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Unholy Trinity

Kevin Grier’s take on our likely health care reform legislation fairly well sums up my own feelings:

I actually think we are going to get a reform that is both worse than the status quo and worse than a pure single payer system.

Kudos to our Congress!
As I understand it, insurance companies will not be able to refuse to cover some one, nor will they be able to charge high risk people a premium that reflects their risk. The price won’t be uniform, but the maximum variation will be well below what it would take to correctly price the variation in risks.
As I noted before, this will make premiums for healthy people extra high. And as the WSJ pointed out yesterday, at least on the margin, it will make healthy people want to hold off from getting any insurance until they are actually sick.
Problem solved, you say?
Ahh, but now it appears that the third leg of the trinity will be rule that it will be illegal to not have insurance!
So young healthy people will be forced to buy way overpriced (relative to their risk) insurance. Plus if said young healthy people make good money, they can look forward to paying more taxes to subsidize the purchase of said insurance by others.
Guaranteed Issue, Community Rating, Individual Mandate.  They sound so reasonable and innocuous, but they are freakin’ lethal.
I guess it shows that we care.
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Learning from Milton Friedman's Rhetoric

via Mark Perry, here’s a delightful video of Milton Friedman arguing for the abolition of licensure for doctors at the Mayo Clinic. (Busting the monopolies in health care provision is the first item in my fantasy of health-care reform!)

The stark contrast between this class act and the histrionics of conservatives today got me thinking about Friedman’s rhetorical style. What’s so compelling about Friedman is his winsome combination of logic, lucidity, confidence, and geniality. He behaves as though the attention of even a hostile audience is a generous gift to be repaid with respect. And respect is paid by taking for granted the listeners’ intelligence and good will in the search for truth. He gladly accepts the burden of laying out the case for controversial propositions and addressing seriously even badly mistaken objections. He never assumes an antagonistic or combative stance, no matter how antagonistic or combative the audience may be. He is neither apologetic nor defensive about his unpopular positions. He evidently does take some small pleasure in his iconoclasm, and I think this can come across as smugness or self-satisfaction to those inclined to disagree with him. But the same wry twinkle can be received as well as a manifestation of the calm confidence that makes his intellectual independence possible and of his basic happiness as a person. His happiness, I think, was his rhetorical secret weapon. One doesn’t suspect a contented person of currying favor, seeking validation, or compensating for some unmet need. He makes it easy to believe in his good faith, and that makes him hard to dismiss.

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Living Wills

In my latest column for The Week, I try to encourage a mature discussion of the real issues lurking beneath the mythical death panel. One of these is the issue of Medicare-funded end-of-life counseling. I’m in favor of it. Why? First, because I’m in favor of end-of-life counseling and living wills generally. I think it’s important to plan for death, and to make explicit to yourself and your loved ones what you do and do not want for yourself at the end of life while you’re still in shape to do that. Second, because it helps individuals who depend on Medicare to retain control over life and death decisions — that is, it helps keep government from taking control of these decisions. Because I expect that in the absence of something like a living will, the default is to consume more end-of-life care than the patient would choose in a context of reflection and adequate information, I expect that the net cost of Medicare-funded counseling sessions would be negative. Because the financial and professional motives of doctors push in the direction of keeping patients alive as long as possible, I don’t think there’s reason to worry that during counseling sessions doctors will try to talk patients into choosing to pull the plug early. Between an increase in patient control over life and death decisions and potential savings to taxpayers, I find it hard to see what the problem is.

That said, there are interesting objections to living wills, whether or not they involved a Medicare-funded counseling session. A Facebook commenter said this:

Living wills are a mistake. People tend to underestimate how they will adapt to lower quality of life due to age and illness, and how they will cling to each last sweet second of life.

He’s right that people tend underestimate the extent of adaptation to pain and reduced function. That’s the sort of thing a doctor might bring up in a counseling session. But it’s not clear how relevant it is. Living wills, as I understand them, primarily involve questions of what to do when a patient has lost consciousness, or is a state of heavily drugged consciousness, and is being kept alive by a respirator or other apparatus that is substituting for an organ that no longer functions. The big questions are about whether to withdraw active life-extending interventions or not, and under what conditions. If you’re functioning at a level sufficient to revise your living will, you can do that. It’s not like you’re locked into your first draft. And it’s not as if it is possible to set out in advance the conditions under which one would like to be legally euthanized. So I’m not sure I see the mistake.

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Is Medicaid Something I Dreamed?

