Greedy Goblin

Tuesday, June 9, 2009

Health care

Not WoW-related, but very interesting topic to me. Read if you want to. If you don't like such post, please turn to the customer service department for returning of your subscription fee.

I've always liked health care economics. It's one of the fields that is not properly solved. It is also a field where market systems seem to fail as being more expensive, despite their not better performance. We never-ever heard of car-makers of communist countries producing better cars than capitalists but we see better health care in communist countries than in capitalists, almost all cases. The most capitalist system, the one exists in the US, is also having the worst cost/benefit ratio if we measure the benefit in average life length or average years spent healthy.

I think health care is the only system where markets have no place and must be under governmental control. No, I'm still not a socialist.

Socialists claim that "people's life cannot depend on $". That's bullshit. You can't live without food, but you can't get food without money. No one tries to communalize the agriculture or the food industry. The free market for food supply work pretty well.

Socialists claim that market cannot exists in health care because of informational asymmetry. The patient is unaware (and unless do serious learning cannot be aware) of his situation and its proper treatment. So the supplier (the doctor) is free to make ridiculous claims about proper treatment, taking any money at will. This is bullshit too. We are also unaware of computer electronics, yet we are capable of buying a computer cheap, simply by comparing the services of the competing suppliers.

The big difference between health care and food production or computer manufacture is not moral or informational. The fundamental difference is that food can be produced, a computer can be produced, health cannot be produced. Everybody dies.

When I buy a computer I simply describe what I want like "I'd like to play WoW on it and I don't want less than 25 FPS in any 25 man raids". This request can be fulfilled by a high-end machine. A competitor claims he can fulfill it with a cheaper machine. Other offers even cheaper, by offering smaller HDD and DVD as they are not needed for graphics. I choose the cheapest who still offer the requested performance. If later his offer turns out to be wrong (as the machine lags), I simply bring it back, demand repay and buy from another competitor. So in a market situation you only get profit if you provide solutions to the customers problems and you are cheaper than the competitors. If you are expensive, customers won't pick you. If you don't provide solutions, they won't pay or sue you to get their money back. You won't get money either way. (M&S who can be easily fooled or act irrationally are excluded from this analysis)

When I need health care, my request is "I want to live and healthy". This request can not surely be fulfilled by any suppliers for any cost. If I have AIDS, I will die, no matter how much I'm ready to pay to anyone. Therefore no supplier can offer me solution. If any doctor would ever claim "I can heal you" he would be out of business in no time due to being sued because of failing to fulfill that promise.

Doctors can only offer "I'll do my best to heal you". However this means you pay without demanding any objective results. "my best" is not objective. Even "professionally done" is not objective. "Computer running on 25 FPS" is objective but no doctor can promise anything like that.

This means that competing suppliers are practically free to make any claims, limited only by non-market factors: their own ethics, and the ruling of a jury based on opinions of other doctors.

There are two simple way to scam money out of this non-objective situation:
  • the doctor offers healing for lower price than it's possible, by skipping important methods. You won't heal of course and he says: "Sorry, but I'm no God, no one else could save you" (this is a lie, a more expensive treatment would saved you).
  • the doctor offers healing (typically for high price) when healing is not possible and when he finally fails he says "Sorry, but I'm no God, no one else could save you". (this is true, but he knew it when he took your money)
You are prone to both scams. You, as a customer cannot prevent them, nor can you see them when they happen. There can be other scam attempts but you can fight them as customer (for example if he offers expensive treatment to a simple problem, you can find another doctor who offers cheaper treatment).

If you are scammed to pay you can turn to the court, but you do it blindly. If my computer does not perform 25 FPS, I can be sure I'm scammed. If my health went worse due to a treatment, I cannot be sure that I'm scammed. Maybe he did everything possible, but I'm beyond healing. Only other doctors can decide if my doctor made a mistake or slacked. So the decision to sue or not is made on an irrational, emotional way, so good doctors are sued just as well to scammers, so court does not decrease the number of scams, just increase the overall price.

The bottom line is that unlike food or computer manufacturers, health producers cannot make any objective claims that would allow informed consumer decision. Therefore scams can be rampart and unchecked. The race between the suppliers is not about offering better and better cost/benefit ratio, but about making up better and better scams.

While doctors can be checked by other doctors, they cannot be financially motivated to do it properly. In the case of a lawsuit the testifying doctor is motivated to testify for the highest bidder and not to testify the truth (even if objective truth does exists). The best way to get good testimony is having professional doctor-overseers, however this can only be done in a government agency, as any private overseer-firm would do exactly as Fitch Ratings did with Lehman (lie for their money). Granted, government overseers can be corrupted too, but that's at least illegal and can be countered by assigning overseers randomly to cases or assigning more than one overseer without they know of each other.

Theoretically we could set up competitive and good health care systems that compete on objective, measurable average health numbers like "our customers have 1.3 years more healthy life than the competitor". Such companies would be great!

Except they would not be health care suppliers but health advisor firms, as the most cost-effective way to increase the average health of the customers is not healing them, but to choose them properly. If your firm has the best doctors on the world and my firm does not have any doctors, I'll still have better lung cancer mortality if I only contract with non-smokers.

So such companies could be both profitable and good for the society as you could increase your chance for healthy years by paying. However they would achieve this by teaching you, not by healing you ("stop smoking or we won't contract you as you would ruin our statistics").

