Would Hayek have favored Obamacare?

by on February 15, 2013 at 6:50 am in Medicine, Philosophy, Uncategorized | Permalink

In this video Nick Gillespie interviews Erik Angner and Erik is (with qualifications) positively inclined.   A few points:

1. When Hayek wrote, health care costs were quite low as a percentage of gdp.  The same can be said of early Friedman writings (it is startling how little attention Capitalism and Freedom, dating from 1962, pays to “the problems of old people”).  It is not clear how views formed in that era should be extrapolated to the current day.

2. Angner-interpreting-Hayek draws a distinction between mandates — which are allowed — and price controls — which are verboten.  Yet it is hard to have major government involvement in health care without price controls, or should I write “price controls,” in some manner or another.  Third party payments cannot be made at any prices that suppliers might like.  Single payer systems have to bargain over price.  For that matter mandates have to put some limits on what suppliers can charge for the mandated good, including quality limits.  The results may not literally be the same as legally mandated price maximums but a) it is hard for a health care-subsidizing government to avoid interfering with the price mechanism, and b) when viewed in these terms, it is not obvious why interfering with the price mechanism is worse per se than mandates or redistribution.  Mandates and redistribution also interfere with the price mechanism, the former as shown by economic theorems about quantity-price duality and the latter once you think of an income as a price or the result of a set of prices.

3. To make it quite speculative, I believe Hayek — if fast-forwarded into the present — might favor a mix of forced savings into health savings accounts, cash transfers to the poor, and direct government provision of basic health care services for the very needy.  Whether or not I am right, Hayek is far from laissez-faire on health care.  But I doubt Hayek would have come close to supporting ACA.  Most of all, I think he would have been horrified by the lack of legal generality and universality in the different categories of treatment, coverage, prices, subsidies, reimbursement rates, and so on.  I think he would have seen this as a sign of our legal and philosophic barbarism, noting that I am not trying to put the predominance of blame on Obama here.

Here is Eric’s Politico piece on the same topic.

liberalarts February 15, 2013 at 7:02 am

Another interesting question is whether Hayek would have favored the GOP strategy of refusing to participate in crafting the ACA. It passed without a single GOP vote and then had to make final passage in its rough draft form, due to the Democratic loss of their 60 seat majority in the Senate (via Scott Brown). I believe that had the GOP gone to the table, the law could have and would have been different. No one ever mentions this anymore, so maybe I am remembering it wrong, but I am pretty sure that the Democrats and the president would have preferred a bit more of a compromise law that had bipartisan support, rather than a one vote win on a partisan bill.

Matt February 15, 2013 at 9:19 am

I doubt the Democrats would have preferred any such thing, as they rather prefer that the Republicans go away and never return, but you’re spot on about the general breakdown in the Republicans’ abilities at the political game.

jb February 15, 2013 at 10:21 am

“Another interesting question is whether Hayek would have favored the GOP strategy of refusing to participate in crafting the ACA.”?????????????? the “crafting” was done behind closed doors of the Dems in the HofR. Hence, the einstein-like statement: “we have to pass it to find out what is in it”. but nice try.

Andrew' February 15, 2013 at 10:38 am

The President has the initiative on legislation. It is a special kind of intellectual…gymnastics(?) to claim the legislation would have been better had half of one house of Congress gone along with the President’s desires to fiddle with healthcare in the middle of a depression when the government could have done something about the economy. More likely he’d have gotten more of what he wanted, which would have made it even worse.

Michael Cain February 15, 2013 at 3:22 pm

“…the “crafting” was done behind closed doors of the Dems in the HofR.”

Yet what was eventually passed was the Senate’s bill, which differed from the House bill in many ways. For example, the House bill contained a public option and the Senate bill didn’t. The loss of the 60th vote in the Senate meant the Dems couldn’t pass any version that came out of a conference committee, so the House Dems’ choices became “pass the Senate bill unamended” or “pass nothing.”

ThomasH February 15, 2013 at 1:40 pm

It’s not clear what more the Republicans could have contributed. ACA is modeled on the systen that Republicans had previously favored and which Romney implemented in Massachusetts, and the have not been able to articulate how they think it should have been different. “Repeal and replace” with what?

