Wednesday, August 19, 2009

Rationing Health Care II: Public and Private Alternatives

A member of the studio audience today accused me (politely) of missing the point with respect to the rationing of health care. The missed point is that there is something particularly onerous when the government rations health care, compared to when the market does so.

The point I think you may have missed is that it matters who is doing the "rationing." Rationing that is a result of market forces and choices of individuals is substantially less onerous than rationing the government employs to keep costs down. The simple reason is because the government can and must impose upon a market to get the desired results.

I am going to disagree with the claim that this was 'the point' of the article in question. The article clearly stated that the problem with 'ObamaCare' was 'rationing' – not that it was the wrong type of rationing. Furthermore, Feldstein described the market as one that allocated resources according to preference, when in fact markets ration on the basis of preferences and ability to pay.

A person with a lot of money can and will bid goods and serves away from people who may have a stronger preference for those goods but which lack the ability to pay. For example, if, in the face of a deadly global plague, if somebody were to put 1000 doses of an effective vaccine up for auction, and there was no substitute, what percentage could be expected to go to poor people? To what degree is 'ability to pay' the better explanation for who gets these 1000 doses than "having a strong preference to live?" That is to say, the doses will go more to the 1000 richest people (and their families), not the 1000 people with th strongest preference for living.

Another example that I have used is one in which there is a severe shortage of water. One person wants a bottle of water to give to her sick child. However, another wants the water so that she can shampoo her dog. The latter, who, we assume, has millions of dollars can easily bid the water away from the person who only has a few dollars to her name. Yet, the idea that this fact alone means that the rich person values shampooing her dog more than the poor person values the health of her child is . . . well . . . let us just say that it is not necessarily true.

However, this does not mean that there is no reason for concern when it coms to government rationing of health care.

The biggest danger is that politicians will come to use health care as a way of buying votes "If your group supports my candidacy I will award you with favored status when obtaining government-sponsored health care. If, on the other hand, you oppose my candidacy, I will punish you with a higher bill to cover the costs."

It is a great deal of power to give legislators, and most of that power will be exercised without the voter ever finding out about it. The laws will be rewritten with subtle amendments that will fly under the radar – each of them shifting the burden away from those the ruling party wishes to weaken, and providing benefits to those the ruling party decides to strengthen.

The result will be a lot of expensive and useless treatments mandated by Congress that will drive up the costs. They will do this because what is useless to a sick or injured citizen is useful as a way for a politician to funnel money from those he wants to weaken to those he wants to strengthen.

Let us not pretend that legislators are all full entirely of good will and human kindness. Even a kind person has his favorites. It would be naïve to expect that this would not happen.

However, whether it is more onerous to take health care goods and services away from those who lack the ability to pay and give it to those have that ability, or to take it from those who opposed the current ruling political party and to give it instead to those who supported the ruling party, is not immediately obvious. At least it is not obvious to me.

This is not an instance of choosing between rationing and not rationing. This is an instance of choosing between rationing based on ability to pay, and rationing based on fealty to the ruling party.

This is an area where I would like to see a nice, rational, public debate. This is the debate that the sophist keep us from having by polluting the public channels with their lies, fictions, and nonsense. This is what qualifies sophists as evil people – as people who belong in a moral category below that of drunk drivers and negligent parents or guardians. We suffer, and we suffer greatly, at the hands of the sophists, yet we do not take sufficient steps to protect us from that harm.

There was a time, not long ago, when drunk drivers were given a substantially free moral pass. Then, enough parents lost enough children to drunk drivers that they took the position that this moral crime was not given the condemnation it deserved. They lobbied to crank up the social condemnation of drunk drivers, and we are better off because of it.

There are benefits to be had for cranking up the public condemnation of sophists. The burdens we have suffered at the hands of the sophist in the past decade has been staggering – and our children will likely suffer a much greater costs. The sophists have destroyed whole countries and are capable even of putting the survival of the human species itself at risk. It is time to recognize the harm they do, and to respond appropriately.

8 comments:

Robert said...

I'm afraid I think your assumption that "Obamacare" (note that Obama has not presented a plan --he's allowing Congress to sort one out-- which is part of the problem) would make Congress too subject to sway by power and money ignores the fact that the principal reason Congress' highest priority is to see that the insurance companies continue to make money is that they are already swayed to an unimaginable extent by equally unimaginable amounts of insurance company money.