The current health insurance companies do mostly this, except they claim the exact opposite and they don't teach you explicitly. While they lie that they insure everyone, they do their very best to screen out risky customers, without telling them why they are screened out (therefore failing to teach them).

The creation of health advisor firms would be great, and we could even combine it to a health insurance system (your insurance cost would depend on the existance or level of advisor contract).

However the above would still give us no solution about health care. Even with the best advisor contract you would be mortal, so no health care system could offer you anything objective, you could still not demand results, just "trying hard". We know exactly from PuG-raids how much that worth.

As the performance of a doctor can only be overseen by another doctor and overseer can only be a government employee. While theoretically we still could have private firm doctors, since they would be at the mercy of the government-overseers, it would be anything but market system. So by excluding all other possibilities we got to government employee doctors, who answer to their overseers and not to you.

I hate to say that, but you and I cannot be clients of the health care "market", enjoying our "customer is the king" privileges. We can only be products in the hands of the workers of the health-factory. Being healed would be just as out of our control as it is in any system. Such government-ran system would be no less humane, just much cheaper with bit better results (as the overseers would screen out bad doctors faster than courts do now).

A piece of good thing after this nasty analysis: while being healed is out of our control, keeping healthy is not. We can decrease the chance of needing healing by standing out of the fires of cigarettes, alcohol, drugs, sexually transmitted diseases, obesity, high blood pressure, high cholesterol and many other "void zones" of our lives.


sebastian said...

Interesting post, doubly so as I work in Health Economics. I don't disagree with you on anything you have said re: Health, I do disagree with the following statement.

"So in a market situation you only get profit if you provide solutions to the customers problems and you are cheaper than the competitors. If you are expensive, customers won't pick you."

What you have described explains the commodity market perfectly, but falls apart when we examine a product range outside of commodities (which incidentally, all of WoW is a commodity market, my Crusader enchant is not better than yours and vice-versa).

I would suggest examining the portable music player market as an example. Sony produces MP3 devices which do exactly what you want them to do, yet sell less than the more expensive iPod.

Your statement suggests that people would buy the Sony as it does the same thing as the iPod but cheaper, but obviously, they do not. I would recommend changing the statement to something of the following:

"So in a market situation you only get profit if you provide more value than the competitors."

The term 'more value' includes the price and all the intangible items that are difficult to measure on a financial scale (not impossible, just difficult). For an iPod, that would be things like 'it's the cool brand' 'it looks pretty' 'my friend has one'.

Yes, these are social values and it is irrational to buy the more expensive iPod, regardless, we cannot ignore the behaviour that people do that.

Debate whether it is rational or not all you like, but this is what happens outside of commodity markets.

n.b. Sony still do sell some MP3 players. This is proof that each person values different things at a different level.

Michael said...

Health care is complicated because different people have very different needs.

Rich people want healing, but also want a nice room and good food.

US health-care is expensive due to lawsuits, which means that in many cases ridiculously good care is provided even when unnecessary (e.g. operating, when another effective option is available or prescribing the new latest drug even though the 10 yo works the same).

An advantage of a non-government run system is that "electoral math" is not a factor is locating hospitals. Disadvantage is that hospitals get built only for those who can pay for premium (high profit margin) services.

sebastian said...

Update from above:

Catching up reading on a blog I should have read more often I find this:

"…The problem is that your prospect doesn’t care about any of those things. He cares about his boss or the story you’re telling or the risk or the hassle of making a change. He cares about who you know and what other people will think when he tells them what he’s done after he buys from you.

The opportunity, then, is not to insist that your customers get more rational, but instead to embrace just how irrational they are. Give them what they need. Help them satisfy their needs at the same time they get the measurable, rational results your product can give them in the long run."


Anonymous said...

FYI, the most capitalist system is in Hong Kong.

spinksville said...

The big thing that you get in socialised health care is more emphasis on preventative medicine. The govt sees the cost of all the health care provided and wants to keep the costs down in a largescale. So it is worth it for them to provide cheap/free preventative healthcare.

In a privatised system, individuals only see their own costs. Not everyone is smart enough to see longterm. Doctors also get more profit from treating real illness, not advising people on preventing illness. So not really profitable for them to push preventative healthcare either.

It is supposed to be one of the reasons that socialised healthcare works out cheaper. More of our illnesses get picked up early because it's cheap/easy to go to the local doctor with a mild cough, etc.

SiderisAnon said...

While I agree with the intent of what you said, there are two flaws in the analysis.

The first is the market effect such a system would have on the available doctors.

Under such a system, the amount of pay doctors receive would undoubtedly be fixed, like that of government workers. So, unless you make private health care illegal, the best and the brightest of doctors will go into private health care where there is more money and better perks. Some other best and brightest would go into a different field. The rest of us would be stuck with what's left. (Some of the best and the brightest would stay in public health because they care, but not all.)

The second flaw has to do with the failures of the government health care that already exists. I'm an American and my mother relies heavily on government paid for health care. There are the same horrible abuses in the system that you get in most government work because there is no management trying to control things because of profit motivation. Profit motivation is far more effective at controlling costs than typical government efforts.

The trick is to try and find a way to have profit motivation but limit the profits so that the consumer doesn't get fleeced.

(I also used to work for the state government, though not in health care.)

Sven said...


