JCB's responses to previous statements made by J.E. Hill, a writer for The Skeptical Review:
JCB's previous statement:
There are no direct subsidies to the health-insurance companies, as far as I know. The subsidies I was referring to are the enormous sums of money paid to health-care providers by Medicare, Medicaid, and other similar programs. The reason for the huge cost and spending increases we're seeing in the health-care arena is the market distortions caused primarily by the government subsidies, as well as by various ill-advised regulations.
Hill's previous statement:
That's not what you said or "referred to". I'll remind you: "However, I would say that it is among the most heavily-regulated/subsidized."
As a matter of fact, the health-insurance industry doesn't receive one cent of subsidy from the government.
The "subsidies" you are referring to are not subsidies either. They are payment for services. There is a big difference. A subsidy is monetary assistance granted by the government to a person or private commercial enterprise, such as the Community Development Block Grant, or farm subsidies where the government gets nothing in return. In this case there are services rendered and that is what is being paid for.
So, the health-insurance industry is not subsidized contrary to your previously statement.
Correct? Yes or no.
JCB's response:
No. Although it's true that (as far as I know) the private, for-profit portion of the health-insurance industry is not subsidized, an ever-increasing percentage of health-care costs in this country are being paid by the government, through programs such as Medicare and Medicaid. See the graph at top of page 10 in this Rand Corporation publication:
http://www.rand.org/pubs/corporate_pubs/2005/RAND_CP484.1.pdf
Medicare and Medicaid are government-run providers of health insurance. The premiums people pay the government for the health insurance they receive through these programs fall far short of covering the cost of the benefits received in the form of payments for medical services. This is what I was referring to as government subsidization of health insurance. If you wish, you may choose not to refer to this as government subsidization of health insurance. But it doesn't affect my argument. Whether or not you choose to call it a subsidization of health insurance or something else, the reality is that the government is paying a large portion of people's health-care-related expenses and that this is creating severe distortions of the health-care market. These market distortions are a major reason that health-care costs are rising so much faster than the overall inflation rate. And, of course, increases in health-care costs inevitably lead to increases in premiums for insurance provided by the private, for-profit sector of the health-insurance industry.
Portion of JCB's previous statement:
Your explanation, on the other hand, is that costs have increased due to unbridled greed on the part of the health-care industry, including, presumably, the health-insurance industry. (At least that's my understanding of your view. Please correct me if I've mischaracterized it in any way.) If that's the case, why aren't we seeing similarly skyrocketing costs in most non-health-care-related industries?
Hill's previous statement:
Oh, you mean like the financial sector?
JCB's response:
I'm not exactly sure what you're referring to here. I personally haven't noticed any significant cost increases in the financial sector. My checking accounts and savings accounts are still free. I believe that costs paid by consumers for products provided by the financial sector predominantly take the form of interest charges, and interest rates are currently at historically low levels. In fact, my wife and I are thinking of refinancing, even though we already have a really low-interest (5.5%) fixed-rate mortgage. One exception may be interest rates on credit cards, which I believe I've heard have gone up somewhat in the past year or so. But I don't know of any long-term inflationary trend in the financial sector that's even remotely comparable to the decades-long trend of health-care costs increasing at a rate higher than overall inflation. If you have data showing that such a long-term trend exists, I'd be interested in seeing it.
Hill's previous statement:
Greed is certainly a factor, but probably more so is the fact that people get sick more often than they buy cars. The biggest factor is that health insurance is its own worst enemy. By reducing their client pool by rejecting claims, they have to keep increasing premiums to keep the profits rolling in and Wall Street happy.
JCB's response:
I'm glad to see you're distancing yourself from the view that greed is the primary cause of our health-care woes. However, I'm not sure I fully understand your two new theories. The first of these theories is that the enormous cost increases we've experienced for decades in the health-care sector are due to "...the fact that people get sick more often than they buy cars." I agree that people get sick more often than they buy cars, at least if you count minor illnesses, such as colds and athlete's foot. But the cost of the resources (i.e., raw materials and labor) required to treat a typical cold or case of athlete's foot are far less than that required to build a car. So I'm not sure why the fact that we get sick more often than we buy cars is relevant. It's also true that, on average, we take showers more often than we get sick. So, by your theory, shouldn't we also be experiencing even more economically-unsustainable price increases for soap, shampoo, and conditioner than we're experiencing for health care?
Perhaps you're simply trying to say that the demand for health care has risen too fast for the health-care industry to keep up. If that's the point you're trying to make, I think you're correct. Due to the increase in both the size and the average age of the population, the demand for health care has risen fairly rapidly over the years. And our health-care system has not responded efficiently to this increase in demand. The crucial question is: Why hasn't it responded efficiently? Is it because we have too much of a free market in health care? If so, then how do you explain what has happened in other more-free-market industries in which demand has increased rapidly over the years? Take the personal-computer industry, for example. Due to it being a much newer industry, we've had a much greater increase in demand for PCs over the past few decades than for health care. When I was a child, no one had even heard of PCs. In those days computers were enormous, expensive machines that took up whole rooms and could only be afforded by large, wealthy organizations. And the capabilities of those machines were pathetically poor by current standards. Now it seems like almost everyone has at least one PC. Many people I know have three or four. And we have a much freer market for PCs than for health care. At the very least, I don't see how anyone could plausibly argue that the PC market is less free than the health-care market. Yet the long-term trend in the PC industry has been for prices to continue dropping dramatically, while the capabilities (e.g., disk size, amount of memory, speed, software sophistication, degree of miniaturization, etc.) have dramatically improved.
