Arnold Kling  

Health Care: The Facts that Matter

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In The Freeman, I write,


Overall, I would argue that on the demand side, the United States healthcare system is essentially socialized. The fact is that close to 90 percent of health-care spending is paid for by third parties, which means that individuals in this country generally experience a socialized process for obtaining medical services.

I am inclined to lump private health insurance in with government programs, and call the whole deal socialism--even before Obamacare tightens the noose on insurance companies any further. If we had truly unregulated, unsubsidized private health insurance, then I would look at it differently. But if we got rid of the subsidies and regulations, I am pretty sure that private health insurance would scarcely resemble what we see today.

On the other hand, Romesh Ponnuru argues that in the mainstream media, the facts do not matter. I think he makes a solid case that the media tend to report left-leaning analysis as fact and portry right-leaning analysis as biased or misleading.


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COMMENTS (5 to date)
Jesse writes:

I agree, but given you post here: http://econlog.econlib.org/archives/2009/10/political_dispo.html
on the difficulty of "government innovation," don't we have a really difficult problem of 'how do we get there from here?'

I agree with that post also - government trail and error usually results in error with no correction. So how do we get to a more market-based health care solution when, as you've pointed out, it is the truly radical position and governments are not good at implementing radical approaches. This has the unintended consequence of backing up the meme of "so many foreign countries have socialized medicine - tried and true - so why don't we try it?" I don't buy the argument but it does get some backing by the combination of these two factors.

The only thing I see is to wait a bit more and hope that a few states try the Singapore model (Caplan has written on this) or something and we get the 50 laboratories trying things before we attempt anything nationally.

q writes:

yes, i also wish that we could have an era of honest experimentation before locking a system in place. but if we could have that era of honest experimentation, i wouldn't be so worried about the system, because it would work itself out.

but if the system isn't designed to correct its mistakes, it won't do so, and so, yes, there is a reason for pessimism.

Publius writes:

Two things: I think the term socialism, and its derivatives, has ceased to be of value in policy debate. While its meaning is technical and precise (and, consequently, of value) to some, its not useful for popular debate -- which is where we find ourselves now. I believe we are far better off focusing on the specific mechanisms we find objectionable, such as the third-party payment you mention. Many liberals who are spooked by charges of socialism, are more than willing to listen to reasoned criticisms of such mechanisms.

The challenge will be to sell them an alternative mechanism to ensure access to the poor. That is, for all its faults, third-party payment appears to increase the certainty of health care delivery for many poor.

...which brings me to Point 2:

Part of the reason that "media tend to report left-leaning analysis as fact and portry right-leaning analysis as biased or misleading," lies in the fact that the right-leaning, or market-oriented position is much more radical, in the sense that there is little actual evidence (though much theory) to support its superiority.

Fortunately, we do have evidence for alternative mechanisms of ensuring access, such as Singapore's model, which Caplan has documented quite well.

But with regards to the desired market-based health care end state, all you can be is "pretty sure that private health insurance would scarcely resemble what we see today. "

Although I agree with you, and I think there is good reason to believe it would be superior, this uncertainty is a huge weakness. We are attacking the status quo with theory, and it should come as no surprise that others are skeptical of the theoretical gains that might accrue from wider access to drugs (with less or no FDA involvement), less or no licensing requirements, and less burdensome regulation of health insurers.

Given that tall task, I again suggest that we focus on identifying the specific mechanisms we find objectionable, and articulate alternatives whose superior is demonstrated not only by theory, but by experience.

There will not be the radical change many of us see as most desirable, but we can contribute more to the debate by instituting positive change at the margin and creating momentum for similar reforms in the future.

R. Richard Schweitzer writes:

One may, of course, regard even voluntary, private and "civic" forms of collectivist activities as "socialized." Which takes us again to Hayek's question.

But, the differences and distinctions come as "voluntary" participations are co-opted through the political processes into increasing degrees of coerced involvements.

The ecomonic advantages of lower marketing and admin costs in group cases bode well for insurance through employers. AARP was built from such marketing functions; as was AFLAC in Japan.

Then we have political actions at the state levels to force cost-sharing through the private contracts which mandated benefits whether or not members wanted them, rather than benefits being developed in response to economic (as opposed to "social" - read political) demands.

A very nice little project for some seminar would be the review of the histories of the fraternal insurers, then the Blue Cross - Blue Shield era, their rise, demise and resurrection.

So, yes, common needs lead to common or social actions; it has been and is the political interventions that brought about the present constructs.

The "socialized" aspects arise from the artificially (politically) induced cost-sharing through the vehicles of insurance which are functions for risk (not cost) spreading.

At least that's how it seems from my 60 years of experience with the field.

Ned Baker writes:

Arnold,

According to you, Romesh Ponnuru, Fox News, and many on the right, the so-called "mainstream media" is rotten with liberal bias. And according to many on the left (Media Matters, FAIR, etc), the press is rotten with conservative bias. But the media's shortcomings don't cut neatly across party lines. These claims of media bias from both sides have become boring and embarrassing.

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