   Economics of public health care...
  I've been reading a little bit about economics over the last year (emphasis on the word 'little'), and the one thing that that has been confusing me lately is the whole health care issue. The idea of public health care, from an economic perspective, goes against my every intuition. Yet, prominent economists like Paul Krugman, who I tend to agree with 99% of the time, argue in favor of it. What am I missing?My confusion is pretty basic and you've probably heard it before. It seems to me that when the person choosing what health care to receive is not the same person as the one who is paying for the health care, you create a situation where there is no incentive to keep costs down. People will spare no expense when it comes to their own health care. If Procedure A is 0.1% more effective than Procedure B, people will tend to choose Procedure A even if A is three times as expensive. So there is this issue of marginal cost vs. marginal benefit that, if people were paying for their own health care, would be taken into account, but since they're not, it's sort of nullified.And this, in turn, eliminates any incentive for health care providers to compete, cost-wise. If two equally-skilled doctors both perform the same procedure, one doctor could theoretically charge much more than the other, without a reduction in patients, because the cost of the health care doesn't really factor into the patients' decision-making.Now, one could argue that the government, can counter-act this by enacting some cost-cutting measures, such as refusing to cover procedures that offer insignificant benefits over much-cheaper alternatives, and refusing to cover doctors that charge more than a fair market value.My concern with this, though, is that the government has no real incentive to actually do this. Contrast this with insurance companies, who have to do these things in order to protect their own existence. The government, with almost unlimited borrowing power and the ability to raise taxes, can, once the bill is passed, break all of these promises knowing that the people, by and large, are too apathetic to actually oversee this thing and make sure that their elected officials are doing a good job.Don't get me wrong. I understand the moral need for universal health care, and I want to believe that it can work. But many seem to be going beyond the moral argument, and are arguing that there is an economic need for universal health care, and I would really like to understand where they are coming from. Are there any good books on this, perhaps?   
  I don't think government-run single-payer health care is a realistic economic possibility for the United States.  Pharmaceutical lobbies are just too powerful.  I mean, somehow it's illegal for government-provided healthcare to currently provide generic brands of drugs to Medicare/Medicaid patients.  How does that make any sense at all?  Brand-name drugs are typically patent-holders.  Once the patent runs out, everyone else can sell an identical drug under their own brand.  That's how Wal-mart offers most types of prescription drugs for $4 for a full month's prescription.But the lobbyists pushed hard with FUD, and made it so taxpayers have to buy $100 Diflucan instead of $4 Fluconazole for Medicaid patients with yeast infections.Just imagine what it would be like if all healthcare in the US were run like this.   ;  (1) In reality, government-run insurance is no more likely to ignore costs than big-med insurance companies.  In that country that still has profit-driven medicine, those lucky few that have their employers cover their medical insurance costs have little to no say in which insurance company covers them, so it's not exactly a "free" market wher the consumer (the sick person) makes an informed and rational choice.  Profit-centered costs are kept down by limiting coverage, avoiding pre-existing conditions, and using litigation as an alternative revenue stream.  Government-driven costs are kept down by limiting fees charged by providers.(2) Again in reality, governent has strong incentive to keep costs down:  people don't vote for those who raise ro create new taxes even when the target is health care.  For-profit insurers just raise rates:  who votes for them?The major economic arguments in favour of universal health care tend to be twofold:  it generally requires a smaller slice of the GDP than for-profit health care (there's no profit-taking skimming off the top) and you don't have the lost productivity of a not insignificant portion of the population unable to obtain any health care at all.Of course, the economic arguments pale in significance to the moral arguments, but that is another topic.   ;Quote:Original post by Bregma(1) In reality, government-run insurance is no more likely to ignore costs than big-med insurance companies.  In that country that still has profit-driven medicine, those lucky few that have their employers cover their medical insurance costs have little to no say in which insurance company covers them, so it's not exactly a "free" market wher the consumer (the sick person) makes an informed and rational choice.  Profit-centered costs are kept down by limiting coverage, avoiding pre-existing conditions, and using litigation as an alternative revenue stream.  