Your second theory is that the health-insurance industry has to increase premiums to make up for a reduction in its client pool due to a rejection of claims. Presumably, the clients who are being eliminated from the pool would mostly be the sickest clients. It would not make any economic sense for insurance companies to take actions that would cause them to lose their healthiest clients, since it is these clients that make them the most money. Since the sickest clients are the ones the insurance companies lose money on, one would think that eliminating them would increase profits, rather than reduce them. Thus it does not appear plausible to argue that elimination of clients through claim rejection would lead to higher premiums. If anything, the opposite would seem to be the case. Even if it were true, your theory would only explain increases in health-care premiums. It wouldn't explain the unsustainable increases we're experiencing in the cost of health care itself.
JCB's previous statement:
Are those industries simply less greedy? Why would they be? What is it about health care that attracts unusually greedy people? Also, why wouldn't cost increases be even worse in industries that are less heavily bridled (i.e., less regulated) than health care? Take veterinary care, for example. I think most people would agree that veterinary care is far less regulated than health care. Americans love their pets almost as much as they love their friends and relatives. Even more so, in many cases. So why aren't we seeing even more serious cost increases in veterinary care than we are in health care?
Hill's previous statement:
Not a real good example.
JCB's response:
I thought it was a pretty good example of an industry operating in a relatively free market that provides quality service while efficiently controlling costs. At any rate, it was better than the examples you've attempted to give of industries in relatively free markets that are as economically dysfunctional as health care. But that's really not your fault, since I don't believe there are any valid examples of such industries.
Hill's previous statement:
If you really want me to take the time to deconstruct this I will, but it's really a waste of time to do so.
JCB's response:
If you're willing to waste your time deconstructing it, I'm willing waste my time deconstructing your deconstruction.
JCB's previous statement:
Or, consider forms of insurance other than health insurance. If greed is causing the price increases we're seeing in health insurance, why is it that we aren't experiencing similarly mind-boggling increases in premiums for life, homeowner's, or auto insurance? Are the non-health-care-related insurance companies less greedy for some reason?
Hill's previous statement:
Oh, my homeowners insurance has been going up...about 10% a year and never a claim.
JCB's response:
Really?! That seems a bit anomalous. For how many years has it been increasing at that rate? Maybe you should shop around for a new policy. Our homeowner's insurance has gone up 10.9% in the past 5 years (11/2004 - 11/2009), which averages out to 2.1% per year. The consumer price index has gone up 13.3% during that same period, or 2.5% per year:
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
I tried to find some statistics on rates of increase in homeowner's insurance premiums, but wasn't able to. But it's hard to believe that homeowner's premiums have been increasing over the long term anywhere near as fast as health-care costs. If they had been, it would have been big news.
Hill's previous statement:
But the short answer is it's all actuarial and (this is very important) they all have to compete for my business and I can switch companies anytime I want.
JCB's response:
Right! In other words, there's a relatively free market in these other forms of insurance. This results in vigorous competition, which keeps costs under control. Unfortunately, we have much less of a free market for health care and health insurance. For example, due to the fact that health-insurance costs are deductible for employers but not for employees, the choice of health-care provider available to most people is--for all practical purposes--limited to the few options their employers happen to offer.
Hill's previous statement:
Competition is a wonderful thing. This is why the health-care industry don't want it from the government or other insurers. But if you have claims or are a bad risk, they'll still insure you but it'll cost an arm and a leg. With health-insurance, I don't have choices. If you were just asking this because you really didn't get this part, I am not so sure we need to continue. I don't mean to be abrupt, but this is really basic stuff.
JCB's response:
Yes! You're right that competition is a wonderful thing! You're probably also correct in your belief that many in the health-care industry like the fact that competition in their industry is severely limited. As great as competition is for the economy as a whole, it rarely seems quite so wonderful when it's directed against one's own efforts. A lack of competition is, of course, a well-known characteristic of a market that isn't very free. Thanks for helping me make my point.
Hill's previous statement:
It really seems like your big issue is with government regulations, since subsidies are now off the table.
JCB's response:
Despite your semantic gymnastics pertaining to this issue, the unavoidable fact remains that health care in this country is heavily subsidized by the government and has been for many years.
Showing posts with label regulation. Show all posts
Showing posts with label regulation. Show all posts
Sunday, March 28, 2010
Health-care debate with J.E. Hill, part 3
J.E. Hill's responses to previous statements made by me:
JCB's previous statement:
There are no direct subsidies to the health-insurance companies, as far as I know. The subsidies I was referring to are the enormous sums of money paid to health-care providers by Medicare, Medicaid, and other similar programs. The reason for the huge cost and spending increases we're seeing in the health-care arena is the market distortions caused primarily by the government subsidies, as well as by various ill-advised regulations.
Hill's response:
That's not what you said or "referred to". I'll remind you: "However, I would say that it is among the most heavily-regulated/subsidized."
As a matter of fact, the health-insurance industry doesn't receive one cent of subsidy from the government.
The "subsidies" you are referring to are not subsidies either. They are payment for services. There is a big difference. A subsidy is monetary assistance granted by the government to person or private commercial enterprise, such as the Community Development Block Grant, or farm subsidies where the government gets nothing in return. In this case there are services rendered and that what is being paid for.
So, the health-insurance industry is not subsidized contrary to your previously statement.
Correct? Yes or no.
JCB's previous statement:
http://www.newsweek.com/id/202015/page/1
"A new report from Obama's own Council of Economic Advisers shows why controlling health costs is so important. Since 1975, annual health spending per person, adjusted for inflation, has grown 2.1 percentage points faster than overall economic growth per person. If this trend continues, the CEA projects that
* Health spending, which was 5 percent of the economy (gross domestic product) in 1960 and is reckoned at almost 18 percent today, would grow to 34 percent of GDP by 2040 -- a third of the economy.
* Medicare and Medicaid, the government insurance programs for the elderly and poor, would increase from 6 percent of GDP now to 15 percent in 2040 -- roughly equal to three-quarters of present federal spending.
