Obama asks the question.............

[Mashuri]

Re: Obama asks the question.............

Health care, along with every other scarce resource, is already rationed. The U.S., many argue, is the most rationed system on earth. "Price" is simply one way of rationing.

Everything is rationed by cost. "Price" can be zero ("free" health care) but the costs in capital, etc, and opportunity costs do not go away. Opportunity costs are where any form of central planning/control really break down. In order to know the true value of something to a particular individual, one not only needs to know what that person chose to acquire and at what cost, but what that person chose not to acquire as well. This is why a person facing what looks to be the same exact choice at two different times often makes two different choices. How can a bureaucrat --- or any third party, for that matter, know the true value of any transaction than the actual people involved in the transaction themselves? There is no possible way. So, what happens with central planning, is prices of particular products/services become distorted from what individuals collectively value their current supply at, so we end up with surpluses or, far more likely with governments' promises of "free" anything, shortages.

Yes, "price" is rationing our current health care system but keep in mind these prices have been heavily distorted by endless government intervention, driving the overall cost of the industry unsustainably high. How is distorting them even further going to help contain costs?

[touchring]

Re: Obama asks the question.............

I never believed in medication for diseases and symptoms that can be cured by food, herbs and alternative cures.

Medicine is a scam, the more you take them, the more medical problems you get in latter life and rarely does it cure the disease.

The first step to lowering health costs is to maintain good health.

http://www.nationmaster.com/graph/he...r-1-000-people

[Munger]

Re: Obama asks the question.............

If you want to incentize doctors to provide efficient care then let the free market work...

I will say it yet again, for the umpteenth time: free markets only work when each side has all the necessary information. In no market is this the case.
All markets are thus inefficient. To the extent govt. oversight and regulation increases the information available to both sides, mitigating the information asymmetry that exists, the market will become more efficient. This is well documented. In fact, health care was the topic of the first academic study of information asymmetry.

Government run healthcare will inevitably lead to fraud, abuse, inefficiency, lack of innovation, and poor quality...they are rare exceptions to this in any field.

As opposed to what we have now.

[Sainttjames]

Re: Obama asks the question.............

I am SHOCKED...SHOCKED...SHOCKED I say....that those that antagonize for socialized medicine...and constantly compare the US to other socialized medicine countries....FAIL TO TAKE INTO ACCOUNT MALPRACTICE TORT REFORM...

Yes...its true...if a GP screws up in those 'other' countries...you won't be seeing multi-million dollar awards to the patient!...SHOCKING!

and guess what ladies and gentleman...guess WHO is a HUGE donor to the Democratic Party?....

Trial Lawyers?

Really?

Say it isn't so....

I would love to see a graph of health care costs, insurance rates and trial awards for medical malpractice since 1950....

[Munger]

Re: Obama asks the question.............

I am SHOCKED...SHOCKED...SHOCKED I say....that those that antagonize for socialized medicine...and constantly compare the US to other socialized medicine countries....FAIL TO TAKE INTO ACCOUNT MALPRACTICE TORT REFORM...

Yes...its true...if a GP screws up in those 'other' countries...you won't be seeing multi-million dollar awards to the patient!...SHOCKING!

and guess what ladies and gentleman...guess WHO is a HUGE donor to the Democratic Party?....

Trial Lawyers?

Really?

Say it isn't so....

I would love to see a graph of health care costs, insurance rates and trial awards for medical malpractice since 1950....

Please try again.

Health care costs - US v. other countries

US health care costs are much higher than any other nations'. Why? Do we have better access to care? Are our doctors paid more? Is it the fault of higher drug costs? Do the related issues of malpractice insurance and defensive medicine have much impact?
A new report sponsored by the Commonwealth Fund compares US and other industrialized countries' health care and attempts to answer those questions. The report's conclusions go a long way towards dispelling some of the "urban myths" surrounding health care.

