Friday, May 15, 2009

One of my Progressive Friends on Facebook...

mentioned that he was concerned that "health care reform" might be derailed by industry pledges to contain costs.

I didn't press him on the issue, but it seems to me he means one of two things:

A) He doesn't believe the folks who say costs can be contained with the current system.

B) He doesn't care about containing costs per se. Rather, he's concerned with universal access.

If he doesn't believe pledges to contain costs, I can't say I blame him. The rise in health care costs in my lifetime (I'm 38) has been staggering. What used to be an afterthought in family budgets has become the second largest expense after housing (in some families it's now #1). That begs the question, "why are prices increasing in excess of inflation?".

As a general matter, inflation is caused by too much money chasing too few goods. Think of frontier mining towns in the 1800's where goods go for prices that would make your jaw drop today. The goods were scarce and money was plentiful. Roughly the same thing has occurred in medicine (and education) over the last 40 years. Supply has been tightly controlled in a number of ways. American medical schools graduate roughly the same number of doctors they did in 1960. In that time the U.S. population has doubled and we've gotten older, demographically speaking. We've managed to keep pace (sort of) by importing every English speaking doctor we can lay our hands on. Nevertheless it's undeniable that medical schools and the AMA which accredits them have operated as a cartel to maintain an artificially high price for health care. At the same time government has poured enormous sums into the health care industry, in part to make it more "affordable". In fact these efforts have had the opposite effect.

There are other culprits of course. Trial lawyers have imposed enormous burdens on those who practice medicine (and those who insure them). That's not to say people with real injuries don't deserve to be be made whole, but too often any undesirable medical outcome is seen as an opportunity for a payday. It needs to stop.

Finally, mandates from government tend to drive costs. When general political considerations trump specific medical judgments, cost containment is bound to be challenging at best. Of three health care programs currently run by the government: Medicare (health care for the elderly), Medicaid (health care for the poor), and the VA system (health care for veterans) none can be thought of models of fiscal probity and cost control. In fact medicare costs are so far out of control that they threaten to bankrupt the country. How then will extending medicare to everyone contain costs? If anything it will just add further strain to a badly malfunctioning system.

The access to argument on the other hand, seems stronger to me. Many Americans are filled with genuine fear of illness and the attendant costs. The prospect of losing one's health insurance when out of a job horrifies people from countries with single payer or government run systems. We are told that 47 million lack health insurance at any given moment, though I'm unclear as to how many of those are foreign nationals. Given that we have roughly 20 million illegal aliens in this country, it seems likely that a substantial portion of the uninsured aren't Americans at all. Of the rest, many are young and healthy and they perceive health insurance as a luxury good. If they show up at an emergency room with a broken wrist, they either pay out of pocket or don't pay at all since they law requires that they be treated in any case. They are in effect, free riders who are betting that they wont get cancer, diabetes, or something else similarly expensive...and for the most part they are right.

The people who really get screwed in the current system are those with long term illnesses. When they change insurers it can be extremely difficult for them to get coverage for their disease. Two decades ago when AIDS was killing a lot of people I knew, many of them told me how difficult it was to change jobs, particularly if they were thinking of working for a small business. The impact of one AIDS patient could make an employers insurance premiums unaffordable. This led to employers being hesitant to hire those with HIV/AIDS, not out of bigotry (though there probably was more than a little of that) but in in effort to be able to afford health care coverage for the rest of their employees.

There are no easy solutions to the problems afflicting health care in the United States. If there were they would have been tried by now and some politician would be gloating about having done it. In some places, usually regulatory, I think government can serve a useful role. But for those who crave government run health care I have this question: what has government ever done cheaper and better than the private sector?

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