Arnold Kling  

Health Care

PRINT
Rent and Rent-Seeking... Technology Innovation vs. Gove...

My latest essay is on health care policy.


America's health care system has many flaws. However, the solution is not to enlarge government's role. What I would like to see is a role for government in health care that is streamlined, rationalized, and bounded. I call this approach "limited paternalism."

I call for shrinking the number of people on Medicare and Medicaid, while increasing subsidized health clinics in poor neighborhoods and taking steps to make it easier for individuals to obtain health insurance directly, rather than through employers.

Can the market help deliver cheaper, better health care? Consider this story from the New York Times.


The clinics, called MinuteClinics, are cropping up in Target and Cub Foods stores in the Minneapolis-St. Paul area. Now in 10 stores, the MinuteClinics aim to diagnose and treat about a dozen common ailments - like strep throat, sinus and ear infections and seasonal allergies - in about 15 minutes. They also provide vaccinations and offer screenings for cholesterol and blood pressure problems.

The article quotes some doctors who object to this sort of health care innovation. One argues that you are better off going to an emergency room. "Often, he said, patients come to emergency rooms complaining of minor ailments that turn out to be more serious. A patient who thinks she has strep throat, he said, may have an abscess, while a supposed cold sore could be a sign of a sexually transmitted disease."

In my opinion, if you want a thorough medical exam, the last place you should go is an emergency room. Recently, my father went to the emergency room for a knee injury, and he was sent home with a soft brace and a diagnosis of a broken femur. Say What??? The treatment was totally inconsistent with the diagnosis. Fortunately, it was the diagnosis that was wrong. The orthopedist who saw him ten days later said that there was absolutely no broken bone, but that my dad had cellulitis, which is a skin infection that causes swelling and inflammation.

Sorry, doctors, but you won't get me to sign that petition to ban minute-clinics and force people to use emergency rooms instead. Let the market decide.

For Discussion. How might government and private sector programs be combined to make health care better? How might they be combined to make it worse?


Comments and Sharing





TRACKBACKS (3 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/94
The author at Houston's Clear Thinkers in a related article titled Kling on health care finance reform writes:
    Arnold Kling is thinking about health care finance again, and that's a good thing. The entire article is well worth reviewing, as Mr. Kling does a particluarly good job of summarizing the defects in the America's health care finance system:... [Tracked on July 23, 2004 5:37 AM]
The author at Business Opportunities Weblog in a related article titled Carnival of the Capitalists writes:
    Welcome to this week's edition of the Carnival of the Capitalists. We've got a big show for you today: In An Alternative View Of Organizations in the Future, Gautam Ghosh speculates that in the future, organizations won't organize for the... [Tracked on July 26, 2004 9:49 AM]
The author at Modulator in a related article titled Carnival of the Capitalists writes:
    Is up at the Business Opportunities Weblog. Whether your political economic stance is left, right or orthoganal the collected posts should provide plenty of mental stimulation. There's money and sex, socialism and capitalism, health care and much, much... [Tracked on July 29, 2004 12:56 AM]
COMMENTS (6 to date)
Boonton writes:
I call for shrinking the number of people on Medicare and Medicaid, while increasing subsidized health clinics in poor neighborhoods and taking steps to make it easier for individuals to obtain health insurance directly, rather than through employers.

It's intesting how even market centered economists are eager to ditch the market when they get a pretend chance to make the world over in their image. The concensus seems to be that we don't want to simply accept the market as the allocator of health care. Why does that mean the market must be ditched entirely?

Simply provide the poor with a subsidy to purchase healthcare or health insurance. If the 'minute clinics' are so great, then they will sprout up in poor neighborhoods like flowers. If some type of mega-Wal-Mart-Hospital is the most efficient way to deliever health care in poor areas then let that develop thru the market.

Once again, I propose my universal coverage plan:

1. Dedicated tax to provide for a universal health care benefit.

2. The tax revenue is made into vouchers that individuals can use to:

a: Purchase health care directly.
b: Cash in against employer provided coverage.
c: Purchase health insurance
d: Donate to charity

3. In order to cash in vouchers, insurance companies must agree to limits on pre-existing condition exclusion & charging different premiums based on risk.

4. Individuals are free to supplement the voucher with their own income if they wish to purchase more healthcare or coverage.

