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A Catholic, Free Market Approach to Healthcare

October 22, 2007
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We have written a number of posts on health care here at Vox Nova.  I invited frequent commenter Blackadder, who most of you know from various comboxes, to articulate more at length his own view on the matter.  I thought at the time of the invitation that he would be a fine representative of those who advocate a market approach to health care.  I believe he has articulated his position well, and without further ado I offer his view.  ~M.Z. Forrest 

We’ve heard a lot of criticism in recent months about the failings of the U.S. healthcare system. It’s expensive. The U.S. spends 16.5% of GDP on healthcare, more than any other industrialized nation, and nearly double what is spent by some. Yet in terms of health the U.S. is only around the middle of industrial countries. Around 45 million people in the U.S. lack health insurance, and many Americans are reluctant to switch jobs, or are apprehensive about losing their jobs, because they would lose their health insurance.

To some extent these problems are overstated. For example, of the 45 million uninsured in America, the vast majority are either: a) already eligible for government healthcare, b) making more than $50,000 a year, c) are between the ages of 18 and 34, and spend more on entertainment than they do on out of pocket medical expenses, or d) are illegal immigrants. And while the U.S. does have lower health outcomes than countries in Western Europe and Canada, this is due to factors (such as the higher rates of homicide, car fatalities, and obesity in the U.S.) that cannot be blamed on the healthcare system itself. Still, the system is far from perfect, and if there was an alternate way to structure our healthcare system that could lead to cheaper, more efficient, and higher quality care, we ought to seriously consider adopting it.

One alternative previously discussed on this blog is the so-called “single payer” system, wherein all healthcare is paid for by the government. Under this system, the government would not itself run hospitals or employ doctors (though it would pay their salaries).On the other hand, it wouldn’t simply be providing health insurance either. Healthcare costs would mostly be paid for, not by patient premiums, but by tax dollars.

At first glance a single payer system may seem quite attractive and in keeping with the principles of Catholic Social Thought. Upon reflection, however, I have come to think this largely illusory.
It is said, for example, that having the government provide free healthcare would promote the common good. A single payer system, however, does not provide free healthcare. Doctors, hospitals, medicines, MRI machines, all of these still must be paid for, and having them paid for with tax dollars destroys many of the ordinary market incentives that serve to reduce costs and spur innovation. The U.S. already has a single payer system for the poor (Medicaid) and the elderly (Medicare). Far from being models of efficiency, the programs are hugely expensive. So expensive, in fact, that the U.S. government currently spends more per capita on healthcare serving 27% of the population than most other countries do on their entire system. Medicare alone has unfunded liabilities of $65 trillion dollars.

In order to control costs, governments that have adopted a single payer system have had to institute rationing of care, and given that a single payer system in the U.S. is likely to be far more expensive than in other countries, while our tolerance for increased taxes is likely to be lower, this rationing is likely to be severe. Not only that, but we can expect this rationing to fall hardest on those members of society who are most vulnerable. Those with common illnesses or in politically powerful groups are likely to fair best under a single payer system, while those who lack influence (read: the poor), or who have uncommon or politically unfashionable illnesses are likely to fair worst. Given the high cost of care for the elderly, the pressure for “voluntary” euthanasia as a means of rationing under a single payer system is likely to be unbearable.

Single payer healthcare also seems out of step with the principles of subsidiary and solidarity. In Section 48 of Centesimus Annus, John Paul II spoke out against increasing government interventions outside of its traditional realm. Such interventions, he said, had given rise to a “Social Assistance State” which “leads to a loss of human energies and an inordinate increase of public agencies, which are dominated more by bureaucratic ways of thinking than by concern for serving their clients, and which are accompanied by an enormous increase in spending.” He went on to note that there were certain types of assistance, such as care for the sick and elderly, that required more than a material response, and that government interventions were therefore not in keeping with the principle of subsidiarity.

By taking over functions that used to belong to the family, church, and voluntary associations, the state has broken down the authority and power of these mediating institutions between the state and the individual. The result is that people increasingly are unrooted, isolated, and socially adrift. Many of these institutions have become frayed and particular affections and loyalties have broken down, leaving people isolated and dependent on the state for protection (ironically, people who oppose this are often called “radical individualists”). State intervention outsources charity and replaces real social solidarity with the fiction that sending tax dollars to Washington bureaucrats (or, rather, being in favor of others sending their tax money to Washington bureaucrats) is somehow charitable. People who believe it is the government’s responsibility to care for the poor are less likely to give to charity or volunteer their time, regardless of how much the government is actually spending on fighting poverty (let alone how effective that spending is). This is, I think, not a coincidence.

