Bryan Caplan  

My Opening Statement

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Here's my opening statement for today's Separation of Health and State Debate.  Hope to see you there!


Why We Should Separate Health and State

Government already plays such a large role in health care that it may be hard to understand what "separation of health and state" means.  Let me be clear: In my ideal world, we wouldn't just abolish Obamacare.  We'd abolish Medicare, Medicaid, regulation of health insurance, medical licensing, and the Food and Drug Administration... for starters.  Unlike many opponents of the latest legislation, I'm not saying, "Keep your government hands off my Medicare." 

Needless to say, my position is unpopular.  You might even think I'm a villain for holding it.  So just to play into your fears, I'll begin by quoting Dr. Horrible's Sing-Along Blog.  In this scene, Penny is telling Dr. Horrible about her last date - never realizing that Dr. Horrible is secretly in love with her.  

Penny: But, he turned out to be totally sweet. Sometimes people are layered like that. There's something totally different underneath than what's on the surface.
Dr. Horrible: And sometimes there's a third, even deeper level, and that one is the same as the top surface one.  Like with pie.

 
This scene perfectly captures what I'm going to tell you about health care.  On the surface, a free market in health care seems like the best approach.  When you look a little deeper, the free-market approach seems naive and dangerous.  When you look deeper still, however, the free market approach turns out to be the best after all.

Why does a free market in health care look good on the surface?  The same reason a free market in almost anything looks good on the surface.  On the free market, firms strive to satisfy the customer, and constantly look for new and improved ways of doing business.  Why?  The profit motive: Firms that make customers happy prosper, and firms that don't go out of business. 

In the health sector, however, most people - including economists! - think that free-market logic fails.  The main complaints:

  • High cost.  Health care is ridiculously expensive.
  • Externalities.  My health depends on your health, and vice versa.
  • Moral hazard.  Health insurance encourages unhealthy lifestyles and risky behavior.
  • Adverse selection.  People with bad health are more likely to buy insurance, which raises rates, which makes healthy people even less likely to buy insurance.
  • Consumer ignorance and irrationality.  People don't know much about health, and it's costly to learn.  Even worse: They make systematic mistakes, and blindly trust medical authorities. 

On closer look, however, it's the complaints that fail, not the market.  Some are false or greatly exaggerated; others blame the market for problems caused by regulation; some are true, but preferable to the alternative.  The problems with the problems:

  • High cost.  A mountain of regulation makes health care and health insurance a lot more expensive than they'd be on the free market.  Examples: Medical licensing greatly increases the cost of doctors, many of whom are overqualified for the work they actually do.  Regulation makes it hard to sell catastrophic and other low-cost insurance policies.
  • Externalities.  This is largely bait-and-switch.  Only a tiny fraction of modern health care treats contagious disease.
  • Moral hazard.  Insurance encourages unhealthy lifestyles and risky behavior if everyone pays the same rates.  But in a free market, insurers would charge riskier customers higher rates.  So why don't they?  Because regulators often tie their hands in the interest of "fairness." 
  • Adverse selection.  The least healthy people buy the most insurance if everyone pays equal rates.  But again, the free-market solution is to charge riskier customers higher rates.  Governments habitually create adverse selection problems by trying to equalize rates, banning pre-existing conditions clauses, and so on.
  • Consumer ignorance and irrationality.  If consumer ignorance were the problem, government could easily solve it with a good website.  What about the deeper problems of systematic error and blind trust?  They're both very real, but argue against government involvement.  If you take any decent health econ class, you'll hear about a pile of research showing that we greatly overestimate the health benefits of medicine - and put too much trust in medical authorities.  The government's response:  Encourage us to use more medicine, and remove financial incentives to second-guess the experts.  Real smart. 

If you're paying attention, you might notice that I've suggested some economically sensible role for government.  What's wrong with government programs to fight contagious disease, fund a health information website, or study the effectiveness of different treatments?  My answer: When you give government an inch, it takes a mile.  Government involvement in health care started with small measures like vaccinations.  Now it's over 20% of the budget, and rising fast.  Government involvement in health care is too dangerous to allow in any form.  We need to just pull the plug.

But wouldn't that be unjust to the poor?  Even if free-market health care is a lot cheaper, there will still be some Americans who can't afford it.  Many people think that a just society should proudly protect its weakest members - just like a family would. 

I could object that the "society as a family" analogy is oppressive, even totalitarian.  But I'm happy to accept it for the sake of argument.  Notice: Within the family, you are only legally obligated to care for your minor children and your spouse.  You are not legally obligated to take care of your siblings, your nephews and nieces, or even the parents who gave you life!  Almost everyone agrees with this approach.  So: If you don't think it's just to legally compel people to support the parents who gave them life, why in the world would it be just to legally compel people to support complete strangers?

