• Priceless: Chapter 1

    I assume you know by now that I’m blogging my way through Priceless: Curing the Healthcare Crisis, by John Goodman. I also assume you’ve read prior posts (found under the Priceless tag). This post pertains to Chapter 1, which begins, “Forget everything you know about healthcare for a moment.”

    That’s what John wants. But I want you to do something different. I want you to not forget anything you know about evidence. In particular, I want you to insist that claims be supported by some and not take an anecdote or two as a sufficient basis for decision-making.

    My read of Chapter 1 is that it is full of unsupported claims and sprinkled with anecdotes. It being a book intended for the masses, I forgive John for that. Many other books for non-experts and with aspirations of policy import do the same, left, right and center. But we don’t have to be satisfied by it. John has no right to expect that we be. He also has the rest of the book to convince us. This is just Chapter 1, after all.

    With that as set-up, you’d expect me to deliver a thorough take-down of the chapter. I’m not going to do that. Instead, I ask that as you read it, keep an eye on what has a citation (and check the references if so motivated). Notice when you’re being encouraged to think a particular way by an anecdote. Stories sell. Buyer beware. Just saying.

    The point of the chapter is that the government (mostly) and health insurers (a little) — third party payers, basically — are ruining what would otherwise be a more efficient health care market. Maybe! Note that I wrote “efficient,” not equitable. There is a difference. Neither is the whole ballgame. Let’s keep that in mind too.

    But, back to John’s point. He claims that if third-party payers and all their regulations would just get out of the way, the market would be free to innovate, and we’d be better off for it. Maybe! Here’s one of his anecdotes about how private enterprise excels,

    Did you know that eHealth already has an electronic exchange, and more than 1 million people have health insurance purchased online through its system?

    I did know that, actually. Another thing I know is that Medicare has an electronic exchange too. It’s at Medicare.gov. There, every one of the nearly 50 million Medicare beneficiaries or trusted family members or friends on their behalf can compare health plans across dozens of dimensions, enter in their drugs to find the best deal for Part D coverage, change plans, and much more. You can navigate it to see for yourself, even if you’re not a beneficiary. I don’t know how this site compares to eHealth. My point is only that private enterprise is not the only entity that can produce an online exchange.

    Here’s another anecdote:

    [D]id you know that eHealth already offers many of its customers an electronic medical record (including a record of doctor visits, prescriptions taken, etc.), based on insurance payment records?

    That I did not know. But I did know that the Veterans Health Administration had one of the (or maybe just the) first electronic medical records, first developed in the 1970s by government employees and since then upgraded considerably. (See Phil Longman’s Best Care Anywhere for the history.) It’s open source and free to other organizations. I don’t know how it compares to eHealth, but at least one hospital CEO voted with his organization’s wallet for it. I also bet it existed well before eHealth. My point is that government was way ahead of most (or all) of the industry on this one.

    A point I am not intending to make is that government is better. Yet, see how anecdotes work? I could probably make that case with anecdotal examples like those above and convince many with it. (Again, see Phil Longman’s Best Care Anywhere.) That is not my ambition.

    I could respond to more parts of Chapter 1, but I’m sure some of the aspects that caught my eye will come up again. I’ll cover Chapter 2 on Wednesday.

    @afrakt

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    • I’m a health economic student in Australia (Master’s). I read the book on Wednesday, when I probably should have been studying for my Health Economics and Policy exam.

      I enjoyed it, but I think I’ll need to find some time to read the book more critically.

      I have substantive comments that I’ll try to post later in the week.

    • I’m not sure I agree with the central thesis of the book. It doesn’t necessarily matter if a system is too complex for an individual to understand. John used the analogy of a lab full of various chemicals that you wouldn’t dare start mixing. But mixing things together with uncertain results is science. I mean, they let me mix the chemicals, and I was an undergrad(!).

      I get it that policy making doesn’t occur in the controlled conditions of a lab. But should we ignore the results of pilot studies if they indicate that an intervention works?

    • Here is the main point (one that shouldn’t need any footnotes): We are all trapped in a dysfunctional system that gives each and every one of us perverse incentives. When we act on those incentives, we make costs higher, quality lower and access more difficult than otherwise sould have been the case.

