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Why Are We So Dumb About Healthcare?
When Sarah Palin first started talking about “Death Panels,” I cringed: Not because the prospect of a government panel empowered to make medical decisions on citizens’ behalf wasn’t totally creepy (it was) but because private insurance does the same thing. Now, I’d argue that a system based on free-market, private insurance has, regardless, enormous advantages to the alternatives, but this doesn’t mean that private insurers don’t sometimes need to be cold-hearted bastards. The sad fact of life is that there’s no way to pay for top-end medical care for everyone, so some form of rationing (even the free-market kind) is inevitable.
But for some reason, nearly every society tries to pretend otherwise. Some of this can be explained away as leftism, but it always seems to hit healthcare the hardest? Consider, for example, how Senator Bernie Sanders made “Medicare for All” a major part of his platform, but not “SNAP for All.” Via Megan McArdle, part of the answer may be that human beings are hard-wired to see providing healthcare as a social good in itself, rather than treating the matter as service we trade for. From a paper by economist Robin Hanson, whom McArdle cites, this may explain many of our irrationalities regarding health care:
[H]umans evolved deep medical habits long ago in an environment where people gained higher status by having more allies, honestly cared about those who remained allies, were unsure who would remain allies, wanted to seem reliable allies, inferred such reliability in part based on who helped who with health crises, tended to suffer more crises requiring non-health investments when having fewer allies, and invested more in cementing allies in good times in order to rely more on them in hard times. These ancient habits would induce modern humans to treat medical care as a way to show that you care.
As he points out later:
It is notable that … while some charity behavior is outcome-oriented, much other charity behavior seems oriented more to creating the appearance of charity efforts. [Specifically,] it seems to me that politicians and others considered for positions of influence in health policy are frequently selected in part for how much they care about health. In contrast, it does not seem to matter much whether people who regulate electric utilities, for example, care much about electricity.
In The Fatal Conceit, F. A. Hayek* suggested that the values essential to success in small-scale societies (“solidarity, altruism, group decision, and such like”) are inappropriate when applied to a modern, macro-society, where values of “savings, several property, honesty, and so on” become far more important. This is no less true for health care than for other matters, though seeing that clearly seems to be particularly difficult.
The sooner we figure this out, the more people we’ll be able to help.
* Just that sort of morning, I suppose.
Published in Healthcare
Health care and education suffer in part because of the laws that underlie them currently: compulsory education and compulsory treatment. If we could get rid of those laws, we’d be looking at an entirely different picture.
I think we have to do that. It’s the only way to get the federal government out of both. States can do whatever they want, and I’m sure it will be better than what is happening now.
The ideal system to me would be charity county hospitals and free markets beyond that. Rationing is absolutely needed when somebody else is paying. That rationing is going to be even more needed in the US because Americans are different about death and we have a medical system that exists on doing everything right up to the bitter end unless there’s an informed family that puts a stop to it.
This explains why small, homogeneous countries can successfully pull off the sharing of resources, including healthcare, whereas we will never be able to do that. We have the nearly perfect size for such experiments in our states, but the left wants top-down centralized solutions to everything, so their projects will be doomed to failure.
Ironically, these European (particularly Scandinavian) countries that are accepting large numbers of immigrants and refugees may find that their citizens’ tolerance for future sharing may diminish. The left sows the seeds of its own destruction, to turn Marx’s own words against him.
I’d be curious what Avik Roy thinks Hillary is going to do with the crisis and how quickly. I’d also be curious what he would say about what should be done.
I believe that we can pay for everyone to have really good healthcare, including at end of life. But it has to work entirely differently than it does today.
It should be real insurance, as opposed to the welfare-style “insurance” we have now. That is, young healthy people should be encouraged to purchase health insurance starting at age 18 and continuing all their lives. The price of it should be the actuarially correct price for the typical person’s health care over his entire life. The price can go up as the person ages and has more income to pay for it.
Those who pay get the health care they have purchased all those years. Those who buy coverage at a more advanced age will have to pay a lot more for it. Those who choose not to buy coverage at all will have to pay out of pocket when they get sick. That is, no coverage for pre-existing conditions. Poor people who cannot afford to buy insurance might be helped by cash subsidies, but if they choose not to use the subsidy to purchase insurance that’s too bad for them. No pity for people who show up at the hospital with no money and no coverage and want free health care. The moral hazard is too great to allow for this.
It’s like fire insurance. No insurance for you if your house has already burned down.
In addition to the repeated attempts to repeal the law of supply and demand, there has been major consolidation in the hospital/clinic systems around the country. The effect has been to create local monopolies, which reduces competition and drives up prices even more. Ironically, they often advertise their mergers as something to celebrate.
I’m an advocate of queuing for the indigent.
Everything is rationed – life is about trade offs. Economics is about these trade-offs – the idea that resources are limited and we therefore have to make choices. The question is who is deciding what these choices are, and how much control over the choices do the people have who are living with these choices.
Glad you brought this up.
Obscured from public debate and scrutiny in those three thousand pages of the two Affordable Care Act laws were thousands of measures to constrain competition.
It was crony capitalism at its most sickening.
One reason we are collectively “dumb about healthcare” is that most of us are healthy. What we want while in this happy state is decidedly different from what we discover we need when we are truly ill.
In a market system, if ten or twenty percent of patients are ill-served, this is an opportunity for the alert entrepreneur. Sick people are willing to spend a lot of money, either directly or via their insurance arrangements, to get well.
