More on Health Care

I don't want this to be a health care blog. Instead I want it to focus on economics and the law. Unfortunately those clamoring for national health insurance are economically illiterate so I must take many of them to task.

Robert J. Samuelson is not one of those economic illiterates. He makes the case quite nicely in his Washington Post column today.

The central cause of runaway health spending is clear. ... The... system encourages doctors and hospitals to provide more services -- and patients to expect them.

That sums the problem nicely. But I had to use ellipses to drive the point home. And what was written in between makes a mockery of the central point.

You see, the problem is that patients are disconnected to the cost of medical care. That is not true with other forms of insurance. If you drive your car recklessly, you will find your premiums increase until the cost of driving poorly is outweighed by the price. The costs are internalized. The same argument is true for medical malpractice insurance. Doctors who are sued a lot pay a ton in med/mal insurance and this induces those doctors either

1) not to get sued or
2) to quit medicine

Either option is economically driven and both benefit society.

But that's where Samuelson gets off the rails, seemingly. Look at this next little bit:

Unfortunately, what pleases providers and patients individually hurts the nation as a whole.

This assumes the answer is that one person must accept the costs of another person's medical treatment. If the costs were not socialized "the nation as a whole" wouldn't give a wet fart about the cost of medical care. If the costs were internalized by the individual (as they are by those without medical insurance, btw) then patients would be more circumspect in the care they received.

To sum, if there is socialized medical insurance everybody will fall prey to the tragedy of the commons. And there is no escaping that truth. Samuelson gets it correct but it takes him until the third-to-last paragraph to state the case plainly.

The one certain consequence of expanding insurance coverage is that it would raise spending. When people have insurance, they use more health services. That's one reason Obama's campaign proposal was estimated to cost $1.2 trillion over a decade (the other reason is that the federal government would pick up some costs now paid by others). Indeed, the higher demand for health care might raise costs across the board, increasing both government spending and private premiums.

The costs of medicine have increased dramatically. This is because of the disconnect between the cost of care and the cost at the point of delivery to the individual of receiving that care. Any solution will realign the incentives of the individual. And any attempt at socialization will fail as it must. Always. And in every case.