Arnold Kling  

My Standard Question for Liberals/Progressives

PSST and Fragility... Underestimating Overqualificat...

A commenter suggested to me that Charles Sable does not fit my stereotype of liberals believing that government is the magic solution for human imperfection. But I picked out his paper on health care, and I found exactly that. He says that health care providers need to be able to improve by learning from and correcting mistakes. He then proceeds to offer legislation to force that.

My question for Sable is this:

If you know a better way to run health care organizations, why don't you start a health care organization?

I would ask this question generically. If a liberal/progressive proposal is supposed to do X, why don't you start a private entity to do X?

There are examples where this question has a standard answer. For example, "why don't you start a private entity to discourage the use of carbon fuels?" The answer might be the standard externality argument that the private entity will not be able to overcome individual self-interest, so that government coercion is required.

But in the case of health care quality, I am not sure that there is a reasonable answer. If health care providers are doing a bad job, what stops you from implementing a better model and taking over the market? Are consumers too stupid to know the difference between providers who make lots of unnecessary mistakes and providers who don't? If they are so stupid as consumers, why do you expect them to be smart as voters?

The way I see it, the main difference between a business entrepreneurship and policy entrepreneurship is that if things do not work out as planned, the policy entrepreneur is insulated from the adverse consequences. For me, that difference does not work in favor policy entrepreneurship.

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CATEGORIES: Political Economy

COMMENTS (11 to date)
MikeDC writes:

If health care providers are doing a bad job, what stops you from implementing a better model and taking over the market?

1. A tax regime that encourages (to the point of crowding out) insurance not tied to employment. This is the single biggest problem with the health care market, because it ties our health security to our employment status, which is generally much less secure.

2. Restrictions on interstate commerce in health care.

3. Significant price controls at both the state and federal levels.

4. An archaic drug approval process.

5. Run by an agency that currently seems to be devoted to raising the prices of and creating shortages in the availability of formerly widely used and helpful drugs.

6. Increasing taxes and legal restrictions on self-help and self-paying options (eg OTC medicines, FSAs) and decision-making plans (high deductible) in favor of plans that further separate the cost decision from the care decision.

Michael Sterling writes:

One thing liberals believe the government can do better than private companies is provide health care to people with pre-existing conditions. Without requiring everyone to purchase health insurance and prohibiting insurers from picking and choosing their customers, private for-profit insurance would quite reasonably insure as few of these people as possible. If I think this is a problem, how could I start a company to deal with this?

Vacslav writes:

Michael, by any definition of insurance and pre-existing condition, it's almost obvious that pre-existing conditions cannot be insured.

But they need to and can be treated.

Surely you can start a company to deal with this - for example, providing financing in the form of a loan. A young pregnant immigrant arriving into this country could use this form of a loan against her future earning - to get her baby delivered comfortably in a hospital. Can this contract be drawn and enforced? If it can't - I am sure there is a regulation against it.

Tom Grey writes:

Great note, Michael -- what progressives want is to use Other People's Money to help, with health care or some other required support, the deserving poor.

... and the undeserving poor; and about 51% (or more) of the voters, one way or another, for one reason or another, for the "social injustice" of not being born healthy and rich.

I do believe that part of the compromise of freedom and security on health care will be some amount of gov't paid for health treatment to the irresponsible, lazy, careless, repeatedly-making- mistake poor people.

Right now it is thru emergency room treatments. Most US fed gov't health care money should be going to emergency rooms to provide life saving support to the most life threatened sick.

David N. Welton writes:

@Tom - Michael made a good point, and you're simply inventing words he didn't say that fit your own narrative of what "those liberals" want. That's no way to have a serious, respectful discussion.

@Vacslav - loans with future repayment might work for a young mother, but not for many people with serious diseases - especially the elderly: you'd simply lose money. Business wise, it makes sense for insurance companies to stay as far away as possible from seriously sick people.

I am not happy with a lot of ways that the government intrudes into private life over here in Italy, but I have to say the health care system works pretty well. Everyone gets taken care of. If the wealthy want, they can pay some extra money and see doctors privately. The big downside from what I've seen, compared to 'back home' in the US, is that the doctors' offices dont' have such nice furniture over here. Joking aside, you're probably better off in the US if you're 1) wealthy and 2) have some sort of very serious and strange condition where lots of high tech and money will make fixing it more likely. Other than that, people live just as long here, and are just as healthy. Of course, there are all kinds of reasons for that that don't have anything to do with the health care system, but it's certainly no socialist distopia.

Lord writes:

Insurance is one of the largest externalities that exist.

Michael N writes:

The claim that "pragmatic collaborations" and "experimentalist governance" are magic simply validates Krugman's assertion that conservatives/libertarians can not talk coherently about liberal/progressive views.

My dictionary defines "magic" as "the art of producing a desired effect or result through the use of incantation or various other techniques that presumably assure human control of supernatural agencies or the forces of nature."

"Pragmatic collaborations" and "experimentalist governance" make no claims that human control will be assured. Pragmatic collaborations (benchmarking, simultaneous engineering, and learning by monitoring) are common practices developed by modern business firms as a response to contemporary challenges of strategic uncertainty. Sabel is suggesting that government borrow administrative techniques pioneered and perfected by the private sector.