* Employer-paid insurance premiums for family coverage, which grew 85 percent in inflation-adjusted terms from 1996 to $11,941 in 2006, would increase to $25,200 by 2025 and $45,000 in 2040 (all figures in "constant 2008 dollars"). The huge costs would force employers to reduce take-home pay."
The Goldhill article I mentioned in a previous e-mail (i.e., the one you said you didn't want to read) provides good explanations of the nature of these many of these distortions:
http://tinyurl.com/yendgv9
As Goldhill points out, "...it is no coincidence that the great inflation in health-care costs began soon after [Medicare and Medicaid were created in 1965]. "
Your explanation, on the other hand, is that costs have increased due to unbridled greed on the part of the health-care industry, including, presumably, the health-insurance industry. (At least that's my understanding of your view. Please correct me if I've mischaracterized it in any way.) If that's the case, why aren't we seeing similarly skyrocketing costs in most non-health-care-related industries?
Hill's response:
Oh, you mean like the financial sector? Greed is certainly a factor, but probably more so is the fact that people get sick more often than they buy cars. The biggest factor is that health insurance is it's own worst enemy. By reducing their client pool by rejecting claims, they have to keep increasing premiums to keep the profits rolling in and Wall Street happy.
JCB's previous statement:
Are those industries simply less greedy? Why would they be? What is it about health care that attracts unusually greedy people? Also, why wouldn't cost increases be even worse in industries that are less heavily bridled (i.e., less regulated) than health care? Take veterinary care, for example. I think most people would agree that veterinary care is far less regulated than health care. Americans love their pets almost as much as they love their friends and relatives. Even more so, in many cases. So why aren't we seeing even more serious cost increases in veterinary care than we are in health care?
Hill's response:
Not a real good example. If you really want me to take the time to deconstruct this I will, but it's really a waste of time to do so.
JCB's previous statement:
Or, consider forms of insurance other than health insurance. If greed is causing the price increases we're seeing in health insurance, why is it that we aren't experiencing similarly mind-boggling increases in premiums for life, homeowner's, or auto insurance? Are the non-health-care-related insurance companies less greedy for some reason?
Hill's response:
Oh, my homeowners insurance has been going up...about 10% a year and never a claim. But the short answer is it's all actuarial and (this is very important) they all have to compete for my business and I can switch companies anytime I want. Competition is a wonderful thing. This is why the health-care industry don't want it from the government or other insurers. But if you have claims or are a bad risk, they'll still insure you but it'll cost an arm and a leg. With health-insurance, I don't have choices. If you were just asking this because you really didn't get this part, I am not so sure we need to continue. I don't mean to be abrupt, but this is really basic stuff.
It really seems like your big issue is with government regulations, since subsidies are now off the table.
JCB's previous statement:
There are no direct subsidies to the health-insurance companies, as far as I know. The subsidies I was referring to are the enormous sums of money paid to health-care providers by Medicare, Medicaid, and other similar programs. The reason for the huge cost and spending increases we're seeing in the health-care arena is the market distortions caused primarily by the government subsidies, as well as by various ill-advised regulations.
Hill's response:
That's not what you said or "referred to". I'll remind you: "However, I would say that it is among the most heavily-regulated/subsidized."
As a matter of fact, the health-insurance industry doesn't receive one cent of subsidy from the government.
The "subsidies" you are referring to are not subsidies either. They are payment for services. There is a big difference. A subsidy is monetary assistance granted by the government to person or private commercial enterprise, such as the Community Development Block Grant, or farm subsidies where the government gets nothing in return. In this case there are services rendered and that what is being paid for.
So, the health-insurance industry is not subsidized contrary to your previously statement.
Correct? Yes or no.
JCB's previous statement:
http://www.newsweek.com/id/202015/page/1
"A new report from Obama's own Council of Economic Advisers shows why controlling health costs is so important. Since 1975, annual health spending per person, adjusted for inflation, has grown 2.1 percentage points faster than overall economic growth per person. If this trend continues, the CEA projects that
* Health spending, which was 5 percent of the economy (gross domestic product) in 1960 and is reckoned at almost 18 percent today, would grow to 34 percent of GDP by 2040 -- a third of the economy.
* Medicare and Medicaid, the government insurance programs for the elderly and poor, would increase from 6 percent of GDP now to 15 percent in 2040 -- roughly equal to three-quarters of present federal spending.
* Employer-paid insurance premiums for family coverage, which grew 85 percent in inflation-adjusted terms from 1996 to $11,941 in 2006, would increase to $25,200 by 2025 and $45,000 in 2040 (all figures in "constant 2008 dollars"). The huge costs would force employers to reduce take-home pay."
The Goldhill article I mentioned in a previous e-mail (i.e., the one you said you didn't want to read) provides good explanations of the nature of these many of these distortions:
http://tinyurl.com/yendgv9
As Goldhill points out, "...it is no coincidence that the great inflation in health-care costs began soon after [Medicare and Medicaid were created in 1965]. "
Your explanation, on the other hand, is that costs have increased due to unbridled greed on the part of the health-care industry, including, presumably, the health-insurance industry. (At least that's my understanding of your view. Please correct me if I've mischaracterized it in any way.) If that's the case, why aren't we seeing similarly skyrocketing costs in most non-health-care-related industries?
Hill's response:
Oh, you mean like the financial sector? Greed is certainly a factor, but probably more so is the fact that people get sick more often than they buy cars. The biggest factor is that health insurance is it's own worst enemy. By reducing their client pool by rejecting claims, they have to keep increasing premiums to keep the profits rolling in and Wall Street happy.
