Freakonomics Is Stupid

It never ceases to amaze me the way people who lack the critical thinking skills God gave turnips manage to make a living as “experts.”

In Becker’s opinion, the health care bill that passed recently is a disaster for at least two reasons. First, it seems to do little or nothing to deal with the single most important shortcoming of our current system: the fact that people pay very little on the margin for the medical care that they receive. Imagine that you could show up at a car dealership and have any car you wanted, and as many cars as you wanted, for no marginal cost. The market for cars would be in complete chaos, and people would have too many cars, and the ones they had would be too nice.

That is more or less the situation we now have with health care. It isn’t pretty to talk about, but if it costs $200,000 to keep an octogenarian alive for a month, someone has to pay for it. If it were the children of that octogenarian who had to cover part of the bill, and paying for that last month of life was the difference between being able to pay for the octogenarian’s grandchildren to go to college or not, there would be some hard choices to make. With health care expenditures approaching 20% of GDP, there are going to be tough choices. Markets cannot function when the people who receive the benefits of a good or a service are not the ones who are paying for it.

And, you know, it’s all about markets functioning. Now perfectly healthy people are going to storm hospitals and demand MRIs and appendectomies and spinal taps, and it’s going to be chaos. But if we have to choose between Grandma and sending little Sally off to college, then Grandma is off to the Soylent Green factory. That’s how markets (blessed be them) work.

Update: Let me spell this out — The “freakonomics” guys are arguing that a free market system is the superior means for delivering health care, because medical costs will respond to market forces the same way that the price of consumer goods respond to market forces. That’s what I’m saying is stupid.

As far as rationing end-of-life care, I found the example appalling. The decision of how aggressively to treat Grandma’s medical condition should not depend on whether the family can afford to pay for it or not. There are countless variable factors in real-world situations that make these decisions difficult, but ultimately the decision of when to switch to palliative care should be a purely medical one.

34 thoughts on “Freakonomics Is Stupid

  1. Okay, if you’re so brilliant, how do do you suggest rationing health care? This particular turnip doesn’t in the least believe that health care is free or infinite in amount.

    • Okay, if you’re so brilliant, how do do you suggest rationing health care?

      Of course health care isn’t free, but neither does it respond to “market forces” in the same way that consumer products do. And there is no place on Planet Earth in which a “free market” system is delivering 21st century health care to a general population.

  2. I think you need to take a breath here Maha.

    Yglesias among others has talked about this a lot. Other lefty commenters have done this.

    Senior end-of-life costs are a huge drain on Medicare and if you can counsel them into just letting go (the genesis of the death panels bullshit) it’s going to save a lot of money. The entire point of the excise tax I opposed but many supported is to make people less inclined to spend on healthcare because as Ezra has said: people consume too much healthcare.

    • Senior end-of-life costs are a huge drain on Medicare

      Of course they are, but that’s not what I was pointing to. The “freakonomics” guys are arguing that a free market system is the superior means for delivering health care, because medical costs will respond to market forces the same way that the price of consumer goods respond to market forces.

    • So the Freakonomics guys are making a convincing argument for death panels?

      Pretty much. The difference is, though, that the death panels won’t be administrated by the government but by market forces. That makes them OK.

  3. Choices like that hypothetical ‘Grandma or Sally’s college’ happen all the time, now. Often, in fact, it’s Grandma (or Hubby, or Junior, or Baby) vs. the house and everything we own. Funny thing about us modern-industrial-western-culture humans – we place extraordinary value on the lives of our loved ones, and will choose to try and save them, instead of just exposing them on the hillside.

    I don’t know what Becker’s parent did to him that would make him so quick to pull the plug, but many people would, AND DO, choose to value one last month with the woman who gave them life and raised them more than Sally’s tuition, or the house.

    This is why medical expenses are a leading cause of personal bankruptcy in the nation. It seems like any serious argument on this subject would have to acknowledge that, instead of making a ridiculous analogy with car shopping.