It gets worse: Exaggerated notions of how much we owe our countrymen are a major rationalization for treating foreigners unjustly.  Billions of people around the world earn a dollar or two a day.  Haitians, for example, would be delighted to take a low-skilled job in the United States - even without health care.  But a leading argument against letting immigrants come is that they're already "bankrupting our health care system."  We're so obsessed with helping relatively poor Americans that we're willing to deny absolutely poor foreigners the basic human right to sell their labor to willing U.S. buyers.  That's evil enough to appall Dr. Horrible himself.


Comments and Sharing





COMMENTS (18 to date)
John Thacker writes:

Only a tiny fraction of modern health care treats contagious disease.

Only a tiny fraction of modern health care expense treats contagious disease. However, the relatively simple and cheap advances in prevention (through hygiene) and treatment of contagious diseases is responsible for most of the increase in life expectancy from medicine.

Not that that really changes your argument.

Kurbla writes:

Bryan:

    "My answer: When you give government an inch, it takes a mile."

Slippery slope if official logical error.
--
Bryan:

    "If you don't think it's just to legally compel people to support the parents who gave them life, why in the world would it be just to legally compel people to support complete strangers?"

Because your proposal doesn't work that well. For example, it doesn't help to those who have no close relatives, or whose close relatives are poor. Etc.
---
Bryan:

    "But a leading argument against letting immigrants come is that they're already "bankrupting our health care system."

It is wrong argument. Good utilitarian argument is - if you allow young, ambitious, educated man, say, medical doctor, to immigrate from Zimbabwe to USA, as much as you helped him, you made twice as much harm to those old, uneducated people, possibly his patients who stayed behind and who will die due to lack of medical (or some other kind of) service.

Alternatively, you can advocate that only sick and old people from poor countries should be allowed to immigrate. This is the best what you can do for poor.

Doc Merlin writes:

Bryan, one point you may want to make later, is that socialized medicine is itself externalizing an "internality" (is that even a word), by its very nature.

mulp writes:

Ok, you have made the theoretical and ideological arguments.

But who wants to live in Haiti or Somalia or any of the other hundred of nations without government regulation, mandates, subsidies, et al for health care?

In the "free market of ideas", we have over two hundred nations, with most having created governments in the past two centuries after all the foundations of libertarian ideas were well known. Many of these nations were heavily influenced by the major powers and founts of those ideals.

In fact Haiti won its independence based on the same ideas that motivated so many in the British American colonies, and of the French Revolution, two centuries ago showing the power of ideas so long ago. That the US sought to isolate Haiti because it carried the principle of "all men are created equal" too far in holding blacks were equal to whites, does not refute the fact that the principles you hang your hat on are centuries old and gave rise to people rising up to obtain their liberty.

So, in more than two hundred nations, and more than two centuries, why has not one nation arrived at what you consider the superior solution and then risen to great economic power.

From the beginning, the US strayed far from libertarian ideas into the pragmatics of economic development, general welfare, with principles and ideas all too often being ignored. When presidents wanted property, for economic growth, population expansion, or merely to obtain choice personal property, property rights were limited only to themselves and denied to "them".

My point at that is you can not appeal to antiquity to call for a return to some mythical past because the US is truer to the the ideal today that two centuries ago.

I hear many claims that the US health care system is the best in the world when some millions must wait until they are sufficiently bankrupt to see a doctor or get needed major medical care for themselves, or for their young child. The US health care system is like the Detroit automakers after they rejected Deming's advice while Japan gave Deming's words the status of god's word and delivered higher quality for much lower cost.

Dozens of nations are 50-100% more efficient on health care than the US, and everyone of them violates every single principle you claim is the key to a superior health care system.

Taiwan, a nation with strong free market principles, objectively studied health care systems around the world, and chose a high tech single payer system, rejecting every one of your principles. Essentially starting from the health care system you claim is so ideal, they moved completely to the kind of system you claim is the worst.

Perhaps the vast majority of the world lives in reality where pragmatic solutions that work are needed, not in some academic or think tank ivory tower where working on paper is sufficient.

Jeff Lonsdale writes:

While there may be structural arguments for keeping government out of health care entirely, the externality arguments with regards to vaccines, antibiotics and contagions seem pretty economically sensible. Your debate might be better if you eventually concede these issues for a government that is currently involved in health care, labeling the people who wantonly create bacteria resistance to the newest antibiotics which they then expose to the general population and the very sick people who risk exposing others to their diseases as involved in something more akin to exposing others to physical harm rather than try to address these issues as tied to the policy of government health care delivery.

