Thursday, August 27, 2009

what the health?

an op-ed i wrote on health care reform...

What the Health?

It was recently revealed at Congressman Barney Frank’s town hall meeting in Dartmouth, MA that Obama’s healthcare plan, covertly known to government agents as H.R. 3200, is actually a Nazi coup attempt against the American government. If only we’d known sooner. It has also been revealed that the proposed healthcare reform “will stop [the] rationing” of healthcare, which must mean H.R. 3200 will effectively limitlessly increase the supply of healthcare enough to satisfy every American healthcare whim thinkable. With that kind of supernatural power, I’m not sure I understand the need to pass a bill.

I am, of course, being sarcastic. This is not a Nazi plan and hopefully I don’t need to go into detail to prove that. But considering the source, the claim that this bill will end healthcare rationing approaches the same level of idiocy, which is why it gave me pause when I found it on the White House website’s healthcare reform “reality check” section. Anyone with a basic understanding of economics knows that healthcare is a scarce resource. It is impossible to satisfy the entirety of healthcare demand with a limited healthcare supply. Healthcare rationing, though it may take different forms, is inevitable. Anyone with a basic understanding of supply and demand knows that as the price decreases, the quantity demanded increases, or inversely stated, as the price increases, the quantity demanded decreases.

Pricing is a form of rationing, by willingness and ability to pay. For those of us romantically involved with the free market, a higher price conveniently provides a greater profit incentive to increase supply. Though healthcare is a unique product with unique characteristics, fundamentally healthcare is no exception. If the economic model is correct, and the quantity demanded increases exponentially with respect to a decrease in price, a nominal charge for doctor’s visits would make sense. Our neighbor to the north has learned this the hard way; where there is concern that some are using free Canadian hospitals as nursing homes. Even in France, caricatured as a bastion of socialism, there is a €22 charge to visit a general practitioner. It’s healthcare rationing.

As Peter Singer eloquently points out in his New York Times Magazine article “Why We Must Ration Health Care,” healthcare rationing in some form is necessary; be it price, queues, QUALYS (quality-adjusted life years), or even death panels. Without an unlimited supply, at some point we have to ask the question of how much we are willing and able to pay to increase the quality of life or increase its duration, and the answer has to involve tradeoffs. The healthcare reform debate should not be characterized by paranoid delusions of a socialist takeover versus free unlimited healthcare or callous profiteering versus altruistic selflessness, but over how best to ration the limited supply of healthcare. As far as I can tell, the healthcare reform debate has yet to fully recognize this.

Instead, the debate is being sabotaged by those on the fringes, who discredit and refuse to consider the merits of reasonable arguments. For those interested, I encourage you to examine the actual proposed bill, because I think it will become immediately apparent to you that partisans on both sides are full of… shenanigans. If you’re a healthcare fanatic, feel free to read all 1,036 pages, but I recommend reading and comparing a couple good summaries. Luckily, you can do all those things at Furthermore, if you are interested in my humble opinion, a proper analysis must recognize a few important points.

Healthcare in the U.S. is not a purely free market system. An AARP town hall meeting erupted in laughter when President Obama described a letter from an elderly woman that wrote, “I don't want government-run healthcare, I don't want socialized medicine, and don’t touch my Medicare.” As a Cato Institute article by Michael Cannon rightly points out, “government tax, spending, and regulatory policies thwart [the] conditions necessary for a [completely] free market.” There are the obvious examples of Medicare and Medicaid, but there are more subtle examples. The private health insurance system we have currently did not arise organically through the free market. It has been heavily subsidized by the government, probably beginning with President Nixon when he signed the HMO Act of 1973.

That brings me to my next point; our private health insurance system is likely not the best answer to the question of how we should ration healthcare. A report on healthcare jointly published by the FTC and DOJ during the Bush Administration agrees that “third-party payment of health-related expenses can distort incentives and have unintended consequences.” As far as I can tell, these distorted incentives render it in your insurer’s interests that you die having received minimal medical care throughout your premium-paying life. To a private insurer, it’s profitable to thwart any treatment costing more than the premiums they would earn through extending your life, and that still ignores quality of life considerations.

Finally, I’ll give you what I consider to be the most sensible framework for the debate. This is a debate about how to ration healthcare, and the greatest consideration should be equity versus innovation, or providing more equitable access to healthcare in the short term at the expense of better healthcare in the long run. Part of what makes healthcare reform such an emotional debate is that healthcare is necessary to extending life, like food. But consider the path of this analogous good. In 1870, even with 70-80% of the U.S. population working in agriculture, starvation was a real and constant threat. Today, the U.S. is one of the world’s largest food producers, and this is possible with only 2-3% of the U.S. population working in agribusiness.

Acknowledging that we can never be certain of hypotheticals, and that the government is actually heavily involved in agriculture, I tend to believe that more equitable access to agriculture in the past would have reduced agricultural profits and production incentives. Thus providing more equitable access to agriculture in the past would have been at the expense of the long run productivity and innovation from which we now benefit. Regarding healthcare innovation, to quote Will Wilkinson, “It’s just a fact that much of the world’s medical innovation comes from the U.S. This goes a good way toward explaining why survival rates for many potentially mortal health problems are highest in the U.S., and also partly explains why U.S. costs are so high.” As we were once in the throes of the agricultural revolution, the biotech revolution has now become common lexicon.

In summary, this debate is moral politics gone mad, while in actuality it should be an essentially administrative debate. The moral decision on whether or not to ration healthcare has already been made for us by reality. What we are dealing with is the tradeoffs involved in answering the question of how. In answering this question, be reasonable, and keep in mind a few points. The U.S. healthcare system is not a free market. If you have private insurance, there is someone between you and your doctor; it’s just not necessarily the government. The U.S. private health insurance system has obvious costs, and is likely not the best answer. And finally, although I believe the most important tradeoff to be short term equity versus long run innovation, I’ll leave you with a quote from economist John Maynard Keynes… “In the long run, we are all dead.”

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