“This is a bit of an ironic post because I think it is you who has blinders on.”
And this is from a person who literally quoted half a sentence and criticized it for not containing the other half.
“It is not necessary for a market to be perfectly free in order for it to be useful in allocating resources more efficiently. In fact, our most pedantic posters here frequently state that there is no such thing as a perfectly free market, and I agree.”
Right off the bat I can see that you did not understand my post. How can you say near-free markets in health care (since you say it’s no different than other services) lead to “allocating resources more efficiently”? This is a relative claim that has no theoretical support given that the service in question does not exhibit the characteristics required for pareto optimal outcomes in equilibrium (even if a near free market existed). We are dealing with sub-optimal outcomes and thus blanket statements like this are not possible, unless of course you continue to make misguided assumptions. I contend that the sub-optimal “2nd best” outcome from a single payer HC system is better than a market-driven privately funded HC system.
“And if you believe that the cost-constrained choices people make in the areas of food, shelter, transportation, energy, or even communications technology don’t impact human health, then you are out of touch with reality.”
I’m not sure what your point is here as I did not say anything related to this. I was in fact arguing about the uniqueness of health care services (not the institutional arrangement) which your point actually supports.
“In any case, there will always be plenty of choice in terms of doctors and hospitals and even treatments.”
This is not the US marketplace. You either have 1) not done any empirical work in this field or 2) are extremely liberal in your definition of “plenty of choice”. Like I stated in the second half of the sentence you ignored – look at regional hospital monopolies (evidenced by price differentials between areas) or rural health care and tell me that there is plenty of choice.
“Well, they are now because we don’t have a free market at all in most of health care. In those areas where we do, e.g. eye care, plastic surgery, even dentistry to a large degree, the market works pretty well, and costs have risen at about the rate of inflation or less.”
If inflation is lower then the market is functioning better? What if the inflation difference is purely due to price elasticity differences? What if quality is increasing faster in health care than these other markets? Even if we agree that these markets are functioning better (closer to a pareto optimum) than HC that leaves us with two possible explanations – that the institutional/regulatory set-up is better (e.g. more “free”) or because the dental/eye/plastic surgery services themselves have different characteristics that allow for more efficient outcomes (e.g. less externalities, less information symmetry/complexity issues, etc.). I have not read any empirical work that has answered this question, and thus to me, this argument is inconclusive. If you have such a study I would love to see it.
“Both of those are positive externalities. An example of a negative externality would be medical waste that pollutes the environment. The problems with externalities are not fundamentally different than in any other area.”
I was struggling with the terminology here as well. It could be considered as a positive externality since more HC = lower negative externality (so a double negative = positive), or alternatively that the current health care system produces unnecessary costs that are not priced in the market (and hence negative externality since more HC as currently provided = higher negative externality). Thinking about it more you are probably correct. However, this does not change the point (which we clearly disagree about) – that there are many benefits/costs associated with health care that are not being factored in when making HC purchase decisions (and that the degree of externalities in HC is much higher than for most products/services due to the fundamental nature of HC).
“Yes, there are economies of scale. But what you lose are choice and competition. The economy of scale argument could also be used to justify merging all car companies into one.”
So you concur that economies of scale exist (from both an administrative perspective and from an adverse selection perspective since everyone in the country would be in the insured pool), yet you suggest that this benefit is somehow less that the benefit from “choice and competition”. I don’t think that increased competition in HC insurance would provide many benefits given the unique nature of HC and market power on the supply side. Further, I believe that competition would still exist to some degree if private supplemental insurance was allowed (and perhaps even from the public sector as states could compete with one another on efficiency). My last point on competition would be that since HC has long term implications private firms are not the best suited to facilitate it’s provision as they tend to be short term focused (the biggest failing of publically held firms IMHO). Then there are the benefits from choice – for one, there would still be choice in a single payer system that allowed for secondary private insurance (as I argue is best). Sure, you could argue the point that many libertarians make about individual preferences regarding risk aversion suggesting that less insurance would be optimal (and hence requiring coverage is utility reducing) but I would retort that since basic medical services to sustain life is going to be provided regardless of insurance, the “no insurance/less insurance” choice would simply allow free-loading to occur (again assuming that public insurance only covered necessary treatments). Further, I would argue that lack of insurance coverage increases overall HC costs as it tends to reduce preventative HC & delays the purchase of treatment (again a function of the unique nature of health care – it’s not like buying a car).
“Are you kidding me? Absolutely I want the private firm deciding coverage, based on its contractual obligations. If they try to screw me, at least I can sue ‘em.”
We obviously disagree here. There are downsides to both alternatives to be sure. Being a Canadian who has lived in the US for more than a decade I have experienced both systems personally and strongly believe that the Canadian system is better in this regard (and in general).
@ beowulf
Michael Moore’s “Sicko” was a pretty pathetic attempt at telling this story IMHO. He makes random silly comments and then undermines his narrative by only explaining one side of the story.
@ Tom Hickey
Yes. My rationing point was referencing real constraints, not financial ones (thanks MMT!!). However, I believe that the latter point, real resource constraints, is very real and especially concerning given the baby boom generation going into retirement and climate change.
@ Warren Mosler, Bill Mitchell & the whole MMT community
Thank you for educating me on the workings of the Fed/Treasury and what this means to economic policy. Further, thank you for helping me with the fallacy of composition that was polluting my logic – being a microeconomics guy in general I was assuming (with the help of mainstream macroeconomic teachings) that macro results followed from microeconomic dynamics when in fact general equilibrium constraints (sectoral balances) are binding.
Note – I stumbled upon MMT two months ago (through a Krugman article) and have been hooked ever since. I have been spreading the MMT word around my network and hope to contribute to its broad acceptance. I am a Finance manager at a professional services firm and hold a BS in Chemistry, an MBA (Finance focus) and a Masters in Applied Economics.
Are you kidding me? Absolutely I want the private firm deciding coverage, based on its contractual obligations. If they try to screw me, at least I can sue ‘em.
Yeah, but enough people won’t sue (especially the ones whose denial of care killed them) that paying off the occasional pain in the ass makes denial of care a profit center.
You really should watch Michael Moore’s movie Sicko. There’s a lot you could find fault with in his movies about guns, Iraq or capitalism, but Sicko is a punch in the gut because its damn near impossible to argue with anything Moore says (cannily, the movie isn’t really about the uninsured, he focuses on people who think they’re covered… until their insurer screws them). Bless Moore’s socialist heart, apparently you can watch Sicko for free online. http://topdocumentaryfilms.com/sicko/
“Yeah, but enough people won’t sue (especially the ones whose denial of care killed them) that paying off the occasional pain in the ass makes denial of care a profit center.”
Beowulf, you’re good with numbers. Give me some. How many people have been killed by an insurance company breach of contract? I’m sure Moore has been able to find enough examples in a country of 300MM to fill up a movie, but is this really a material problem? I mean patients are presumably getting advice from their doctors, and given the adversarial relationship between doctors and insurance companies, I wouldn’t think it would be so easy to get away with.
Insurance is a tough business because selection bias guts the entire model, and it’s very hard to find all of the places where it can appear.
My wife’s sister worked in the healthcare insurance industry as a lawyer for 15 years (recently switched to the provider side). She’s basically a left-wing nutjob, but when you get her talking about selection bias in health insurance, she sounds like Charles Krauthammer.
ESM, a friend of mine’s brother is one of the insurance types that makes these kinds of decisions. I would not let him take care of my cat. He is a low life. And he is proud of how much he “saves” the company.
@ESM,
Good luck with your lawsuits. These companies can drag any lawsuit out ’til you’re dead. You realize the litigation system in this country is a profit centre for lawyers nothing more. And guess what, those with the biggest pocketbook usually win.
Even if you win, they can appeal forever until you are dead or bankrupt.
My only advice is, “Don’t get Sick!” They will screw you if it means an extra dollar in their pocket.
“You realize the litigation system in this country is a profit centre for lawyers nothing more.”
I agree it has become a make-work business for litigators at any rate. I have some experience with civil litigation in federal court, and it has been ridiculously frustrating to say the least. In my opinion, it is the fault of the judges (unfortunately, appointed for life), who realize that if they work harder, faster, and more efficiently, they will just be given more work. So they slow things down and let litigators delay. The mindset is I suppose that if the experience is made as unpleasant as possible for the clients, then they’ll think twice about asking courts for redress in the future.
It’s a lot like the DMV – government in(action).
That being said, if there is an urgent issue (and I think a human being who needs a life-saving treatment qualifies), courts can move quite fast. I’ve seen a judge rule in less than 90 minutes (from the time an urgent letter request was emailed to his office) on something he had been sitting on for over 4 months.
A judge is pretty much omnipotent inside his own courtroom. When he decides to end the lawyerly BS, the BS stops immediately.
“I disagree that health care is any more a necessity, or in any way more free from the law of supply and demand, than food, shelter, transportation, energy, or, frankly, an iPhone.”
