Health care in the US (debate with E), part 3

A continuation of the health-care debate I've been having with my friend, E:

JCB (previous statement):

Yes. Health care is ridiculously expensive in this country. The question is: Why is this the case?

E (previous statement):

Quite a few factors I'm sure.

JCB (previous statement):

Yes. I think it's due to a combination of factors, including extensive government interference in the market, an aging population, and lawsuit abuse in a legal environment that favors plaintiffs.

E (new statement):

Ah, the Conservative Mantra. If there's a problem that seems to have anything to do with private profit, the smokescreen of "It's all the government's fault!" is quickly heard.

E (previous):

One would seem to be to be clearly the unmitigated greed of the insurance industry and the drug industry (in other words, the free market going where it always goes for other than commodities).

JCB (previous):

The problem I have with this explanation is that the health-care sector doesn't have a monopoly on greed. Pretty much all of us are greedy.

E (new):

I'm not, and I don't think that most people are. Not for material things anyway. Most people just want to survive and live for the most part like those around them. Very few people are striving for great wealth, which is what greed would motivate one toward. That and criminality. Further, a very great many people go through life doing what they do largely without consideration of material wealth. Millions of people work for non-profits and lower wages than they might make in the private sector.

From a quick google search: http://www.bls.gov/opub/cwc/cm20081022ar01p1.htm

By 2007, nonprofits employed 8.7 million workers, or 5.9 percent of all workers.

Why?

There are several hypotheses as to why the wages of nonprofit workers could differ from their for-profit counterparts. According to the labor donation hypothesis, workers in the nonprofit sector are willing to donate a portion of their paid labor and receive lower wages because they obtain satisfaction from the fact that their efforts achieve altruistic goals.

The numbers show that professionals such as ourselves earn less in non-profits than in private industry.

And then there are the umpteen zillion volunteer workers, who do not seem to show signs of greed. I expect that few of them are so wealthy that their alleged greed is already satisfied.

In general, I think that most people want to maximize happiness, and that's only sometimes associated with significantly above-average wealth. I think that for most people, once a certain, relatively modest level of security and comfort are obtained (that's not greed) they aren't driven by greed to get "more stuff", and certainly not at the expense of hurting others. Most people would want a car. Few would be greedy to the point of claiming to need a Hummer or something equally expensive. For-profit businesses are a very different creature. Their profit objectives desires are without limits, and they are largely unhampered by ethical considerations unless they are forced to address such as a PR issue.

JCB (previous):

I'm a greedy optical engineer working for an unmitigatedly greedy multinational consulting corporation.

E (previous):

I'm sorry to hear that you're greedy. It goes without saying that your for-profit corporation is greedy.

JCB (previous):

Yet my salary and the rates my company charges its customers have risen at about the same rate as overall inflation.

E (new):

Those rates are already greatly inflated. My company's rates are too, charging the government 3x-4x what they pay me. Even after factoring in benefits, etc., I have to believe that companies such as ours are not richly satisfying the greed of their managers and shareholders (sadly, the former being more than willing to prey on the latter), at the expense of the public as a whole, who foots the bill.

JCB (previous):

Other than health care and higher education (another industry suffering from massive government interference),

E (new):

"Government interference" ... ha ha. Exactly what sort of hypothetical interference would this be? Mandating sterilization of surgical equipment? Mandating the rule of no needle re-use? Possibly (not sure) mandating work limits on surgeons (i.e. no surgery for 12 hours after pulling an all-nighter in the OR, though maybe no such rules exist)? Government regulation of health care is very definitely a Good Thing, and I expect that we need more of it, though hospital and other profit-motivated organizations and their lobbyists will no doubt prevent that.

I suppose you don't want the FDA mandating that your food and drugs not kill you either.

I don't see how higher education is suffering at the hands of the government at all. If anything, the government channels bazillions of dollars into schools of all sorts, from my local community college to Stanford. I think this has been the case forever in the US.

JCB (previous):

I can't think of a single example of an industry for which the average inflation rate has been consistently so much higher than the overall inflation rate.

E (new):

Which says exactly nothing about the cause of that state of affairs. An observation is not an explanation of anything.

JCB (previous):

There may be some of which I'm unaware. Let me know if you can think of any.

E (new):

The insurance industry. On my last health policy, a catastrophic one, after the first year they were going to raise my rates by 30%.

The oil industry (check pump prices). At one point, the beer hops industry.

Nevertheless, if I could think of any other industry with huge cost increases, you would simply say that it was because of "massive government interference" (a completely subjective term I might add) and dismiss the example.

E (previous):

Another would the fact that the relationship is so bizarre between customers (including companies trying to offer benefits), the insurance industry, and care providers.

JCB (previous):

That's an great point. But what is the source of this bizarreness?

E (new):

As I recall that article ["How American Health Care Killed my Father," by David Goldhill, Atlantic Magazine, September 2009] described the situation in some detail. I can't recall exactly, but it was interesting. I'll have to re-read the article.