      By liberating people (in ways described in later chpaters), we can free them of these perverse incentives and empower them to begin solving the problems of cost, quality and access.

      It isn’t that private is better than government (althought it often is), it’s that 300 million people — using their intelligence, creativity and innovative ability are going to find better answers than a few third-party payers, acting on their own and acting in their own interets. (Does that need a foot note as well?)

      • You seem to take as givens things that I find to be sometimes folkloric (Canadians seeking care by the hundreds of thousands) and sometimes simply false (insurance reducing access — as if the solution for a supply shortage [itself addressable in principled ways] is simply to defund part of the potential purchaser base), and even when you have citations, you sometimes 1) seem to read them quite differently than I do — the Rand insurance experiments, and 2) don’t recognize an obligation to demonstrate authoritativeness for unconventional readings and conclusions. Unconventional, you say, exactly, that’s the problem; but to me, you sound like a man as much in the thrall of a kind of pseudo science as you say is true for conventional policy thinkers — in its own right, a kind a side-handed insult. And you’ve set this book up so that one has to go many pages in before one sees a fully structured argument for your claims. So it’s reasonable for us — readers who are not here for a sermon, who want to see some structured argument — to be a little impatient.

      • A footnote? No, you’d need several dozen textbooks, and a few decades of journal articles, to boot.

        You know enough economics, John, to know the very specific conditions under which we can guarantee that those 300 million individual decisions will cumulate into the most efficient system–which, as others point, doesn’t exhaust the criteria that people in most advanced societies wish to apply to health system performance.

        If you wish to truly prove your case, then stop trying to claim it’s all self-evident at Chapter 1.

    • Given that the US health spending per citizen is twice that of the UK with no better health outcomes, I’d think you could make a powerful argument that we need an NHS.

      I just don’t get theoretical arguments that entirely ignore the evidence from the rest of the developed world. Yes, we have a dysfunctional political system and bloated government, but it’s not like the Brits (who spend half per capita what we do on health care for no worse outcomes) or the French (who spend less than 2/3 what we spend) are models of good governance and efficient delivery of government services.

      • I’m a family doc, and I’m all for it. As long as we also remake our malpractice system to be just like theirs as well.

        • If you have a system like the NHS, then malpractice suits are a lot less important. After all, if you don’t have to worry about who is going to pay for your medical care, you hardly have to sue over it.

          • I don’t agree with that statement.
            One vital disincentive in Europe is that “loser pays.”
            I’ve been named in one suit, which never made it to court because the family finally saw they didn’t have a case. What did it cost my malpractice insurance to pay my attorney? $20,000. I guarantee you, if the family would have had to pay that on the losing side, the suit would never have been filed in the first place.

            • Ron

              The principal in the UK (and Canada) in tort law is that the plaintiff pays 2/3rds (I believe) of the defence costs *as assessed by the Taxing Master*– you cannot therefore pad your defence costs (it’s a major issue for a law firm if they get caught so doing, with the bar society, at least if regularly).

              It’s a deterrent. A significant one to be sure.

              Lawyers here generally don’t engage in continent fees: ie no win, no pay.

        • Ron

          Malpractice is less than 10% (5%?) of US healthcare costs. Even adding in the cost of unnecessary tests and procedures compelled by the risk of malpractice suits, we are not talking big numbers. Maybe 10% of healthcare spending?

          What is true is that every segment of the healthcare provision chain (equipment, drugs, clinical staff, doctors) is paid less in the UK and Canada. Hence lies the problem in achieving reform in USA.

          • When discussing malpractice issues I think one must be aware of what community standards mean. Malpractice incentivizes physicians to over treat and thus that over treatment becomes ingrained into the community standard. Thus one has to count those costs as well to determine the actual costs of malpractice.

            Additionally 10% is a lot of money.

          • Since US Healthcare spending is 16% of GDP, 5% of that is a very big number (roughly 130-140 billion dollars). Wikipedia says that including indirect costs of malpractice suits, that estimates to range between 5 and 10%. I’m surprised it is that high. Wikipedia also claims that costs and premium rates have been declining recently.

            http://en.wikipedia.org/wiki/Medical_malpractice#Arguments_about_the_medical_liability_system

        • One component of Obamacare was a program to enable states to experiment with new ways to settle malpractice disputes and to reduce costs in that area.

