Arnold Kling  

Obama on Health Care

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from the Leonhardt interview.

I don't know how much that hip replacement cost. I would have paid out of pocket for that hip replacement just because she's my grandmother. Whether, sort of in the aggregate, society making those decisions to give my grandmother, or everybody else's aging grandparents or parents, a hip replacement when they're terminally ill is a sustainable model, is a very difficult question. If somebody told me that my grandmother couldn't have a hip replacement and she had to lie there in misery in the waning days of her life -- that would be pretty upsetting.

...So that's where I think you just get into some very difficult moral issues. But that's also a huge driver of cost, right?

Gosh, I wish I could have had him beside me when I was debating health care in Vermont. I kept trying to make this point, and instead the questioners kept coming back to me with statements like, "It's just a matter of coming up with the political will."

Well, if the typical Vermont lefty is someone who reads the New York Times and likes Obama enough to read the whole interview, they may get a clue about what I was trying to say, even if they don't connect it with me.

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COMMENTS (17 to date)
scott clark writes:

This just makes it worse. Here BO is hinting that he understands the issues at stake. So is he pushing universal healthcare just because its popular and will get him and keep him elected, knowing full well that it could turn into an economic and social cluster f-? Is he pushing it so he can take over and just straight up push the terminally ill off the rolls? In the interview he keeps saying we'll need to have more conversations, the people will have to have more conversation, we'll need docs, and scientists, and ethicists, to talk some more. But plenty of smart folks have already had the conversations. See, BO, you've already tackled the issue, you're just not comfortable with the only logical outcome. What a mess. This interview has Mencken written all over it. It shows again that politicians only concern is getting and keeping power, doing whatever it takes to stay in the saddle, such that you can't even worry about which way the horse is headed.

Commenterlein writes:


Not trying to be snarky, but what is "the only logical outcome"?

I thought that any system one could devise ends up with some form of rationing, and depending on the social welfare function you choose different forms of rationing look less bad than others. Put more bluntly, somebody "has to lie there in misery in the waning days of their lifes", and now we need to have a conversation about who that should be.

Tom West writes:

That's one big advantage of having a second tier that's out of the sight (for example, Canada's second tier is the USA).

Lying in misery is a whole lot easier when you're not even aware that there's an alternative, even if it's tremendously expensive and unlikely to work alternative. (Or, at the very least, the alternative is so far away as be essentially unreal)

Far easier to be told "there's nothing that can be done" by doctors you trust.

scott clark writes:


You got me right, the only logical outcome is that, because scarcity exists, there will be rationing. BO won't say that, because he is not comfortable with it, he believes that you really can have it all or because he knows its a political kiss of death. From there (the idea that rationing will happen) you quickly realize that the rationing probably should happen by the individuals own choosing, in a non-coercive market, because that, while being tough to watch in lots of ways, would still be better than coercive government decisioning, and would waste less resources than lobbying the government to include certain things, exclude other things, and all the lobbying dollars working at cross purposes just to capture a little attention.

Political Observer writes:

If we only had the political will! But what will are they talking about. The will to allow for unlimited demand regardless of cost or the will to affordable cost by controlling supply or some combination of both? As Mr. Clark so wisely notes - everything is about scarcity. There are no unlimited resources. Unlimited demand only drives up cost because of scarcity. And those cost will have to be borne by all of us - not just the rich. So what are we willing to give up to support this unlimited demand? That tradeoff never seems to be part of the debate. As taxes increase to pay for this entitlement - what does the taxpayer need to give up with the continous decreasing discretionary spending choices?

On the other hand we can adopt the Medicare/Canadian model and restrict supply through cost controls. Yes than medical cares seems more affordable but also less accessible as providers disappear. And without market corrections the constriction of suppliers continues. While the direct cost appear "affordable" the indirect cost: your time, availability or services; location of available services; etc. are the cost you bear. In the cited example - even if you are willing (and allowed) to cover the entire cost yourself there may not be anyone who will supply the replacement hip nor the surgeon to perform the operation.

The delusion that Obama and his Marxist partners want you to believe is that we can have this all without cost. And of course when someone points out that there are cost than their response is yes but someone other than you will pay them. If only scarce resources didn't exist.

