Wednesday, August 19, 2009

Rationing Health Care

An article in the Washington Post this morning complains that Obama's health care package will result in the rationing of health care services.

(See: Washington Post ObamaCare Is All About Rationing by Martin Feldstein.)

I am not at all certain whether the health care proposal is a good idea, and I would like an honest and open discussion as to its merits. Unfortunately, there are far too many people such as Feldstein who has decided to suppress intelligent discussion by filling the room with noise.

The facetious nature of Feldstein criticism is simply illustrated by pointing out the fact that free markets themselves are defined as a system for rationing scarce goods and services. In the case of free markets, rationing is done according to willingness (and ability) to pay. The criteria for determining who gets a scarce resource and who goes without is determined by discovering who is willing and able to pay the most money and who either does not have the interest or does not have the money.

Consider Feldstein says in his own proposal.

[U]nlike reductions in care achieved by government rationing, individuals with different preferences about health and about risk could buy the care that best suits their preferences.

This is true . . . if they had the money

This is a rationing system, that pulls health care away from those who do not have enough money to pay for health care that suits their preferences and assigns it instead to those who do have money.

The only resources that do not have to be rationed are those that are so common that everybody can have all they want without effort, or public goods from which individuals cannot be excluded.

The implication in Feldstein's editorial that we have a choice between rationing under this health care proposal and no rationing is absurd. Unfortunately, we are plagued by people who embrace and promote absurdities when they are politically useful, mindless to the effect that this noise has on intelligent debate over the real-world merits or demerits of the proposal.

This use of the term 'ration' allows Feldstein to effectively mislead people by use of the fallacy of equivocation. Equivocation occurs when an agent uses the same term, but relies on an undetected shift in its meaning to generate the illusion that evidence has been given in support of a desired conclusion.

The second definition of rationing is the type that one might be familiar with from World War II, where the government passed laws prohibiting people from purchasing more than a certain minimum amount of goods and services deemed essential to the war – such as gasoline and sugar. However, proof that the government is going to engage in this second type of rationing requires evidence that the government is going to prohibit people from buying particular goods and services. If those types of prohibitions are not in the bill, then the claim that the bill requires rationing in this sense is false.

It is the case that the government health bill says that the government will not pay for certain types of procedures. This would be done to keep down costs. However, in this sense every insurance company in existence publishes a list of procedures that it will not cover – which in many cases includes 'experimental procedures' where the chance of success is low or unknown. Insurance companies impose these limits in order to reduce the amount of money they will have to pay out. In other words, they 'ration' in exactly the same way the government would be required to ration.

There is nothing in the government bill that bars people from buying supplemental insurance to cover options that the government does not cover – if they have the money to do so. In other words, there is nothing in the bill that outlaws price rationing, where those with an interest in these high-cost, low-benefit procedures can pay for them out of their own pocket, provided they have deep enough pockets.

In other words – the type of medical care rationing that many conservatives seem to favor, that allow rich people to bid medical care away from the poor by bidding the price above what the poor are capable of paying, would still exist.

However, my objection here is not just that Feldstein made some false and misleading claims about health care that I have not corrected. My real objection is that people such as Feldstein have an obligation not to make these types of mistakes.

We make a mistake in this country because far too often we stop at correcting a person's mistake while ignoring the moral failings that resulted in that mistake. Feldstein should have known better than this. And if Feldstein is incapable of understanding these points the editors of the Washington Post should have caught the problem and handed it back with questions. Where the author and the Washington Post fail to live up to these obligations the rest of us have the right to ask, "What type of person are you that you see fit to pollute public discussion on such an important issue with this kind of garbage? Is it too much to ask that you show a smidgen of moral responsibility here?"

It is precisely because we do not condemn those who commit the moral crime of intellectual recklessness that we have so much of it – and why we suffer so many ill effects because of it.


The VIcar said...

Newspapers say things like this because newspapers are, at a basic level, censored by their owners, and their owners are rich and greedy.

This is hardly an original statement, I realize, but people don't realize just how greedy newspaper (and other media) ownership is. From the standpoint of an average person, the folks up at the top of the ladder have an insatiable greed which is practically unimaginable.

