Strictly for my Minarchists
So tell me: The argument is that if we further nationalize health-care financing it will mean reducing expenditures which will mean squeezing the profits of Pharma which will reduce innovation and more people will die and that’s bad. How is this not also an argument against any course of action which reduces health-care spending? For instance, favored right-wing programs are tort reform and increasing the share of health-care costs borne directly by the consumer. The argument is always that these changes reduce “unnecessary procedures” and – ta-da – control costs. But this would also, then, reduce the incentive for innovation in the health-care sector. Lower profits; less capital attracted.
I think y’all are proving too much.
Comment by joe from Lowell —
September 16, 2009 @ 9:17 am
Similarly, why do I never hear any proposals to forbid the military, VA, or Bureau of Prisons from negotiating for lower drug prices? We could be funneling much more money to the innovators that way.
Comment by stephen —
September 16, 2009 @ 10:26 am
Good point.
This occurred to me as well, a while back actually, which is why I favor the “consumer pressure cost control” argument to the innovation argument, as they are most often applied.
Of course I still believe that the “correct” balance between the aggregate amount of spending, and level/kind of innovation is most likely to occur in a fist party payer system than a third party one of any kind. But that is a more nuanced and honest argument, full of trade offs, then the the free pony (less cost and more innovation!) one.
Of course we are never going to see a real consumer driven health care market, so it is a pretty cheap prediction to make.
Comment by TGGP —
September 16, 2009 @ 10:41 am
I’m with Robin Hanson: a lot of medicine isn’t doing any good anyway, so reducing output would be no big deal.
Comment by Seward —
September 16, 2009 @ 10:57 am
Well, I don’t think the profits of Pharma will be squeezed actually, so that is a bit of a non-starter. Now, market entry will become more difficult (as it is any regulated market – indeed, that is part of the rationale of regulation – claims of “excessive competition” and other such non-sense notions), so there is a detriment to innovation argument issue there, but I don’t think Pharma will be taking any sort of cut. Indeed I predict that they’ll negotiate themselves a very sweet deal out of this in fact.
Comment by dhex —
September 16, 2009 @ 10:59 am
contra hanson, though, a lot of flash in the pan or even totally crazy (at the time) medical procedures lead to useful stuff down the road. angioplasty comes to mind; it took 50 or 60 years from the genesis and experiments of the idea to get somewhere near a reasonable application, and it wasn’t until the late 70s that it actually worked in people.
the current stenting fad isn’t a cure-all for hear patients that it was being sold as (both literally and pr-wise) but in the area of strokes and stroke prevention it may turn out to be an incredible tool.
which has no bearing on the ot but you never know what dreams may come, etc.
Comment by Seward —
September 16, 2009 @ 11:02 am
TGGP,
I’ve read that roughly about 1/2 of what doctors do has no demonstrable medical or scientific value. Some claim that is why comparative effectiveness research is so badly needed; but this is our fourth or fifth round with that so I think the problem is that it is easy to game and undermine such research efforts, particularly when there are lots of political forces at play.
Comment by cbisquit —
September 16, 2009 @ 11:14 am
How would tort reform lessen the profits of pharmaceutical companies? The marginal cost of writing one more prescription is, to the doctor, a piece of paper. Less liability means the doctor is more likely to do what the patient wants.
I think the problem here is you’re conflating procedures like expensive tests of dubious efficacy with pharma, which has a pretty good track record.
Comment by Seward —
September 16, 2009 @ 11:17 am
On the issue of costs generally, while the U.S. spends more on healthcare than other nations per capita, those nations are catching up to us. We’re something like the middle of the pack as far as per capita increase is concerned. This shouldn’t be surprising; there has been a lot of pressure from various publics in nations with more socialized healthcare systems to increase healthcare spending by the government. That’s been true in Canada and other places – and I guess that pressure will increase in Canada now that there is the very real threat that private payment could become a norm.
