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In case you haven’t seen it yet, OSHA humour

http://austrianeconomists.typepad.com/weblog/2009/08/anarghy-the-state-and-dystopia.html

Haha – no. I just think if we expand the meaning of “central planning” to include private agents who plan things, comparisons to USSR central planners start to lose meaning. Everybody plans – individuals plan. That doesn’t make it “central planning”. I’m fine with the word – just don’t want to overuse it.

Always a problem in health care. It’s often hard for even the doctor to know for sure the best course of care. But, you know, that’s what second and third opinions are for. BTW, for marginal LASIK patients, this is an issue.

Not a question of “central” planning – certainly of planning.

You’re just allergic to the word “central”. Doesn’t mean it isn’t true. Patients may not always know whether they need a procedure or how much it should cost, but planners don’t either.

They don’t know everything about the proceedure – I don’t know how to make a loaf of bread. But patients’ knowledge of the certainty of the outcome of the proceedure, and the need for the proceedure in the first place far exceeds their knowledge of those things in other proceedures, where I’d worry much more about asymmetric information.

Just because you couldn’t do what someone who produces the goods and services you doesn’t mean there’s information asymmetry. The problem comes when you don’t even know what good or service you’re really buying or whether you need a good or service – I don’t see that problem in lasik surgery.

The other compensation methods create costs that are not easily accounted for on a ledger – pain and suffering by patients.

It’s not a question of central planning – and certainly not in the sense of setting prices and quantities.

Of course it is. All third party payers have to do that.

I think we’ve circled back to Kenneth Arrow’s insights now.

What asymmetric information exists?

Unless you’re saying that patients and doctors have the same amount of information about the medical procedures in question, asymmetric information exists. Patients who have no expertise in the field of medicine must choose doctors and procedures (there’s more than one way to get a boob job or liposuction, for example).

Maybe you misunderstood my point. Obviously to the extent that there is a public plan, they’ll have to grapple with this too – but I see this as a problem that both public and private insurance providers need to deal with, and that fee for service is a contributor to cost inflation in both the public and private sector. It’s not a question of central planning – and certainly not in the sense of setting prices and quantities. Perhaps in a limited sense when it comes to a public plan (although even in that case, “planners” aren’t making people choose specific plans – they’re simply saying “if you choose a public plan, these are the options we’re making available”). And I think I’ve said quite clearly I don’t think the public plan should be the primary provider of insurance.

RE: “If the consumer decides how to spend his health care dollars, then this goal will quickly be achieved. ”

I think we’ve circled back to Kenneth Arrow’s insights now.

RE: “The problem of asymmetric information still exists, yet the market seems to have dealt with it without government or insurance companies.”

What asymmetric information exists? Patients know when they can’t see well or when they want a new nose, and uncertainty about the success or necessity of a proceedure is well available. I don’t understand where the asymmetric information is in these cases.

Good thoughts.

I’ll spell out my problem with QCARE – “quality” is arbitrarily defined by the payer, not the user. Distortions always occur in that model. It’s similar to the USSR (and frankly, to the model we now have here) in that way. The customer is not the one that defines “quality” or any other metric. BTW, in terms of medical care, we actually had a lot of choice. We could pay additional out of pocket to entice doctors to treat us or we could just wait. The problem is that we didn’t have a lot of medical innovation and limited resources and a burgeoning, unreliable black market. After immigrating to the United States, I discovered that half the procedures performed on me in Soviet Hospitals were folk remedies! But, that’s a story for another day.

So maybe there’s a combination solution? I don’t know.

Well, you’re facing the same problem that the dedicated, educated and very smart Soviet central planners had. How do you efficiently deliver a product which is desired and in the desired quantities? It’s an impossible task for them because they cannot know all that they need to know to make that happen. If the consumer decides how to spend his health care dollars, then this goal will quickly be achieved. Note that it is achieved in areas of medicine where insurance and the government does not get involved – LASIK eye surgery and plastic surgery. Both have come down in price while service and technology has gotten much better. The problem of asymmetric information still exists, yet the market seems to have dealt with it without government or insurance companies. Do we know the Mayo Clinic provides excellent comprehensive care because our insurance company told us so? Of course not.

The issue of malpractice is too big for me. In general, I want to be able to sue a doctor for negligence or malfeasance. On the other hand, it’s so easy to get into court! Even if the plaintiff doesn’t win, the doctor (or, specifically, his insurance company) will spend a lot of money responding to the suit. I think it’s a bigger issue in terms of this particular bill. It cuts doctors’ compensation while leaving the risk of malpractice suits unchanged. Of course, that means fewer doctors will continue to practice and fewer will be attracted to the industry while at the same time trying to add another 50 million people into the medicaid system. I don’t have any suggestions. I was just alluding to the effect of leaving malpractice risk high while lowering compensation on the supply of doctors in the context of H.R. 3200.