Mike February 15, 2013 at 9:16 pm

That’s not really an interesting question at all. Just a chance to gripe that Republicans aren’t Democrats.

mulp February 16, 2013 at 12:00 am

Geez, conservatives are determined to rewrite history – Reagan never hiked taxes, no GOP votes for Obamacare,…

Republican Olympia Snowe voted it out of committee. A Republican in the House voted for it. And Republican Arlen Specter provided the critical 60th cloture vote.

These and other Republicans were punished by the Republican establishment for going against the Republican caucus decision to oppose everything Obama proposed for pure political power reasons, not for reasons of governance. The Republicans in Congress in 2009-10 were not representing their constituents,but instead engaged in election politics on direction from party establishment.

Rahul February 15, 2013 at 7:11 am

It is not clear how views formed in that era should be extrapolated to the current day.

Funny how that dictum so often gets selectively applied to views that one doesn’t like.

Andrew' February 15, 2013 at 8:22 am

To what do you refer?

One thing people often refer to is how ‘we’ “worship” the founding fathers. But I think their arbitrary view of governance is the source of their error. I don’t care that much about what the founding fathers thought. I do care what they signed into law and what that law means. And the law means what they meant. We can change the law. We just can’t legitimately ignore the law or twist the meaning and still believe we have rule of law.

dan1111 February 15, 2013 at 8:58 am

+1

MD February 15, 2013 at 1:21 pm

I doubt they all thought the same thing about what the laws they passed meant.

Dave February 15, 2013 at 7:55 am

Has some one explored why “the problems of old people” were overlooked? What were the problems of old people like in those days? There’s the caricature that granny was left to die in the street but really did happen to granny in both the pre-New Deal and pre-Great Society America?

So much of healthcare is currently driven by seniors. Was that the case then, too? If not, was it because of a lack of technology, a lack of money to pay for the care, or a different culture that thought it was okay if old people died?

liberalarts February 15, 2013 at 8:01 am

@Dave -How about a lack of seniors then? The ratio of senior citizens to young people was much, much lower then. If you made it late into your life, you spent out your money and then moved into your kids’ houses.

prior_approval February 15, 2013 at 8:39 am

Actually, you just might want to look at post WWI and post WWII demographics in Europe. Killing millions and millions of young men actually has a demographic effect in terms of the balance between old and young.

because hayek... February 15, 2013 at 8:04 am

…would have said that anything that goes beyond basic health coverage for the very needy would be what? unnecessary? cruel (to the taxpayers)? an abomination of the free market? Let those poor people die of cancer but not of the flu?

Being a free-market thinker does not make one an a***h***. It is perfectly possible to still have compassion.

“and direct government provision of basic health care services for the very needy.”

LarryM February 15, 2013 at 12:27 pm

You’re kind of missing the “cash transfers to the poor” bit. Certainly there are arguments favoring a public health care system over cash transfers, but favoring cash transfers isn’t inherently a “compassion” issue. Now, if you’re spending less on the cash transfers than you would spend on provision of health care, you can at least TALK about compassion, but I think you’re kind of missing a pretty big argument if you ignore the extent to which Hayek and other similarly inclined libertarians favor cash transfers.

Benny Lava February 15, 2013 at 8:08 am

Posts like this often remind me why I don’t respect economics. Who cares what Hayek thought? Is he God? Why do you treat him like Jesus? WWFHD?

Rahul February 15, 2013 at 8:28 am

Economics as a scientific undertaking must be unique in trying to settle contemporary debates by repeatedly asking “What would long-dead-X have done?”

What makes it more ironic is in a jiffy economists jump to “What does the data indicate?”.

Andrew' February 15, 2013 at 8:46 am

It doesn’t bother me at all. One thing about economics and other soft sciences is that progress can be made and then lost for decades or centuries, it seems, since it is so opinion and marketing-based. This can happen in hard sciences as well (you just don’t have people telling you that you are anti-science if you don’t institute a universal policy based on a single study). You could probably flip the coin and complain that hard science puts way too much emphasis on the recent fads.

