But it did precisely the opposite. What ended up happening, as we all would expect knowing what we know today, was a great cost shift. Indeed, the 80s seems to be a time when the rate of increase in US health spending moved out of line with other countries’ experiences. In this case, hospitals began charging more to patients with private insurance, which in turn put more pressure on private insurers to raise premiums but also to pursue unpopular cost-cutting strategies in response. Of course, think of how the voting population responds to this. “Look at the exorbitantly large increases in private insurance premiums!” Look at how evil insurers are! And of course, this greases the wheels even further for a discussion of both single-payer health care and perhaps even single-provider health care.

Now, there are forces that push us away from both single-payer and single-provider in health care, but it is clear to me that starving the beast (even if unintentional) has resulted in precisely the opposite of what its proponents would suggest. Maybe the better option would be to allow the beast to continue eating until the tax payments required to keep it alive would have spurred the population to wield a pitchfork. Is there a better test case for this theory out there?

Can you think of any other market where the buyers of a product are trying to tell the sellers how to efficiently produce it?

Great quote. I’d say that higher education gets close particularly if we take a generous view of what “buyer” means.

After checking in and being called back to see the doctor, a nurse takes my height, weight and blood pressure. I wait. When my doctor comes in (it’s the first time I’ve met him), he first asks if I am married. I say yes. He next asks if I am allergic to anything. I said no. Then … he asks if I hurt myself on the job. Seriously. The second he heard it was my back, he was asking if it was an on the job injury. I suppose I should have answered yes – after all I think I tweaked it (start laughing now) while reading a book in preparation for my Money and Banking class. Seriously. I managed to contort myself into a bowling alley chair and stay there for an hour or so, and couldn’t get up after an hour of reading. He asked that question before asking exactly how I injured it or what I thought happened or how it felt or anything like that. Are medical practices for treating backs any different if I hurt it while shoveling snow in my yard or shoveling snow while on the job? Are doctor reimbursements higher if it is a possible workers’ comp case? Lower? Is there more paperwork to file? I tried to ask him why he made this his third question to me … but before I could get my question out, he was onto his next one …

“I know you are married. But if you are having sex with other women, you should wear protection.” He mumbled something after this, but I was too busy retrieving my tongue after it rolled out on the floor in astonishment to have paid much attention to that. And before I could ask what the heck that was for, he was onto yet another couple of questions which are surely going to make my back heal up quicker …

“Do you have a working fire alarm and carbon monoxide detector in your house?” Seeing the apoplexy building in me caused my doctor to finally chime in that, “New York State now forces me to ask these questions.” I asked him what the clinical purpose for these questions was and he quickly went to his computer to log in my answers. Yes – big brother in New York State is using my doctor to make sure I have a working fire and carbon monoxide detector in my house. If my doctor does not log these in for each patient he sees, he is at risk of losing his medical license one supposes.

Finally after finishing his examination, I proceed to the check-out desk to pay for my office visit. Remember, I have a high-deductible catastrophic plan coupled with a health savings account, presumably so I would be price sensitive to my medical purchases. When I asked what the total bill for the visit would be I was told $180. Fine, sounds fair (does it?) so I took out my card to pay it from my health savings. The clerk told me however that I am not allowed to pay the entire bill for the office visit. She said she could, at most, let me pay half ($90) and that she had to submit the visit to the insurance company for review, and that I would receive a bill for the remainder of the visit in three weeks’ time. It would not have mattered if I had $500 in cash to pay her at the desk she told me, the visit still had to be submitted for review to Excellus, and then they would actually decide (in concert with the doctors’ office) how much ultimately my visit would cost me.

There were some other gems uncovered during this visit (which lasted a total of 17 minutes – 6 of which was doctor time with me, 6 of technical assistant time with me, and 5 minutes of waiting for the doctor and doing paperwork to check in and check out), but we’ll leave those for another day. I present the above information without comment.

Given my interest in health economics and graphic novels, I was initially hopeful about Jonathan Gruber‘s graphic novel, entitled Health Care Reform: What It Is, Why It’s Necessary, How It Works.  But in all honesty, the book is awful.  Gruber crafts his argument like a salesman, not an economic educator.  He’s careful to avoid outright mistakes, and makes a couple of awkward disclosures.  Yet he omits a long list of crucial, damaging points.

