I add to Russ’s three excellent questions about health-care my own, additional question: Why does there exist a widespread sense that each of us, as individuals, is incapable of — or should not be obliged to — providing for our own health-care needs in the same way that we provide for our own grocery needs, our own household-furniture needs, our own automobile-insurance needs, and many other of our needs?
A Fourth Health-Care Question
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Or a fifth question: how come President Hoover campaigned on putting a “chicken in every pot” and not on a health-care platform, for example?
This is an answer to Don, not Wintercow.
Com’on Don,
You know the answer as well as I do. People who think for themselves and do for themselves are absolutely no good to the socialist, we are hated, we are feared, and we will be eliminated at worst or shut up and prevented from public speech at best. Unless we win the fight that is coming.
It is about control of people, it is not about health, care, love, or pretzels.
The left has been carefully infiltrating the most important segments of our American society beginning with the European immigration in the industrial revolution, those segments being those that influence children the most to become what they are programmed to be; education, news, entertainment, and legal (justice system).
That we have such a large portion of our population that are rabid looney left wingers is no surprise; that so few of us who value freedom of the individual and self responsibility is the amazing thing.
Some will undoubtedly not purchase insurance. When they need it who will pay, them or the state? I agree if people are left to pay for more services they will compare prices and “shop” and this will lower the price of medical services much like lasik surgery. Are we suppose to assume that with lower priced insurance and procedures that we will have to pay for out of pocket, at lower prices, produce the wealth to society that we can pay for the people who choose not to buy insurance without bankrupting the state?
Yes.
The true price signal for most of what we classify as “healthcare” is dampened and distorted by a system that encourages people to spend as though it was not their own money.
Once a true price signal is established, prices across the board will come down for everyone.
It will be far cheaper to provide vouchers for those who lack resources once the free market cleans out the inefficiencies and distortions.
2)
Would these vouchers replace medicaid/medicare or once the price signal is established then medicaid/medicare will become affordable again. (If it ever was)
They certainly would.
Medicare/Medicaid is the single largest government intervention into the market – and masks its “efficient low overhead” behind two lies:
1) If there is an “over-run,” it’s painlessly easy to borrow/tax the difference.
2) Lack of profit means lower overhead cost.
#2 is bogus because the lack of overhead also manifests in lack of fraud enforcement. The system encourages overcharges, and lacks the means to investigate like a private entity would.
I bring you two examples:
Male – late 60′s – breaks his shoulder in a fall. Medicare is billed for “surgery,” when no surgical procedure took place. The man is told that “this will cost less in the long run, because billing it as surgery gets you five follow-up consultations at no additional charge.”
The man required only one follow-up visit outside of his physical therapy.
Female – mid-70s – had suspicious mole removed. Medicare billed for SIX moles removed. She likes her doctor, and is afraid of turning him in, but hey, it’s not like it’s her money, right?
Such shenanigans would NEVER happen with private insurance.
(the above examples are in fact people I know personally – the facts in the anecdotes are indisputable.)
Ike,
“Such shenanigans would NEVER happen with private insurance.”
Say female knows doctor charges for 6 and doc pays female to keep quite. This is insurance fraud happens everyday under private insurance. So have to disagree there.
Sticking with the subject, how will the vouchers keep people from free riding. I mean if we give them vouchers or pay with medicaid what is the difference? They don’t pay and don’t care about prices and consume too much health services.
Ike,
You’ve put some really good comments up on this blog, but I can not relate to this:
“It will be far cheaper to provide vouchers for those who lack resources once the free market cleans out the inefficiencies and distortions.”
Why do people (those who) lack resources? Shouldn’t that be addressed as the major problem and not side slipping off into providing for them?
Of course, once you reign in the costs and the economic drag of taxation, then there will be fewer people in the “lacking” category.
In one respect, we already provide for those who lack resources for preventative care. Hospitals simply write off the costs.
Your point is made.
(and thanks for noticing my infrequent and humble contributions. I’m a communicator and not an economist, but once someone declared that “we’re all Keynesians now” I figured I needed to bone up to prove otherwise. This is the smartest place I know to hang out and swap ideas, bar none. I merely hope to hold my own.)
“we can pay for the people who choose not to buy insurance without bankrupting the state?”