In a political system, if ten or twenty percent of voters are ill-served, break out the champagne; you have yourself a landslide victory. Great health care is not required, only the illusion of great healthcare. Each citizen has only one vote, so the key is to convince the majority that the system is great. Therefore, there is over-investment in things healthy people want (free contraceptives!) and can imagine themselves needing (trauma care) but underinvestment in arcana invisible to the average voter that only sick people need (percutaneous valve replacements).
In theory, one can look at different competing insurance companies, judge for oneself how each one decides which treatments it’ll pay for and which ones it won’t, and contract with the company that lines up closest to one’s own values.
This cannot be done with government-mandated healthcare policies.
That’s the difference.
In theory.
That’s what things were like until the third party payor system began to grow. In many cities, the best doctors in town competed for attending positions at the county hospital; it was basically pro bono but was highly prestigious.
The “up to the bitter end” thing is in part because somebody else is paying for it, and in part because people who play doctor on TV have helped create false impressions about how good outcomes are for all kinds of things.
My sister is a nurse, now in her 60s. She has colleagues who have gotten DNR tattoos on their chests.
I would just like to say something in defense of caregivers and end-of-life decision making. It’s hard on everyone concerned.
I completely agree with you Mr. Axe, but we lose people right here:
The sob stories about those that show up without money or coverage will always saturate the news and “win the day”. It’s the same with retirement. Most don’t save for it, I do. Do you think that will stop the government from coming and taking mine to pay for those that didn’t save?
Yes, though “really good healthcare” is not the same as “the kind of health care everyone would be satisfied with.”
Even the free market kine? The fact of the human condition is that everything is rationed, because we live in a finite supply world–the finity being the limits of production capacity. A free market does that rationing by demand-supply pricing, with the drag upward on production caused by high prices relative to the costs of production–which drags prices back down. That’s what businesses in free markets do. That price-rationing is the most moral and most equitable means of allocation we’ve found in 8,000 years of civilization–that’s our individual self interest.
We have inalienable rights to our individual life and our individual pursuit of happiness, the latter which as Adams recognized includes the right to see to our security. The services of health care provision and health care cost coverage (née health insurance) supporting that life and that security, however, are businesses just like any other, and are best handled with free-market price rationing, just like with any other business.
The sooner we figure that out, the sooner we can get health-related costs–every single one of them–down to a…serviceable…level.
Eric Hines
Exactly. It’s an infinitely superior rationing system for these reasons, as well as the fact that it’s way easier to go around it (through, say, charity) than around a single-payer bureaucracy.
Those means of going around free-market rationing (say, charity) add further downward pressure on pricing. In the end, regardless of the rationing system (because black markets exist), there are exactly two floors to prices: zero, when the product/service is not produced at all (zero here is indistinguishable from infinite), and the cost of producing the product/service. If the price charged is less than the cost of production for any length of time (free market loss leaders), the price will quickly fall to that zero. As we’re seeing in ObamaMart, even as the prices for diminishing but still extant services skyrocket.
Eric Hines
Interesting that you bring up Hayek. Hayek was a supporter of universal coverage. Here he is in The Constitution of Liberty:
Nobody is perfect. Or are you seriously claiming proof by authority?
Eric Hines
Sheldon Richman of the Foundation for Economic Education writes
The whole thrust of the statist approach – from Hillarycare on – has been to eliminate high deductible actuarially based medical insurance policies plus some instrument like an HSA to cover the deductible.
A high deductible policy plus an HSA – which could be subsidized in an income linked manner – would have been a lot cheaper and better than the monstrosity we’ve got now.
That’s a really long walk from “help to organize a comprehensive system of social insurance”, and common hazards of life is so broad as to take on all meaning.
It could mean SSDI. It could mean subsidized health insurance. It could mean that hospitals write off a percentage of their losses in charity care, and get hit with a provider tax to augment the already-underfunded Medicare and Medicaid dollars.
It could mean that the state builds a hospital. It could also mean that the state does none of those things, since, in the quote, Hayek does not explicitly state “provide a minimum insurance level for every citizen as regards their health”.
But hey, Hayek’s for it, so that must mean unfunded liabilities in the tens of trillions in the “universal coverage” plans should simply fly away, like dandelions scattered on a breeze.
Why Are We So Dumb….?
Direct to consumer drug ads don’t help, either.
One word: children.
It used to be that we were taught, and brought up to believe, that our reason should rule our instincts, appetites, whims.
I believe teaching people that again is a big part of the solution (or trade-off, I guess, per Thomas Sowell), rather than treating their instincts as immovable and changing everything around those.
Children are, of course, a different case, since they have not had the opportunity to purchase the insurance I mentioned.
They should be given the care they need and their parents billed for it, if they have the means to pay. Mostly, free clinics for children would be the way to go, to keep them out of the emergency room for ordinary care.
I was mostly addressing end of life issues, on which we spend the bulk of our medical resources. We can find a way to deal equitably and generously with children and still be sensible about making adults pay (through actuarially priced life-long insurance premiums) for their own end of life care.
That sort of thing just wouldn’t do, though. That would lead to
citizensconsumers, you know, not consuming sufficiently.Ah, okay. Yes, I think that’s a good idea. Especially if you could bequeath the unused funds to your heirs if you didn’t use it up—thus making everyone consider those end-of-life decisions a little more rationally?