Tyler Cowen February 15, 2013 at 9:03 am

It’s simply another way of getting a fresh perspective. I’m not suggesting Hayek has to be right, I disagree with him on plenty of stuff.

Andrew' February 15, 2013 at 9:14 am

That, of course and maybe it’s fine simply because it is a science of thought, like psychology. There is more data because you can record thoughts that are translated into actions. In my aspirational pursuit of ‘hard science’ I don’t have any trouble reading Plato, Cajal, Popper, Hayek(!), Polanyi, etc. Unfortunately I just rarely have the time because the (over)emphasis is on the next pretty picture.

Andrew' February 15, 2013 at 9:16 am

And what about all that nonsense over “scientific consensus”? Hayek has enough consensus for 1000 scientists all by himself.

dead serious February 15, 2013 at 9:47 am

At least he didn’t approach this from a(n Ayn) Randian perspective. A not small accomplishment for a libertarian. So there’s that.

Andrew' February 15, 2013 at 10:39 am

I was going to say I’ve learned more about science from Hayek than I have from my advisor or department. I can say the same about Rand.

Rahul February 15, 2013 at 1:06 pm

….and who chose that advisor?

Crocodile Chuck February 15, 2013 at 3:36 pm

“At least he didn’t approach this from a(n Ayn) Randian perspective”

I wouldn’t be too sure about that, if I were you: http://www.nakedcapitalism.com/2011/09/friedrich-hayek-joins-ayn-rand-as-a-hypocritical-user-of-medicare.html

Greg Ransom February 15, 2013 at 1:52 pm

Econ & public policy & constitutional governance are massively complex. There are a million things to grapple with and think about.

Most people don’t grapple with very much — and they do a terrible job with much of what they grapple with.

It is useful to use a rich and robust worked out view of many, many, many things, and see if the thinker has coherently applied to a special topic, or if his application holds up to analysis.

It gives us a common conversational background network of ideas to use as a manageable background for a conversation.

In this case, it’s interesting how Hayek sought to manage his various background assumptions — and to compare those with things Hayek understood — or came to understand later in his life — which don’t fit well with the elements he brought to this very special healthcare insurance party.

If you don’t get that, I don’t have time to teach you to walk.

Bill February 15, 2013 at 8:20 am

Do you guy have bumper stickers which read:

What Would Hayek Do?

prior_approval February 15, 2013 at 8:37 am

Why don’t we just quote the man, no need to paraphrase his thoughts –

‘There is no reason why in a society which has reached the general level of wealth which ours (note – he is talking about war torn Britain here, not the U.S.) has attained the first kind of security should not be guaranteed to all without endangering general freedom. …. [T]here can be no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody. … Nor is there any reason why the state should not assist the individual 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. There are many points of detail where those wishing to preserve the competitive system and those wishing to super-cede it by something different will disagree on the details of such schemes; and it is possible under the name of social insurance to introduce measures which tend to make competition more or less ineffective. But there is no incompatability in principle between the state’s providing greater security in this way and the preservation of individual freedom.
“To the same category belongs also the increase of security through the state’s rendering assistance to the victims of such ‘acts of God’ as earthquakes and floods. Wherever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make provision for the consequences, such communal action should undoubtedly be taken.’

If Britain in WWII was wealthy in Hayek’s view, I wonder what he would think of this sentence – ‘When Hayek wrote, health care costs were quite low as a percentage of gdp.’ Considering that even antibiotics were not available, and the death of so many people who would now be routinely saved through such pharmaceuticals also had an effect on gdp. It isn’t as the lack of effective health care has no effect on gdp.

‘it is startling how little attention Capitalism and Freedom, dating from 1962, pays to “the problems of old people”’

Well, now that the baby boom can no longer deny they are becoming old people, it is the most important thing in the world.

dan1111 February 15, 2013 at 9:05 am

Yes, but: How would his views have been affected by the modern context? What would he think of Obamacare as a specific proposal? I think these are both wide-open questions.