Overall results
According to the report, "�higher prices for health services such as prescription drugs, hospital stays, and doctor visits, are the main reason for higher U.S. spending. The latest data from the Organization for Economic Cooperation and Development (OECD), which compare trends among 30 industrialized countries, show that the U.S. spent $5,267 per capita on health care in 2002�53 percent more than any other country." And that "other country" is Switzerland, which has the distinction of being the only other OECD nation that spends more than 10% of GDP on health care. When compared to the median expenditure, US costs are much higher.

Access and waiting lists
One of the metronomic chants used by those disparaging other nations' health care systems is the much-hated "waiting list" - with the assumption that their costs are lower because people have to wait forever for a liver, dialysis, blood test, or MRI. The facts tell a different story:
"�despite the lack of waiting lists, Americans do not have access to a greater supply of health care resources than people in most other OECD countries. In fact, the U.S. has fewer per capita hospital beds, physicians, nurses, and CT scanners than the OECD median." The report also compared costs in nations with waiting lists for certain procedures to those without - surprisingly, those with waiting lists actually had higher costs. I don't know if they had waiting lists as a means of addressing higher costs, or somehow the lists drove costs higher. I am also curious as to the mix of generalists to specialists...

Malpractice and defensive medicine
Yes, the US has more malpractice suits per capita than other nations (twice as many as in the UK and Australia, and 3.5 times more than in Canada). But, and here's the big "but", the average award in the US was 14% lower than in Canada, 36% less than the average in the UK, and slightly higher than Australia's average expense (the other countries studied for this factor). So, while our "frequency" is higher, our "severity" (cost per claim) is lower.
Notably, the total impact of malpractice expenses as a percentage of US health care costs was less than 0.5%. That does not factor in defensive medicine - but even the highest estimate of the excess costs resulting from defensive medicine adds but 9% to our total costs - not enough to explain the difference in total costs between the US and other OECD countries.
Price

Here's the issue, at least according to this report. We pay more for "prescription drugs, hospital stays, and doctor visits" than other industrialized nations.

Cautionary note -although it is clear that malpractice, defensive medicine, and too many CT scanners and hospital beds are likely not significant contributors to the vast gap in costs between the US and other countries, the report does not indicate what factors are driving prices.

What does this mean for you?

Remember that this compares the US to other countries; cost drivers that impact you, your business, and your premiums must be examined through the lens of US experience. Price is driving your costs, but it's impact is multiplied by utilization and frequency.

[chimsha]

Re: Obama asks the question.............

Just a few words regarding my experience with "free" national health service in Spain. Although you don't exactly get to choose your doctor, you get assigned a primary health clinic depending on where you live & have some choice as to which doctor you can choose. The bottom line is that some are excellent, most are average & some are lousy! Much like in any profession. You will have to wait a long time for specialist visits if your ailment is not considered urgent (anything from 2 to 6 months) but most common clinical procedures (blood tests, x-rays etc.) are pretty quick & just a questio of a few days. Obviously, you can always jump to the head of the queue by going to emergency in a hospital & you would get immediate access to a specialist. What I do is also have a private insurance (costs aprox $100/month) which allows me to go directly visit specialists, private room in hospital, etc. but for any major surgery would definitely choose the public system where the best surgeons operate & it doesn't cost me directly a penny. Of course a company which employs someone will pay roughly double the net salary to cover medical,pension, unemployment, etc. Would I vote in favour of a nationalized system with the possibilty of also subscribing a private insurance scheme? Yes with nos hesitations....and I have lived in several european countries not only Spain.

[Munger]

Re: Obama asks the question.............

As for information. There is no possible way a group of government workers will ever have enough information to "tame" any market. Since a relatively tiny group of people would now have to make decisions for an exponentially higher amount of people in the general population, there will be far more "asymmetry" than between your average individual doctor and patient.

Information asymmetry does not demand a "bureaucrat" to make decisions (great buzzword to demonize reform btw - nothing like trying to get people to picture a DMV-type worker physically standing in between you and your doctor to really move reform forward; nevermind that an insurance company beaurocrat motivated only to not reimburse you is currently standing between you and your doctor).

