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Wednesday, October 28, 2009

Gee, just wondering...

Regarding the latest wrinkle in the health care/insurance debate, Michael Cannon points out:
Like the three “public options” we’ve already got – Medicare, Medicaid, and the State Children’s Health Insurance Program – Fannie Med would drag down the quality of care for publicly and privately insured patients alike. Yet despite offering an inferior product, Fannie Med would still drive private insurers out of business because it would exploit implicit and explicit government subsidies. Pretty soon, Fannie Med will be the only game in town – just ask its architect, Jacob Hacker.
Even those who can maintain their private coverage face this:

The story is largely the same from state to state, though the increases are smaller in the few states that have already adopted the same mandates and regulations that Democrats want to impose on all states. For the average small employer in high-cost New York, for instance, premiums would only rise by 6%. But they'd shoot up by 94% for the same employer in Indianapolis, 91% in St. Louis and 53% in Milwaukee.

A family of four with average health in those same cities would all face cost increases of 122% buying insurance on the individual market. And it's important to understand that these are merely the new costs created by ObamaCare—not including the natural increases in medical costs over time from new therapies and the like.

Can the gubmint do for affordable health care coverage what it did for affordable housing? I'd rather not find out.


Harry Eagar said...

Riddle me this.

One-sixth of the biggest economy in history already is devoted to supporting health care for five-sixths of the population.

How much would be required to do it right?

Why does no other country spend so much, proportionately, for so little?

Bret said...

It's the particular mix of wealth, size, non-homogeneous population, not particularly healthy population with not particularly healthy lifestyles, non-optimal tax incentives, and non-optimal regulation.

Susan's Husband said...

For how long would it be required? One day, one decade, or indefinitely? Economies are dynamic, not static.

erp said...

Harry, just to set it straight.

We are all supporting health care for 100% of the population.

What Obama is angling for is even more control of our economy via a phony baloney campaign about the lack of health care insurance by those who either don't want to purchase it or are already covered by Medicaid.

Susan's Husband said...

Let's drop this in the debate.

Harry Eagar said...

Guy, the fact is that the greatest innovations and advances in health care during my lifetime were financed and directed by Britain's National Health Service.

David on his health thread mentioned knee replacements as the most common procedure among old people. An import from France.

erp, we do not cover 100%.

Anyhow, none of you answered my riddle. Bret tried but did not mention (except possibly by implication) the 25% overhead charge for administration of payments.

erp said...

Harry, you're talking coverage again. Everyone gets medical care; everyone doesn't get covered (insured).

Do people like our congress critters get more and better medical attention than a homeless person?

Sure, but then CC's get better care than we do and we're paying over $12,000/yr for our Medicare, Medicare Deductible, Medicare Part D, BC/BS supplemental, incidental medical care not covered, medications not on the formulary and the dreaded donut hole when the maximum drug coverage is reached.

Susan's Husband said...

Mr. Eagar, the National Institute of Health and others disagree with your assertion. Perhaps you could provide specific examples of NHS developed medical innovations?

Howard said...

Affirming Bret's response I would also emphasize perverse tax incentives and the predominance of third-party-payer. Both were part of the unintended consequence of prior government actions. (Tax free compensation in response to WWII wage and price controls) This promoted health insurance plans which covered even routine care. Also, Medicare as structured contributed the the third-party-payer problem.

Arnold Kling presents some observations on these muddled incentives:

"Private health insurance in the United States, like government health insurance, insulates the consumer from the cost of medical care. Strong regulatory and tax incentives induce businesses to include a large health insurance component in employee compensation. Looking at how private health insurance operates in this country, and why it takes the form it does, I detect considerable influence from government policy. It is hard to tell what kind of insurance, if any, would emerge in a market unaffected by government subsidies, taxes, and regulations.

Overall, I would argue that on the demand side, the United States healthcare system is essentially socialized. The fact is that close to 90 percent of health-care spending is paid for by third parties, which means that individuals in this country generally experience a socialized process for obtaining medical services.

The United States deviates most from socialized systems on the supply side. What I believe is most distinctive about the U.S. healthcare system is that it combines fee-for-service compensation for healthcare providers with fairly unlimited access to medical services. This means that supply is limited neither by rationing nor by absence of compensation nor by any fixed government budget. Notwithstanding considerable regulation of medical practice, the supply of health care is relatively unsocialized.

The combination of socialized demand and relatively unsocialized supply explains one of the key facts about health care, which is that the United States spends far more on health care than other industrialized countries. We spend close to 17 percent of GDP on it, while other countries generally spend just over 10 percent. Because our GDP per capita is also higher than other countries’, the differences in healthcare spending are even more dramatic in terms of absolute dollars per capita. We spend almost twice as much per person on health care as many other industrialized countries."

There are of course many other facets to the debate including the potential for future innovation and the ability to adapt through trial and error processes. The suitability to American culture is also worthy of consideration.

Harry Eagar said...

I read your links. They don't contradict me.

I'm still wondering why $2.5 trillion isn't enough. How much would it take?

But I understand why Ross Perot is so rich.

David said...

Harry: Just because the IRS doesn't charge Medicare for collection and payment processing doesn't mean that it doesn't cost the government money.

Also, I'd add two items to Bret's list. First, we choose to spend a lot of money on healthcare compared to other countries. Some of that is a wealth effect and some is just revealed preference. Second, we allow pharmas to charge the market price, which makes our drugs significantly more expensive.

But basically I don't care how our spending matches up with other nations because the game is fixed. If we spent less than other nations, say 5% of GDP, I doubt that all the people now lobbying for national healthcare would complement us on our efficiency. Instead, it would prove the heartlessness of capitalism and the need for national healthcare to force us to spend more.

Harry Eagar said...

Maybe. But I'm not taking sides; I have no preference among the various proposals.

I just want to understand why the present system is so beloved.

erp said...


There's nothing beloved about the current health care situation.

Instead of giving the feds more power, we should be getting them out of health care and every other private sector area where they don't belong -- like manufacturing, farming, banking, schools, etc.

Howard said...

A meaningful portion of the electorate senses how reckless Congress has been and see the real possibility of passing legislation that makes things worse for many people. That is enough to elicit protest.

Howard said...


All good points including about the game being fixed. Do you have any estimates on the pharma partial free rider numbers?

Hey Skipper said...

I just want to understand why the present system is so beloved.

This sentence is a perfect example of why passive voice should be outlawed.