1. Gruber explains the basic facts about health care costs: they’re rising, and government picks up much of the tab.  But he almost totally neglects the connection between the two.  Medicare and Medicaid vastly increase demand for health care.  There’s no denying it.  Imagine how much more affordable health care would be if these programs had never been adopted – or if they were abolished.

2. Gruber doesn’t just ignore the indirect effects of Medicare and Medicaid on health costs.  He repeatedly panders to the populist view that near-total insurance is good.  He brags that Obamacare will close the “enormous gaps” in many private insurance policies.  He frowns on insurance policies that place any ceiling on annual or lifetime payouts.  He even reassures readers that, under Obamacare, the government’s “comparative effectiveness research” cannot legally be used by private insurance companies to restrict health insurance coverage.  Gruber’s happy to blame “Cadillac” health insurance policies for raising medical costs.  But private insurers’ many efforts to restrain spending earn nothing but criticism from him.

3. More generally, Gruber ignores almost everything government does to increasethe cost of health care.  There’s no discussion of medical licensing versus certification.  There’s no discussion of the regulatory barriers to low-cost, high-deductible policies.  There’s no discussion of medical liability.  He mentions the high cost of “free” emergency room care, but fails to mention that this is a side effect of long-standing populist policy: government forces emergency rooms to treat people even if they certainly won’t pay.

4. There’s zero discussion of moral hazard – the unhealthy lifestyles that many people choose despite the risks.  For Gruber, or at least Gruber the graphic novelist, bad health is something that “just happens to you.”  Sigh.  Insurance companies aren’t omniscient, but they could do a lot more to tailor rates to risks – if it were legal to do so.  And maybe people would respond to those incentives by living healthier lives.

5. Gruber fails to counter “You can’t put a price on safety” populist rhetoric with the basic economic logic of risk.  Namely: There’s a trade-off between risk and other goods – and no person or society can afford perfect safety.  Indeed, he panders to the populists.  Gruber mentions people who “think they don’t need insurance because they are healthy” – then condescendingly adds, “They don’t realize that if they do get sick, they won’t be able to afford the care they need.”  Yes, or maybe they’ve weighed the risks and reasonably decided to take their chances.

6. Gruber never mentions health economists’ consensus that health care is vastly overrated.  Differences in medical treatment explain at most a tiny fraction of (a) why we’re so much healthier than we used to be, and (b) why the rich are so much healthier than the poor.  Gruber does admit that a lot of health care spending is pure waste.  But he neglects one of the best explanations: We waste a lot of health care because patients overrate its effectiveness.

7. Gruber is quick to praise the wonders of Romneycare in Massachusetts.  But he doesn’t mention the fact that Massachusetts already had extremely high coverage: coverage increased from 94% to 96%.  (Gruber says 98%, but I’ll go with Wikipedia).  Achieving Massachusetts-level coverage at the national level, where coverage rates are markedly lower, will be far more expensive.

8. Gruber studiously avoids the most remarkable health care system on earth:Singapore’s.  While it’s far from laissez-faire, it’s amazingly cheap and effective, and relies very heavily on individual incentives.  Why should anyone “learn from Massachusetts” when they can learn from Singapore?

9. Gruber praises the CBO’s “evidence-based estimates of how legislation will impact our nation,” including its estimates of the budgetary effects of Obamacare.  But he never mentions the crucial caveat: the CBO takes politicians at their word.  If legislation says that it’s going to reduce Medicare reimbursements, CBO assumes those cuts will actually happen – even though Congress habitually reverses its cuts before the day of reckoning arrives.  CBO’s estimates are about as “evidence-based” as the statement “If my father was a king, I’d be a prince.”

10. To his credit, Gruber carefully explains (a) the indirect consequences of banning pre-existing conditions clauses, and (b) how the individual mandatemitigates these indirect consequences.  Unfortunately, he doesn’t take this chance to explain that, contrary to most economists and econ textbooks, insurance companies are quite good at solving adverse selection problems – unless regulations prevent insurers from charging riskier people higher rates.

11. Gruber ignores the disemployment effects of fining employers who fail to provide coverage for their employees.  He just panders to populist prejudice: Obamacare gives small firms a tax credit, and big corporations can easily afford to pay.  (“Companies of that size should be offering insurance, or contributing to their employees’ coverage.”)  Never mind the unemployment rate – or nominal wage rigidity.