          I don’t know if any states have made concrete proposals or started to implement anything, but I believe the idea was to think outside the box and find something more equitable than draconian damage caps, ala Texas, without unduly penalizing physicians and surgeons.

          I would be very interested to know if anyone has any information on any progress in this area.

          • In line with the NHS, I believe one of the most fundamental things we can do is mandate the use of a gatekeeper – the primary care provider (primary care physician, nurse practitioner, and/or physician assistant). Too often we Americans use specialists for no reason and seek out expensive medical technologies because we think that they are “better. ” Maybe the use of gatekeepers can drive down one of the biggest inflators of healthcare costs—medical technology.

    • I am hoping for more detail. The electronic records eHealth uses appear to be based upon insurance payment records. As a practicing doc, I am not exactly sure what I would get out of that. I would not have the results of any tests or studies. I would know what medicines patients are taking, except for OTC meds not covered by insurance. Overall, as described, I would not consider this very helpful. In order to save costs and improve quality, I need access to results and diagnoses. I need the names and places of those who treated patients in the past. I need the doses of meds used and responses to them. Not stuff I would expect to find in the records of insurance payments.

      All that said, if eHealth has found a way to get around or satisfy privacy requirements, then we could all benefit.

    • Austin, what is your evidence? We have seen government programs imposed where the evidence demonstrated the programs would not work. After failure those programs were adjusted but they never took into account all the incentives behind all the players and thus they have failed over and over again. I think John’s evidence in his book is a bit more substantial than what you have shown to date and certainly more substantial than the evidence of government failure.

      Beware of all evidence, but we have seen very little from the left that has stood the test of time and with regard to your reply I didn’t see any evidence at all, but perhaps that was intentional as you seem to have been pointing out the difference between anecdote and evidence which is well appreciated.

      Take ACO’s. Have the incentives changed?

      • Keep reading the series of posts on the book. I will provide evidence to support my assertions. In this post, I am not attempting to counter John’s claims (whether evidence-based or not). I am encouraging readers to read this chapter and find evidence-free claims. I am also noting that anecdotes don’t cut it, neither mine, nor his. Did I not make that clear? I really thought I did.

        I do not speak for the left.

        • I’m sorry, I must not have been clear. I mentioned that I appreciated your pointing out the difference between anecdote and evidence. I think that is a first step to any honest dialogue and was glad you made it.

          I do not know what part of the spectrum between left and right you represent. My recollection is that I have never seen your blog before. When I make this type of comparison I deal with what exists today and compare it to a proposal being made. Generally it will be a comparison between what the government offers (that I might mistakenly call the left) and what John offers unless in your criticism of John’s work you are offering something different. Please note that I have significant disagreements over some tangential issues with John in his first chapter that I have not mentioned because that is not part of the issue I am most interested in, incentives, which I believe are most predictive of what will occur when any law is passed. Incentives was the essence of my ending question in my earlier posting.

    • For markets in general certainly efficiency is the highest goal.

      When it comes to health and education and defense, equitable is the overriding priority in my book. There is simply no way markets can provide health care and education to people who can’t afford to pay for them. Right from the start I think anyone who advocates a market only approach is placing health care on the same status as laundry soap, automobiles, produce, and travel and entertainment. Consumers are way better at placing value on these things than they are on health care. Life effectively has infinite value, so ‘what the market will bear’ is heavily skewed in favor of providers.

      Having a healthy and educated population is as essential in my view as having a population that is secure from foreign invasion and meddling.

      I’m prepared to say ‘tough luck’ to people who can’t afford big houses, luxurious autos, fine wine, stylish clothes, vacations, lavish entertainment, or the many other rewards of economic success.

      But I’m not prepared to say tough luck to people who can’t procure their own health security or income security (for which education is a key factor). I could no more say tough luck to a northwestern or southeastern regional militia who was unable to fend off a foreign invasion. Anybody who can be satisfied in a system where they themselves has access to cadillac coverage, while millions of the less fortunate suffer without needed treatment is repulsive to me. I would rather have a system where everyone gets the same mediocre treatment than one where some people go entirely without. I just can’t see health and life as a reward or privilege of economic success, which is exactly what market based solutions do. The sun and rain fall on everyone equally, and since we have discovered these miracles of life we call modern medicine, we should do our absolute best to see that this miracle rains down on everyone equally as well.

