannot blame the VA employees, most of whom are eager to do a good job, but are helpless to change the “system.”

Yeah, quit your griping, it is free after all.

The only way to combat this is to get the government out of health care. Government provides a protected environment for bureaucracy and shields it from competition. It provides a black hole for resources to be devoured. Things cannot possibly improve unless innovation is allowed to see the light of day.

Actually, in spite of my early sarcasm, I think this may not be the best solution. While I think government is generally a bad thing, and whenever somebody tries to do good via the government it ends of being perverted and twisted there may still be a role for government, but a very limited role.

  1. Break the supply bottle-neck on the number of doctors.
  2. Force everyone to buy at least catastrophic health insurance.
  3. Partial subsidies for the health care above.
  4. Get rid of the tax benefits for health care benefits paid by employers.

The first one should help with some of the supply side issues. Numbers two and three would help with adverse selection and moral hazard. The last one would end what works very much like a subsidy promoting higher consumption.

Would this solve all of the problems? No probably not, but it could certainly help with the current situtation. Even it slows the growth rate of health care expenditures it would be a good thing.

FILED UNDER: Economics and Business, Health,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. Dave Schuler says:

    Perfect agreement. 😉

  2. Steve Plunk says:

    I would also add allow more nurse practitioners and health techs to handle simple medical needs. Colds, flu, minor injuries could all be handled by less educated (and less expensive) workers than doctors.

    Eventually we will have to face the moral questions of treating those who cause harm to themselves and can’t pay and what levels of care do we give those who can’t pay. Tough issues but they must be faced.

  3. Dave Schuler says:

    I would also add allow more nurse practitioners and health techs to handle simple medical needs. Colds, flu, minor injuries could all be handled by less educated (and less expensive) workers than doctors.

    I see that as part of the solution to #1 above.

  4. legion says:

    The only way to combat this is to get the government out of health care. Government provides a protected environment for bureaucracy and shields it from competition. It provides a black hole for resources to be devoured. Things cannot possibly improve unless innovation is allowed to see the light of day.

    That’s gotta be one of the most nonsensical defenses of privatization I’ve ever seen. The only improvement from privatizing healthcare will be in the dividends paid to HMO shareholders. Gov’t services have an implicit requirement to actually provide the service. Private services have an _explicit_ requirement to make a profit. If they can get away with providing substandard product (or no product at all – see:contracting, Iraq (rebuilding)), they win. If they get busted for not performing, the worst that happens is they lose the contract, the people who made the decisions get raises, the contract goes to someone else who’s no more likely to do the ‘right thing’ that the first company, and the people who died due to lack of care are still dead. And if the first contract company goes bankrupt, their families will never even see compensation for their losses.

    When you absolutely _have_ to have accountability for providing something, you _cannot_ rely on privatization. Period.

  5. Rick DeMent says:

    22 documents with eight different commands, most off-post, to enter and exit the medical processing world.

    As opposed to 50 documents with 12 insurance administrators in the private sector.

  6. Steve Verdon says:

    Legion,

    I’d respectfully sugget you aren’t looking at the data and arriving at the obvious conclusions. Government as it currently works, is very much part of the problem.

    And your same gripes about private industry apply to government as well possibly even more. Name me a bureaucrat that was fired for 9/11. Name me an agency that was shut down for failing to do its job (e.g. FEMA and Katrina). When a government agency screws up we have hearings, hand wringing, and posturing by politicians and then back to business as usual.

    With a private firm if they get caught engaging in fraud they can get sued, their reputation is tarnished and people will shy away from their products. Take the recent pet food scare, I actually switched brands even though the type of dog food I was using wasn’t affected (Eukanuba dry). Will I go back? No, in part because of the tainted food and the new food we are using has yielded tremendous results. This happens on a large enough scale and the firm can go out of business. The investors can get pissed off and fire the top management.

  7. Steve Verdon says:

    As opposed to 50 documents with 12 insurance administrators in the private sector.

    Funny, I don’t have to do that. In fact, I fill out nothing save hand over my insurance card and the co-payment. My guess you are making that up.

  8. Dave Schuler says:

    Steve, the paperwork is on the healthcare provider’s end and it’s a real, legitimate problem.