In his response to Whole Foods CEO John Mackey, Ezra Klein writes:

Food is more like health care than it is like cable television. We worry if people don’t have enough food to eat. We worry quite a lot, in fact. So we have a variety of programs meant to ensure that people have sufficient food. If you don’t have much money, you rely on these programs. As of September 2008, about 11 percent of the population was on food stamps. It’s probably somewhat higher now. Millions more rely on the Women, Infants, and Children nutrition program, and reduced-price school lunches.

The insight that people need food has not led us to simply deregulate the agricultural sector (though that might be a good idea for other reasons) or change the tax treatment of food purchases or make it easier for rich people to donate to food banks, which is what Mackey recommends for health care. It’s led us to solve, or try and solve, the problem directly by giving people money to buy food. And that works.

Last time I checked the United States has a means-tested health-care program called “Medicaid.” I take it that Ezra has not been arguing all this time for a program the country already has. Nor do I recall Ezra’s arguments about health-care reform centering on the eligibility requirements for Medicaid. But why not? Wouldn’t that work?

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Peter Singer on Health-Care Rationing

Via Conor Clark, I find Peter Singer in the NYT saying this:

If the Department of Transportation [followed the principle that it was impossible to put a dollar value on human life] it would exhaust its entire budget on road safety. Fortunately the department sets a limit on how much it is willing to pay to save one human life. In 2008 that limit was $5.8 million. Other government agencies do the same. Last year the Consumer Product Safety Commission considered a proposal to make mattresses less likely to catch fire. Information from the industry suggested that the new standard would cost $343 million to implement, but the Consumer Product Safety Commission calculated that it would save 270 lives a year — and since it valued a human life at around $5 million, that made the new standard a good value. If we are going to have consumer-safety regulation at all, we need some idea of how much safety is worth buying. Like health care bureaucrats, consumer-safety bureaucrats sometimes decide that saving a human life is not worth the expense. Twenty years ago, the National Research Council, an arm of the National Academy of Sciences, examined a proposal for installing seat belts in all school buses. It estimated that doing so would save, on average, one life per year, at a cost of $40 million. After that, support for the proposal faded away. So why is it that those who accept that we put a price on life when it comes to consumer safety refuse to accept it when it comes to health care?

I find this bizarre and confused. Maybe I’ve missed it, or I run in the wrong circles, but I never had the impression that the argument against government rationing of medical treatment was that you can’t put a price on human life. Of course you can! Individuals do it all the time through their rationing–through occupational choices, consumer choices, residential choices, transportation choices, and health and medical choices, all of which reveal how much the individual is willing to pay to avoid an X% risk of death. As Singer mentions, this is how the Consumer Product Safety Commision comes to estimate the cash value of a life: by taking an average of revealed willingness to pay in these kinds of individual choices. The argument against government rationing of medical care is not that life is infinitely valuable, but that government has no legitimate authority to decide how much an individual should be allowed to pay.

Suppose Peter Singer came along and told you that the data show that, on average, Americans value their lives at six million dollars, and that therefore you shouldn’t be able to spend seven million dollars on yourself, since your whole life isn’t even worth that much. Would you be impressed? I hope not!

Individuals trade reductions in risk of death against other goods in the context of their own limited budgets. (I.e., they ration their resources.) What you are willing to pay to reduce the risk of death depends in large part on how much you’ve got to spend. If individuals with a ton of money spend boatloads on medical care, they are thereby revealing how much they are willing to pay to reduce the risk of death and are thereby pushing up the average willingness to pay for extra life. For the government to step in and limit spending on medical treatments on the basis of the fact that the limit reflects the average willingness to pay for extra life is exactly like government stepping in to limit how much individuals can pay for extra safety features on a car on the basis of what people do tend to pay. This stupidly takes an evolving average as normative while cutting off the possibility of further evolution.

Of course, the government, like individuals and families, has a limited budget. So if the government is going to pay for medical care, it has to ration. And that very fact is an argument for limiting the government to only paying for the care of people who are unable to pay for a minimum of care themselves.

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Vet Spending

We have a Viszla and no children. He gets “ultra-premium” dog food, ridiculous toys, and relatively expensive treats (because he likes them better!) When we were deciding on a vet, we picked the place run by people with degrees from Cornell, because we looked it up and Cornell is the top-ranked vet school. I’m pretty sure we’re not economizing. And I’m pretty sure Robin Hanson’s on the right track. But it is possible to call around and get accurate quotes on the cost of neutering your dog. I didn’t happen to call around because Winston gets the very best! (Also, I figured prices wouldn’t vary that much in a competitive market.) I don’t think Winston is impressed, but we’re pretty happy with ourselves.

