An exchange about health care

Charles W. Tidd, Jr., Newtown, Conn.: Your column today
continues to avoid a central issue: a great number of Americans do not
trust the government with their health care. This mistrust is not the
result of television ads by insurance companies but follows from
increasingly frequent routine encounters with the government: waiting
for a passport, figuring out the tax law, having an intelligent
conversation with someone at the DMV, listening to the news – Hurricane
Katrina, the federal prosecutors, the pardons by both Clinton and Bush,
immigration. The list goes on and on.

Why in the world do you want to trust the nation’s health care to the government?  He who pays the piper calls the tune.

I write you because there is no question that our health system
needs to be fixed, but until the issue of public mistrust of government
is addressed, any sort of universal health care will be shunned by many
people.

Paul Krugman:: Do people really distrust the government? I
think we have this program called Medicare, which most people seem to
like. On the other hand, maybe people don’t know that it’s the
government: former Sen. John Breaux was famously accosted by a
constituent demanding that he not let the government get its hands on
Medicare.

Here is the link

People like Medicare because it pays some of the bill, while keeping interference in the medical process to an apparent minimum; admittedly non-interference is in part illusory because the indirect effects of Medicare (e.g., it drives up prices) have become enormous.  Almost all government payments of this kind are popular, whether or not the programs are a good use of scarce resources.  People are looking to get something from their costly government, and not necessarily because they trust it.

As Medicare expenditures rise, this illusion of non-interference will become much harder to maintain and indeed Medicare itself may become less popular.  I am always curious to hear — from single-payer proponents — which interest groups they think will have a decisive say over the system, and how those interest groups differ in America vs. Western Europe.  That is one reason why we cannot simply replicate the VA approach writ large, or for that matter the French system.  For a sobering wake-up call, compare the flood defense policies of the Netherlands to, say, Louisiana.

Comments

We used to have something in this country called regulated monopolies. That is, the government would "outsource" some activities to a licensed private company to carry out these activities with the occasional review by the licensing organization, ie, the government. We seem to have lost this via deregulation a la Reagan. What we need is a regulated monopoly (privatized Medicare?) to cover 100% of the US population and is subjected to regular, public reviews for performance. This is something akin to the postal service which, granted, has had some spectacular failures, but at the volumes we're talking about is doing a pretty good job overall (read Mosby's Paradox of Excellence).

The essential problem with private health insurance is this: As a business, it is in the best interests of the health insurance provider to cover only those patients who are at least risk of becoming ill. A health insurance company A that covers people who are likely to become ill will be at a competitive disadvantage vis. a vis. a health insurance company B that sheds its sick customers at the first opportunity. This process is creates a feedback loop that drives healthy people to company A and sick people to company B. Soon, company B either raises premiums so high that they become un-affordable, or it goes out of business. In a truly free-market, unregulated health care system, market failure is inevitable. So the question is not whether we should have a free-market system or a socialized system, but rather, just how socialized the system should be.

Tony,

Any business in a competitive field acts to make it's customers happy. It does this because if it doesn't, it's competitors will, and the competitors will gain market share and profit. Where you see the most dissatisfaction with business is exactly in those businesses protected from competition by government regulations and licensing requirements.

In the field of "private" healthcare, I see two fundamental problems: (1) the government limits the supply of medical resources through sanctioned cartelization of the professional services and it overbearing regulations regarding the provision of services; and (2) the tax system is distorting the distinction between customer and recipient of healthcare- ideally, these should be the same person, but in reality they are not. The customer is the employer of the recipient in most cases.

As for the idea that all we need to do is extend Medicare to everyone, this will be a complete political disaster in the United States. As it stands right now, it is clear that Medicare shifts costs from itself onto non-Medicare patients. In a single-payer system, this shift will no longer be possible- Medicare will have to bear the complete costs of the resources it purchases. As the government struggles to control the increasing costs (it is already having problems with this with Medicare/Medicaid as they stand today), it will resort to stricter price controls and more regulations, both of which will further restrict the supply, and greater explicit rationing will occur. As the care the new program supplies deteriorates, the wealthier will break free and a new market for private care will split off again and grow, drawing resources away from the government financed one. The politics, then, will get extremely nasty as the government will then attempt to squash and eliminate it's competitor for resources.

I'm curious about comparative flood-defense policy. Care to make a post about this, or at least provide a link?