@ESM
I find this statement as being totally misguided. What are the assumptions underlying any optimally outcome in a free market? One of MMT’s main benefits is that it makes one question their assumptions about money and central banks (e.g. not like an individual). Yet your statements show utter disregard for assumptions. I have been taught that optimally outcomes from the “law of supply & demand” in a free market include the following assumptions (among others): rationality, no market power (price takers), symmetric/”near perfect” information and no positive/negative externalities (all costs internalized). If you actually believe that the products & services you listed do not violate these assumptions to different degrees then you are out of touch with reality.
Most on this blog appear to agree that the health care industry has significant distortions from market power (e.g. price differentials in hospital costs between states/cities, monopoly conditions in rural locations or emergency situations, monopolistic control of medical schools). However, I would add that information quality and symmetry of information are real imperfections in health care, especially considering that much of health care spending occurs at very emotional (and irrational) times (we need to keep in mind that much of health care spending occurs close to death). Further, both positive and negative externalities in health care are large (e.g. positive from others benefitting from your good health related productivity and negative through bad health’s impact on friends & family).
It is with these opinions in mind that I must object with the plan to provide healthcare vouchers. The only imperfection that this addresses (although a significant benefit) is informational quality of buyers (who would now know prices). In regards to the supply side market power it makes things worse. Supplier induced demand would increase (and eat up the non-refundable portion of the voucher real quick) and overwhelm the benefit from better information. The vouchers other benefit – incentive for cost containment – would exacerbate the more problematic under consumption due to poor understanding of direct long term costs and significant negative/positive externalities.
In regards to the insurance aspect of health care – are there not economies of scale in insurance which would be realized from public provision? Would you rather have a private firm deciding coverage (with a profit motive) or a public entity (with a public purpose objective). We all can’t have artificial hearts like Dick Cheney…rationing is a reality today and will be in the future.
I believe in publically funded, privately provided basic health care (private funding for medically unnecessary or unproven treatments). In doing so the government could help address supply side market power (with demand side market power), informational quality/symmetry issues and internalize many externalities while retaining some private sector competitive forces. Sure, there are significant political challenges to such a change, and risks from poor administration by the public sector, but by using best practices from around the globe I believe the US could significantly improve its health care industry.
Regardless as to whether you agree with my “2nd best” solution for health care I would expect most on this blog would concur that ignorance of economic assumptions leads to many of our issues in the mainstream media. I expect better from folks on this blog…and I actually think this sort of narrative (revisiting assumptions) should be more fully exploited by MMT advocates.
The only point I question here is, “We all can’t have artificial hearts like Dick Cheney…rationing is a reality today and will be in the future.” We can “afford” nuclear, chemical and biological weapons of mass destruction and support a military on a scale that dwarfs the spending of all other countries combine but can’t “afford” the latest and greatest in health care. MMT says that affordability is not the problem, and military spending shows that TPTB get this already. The only question is whether the real resources including knowledge resources are available. We know how to do this and the expense is minimal in comparison with most military spending, which is unconstrained by cost considerations if it is deemed “necessary.” Then the health care question becomes why someone’s operation necessary and someone else’s is not when all other things are equal except the ability to pay out of private funds.
Tom,
As you sort of point out, “afford” does not necessarily mean in terms of dollars, but rather, for society as a whole, it is probably best put in terms of real output/resources.
That said, the $ cost is a good benchmark, as one can reasonably translate between $’s and available real resources. The initial “price” of an artificial heart is around $100k-$300k – http://www.ncbi.nlm.nih.gov/pubmed/10311835. I don’t think it’s unreasonable to think that if healthcare were no rationed, we would easily have a population desiring something in the range of $100k-$300k in total healthcare costs in very short order. Btw, $100k for each of 300M people is… 30T!! The real resources needed to maintain the military are far less than those needed to provide health care.
Also, currently US healthcare spending is about 15% of GDP, and US military spending is about 5%.
“””
Then the health care question becomes why someone’s operation necessary and someone else’s is not when all other things are equal except the ability to pay out of private funds.
“””
Answer: because you should be allowed to trade freely with those that can provide health care.
I absolutely disagree, Djp. What is the evidence for that assertion.
There is no limit on military spending and both parties sign off of everything requested and then force the military to buy stuff it doesn’t need or even want. I have served i the military. Every unit in the Navy burns its entire fuel allocation by the end of the period just steaming back and forth if need be, so that they won’t loss any of allocation the next period’s allocation. This is SOP and everyone knows it.
Health care is expensive because of the institutional arrangements around how it is delivered, as well as the monopoly on care due to the influence of special interests. There is much too little competition in the field because it is intentionally limited. I could go on and on.
For example, my feline companion has asthma. The inhaler at a pharmacy was $148. At COSTCO was $122. From a Canadian pharmacy $90. From India via email, $45. Buying it in India $8. In Nepal, $5.80. If you don’t travel or have friends that do, you get screwed by the “market.”
Anyone participating in the US healthcare market other than for acute treatment that isn’t on Medicare and doesn’t have to buy insurance from one’s employer is crazy. High quality care is available much more inexpensively in other countries, and a lot of care is free even for foreigners.
This is not a market here in the US. It is a rip off. The sooner more people wake up to it, the better.
Clonal Antibody Reply: October 23rd, 2011 at 10:01 pm
The difference you see in the price of inhalers is because exchange rates are based on the International demand for a currency, and not on PPP (Purchasing Power Parity) The current exchange rate for the USD to INR is 1:50 However, PPP is ~1:8 Further, in India, intermediary markups are much smaller than they are in the US. For example, Pharmacy markup in the US particularly for generic drugs is huge see Medicaid’s Reimbursements to Pharmacies They are of the order of 10-15% in India
@Tom
“I absolutely disagree, Djp. What is the evidence for that assertion. ”
Which assertion? The one I gave a reference for, or the relative costs in terms of percentage of gdp (which you can get from Google in about 120 seconds, if you’re slow like me).
Ok, so I think you are now saying that military expenditures cannot fund current health care expenditures at current US prices. But that this is only because health care prices are too high in the US? Ok, maybe the military expenditures are too high also — not because we shouldn’t be buying/building the things we do, but because the gov is a very price insensitive buyer. So I guess now we’re left with who’s more price insensitive — the gov buying military goods and services, or the people purchasing health care?
For me, the way to get prices sorted out is to let the market decide. Real competition will drive those prices down – ESM sited dentistry, and I think one of the favored examples in these debates is laser eye surgery (where the cost is largely born by the purchaser directly).
I agree, what we have now in health care is not a market. The gov is far too deeply involved.
———————————————–
Out of curiosity, what would your stance be on veterinary care costs? Should we have a single payer system there? I bring it up because, AFAIK, that industry is largely private in both the US and the UK, and in both places what people seem willing to pay for seems outrageous to me — though, as long as they can really afford it, I don’t really have a problem with it. If the prices are too high, do you think they would all be better off if the gov ran the system?
——————————————————–
On prices being different in different places:
15-20yrs ago, I could get a Coke for about $0.15 in China — and it might’ve even been a better product (sugar not corn syrup). Does this mean I was getting screwed because I paid $0.50 in the US?
There are even many things you can buy in one country that will land you in jail in another. Durien comes to mind. So, I’m not really sure I get your point.
——————————————————
Funny you mention inhalers though, several of my friends are pretty annoyed that the gov has decided to intervene and force them all to pony up an extra $20-$40 to buy their inhalers. Yes, they’re getting screwed, but not by the market.
If we are talking neoliberalism — free markets, free trade, and free capital flow, why doesn’t the US open its borders to physicians and pharma from abroad? The market here functions on the basis of legally imposed scarcity.
If we are going to have free markets, then open the borders and let’s compete. We are making US workers compete with workers in the ROW, why not physicians, drug companies, and the rest of the protected interests.
I wholeheartedly agree with Tom on this. MMT shows us that affordability is not an issue. The spending on the military in the US is a sacred cow. Never any mention of unfunded liabilities despite spending nearly a trillion a year and having all those vets come back with legs blown off. Not to mention passing giant trillion dollar bailout bills for failed banksters over a weekend. The immorality and viciousness of the US leadership and people with a conservative mindset is mind-blowing.
How about we implement MMT and provide a good and prosperous life for our citizens which includes the right to decent healthcare paid for by our government. If we can “afford” to bail out bankster leeches and blow the crap out of multitudes of countries to the tune of trillions, we can certainly afford healthcare. People who would argue otherwise are, in my opinion, sociopaths, or worse.
Or, if we are going to have this crap private for profit death system imposed on us, at least implement MMT and a job guarantee so we can “afford” it personally.
Sure, let’s have competition for health care. I’m not at all opposed to removing some of the rent seeking behavior of certification boards – I suspect you are more opposed to rent seeking in general than I am.
@ Jon
“””
How about we implement MMT and provide a good and prosperous life for our citizens which includes the right to decent healthcare paid for by our government. If we can “afford” to bail out bankster leeches and blow the crap out of multitudes of countries to the tune of trillions, we can certainly afford healthcare. People who would argue otherwise are, in my opinion, sociopaths, or worse.
“””
Your definition of “decent healthcare” is what would make this workable or unworkable. Tom’s assertion is that everyone could have an artificial heart, I suspect that’s not true, and I suspect that even if it were if we pile on a few more similar bequeaths to “everyone” then it definitely won’t be true.
