by Jeoffry B. Gordon, MD, MPH
The public policy and current political action around changing the system overlooks two important technical fallacies:
(1) That health care is most efficiently distributed by a free market mechanism; and,
(2) That medical services are an ordinary commodity.
The commercial market model is a failing economic and public policy ideology used to rationalize and justify corporate control of the health care system to profit from the enterprise. Medical services are not an ordinary commodity but more like a “public good” which should be financed using a regulated public utility model.
A “public good” is a product or service which benefits everyone in the community. Public goods are characterized by: (1) value that has benefit to the community as a whole beyond any purchase price paid, (2) often requiring large initial investment costs that are generally too expensive for any individual or private corporation to afford and earn a reasonable return, (3) requiring a higher level of administration than any individual or company can arrange and (4) having value that accrues over time and is difficult to price properly. Public goods have “externalities,” that is, value that accrues to people who benefit by other’s consumption of them without paying for it themselves.
It is crucial to know the epidemiology of medical expenses. In fact, 1% of the total population consumes 25% of medical care (by cost), 5% of the population consumes 49% and 50% of the population consumes only 3% of medical care by cost. Since relatively few people incur rare, huge, often catastrophic costs on a largely unexpected basis, pooling of risk is necessary. And the bigger the insurance pool is, the better it functions economically.
By definition “public goods” are not well distributed by market mechanisms. Americans are very accepting of some public goods, i.e. police and fire departments, national military forces, the GPS system, water distribution and sewage treatment plants, education, radio frequencies and the internet. Looked at from an economic and a public policy perspective, health services are the epitome of a “public good.” This is what is meant by the phrase “Health Care is A Human Right!” Hospitals, ambulance systems, mosquito control, TB control, restaurant inspections, sanitation, and vaccines are all good examples.
When a person gets sick he or she functions poorly as a consumer. Often there is no opportunity to investigate or shop around for quality, never mind price. A seriously ill person has no price sensitivity – care is needed now and many patients will face even bankruptcy to get needed care in spite of looming bills. Even the most intelligent and computer literate sick patients are often seriously deficient in relevant knowledge both of disease states and who is well qualified to treat them.
Under our insurance system, the patient is rarely the consumer. Most purchasing decisions are made by a doctor acting as the patient’s surrogate. While one can discover a price for one item or service, it is totally impossible to have any sense of the ultimate charges for any significant package of medical services, so it is impossible to price shop even when there is time.
Furthermore, most doctors provide care with little or no knowledge of the patient’s actual purchasing power, with or without insurance. Finally, we all know that there is virtually no opportunity for service or product substitution. You had best get the right care the first time. If your care is inadequate you may be dead or disabled or in any case set back and it is heroic to seize the opportunity to identify and ‘consume’ alternative services. For all these not so subtle reasons, health care services do not belong in the commercial marketplace or the market must be significantly modified by non-market norms (values) and institutions (government or other public interest entities).
These economic concepts provide an important insight into why the last 40 years have failed to provide adequate medical services through a commercial market. Thus we can say that those contemporary proposed solutions for health reform which mandate (subsidized) buying into the fragmented commercial health insurance based system are likely to be intolerably expensive, economically inefficient, and, in the end, not solutions to the problem.
In my opinion the only real solution is a government run, universal care, single-payer, public utility type financing of medical services. This is not socialized medicine (like the VA system). The government will not own hospitals, nor put physicians on salary. I will have 10 per cent more time to see sick people. I will be able to lower my office overhead by 20 per cent. And no patient will be worrying about how they will pay for their care or medicines.
Jeoffry B. Gordon is a family physician.
Submit a guest post and be heard.
Related posts:
- Can a free market in health care really exist?
- How health care reform can improve public health
- What’s wrong with profit-driven health care?
- Cutting health care costs
- Should a public plan option be part of any health reform initiative?
- Convincing doctors to accept a public health care plan option
- The Mayo Clinic opposes a public plan, and the dissonance facing progressive health reformers
{ 40 comments }
So what about this argument is unique to medicine? It seems to me the argument for public good could apply to any service where there is a professional relationship and where the client-patient is in an unequal consumer relationship with a professional who both evaluates, recommends treatment and provides treatment. Lawyers, dentists, accountants all have similar advantages. Except where time also disadvantages the patient, as with emergency care, and comparison pricing and second opinion seeking are not something that can be done in any practical sense, then cannot these other services also be argued to be “public goods?” I see here, at best, a case that emergency department medical care, like firefighting, EMS, and police services might be called a public good, the exception mainly being that we rely on far more private resources that are privately developed for medical care than we do for any of the other public goods.
The irony is we as a country don’t even fund emergency care properly, we confiscate much of what is delivered under terms of extortion, EMTALA. If that is how one segment of the “public good” is treated, I can’t see much reason to embrace considering all of the medical care enterprise as a public good.
The public good aspect of health has already been assumed by public health officials and their actives. things like vaccines are something will more easily fit the description of a public good. but knee replacements, cholesterol medication, cancer treatment are far closer to commodities, they serve only the person affected, they often correct for activities an individual willfully participated in knowing they were taking on certain risks. in other words if I take up skateboarding I contribute nothing to society and society should not have to bear the burden of me breaking my arm. yes its hard to be a consumer when you have a problem, but well sculpted individualized health plans would offer the time to be a consumer before a diagnosis.
