A couple of days ago David Herszenhorn of the New York Times asked two people — Joseph R. Antos of the American Enterprise Institute and Jacob S. Hacker of Yale University who (I think) first suggested the public option — the simple question, why does health care cost so much? Although their answers differed, as Herszenhorn said they both boil down to “normal market forces mostly break down in the American health care system.”
There is a mega-question about whether “market forces” could ever create a sane health care system. There is no place on the planet where 21st century health care is being delivered by a “market driven” system, so any answer we come up with is entirely theoretical, but I say no. However, I’m going to put that question aside for now.
Something else struck me about the two answers that Herszenhorn didn’t discuss. It seems to me that Antos’s response was bristling with attitude about “entitlement” — a word he used twice — whereas Hacker was more dispassionate. Although I agree with some of what Antos said, the implication that patients are somehow being greedy or “demanding” by seeking the best health care they can get is, to me, disturbing.
And then conservatives are always the first ones who start screaming about “rationing” when anyone discusses the best allocation of our finite health care resources. Go figure.
Then Herszenhorn says,
One reason, as mentioned previously, is that people like to live and be healthy. There seems to be no upward limit on the amount of money that most people would spend toward that goal (as evident in the number of medical-related bankruptcies in America). And that, of course, puts the purveyors of health care at a distinct advantage over the consumers of health care.
I’m sorry I don’t remember where I read this — will the author please stand up? — but somewhere I read that health is different from other things we insure because there is no limit to the monetary value of life. If you insure your car, the most the insurer will ever have to pay is the replacement value of your car (overlooking the medical liability aspect of car insurance, which really is a health care problem). Same thing with your house, or other possessions.
But what is the “replacement value” of a life? People facing death generally will pay any price to keep living a little longer. Same thing with chronic pain or physical impairment. And, in a culture that is supposed to value individuality, there shouldn’t be anything wrong with that. Of course people want all the expensive, cutting-edge gizmos anyone ever invented to extend their lives and the lives of people they love.
The idea that one should live or die based on whether you’ve got the money to pay for health care should have no place in an egalitarian society. If thinking that way is “socialism,” then call me a socialist.
But this also, seems to me, points to the ultimate reality that the private insurance model is an inadequate, and even irrational, way to provide for a nation’s health care.
It also points to the ultimate reality that of course “market forces” will break down when you’re talking about something that is beyond ordinary monetary value. Because there is no limit to the value of a life or the quality of a life, “market forces” always will break down trying to provide for life and health. How could market forces not break down, unless everyone agrees on the monetary value of what is being marketed?
Hello, Barbara—long time. You and your readers may be interested in something of a technical nature. Ken Arrow, a Nobel prize winning economist/mathematician, wrote a paper in 1963 on why the health care market is not a free and open market. The paper is technical, so it isn’t an easy read, but it might be of interest:
http://www.who.int/bulletin/volumes/82/2/PHCBP.pdf
You raise an excellent point here. This is why I read your blog.
Maha,
I believe you might be referring to something Badtux wrote a few months ago, as to why health care economics are not like standard market economics.
I read about the life vs. car insurance angle from Badtux the Snarky Penguin, thanks to your blog referral, if memory serves
Badtux may be the source you are thinking of re the unlimited value of life, at least to the person whose life is at risk. A number of his free-thinking posts have pointed out that the SOURCE of inflation in the cost of health care has not been the insurance companies as much as health care providers. Doctors, hopitals and Rx companies. The insurance industry has happily passed the cost along in ever higher premiums. The revenue for the insurince industy has gone up, but the % of their cut hasn’t. So there’s a false logic to blaming the insurance industry for ALL ills, when a solution will require reining in costs.
One other Badtux proposition I agree with – the Family Doctor is scarce and underpaid compared to specialities because in Family Practice, the doctor can’t take a ‘sky-is-the-limit’ approach, because family care isn’t life-threatening. It’s in the specialties (cardio ,cancer, etc) where the life of the patient is at risk – the doctors can gouge without limit.
I hope BT happens along to correct me if I have misrepresented his position.
The Health Care Bill does address the most severe abuses by the insurance industry and caps their profits (as a % of premiums). Cost Control must reduce the fees doctors, hospitals & pharma charge.