Your use of the Dr Horrible quote was amazing.

Les writes:

Bryan wrote: "On closer look, however, it's the complaints that fail, not the market. Some are false or greatly exaggerated; others blame the market for problems caused by regulation; some are true, but preferable to the alternative."

How do we know that is true?

Because the complaints in the comments illustrate it to perfection.

Tom writes:

Please explain to me how you can have a medical system which still uses the principle of the Hippocratic Oath -- one which applies to people who can't pay for the care they need -- but which doesn't logically lead to pooled risk and burden-sharing? Or do you support a system that leaves accident victims -- or children of the indigent -- to die if they can't prove their ability to pay? Or have you figured out an effective, practical way to contain the extension of this principle?

To paraphrase the old saying: government management of something which requires the participation of all members of society is the worst possible solution -- except for all the others.

Tracy W writes:

If consumer ignorance were the problem, government could easily solve it with a good website.

This seems doubtful. How do you get consumers to read the website? Or be convinced by it?

I also think you misrepresent the adverse selection problem - how does the health insurance company work out how risky someone really is? There are proxies you can use, but the proxies aren't perfect measures of risk. So the adverse selection problem still applies.

High cost - Atul Gawande, in The Checklist Manifesto argues that a lot of the problem with modern medicine is that the advance of pencillion mislead us about health treatment. Many health problems turned out to be treatable, but not with a quick drug, but instead with complex treatments that require many things to go right to work. This implies high cost of medical treatment (and a fair few other things), not just because of regulation but because of the fundamental nature of the problems.


Marcus writes:

Tom, please explain how a free-market for health care would cause doctors to violate their hippocratic oaths. I'm reading it right now and the only statement of relevance I see in regard to your post is this one:

"I will remember that I do not treat a fever chart, a cancerous growth, but a sick human being, whose illness may affect the person's family and economic stability. My responsibility includes these related problems, if I am to care adequately for the sick."

Which, as far as I can tell, is a plea to be cost conscious. It is most certainly not a plea for socialized medicine.

As for your question, "Or do you support a system that leaves accident victims -- or children of the indigent -- to die if they can't prove their ability to pay?"

A red-herring. In a world of limited resources, every system is going to leave someone, somewhere untreated.

The real question is, which system empowers people the most to BOTH create and consume the health care resources they value weighed against the opportunity costs of creating and consuming those same health care resources.

The answer is not socialized medicine which only empowers the political class.

s writes:

I don't really see a free-market system as being bad for the poor. There would be enormous reductions in cost and increases in competitiveness, that makes health care more affordable to poor people. There will be an incentive for doctors to find a cheaper ways to treat the poorest, and they will.

There would also be increased incentive for people to stay healthy. Insurance would be very cheap and affordable. And, there will always be plenty of doctors willing to work pro-bono and there will always be plenty of people willing to help out those in need.

ed writes:

Here's another possible market failure: People seem to have preferences over social as well as private outcomes, but at the same time most of us are happy to free ride off the charity of others.

wintercow20 writes:

Bryan,

Two points:

(1) I think Balan's defense on externality grounds goes deeper than contageous disease - so I would delve more deeply into it.

(2) Can we really ignore public choice arguments when it comes to health care? You barely make them in your comments above.

Have fun!

Dave writes:

I'm definitely sympathetic to people with pre-existing conditions, but I found the argument about helping society vs. helping your family to be especially compelling.

After the debate tonight, could you compile all the different arguments into one post/webpage? It would be great to have all the different arguments in one place to show to other people.

Tom West writes:

So: If you don't think it's just to legally compel people to support the parents who gave them life, why in the world would it be just to legally compel people to support complete strangers?

Simple. Seeing other people suffer makes most humans unhappy, and the closer the proximity, the more unhappy it makes them.

Forcing the country as a whole to lessen that suffering makes me happier while making the cost to do so cheaper for me. If enough human beings share this belief, then doing so is welfare increasing.

Hence I strongly suspect that for most human beings, voting for taxes to relieve suffering is welfare increasing (to a point, obviously). To forestall the obvious comeback, this assumes that taxes are not so injurious that it is immoral to inflict them on another.

Otherwise the only way to avoid the direction we're going seems to be to have a dictatorship that imposes prevents humans from passing policies that increase their happiness.

nazgulnarsil writes:

WRT adverse selection, people are willing to derive some negative utility by paying for people less healthy than them if it allows them to derive the positive utility of feeling that they live in a fair society.