There is a lot of cost shifting inflating your insurance premium, but <2% of your premium goes to paying for the nonpaying uninsured. Almost all of the cost shifting goes to paying for those insured by the government (Medicaid and Medicare), because government frequently underpays providers.
Most of the uninsured pay their bills (and when they do, frequently pay more than the insured). It is not immoral or necessarily irrational not to have health insurance. I would argue that the uninsured play a useful role for all of us by their incentive to shop and negotiate lower health care prices, and by requiring insurance companies to compete with the consumer option of not buying anyone's insurance product. They retain for us the last remaining vestige of how health care consumption should occur.
But most important, it is the right of all of us to NOT buy insurance.
Finally, Ike Pigott is right–it is the prepayment (and nonpayment) financing of health care that is responsible for most of the price inflation. And price inflation is the self perpetuating reason consumption without insurance seems nonviable for most of us.
I thought my taxes went to “paying for the nonpaying unisured” through medicaid and medicare.
I know it is our right not to buy insurance, but does this create an externality and free riders? My insurance premium is higher and/or taxes because of the non payment of these people. I think many can afford to buy it but don’t because it is their “right.” However I also know many that don’t buy insurance but still have money to go out for dinner and beers every weekend.
‘I thought my taxes went to “paying for the nonpaying unisured” through medicaid and medicare.’
Actually, those in Medicaid and Medicare are counted as “insured.” The “uninsured” include those who have NEITHER private insurance, nor Medicare, nor Medicaid, nor other government programs (Veterans Health Administration, Indian Health Service, etc.).
People who are eligible for government programs but have not bothered to sign up are counted as “uninsured” even though they can sign up instantly and (in the case of Medicaid) retroactively whenever they get sick.
“I thought my taxes went to “paying for the nonpaying unisured” through medicaid and medicare.”
Nope. Medicaid and Medicare are considered insurance. So, by definition (the same definition used to come up with “47 million”), no.
“My insurance premium is higher and/or taxes because of the non payment of these people.”
By <2%. Any idea how much higher your grocery bill is due to shoplifters or grocery company charity programs? How about that TV you bought at Best Buy? How about 200 years ago when physicians would charge paying customers more so that they could make up for their nonpaying customers?
Shall we try to compare that <2% with the cost to you of increased prices through government created third-party financing?
"I know it is our right not to buy insurance, but does this create an externality and free riders?"
Probably. It is unlikely, however, that those inefficiencies compare to the ones caused by a government solution to those inefficiencies.
Thank you for all this info viking vista et al.
What I am trying to discover, I guess, is does the “economic/economist’s solution” to health reform still include medicaid and medicare?
If under a new system we lump the “uninsured with those in medicaid/medicare” will we see too much free riding? Leaving the tax payer picking up the bill as we do now?
Have no fear Don, P. Obama is working on solutions to these unmet needs. In the mean time keep all of your receipts for potential future reimbursement! As a quasi government entity an Acorn representative will be contacting you in the future to arrange delivery of goods and services needed to sustain a quality life! Don’t fret if it takes until your near starvation for them to reach you. You know the glacial speed that government moves.
Don, I’ll take a stab at fielding that one.
Because health-care costs are hard to budget with certainty.
We know how much groceries ought to cost per month.
We know how much transportation ought to cost per month.
We know how much utilities ought to cost per month.
But healthcare is an outlier, because it can be zero for four months and then shoot up because of an expensive antibiotic. (Of course, in a real free market, those antibiotics wouldn’t be that expensive, but our reliance on insurance allows us to rationalize that $10-copay saved us from a $200 hit instead of a $60 one.)
With no real basis for budgeting or averaging, the average American will gladly pay (either out of pocket or using unseen employer dollars that affect total compensation) a steady amount, with the knowledge they won’t hit the bankrupt slot on the Wheel of Fortune.
Oh — but people are going bankrupt anyway! That’s what I’m seeing in all the single-payer argumentation.
What it boils down to is we’re lazy, and as a whole, too stupid to calculate how badly we’re ripping ourselves off to feel “safe.”
There… I said it. What do I win?
Ike,
You said
“Oh — but people are going bankrupt anyway! That’s what I’m seeing in all the single-payer argumentation.”