If one takes the long view, the answer may be for the government to completely underwrite the cost of education for qualified students with a binding agreement that they accept a government fee structure on some sliding scale. The object would be twofold – significantly increase the supply of qualified, trained doctors while reducing the cost of services they provide. In theory, this would also produce downward pressure in the prices the non-particpating doctors could charge. The downside is that it would take a decade for such a program to affect the medical market.
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I’m curious as to where Antos and American Enterprise Institute stood on the Terri Schiavo debacle. There was no end to the amount of the Schiavo family fortune that the right was prepared to have spent on extending her life, and yet they get pissy about everyone wanting health insurance so they can do the same thing for themselves and their families.
I know, I know. Hypocrisy, yawn, overdone topic. Yet I continue to be astonished by their inability to see it.
Glad to know that somebody reads my blog ;). Doug, you pretty much summarized things. The insurance companies are evil, but because of their response to the cost issue — making every attempt to deny coverage and increasing rates to outrageous amounts on anybody they think might possibly get sick in the future — rather than because they themselves are the cause of the cost problem. I was surprised when I looked at the actual numbers (as vs. what “everybody knows”) and discovered that, but that’s what the numbers say.
There are serious cost issues with the way we provide health care here in America, and it’s not just a fee structure issue, though that doesn’t help. Every hospital believes they need the very latest gadget that will be used only three or four times per year because if they don’t, their competitor across the street that *does* have that very latest gadget will out-compete them. Then they raise their rates to cover the cost of that gadget — after all, their competitor already raised *their* rates. It’s a race to the top! Thus the whines about losing money on Medicare/Medicaid, which covers actual health care costs, not gadgets that are used only three or four times a year and for which there are good alternatives most of the time.
The free market simply fails in this case, because providers are competing on features — who has the most advanced equipment, who is certified in the most advanced skills, etc. — not on cost. Because, as previously pointed out, a person’s life is (to that person) literally priceless. Who wants to go to a hospital that proudly proclaims, “we’re the cheapest hospital in town!” when they need a tricky surgery? Doesn’t happen. People want the *best* hospital in town, not the cheapest.
Then there’s all the hucksters going directly to the people to “educate” them. Take virtual colonoscopy, for example. Sounds a lot more pleasant than having someone give you a giant enema then shove a friggin’ light pole up your rear, right? Except for one problem: *IT DOESN’T WORK*. The research shows that the only way to detect cancer precursor plaques is via the old fashioned shove-a-pole-up-your-rear method. But people get sold this snake oil by hucksters and demand it of their doctors, and their doctors are happy to oblige. Then Medicare tries to cut off funding for this mostly-worthless procedure, and the prunes are outraged that someone wants to cut off funding for something that doesn’t work!
In short, getting control of the costs problem ain’t going to be a day on the beach by any means. Reforming the insurance industry was/is necessary, but the whole system is going to collapse under the weight of all these costs unless some very hard decisions are made at some point within the next ten years, because we simply can’t keep going on this way — it’s going to bankrupt us all. Unfortunately, hard decisions are exactly the kind of decisions that our political system seems most unable to make right now…
– Badtux the Healthcare Economics Penguin
Regarding the excerpt above, I keep revisiting one sentence that just doesn’t sit well with me. That sentence is:
“There seems to be no upward limit on the amount of money that most people would spend toward that goal (as evident in the number of medical-related bankruptcies in America).”
I don’t believe that the number of medical-related bankruptcies are a result of the fact that people will pay any price for health. Is that what was meant by that statement? Medical-related bankruptcies, I think, can be attributed to the fact that even average health care is too costly for a lot of Americans. Despite the fact that I worked for the Federal Government and had health insurance, I was on the low end of the pay scale and could not purchase what everyone calls the “cadillac” of health insurance plans. Even with the health insurance I had, I usually only went to the doctor when I was so sick, it was the only option. Perhaps, when you talk about market driven health care, you can explain what the author might have meant.
As for rationing, (I have said this before, but I really think more Americans need to understand this concept about our health care system much more clearly) our system already rations health care! If you have a lot of money, you get a lot of health care. If you have a medium amount of money, you get a medium amount health care, etc., etc.
Others, including MY have argued that this is the problem. We spend too much on the last ditch end-of-life prolonging efforts. Doctors almost never say the best course of action is to let someone go. They are trained against it etc.
People are simply too scared to die and the price goes up so we should change things so people can make an informed decision.