Comment by Neel Krishnaswami —
September 16, 2009 @ 11:17 am
When health economists study the relative effectiveness of interventions that improve health, the three things that pay off big are diet, exercise, and (lagging behind the other two) drugs. No other interventions have a statistically measurable effect.[*]
So how effective are drugs? Well, so effective that Medicare Part D (a program I opposed as a cynical, thoughtless, giveaway to seniors) actually ended up saving Medicare money, by reducing the demand for other forms of medical care. That is, drugs work well enough that W. wasn’t able to screw up Medicare….
Now, at this point your minarchist friend could observe that if consumers were putting their own money into play, they would preferentially pick the treatments that, you know, work. So you can potentially cut costs without cutting the flow of money to the drug companies’ R&D.
My beliefs aren’t that strong, because the medical sector is complicated, and I have my doubts about any bill Congress is likely to produce due to the strength of the lobbies involved. On the flip side, there’s enough waste that you don’t need brilliance to do better.
[*] This is not the same as “no effect”. A treatment may only be applicable in rare cases. Or, it could be applied in cases where it actually causes harm, canceling out its benefits. (For example, if doctors and nurses don’t wash their hands frequently enough, hospital stays can end up making people sicker on net, as the benefits of treatment are negated by a increased rate of infections.) Either way, that means it won’t show a net benefit in aggregate statistics.
Comment by Seward —
September 16, 2009 @ 11:20 am
cbisquit,
Well, as a somewhat allied point I think it is pretty clear that Pharma’s innovations when they have allowed patients to forgo surgeries, etc. save shit tons of money, even though they boost the profit margin of Pharma. A lot of this people saying “look at all the money they are making,” which is the “seen” part, while the unseen part is that a whole host of things are being avoided that were much more expensive. Mad props to Bastiat.
Comment by Seward —
September 16, 2009 @ 11:24 am
Neel,
Yeah, I saw those studies too about Part D.
One study about that here: http://www.nber.org/papers/w13501
Hat Tip: Tyler Cowen
Comment by Neel Krishnaswami —
September 16, 2009 @ 11:39 am
Via the Healthcare Economist blog, I was thinking of this paper: Prescription Drug Coverage and Elderly Medicare Spending.
Comment by Seward —
September 16, 2009 @ 11:52 am
Neel,
I think basically the less invasive we get the cheaper things will be; so bring on those Star Trek medical instruments!
http://www.youtube.com/watch?v=un8o6dny6rg
Comment by Thoreau —
September 16, 2009 @ 12:00 pm
I wonder what the people concerned about pharma profits think if, say, pharmacy chains merge, and the result is a larger player in the marketplace who can drive a tougher bargain with pharmaceutical companies. Or a health insurance company (yes, I know, some would argue with using the word “insurance” here, but we all know what I mean in this case) gets more and more subscribers and has enough clout to drive a tougher bargain with pharmaceutical manufacturers.
Would they support anti-trust legislation to break up the pharmacy chain or insurance company, in order to protect the profits of the pharmaceutical manufacturers and hence protect the incentives for innovation?
If they have a principled opposition to anti-trust, would they at least get nervous and start muttering about how innovation is going to be killed?
What if, say, WalMart were to drive a hard bargain with its suppliers and start selling drugs at discounts?
What I’m getting at is that there are lots of things that could happen to reduce pharmaceutical profits, and not all of them elicit wailing and gnashing of teeth over the threat to innovation.
Comment by Seward —
September 16, 2009 @ 12:12 pm
Well, the only sort of monopolies and oligopolies that I fear are the numerous ones that the government enforces.
What I’m getting at is that there are lots of things that could happen to reduce pharmaceutical profits, and not all of them elicit wailing and gnashing of teeth over the threat to innovation.
I guess I am not that concerned with Pharma profits. In fact, I am not concerned with any industry’s profits. That just seems like picking up the stick from the wrong end IMHO. Productivity is really the only thing that matters.
Comment by Seward —
September 16, 2009 @ 12:18 pm
Thoreau,
BTW, insurance, etc. are all pretty good examples where competition (and thus productivity gains) is significantly curbed by our current legal framework. And of course in some states there are already insurance companies that have near monopoly status, but that isn’t the result IMO of any natural market factors.
Comment by Picador —
September 16, 2009 @ 2:14 pm
Seward:
All monopolies and oligopolies are the result of government enforcement, assuming they’re undergirded by, say, property rights. You seem to be embracing a distinction without a difference.
