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« Problems in the Reserve Component | Main | Iran Tortures Bloggers » December 27, 2004Why Government Health Care Won't WorkA number of people on the left seem to believe that the government could provide health care to everyone if it only chose to do so, and that to not do so is somehow cruel or inappropriate. I suppose that it’s not impossible for government to provide some semblance of health care. But would it be effective? Would it be a system under which anyone would care to live? Let's say that we start by just giving everyone a government guarantee of health care: if you don't have it, the government will give it to you. Sounds reasonable enough: we're just protecting the most vulnerable members of society by guaranteeing them an important resource. This new health care provides only basic care, to keep costs down: let's say an annual checkup and visits to the doctor as required by other medical problems, as well as covering the cost of your chronic and acute medical problems. The annual checkup helps to keep costs down by trying to head off medical problems at the pass, while the ability to see a doctor as necessary ensures that people don't have to skip care simply because they can't afford it, so problems don't get worse and people don't end up in the emergency room for non-emergency care. This strikes me as a reasonable plan to provide basic care to those Americans who don't have it, although I'm sure that it would require some work around the edges. What happens next? Well, there are roughly 44 million Americans without health insurance, so we’ve now added that many people to the rolls. We’re going to assume that they’re relatively healthy; perhaps an unwise assumption, but I don’t want to be accused of stacking the deck. So we’ll assume that, in addition to one annual checkup, the average new recipient sees a doctor once a quarter for various ailments. That’s 220 million additional doctor’s visits a year, including the checkups. How many doctors does it take to address an additional 220 million visits a year? Let’s say that the doctors work 40 hours a week for 50 weeks a year (2,000 hours) and can see a patient every 15 minutes. That allows each doctor to see 8,000 patient-visits a year, so we’re looking for 27,500 doctors to address these additional requirements. That’s a lot of doctors. Let’s scale back our requirements: let’s say that the average health care recipient only goes to the doctor three times a year, once for a checkup and twice for other ailments. That reduces our need from 220 million visits to 132 million visits, which means a need for only 16,500 doctors. I’m going to assume that a third of those doctors can be addressed by having current doctors take on additional patients, so we only need 11,000 new doctors. How do we come up with new doctors? We’ve got to encourage more people to attend medical school. How do we do that? Probably a mix of increased pay and decreased costs: subsidies for medical school, tax credits for student loans, tax credits for buildings and office space devoted to medical purposes, and higher fees for medical practices to encourage people to take up the stethoscope. We can also extol the virtues of those who choose the medical profession, to create non-material rewards for choosing the profession. And we can hamstring tort law in the hopes of encouraging doctors who have left the field to return to it (although this is a risky alternative, since tort law often provides us with our only recourse to true medical malpractice). Getting an additional 11,000 doctors on the streets will probably require a mix of all of these practices, and may also result in lowered standards, recalling the old joke about what you call the guy who was last in his class at medical school. For the sake of this thought experiment, however, we’ll assume that we’re able to entice an additional 11,000 people to become doctors without lowering our standards of care. These changes will not end our problems, however. If we increase the cost of medicine, we increase the costs of our notional program (astute readers have no doubt noticed that I haven’t yet even addressed how to pay for the initial program). We’ve got to pay more to doctors in order to encourage more people to become doctors, which means that our program is not only costing the public more money in taxes, but it’s costing all other health care providers more money to provide identical services. Given that government has already guaranteed to cover those people without health insurance, increasing costs will inevitably lead to people losing their coverage. It will become cheaper for businesses to offer their employees additional money rather than health benefits, since health benefits will no longer be such a valued commodity. More and more Americans will move from the private rolls to the public rolls, assuming we’re not willing to allow anyone to go without health insurance. The costs of the public health care program will spiral upwards as the economy adjusts to the government guarantee, until it reaches an equilibrium with the vast majority of Americans (probably all of them, actually) move onto the public health insurance program. We now have a universal health care system in place, and every American has health insurance taking care of them. With everyone now in possession of ‘free’ health care, doctor’s visits will soar. Right now, most people don’t go to the doctor every time they have a problem, because they can’t afford it. That can be unfortunate, but