Mr. Kling writes: "The way I see it, the main difference between a business entrepreneurship and policy entrepreneurship is that if things do not work out as planned, the policy entrepreneur is insulated from the adverse consequences."

Be that as it may, a key feature of experimentalist governance is that a "policy entrepreneur" has no plan that is to be worked-out: "In a world where 'principals' are uncertain of what precisely their goals should be and how best to achieve them, they must be prepared to learn from the problem-solving activities of their 'agents'."

Mr. Kling concludes: "For me, that difference does not work in favor policy entrepreneurship."

Mr. Sabel agrees: "Experimentalism correspondingly diverges not only from conventional hierarchical governance, but also from other contemporary reform movements focused on reinforcing principal-agent relations, whether from the top-down, as in the New Public Management (NPM), or from the bottom-up, as in devolved or 'interactive' governance. ... Instead, it is based on the reciprocal redefinition of ends and means through an iterated, multi-level cycle of provisional goal-setting and revision ...."

MikeDC writes:

Why is it reasonable to believe that free market insurers would refuse to to provide coverage to folks with pre-existing conditions?

The certainty of requiring some medical care doesn't necessarily make an insurance venture unprofitable. The simplest example of this is life insurance. The world death rate is 100%, and yet we still have widely available life insurance.

Of course, it's reasonable to expect insurers to be able to charge higher rates to insure against higher risks (or more properly, higher known likelihoods). Thus, the primary obstacle here are community rating regulations, which are generally favored by liberals, coupled with the other regulations I mentioned in my earlier post.

In short, effective private alternatives are outlawed.

twv writes:

It seems obvious from this discussion, and many like it, that public policy has for a long time tried to "solve" at a basic level a very widespread problem: How do you ensure medical treatment, from cradle to grave, for people who do not have much money, and to those who refuse to insure themselves against inevitable physical injury or decay.

Government solutions tend to imperialize the markets, though. The attitude has not been "if you have some money, save enough for emergencies, and insure against major problems, fine - we'll focus on those who don't." Instead, it's been: "We'll take care of you," to the point that government policy erodes incentives for self-preparation, turning more and more people into servile "clients" and "patients" rather than pro-active consumers.

Governments could simply stop guaranteeing people cradle-to-grave medical assistance. This would have the heady effect of turning serviles into active savers, self-insurers, and seekers of information as well as alternatives in medical care. Further, it would turn all of the poorest and disabled non-workers into charity cases, to whose aid public interested folks could work in the open, and with clarity.

Such a regime might also return us to the age when doctors regularly engaged in providing pro bono services to the poor, or engage in radical price discrimination.

This sort of freedom scares the bejeezus out of liberals and progressives, and is not what any of us have grown accustomed to. That it may be where we are headed, after the coming financial collapse, should add a frisson to medical industry reform discussions.

Sable appears to be trying to find a way to avoid this scenario of distributed responsibility, as well as avoid the problems inherent in top-down systems previously relied upon.

Of course, the reason he doesn't consider starting his own enterprise, or hooking up with a major institution with the aim of revolutionizing the industry, is that economists tend to be court wizards, not entrepreneurs, and in government there's less accountability for wizards than there is in business for entrepreneurs.

"Experimental governance" may be nothing more than a clever accountability avoidance system, but maybe it just looks that way. Maybe it really does square the circle and make government adaptable to changing situations.

I'd have to read and think a lot more about it to have a good idea. On the surface, though, it doesn't look promising. It looks more like "market socialism" - an ungainly structure built more on hand-waving and black boxes than actual, accountable feedback-functioning organization.

David C writes:

"If health care providers are doing a bad job, what stops you from implementing a better model and taking over the market? Are consumers too stupid to know the difference between providers who make lots of unnecessary mistakes and providers who don't? If they are so stupid as consumers, why do you expect them to be smart as voters?" - Arnold Kling

I'd just like to respond to this part. I thought it was well established that there is very little correlation between the quality of care provided and the cost of care between different hospitals/cities/states or whichever you prefer. Consumers ARE too stupid to compare quality in health care. How do you get around this problem? Qualifications.

There's usually a significant correlation between an individual's qualifications and their skill level. So we have very strict licensing laws. But this creates problems. There aren't enough doctors to provide care, so people miss out on care. It also means that when a bad doctor creates lots of problems for their employer, it's much more difficult to get rid of him/her. And then he or she is able to start up their own practice where there are even fewer standards in their way. And people go to them because there's a doctor shortage.

A way to get around all this is to have only a few people with extremely high credentials who have been subject to the utmost scrutiny and have them delegate decisions to the rest. In this manner, voters can vote on the qualifications of a few individuals to make centralized decisions when they can't make good decisions as consumers. It's more complicated than all that of course, but there's certainly a lot of teeth to even the most liberal of arguments.

joeedh writes:

If we had a true healthcare market (as other center-right countries do) the author would have a point. Unfortunately, we don't. That's why we need decent free market healthcare reform.

The Obamacare bill came close, but the Democratic leadership tried to sob off the far left by micro-regulating. I imagine that bill will be revisited many times in the future. . .

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