Not to sound like a broken record, but Jesus H. Christ, do “libertarians” know how stupid they sound when they say things like this? One more time: enforcement of property rights by the government is no more or less intrusive or unnatural than any other government enforcement of rights that “libertarians” whine about.
Comment by Jim Henley —
September 16, 2009 @ 2:22 pm
Once one learns the history of freehold tenure (”property rights”) – that the concept was instituted by governments to simplify tax collection – it’s like finding out there’s no Santa. Damn that tricksy Henry Farrell for ruining my Christmases!
Comment by doubled —
September 16, 2009 @ 2:33 pm
It amazes me those that state we need to take the profit out of healthcare. Would doing so increase the number of doctors/nurses/medicines/procedures over say the next 10-15 years? To think so shows an ignorance of both economics and human behavior.
For being such a smart man, why doesn’t Obama see this as a supply/demand issue? That increasing the demand will cause shortages and lead to rationing? That if instead we increased the supply of medical providers/products/services, costs would be reduced?
Is he such an anti-capitalist that supply/demand curves cease to exist in his world of ‘hope’ and ‘change’.
Comment by Jim Henley —
September 16, 2009 @ 2:37 pm
doubled, I think I can see why you’d rather answer your own question rather than mine but, like, you need to get your own blog for that.
Comment by Seward —
September 16, 2009 @ 3:19 pm
Jim Henley,
Actually, that seems like a gross oversimplification of the actual history of freehold tenure. Free hold tenure in many countries came about for many reasons completely unrelated to taxation; including in Europe the post-plague need for large land holders to seek better rent arrangements with their tenants as well as in New Zealand, where the pressure to create freehold tenure (as opposed to the original leasehold system there) was the result of pressure from agriculturalists. The notion that it is all about ease of taxation is (a) reductionist in the extreme even when that was a factor and (b) in many historical instances simply wrong.
Comment by Neel Krishnaswami —
September 16, 2009 @ 3:30 pm
picador, you’re wrong. There really is a simple criterion for deciding when a property right is natural or not. The bit you missed in your rant is the differential costs of enforcing rights.
So, a good can be property when it is exclusive and rival — that is, it is exclusive when it is possible to prevent people from using it, and it is rival when someone using the good precludes others from using it. Something is a private good when it is rival and exclusive. It is a public good when either of those two conditions fails.
In general, public goods will be underproduced by the market, either because of free-riding (if it is not exclusive), or because there’s no way for private actors to capture the benefit of their creation (if it is not rival).
The function of legal property rights is to turn public goods into private ones. The threat of legal sanction makes, via coercion, a public good into a private one, and then the normal action of the market will tend to produce an optimal level of the good.
However, enforcing property rights is not free. If the costs of creating a property right is very high, then we can conclude that there is no natural property right.
For many goods — for example, small physical property — simply maintaining public order will ensure that they are rival and exclusive, because people can just keep it in their house and trade it among themselves. For other goods — such as intellectual property — the costs of enforcement are sky-high, and so we can conclude that there is no natural property right here.
Also, the term “enforcement cost” is a bloodless term. An enforcement cost is the threat (and often, the reality) of expropriation, imprisonment and violent death. It requires only basic morality to want to minimize those costs.
Comment by doubled —
September 16, 2009 @ 3:32 pm
I don’t know what question you are hoping to get an answer for from this post, but I was responding to this : ‘ Lower profits; less capital attracted.’
Lower profits also means less medical personel attracted to supply medical treatment. That means the supply of medical providers/procedures will, over time, decrease, exacerbating the problem Obama is trying to fix. That is all , sorry if it got your panties in a bundle to make a comment here on the general topic of the thread while obnoxiously avoiding answering your question.
Comment by Seward —
September 16, 2009 @ 3:36 pm
Picador,
All monopolies and oligopolies are the result of government enforcement, assuming they’re undergirded by, say, property rights. You seem to be embracing a distinction without a difference.