Only cash based practices and high deducible insurance are really market based medicine. free markets depend on prices and medicine put those out of sight a long time ago.
Your explanation is beautiful until it falls completely apart with your last paragraph, and in a nutshell you have demonstrated exactly why this debate is so difficult.
Using the “public good” argument you make a great case for a true, universal single payer system, and in such a system the hospitals would ALL have to be owned by the government, and ALL doctors would have to be government employees – if you take the profit motive out of part of the system it can only work if you take it out of ALL parts of the system – yourself as a physician included.
Even if your paycheck doesn’t come from Uncle Sam himself, under the system where there is only one payer, that payer will determine how much you will make, what you can and cannot do to treat your patients, and even where you can practice. You are being naïve to think that you will have any choice under such a system.
Of course, you will still be personally liable for your medical decisions, so you’d better keep paying those malpractice premiums – no governmental immunity for you if the trial bar gets its way…
The problem with the patient as the consumer is that most patients do not know what they SHOULD buy.
They want MRI tests when they don’t need them.
They do not want to take their cholesterol lowering medicine though studies show that the medicine could save their life.
They spend fortunes on vitamins with no proven benefit, but complain if their prescription medicine evokes any payment above the minimum, despite its proven worth.
They want asthma medicine but don’t want to pay for the test to see if it is working. How am I supposed to practice?
I spend all day rewriting prescriptions I already wrote to comply with the various medical plans, all of which are different and randomly change the rules. I would be home now if not for these constant unnecessary interruptions.
I need one set of rules to follow that are predicable. Not 2 labs, multiple pharmacies and rules for each, insurance companies with different billing preferences, insurance cards that provide no useful information, and patients that don’t want necessary services because they have a high deductible.
Let’s take your theory one step further. Those members of society without cars would be better able to participate in the job market if they had them, so for the public good, we should provide them with said cars. Absurd, right? So is your definition of medical care as a public good, with the notable exception of immunizations (provided free, or mostly free by the Public Health departments in most states). I do appreciate you having looked up the attributes of a public good, but your attempt to extend it to health care is rather amusing.
Regarding widening the insurance pool; I’m all for that, but I am against me being forced to foot the bill in for others in order to widen that pool. You would call it taxes, but either way, I’ve got less money than I would have otherwise had. By taking money from me, you’re taking money out of the economy, money that serves to employ people, and yes, provide insurance. In simple terms, that empty nurses aide position won’t be filled, because I can’t afford it any more. From a cost-benefit analysis perspective, it’s a “fail” at present.
Medical care is a life and death matter. It is necessary for survival. It is also unpredictable. Only 20% of people make up 80% of the costs in any given year. When we fall into that category is when the realization comes that insurance for all at a reasonable cost is needed.
The health care system itself is directed towards a population and there is constant training and learning to be ready to respond. Whatever is paid in supports the whole. No one owns a slice because they have insurance. Even the sick, especially the poorer sick also play an important role. They are usually the ones who let young physicians learn their profession at a time when they are not the best at it.
There is presently no choice or competition since the subscriber gets the leavings after insurance plans, hospitals, providers, and employers decide the shape of plans to be offered. The only buy in is having a job or the economic where with all to buy insurance. Workers would not be happy if they had to pay the whole premium.
If the cost of this overall system is not shared in some rational way it will soon widen the gap between haves and have nots with disastrous consequences. I say everybody in and no one out.
By the way I do not believe this is a public good since I agree this is not the business of government to make sure some global “good” is available to all. However it is the government’s business to stop widespread suffering if this is not being done by society. We have a health insurance crisis, not a medical care crisis primarily. Too many are uninsured or under-insured leading to massive unnecessary death and poverty. It is on this basis the government must act since the private insurance industry has failed miserably to either cover all or puts the brakes on increasing costs. Interestingly enough when HMOs were created in the 1970s this is what they pledged to do. It has not happened.
“However it is the government’s business to stop widespread suffering if this is not being done by society.”
This I find to be a dubious assertion. Since when has the government been tasked to stop suffering? Rwanda, Sudan, Burma… What about them? If you mean our own population (as I’m sure you do), why, if it is the governments business, have they never done it before? It is not a traditional role of government, nor should it be. Really, where would it end? What suffering would it not seek to alleviate?
No Tom, you’re right, we shouldn’t provide them with cars. But maybe the government can provide the populous with other methods of getting to work. I haven’t really given it much thought, but off the top of my head it might involve buses, trains, subways and trolleys. You know, some kind of PUBLIC TRANSPORTATION. Just a thought.
Thanks for supporting the argument for a public system!
You make your argument well. However your argument, like all arguments rests on a certain set of assumptions. One of these assumptions is that the concept of “public good” is obvious and well defined. I would argue that the definition of public good is artificial and the distinction between public and private goods is hazy.