JCB's previous statement:
Are those industries simply less greedy? Why would they be? What is it about health care that attracts unusually greedy people? Also, why wouldn't cost increases be even worse in industries that are less heavily bridled (i.e., less regulated) than health care? Take veterinary care, for example. I think most people would agree that veterinary care is far less regulated than health care. Americans love their pets almost as much as they love their friends and relatives. Even more so, in many cases. So why aren't we seeing even more serious cost increases in veterinary care than we are in health care?
Hill's response:
Not a real good example. If you really want me to take the time to deconstruct this I will, but it's really a waste of time to do so.
JCB's previous statement:
Or, consider forms of insurance other than health insurance. If greed is causing the price increases we're seeing in health insurance, why is it that we aren't experiencing similarly mind-boggling increases in premiums for life, homeowner's, or auto insurance? Are the non-health-care-related insurance companies less greedy for some reason?
Hill's response:
Oh, my homeowners insurance has been going up...about 10% a year and never a claim. But the short answer is it's all actuarial and (this is very important) they all have to compete for my business and I can switch companies anytime I want. Competition is a wonderful thing. This is why the health-care industry don't want it from the government or other insurers. But if you have claims or are a bad risk, they'll still insure you but it'll cost an arm and a leg. With health-insurance, I don't have choices. If you were just asking this because you really didn't get this part, I am not so sure we need to continue. I don't mean to be abrupt, but this is really basic stuff.
It really seems like your big issue is with government regulations, since subsidies are now off the table.
Friday, March 26, 2010
Health-care debate with J.E. Hill, part 2
Further debate between J.E. Hill of The Skeptical Review and myself:
Hill:
You wrote:
"However, that's not the fault of the free market. Is it merely a coincidence that our health-care industry is simultaneously the most heavily-regulated/subsidized, as well as the most dysfunctional? "
Are you asserting that the health-care insurance industry is the most heavily-regulated/subsidized of all industries?
JCB:
This is a thought-provoking question. Subsidization and regulation are not entirely quantifiable because comparing different types of subsidies and regulations across different industries amounts to an apples-to-oranges comparison. So I'll admit it was a bit rash of me to claim that health care is the most heavily-regulated/subsidized of all industries. Instead, I probably should have said something like "...among the most heavily-regulated/subsidized...." I would say that health care is currently the most dysfunctionally regulated/subsidized of industries in our country, in that the severe market distortions caused by those regulations/subsidies are rapidly bankrupting us, while destroying the quality of available care. We have a lot of problems of various kinds in many other industries, but these pale in comparison with the threat posed to our economic and physical well being by our current health-care system.
Hill:
I am not so sure you read the question carefully, so I'll ask this again: Are you asserting that the health-care insurance industry is the most heavily-regulated/subsidized of all industries?
JCB:
You're correct that I inadvertently overlooked the word "insurance" in your question. As in the case of the health-care industry as a whole, I would not claim that the health-insurance portion of that industry is necessarily the single most heavily-regulated/subsidized of industries. However, I would say that it is among the most heavily-regulated/subsidized. Here's a link that provides an overview of health-insurance regulations by states and the federal government:
http://www.allhealth.org/briefingmaterials/HealthInsuranceReportKofmanandPollitz-95.pdf
In addition, the government has nationalized huge sectors of the health-insurance market through Medicare, Medicaid, and various other programs. In these sectors, health-insurance is not merely regulated, but is completely controlled (i.e., owned and operated) by the government and is massively subsidized in a manner that is completely unsustainable.
Hill:
You have yet to show the insurance industry is heavily subsidized by the federal government.
Please show the federal agency that provides these subsidies and the amount that is paid directly to the health insurance industry on a yearly basis.
Of course Medicare, Medicaid and other federal or state health programs exist. The reason Medicare, for example, exists is that seniors simply cannot afford what health insurance companies would charge them for health care. But that's not the question here.
We'll get to the regulations later.
JCB:
Hill:
You wrote:
"However, that's not the fault of the free market. Is it merely a coincidence that our health-care industry is simultaneously the most heavily-regulated/subsidized, as well as the most dysfunctional? "
Are you asserting that the health-care insurance industry is the most heavily-regulated/subsidized of all industries?
JCB:
This is a thought-provoking question. Subsidization and regulation are not entirely quantifiable because comparing different types of subsidies and regulations across different industries amounts to an apples-to-oranges comparison. So I'll admit it was a bit rash of me to claim that health care is the most heavily-regulated/subsidized of all industries. Instead, I probably should have said something like "...among the most heavily-regulated/subsidized...." I would say that health care is currently the most dysfunctionally regulated/subsidized of industries in our country, in that the severe market distortions caused by those regulations/subsidies are rapidly bankrupting us, while destroying the quality of available care. We have a lot of problems of various kinds in many other industries, but these pale in comparison with the threat posed to our economic and physical well being by our current health-care system.
Hill:
I am not so sure you read the question carefully, so I'll ask this again: Are you asserting that the health-care insurance industry is the most heavily-regulated/subsidized of all industries?
JCB:
You're correct that I inadvertently overlooked the word "insurance" in your question. As in the case of the health-care industry as a whole, I would not claim that the health-insurance portion of that industry is necessarily the single most heavily-regulated/subsidized of industries. However, I would say that it is among the most heavily-regulated/subsidized. Here's a link that provides an overview of health-insurance regulations by states and the federal government:
http://www.allhealth.org/briefingmaterials/HealthInsuranceReportKofmanandPollitz-95.pdf
In addition, the government has nationalized huge sectors of the health-insurance market through Medicare, Medicaid, and various other programs. In these sectors, health-insurance is not merely regulated, but is completely controlled (i.e., owned and operated) by the government and is massively subsidized in a manner that is completely unsustainable.
Hill:
You have yet to show the insurance industry is heavily subsidized by the federal government.