MMT does not create real resources out of thin air. At the end of the day available real resources are what really matters. Maybe at some point far in the future the Japanese will have perfected the construction of a bunch of robot medics, but right now quite a bit of medical care is still doled out in one on one sessions with a physician. While I hope that some day those Japanese robots at Honda will be able to perform hip surgery and knee replacement surgery, I also recognize that today these tasks actually consume a lot of real resources.
Try to do some back of the envelope calculations on what it would take to “give everyone” an artificial heart before labelling those who do sociopaths. For better or for worse, it’s vastly cheaper to create a truly mind-numbing military than it is to give everyone all the healthcare they want.
That said, I would still favor giving people checks to pay for the “decent healthcare” that everyone deserves, rather than giving them a blank check. I would also like people to have the option to pay for premium care — that’s the best way to fund new innovations. Why is it that paying an early adopter premium is so successful in spurring innovation in other areas, but not healthcare?
This is a bit of an ironic post because I think it is you who has blinders on.
It is not necessary for a market to be perfectly free in order for it to be useful in allocating resources more efficiently. In fact, our most pedantic posters here frequently state that there is no such thing as a perfectly free market, and I agree.
“If you actually believe that the products & services you listed do not violate these assumptions to different degrees then you are out of touch with reality.”
And if you believe that the cost-constrained choices people make in the areas of food, shelter, transportation, energy, or even communications technology don’t impact human health, then you are out of touch with reality.
“Most on this blog appear to agree that the health care industry has significant distortions from market power…”
Is that supposed to be an argument? In any case, there will always be plenty of choice in terms of doctors and hospitals and even treatments. If you’re in the middle of the street bleeding to death, sure, you’re at the mercy of the paramedics who arrive if they want to extort money out of you in exchange for a blood transfusion, but there are ways to protect yourself against such situations (e.g. insurance contracts).
“I would add that information quality and symmetry of information are real imperfections in health care,…”
Well, they are now because we don’t have a free market at all in most of health care. In those areas where we do, e.g. eye care, plastic surgery, even dentistry to a large degree, the market works pretty well, and costs have risen at about the rate of inflation or less.
“…at very emotional (and irrational) times…”
I believe this is way overstated. The timescale for most health care decisions is days or weeks or longer, and there are countless ways of getting help from friends and family and from the internet (and from doctors too — not all of them are profit-seeking sharks). The funeral home business is probably a better example of a market where people make economic decisions in a fragile emotional state (real estate too, apparently).
“… both positive and negative externalities in health care are large (e.g. positive from others benefitting from your good health related productivity and negative through bad health’s impact on friends & family).”
Both of those are positive externalities. An example of a negative externality would be medical waste that pollutes the environment. The problems with externalities are not fundamentally different than in any other area.
“In regards to the insurance aspect of health care – are there not economies of scale in insurance which would be realized from public provision?”
Yes, there are economies of scale. But what you lose are choice and competition. The economy of scale argument could also be used to justify merging all car companies into one.
“Would you rather have a private firm deciding coverage (with a profit motive) or a public entity (with a public purpose objective).”
Are you kidding me? Absolutely I want the private firm deciding coverage, based on its contractual obligations. If they try to screw me, at least I can sue ’em.
Things have changed! Taking down the rich is suddenly become American …wow
Their existence is not the problem ….what is however is the belief that economic well being
Is dependent on protecting the wealth of the rich …..and not the source of their wealth (the other 99%)
On an insanity scale the world is most certainly certifiable …
Mr Mosler, you argument makes sense in the technical sense but you do not account for human nature.
The reason we the 99% want to end the deficits is to crush the 1% and return America to a democracy of the people for the people.
We could not care less about if the stock markest and economic crashes short term.
We have nothing more to lose, while the 1% will lose thier power and lock on the US government.
To American who’s family has fought and died for this country, taking our freedoms back is worth much, much, much more then a short term economic crisis.
Alex, if you think that ending the deficits, paying down the national debt, going on the gold standard, or “ending the Fed” will benefit the 99% rather than the 1%, you should go directly to the Mandatory Readings in the menu bar and begin with The Seven Deadly Innocent Frauds of Economic Policy.
Trying to punish the 1% with such proposals will just make the lot of the 99% worse, increase inequality, and reward the 1%. Sure, it will shrink the pie, but the 1% will profit from it by taking a bigger piece. If you don’t see why this is true, study up.
It can take a while to wrap your head around, but people trade health for money (or other things in life that can be exchanged for money) all the time.
Just think of the different health risk levels in various occupations, from being a coal miner, to a police officer, to a reporter in a war zone, to a football player.
People who eat poorly (or too much), smoke, take drugs, have promiscuous sex, or engage in dangerous sports are all trading health for other desirable things. I prefer to leave it to the individual to do his own internal cost/benefit analysis.
The problem who get the money if the deficit is increase? With the current Fed Reserve system and corrupt Republican majority in Congress, most of an increased deficit will simply go to the 1% and the 99% of Americans will get nanda.
In-equality will increase, Fox News will shout how these 1% worked so hard for this money, and eventually when the 99% become pesants as in Argentina there will be a revolt.
I just hope that American remember how to use their guns and line the 1% up at the edge of the Missippi and then flush thier bodies out into the Gulf.
I think the violence police are a little selective in what tickles their antennae.
There was another thread not long ago advocating similar activities – it did follow hard upon the notable censoring. To me this seems much more direct, unlike the counterfactual that earlier stirred such controversy.
The speeling police would generally have a field day around here.
@ESM, Just wondering if the violent language police are still on patrol…
I’m on stakeout tonight and don’t feel like leaving the van.
That and there’s a difference between saying something stupid (The transportation costs alone would thwart his plan) and something something stupid PLUS calling out a public official by name.
another deficit terrorist was on charlie rose last night (10/20). ray dalio – largest hedge fund manager in the world – $127b. obviously a pragmatic guy who knows how to make a buck but doesn’t have a fundamental understanding of how our monetary system works. definitely recommend watching the segment when it comes online. as of now they haven’t posted it.
It’s quite amazing that Dalio doesn’t get it. He is committed to being cutting edge as much as to making money. Surprising he hasn’t picked up on MMT yet.
Nice article, although when the guy treads into medicine, he stumbles badly. There’s simply no way around the CBO projections unless liability is reformed, and since that won’t ever make it through the senate, the CBO numbers stand.
Meh, too bad its only getting around with balding money managers, whose words mostly reaches other money managers most of whom are of the libertarian or right wing variety.
This is a logical place for it to start, since money managers have a vested interest in getting it right on a daily basis and are looking for any leg up they can get. Economists don’t have similar interests or pressure, so change probably won’t start with them, and they’ll resist changing their assumptions as long as they can retain credibility. But when their credibility looks threatened, they’ll come along, too.
I’m a libertarian, and I support a larger deficit. Of course this particular balding money manager is certainly not a libertarian, judging from his views on health care. In fact, that whole section really undermines his credibility (once the government is monopsony buyer, it could “save” money by “negotiating” with providers and drug companies?).
ESM, he is talking about controlling spiraling health care costs, which I believe you hold are driven by the monopolist. IF the monopolist bids less, then the prices come down. He agrees with this approach, along with amping up policing of “waste, fraud and abuse,” which are conservative mantras.
You know as well as I that this would be government price-fixing. If it works so well with health care, why can’t we do it with other sectors of the economy?
The reason of course is that when the government fixes a price, supply and demand become untethered from consumer desires and economic costs. If the government sets prices lower for a service, then there will be more demand for that service and less supply.
It’s not high health care costs that are the problem, per se. The problem is that consumers and suppliers are not meeting together in the marketplace directly to establish prices which allocate resources optimally. The fact that this has caused prices to rise fast is merely a consequence of the fact that it is the consumers which are insulated from price, rather than the suppliers.
Single payer health care would perhaps lower prices, but only at the expense of removing market-based feedback (and incentives) for suppliers. Inevitably, this will result in less supply, and the non-optimal allocation of resources would remain a big problem.
Depends on whether one thinks of health care as a consumer good or a public utility. It’s already recognized as public utility in many ways. The idea that banking, healthcare, education, etc. are consumer goods is a conservative norm, not an economic principle, whatever that is. This is a political question.
Presently, there is a push by one political faction to privatize areas that the opposing faction associates with the commons. The kerfuffle is over where to draw the line between public and private.
The former argues for economic efficiency, while the latter argues for effectiveness wrt public purpose.
The question is whether a market place with low enough friction is possible in healthcare. Maybe, I am not sure.
But, besides that, if we think healthcare is a right, then the poor will still be priced out of good healthcare. We can tolerate when they get priced out of better housing and consumer goods, but are we OK as a society with a large chunk of population that receives either sub-par or no healthcare? In which case some sort of public healthcare becomes a necessity and with it the free frictionless market goes out the window. Yes, the resources might not be allocated the most efficiently in some sense, but that the price the society would pay for ensuring adequate access to healthcare for all.
“though presumably efficiency can serve public purpose as well…”
In The Effective Executive, Peter F. Drucker makes the basic point that effectiveness is doing the right thing, and efficiency is doing things right. He emphasizes that effectiveness is the top priority of leadership, not efficiency. Efficiency follows effectiveness. Too many leaders get absorbed in efficiency to the detriment of effectiveness and they fail. Other leaders are focused on effectiveness and they succeed, even if they aren’t always most efficient.