      Competition works best when it is undertaken within a framework of rules and cooperation. That’s why every single professional sports league has rules, referees and umpires, and governing boards to settle disputes. Could you imagine a sport with no holds barred, a laissez faire competition where death might be the cost of failure? No thanks. We are better than that.

      Anybody who claims the free market is the answer for defense, education, or health care has a whole lot of explaining to do before I’ll even be interested.

      I can’t see how getting government out of the way is anything other than a license for the wealthy and powerful to autonomously and without restrictions pursue their goals in an undemocratic fashion with no need whatsoever to consider the interests or needs of any but those with wealth and property. In other words, it seems to me a plan to return to effectively a rebirth of feudalism and to crown a new aristocracy.

      To identify the faults of government and democracy, and they are many, does not constitute an argument for abolishing it or eviscerating it. For me it is an argument for fixing it. I simply can’t imagine living in a world where private profit motives dominate every decision effecting critical aspects of people’s lives, livelihoods, and futures, with absolutely no recourse to correct injustices. This seems every bit as horrifying to me as any nightmare Big Brother scenario one can concoct. A good balance of private and public power seems to me like just the right approach toward achieving important goals like health, education, and security.

      • Thank you Jeff, I think your first sentences sum up a lot about our health care debate.

        “For markets in general certainly efficiency is the highest goal. When it comes to health and education and defense, equitable is the overriding priority in my book.”

        This is a spectrum and we may all be different places along it. However we need to remember that these positions are based on values like individualism, community, self-determination, compassion, personal responsibility, social responsibility, etc.

        We know this, but I think it bears repeating frequently since it’s those values discussions that too often devolve into shouting matches. So thank you for the reminder.

        • Sarah

          There is no solution to national defence that does not provide equal protection for all. It’s a given of the problem. Law and Order works similarly (in theory, if not in practice).

          Over to healthcare. ‘The law in its majesty allows the rich man, equally with the poor man, to sleep under Waterloo Bridge’.

          Well quite. There’s free will in health care for you. The right of the poor to choose not to be treated, or the right of the wealthy to have less good healthcare.

          Strangely the former exercise that right quite a lot. The latter? Not so much.

    • It’s almost incredulous how often simple economics are often ignored in debates on health care policy.

      Providers (doctors, hospitals and drug companies) will always have short side power. That is, they have have monopoly power via licensing, economies of scale and patents (respectively) over consumers and insurers.

      The reason why single payer (England’s NHS) or social health insurance systems (Germany’s SHI system) have been able to control costs over providers is due to their monoposonistic power in the market. Multiple private insurers, even large ones, have very little influence over providers. This means that providers are able to set different price schedules for individuals and private insurers leading to wide spread price discrimination. This is a very large part of the reason why US health care costs are as high as they are. http://www.princeton.edu/~reinhard/pdfs/MAYNARD_PAPER_25TH_JAN_2012.pdf

      http://www.wpmassociates.com/healthcare/policy/devil_take_hindmost.pdf

      The rhetoric that individuals would be able to innovate and drive costs down if they were free from the restraints of the current system is at best circular reasoning in a data free environment. Most consumers don’t even want to make their own health care decisions: http://healthaffairs.org/blog/2011/10/04/the-credible-threat-of-consumer-engagement/

      Lets not forget there is a lot of evidence to suggest that private, for profit health care not only restricts access, but provides more expensive and lower quality care as well: http://wellesleyinstitute.com/files/privatizedhealthcarewontdeliver.pdf

