Five Big Health Care Questions

I think there is a problem with a Government Health Service. Eventually, the services will be expanded via politics. Services will never be enough and every elected official will work to improve service (= increase costs), private insurance will be less attractive and eventually most will be on Government health care. I think it is unrealistic to think that could survive political pressures to improve services and reduce the costs to the users.

The Board would make a broad determination of which treatments are approved. In this regard, the Board would be expected to be a slow adopter of expensive medical technology. Before approving a costly innovative treatment, the Board would wait until its use in the private sector has been proven and the price has started to come down.

And wouldn't this service also succumb to political pressure to constantly raise the level of service despite recipients level of "means"?

I guess I don't understand what would keep this service in check.

Good thoughts above about the probability that any system would spiral out of control due to political pressure. But that's why it needs to be a welfare based program. The costs of Social Security and Medicare are out of control because these systems are designed in such a way that the majority of the voting public has an incentive to make them spiral out of control. Welfare programs create no such incentive. With one politically powerful group paying, and another politically unpowerful group receiving the checks, the cost control is automatic. Rather than pushing for ever increasing benefits, the majority voters push for ever tighter restrictions on what the recipients must prove in order to receive benefits. I know, it seems harsh, but it works.

OT, but David Warsh says nice things about you: http://www.economicprincipals.com/issues/07.02.11.html

Arnold -- I think part of the problem with the cash-payment situation is that it's easier for a hospital to refuse to treat you than to stop treating you once it starts. Therefore, the hospital wants to be assured not only that you have enough money for the planned procedure but also that there are deep pockets to cover whatever unforeseen things might need doing once you're a patient. Of course, there are other ways to do this than with insurance, but hospital administrations aren't set up to take liens on real estate or become drawers on letters of credit.

The immediate problem with compensating the tragically ill with a single payment based on the typical cost of treating their condition is that by definition, many patients may incur costs greater, perhaps much greater, than is typical.

What the patient might seek is under such a system is a clinic that would provide them with services related to their condition in exchange for the 'going' lump-sum rate: consider the lump sum payment as a 'cancer voucher'. But if such clinics existed, they would be subject to the usual problem with central planning of prices. If the price is incorrect, the market does not clear well, yet if the planned segment of the market has a sufficiently large share of the market, it cannot reliably take its pricing cues from the unregulated sector of the market.

Furthermore, it is not immediately obvious what incentives the clinic, having already been paid for an indeterminate basket of services, has to provide the best basket of services it can, for the price paid. The strongest incentives exist for chronic illnesses: wherein if the patient dies, the income stream stops.

Where this leads in the long run doesn't seem inherently bad: clinics that specialize in treating specific illnesses, are paid for positive outcomes, and average variability of outcomes over large-ish numbers of patients. The people that fall through the cracks are those who are struck by rare illnesses.