Drucker’s basic message to leadership is first focus on doing the right things and then on doing them better.
Drucker, then Deming.
Robert Kelly Reply: October 21st, 2011 at 12:46 pm
@ESM,
I agree with ESM.
Health Care is tricky because single payer will increase demand greatly. Visit any city ER and witness what happens when a third party is paying the bill. Warren’s plan is good in that it keeps the incentives in the right place. Just “expensive” politically. The nightmare would be bureaucrats making medical decisions.
If insurance could actually be insurance (without all the various mandated coverage), we should be able to work something out without worrying about “death panels”.
“first, that applies to all govt purchases, labor included.”
No it doesn’t. It is possible for the government to pay market prices for goods and services (difficult perhaps, but certainly possible). And to the extent that the government fixes the price of the dollar to something (say, 6 minutes of unskilled labor under an ELR), it still doesn’t need to fix relative prices of goods and services.
“second, single payer reduces real costs that currently have a nominal cost of probably $1T annually.”
If you’re talking about administrative costs, they’re nowhere near that high, and in any case, administrative costs are the price we pay for competition. We could save administrative costs by merging Apple, Google, and Microsoft together too, but somehow I don’t think you would like that idea.
Also, I’m not proposing to keep the crazy system we have now. I don’t even claim that it is better than single-payer. I only claim that single-payer is not solving the fundamental problem, which is the lack of a free market in health care.
@Peter:
Health care is just too complicated and all-encompassing to establish as a right. Perhaps some small subset of health care could be. I think almost everybody in our society would agree that a person bleeding to death in the street should be saved regardless of his ability to pay for a tourniquet, stitches and the services of surgeon. But how about a person who (feels he) needs to see a psychiatrist or a chiropractor? Or somebody who needs physical therapy or medicine for acne? Or a terminally ill patient who wants to extend his life another month or two? This is 7-8% of GDP for even economies with socialized medicine, remember.
Also, it should be recognized that a right to healthcare is a positive right in the sense that it creates obligations on other people, necessarily infringing on their negative rights. If I have a right to have my bed pan emptied, then it means somebody else has to empty that bed pan, or at least pay somebody else to do it.
Negative rights are more fundamental (in my book) and easier to understand and protect. They’re also more in tune with the Constitution.
some 650 billion goes to insurance and other admin functions, and at least half that is spent by doctors dealing with insurance and other admin that would be eliminated with my plan, plus my plan probably doubles available doctor/patient time.
also,
health care can never be a ‘fair game’ re game theory, when a sick person absolutely needs attention and the provider only has to provide if he likes his return on equity.
and it’s hard for govt purchases to be at market when ‘market’ assumes both sides are price sensitive, etc.
In matters like education and health care the goal should not be to lower demand to lower prices if we are considering public purpose. Most people do have any great incentive to overuse either. IMHO, they should be encouraged to use a whole lot more than they are now, and with institutional redesign that would easily be possible in a more efficient way that either is now being delivered.
What I object to also is the monetization of what are essentially public goods. What we are seeing is huge rent extraction in the areas of health care and education, which is leading a huge number of people into debt peonage and also excluding a lot of people from what should be public services.
This would be good not only for the people involved but it would also strengthen society. It’s a win-win, and MMT shows that it is completely affordable as long as the real resources are available. With better institutional design, many resource issues could be reduced or eliminated.
The outcome would be a healthier, better educated, smarter and more productive society, which would contribute not only economically, but also politically and socially.
ESM, then we can agree on single payer for basic health care – which would be still more than just not letting a bleeding man die, but not include the more advanced and expensive, “luxury” procedures – and then let the market provide the more expensive healthcare? How about that?
except people don’t “consume” health care services. They either NEED them or they don’t. Minus a logical annual or semi-annual check-up there isn’t any real potential increase in consumption. Therefore supply and “demand” don’t really exist. The level of demand for health care services is really based on the weighted average health of the population multiplied by the the size of that population. There’s not going to be much variance beyond that figure. There could be a tendency for the SUPPLIERS to create waves and bubbles and fads in health care services….(did you know how important your B levels are?!?! Get yours checked today!!….and everyone rushes to their doctor thereby stimulating more demand). However you can easily handle such bubble-creations by simply allocated a reasonable 1-3 fully paid for regular check-ups + subsidize all “normal and necessary” operations to keep a human citizen healthy and functioning (broken limb surgeries, organ issues, chronic disorders, etc.). Anything outside of the realm of “normal and necessary” can come out of the people’s pocket…like the lap band. This isn’t rocket science. Most things are not as complex and we humans sometimes like to make them.
I’m not against the government being involved in providing certain basic services. Certainly ones which are important for public health like vaccinations. As a rule, though, I prefer the government solve the problem of poverty by giving poor people money and letting them make their own consumption decisions, including decisions about how much health care to buy.
To a large extent, we already have guaranteed basic health care via the emergency room, since they can’t turn you down, and they can’t really collect any bills. I think the emergency room experience is a perfect example of what single payer health care will be like.
@Mario:
I disagree that health care is any more a necessity, or in any way more free from the law of supply and demand, than food, shelter, transportation, energy, or, frankly, an iPhone.
>>I prefer the government solve the problem of poverty by giving poor people money and letting them make their own consumption decisions, including decisions about how much health care to buy.
But we know that a lot of people will not be wise or responsible enough to acquire coverage and the health of the society will suffer as a result. Basically, the solution is either to allow freeloaders or force a minimum mandate (which would probably translate to the same in the end).
>>To a large extent, we already have guaranteed basic health care via the emergency room, since they can’t turn you down, and they can’t really collect any bills. I think the emergency room experience is a perfect example of what single payer health care will be like.
I don’t think emergency room is enough. There are basic procedures that can increase overall health but would not qualify for emergency room. There are a ton of stories of people with no or bad coverage not going to the emergency room till its too late. In the end it costs society more, not less, in both nominal and real terms.
But, I think we are converging on a system that mandates a certain minimal level of healthcare (or, alternatively, allows freeloaders access to such a healthcare) and everything else in excess of that is supplied by the conventional insurance marketplace.
“As a rule, though, I prefer the government solve the problem of poverty by giving poor people money and letting them make their own consumption decisions, including decisions about how much health care to buy.”
Completely disagree. Downscale people aren’t the sharpest in the world, and giving them money for health care, unless it were a voucher, almost guarantees that the $ would go to something that degrade their health. I don’t think it is possible to trust a lot of people to make good decisions for themselves and their families, since they are just not equipped to do so.
They could be made better equipped by improving the educational institutional arrangements, but there are generations already beyond that possibility. Yes, a nanny state approach is needed in some instances, as much as I would like to see otherwise. But we haven’t prepared for it yet.
The ideal of education should be to produce self-sufficient, creative, knowledgeable and resourceful individuals who know how to improve their situation and that of society by increasing the adaptability rate through coordination and exploring options. Then they should be given access to an information rich environment and the necessary tools. That is only possible of key institutions like are redesigned to accomodate this.
Bucky Fuller laid all this out decades ago, using Bell Labs as a model. His contention was that provided with this kind of environment, one person in a thousand would be all it would take to produce the innovation that would make doing more with less possible on a grand scale, thereby improving productivity and use of real resources. (See Ray Kurzweil’s “Law of Accelerating Returns”)
I disagree that health care is any more a necessity, or in any way more free from the law of supply and demand, than food, shelter, transportation, energy, or, frankly, an iPhone.
and I “disagree” with MMT that federal deficits aren’t a problem. That was so easy wasn’t it!!! Weeee!!!! Let’s play the “yes/no” game!!! Weeeeee!!!
And yet the evidence of Canada and even the UK shows that you can do public health care very well at high effectiveness.
and don’t forget Australia too. I know from FIRST HAND experience. My wife is a cancer destroyer (PRAISE GOD!!!) and all of our services have been handled in AU by literally some of the best oncologists in the world, all at a very, very low cost, and very speedy process. ESM I’m sorry man but your obstinate refusal to look at the REALITY of these things is more than irritating and annoying…it’s personal and more than pisses me off to no end. I’d be less of a man if I said what I really think about the way you so stubbornly stick to your illogical and senseless “ideas” about health care. Grrrrrr!!!!!
Even if you INCLUDE the costs we have incurred flying my wife RT half way around the world to get her services in AU, it’s STILL a bargain compared to the US bullshit system. Fuck this shit and stop arguing against reality. It works. It WORKS!!! And I can’t tell you how much I THANK GOD that there are nations and societies that realize this stuff works and plan accordingly. THANK YOU GOD for saving my wife’s life with the aid and assistance of the AU health care system.
I hate when people are so perverse to put “theories” before real life flesh and blood let alone functional logic, reality, and truth.
Note: I am livid right now but still maintaining proper decorum as best as I can. Thank you all.
“I disagree that health care is any more a necessity, or in any way more free from the law of supply and demand, than food, shelter, transportation, energy, or, frankly, an iPhone.”
In line with conservative denial of the existence of public goods. That is a fundamental disagrement with liberals.
So what about the commons, public purpose, the general welfare, and public utility. Out too?