I do like your closing sentence.

prior_approval February 15, 2013 at 9:15 am

‘What would he think of Obamacare as a specific proposal? ‘

A sad joke, most likely, combining all the worst features of a non-solution to a real problem which every other Western society has been able to handle at costs which show just how utterly incompetently the U.S. has handled one of the modern bedrocks for creating a society which fosters freedom. Essentially no one in Europe (and no one at all in the UK, ever) worries about changing a job due to health insurance, nor fears losing a job will mean they have no health insurance for themselves or their family.

Andrew' February 15, 2013 at 9:22 am

Until other countries do as many procedures as we do, have as many MRIs as we do, and provide as much medical innovation as we do, then no, of course they haven’t solved “the” problem with their emphasis on cost growth.

dan1111 February 15, 2013 at 9:35 am

I have lived in the UK for two years now. Yeah, it’s nice not having to worry about health insurance. But that is only one side of the story. There are lots of downsides to this system, as well.

Jk February 15, 2013 at 9:06 am

Interesting post, and I appreciate your care here especially in your last note about blame. I would think the interesting issue, if Hayek favored in theory your alternate to ACA, would be what Hayakians should favor in practice as first practical steps in our actual situation. Can you propose how to get sufficient cash payments to the poor enacted into law? Sufficient even given costs as they exist now? Do you really think Obama could and should have passed that instead?

Isn’t it possible that your fast forwarded Hayek would say… Well, you’re in trouble here. In theory what you’ve said is my view. But in this case the least bad of many bad first steps is Obama’s?

RPLong February 15, 2013 at 9:10 am

Hayek today would have the benefit of having seen the grotesque results of our experiment meddling with health care. The more we do it, the worse it gets.

It’s like a child dismantling a radio. When he first unscrews it and looks inside, it all seems okay. But as each subsequent piece is unscrewed and removed, the child gets further and further away from being able to put the radio back together again. After a few minutes, the radio is unreparable by anyone.

I think people who believe we can meddle with the health care market are some combination of childish and delusional. They can’t be convinced by all the evidence in the world. They won’t stop until the whole thing is irrevocably broken.

prior_approval February 15, 2013 at 9:18 am

‘I think people who believe we can meddle with the health care market are some combination of childish and delusional. They can’t be convinced by all the evidence in the world.’

I think that second sentence may have been just a touch incorrectly formulated – ‘All the evidence from the rest of the world is unable to convince a certain group of Americans that any model of universal health care would be better than the system they currently have.’

RPLong February 15, 2013 at 9:33 am

I was a health economist in “the rest of the world.” The American health care system has thus far heavily subsidized what the rest of the world has been able to “achieve.” Now that we are finally dismantling the engine, the machine will soon cease to run.

You’ll know what I mean when they start publishing the numbers of how many CAT scan machines exist per capita, as they do in other countries. Or when you have to see three doctors on three different days to get a non-emergency, non-dental X-ray. Or when you have to wait 4 months to get an emergency triple-bypass or 2 years to get your son hearing aides.

These are the conditions that already exist outside of the USA. In fact, they are all personal experiences had by either myself or people I know.

We can agree about one thing, though: Americans are horribly ignorant about health care systems. Unfortunately, they are about to get a crash-course on what it means to be guaranteed coverage in terms of what that coverage is actually made of.

Brian Donohue February 15, 2013 at 10:40 am

If the United States didn’t exist, the rest of the developed world would be running around, hair on fire, about the exploding cost of health care they’re seeing. I’m sorry, nobody has come close to figuring this out.

prior_approval February 15, 2013 at 2:21 pm

‘about the exploding cost of health care they’re seeing’

And yet, the current political discussion about health care costs in Germany is what to do with the billions in surpluses which the Krankenkassen currently hold. That’s right – the ‘gesetzliche’ (‘government’ is not a decent translation, though also not false) health insurance companies are currently holding surpluses, because health care costs are not exploding.

Any idea when there might be any reporting about this major aspect of the German health care debate in American reporting? Yeah, I’m not holding my breath either.

Brian Donohue February 15, 2013 at 3:06 pm

surpluses, eh? two words: accrual accounting.