But if single payer is not the answer, does this mean that we just have to live with the problems of the current system? Not necessarily. There are a number of ways that our healthcare system might be improved that don’t involve a government take over. Some possibilities might include:

* More doctors: It is basic economics that if you want to decrease the price of something, you should increase the supply. High healthcare prices, therefore, could be brought down by increasing the number of doctors and other healthcare providers in the U.S. Currently the supply of doctors is tightly controlled by the A.M.A. and the A.A.M.C. which have put a number of significant obstacles in the path of individuals who want to become doctors or practice medicine, and often they are aided and abetted in this by the state. Loosening some of these requirements could lead to a larger supply of healthcare providers and thus to lower health prices.

* Encourage competition: Another way to lower prices is to increase competition. Right now it is illegal to buy out-of-state health insurance. Removing this requirement could therefore potentially reduce the price of health insurance in some states.

* More High Deductible Policies: While having health insurance to cover catastrophic illness or injury makes sense, the logic of having insurance for ordinary health costs is less so. In fact, millions of Americans pay more in insurance premiums (directly or indirectly) than they would paying for their healthcare expenses out of pocket. Use of high deductible health policies would not only save them money, but could also help to bring down health costs generally. When people pay for their healthcare themselves they are more likely to price discriminate, which creates incentives for healthcare providers to cut costs and lower prices. Further, to the extent that such policies are no longer tied to employment, people will be less reluctant to change jobs and less apprehensive about losing their jobs due to the health insurance issue.

* Encourage healthy behavior: It is said that an ounce of prevention is worth a pound of cure, and this saying is true. Significant increases in healthcare costs are associated with conditions, such as obesity, that are largely preventable. The trick, of course, is to find a way of encouraging healthy behavior that doesn’t either create a nanny state or produce perverse incentives. We could tax smoking, for example, or pay people to lose weight, but if we aren’t careful, we may find that we have grown as depending on the revenue from those taxes as smokers are on nicotine, or that by creating financial incentives for people to lose weight we have also made gaining weight (which can then be lost) more desirable. The law might be able to move things in the right direction by allowing insurance companies to charge higher premiums based on health risk factors such as smoking or weight, or by encouraging coverage of such things as gastric bypass surgery (I should say that I’m generally opposed to government mandates for health insurance, as they increase prices while offering often dubious benefits). Ultimately, though, the solution to these problems is primarily cultural. People need to be taught to master their desires, and unless they do, any legal changes will only be dealing with the symptoms of the problem, rather than the disease itself.

* Means testing for Medicare: Seniors are, on average, the wealthiest age group in America. Some of them, in fact, are fabulously wealthy. Yet under Medicare, even billionaires have their healthcare provided at taxpayer expense. Given the massive budget shortfalls Medicare is facing, the most sensible option is to restrict benefits to those who cannot otherwise afford them.

No doubt there are many other possibilities as well. This is one of the advantages of markets; they don’t rely on the single intelligence or creativity of any individual, however brilliant, to solve a problem. So, in that spirit, I’m open to further suggestions.

I invited frequent commenter Blackadder, who most of you know from various comboxes, to articulate more at length his own view on the matter.  Thank you Blackadder for taking the time and effort to offer this commentary.  ~M.Z. Forrest 

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32 Comments
  1. Denis E. Ambrose, Jr. permalink
    October 22, 2007 2:29 pm

    An excellent post; thanks Blackadder.

  2. October 22, 2007 2:42 pm

    I was just reading a WSJ article about a clinic which is offering a novel option for patients: they can pre-pay ($83 per month) to receive basically unlimited coverage each month. I’m not sure if that’s a good model, but it’s certainly an interesting idea.

    Anyway, good post, Blackadder. I don’t think the single payer system is the way to go, but certainly neither is the status quo.

  3. Daniel H. Conway permalink
    October 22, 2007 3:07 pm

    Thoughtful.