    Not only do many people find the application of market principles to health care philosophically repellent, there is plenty of evidence that it just doesn’t work very well practically. Humans steadfastly refuse to behave as logical consumers when the lives of their loved ones are in question. The problem isn’t that the market fails because people who benefit aren’t the ones paying, the market fails because normally-adjusted, loving, humane human beings will often do just about anything to keep their mother, spouse or child alive, even if it ruins them financially.

    Many of us think we are better off as a society enabling that kind of generosity and love through societal provision of health care for all, rather than trying to train it out of people just so that a private market for health care can function efficiently.

  4. When you wade through the code, the conservative argument is simple.

    If you can’t buy it, you can’t have it. Life & health included.

    Unspoken qualification to the above rule. People of my *tribe* are the exception to his rule. If we have insurance through our employer that allows access to care far in excess of the premiums, we are entitled.

    Botom line – It’s all about maintaining quality care for anyone at MY level or higher and excluding anyone under me. A policy of free-market discrimination based on denial of care to the unworthy will increase the quaity of care for the truly deserving.

    This is top-down class warfare. People at the bottom should die quietly. Too bad you weren’t born rich.

  5. Markets cannot function when the people who receive the benefits of a good or a service are not the ones who are paying for it.

    This guy never heard of insurance? Because that’s how it works.

    • This guy never heard of insurance? Because that’s how it works.

      Seriously. If you follow this guy’s argument to a logical conclusion, he’s arguing that health care be strictly on a “you get it if you can pay for it with your own money” basis.

  6. Bill Gates’s father said in an interview, years ago, that there is no such thing as a self-made man; they — and all the rest of us — received considerable help from others along the way.

    Whenever I hear anyone else nattering on about “Why should I have to pay for other people? I worked hard for my money and it should be mine, all mine,” Mr. Gates’s words come to mind, and I cannot help but marvel at how little such folks appreciate all the help others have given them.

    Becker is a fool. Saying that providing health care to everyone is like giving away free cars is beyond ridiculous. Unless, of course, he also believes that there should be no public education because too many will attend school, no public roads because too many people will drive on them, no government funded anything from which too many people may benefit. In which case, one can only assume he was born and raised in a cave, and continues to live there. The question then is, what qualifies this troglodyte as a expert on anything beyond stalactites, stalalagmites and bats?

    • Bill Gates’s father said in an interview, years ago, that there is no such thing as a self-made man; they — and all the rest of us — received considerable help from others along the way.

      Absolutely right.

  7. If you follow this guy’s argument to a logical conclusion, he’s arguing that health care be strictly on a “you get it if you can pay for it with your own money” basis.

    Yes, this is precisely what they want. If you get sick you should just die. If you become disabled you should just die. This is the point of HSA plans — because if you’re a low-paid worker there is no way you will be able to save the resources needed if you need surgery or complex, expensive treatments. We peons should just die. They never think that they themselves might one day fall into that category or situation.

  8. Look to the movies for real life solutions.

    Logan’s Run – EVERYONE dies at thirty

    Soylent Green – It’s people, baby

    Boy – if I worked for the Heretic foundation these solutions would have cost some serious coin.

  9. MNPundit:

    Senior end-of-life costs are a huge drain on Medicare and if you can counsel them into just letting go (the genesis of the death panels bullshit) it’s going to save a lot of money.

    This is total bullshit. No one has ever suggested counseling seniors into “just letting go”. The goal is to make people make conscious decisions, and get them in writing, before they’re unconscious or otherwise unable to communicate clearly.

    That can mean “do everything you can, to keep me alive as long as possible.”

    It can mean “tube feeding is fine, but a respirator isn’t; if I’m on a respirator let me go.”

    It can mean “I don’t want anything other than palliative care, once there’s little to no chance of recovery to normal functioning.”

    It can mean anything from full care, to no care, or anything in between.

    It’s true – most people, if given a choice, will not want to be kept alive on, e.g., a respirator for six months until their body just gives up the ghost. It’s true, there will be significant cost savings by avoiding heroic measures for people who would have chosen to avoid them. But counseling has nothing to do with getting people to “let go”.