As for fee-for-service – you’re also raising points about exactly why I wish he had talked more about moving away from it – because there are problems with salaried doctors or capitation as well. However, I’m not sure they would inflate costs in the way that FFS would. Sure they’d limit access and provide lower quality care – but I don’t see how shunting patients off to specialize alone is going to inflate costs the way FFS does. They already do that, and under a salary or capitation plan a doctor would be as likely to ignore the need to see a specialist, as they would do push them to specialists more than they currently do. So maybe there’s a combination solution? I don’t know. But the problems with salaries and capitation don’t just erase the cost inflation of FFS.

Malpractice is one thing I’m never sure what to think on. Of course I’m not a trial lawyer, and my impression is there’s no good reason not to do tort reform. I’ve heard, however, that that would barely make a dent in costs. Not sure what’s exactly right, but even if it would be small potatoes it’s still a good thing to do.

I’m confused at why you’re concerned about QCARE and how it bears a resemblance to the USSR.

reread my post – top down quality measures.

If you like the Minnesota public plan, don’t you want some sort of cost control and coverage rationing mechanism in the public plan

What I like about it is that it is explicit and honest about limiting the amount it will pay and allowing people to pay for as much health care as they want out of pocket. Ideally, we would have a national market in health insurance which is decoupled from employment, no tax advantages to employers that aren’t also enjoyed by individuals, widespread HSAs and doctors and hospitals competing for health care dollars. That would bring down prices and increase options for consumers.

I’m personally not clear on how Minnesota has moved away from fee for service, exactly – and that seems to be the key to me.

Be careful what you wish for. Fee for service pays by procedure – which provides incentives to perform more procedures. The other plans have their own draw-backs. A capitation plan results in doctors packing their practice with patients but not spending very much time with them and providing very poor service as a result. Lots of things get missed that way – a big problem on the West Coast, btw. A flat fee (salary, if you will) leads to a “no treatment” policy. Procedures are expensive for doctors to administer – medication and tools are expensive. With a flat fee, if a patient comes in doesn’t need procedures, that works great. The minute the patient needs a procedure, the cost of it comes out of the doctor’s pocket since he can’t charge for the procedure. So, they observe but don’t treat the patient until the condition gets so bad that they can reasonably pass it off to an expensive specialist (patient dumping). That increases costs, not decreases them.

Paying on outcome creates the incentive to always select to treat the patient who is least sick – he’ll suck less of your time and you’ll get a bigger pay off. No matter how detailed we get in defining “outcome”, the bias will always be to NOT treat the sickest patients most in need of care. If we narrow the definition of “outcome” too much, imagine the size of a government (or insurance) bureaucracy that will be necessary to decipher payments to doctors. That plan will cost more but not treat the sickest patients.

Another complication is that the trial lawyers have gotten their lobby to arrest any tort reform. So, malpractice insurance costs will not go down under either the house or senate plans. Under the plans, doctors’ pay will decline, but their risk won’t. I’m sure you understand the effect this will have on the supply of doctors.

Personally, I don’t see how we can actually bring costs down without forcing doctors and private insurance companies to submit to national competition first and then seeing where the government may need to engage in some limited wealth redistribution to ensure a basic level of care for all. That plan would actually be cheaper but will take years to implement and require rewriting of masses of laws and regulation. Libertarians may not like the government component, but I don’t think we can get around it and I’m not sure all libertarians are necessarily against this kind of involvement.

As you can see, it’s a very complicated issue and it’s impossible to cobble together a bill that won’t make everything worse in a couple of months and will be impossible to undo once implemented. That’s not a scare tactic. THAT is actually scary. We need more time and something entirely different from what they’re proposing, that’s why I don’t want them to pass this thing now.

I’m confused at why you’re concerned about QCARE and how it bears a resemblance to the USSR. If you like the Minnesota public plan, don’t you want some sort of cost control and coverage rationing mechanism in the public plan – with the opportunity to seek private coverage of that isn’t adequate?

I’m personally not clear on how Minnesota has moved away from fee for service, exactly – and that seems to be the key to me. If not fee for service, as Pawlenty seems to suggest, then how are the payments made?

The QCARE is more problematic for me because of it’s top down quality measures. We could never get that to produce results that were valued by the end users in the USSR.

As an aside, I take issue with the pot-shot accusation you made. He pounds the Massachusetts plan ,which was Romney’s idea, pretty badly. Democrats wrote this plan. This is not a bi-partisan effort. What makes stating that fact a pot-shot in your mind?