The problem is in how libertarians generally define a monopoly. So the question is, is the monopoly the result of government favoritism (thus does the government enforce it), or is the result of, well, better competitive strategies by the monopolist. The latter the libertarian never has a problem with partly because those sorts of monopolies invariably collapse far more quickly than the former. Also the latter are generally quite good for consumers, even if some producers lose out, whereas the former protect producers at the expense of consumers (and of course really screw over the poor as well).
Comment by LarryK —
September 16, 2009 @ 3:43 pm
Doubled, in a nationalized, single-payer system, doctors for instance can still be paid very well, and thus their economic incentive to stay in the profession is satisfied. In addition, many doctors want to be doctors in the first place for non-economic reasons.
Insurance company profits, however, add no value at all to a well-functioning medical system. The drive for higher profits in general can only be met by denying healthcare.
Comment by Seward —
September 16, 2009 @ 4:08 pm
LarryK,
FYI: The profit margins of insurance companies are very small, particularly in comparison to their overall expenditures as well as compared to other industries. Check out the gross profits of Aetna for example: http://finance.yahoo.com/q/ks?s=AET
As for them adding no value, well, the profits provide one of the incentives to start the insurance company in the first place.
And the last thing I want is a nationalized, single payer system where it is illegal for me to pay for health care on my own dime, if that is what you are suggesting. That has got to be one of the greatest violations of personal autonomy I can think of.
Comment by doubled —
September 16, 2009 @ 4:22 pm
Larry K : ‘Insurance company profits, however, add no value at all to a well-functioning medical system. ‘
I don’t know , do auto insurance companies add no value to our transportation system? Spreading risk is not in itself bad, there is insurance for any number of things, are their profits automatically bad? Or is it only when it concerns an emotionally charged issue like healthcare is profit a pariah, to condemned as ‘evil’?
If someone gets cancer , having those who don’t share in the cost may not seem like value added to you, but I bet it does indeed to those who receive the benefit.
Larry K again : ‘The drive for higher profits in general can only be met by denying healthcare.’
Said as if a government run plan would/could never reject care. You would have to be quite naive to beleive that, just look into denied care in England for premature babies of less than 22 weeks, or Canadiens coming to US for care they can’t get, or have to wait months for.
The US will have to ration care or raise taxes to cover the deficit, those are the two choices as I see it. There are plenty who feel that ‘hope’ will be enough to overcome the realities of supply/demand of a limited resource, I’m just not one of them.
Comment by cbisquit —
September 16, 2009 @ 4:24 pm
to get an idea of how little health insurance profits compared to other industries check out http://money.cnn.com/magazines/fortune/fortune500/2009/performers/industries/profits/
it’s ranked 35th. lower even than beverages
Comment by Seward —
September 16, 2009 @ 4:34 pm
cbisquit,
Way OT but some thoughts on those numbers (and I am partly assuming that these are U.S. companies only):
Airlines are down there at the very bottom, where I expected them to be.
What struck me is that 7 out of the top 10 are companies make physical things (if I counted correctly); while this isn’t a direct proxy for how much stuff these sectors make, it is a pretty direct way to attack the whole notion that the U.S. has “de-industrialized.”
Comment by joe from Lowell —
September 16, 2009 @ 4:52 pm
It’s funny; I have no doubt whatsoever that doubled believes in the Laffer Curve, and understands the theory of increasing taxation initially leading to more revenue, but beyond a certain level, leading to diminishing revenue.
It would seem a simple enough matter to apply this theoretic framework to the subject of profit in the health care sector. If the pill costs X, it won’t be available because nobody will produce it. If the pill costs 25,000x, it won’t be available because nobody can afford it. It’s not only a simple enough framework, but I venture to guess, a rather familiar one as well.
Comment by Joshua Holmes —
September 16, 2009 @ 6:08 pm
I think the difference is that the innovation of Big Pharma is seen as producing results, whereas the innovations directed to useless procedures or legal fees are not. In a different context, it may be like the difference between thinking that military spending ought to be reduced generally, and thinking that “Star Wars” ought to be scrapped.
Not a particularly strong argument, though.
Comment by Seward —
September 16, 2009 @ 6:42 pm
Joshua Holmes,
Well, in light of that argument I think that there is something to be said for New Zealand’s universal no fault system; though it wouldn’t have to be publicly run (it could be run like Chile’s largely private pension system).