Can you please elaborate?
Are you saying that people in single payer countries still go bankrupt?
If you see my post above, this is the current battle in my head.
Thanks
No. From what I understand Ike is saying is that single payer defenders argue that in the current competition based system people go bankrupt. Ike is not arguing that people go bankrupt in a single payer system [but, I add, the government might go bankrupt].
Right, that is how I understand the argument. Don’t they have a point though with the bankruptcy? That is what I am asking above about who will pay for those who don’t buy insurance? I am assuming Medicare and Medicaid will remain in place for many years to come.
Neither Medicare nor Medicaid are sustainable. They are not insurance, they are wealth-transfer disguised under bogus IOUs.
The “crisis” that’s looming has to do with how close we are getting to the final step in the Medicare Ponzi Pyramid.
“Right, that is how I understand the argument. Don’t they have a point though with the bankruptcy? That is what I am asking above about who will pay for those who don’t buy insurance”
Of those who don’t buy insurance, only those who consume health care without paying, cost you anything. And most of those costs (in the form of cost shifting, even exclusive of the high cost of taxes), are due to those covered by the government.
In short, the uninsured (as opposed to those insured by companies or governments) are not a significant problem to you. Their mere existence, and the mythology about them, is a great asset, however, to power lusting politicians.
With regard to bankruptcy, you suffer it when you don’t have sufficient money to pay your bills. Money is fungible. You will find in systems with socialized health care, that when somebody does go bankrupt, nobody chooses to attribute their insufficient funds to the years of health care taxes they’ve been paying.
Also with regard to bankruptcy–very expensive health care, those things that cost tens and hundreds of thousands of dollars per event, and for which you anticipate a significant improvement in morbidity or mortality (as opposed to many cosmetic treatments), are for almost everyone, CHEAP. The proof of that is in the premiums for high deductible insurance.
Gaucho is correct.
Many of those advocating a Universal/Single-Payer system believe it will decrease the number of personal bankruptcies. They cite anywhere from 40-60 percent of all personal bankruptcies are related to catastrophic illness (and the accompanying treatment costs.)
They even point to data showing the number of those bankruptcies which occur in households that have insurance; instances where the greedy companies refuse coverage.
My point here is two-fold:
1) The people who over-buy insurance because they are too lazy to budget properly are getting hosed at both ends.
2) Transferring the costs of catastrophic healthcare from individuals to a single collective account will not reduce the amount of debt.
Say an expensive medical event occurs when I’m 67 years old. Medicare pays 80%, which allows me to avoid bankruptcy. How does that 80% of the cost of the medical event compare with the 2.9% (half tax-free and compounded with interest) of every wage that I have ever earned in my entire 43 years of working? Did Medicare really save me from bankruptcy?
Money is fungible. If coercive monopolists really believed, as they say, that people have to be protected from their own bad judgement and planning, then why wouldn’t they instead advocate forcing me to save for my own future, in my own private accounts? Clearly they are interested in something other than saving me from myself.
“Because health-care costs are hard to budget with certainty.”
Health care is not unique in that regard. Consider car or house maintenance. If you’re a farmer, consider the weather. Employment and income is another.
Life is full of such things. The market has (i.e. people have), over the centuries, developed very good solutions.
I agree, and in my haste to type left out the key difference.
The variability in healthcare costs has higher amplitude.
If your car breaks down, it can cost you $50, or $500, or even $5-thousand. But it won’t cost you $50,000 – because you can total out the car. Same with a home, but with different figures.
With a human body, you never know. It might be cancer, and it might be a heart valve. Or it can be a bandage.
Fact is, we’re an innumerate society. We try to insulate ourselves financially from outcomes that are far less probable than the degree of protection offered.
Even if the amplitudes were unique, and I disagree that they are, the principle and therefore ways of dealing with it are quite the same. I am very unlikely to suffer a health care cost comparable to totaling my house. Likewise if I am a farmer in a drought, or if a blight strikes my crops. Likewise if I am unemployed for a year or more.
I can agree with you, however, that health care is one of those kinds of low risk, high event cost problems.
People have been dealing with such things for centuries. There is nothing new. There have been innovations, like insurance, that provide options for dealing with such issues.