Information economists believe in the free market. They know that markets only work when each side has the necessary information. As such, by and large they advocate regulations mandating disclosure. Cutting the pay to play between big pharma and doctors and actually performing cost-benefit analysis of treatments would go a long way.

[Sainttjames]

Re: Obama asks the question.............

Point taken Munger...

BUT according to your post:

Cautionary note -although it is clear that malpractice, defensive medicine, and too many CT scanners and hospital beds are likely not significant contributors to the vast gap in costs between the US and other countries, the report does not indicate what factors are driving prices.


SO... you haven't diagnosed the cause of the disease, but you are willing to prescribe the solution?

[Munger]

Re: Obama asks the question.............

Just a few words regarding my experience with "free" national health service in Spain. Although you don't exactly get to choose your doctor, you get assigned a primary health clinic depending on where you live & have some choice as to which doctor you can choose. The bottom line is that some are excellent, most are average & some are lousy! Much like in any profession. You will have to wait a long time for specialist visits if your ailment is not considered urgent (anything from 2 to 6 months) but most common clinical procedures (blood tests, x-rays etc.) are pretty quick & just a questio of a few days. Obviously, you can always jump to the head of the queue by going to emergency in a hospital & you would get immediate access to a specialist. What I do is also have a private insurance (costs aprox $100/month) which allows me to go directly visit specialists, private room in hospital, etc. but for any major surgery would definitely choose the public system where the best surgeons operate & it doesn't cost me directly a penny. Of course a company which employs someone will pay roughly double the net salary to cover medical,pension, unemployment, etc. Would I vote in favour of a nationalized system with the possibilty of also subscribing a private insurance scheme? Yes with nos hesitations....and I have lived in several european countries not only Spain.

Shhhhhhhhhhhh..... there are libertarians on this forum!

[Mashuri]

Re: Obama asks the question.............

[quote=Munger;110778]Information asymmetry does not demand a "bureaucrat" to make decisions (great buzzword to demonize reform btw - nothing like trying to get people to picture a DMV-type worker physically standing in between you and your doctor to really move reform forward; nevermind that an insurance company beaurocrat motivated only to not reimburse you is currently standing between you and your doctor).[quote]

Any third party that interferes with a transaction between two individuals is a bureaucrat, including insurance companies that have been fostered by government. Any "reform" you propose that would still involve third-party intervention means we're going to have to answer to bureaucrats.

Information economists believe in the free market. They know that markets only work when each side has the necessary information. As such, by and large they advocate regulations mandating disclosure. Cutting the pay to play between big pharma and doctors and actually performing cost-benefit analysis of treatments would go a long way.

So, then you're against a centralized government provided health care, correct? Because that would just shift the "pay to play" between doctors and big pharma to doctors and big government.

[Mashuri]

Re: Obama asks the question.............

Shhhhhhhhhhhh..... there are libertarians on this forum!

Uh oh! He's resorting to ad hominem attacks. We all better leave... :p

[Munger]

Re: Obama asks the question.............

Everything is rationed by cost. "Price" can be zero ("free" health care) but the costs in capital, etc, and opportunity costs do not go away. Opportunity costs are where any form of central planning/control really break down. In order to know the true value of something to a particular individual, one not only needs to know what that person chose to acquire and at what cost, but what that person chose not to acquire as well. This is why a person facing what looks to be the same exact choice at two different times often makes two different choices. How can a bureaucrat --- or any third party, for that matter, know the true value of any transaction than the actual people involved in the transaction themselves? There is no possible way. So, what happens with central planning, is prices of particular products/services become distorted from what individuals collectively value their current supply at, so we end up with surpluses or, far more likely with governments' promises of "free" anything, shortages.

Yes, "price" is rationing our current health care system but keep in mind these prices have been heavily distorted by endless government intervention, driving the overall cost of the industry unsustainably high. How is distorting them even further going to help contain costs?

You are against central planning. I get that. Governments aren't the only entities that plan centrally. Every corporation has what are called "executives." These people are the central decision-makers for that entity as well as for the people using that insurance company.