the reverse isn’t any better. When people can go to the doctor without paying for it, people are more willing to see a doctor for their ailments, even minor ones that do not require professional medical care. See both Britain and Canada for examples of this in action. This means that those 132 million additional doctor’s visits I mentioned above begin to move upwards rapidly, overwhelming the ability of the available doctors to address. So we need additional doctors to cover the increase in demand. Trying to squeeze more doctors out of the population may be possible, but only at the price of significantly increasing the cost of medicine and further increasing the costs of our idealized health care system. Once again, we’ll assume that somehow we’re able to conjure new doctors and nurses without sacrificing any of the quality of care, and we’ll ignore the problems caused by the surges in demand that cannot immediately be matched by surges in capacity. The bottom line remains the same: this new health care system will become phenomenally expensive in very short order. Right now we spend some $1.5 trillion annually on health care in America. The federal budget runs about $1.8 trillion (removing $600 billion already being spent on Medicare/Medicaid). So this universal health care system will increase the budget by roughly 30%, a figure I think we can agree is no small sum. Increase those costs by even just 10% for increased demand in the face of ‘free’ health care and that’s an additional $150 billion in federal spending every year. So we’re going to have to come up with some combination of tax increases and borrowing that adds up to $1 trillion a year to pay for this health care plan, even in a conservative estimate, meaning we need to increase inflows by almost half. Any thoughts on how we’re going to increase taxes and borrowing by 40%? Maybe we should place caps on what we’ll pay for procedures, then. Calculate a fair price for an MRI or 15 minutes of a doctor’s time, and pay that and no more. An interesting idea, but it runs afoul of prior experience. Regardless of what one pays for a medical procedure, the cost remains the same. By cost I’m referring to what it takes to actually perform the procedure: the time put in by the doctors and nurses, the equipment used, the supplies needed, and so on. I may not charge you a dime for an appendectomy (which, given I’m not a doctor, is still overcharging you), but that won’t change the resources necessary to perform the surgery. Unless you’re willing to repeal the 14th Amendment, you can’t force people to do that sort of thing against their will. So if what you’re willing to pay isn’t enough to cover their costs (and a little something for their trouble), they’re not going to do it. We already see that in the growing number of hospitals that simply don’t accept Medicare. The fixed price is lower than what it costs the hospitals to perform the procedures, so they stop performing the procedures. Call them greedy if you like, but any business that runs at a loss will eventually go out of business. Having a number of hospitals go under strikes me as decidedly counterproductive when the system is already short on medical care. Our current health care system has a vast number of flaws. But it simply isn’t possible to have the government wave a magic wand and suddenly create more health care where it doesn’t exist. Medicine is already a reasonably lucrative career; the rising demand for health care ought to be driving more and more people into the field. The fact that it isn’t suggests that the incentives the government would have to offer to find all the new doctors I mentioned above (not to mention nurses and administrative personnel, whom I glossed over here) would be considerable. Not necessarily insurmountable, but the costs would be much higher than what we’re spending now. (For those who would like to argue that we could lure decent people into medicine without having to spend more, think again: those people are already in the profession. Those who have chosen not to become doctors and nurses have done so because the rewards don’t meet their threshold.) My estimate of a 40% increase in the budget is conservative: it could easily surge to twice that, or worse. Unless we install some rather draconian rationing, that is. Rationing is what the market does already: if a good is scarce, it goes to whoever is willing to pay the most for it. But if everyone can get whatever medical procedures they need without regard to cost that system doesn’t work for us any more. That doesn’t change the fact that there is a shortage, however: it just changes how we deal with that shortage. Instead of using price as a differentiator, the system can either use time (first come, first served) or some method of rationing care. The latter method would probably be the method selected, as it would give a greater appearance of equity. If you have one heart available for transplant and it can either go to a 90-year old man or a 20-year old woman, few would consider it equitable for the man to get it simply because he was first in line. Better to give it to the woman, since she’s more likely to get the most use out of the procedure. As for the man, while it is unfortunate for him, from a strict cost-benefit standpoint society is clearly better off using limited resources for the most gain, and a heart given to a young woman will result in far more years of life (on average) than a heart given to an old man. Rationing decisions will not always be so easy, however, and there will doubtless