JCB (previous):

Is it the free market and the unmitigated greed of the health-care industry?

E (new):

At least in part, I'd say yes. In this case, the "free" market is not really free. Consumers often have no choice when it comes to obtaining health care. When my brother had his appendix burst, it wasn't as if he could go shopping around or check Fat Wallet for best prices/deals. He had to go somewhere nearby and do it immediately. And thereafter, he had to pay whatever they chose to charge, and he did so. If you have very little money, you're forced to go to a place that will charge you little or to a free clinic, no matter how crappy it is. If you have an emergency or think you do, or sometimes even if you have a cold, without money you must get your health care at the emergency room. Health care is NOT a commodity in the current system in which it is provided. There's no "brain surgeon exchange" like there is a pork-bellies exchange.

JCB (previous):

If so, why haven't such bizarrely dysfunctional relationships evolved in other similarly-greedy yet less-heavily-regulated (i.e., more free-market) industries?

E (new):

How about banks and their credit cards? The credit-card industry, judging by its practices, is only about to become regulated in any consumer-meaningful way. And they fought that tooth and nail. And they tried to mitigate the effects of the upcoming legislation by jacking rates way, way up on cardholders who they did not otherwise terminate. Credit-card industry = dysfunctional (the relation to the consumer is to try to keep him/her in debt with large lines and low-monthly payments), very greedy as I've pointed out above, and apparently vastly-under-regulated, hence the need for this latest regulation.

I have no reason to believe that the health care industry is "heavily regulated" unless you mean the awful rules meant to keep people safe. I'd just as soon have more of that regulation.

And to your question, the answer is "because they can't get away with it". When any kind of for-profit organization can "get away with it" they inevitably do, no matter how evil the thing it might be. When they can't immediately get away with it, they try to lay the foundations of being able to get away with it. The credit-card industry, mentioned above, is one such example of organizations that get away with evil-for-profit and have been doing so for many, many years.

JCB (previous):

That's a great idea. If people would self-insure as much as possible, they'd be much more sensitive to costs and competition would drive prices down.

E (new):

That was one of the points of the article - that people are, with the current System, largely unaware of costs because they don't need to be. What do I care how much that MRI cost in total? But even a sensitivity to costs does not in any way lead to a state of affairs in which people can afford all the care that they need. It might well lead in that direction. But it also could, probably would I think, lead to a situation in which only the richest people would be able to get access to technologies and procedures that could improve their health. MRIs are one such example. I can't imagine someone like my archetypical neighbor, who is uninsured because his employers don't offer it, affording any of those MRIs without massively increasing his debt. And he has kids to feed.

So while perhaps more competition might make blood tests more affordable (maybe), it wouldn't mean that expensive things would become so. In fact, I could imagine a bidding war on tests/procedures for which there was not an broadly-available supply. There might well be a shortage of heart surgeons, and maybe, maybe, if rates for that procedure went up (which would be pocketed by hospitals and their shareholders) eventually more heart surgeons would come online, but in the meantime poorer people would die. "Too bad" says the Conservative. Because his insurance will cover it. If it didn't, you can sure he'd be on Fox news demanding his red-blooded-American rights to such coverage.

JCB (previous):

I'll have to read the article. I'm certainly no fan of the insurance industry as a whole. The sales pitches used by a lot of life-insurance salespeople, for example, are deceptive to the point that they border on fraud or may actually be fraudulent. Bank on Yourself is one such sales pitch I've encountered recently. Yet, rates for non-health-care-related insurance (i.e., life, homeowners, auto, etc.) have not risen faster than overall inflation, as far as I know.

E (new):

This http://docs.google.com/viewer?url=http://www.bls.gov/cpi/cpid1001.pdf if I read it correctly, shows an overall CPI increase of 2.6% from 1/2009 to 1/2010. In the same period, home/tenant insurance increased 3.3%, or 27% higher than the CPI.  In the same period, motor vehicle insurance increased 4.7%, or 80% more than the CPI did. And these types of insurance are very "free market" in 1) you're not required to carry them at all, you have to choose to, and 2) judging by the ads in the media, they're all clambering for your business, and are mostly trumpeting their low prices. Low maybe, but increasing rapidly it seems.

JCB (previous):

So I doubt that insurance-industry corruption could be an important root cause of the health-care-inflation problem.

E (new):

Judging by the above, I doubt that insurance industry corruption is not an important root cause the health-care-inflation problem.

JCB (previous):

However, it could be that a higher-than-normal level of corruption has resulted from the massive government interference in the health-care market.

E (new):

It could be that a higher-than-normal level of corruption has resulted from insufficient government regulation of provider operations and prices and service quality, as well as insufficient government regulation of safety, leading to malpractice and the resulting oft-lamented-by-conservatives expensive malpractice suits and settlements. With more/better regulation, corruption might be reduced and prices might go down.