This is particularly true in insurance, where people do not "choose" their health insurance company (1) because many people are stuck with what their employer gives them and (2) because insurance companies are highly concentrated regional monopolies.

Insurance companies do perform a function though, that of spreading risk. They provide a benefit in that their marginal utility curve differs from the insuree. But they haven't done anything except pooled a large amount of money.

I'm a big believer in the profit motive in 99 percent of all cases. If the government decided to open a non-profit hamburger stand, I doubt that it would compete successfully against Five Guys. If it tried to open a non-profit airline, I doubt that it could offer the same value as JetBlue. Insert joke about General Motors and/or the Post Office here. The point is, I think the profit motive is generally well worth it in terms of the incentives it creates to cut costs, develop new products, improve customer service, and so forth.

But health insurance is not like those things.

Insurance exists because of the decreasing marginal utility of income: most people would rather have a 100% chance of paying $300 a month than a 1% chance of paying $30,000 a month. In fact, our hypothetical customer -- let's call him Frederick, after George F. Will's middle name -- might very well accept a 100% chance of paying $400 a month rather than take 1% chance of having to pay $30,000, which he might not be able to afford. This is true even though Frederick will lose $100 on this deal in an average month.

There's nothing wrong with this arrangement -- the customer has improved his marginal utility and the insurance company has made $100. It's a win-win.

The thing is, though, that the insurer hasn't had to work particularly hard for his $100. He hasn't had to figure out how to cook up tastier fries or save you a few bucks off the cost of your next flight to Orlando. All he has to do is to have a bunch of money pooled together, such that he has a different marginal utility curve than you do. He has the luxury to accept the risk of unlikely outcomes, particularly if he can hedge his position by making the same deal with other customers, most of whom won't wind up requiring an angioplasty or cataract surgery, even if Frederick does.

Now, what's supposed to happen in the free market is that another company will come in and offer Frederick a better deal: they'll offer him the same coverage for $350 a month, accepting a smaller profit, and Frederick will happily take the deal. There are at least a couple of reasons, however, why this may not be happening in the insurance industry. The first is that Frederick might not realize he's paying $400 every month for insurance. That's because if he's like the majority of Americans, he's getting his insurance through his work, and except when the HR lady gave him a shiny brochure on his first day at the office, he's probably never thought very much about what this insurance is costing him in terms of foregone salary. This is particularly so because health insurance benefits, unlike other types of income, aren't taxed, and so Fredrick is less cognizant of them if show up on his paycheck at all. Not only, then, is the free market maxim of perfect information violated, but it's violated in such a way that creates artificial profits for the insurance industry: the government is effectively subsidizing every dollar that Frederick's company is willing to spend on his insurance benefit.

The profits the insurance industry is making, of course -- profits artificially boosted by an enormous backdoor tax subsidy -- don't seem to be buying the customer much of anything in terms of improved service or cost savings. On the contrary, health care costs are rising by as much as 9-10 percent per year, without any concomitant increase in the level of service. If JetBlue were raising the cost of its fares by 10 percent per year, they'd be out of business.

The reason the insurers are staying in business, though, is because barriers to entry in the health insurance industry are in practice quite high. Insurers benefit from pooling risk. The larger the pool, the better in terms of the insurer's ability to hedge its risk and build negotiating leverage with its providers. That makes it very difficult for a Five Guys or a JetBlue type of start-up to compete: they'll have trouble getting together enough customers to pool their risk adequately, and even if they do, they won't have as much negotiating leverage as the big guys. Health care providers may demand a better deal or refuse to accept them. As such, they'll never get off the ground.

Insurance, in other words, is a volume business, the main requirements for which are that (1) you have a lot of money pooled together and that (2) you've been around for awhile.

CIGNA and Aetna have a lot of money pooled together and they've been around for awhile -- but they don't have as much money, nor have they been around as long, as the federal government. It's possible, certainly, that the profit motive in the insurance industry has driven more innovation than we're giving it credit for. But that isn't my bet, and it isn't George Will's: There's no obvious reason that the government couldn't provide more for less. And if we are wrong, we would find out soon enough: if the public option can't deliver more bang for the buck than private insurers, it wouldn't gain much market share from them, and Will will have nothing to worry about.