    I am having trouble distinguishing between efficiency and expensive. Both are separate terms. Aggregate efficiency delivery of X can be very expensive if lots and lots of people receive this very efficient delivery system.

    “Look at how much it costs…” does nothing for me because the total number of people involved (the denominator in the per capita normalization of these numbers) is enormous. Additionally, the expense of a system may be determined by the enormous incomes generated by the providers of the health care. How does one figure this? As a consequence, care gets expensive, because people in the system are expensive.

    Rest assured, there is nothing “efficient” about insurance companies-they require more expense at the delivery end of the equation (more forms and paperwork now than ever before). The overhead and secretarial needs are enormous to adequately maintain the level of care. From the micro perspective, the system is enormously inefficient as it runs now. Over 25% of the time of most subspecialists are devoted to “working things out” with insurance companies, without consideration of the office staff requirements.

    I think efficiency in this current system is very overstated. At the user level, not the macro level, time and energy are wasted routinely. For that dreaded “prior authorization.”

  4. jonathanjones02 permalink
    October 22, 2007 3:12 pm

    I’m glad Blackadder posted his thoughts.

    The one thing we can say for sure is that the coming entitlement crunch due to baby boomer retirement is going to hurt. David Walker has been warning about it very loudly for years.

  5. Daniel H. Conway permalink
    October 22, 2007 3:13 pm

    About routine coverage of ordinary health costs: the vaccine issue is a different concern, I think.

    My vaccination is liekly to mean little for me. Say we didn’t vaccinate for measles. More than likely, by enormous likelihoods, I get a little sick, get some spots, get better, and nothing happens. However, for some unlucky folks, really horrific things happen. I get vaccinated for them, really. This is the common good kind of thing. While we portray vaccination as a individual protectant measure, and it is, chances are, nothing really bad would happen to the unvaccinated person. We have policies to protect the somewhat unusual horrific unlucky individuals. And the very young. Measles and polio vaccination have been the prime examples of this.

    So, should vaccination, with its tremendous communal importance be covered as a communal need or by individual out of pocket expenses?

  6. Daniel H. Conway permalink
    October 22, 2007 3:16 pm

    Now about mental health care.

    The communal impact of poor mental health care is quite evident. Lots of untreated schizophrenics on the streets really defers side walk business activity, ruins neighborhoods, and creates some environments that lack safety.

    IS there a communal impact on mental health care, or should these unfortunates be required to pay out of pocket for their care and relatively cheap drugs? Or is the community responsible to chare the burden of these folks?

  7. Daniel H. Conway permalink
    October 22, 2007 3:18 pm

    Scaling evaluation seems key.

    And the economics of this I actually do not know. However: Does the impact of the ill person (say his untreated hypertension-a super-cheap drug therapy) have communal economic productivity impacts? Say he doesn’t get meds, and gets a stroke. What does this do to the productivity of the household, the caretaker?

    Does the health of a populace and its access to health care have clear economic benefits to the community?

  8. Daniel H. Conway permalink
    October 22, 2007 3:26 pm

    One of the concerns I have in a capitalist culture ruined by individualism on the left and the right is the loss sense of community and common good (as is hip to note today).

    What is my wealth? I am very lucky. I am currently living in a lovely neighborhood with good streets, good municipal services, good libraries, great elderly services, lovely parks, and decent schools all round. I consider these all part of the communal wealth to which I contribute and which I get huge benefit. This I think of as part of my wealth.

    I also have private wealth. My computer, my house, etc.

    Both contribute to my sense of “wealth.” To what degree is the discussion of the failure to want to support governmental services (health care, support for higher education, support for parks, bridges, roads, etc) a failure to invest in the communal or shared wealth? I think this has been the tremendous challenge since the thrust over the past 30 years has been to reassort the wealth of each person (excluding that to fund military ventures) to their own entertainment systems (Playstations, Gamecube, etc) and away from communal wealth.

    I’m done.

