Managed Competition with Subsidies is not a Free Market in Health Care

Paul Krugman summarizes the leftist argument for socialized medicine in today's New York Times. He also cites a longer article by Ezra Klein purporting to prove that competition doesn't lower the cost of health care. Krugman's summary.

Patients by and large don’t have the information to evaluate medical treatments; in any case, they mainly buy insurance rather than medical care directly; and insurers profit not by providing the most cost-effective care, but by trying to insure people who won’t need care.

And it’s not as if market competition hasn’t been given a try; in this country it has been tried over and over, by politicians who won’t take no for an answer.

Ezra Klein cites any number of examples such as Medicare Advantage and Medicare Part D to show that the competition within those programs has not lowered costs.

These are misleading arguments that need rebuttal.

• In a free society, why is it a goal to spend less on health care? If we have rising levels of discretionary income, why wouldn't we choose to spend more on improving our quality of life?
  
• We conflate total costs with unit costs. An aging population is going to consume more health care, there is nothing to be done about the demographic curve. However, competition can reduce unit costs.
• Even if people have to make decisions about medical providers under emergency conditions, they do not make decisions about insurance plans that way. True competition between plans is stifled by Obamacare and so many other regulations.
• Even under emergency conditions, people make informed decisions about health care treatment. They can often decide which emergency room to visit and have information about who is best when they do so. During my last few emergency room visits, I arrived by private vehicle, in full possession of my faculties, as did over 90% of the other patients I saw there.
• If we had people paying significant out of pocket expenses, and they had better choices in health care providers, then an Angie's List for doctor's would spring up. Krugman thinks the average person as both ignorant and stupid, unable to learn for themselves. When the chips are on the line, I find people to be just the opposite, researching treatments and providers extensively.
• Competition has been slowly squeezed out of the market place ever since the introduction of Medicare and the insurance industry following all of Medicare's practices. It is a lie to say that any free market solution has been tried in the last three decades. Klein makes the classic leftist argument that when a quasi-competitive managed system that also involves government subsidies and regulation doesn't deliver cost savings, this is proof of the failure of free markets. It is not.

Until we decouple insurance from work and free up the insurance industry to provide plans with high deductibles and relatively high catastrophic caps, we are not going to get unit cost containment. Until the baby boomers leave the stage, we are going to see increases in health care costs, period.

The Government Option in Health Care - Update 2

In today's Wall Street Journal, the aptly named Robert Reich, makes more of the left wing argument for the so called "public option" in health insurance coverage. After tilting at a number of straw men, he gets to the crux of the argument:

Critics charge that the public plan will be subsidized by the government. Here they have their facts wrong. Under every plan that's being discussed on Capitol Hill, subsidies go to individuals and families who need them in order to afford health care, not to a public plan. Individuals and families use the subsidies to shop for the best care they can find. They're free to choose the public plan, but that's only one option. They could take their subsidy and buy a private plan just as easily. Legislation should also make crystal clear that the public plan, for its part, may not dip into general revenues to cover its costs. It must pay for itself.

He has rolled out what other propagandists used to call the Big Lie, a lie so audacious that no one would believe you would make it up. I repeat "the public plan... may not dip into general revenues." And how many examples do we have of quasi-government entities doing just that, in the history of our country? How about in the last year? The public option will be priced so attractively that it will lose money, then the Congress will step in and bail it out. What else will reasonably happen when the federal government, which knows nothing about running businesses, starts losing money in health insurance? What fools do the lefties take us for?

The other money quote that I just can't resist: "Without the government as competition, the private sector has little incentive to improve." So chip makers, computer manufacturers, television manufacturers, etc. all improved their products due to competition from the federal government? These arguments for public option health care are too easy to demolish, unfortunately, the left has a majority in the Congress so Common Sense may not necessarily prevail.

Editorial note. I typically do not use the term "liberal" to describe the left wing today. That is because I consider myself a liberal in the original sense of the term. Fortunately, our nation was founded on the liberal principals of equality before the law, free markets and limited government. Because we wish to conserve those liberal traditions, we are tagged with the label conservative, although that does not really capture my philosophy.

Third Party Payer and Prayer

Over the weekend, I was making a few calls to recent visitors to our church. One woman, a nurse named Anne asked for prayer for Melissa, an 18 year old. Melissa had been in and out of her large HMO's doctor's offices with pain in multiple parts of her body for the last nine months. (Just call this HMO K.) Finally, she was able to be seen at UCSD Medical Center and was told she has bone cancer that has spread throughout her body. They sent her home to die. Anne asks for prayer, because Melissa has no faith and is afraid of dying. Please join me in praying for her.

