David R. Henderson  

Bleg on Health Care Questions

AMA Highlights... Me at Webber Tonight...

On March 19, I will be speaking at Oberlin College in Ohio. It will be a debate with Ted Marmor of Yale University. Well, not quite a debate. The format is that the organizers, Professor Marmor, and I will agree in advance on 5 to 7 questions. We will each get a few minutes to answer each question. When that is done, it will be open for Q&A from the audience.

One of the organizers suggested the following two questions:

1. What is your opinion of the ACA, aka Obamacare? What are costs, what are the benefits?

2. Is America's health care among the best or the worst in the first world?

Here's mine: Was the U.S. health care system before the implementation of Obamacare a free-market system? If yes, explain why. If no, explain why and tell how you would characterize it.

My request to you: Please suggest other questions and I will pass the best ones on to my contact at Oberlin.

Comments and Sharing

COMMENTS (48 to date)
Charlie writes:

I would suggest an addition to question 2: Is America's healthcare per dollar spent among the best or the worst in the first world?

Other ideas:

What practical tweaks should congress make to improve healthcare or health insurance or lower the cost of either?

David Thomas writes:

What has been the greatest driver of the increasing health care expenditures? (higher prices, increased consumption, innovation, regulation, etc.)

Many people and organizations call health care a basic human right. What practical policy effects are there if we treat health care as a right vs. treating it as a good/service?

ZC writes:

1. Is receiving medical care a right or a privilege?

2. Would a single payer system (i.e., Medicare for all) decrease or increase overall healthcare expenditures in the US? Would patient outcomes be expected to improve, worsen, or stay the same?

3. Related to #2. How much compensation do the executives at the 10 largest insurance companies receive annually? (It's entertaining how eye opening these numbers are for the audience).

4. How does an increase in the utilization of mid-level providers (nurse practitioners, PAs, etc.) impact medical expenditures, both directly and indirectly?

Frank A writes:

1. What are the costs/benefits of tying Health Insurance to employment?

2. How do we de-couple Health Insurance (financial) from Health Care (health)?

Tom Nagle writes:

There is a difference between "high quality" and "good value". The quality of a BMW is certainly among the highest quality in the world, but would the American public be better off if, therefore, Congress mandated that every car sold in America had to have all the quality and features of a BMW? Many people who can afford a Chevrolet or Ford would be unable to afford a BMW and many people who would buy one would be worse off because of the other things they had to give up to pay for their car. This is exactly analogous to the US Healthcare system and the ACA has done nothing to fix it. It has simply said that taxpayers will subsidize the cost of the BMW quality heath care for those who cannot possibly afford it.

Daniel Artz writes:

The design of the Affordable Care Act is, in several particulars, based on the idea that health insurance is the best way to finance health care. Do you think that requiring health insurance to cover routine, expected or elective health care expenditures will increase or decrease the cost of such services? Explain. If you believe that health insurance should be required to cover routine, expected, or elective health care services, such as periodic checkups, vaccinations, contraception, and childbirth, do you also think that auto insurance should be required to cover oil changes, transmission fluids, radiator flushes and refills, rotating and replacing tires, brake relining and other routine maintenance? Should property insurance on your home be required to cover periodic repainting, replacing furnace filters, and other routine maintenance? How does the use of insurance to cover routine and expected services affect the consumers' incentives with respect to such services?

c141nav writes:

How would you write a comprehensive health care law?

RPLong writes:

My question:

How can we address the obvious tension between the public-sector health care trend of "Comparative Effectiveness Research" and the private-sector medical science trend "Personalized Genetic Medicine?" Does this imply a tension between cutting-edge medical science and cutting-edge public health care delivery systems?

Jake writes:

If the United States implemented a single-payer healthcare system in the near future, to what extent would various forms of government failure -- such as regulatory capture, political principal-agent problems, and favoring of special interests -- have a negative effect on the healthcare system's ability to provide efficient services?

Maniel writes:

Although my congressman may think he knows what health insurance I need, I'm not so sure.
Q: If I need help buying health insurance (HI), why not simply provide me HI stamps (like food stamps) and let me shop for my own?

Eric Falkenstein writes:

I think Munger's paper on the Santiago's bus system is a good analogy. Government creates a mess, but once the government takes over the solutions are always to do it better, not to get out.


