Over at NRO’s Critical Condition, I posted a lengthy critique of Ken Arrow’s thesis that health care is fundamentally different from other sectors of the economy, and therefore incompatible with free-market principles.
Ezra Klein mistakenly cites the points of agreement between another writer and me (i.e., the ways in which free-market sectors of the economy are similar to health care) as describing why health care is different. Klein then goes on to say:
First, if you don’t get good health care, you might die. That makes it hard for individuals to say no to things, it makes it hard for insurers to resist the backlash that comes when they say no to things, and it makes it hard for government to say no to things. And second, most health-care costs are subsidized by a third-party (employers for most of us, taxpayers for seniors and the poor), which means the people receiving the benefit aren’t feeling the cost.
Klein’s second point was addressed in my earlier post, and also in Arrow’s original paper: third-party payment is a significant distortion, one that we would do well to reduce. Unfortunately, PPACA makes this problem worse.
That brings us back to the point that Klein and other liberal writers raise: health care is different because it involves life and death decisions. Yes, that is an unusual feature of some elements of health care, but not all: indeed, not most. For example: going to the dentist is rarely a life-or-death decision. Getting a hip replacement isn’t a life-or-death decision. Using a branded blood pressure drug, instead of an older generic one, is rarely a life-or-death decision. Getting an allergy shot to get through the spring pollen season is rarely a life-or-death decision.
A patient diagnosed with hormone-resistant prostate cancer, for which there is no cure, is going to die no matter what. Should that patient be given a $90,000 therapy that might extend his life by an average of four months? This, too, is not a life-or-death decision. It’s a death-or-death decision.
It turns out that the true range of life or death decisions in health care is rather narrow. If a poor woman gets hit by a bus and is sent to the ER, we all agree that America should come together and pay for that woman’s care: and, in fact, we do pay for it. If a physician makes a mistake, causing a patient to die or suffer disability, we have malpractice litigation for that—i.e., this is a problem upon which government-subsidized health care has no impact.
It would benefit those who believe that health care is incompatible with the free market to refine their arguments. A stronger liberal argument for socialized medicine would be: let’s let the free market reign in those areas of health care that are most like the rest of the market economy (i.e., non-catastrophic and elective care), and instead focus on socializing the aspects of the system that are most unlike the rest of the economy (i.e., catastrophic care).
Such an argument would begin to converge with conservative calls for consumer-driven health plans. CDHPs seek to achieve something quite similar to what I describe above: they put cash, in the form of tax-free health savings accounts, in the hands of individuals to pay for routine health expenses, while still insuring against catastrophic illness or injury. CDHPs continue to be refined, and are prevented from innovating further by unwise regulation, but they represent the best attempt thus far to segregate the most market-oriented aspects of health care from the least market-oriented. I would welcome liberal thoughts on how to achieve the same.
There are plenty of non-ER life-or-death decisions: things like diabetes, kidney or liver treatments. Treatments for a variety of heart and pulmonary conditions are life-or-death decisions. Especially for those diseases which are congenital, there is little reason to believe that CDHP would deliver any performance improvements over a plan which simply refuses brand name drugs.
Moreover, CDHP's cost reduction capabilities, while proven, are small. This is even more obvious by comparison to what could be provided by relaxing general practice regulations. There's no reason that nurse practitioners or physician assistants could not perform most of the tasks currently handled by GPs. In fact, in some HMOs, they do already and there has been no quality of care problem.
From a liberal perspective, the problem with these solutions is straightforward: they seek to reduce healthcare costs by reducing healthcare access for those who cannot afford to pay. The idea that fundamental issues of human well-being will be decided based, essentially, on what you do for a living is strikingly inequitable. Indeed, if we stated straightforwardly that healthcare would be rationed based on your role in society, a la the Soviet Union, you would be condemning the system. Yet that is precisely what you propose.
Reply to this commentLinkReport AbuseThe problem with Hyena's argument in attempting to make market-driven healthcare analogous with the Soviet Union is flawed. The SU was State sanctioned rationing. Market driven healthcare makes the individual responsible for his/her choices or lack thereof.
To say that an individuals poor choices is analogous to the State discriminating and rationing care against an individual, prenegates any persons right to choose best for themselves and their family in the first place and takes away the notion that free men make the best choices for themselves as opposed to a central State. Albeit we may be headed that way under the current administration and democrats in general, we have not arrived there yet. Nice try but no sale.
Reply to this commentLinkReport AbuseA major problem with health-care costs is that they are regressive. An angioplasty costs the same whether the patient earns $25,000 a year or $250,000. Insurance copays are also regressive and can pose real hardships for lower-income patients; for example, the copay for an angioplasty ends up being roughly $2000. This may seem like chump change to some NR readers, but it is a lot of money to most people. And remember--medical costs hit the sick.
Reply to this commentLinkReport AbuseWorse, consumers have few alternatives for necessary procedures. If you need to buy a car, you can choose among used and new cars of different costs, but you can't save money by doing without anesthesia during surgery or hobbling around on a broken leg for 6 months. When people try to save money, they usually postpone or do without preventitive screenings, which is not a good idea in the long run.
I don't know what the solution is--certainly not nationalized health care. But when conservatives' solutions are only beneficial for the upper class, such as health savings accounts that are not much good to people who need their income to live on, they lose input and voters.
Obama has been a gift to the Republicans. If he had better political instincts, Republicans would still be in trouble.
This is slightly off-topic, but it is a pet peeve of mine.
Reply to this commentLinkReport AbuseRegressive - adj. decreasing in rate as the base increases
Having something cost a greater percentage of your income does not make it regressive. Our current income tax is progressive because the rate increases with income. A property tax would be progressive if the tax rate increased with property value. A sales tax would be regressive if the tax rate dropped with an increase in price.
Health care costs might actually be regressive, in that a quadruple bypass might not be twice as expensive as a double bypass.
Hi guys,
Hyena: I think you misunderstand the nature of consumer-driven health plans. CDHPs don't foist more of the costs onto the consumers. Rather, they transfer *control* of the spending onto the consumers.
Let's say you have a traditional, garden-variety PPO insurance plan in which, of every $100 spent on your care, 85% is paid by the insurer, and 15% directly by the beneficiary as cost sharing (in the form of co-pays, deductibles, and coinsurance).
A consumer-driven plan would structure it like this: 55% is paid by the insurer, 15% paid directly by the beneficiary as cost-sharing, and 30% is funded by the insurer/employer into a tax-free health savings account, which the beneficiary can spend or save. If the beneficiary saves the money in the HSA, it rolls over into the following year. Furthermore, the HSA can be invested, collecting interest. Think of it as a much richer version of rollover minutes with your cell phone plan.
What is great about this approach, along with the fact that it expands individual liberty to choose how to spend your own health dollars, is that it leads to greater efficiency in health spending, driving the cost of insurance lower in a virtuous cycle.
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