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The Real Health Care Debate

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If you ever want to see a real debate on health care policy, schedule an event featuring Daniel Callahan and me. Callahan is very anti-market, but he and I start from a baseline level of agreement about what the health care issue is all about. What follows are some excerpts from his book, Taming the Beloved Beast, and my own comments.

p.1


health care economists attribute about 50% of the annual increase of health care costs to new technologies or to the intensified use of old ones.

What he calls technology is what in Crisis of Abundance I called "premium medicine," because I want to include the increased use of specialists as well as physical capital. Callahan would agree.

He agrees that Medicare is unsustainable in its current form. He agrees that minor changes to our current health care system, such as those being debated this year, are not going to do the trick. p. 15:


pursuit of such efforts can be likened to one of the endemic problems of end-of-life care, that of embracing hope and unlikely treatments and of refusing to grant the obvious fact that the patient is dying. Do not give up: provide one more round of chemotherapy. Do not give up: provide one more effort toward improving the efficiency and cutting waste in the health care system.

He agrees with me that other developed countries, including those in Europe, control health care costs by restricting supply. The techniques (listed on p. 76) include expenditure ceilings (global budgets), restrictions on the number of medical students and physicians, reduction in hospital beds and shift to outpatient care, control of licensing of expensive technologies, drugs, and devices, and of their diffusion, performance-related payment systems, and monitoring of physician use of resources. He does not attempt to sort out which of these approaches is most effective. He concludes (p. 77)

just about everything that can cost the government money is regulated in Europe...Technology is treated as just one more cost item, but an important one. Control everything else, the reasoning seems to go, and you will control technology as well.

The important point to note is that there is no magical efficiency that comes from eliminating private health insurance (in fact, many European countries use private health insurance). Other countries hold down health care spending by restricting supply, particularly of expensive medical services.

How do we know that it is the United States that is wrong and Europe that is right in its priorities? Callahan just says that we are wrong because we spend more. He does point out (p. 28) that


life expectancy of Americans over 80 years is the highest in the world

but he uses that to make a rhetorical point that Medicare is better than private health insurance, because our life expectancy under age 65 does not look good in comparison with other countries. But I would want to look at death rates from other causes, such as homicides and auto accidents, before making the attribution to our health insurance system. More importantly, the higher life expectancy of Americans over 80 would seem to suggest that our high levels of medical spending perhaps buy us something.

In addition to his willingness to tell Americans how much they should spend in the aggregate on health care, Callahan has some specific changes he would like to see (p. 160-161):


eliminate coverage for contraceptives, male or female (because a risk of pregnancy from intercourse is not a disease, illness, or injury); for assisted reproduction for women over the age of 35 (because a decline in fertility beyond that age is not a disease or illness either); for erectile dysfunction for men over the age of 65 (a normal pattern, not a disease); repeat joint or other surgery for men and women who, after the age of 65, want to continue an athletic recreation life...denial of mental health coverage for all but the most severe cases, not as a response to an unhappy life, a troubled romance, or difficulties raising one's children.

I wonder if he would oppose coverage for abortion, given that pregnancy is not a disease, illness of injury. Of course, these are only collective decisions if we have collective health insurance.

I have left out much in the book that is valuable and provocative. But I want to get to the points where he and I disagree the most. Near the end of the book, he poses six dilemmas. The first dilemma is cutting Medicare costs without being cruel. He proposes (p. 214)


greater support at the lower levels of basic medical, economic, and social care with corresponding reduction of support for the most expensive hospital and critical care medicine...a health care system should help young people to become old, but not to help the old to become even older

Earlier, on p. 177, he writes:

After age 80...the priority should shift from the cure of disease and acute care medicine to the provision of good long-term and home care...

As harsh as this might sound, I think Callahan may have a point. Because we have government-provided health care for the elderly, it may very well be that in the United States we err on the side of spending relatively more helping the old to become older and relatively less helping the young to become old. However, I doubt that the solution for this is to turn even more control over to government. If anything, the demographics are such that voters are going to want to steer even more resources to the old and fewer resources to the young.