Patrik February 15, 2013 at 5:14 pm

@prior
Since you’re living in Germany you should know about the many problems with our (German) healthcare system. One of which is high cost – even though not as high as in the USA. Another of the difficulty in getting doctors into rural and predominantly GKV areas.

Just don’t make it sound like we discovered healthcare paradise in Germany.

prior_approval February 16, 2013 at 6:35 am

Of course there are problems in Germany – but the truth remains that the health care system is currently running surpluses. (Which they want to retain against future needs.)

And Germany spends a solid third less of its gdp on health care than the U.S. – and the problem of doctors in rural areas America is considerably worse than in Germany. Part of this is simple geography, though a much larger part is the fact that unlike in Germany, no one is actually working on any solutions (and yes, I live on the edge of the Schwarzwald – the lack of future doctors in that region is a constant theme in the news).

prior_approval February 16, 2013 at 6:43 am

Well, let’s go beyond a two word perspective, and present some actual English language reporting –

‘March 14, 2012 — BERLIN — As the Republican presidential candidates try to outdo each other over criticizing the Obama administration’s healthcare plan, several German healthcare officials who watch the debate in the United States are in disbelief as to why the American public doesn’t want a national plan.

Their reactions come as the German public healthcare system reached a record € 4 billion ($ 5.28 billion) surplus for 2011.

“For me as a German, what I cannot understand is that you make the question of health insurance an ideological question,” said Wolfgang Zoeller, a Bavarian politician who has spent the last 22 years in the German parliament or Bundestag.

Americans talk about whether having a national health plan “is going in the direction of Socialism or Communism,” Zoeller said in an interview in the Bundestag. The nearly 70-year-old politician said he’s far from being a Socialist, noting that he had recently voted to reduce bureaucratic problems surrounding Germany’s inheritance tax.

“For me the question of a national health insurance is a humane question. I would like that every person, regardless of his or her age, income, pre-conditions or financial possibilities, be helped if they are sick.

“Otherwise you have the famous phrase: Because you are poor, you have to die earlier. And I don’t want that,” Zoeller said.

Germany has one of the oldest public healthcare systems in Europe and while the rules can get complicated, it’s based on a simple principle: If you make more money, you pay more into the system. The premiums are based on a percentage of your income. That’s why, as the economy booms here, the national insurance system is producing strong surpluses, Zoeller and others say.’ http://www.thelundreport.org/resource/germans_confused_over_us_healthcare_debate

The German system dates back to the age of Bismarck, by the way.

Jk February 15, 2013 at 9:12 am

Also, I think you should add that whatever Hayek would favor… Your proposal or the ACA, it would be something that current politicians claiming to be Hayekians would denounce as “socialism”

mw February 15, 2013 at 9:24 am

Show a little imagination. If Hayek were alive, his tremendous distance from the mainstream Republican orthodoxy would have made him a Bruce Bartlett, which obviously results in psychological trauma and a reactive desire to separate oneself even further from Republican orthodoxy than one is naturally inclined, so he’d probably would be defending Obama from the raft of partisan charges.

PBurns February 15, 2013 at 10:11 am

A STORY:

It seems that before the Koch brothers were pumping hundreds of millions of dollars into undermining the social fabric of this nation by buying entire elections, they were trying to get libertarian totem Frederich Hayeck to come to the U.S. to become a “distinguished senior scholar” at the Institute for Human Studies, which the Koch brothers wanted to turn into a libertarian citadel.

Only one problem: Hayek would not come because he did not want to leave Austria, which had nearly universal health care, for fear he might get sick abroad.

So what happened next? It seems Institute for Human Studies vice president George Pearson (who later became a top Koch Industries executive) researched the problem and wrote to Hayek that he could get free health care in the U.S. through Medicare because Hayeck had paid into the Social Security system some years earlier when he was at the University of Chicago!

Like libertarian Ayn Rand, Frederich Hayek was only too happy to use “socialized” medicine and income support as soon as his own health failed and his bank accounts grew thin.

Theory is a nice thing, but it’s not much use when you are sick or need to buy a loaf of bread, or cup of coffee! When push comes to shove, people tend to flip and flop as expediency dictates.