For instance, depending on a society’s level of technological sophistication food production and distribution could be considered a public good. One could imagine a society in which food production and distribution would meet criteria 1,2 and 3 of the above definition: requiring enormous resources, high up front cost and characterized by “externalities.” Surely you benefit If your neighbor is well nourished and then becomes a productive member of society- perhaps by developing a trade which then benefits you by streamlining your labor. But the majority of food distribution and production today (at least in the U.S.) is done through private means. And on a per calorie basis, historical costs of food (adjusted for inflation) continue a steady (if bumpy) march downward.
Does this imply that based on man’s particular place in history and techological sophistication a “public good” can at times morph into a private good? Or does the distinction always hold up? To the extent that the above argument rests on this rather malleable definition of public good, it is shaky.
In addition, some of the examples that Dr. Gordon implements to buttress hus position directly contradict his argument. The internet is not publicly owned or distributed. It is, in fact a great example of the power of entrepreneurs in a free market to rapidly innovate and bring extraordinary wealth and opportunities to the population at large.
There is one thing that makes healthcare truly a unique good and it is not that it is a “public” good. It is the expectations of the doctor and patient. There is an implied covenant implicit to the doctor patient relationship- and codified in the Hippocratic oath- that at every interaction the patient/consumer receive the highest level of care.
The question then becomes: what is the highest level of care? And does it always equate with the most expensive care?
“When a person gets sick he or she functions poorly as a consumer. Often there is no opportunity to investigate or shop around for quality, never mind price. A seriously ill person has no price sensitivity – care is needed now and many patients will face even bankruptcy to get needed care in spite of looming bills. Even the most intelligent and computer literate sick patients are often seriously deficient in relevant knowledge both of disease states and who is well qualified to treat them.
Under our insurance system, the patient is rarely the consumer. Most purchasing decisions are made by a doctor acting as the patient’s surrogate. ”
Replace sick patient with broken car and doctor with mechanic. Or broken toilet and plumber. Or lawyer and…
How’s medicine really that different from everything else but the hubris of doctors to think it’s really all that life a death when most of the time it isn’t.
You turn doctors into government employees, which is what your idea would do, melcos is correct, and I bet many, myself included will find something else to do.
I don’t know what sort of definition Dr. Gordon is using for “public good”, but it’s most definitely not the classic economic one. When most people talk about public good (and the one described by Wikipedia), a public good is a service that people realistically can’t be excluded from. National defense is a public good because the US army can’t tell other countries, “These people are okay to invade, but the other citizens are all off-limits.” Police is a public good because it would be impractical to have a list of people who the police are not supposed to protect/serve. Thus, any medicine where you purposely show up for healthcare (theoretically, emergency medicine performed on people found unconcious could be considered a public good), is most definitely not a public good.
CHenry,
EMTALA, especially when combined with hospital privileging bylaws, is a form of slavery. Try mandating that trial attorneys and plumbers be ripped out of their beds at all hours of the night to provide services to an unknown population whether reimbursed or not. The “I’m from the government and I’m here to help” welcome has a very jaded current arrangement with physicians. I remain wary and skeptical at best.
Where in the world did you get that definition of a public good?
The definition of a “public good” is a good that exhibits both (1) non-excludability and (2) non-rivalry.
Care to argue that an appendectomy is non-excludable? Or that a dose of antibiotics is non-rivalrous?
These arguments about mechanics and plumbers are out of place. Nobody I know has ever gotten several estimates from different physicians, labs, imaging centers, etc. regarding the cost of their services. I, for one, have always gotten multiple cost estimates from plumbers, mechanics, accountants (never needed a lawyer) etc. Let’s stick to relevant points. When we veer off into the absurd, the debate doesn’t serve anyone’s interest. Let’s all accept that medicine is fundamentally different than these other services, which is the reason we have a health care crisis and not a plumbing crisis and every other industrialized nation has moved to universal health care and not universal roofing.
Actually, Steve, it’s right on point. When my car breaks down and I need to get to work to pay the bills, I don’t call around for a bunch of estimates and wait for people to come out and give them. I get it to the closest place who can repair it that day and take the hit. When my pipes break on a holiday weekend, and it always is for some reason, I get the guy who answers the phone and wants to change out the wazoo for the privilege. Same thing with medical emergencies or urgencies. But when it’s elective like breast implants or picking a PCP from your preferred list then you have the luxury of calling around and taking your time. Medicine is not fundamentally different. It’s a job that a bunch of private people do to make a living providing a service. Making it more that that is what is out of place and is why the debate isn’t serving anyone’s interest, because it’s missing the very fundamentals of the situation.
You’re missing the point Nuclear Fire. Your examples are for emergencies only – a minority of medical care – and I’ll grant you those situations. But for “elective” medical care you state that people have the luxury of taking their time. So I’ll ask the question again – who do you know who has shopped around for a physician based on how much they charge? Nobody knows how much these services are and that was the point the author was making. It’s fundamentally different than contractor work because, as we all know, the very first thing you get from a contractor is a cost estimate. That’s just not how medicine. Why? Because it’s medicine and not a faulty toilet and no amount of endless rationalizing are going to make those things equivalent. And please, you couldn’t come up with a better example of “medical care” than breast implants? You got me on that one – people do shop for the best price. You know why? They’re actually paying for it.