I don’t care who crafts what legislation – as long as the legislation is good. So, if the Dems can come up with a good bill on health care, I’ll support it. I don’t think we’re going to get government out of health care entirely. There is broad support for government involvement at a very basic level – to guarantee basic care for everyone, but without killing choice. If that’s the case, we should be looking at a Singapore type model. This bill is written by the very far left socialists of the Democrat party. That’s the problem. It is a take-over of the health care industry. They need to scrap this and start over. A month time frame on something this complicated and important is insulting to the people of the United States, frankly.

Incidentally, in committee, the proposal to submit congress to this plan was voted down by the Democrat majority. That just tells you how bad it is and that the authors of this plan know it.

BTW – check out Tim Pawlenty’s op-ed in the Washington Post today. His “system” in Minnesota sounds very much like what we’re both converging on. Although he only mentions it as a state employee plan, and not a public plan. He doesn’t provide details, but it jettisons the fee-for-service approach, rejects Massachusetts-style mandates, and seems to be doing well at controlling costs. Aside from some noxious pot-shots at Democrats that I don’t think make much sense (perhaps you do ), it’s a very good article.

I’ve read through the bill with a doctor. H.R. 3200 is Medicaid with everything pushed through primary care physicians as the gatekeepers. We don’t have enough physicians today, in a system that doesn’t rely entirely on them. The “public option” (medicaid) will pay the very low fees to physicians as it does now, cutting most physicians and pediatricians incomes by nearly a third and discouraging people from the field. Forcing people through the physician gateway even now would cause massive wait lists just to get into the system.

When people don’t pay out of pocket it’s not like their care is free, Methinks.

It doesn’t have to be completely free to have the effect of inflating demand – and you know that. Or you should.

But obviously I agree with you – keeping people from paying out of pocket is the wrong approach entirely. Are you sure that option is gone?

Yes, unfortunately, I’m sure. They do it in a round-about way. Briefly: you have to file a “certificate of need” if you want to open a surgery center. The catch is that it must be approved by the hospital with which you seek to be in direct competition. The bill also places restrictive controls on the expansion of hospitals in the name of cost cutting, but hospitals have no excess capacity in their surgeries – which is one reason why surgery centers were opened. It is illegal to just open a center and certify it. The hospital lobby has been trying to kill surgical centers for years and they finally got their chance in this bill. Same for MRI centers. Private practice for examinations may still exist, but not for actual procedures like imaging or operations or even diagnostics. The doctor writing that blog entry operates her own surgery, so she’ll be able to give more details (whenever I figure out how to start the blog – that was a job given to me and for which I’m a terrible candidate).

I’m also wondering if you’re overstating the control of exchanges – yes they do mandate facets of programs on the exchanges, but the whole point is some degree of flexibility, so they can’t “dictate all the details”.

Read the bill. The government will dictate all aspects of every plan allowed onto the exchange. It basically takes the states with the most mandates and pushes those plans. Unfortunately, the stated intention is flexibility, but once you read the details, you realize that the minimum requirements are very expensive and extensive mandates.

In NYC, my plan cost $1200/month for two very healthy young adults. BTW, medicaid has a neat trick – they take patients with pre-existing conditions, but they limit the treatments provided. Once a medicaid patient is accepted by the doctor and medicaid pays for the visit, the doctor cannot accept cash payment for any procedures NOT covered by medicaid. So, they’ll take you, but they won’t treat you, and they’ll prevent you from paying for treatment yourself. I’ve actually known several people to get stuck in this loop.

This is a bad bill, even for people who support a public plan, Dan. It’s just a bad bill and the plan from the Senate isn’t better.

I have a problem with the point you make about direct cost to user vs. third party payment cost. When people don’t pay out of pocket it’s not like their care is free, Methinks. Perhaps there is some psychological impact that affects demand, but for the most part I don’t buy the argument that the market works better when you’re actually in the doctor’s office than it does when you’re deciding what insurance plan is best for you. But obviously I agree with you – keeping people from paying out of pocket is the wrong approach entirely. Are you sure that option is gone? That sounds a little odd – but this is not my field so I haven’t dug into the bill (not to mention it’s changing so often).

I’m also wondering if you’re overstating the control of exchanges – yes they do mandate facets of programs on the exchanges, but the whole point is some degree of flexibility, so they can’t “dictate all the details”. And even if they did, then the exchange is no different from a public plan, which I said I was fine with and you said you don’t have a problem with, “depending on the details”. I personally don’t have strong feelings between an exchange or a public plan.

I do agree – there’s a lot of agreement on health care. And even where I disagree with others like Don on something like the public plan, I think 90% of the other facets of health care I do agree with him on (although the remaining 10% is quite important).

http://www.thefreemanonline.org/featured/warning-osha-can-be-hazardous-to-your-health/

mises.org has several articles on the subject. Here is a good one:

http://mises.org/story/3440