    • When John writes about a few third parties acting on their own interests versus 300 million Americans who have this pent-up creativity and innovation, it gets me to thinking:
      1. John seems to be disappointed in the effectiveness of insurers, presumably due to these stifling regulations. If we are waiting for the insurers to offer permanent, affordable plans, forget it – it would be illegal even if the insurers were capable of doing so,.
      2. Our only hope is for 300 million people to come together, outside of the typical health insurer, to form communities which can unleash the innovation and creativity that has been bottled up for years.
      Combining the worst of #1 and the best of #2 leads me to thinking of 501(c)(4) health insurers.
      Presumably, they would be unshackled by typical insurer regulations (other than solvency and fraud), and would be able to unleash their innovative talents, for to fully earn their tax-exempt status, these insurers are to offer plans not commercially available.
      Seems to me the door is open (and has been opened for 26 years, with the passage of IRC section 501(m) to provide the very opportunities John desires, as well as many of us.
      Don Levit

    • The first question that occurs to me is: Does John want to assume, as a hypothesis, that consumers are able to know which medical care they need and whether care is good or bad quality?

      My impression is that doctors have great difficulties with these questions. Consumers are in a worse position. The result is that in healthcare, neither sellers nor buyers knows the quality of the product.

      A market cannot discover information that none of the parties knows.

      Consumers might hire evaluators who know more in order to get the benefit of their judgment. I’m a librarian and thinking of speculative proposals to replace peer reviewed journals by an open market of evaluation services.

      But a similar speculative proposal seems to be needed for John’s book, just to elaborate the hypothesis that consumers could theoretically have medical knowledge. This would already bring third parties in.

      In Chapter 2, perhaps consumers could judge the quality and need for knee replacements. This seems more straightforward than many kinds of care. But I still wonder whether the actual price is discovered. Who bears the risks? Who pays for surgery facilities?

      But I can set aside such questions if the point is narrow. The narrow point is that there are *some* medical procedures for which a working market can be established. I’m not an economist, however.

    • Those who say that people do not know what health care to buy, should consider that a GP can represent the patient and seek care from others. Because the GP may not provide much expensive care himself the incentives are not so bad. The typical GP should pretty capable in this area.

      • I think buying insurance is much harder than figuring out what service provider to use.

      • You are overestimating the knowledge and time of most GPs.

        And seriously underestimating the barrage of selling that drug companies and other medical treatment providers subject GPs to. Not to mentin the outright bribes of the GSK and Merck and Pfizer scandals.

        You have to have centralized bodies mandating treatment standards and methodologies.

        • I know you don’t mean it this way, but it could sound as if you are labeling most GP’s into a group and then designating that group as crooks.

          What makes valuethinker believe that bureaucrats making similar decisions with little knowledge are not incentivized in the same fashion? Has value thinker not noted how Congress votes on issues involving the stock market and our Congressmen knowing the results beforehand engage in buying and selling stock? It is much easier to make this type of bad decision from far away in Washington than for a physician to make such a decision on much smaller scale of benefit looking the patient in the eye and facing a loss of reputation.

          • Al

            - Congressmen are not civil servants, they are elected. There’s a lot less evidence of corruption of civil servants. And it would be hard to corrupt a whole system, as opposed to individuals

            You are in effect reasoning by false analogy. I am not suggesting that US congressmen, or British MPs, select medical treatments

            - the point about any medical buying group, and the NHS is an example, is that they have clinical standards, ability to test evidence, ability to coordinate purchases and obtain better terms. NICE in particular (drug effectiveness protocols) is criticized highly, but admired by other countries– the criteria for drug dispense are then fed down to the GPs

            NICE (national institute for clinical effectiveness) is hardly an uninformed body of bureaucrats. It has scientists and leading medical advisers, professors of medicine, etc.

            - no GPs are not crooks. But they are not in a position to know what’s current best practice. And they can be influenced by external healthcare providers. They are, in effect, outgunned. The existence of doctors owning pieces of external healthcare providers is a further risk of corruption of judgement– see that piece in the New Yorker on the most expensive medicare county in America (a border county in Texas– no it’s not illegals, it’s simply the doctors all own pieces of clinics and refer their patients constantly to them)

            The Merck and GSK scandals showed us to what extent external providers are capable of going to distort the market in their favour.

            My own general take on US healthcare is that some form of single-payer system is coming. Call it strong public mandate, call it what you will. The cost issue is becoming too severe, and too serious a competitive disadvantage for US business and society against foreign competition. And so it is better to get ahead of the curve on that, rather than clinging to nostrums like ‘free choice’ that don’t, in practice, really work out that way.