Steve:
Most people don’t shop around, at least not on price, unless they are really paying out of pocket (and not dumping the obligation on the way out of the ER.) Most people “shop” by looking for someone who 1. takes their insurance and 2. isn’t too far away and 3. can give them an appointment in a reasonable period of time. That is the extent of the “shopping” in most cases, since to the patient, the price paid is the same.
None of that has anything to do with medical care being a public good, unless you mean to turn the definition of public good on its head.
And Dr. Green, the idea that medical care is as essential as food and water is plain laughable. Countless generations got on without what are common services today. But simply because we enjoy these luxuries, really, something that has arisen from an economy of plenty, does not make them necessities. They are nice to have, when you can have them. They aren’t public goods, any more than MR scanners and PET scanners and cardiothoracic surgical teams are public goods.
I typically don’t ask people that kind of question except for two small instances. The first is for myself and my family, we always shop around and we determine what we can afford. When I was poorer, I had to settle for poor quality but cheaper prices (same as with my clothes, entertainment, housing etc), as I’ve become better off I choose better doctors with nicer offices and quicker responses and better reputations (my current one has espresso in the waiting room and he’s damn expensive and only takes cash).
The other instance would be my patients. I don’t sign up to be on every insurance companies preferred list and I don’t troll the ER looking for cases. If people want to see me then they have to shop around, find me and decide that they want to pay more or submit their paperwork themselves because I don’t accept their plan because their insurance company is unreasonable to deal with (except filling out medical necessity forms with detailed bibliographies supporting my case, cause I just find that fun, seriously).
My fee is my fee between me and the patient. I run my office like any small business owner. So I guess the answer is every patient I see walking through the door has shopped around for me and chosen me because or in spite of my fee. That’s who. As far as “nobody knows how much” it’s really not that hard, you just call and ask. My consult fee is $300. That is at least an hour appointment, as well as reviewing all your outside records before you arrive, a very detailed consult note mailed you your address and all the providers addresses you tell me to sent it do as well, and management of high risk medications I may recommend including monitoring of labs until your next visit (3-12 months depending on the condition and your seriousness), email contact and cell phone for questions (if you have a true rheumatological condition needing follow up). Follow ups are between 20-50 depending on how detailed the visit it is. If you’re clergy or cops I tend to “forget” to send a bill. If you’re working poor you pay what you can within reason (and sometimes not in reason). If you’re referred by a former teacher of mine you pay whatever they tell me you pay out of respect and gratitude for what skills they gave me (ok, so I only really publicly admit the 300/50 fees). There’s plenty of doctors out there who do the same from PCPs to peds ENT. Have you actually tried looking for yourself or just assume that no one else does it because you don’t?
Hm, looks like Hello Health advertises their rates. Oh, the local “Quickcare” advertises their rates online. Hm, oh, both hospital affiliated clinics in my town advertise their rates online. Damn, that took a whole 5 minutes and google to figure out.
And my example wasn’t just breast implants. It was from breast implants to picking a PCP, the two extremes of the spectrum, but way to go manipulate what I said to your benefit.
You argue that you can’t find out cost and say emergencies are not what you’re talking about. Emergencies and urgencies are about the only time you can’t find out ahead of time what things cost, same as in other real life situations. Guys like those are Hello Health actually advertise that they’ve shopped around and found/negotiated the lowest prices for things like drugs and imaging and labs. I know the costs of the drugs I write, the co-pays of the different tiered plans (even though I don’t accept insurance I still need to know what’s important for my patients) and which pharmacies have the best prices. I know the typical costs of what labs will charge for certain monitoring labs and let my patients know that XYZ is about $$ and I tell them to call various labs and make sure they get at least that good of a price. This is real world. Welcome to it.
It’s a joke to pretend that medicine isn’t a business and the more people like you try to the worse off we’ll be because you can’t solve something until you actually understand how it works.
There is nothing special about medicine and only a fool doesn’t shop around in medicine unless it is truly an emergency.
Steve hits the core of the problem – caused by a stupid govt policy – wage + price controls. That, after WWII, lead to bus giving employees a fringe benefit that evaded the govt controls and Congress made it tax free. That started the problem and then politics got more + more involved. And when politics is involved (ie, the govt), you get lobbying by special interests. Hence all the mandates.
We need to sever the link so that people shop + choose their health insurance a la carte – just buying what seems appropriate for their situation and being able to buy it from any provider in the country.
At that point, people will stop treating it as prepaid health care + start again to use it as insurance – something to be used in case of emergency – like auto insurance, like homeowner’s insurance, like disability insurance, etc.
Our safety net should provide for the truly poor + indigent – that is what Medicaid should be doing but it too, needs some reform to make it more equitable for providers and patients – with some free market mechanisms.
Our present hybrid healthcare system is not free market + probably has never been for the past 50 years or so. I for one, would love to see a much more free market system (with some regulation to be certain the insurance companies have reserves to pay claims) and Medicare is not a system to be used as a guide – being $46 trillion in the hole is not a model system. It too needs reform but htat is a subject for a different day.
If Tom et al pine for a neanderthanl existence that is their business. Public and individual health has improved our ability to survive better and is considered necessary by the overwhelming majority of those who live in this country. So many of these oppositional arguments sit on the notion that we got along without it before.