One important difference between the health care and food markets is price. In rich Western countries, an hour's work at minimum wage is typically enough to buy enough food for the day, whereas it's nowhere near enough to cover cancer treatment. In particular, the cost of what's considered "acceptable" health care by the majority is well beyond the reach of the poorest. This leaves you with two basic options: leave the poor to die because they can't afford healthcare or socialise the payment for it.

A second big issue is "who makes the treatment decision?". Your doctor may not be scamming you when he recommends the "best" treatment; it may indeed be 10% better than the next best alternative, but if it's double the cost, that leads to a reduction in overall system cost effectiveness. In a system where the insurance company is picking up the bill, the customer will always pick that "best" treatment, because the cost *to him* is zero. But the effect of that is to drive up insurance costs for everybody in the long term. It's a classic example of the "Tragedy of the Commons".

State controlled systems attempt to get around that by making sometimes unpopular decisions on what treatment to offer based on metrics such as the quality adjusted life year (QALY) used in the UK. Now the inevitable consequence of this is that some people won't get the treatment that is best in terms of clinical outcome, but rather the best in terms of cost-effectiveness, which means that they as individuals lose out, even though the overall outcome is better. Drug companies with branded products (rather than generics) hate this, of course, so often fund patients' groups who campaign to get particular treatments accepted.

A bit of an aside, I know, but there are better reasons for preferring the iPod to the Sony equivalent than "being cool". Last time I tried to use a Sony mp3 player, the supplied software helpfully deleted all my mp3s and replaced them with machine-locked walkman-specific files. More recently, Sony have been caught putting rootkits on CDs. Ultimately there's more to mp3 players than just the hardware capabilities of the machine itself, the associated software is important too, and iTunes is a huge competitive advantage for Apple.

We Fly Spitfires said...

Really interesting article. I agree with the whole metric of performance and this is why a lot of private healthcare tend to advertise their other qualities, like service.

For instance, in the UK, private healthcare is always banging on about quality and speed and I think it's a big attraction to a lot of folks. They don't want to wait 6 months for a knee operation when they could do it done next week privately.

Also the marketing side has a large impact and companies like Bupa try to market themselves as being high quality and 'better' even if they don't really have any evidence for it.

Yaggle said...

The United States has run an extensive test trying to prove that privatizing health care is better than socialized health care. The test has proved that it is not better. The question that remains is not whether socialized health care is best, but how to best implement socialized health care. Basically use what we have learned from European-style socialized health care, and privatized health care, and try to take the best from both, kind of like the way WoW took the best from Everquest and Ultima Online and then replaced the bad parts with new ideas.

wtf said...

But you're just explaining informational asymmetry, although you say that this concept is "bullshit" at the beginning of this post.

Russell Abbott said...

You might want to check this article out also.

Not exactly what you were talking about, but a related point. It looks at the most expensive town for healthcare in America and figures out what's wrong with it and why.

Anonymous said...

Consider the following true stories:

I have a good friend who finished medical school to become a pediatrician. After his long schooling, he ended up $250k in debt. He took his first job, paid his malpractice insurance and is netting less than a person making $60k/year. He is expecting to maintain this income level for at least 8yrs while he works off his debt; as long as he doesn't get sued.

My wife has a friend who was selected for jury duty. The trial involved a couple suing an obstitrician for 'not doing enough' to save their baby. Their baby was a crack addicted baby, who was pre-mature, and had several birth defects. Many medical experts testified that the doctors did all they could to save the child, but the crack addiction in combination with the defects were too much for them to resolve. The couple was suing for $10million. During the jury deliberation, she hung the jury who wanted to award the money because "it's sad that the baby died". The jury even acknowledged that the doctors did all they could, but wanted to give away the money anyway.

What we have is a system where people get rich. However, those people aren't doctors; they are lawyers. Tort reform would do a lot to get rid of needless procedures, paperwork (waiting for the doctor), and actually re-introduce medicine back into the healthcare industry.

Until the tort reform issue is resolved, people will continue to pay a premium to pay off the lawyers who make a living suing people for millions of dollars over stupid things.

Lucky for us, over 80% of congress, and the president, are lawyers.


Steve said...

The American Health Care system for all it's problems, still provides some of the finest health care in the world. Those problems are fixable.

One problem that I see, is that in America, people have come to believe that they should NOT be responsible for the costs of their health care, or even for their health insurance. They expect to be able to go to a doctor for anything at all and not have to pay more than their $20 insurance co-pay. As a previous poster mentioned, when there's no cost penalty involved, there's no reason to NOT choose the best and usually most expensive treatments.

Second is the very setup of health insurance in America. In any other insurance situation, you purchase insurance against unlikely, but typically devastating catastrophes. I buy home owner's insurance on the off chance my house burns down or gets run over by a tornado. I buy car insurance in the event that I'm involved in a car wreck. I don't expect any of these things to happen, but if they do, I'll be ok because I've paid the insurance company to accept that risk for me. I *don't* pay car insurance to replace my brakes when they wear out, or homeowner's insurance to steam clean my carpets. Those are routine maintenance items and planned expenses. Health insurance in America, in addition to covering catastrophic health care, also covers those routine health maintenance things and normal, planned expenses, like routine physicals, annual checkups, and routine pregnancy care.