            • Valuethinker, let me make it nice and sweet. NICE is not so NICE, nor does it work so well.

              As far as bureaucrats I believe most are honest but live under a system that can create many dishonest actions.

              I will ask again what makes you ” believe that bureaucrats making similar decisions with little knowledge are not incentivized in the same fashion?” I will also ask what makes you think a bureaucrat in Washington has better answers than the physician at the bedside? Please do not provide the erroneous false analogy argument.

              I don’t discount human nature. Physicians are highly scrutinized, but the workings of the bureaucrats in our healthcare systems are not.

    • When Austin wrote “Note that I wrote efficient, not equitable,” he need to say no more. Do we want an efficient healthcare delivery system or equality? I don’t believe we can have both. I’m interested to see if these two sides find any common ground.

      • It’s a balance between oppositions.

        • Austin

          I would argue that in healthcare, given the very high information costs, equity and efficiency are pretty much on a par.

          An efficient system is also an equitable one, because it separates the need for treatment from the ability to pay. Otherwise you get too many perverse incentives.

          The striking thing about the current US system is the constant incentive to go for high cost solutions. From the ‘wait until the ER has to take me’ of the uninsured, through to the avoidance of preventative treatment and care by the vulnerable, through to doctors owning external healthcare providers and referring their patients to them.

    • I am struck by how many of these comments assume that one must trade efficiency for equity. It is perfectly possible to have a market allocate goods and services and then to equalize access to the market for goods and services by giving people subsidies rather than by controlling the production process directly.

      That is the whole point of Priceless–US health policy has focused on telling providers and consumers how to run their businesses and lives by controlling prices, spending, financing alternatives, and methods of doing things.

      What works better when it comes to alleviating hunger and famine, Central planning in agriculture or food stamps?

      • In effect you propose Medicare (subsidy to those unable to afford the goods and services).

        And US Medicare is in bad financial shape.

        The problem comes back to the original Kenneth Arrow paper. Healthcare is an industry characterized by:

        - ill informed consumers – they don’t know what the best treatment is

        - self interested providers – doctors and healthcare companies have financial agendas

        - high uncertainty as to most effective protocols

        In such situation the ‘free market’ won’t give you an efficient allocation of resources. Not when there is costly search, high transactions costs, (very) imperfect information, high uncertainty.

        So you wind up having some forms of central control. It doesn’t have to reach the levels of Sweden, Canada or the UK, but the payer (ie the insurance provider, be it the state or private insurers) has a say in what care is provided.

        As to your rhetorical comment re Food Stamps. Actually, food shortages in places like India are not fought by simply giving people Food Stamps. In fact, what they do is give people food rations when scarcity threatens.

        Most analysts don’t hold Food Stamps up as a particularly good example of state welfare transfers to individuals. However FDR was cleverer than most of us: by lodging it in the Department of Agriculture, and farmers are politically one of the most powerful groups in most western countries (even disregarding the American peculiarities of 2 (powerful) senators per state, and the Iowa Caucus of course), and so Food Stamps has been protected for a long time.

        • @valuethinker:
          “The problem comes back to the original Kenneth Arrow paper”

          If we relied upon everything from time of the Arrow paper we would be doing open heart massage instead of using defibrillators.

        • Of course I forgot the other point from Arrow.

          Generally it is insurers who pay for medical treatment, the consumer buys *insurance* not *health care*.

          Accordingly neither provider nor consumer has an incentive to control cost.

          If we are talking car insurance or home insurance, there is a network of loss adjusters, estimates of the cost of repair of any particular item, etc.

          In other words, central control. And a heavily regulated industry.

          • Valuethinker, I don’t follow your logic. How does a political entity provide control absent the provision of political favors?

            Look at HSA’s and how they effectively control costs at the lower end of the spectrum. Then look at government entitlements. What do the newspapers keep writing about? Bankruptcy in x number of years.