Please show the federal agency that provides these subsidies and the amount that is paid directly to the health insurance industry on a yearly basis.
Of course Medicare, Medicaid and other federal or state health programs exist. The reason Medicare, for example, exists is that seniors simply cannot afford what health insurance companies would charge them for health care. But that's not the question here.
We'll get to the regulations later.
JCB:
There are no direct subsidies to the health-insurance companies, as far as I know. The subsidies I was referring to are the enormous sums of money paid to health-care providers by Medicare, Medicaid, and other similar programs. The reason for the huge cost and spending increases we're seeing in the health-care arena is the market distortions caused primarily by the government subsidies, as well as by various ill-advised regulations:
http://www.newsweek.com/id/202015/page/1
"A new report from Obama's own Council of Economic Advisers shows why controlling health costs is so important. Since 1975, annual health spending per person, adjusted for inflation, has grown 2.1 percentage points faster than overall economic growth per person. If this trend continues, the CEA projects that
* Health spending, which was 5 percent of the economy (gross domestic product) in 1960 and is reckoned at almost 18 percent today, would grow to 34 percent of GDP by 2040 -- a third of the economy.
* Medicare and Medicaid, the government insurance programs for the elderly and poor, would increase from 6 percent of GDP now to 15 percent in 2040 -- roughly equal to three-quarters of present federal spending.
* Employer-paid insurance premiums for family coverage, which grew 85 percent in inflation-adjusted terms from 1996 to $11,941 in 2006, would increase to $25,200 by 2025 and $45,000 in 2040 (all figures in "constant 2008 dollars"). The huge costs would force employers to reduce take-home pay."
The Goldhill article I mentioned in a previous e-mail (i.e., the one you said you didn't want to read) provides good explanations of the nature of these many of these distortions:
http://tinyurl.com/yendgv9
As Goldhill points out, "...it is no coincidence that the great inflation in health-care costs began soon after [Medicare and Medicaid were created in 1965]. "
Your explanation, on the other hand, is that costs have increased due to unbridled greed on the part of the health-care industry, including, presumably, the health-insurance industry. (At least that's my understanding of your view. Please correct me if I've mischaracterized it in any way.) If that's the case, why aren't we seeing similarly skyrocketing costs in most non-health-care-related industries? Are those industries simply less greedy? Why would they be? What is it about health care that attracts unusually greedy people? Also, why wouldn't cost increases be even worse in industries that are less heavily bridled (i.e., less regulated) than health care? Take veterinary care, for example. I think most people would agree that veterinary care is far less regulated than health care. Americans love their pets almost as much as they love their friends and relatives. Even more so, in many cases. So why aren't we seeing even more serious cost increases in veterinary care than we are in health care? Or, consider forms of insurance other than health insurance. If greed is causing the price increases we're seeing in health insurance, why is it that we aren't experiencing similarly mind-boggling increases in premiums for life, homeowner's, or auto insurance? Are the non-health-care-related insurance companies less greedy for some reason?
http://www.newsweek.com/id/202015/page/1
"A new report from Obama's own Council of Economic Advisers shows why controlling health costs is so important. Since 1975, annual health spending per person, adjusted for inflation, has grown 2.1 percentage points faster than overall economic growth per person. If this trend continues, the CEA projects that
* Health spending, which was 5 percent of the economy (gross domestic product) in 1960 and is reckoned at almost 18 percent today, would grow to 34 percent of GDP by 2040 -- a third of the economy.
* Medicare and Medicaid, the government insurance programs for the elderly and poor, would increase from 6 percent of GDP now to 15 percent in 2040 -- roughly equal to three-quarters of present federal spending.
* Employer-paid insurance premiums for family coverage, which grew 85 percent in inflation-adjusted terms from 1996 to $11,941 in 2006, would increase to $25,200 by 2025 and $45,000 in 2040 (all figures in "constant 2008 dollars"). The huge costs would force employers to reduce take-home pay."
The Goldhill article I mentioned in a previous e-mail (i.e., the one you said you didn't want to read) provides good explanations of the nature of these many of these distortions:
http://tinyurl.com/yendgv9
As Goldhill points out, "...it is no coincidence that the great inflation in health-care costs began soon after [Medicare and Medicaid were created in 1965]. "
Your explanation, on the other hand, is that costs have increased due to unbridled greed on the part of the health-care industry, including, presumably, the health-insurance industry. (At least that's my understanding of your view. Please correct me if I've mischaracterized it in any way.) If that's the case, why aren't we seeing similarly skyrocketing costs in most non-health-care-related industries? Are those industries simply less greedy? Why would they be? What is it about health care that attracts unusually greedy people? Also, why wouldn't cost increases be even worse in industries that are less heavily bridled (i.e., less regulated) than health care? Take veterinary care, for example. I think most people would agree that veterinary care is far less regulated than health care. Americans love their pets almost as much as they love their friends and relatives. Even more so, in many cases. So why aren't we seeing even more serious cost increases in veterinary care than we are in health care? Or, consider forms of insurance other than health insurance. If greed is causing the price increases we're seeing in health insurance, why is it that we aren't experiencing similarly mind-boggling increases in premiums for life, homeowner's, or auto insurance? Are the non-health-care-related insurance companies less greedy for some reason?
Wednesday, March 17, 2010
Health-care debate with J.E. Hill, part 1
A few days ago I sent the following e-mail to several people:
One of the people I sent it to was J.E. Hill, a writer for The Skeptical Review. He responded as follows:
My response:
Hill's response:
My response:
I believe we have to do whatever we can to stop the threat posed by Obamacare to our health-care system, our economic well being, and our freedom. If you agree, here's something that's easy to do:
Just fill in the required information to send e-mails to members of Congress asking them to vote against Obamacare. It'll take you less than 5 minutes. You can simply send the text provided or edit it as desired. I hope you'll also forward this link to others who might be interested.