Archangel writes:

Here's a few:
- Should insurers be allowed to collude to drive down costs? http://www.bloomberg.com/news/2014-01-08/what-liberals-don-t-get-about-single-payer.html

How does the market/government balance physician practice acquisition and antitrust monopolies even when the primary goal is to improve patient care? http://www.beckershospitalreview.com/legal-regulatory-issues/the-st-luke-s-antitrust-case-10-things-to-know.html

Should insurers/regulators allow patients with HSAs the ability to privately negotiate their out-of-pocket expenses and count it against their deductible? http://pokitdok.com/

Should physician/hospital's negotiated fee schedules with insurers be publicly available information?

marko writes:

1. What is, in your view, the single biggest problem with the US health system?

2. If you could start from the scratch, how would you design a new health system? (lets imagine you are advising a new Charter City government or something like that)

Jay writes:


Why is #3 relevant and not a complete waste of everyone's time and an exercise in class warfare nothing more? How much did Steve Jobs make in his final year, or the quarterback of any NFL team and how did that impact healthcare in the U.S.? The answer is "who cares". What we do know is that profit margins for health insurance providers are well below average for corporations and certainly lower than Apple or the NFL.

MoebiusStreet writes:

During the debate over PPACA, it seemed to me that there was a lot of shifting going on regarding what the actual purpose and goals of the program. I heard justifications such as "overall healthcare expenses are too high"; "the poorest cannot get proper healthcare"; "those who don't get health insurance from an employer are left out of the system".

On what criteria should we judge the success of PPACA?

Steve Y. writes:

Add my voice to those who are wondering about "single payer."

Citing Medicare and European health-care systems as examples, advocates of a single-payer system say that such a system delivers high-quality health care to more people at a lower cost.

1) Is this statement true? (I have my doubts: Medicare, like Social Security, has the many paying for the few, and why don't advocates mention Medicaid as the single-payer example?)

2) Does the literature on monopsony contain insights about the costs and benefits of single-payer?

3) Does it make a difference if the monopsonist is the government instead of a private actor?

Andrew_FL writes:

In order to have a free market, there first needs to be a market. Providers need to compete in terms of price and quality of care and consumers need to shop for the best combination of the two they can find.

I don't think such a situation is even close to the pre-Obamacare situation in the US. I think we had a situation where consumers were largely ignorant of the actual prices of things they were getting and certainly not shopping around for better deals. I think this a direct consequence of "insurance" being extended to things that are not "risks" but certainties, by way of regulatory obligation.

If there are no price signals and no responses to those signals, you don't have a market. Not the way I understand it, at any rate.

Jay writes:

@ Steve Y.

Not disagreeing with your overall sentiment, but you have to be careful in use of terms. The only truly "single payer" systems in the developed world are Canada and Taiwan. Europe is dominated by guaranteed coverage usually provided by a mix of private and public funding but heavy on the public.

Motoko writes:

Why should I have to pay for healthcare for people who eat unhealthy diets, don't exercise, smoke, etc?

Aaron Zierman writes:

Does the ACA do more to solve externalities or does it create externalities?

MikeP writes:

Do you think it is possible to have an explicitly two-tier health care system in the US where some standard of care, perhaps that which was state-of-the-art thirty years prior, is provided at low or no price to those who cannot afford more while everyone else gets their insurance and care in a completely free market?

andy weintraub writes:

Keep in mind: Oberlin College has very few, if any, libertarians among its student body or faculty. I'll bet almost 100% support ACA.

Steve S writes:

1) What incentives need to be in place to "bend the cost curve down?" Are these incentives specific to the health care market, and if so, why?

2) The price of medical care has been rising faster than inflation at the same time 3rd party payments (private insurance, Medicare, Medicaid) have been increasing. Health care expenditures that do not generally accept third party payments (Lasik, plastic surgery) have at the same time been decreasing in price and increasing in quality. Do you believe there is a causal link between these factors? Provide evidence and counter-examples if you agree/disagree.

txslr writes:

To what extent do you think our debates over healthcare are driven by the inability (impossibility?) to measure things meaningfully and make valid comparisons?