However life span was not as certain in the past. Our longevity has increased with time as a population because of improvements in community and private health care. Healthy citizens produce more wealth for the nation and as an ethical capitalist I think is a necessary investment to make sure all have access to medical care. Cave people did not practice ethical captialism. It was everyone out for their own or their own clan without any regard that their behaviour was destructive to others. It did not occur to them that their fellow species may have been useful to their own survival.
It is the purpose of government to reduce suffering and prevent any thwarting of progress. At least that’s my read of the Preamble.
“It is the purpose of government to reduce suffering and prevent any thwarting of progress. At least that’s my read of the Preamble.”
Wow. Um, no. Perhaps you should re-read the constitution or take a constitutional law course. When even our supposedly educated citizens are this ignorant of their basic legal foundations we’re in trouble.
If you want to argue that’s what government should be for, fine, but don’t make the ridiculous claim that that was the purpose.
Great … from “Learned Profession” to Con Edison…
There is an article in September’s Atlantic Monthly that I think many would be interested in reading. The main point (at least my attempt to distill it) is that health care costs and quality could be improved if the direct payer of care was the direct recipient of care; the current system of third party payers creates a large disortion of incentives as these players (gov’t, pharma, hospitals, insurance) are neither the direct beneficiaries or givers of health care (the patient/doctor relationship is where health care is “made”), but rather control the flow of cash. He proposes a system catastrophic insurance, then a combination of HSA plans/cash and carry with government aid for poor.
You all might be good doctors, but you’re terrible economists. Too much hairsplitting over semantics here, too. People can argue all day about the vagaries of what constitutes a public good and whether such a thing even exists, but Dr. Gordon makes a clear statement of what he’s describing and it’s sufficient for him to make his argument.
So, food and water – public good? Sure why not. After all we have public water utilities, clean water legislation, agricultural subsidies, FDA and USDA protecting the food supply, etc.
Public transportation – public good? Well, yeah. At least that’s pretty much the idea. Buying a car for everyone is a little too weird of an example to be discusses as a public good: it’s a little silly and not very cost-effective.
Now. Health Care. To support Dr. Gordon’s argument I think the “good” is better described as “Access to the Health Care System.” Nobody knows when they will need health care or what services they will need when their time comes, but if you have Access, then you’re set.
So is it or should it be a public good? Well, there are definitely aspects of health care that can be thought of as commodities and thus responsive to free market principles. We can price shop for things like an annual physical, cosmetic procedures, and even maybe some more serious or expensive things like a joint replacement or maternity care (you planned to have the kid, why not plan to pay for the delivery?). But how much influence can an individual have on price? Could I really negotiate a better office visit rate than a pool of thousands of insurance customers? Do I really know enough about joint replacement surgery to know that the price at this hospital is a better value than the price at that hospital? What if there are complications? What do I pay then?
Let’s say I do a pretty good job of haggling. I no longer trust my doctor farther than I can throw him because hey, I’m pretty sure he’s just trying to squeeze another nickel out of me, but that’s OK: I saved $500 on my knee replacement. And I’m saving maybe $50 a year because I shopped around for my preventive care.
WHOOPS! But now I need a triple bypass – unfortunately no time to haggle over this one. What will that $1000 I saved over 10 years get me? They’ll turn on the lights in the CV Lab?
Do you *seriously* think that saving a little bit in costs here and there through price competition can put anything more than a tiny dent in the really *large* health care costs that really pile up on people?
The whole concept of health insurance is based on the idea that access to health care is a public good (at least in the way we’re discussing it here). You pool your money together because you don’t know who will need that money when. The only different concept here is expanding the pool in a way to include more people so that fewer people are buried by their unexpected costs. “But I don’t want to pay for some lazy slob.” Yeah, well, tough: you already are. Through higher premiums. Through higher health care prices. Through your taxes funding state and federal aid programs for low-income individuals, hospitals, and clinics.
What really gets me is the ones crying about EMTALA!! but not understanding that a public health option, or perhaps a co-op to some extent, is a way to make up for the burden that EMTALA creates for hospitals and doctors. Society doesn’t want patients turned away because they can’t pay – that’s why we even have a law that obligates you to treat in the ED. The hospital eats the cost, and maybe makes up some of the difference through assistance from the state goverment or fundraisers or something. Wouldn’t it be better just to pay for those costs in some up-front sort of way that distributes the cost more logically, rather than forcing health care systems to beg the state for money and charge $100 for an aspirin? And wouldn’t it be even better to do it in a way that patients are getting the preventive care they need instead of relying on the expensive and inefficient care from the ED?
Public option, folks. Give it a chance.
-g
PS – to anyone who wants to use the internet as an example to argue for a free market, the development of the internet is about as purely communist as you can possibly get.
Great article that come out today clearly show that health care reform and universal health care do not establish or recognized health care as a right
Myth 17: Health care reform will establish a right to health care.
August 24th, 2009
http://www.aapsonline.org/newsoftheday/00432
Ironically, the Federal government will argue that it’s ambitious claims of dominion over Healthcare because it falls under the “Commerce Clause.”