By way of example I "participated" (got to listen in) just today in a telephone town hall with my Democratic (stealth Republican) Congresswoman, Melissa Bean, and she clearly stared that her priority was to see that the insurance companies could compete "on a level playing field." Frankly, I don't give one whether the insurance companies prosper, whither, or die because they can't compete. It's amazing that the people who seem to think the insurance companies can't compete are the same ones always trumpeting the Friedman doctrine/mantra of the presumed superiority and efficiency of the so-called free market, and that we need to contract all government services out because they are so supposedly inefficient and ineffective.

To get back to the point, is it not remarkable that the balance of the western world manages to operate single payer and blended health systems without significant shifting of resources toward the select few? That situation (resource shift) is, unfortunately, what we have now.

anton said...

"The laws will be rewritten with subtle amendments that will fly under the radar – each of them shifting the burden away from those the ruling party wishes to weaken, and providing benefits to those the ruling party decides to strengthen." Ergo - ``One nation under God!`` and ``In God We Trust`` and US America now believing itself to have been created as a ``Christian Nation``.

Jay said...

Alanzo said:
This is not an instance of choosing between rationing and not rationing. This is an instance of choosing between rationing based on ability to pay, and rationing based on fealty to the ruling party.


That is exactly the concern I (and many other people on the right) have. I don't want to see the health care system become something as byzantine as the tax code. But history shows us the potential is there.

At least if market forces are at play, ability to pay becomes a factor in the price. One of the elements I think you've been leaving out of your discussion when it comes to the economics of healthcare is the supply side.

I think its reasonable to assume that some kind of nationalization might take place during a catastrophic event like a pandemic. So let's take the 1000 vials of vaccine out of the discussion.

What does need to be discussed are tests and treatments for common illnesses. You claim that the rich have the ability to bid up the price and get the care they want. True, but you leave out the market created by this. Savvy doctors and nurse practitioners will see a chance to fill a need and make a profit by providing lower cost care. Sure, the offices might be in Walmart or a strip mall, instead of a medical park, but that doesn't mean the care would be sub-par or dangerous. We already see this kind of service being provided in eyecare (and veterinarians for that matter).

In my mind the worse thing that happened to our healthcare system was insurance. Obviously some kind of insurance for catastrophic illness or accident is reasonable. But by disconnecting the recipient of the service from that payment for that service we have distorted the market. For example, if I get corrective laser eye surgery and I am blinded by the procedure, chances are they are not going to give me a bill and expect me to pay. But if a patient in a hospital contracts a secondary staph infection and dies, the hospital will bill the insurance company for not only the original treatment, but for the additional treatment needed to fight the infection. Not exactly great customer service.

However, that fight is not on the table at the moment. But its important to keep the point in mind when talking about government insurance. If there is any entity on earth less concerned about market forces than a Democratically controlled Congress, I can't think of one. (Okay, so I made one political jab...I hope that doesn't make me worse that drunken baby killers.)

Jay said...

Robert:
It's unreasonable to think that any private company can compete with the government. The government is under no obligation to make a profit and can change regulations for political gain with no concern for long term viability.

For example, we are already talking about insurance companies being required to eliminate exclusions for pre-existing conditions. Very altruistic. What are the long term costs of that? Who has to bare the burden for those additional costs? What's to stop a future Congress from regulating the price of insurance? The government plan isn't really worried about the bottom line, and so what if the regulation puts some private companies out of business its no real problem, the government plan will always be there to pick up the slack.

The constant access to either the Treasury or the ability to write off losses and add it to the deficit, I can't see how competition is even an argument proponents of this plan are making with a straight face.

FourTwenty said...

"...if somebody were to put 1000 doses of an effective vaccine up for auction, and there was no substitute, what percentage could be expected to go to poor people? To what degree is 'ability to pay' the better explanation for who gets these 1000 doses than "having a strong preference to live?"

Wouldn't that be up to the person or company that made the vaccine?

WAR_ON_ERROR said...

So, how do you suggest we punish the evil sophists?

Ben

Ernie Bornheimer said...

"This is an instance of choosing between rationing based on ability to pay, and rationing based on fealty to the ruling party."

Surely you can think of better ways to "ration" health care. How about the same way we "ration" the services of the police or firefighters? We all pay for it, then whoever needs the service, gets the service. Sure we can, and should, argue about the edge cases, but that's all they are. I think there's enough to go around.

Thanks,

Ernie

anton said...

Ernie B:

That is the most sensible argument I have heard so far.

But then again, In jolly old England where most of this all started, the insurance companies each had their own "fire departments" and provided "shields" to identify homes of those who had paid for fire coverage. If you didn't have the right shield, the other "fire guys" just let your house burn down. Its about time that "health care" caught up with "home care".