12. Gruber’s book begins and ends with the high cost of medical care and what to do about it.  But what does Obamacare really do about costs?  Not much.  Right now the Medicare Payment Advisory Commission gives “nonbinding” recommendations to Congress.  Under Obamacare, the new IPAB gives recommendations that Congress legally has to “respond to.”  In my book, that’s still “nonbinding.”

13. Gruber emphasizes how “complicated” cost control is.  But we should support Obamacare anyway:

To not support this bill because it doesn’t “do enough” on cost control is like criticizing a baby for not going directly to long-distance running.

In reality, cost control is simple.  Everyone knows how to do it: Austerity and incentives.  Government needs to spend less, and stop using regulation to discourage frugality.  Alas, these realistic solutions are extremely unpopular.  Gruber is too technocratic to go full populist and say, “We should spend as much as it takes to give the best possible health care to every American.”  But in the end, that’s the philosophy behind Obamacare: Do whatever it takes to cover everyone, and hope the American public one day sees the wisdom of austerity and incentives.

I need to print this onto a notecard, along with a few other posts and just hand them out at dinner parties when I am about to get myself uninvited. Just grab my drink, hand out the card and then be on my merry way. It will save a lot of frustration.

In other news from the AP, half of America is now poor. I won’t throw my considerable pennies at that claim, or reasons for it, but check out this part of the article:

The struggling Americans include Zenobia Bechtol, 18, in Austin, Texas, who earns minimum wage as a part-time pizza delivery driver. Bechtol and her 7-month-old baby were recently evicted from their bedbug-infested apartment after her boyfriend, an electrician, lost his job in the sluggish economy.

After an 18-month job search, Bechtol’s boyfriend now works as a waiter and the family of three is temporarily living with her mother.

“We’re paying my mom $200 a month for rent, and after diapers and formula and gas for work, we barely have enough money to spend,” said Bechtol, a high school graduate who wants to go to college. “If it weren’t for food stamps and other government money for families who need help, we wouldn’t have been able to survive.”

This one is a particularly popular straw man documentary:

Documentary look at health care in the United States as provided by profit-oriented health maintenance organizations (HMOs) compared to free, universal care in Canada, the U.K., and France. Moore contrasts U.S. media reports on Canadian care with the experiences of Canadians in hospitals and clinics there. He interviews patients and doctors in the U.K. about cost, quality, and salaries. He examines why Nixon promoted HMOs in 1971, and why the Clintons’ reform effort failed in the 1990s. He talks to U.S. ex-pats in Paris about French services, and he takes three 9/11 clean-up volunteers, who developed respiratory problems, to Cuba for care. He asks of Americans, “Who are we?”

How do we think an identical documentary that resembles this would go over?

Documentary look at health care in the United States as provided by profit-oriented health maintenance organizations (HMOs) compared to “free”, universal care in Canada, the U.K., and France and demonstrates that it is no so free and not so universal, nor does it achieve the egalitarian claims its founders and supporters advocate for. Oroom contrasts U.S. media reports on the high quality of Canadian care with the actual experiences of Canadians in hospitals and clinics there, and especially those Canadians in hospitals and clinics and recovery rooms and intensive car units in America. He interviews patients and doctors in the U.K. about cost, quality, and salaries. He examines why Nixon promoted HMOs in 1971, and why the Clintons’ reform effort failed in the 1990s and also why corporations offer health insurance as part of our compensation packages today, why a mess of cartel-like provisions keep doctor pay high, why the high regulatory burden keeps drug costs high, why limits on selling insurance across states, how mandating minimum coverages, by community rating, by guaranteed issue and subsdizing expensive procedures have all reduced drive up expenditures in the US and why efforts to end the tax favored treatment of employer provided health insurance failed as well as why efforts to make the insurance and medical market more competitive have failed. He talks to U.S. ex-pats in Paris about French services, and he talks to some other U.S. ex-pats in Paris about unsatisfactory French services, and he takes three 9/11 clean-up volunteers, who developed respiratory problems, to Cuba for care. He takes three others to Cornell Health Center for care. He asks of Americans, “What is your favorite color of the rainbow?”