Specifically for health care, one great recent innovation is the HSA. It makes costly health care events readily affordable, encourages self-insurance against age-related risks, and imposes an efficient consumer-oriented price structure on routine health care consumption.
We’re in agreement.
You are unlikely to suffer a healthcare cost akin to losing your home. But the majority of people act as though they need tremendous amounts of coverage because cancer will hit them tomorrow.
I love HSA’s, and for years was one of the only employees in my office participating in flexible spending accounts.
My point regarding amplitude is that people are scared of the potentially limitless cost ($2-million for catastrophic injury or transplant) of the insanely improbable – whereas with a house, you are not likely to purchase a million-dollar plan for a $200,000 property.
I think it has to do with two things: Large variance, and the sense that that variance is not under the control of the consumer.
Grocery needs are stable, and to the extend that they are not they are dependent primarily on the preferences of the consumer. Furniture needs are dependent primarily on the preferences of the consumer. So are most other “needs.”
There is a widespread sense that health expenses are dependent less on the preferences of the consumer, and more on random factors, such as random incidence of disease. “Random” here means not only “unpredictable” but also “outside the control of the consumer.” For example, if you are diagnosed with Type-I (“juvenile”) diabetes at age 10, you will have larger-than-normal health care expenses for the rest of your life, predictable after the diagnosis but not subject to your control.
This “widespread sense” is partially correct. Obviously, some health care expenses are due to consumer preferences (lasik vs. glasses, cosmetic surgery) and some are due to lifestyle choices (treatment for smoking-related diseases) but quite a lot of it is due to random factors beyond the control of the consumer.
Of course, we could insure against such expenses, and if health insurance were more like fire insurance, that’s what we’d be doing. But sometimes the expenses are beyond your control but known in advance — like an adult who was diagnosed with Type-I diabetes as a child. The normal insurance process doesn’t allow for insurance against that, because it’s known in advance. But there is a “widespread sense” that since it wasn’t this adult’s fault, s/he should be protected financially against that outcome.
N.B. Type-I (“juvenile”) diabetes is not related to lifestyle, diet, or (as far as anyone knows) genetic factors. Don’t confuse it with Type-II (“adult”) diabetes which is strongly related to both genetic and lifestyle factors.
“But there is a “widespread sense” that since it wasn’t this adult’s fault, s/he should be protected financially against that outcome.”
Yes, there is the sense by some that some people’s problems should be made the problems of other people.
What is overlooked in that analysis is the effect on prices of the financing regime. The assertion that someone cannot afford their own health care expenses is of course dependent upon how much that health care costs. The growth that we have seen in costs is NOT, for the most part, due to a growth in Type I diabetes or similar ailments, or even to the innovations in their treatments. Only about 10% of the growth is attributable to demographics. The growth is almost entirely due to excess health care consumption. And that will continue to grow, because the excess is free or very cheap to those making the decisions to use it (or worse, demanded by people who feel that they have already paid for it).
Correcting the current problems of health care financing would result in a more efficient price structure for consumers. That would disproportionately help those you are talking about–those who spend the most on health care services.
The other approach–spreading the problems around–perpetuate the current growing problems in financing by subverting the price mechanism by preventing cost-benefit decisions by the consumer.
Such a sense has been promoted, particularly among the left, because it has great emotional appeal. Anecdotal support can be particularly poignant and heart tugging.
Think of the old people, think of the poor, think of the children, and especially think of the children of poor people.
It’s all about moving the nation toward single payer just about everything.
Dependency justifies further dependency.
Nobody stops to think that if we cannot afford health care, then we cannot afford health care. It makes no difference if the government, which has no funds of its own, pays for us. More specifically, it is a clear fallacy that the young can afford to pay for the health care of OTHER old people, but not for themselves in their own old age.
I think there’s a huge time factor in play here, and let me explain. Given the U.S. median age, the majority of citizens have grown up with Medicare and Medicaid in effect. They’ve heard very, very little public discourse arguing against either program….and certainly little debate on any of the excellent points that Prof. Boudreaux raises.
So the only reality that most people know, then, is that the government pays for the health care of the old and the poor. The fundamental selfish question, then, is “What about me?” Hence this plea for somebody/everybody else to pay for my health care.