  9. STEFAN ELTGROTH, M.D. permalink
    October 22, 2007 4:30 pm

    Some problems I see first off as a Physicain re “More Physicians”
    Great Britian and Canada have a SHROTAGE of physicians ( you may remember some of those arrested in England in the recent terrorist attack attempts were foriegn born doctors brought into the country because of this shrotage). No one in their right mind will spend 4 years in college, 4 years in medical school followed by 3-4 years of a low paying residency with mounting debt with only lawyers and insurance companies ( or the government !) telling you how to practice medicine, with tens of theousands of dollars in malpractice insurance to pay, and then have the government ( as they do in Canada) set your 5 figure salary. You can’t make people become doctors in the money is too low and the hassle factor is too high, unless you want to inport them all like England has to do!!

  10. October 22, 2007 4:51 pm

    There are serious problems with this piece, more due to what is unsaid than what is said. Let me start with the subsidiarity point. Nowhere does Blackader explain how a single payer system respects subsidiarity less than the current system. When he talks about decisions being “dominated more by bureaucratic ways of thinking than by concern for serving their clients”, I think this perfectly sums up the current system where the decision to insure or not, or to pay for certain treatment or not, depends on the whim of a profit=making inusrance company. Sure, single payer systems can fall victim to the bucreacratic mindset, but it is dominated by the need to exclude people to make money (the US insurance industry spends $50 billion a year doing just that).

    What does subsidiarity really mean in the health care debate? I think it does not depend so much on the method of insurance than the choices faced by the patient. If you work for a huge company, you are dealing with a system that is as distant from the person as any single payer system. That’s the nature of insurance, of pooling risk. People who don’t understand that concept are mis-interpreting subsidiarity. SO what does subsidiarity really call for? It calls for a personal relationship between a a family and a family doctor, a system based primarily on primary care. In other words, a system that is far removed from the “ER care” philosophy that underpins the current American system.

    Let’s explore this a little further. In Europe, GPs make up half of all physicians, but less than a third in the US. In the US, specialists earn 300 percent more than GPs, as opposed to 30 percent in Europe. It gets worse. Only 40 percent of primary doctors provide after-hours care in the US, from 75 percent elsewhere. So when Blackadder talks about increasing the supply of doctors, I would say we need a shift away from specialists to primary care physicians. ANd by the way, the worse outcomes in the US can be traced directly to the lack of preventive primary care– the ER system is both expensive and inefficient (just the the entire US system).

    Let me now address rationing, the old canard used by all opponents of single payer. It is true that there is rationing in some countries that provide universal health care, most notably in the UK– but that’s because they provide it on the cheap. France spends more money, and gets a lot more in return– supberb outcome and less rationing than in the US. Here is the problem: European countries keep records on wait times. No such centralized information exists in the US. However, studies show clearly that rationing is a huge problem in the US. In response to the claims made by ‘Sicko”, Businessweek did some research, concluding that “American people are already waiting as long or longer than patients living with universal health-care systems” (http://www.businessweek.com/magazine/content/07_28/b4042072.htm). Only 47% of U.S. patients could get a same- or next-day appointment for a medical problem– worse than any other advanced economy bar Canada. And 26 percent of Americans went to an ER in the past year because they could not see a doctor. And of course, the elephant in the room is rationing based on cost: “51% of sick Americans surveyed did not visit a doctor, get a needed test, or fill a prescription within the past two years because of cost”.

    The final point I would like to make concerns Blackadder’s arguments about costs and entitlements. Let’s get the facts straight: he is absolutely right that the main problems regarding fiscal sustainability can be traced to Medicare (Social Secuirty is largely sound, though the media simply do not understand this distinction). Rising health care costs are busting budgets all over the world for non-demographic reasons, relating to the magnified costs of new health care technology. So this is a worldwide phenomenon that needs tackling. But remember, the level of costs are higher in the US, and (crucially), so is the growth rate. Remember too, that the Medicare problems were ratcheted up substantially by a drug entitlement that was largely written by the drug industry, and sends massive subsidies its way.

    Also note that Medicare may well be inefficient, but it’s far better than its private sectro alternatives. Medicare spends about 2 percent on overhead, whereas private insurance companies spend as much as 20 percent. In a direct natural experiment, when the Republicans made traditional Medicare compete with Medicare Advantage (a system whereby the government, instead of paying the provider directly, paid a middleman, typically an HMO), in turned out that the latter was 10-20 percent costlier, for obvious reasons. The profit motive should serve no role in health care.