So Nuclear since you purport a different view of the purpose of the Constitution, enlighten me. Calling me ignorant is not a road to better understanding. I’m listening. The purpose of the Federal Government is laid out in the Preamble so where did I misread it. I also believe that we are no longer living in early days of this Republic and those Constitutional generalities but must be specified for the time we live in. I live this to the Supreme Court not bloggers with an agenda who mostly want to dilute the rightful power of the central government.
I would equally say that when individuals do not realize their well being depends on the efforts of others as well as ourselves, we have regressed. Being healthy, is an important aspect of ensuring a vibrant nation.
I should have been more expansive on what I meant by suffering since I am not referring to individual problems but the greater issues such poverty, economic stability, safe products and untainted food, etc. It seems there have plenty of laws addressing these problems. Health Insurance reform seems to be one of those areas that needs addressing.
I have already stated that it is not the purpose of government to interfere to support a “good.” It intervenes when there is enough suffering(as illustrated above) or destructive behavior to warrant a remedy to stop it or forbid it altogether. Private insurance as it exists today produces bankruptcy of individuals, lost jobs, massive deaths, and mis-allocation of resources. That seems enough to say “there ought to be a law.”
Dr. Gordon’s economic analysis of public goods and asymmetrical information is correct. But is does not necessarily follow that a public health plan or a single-payer is required. Those might be excellent choices, but I don’t have the background to make an informed decision on this matter. Economists often agree that market failures exist but differ on the best remedy for them.
Any HC economists out there? Please weigh in.
Dr. Gordon’s economic analysis of public goods and asymmetrical information is correct. But is does not necessarily follow that a public health plan or a single-payer is required. Those might be excellent choices, but I don’t have the background to make an informed decision on this matter. Economists often agree that market failures exist but differ on the best remedy for them.
Any HC economists out there? Please weigh in.
Oops…forgot to say great post! Looking forward to your next one.
Donald Green,
I’ve asked it before, but I’ll ask it again: At what point point are you prepared to tell the government to back off their quest to remove suffering from this world? The pursuit of happiness is the job of the individual, not the government. I am sorry, but no government, no matter how powerful, can eliminate suffering, poverty, economic instability, contaminated food, etc. Dictates are not a solution. If you are suffering, it is in fact a motivating factor for you to get out of the situation you’ve placed yourself in. What happened with welfare? An entire generation of inner city blacks dropped out of the economy altogether, and the percentage of children rocketed. I would argue that the attempt t orelieve suffering significantly backfired in that instance. I suspect the same is probable with health care.
Dear Tom, It is naturally a political question and it is a question of finding the rosetta stone issues that cut across wide swaths of the population. There must be general agreement that it is not available adequately in the market place of the society. At no time do I think the government should intervene in every deficiency in society. However problems such as education, health care, mass transit, research, adequate defense can not be supported adequately by private means. In other words it is a legislative debate painstakingly leading to laws. The process will be ongoing because this is the messy business of a democracy.
Hopefully by choosing what keystone issues to adopt so opportunity is restored to marginalized populations and the true business of society, dealing with people’s needs and wants, can be reasonably provided by individuals and companies. The idea is to improve opportunity not squelch it. You feel government interferes. I do not. Programs like Social Security and Medicare have provided the funds, not actual choices how it is spent within the limits of what is available to spend. It is certainly left to individuals, if they so wish, to embellish this if they can afford it. No one is or should stop you from doing this. The government just provides a floor. If it is wasteful, of course, it will have to be changed. Finally you live in a society with the social contract that assumes you participate because you believe it is necessary for your survival. If it is not doing this it must be addressed or you die.
You can live with a hole in your shoe but you cannot live with a hole in your heart. Twenty thousand of your fellow citizens die a year from lack of health insurance. Sickness incurred by the uninsured leads to non-productivity and higher unnecessary expenses or lack of production. Health care is a critical asset to the individual and the society as a whole. It should not be for sale. We should all pay for it. If you carry individualism to a certain place, it means moving back to the caves. However, I actually want what you want and since presently the private approach is costing us all $400 billion extra and there with proven models in the world to show a centralized system of payment, not delivery or managing health care, provides superior general care at a lower cost. Can’t we at least give it a try? What we have now will bankrupt us in a generation. You think the government debt is bad now, just wait when the number of tax payers becomes even less.
The Swiss and the Germans actually provide health insurance with private insurers, if that is your preference. Medicare payments, incidentally, are actually done with private insurers following Medicare rules. The overhead is 1.5%. If true health care reform fails OK we’ll go back to doing it to what the opposition suggests. However, like Medicare, I believe it will pay off in spades for all of us. My father was a Scot and my upbringing was in backwoods of Newark, NJ. I am certainly not looking to squander my money or cutting off any choices I wish to make or have gained. Yes I value my freedom as much as the next guy. I just happen to believe it is enhanced by widening the tent as the founders stated, “We the people…..in order to make a more perfect union….” I do not believe if someone is doing better I must have lost something. I actually think if things are working right, I should be better off.
By the way I have bought and sold several companies successfully, owned a few homes, paid off many loans, financed my childrens’ education on my own, with other’s help, and even some governmental assistance. I still consider myself an ethical capitalist. However I am also a “commonist survivalist.” I could not have succeeded without others including my government.