be innumerable reports of disparities in treatment and flaws in the system no matter how scrupulously and fairly it is administered. This is because systems that rely on value judgments are by their nature neither perfect nor perfectible, and therefore will always have outliers critics can point to. (Observe Captain Ed’s capture of a Boston Globe report that highlights the failures to prevent crime in a report that is forced to note that crime overall is down.) Ultimately, a rationed system becomes a system in which almost nobody is free to decide how they will be treated, because treatment is doled out in accordance with government norms. The rich will still be able to get treatment, because they can pay for it, but the vast majority will have to accept what they get from the government. Government health care is a wonderful idea, except when we try to put it into practice. But as Robert Heinlein so succinctly put it, there ain’t no such thing as a free lunch. Shifting the costs of health care onto the government (which is ultimately funding by all of us anyhow) would simply cause the costs to rise, because by reducing the perceived price, we would increase demand. We would end up with a bigger problem than if we had simply left well enough alone. I don’t know what the solution to our health care problems is. But I am quite confident a government health insurance plan will not do the trick. Posted at December 27, 2004 08:42 PM
Trackback PingsTrackBack URL for this entry: CommentsI don't really know how to respond. You present a good and well thougth out argument though. I will just say that it seems to me that more companies, at least around here, are beginning to drastically cut or stop offering health care to their employees. My wife's work has gone from having health care that encouraged people to work there, to just being average. Next year they are adding on a $150 per month for employed spouses who have access to insurance, but go through her company. The cost is already getting out of control. It is a great argument that those who can afford services are the ones who should use them, but what about the near 25% with no health care. I am no economist and I am not bothering to check for facts this morning, but isn't giving antibiotics for a cold cheaper than treating pneumonia. Contrary to how many try to portray the left, I would prefer not to have government in control of most things. I just also prefer a country where we live by Theodore Roosevelt's theory that "we will be judged by how we treat the lesser among us." I think that if doctor's are getting into the business strictly for profit, then I don't really wnt them treating many people anyway. As a group, I think doctor's do alright for themselves. Then again, if we just let those 25% die, we can save money and free up space for more shopping centers and high rent condos. Posted by: Scott at December 28, 2004 07:25 AM I'm a "leftie" who strongly opposes putting the government in charge of our health care. You have a lot of great arguments - I’d just add something about the VA system. You should see what my grandfather (WWII vet) has had to deal with trying to get government health care. I can’t imagine the general population being happy with that sort of system. I can confirm your supply and demand analysis – I worked for an HMO for a long time, and watched our rate of non-emergency visits to the ER drop dramatically as soon as we added a $50 copay. Most interesting was the drop in the number of children with ear aches getting brought to the ER between 6pm and 8pm; with the $50 copay in place, parents suddenly found the time to get their kid to a regular doctor’s office during office hours instead - a much less expensive (and more appropriate) treatment option. If Americans actually wanted HEALTH (as opposed to health care), there is so much we as individuals could do without any government spending or intervention what-so-ever. For example, obesity costs us over $100 billion per (direct + indirect costs), and a similarly obscene amount is spent on smoking-related illnesses. These costs would go away if Americans made a few simple lifestyle changes – quit smoking, get regular exercise, eat a balanced diet, maintain a healthy weight – and fewer Americans would find themselves suffering from heart disease, diabetes, lung cancer, and other horrible chronic and acute diseases. Unfortunately millions of Americans choose to be self-destructive when it comes to their health – >60% overweight, >25% smoke - and then they expect others to pay the bill for their damage. Posted by: Heather at December 28, 2004 09:35 AM Well, there's lots to say but let me point out just one glaring flaw in your reasoning. Some of your calculations are based on the idea that we'd have to create additional incentives to get people into medicine. I don't think this is correct. Right now the AMA has a stranglehold on medical school admissions. The number of people accepted into medical school is far smaller than the number who apply. The AMA will tell you that this is done in order to ensure quality. But it could be argued that, by imposing these admissions quotas, the AMA is simply trying to prop up medical salaries. I suspect there's some truth in both claims. In any case, my point is just that we could easily produce 20,000 more doctors, and probably without a substantial decrease in the quality of medical care. After all, it's estimated that 100,000 people die annually from correctable medical errors (e.g. wrong dosages, wrong medicine). How much worse can it get?