    Let me end with an argument I have made before. Really, the argument is whether we want social insurance (a large risk pool where the young and the healthy subsidize the old and the sick) or actuarial insurance (like car insurance, you pay based on individual risk). I think the former is very Catholic, while the latter strikes me as almost Calvinist. Remember, if you believe moral hazard is driving up costs, then what you are really saying is that Americans are currently consuming too much health care (this is the approach behind health savings accounts and similar measures). That strikes me as very wrong.

  11. radicalcatholicmom permalink
    October 22, 2007 5:28 pm

    Great discussion, gentlemen. Very informative and thoughtful.

  12. Blackadder permalink
    October 22, 2007 5:50 pm

    Let me take Morning’s Minion’s last point first, as it seems he misunderstands the rational behind health savings accounts. Suppose you are buying a car. Since you are going to be paying for the car yourself, you have an incentive to look for the best deals and to choose one dealer over another if he is selling cars of a comparable quality for a lower price. Since you have this incentive, car dealers have an incentive to lower prices, and compete with each other for your (and everyone else’s) business.

    Now suppose that cars were paid for almost exclusively by third parties. Instead of paying for the cars themselves, people pay companies a certain premium a month, in exchange for which the company will pay for one car every x number of years. Since they are no longer paying for the cars themselves, people become price insensitive. The fact that car A is more expensive than car B no longer enters into a person’s deliberations about which car to buy. As such, dealers no longer have an incentive to reduce prices, or otherwise offer bargains to attract business. Car prices thus go up, which causes premiums to rise, and eventually more and more people find that they cannot afford to pay the premiums. No doubt at that point people would begin calling for a government takeover and accusing those who think the problem is with third party payment of thinking that people drive too much.

  13. Blackadder permalink
    October 22, 2007 6:06 pm

    On the issue of subsidiarity, here is what the Catechism says:

    “Excessive intervention by the state can threaten personal freedom and initiative. The teaching of the Church has elaborated the principle of subsidiarity, according to which ‘a community of a higher order should not interfere in the internal life of a community of a lower order, depriving the latter of its functions, but rather should support it in case of need and help to co- ordinate its activity with the activities of the rest of society, always with a view to the common good.'”

    http://www.scborromeo.org/ccc/p3s1c2a1.htm#1883

    Centesimus Annus #48, which I quoted previously, also has to do with state intervention. So I would think the connection to the issue of government healthcare would be fairly clear.

    I agree that private insurance companies can also involve bureaucratic ways of thinking. It’s one of the reasons why I think insurance should play less of a role in healthcare than they do now. But private insurance companies do have one serious advantage over government in this regard: no one is likely to sentimentalize them, or to think that they only want to help people. People do tend to have such illusions about government, often with dangerous consequences.

  14. Blackadder permalink
    October 22, 2007 6:16 pm

    On the issue of profit, if Morning’s Minion was right, and the way insurance companies made money was by excluding sick people from coverage, one would expect that the uninsured would be disproportionately sick. In fact the opposite is the case: the uninsured are disproportionately young and healthy.

    But suppose that Morning’s Minion were right, and the problem with health insurance was the profit motive. Why is this an argument for single payer rather than, say, non-profit health insurance companies? Presumably, without the evil of the profit motive driving up overhead, such companies would be highly competitive.

  15. Zak permalink
    October 22, 2007 6:47 pm

    MM,
    I think Calvinism is a canard in this debate, but then, I would guess that it is every time you use it to explain American political issues. it seems to be a way of saying to Catholics you disagree with, “you’re not being Catholic.” It doesn’t seem to be a way of directly engaging their arguments.

    You did, however, address many of Blackadder’s points. I don’t think very much of health insurance bueeaucracies, but couldn’t steps short of a single-payer system effectively limit those effects? For example, prohibit descrimination based on a person’s medical history or rejecting coverage of pre-existing treatment, or even, as Blackadder suggests, making health insurance providers non-profits?

    Isn’t one reason Medicare Advantage plans cost more that they generally have better prescription drug coverage than Medicare Part D?

    I don’t think that you’re going to get more doctors becoming GPs with the current healthcare system (especially the costs of medical school). It probably makes more sense to expand the scope for Nurse Practitioners.

