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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.
Posted by Tyler Cowen on July 17, 2007 at 06:10 PM in Medicine | Permalink
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).
Posted by: Ed in the Silicon Valley at Jul 17, 2007 6:56:22 PM
I find it interesting that people believe that when a corporation manages a system it acts in the best interest of the people and when a government manages a system it does the opposite. By law, a corporation is beholden to the interests of the shareholders and that means profit margin. Thus, the law dictates the nature. You won't expect a lion to befriend a gazelle.
It has always been a motif of the conservatives to run government programs poorly in order to kill it. The fact that Katrina, immigration, education, and the war on Terror is being bungled by the current Administration and the fact that they are
Republicans is no coincidence.
Opponents of single payer health care say that the price of Medicare is rising but nobody connects where those costs are being generated. The outrageous rise of housing over the last 10 years was no concern to people even though people are resorting to risky loans in order to own.
Though people don't like the DMV (I just went there today) I'd gander it'd be worse if a private corporation was running it. When you have a problem with your credit card or cell phone service, you have to go through a bureacratic system to get the issue resolved.
If we ran the postal system like the health insurance companies, only 2/3rds of the people would get their mail and those who do would be paying through the teeth.
Posted by: Tony at Jul 17, 2007 7:11:20 PM
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.
Posted by: David Flores at Jul 17, 2007 7:31:49 PM
Tony said: "I find it interesting that people believe that when a corporation manages a system it acts in the best interest of the people and when a government manages a system it does the opposite."
I have honestly never met anyone who believes that a corporation acts in anyone's interest but there own. But these same people, myself included, often have no idea for whose interest the government is acting when it passes any specific a law. Especially when the Legislature passes a law with the intent of having the courts sort out the gory details. Lobbying tends toward obfuscation.
RE:the DMV. Do you have any evidence, or argument to persuade us that a private licensing agency would underperform the DMV?
RE: the mail & healthcare. I agree running the public mail system like the current healthcare system would be a bad idea. But, allowing a FedEx into healthcare is another story.
Posted by: Dan in EuroLand at Jul 17, 2007 7:33:23 PM
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.
Posted by: Yancey Ward at Jul 17, 2007 8:15:04 PM
"It has always been a motif of the conservatives to run government programs poorly in order to kill it. The fact that Katrina, immigration, education, and the war on Terror is being bungled by the current Administration and the fact that they are Republicans is no coincidence."
Are you saying the conservatives are in a conspiracy against themseves?
Or do you really want to suggest that they are trying to demonstrate that big government can't work *even if run by Republicans*?
This seems rather far-fetched.
Posted by: LemmusLemmus at Jul 17, 2007 8:25:31 PM
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.
Posted by: Yancey Ward at Jul 17, 2007 8:26:00 PM
Incidentally, Mr. Tidd and and I both live in Newtown, Connecticut.
Posted by: Yancey Ward at Jul 17, 2007 8:27:36 PM
I'm curious about comparative flood-defense policy. Care to make a post about this, or at least provide a link?
Posted by: Jacob Wintersmith at Jul 17, 2007 8:36:18 PM
"I'm curious about comparative flood-defense policy. Care to make a post about this, or at least provide a link?"
this how Tyler keeps us hooked. he does this a lot.
A doctor told me recently that salaries in the medical field have not risen at the same pace as other competitive jobs (especially in the business field), despite the increasing demand as baby boomers age. He blames the increasing size of medicare.
Posted by: thehova at Jul 17, 2007 9:23:19 PM
Did you see "The inevitable future of health care" by Stephen Cecchetti at www.voxue.org?
Posted by: qingdao at Jul 17, 2007 9:54:14 PM
gingdao,
Cecchetti's predictions about the accuracy of, first, medicine's predictions of the likely future health problems of a young person and, second, the costs of treating those future health problems, are, to be generous, much too confident. However, I will grant him his prediction that chronic health problems will have to be covered by something other than insurance. I will even grant him his prediction that, as a society, we will decide to cover these costs for those who can't afford it since we actually already do that in a haphazard way. However, unless the character of the country changes in a major way, there is no way that the level of care supplied won't be multi-tiered. I seriously don't see how the US will outlaw a higher standard for those who can foot the bill themselves, and that is how I read his future scenario, though he does not explicitly write that. I assume that is what he means when he says healthcare will be paid for and run by the government in the future. Such a future I will oppose violently, if necessary. I probably would not be alone.
Posted by: Yancey Ward at Jul 17, 2007 10:57:38 PM
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.
Posted by: jb at Jul 17, 2007 11:19:30 PM
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.
I guess your point is that the Dutch flood defense policies have been privatized which is why they are so much more efficient (although Rijkswaterstaat is a government agency, so I doubt it).
I especially like these kinds of arguments:
RE:the DMV. Do you have any evidence, or argument to persuade us that a private licensing agency would underperform the DMV?
It's pretty difficult to underperform the DMV, but is that the goal - not to underperform it? Is your assumption that, for the massive cost of overhauling our motor vehicle registration system, we should expect the same performance in return?
It has to be shown that for the cost of overhauling a system and entrusting it to what will amount to unregulated and profit-driven entities, costs will drop significantly and service to consumers will be improved.
Government bureaucray is the pits, but I don't get particularly stellar service when I call the cable company, phone company, most airlines, or even my HMO provider either.
Posted by: fustercluck at Jul 18, 2007 12:08:56 AM
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.
Posted by: kebko at Jul 18, 2007 12:45:06 AM
I cited those regulated monopolies on purpose because I think that's what "privatized" health care service would look and feel like. Maybe a better example would be other insurance companies (e.g. auto insurance), which are not much fun to deal with either.
As for airlines, I have found better deals a lot of the time dealing directly with the airline. I check a list of bookmarked sites (sidestep, orbitz, travelocity, cFares, for best routes/fare comparisons but save the commission by booking directly with the airline.
OT, these sites look interesting if you happen to do a lot of traveling. They seem to be targeted toward domestic flights but my hope is that they'll provide the same service for international flights.
Posted by: fustercluck at Jul 18, 2007 1:10:50 AM
"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.
Posted by: plati-dude at Jul 18, 2007 1:53:23 AM
Holy crap, where have all the clueful commentators gone? They've been replaced by idiots. Specifically, Tony, plati-dude, jb, Dan, and David Flores. The reason our medical "insurance" system doesn't work is because it's not insurance, and because the recipient of the services isn't paying for them. Insurance works fine; paying your medical bills by filtering them through a third party which we call an insurance company does not work fine.
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.
It's clear here: market intervention does not lead to freedom; it leads to more market interventions.
Posted by: Russell Nelson at Jul 18, 2007 2:07:34 AM
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.
Posted by: just wonderin' at Jul 18, 2007 4:33:29 AM
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.
I believe the reason is because it's illegal.
Posted by: 8 at Jul 18, 2007 10:56:14 AM
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.
Posted by: Pinkston at Jul 18, 2007 10:59:38 AM
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.
I just sampled your DNA and found your predisposition to heart disease... Insurance canceled.
I'm as in favor of free markets as the next guy. Unfortunately, there are instances where free markets just do not work effectively (as opposed to efficiently) and we are worse off as a whole.
Posted by: Ed in the Silicon Valley at Jul 18, 2007 12:29:41 PM
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.
Posted by: Pinkston at Jul 18, 2007 1:03:28 PM
You're right, Tony. Why do conservatives hate the War on Terror?
Posted by: TGGP at Jul 18, 2007 2:18:12 PM
"health care cannot function as a reasonable free market."
How do you know? We've not tried it in living memory.
Posted by: Anthony at Jul 18, 2007 2:59:13 PM