I have to chime in here on the ER claim cuz I hear it ALL the time. It is categorically untrue that people cant be turned away from an ER. It happens every day in lots of places. We treated someone in our hospital with a head injury that was helicoptered past four hospitals with neurosurgeons on call. They were injured 80 miles from us in the south metro Atlanta
area and ended up in our OR.
@ESM, I like Mosler’s healthcare plan, it is appropriate for the US politics though it would be so much easier to just pinch Australia’s Medicare levy and surcharge system on income but I just can’t see that flying in US politics.
Just like I can’t see the STV (preferential voting) flying in the US even though it would be much more representative of the US public.
“So what about the commons, public purpose, the general welfare, and public utility. Out too?”
Tom, even the most extreme libertarians believe that the military should be a public utility. Certainly, no individual has a need for a cruise missile or a nuclear aircraft carrier, but they’re pretty useful at the national level. I consider myself a pretty moderate liberatarian, but I can’t see why a sector of the economy that is as large, as diverse and as individualized as health care needs to be controlled by the government. Course, I don’t think water or electricity should be either, so maybe I really am out of the mainstream.
I agree. The catastrophic insurance part has to be nailed down a little better, but in general there is a lot of price feedback to the consumer, which I think will provide a more efficient allocation of resources.
Greg, is this allowed, or are these hospitals doing something illegal by rerouting patients elsewhere? If they’re acting illegally, then I would not consider my statement untrue. I mean I don’t think it’s wrong to say that you can’t kill somebody in the US for no good reason, even though it happens all the time.
“It’s an important point, since the modern conservative’s case for minimal government rests on the presumption that competition always promotes society’s welfare. But our best understanding of how competition actually functions, as Darwin’s work makes clear, supports no such presumption.”
He makes the case that sometimes what is good for the individual doesnt necessarily lead to the good of the whole. For instance I could see how in some sort of unfettered ‘free market’, a bunch of for profit healthcare providers could end up competing with each other to make more money, and this would lead to worse healthcare for all… if the government didnt set up the regulations correctly. Resp,
The law has to do with acceptance of federal funds for health care, which virtually every institution does of course and “availability” of appropriate services. How does a hospital make a surgeon take call? Unfortunately, often a hospital “doesnt have anyone “on call for that service” So yes it is allowed while legislatively “illegal”
If there arent effective ways of enforcing a law what good are they. The point is our “system” doesnt in its totality provide basic life saving health care for all. And it wont until it becomes fundamentally different. Until that is a goal of the system
“‘the modern conservative’s case for minimal government rests on the presumption that competition always promotes society’s welfare.'”
This statement is both incorrect and woefully incomplete. The case for minimal government rests in individual choice and incentive.
Competitition creates incentives to work hard, lower costs, and innovate, but it is not the only factor. There is also the prospect of enjoying the fruits of your labor (which of course includes the concept of private property).
And choice is an extremely important part of the argument for limited government. Every individual is different, with his own set of preferences as well as tolerance for risk and pain and whatnot. The more decisions left to the individual, the greater the opportunity for individual optimization of utility.
Note that I am not arguing for no government. The optimal level in my opinion is quite a lot of government actually. Just happens to be a lot less than we have now.
“Note that I am not arguing for no government. The optimal level in my opinion is quite a lot of government actually. Just happens to be a lot less than we have now.”
I would say less government in some areas and more in another, depending on requirements. There are some huge imbalances now, and there is way too much corruption virtually everywhere in the world. One major problem with states is that their governments are rather easily hijacked.
As a radical libertarian of the left, I would prefer “no state” and I reject the authority of the state as either natural or rightful. While I am a philosophical anarchist, I am not naive enough to think that societies can exist and prosper without any governing principle. But I don’t think that the modern state is the only of providing this, and it is certainly not the best way for a lot of reasons that others have written extensively about, so I won’t repeat here. Obviously, I don’t think that abolishing the state is either possible or practical at present, but I look forward to the withering away of the state in the future, recognizing that this is likely some way off. In the meantime, we need to make do as best we can under the (awful) circumstances that prevail in the world to manage existing state power as democratically as possible.
Ben, your post is one of the best summaries I have run across, and it touches all the bases. It’s a model of good composition and argument. I’ve shared it with my networks, and encourage others to do likewise.
@Ben Strubel,
Ben,
You write beautifully about monetary operations, but how do you justify what you’ve said about medicine in the US. You don’t appear to have a handle on medical operations.
@ Ben Strubel
Great article, Thank you!!
@ESM
“This is a bit of an ironic post because I think it is you who has blinders on.”
And this is from a person who literally quoted half a sentence and criticized it for not containing the other half.
“It is not necessary for a market to be perfectly free in order for it to be useful in allocating resources more efficiently. In fact, our most pedantic posters here frequently state that there is no such thing as a perfectly free market, and I agree.”
Right off the bat I can see that you did not understand my post. How can you say near-free markets in health care (since you say it’s no different than other services) lead to “allocating resources more efficiently”? This is a relative claim that has no theoretical support given that the service in question does not exhibit the characteristics required for pareto optimal outcomes in equilibrium (even if a near free market existed). We are dealing with sub-optimal outcomes and thus blanket statements like this are not possible, unless of course you continue to make misguided assumptions. I contend that the sub-optimal “2nd best” outcome from a single payer HC system is better than a market-driven privately funded HC system.
“And if you believe that the cost-constrained choices people make in the areas of food, shelter, transportation, energy, or even communications technology don’t impact human health, then you are out of touch with reality.”
I’m not sure what your point is here as I did not say anything related to this. I was in fact arguing about the uniqueness of health care services (not the institutional arrangement) which your point actually supports.
“In any case, there will always be plenty of choice in terms of doctors and hospitals and even treatments.”
This is not the US marketplace. You either have 1) not done any empirical work in this field or 2) are extremely liberal in your definition of “plenty of choice”. Like I stated in the second half of the sentence you ignored – look at regional hospital monopolies (evidenced by price differentials between areas) or rural health care and tell me that there is plenty of choice.
“Well, they are now because we don’t have a free market at all in most of health care. In those areas where we do, e.g. eye care, plastic surgery, even dentistry to a large degree, the market works pretty well, and costs have risen at about the rate of inflation or less.”
If inflation is lower then the market is functioning better? What if the inflation difference is purely due to price elasticity differences? What if quality is increasing faster in health care than these other markets? Even if we agree that these markets are functioning better (closer to a pareto optimum) than HC that leaves us with two possible explanations – that the institutional/regulatory set-up is better (e.g. more “free”) or because the dental/eye/plastic surgery services themselves have different characteristics that allow for more efficient outcomes (e.g. less externalities, less information symmetry/complexity issues, etc.). I have not read any empirical work that has answered this question, and thus to me, this argument is inconclusive. If you have such a study I would love to see it.
“Both of those are positive externalities. An example of a negative externality would be medical waste that pollutes the environment. The problems with externalities are not fundamentally different than in any other area.”
I was struggling with the terminology here as well. It could be considered as a positive externality since more HC = lower negative externality (so a double negative = positive), or alternatively that the current health care system produces unnecessary costs that are not priced in the market (and hence negative externality since more HC as currently provided = higher negative externality). Thinking about it more you are probably correct. However, this does not change the point (which we clearly disagree about) – that there are many benefits/costs associated with health care that are not being factored in when making HC purchase decisions (and that the degree of externalities in HC is much higher than for most products/services due to the fundamental nature of HC).
“Yes, there are economies of scale. But what you lose are choice and competition. The economy of scale argument could also be used to justify merging all car companies into one.”
So you concur that economies of scale exist (from both an administrative perspective and from an adverse selection perspective since everyone in the country would be in the insured pool), yet you suggest that this benefit is somehow less that the benefit from “choice and competition”. I don’t think that increased competition in HC insurance would provide many benefits given the unique nature of HC and market power on the supply side. Further, I believe that competition would still exist to some degree if private supplemental insurance was allowed (and perhaps even from the public sector as states could compete with one another on efficiency). My last point on competition would be that since HC has long term implications private firms are not the best suited to facilitate it’s provision as they tend to be short term focused (the biggest failing of publically held firms IMHO). Then there are the benefits from choice – for one, there would still be choice in a single payer system that allowed for secondary private insurance (as I argue is best). Sure, you could argue the point that many libertarians make about individual preferences regarding risk aversion suggesting that less insurance would be optimal (and hence requiring coverage is utility reducing) but I would retort that since basic medical services to sustain life is going to be provided regardless of insurance, the “no insurance/less insurance” choice would simply allow free-loading to occur (again assuming that public insurance only covered necessary treatments). Further, I would argue that lack of insurance coverage increases overall HC costs as it tends to reduce preventative HC & delays the purchase of treatment (again a function of the unique nature of health care – it’s not like buying a car).
“Are you kidding me? Absolutely I want the private firm deciding coverage, based on its contractual obligations. If they try to screw me, at least I can sue ‘em.”
We obviously disagree here. There are downsides to both alternatives to be sure. Being a Canadian who has lived in the US for more than a decade I have experienced both systems personally and strongly believe that the Canadian system is better in this regard (and in general).