For example, we are continuously told that other countries spend less on healthcare and get better or similar outcomes, but we don't really have evidence to support this conclusion. On the input side, for example, John Goodman has said:

"Every developed nation has so completely suppressed normal market forces in health care that no one ever sees a real price for anything. When the national income accounts folks try to measure what is happening in health care, therefore, they are always looking at phony prices. When you add up all the individual transactions (each with a phony price) you end up with one large phony number. Since other nations do more than we do to shift costs and disguise costs, their phony numbers tend to come in lower than our phony number.”

On the output side, consider consumer surplus. We have no way of measuring relative consumer surplus across health care finance systems, so we pretend that it doesn’t exist and we design systems that don’t consider it. And yet the creation of consumer surplus is, or arguably should be, the ultimate goal. Instead we focus on what we do have, which are mostly sketchy statistics (e.g. infant mortality) and/or statistics that bear only tangentially to healthcare (e.g. longevity) to make system comparisons of questionable validity (e.g. ignoring alternative explanations for observed differences).

In the final analysis all we really know is that other countries report lower spending on healthcare than we do. But their actual spending in terms of resources may be higher, lower or the same as ours. In turn, their outcomes may be better, worse or the same as ours – we really just don’t know.

We suspect that we spend "too much", but that suspicion can only be justified by the fact we have a system that hides prices from consumers and relies on third-party payers and such systems lead to over-consumption. Likewise, we must suspect that, for example, Canada either spends too much or destroys value by coercive rationing. If we are going to relieve ourselves of these suspicions is there any path forward other than to free the markets so that individuals make their own choices with full knowledge of the costs?

Erik Olsen writes:

I was having an email debate about minimum wage and income inequality with a member of a non-profit on whose board I sit. I pointed out some of the information that has been posted by Cafe Hayek and other blogs (perhaps Econlog but I didn't do a search) about how the cost of many goods, as price in the 1980 Sears catalog, has come down in terms of hours worked. His response was that not all industries have seen such a decline and he cited health care, housing and higher education. The irony of this was lost on him but I wager not on you or on your readers.

Steve S writes:

I asked my question #2 above (5:42PM) because I've never really heard a solid rebuttal for why those issues aren't related. If anyone here in the comments knows of anyone who has tried, I'd appreciate a link or a statement.


jorod writes:

If I like my doctor, can I keep him?

steve writes:

We will be more successful at controlling costs by putting providers or putting patients at risk? Does it matter?

What should we learn from other countries about reforming our health care system? What could they learn from us?

Is provider induced demand real? If it exists, does it make it more or less likely unregulated markets can provide quality health care at low prices?

Why do utilization rates vary so widely across the US?


Dan JJ writes:

Is it possible to have a medical system that is ideal in that everyone (ALL PEOPLE) will receive medical care to the desire in which no ailment will go untreated or not receive the best treatment?
Why should we expect that this service is different from any other in its adherence to rules and laws of economics in supply and demand?
In all of govt endeavors to alleviate some societal ill (war on poverty to 'eliminate' poverty, war on drugs, war on hunger to wipe out hunger, etc), the failure in doing so is tremendous. How is it that this endeavor will now solve the perceived problem of the medical industry failing to service ALL comers at a level, now appreciated by the middle class and up?

MikeP writes:

Which movie quote is the better description of Obamacare?

1. You still don't understand what you're dealing with, do you? Perfect legislation. Its structural perfection is matched only by its hostility.
I admire its purity. A survivor... unclouded by conscience, remorse, or delusions of morality.
I can't lie to you about your chances, but... you have my sympathies.

2. Listen, and understand. That legislation is out there. It can't be bargained with. It can't be reasoned with. It doesn't feel pity, or remorse, or fear. And it absolutely will not stop, ever, until you are on Medicaid.

Brian Mason writes:

Cell phones have become dramatically better, cheaper, and more accessible since their introduction in 1973. Why haven't humans been able to improve the quality, cost, and accessibility of health care at the same rate in the same way for the same reasons?

Shayne Cook writes:

1. If Government is actually concerned about health care and the costs of health care for individuals, why aren't actual health care expenditures (and health care insurance premiums) 100% tax deductible?
(NOTE: ACA increased the threshold of tax deductibility of actual individual health care expenditures from 7.5% of AGI to 10% of AGI - and even that is only available to itemizers.)