Government-driven costs are kept down by limiting fees charged by providers.Good point, but I still think that the insurance companies have an incentive to keep costs down, because even if the individual consumer has little choice in what company covers them, the employers who have to pay for all or part of the coverage still have a strong incentive to shop around and find the lowest-price coverage.Quote:Original post by Bregma(2) Again in reality, governent has strong incentive to keep costs down:  people don't vote for those who raise ro create new taxes even when the target is health care.  For-profit insurers just raise rates:  who votes for them?I would argue that the employers vote with their dollars. People can vote for politicians, but a raise in taxes seems like a less-effective incentive, especially for the lower-income folks, who are more likely to use the public option, but likely pay little or no income tax.Quote:Original post by BregmaThe major economic arguments in favour of universal health care tend to be twofold:  it generally requires a smaller slice of the GDP than for-profit health care (there's no profit-taking skimming off the top) and you don't have the lost productivity of a not insignificant portion of the population unable to obtain any health care at all.Good points, especially the second one. Employers often complain about paying for health care, but how does it help them to have people out of work because they're too sick? In fact, I recently read an article where some employers are offering free preventative care, including exercise programs, and incentives to keep employees healthy, and it has helped keep their other health care costs down, and they're reaping the benefits of the healthy, productive staff.It's like when people complain about unemployment insurance and welfare and other programs that pay people for doing nothing. Sure, these programs often have the effect of giving people an incentive to stay out of work. But it seems to me that the benefits far outweigh those problems, because these programs allow people to retain spending power while they're out of work, and that's good not only for the unemployed themselves, but for their landlord / mortgage provider, for their local grocery store, etc. I was out of work for three and a half months this year, after losing my job, and unemployment insurance allowed me to keep paying my bills and shopping for food while I looked for a new job that took advantage of my skills and paid similarly (as opposed to being forced to take the first terrible job that came my way, which would have greatly reduced my spending power). These programs are good for the economy, in my opinion, and universal health care may have similar positive effects.Quote:Original post by BregmaOf course, the economic arguments pale in significance to the moral arguments, but that is another topic.Agreed. I don't mind taking an economic hit in order to do the right thing, as long as it's sustainable. I'm just interested in learning more about why some think it's a good economic idea. Sure, most of the bankruptcies in this country are the result of high medical costs, but will UHC do anything but shift that burden onto our debt? And is that better or worse, in terms of the whole economy? If worse, how much worse? And is it worth it? Some seem to think that it's actually better, economically-speaking. I'm definitely open to the idea, but I'm not 100% convinced.   ;Quote:Original post by CDPropI've been reading a little bit about economics over the last year (emphasis on the word 'little'), and the one thing that that has been confusing me lately is the whole health care issue. The idea of public health care, from an economic perspective, goes against my every intuition. Yet, prominent economists like Paul Krugman, who I tend to agree with 99% of the time, argue in favor of it. What am I missing?As Bregma pointed out, single payer insurance would require less GDP than what is currently spent, estimates are around $500 billion less each year. Current expenditures total around $2.5 trillion. You've already noted that health care is the leading cause of bankruptcy. It's also a tremendous burden on businesses, who have to deal with administering employee health care benefits rather than focusing on their mission. And tying heath care to employment keeps many people in jobs they don't want which decreases productivity. And on the doctor side of things, it would be less expensive to deal with one insurer than with the 1300 insurers that exist today. Quote:Original post by CDPropMy confusion is pretty basic and you've probably heard it before. It seems to me that when the person choosing what health care to receive is not the same person as the one who is paying for the health care, you create a situation where there is no incentive to keep costs down. People will spare no expense when it comes to their own health care. If Procedure A is 0.1% more effective than Procedure B, people will tend to choose Procedure A even if A is three times as expensive. So there is this issue of marginal cost vs. marginal benefit that, if people were paying for their own health care, would be taken into account, but since they're not, it's sort of nullified.It's already nullified. People don't pay for their health care, they pay for their health insurance and even then not directly but typically as an employment benefit. And quite often the person choosing what care to deliver is a doctor or a hospital director, not the person receiving the care or their family member. This means that on the one hand, we have insurance companies denying people care, and on the other we have doctors and hospital administrations assigning too much care - usually too many tests - in order to pad their bill to the insurance company. We have a system with very little incentive to keep costs down, to the point where