What Will's position reflects instead is ideology: who cares that the federal government could build a better mousetrap? They're the government and that's bad. His argument is really no more sophisticated than that. If a libertarian conservative wants to make this argument, more power to them, but they absolutely should not be turning around and suggesting that a public option would raise health care costs. They're saying, rather, that they're morally opposed to the cost savings that would ensue.

If you've been reading me for a while, you'll know that, as compared with most self-described liberals, I'm unusually sympathetic toward the notion of the profit motive and private industry; I've defended Wall Street bankers and the AIG bonuses at various points during the financial crisis, among other things. It's my belief that private industry is usually able to deliver more efficient outcomes to the consumer than the government could.

But usually isn't always. And health insurance, as Will seems to admit, is one of those exceptions.

http://www.fivethirtyeight.com/2009/...tion-will.html

[jhurt]

Re: Obama asks the question.............

If you want to incentize doctors to provide efficient care then let the free market work...that is FYI NOT what we have right now. Right now the doctor who has 30 years experience and excellent results, who can make the diagnosis without an MRI, who can do the surgery 2x as fast and with less complications...he/she is paid the same as the first year practioner. How is that right? If the free market were in force and the utilizer of the service (e.g. the patient) actually had to make a decision regarding payment (e.g. if they got an MRI they had to pay more) then the market would reward those who had good results at cheaper costs. That's how it works. Right now medicare and medicaid patients come in and demand MRI's just b/c they can and it won't cost them anything. Government run healthcare will inevitably lead to fraud, abuse, inefficiency, lack of innovation, and poor quality...they are rare exceptions to this in any field.

[Mashuri]

Re: Obama asks the question.............

You are against central planning. I get that. Governments aren't the only entities that plan centrally. Every corporation has what are called "executives." These people are the central decision-makers for that entity as well as for the people using that insurance company.

Now we are getting somewhere. They key difference is that government central planners are forced upon us while, in a true free market, we choose whether or not to transact with any given company. Today's corporation, however, has been bastardized by government, who has privileged them with sweeping limited liability -- even to people with whom they have no contracts. Think about how that has affected corporate behavior.

This is particularly true in insurance, where people do not "choose" their health insurance company (1) because many people are stuck with what their employer gives them and (2) because insurance companies are highly concentrated regional monopolies.

Again, this is because of government intervention, incentivizing "insurance" (really it's a health fund pool -- insurance is supposed to only be for hedging against risks) to link with employers through tax incentives. I would take your regional monopoly statement a step further and call them a cartel.

Insurance companies do perform a function though, that of spreading risk. They provide a benefit in that their marginal utility curve differs from the insuree. But they haven't done anything except pooled a large amount of money.

As I stated earlier, they do not perform this function anymore. They are forced to act as general health fund pools. Risk implies that there is a low probability of something happening. Routine health care, like physicals for example, has pretty much 100% chance of happening and covering that is not insurance.

[Munger]

Re: Obama asks the question.............

Now we are getting somewhere. They key difference is that government central planners are forced upon us while, in a true free market, we choose whether or not to transact with any given company. Today's corporation, however, has been bastardized by government, who has privileged them with sweeping limited liability -- even to people with whom they have no contracts. Think about how that has affected corporate behavior.

You cannot choose your insurance co. when they are a monopoly. I posit the opposite: govt. has been bastardized by the corporations.

Again, this is because of government intervention, incentivizing "insurance" (really it's a health fund pool -- insurance is supposed to only be for hedging against risks) to link with employers through tax incentives. I would take your regional monopoly statement a step further and call them a cartel.

A point of agreement: govt. should not be subsidizing health insurance. However, the insurance monopolies formed organically, as they often do, because of economies of scale. After a monopoly has thus been formed, markets will be more efficient after govt. intervenes to correct this market distortion.