@ beowulf
Michael Moore’s “Sicko” was a pretty pathetic attempt at telling this story IMHO. He makes random silly comments and then undermines his narrative by only explaining one side of the story.
@ Tom Hickey
Yes. My rationing point was referencing real constraints, not financial ones (thanks MMT!!). However, I believe that the latter point, real resource constraints, is very real and especially concerning given the baby boom generation going into retirement and climate change.
@ Warren Mosler, Bill Mitchell & the whole MMT community
Thank you for educating me on the workings of the Fed/Treasury and what this means to economic policy. Further, thank you for helping me with the fallacy of composition that was polluting my logic – being a microeconomics guy in general I was assuming (with the help of mainstream macroeconomic teachings) that macro results followed from microeconomic dynamics when in fact general equilibrium constraints (sectoral balances) are binding.
Note – I stumbled upon MMT two months ago (through a Krugman article) and have been hooked ever since. I have been spreading the MMT word around my network and hope to contribute to its broad acceptance. I am a Finance manager at a professional services firm and hold a BS in Chemistry, an MBA (Finance focus) and a Masters in Applied Economics.
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Are you kidding me? Absolutely I want the private firm deciding coverage, based on its contractual obligations. If they try to screw me, at least I can sue ‘em.
Yeah, but enough people won’t sue (especially the ones whose denial of care killed them) that paying off the occasional pain in the ass makes denial of care a profit center.
You really should watch Michael Moore’s movie Sicko. There’s a lot you could find fault with in his movies about guns, Iraq or capitalism, but Sicko is a punch in the gut because its damn near impossible to argue with anything Moore says (cannily, the movie isn’t really about the uninsured, he focuses on people who think they’re covered… until their insurer screws them). Bless Moore’s socialist heart, apparently you can watch Sicko for free online.
http://topdocumentaryfilms.com/sicko/
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ESM Reply:
October 23rd, 2011 at 9:11 pm
@beowulf,
“Yeah, but enough people won’t sue (especially the ones whose denial of care killed them) that paying off the occasional pain in the ass makes denial of care a profit center.”
Beowulf, you’re good with numbers. Give me some. How many people have been killed by an insurance company breach of contract? I’m sure Moore has been able to find enough examples in a country of 300MM to fill up a movie, but is this really a material problem? I mean patients are presumably getting advice from their doctors, and given the adversarial relationship between doctors and insurance companies, I wouldn’t think it would be so easy to get away with.
Insurance is a tough business because selection bias guts the entire model, and it’s very hard to find all of the places where it can appear.
My wife’s sister worked in the healthcare insurance industry as a lawyer for 15 years (recently switched to the provider side). She’s basically a left-wing nutjob, but when you get her talking about selection bias in health insurance, she sounds like Charles Krauthammer.
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Tom Hickey Reply:
October 24th, 2011 at 12:21 am
@ESM,
ESM, a friend of mine’s brother is one of the insurance types that makes these kinds of decisions. I would not let him take care of my cat. He is a low life. And he is proud of how much he “saves” the company.
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Jon Hooper Reply:
October 24th, 2011 at 2:01 am
@ESM,
Good luck with your lawsuits. These companies can drag any lawsuit out ’til you’re dead. You realize the litigation system in this country is a profit centre for lawyers nothing more. And guess what, those with the biggest pocketbook usually win.
Even if you win, they can appeal forever until you are dead or bankrupt.
My only advice is, “Don’t get Sick!” They will screw you if it means an extra dollar in their pocket.
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ESM Reply:
October 24th, 2011 at 8:37 am
@Jon Hooper,
“You realize the litigation system in this country is a profit centre for lawyers nothing more.”
I agree it has become a make-work business for litigators at any rate. I have some experience with civil litigation in federal court, and it has been ridiculously frustrating to say the least. In my opinion, it is the fault of the judges (unfortunately, appointed for life), who realize that if they work harder, faster, and more efficiently, they will just be given more work. So they slow things down and let litigators delay. The mindset is I suppose that if the experience is made as unpleasant as possible for the clients, then they’ll think twice about asking courts for redress in the future.
It’s a lot like the DMV – government in(action).
That being said, if there is an urgent issue (and I think a human being who needs a life-saving treatment qualifies), courts can move quite fast. I’ve seen a judge rule in less than 90 minutes (from the time an urgent letter request was emailed to his office) on something he had been sitting on for over 4 months.
A judge is pretty much omnipotent inside his own courtroom. When he decides to end the lawyerly BS, the BS stops immediately.
“I disagree that health care is any more a necessity, or in any way more free from the law of supply and demand, than food, shelter, transportation, energy, or, frankly, an iPhone.”
@ESM
I find this statement as being totally misguided. What are the assumptions underlying any optimally outcome in a free market? One of MMT’s main benefits is that it makes one question their assumptions about money and central banks (e.g. not like an individual). Yet your statements show utter disregard for assumptions. I have been taught that optimally outcomes from the “law of supply & demand” in a free market include the following assumptions (among others): rationality, no market power (price takers), symmetric/”near perfect” information and no positive/negative externalities (all costs internalized). If you actually believe that the products & services you listed do not violate these assumptions to different degrees then you are out of touch with reality.
Most on this blog appear to agree that the health care industry has significant distortions from market power (e.g. price differentials in hospital costs between states/cities, monopoly conditions in rural locations or emergency situations, monopolistic control of medical schools). However, I would add that information quality and symmetry of information are real imperfections in health care, especially considering that much of health care spending occurs at very emotional (and irrational) times (we need to keep in mind that much of health care spending occurs close to death). Further, both positive and negative externalities in health care are large (e.g. positive from others benefitting from your good health related productivity and negative through bad health’s impact on friends & family).
It is with these opinions in mind that I must object with the plan to provide healthcare vouchers. The only imperfection that this addresses (although a significant benefit) is informational quality of buyers (who would now know prices). In regards to the supply side market power it makes things worse. Supplier induced demand would increase (and eat up the non-refundable portion of the voucher real quick) and overwhelm the benefit from better information. The vouchers other benefit – incentive for cost containment – would exacerbate the more problematic under consumption due to poor understanding of direct long term costs and significant negative/positive externalities.
In regards to the insurance aspect of health care – are there not economies of scale in insurance which would be realized from public provision? Would you rather have a private firm deciding coverage (with a profit motive) or a public entity (with a public purpose objective). We all can’t have artificial hearts like Dick Cheney…rationing is a reality today and will be in the future.
I believe in publically funded, privately provided basic health care (private funding for medically unnecessary or unproven treatments). In doing so the government could help address supply side market power (with demand side market power), informational quality/symmetry issues and internalize many externalities while retaining some private sector competitive forces. Sure, there are significant political challenges to such a change, and risks from poor administration by the public sector, but by using best practices from around the globe I believe the US could significantly improve its health care industry.
Regardless as to whether you agree with my “2nd best” solution for health care I would expect most on this blog would concur that ignorance of economic assumptions leads to many of our issues in the mainstream media. I expect better from folks on this blog…and I actually think this sort of narrative (revisiting assumptions) should be more fully exploited by MMT advocates.
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Tom Hickey Reply:
October 23rd, 2011 at 6:40 pm
@CDNDC,
The only point I question here is, “We all can’t have artificial hearts like Dick Cheney…rationing is a reality today and will be in the future.” We can “afford” nuclear, chemical and biological weapons of mass destruction and support a military on a scale that dwarfs the spending of all other countries combine but can’t “afford” the latest and greatest in health care. MMT says that affordability is not the problem, and military spending shows that TPTB get this already. The only question is whether the real resources including knowledge resources are available. We know how to do this and the expense is minimal in comparison with most military spending, which is unconstrained by cost considerations if it is deemed “necessary.” Then the health care question becomes why someone’s operation necessary and someone else’s is not when all other things are equal except the ability to pay out of private funds.
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Djp Reply:
October 23rd, 2011 at 7:39 pm
@Tom Hickey,
Tom,
As you sort of point out, “afford” does not necessarily mean in terms of dollars, but rather, for society as a whole, it is probably best put in terms of real output/resources.
That said, the $ cost is a good benchmark, as one can reasonably translate between $’s and available real resources. The initial “price” of an artificial heart is around $100k-$300k – http://www.ncbi.nlm.nih.gov/pubmed/10311835. I don’t think it’s unreasonable to think that if healthcare were no rationed, we would easily have a population desiring something in the range of $100k-$300k in total healthcare costs in very short order. Btw, $100k for each of 300M people is… 30T!! The real resources needed to maintain the military are far less than those needed to provide health care.
Also, currently US healthcare spending is about 15% of GDP, and US military spending is about 5%.
“””
Then the health care question becomes why someone’s operation necessary and someone else’s is not when all other things are equal except the ability to pay out of private funds.
“””
Answer: because you should be allowed to trade freely with those that can provide health care.
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Tom Hickey Reply:
October 23rd, 2011 at 9:39 pm
@Djp,
I absolutely disagree, Djp. What is the evidence for that assertion.
There is no limit on military spending and both parties sign off of everything requested and then force the military to buy stuff it doesn’t need or even want. I have served i the military. Every unit in the Navy burns its entire fuel allocation by the end of the period just steaming back and forth if need be, so that they won’t loss any of allocation the next period’s allocation. This is SOP and everyone knows it.