Posted by: Mike at December 29, 2004 03:21 PM Mike, you're a picture-perfect example of what I've seen all too often in my military career: you think you've found a single flaw in my argument, and therefore you needn't discuss it further because it must be wrong. In order to debunk the argument, however, you have to do two things: one, you've got to demonstrate that the alleged error is vital to the argument, and two, you've got to demonstrate that the error actually exists. You're 0-for-2. It is possible we could entice the doctors we need without increasing the rewards doctors currently receive for their position. I think the number of people leaving medicine for other fields suggests that, AMA tampering with the number of people going into medicine aside, there is going to have to be some improvements in remuneration before we'll have as many doctors as we want. But let's assume that you're right, and we can somehow magically get the number of doctors we need simply by removing these quotas. Does this invalidate my argument? Not at all. This does nothing to address the other problem government health insurance creates: increased demand. As soon as it's 'free,' you're going to see a significant uptick in the number of people going to see the doctor. Even assuming we can continue to generate doctors to handle the increased need without raising the rewards of the profession, costs are going to increase. At some point, the system simply isn't going to be able to cover the costs (Medicare is already at this point), at which time the bureaucrats step in to ration health care. Even stipulating your assumption we can somehow magically come up with as many doctors as we need to handle demand (a silly assumption), the costs of universal health care will render the system untenable in very short order. Let me explain it as simply as I can: if it costs $50,000 to cover one doctor's expenses (a very arbitrary number), even if you can keep that figure the same, 20,000 additional doctors means an additional $1 billion in costs. And as a wise man once observed, a billion here, a billion there, pretty soon you're talking about real money. I don't expect to ever convince you of this, but it is true nonetheless: there's no such thing as a free lunch. Government taking over health care will not provide better health care for all. It will provide slightly better health care for the very poor, and significantly worse health care for the middle class, with a net decline in the quality of health care for all. Now if you're willing to make that tradeoff, that's your business. But don't drag the rest of us down with you. Posted by: Andrew at December 29, 2004 04:49 PM Andrew, It's becoming harder to take your bad manners with good humor. I never suggested that I had debunked your entire argument. All I said was that I am going to point out a flaw in your reasoning. I didn't say it was a crucial flaw or your argument's lynchpin. And as far as I can tell, it is a flaw. In any case, health care is a complicated subject and it's folly to think that you could convincingly show that universal health care won't work in just several paragraphs. At best, you've raised a few problems that any universal plan will have to address to be viable. But surely you can't believe that you've conclusively shown that these problems are insurmountable.
Posted by: Mike at December 30, 2004 03:14 PM Mike, If I have insulted, I apologize. Perhaps I misunderstood your comment, but when you claim a glaring flaw in my reasoning and leave it at that, I assume that you believe that flaw has debunked my argument. I note that once again you have asserted that my argument is inadequate, but you have made no attempt to actually address the argument as such. I point this out not to be rude, but simply to note that it is difficult for me to see the point of continuing a debate if the other side refuses to present an argument. Telling me that you can't 'convincingly show that universal health care won't work in several paragraphs' isn't argument, it's assertion. If you believe that these problems are surmountable, I look forward to you showing how. But the belief that somehow we're going to have to consume barrels of ink to demonstrate that something is impossible is unfounded. This is a simple question of math. The only way universal health care can work is if we ration health care. We simply can't afford to pay for unlimited health care for all. Can we agree on that, at least, or do you believe that the government could somehow provide as much health care as everyone wants? Assuming we agree on that, then we have to ration health care, or go to a first-come, first-served system. Perhaps there's another way to attack the problem, but I can't think of one: either we decide who gets first crack at the available health care ahead of time, or we let the early bird get the worm, so to speak. In either case, many people who seek health care will end up not getting it. This isn't just theory. Take a look at the health care systems of Canada and the United Kingdom. In both nations, people have to wait for months for even urgent medical care. If I'm not mistaken, I believe there are even documented cases of people dying while on a waiting list for a doctor's appointment. I do not consider that an effective health care system. In fairness, my title probably oversells the case, since whether or not a new health care system 'works' will depend on your perspective. If your health care consists entirely of hitting the ER for your medical needs, a government universal health care plan will seem a marked improvement. If, on the other hand, your health care plan now gets you routine and emergency care, the government proposal is a marked step down. So perhaps I should call this essay why universal health care won't work the way utopians think it will. Again, this really isn't as complex as you want to believe. There is a limited supply of medical care available in this country. Taking medicine out of the free market would change the rules so that the government determines who gets care rather than price, but it wouldn't change the supply. A universal health care system would probably increase demand without increasing supply. But even if the supply were increased somewhat by increasing the number of people going into the medical field, the increased supply would still be swamped by the increased demand. I look forward to your explanation for why this assessment is incorrect. Posted by: Andrew at December 30, 2004 03:37 PM Andrew, Sorry for my terse replies. I'm away from home right now so my computer access is rather sporadic, but I do want to engage with you on this issue. I'll be back home on the 2nd and I'll post a thorough reply then. As for my use of "glaring", I meant it as a synonym for "obvious" rather than "fatal". Talk to you soon.
