Arnold Kling  

Health Care Cynicism

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1. Russ Roberts interviews Robin Hanson, for those of you who are curious to find out more about his thesis that when people do not pay for their own health care, the services that they obtain on average do as much harm as good. You can also hear him talk about another of his favorite subjects--prediction markets.

2. Clark C. Havighurst and Barak D. Richman offer a provocative thesis that our health care system is designed for the benefit of providers and affluent consumers. Their argument will be presented at an AEI symposium here. Their argument is perhaps best summarized in a comment by David Hyman (link available at the page for the symposium).


(1) U.S.-style health insurance weakens price elasticity and makes it possible for providers to reap supra-supra competitive profits from their monopoly position.
(2) Providers behave like self-appointed, reverse-Robin Hoods, exploiting the poor and the working–middle classes, and redistributing the resulting wealth and medical resources to the upper-middle class and the wealthy. The result is highly regressive.
(3) Providers reject efforts to control moral hazards and implement cost benefit trade-offs, resulting in “nothing but the best” health insurance coverage terms and delivery systems. These efforts are greatly aided by the tax subsidy for employment-based health insurance. Unfortunately, “nothing but the best” costs much more than many Americans are willing and able to pay.
(4) The fact that costs are hidden while benefits are immediately evident encourages everyone to demand more and better health care than they would want if they faced the true costs of their decisions.
(5) Low and moderate-income Americans get shortchanged on the delivery side because they are less assertive and die sooner.
(6) Regulation of the health-care sector serves the interests of elites and incumbent providers of services, and not those of consumers.

Hyman offers some basic wisdom about the political process.

The “haves” come out ahead because they have the knowledge and incentive to do so, while the have-nots remain (comparatively) uninformed and disinterested.

Think about the U.S. in comparison to other developed countries that have government paying for a larger share of health care. The theory that the political process benefits the "haves" would suggest that in other countries the "haves" should benefit even more, yet my impression is that this is not the case. Our system appears to be more politically distorted, even though we supposedly have the more free-market system.


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COMMENTS (3 to date)
Buzzcut writes:

The tax deductibility of health insurance is skewing the system towards the wealthy. Tax deductibility is a lot more valuable to someone in the 39% tax bracket than someone who doesn't even pay federal income taxes.

Horatio writes:

Is our system really more free-market?

The structure of government interference is different in the US, but I am not sure if it is less restrictive than in Western Europe.

caveat bettor writes:

Horatio, it seems that folks wait an awfully long time for organ transplants in Western Europe, vs. waiting times in the U.S. I understand that dental care is also greatly inferior. I think that we get 30% better care (for the 300% that we spend).

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