2. Why are heath insurance premium payments 100% tax deductible for businesses but not for individuals?

Gomer Wumphf writes:

1. A major problem with government is incentives. While the private sector is rewarded for efficiently satisfying customers, the public sector is rewarded by loyalty to superiors, and amassing and centralizing power. Every page, every sentence, every word of legislation and regulation is fertilizer that enables public sector bureaucrats to grow the bureaucracy and the power of the state. Public sector bureaucrats are in fact punished for efficiency and problem solving - they lose funding and therefore status and power. Consider for example:

• Why is American education poorer but vastly more expensive today than before the creation of the Department of Education?
• Why, as the end of a fiscal year approaches, does every government bureaucracy rush to spend every remaining cent of funds?
• What would happen to the Drug Enforcement Agency if the drug problem were “solved”?
• Why is there a Bureau of Indian Affairs in the 21st century?
• What has the Department of Energy accomplished re energy independence - the ethanol lunacy?
• What has the Environmental Protection Agency accomplished other than insuring “dirty” jobs and processes move to such ecological wonderlands as China, India, Bangladesh, etc.?
• Why is the cost of compliance Code (time wasted, litigation, record keeping, mal-investment, fraud, 100K+ IRS workforce, preparer fees, etc.) with our 70,000+ page Income Tax approaching half a trillion dollars a year?
How do we incentivize government bureaucrats to change behavior?

2. An MIT study estimates that technology will obsolete over 40% of existing jobs in the relatively near future. Furthermore some impacts of technology are increased productivity and lower product and service costs. Will technology caused deflation impact tax receipts and federal debt service and how will government react?

lowcountryjoe writes:

Somehow and in some way it has to be pointed out, perhaps through walking through an example, just how absurd it is to require that pre-existing conditions be covered in a system where premiums are being subsidized. Just to be spared the "cold-hearted" label, an analogy to wrecking your car without insurance and still managing get coverage after the fact -- and paying less in premiums than a good driver would, needs to be crafted as a response.

Peg writes:

Our society had judged that it is appropriate to give assistance to those in need when it comes to items like housing, food, transportation and the like. Yet, very few would expect that help to provide a standard for shelter or food or transportation, etc. that would be identical to what the wealthy or upper middle class can purchase.

Nevertheless, more than a few do seem to think that when it comes to health services, everyone deserves "the best" and anything that can be done.

How do we go about educating people that it is impossible for our government to provide "everything" to everyone - and to determine what sort of help is reasonable and rational - and what is not?

John Csekitz writes:

Professor I am not an economist by trade or in training, so please forgive if my ignorance is showing. But I would ask.

In a competitive market, market share helps or is often used for direction as to what the consumer’s wants, choices, desires and preferences for varying products are at varying cost points (what this layman will call evolution by choice preference). How is that process accomplished in the ACA, single payer or highly regulated market and how do they compare?

Luther Stueland writes:

Broadly speaking, we spend the same % of GDP on food, clothing, shelter & health care combined as we have over the past century. What's the crisis?

David Boudreau writes:

Of the many attributes of the US health system (before ACA) that led to its high costs and inefficiencies, which ones were improved by ACA, which ones made worse, and which ones relatively untouched?

I'm thinking of things like third-party payer, insurance being as much pre-paid medical service as true insurance against unforeseen events, tax deductibility of employer-provided insurance coverage, mandated coverage driving up insurance costs, etc.

Politics Debunked writes:

The US has nothing remotely close to a free market in healthcare. U Chicago econ prof John Cochrane had a good summary editorial in the WSJ he reposted on his blog here with links for more info:

This page


details (with source links) the myriad ways government restricts competition throughout healthcare and otherwise interferes with market functioning to benefit special interests such as via linking insurance to employment. It also indicates some of the problems with international comparisons.

James Buchanan writes:

Is the ACA a solution to healthcare problems or to medicare/medicaid entitlement costs?

Is the ACA affordable? If so, why are businesses cutting hours and employees to hedge against the rising costs of the ACA? Why are unions asking for and getting exemptions to the ACA if it reduces healthcare costs? Why is congress exempt from the act if it provides better healthcare at affordable costs?

Nancy Pelosi told the public that we have to pass the law so we know what is in it. Do we know what is in it yet?