Third, even if the consumer WANTED to search around for the best healthcare deal, there are laws that make it exceedingly difficult to do so. Doctor's are not allowed to post or otherwise advertise their charges for anything except elective procedures like LASIK or breast augmentation. You never know what a doctor visit will actually cost until AFTER they've performed their service and given you their bill.

And fourth, of course, is America's get-rich-quick litigious society who just look around for ANY excuse to sue someone so they can get their multi-million dollar settlement from the insurance company. They don't care that it drives the doctor's malpractice insurance costs through the roof, which necessarily FORCES him to charge the obscene amounts for his services.

Anonymous said...

@ Gevlon : "The most capitalist system, the one exists in the US" --
Certainly not! Under the current administration, it is getting less and less capitalist every day. This is a descriptive statement, not a normative or evaluative statement.

Nobody seems to have determined what makes a health care system the "best". Do we pursue affordable health care for everybody or exceptional health care for the few who can afford it?

Hatch said...

Private Health Care fails because it is fully at odds with it's customer. I want to get treatment, and the company wants to avoid paying for me at all costs.

For instance, a car maker and I agree at least on the basics: they want to sell me a car, and I want to buy it. At that point, sure, they want me to pay more and I want to pay less, but at that point it's just numbers. We have the same basic goal.

The Health Care Companies ENTIRE business is about preventing me from getting care if it costs them money. We are exactly at odds.

So health care can't be for-profit if we want it to actually be effective.

Adam said...

Also, don't forget the inelasticities of both health care supply and health care demand. It takes a lot of time to make new doctors and once an individual is trained they are unlikely to walk away from their career for both economic reasons (high debt loads) and emotional reasons (they want to be doctors). This leads to steep supply curves and horrible entry barriers. On the other side everybody wants to be healthy and society doesn't look well on the idea of letting people die because they can't afford to get necessary care. Between the two competing circumstances we have private insurance companies taking profits that are socially inefficient. All in all it's a systems engineering problem that doesn't lend itself to emergent, evolutionary solutions and really begs for a unified and coherent organizational framework.

Omestes said...

Socialists claim that "people's life cannot depend on $".

This is true for some values of socialists, but not all. Social Security, Roads, Medicare, fire/police, military etc... are all socialist systems. Anytime you endorse any expense on a communal activity your being a socialist.

People have decided to rebrand the term into a partisan slander, and not just another sociopolitical philosophy. Like all such philosophies we can draw lines, and personalize it.

Other than that, you have some decent points. But your forgetting the mess our insurance/HMO system is, and the level of corruption within the system. Due to both of these choice becomes limited to a vast majority of people. Without choice, free market solutions fail, even while corruption leads to gross inefficiencies.

Heathcare should focus on "making someone well", and not "getting them on pills by my sponsor" or such. This making people well slogan also precludes deciding certain people should die because it isn't profitable.

Its like a police system that won't protect you if you look like you pay taxes.

I think we need some socialist programs because an absolute free market has flaws.

Bob said...

@Steve: Your second point is one of the best anologies I've read in a while.

My thoughts:
The ultimate problem (and solution) is that the power lies with the payer. A parent who pays the bills gets to decide whether the household gets cable or satellite television. DSL or Cable internet. DVD or Blu-Ray. Wal-Mart or Ethan Allen funiture. 27" TV or 60" plasma. The parents make these decisions based on THEIR priorities, not their children's. The parent can add conditions to purchases if desired. "You can has a car as long as you home by 10 and get above 3.7 GPA and 3k DPS."

Private industry must do whatever they can do reduce their costs. The one that does best, wins. Government has no such requirement. Look at American colleges, how much government funding, loans, and grants are available to everyone? This is to "make education affordable to everyone." Yet every year, college tuition goes up. Colleges have no need to limit spending when government will always make more money available.

But back to my first point: If government does pay for all, they WILL eventually need to reduce costs. This will come in form of "preventative options." Since gov't is paying you can't smoke. You can't have more than 2 alcoholic drinks a day. I'm sorry, you can't super-size that order because you appear too heavy.

You do not gain choices in gov't health care, you lose them. Look at public schools, you have no choice. You go to the school in your school district. Gov Health Care will be the same, you will go to the facility in your health district.

I started with: "The ultimate problem (and solution) is that the power lies with the payer." When we pay, we has the power. When the government pays for us, they have the power.

Thank you, Gevlon. As usual it was a very thought provoking post.

Sven said...

"You do not gain choices in gov't health care, you lose them. Look at public schools, you have no choice. You go to the school in your school district. Gov Health Care will be the same, you will go to the facility in your health district."

Yes, you can lose choices in social healthcare. That's what prevents the tragedy of the commons and stops costs spiraling out of control. It is a disadvantage, true, but I would argue that it is outweighed by the advantages in lower costs on average.

highlatencylife said...

There's a difference between living, and living well.

If the quality of life is not there. I say shoot me like a horse.

Health care wants to keep you alive, and drain your resources even if your a vegetable. No thanks.

Gibbiex said...

Certainly provocative. Healthcare in America is a complex issue. I work in healthcare, as does my wife, as do our friends, as do my parents. I'm firmly entrenched.

Here are some facts that you have conveniently ignored.

1) America has the best healthcare in world, period. Yet the quality of our health is generally poor. Do not get confused if socialist or communist countries have better statistics. We have the best health care in the world. Shieks come to get treated here, everyone in the world would come to get treated here if they can afford it. America has the best healthcare in the world. I've said it 3x, maybe you will believe me. If not, look at the statistics showing the spending on healthcare here.