Sarge writes:

Kurbla,

When you said, in response to Bryan's comment about families, that "it doesn't help to those who have no close relatives, or whose close relatives are poor," I'm not sure what you were trying to get across. Bryan's point was not that we don't need government to provide health care because people have families who can take care of them and have an obligation to do so. His point was rather the opposite; we virtually all recognize that there is no basis to force someone to support family memebers (aside from children or ones spouse), so how can there be a basis to require us to support strangers? So your statement that some people have no family capable of supporting them is factual, but completely beside the point.

Also, I think that the observation that the government will take a mile if given an inch is pretty sound. I hold up as Exhibit A: The USA PATRIOT Act.

Your argument about restricting immigration was a new one. I've never heard anyone argue that a doctor in Zimbabwe should be refused freedom of movement because it's not in the best interest of the poor. Unique, but unconvincing.

Tom West,

Your statement that "Seeing other people suffer makes most humans unhappy, and the closer the proximity, the more unhappy it makes them" is also factually correct. And I would never, ever dream of stopping someone from doing whatever they wish to help those people. I try to do some good myself, within the limits of my fairly low income. (Donating blood is a favorite; it's cheap for me to do and I'm pretty sure I read somewhere that blood is somehow important.)

But going from that premise to saying "Forcing the country as a whole to lessen that suffering makes me happier while making the cost to do so cheaper for me." I'm perfectly willing to take your word that doing so would make you happier. Happiness is good, but forcing others to support your happiness is less good. Bad, even. And I'm highly skeptical of this conclusion on factual grounds as well. If it would make people happier to provide more support to the poor and downtrodden, I see no reason why they wouldn't be doing more of it. I suppose you could say they would but cannot afford to do so, but that argument falls flat. (Preparing to yank numbers out of the air for illustration; so don't quote me on them.) Suppose, for example, that if we increased everyones taxes by $500 a year, we could relieve some suffering. Before that tax was imposed, everyone had the option to use that $500 to support the poor, if they so desired. But, given the choice, most people end up buying Blu Ray players, or perhaps throw a good keg party. The fact that most people, if given the free choice, end up not using the money for that purpose makes me strongly suspect that doing so does not increase their personal happiness relative to other options available. It very well might make them happier to see more money go to the poor, as long as it's other peoples money and not theirs.

To be sure, there is no shortage of people who say they want to do more for the poor. But there is nothing preventing them from doing so already. Every time you buy a new Blu Ray player, or throw a keg party, or take your family on that Disney vacation, you are using money you could have donated to Medical Charity X, and the time you spend watching the Super Bowl could have been put to use working with Habitat for Humanity. I'm more inclined to go with revealed preference than professed preference. I don't know how familiar you are with Bryan's academic work, but his model of rational irrationality gives provides an excellent explanation for why there is often such a huge gap between revealed preference and professed preference. It also shows why, so often in the democratic process, rather than having voters "passing policies that increase their happiness," we often get policies that decrease everyones happiness as the winning platform by popular demand. (I swear, Dr. Caplan, I'm not trying to suck up here.)

Mulp,

"But who wants to live in Haiti or Somalia or any of the other hundred of nations without government regulation, mandates, subsidies, et al for health care?" Okay, this one is just silly. Haiti doesn't have lousy health care due to lack of government involvement. They have lousy health care because they are dirt poor. Recently a friend of mine, someone who's intelligence I highly respect, made a similarly silly comment. She noted after the earthquate in Hatai that part of the reason it was so devastating was because of insufficient building codes and regulations. Um, no, it was so devastating because they are impoverished, and constructing buildings according to code in, say, the United States is wicked expensive and far beyond what they could create at their current level (or absense) of prosperity. Of couse, one of the reasons they are so poor is because they have such an overbearing and repressive and downright ugly government.

Alrighty, I've got to stop ignoring my job now. After all, your tax dollars are at work here.

G.R. Mead writes:

Penny is dead.

We are all Dr. Horrible now ...

"Listen close to everybody's heart,
And hear that breaking sound;
Hopes and dreams are shattering apart
And crashing to the ground...

I cannot believe my eyes
how the world's filled with filth and lies
But its plain to see
Evil inside of me
is on the rise ..."

Sarge writes:

Tom West,

One more ever so minor note here. Bryan's questions was "why in the world would it be just to legally compel people to support complete strangers?" Your answer was that doing so could increase happiness.

Therefore, does something which increases happiness equal justice, by definition?

If your answer is yes, it would be quite simple to show how that principle leads to absurd and, dare I say, obviously false conclusions.

If your answer is no, then your response failed to respond to Bryan's question in more ways than I initially thought. He asked a question about justice, you responded in terms of happiness.

Or maybe I am missing something? A little help here?

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