Arnold Kling  

Romney and Kling on Massachusetts Health Care

Economic Literacy Via Philosop... The Philosophy Major...

In response to an op-ed by the Massachusetts governor in yesterday's Wall Street Journal, I write,

These are the "near-poor," who are portrayed by the Governor as an oppressed class who badly needs support from the state.

"We needed far less than the $1 billion for the subsidies. One reason is that this population is healthier than we had imagined. Instead of single parents, most were young single males, educated and in good health."

Oddly enough, this oppressed class does not need much health care. A cheap date, so to speak.

The governor's claim that the cost of covering the uninsured will be low because they are "young, single males, educated and in good health" raises a question about how much we should be worried about the uninsured in the first place.

What if the health insurance crisis is phony to begin with? In that case, then the Massachusetts plan is actually a good fit. A phony solution for a phony crisis.

When I first started studying the literature for my book on health care, I thought that the health insurance crisis was phony. I thought that we might find that the extravagant use of health care in our society has demonstrable benefits for our citizens.

The more that I learned, the less confident I became that the U.S. spends its health care dollars cost-effectively. Although I do not think that the international longevity statistics that are frequently cited to indict the U.S. health care system are the "smoking gun" that they portrayed to be by single-payer advocates, there is other evidence that health care procedures are undertaken with very poor benefit-cost ratios.

If there is a crisis in American health care, it is the widespread use of cost-ineffective procedures. And if that is the problem, there is nothing in the Massachusetts health plan that speaks to the solution.

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COMMENTS (4 to date)
knzn writes:

The problem with health care is not that we spend a ridiculous amount on it today, but that we spend more and more every year, so that, eventually, we will be spending a ridiculous amount. Waste may be able to explain much of what we spend on health care at any one time, but I doubt it can explain why our spending is growing so quickly. Accordingly, I would say that the real crisis is not “the widespread use of cost-ineffective procedures” but the fact that we use ever more of both the cost-effective ones and the cost-ineffective ones. This crisis would exist even without the waste, although, without waste, its effects would be pushed forward in time.

Scott Peterson writes:

I completely agree that "the widespread use of cost-ineffective procedures" is one of the single biggest problems with the US health care system.

Let me give you an example: An 85 year old woman is having knee problems. Her doctor recommends knee-replacement surgery; the key is that it is paid for by Medicare so the lady agrees. The surgery only partially solves the problem, and a couple of years later she is in a wheelchair anyway due to other age-related problems.

The patient has no incentive to take a hard look at the cost-benefit equation in this example; and the surgeon has a strong incentive to recommend marginally necessary procedures to move his revenue numbers up. In short, the US taxpayer is getting the shaft.

JohnJ writes:

I would also correlate this with those who decide that they know what is in someone else's best interest, therefore they intend to pass laws requiring people to do something they might not want to do, and that they weren't hurting anyone else by not doing. This is why charity should not be mandatory, because once you start linking everyone's lives together, all of a sudden everyone's life has an effect on everyone else's, and the government has a responsibility to get more involved. It's funny all the problems freedom solves. As long as I'm not hurting anyone else, I should be free from the undue burdens of government. I realize that sounds Libertarian, when I've proclaimed myself to be a Conservative. My Conservative views allow me to understand the need for communities to decide to pass laws that are in their best interest, such as drug laws, while maintaining that only those people who want to be subject to those laws should be (as determined by the majority of a community), without forcing it upon everyone. That's why socialists are so determine to make their ideas federal, that way there's no way to "opt out".

Jon writes:

Arnold and Mitt commit grevious math abuse here. Perhaps, over half of the uninsured are healthly singles who will likely get covered before they are sick. This is not the population that worries anyone.

The problem is the people who are older, have chronic conditions, or who have children who cannot get affordable insurance. For many of these insurance is an oxymoron since you cannot ask someone to sell "insurance" for a condition that they already endure.

Face it Arnold, until you have a mechanism for unconcious people being rescued from car accidents to research and evaluate bids, there will be no free market uptopia in health care.

What economists should focus on is developing market mechanisms for price discovery. Then figure out how use regulation and government mandates to apply these prices where markets don't work and to deliver services to people who produce less (in market value) than the cost of keeping them alive (the ones the social Darwinist-Libertarians would let perish)

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