Now, why is our quality of health generally just as good as many other countries, or worse? It's because of the environment. No, not the grass and the trees, but what you eat and put in to your body. Other countries work far less than we do, and have far less convenience foods. All these things are very detrimental to health. Thus, even though we are very good at treating and predicting heart attacks, it's still the #1 cause of death (actually it's lumped into a catagory called CV disease).

So, now that we've established that we are killing ourselves, and our high technology is doing little to prevent it, lets talk about costs. Having the very best health care is very expensive. All the drugs that are produced? Yeah, we eat the costs, and subsidize the rest of the world. All the technology that is developed here first, and spread throughout the world? It's like buying the very best CPU every 3 months or whatever. It's insanely expensive. In fact, certain laws actually require upgrades of diagnostic machines periodically. The companies that make these machines are filthy filthy rich. First they lease it to a hospital (so the hospital never gets the capital investment), and once it's obsolete, they throw it away and get another one, for another million dollars or whatever (for example MRIs are about a million, LINACs are about 1-2 million, CT are 500k, etc. Everything is obscenely expensive in healthcare. For example, a healthcare device which is basically a pump, would cost maybe ten bucks from Target. However, target doesn't make pumps that do specialized things, these have to be manufactured just for this tiny market. So the pump costs $200 or $2000. Same cheap assed parts, but because of teh R&D effort, it costs a shit-ton of money.

Gibbiex said...

Then there is the FDA, which is the toughest in the world. If a drug/device gets through the FDA, it has nearly automatic acceptance in the rest of the world. For every drug that makes it to market, the drug company spends 1-2 BILLION getting it past the FDA. For every one drug that makes it to market, 100 drugs that enter the FDA trials are killed. Each of those drugs costs millions of dollars to develop to that point. Then, then the US patent and trade says they only have 14 years of patent, and they wasted 8 years getting it approved by the FDA. So now they have 6 years to recoup the BILLIONS invested. So that is why the drug costs $200-300 each, and why there is so many battles to extend the patent or revise the drug slightly for a new patent. However, no patient could afford spending all that cash out of pocket on each drug every month. That would be your entire income! So insurance companies come into play. Yet, nearly all americans take some form of drug. Isn't an insurance pool supposed to use 'healthy' people to treat 'sick' people? Guess what, nobody is healthy. Everyone sees the doctor once a year (or should), and those who are truely sick spend hundreds of thousands getting treated, because there is a 5% chance they may survive, and it's not their money anyway. If it were me, i'd spend my entire life saving for a chance at a cure, even 5%. Because if I am dead, I CAN'T SPEND IT!

So, that's why healthcare is expensive.

TL;DR - eat more veggies, work out, stop eating junk food, you will save the nation hundreds of thousands in treatment costs.

Sven said...

"America has the best healthcare in world, period."

That depends on how you measure "best". Is the "money no object healthcare" the best? Yes.

Is it the leader in medical innovation? Again, yes.

Is there a high cancer survival rate compared to most other developed countries? Yes.

Is there a high infant mortality rate compared to most other developed countries? Yes.

Is it the best healthcare for the ~45M people who don't have any health insurance? No.

Is it the most cost effective? Again, no.

Simply saying that US healthcare is "the best" without saying how you measured that and why you chose to ignore other metrics that suggest otherwise is uninformative.

Steve said...

Is it the best healthcare for the ~45M people who don't have any health insurance? No.

I always hate it when people trot out the old "people who don't have health insurance" line. It makes a non-verifiable assumuption that all of those people WANT health insurance. There are a large number of people in the, "I'm healthy and feel like it's more important for me to spend my money on a new big screen TV, my iPhone subscription, or 20-inch rims for my car, than it is for me to buy health insurance for myself." Sure it's arguably short-sighted on their part, but they're free to make that choice for themselves.

It's not that they CAN'T afford insurance for themselves, they simply choose to not make the lifestyle sacrifices necessary to have the money available for health insurance.

Show me the statistic of people who don't have health insurance, that want it, but *honestly* lack the money to purchase at least catastrophic-coverage type policy for themselves and/or their families.

At the end of the day, it's YOUR health, and YOU'RE the one responsible for your health and your health care. It's NOT the responsibility of your employer to *give* you health insurance (though most offer it), it's YOUR responsibility to obtain the level of coverage and care that you feel is appropriate to your needs and your budget.

Anonymous said...

I disagree that the *only* system that needs government oversight is healthcare. I believe that the government's responsibility is to protect its citizens. I would not support a privatized police force; we need oversight to be protected correctly. Likewise with a fire department to protect us from burning up, a public works commission to protect us from dysentery, civil engineers to protect us from floods, and soup kitchens to protect us from starving (notice I didn't say "welfare." I just mean giving food to people who would otherwise starve).

Privatization in any of these fields would be a disaster. Imagine if your M&S neighbor burned his house down and yours caught fire, too. Suppose you forgot to renew your "fire protection" and the fire department refused to come out and put the fire out. Then the fire spreads and burns down the block. All bad.
We need socialized *protection* so that we can have the highest chance of living that we can. Privatizing any of these fields turns the *protection* into a protection *racket*. We (ideally) send the cops after thugs who try this, so why not send government after healthcare providers who try the same kind of racket?

