It is one of the best health care papers in recent times, it is here, I cannot find an ungated version. Glied reminds us that only about 1/3 of American health care spending comes from private insurance. Moving to international comparisons, the more general point is that:
…there is no persistent and regular relationship between the structure of system financing and the rate of growth in per capita health expenditures in a health system…the efficiency of operation of the health care system itself appears to depend much more on how providers are paid and how the delivery of care is organized than on the method used to raise the funds.
In other words, as I’ve stressed before, the health care cost problem comes from immediate suppliers, namely doctors and hospitals, and not from health insurance companies.
The best parts of the paper concern equity. It is GPs which help the poor, not additional spending on technology or surgery; see p.18 for other comparisons along these lines. Furthermore, and this you should scream from the rooftops, consider this:
…patterns of health service utilization in developed countries suggest that the marginal dollar of health care spending — money used to purchase high tech equipment or specialist services — is less progressively spent than the average dollar.
In other words, egalitarians should not allocate marginal government spending to health care. And there is evidence that the more a government spends on health care, the less it spends helping people in money ways. That is, there is crowding out.
Finally, Glied offers a summary comparison:
Putting $1 of tax funds into the public health insurance system
effectively channels between $0.23 and $0.26 toward the lowest income
quintile people, and about $0.50 to the bottom two income quintiles.
Finally, a review of the literature across the OECD suggests that the
progressivity of financing of the health insurance system has limited
implications for overall income inequality, particularly over time.
Highly recommended.
Defenders of America’s current health care system often point to the waiting times for hip-replacement surgery as evidence of our system’s superiority. “Americans can get new hips in a matter of days,” they boast, “while the Canadians and Europeans have to suffer for months until their socialized medicine comes through.”
What this argument overlooks is that private insurance pays for only a small percentage of hip replacements in America. Most are paid by Medicare, and the remainder are mainly Medicaid.
IMHO In the discussion of healthcare we should always make clear the distinction between costs and spending. I have heard some economist say that costs are not rising but spending is rising. Cost may be to too high due to excessive licensing but I understand that we are getting more and better treatments (probably more than it beneficial) and that this is the real problem.
So did Tyler really mean to say “the health care cost problem† or the health care spending problem? He could mean the health insurance cost problem since it is difficult to buy insurance that does not cover too much (although my Blue cross policy seems reasonably affordable at $303/month for my family of 4, one of us a breast cancer survivor and who also had a $30,000 bill for another condition 2 years ago).
Frank,
As always, you’re a thoughtful commenter regarding the social welfare implications of particular policy prescriptions. But your perception of libertarian skepticism is quite off-topic, and possibly straw man. Libertarian skepticism of state power as a means of improving social welfare is not categorical, at least not on this blog. This skepticism simply acknowledges that a solution based on state power is bound to have negative public choice implications that are generally ignored by policy prescriptions at hand, and that the liberty interest of individuals place the burden of proof on those advocating for state power (including accounting for public choice considerations) before the experiment actually begins, not on those who would be the unwilling subjects in the experiment.
“egalitarians should not allocate marginal government spending to health care”
But should we allocate it to ~primary~ care?
Of course, you like the paper that supports exactly what you think already.
Paul J. Reber wrote:
My own intuition is that it’s not that helpful to focus exclusively on the overall cost of healthcare. If we get progressively better healthcare at increasing costs, I think that’s acceptable.
Do not forget that the returns to healthcare beyond the really cheap basics like vaccinations, antibiotics, emergency care and food fortification are very small. They may even be smaller that the benefits to health from being a little richer in non healthcare ways (like being able to afford a newer safer car or to live in a more rural area or join a workout club, or to work a safer job). Also the poorer one is the more one would presumably be willing to trade health and longevity for more money (fishermen and coal miners come to mind).
Paul J. Reber wrote:
The health care provided to the well-off in the US is also doing pretty well overall. The problem is that the not-well-off do very poorly in the US system. But rather than frame this as just a problem of reducing inequality, I think it would be better to focus on the direct question of how to make healthcare better than it is for the poor.