the US spends twice as much per capita on health care than other nations. The system is broken. If it wasn't, it wouldn't be an issue. I disagree that people will spare no expense when it comes to their own health care. People spare expenses on their own health care all the time, even people with health insurance. Excessive co-pays prevent people with insurance from seeking treatment all the time. Quote:Original post by CDPropAnd this, in turn, eliminates any incentive for health care providers to compete, cost-wise. If two equally-skilled doctors both perform the same procedure, one doctor could theoretically charge much more than the other, without a reduction in patients, because the cost of the health care doesn't really factor into the patients' decision-making.How often does that happen now under the current system? What prevents one doctor charging more than another doctor for the same procedure today? Do insurance companies allow doctors to behave the way you describe or do they state up front how much they will pay for particular procedures? Quote:Original post by CDPropNow, one could argue that the government, can counter-act this by enacting some cost-cutting measures, such as refusing to cover procedures that offer insignificant benefits over much-cheaper alternatives, and refusing to cover doctors that charge more than a fair market value.My concern with this, though, is that the government has no real incentive to actually do this. Contrast this with insurance companies, who have to do these things in order to protect their own existence. The government, with almost unlimited borrowing power and the ability to raise taxes, can, once the bill is passed, break all of these promises knowing that the people, by and large, are too apathetic to actually oversee this thing and make sure that their elected officials are doing a good job.The government has no real incentive to keep costs down? Politicians want to raise taxes again and again to pay for ongoing waste in the system? Not in this country. Raising taxes in this country is like pulling teeth. Obama calls for raising the top tax margin 3% and gets labeled a socialist for it. The thing is the government doesn't need to make a profit, so 20-30% would be cut right off the top. Insurance companies enact cost-cutting measures to increase their profit margins, not to pass the savings along to consumers. The fact is that if private markets worked they way their advocates claim, the health care system in the US would not be broken. The US would not spend twice as much per capita as the other industrialized nations do. Quote:Original post by CDPropDon't get me wrong. I understand the moral need for universal health care, and I want to believe that it can work. But many seem to be going beyond the moral argument, and are arguing that there is an economic need for universal health care, and I would really like to understand where they are coming from. Are there any good books on this, perhaps?This might be a good place to start: Physicians for a National Health Program Lobbyists in Washington have blocked single-payer from the discussion. It was kept completely off the table until a dozen doctors and nurses protested in the Senate and got arrested. This prompted progressive organizations to pressure Baucus to include single-payer advocates in the discussion, but by the time they weighed in it was too late. What remains of their effort is something called "the public option" - which is basically a limited expansion of medicare. Even this scares the health insurance industry, at least, that's what their complaints about potentially having to compete with a public plan look like. Ironically, they talk up the benefits of competition even as they demand that Congress limit their competition! Without a public option there is no reform, there's only cosmetic changes. Sadly, the public option appears to be headed towards a merger with something called "an individual mandate", which is newspeak for forcing people to buy health insurance the way car owners are forced to buy liability insurance. In my view that would amount to a poll tax (which makes it unconstitutional). It also appears that Congress is looking to pay for health insurance by taxing the health insurance benefits that people get through work. That was McCain's health care proposal during the election last year. The individual mandate was part of the Massachusetts plan that Romney put through. It seems to me that something is really wrong with Congress when the reform plans of two losing candidates ends up as the leading proposals in the reform. That says to me that big business has been twisting and cajoling Congress and the media into promoting reforms the public does not like and gutting reforms they do like. Congress belongs to big business and could not care less what the people want. In Poll, Wide Support for Government-Run Health Quote:...The poll found that most Americans would be willing to pay higher taxes so everyone could have health insurance and that they said the government could do a better job of holding down health-care costs than the private sector....Across a number of questions, the poll detected substantial support for a greater government role in health care, a position generally identified with the Democratic Party. When asked which party was more likely to improve health care, only 18 percent of respondents said the Republicans, compared with 57 percent who picked the Democrats. Even one of four Republicans said the Democrats would do better.The national telephone survey, which was conducted from