  16. Blackadder permalink
    October 22, 2007 7:38 pm

    On the issue of doctors, Morning’s Minion says that the problem is the increased specialization of doctors and decline of GPs. What he doesn’t say, however, is how a single payer system would solve this problem. Here, for example, is a recent article about the increased specialization of doctors and the decline of GPs… in Canada:

    http://working.canada.com/toronto/news/story.html?s_id=CDFy%2BXG7pXOufXYbIkyLPOgTwJYg%2FouLpSnPZyAo94fxut6LNGkVNA%3D%3D

    I would agree with Zak that part of a solution would be expanding the scope of Nurse Practitioners, who, studies have shown, are just as competent at many medical tasks as are doctors:

    http://news.bbc.co.uk/2/hi/health/475236.stm

    We also might want to think of ways to encourage medical schools to accept more students, and take a hard look at medical licensing and accreditation requirements to see whether they are truly necessary to ensure quality, and to what extent they are merely a pretext for restricting the supply of healthcare providers.

  17. Blackadder permalink
    October 22, 2007 8:43 pm

    On the issue of waiting times, Morning’s Minion points to France as an example of a country where rationing (so far) as been relatively slight. He fails to mention, however, that France does not have a single payer healthcare system, and that, in the words of a Brookings Institution report, the system is facing “crises of unprecedented scope.”

    http://www.brookings.edu/~/media/Files/rc/articles/2002/07france_dutton/dutton.pdf

    To the extent that waiting times are a problem, there are several ways this could be dealt with. One way would be through government fiat. In the U.K. a while back, the Labour government tried to deal with long waiting times by mandating that a certain percentage of patients had to be seen within 72 hours. I saw the results of this during the last election, when Tony Blair was assailed at a townhall meeting by constituents who had wanted to make appointments a week in advance but were told they couldn’t because the hospitals had a government target to meet. Blair seems genuinely shocked by this; I wasn’t.

    Another alternative would be to give the market a chance to sort the problem out. The article Morning’s Minion cites mentions the rise of walk-in medical clinics (which, of course, the Doctors’ Unions are trying to clamp down on). And, at the risk of repeating myself, increasing the supply of doctors would seem to be a good way of limiting waiting times and decreasing reliance on rationing.

  18. Donald R. McClarey permalink
    October 22, 2007 9:28 pm

    Good discussion Blackadder. I wish there were a nation on Earth that truly had a solution of how to pay for health care in an efficient, cost effective manner that did not lead to rationing, but the more I look at different health care systems around the world, the more problems I see. Our system obviously needs massive reform, but I just don’t see more government involvement being the best solution. In regard to taking profit out of healthcare being a solution to soaring costs, I would note that almost all colleges and universities in this country are not-profit, and the ever increasing cost of higher eductation in excess of the inflation rate, leaves me skeptical about the effect of removing profit from the equation equaling a lower price for the consumer.
    I removed the duplicate.

  19. SMB permalink
    October 22, 2007 9:43 pm

    Thanks for the interesting discussion. Regarding Blackadder’s comments on ‘healthy behavior': this has always struck me as a troubling aspect of the argument against a single payer. The idea seems to be that if people have to pay for their own health care, they will take better care of themselves–and then they won’t get sick! It is a short step from this to thinking that sick people are getting their just deserts for a vicious lifestyle. References to ‘obesity’ are especially troubling, since the causes of that condition are complex and not simply reducible to moral weakness.

  20. October 22, 2007 10:56 pm

    On the “Calvinism” point– the more I see some kinds of comments on health care, the more I think it reflects a Cavinist ethos. Consider this: the World Values Survey shows that about two-thirds of Europeans think the poor are poor because they are unlucky, while the same percentage of Americans think the poor are poor because they do not work hard enough. That, my friends, is American Calvinism in action. And it’s the same kind of arguments in health care: people without insurance must in some way be lacking in personal virtue and personal responsibility.

    Here’s a basic rule of thumb that I know some of you won’t like: whenever American Catholicism divergences from world Catholicism on a certain issue. then that’s the Calvinist influence!