          • Valuethinker:
            You are correct that no party in the system has an incentive to control cost.
            That is why I envision a plan in which using the system will result in financial repercussions, and not using the system will result in financial gains – for all the parties.
            At its very core, accessing medical services is a choice.
            One can say “Sure, what is the alternative – extreme pain or even death?”
            While that is true, still one has to make a conscious decision to alleviate the pain or delay one’s demise.
            One could also make the same case for accessing one’s retirement plan “early,” or utilizing a reverse mortgage in order to pay for medical expenses.
            In both cases, less assets are available for one’s heirs.
            In the plan I hope to make available, the insurer and the insured share in the gains and losses.
            Just like not accessing one’s retirement account leaves more dollars for future spending, so, too, does not accessing one’s paid-up policy amount provide larger benefits , so that a deductible can be raised, fully funded, with the result of lower premiums for the insured and higher reserves for the insurer.
            Don Levit

    • Valuethinker: The problem with your reliance on Kenneth Arrow is that every imperfection you site is much more imperfect in the public sector. That is why there is no voting model (or any other public choice model) which can even begin to generate efficient outcomes.

      In general, we would expect political outcomes to be worse than market outcomes, relying on nothing more than Arrow’s paper alone.

      • Who said politicians were going to decide my medical treatment?

        Do I pick which weapon systems the British military buys?

        What politicians do is set the *budget* of healthcare systems. Healthcare systems figure out the treatment protocols.

        And yes, that’s characterized by all kinds of messiness. So is national defence (or law and order).

    • Al

      Sorry the thread seems to have run out. Can’t reply directly to you.

      You tried to argue that I was saying politicians would pick the medical budget. That was a false analogy– my argument is not erroneous

      nor was I saying a bureaucracy (other than the medical one) is making choices about individual healthcare treatment.

      What the medical system (be it private or public insurer) decides is what’s the allowable range of treatments from those on offer. Sets the protocol. And sets the budget. That’s any insurance company, whether private or public.

      Sorry you don’t like NICE. It gets stick in the press over the question of quite expensive drugs of sometimes limited efficacy (whether the rule of £20-30k pa of quality life extension is too restrictive is not an easy question– when on efficiency and equity grounds you could do an awful lot with that £20k elsewhere). But it does work. And it is widely admired internationally.

      You get down to Galbraith’s notion of countervailing power, which was fleshed out by microeconomists more rigorously since.

      Basically if you have large oligopolistic health care providers (could be hospitals, certainly drug and medical device providers, insurers) then the individual consumer is out-gunned. (so is the individual GP, even granted the best of motives, and doctors probably err that way compared to say lawyers or investment bankers (setting the moral threshhold high ;-)).

      So you have to have centralized buyers. A private insurance company in theory can take that role, dictating what is paid for and how much. However there is too much incentive to dump expensive patients onto somebody else. That’s what led to the creation of Medicare– the old are literally too expensive for private insurance (since almost all old people need medical treatment).

      What works better (in that virtually every other country but the USA does it) is you have national clinical standards bodies- there’s your specialist bureaucrats dictating things. And national (or provincial, in Canada) budget holders– large enough to negotiate with oligopolistic suppliers. And everybody is insured (whether: Canada, UK, Sweden by the state; Switzerland, Germany France by a combination of private and public insurers).

      The US will get there (single payer, not single provider, the latter is much less likely, even at a state level, although a strong public mandate must remain a possibility, after all that is how the Veterans Administration does it, with good outcomes).

      • Valuethinker I appreciate your desire to discuss, but I don’t want to get too far afield. We disagree totally and I don’t want to expand the discussion to the extent you have as to respond to your latest posting I would have to exceed the rules of the list many times over.

        Let us just deal with the two issues we were working on in my last post.

        1)NICE:You are entitled to your own beliefs. I believe the British system is considered one of the worst. You are entitled to believe what you wish.

        2) Human Nature: You made some pretty definitive statements and I have questioned them over and over again. I will repeat the question again.

        What makes you “believe that bureaucrats making similar decisions with little knowledge are not incentivized in the same fashion? I will also ask what makes you think a bureaucrat in Washington has better answers than the physician at the bedside?”

        I am sure over the coming weeks we will have plenty of time to discuss the multiple of issues that are present in your above posting most of which I totally disagree with. I prefer taking issues one at a time discussing them thoroughly. If there is another issue you wish to discuss at this time please feel free to restate it individually for discussion.