Health Care Oddities

The silliness associated with health care can be extraordinary at times. Paul Krugman today comments on the apparently common notion that government health care cannot work – it does in many countries; and that a private system can work anywhere – it cannot, as I tried to explain yesterday.

Plus as he points out: America doesn’t have a totally private system anyway. Quite the contrary of all the health care dollars spent here 47% are accounted for by the government through Medicare and Medicaid; while private insurers foot the bill for 35%.

These numbers put a different gloss on the discussion.

They highlight, for instance, that controlling costs in the health care system has to include reform of the government provided side as well as the private side. This is where the so-called ‘moderate Republicans’ and ‘Blue Dogs Democrats’ find themselves trapped: they mostly voted for the Bush extension and modification of the Medicare system that specifically prevented the government from enacting cost control measures. For instance they made sure that there could be no hardball negotiation of drug prices. Their actions demonstrate that they are focused on protecting the profits of their campaign donors and are not concerned about deficits or cost control at all.

So whenever they warble about the cost of Obama’s health care reforms they are simply trying to divert our attention away from their true objective: keep the profit stream alive.

I am continually amazed at the hysteria whipped up about the word ‘socialized’ when it comes to medicine. With almost half our health care already delivered that way getting the rest reformed should be easy. But as the Krugman post illustrates there are some consumers who are blissfully unaware of the sources of their care.

Speaking personally: I have family members who rant endlessly about the inefficiency and waste of Medicare yet who relied totally on it for care when private insurance was either too expensive or refused to pay for certain kinds of care. It is this ability to receive help yet criticize the source of it simultaneously that muddies any rational debate over getting the system cleaned up.

These anecdotes highlights a few things:

• Just how pernicious the ‘market magic’ ideology has become. Average Americans have been systematically misled into believing that free market can solve all economic problems. I don’t think there is a single respectable economist, no matter what their political convictions are, who believes that. On the contrary, the study of so-called ‘market failures’ has burgeoned in recent decades. The delivery of many services is best done either through a government system or through a private system heavily conditioned and regulated by government. Health care is manifestly one of those services.
• You had better be careful with your lobbying. One of the strongest blocs of opposition to reform through the years has been the American Medical Association – and why not doctors and hospitals in America extract a huge rent from the system – yet even they are now facing the inevitable crush of the market: as the insurers push back to preserve profits the doctors find their own profits under attack. Similarly big companies like GM who wanted to scupper a government system and use health care as a ‘worker benefit’ now want to bail out because the cost of that benefit makes them uncompetitive in a global economy. Self-interested groups like these ignored the economics for as long as they could extract extra rents from the system. Once the cost of the fragmented system they advocated impinged on their profits they started to switch sides.
• The American political system is infested with so much money getting legislation that actually helps voters is well nigh impossible. The flood of money from health care companies into Congress can only distort the process. Were this a foreign country we would all be sniggering at the utter corruption of such a process. Here we defend the same thing as ‘freedom of speech’. It takes a ridiculous amount of energy to overcome the corrupt bulwark that lobbyist money builds to defend a vested interest’s ability to game the system: doctors and insurance companies have succeeded for years in preventing health care reform so as to keep the gravy train alive. [I won’t mention bankers here, but they are even worse]. Now they complain … tough!

Finally I read a letter in today’s Financial Times advocating the old free market argument: the correspondent was defending the level of spending on health care along the lines of freedom of choice. If consumers want to spend 20% of GDP on health care we should let them … it’s their choice.

That is, of course, a red herring and should be ignored. Reform is necessary because even though we are consuming almost that much of GDP in health care, we are not getting a good return on our money. The outcomes do not justify the expenditure. Let me give you a simple concrete example that defeats the ‘freedom of choice’ argument: our system consumes millions of dollars a year on insurance company administration, some of which is designed – sensibly and properly because of the profit motive – to prevent the consumption of health care dollars by willing consumers by denying payment for service. In other words our system deliberately defeats freedom of choice and actually diverts money into that negative activity. Are freedom of choice advocates willing to strip insurance companies of that ability to protect their profits by forcing them to pay for all and any claims? If they are, then they have to advocate a non-free market solution. But to them only a free market can deliver ‘freedom of choice’ – their whole argument against reform rests on the potential ‘rationing’ represented by government intervention in the market. They want the market to ration via a price system. But that price system includes processes to limit choice! They are logically defeated. Their argument fails.

Meanwhile the ‘debate’ rumbles on, and we still sped too much on health care.