Thanks for the insightful post. I admit that I enjoy your goblinish views on all topics, not just on the AH.

Sterling said...

You have made a number of great points.

I find myself disagreeing with this article, even though it is well thought out.

I find two glaring holes in most "government" health care systems
1) less and less choice for the "consumer"
2) no encouragement for self responsibility.

It is possible to solve for this, but I don't see it in most socialist based health systems.

Further, if you examine how much regulation and government control you see in the health care industry and then call our health care system "free market" is a gross over simplification. It would probably be better described as in the "middle" between socialist and free market rather then at either extreme.

I think it is also important to distinguish between health care providers and insurance companies. While they interact, they are different businesses with different products. Having a problem with one is not the same as a problem with the other. And different solutions could be applied

Sven said...

"Show me the statistic of people who don't have health insurance, that want it, but *honestly* lack the money to purchase at least catastrophic-coverage type policy for themselves and/or their families."

A reliable test for honesty need does not exist, so by definition statistics on this subject cannot be gathered, as I'm sure you know.

Regardless of people's motives for not having healthcare, the fact remains that they are served badly by the US system as it stands. I notice that you set the bar at "catastrophic" coverage. What about other illnesses (e.g. back pain or mental health problems) that impede people's capacity without being immediately life threatening. It's in nobody's interest to have a society full of the walking wounded when medical help would actually help them to earn more.

Carl Lewis said...

Firstly hello, I have been a reader of your blog on and off and since have become slightly more serious about the economics of Wow.

This Post while well intentioned and has somewhat of an anecdotal tone to it is misguided. please correct me if I am wrong. Your assertion that the United States is a capitalist system vis-a-vis Healthcare is a False one and only muddies the waters in analyzing the merits of Market based health care and government based care.

The united states has not had Market based healthcare for over 60 years and I would assume you're not really old enough to remember it in any meaningful way.

Health Care has a myriad of components which you fail to address. First among these components is People. What these people produce affecting ones health (positivley hopefully) is a product of time and effort. Please present and example of any socialist economy where the Production per capita is higher than a similarly situated market based economy. the two types of people most intergral to the function of health care are Doctors, Scientists.

In these two professions, with out even looking toward the the end care of a patient, just examining formation of these classes, you can already see the negative effect of government control. Today you cannot work your way through school, which is a prerequisite, to getting your medical license, engineering certification, or any of the other hoops you have to jump through in order to do the job. These are Barriers to entry which prevent people who other wise would have become good doctors from becoming so. So then the question is why is school so expensive? and the answer is simple, Money. But not Schools charging too much, But because there is too much cheap money. The student loan system creates an abundance of cheap money for a short period of time inflating the cost of an education, if there is more money out there there is more demand to go to schools, with the supply of spots to go to school staying the same, the cost of admission increases. But then you get the double whammy of the interest on that debt becoming due upon graduation when you are least able to pay that money back. So unless you are independently wealthy, you can't do General Care and must do something that makes the most money to compensate for the time, the hard work, the interest and principal of the loan that got you where you are. which is why there are a diminishing amount of General Practitioners in this country especially since the Advent of HMO's and Managed care, and the growth of Medicare and Medicaid, all of which are products of legislation and government trying to FIX health care.

Now on the science side you have the FDA which I won't even go into because it would just be a boring history lesson. and I would like to keep this short (at work).

Economics is the study of the distribution of scarce resources, Health Care is the science of the preservation of human life. The two are oil and water and we will never find the optimal balance between the two if one belives every life is worth saving. The only way to improve the quality of health care is to actually improve it through discovery and innovation. Redistributing money via the government to make the same level of Health care better is by its very nature less efficient than the markets because you are putting levels of bureaucracy between the provider and the patient. you need at least 2 state agencies to administer health care. The IRS and the Dept of health and human services which diminish the amount of power a dollar has to produce a unit of health care.

To improve the economy of health care IMHO you need to Improve the economy and its production as a whole, or you improve the technology, of which Socialism, and Stateism Can never provide.

CSkinner said...

[quote]We never-ever heard of car-makers of communist countries producing better cars than capitalists but we see better health care in communist countries than in capitalists, almost all cases. The most capitalist system, the one exists in the US, is also having the worst cost/benefit ratio if we measure the benefit in average life length or average years spent healthy.[/quote]

Your premise here is incorrect. The foundation of your argument is that capitalist systems did not produce the best Health Care in the world, and that is wrong.

The US has the best Health Care in the world. People come here from Canada, and certainly Mexico, and other places to get health care. Why? Because it is better than anywhere else and there are no long waiting lists (except for things that are in low supply, such as hearts and kidneys, etc.)

We have a government run Health Care called Medicare and it is going bankrupt. Nothing run by the government is ever free from corruption. If a corporation becomes corrupt, it eventually dies because the consumers move on. If a government becomes corrupt, things just get worse, and people usually end up dying.

Government has no place in the private sector but to protect it's Citizens from harm, then stay out of the way.

(btw, American's life spans are short because the majority are fat, lazy and eat horribly. That is personal freedom, and if the Government takes that away, well... then the total cause is lost...)

CSkinner said...


Britain has found that socialized medicine does not work - they are trying to move away from it. Canada has found the same thing.