Callahan's second dilemma is wanting to encourage needed innovation while controlling its effect on spending. p. 214:


We must shift to the use of a priority system for research and allocation decisions.

He doubts the ability of the market to set priorities. He does not think that consumers have the will to resist medical innovation. I disagree, of course. And I also doubt that government would set the right priorities--as he points out, we spend far more on cancer research and far less on other medical research than what likely makes sense from a cost-benefit perspective.

His third dilemma is government vs. the market. On p. 215:


In the end, government must answer to the public, forcing an accountability that is absent in private sector medicine.

Of course, I think this sentence is 180 degrees wrong. If you could summarize the difference between a pro-market and an anti-market person in one sentence, it would be that pro-market people believe that the market as an institution provides greater accountability than does government, and anti-market people believe the reverse.

His fourth dilemma is individual preferences vs. social needs. p. 216:


The traditional doctor-patient relationship, one of the core values of medicine, can be an obstacle to good health policy, invoked too often by many physicians to justify practices at odds with the control of costs.

I actually agree with this, but I do not think that the solution is to impose a top-down change. I think that government can help to provide more statistical information to consumers and doctors, but ultimately I do think it should be up to individuals to decide whether to go with the generic evidence or make a different call.

The fifth dilemma is how much spending on medicine is enough. On p. 217:


There is a need for a public and professional recognition of the finiteness of life and resources. That would mean a different set of underlying values about health, aging, and death--a truce with them in place of the present and increasingly expensive war against them.

So, we should spend less on medicine and more on....what? Big-screen TV's? smart phones? professional sports? My guess is that if Callahan got his wish and medical spending were reduced, he would not be happy with where money is spent, and his desire for socialist control would only increase.

Finally, he notes the disparity between medical services for the young and the old. he points out that paying for the health care of the elderly by taxing working-age people means taking resources away from people with children. p. 218:


I believe the only reasonable approaches are to concede the greater importance of children and younger age groups for the future than for the elderly and to make certain the economic imbalance does not increase. I would hope the elderly would take the lead in lobbying Congress and their state legislators for good health and education programs for the younger generation.

Once again, the cure for a problem created by socialism (Medicare's intergenerational effects) is more socialism. For Callahan, the road to serfdom is a joyride.

Despite these differences, I would recommend Callahan's book very highly, particularly to people on the left. Compared with what so many pundits and policy wonks are saying, Callahan offers a strong dose of reality therapy.


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COMMENTS (18 to date)
JPIrving writes:

Not very libertarian, but I keep thinking that the most direct way to lower healthcare spending would be a big tax on sugar, wheat, rice, and potatoes... Move people onto a paleo diet and watch costs fall...

nicole writes:

My question is, does he support eliminating coverage for pregnancy? After all, that is not a disease at all, and neither is it any kind of unavoidable risk, but I very rarely find anyone willing to advocate this position. Other than myself, of course.

Ted Craig writes:

Why tax those items? Just cut the subsidies.

Here's a question that I've been wondering about: if we bar refusal of insurance based on pre-existing conditions, are we also going to end state subsidizing of activities that generate pre-existing conditions, i.e. school sports?

BJE writes:

JP:

Dead people are cheap. People that live longer (>65) cost lots of money. Type 1 diabetes reduces life expectancy by ~15 years... those are 15 of the most costly years... on net (treatment until death - savings due to premature death) I'm not sure if diabetes is a cost saver, but deaths related to obesity are almost certainly a cost saver.