Some studies have shown that the difference in health between the rich and the poor is even greater in Canada, Australia, New Zealand and the UK than in the USA. Some people have proposed a reason for this is that if you are of the low classes in society it is good for your doctor to see you as walking dollar sign.
A visit to a GP costs 3 to 5 times more in the US than in France. Malpractice insurance costs are often used as an explanation, but the median income of medical doctors after deducting said insurance is $250K/year.
The root cause of the health care crisis is pretty clear: providers have organized themselves into a cartel. The solution is to break up the AMA, transfer licensing to a truly independent authority rather than a doctor’s trade union. The transition would be rough, but could be handled using military doctors to vet med school programs much as Reagan used military air traffic controllers to break the ATC strik in the eighties.
This sounds like a very valuable paper. However, though I have only your quotes to go on, it seems to me you are drawing lessons from them that the quotes do not support.
the marginal dollar of health care spending — money used to purchase high tech equipment or specialist services — is less progressively spent than the average dollar.
“In other words, egalitarians should not allocate marginal government spending to health care.”
It does not seem to me that that is what the quote is saying. If I understand it correctly, it is merely saying that funding for basic services and general practice is more likely to benefit the poor or medically-underserved (however you interpret “progressive” vs. “regressive” healthcare) than is money for high-end resources. This could be true for at least a couple of reasons: the less-privileged segments of society lack basic services as well as access to advanced care, and must get basic services before advanced care is even meaningful for them, so of course marginal investments do not benefit them immediately until the basic-care gap has been closed; or, given the gap between the privileged and under-privileged in access to basic care, which serves as the gateway to advanced care, investment in high-end services will only benefit the more privileged, who are the ones who get the tests and referrals that make it available – and so, again, such investments will be regressive until the basic-care gap is closed. But neither of those explanations, or the phenomenon of regressivity in general, warrant the conclusion that we should never invest in high-end care. The obvious solution would seem to be to invest as much as is necessary to ensure universal basic care, and then add in marginal dollars to the extent we think we can afford them. In other words, the solution to the problem of unequal benefit from marginal investment is not to abandon advancements in high-end infrastructure entirely, but rather to eliminate the causes of the unequal benefit.
“there is evidence that the more a government spends on health care, the less it spends helping people in money ways. That is, there is crowding out.”
Well, that would have to be true. It is true for any two categories of expenditure. (Recall “guns vs. butter”?) That is not an argument against healthcare spending, or against government as a source of healthcare spending. It is simply an observation that all spending decisions take place in the context of a competition among global budgeting priorities.
Putting $1 of tax funds into the public health insurance system effectively channels between $0.23 and $0.26 toward the lowest income quintile people, and about $0.50 to the bottom two income quintiles. Finally, a review of the literature across the OECD suggests that the progressivity of financing of the health insurance system has limited implications for overall income inequality, particularly over time.
As she notes, the former sentence implies that government-funded healthcare provision is “modestly redistributive”, in the progressive direction – which is a good thing. The second sentence merely implies that healthcare expenditures, while progressive in terms of the distribution of healthcare resources per se, are not a mechanism for overall income redistribution – which is hardly surprising, because they are in general not meant to be. For those who seek redistributive economic policies, this means only that healthcare stands aloof from any such goals; for those who oppose them, this means that they have no grounds for opposing publicly-funded healthcare out of fear of its possible contribution to the collapse of class barriers. These also are good things.
Is the individual market even insurance? Insurance is the pooling of risk. (Or is my understanding and definition too simplistic?) Can an individual form a pool? Some may say compare individual insurance to auto insurance. But state mandate that every car owner have insurance. Therefore costs and risks should fall on a per capita basis because they are spread over de facto pools of drivers and further segmented by neighborhoods, age groups and vehicle types. Do so-called individual health insurance polices work in a similar fashion?
“the efficiency of operation of the health care system itself appears to depend much more on how providers are paid and how the delivery of care is organized than on the method used to raise the funds”
and
“In other words, as I’ve stressed before, the health care cost problem comes from immediate suppliers, namely doctors and hospitals, and not from health insurance companies.”
“how providers are paid” and “how delivery of care is organized” are bother based upon what insurance will cover which is based upon what medical coders code for what care providers provide based on what insurance will cover. insurance runs the business.
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