Comment by Joshua Holmes —
September 16, 2009 @ 6:53 pm
For many goods — for example, small physical property — simply maintaining public order will ensure that they are rival and exclusive, because people can just keep it in their house and trade it among themselves. For other goods — such as intellectual property — the costs of enforcement are sky-high, and so we can conclude that there is no natural property right here.
This proves a bit too much. For example, unravelling the chain of property transactions to determine how much a mortgagee is owed in a bankruptcy can be extremely complex, whereas a Cease and Desist Letter generally is not.
Comment by mb —
September 16, 2009 @ 7:26 pm
Heath care does not work in a free market model. The in-elasticity of demand alone makes it a poor candidate for the free market. Add to that the external costs borne when health care is denied to some and it is easy to see why even our system, at some point, provides universal coverage. We just do it in the most expensive and least efficient manner possible, i.e., in the Emergency Room. Yay us. Long may we wave.
I think if it is true that tort fears drive excess unnecessary care, then that care should be identified and the physician’s malpractice carrier should cover that portion of the care related to tort risk reduction. I think this is, in fact, a very small cost. There’s probably more cost in the poor way lab charges are bundled than in tort risk reduction. Certainly more unneeded care is provided in the service of meeting the patients’ expectations, e.g., the over prescription of antibiotics. Saying no is hard for a lot of docs.
If the medical community would do a better job of policing itself, then I’d be more favorably disposed toward tort reform. But I’ve been in too many executive sessions where physician negligence was discussed off the record with no warning to other organizations about said physician(s). I have great respect for physicians in general but their attitude toward the duds among them is like the Catholic Church’s response to pedophile priests — cover up at every turn.
Comment by Neel Krishnaswami —
September 16, 2009 @ 8:42 pm
A property right in a good exists for real when other people do not mess with the good without permission. To determine whether a given expenditure on an enforcement regime can create that property right, you need to look at the ex ante expected cost or benefit of breaking the rules. The sign of that expectation will tell you whether people will obey the rules or not.
Then, you can compare the gains from the property right to the costs of creating it to see if there’s any case for that right to exist at all. (Really, you need to compare it with the gains from the best alternative, but that’s probably an impossible analysis in practice.)
This means that what a natural property right is can change over time, as technology and social structures change. For example, modern, complex, bankruptcy law was invented back in the 1830s when people realized that keeping a factory running as a going concern would fetch creditors more money than just liquidating it. Social changes (the widespread adoption of the corporate form) required a change in property law.
Comment by Seward —
September 16, 2009 @ 9:07 pm
Neel,
I can agree with that, however, I would argue that costs and benefits includes more than just the formal sort of mechanisms of the state; indeed, property, etc. rights could not exist if they depended on the sort of gold plated measures of enforcement that states allow.
Comment by Joshua Holmes —
September 16, 2009 @ 9:15 pm
This means that what a natural property right is can change over time, as technology and social structures change.
So, given a particular set of social structures, you could have a patent be a natural right and a plot of land not be?
Comment by Thoreau —
September 16, 2009 @ 9:55 pm
I am fascinated that the conservatives and libertarians are claiming that a government program that involves healthcare will result in:
1) The government throwing less money at it than the private sector.
2) Massive expenses.
Meanwhile, liberals are claiming that a government program that involves healthcare will result in:
1) Generous government spending.
2) Cost savings.
Look, I promised to sit this one out, but could the participants at least verify that they all have the correct scripts in their hands? I think a few pages got mixed up somewhere along the line.
Generally, it’s the conservatives who insist that a government program will become bloated, unless it involves the military (which isn’t actual government spending, according to conservatives).
Pingback by Matthew Yglesias » Free Marketers for High Health Spending —
September 17, 2009 @ 9:59 am
[...] Jim Henley, I’ve been a bit confused by the logic of some recent free market defenses of high health care spending: The argument is that if we further nationalize health-care financing it will mean reducing [...]
Comment by LarryM —
September 17, 2009 @ 11:35 am
Well, yes, of course you are correct, but dishonest/free pony arguments in the health care realm aren’t exactly limited to free marketers by any means.