  10. Health care doesn’t need to be “rationed” in this country any more than food or housing does. If it weren’t for the insurance and Medicare already available, my GP’s practice would dry up and die. Of course, there’s never any reality-based rationale given by those who insist health care should be rationed. I strongly suspect “the poor should just die, and decrease the surplus population” has a lot to do with it.

    Some months ago, one of the commenters here (I apologize for forgetting who you are) said, “Health care is not like a toaster. I can choose to go without a toaster. I can’t choose to go without health care.” The buying-a-car comparision is just moral blindness.

  11. Okay, if you’re so brilliant, how do do you suggest rationing health care?

    If not easy, I always thought you could figure out a way to ration health care. A health panel makes a list of the disease and what efficacious ways there are to treat it. Then they draw a line at the point where it has been decided that the government will pay (for instance 20% chance of success – no pay, 50% chance – pay – arbitrary example). You can still have the procedure with 20% success rate, but you will have to pay out of pocket for it or have supplemental insurance to cover it.

    Life threatening diseases will cost more, but there should be a best practices routine for dealing with them, with some defined variability allowed. You may do this OR that, but if you want the other you have to pay yourself.

    Of course, sometimes doing the least is more expensive in the long run, so you want to offer the procedures that will prevent expensive maintenance down the line.

    Simple example – you need a tooth extracted. You can have it just pulled ($), or you can have a bridge put in ($$) or you can have an implant ($$$). Having it just pulled can lead to further tooth loss, poor nutrition and diminished quality of life, so maybe the panel allows for a bridge. Implants are a great choice, but terribly expensive, so maybe the panel will reimburse the doctor the amount for a bridge and if the patient chooses an implant, he pays the difference.

    Or a real life examples from Germany, which rations health care. In vitro fertilization has a 10% success rate with each cycle (something like that). The insurance must by law cover 3 cycles, anything over and above, patient pays. Embryo freezing is legal but not covered (patient pays), but extra ovulation cycles are.

    They also cover acupuncture for certain pain treatments, but not others, and they don’t pay for other treatment such as homeopathic, laying on of hands, etc. but they do pay for some phytomedical (plant-based) treatments, if they have been proven in scientific studies to work. You are welcome to pay for any of these other treatments yourself, however.

    If your kid has something dire, like childhood leukemia, then you are treated at a hospital in Germany – for as long as it takes, no money down. If you do your homework, you can find the hospitals in your area participating in the latest study. You can try to enroll your kid in the study, or choose a previous study (where results have been published) with known outcome probabilities. If you have private insurance in Germany, the professor will come see you personally (= better care, supposedly), otherwise it’s just the highly trained doctors on the wards who see you.

    But the point is that you have to start somewhere. You need doctors, not health insurers, deciding what is the minimum care an insurer (government or otherwise) must provide. And I think they must provide enough coverage to allow a person a chance at a certain quality of life. How much quality? That would be debatable. And when they have decided how much to provide, then private insurers can come in and offer more – that would be their niche.

    And yes, some patients will be upset at the coverage/non coverage no matter what, but they are upset now anyway.

    So that’s what I would do if I ruled the world.

  12. Access to health care is vital, literally, as is access to water, heat, shelter…’Market forces’ do not determine the cost, delivering, right of access to the latter – for obvious reasons. Why ‘market forces’ should control the cost, delivering, right of access to health care (as vital as water…) is beyond me.

    Besides, if it’s ‘market forces’ that have delivered Americans a health care system 37th in the world in the quality of its care, do we really want to stick with them?

  13. For the most intelligent, articulate debunking of this fatuous notion that health care is even something that should be subject to the vagaries of the so-called “free market”, read Robert Kuttner’s classic book, “Everything for Sale: The Virtues and Limits of Markets”.

  14. The guy is right you know. Need proof? Look at all the money we are pouring into the defense department and look at all the wars we choose to fight.

  15. Massimo, I am not surprised the Freakos are promoting death panels. i have learned that if you want to know what the right is up to, look at the accusations they hurl at the left.

  16. i responded on the NYT site with this:
    You and Becker may think people are paying nothing for the healthcare they get, but in fact most of us are paying a large chuck of our incomes for health insurance that covers very little. one fifth of my income this month is going to the health insurance company, which will not cover the one pre-existing condition that my physician has said is the most likely to put me in the hospital or the grave in the next few years.