Now I have answered you. I understand you may view life differently so the back and forth will continue. However if my view prevails it will not be because I wanted to harm anyone, in fact, quite the opposite. It comes from my knowledge and experience that tells me it will move us forward to a better place.
Tom:
When government intervention is logical and economically feasible, why stand in the way of a “quest to remove suffering from this world?” Removing suffering as an end of course does not justify any and every means necessary, but our government does have a responsibility to “protect the general welfare.” And are you suggesting that someone who develops cancer and can’t afford treatment just needs to be more motivated?
For jsmith (and Tom, to an extent):
The “remedy” depends on what aspect of the situation you’d like to address. The white house has identified the population of uninsured as its primary problem, in which case establishing a government run universal health coverage plan is the most direct answer. There are of course arguments for relying on free market mechanisms to some extent, but unfortunately we’ve known for decades (pdf alert) that health care – particularly the very expensive stuff that makes up the bulk of current spending – isn’t managed particularly well by market forces. Unless, of course, you go straight to “that’s too expensive for you to afford.” That is, after all, a significant factor in free market pricing.
I am not a healthcare economist, and I’m sure you’ll find varying opinions among them, but if you want to know possible remedies for various ills in healthcare systems then you need look no further than other advanced countries around the world – all of which provide some form of universal coverage. The inability of Americans to accept factual information about how other countries work is legendary, but I would think highly-educated individuals like health care professionals would be more receptive. Am I wrong?
-g
And Dr. Green does an excellent job of bringing us back to the concept of a “public good” then identifying access to health care as such. Nicely done.
-g
Dr. Gordon bases his argument on two economic theories that he does not understand (the theories behind public goods and regulated utilities). The definition of a public good is NOT something expensive that benefits everyone. Rather, a public good is “non-rival” and “non-exclusive” (where the marginal cost to serve one more person is close to zero). The classic example of a public good is national defense. I cannot be excluded from sharing the benefits of national defense despite free-riding (i.e. not paying my fair share of the cost). Neither does my enjoyment of national security preclude someone else from enjoying it. Thus, defense-related projects would be under-produced if we relied on individuals to voluntarily fund them due to free-riders. Obviously, medical care does not fit the model of a public good.
Neither does health care fit the model of a regulated utility (i.e. a natural monopoly with huge upfront costs and low marginal costs). Sure, building a hospital is costly – as is building an electricity generating plant. But the reason utilities are considered natural monopolies is the electrical grid, power lines, meters, and so on that would be costly (and cumbersome) to duplicate across numerous competing utilities. Besides, there are numerous facilities that could compete with hospitals (house calls, phone consults, web or email-based visits, clinics, specialty hospitals). There is asymmetry of knowledge in medical care, but that’s true in numerous industries. The authorized Prada dealer doesn’t want its customers to know about the discounter selling identical goods below MSRP.
Health care is a marketplace, but it’s dysfunctional. So how can we turn health care into a competitive market? People need to control more of their own health care dollars. They need to save for future health care needs the way they save for retirement. Third-party payment needs to be reserved for insurable events and mostly be replaced with indemnity insurance. On the supply side, barriers to entry need to be removed and laws protecting providers from competition need to be repealed.
Dr. Green and Gromit,
I have enjoyed reading your replies and your well-articulated arguments. Keep it up.
NF, I think your practice model sounds rational (and very reasonably priced) and I don’t think that conceptualizing basic health care as a “public good” or legislating a public option will prevent you from doing business the way you prefer. It simply takes the stress off people who can’t afford you by giving them the option to see one of your competitors who will accept payment from a public plan (should a public plan cover the type of medical services that you offer.) Hopefully this won’t put you out of business. If yo offer the type of personalized in-depth care that it sounds like you offer, I doubt it will.
I know EMTALA is annoying for doctors, but the stakes are much higher for patients so I’d rather “enslave” a doctor by dragging her out of bed in the middle of the night than condemn an unfunded emergency patient to painful and preventable death or disability by denying treatment because of inability to pay. I would like to see reimbursement for EMTALA care, however, and I don’t know how anyone proposes we achieve this without public financing. Still, I’m not sure if a public option addresses this problem because I don’t know what percentage of the people accessing EMTALA would even qualify for “public option” coverage. Perhaps you know, Gromit? My thought is that if we want to take the burden of EMTALA off of hospitals and providers, EMTALA may have to be reimbursed separately or public option coverage will have to be extended to every single person in the U.S., legal and illegal, whether they sign up for it or not. It’ll have to automatically kick in when an unfunded person accesses services. This is beginning to sound more like a limited form of universal coverage to me (which is what I’d like to see offered.)
So CT scanners, interoperative MRI suites, Da Vinci surgical systems? They are not costly to duplicate across competing facilities? What’s the marginal cost of a single case using equipment such as these?
How does asking people to control more of their own health care dollars provide coverage for the currently uninsured? What happens when the members of the insurance pool most able to pay for their procedures realize that it’s cheaper to fly across the Atlantic for a surgery? Do you think patients would get better or worse care having to navigate a system of sub-specialists who focus only on those procedures they can perform most profitably (Hello, Lasik! Good to see ya, implantable pain pumps!)? If competitive markets were the answer, shouldn’t private individual insurance plans have taken over the market by now?