My grumpy position is as follows: whatever your priors are, and whatever your ideal system, we can’t get there (or anywhere close) given current political constraints. Personally, I think that either a more market driven approach OR a much more statist approach would be better than the current bastardized system, but neither is politically possible now.
Which means that any meaningful reform will have to wait until the many flaws in the current system are made more manifest by time.
Comment by LarryM —
September 17, 2009 @ 11:41 am
Thoreau,
Well, your cycicism mirrors mine, but to be fair both sides at least invoke efficiency arguments (i.e., “the free market is more efficient than the government” vs “cost savings by eliminating insurance company overhead and profits, and via the bargaining power of the federal governmant) to try to square the circle. Those arguments don’t strike me as persuasive on either side, but it’s not like the two sides ignore the facial inconsistancies in their positions.
Pingback by Rational Arguments » Reader Question – Don’t we need to pay for innovation? —
September 17, 2009 @ 3:49 pm
[...] So many others have answered this question, I’m going to let them speak for me. First up is Jim Henly: The argument is that if we further nationalize health-care financing it will mean reducing [...]
Comment by Seward —
September 17, 2009 @ 4:08 pm
Thoreau,
1) The government throwing less money at it than the private sector.
2) Massive expenses.
I haven’t actually heard the first part of the argument; what I have heard is that the state will throw a lot more money at the issue, while also misallocating that money so as to lead to less than socially optimal outcomes. I agree with that because the state tends to ignore the price mechanism in favor of price and supply controls.
1) Generous government spending.
2) Cost savings.
I haven’t seen the former of this pair either. What I have seen is liberals arguing that the state will more rationally allocate funding in these areas and that this will result in savings.
Maybe we don’t read the same things or I am not understanding that these are the arguments that are being made.
__________________________
Anyway, I think the entire notion that there is such a thing a “right” level of healthcare spending is just, well, odd (and a lot of the health care debate on both the left and right is predicated on this just bizarre notion). It assumes that there is some sort of “objective” amount that should be spent, which makes little sense at all. Look, as people become more wealthy they increase their resource usage and the marketplace responds; this includes computers, health care, shrimp, paper, etc., so long as their subjective valuations
Comment by joe from Lowell —
September 17, 2009 @ 8:01 pm
Actually, this is very easy. Government spending (G) is a subset of total spending (T). So is private spending (P) Increasing G can reduce T, by reducing P by a greater amount than the increase in G.
Imagine a nation in which the government spends no money on roads. The citizens of that nation have to spend absurd amounts of money on transportation. If the government collects some taxes and builds some roads, it becomes immensely cheaper for those citizens to move about, even given the cost of the public road-building projects.
Comment by Lee A. Arnold —
September 17, 2009 @ 10:01 pm
The only way to get the largest costs down is by further innovation, and that means spending.
There is in fact some sort of “right” level of healthcare spending. This is because the desire for healthcare isn’t infinite; it ends when one is healed. Consequently the demand for healthcare has been predictable; it is a growth constant (income elasticity of demand at around 1.6) that appears to be related to income, technological change, and demographics.
Libertarianism won’t have much useful to say about healthcare because healthcare doesn’t have any other regular market characteristics, either: It must be made available across the distribution of income (unlike almost all other consumer goods,) and both the supply and the demand tend to have monopolistic characteristics which partly defeat competition.
Many people appear to confuse the fear of spending with a onetime increase in spending which will occur by getting everybody into the system. The distribution of income is such that a large number of people can’t afford healthcare. This “hidden demand” will increase healthcare utilization in a onetime surge, with onetime supply shortages that can be predicted. The biggest shortage is doctors, and that shortage is here already.
There is also the objection that more money will be spent on elective and cosmetic procedures; certainly these things can be omitted from government mandates for a baseline coverage plan.
Libertarianism also doesn’t say much that is useful about oligopoly and monopoly. The private insurers are an oligopoly, and so even with strict government regulations, there will be little competition even when they are all in the same state. They are going to be continuously attempting government capture, so without a public option, the crookedness will never end.
