Against Free Health Care
Concerning the push for a public health insurance plan, Arnold Kling writes:
Getting people to reduce their use of medical services is the spinach of health care reform. Expanding insurance coverage is the dessert. The Democrats want to enact dessert now, and worry about spinach later. For the dessert part, they want no Republicans involved. Down the road, when they are ready to tackle the spinach part, they will press for bipartisan cooperation and statesmanship from Republicans.
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If I were a Republican, I would support a public health insurance plan that provides real health insurance. That is, it would have low premiums, but extremely high deductibles and co-payments–beyond anything we see today. People on the plan would, on average, pay more than 50 percent of their health expenses out of pocket. Only people at the very high end of expenses would get insurance payments. [ed. note: I take it that Kling, who explicitly advocates the subsidization of insurance for the poor, is happy to have the relevant limits calculated in relative terms, as a percentage of income. - JS] Even their co-oayments [sic] would not drop to zero.
There are various reasons why such plans do not exist today. Many of these reasons are regulatory. I am not sure how such a plan would fare in a free market. But that is the kind of public plan I could get behind.
Me too, and I’m genuinely baffled by the number of liberals who insist that even in the absence of outright government rationing (which, of course, would be eminently subject to capture by the medical lobby), health care costs can be seriously controlled without creating direct incentives for individuals to question the value of various proposed expenditures and go in for the kinds of lifestyles that make medical treatment unnecessary in the first place. I’ll have another post up on the subject soon that will deal with a common objection to a proposal like Kling’s, but for now let the takeaway be the simple observation that it’s very difficult for things to be at once free and cheap; I’m certainly not insisting that making health care consumers into health care “shoppers” would suffice to drive down medical costs to the appropriate levels, but it seems to be an obviously central element of any health care policy that could ever really work.
Filed under: health care, politics
for now let the takeaway be the simple observation that it’s very difficult for things to be at once free and cheap;
That, and it’s very difficult for things to be free or cheap, and underconsumed.
I’ve heard this healthcare shopper argument before and I’ve always found the proposition ridiculous.
First, What would be the immediate consequence for someone to weigh the costs and benefits of medical decisions and then forgo medical treatment because that individual determines its too costly?
Well, if it turns out that they didn’t the medical treatment, nothing. They would have saved a boat load of money and everything is hunky dory. But if they are wrong? Well, one or more of the following things could happen:
1.get horribly sick
2.experience excruciating pain
3.irreparable damage to their body that will criple the indivual for the rest of her life
4. death
That’s obviously a very consquential decision. I would find it troubling that someone would risk consequences 1-4 simply because they are poor or elderly, but if people were capable of making informed decisions I could see an argument for a shopper role. What makes this preposterous is that healthcare consumers, you me and everyone who isn’t a doctor, are fundamentally incapable of making informed decisions due to the gigantic asymmetry of information between a doctor and her patient.
By what mechanism, would someone be able to become informed and experiened enough to question/contest a doctor with decades of medical experience? If your pediatrician says that your son has medical condition X, which if left untreated would most likely result in sickness, pain, or death, is your first thought to weigh the financial cost associated with your son’s treatment? And if it was, would you feel confident in contradicting your doctor’s medical advice because the treatment was “too expensive”?
I highly recommend the New Yorker piece “The Cost Conundrum” which addresses the “health care shopper head on. Here’s the key graf:
Joseph, I don’t find that particular objection very compelling. The health care shopper doesn’t have to choose between doing exactly what the given doctor recommends or doing nothing at all, nor does s/he have to haggle — s/he can ask about less expensive options and about how necessary certain tests are (e,g, is it to account for a 1-in-100 chance or a 1-in-100,000); and s/he can seek a second opinion (and third, etc.) along with another cost estimate.
Why so? We’re capable of making informed decisions in buying cars, computers, televisions, and houses despite the informational asymmetry between buyers and sellers, so why can’t similar things happen when it comes to the provision of treatments or – even more importantly – the selection of health care providers? I’ll grant that consumers’ decisions will often be imperfect, and as I’ve said I think that there should be mechanisms in place to ensure that people aren’t in a position where they just can’t afford health care, but do you really want to claim that the average consumer has no ability to, say, press his or her doctor on the question of whether a given treatment is really necessary, or get a second opinion or do a bit of research in the library to confirm a doctor’s verdict?
Even more important is the possibility for a sort of collective wisdom to emerge. That NYer article – and I’ve been intending to write about the passage you quote, which is so silly that it pretty much made me fall out of my chair – is really a case in point; if the people in McAllen had to bear some significant share of their medical costs can you doubt that they would have, e.g., talked to their friends and neighbors about the kind care they were getting from their doctors, and at what costs? Or that they’ve turned down their doctors offers for unnecessary home visits or constant referrals to specialists? Do you really want to argue that costs would’ve gotten as out of hand as they did if people hadn’t been able to treat health care as effectively free? Even if no one individual is likely to be able to address these problems on his or her own, millions of people making millions of tiny decisions can obviously make a significant difference – not, again, enough to solve the problem of runaway medical costs altogether, but certainly enough to help.
What makes this preposterous is that healthcare consumers, you me and everyone who isn’t a doctor, are fundamentally incapable of making informed decisions due to the gigantic asymmetry of information between a doctor and her patient
The fundamental incapability you describe here is not due to a lack of knowledge about one’s own health, or due to a lack of critical decision making skills, but due to the fact that the decision truly isn’t “informed.”
The costs of a medical care transactions are nearly always hidden. When they are not hidden, they are highly subsidized. This corrodes the decision making process since we are not evaluating true cost-benefit values.
In the scenario you outline, you assume a wide variety of adverse outcomes for declining certain care. It is possible that people who deny themselves care due to cost could have such a fate, however I feel it will be rare. Our medical ethics drive doctors to prevent this from happening. The issue at hand is that our compensation structure for doctors also drives them to do as many procedures as possible, and this produces waste. Since we as consumers operate in a system that does not unveil the costs of these procedures to us, we have no problem saying “yes” all the time.
If we had more of the cost burden on our shoulders, it would force us to make more calculated decisions about our care.