JPIrving writes:

BJE

It takes many expensive decades to die from obesity, and eating foods which promote high insulin has other harmful effects such as sarcopenia, Alzheimer's, dementia,cancer, MS, essentially all the diseases of civilization. If we really wanted to save money we could just shoot everyone, but I think keeping them healthy is a close second...;)

The only reason old age is associated with an acute loss of muscle and neural decline is because of a failure to eat and exercise correctly. Type Art De Vany into google, he is a 72 year old retired econ professor. 6'1'' 205 lbs 8% body fat, strong as an ox, and fast. He takes no medications, I reckon he costs medicare a good deal less than the average 72 year old. If we could get people over 50 to eat and exercise half as well as him I imagine we would see infirmity and illness fall sharply.

Of course I dont really think a tax would be morally justifiable, if we had a free market in healthcare people would have to bear the full cost of their health decisions.

Instead people trash their bodies, "over use" medicare when the damage really accumulates after 65 and then people like Callahan say we need to cut them off. Why not just keep them healthy and go with the status quo system?

Redland Jack writes:

@ nicole

This is, I believe, the sole reason that women (on average) receive greater benefit from medical insurance at every age group from 15-45 on the actuarial tables.

I think that Epstein talks a fair amount about this in Forbidden Grounds, which leads me to believe that it is mandatory for pregnancy to be included by employer's under the Civil Rights Act of 1964, though I wouldn't swear to it.

Gary Rogers writes:

This is an excellent summary of the decisions that need to be made and I am not surprised that there is so much agreement because it is an honest and comprehensive assessment. The disagreement comes with deciding how much healthcare is the right amount. Is it right to spend countless dollars for end of life care? Should elderly care be rationed in favor of younger patients with more life ahead of them?

For those of us who know how well markets work the answer is a simple matter of letting everyone pay for their own healthcare. As long as somebody else is paying, there is no limit to the demand, but when each person has to decide what healthcare is worth, decisions are made and the providers react accordingly. Of course this will not be fair. Some people will not live to be eighty and some will develop conditions for which they cannot afford treatment and they will suffer and possibly die. But, why is it any worse to not be able to afford coverage than to have a government death panel refuse coverage?

R. Richard Schweitzer writes:

We have in this country a document called the Constitution.

It is not as difficult to parse as say the Koran.

It does not seem to offer as many interpretations as the Bible (either or both testaments).

If we look to that document, does it not give us a clear guide as to HeathCare "Policy" for the nation?

And, does that doccument not specifically enumerate those items of "policy" within the authority and concern of Congress?

Surely we shall follow the those words all the days of our lives even unto MassCare, TennCare and the State O'Maine?

Contemplationist writes:

R. Richard

I'm afraid the Constitutionalist view is not going to persuade anyone left of center.

Yancey Ward writes:

People on the left need to answer a question- is it permissible that some get better medical care than others because they have greater means to pay for it?

If the answer is yes, then controlling costs only matters in regards to government, and there you spend less by simply spending less- what you spend depends on where you set the baseline of care and who gets subsidies. One can certainly try to find efficiencies in government spending, but those efficiencies, if they exist, will be quickly adopted everywhere.

But, note, the more you value equality, the more you have to spend, and the less able you are control costs (and remember, costs are not just money spent). In the limit approaching equality, the answer to my first question is no, and at that point, you must limit the ability of a free person to spend what he/she thinks is appropriate for their healthcare, or you must have an essentially unlimited budget.

agnostic writes:

The low-carb vs. high-carb thing is even more interesting in this context because Americans only started loading up on carbs and ditching red meat, butter, etc., because the government frightened everyone by telling them that fat and cholesterol were poisons, while giving sugar and carbs a pass.

The McGovern commission freaked everyone out in the late '70s, and there followed the explosion of obesity, type II diabetes, heart disease (incidence, not deaths), and other diseases in the cluster called Metabolic Syndrome. Gary Taubes does an excellent job reviewing the history in Good Calories, Bad Calories.

Now people are talking about taxing sugary drinks -- you mean like those fruit juices the government and experts told us to gulp down "as part of a healthy breakfast"? Now we need a correction to correct the first correction.