Big pharma and medical technology are forms of monopolistic competition; there is no competition for many of their products, and market entry can be impossible.
Hospitals themselves are a sort of local geographic monopoly and this is a good thing (if they are run correctly) because increasing returns to scale are efficient, just as with technology. The government and the universities already provide most of the basic research spending; innovation by the private companies is mostly in regard to marketable delivery systems.
Healthcare is a leading sector of the economy, perhaps the growth industry of our times, and we must spend more on it because it will expand many other industries, such as education, manufacturing, and construction. Technological innovation is the only way that long-term costs will be brought down, and the solution is to spend now.
Comment by Seward —
September 17, 2009 @ 10:52 pm
The citizens of that nation have to spend absurd amounts of money on transportation.
Or not. In Sweden 2/3ds of the roads are private and they cost far less to build and maintain than Sweden’s public roads. Similarly in other countries privatization of roads has lead to general improvement in the roads because the road providers become consumer sensitive, as opposed governments which are not consumer sensitive.
We find the same problems with government run health care systems, which are also not consumer sensitive, but serve, well, the employees of the system instead. Think of the empty hospital in “Yes, Minister.”
Comment by Seward —
September 17, 2009 @ 10:56 pm
BTW, what has made U.S. interstates work is that they were funded by user fees, thus they were very sensitive to consumer demands. However, as those user fees have become siphoned off for things totally unrelated to the interstate road system that lack of a connection has begun to weaken the benefits of that system as it was originally created.
Comment by Seward —
September 17, 2009 @ 11:17 pm
Lee A. Arnold,
This is because the desire for healthcare isn’t infinite; it ends when one is healed.
No, not really. It ends in all sorts of ways and with increasing advances in technology it need not end; particularly if you don’t have a problem with improving your facial features, how your body works, etc. These days medicine in the West is more than simply about healing, and I suspect that over time healing will become a more minor part of what medicine is about. So there really isn’t any “right” amount of healthcare consumption.
Comment by Seward —
September 17, 2009 @ 11:37 pm
I had to look this up…
Apparently Britain – at least in the 1980s – had hospitals just as they were described in “Yes, Minister.” Bizarre.
http://www.jonathanlynn.com/tv/yes_minister_series/yes_minister_qa.htm
Comment by Lee A. Arnold —
September 18, 2009 @ 12:00 am
No one wants to get a cast on the arm when it isn’t broken. As for auxiliary procedures, I think you are correct — there are lots of people who will go for them, and this industry will be huge. I also wrote, “There is also the objection that more money will be spent on elective and cosmetic procedures; certainly these things can be omitted from government mandates for a baseline coverage plan.” It’s easy to distinguish the two sorts of procedures in most cases by their intentionality. I remember a science fiction novel (by Samuel Delany?) where people had wings attached to their backs so they could fly — I expect it will happen, and within a few decades. We won’t be calling it “healthcare.”
Comment by Seward —
September 18, 2009 @ 7:29 am
Lee A. Arnold,
Well, if that is the case, then healthcare won’t be as important in the future.
…certainly these things can be omitted from government mandates for a baseline coverage plan.
Given what we know of interest groups that seems unlikely. Indeed, that seems to be the lesson of “alternative therapies,” many of which are now part of the health care mandates that the states have. I would say if people expect for middle class support for this thing then it is going to have pay for a lot of elective procedures that will not exactly “bend the cost curve” downwards.
Comment by Seward —
September 18, 2009 @ 7:47 am
Lee A. Arnold,
Tyler Cowen on the Baucus bill: http://www.marginalrevolution.com/marginalrevolution/2009/09/the-cost-of-the-baucus-bill.html#comments
Comment by dhex —
September 18, 2009 @ 10:52 am
This is because the desire for healthcare isn’t infinite; it ends when one is healed.
as someone within the industry, i feel reasonably comfortable saying that this isn’t remotely true. the entire field of psychiatry comes to mind, or complementary medicines (or “medicines” if you prefer, as i would in the case of things like reiki, etc)
Comment by Lee A. Arnold —
September 18, 2009 @ 1:30 pm
If alternative therapies turn out not to work, eventually they will not be covered. Stop being confused by the fact that demand is currently in excess of supply, or that some people have psychiatric problems, or that some people are never healed. These are all statistical regularities. Give real evidence that the demand for healthcare is infinite. The long-term income elasticity of demand for healthcare has been steady at around 1.6. Explain how an infinity of demand would cause that.
