David R. Henderson  

I (More or Less) Agree With Krugman

Insurance as a Prisoners' Dile... Off on Vacation...

Paul Krugman had a blog post last week that I agree with most of. (Pardon the preposition at the end of the sentence.) He criticized a bill, the Preserving Access to Targeted, Individualized, and Effective New Treatments and Services (PATIENTS) Act of 2009, put forward by Senators Jon Kyl (R-AZ), Mitch McConnell (R-KY), and Pat Roberts (R-KS). According to Krugman, the bill would prohibit Medicare or Medicaid from using "comparative effectiveness research" to deny coverage. I'll assume that Krugman has stated correctly the main provisions of the bill.

If so, his criticism is mainly correct. Below I quote his four comments and comment on each in turn.

1. Krugman writes, "Politicians who rail against wasteful government spending are taking action to prevent the government from reining in ... wasteful spending."
I agree. The idea with comparative effectiveness research is to bring at least some crude cost-benefit analysis to government spending on health care. Spending on procedures that do not pass the bar would not be done.

2. Krugman writes: Politicians who warn that the burden of entitlements is killing the federal budget are stepping in to block ... the single most painless route to reducing the growth of entitlements.
I don't know that it's the single most painless route, but it's certainly a route.

3. Krugman writes: They're doing it in the name of avoiding "rationing of health care" ... but they're specifically addressing taxpayer-funded care. If you want to go out and buy a medically useless treatment, Medicare won't stop you.
Overstated but true. Medicare won't stop you even if you find it medically useful. Implicit in his claim is the idea that Medicare would say no only to treatment that is useless. In fact, it would probably say no to useful treatments whose benefit it computes to be below the cost. It could also say no to treatments for which someone's benefit exceeds the cost. Krugman seems to have forgotten what I call the 7th pillar of economic wisdom: The value of a good or service is subjective. But that's alright because in all the above cases, a person who valued a medical treatment more than the value the government placed on it would be free to buy it. This seems like a small move away from welfare-state socialism and I'm glad to see Krugman embrace it.

4. Krugman writes: These same politicians are, of course, opposed to efforts to expand coverage. In other words, it's evil for government to "ration care" by only paying for things that work; it is, however, perfectly OK, indeed virtuous, to ration care by refusing to pay for any care at all.
This is too involved to comment on tersely. For one thing, I doubt that the authors of the bill used the word "evil." Putting that aside, Krugman does seem to be onto a basic contradiction in the thinking of Messrs. Kyl, McConnell, and Roberts.

Krugman's comments above clearly suggest that he is in favor of letting people, even people on Medicare, pay for medical care if they value it enough. I guess we can look forward, then, to a New York Times column, or at least a blog post, by Krugman in which he advocates:
1. Letting people out of Medicare who want out.
2. Letting people pay doctors and hospitals more than the Medicare-set rates. (It's now illegal for doctors and hospitals to bill Medicare beneficiaries even a penny more than the rates set by Medicare.)

H/T to Scott Sumner.

Comments and Sharing

COMMENTS (11 to date)
Joe writes:

Doctors and Hospitals do not need to accept medicaid, and then they are free to set charges at whatever they see fit. See Memorial Sloan Kettering for an example. So, if you are willing to pay enough you will always get the best care..I always thought this was awful, but then realized that they are rich and will always have a $$$ Advantage...

Kevin writes:

What an awesome name. How much do bill namers get paid?

John writes:

The problem with Comparative Effectiveness Research, and various and sundry preceding activities, is in the dismal failure of quantitative measurement of essentially qualitative responses.

Despite our best efforts, the Human Organism just fails miserably at fitting into neat categories and boxes when it comes to the diagnosis and treatment of human disease. When I was a medical student in the 1970's, we faced significant criticism for the failure of our medical education system to give us adequate insight into the personal needs and individuality of our patients. We were told endlessly, and correctly, that medical care was not a factory activity. We needed to be in tune to the needs of our patients, their family and marital dynamics, their social milieu, and above all,to stop treating patients as "The Gallbladder in Hospital Room 301", or the "Diabetic, hypertensive guy" in clinic room 5.

But now, CER seeks to "lump" them all into neat categories once again, and to evaluate treatment by assumed population similarities. Despite the failures of prior attempts in the past. Such hubris will inevitably lead to yet another "Patient Revolution" seeking a re-humanization of clinical care once again - repeating the 70's. Thanks guys - the MBAization of health care is about as appetizing as the recent "quant"ifaction of the finance world, and likely as foolhardy.
Good luck with that.