It also turns out that the doctors at K thought she was a teen hypochondriac trying to get pain meds. I am not alleging that she could have been saved by earlier treatment, but it seems to me that when doctors and hospitals are not being paid by the patient, we start to distort the relationship. The patients often seek treatments that might not if it was their own money. HMOs, in an effort to keep treatment affordable, erect barriers to obtaining specialty care. There are certainly enough horror stories about HMOs for us to see the worst effect of this phenomenom.

But rather than cast blame on HMOs or patients for that matter, I think we should reconsider third party payer for health care and insurance. Wouldn't we all be better served if the patient was the one with the power to decide how their health care dollars get spent and had an incentive to limit their own treatment because they would receive some cash back? Something to consider as we debate health care "reform." As discussed at Carpe Diem, health care costs for cosmetic surgey have been contained, because insurance doesn't cover this.

I know the left will object that some people will die because they can't afford treatment, but that is what catastrophic caps are for. As for the rest of the debate, I don't care what the left will say, the relationship is better and therefore the care will be better when the patient is truly seen as the customer.

There May be Hope and Little Change for us yet

Will Rogers famously said, "I am not a member of any organized political party. I am a Democrat." The opening agenda of the Democrats seems to confirm the quote and I happy to see them tackling issues that will waste their political capital.

Obama's supposed first act will be to close the Guantanamo Bay holding facility. I commented on this previously, but now I say, great, chew up political spin cycles on how you are going to deal with moving the prisoners to the U.S., the embarrassment of no other countries taking them and a big fight over what constitutional rights they should be afforded. Ultimately, this is a small issue. If the Democrats start to look weak in the fight against jihadis, I think that will be self correcting. Meanwhile, I look forward to them wasting time and political capital on this issue.

Second, in a shocker, Nancy Pelosi says she is open to prosecution of former Bush administration officials. I say, go for it. Hold hearings. Televise them. Get conservatives worked up over the injustice of it all. Embarass yourselves with comparisions to Clinton, Blagojevich, Tim Mahoney, Bill Richardson, the mayors of Detroit and Baltimore, etc. Criminalize participation in the Executive Branch and see how many capable folks on your own side decline nominations.

Third, the Democrats are signalling that they are going to run against Bush in 2010 and 2012 as well. They are trotting out talking points about how this "deep recession" might last that long, and why they should be forgiven if they don't have it fixed by then. Good luck. Even though the shenanigans at Fannie Mae could be fairly blamed on the Democrats in Congress and the previous Clinton administration, see how far that got the Republican party in the last election. And desrvedly so, I might add. Because, it was Bush's watch, and he could have used the investigative power of the Justice Department to clean up Fannie and Freddie if he had the will to do so. My point is that blaming the previous administration will only buy you about a year. Then, tough, it's your problem. Meanwhile, the Democrats will have given conservatives some time to re-group to challenge what I consider the biggest menace, the proposal to slowly nationalize health care.

See Carpe Diem and Beers With Demo for some excellent discussion on why more free market competition would be good for health care costs, not less. More from Professor Perry here and here.

Wait 'til It's Free - Round Two

Dean had a great post about how the free market works to reign in the costs of health care. His title references P.J. O'Rourke:

"If you think health care is expensive now, wait 'til it's free"

Carpe Diem tipped us off to another danger of government run health care, a threat to your personal freedom. From the Washington Time article:

Recent news dispatches from Tokyo have highlighted a new Japanese law that ranks as the world's most aggressive, and possibly most ill informed, anti-obesity measure.

The law requires everyone between 40 and 74 years of age to have their waist measured. The requirement, which will cover almost half of the country's population, stipulates that people whose waists exceed the allowable limit — 33.5 inches for men and 35.4 inches for women — will be given three months to get in to shape. Failing that, they will be given another six months of health re-education to reduce their waist measurements. Companies with large-waisted employees will be financially penalized.

Six months of health re-education? Welcome to the gulag, comrade, and I don't care how many gold medals you won as a Sumo wrestler. You know this will be good for you.

But seriously, this is such a great example of how the "Road to Serfdom" is paved. What area of freedom is more personal than one's own choice of dinner entree? The more the government controls the economy, the more the government will control our private lives. It's axiomatic. We need to make the fight against universal health care on both the economic front and the personal freedom front if we are to have success against this evil.