  21. October 22, 2007 11:03 pm

    Blackadder’s arguments revolves a lot around basic market economics. But market discipline simply will not work (or at least work in the way people hope it will work) in the domain of health care, largely due to a massive asymmetry of information between health care provider and patient. He is basically trotting out the old moral hazard argument, that giving imply for free or at subsidized rates leads to overconsumption. In general, that is true (and one reason why gas is too cheap in the US). But health care is a public good, just like education. I don’t hear people complaining that people consume too much education beucause it is too cheap. As economist Uwe Reinhart has shown, people do not simpply consume health care because it is cheap. You do not give up your golf round to check into hospital. You do so because you are sick, and you are facing a huge asymmetry of information on the issue.

  22. October 22, 2007 11:18 pm

    Zak asked if Medicare Advantage Plans cost more beucause they have better prescription drug coverage than Medicare part D.

    No. You are confusing different things here. First, let’s go back to the world before Medicare Part D (the presciption drug benefit). Medicare Advantage was a product of the late 1990s, an attempt to entice the elderly into private insurance by giving the money directly to the plan or the HMO they signed up for. The idea was that “market discipline” would allow the elderly to receive quality care more efficiently. In fact, the opposite turned out to be true, as Medicare Advantage turned out to be substantially more expensive than traditional Medicare (the single payer system whereby the government pays the provider directly).

    When Medicare Part D came along, the Republicans refused to even provide fair competition as traditional Medicare was not allowed to have any role whatsoever. I think the reason for keeping it out of the pciture is obvious.

    So, the question is this: in an era of skyrocketing health care costs, why are we supporting a system whereby the middle man (insurance companies, drug companies) take a skim? It’s like Tony Soprano in charge of health care!

  23. October 22, 2007 11:31 pm

    One more thing, and then I’ll shut up. On the cost issue, it’s worth remembering the 80-20 rule: 20 percent of patients eat up 80 percent of costs. It’s not surprising that most the the uninsured are “healthy” in the sense of not needing chronic care. But by foregoing basic preventive (and cheap) care, when the problem hits later in life, it hits with a vengeance. Obviously, this is costly (this goes back to my point on the need for primary family medicine). The uninsured also suffer from horrendous dental hygiene– while not life threatening, there are still serious consequences for a lack of treatment.

    On France, I am well aware of the fiscal sustainability porblems in the health sector. I should point, however, that health care costs in the US are rising at least as fast (I belive faster, though I have no facts at hand to back this up right now). Whether it shows up as government spending or private spending ultimately does not matter. I agree, though, that we need to think clearly about how to deal with the non-demographic costs of health care spending. If we are in a world where service must be cut back, doesn’t it make more sense to at least have the most efficient starting point?

    Final point (really!): in my post on Clinton’s proposal (http://vox-nova.com/2007/10/12/why-i-like-hillarys-health-care-proposals/), I noted that her plan allows people to either keep their present inurance, choose private insurance while not allowing the inusrance companies to disciminate, and a public plan. This is a level playing field. If this passes, we will see clearly whether the public or the private option works better. This is true “market discipline”. I’ll end with a challenge: will you support Hillary’s plan on the grounds that the private insurers will win business hands down?

  24. Donald R. McClarey permalink
    October 22, 2007 11:37 pm

    Tony, there is always a middle man in most complex enterprises. You simply wish to make government the middle man. That is precisely like having Tony Soprano, with a life long grant of immunity, in charge of health care. By taking profit away from health care you substitute government fiat for market mechanisms. In a market system you can always take your business to a competitor, in a government controlled system there is no competitor.

    More about the joys of government medicine as experienced by our British cousins courtesy of the National Health Service.

    http://www.spectator.co.uk/melaniephillips/284306/the-retreat-from-scutari.thtml

  25. October 23, 2007 2:10 am

    MM — what’s the “basic preventive care” that can prevent cancer or heart disease or Alzheimer’s “later in life”? I’m familiar with a lot of studies about diet and exercise, etc., but you seem to have in mind some form of medical treatment. Anyway, I’d really like to know while I’m relatively young.

  26. J. Brown, MD permalink
    October 23, 2007 11:48 am

    Some thought from a FP physician:
    I am not confident that increasing the number of physicians would bring prices down. For some odd reason areas that have more physicians typically have more expensive health care without significant increase in outcomes.
    Free market forces in medicine are modified by the monopolistic culture of medicine. In my personal experience, the breaking of that monopoly by the introduction of midlevel providers such as Nurse Practitioners, Nurse Midwives, Nurse Anaesthetists, and Physician Assistants has had the result of bringing down the cost of delivering medical care. Whether outcomes will suffer remains to be seen.