Forget taxing high-carb foods. They taste like crap unless covered in fat or protein anyway. The only reason people started wolfing them down was due to fear of bad health, based on what government figures told them. Just retract that -- Hey folks, you can go back to eating tasty, hunger-satisfying food again!

WCU 1581 writes:

It seems that while people are living longer, they are also spending significantly less money. This ends up equaling those that reach the retirement age are generally taken care of by the government. If this income was dispersed and subsides and excise taxes were reduced it would possibly lead to less wasted money in the long run scheme of things.

For those at the age of retirement or more that are healthy and not just racking up on medicare and federal aid more power to you, but the vast majority are only taking from future generations.

If all else fails just move to Canada... sure half of your paycheck will go to "free health care" but at least there won't be such a debate.

Lo Statuz writes:

Almost all thinking in this area is based on the assumption that allocating more resources to medicine results in at least a little more health. But the evidence for this assumption is weak, and it might go the other way.

How about an Arnold Kling/Robin Hanson debate?

Allison Bracken writes:

I agree that there are many questions to be answered about the upcoming health care bill. Although, we do spend more money in health care, is that a bad thing? In my opinion human lifes are much more important than money. Obviously we have been doing something right if our life expectancy is higher that anyone elses in the world. It makes me wonder why we are messing with something that works.

It is sort of frightening to think of a world where someone gets refused chemotherapy because the government does not think that it will help, or that it is too expensive. If this passes patients will be getting poor care because not every test they need to ensure their health will be taken. The government should not have the right to tell someone whether they have the right to live or not. This goes against our constition because we will not have the right to live and prosper.

If the government really wanted to cut costs then they should invest more money into supporting healthy eating, since obesity contributes to a vast variety of illness. Heart disease, which is America's greatest killer, can be caused by obesiy in some cases. Also, they could raise the price of cigarttes and alcohol more. These things are what is killing our people, and making so much extra health care costs. So try resolving these issues first, do not try to kill us off by refusing health care.


Dan Weber writes:
If the answer is yes, then controlling costs only matters in regards to government, and there you spend less by simply spending less

Too bad the Republicans were screaming about death panels when there was talk of limiting Medicare spending. And too bad the Democrats were too cowardly to point out that hypocrisy.

I think we could get a really nice compromise if Medicare 1) covered everyone, and 2) had a total payout cap. It gets us a nice base level of universal coverage, cost containment, and allows people to still buy their own health care. Point 2 would probably meet some resistance from Democrats, but if the Republicans aren't willing to consider it either, then we are dead in the water.

Yancey Ward writes:

Dan Weber,

Honesty is the first casualty of this debate. No one wants to admit the truths- covering more people will cost more money, or mean less services for those with coverage, or, more likely, both. Controlling costs will mean spending less money and having fewer medical resources devoted to certain groups.

Part 2 you outlined above is the real problem. No one wants to tell A she is going to die of her cancer in a year, but B is going to live another 10 years because she could pay for the treatments. This conflict, which is a direct result of the fact the medical technology treats more and more illnessess every year, leading to more and more older people, who suffer more and more age-related illnesses that future, new medical interventions will ameliorate.

If we could simply live with the objections to lack of equality of means, controlling costs isn't that hard at the government level- you institute a hard cap on what government will pay for each person. What the costs are in the private sector is completely irrelevant since people would be spending their own money anyway, absent government mandates (which are just taxes and government spending by another method).

David Brown writes:

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Dan Weber writes:

No one wants to admit the truths- covering more people will cost more money, or mean less services for those with coverage, or, more likely, both

Quite a bit of the medical care we pay for has no benefit. But for cultural, social and legal reasons, we do it anyway.

For government spending, there should be a budget (hopefully one that is on autopilot, based on national population and the general inflation rate) and that should be spent. This doesn't mean a hard cap on each person's care, but it does mean a total cap on everyone's (government-paid) care.

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