Arnold Kling  

Real Health Care Reform

One Ply Look-Ahead... Flubs...

David Goldhill makes a lot of the points that I have been making. Two excerpts:

But fundamentally, the "comprehensive" reform being contemplated merely cements in place the current system--insurance-based, employment-centered, administratively complex. It addresses the underlying causes of our health-care crisis only obliquely, if at all; indeed, by extending the current system to more people, it will likely increase the ultimate cost of true reform.


for every two doctors in the U.S., there is now one health-insurance employee--more than 470,000 in total. In 2006, it cost almost $500 per person just to administer health insurance. Much of this enormous cost would simply disappear if we paid routine and predictable health-care expenditures the way we pay for everything else--by ourselves.

I could have chosen much more to excerpt. Read the whole thing.

The question is: why are views such as Goldhill's, or John Mackey's, or mine, so beyond the pale? Possibilities:

1. Health care is something that people deeply feel ought to be paid for by someone else. No one even wants to pay for their own insurance, much less pay providers for treatment. The political process is trying to give people what they want.

2. Progressive ideology is that technocrats know best. Swarms of progressive intellectuals mobilize to kill any idea that conflicts with their ideology.

3. What seems clear and logical to me is in fact wrong. Contrary to my thinking, we really could have an affordable health care system managed in Washington. We could have an affordable system by getting rid of profits or by government rewarding quality or by government funding of prevention or some other progressive magic bullet.

Comments and Sharing

COMMENTS (17 to date)
Damien writes:

It's mostly 1). I think it revolves around the fact that, in Goldhill's system, health care would be rationed according to ability to pay. For some reason, many people believe that health care is a "right" and that there is something intrisincally immoral to asking individuals to choose between healthcare and other ways to spend their money. The argument is that no-one should have to face this trade-off as health is so important that health care is a basic necessity.

This means that market oriented people come accross as callous. "What do you mean people should pay for their health care; are you suggesting that people might die/be disabled/be in poor health because they are too poor to pay for health care?". Emotions also play an important role ("what about children; what if their parents are too stingy to spend money on medical services?").

Prakhar Goel writes:

Option 1 proves too much. If I shouldn't have to pay for healthcare, why should I have to pay for food? What about all the people who go hungry. Yet we do not see people railing for collectivized or government guaranteed food (yet) (thankfully as collectivized farming was an unmitigated disaster in the USSR).

People may think that the reason is option 1 but I think that is the progressive media at work. What I don't think that you have adequately taken into account is that all people are not you. They do not have degrees in economics, they are not even capable of being rational about such abstract matters, and thus they are easily manipulated.

Option 3 is unlikely, at least from my perspective.

Option 2 is the core reason. It is driven by the progressive drive for more control and more power. Sad because socialized health care is just as incompetent as socialized farming. The reason this is not painfully obvious in GB and Canada et al. is that a) the progressive media has done an excellent job of covering up for the failing health care systems in these countries and b) that these systems have decades of infrastructure from their private predecessors. Even now, the existence of the private drug industries in the US is a massive boon for the GB NHS etc.

To see an example of the kind of screw ups that the media has covered up, I would suggest looking at the case of Maidstone Hospital.

Damien writes:


it doesn't have to be either/or, but I'd say that there's already "government guaranteed food". That's what food stamps are for. Farm Bills are also there because of the idea that the food supply is too important to be left to the market.

I'd say the reasons we have food stamps instead of cash payments to the poor is also why people are pushing for universal coverage. Paternalism. The poor are too stupid to know what's good for them and, if they have to pay for minor procedures, they won't and will get sicker.

Note that this plays well with 2) as well. Technocrats know what's good for people and will decide what's free and what's not, what the out-of-pocket cost will be, etc.

Regret writes:

"Much of this enormous cost would simply disappear" isn't very good economics. While I completely agree that having individuals pay themselves would improve the efficiency, it's not because the individuals are doing the same work - that would be a net neutral. It's because we assume individuals would do it differently and would eventually choose more efficient solutions.

Matt C writes:

I think 1) is true now. I don't think it had to be that way. The U.S. didn't used to feel this way. There are poor countries that don't feel this way today.

Now it's a fairly reasonable point of view. If your kid came down with appendicitis, could you pay for an appendectomy out of pocket? Health insurance costs for a family commonly exceed $1000/month (counting employer contribution). It's scary.

I think we could have had a different system where routine health care was much more affordable for ordinary people. But we don't, and there isn't an easy way to get there now.

Of course, there are a lot of interest groups (politicians included) who want to cultivate an entitlement attitude about health care. That doesn't help either.