Did you see "The inevitable future of health care" by Stephen Cecchetti at www.voxue.org?

The problems with health care are not amenable to insurance-based solutions.

The problem is that routine palliative care (regular doctors' visits, etc) has huge positive externalities, but is too expensive for ordinary people to pay. Insurers don't like this because the likelihood of their paying out is ideally 100%, so they pass on the costs to employers, who pass on the costs to consumers and employees, and so on.

What is needed is some sort of straight subsidy/tax break, to make routine healthcare cheap enough so people will buy enough of it to provide the positive externalities, but not too much so there's shortages and rationing.

The market won't fix this, because of insurers' market power and consumers' elastic demand for the health care with the most positive externalities. On the other hand, asking the government to decide the right level of subsidy/tax break is a recipe for disaster. Therein lies the problem.

Well, fuster - cable & phone companies are generally regulated monopolies. Airline service has gone from an occasional luxury for all but high end businesspeople to a common service for anyone in the middle class. The reason you get poor service is because you, like everyone else, go to travelocity, look at the list of providers for your trip & click on the cheapest one. You're giving up service voluntarily in order to save money. If airlines were regulated monopolies, or government agencies, you'd be paying 1st class fares & getting the same service you are now. Now, you can pay for 1st class if you want better service.

I'll let you have HMO's. I agree that health care cannot function as a reasonable free market.

I thought Russ Roberts had a great conversation with Robin Hanson over at econtalk.org about health care. They spent the first 5 minutes pooh-poohing the idea that health care markets were necessarily dysfunctional, but then the rest of the talk is a very interesting analysis of all the ways in which people are dysfunctional when it comes to acting within health care markets.

"Any business in a competitive field acts to make it's customers happy."

Well, they act to make profits, anyway. And, they typically go about garnering these profits (at least partly) by externalizing costs wherever possible. But, of course, it's all due to price distortions caused by Medicare that American's are faced with financial ruin for trying to cover their healthcare needs. I mean, after all, competitive businesses merely strive for customer happiness. I'm surprised no one has mentioned frivolous lawsuits.

Insurance works fine; paying your medical bills by filtering them through a third party which we call an insurance company does not work fine.

What would insurance companies do differently in a free market to stop the very inflationary spiral you describe from happening? It can't be simply "pay all your own costs". If it is as simple as making everything but high cost procedures out-of-pocket expenses, why don't insurance companies do this today? After all, paying the highly inflated prices affects their bottom line.

On the other hand, I found the part where you called the other posters on this thread idiots to be quite rhetorically effective.

What would insurance companies do if they were free to actually offer health insurance? For one thing, they would probably do what they do with auto, life and every other type of insurance. They would charge people according to risk. While the idea of charging unhealthy people more may sound callous (Flores even describes it as a market "failure"), the implications for public health and eventually prices are favorable. Health is not something that's simply assigned at random. It's largely determined by individual behavior. Cardiovascular diseases, diabetes (especially type 2) and even cancer are heavily influenced by individual behavior. Their treatments are also very expensive. A system that charged people who are overweight or smokers, for example, more for health care would provide people with more of an incentive to take care of themselves, as well as an incentive that is more immediate than the likely heart attack down the line. In contrast, we now have a system where someone who smokes, eats too much and never exercises has similar out-of-pocket costs to someone who behaves more responsibly. And then people wonder why health care is so expensive.

You're not running that insurance company very well, Ed. You'd be better off offering a policy that would only cover heart disease at a very high rate.

"health care cannot function as a reasonable free market."

How do you know? We've not tried it in living memory.

One of the problems now is not enough choice or competition.

By that I mean choice of plans and competition among insurers and doctors as the AMA effectively limits the supply of the latter.

Yes, it is true. Right-wing pricks have more influence over american policy than european.

It always seemed to me that the solution was something like Australia. Keep our insurance companies but require them to cover everyone. i.e. no booting anyone for pre-existing conditions. Then force them to cover most kinds of treatment (i.e. broken bones, cancer, mental illness, etc.)

The differences would then emerge over quality of care, bureaucratic competence, premiums, deductibles and so forth.

The waste in the system is because the companies spend so much time deciding who to cover, who to drop, and what to cover. Eliminate that and they'd be more efficient. Plus there'd probably be more mergers.

I just renewed my DL at the DMV office in Santa Monica. Quick, painless, pleasant, efficient.