  17. Moonbat
    Am I the only one who didn’t know that ‘moonbat’ is the opposite of ‘wingnut’?

    Sorry just learned, I love it.

    Great question, Maha. Nail everybody with ‘how do you suggest rationing healthcare? If they say by how much money they have, we can stop the conversation. No amount of talk will convince them otherwise.

    No self made man for absolutely sure. The roles of government are protection and empowerment. If the rich didn’t have a great share of these, they could not be rich.

    “people consume too much health care’ and yes the over consumption of health care costs lives and money. More is not better!!!!!!! But our real problem is under consumption for what ever reason. This costs more lives and maybe in many cases more money.

  18. What kind of a mind even comes up with something like this?
    Some of his stuff that I’ ve read is less “Freakonomics,” but more “FREEPERNOMICS!”
    Yikes!

  19. Just for the record, our present system of health care IS RATIONING. If you have a whole lot of money, you get a whole lot of health care. If you have a medium amount of money, you get a medium amount of health care. If you have a little bit of money, you get a little bit of health care, etc., etc., etc. People should not become millionaires on other peoples’ health problems. But, they do. And, with our present system there is always someone between us and our doctors–the insurance man. So, to vote for the status quo is voting for rationing of health care.

  20. Right now, the system seems set up to suck every dollar you have out of you just about the same time you draw back to go for the bucket-over-the-goalpost move. The nursing home industry is set up to get your dollars quickly, by charging, oh, say, $11,000 per month while you have any money, then putting you out/into a cheaper place/on a different billing format when you become broke and dependent on Medicare/Medicaid. The care is often the same, from what I’ve seen, and even in the same place, just much less expensive when billed to the government. The “invisible hand of the market” knows just how to pick your pocket, or whatever it is doing in your pants.

  21. “Imagine that you could show up at a car dealership and have any car you wanted, and as many cars as you wanted, for no marginal cost.”
    Right, when I was in the emergency room with a broken leg, I was telling the X-ray technicians how many x-rays to take, and instructing the nurses and doctors about which pain medication to administer and what surgical treatment was needed ! The hospital gave me a medical treatment menu with prices so that I could select which type of medicines, stitches and medical equipment that would be used in my treatment — I specifically rejected the use of the machine that goes “ping” because I calculated the marginal utility was far less than the machine that goes “bong”! Have these morons ever been treated at a hospital ?

  22. Pingback: Tweets that mention The Mahablog » Freakonomics Is Stupid -- Topsy.com

  23. “if it costs $200,000 to keep an octogenarian alive for a month, someone has to pay for it.”

    Nobody knows if which month is the last month. I’ve paid attention while four grand parents, my father and my wife died of illnesses. Some went suddenly, some declined, unevenly for years. It’s a preposterous goal to save money in anyone’s last days because you really don’t know what the last days are until they’re gone.

  24. Markets cannot function when the people who receive the benefits of a good or a service are not the ones who are paying for it.

    If the goods and services are being paid for…you’ve got a functioning market. Who receives the benefit or who’s paying doesn’t affect the market. Only two elements are required to complete an exchange and create a functioning market. At least it was when I went to school.

  25. Huh, how are you all quoting? Anyhow…

    Yes it is letting go. Letting go of the life at all costs and one second is worth any price attitude that Americans have as opposed to passing on in a way that is more peaceful. So pretty much letting people know the positives of not struggling for one more instant of life to the end which is the default position of current medical professionals.

  26. I’d like to amend what I wrote earlier. It’s not “Freepernomic’s.” It should be “Reefernomic’s,” because these guys must be smoking AND inhaling.

  27. I wonder if there’s any correlation between the $200,000/month it costs to keep an octogenarian alive and the over 30,000 medicare patients who die every years from OVER treatment.

  28. a free market system is the superior means for delivering health care, because medical costs will respond to market forces the same way that the price of consumer goods respond to market forces.

    gee, I guess they have been sleeping through the last decade or 2 or3 or else they have no grasp on reality.

Comments are closed.