5. Unlike an entitlement, the voucher size will be directly tied to tax revenue. There will be no 'unfunded liability'. If people want a larger voucher they must accept higher taxes and vice versa.

Mcwop writes:

A few comments:

One argues that you are better off going to an emergency room.

There is such a thing as urgent care centers, which are a far cheaper “halfway” house to the emergency room. We have one nearby where I had stitches, an ear infection treatment, and several other minor fixes all without an appointment (and not much wait either). It was cheap too. There needs to be more of these centers.

As to the discussion question:
If the government truly believes that it can provide health care insurance more efficiently than the private sector, then why does it not set up a federal mutual insurance corporation? This would be an idea similar to FRE or FNMA. They can provide coverage that anyone can purchase, and even subsidize low income people somehow through the premiums of others. The agency can be free from any taxes, and they could limit their marketing expenses that are attributed to higher health costs. Corporations and small businesses can be free to offer health insurance through this quasi government agency if they choose. The kicker is that they must operate as a mutual insurer. This means that payouts and expenses must be matched by premiums plus the earnings on premiums.

This would be an experiment worth watching.

asg writes:

I confess to some surprise at seeing "WTF" in a Kling post, but that aside...

... there's a fairly important error, or at least misunderstanding, in the TCS essay. Arnold quotes the Fraser Institute paper as saying: "Canada spends more on health care than any other industrialized OECD country except Iceland."

Yet it does not say that... or rather, it does, but earlier in the paper (and in the graph displaying the data) it points out that what they mean is "any other industrialized OECD country with universal access." (my emphasis) That is, the U.S. and Mexico are excluded from those comparisons. So it is not true, as one might think upon reading the quoted sentence, that Canada spends a greater percentage of GDP on health care than does the United States when the figures are adjusted for age of the population.

Rick Stewart writes:

For Discussion. How might government and private sector programs be combined to make health care better? How might they be combined to make it worse?

Health care? I see no way the government can efficiently make health care in the United States better, with or without the private sector.

If the question was intended to address the challenge of 'access' to health care, certainly the government could help eliminate the problem of a private market for health insurance, which naturally seeks to increase profits by underwriting customers.

I suggest a simple solution. If an insurance company wishes to sell health insurance policies in a state, they must allow any individual living in the state to purchase the policy at exactly the same price. Period.

This allows insurance companies to concentrate on 1) developing diverse policies that customers actually want (and that provide a profit to the company), 2) reducing administrative costs, 3) pressuring providers for lower costs.

Jim Glass writes:
if you want a thorough medical exam, the last place you should go is an emergency room.

My college roommate went to the local emergency room with a bad pain in his side, was given codeine to kill the pain, and almost died from his abscessed appendix. He might well have died if he hadn't felt the pain through the codeine and made a long trip to his own doctor who hospitalized him immediately, because it certainly would have ruptured. As it was he was in the hospital for weeks and missed a term of school.

Off of my more recent experiences taking people to NYC hospital emergency rooms, they are about the last place I'd want to go even in an emergency.

Lawrance George Lux writes:

Arnold,
Your plan suffers from the same defect as all such plans--an inability to get support because ordinary people cannot understand what it will mean.

A number of questions must be answered about Health Care, before real solutions can be found:
1) How much are the American people willing to pay per person to supply health care?
2) Who is to judge what health care is needed?
3) How are the funds to be distributed?
4) How to stop escalating health care costs, when the current system allows unrestricted Provider charging (specifically not a Market-driven decision)?

The determinatiion of how much American people are willing to pay for health care is simple: tell the American public they must determine how many hours of work per week they wish to devote to health care. All Income will be considered by weekly segments, and Everyone will be considered to work 40 per week. The American people could chose any number of hours they desired--from 1-20 hours. All Income would be so considered--even Government payments State, Local, and Federal. The total Income taken in yearly would be estimated, and the average premium per Enrollee would be determined.

Each Doctor would receive from this fund for each Patient he was primary Care giver. The Doctors would have to determine how they would disperse the money--through purchase of Drugs, hospital care, medical mechinery, Consultant Doctors and Specialists, etc. Their own personal income would be dependent upon how they used the funds, and how well they negotiated for medical services as a group. They would also determine what Patients had the most viable chance for any care. lgl

Comments for this entry have been closed
Return to top