Posted by: Mike at December 31, 2004 02:31 PM Great assessment of the potential for government run health care. We can already see some movement toward health care rationing in some of the states. I believe Oregon now has an age limit for some of the procedures now carried out. I suspect that the elderly will pay a great deal of the price if we do go to universal health care. Something like a quarter to a half of all medical spending is now done in the last six to twelve months of a persons life. The argument will go that if we stop spending money to provide this 'short term' benefit, we can afford to spend more on younger people. Can't argue with the thesis but that doesn't make it right. If anyone examines the Canadian or English systems they will find long lists of people who are waiting for elective surgery. Some, with cancer or heart trouble, will and no doubt have died before their name came up. It is also true that lots of doctors from both countries have emigrated to places where they are freer to practice without the restrictions placed on them by socialist governments. If we open up the medical schools, we will begin to get less capable doctors practicing medicine. This is a fact of life. Not everyone who wants a career in medicine is suited for it. Who would you rather have taking care of you, someone from the top or the bottom of the class? I don't have any answer on how to improve medical care to the population as a whole. Like our government, the system we have [democracy] may not be the best system but it is the least bad one we have discovered. Hopefully, over time, as we understand the impact of genetics on disease, we can learn to correct some of the worst diseases through gene therapy. This is decades away at best. Posted by: dad at January 2, 2005 02:49 PM Okay, now that I have some free time let's go through your post step by step. Here's a brief reconstruction of your argument in the form of premises and a conclusion: 1) In order to insure the 44 million people without health insurance, we would need more doctors. I think you make some good points, but overall I'm not convinced. As I explained earlier, I think premise (2) is very dubious. And if (2) falls, then so does (3). And if (3) falls, (4) becomes highly questionable. In addition, I am also not convinced by (5). And if (5) falls, then (6) and (7) don't look so good. In short, I think your argument is weakest where it needs to be strongest, namely at premises (2) and (5). I already explained the problem with (2). The fact is that the nunber of applicants to medical schools far exceed the number of attendees. Many people desire to be doctors, but few are granted the opportunity. If the AMA were forced to accredit more programs we could have all of the doctors we need without increasing their salaries. Of course, by accrediting more medical programs we run the risk of reducing the quality of health care. But exactly how much would quality be reduced if we trained an additional 15,000 doctors? Frankly, I have no idea. Here we brush up against a possible philosophical disagreement in that I'd be willing to tolerate a slight reduction in quality if this would produce universal coverage. We can debate this further if you like. Now let's consider premise (5). As I'm sure you're aware, part of the reason why health care is so expensive is because people see doctors for frivolous reasons. Because a third party (insurance) foots the bill, there is little to discourage individuals from pursuing unncessary health care. After all, if, say, 10% of patients overuse the medical system, everyone's insurance premiums are raised. That being said, I trust that you're also aware that insurance companies have devised methods to control this phenomenon such as co-payments and deductibles. In principle, there's no reason why a government run system couldn't do the same. A legitimate worry is that the use of co-payments and deductibles would harm the very people the system was trying to help -- namely the poor. But I'm confident that a system of disincentives could be structured that was both fair to the poor and prevented people from overusing the health care system. Finally, let me note that you only point out the possible costs of a government run system and none of its potential benefits. I'm not especially knowledgable on this topic, but some possible benefits include:
Posted by: Mike at January 2, 2005 07:55 PM Post a comment |