Commenterlein writes:


You wrote:

"you quickly realize that the rationing probably should happen by the individuals own choosing, in a non-coercive market, because that, while being tough to watch in lots of ways, would still be better than coercive government decisioning"

Well, not that quickly. I, and many other people, believe that a well-functioning insurance market (with some limits on coverage) would be much better than being exposed to eminently diversifiable catastrophic health risk. But I also believe that severe adverse selection problems prevent this market from working in reality - note that one of the best method to lose your health insurance is to get really sick. A perverse outcome if there ever was one (and no, it's not the governments fault). Hence, I believe that the government can play a useful and efficiency improving role in providing universal catastrophic health insurance.

Political Observer writes:

To Commenterlein:

What constitues an efficient role for the government in this area? You raise a concern about the adverse selection problem in the profit seeking sector for health insurance that denies coverage for those who happen to get sick. The presume that a government provided universal health insurance would make the market operate more efficiently by eliminating this adverse selection problem. However your presumption is again that government intervention overcomes the scarce resource constraint - thus providing some unspecified quality level of care on demand.

Universal health care does not eliminate scarcity or rationing. It simply applies political leverage as to who benefits and who does not. Coercive government health care requires univeral participation even of those who have little need if any for this coverage in order to subsidize the cost borne by the higher health risk population (in my years as a health plan administrator I found that in any given year about 4% of the covered population consumes about 90% of the benefits paid out). However as the percentage of risk population increases even government realizes that scarcity exist - thus access to health care for the sick does become an issue. Witness in the State of Oregon where the government run health care is now determing when treatment options are no longer cost effective and are denying coverage to seriously ill patients. The one consolation in this situation is that they do inform the denied patient that they will cover the cost of their medical suicide if they chose that treatement option.

Economically illiterate writes:

We in the UK have run the socialised healthcare experiment so you guys don't have to. After 50 years, healthcare in the UK is catastrophically bad. Reported just last month was the story of a single NHS hospital in the UK that managed to kill more patients in 3 years than then entire number of British troops killed in the both the Iraq and Afghanistan conflicts. The indignity of rationing (called 'postcode lotteries' in the UK), 10's of thousands of Hospital Aquired Infections, the colossal budget overruns, filthy hospitals and the endemic waste of resources are standard features of our NHS. This is an institution that has been subject of reform after reform and had extra Billions of GBP injected into it by the Labour government...all for no discernable improvement. Do not go down this road America.

scott clark writes:


Government catastrophic health insurance is a far cry from what many Democrats are looking for though, don't you think? Medicare and Medicaid are not what I would think of as catastrophic coverage. What's catasptrophic anyway? Medical expenses over $10,000, $25,000?
You say the gov can be effiency enhancing. I say it can't be. I'd say that even if it tried its level best, with ultra sincere administrators, it would soon find itself making bad, ineffiencent decisions. They can't calculate for efficiency anyway. there is no solid economic calculations without legit market prices, and gov is just too distorting. They can't do honest economic calculation when their revenue stems from taxation and not voluntary exchange.

So back to the logical conclusions, we have to bite the bullet, terrible things are going to happen, people are going to die of disease and old age, we were born on the wrong side of garden of eden, so we can try to live as best we can and help our families and communities when we can, we can work on providing solutions by cooperating and innovating and using technology, but using force and taxes and the like to get our way, well that's just not going to make the world a better place.
But telling people that terrible things are going to happen is just not hopey-changey enough for the electorate.

mark writes:

Considering where some Democrats are on the issue - i.e., in favor of unlimited subsidized demand - I took some comfort in the President's remarks. I don't think there is a political case at this time for obliterating a private health care system in the States. So I don't think we are going to wind up in a NIH mode anytime soon. Could "economically illiterate" post a link to that story about the NIH hospital?

Commenterlein writes:

"You say the gov can be effiency enhancing. I say it can't be. "

So government can't help reduce externalities, provide public goods (defense, anyone?), overcome collective action problems, etc.? Never? I am sorry, but that's just loony. There is such a thing called market failure, and they are pretty pervasive. Once we have one, we then need to figure out whether the inevitable costs associated with getting the government involved outweigh the benefits. Looking across countries, the health care systems with the best cost-benefit trade-offs seem to be in places like France and Sweden and have pretty heavy government involvement.

As an aside, bringing up the extremely badly-designed NIH as an argument against government involvement in health care is akin to bringing up Chrysler as proof that privately-owned car companies can't work.