One of the people I sent it to was J.E. Hill, a writer for The Skeptical Review. He responded as follows:
Yeah, right. Let's keep having insurance companies come between us and our doctors, turn us down for insurance when we need it the most, and keep on making billions while thousands of Americans die each year from not having adequate health care.
My response:
Thanks for getting back to me on this important issue. You're right that we have extremely serious problems with health care in this country. However, that's not the fault of the free market. Is it merely a coincidence that our health-care industry is simultaneously the most heavily-regulated/subsidized, as well as the most dysfunctional? Can you think of any other US industries in which costs have been consistently increasing at a rate way beyond overall inflation, while the quality of the products delivered to consumers continues to decline? The only example I can think of is higher education, which also suffers from heavy government involvement and subsidization. A lot of people complain about gasoline prices, but corrected for the overall inflation rate, they've been relatively stable over the years:
Here's an Atlantic article that provides one of the best explanations I've seen of what's gone wrong with the health-care sector:
The only viable solution to these problems is massive deregulation and elimination of subsidies. Expansion of government regulation and subsidization will only serve to further increase costs and/or reduce the quality and quantity of available care. If you don't believe that, read a few of these articles about what's going on in Canada:
Hill's response:
I really don't care to read your "best explanations" as you would not want to read mine. This is a common sense issue. Except for Medicare, the government has maintained a hands-off attitude toward health care, and Medicare is one of the most successful programs ever...just ask any senior.
There is no "free market" in this country. There is no reputable economist that would assert that we have a "free market." This is a chimera used by the right to keep the ignorant thinking they are getting a really great deal all the while being taken to the cleaners.
You cannot have a free market with a central bank; you cannot have a free market when the government supports certain corporations through tax breaks or cash incentives (corporate welfare); you cannot have a free market by giving corporations subsidies. You cannot have a free market with anti-trust laws and government regulations.
Of course we all know what can happen without the last one.
Without a strong central bank, anti-trust laws, and regulations, unbridled capitalism would resemble the capitalism of the turn of the century. The Great Depression was not caused by the central bank, but lack of regulations and checks and balances in the "free-for-all" market economy created by speculators. Sound familiar?
I don't mind capitalism. But capitalism without limits or ethics or a moral guidance spawns unbridled greed.
Healthcare in this country is unbridled greed. If there is one thing about the present proposal that bothers me it's that it does not go far enough for universal care or tax the wealthy enough to pay for it.
Oh, you wanted one more US industry in which costs have been consistently increasing at a rate way beyond overall inflation, while the quality of the products delivered to consumers continues to decline...exclusive of the defense contractors, how about the airline industry?
The issue here is quite simply private corporations have been entrusted to provide our healthcare and do a terrible job of it and make billions in profit doing it.
I think you complain too much about people trying to do something to improve our system and make it more competitive.
My response:
> I really don't care to read your "best explanations" as you would not want to read mine.
OK, how about this: I'll read yours if you'll read mine. Or, better yet, I'll read yours even if you don't read mine. Can you send me a link to it?
> This is a common sense issue.
I'm not the first to point out that common sense is not all that common.
> Except for Medicare, the government has maintained a hands-off attitude toward heath care, and Medicare is one of the most successful programs ever...just ask any senior.
The claim that Medicare is the only area of government involvement in health care is completely unsupportable. What about Medicaid? What about the FDA? What about the reams of regulations that must be adhered to by hospitals, doctors, and insurance companies? The government is heavily involved in regulating and/or subsidizing virtually all aspects of medicine, from drugs to insurance. As for Medicare, to say that it is "...one of the most successful programs ever..." is analogous to claiming that Bernie Madoff had one of the most successful investment strategies ever. The only difference between Medicare and what Madoff did is that Medicare is a Ponzi scheme of a size Madoff could only have dreamed of. As Goldhill points out in that Atlantic article:
"In 1966, Medicare and Medicaid made up 1 percent of total government spending; now that figure is 20 percent, and quickly rising."
"In designing Medicare and Medicaid in 1965, the government essentially adopted this comprehensive-insurance model for its own spending, and by the next year had enrolled nearly 12 percent of the population. And it is no coincidence that the great inflation in health-care costs began soon after."
> There is no "free market" in this country. There is no reputable economist that would assert that we have a "free market." This is a chimera used by the right to keep the ignorant thinking they are getting a really great deal all the while being taken to the cleaners.
It's true that there is no purely free market in this country (or anywhere else). However, it is also true that there are industries in which the market is relatively much freer of government interference than in other industries. And it is no coincidence that it is the industries in which the government interferes the most that are the most dysfunctional.
> You cannot have a free market with a central bank; you cannot have a free market when the government supports certain corporations through tax breaks or cash incentives (corporate welfare); you cannot have a free market by giving corporations subsidies. You cannot have a free market with anti-trust laws and government regulations.
I completely agree with you on those points. The question is, which works better: a freer market or a more regulated market? Another good question is: what kinds of regulations are beneficial and what kinds are harmful?
> Of course we all know what can happen without the last one.
Or think we know. Opinions vary widely on the effects, intended and otherwise, of various government regulations. I'm not against all regulations, BTW. A rational regulatory framework is necessary to provide a coherent structure within which a free-market system can operate efficiently.
> Without a strong central bank, anti-trust laws, and regulations, unbridled capitalism would resemble the capitalism of the turn of the century. The Great Depression was not caused by the central bank, but lack of regulations and checks and balances in the "free-for-all" market economy created by speculators. Sound familiar?