I think this factor lays the groundwork, then the “rationale” kicks in of how expensive health care is….how other countries provide “free” health care…the number of bankruptcies that may result from health care issues…etc.
“the majority of citizens have grown up with Medicare and Medicaid in effect”
The programs are both unjust and unsustainable. What is worse, all solutions are unjust because they involve the government breaking promises or transferring wealth to subsidize changing or phasing out these programs. But the best solutions are at least only transiently unjust, and may reflect less of an unjust cost than people would otherwise experience by their continuation.
I think it’s because we’re not willing as a society to let people die because they can’t afford health care. Thus, emergency rooms are required to treat everyone. Given that guarantee, the health care debate is really over how to maximize health and minimize costs.
Robert Book has it right. A very thoughtful and generally libertarianish/lefty blogger, Jim Henley, goes further in a thread here:
http://highclearing.com/index.php/archives/2009/09/07/9869
I have some comments, but as you can see these are not so well received by the mostly-lefty commenters on the site.
It’s hard to sustain the empire and provide health care to those that can’t afford it.
Trying to do both is liable to bring the whole system down.
The question is: If we didn’t have to support the empire, the MIC, a large bureaucracy, would we have any difficulty providing charitable medical care?
I think not.
Because of the widespread belief that in this country, tax money should be used to provide some baseline of food, shelter, warmth, etc., so that people on the street do not experience pain from hunger, shiver from the cold, or throw up from heat exhaustion.
When that gets applied to healthcare being provided to people, it naturally means that most people agree everyone should get that amount of healthcare that would keep them from experiencing acute discomfort and pain and keep them from dying, if possible. Because we as a society feel this way and pay for it already, a better system than the one we have now is sought. That is why.
Excellent!
If, before launching into predictable knee-jerk remarks, you at least finish reading the sentence you are responding to, then you might avoid being asinine:
“…in the same way that we provide for our own grocery needs, our own household-furniture needs, our own automobile-insurance needs, and many other of our needs?”
Your answer ENTIRELY misses the point.
Because no one, generally, goes bankrupt or dies because they are unable to pay for those things listed. Don’t make me go Hayekian on you…Oh well TOO late;
“”Nor is there any reason why the state should not assist the individuals in providing for the 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.”
F.A. Hayek
Muir–
You and Billford are saying, that you think the reason that almost all people in this country purchase health care services through third party insurance, is because “tax money should be used to provide some baseline”.
That is a complete non sequitur. The reason you need to read before you post, is so don’t make an ass of yourself.
This question is answered at http://www.anthonyworlando.com/2009/07/26/less-is-more-the-ugly-truth-about-american-health-care/ and http://www.anthonyworlando.com/2009/08/22/getting-more-for-less-a-solution-for-american-health-care/
You really need to take a closer look at government-run health programs in other Western countries, both quality measures and cost growth rates. Health care quality data are not clean, or particularly easy to find for controlled comparisons, but you can reasonably infer conclusions in many areas. And what is available does not paint a rosy picture for those systems, compared to what people commonly experience in the US. Irrespective of quality, it seems the Western world has yet to implement a sustainable system. The solutions to what ails US health care are not to be found in Europe or Canada–though there are clear lessons from those places on what to avoid. Singapore has what appears to be a sustainable system with reasonable quality measures, although I find the major component offensive to individual autonomy–a high value which since I refuse to lose it for myself, I certainly cannot deny for others.It appears that in the US, either nothing will happen, or something will happen that exacerbates the financing problem. It seems then, that over the next quarter century or so, we will witness the implosion of Western medicine, which will in itself teach us something. Some of us, anyway.
Could you point to the research that you speak of? I appreciate the difficulty in quantifying a lot of these measures, and I’d like to compare the numbers I’ve seen with the studies you’re citing. Don’t forget, data only makes sense within a model, which is why I presented a historical and economic framework on my blog.