2) This is true, but looking at ideologues is only part of the story. We've got a lot of smart, connected players who are busy soaking up part of that (let's say) trillion dollars of excess health care spending. The important part of their ideology is that they keep getting paid. And they'll spend a lot to make sure the system continues to do so.

mark writes:

I think it's number 1. Combine Medicare, Medicaid and tax-free employer sponsored health benefits with arbitrariness of pricing by healthcare providers. The population has become conditioned to perceive that someone else is paying for its medical needs and fixing the price for the relevant services.

As well, the incompetence of the Bush era has done its part in discrediting individualistic and market-focused solutions and legitimizing alternative approaches.

Jordan Amdahl writes:

Option 1 proves to be the best explanation when combined with Caplan's irrational rationality. The democratic and political processes do not involve a a real choice in policy or candidates and therefore never reveal preferences between policies or candidates. Instead of choosing preferred policies (or developing real preferences in the first place), people choose policies that signal membership to certain social groups they want to be part of.

michael writes:


An individual choosing to pay cash for an x-ray is not "the same work" as a health insurance administrator (with pay and benefits) in an office deciding yes or no based on an expensive study done by the insurer.

Note that the newly unemployed administrator must now be employed somewhere else doing something more productive.

SydB writes:

Before considering the options posed, let me raise a question: Goldhill mentions cosmetic surgery, dental procedures, and LASIK. He in a sense lumps them all together, but uses an internet search on LASIK to claim 80% reductions--in LASIK and nudge nudge hint hint in cosmetic surgery and dental.

I'm sure we can dig around to find particular procedures--e.g. heart surgery--that in real terms are less expensive since introduced. Perhaps not, but it seems a specious argument to make.

Those making claims such as Goldhill or Kling should give us real data on the cost inflation of dental procedures and cosmetic surgery. Then compare that with medical cost inflation overall.

Also, his examples on technology seem irrelevant. GPS--and many of the technologies we use in the private sector--were in fact subsidized by military R&D. And then those products have very large markets. A large medical tool does not have a large market. I suspect the cost of pacemakers, for example, have decreased significantly.

I'm all for considering catastrophic health insurance combined with a high deductible pay-go. But I'd like those making the argument to look at real data when making the arguments. An internet search on LASIK is not sufficient.

Joel writes:

How about

2A. The conveyors of information to the public (aka Mainstream Media) mobilize to demonize and otherwise de-legitimate any perspectives that disagree with their world view?

SydB writes:

For example, this article from the times indicates that the cost of dental procedures has not decreased even if dental procedures are often not payed for by insurance.

But: The percentage of dental costs paid for by insurance could increase costs (as in other health care costs). Hard to say.

Also: The market is constrained by the dental community (e.g. not allowing technicians to perform procedures). Why would the health care be any different. And if we did lax up, what would be the cost. A bad LASIK provide may go out of business after blinding 100 people, but is that a cost we're willing to pay (though according to the atlantic article 100,000 people die yearly from preventable infections).

Prakhar Goel writes:


Well put.

#1 is the proximate cause but #2 is the real cause.

The people who claim option 1, after seeing the figurative dead body are blaming the bullet and the gun while ignoring the hand that held it.

Dan Weber writes:

I don't think #1 applies. I may be out there, but I think "who pays?" is the last thing to be debated. Third-party payment plans suck for basic care, and it doesn't matter if the payer is an individual or the government. But people who can put up with managed care get good care at lower prices, and it doesn't matter if the government or individuals pay.

Given that, I sort of disagree with #2. I would happily turn over my health care decisions to a board of technocrats, but (1) I need to be able to choose the board, and (2) their decisions need to be transparent, and (3) they need to be judged on their long-term performance. The last two don't apply with traditional insurance companies.

Jim writes:

Why is it that no attention is being given to 2 of the big costs associated with medical care in the US; namely the ridiculous costs extracted by trial lawyers and the amount of money spent by hospitals to give free health care to illegal aliens?

Dave writes:

Thanks Jim
We need tort reform and to kick out all of the illegals and fine and/or jail those who employ them.
Also how about everyone is required to purchase their own insurance? I would have a 1000 deductable and pay for my own basic care.

R. Richard Schweitzer writes:

All these arguments seem to miss the basic fallacy:

The attempts to use a the mechanism of insurance, which is basically a system of sharing (spreading) risks to achieve a political or social goal of sharing (spreading) costs.

All costs must be covered.[Econ. 102]

Most people have forgotten the Congressional intrusion into controlling the the benefits (A-H) of "MedSupp," which was forced onto the states and their regulation of insurers.

Methinks writes:

People have no idea what healthcare costs and they have been trained to believe that they are not only entitled to an unlimited amount of healthcare but that they should not bear the cost - whatever it is.

The trouble is, someone must pay for one's healthcare in order for one to receive it. What single-payer systems have discovered is that one is limited in his ability to force a third party to pony up for the care he desires.

In the end, we all end up paying for our own health care - either with money or with pain, suffering and waiting. The only difference between socialized medicine and a free market is that with socialized care we end up paying more.

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