See Robert Fogel:
http://www.american.com/archive/2009/september/forecasting-the-cost-of-u-s-healthcare
Comment by Seward —
September 18, 2009 @ 1:42 pm
Lee A. Arnold,
“Alternative therapies” have been added to healthcare mandates without a smidgen of scientific evidence to demonstrate their validity. Furthermore, we have an entire federal program on the subject that has spent 2.5 billion with nothing to show for it: http://www.msnbc.msn.com/id/31190909/
I have no faith that they will eventually not be covered because government programs, mandates, etc. rarely if ever die.
Comment by Lee A. Arnold —
September 18, 2009 @ 2:35 pm
Seward, that study you link says that almost all of the stuff doesn’t work. Therefore in the future it will start to lose coverage because taxpayers and policyholders are not going to want to pay for it.
However that is not going to save much money, because most of that alternative stuff is pretty cheap to begin with — which of course is why it was brought forward in the first place.
People will still use them because of the placebo effect, which is a real and strong mind-body interaction, and which can work.
You write “government programs, mandates, etc. rarely if ever die” but this is false. U.S. history is full of government programs and policies which were curtailed or ended. It’s a slow process, but we only want the stuff that works.
Comment by Seward —
September 18, 2009 @ 3:37 pm
Lee A. Arnold,
Actually, given the general level of ignorance of the public with regards to such matters I expect such funding to continue. The mere fact that such a thing was formed by elements of the government ought to tell us that much because on their face the claims of alternative medicine are a nonsense.
U.S. history is full of government programs and policies which were curtailed or ended.
Name ten of them over the past fifty years. Efforts to kill clearly sutpid, ineffecient, corrupt, etc. government programs break up on the shores of vested interests, iron triangles, etc. very generation. Look at how they are now trying to continue the clearly bullshit provisions of the Patriot Act which were supposed to sunset. Or look at Amtrak, which you know, was supposed to be self-sustaining what was it, five years after it began.
Furthermore, even if that were true, the market replaces actors and policies at a far fast rate than the state does; which is one of the many benefits of markets over government.
Comment by dhex —
September 18, 2009 @ 4:04 pm
Mr. Arnold – if you would, please revisit your original statement:
This is because the desire for healthcare isn’t infinite; it ends when one is healed.
seeing as there’s a small market for mood stabilizers for dogs, “healed” in many (but not all) cases may very well be the wrong framework by which to view healthcare’s ends.
Comment by Seward —
September 18, 2009 @ 4:15 pm
dhex,
…“healed” in many (but not all) cases may very well be the wrong framework by which to view healthcare’s ends.
That was sort of what I was getting at. I wish I had your writing skills. Though I would still capitalize the beginning word of each sentence.
Comment by Lee A. Arnold —
September 18, 2009 @ 6:59 pm
If the market can’t do things, the government has to step in. The market cannot provide healthcare to the entire distribution of income: it never has, and it never will. The question is how to get everybody covered.
Personally I think we should have a two-tier system: a guaranteed basic coverage, with private insurance if you want it and can afford it, on the top. I think that’s where we are heading.
The idea that a public option will crowd-out the private insurers isn’t credible — nobody will stand for it. It’s going to end up as a two-tier system. The distinction between what people need for health and what people need for their rhinestone-encrusted lifestyles may end up being the dividing line.
You guys are promoting the old “slippery slope” argument that everything will eventually be included. That depends on affordability and the voters, and could change over time. Right now, there are no mood stabilizers for dogs in the Baucus bill. The basic coverage list is in there. I don’t see any elective or cosmetic procedures in it.
Pingback by In American Union, Price Controls You § Unqualified Offerings —
September 21, 2009 @ 8:27 am
[...] any absolute version of the framework now. To be more specific, as I read Megan’s response to my original post (which she quoted in the first version of her own), it ultimately rests on some flavor of the [...]