June 12 to 16, found that 72 percent of those questioned supported a government-administered insurance plan — something like Medicare for those under 65 — that would compete for customers with private insurers. Twenty percent said they were opposed. ...Three of four people questioned said unnecessary medical tests and treatments had become a serious problem, suggesting that they would support calls by health researchers for a payment system that would better reward appropriate care. But an even higher number, 87 percent, said the inability of people to have the needed tests and treatments was a serious problem. One in four said that in the last 12 months they or someone in their household had cut back on medications because of the expense, and one in five said someone had skipped a recommended test or treatment....Is this the Krugman column that inspired your question? Health Care Showdown (June 22, 2009) His remarks seem partisan, but he doesn't spare the Democrats. Quote:...The real risk is that health care reform will be undermined by “centrist” Democratic senators who either prevent the passage of a bill or insist on watering down key elements of reform. I use scare quotes around “centrist,” by the way, because if the center means the position held by most Americans, the self-proclaimed centrists are in fact way out in right field....He also reaches the obvious conclusion that bipartisanship has become a losing proposition. There is no purpose in compromising with people unwilling to compromise. What you end up with in that situation is deform, not reform.   ;  Collectivised Healthcare will cause the same problem that collectivised farming caused in Russia.State Treatment rationing kills.   ;Quote:Original post by LessBreadIt also appears that Congress is looking to pay for health insurance by taxing the health insurance benefits that people get through work. That was McCain's health care proposal during the election last year. The individual mandate was part of the Massachusetts plan that Romney put through. It seems to me that something is really wrong with Congress when the reform plans of two losing candidates ends up as the leading proposals in the reform. That says to me that big business has been twisting and cajoling Congress and the media into promoting reforms the public does not like and gutting reforms they do like. Congress belongs to big business and could not care less what the people want. I agree that McCain's idea was stupid as health-care reform.  Taxing companies more who offer health benefits is just going to push healthcare costs out of reach for many employers, who will simply stop providing them.  This results in more uninsured.(On a side note, I think it's utterly ridiculous that health benefits are tax-free.  Why doesn't my company pay my car insurance tax-free?  Flood insurance?  It's only a tax break because big business lobbied Congress for a way to provide competitive benefits during the wage-fixed years around WWII, as it was illegal for them to just pay their employees more.)What was I saying?  Oh yeah...Health care reform was one of many issues in the 2008 presidential election.  I would have voted for Romney if he'd made it through the primaries, but not because of his stance on health care (I had hoped he would be able to get the federal deficit under control).  I don't think Obama's presidential victory verifies that each individual portion of his platform was mandated by the American public.Besides, the President is not a legislator.  He's an executor.  Unfortunately, that little detail gets buried in all the excitement about raising up one grand idol on which we hang all our hopes and dreams.   ;Quote:Original post by LessBreadQuote:Original post by CDPropMy concern with this, though, is that the government has no real incentive to actually do this. Contrast this with insurance companies, who have to do these things in order to protect their own existence. The government, with almost unlimited borrowing power and the ability to raise taxes, can, once the bill is passed, break all of these promises knowing that the people, by and large, are too apathetic to actually oversee this thing and make sure that their elected officials are doing a good job.The government has no real incentive to keep costs down? Politicians want to raise taxes again and again to pay for ongoing waste in the system? Not in this country. Raising taxes in this country is like pulling teeth. Obama calls for raising the top tax margin 3% and gets labeled a socialist for it. Since when has an insufficient tax base prevented a politician from spending money? The national debt and our deficit is pretty good evidence of that.Quote:The fact is that if private markets worked they way their advocates claim, the health care system in the US would not be broken. The US would not spend twice as much per capita as the other industrialized nations do. Bullshit. The problem US health care system is NOT a fault of private industry or capitalism. It's a product of government interference of private industry and capitalism. Hospitals are required to treat everyone that comes to them, not just those who can pay. So the cost of those who can't pay, are shifted to those who can. Plus, the insurance companies have so many requirements passed on to them from state legislation that it becomes impossible for them to offer cheap coverage.I'm not saying that hospitals shouldn't be required to provide treatment, I'm just pointing out that it isn't simply a failure of capitalism if they can't provide cost effective service with that sort of