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Will Health-Care Innovation Survive Obamacare?

I have the sense that many defenders of an even-more-fully-government-run health care system have a hard time taking this question seriously. But they should. 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 with 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. Indeed, that a certain strata of Americans spend so much, often on stuff that makes no difference, also partly explains the high U.S. level of innovation. Profligate U.S. spending on state-of-the-art treatments acts as a subsidy to the health care systems of other countries, who get to free-ride off American innovation and (often “wasteful”) market experimentation. As Megan McArdle put it:

At the highest macro level, life expectancy, Europe generally outperforms us.  But it’s not clear how much of that is health care, and how much things like our murder rate, and our famously sedentary lifestyles.  When you drill down into many diseases, we outperform them.  And many argue that we outperform them on hard-to-measure “lifestyle” issues:  how fast your torn ACL gets repaired, how quickly (or whether) you get a hip replacement, etc.  Such quality of life issues are nearly impossible to measure, though this hasn’t stopped many people from trying.  But I don’t really trust the figures they generate.

Europe gets a great deal out of all of this.  We figure out what works, then they adopt it.  But we get a great deal too–we get earlier access to controversial treatments, and our future generations get all the treatments we’ve discovered so far.

Megan mentions Virginia Postrel’s terrific Atlantic piece about her ordeal with breast cancer and the expensive but effective drug Herceptin, which may well have saved her life. And which New Zealand’s government health system wouldn’t pay for initially…

Looking at the crazy-quilt American system, you might imagine that someone somewhere has figured out how to deliver the best possible health care to everyone, at no charge to patients and minimal cost to the insurer or the public treasury. But nobody has. In a public system, trade-offs don’t go away; if anything, they get harder.

The good thing about a decentralized, largely private system like ours is that health care constantly gets weighed against everything else in the economy. No single authority has to decide whether 15 percent or 20 percent or 25 percent is the “right” amount of GDP to spend on health care, just as no single authority has to decide how much to spend on food or clothing or entertainment. Different individuals and organizations can make different trade-offs. Centralized systems, by contrast, have one health budget. This treatment gets funded, and that one doesn’t.

If I lived in New Zealand, I wouldn’t be dead, just a lot poorer. But if every place were like New Zealand, far fewer complex new drugs would get developed in the first place. And my odds of survival would be much, much lower.

The biggest challenge for advocates of less hindered market competition in health care is that it is so hard to see what is lost to excessive regulation and government rationing. Glenn Reynolds, writing in the Washington Examiner, does a terrific job illustrating what could be lost to a system of government rationing. For example, his family:

[M]y wife, a longtime vegetarian and marathon runner, had a freak heart attack at the age of 37.

It wasn’t from too many Big Macs. After some rough patches, she’s now doing well, thanks to an obscure and expensive anti-arrhythmic drug called Tikosyn, and an implantable cardioverter/defibrillator. Not too long ago, she’d have been largely bedridden. These medical innovations made the difference between the life of a near-invalid and a life that’s close to normal.

My mother had a hip replacement. Her hip didn’t break – she basically wore it out with exercise. When the pain got too bad, she got it replaced, and now she’s moving around like before, only painlessly. Not too long ago, she would have been chairbound.

My father had prostate cancer; his doctor suggested waiting but on biopsy it turned out to be pretty aggressive. It was treated with radioactive “seed” implants. He’s now been cancer-free for several years, without the side effects of earlier treatments — or, worse, of cancer.

My daughter had endoscopic sinus surgery this spring. She had been sickly and listless, complaining of constant migraine headaches, missing a lot of school, and generally looking more like a zombie than a teenager. Several doctors dismissed her problems, or prescribed antibiotics that didn’t help much, until we found one who took the extra step.

A head CT scan done on a fancy new in-office machine showed a nasty festering infection, the surgeon cleaned it out, and now she’s like a normal kid again. Before laparoscopy, her condition would probably have remained untreated, and she would have been another “sickly” kid. Better to be well.

The normal critique of socialized medicine is to point out that people have to wait a long time for these kinds of treatments in places like Britain. And that’s certainly a valid critique. I’m sure my mom and daughter would still be waiting for their treatments, while my father and wife would probably be dead.

The key point, though, is that these treatments didn’t just come out out of the blue. They were developed by drug companies and device makers who thought they had a good market for things that would make people feel better.