Health care is expensive because of the institutional arrangements around how it is delivered, as well as the monopoly on care due to the influence of special interests. There is much too little competition in the field because it is intentionally limited. I could go on and on.
For example, my feline companion has asthma. The inhaler at a pharmacy was $148. At COSTCO was $122. From a Canadian pharmacy $90. From India via email, $45. Buying it in India $8. In Nepal, $5.80. If you don’t travel or have friends that do, you get screwed by the “market.”
Anyone participating in the US healthcare market other than for acute treatment that isn’t on Medicare and doesn’t have to buy insurance from one’s employer is crazy. High quality care is available much more inexpensively in other countries, and a lot of care is free even for foreigners.
This is not a market here in the US. It is a rip off. The sooner more people wake up to it, the better.
Clonal Antibody Reply:
October 23rd, 2011 at 10:01 pm
@Tom Hickey,
Tom,
The difference you see in the price of inhalers is because exchange rates are based on the International demand for a currency, and not on PPP (Purchasing Power Parity) The current exchange rate for the USD to INR is 1:50 However, PPP is ~1:8 Further, in India, intermediary markups are much smaller than they are in the US. For example, Pharmacy markup in the US particularly for generic drugs is huge see Medicaid’s Reimbursements to Pharmacies They are of the order of 10-15% in India
Djp Reply:
October 23rd, 2011 at 10:10 pm
@Djp,
@Tom
“I absolutely disagree, Djp. What is the evidence for that assertion. ”
Which assertion? The one I gave a reference for, or the relative costs in terms of percentage of gdp (which you can get from Google in about 120 seconds, if you’re slow like me).
Ok, so I think you are now saying that military expenditures cannot fund current health care expenditures at current US prices. But that this is only because health care prices are too high in the US? Ok, maybe the military expenditures are too high also — not because we shouldn’t be buying/building the things we do, but because the gov is a very price insensitive buyer. So I guess now we’re left with who’s more price insensitive — the gov buying military goods and services, or the people purchasing health care?
For me, the way to get prices sorted out is to let the market decide. Real competition will drive those prices down – ESM sited dentistry, and I think one of the favored examples in these debates is laser eye surgery (where the cost is largely born by the purchaser directly).
I agree, what we have now in health care is not a market. The gov is far too deeply involved.
———————————————–
Out of curiosity, what would your stance be on veterinary care costs? Should we have a single payer system there? I bring it up because, AFAIK, that industry is largely private in both the US and the UK, and in both places what people seem willing to pay for seems outrageous to me — though, as long as they can really afford it, I don’t really have a problem with it. If the prices are too high, do you think they would all be better off if the gov ran the system?
——————————————————–
On prices being different in different places:
15-20yrs ago, I could get a Coke for about $0.15 in China — and it might’ve even been a better product (sugar not corn syrup). Does this mean I was getting screwed because I paid $0.50 in the US?
There are even many things you can buy in one country that will land you in jail in another. Durien comes to mind. So, I’m not really sure I get your point.
——————————————————
Funny you mention inhalers though, several of my friends are pretty annoyed that the gov has decided to intervene and force them all to pony up an extra $20-$40 to buy their inhalers. Yes, they’re getting screwed, but not by the market.
Tom Hickey Reply:
October 24th, 2011 at 12:17 am
@Djp,
If we are talking neoliberalism — free markets, free trade, and free capital flow, why doesn’t the US open its borders to physicians and pharma from abroad? The market here functions on the basis of legally imposed scarcity.
If we are going to have free markets, then open the borders and let’s compete. We are making US workers compete with workers in the ROW, why not physicians, drug companies, and the rest of the protected interests.
Jon Hooper Reply:
October 24th, 2011 at 1:46 am
@Djp,
I wholeheartedly agree with Tom on this. MMT shows us that affordability is not an issue. The spending on the military in the US is a sacred cow. Never any mention of unfunded liabilities despite spending nearly a trillion a year and having all those vets come back with legs blown off. Not to mention passing giant trillion dollar bailout bills for failed banksters over a weekend. The immorality and viciousness of the US leadership and people with a conservative mindset is mind-blowing.
How about we implement MMT and provide a good and prosperous life for our citizens which includes the right to decent healthcare paid for by our government. If we can “afford” to bail out bankster leeches and blow the crap out of multitudes of countries to the tune of trillions, we can certainly afford healthcare. People who would argue otherwise are, in my opinion, sociopaths, or worse.
Or, if we are going to have this crap private for profit death system imposed on us, at least implement MMT and a job guarantee so we can “afford” it personally.
Djp Reply:
October 24th, 2011 at 9:12 pm
@Tom Hickey,
@Tom
Sure, let’s have competition for health care. I’m not at all opposed to removing some of the rent seeking behavior of certification boards – I suspect you are more opposed to rent seeking in general than I am.
@ Jon
“””
How about we implement MMT and provide a good and prosperous life for our citizens which includes the right to decent healthcare paid for by our government. If we can “afford” to bail out bankster leeches and blow the crap out of multitudes of countries to the tune of trillions, we can certainly afford healthcare. People who would argue otherwise are, in my opinion, sociopaths, or worse.
“””
Your definition of “decent healthcare” is what would make this workable or unworkable. Tom’s assertion is that everyone could have an artificial heart, I suspect that’s not true, and I suspect that even if it were if we pile on a few more similar bequeaths to “everyone” then it definitely won’t be true.
MMT does not create real resources out of thin air. At the end of the day available real resources are what really matters. Maybe at some point far in the future the Japanese will have perfected the construction of a bunch of robot medics, but right now quite a bit of medical care is still doled out in one on one sessions with a physician. While I hope that some day those Japanese robots at Honda will be able to perform hip surgery and knee replacement surgery, I also recognize that today these tasks actually consume a lot of real resources.
Try to do some back of the envelope calculations on what it would take to “give everyone” an artificial heart before labelling those who do sociopaths. For better or for worse, it’s vastly cheaper to create a truly mind-numbing military than it is to give everyone all the healthcare they want.
That said, I would still favor giving people checks to pay for the “decent healthcare” that everyone deserves, rather than giving them a blank check. I would also like people to have the option to pay for premium care — that’s the best way to fund new innovations. Why is it that paying an early adopter premium is so successful in spurring innovation in other areas, but not healthcare?
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ESM Reply:
October 23rd, 2011 at 8:02 pm
@CDNDC,
This is a bit of an ironic post because I think it is you who has blinders on.
It is not necessary for a market to be perfectly free in order for it to be useful in allocating resources more efficiently. In fact, our most pedantic posters here frequently state that there is no such thing as a perfectly free market, and I agree.
“If you actually believe that the products & services you listed do not violate these assumptions to different degrees then you are out of touch with reality.”
And if you believe that the cost-constrained choices people make in the areas of food, shelter, transportation, energy, or even communications technology don’t impact human health, then you are out of touch with reality.
“Most on this blog appear to agree that the health care industry has significant distortions from market power…”
Is that supposed to be an argument? In any case, there will always be plenty of choice in terms of doctors and hospitals and even treatments. If you’re in the middle of the street bleeding to death, sure, you’re at the mercy of the paramedics who arrive if they want to extort money out of you in exchange for a blood transfusion, but there are ways to protect yourself against such situations (e.g. insurance contracts).
“I would add that information quality and symmetry of information are real imperfections in health care,…”
Well, they are now because we don’t have a free market at all in most of health care. In those areas where we do, e.g. eye care, plastic surgery, even dentistry to a large degree, the market works pretty well, and costs have risen at about the rate of inflation or less.
“…at very emotional (and irrational) times…”
I believe this is way overstated. The timescale for most health care decisions is days or weeks or longer, and there are countless ways of getting help from friends and family and from the internet (and from doctors too — not all of them are profit-seeking sharks). The funeral home business is probably a better example of a market where people make economic decisions in a fragile emotional state (real estate too, apparently).
“… both positive and negative externalities in health care are large (e.g. positive from others benefitting from your good health related productivity and negative through bad health’s impact on friends & family).”
Both of those are positive externalities. An example of a negative externality would be medical waste that pollutes the environment. The problems with externalities are not fundamentally different than in any other area.
“In regards to the insurance aspect of health care – are there not economies of scale in insurance which would be realized from public provision?”
Yes, there are economies of scale. But what you lose are choice and competition. The economy of scale argument could also be used to justify merging all car companies into one.
“Would you rather have a private firm deciding coverage (with a profit motive) or a public entity (with a public purpose objective).”
Are you kidding me? Absolutely I want the private firm deciding coverage, based on its contractual obligations. If they try to screw me, at least I can sue ’em.
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@alex
Things have changed! Taking down the rich is suddenly become American …wow
Their existence is not the problem ….what is however is the belief that economic well being
Is dependent on protecting the wealth of the rich …..and not the source of their wealth (the other 99%)
On an insanity scale the world is most certainly certifiable …
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Mr Mosler, you argument makes sense in the technical sense but you do not account for human nature.
The reason we the 99% want to end the deficits is to crush the 1% and return America to a democracy of the people for the people.
We could not care less about if the stock markest and economic crashes short term.