I’m curious what you mean by “a sustainable system.” I like Singapore’s system too, but the reason it has “reasonable quality measures” is because of its lack of “individual autonomy.” Also, it has a young, healthy population, and its economy has been very strong for the past 40 years. When the population ages and the economy cools…
Your point about individual autonomy is interesting and important. I’m sure Professors Boudreaux and Roberts are especially protective of this right. As a philosophical matter, it’s too complicated to get into here, but as a practical matter, individual autonomy works poorly in the health care market, as shown in Kenneth Arrow’s 1954 paper and the CDHC research I cite on my blog. It’s a joke to think that we have individual autonomy currently; instead of government bureaucrats, we have insurance company bureaucrats — subtly different but certainly not much better. Also, as T.R. Reid pointed out in the Washington Post a few weeks ago, many other Western countries have more consumer choice than we do. The only thing that would increase individual autonomy would be CDHC (which, put another way, means eliminating the employer tax deduction), but as I said, on its own, CDHC has a mixed record.
Thanks for your feedback!
You’re not wrong about ‘insurance company bureaucrats’. But the way to deal with that is to abolish state laws that stop people taking insurance across state lines and so enable many insurance companies to establish local monopolies, making them monolithic and bureaucratized. Repealing these laws would solve the bureaucaracy problem.
I’m not against that idea, but the problem is that insurance is regulated differently in different states, like community rating. If we are to do this, we need to establish a set of federal regulations for insurance companies, which is actually one of the aims of the bills currently under consideration in Congress.
Also, I should point out that eliminating local monopolies would be a big step forward, but it still doesn’t give us “individual autonomy.” How much care is rationed to us would still be dependent on “insurance company bureaucrats.”
I’m sorry Mr. Orlando, but im having a little trouble with your first article that you left a link to. You see, I’m confused by the fact that on the one hand you describe powerfully the enormous waste in the American system and all the ‘unnecessary’ treatments, but any attempt at fixing this problem- for example, HSAs which remove moral hazard- you deride because they force people to cut back on ‘necessary and unnecessary’ care.
I’m sorry but I don’t know which one you want me to believe.
If there is so much waste in the healthcare system, then doctors, when facing patients with HSAs, would cut back on all the unnecessary stuff and provide only what is absolutely necessary to cure the patient.
The patient may not know which treatments are necessary and which are not, but the doctor does and only by providing the best treatment at the lowest cost will he get a patient to return to his surgery and not go somewhere else.
Therefore, a moral hazard caused by a third-party paying is the only reason why we would see unnecessary treatment and the biggest moral hazard is to be found in schemes like medicaid/care which you yourself call ‘socialized medicine’. You even admit in your second article that HSAs do actually solve the problem of moral hazard.
A case for less, not more, government intervention, don’t you think?
I agree that HSAs are part of the answer, and the moral hazard of employer-based tax deductions is one of the primary problems with the system. However, the evidence that I highlight in my second article shows that HSAs do indeed result in consumers cutting back on “necessary and unnecessary” care. The reason isn’t because doctors are cutting back on the wrong care, but rather because consumers don’t go to the doctor as much as they should. As Arnold Kling might say, consumers aren’t cutting back by “voice,” but rather by “exit.”
All of which means, yes, we should have less government intervention for some illnesses — the kinds that consumers are good at balancing with out of pocket costs — but we should have government coverage of illnesses where consumers can’t tell the difference between necessary and unnecessary care, like chronic conditions. (See the quote by Ezra Klein re the French system in my second article.)
“I agree that HSAs are part of the answer, and the moral hazard of employer-based tax deductions is one of the primary problems with the system.”
That is not the moral hazard of HSAs, that is the moral hazard of health care as the Federal government has defined it since WWII. There is no change in moral hazard by shifting to HSAs. Another very good reform would be to replace the employer benefits tax exemption with a revenue-neutral personal income tax cut. But that is reasonably treated as a separate issue.
“consumers cutting back on “necessary and unnecessary” care. ”
The reason health care consumption is inefficient, is because people have no incentive to personally economize. But such economizing REQUIRES people will be spending less on health care.
As to whether you or some expert thinks the person is making the wrong decision regarding health care versus some other kind of consumption is really not a judgement that you or anyone else is capable of making, since your values are not the values of the decision-maker. If you WANT to know what his values are, then simply look at what he chooses to buy.
I agree with your first point. That was exactly what I was saying. I did not say that there was moral hazard with HSAs. I made the same point as you: moral hazard is part of the employer tax-deduction system created by the federal government during WWII.