The basis that Socialized Health Care is better is completely flawed and unfounded. Current events and studies will show you that it is a complete failure and will continue to do so. I can cite examples as needed (such as 13 day wait in Canada for Heart Surgery and women not getting Breast Cancer meds in Britain because they are not 'feasible'. My mother survived Breast Cancer and would have died without meds)

Those of you who believe it works have your heads in the 'socialist utopian sand'. There is not a single hospital in the US that will refuse a patient, and there are a NUMBER of charities that will pay for anyone who needs help and cannot pay.

Gevlon would say M&S, I'm sure, on another matter, but not here?

The flaws with Health Care in US (expense...? what else?) is because of Government overregulation and out of control lawsuits. My wife does not want to be NPA because the insurance she would have to carry would cost her more than the pay increase. She is happy with RNC (and all the other letters I cannot remember :)) If government would not make POWER GRABS to control people CRADLE TO GRAVE, and focus on things such as out of control lawsuits (vs. doctors, drug companies, hospitals, nurses, all care givers) then the system would fix itself.

In essence, get govt. out of the way and let people prosper.

Socialism fails. Ask France. Ask Germany. It will always fail, and as everyone knows, if you have one rotten apple in a barrel, the whole barrel rots.

Socialized Health Care is that rotten apple.

Thunderhorns said...

I tend to agree. I'm very anti-socialist. But healthcare is a rough one.

When you think about it, the market for healthcare is driven by sickness and poor health. Thus the way to drive the market is to increase sickness and poor health. If everyone were healthy and well, there would be no market for healthcare.

So if have a market driven by sickness and poor health, what is a market-drive company to do to increase their market?

Make more people think they are sick and in poor health.

This is a frightening reality when you realize that is in a company and doctor's best interest to tell you something is wrong with you be it something like high cholesterol, high blood pressure, weight problems, or anything else they can get you permanently medicated for.

It's one of the few industries I feel should be removed from market driven forces because there is no positive way to expand the market. Expanding the market for healthcare is almost always based on a negative driver, usually a particular health problem or sickness that requires constant medication and treatment. This usually leaves the person receiving such treatment in a financial bind unless they have very good insurance.

So socialized or government controlled healthcare might be one of the things I support. But I also worry that it will seriously lower the quality and acess. I love being able to see a doctor in a timely manner because there are so many competing for my business.

Maybe America will come up with a successful hybrid system that increases efficiency and takes some pressure off all sides of the healthcare equation.

Carl Lewis said...

@ Thunderhoof

I think that you're making and unfair correllation between the success of the health care industry and the level of sickness. This is somewhat unfair becasue the correlation isn't linear since a sickness or disease has to exist before it's treatment can be made a product and marketed. If there is no sickness there is no cure.

Your supposition that in order to produce a profit, a company will convince people of a sickness that doesn't exists through a doctor, so they can sell drugs to people that don't need them is ludicrious. One it's Fraudulent and the company would be sued in a hot minute, Two that doctor would lose his license, Three it's illegal and constitutes a battery. This is clearly NOT in the best interest of Doctors or Companies as our tort system is very quick to bring law suits even if brought in bad faith could cripple the company that produces the drug.

Notwithstanding my reasons above, you miss one huge detail, The FDA, you cannot sell a drug in this country with out FDA approval, where you have to prove that it does what you say it does. Off lable uses for drugs are prevelent but are backed up by tomes of research and under heavy scrutiny, or done in small experimental settings where the patitient doesn't have to pay.

Your view that the driving force behind health care is feelings based. Would there be no sickness if there was no health care? would there be no healthcare if there was no sickness?

Look at Canada Look at England look at Cuba where they have socialized medicine and tell me the level of treatment is even close to that of the united states. Case in point Liam neesons wife who recently died would have lived if the accident happened in the United States, and that is the conclusion of many medical experts.

There is no hybrid system, one good form of health care would be an educated populace, and the ability to deduct the cost of your living from your taxes because you aren't a burden on the system.

You're living in the hybrid system you propose right now have been for 30 years.

Steve said...

Sven said...
"Show me the statistic of people who don't have health insurance, that want it, but *honestly* lack the money to purchase at least catastrophic-coverage type policy for themselves and/or their families."

A reliable test for honesty need does not exist, so by definition statistics on this subject cannot be gathered, as I'm sure you know.

Actually it seems there are reliable statistics for that. I found them here:

The ~45 million uninsured figure seems to come from the propagandist film-maker Michael Moore who stated in his movie SiCKO that 50 million Americans didn't have health insurance. Problem is, Mr. Moor has a history of "fudging" facts and numbers.

If you read through the article I linked to, you find that census data showed that 47 million people living in America didn't have health insurance.

Of those 47 million:
- ~10 million are illegal immigrants, not citizens of the United States.
- 17 million have household incomes of US$50,000 per year or more, significantly above the national median income. Those folk should be able to purchase their own insurance, if they wanted.
- 45% of uninsured have insurance within four months after completing a transition to a new job, since employers provide for most of the nation's health insurance.

The realistic figure for chronically uninsured Americans who do not qualify for existing government medical assistance is between 8-14 million people.

The total population of America is around 250 million people. So what you have is the government trying to railroad a HUGELY expensive government-funded health care bill which will essentially usurp 1/6th of the ENTIRE American economy into full government control in order to give health insurance to the less than 6% of it's citizens who aren't able to obtain insurance on their own.

That's SERIOUSLY out of whack.

Anonymous said...