interference. No one would expect any other sort of business to provide cheap service if they had to provide their service for free to people who couldn't afford to pay them. It's ridiculous to think that hospitals should be able to. Hospitals are a public service and should be treated as such. The majority of hospitals should be public and not run for profit. Of course there would still be room for some private hospitals if they could offer care and service above and beyond what a public hospital could offer (which would most likely be the case) but the majority of people would be able to go to a public hospital without any direct cost to them.The idea that you can just have a single payer system where all this money is going to private industry without any control over pricing is absurd. Fix and control hospital costs, and then you'd have a system where either, insurance would be easily affordable, or a single payer system that wouldn't be extremely expensive.   ;Quote:Original post by ROBERTREAD1Collectivised Healthcare will cause the same problem that collectivised farming caused in Russia. State Treatment rationing kills.Since you live in a country that collectivized it's health care system why don't you tell us how it's become like Russian collectivized farming? And please also tell us where you go personally to get health care when you need it? Do you use the NHS yourself? If so how do you rationalize away that hypocrisy? Has state rationing killed anyone you know? Here's your chance to tell us your horror stories. For what it's worth, there is little call for collectivizing the health care system. What people are calling for is collectivizing (your words) the health insurance system. In other words, the call isn't for the government to take over the hospitals and put every doctor on the payroll - the way that the UK does it. Portraying single payer health insurance as socialized medicine is a common bit of misinformation put forward by defenders of the status quo. ;  I'm from Canada, where we have universal health care, but I'm no expert on the logistics behind it, but here's some points I can see from my vantage:Quote:Original post by CDProp...And this, in turn, eliminates any incentive for health care providers to compete, cost-wise. If two equally-skilled doctors both perform the same procedure, one doctor could theoretically charge much more than the other, without a reduction in patients, because the cost of the health care doesn't really factor into the patients' decision-making.Now, one could argue that the government, can counter-act this by enacting some cost-cutting measures, such as refusing to cover procedures that offer insignificant benefits over much-cheaper alternatives, and refusing to cover doctors that charge more than a fair market value.Here's where Canada's plan doesn't work with libertarians in USA. Health Canada dictates what doctors can charge for specific operations, as well as what procedures Canadians can have. If you want more, you can pay for it, but you may not find the procedure available in Canada.Health Canada also refuses specific tests and medication if they are deemed too expensive for their benefit. There is currently a big stink going on in Canada where a test for lime disease is not being administered even though it is available in the USA. Canadians are going to USA to pay for the test themselves. Canada refuses to pay for it because it gives false positives, which leads to potentially harmful misdiagnosis and unneeded application of expensive medicine. It's in the governments best interest to keep costs low, so it doesn't provide the test. It has led to a couple of cases where patients are misdiagnosed in the other direction - doctors fail to find lime disease. The lack of universal health care is the number one reason I have no interest in moving to the USA. When I was younger and thought myself invincible I was all set to go - but once I had a couple of health scares, and my family started aging, I realized how expensive and stressful a lack of health care can become. Furthermore, I have American family who all live in Canada now because they have a genetic condition that predisposes them to an illness - they may never get it, but health insurers in the USA refuse to insure them. Their quality of life in the USA was miserable and they are were not even sick! One of them had a test to determine that they were not predisposed to the condition, but it had to be done in secret so they wouldn't immediately get their insurance revoked!Now, to be fair, the Canadian health care system is deemed 'in crisis' - it needs more funding and additional staffing - there is a huge shortfall of employees for the field. But there's nothing like walking into the ER with sever injuries and getting all the care you need without someone stopping to ask you if you are insured. Sometimes you do have to wait for quite a while.I consider the Canadian government there to make sure the nation runs smoothly, and let me live my life. I don't want to sweat health insurance long before i need it - nor do I want to worry when I do.At it's root, the history of the America will never allow universal health care - it is too invasive to peoples live, and too restrictive of their choices. It is a base difference between United States and Canada.Economically, I feel it makes sense when you consider that Health Canada does everything it can to keep people healthy with focuses on preventative medicine, anti smoking campaigns and the like - instead of letting them get ill and ending up in hospitals, which is hugely expensive.   