  27. Zak permalink
    October 23, 2007 1:13 pm

    Belief in the power of the goddess Fortune does not make you a good Catholic or even demonstrate a residual Catholicism among the neo-pagans. It merely means that people, who no longer accept the idea of Providence or grace need an alternative means of explaining the otherwise inexplicable.

    Calvinism shouldn’t be reduced to “hard work makes everything better, bad people had it coming to them.” And I’m not sure that Calvinism is the dominant current in American Protestantism. Its theology is too extra-Biblical for fundamentalists and many Evangelicals, although you could make the case that through 18th century Puritanism and Presbyterianism, it helped shape two of the dominant cultures in the US, even after its religious effects were gone, a la Weber in The Protestant Ethic and the Spirit of Capitalism, but his argument has been questioned extensively from what I understand.

  28. Zak permalink
    October 23, 2007 1:16 pm

    MM,
    My point about Medicare Advantage plans is that many covered prescription drugs even though Medicare did not. It is thus not surprising that they would be more expensive.

    Also, aren’t they compensated based on the average healthcare costs of 65+ patients in the region where they operate?

  29. Blackadder permalink
    October 23, 2007 3:07 pm

    A number of points:

    1) Morning’s Minion says that basic economic principles don’t apply to healthcare because there is an asymmetry of information. But asymmetry of information is hardly limited to healthcare. The guy who sells me a car knows more about the car he’s selling than I do. The guy who fixes my car knows more about what’s wrong with it than I do. The only difference in the case of health insurance is that the asymmetry is in the consumer’s favor. A person typically will know more about his health than will a potential insurance company.

    2) Morning’s Minion also thinks that the basic economics does not apply to healthcare because “people do not simply consume health care because it is cheap.” Of course, people don’t do anything simply because it is cheap. But leave that aside. The primary problem with third party payment is not that it leads to overconsumption, but that it creates price insensitivity. Granted that most people don’t go to the doctor just for kicks. But if a person does go to the doctor and doesn’t care how much it costs, he is liable to rack up a larger bill there than if he did count the cost. For example, if he’s offered a choice between a $30 a bottle drug and a $100 a bottle drug, both of comparable quality, he will be much more likely to choose the $30 bottle if he is paying for it than if he is not. And if most everyone has their healthcare paid for by a third party, this price insensitivity means that there is no incentive for healthcare providers to lower prices to compete for people’s business. They can, in fact, provide the same services for higher prices without driving away their business.

    3) Morning’s Minion says that its Calvinist to think that the poor might be poor for some reason other than bad luck. Well, okay. But we aren’t talking about the poor; we’re talking about the sick. And it is manifest that there are certain things a person can do (e.g. smoke, overeat, engage in risking sex) that make them more likely to have significant health problems. If charging high premiums based on such risk factors will a) encourage people to give the unhealthy behaviors up, and b) will help lower healthcare prices for everyone else, then I fail to see why it should be so objectionable.

    4) As to Morning’s Minion’s challenge, I don’t see how you can call government versus private competition a “level playing field” when the government plans are heavily subsidized with taxpayer dollars. If the government plans had to be paid for solely by patient premiums, that would be a more even competition. It still wouldn’t be a level playing field, as the government is exempt from a whole host of regulations and taxes, but even with these disadvantages, I suspect that private firms would be able to outperform government ones. Of course, when the government lost, it would simply change the rules to hobble private competition.

  30. Blackadder permalink
    October 23, 2007 3:12 pm

    One more thing. Morning’s Minion says that “whenever American Catholicism divergences from world Catholicism on a certain issue, then that’s the Calvinist influence!” Presumably, then, he thinks that the greater support among American Catholics historically for democracy, religious liberty, and freedom of speech are due to Calvinist influence, and therefore, also presumably, bad.

  31. Ut videam permalink
    October 25, 2007 12:45 am

    Just noticed an excellent post by Dr. Ron Paul on this issue:

    http://www.ronpaul2008.com/articles/54/free-market-medicine/

  32. Jtphenom permalink
    October 28, 2007 8:58 pm

    Anyone know why the links take me directly back to this site??

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