To your second point, I’m defining “necessary and unnecessary” based on “evidence-based medicine.” It wasn’t a value judgment. People can cut back on some care and not experience worsening health, but other care (“necessary” was the word I used) is essential to maintaining optimal health. Consumers are bad at telling the difference.
Again, thanks for pushing back on these points!
A few more things:
The federal research agencies only account for 4% of new drugs, so they can’t be responsible for ‘big medical breakthroughs’- private companies are.
The reason why infant mortality rates in the US are high is due to many more premature births (which are caused by certain ethnic and social factors)- not due to worse healthcare.
From the name I can guess that the reason the VHA does well with universal coverage is that it caters for a relatively small group of people, the veterans, with comparatively similar risks and illnesses.
Most drugs aren’t created by federal agencies, at least not in the form that they reach the consumer, but most drugs that reach the consumers began as federal research. As Marcia Angell puts it, “[The] pharmaceutical industry is not especially innovative. As hard as it is to believe, only a handful of truly important drugs have been brought to market in recent years, and they were mostly based on taxpayer-funded research at academic institutions, small biotechnology companies, or the National Institutes of Health (NIH). The great majority of ‘new’ drugs are not new at all but merely variations of older drugs already on the market.” As Gordon Tullock showed several years ago, we’d probably be much better served by a system that motivates pharmaceutical companies by prizes than patents.
Can you point me to the research you’re thinking of for your points about infant mortality rates?
Yes, that is probably part of the VHA’s success, but don’t forget that the VHA was quite unsuccessful until the late 1990s; we can still learn a lot from the changes they made. Also, other countries with similar systems (and very different populations) have similar records of success. In any event, as I point out in my second article and my comments above, we’d probably be better off by having a hybrid VHA/HSAs system.
Thank you for all this feedback!
Answer: “I don’t like to think for myself and I want everyone to take care of my needs.”
The President answered all 4 of your questions tonight. Hint… we don’t think like economist… and that’s a very very good thing.
“It, too, is part of the American character. Our ability to stand in other people’s shoes. A recognition that we are all in this together; that when fortune turns against one of us, others are there to lend a helping hand. A belief that in this country, hard work and responsibility should be rewarded by some measure of security and fair play; and an acknowledgement that sometimes government has to step in to help deliver on that promise.”
“others are there to lend a helping hand”
Of course he’s lying. He doesn’t really believe that. If he did, he wouldn’t think it necessary to coerce people into doing so. In fact, if he did, he wouldn’t need to do anything at all except get out of the way.
The argument is that people who need medical services will go to an emergency service and impose costs on others. The counter is, why not make those guys pay for their own emergency services?
The uninsured who go to emergency rooms ultimately pay most of their bills. To the extend they don’t, your private insurance premiums are increased by <2%.Emergency rooms ARE flooded with frivolous complaints. And there is a tremendous amount of cost shifting from them, that increases your insurance premiums substantially. But those people are not uninsured. They are insured by the government.
Do you provide your own military needs? Police service needs? Sewer needs? Don’t be an ass
“….providing for our own health-care needs in the same way that we provide for our own grocery needs, our own household-furniture needs, our own automobile-insurance needs, and many other of our needs?”
[Late] Answer:
Because government hasn’t interfered sufficiently in those markets (yet) to warrant this level of interference.
This is The Mob, writ large.
And not nearly as effective. At least La Cosa Nostra has cultural ethics, and are quite good businessmen. I prefer to do business with voluntary gangsters rather than government ones.
And they’ll give me a quick answer for “end of life care.”
I recently came across your blog and have been reading along. I thought I would leave my first comment. I don’t know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Margaret
http://lotterymegamillions.net
I was lumping together the unisured and insured by the gov’t as “unisured”. Because, I believe that many on medicaid go on medicaid only after getting in a accident and had not purchased insurance.
Also I am not quite sure on what economist propose as health care reform. I undertand the bit that people need to pay more out of pocket, but do the economist want to eliminate medicaid and/or medicare or after prices fall then medicaid/medicare will become affordable to the wealthier society?
The financing scheme is by far the most important factor in costs. More important than talking about an ideal system is to talk about what should be done now to address the cost problem.