    For those who favor a BNH-style public health system here (which as best as I can tell no one in the Congress is proposing), it should be remembered that costs are rising worldwide for healthcare including in countries with fully nationalized healthcare systems and the experience here has been that programs become less sustainable from a political standpoint as costs rise not more so.

    That’s why I keep harping on increasing the supply of healthcare. We don’t have an insurance problem in this country. We have a healthcare cost problem in this country and it will only get worse unless we can do something about the production equation, supply and demand side both.

    I know that the prevailing wisdom among Democrats these days is that the entire problem can be solved by eliminating adverse selection but I don’t really find that credible.

  9. Steve Verdon says:

    Dave,

    That’s why I keep harping on increasing the supply of healthcare. We don’t have an insurance problem in this country. We have a healthcare cost problem in this country and it will only get worse unless we can do something about the production equation, supply and demand side both.

    I don’t disagree save that I think you appear too quick to seperate these issues of health insurance (insulation?) and supply. I’m convinced on the supply side of the problem. After all, basic economic theory tells us when the supply increases prices fall (ceteris paribus). Still, I think there is also a demand side issue as well, and if we look at both sides we’ll get further than simply addressing either side in isolation.

    As for the paper work/administration issue, I’m not convinced it is any worse in the private sector than in the public sector, and if it is I wouldn’t be surprised is that the reason is the public sector requirements. I’ve seen enough evidence to make me suspicious of the conventional wisdom that privat admin. costs are way way high and public admin. costs are much much lower. I’d believe that they might be similar, but the conventional wisdom is like arguing that government is efficient and trustworthy.

  10. Dave Schuler says:

    Oh no, Steve, I agree with you on the problems posed by excess demand as well. That’s why nearly every time anybody proposes universal coverage I mention the to me obvious point that increasing demand (which universal coverages does virtually by definition or what use is it?) without increasing the supply will lead to higher healthcare costs which will, in turn, lead to erosion of support for universal coverage.

    A recent experience with just that dynamics was TennCare.

  11. Rick DeMent says:

    Steve,

    Funny, I don’t have to do that. In fact, I fill out nothing save hand over my insurance card and the co-payment. My guess you are making that up.

    And you never worked in a Dr’s office, so I guess your clueless…

  12. legion says:

    With a private firm if they get caught engaging in fraud they can get sued, their reputation is tarnished and people will shy away from their products.

    While I agree that that’s what’s supposed to happen on paper – and no doubt does in certain industries – I don’t see anyone ditching Halliburton, KBR or Blackwater.

    I fully agree that gov’t can be at least as bad as industry, but it seems easier (at least IMHO) to fix a broken/corrupt gov’t than a broken/corrupt industry… One we can vote out eventually; the other will continue to exist so long as they pay dividends & don’t do anything egregious enough to get shut down. And if they’re multinational, there’s even less of a ‘stick’ to punish them with – there’s always somewhere willing to let them operate…

    Unfortunately, what we have today is a broken industry (many indutries, not just healthcare) coupled with a corrupt/disinterested gov’t, performing lip-service regulation (at best). that’s a recipe for generations of tragedies…

  13. Steve Verdon says:

    Legion,

    While I agree that that’s what’s supposed to happen on paper – and no doubt does in certain industries – I don’t see anyone ditching Halliburton, KBR or Blackwater.

    Really, and have they been guilty of fraud or passing along tainted products?

    I fully agree that gov’t can be at least as bad as industry, but it seems easier (at least IMHO) to fix a broken/corrupt gov’t than a broken/corrupt industry…

    You’re joking right?

    One we can vote out eventually;

    You think our government and what the bureaucracies do change all that much simply based on which party is in power?

    the other will continue to exist so long as they pay dividends & don’t do anything egregious enough to get shut down.

    Maybe, but you forget about competition. If firm in an industry with several competitors gets lazy the competitors can step in and steal customers. Who competes with the government? You can’t form a competing bureaucratic agency.

    Unfortunately, what we have today is a broken industry (many indutries, not just healthcare) coupled with a corrupt/disinterested gov’t, performing lip-service regulation (at best). that’s a recipe for generations of tragedies…

    Yes it is, and it will likely only get worse if you go with universal health care.