Though I'm personally opposed to anti-trust laws, I don't have a problem with a central bank and a reasonable level of economic regulation. But health-care regulations have gone way beyond what is reasonable and common-sense. They're destroying the quality of our health care while rapidly bankrupting the country. Rather than being a helpful bridle to guide the horse of capitalism, our current regulatory environment is more like an injection of mind-and-DNA-altering drugs that has turned the horse into an uncontrollable raging monster.
As for the Great Depression, the government foolishly tried to regulate and spend its way back to prosperity. It didn't work any better than the Bush/Obama bail-outs and stimulus money have worked to end our current economic downturn.
> I don't mind capitalism. But capitalism without limits or ethics or a moral guidance spawns unbridled greed.
I agree with you. I suppose our disagreement is on which forms of regulation are beneficial and which are destructive.
> Healthcare in this country is unbridled greed. If there is one thing about the present proposal that bothers me it that it does not go far enough for universal care or tax the wealthy enough to pay for it.
The problem is not unbridled greed. The problem is that people's natural greed (i.e., rational self interest) is actually heavily bridled in such a manner as to cause severe and destructive distortions of the market. If our health-care problems were due to mere greed, then why is it that other less-regulated industries aren't experiencing analogous problems? Is the oil industry less greedy than the health care industry? What about the consumer electronics industry, the food industry, the automobile industry, or the veterinary-care industry? Why is greed only a destructive force in health care?
> Oh, you wanted one more US industry in which costs have been consistently increasing at a rate way beyond overall inflation, while the quality of the products delivered to consumers continues to decline...exclusive of the defense contractors, how about the airline industry?
Do you have any statistics to back up your claim about the airlines? It's true that quality has declined in the airline industry, but I don't think the cost of airline tickets has gone up on average at a rate beyond overall inflation. In fact, prices seem to be quite low if you shop around and plan your trip in advance. They certainly haven't gone up at the completely insane rates we've seen in the health-care sector. As for quality, that has declined in response to consumer demand. Most people would rather put up with less leg room and no food than pay extra airfare. They just want to get from point A to point B as quickly and cheaply as possible. And the airlines do a remarkably good job of providing what their consumers want. As for the defense industry, do you have evidence that costs have risen at a rate significantly beyond overall inflation or that product quality has deteriorated? I've actually worked for years for a company that does some defense-related consulting. The hourly rates we charge the government have not gone up at a rate significantly different than inflation. But our product is almost exclusively labor (for engineering and R&D). Perhaps the situation for defense contractors who produce hardware is different.
> The issue here is quite simply private corporations have been entrusted to provide our health care and do a terrible job of it and make billions in profit doing it.
They have done a terrible job. The question is why have those corporations done such a terrible job when corporations in virtually every other industry do such a great job? The answer has to do with the perverse incentives and other distortions of the market caused by excessive government interference in the health-care market.
> I think you complain too much about people trying to do something to improve our system and make it more competitive.
I only complain about people who are trying to change our system in ways that will make it worse. ;-)
I'm really enjoying this discussion! Thanks for your responses.
Thursday, March 4, 2010
Health care in the US (debate with E), part 2
A continuation of the health-care debate I've been having with my friend, E:
E: ...with regard to health care costs and your allegation that their cause is "massive" government "interference" with the providers of it:
It is hard to believe that these Godless Communist countries with "socialized" health care have LESS regulation than we do. Since their governments control large sectors (or all) of their respective delivery systems, it would be fair to say that the systems in these countries are much, much more regulated by their governments than ours is. Yet they spend far less per-capita than we do, despite all this "massive" government "interference". This observation includes first-world countries with first-world health services.
Link to table
Despite our relative lack of health-care regulation, we still spend far more than the nearest country or any of the "socialized" medical-care countries.
At the very least this fact seems to destroy the "health care is expensive here because of massive government interference" argument.
JCB: The countries with completely socialized health care hold costs down by means of strict rationing. That's why I much prefer our current system to alternatives such as the Canadian system. Of course, our system is probably completely unsustainable in its current form. We're either going to have to radically deregulate and desocialize our system or transition to a completely socialized/rationed system. The former option would be far superior in every way. Unfortunately, the latter is much more likely to happen.
E: And we hold down costs by means of strict rationing too. But our rationing is based simply on how poor you are. Which of course works in our favor as well as in the favors of people yet higher up the wealth ladder. "Poor, too bad, you can't afford health care, too too bad for you loser. You should have had good genetics and good (i.e. wealthy) parents and grown up somewhere that encouraged the good sense that I have." "Unlucky you. No MRI. Die." Rationing. Brutal, class-wide rationing.
JCB: People not buying what they can't afford is not what is normally referred to as rationing. But, no matter. Whatever we choose to call it, it's obviously a serious problem. The key point, however, is that it's not a problem that can be blamed on the free market, since--as Goldhill shows--our health-care market is highly distorted by government interference.
E: I much prefer the Canadian system to alternatives such as our system. We are going to have to radically regulate and socialize our system, in the sense of providing a safe and deep "safety blanket" (by that I mean, making modern technologies and treatments just as available to the poor as to the rich). You know, the sort of thing we do with roads and schools and above all, the military. This option is far superior in every way, unfortunately with powerful status quo seeking to maintain profits, that's unlikely to happen, as we're currently seeing.
JCB: Transitioning to a purely socialist system may actually be preferable to keeping our existing system, since it'd at least allow us to control spending. Our existing health-care system is almost certainly economically unsustainable. Unfortunately, the quality of medical care available under a socialist system would of necessity be far inferior to what could be achieved were we to adopt a free-market approach. Why? Because excellent health care requires a high degree of innovation and hard work by highly-skilled, dedicated workers. A free market is the only known economic system capable of providing the kinds of incentives required to consistently motivate people to achieve high levels of excellence in their work. Socialist government bureaucracies, conversely, are not generally renowned for their ability to inspire excellence.
