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.

Health Care "Utilization"

The new euphemism for rationing is utilization. If you ever read or hear utilization in a story about health care, be sure to substitute the word the pundit meant to use: rationing.

For example, on CNBC they just talked about the need to tax "Cadillac" insurance packages because they encourage recipients to "over-utilize" their health care. In other words, people are incented to go to the doctor more often when they receive packages of health care benefits that create a disconnect between the payor for the coverage and the recipient of the coverage. Well no shit, Shirley!

Here's another area where there is and must be over-utilization: single payer health care plans. Because the person paying the bill has no direct cost they are more likely to over-consume the resource. This in turn creates the need for rationing via long wait times. You see, in that way the government can limit health care to those who most need it and are willing to sacrifice their time to seek care. IOW, it's the government's way of increasing the cost of health care while keeping the price low.

More on this later.

Health Care Rationing

There has been a lot of talk about health care rationing recently. And make no mistake, any government takeover of health care provision will mean rationing based on bureaucratic methods.

But it is important to note that rationing is happening now. Any honest witness to the current situation will observe that we currently ration by dollars. Those who can afford health care insurance get better and more care because they have earned that privilege.

Note too that there is rationing based on poorness and age. The very young are covered by WIC and the very poor are covered by Medicare.

One may argue that one type of rationing is more effective over the long-term than the other types. In point of fact I would argue exactly that. For example, it is true that the benefits that are only initially available to the very rich become accessible to the poor as well. MRIs were once without the reach of average citizens. The early funding for the expensive procedure allowed doctors to experiment with various methods of delivering the images. And through some trial and error (and economies of scale) the prices were brought down to reasonable levels so that nearly anybody can benefit from the procedure.

Another example is tits. (That's right, I said tits in my first substantive post on this blog.) The price of boob jobs has gone down substantially -- and the quality of results has improved significantly too -- because it is a competitive market. If new tits had stayed incredibly expensive the marketplace that discriminates (or rations) based on price would be very small. Indeed the number of 20-something tits on 40-something women would be vanishingly small to the detriment of people everywhere. But the marketplace delivered low price, high quality tits to everyone with a few grand available. Yeah, the marketplace. Yeah, tits!

But let's be clear. Price is the dominant mechanism for rationing right now. Youth, old age and poorness are also used but to lesser extents.

When the bureaucracy gets to make decisions about rationing the results will be worse for all, no doubt. But let's be clear on the language.