Peter writes:

"In fact, it would probably say no to useful treatments whose benefit it computes to be below the cost."

I think this is called "comparative-cost effectiveness." What is being debated is "comparative effectiveness." Comparative effectiveness has nothing to do with cost; it tests which treatments work best for a given condition regardless of cost.

hoads writes:

I agree with John--this is the "MBAization" of healthcare and the end result will be doctors dictated by government bureaucrats.

Of course we should rely upon evidence based medicine but, creating a huge government funded database for every conceivable medical treatment, diagnosis, pharmaceutical, procedure in an effort to identify cost trends that then becomes government mandated medical standards is too much of a slippery slope. We should be very wary about our government having wholesale access to our medical records and that is what this legislation requires--doctors must adopt electronic records which will give the "public plan" unfettered access to medical data of individuals.

A better approach IMO is to identify cost concentration areas, gather data on that specific area and then proceed to compare effectiveness.

Bill Nichols writes:

I would have expected a Nobel laureate like Krugman to appreciate that comparative effectiveness studies can be useful to inform the doctor and patient, but effectiveness has both variation and subjectivity. Using a point estimate to establish a cut point is an innumerate use of statistics.

David R. Henderson writes:

Nothing I said suggests that I think government should have data on our medical records. I was talking about Medicare and Medicaid. I don't know what else is in the bill. That's why I said that I was taking Krugman's word that he had reported the bill accurately.
Many of the criticisms above may be valid, but they are not criticisms of my point. If the government rejects some treatment, that saves taxpayers money, and then the person who still wants the treatment can buy her own.

DanT writes:

This bill is political maneuvering which only works for a minority party which is completely out of power.

Medicare/Medicaid can only be financially stable by rationing treatment. Democratic politicians have been promising to make M/M financially stable but saying they won't ration treatment, when they know they will. Republican politicians know it too.

The Democratic majority MUST defeat this bill to keep M/M financially stable and to lay the groundwork for their plans for future "health care" expansion. When they do, the Republican politicians can then show that Democratic politicians future "health care" expansion will require rationing and the Democratic politicians knew that all along.

In essence, these Republican politicians are introducing a bill they don't want to pass so that the Democratic politicians will be forced to defeat it and reveal the hypocracy of their future "health care" plans.

We don't see this tactic in power-sharing governments because then bipartisan action is needed to defeat it and it reveals the hypocracy of both political parties.

Dan Weber writes:

It sounds great to me that Medicare and Medicaid will only pay for procedures that have been proven to be effective.

It means that the government is only paying for things that work, and that we will still need a private sector that does things not "approved."

One big problem is Congress: they meddle like hell in MedPAC right now. Such a board needs to be independent of Congress, like the Fed.

Bill Nichols writes:

David R. Henderson writes:

Many of the criticisms above may be valid, but they are not criticisms of my point. If the government rejects some treatment, that saves taxpayers money, and then the person who still wants the treatment can buy her own.

You have missed an alternative. Government rejection of payment for a treatment does not necessarily reduce cost. Rather than pay out of pocket, the consumer may opt for a government approved treatment, which may be more expensive, and may or may not be more effective under the circumstances. The point being, the algorithm need not minimize cost to the taxpayer.

A more fundamental false alternative fallacy results from Krugman beginning the analysis with the status quo and making small adjustments from that starting point. Moreover, if one begins with the assumption that absent government control, profit seeking doctors will prescribe ineffective treatments, any crude government approach seems unlikely to be effective against a more nimble adversary.

Steve Roth writes:

>(Pardon the preposition at the end of the sentence.)

This is profoundly telling. It reveals a slavish, unconsidered adherence to a ridiculous and unfounded grammatical principle which has currency only among small-minded pedants. (cf. for another wonderful example, Pinker's NYT Op-Ed on Roberts' inaugural mis-speak.)

Winston Churchill (whose virility is so enthusiastically touted by the right, ignoring the fact that he was an elitist intellectual of the very type they so love to vilify) put paid to this foolishness in a marginal comment in one of his manuscripts, replying to an editor who had corrected one of his sentences because it ended in a preposition:

"This is something up with which I will not put!"

Is it possible that this current instance reveals a mind prone to slavish, unthinking adherence to ridiculous and unsupportable truisms? The kind of "loyalty" to arbitrary established rules and nostrums that delivered us a president who actually believed that everything he needed to know he learned in kindergarten?

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