Tuesday, August 25, 2009

Spending "Too Much" on Health Care?

Foremost in most arguments in favor of health care reform is the assertion that Americans are spending too much on health care and that they should spend less. In Washington-speak, this is called "bend[ing] the health care cost growth curve down." In America, individuals or some groups may or may not be spending too much on health care, but to make such a claim on behalf of entire United States is presumptuous and logically flawed.

For elected federal officials (e.g., President Obama and certain members of Congress) to make this assertion is particularly arrogant because they apparently assume that the federal government (1) should intervene in the health care decisions of every individual American and (2) has the authority to do so.

Such claims also generally commit the error of looking at only one side of the equation (what is paid) while largely ignoring the other side (what is purchased). As a matter of principle, I may grumble at a doctor's bill, but if I believe I received good service for my money, my grumbling will be minimal.

Health care needs and wants vary from person to person, inevitably changing the health care equation for each person. Furthermore, an individual's health care needs will also change over time. For example, the wife of a couple starting a family will likely require prenatal care, while a retired couple will likely require care geared toward the diseases and annoyances of old age. Even individuals in identical circumstances will prefer different levels or types of care. One retiree requiring extra care may prefer to live with family members who will provide that care, while another retiree with the same needs may prefer to live in an assisted living facility. These are incredibly complex decisions that directly and intimately affect lives of individual Americans.

For government to even attempt to tell an individual how much he can spend on his own health care strikes me as a particularly insidious form of tyranny. Such decisions should remain with individuals and the people closest to them (usually their families).

Apologists for such medical tyranny often argue that such government-mandated rationing is simply a variation of how limited resources are allocated in a market economy, but they apparently don't realize that this comparison actually refutes their argument. They would give the government a health care monopsony (one buyer--the mirror image of a monopoly, which has only one seller) to enable it to set the prices for medical services, much as it does in Medicare. In most cases, because the government is seeking to reduce expenses, the government would set prices below what the market would normally bear, which would create both a shortage of supply and an excess of demand in that service. The government would gain both by paying less for each service and by paying for few numbers of that particular service. Some people would gain by paying less for a service, but others would be forced to go without because of the shortage of supply. In the worst case scenario, the government monopsony could simply refuse to pay for a service--essentially setting the price at zero--and very quickly no provider would offer the service.

In a market economy, individuals would purchase health care services based on what they need and can afford to purchase weighed against other things they want to do with their money. In the end, more people would be served, but at a greater total cost. In many cases, people would probably wish to spend more but would be restrained by their circumstances.

Admittedly, both of these scenarios are highly simplified, lacking the messy details of real life, but they strongly suggest that any government monopsony that "saves" money must therefore ration health care. The committees that fix these artificially low prices would truly be "death panels" in their effects, just less visible than a panel that rations health care services for individual patients.

Slight Tangent
I take issue with Mr. Krauthammer's criticism of the usage of "death panels"--Sarah Palin's "shrewdly timed metaphor," as Ms. Paglia aptly called it. [See link and warning below.] Ironically, after asking "Sarah Palin to leave the room," he then finishes making her case against government-subsidized end-of-life counseling, albeit using less incendiary language.

Further reading:
Robert A, Book, "Illusions of Cost Control in Public Health Care Plans," The Heritage Foundation.

Charles Krauthammer, "The Truth About Death Counseling," The Washington Post

Camille Paglia, "Obama's Healthcare Horror," Salon.com [Warning: rated at least PG-13 for explicit language. Ms. Paglia's is often a good read, but not for the politically or socially squeamish.]

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