    Rick,

    I still think you are making it up. Sure there is heavy administration costs with health care, but how much of it is due to regulation and legal issues? You really expect me to believe that the government, the ultimate source for all things red-taped, is actually going to produce less bureaucratic waste? Gammon’s data and his law say otherwise. The only person who is truly clueless is the one who discounts what the data is telling him, and that would appear to be you.

  14. Kent says:

    So long as we have a civil service in place of patronage, we will not see rapid changes in the bureaucracy whenever the administration changes hands. That’s the blessing and the cursing of a civil service.

    I think it’s clear the government has a very important role in health care — that of regulator. Note: “important” != “large.” This does not mean government can’t botch that role, which is where the hard work of governing well comes in. If government is also the provider and customer for health insurance, we have the same situation as for education — a huge conflict of interest. It has not worked out well in that context, which does not leave me sanguine about this context.

    I would prefer to see private charity cover the very poor, rather than government. I’m sure they could do it, and do it better. I’m also sure the transition would be far from painless, so it’s politically very difficult.

    Mandatory insurance is indistinguishable from taxes, except that the money goes to a private insurer rather than government. That’s not unimportant, but I don’t see much magic in the distinction.

  15. M1EK says:

    Again with the theory that employed people overconsume health care. BS. The overconsumers of health care are the retired and the premature infants; the latter for obvious reasons and the former because they have the time and the will to sit and waste their time. Me, I underconsume if anything (as do my coworkers) because going to the doctor is such a timesuck.

  16. Steve Verdon says:

    Kent,

    Without mandantory insurance you’ll have an adverse selection problem…are you going to let those people die or suffer because of that choice, or are you going to cave in when the time comes? If you are going to cave, then you’ve simply shifted those costs to those of us who will buy insurance.

    M1EK,

    I’m not so sure you are an under-consumer. Are your medications covered? Are you glasses? How about pregnancy and child-birth if you have a wife? How about other things like Lasik? You maybe an under-consuming individual, but I hope you can see that even a healthy person or family can suck up lots of resources due to the way health coverage has evolved over time.

  17. M1EK says:

    Steve,

    Even if we were to take as a given that the proper role of a health insurer includes none of the things you listed (and, of course, many disagree even on utilitarian grounds), most health spending today is STILL on behalf of those two groups I mentioned. In other words, even with all the supposed overconsumption due to the awful oil-change-analogy, there’s STILL not enough to make up for the retirees and the preemies.

  18. legion says:

    Really, and have they been guilty of fraud or passing along tainted products?

    Guilty? Only a subcontractor or two. Further investigations were systematically blocked by the GOP Congress, despite regular charges of fraud, abuse, and corruption.

    You think our government and what the bureaucracies do change all that much simply based on which party is in power?

    Have you paid the slightest attention to the parade of ‘Sgt Schultzes’ the DOJ has sent to Congressional testimony lately? By systematically replacing every official they could lay hands on with partisan hacks more interested in Bush’s PR than any level of professional competence or morality, this admin has made huge inroads into destroying gov’t credibility in every major public sector for generations to come. Remember ‘heckovajob’ Brownie at FEMA? How about NASA? Remember when Christine Todd Whitman was running the EPA? Her lies about the safety of Ground Zero cost people their lives. I could go on. A lot.

    If firm in an industry with several competitors gets lazy the competitors can step in and steal customers.

    Unless the gov’t that’s supposed to be regulating them & protecting the public is already bought & paid for (or just willfully incompetent).

    You can’t form a competing bureaucratic agency.

    No, but you can impeach oathbreaking crooks.

  19. Andy says:

    With a private firm if they get caught engaging in fraud they can get sued, their reputation is tarnished and people will shy away from their products. Take the recent pet food scare, I actually switched brands even though the type of dog food I was using wasn’t affected (Eukanuba dry).

    Yes, because everyone comparison shops healthcare providers after a car accident. Just like dog food.

  20. Steve Verdon says:

    Yes, because everyone comparison shops healthcare providers after a car accident. Just like dog food.

    Here is a life hint for ya’ Andy. When shopping for health care, if your employer doesn’t provide it, comparison shop before the accident…you konw, like when you are actually buying it.

    Geez, I can’t believe I had to give that kind of advice.

    Oh, and Andy, don’t forget to breath, eat, and get plenty of rest.