Shouldn’t the top one percent of income earners be called the "23 per-centers”… after all they are responsible for 23%+ of all the taxes paid?

Will the ACA eventually lead to a single payer system given all of the financial incentives (penalties) that are built into the legislation?

If the ACA leads to a single payer system, will our healthcare system become the postal service?

Nobel Prize winning Economist James Buchanan proved that the government is an inefficient “business” and should be limited. If the government assumes control of and is responsible for running the health care system, what magic pill must we all swallow so that Dr. Buchanan’s work does not make sense any more? And will that pill be covered under the ACA?

Sorry for the sarcasm… but I feel better now...

Paul Eich writes:

I like Steve F's comment, but it's easy to answer for an economist - which person's time in the provision of health care does the patient have a right to?

Many good comments. My question: What is the difference between health care and health care insurance, and why are those terms confused when discussing the topic?

If the goal is to have the most people decide to purchase insurance, this would best be accomplished by eliminating legislation that makes insurance expensive (see Dr. B's comments above).

If the goal is to have delivery of quality health care, process innovation and technological advances will be necessary, both of which are driven by potential for profit (IOW, incentives matter).

Another: What criteria should be used before a government can recommend dietary guidelines? What level of scientific proof must be reached? (they've been trying to prove the low-fat diet is healthy for 40 years, and failed).
Everyone says most disease is a result of lifestyle decisions. However, the govt has advocated a diet which makes many people sick, but does nicely for US agriculture industry (thanks USDA for those guidelines). It would be easy to argue that the USDA recommends a diet that makes so many people sick, their care will exceed what the USG can pay via medicare (even Obama admits medicare is top threat to fiscal strength of USG).

The Death Panels Question:
If 25% of health care expenses are incurred in the last year of life (true per "Crisis of Abundance"), what could be done to incentivize everyone over 50 to at least fill out a living will or end of life directive? $1000 tax credit might save 100 times that amount, and much more in the suffering those caring for their parents who don't know what to do.

What is "quality care"?
What criteria are relevant to the question of which health care "system" is the best or worst? The term "quality care" is bandied about - everyone wants that! - but what does it mean?

Cox School Gini writes:

[Comment removed for supplying false email address and for multiple other policy violations. Email the webmaster@econlib.org to request restoring your comment privileges. A valid email address is required to post comments on EconLog and EconTalk.--Econlib Ed.]

DrC writes:

Given that patients in the US healthcare system have better survival rates for cancer and heart disease than patients in Europe and Canada, how much of a decrease in survival probability do you believe Americans would accept for lower cost care?

You may need to dig up some real numbers for this.

The CONCORD study is a good place to start.


Tom writes:

Other nations enjoy much greater efficiency per health care dollar spent ... what must we do better to stop throwing tax dollars down the rabbit hole, and start using them to improve the quality of care for all Americans?

Troy Camplin writes:

The system we are in was a result of price controls. Specifically, there were wage caps in the 1950s, and employers, to get around them, started offering things like health insurance as benefits to therefore indirectly increase offered wages. Had the government never engaged in wage and price controls, we wouldn't have had 3rd party payers dominating insurance, driving up health care prices. Of course, the inclusion of Medicare and Medicaid contributed to the problems inherent in third party payments separating the payer from what they are paying for. The high prices of health care can be directly related to the positive feedback created by artificially reducing the immediate cost of health care by spreading it out through various kinds of insurance. One can also talk about the fact that hospitals cannot advertise prices, that governments restrict competition among hospitals by requiring them to prove "need" before one can be built, etc. Then there is the FDA. Health care provisions have been one of the most regulated sectors of the economy throughout the 20th century.

Floccina writes:

Since the states control the regulation and the licencing of medical practitioners does the federal Government paying for so much of healthcare create a perverse situation where the states are not motivated to make changes that might reduce costs?

Floccina writes:

1. Since the states control the regulation and the licencing of medical practitioners does the federal Government paying for so much of healthcare create a perverse situation where the states are not motivated to make changes that might reduce costs?

2. Do you think that General Practitioner MDs, GP's would shop for price for their patients if they knew that their patients would pay out of pocket?

3. Can a Government program ever be structured to pay the same for a family member giving care as an assisted living facility.

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