I don’t really expect much of an answer on any of those; they’re mostly rhetorical. But I do honestly wonder: What percent of annual health expenditures do you estimate to be price elastic?
And yay for the free market! I have a great suggestion for removing barriers to entry. All these professional licenses and educational requirements are far too restrictive. Besides, aren’t all those medical books in the library anyways? You could see someone like Will Hunting, M.D.! Except I guess you couldn’t call him a doctor. Maybe “Health Coach?” I bet he could handle at least half the daily case load of an average family practice MD, and he wouldn’t need to charge nearly as much. No worries about errors or anything, either: if he screws up, the free market will punish him!
-g
Dear Dr. Herrick, I, myself, am not arguing that health care is a “public good” or “public utility.” Health care is a human necessity. When people are sick or want to keep themselves well this is the service we almost all rely on. Is there any doubt in your mind that this is so? If impoverishment and death is the outcome when it is not available because of inability to pay, this really begs the issue. This suggests it is not following market place rules. Businesses are suppose to enhance wealth both to its owners and its users. I would refer you to Kenneth Arrow’s treatise on why health insurance does not fit the usual competitive model of the market place. It can be easily googled.
You could set aside money your whole life and still be behind the 8 ball if you get sick. Instead of hoarding it in this manner why not pay for meaningful insurance according to your ability to pay through a central mechanism. This removes the worry and tension and fulfills an essential part of the social contract. Rich or not so rich benefit when the population is as healthy as it can be. Thomas Paine: “No one joined a society to be worse off.”
To some extent everyone agrees treatment can not be withheld from anyone. People cannot be refused care in an ER or hospital whether they can pay or not(sort of like your defense argument). However this approach is both an overly expensive and insufficient way to deliver care. It would be less expensive and more life saving to give this group of people to give them health insurance.
Public Health is already an accepted necessity. In addition without individual care in the range of affordability and accessibility our survival is in danger. I have already alluded to the numbers of dead and the loss to the economy because of our present system. It just stands to reason if everyone has this need but its costs in the society are too great, then a government imposed tax and/or regulations to pay for it is the next logical step. Will there be problems or complaints? Undoubtedly, but we in the US do not even come close to the 86% satisfaction rate of Canadian Medicare, for example. Anecdotal horror stories aside, reports from other developed countries echo this result.
By fixing this major hole in our economy we will provide more capital and opportunities to private entrepreneurs. Wasn’t it health insurance premiums for employees active and retired that helped sink GM?
Simply put, a rational health care system is presently out reach financially for too many people. It is time for Medicare for all.
Excellent post! These are all the things I’ve been trying to articulate on health care economics.
BTW, KipEsq, health care is non-excludable… that guy with appendicitis will indeed get the operation, only it may be delayed and his recuperation may be prolonged if he waits.
And those antibiotics approach non-rivalry, surely as much as public utilities like water and electricity.
I KNOW that leaving medical decisions for patients to make based on their perception of cost-benefit is ludicrous. Even leaving it to physicians is fraught with problems, but at least these problems can be managed.
So far, private insurers have “managed” these dilemmas by foisting the elderly and poor onto the govt plans… so, why not just foist everyone on the govt plans and then at least they’ll be fully funded?
Kudos, Dr. Gordon. Well, done.
Establish justice
Ensure domestic tranquility
Provide for the common defense
Promote the general welfare
Secure the blessings of liberty for ourselves and our posterity
A constitutional argument in favor of centralized government authority to enact a system to address this issue may be hiden in the line, “promote the general welfare…”
Which ever way this argument and philosophy blows, I still hold dear my independence as a citizen and physician. One may feel they have a RIGHT to healthcare, but I can assure you that you do NOT have a RIGHT to my services. A RIGHT…..this is not a term to be bandied around like some new twitter inspired lexicon.
There have been some very good arguments for all sides posted here. Reaffirmation of my views rivals the education gleaned from some of the opposing views. For now, the knowledge sharing is a “public good” on this subject and the passion of personal belief refreshing and honest.
Dr Grodon,
I could not agree more with you. Heath care is the very epitome of what economists refer to as “public good.” If someone gets sick, their ill health costs everyone around them: Others can get sick from the infectious diseases spread by a contagious person; others are impacted economically by the decisions of the sick person and his caregivers beyond what they can mitigate, and; the risk for all of us is random and often overwhelming. The prevention based remedies that can be positively effected by the existence of a universal heath care system can obviate many problems and risks before they become unmanageable catastrophes. (For instance: people who get regular checkups are much more likely to discover and treat potential problems, such as many forms of cancer, long before they become untreatable.)
It is time that we all set aside the ‘partisan game’ and seek what will make us all individually, not to mention, collectively more free, independent and, healthier.
Nobody wins where everybody looses, and everybody looses when the sick don’t get medical care–or try to cut corners when they do get it–and, as a result, expose the rest of us negatively to both health and economic risk.
We wouldn’t tolerate a plethora of “private” fire departments renegotiating service rates at the scenes of fires. So to, we should not tolerate this very similar situation in health care.
Comments on this entry are closed.