I would start by replacing Medicaid with a voucher system. There would be no such thing as a “Medicaid provider”, so Medicaid would become completely transparent to physicians and hospitals. Those on Medicaid would directly get funding into an account of their own. They would then consume health care from sources of their own choosing, and could use money from that account to pay for health care services. The most important thing–whatever money they did not spend, they could keep for themselves.
I would also allow a private investment option for the Medicare wage tax. Working people could choose to place that money into their own private retirement HSA if they want. And of course, almost everyone would want to after doing the math. The remaining Medicare program would constrained to self-funding and isolated from the general budget, except for a phase out period for those currently above a certain age.
The 3rd piece of the puzzle is already in place–the HSA. It is growing rapidly. Eventually it will be the primary means by which people fund their old age through the cost savings of their youth.
So the idea with the voucher is if they can keep the money if they don’t spend they will “shop” around for prices or even not go to doctor at all?
I can see that providing the right sort of incentive; however, with such large expenses such as cancer or such there will be abuse, but the reducing cost issue will be addressed. Do you believe that the voucher system could generate momentum politically? I mean school vouchers have not gained momentum, have any voucher system?
School vouchers have been stifled because they are a threat to the public teachers unions (or more accurately, because they will result in parents choosing better schools, which are frequently not public schools).
I don’t see that same direct self-serving opposition to voucher systems for welfare (like Medicaid). Of course, there will always be the communist element that knee-jerk opposes anything that serves to empower the individual, but that is it. Government power mongers need not be particularly threatened by it, since they would control HOW MUCH money to provide (thereby being able to maintain government spending and power). Medicaid providers are by-and-large, not particularly happy with the low reimbursements–and almost all are also private providers, so are not likely to be a significant opposition.
You’re talking about the “potential” for fraud in the current system, where the patient is complicit.
I’m talking about fraud that is ongoing NOW, where the patient has no say or financial stake in the matter. My examples are NOT hypothetical.
The point is an illustration that “Medicare has lower administrative costs” is a red herring, because it tolerates far more in fraud than a free market solution would.
|> Say female knows doctor charges for 6 and doc pays female to keep quite [sic].
How much would the doctor pay the patient for her quietness? Enough to cover her increase in premiums?
If the doctor makes it a habit to overcharge the insurance company, wouldn’t said company (who is not only Evil, but also Greedy) not realize that some doctors seem to demand payments significantly higher than the norm?
If the patient makes it a habit to take bribes from doctors, how many insurance companies will said patient have to defraud before the patient becomes uninsurable?
Will private insurance completely stamp out fraud? Of course not. But there are some very good feedback mechanisms to curtail it.
I was not talking about the potential fraud, this type of fraud does occur and will occur under any system.
I understood your fraud was real and is also terrible. I also agree that there would be less under the free market solution, however there will be fraud where you said there would NEVER be.
I agree
Insurance companies don’t ration care, they make decisions about their contractual obligations to pay (without having any power to prevent you from consuming by other means)–with appropriate denials reflected in the premiums they must charge. Insurance is a product, which for the time being at least, we still have the option of buying. It is not a requirement for health care consumption–and as people are figuring out in growing numbers, it isn’t even a good deal for consumption in the way people traditionally use it.
When a controlling legal authority unhindered by any kind of voluntary contract and able to compel membership tells you without recourse the limits of your consumption, THAT is rationing.
Many local markets are plagued by unfair competitive advantages. God knows why anyone in their right mind who recognizes that problem would suggest we need to institute MORE unfair competitive advantages that are even LESS constrained by market forces.
Thanks again for the great feedback! I should point out that my proposed solution includes HSAs, so I am supportive of freer markets for at least part of the health care market. The answer to your final paragraph is that, even without the trouble of local monopolies, there would still be significant market failure (asymmetric information, moral hazard, and adverse selection).
I see your point about rationing. All I was saying was that both systems — either private insurance or government-run care — a third party determines what is “cost-effective” to cover, and you have to pay the rest. That latter part, of course, is rationed by price — which is to say, the consumer’s ability to pay.
It isn’t for you or I to decide that everyone MUST value “optimum health” over all other consumption goals.