Bryan Caplan  

What Would Happen If the Median Economist Controlled Health Care Policy?

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Arnold writes:
On health care, the irrational public--the ones that want government to keep its hands off their Medicare--is helping to fight the Progressives who want to impose a health plan that is based on what I see as a failed model--the Massachusetts plan. In Bryan's ideal world, wouldn't our health care system be run by the wise technocrats of the Obama Administration?
In my ideal world, we'd recognize that economists' textbook arguments against free-market health care are largely bogus (a vestigial reflection of anti-market bias) and respond by abolishing Medicare and Medicaid, medical licensing, and all the other health care regulations on the books.  But Arnold still suggests an interesting hypothetical: What would happen if the typical economist controlled health care policy?

Contrary to Arnold, I think it would be a vast improvement over the status quo.  I've talked to plenty of left-wing economists about this topic.  On balance, their views are much more reasonable than the median non-economist's.  Yes, most economists probably favor universal coverage, and I don't.  But few economists want a government monopsony.  And they're on board for three major reforms that I support:

1. Denying care to people on Medicare and Medicaid when their treatment is expensive and the actuarially predicted benefit is small.

2. Substantially raising deductibles for people on Medicare and (maybe) Medicaid.

3. (Moderately) deregulating medical licensing to allow a greater role for doctor's assistants, nurse practitioners, etc.

In fact, since the typical economist's argument against means-testing Medicare is that it would undermine its popular support, I think that in this hypothetical scenario that I could convince the typical economist to accept a fourth wise reform:

4. Means-testing Medicare.

So answer me this, Arnold: Isn't universal coverage bundled together with these four reforms an improvement over the status quo?  And isn't the status quo (or worse) exactly what we're likely to see as long as the median voter has his way?


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COMMENTS (11 to date)
Adam writes:

Brian,

Is there empirical evidence that the median economist (ME) supports the cited three reforms? Is the ME onboard for similar reforms across the vast Federal budget? The policy-induced financial crisis during the last year has made it abundantly clear that MEs favor Statist solutions, not libertarian ones.

Best,

Adam

Shayne Cook writes:

I'd pose what I think is a far more compelling question ...

What Would Happen if Wal-Mart Management Controlled Health Care Policy?

They (Wal-Mart management) seem to have a knack (penchant) for identifying and eliminating not only the inefficiencies in their own operations but in the operations of their entire supply chain. They have a proven capability to provide the lowest cost goods and services, while simultaneously expanding the availability and accessibility of those goods and services. And they make a profit doing it.

david writes:

@Shayne Cook

They have this proven capability because of competition and a profit motive and liberal government subsidies in the form of highways and public infrastructure; remove all that and Wal-Mart management will be as rent-seeking and inefficient as any public official, if not more so.

Shayne Cook writes:

@david

I agree, and concede to your point.

It appears to me that the health care industry has available to it all of those self-same forms of taxpayer (Government) subsidized highways and infrastructure, and yet remains highly inefficient.

Shayne Cook writes:

@david (follow-up)

I may have been wrong, or at least premature, in "conceding to your point" - I assumed I knew what point you were trying to make.

After thinking about your comment a bit more, I'm convinced I don't know what point you were trying to make. My bad.

david writes:

@Shayne Cook

Wal-Mart is efficient (in the operational sense, not economic) because of a profit motive.

Wal-Mart makes a profit because key parts of its business model are subsidised by taxpayers. No matter how dramatic its efficiency, there would be no Wal-Marts without a toll-free or heavily discounted highway system (for instance).

Wal-Mart is also rent-seeking; its use of monopsony power is well-documented. Its use of monopoly power is more controversial. In any case, both contribute to its profit.

Therefore... you asked what would happen if healthcare were run by Wal-Mart: imagine Wal-Mart as described above, but without the profit motive. Subsidised by taxpayers, rent-seeking, but inefficient.

Daniel Kuehn writes:

And it should be noted, Bryan, that you and the median economist are even closer than that on your actual economic understanding of the problem.

The "universal coverage" issue, when advocated be economists, is rarely advocated on economic grounds - it's advocated on ethical grounds with a clear-headed understanding of the economic costs of universal coverage.

So they diverge from you philosophically or ethically (which, let's be clear, are perfectly valid reasons for making policy) - but their divergence from you on their understanding of the economic impact of universal coverage is probably minimal.

And they say we can't agree on anything :)

Kartik writes:

Health Care reform is very simple. Of course, these simple changes will not be enacted.

1) Cap malpractice lawsuits at $250,000

2) Cut off illegals unless they pay out of pocket (which itself will make a lot of them leave).

3) End subsidies on corn (which lead to some unhealthy food becoming very cheap). Everything from coca-cola to pork and beef are dependent on corn prices.

4) The American public has to take it upon themselves to improve their habits. Americans have the worst diet in the world, and this is a matter of personal responsibility, rather than blaming the government. The government can end subsidies on corn, ban growth hormones in beef, etc. But the public cannot complain about costs, when their own habits increase their incidence of cancer, heart disease, and diabetes.

Trevor H writes:

Bryan - I would edit your point 1 to read

1. Deny "coverage of" care to people ...

We wouldn't want to give Palin more gist for the mill. I agree with the rest.

I think one more point in the reduction of regulation that could be valuable is the elimination of prescription requirements for many drugs. If people are uncomfortable with complete freedom, why not create a new class of drugs call them "pharmacist dispensable" that would at least free people from the $100+ primary care visit to get a z pack or whatever. Pharmacists don't go to college for 8+ years to be simple order takers.

Kartik writes:

Whenever there is too much regulation, cartel power, and political interference, things can seem imbalanced for a while, but market forces always correct in the end.

Medical tourism is set to drain $162B out of the US healthcare system, and deservedly so :

http://www.singularity2050.com/2008/08/more-on-the-economics-of-medical-tourism.html

Shayne Cook writes:

David:

When I "imagine" a "Wal-Mart", with or without the profit motive, subsidized by taxpayers, rent-seeking, but inefficient, it isn't Wal-Mart. It's similar to when I "imagine" a world without corn flakes - there simply aren't any corn flakes in that imaginary world.

I must be thick. I thought the object of this U.S. health care policy debate was to divine some sort of operational efficiency for the system. Besides which, I'm still missing your point.

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