I can honestly say that I was once uninsured and wanted insurance. I wanted to buy an individual policy. Thanks to laws designed to prevent screening out the unhealthy in my then state and county, it was actually NOT POSSIBLE to buy an individual policy. So you got insurance from your job, your trade association, your union, or none at all, regardless of ability to pay. That sucks, and shouldn't be allowed.

All health systems have edge cases where people fall through and get screwed. In the US, this is largely determined by net worth. In other countries, it is determined by other things. There is no perfect system.

I moved to Canada* from DC, and I am finding in my new city that my wait times for procedures and appointments are shorter, it is easier to find a doctor that takes my insurance, and my access to urgent care outside of the hours of 10-4 M-F(other than the ER) is greatly improved. In any large country, these variables are HUGELY dependent on location. That said, I have a catastrophic policy for the US just in case, because I don't want to be an edge case--this way I can try to get fixed up in 2 countries!

*For those who may not know, the Canadian system is like Medicare in the US that covers everyone. Doctors are in private practice, and patients have free choice in finding one that is taking new patients. Many people get supplemental insurance from their employer that covers things like drugs, private hospital rooms, and physical therapy. This is way cheaper than insurance in the US--even with higher taxes here, my take home pay is higher due to the high cost of paying for my portion of the insurance premium. It is not Utopia, and many people have long waits for specific things, but the same was true in DC.

Also, there are many urgent care walk-in clinics that take insurance and are open 7 days a week, 12 hours a day which is SOOOOOOO much better for sick kids that I wonder why no one has tried it in the US. I totally would have used one. Do US docs not want to work the hours?

Carl Lewis said...

@ the Above poster

You somehow suggest that DC is less socialist than Canada.

I agree with you that denying sick people coverage is also a problem but wouldn't be if the government didn't limit the insurance pool companies can use to diversify risk.

Thunderhorns said...

Carl Lewis,

We'll probably disagree, but I think the healthcare industry as a whole is driving sickness in this country, especially mental health issues such as depression. Depression is a nebulous mental condition with no means to diagnose it as a physical disorder requiring medication. You can walk into any mental health service, give them a sad sob story, and you'll most likely walk out with a prescription anti-depressants that you may never be off of again.

Even disorders like Attention Deficit Disorder may be nothing more than youthful energy in all but a few cases, but mental health professionals are so quick to medicate that you may find your child medicated from birth to death before you know it.

I don't know hardly anyone over the age of 35 that isn't taking some sort of permanent medication.

This is all driven by the healthcare industry and it's drive to find a medication for every disorder or everything wrong with people.

Your nose too big? Get plastic surgery.

Too fat? Here take a diet pill or have liposuction.

Feeling sad? Here's a pill for that too.

Stressed out? Here take this pill.

Cholesterol or Blood pressure too high? We've got pills for that too.

Anxiety? Here's your pill.

Tell me, at what point do we start telling human beings to show some back bone and use a non-medical means to clear up problems that can be cleared up with non-medical means? What point do we do that?

Especially when everyone makes more money by selling "lazy happy" pills to "cure" everyone of their issues?

Sorry, you need to open your eyes. The medical industry is a monster right now. It is turning people into hypochondriacs because having a medical problem is so frightening. The medical industry is out to convince everyone that if the don't fall within their perfect numbers, then they have a serious health problem.

Carl Lewis said...

@ Thunderhorns

I take it that you're a medical doctor or a Psychology Post doc, with ample experience treating and through your study and multitude of diagnoses have found that depression and ADD are nebulous disorders with no common traits. If do please forgive my taking umbrage with you.

Being one of those hypochondriacs that have seen dramatic positive life developments from taking medication and working in a field where I see the effects of people being unmedicated or the results of going off their medication I will respectfully disagree with you.

Everything you listed which I assume you have disdain for provide positive economic and positive personal benefit in the vast majority of their applications.

Liposuction invented by the Romans btw, makes people more comfortable with themselves, gives confidence and in most cases leads patients to lead happier and more productive lives.

There are plenty of brilliant people who because of their depression deteriorated and were not as productive as they could have been, Howard Hughes, Charles Goodyear and many others who made important discoveries and inventions wasted opportunities and time fighting their depression. Would it be better for the people who suffer from depression to be less productive and a burden on society? Do you think you can make them more productive?

Would you rather people broke down from the stress? instead of finding the best way to cope so they don't become burdens?

At what point do we tell people to show back bone? I'm sorry friend but I don't believe we should tell people to do anything, I believe in freedom and choice. I don't care to be responsible for the consequences of instructing someone to act in the way I think they should.

Do you have a non-medical way to clear up depression? can we hear it?

Do you have a non-medical way to elimnate the stresses of working and children? Can we hear it?

Do you have a way to make someones nose smaller or to correct a deviated septum? Can we hear it? Can you also give me a call we could make some real money.

I would Love LOVE if there was a pill to make all the M&S productive. Do you have any Idea how amazing that would be? The near elimination of welfare, the eradication of unemployment, the increase in economic efficiency. the lack of corporate waste, the increase in competition, the elimination of poverty! Could you imagine that? People working for the sake of working because they are compelled to farm, to invent to discover?

number one the pharmaceutical industry doesn't rush too bring a medication to market nor do medical device companies especially with the average 5 year testing window and the expense involved which is all borne by the company. In Europe I understand it's different but still prohibitive.

Your view of Medicine is Myopic at best...