Matthew Yglesias, Ezra Klein (again), and a bunch of letter-writers in the New York Times all take issue with my relatively-free-market prescription for health care.
Yglesias contends that markets are better at giving people what they want than giving them what they need. Whether someone “wants” a cancer screening, he notes, isn’t all that important. But very few people “want” or “don’t want” a cancer screening in isolation from their actual goal, which is good health. And since most people want good health and have an incentive to equip themselves to make the right decisions, I’m not sure Yglesias’s distinction matters. He adds, “Someone really does need to tell you that certain procedures are unnecessary or unduly speculative.” Sure. But why do we assume that government intervention is necessary for that to happen, or will even do a better job of ensuring that it happens? Yglesias suggests that the advice-giver’s interest in profit will bias the advice. But if that is true, then in a free market 1) wouldn’t people tend to stop going to that advice giver? And 2) wouldn’t there be a profit in getting a reputation for giving good advice? The assumption that markets cannot generate good advice is clearly untrue.
Klein points out that even in the less important market for televisions, some people make bad decisions and end up with crummy sets. Crummy by what criterion? Maybe they’ve just made a different price-quality-speed of purchase trade-off than Klein would. But alright, stipulate Klein’s point. Again, why do we expect the government to make better decisions? Klein thinks that my explanation of how the market can supply goods such as solid advice is “a bit hand-wavy.” That response puts me in mind of Murray Rothbard’s “fable of the shoes.” But the assumption that government is likely to correct the market’s flaws is hand-wavy itself.
The common theme among the letter-writers, meanwhile, is that we could cut health-care costs drastically by getting rid of private insurance and its attendant administrative costs. I have three responses to the line of argument. First, some administrative costs are worth keeping. As Shannon Brownlee and Ezekiel Emanuel write, “Following heart-attack or cancer patients to see which interventions work best is an administrative cost, but it’s also invaluable if you want to improve care. Tracking the rate of heart attacks from drugs such as Avandia is key to ensuring safe pharmaceuticals.” Stopping fraud involves administrative costs too. Medicare could use some more of them. Second, as Brownlee and Emanuel also point out, administrative costs are not a major source of health-care inflation. Third, market reforms can bring down administrative costs. Allowing the expansion of the individual health-insurance market would, for example, enable the mass-marketing of policies at lower costs.