From: http://terriermandotcom.blogspot.com/2012/06/one-nation-under-god.html

Brian Donohue February 15, 2013 at 10:35 am

Hayek, IMO, was a profound thinker whose reputation will continue to grow, deservedly. I’m not sure I’d define him as a Libertarian by today’s standards though. Which is good because, although some of my favorite commenters here are hard-core Libertarians, ‘men of systems’ as Burke would say, they sometimes end up in reductio ad absurdum land.

I think Eric unhelpfully conflates ‘social insurance’ with ‘redistribution’. These do not necessarily have to go hand-in-hand.

If 1,000 people buy home insurance and one house burns down, do you consider this ‘redistribution” from the 999 to the 1? If so, you’re not thinking hard enough.

Similarly, mandates do not require redistributive elements. Think mandated HSAs or “Social Security accounts.”

Look at the first Hayek quote Eric uses in the article: ““In the case of sickness and accident, … the case for the state helping to organize a comprehensive system of social insurance is very strong.” Amen, brutha. There are clear free lunch benefits to risk-pooling which can be undermined by adverse selection if not mandatory.

In practice, of course, there will always be an element of redistribution to the poorest, but it can be quite limited. Here’s Eric quoting Hayrk again: ““Perhaps there is also a case for making [health insurance] compulsory since many who could thus provide for themselves might otherwise become a public charge.” Preach, Freddy!

I don’t want to live in a society where we blithely step over people dying in the streets. Cognitive biases lead some people to make poor choices, choices inimical to their own interests – if they are not required to make responsible choices to avoid these outcomes, the rest of us are gonna have to pay for them. (Shhh- if you listen closely, you can hear the slippery slope alarm bells now going off inside hard-core Libertarian heads.)

So, there are societal risks that lend themselves to mandatory, all-inclusive programs. Of course, there are micro concerns about behavior and incentives, but…

Old age is the easiest. You can’t game the system to age more quickly. Death benefits are a close second- presumably, the incentive to stay alive outweighs any gaming calculation.

Disability is more worrisome, because the definition is less clear-cut. Consider the alarming increase in the number of ‘disabilities’ over the past 20 years.

And health insurance is trickiest of all. One confounding factor is that preventative care can reduce long-term costs. But in principle, this is also doable.

What I hate from the left is, AFAICT, intentional blurring, redistribution masquerading as social insurance. To the extent these programs include elements of redistribution, let’s be honest and upfront about it.

Spencer February 15, 2013 at 11:23 am

Exactly where does health care step over the line?

If public health care at 6% of GDP is OK, why is public health care at 12% of GDP not OK

How does this make any difference to your philosophy?

Becky Hargrove February 15, 2013 at 12:11 pm

When I think of Hayek, or Adam Smith for that matter in regards to healthcare, I can only think that they would be astounded to the point of shock, at a system which has nothing to do with actual needs, incentives or aspirations on the part of the participants. For one thing, too many potential methods of healing were stamped out in the seventies and are now only slowly resurfacing, but not in the rural places they are most needed and were once utilized (where people lack professional access) but as “exclusive” health care options for the well to do in city environments. Most importantly, the incentive older people actually have to participate in healthcare options is not considered either in its positive or negative ramifications. In other words, what people have incentive to offer one another and accept from one another has been severely crushed and along with it, the very social improvements which so encouraged Adam Smith in his time.

Greg Ransom February 15, 2013 at 1:56 pm

What would Hayek do to sort out this mess? — LSE public lecture

Date: Monday 18 February 2013
Time: 6.30-8pm
Venue: Old Theatre, Old Building
Speaker: Dr Eamonn Butler
Chair: Allister Heath

http://www2.lse.ac.uk/publicEvents/events/2013/02/20130218t1830vOT.aspx

Greg Ransom February 15, 2013 at 2:18 pm

Peter Wallison, Obamacare — What would Hayek Say?

http://www.aei.org/files/2011/03/15/FSO-2011-03-g.pdf

Tigre de Tasmania February 22, 2013 at 9:46 am

Exxcellent post

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