Dr. T writes:

"You got me right, the only logical outcome is that, because scarcity exists, there will be rationing."

What scarcity? In private sector medicine, the only scarcity we have is money. If you've got money, you can get almost anything done. Completely useless $2000 "executive" physical exams: no problem. $900 Magnetic Resonance Imaging studies for an injured knee ligament: fine with us. A $40,000 hip replacement for a terminally ill 64-year-old woman: we'll do it. But, a $40,000 hip replacement for a terminally ill 65-year-old woman: no way, Medicare won't pay.

We're going to end up with a federally-controlled health care system soon because Obama is (unfortunately) more charismatic than Hillary Clinton was in 1993 and 1994 when she presented her plan. Most people (initially) will welcome the change because they won't see the separate insurance deduction from their pay and because many have had bad experiences with their private insurers. Private insurers never seemed to recognize that federal competition could occur at any time, and they often treated customers like crap. Well, they'll be out of business soon.

George writes:


Well, it helps if you google for "NHS", not "NIH". :-)

Here's one about Mid-Staffordshire — and how it's not even the worst:

scott clark writes:


Sure, you can construct wonderful theories that show government as the solution to externalites, collective action problem, and providing public goods, very clever, Nobel prize winning stuff, but I see in practice that government creates transactions costs, spreads local externalities on to populations that would not have actually had to deal with them otherwise. You want a department of defense, but you actually get a department of offense, you want police forces of peace officers, but you get cops who are above the law, and wrong door raids, and drug war policing, you want reduced transactions costs but you get tariff barriers and regulated trade and embargoes and sanctions, you want a free trade zone for the US states but you get the commerce clause that the gov uses to stick its nose into every place it doesn't belong. You see solving collective action problems and I see eminent domain abuses. I am from the school of what AK calls Masonomists, I say when markets fail, use markets. Market failing is an opportunity for an entrepreneur to provide a solution.

Look, Leviathan does not get you out of the Hobbsien jungle. You're still in the jungle but now your stuck there with a monster. And maybe for awhile the monster helped you and protected you from some other bad things, but the monster soon enough grows too large for its restraints and then it gets hungry and comes looking for you.
You seem to be under the impression that you can actually control the government, that your opinions are heard and counted in some way, that some things get out of hand in government, but sometimes it could be OK, especially if they would just listen to the Commenterlein. But that's not what government looks like it does in practice to me. It seems that trying to talk to government is more like shouting into a hurricane. Maybe that's loony, but that's all I've got.

Dr. T, in some sense, the only scarcity anyone ever faces is money and time, too, I suppose. THe scarcity I am referring to is just the fact that tradeoffs exist. If I spend $40K for a hip, that's $40K I don't have for a new car. That's all we mean, but gov wants to act like you can totally have a hip and a car, no need to choose, no tradeoffs. The rest of your post is entirely correct.

Troy Camplin writes:

Beware of anyone proclaiming it's all a matter of "political will," as that always means, "it's all a matter of suspension of rule of law" and "It's all a matter of seizing more money."

The fact is, every single time government run health care, there is massive amounts of cuts in service. It's not a matter of will, it's a matter of ideals not matching reality. In reality, there is not enough money. Thus, we will have a government deciding who gets treatment and who doesn't, who lives and who dies. Those are horrible decisions to hand over to government bureaucrats.

Vangel writes:

"Whether, sort of in the aggregate, society making those decisions to give my grandmother, or everybody else's aging grandparents or parents, a hip replacement when they're terminally ill is a sustainable model, is a very difficult question."

I disagree. The question is actually very easy to answer.

First, there is no decision made by society, only by people working for the government. Second, we live in a world in which resources are scarce so it is not possible to fund every activity that we may desire. That means that actions should be voluntary and that there is no place for a government bureaucrat to make decisions on behalf of 'society.'

I don't know about the rest of you but I find the American slide towards respectable collectivism disturbing.

Liberty Lover writes:

"...So that's where I think you just get into some very difficult moral issues. But that's also a huge driver of cost, right?" This assumes the public sector continues to control a huge swath of the health care market.

How much will price decrease and quality increase as a result of the private sector taking over from the public sector? If innovation, the profit motive, and all the other benefits of free markets are allowed to work I assume the price will decrease making the hip replacement more affordable. This approach also eliminates the socialist squabbling over finite resources.

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