Over the last decade or so, you may have noticed that lots of mid-sized (and several large-sized) newspapers on the national stage of the U.S. have been bought and sold, and in the process they have been gutted, often removing the features which make the papers attractive in the first place. (Locally-written book and movie reviews, for example, have been replaced by nationally syndicated ones in many papers.)

The reason for all the changes is that a newspaper is considered unsuccessful if it is producing 10% profit each year. Think about that for a moment: do you know of any investment open to the average person where a 10% profit each year would be considered poor performance?

And yet to the people who control the media, that's normal. And they get what they want, too, or else they go elsewhere, so you can bet they're rich. Is it any surprise that they see to it that their possessions come down heavily on the side of the wealthy?

Jay said...

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.

Another concern is the government employing measures that remove the natural distribution of the scarce resource (in this case healthcare) and either drive costs out of control or force providers out of the market because the return on investment is too low.

I agree with your statement "Many of the current problems with our health care coverage can be traced to government mandates that drive up the cost and limit the ways in which people can obtain health insurance." Let's all take a breath, step back from the brink, lower the rhetoric and examine what works in our system (a lot) and fix the issues that really need to be addressed.

Anonymous said...

> 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.

Is it? Always? I'm not sure.

Anyway, on a related note... this is the best article I've read regarding alternative Health Care Reform options:

Jay said...

I think that government intervention in the market is alway onerous. At times it makes sense. I wouldn't want to have to shop around for sewage treatment. As for healthcare, I'm more inclined to have direct payment to individuals (via tax credits) and allow them to purchase insurance rather than have the government run a system. Market forces are maintained and people can afford to participate.

Eneasz said...

Jay -
I think that government intervention in the market is alway onerous.

I'm not sure how to make sense of this statement as it's written, I think you may be using one of terms in that sentence in an unusual way? The government intervenes in the protection market via a free police force, for example. More to the point, in times of drought the government sometimes intervenes in the water markets. This causes distress to the users of golf courses, but it brings relief to those at risk of severe dehydration. I don't think this is a case of legal obligations causing more hardship than they prevent...

All that is only tangentially related to health insurance reform anyway, because there is no such proposal in congress. What these people are claiming is that the government will take away your ability to choose certain procedures. This is simply false. The most aggressive options being proposed would simply set up yet another health insurance company that people could choose to subscribe to, this one would simply be run by the govt instead of a board of directors. People could still pay out-of-pocket for anything they want to, and in fact they'd have MORE health-care options because they could now have SOME level of insurance that would cover a portion of those costs for certain common procedures.

The reform proposed would give people more choices in health care, not take any away. It is the exact opposite of everything these critics are claiming.

TW said...

Good post and it is interesting to see how this debate has grown in the US. Being English, I find the majority of the anti-nationalised healthcare remarks fairly entertaining - especially the ones which show no understanding of how the NHS works. (This is not to say that the NHS is ideal, nor is it identical to the model proposed by Obama, which makes its use as a anti-icon even more weird).

Healthcare, IMHO of course, is such an important role for society it really should be centrally controlled. While not perfect this allows for economies of scale to be used on a national basis. There is nothing in the UK healthcare system that restricts patient choice in the manner normally described. A sick person in the UK can go to their nearest hospital for treatment, or travel to a different one for specialist care, or even chose to pay for their own treatment (using a variety of health insurance schemes or their savings). There is a priority system as to how people will get treated but this is based on medical grounds rather than their ability to pay - although as with most things, the rich find it easier to private.

Living in a very remote rural area, the biggest advantage of a national health service is that there is a free hosptial near by. The government is required to provide healthcare services to the public even in places where it would not be economically viable.

Creating a system where the government issues tax credits to people who can then use them to buy insurance which will then pay for their treatment seems (on first reading) a bit of a jumbled way of doing things. It introduces several levels of bureaucracy that add nothing to the end result. Insurance companies and accountants will get rich for no real effort.

Additionally, wouldn't a system like this open the doors to the very poor selling their credits and falling into worse health? While it is often neglected, one of the realisations that lead to the NHS was that treating everyone (even those who cant afford it) helps keep everyone healthier and reduces overall costs. Who wants vast numbers of sick homeless people acting as breeding grounds for disease?