You mentioned roads and the military. I'd be in favor of as much privatization of roads as is practical. The cleanest, best-maintained freeways I've ever driven on were privately-owned toll roads, such as those found in Orange County, CA. Many government-operated roads are notorious for being poorly maintained, with lots of trash, potholes, graffiti, etc. As for the military, that of necessity has to be controlled by the government. At least I don't see a practical way to avoid that. However, a system of private contractors operating in a competitive, free-market environment is the most efficient means of producing the highest-quality military equipment.
I just noticed that you also mentioned the issue of socialized schools. The record of government-run schools is spotty, at best. The dysfunctional nature of many of our public schools provides further evidence of the inherent inability of socialized systems to consistently provide high-quality services. I believe that a more free-market approach to schools would vastly improve the quality of education available in this country.
E: ...with regard to health care costs and your allegation that their cause is "massive" government "interference" with the providers of it:
It is hard to believe that these Godless Communist countries with "socialized" health care have LESS regulation than we do. Since their governments control large sectors (or all) of their respective delivery systems, it would be fair to say that the systems in these countries are much, much more regulated by their governments than ours is. Yet they spend far less per-capita than we do, despite all this "massive" government "interference". This observation includes first-world countries with first-world health services.
Link to table
Despite our relative lack of health-care regulation, we still spend far more than the nearest country or any of the "socialized" medical-care countries.
At the very least this fact seems to destroy the "health care is expensive here because of massive government interference" argument.
JCB: The countries with completely socialized health care hold costs down by means of strict rationing. That's why I much prefer our current system to alternatives such as the Canadian system. Of course, our system is probably completely unsustainable in its current form. We're either going to have to radically deregulate and desocialize our system or transition to a completely socialized/rationed system. The former option would be far superior in every way. Unfortunately, the latter is much more likely to happen.
E: And we hold down costs by means of strict rationing too. But our rationing is based simply on how poor you are. Which of course works in our favor as well as in the favors of people yet higher up the wealth ladder. "Poor, too bad, you can't afford health care, too too bad for you loser. You should have had good genetics and good (i.e. wealthy) parents and grown up somewhere that encouraged the good sense that I have." "Unlucky you. No MRI. Die." Rationing. Brutal, class-wide rationing.
JCB: People not buying what they can't afford is not what is normally referred to as rationing. But, no matter. Whatever we choose to call it, it's obviously a serious problem. The key point, however, is that it's not a problem that can be blamed on the free market, since--as Goldhill shows--our health-care market is highly distorted by government interference.
E: I much prefer the Canadian system to alternatives such as our system. We are going to have to radically regulate and socialize our system, in the sense of providing a safe and deep "safety blanket" (by that I mean, making modern technologies and treatments just as available to the poor as to the rich). You know, the sort of thing we do with roads and schools and above all, the military. This option is far superior in every way, unfortunately with powerful status quo seeking to maintain profits, that's unlikely to happen, as we're currently seeing.
JCB: Transitioning to a purely socialist system may actually be preferable to keeping our existing system, since it'd at least allow us to control spending. Our existing health-care system is almost certainly economically unsustainable. Unfortunately, the quality of medical care available under a socialist system would of necessity be far inferior to what could be achieved were we to adopt a free-market approach. Why? Because excellent health care requires a high degree of innovation and hard work by highly-skilled, dedicated workers. A free market is the only known economic system capable of providing the kinds of incentives required to consistently motivate people to achieve high levels of excellence in their work. Socialist government bureaucracies, conversely, are not generally renowned for their ability to inspire excellence.
You mentioned roads and the military. I'd be in favor of as much privatization of roads as is practical. The cleanest, best-maintained freeways I've ever driven on were privately-owned toll roads, such as those found in Orange County, CA. Many government-operated roads are notorious for being poorly maintained, with lots of trash, potholes, graffiti, etc. As for the military, that of necessity has to be controlled by the government. At least I don't see a practical way to avoid that. However, a system of private contractors operating in a competitive, free-market environment is the most efficient means of producing the highest-quality military equipment.
I just noticed that you also mentioned the issue of socialized schools. The record of government-run schools is spotty, at best. The dysfunctional nature of many of our public schools provides further evidence of the inherent inability of socialized systems to consistently provide high-quality services. I believe that a more free-market approach to schools would vastly improve the quality of education available in this country.
Tuesday, March 2, 2010
Health care in the US (debate with E), part 1
(This is a continuation of a thread that began as a discussion of drug patents with my friend E. However, I decided to change the title, since the original topic has morphed into a discussion of what's wrong with health care in the United States.)
JCB: Yes. Health care is ridiculously expensive in this country. The question is: Why is this the case?
E: Quite a few factors I'm sure.
JCB: 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: One would seem 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: 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. I'm a greedy engineer working for an unmitigatedly greedy multinational consulting corporation. Yet my salary and the rates [my employer] charges its customers have risen at about the same rate as overall inflation. Other than health care and higher education (another industry suffering from massive government interference), 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. There may be some of which I'm unaware. Let me know if you can think of any.
E: 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: That's a great point. But what is the source of this bizarreness? Is it the free market and the unmitigated greed of the health-care industry? 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: It's more than I can understand but I'll try to find that really good article that I think I was telling you about. The author thought that insurance should be just that - insurance against catastrophic events, rather than a product that paid for every little evaluation or treatment.
JCB: 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: He made the analogy to car insurance, which doesn't pay for your oil changes and people don't expect it to.
JCB: Good analogy.
E: If I recall correctly he also thinks that private insurance companies are corrupt and part of the problem, not the solution.
JCB: 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. So I doubt that insurance-industry corruption could be an important root cause of the health-care-inflation problem. However, it could be that a higher-than-normal level of corruption has resulted from the massive government interference in the health-care market.
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