I never had an encounter with Verizon Wireless (supposedly the industry's best customer service) where I would use the same adjectives to describe what happened.

I think this is a clear-cut case of politicians trying to sell snake oil, and people buying it. 3,000 years ago politicians used to claim they made the sun rise and fall each day, breaking the laws of physics. Today they claim to be able to break the laws of economics. To me its the same shame to a different tune, and all for the benefit of the corporate interests who would profit from socialism.

Yes, our health care system sucks. But why does it is suck? When it was closer to a free market, it was very, very good. More regulation and over 50% socialization later, its worse.

I think there are a few large contributing factors:
-People mistake socialism with charity.
-People believe free markets and charity are somehow incompatible.
-People don't understand why health care has gotten to be so bad; most don't even know why we have employer-provided care.
-Some people think medicine has too much in the way in information asymmetries for a market to work, even though its worked just fine in the past.
-Most people just aren't taught economics in school.
-Some people even think HMOs (as they operate today) are a product of the free market! Yikes!
-People think republicans are pro-market, when they are really pro-corporatism.
-People think established corporations are pro-market, when they are really pro-corporatism.

Insurance companies dropping people for preexisting conditions is a good thing. It makes insurance cheaper for healthy people, rewarding health and driving health care costs down for everyone. I do think government should make sure insurance companies are straightforward and honest about their policies, however. Cryptic lawyer-speak in your insurance contract with allows them to drop you for any reason sounds like fraud to me.

But until people stop equating socialism with charity, and realize charity and welfare can easily exist in a capitalistic system, I don't think we will stop hearing cries for more socialization of our economy.

In the last 2 days I've gotten calls from from my cell phone provider and my bank, offering to pay me ($25 and $75, respectively) to take customer satisfaction surveys. Thats awesome. Sadly, I can't ever see the government doing that...

Very well said (although I think its only part of the problem):
And the reason people can't afford to simply pay their medical bills is because the costs have become driven up because most people's medical bills are paid by somebody else. No reason to be frugal. No reason to try to save money. Has anybody shopped for medical services based on price in the last fifty years? I doubt it. So why would anybody expect medical services to be affordable? Lo and behold, they are not.

How about we let consenting adults enter into a relationship with whomever they choose, of their own free will and their own funds? The problem with Socialized health care are as follows

1.) Only half of america will pay - Anti-freedom/Pro-corruption
2.) The care will suck. Been to a military doctor (Take motrin and go away)? I left the service because of that crap.

Since when does someone deserve the time/life/services of another without just compensation?

Even taxation/eminent domain/etc are all supposed to provide just compensation in return for the life/property (income is in most cases a financial arrangement to sell our lives, so an income tax is really a life tax). So we are always supposed to be justly compensated for our time and property. Government services are SUPPOSED to be universal. Universal, fair and EQUAL taxation should remove most of the ethical complications to socialized medicine (outside of crappy care, no access to life saving surgeries, etc etc etc).

"... This mistrust is not the result of television ads by insurance companies but follows from increasingly frequent routine encounters with the government: waiting for a passport, figuring out the tax law, having an intelligent conversation with someone at the DMV, listening to the news — Hurricane Katrina, the federal prosecutors, the pardons by both Clinton and Bush, immigration. The list goes on and on. ..."

I'm sorry, but this is a sloppy argument, unconvincing to anyone except those who've already decided the government can do no right.

I'll give you the passport problem, but it's relatively recent, and related to new rules requiring passports for travel that didn't previously require a passport.

Figuring out the tax law. What could be easier - for 90% of filers, than poping a disk into a computer and following the on-line instructions? True, it's not govt. that makes the disks, but if it can be reduced to a series of simple questions, how tough can tax law be? I used to do my own taxes, by hand, long form, before the computer age. I'm not a lawyer or an accountant. I figured out how to do business partnership taxes and my IQ is only 100. It's not that hard. It just requires effort.

Having an intelligent conversation with someone at the DMV. Well, for the most part, one needn't have a conversation at all. Most things can be done on line, or via mail. If one does have to go in person, one needs only bring the required documentation. Then the conversation will be about licensing, or registration, or voting registration, etc. What is unintelligent about having a conversation about automobile registration?

The news. Ok, the Bush admin. certainly shouldn't be in charge of anything, but that's the roll of the dice we call representative democracy. One assumes that an American NHS would be controlled primarily by career civil servants, not politicians.

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