But under a national healthcare plan, the “market” will consist of whatever the bureaucrats are willing to buy.

I plan to write something longer about why this is such a tough issue to crystallize and communicate. My hunch is that our thinking about any issue like this, where enormous humanitarian benefits are side-effects of systems driven largely by self-interest, is badly distorted by the Knobe Effect.

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Most Unexpected Comparison of the Day

From Arnold Kling:

I worry that today’s equivalent of Robert McNamara is Peter Orszag, who I fear is poised to do for our health care system what McNamara did for Vietnam.

I suspect this is a bit overheated, but the fact that Arnold’s book, Crisis of Abundance: Rethinking How We Pay for Health Care, is so outstanding makes this tough to simply dismiss.

Anyway, my similar but less dramatically stated worry, which I expressed in my latest column for The Week, is that the reforms currently on offer take the form they do because of Democratic dreams of a single-payer system, but such reforms, once they make contact with political reality, will likely produce a U.S. system that is even more of an convoluted, unsustainable mess. I think Princeton’s Paul Starr is spot on about the politics:

Some supporters favor this approach [i.e., a new “insurance exchange” offering a “public plan”] because they see it as a step toward single-payer, which is exactly what the opponents fear. Squeezed by the public plan, providers might raise prices for patients insured by private plans, sending those plans into a death spiral.

But a Congress that is not about to adopt single-payer is unlikely to adopt a Trojan horse for single-payer. Some compromise proposals — such as Sen. Charles Schumer’s — offer a second model, calling for a “level playing field” between private insurers and the public plan, including limits on the latter’s ability to flex its purchasing muscle. But tight controls on its bargaining power might doom it entirely if it faces severe adverse selection.

Here’s the delicate political problem: Depending on the rules, the entire system could tip one way or the other. Unconstrained, the public plan could drive private insurers out of business, setting off a political backlash not just from the industry but from much of the public. Over-constrained, the public plan could go into a death spiral itself as it becomes a dumping ground for high-risk enrollees, its rates rise, and it loses its appeal to the public at large. Creating a fair system of public-private competition — giving the public plan just enough power to offset its likely higher risks — wouldn’t be easy even if it were up to neutral experts, which it isn’t.

FUBAR, as McNamara’s pawns would say.

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Why Can't My Team Do Whatever It Wants!?

Ezra Klein is annoyed with the Obama adminstration’s pusillanimous pussyfooting. Even that foul-mouthed hard-guy Rahm Emanuel is a squish these days. Why are the Democratic powers-that-be willing even to entertain the lame “trigger” public plan, which kicks in only if private plans fail to hit certain benchmarks for performance. Klein:

What Emanuel is saying here, however, is that in 2009, when Democrats control the White House, the House of Representatives, and the U.S. Senate — and have larger margins than Republicans ever did in the latter two — that they are interested in settling on the same policy compromise [behind Medicare Part D, a product of a Republican president and Congress]: a weak public plan that would be activated if certain conditions aren’t met by private industry. That’s a bit weird. Weren’t elections supposed to have consequences?

Policy follows public opinion, more or less. And the public hasn’t really changed much since 2003. This is something partisans have to learn and relearn again and again. If a policy was unpopular before a change in the party controlling government, it will probably remain unpopular after. And politicians like getting reelected. It’s pretty simply, really.

Bush couldn’t reform Social Security because his plan was unpopular. Obama won’t be able to deliver a health-care bill ideological Democrats want, because what they want is unpopular and legislators know it. So Congressional Democrats want something they can cast as “victory” while doing nothing that could hurt their noble struggle for ongoing political self-preservation. Right now, strongly ideological media liberals like Klein have to decide whether they’re going to (a) act as enforcers, sending the signal to the powers-that-be that they will vocally and publicly count a “trigger” plan as a pathetic failure, or (b) sigh and prepare to declare whatever legislation passes a profound victory for ordinary Americans that shows just how great Democrats are.

But I imagine this one’s a tough call. For lots of ideological Democrats, the point of preserving political capital is to secure real universal health care. So I expect to see a fair amount of (potentially counterproductive) enforcer rhetoric.

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Health-Care Reform Discussion Question

Does the fact that the United States does not now have a system of universal health care, despite more than a half-century of strenous legislative efforts by the Democratic Party, imply that a U.S. system of universal health care would produce results significantly different than that of countries that have had such a system for decades?

Pithier: If the U.S. suddenly got the Canadian-style system that majorities of Americans have traditionally resisted, would Americans start acting like Canadians?