We have nothing more to lose, while the 1% will lose thier power and lock on the US government.
To American who’s family has fought and died for this country, taking our freedoms back is worth much, much, much more then a short term economic crisis.
We are Americans, who are you?
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Tom Hickey Reply:
October 21st, 2011 at 6:27 pm
@Alex,
Alex, if you think that ending the deficits, paying down the national debt, going on the gold standard, or “ending the Fed” will benefit the 99% rather than the 1%, you should go directly to the Mandatory Readings in the menu bar and begin with The Seven Deadly Innocent Frauds of Economic Policy.
Trying to punish the 1% with such proposals will just make the lot of the 99% worse, increase inequality, and reward the 1%. Sure, it will shrink the pie, but the 1% will profit from it by taking a bigger piece. If you don’t see why this is true, study up.
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WARREN MOSLER Reply:
October 21st, 2011 at 9:16 pm
You can’t end deficits but you can drive up unemployment trying.
Read ‘the 7 deadly innocent frauds’ on this website thanks.
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jim Reply:
October 22nd, 2011 at 8:19 am
@Alex,
We could not care less about if the stock market and economic crashes short term.
We have nothing more to lose, while the 1% will lose their power and lock on the US government.
______________________________________________
Interesting that you want to do the same as the Tea Party, but for exactly the opposite reason.
The Tea Party message is that balancing the budget will bring economic prosperity.
Reply
WARREN MOSLER Reply:
October 22nd, 2011 at 4:52 pm
it’s not about stock market crashes or financial crashes.
it’s about making it a lot worse in real terms for the 99%, while only somewhat worse for the 1%
history has had a way of simply shifting around who the 1% are from time to time.
MMT opens the door for the 99% to get a fair shake.
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@ESM
“…. including decisions about how much health care to buy.”
This simply doesn’t sound good to me – “health” and “buy” – so WRONG. But it is political, I know.
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ESM Reply:
October 21st, 2011 at 9:06 pm
@RyanVMarkov,
It can take a while to wrap your head around, but people trade health for money (or other things in life that can be exchanged for money) all the time.
Just think of the different health risk levels in various occupations, from being a coal miner, to a police officer, to a reporter in a war zone, to a football player.
People who eat poorly (or too much), smoke, take drugs, have promiscuous sex, or engage in dangerous sports are all trading health for other desirable things. I prefer to leave it to the individual to do his own internal cost/benefit analysis.
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The problem who get the money if the deficit is increase? With the current Fed Reserve system and corrupt Republican majority in Congress, most of an increased deficit will simply go to the 1% and the 99% of Americans will get nanda.
In-equality will increase, Fox News will shout how these 1% worked so hard for this money, and eventually when the 99% become pesants as in Argentina there will be a revolt.
I just hope that American remember how to use their guns and line the 1% up at the edge of the Missippi and then flush thier bodies out into the Gulf.
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ESM Reply:
October 21st, 2011 at 9:29 pm
@Alex,
Just wondering if the violent language police are still on patrol…
If not, then the spelling police will have their hands full.
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Djp Reply:
October 21st, 2011 at 10:33 pm
@ESM,
I think the violence police are a little selective in what tickles their antennae.
There was another thread not long ago advocating similar activities – it did follow hard upon the notable censoring. To me this seems much more direct, unlike the counterfactual that earlier stirred such controversy.
The speeling police would generally have a field day around here.
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beowulf Reply:
October 22nd, 2011 at 12:57 am
@ESM,
Just wondering if the violent language police are still on patrol…
I’m on stakeout tonight and don’t feel like leaving the van.
That and there’s a difference between saying something stupid (The transportation costs alone would thwart his plan) and something something stupid PLUS calling out a public official by name.
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another deficit terrorist was on charlie rose last night (10/20). ray dalio – largest hedge fund manager in the world – $127b. obviously a pragmatic guy who knows how to make a buck but doesn’t have a fundamental understanding of how our monetary system works. definitely recommend watching the segment when it comes online. as of now they haven’t posted it.
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Tom Hickey Reply:
October 21st, 2011 at 11:37 am
@DollarMonopoly.com,
It’s quite amazing that Dalio doesn’t get it. He is committed to being cutting edge as much as to making money. Surprising he hasn’t picked up on MMT yet.
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Matt Franko Reply:
October 21st, 2011 at 12:56 pm
@DollarMonopoly.com, CNBC has been low profile reporting that one of John Paulson’s ‘hedge’ funds is down 32%….
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SethM Reply:
October 22nd, 2011 at 7:32 am
@DollarMonopoly.com, It’s a little extreme calling Dalio a ‘terrorist’ of any kind don’t you think? Throwing that word around cheapens the discussion.
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Abnormal Returns’ topline quote a few days ago would warm the heart of any MMTer:
Joe Weisenthal, “The fact of the matter is that this connection between deficits and rates is patently false.” The Costliest Mistake In All Of Economics: http://www.businessinsider.com/the-costly-misplaced-worry-about-the-deficit-2011-10
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I assume that ‘given our ….low unemployment rate’ should be ‘high unemployment rate’ in the Conclusion?
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Nice article, although when the guy treads into medicine, he stumbles badly. There’s simply no way around the CBO projections unless liability is reformed, and since that won’t ever make it through the senate, the CBO numbers stand.
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Meh, too bad its only getting around with balding money managers, whose words mostly reaches other money managers most of whom are of the libertarian or right wing variety.
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Tom Hickey Reply:
October 21st, 2011 at 12:23 am
@Deus-DJ,
This is a logical place for it to start, since money managers have a vested interest in getting it right on a daily basis and are looking for any leg up they can get. Economists don’t have similar interests or pressure, so change probably won’t start with them, and they’ll resist changing their assumptions as long as they can retain credibility. But when their credibility looks threatened, they’ll come along, too.
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Jackson Reply:
October 21st, 2011 at 9:14 am
@Deus-DJ,
and pray tell, what’s wrong with that? BTW, the guy cannot exactly be a libertarian while supporting a larger deficit.
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ESM Reply:
October 21st, 2011 at 9:54 am
@Jackson,
I’m a libertarian, and I support a larger deficit. Of course this particular balding money manager is certainly not a libertarian, judging from his views on health care. In fact, that whole section really undermines his credibility (once the government is monopsony buyer, it could “save” money by “negotiating” with providers and drug companies?).
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Tom Hickey Reply:
October 21st, 2011 at 10:34 am
@ESM,
ESM, he is talking about controlling spiraling health care costs, which I believe you hold are driven by the monopolist. IF the monopolist bids less, then the prices come down. He agrees with this approach, along with amping up policing of “waste, fraud and abuse,” which are conservative mantras.
ESM Reply:
October 21st, 2011 at 11:24 am
@ESM,
@Tom:
You know as well as I that this would be government price-fixing. If it works so well with health care, why can’t we do it with other sectors of the economy?
The reason of course is that when the government fixes a price, supply and demand become untethered from consumer desires and economic costs. If the government sets prices lower for a service, then there will be more demand for that service and less supply.
It’s not high health care costs that are the problem, per se. The problem is that consumers and suppliers are not meeting together in the marketplace directly to establish prices which allocate resources optimally. The fact that this has caused prices to rise fast is merely a consequence of the fact that it is the consumers which are insulated from price, rather than the suppliers.
Single payer health care would perhaps lower prices, but only at the expense of removing market-based feedback (and incentives) for suppliers. Inevitably, this will result in less supply, and the non-optimal allocation of resources would remain a big problem.
WARREN MOSLER Reply:
October 21st, 2011 at 12:01 pm
first, that applies to all govt purchases, labor included.
second, single payer reduces real costs that currently have a nominal cost of probably $1T annually.
third, i like my health care proposal better…
Tom Hickey Reply:
October 21st, 2011 at 11:44 am
@ESM,
Depends on whether one thinks of health care as a consumer good or a public utility. It’s already recognized as public utility in many ways. The idea that banking, healthcare, education, etc. are consumer goods is a conservative norm, not an economic principle, whatever that is. This is a political question.
Presently, there is a push by one political faction to privatize areas that the opposing faction associates with the commons. The kerfuffle is over where to draw the line between public and private.
The former argues for economic efficiency, while the latter argues for effectiveness wrt public purpose.
WARREN MOSLER Reply:
October 21st, 2011 at 12:03 pm
though presumably efficiency can serve public purpose as well…
Peter D Reply:
October 21st, 2011 at 12:01 pm
@ESM,
The question is whether a market place with low enough friction is possible in healthcare. Maybe, I am not sure.
But, besides that, if we think healthcare is a right, then the poor will still be priced out of good healthcare. We can tolerate when they get priced out of better housing and consumer goods, but are we OK as a society with a large chunk of population that receives either sub-par or no healthcare? In which case some sort of public healthcare becomes a necessity and with it the free frictionless market goes out the window. Yes, the resources might not be allocated the most efficiently in some sense, but that the price the society would pay for ensuring adequate access to healthcare for all.
Tom Hickey Reply:
October 21st, 2011 at 12:44 pm
@Warren,
“though presumably efficiency can serve public purpose as well…”
In The Effective Executive, Peter F. Drucker makes the basic point that effectiveness is doing the right thing, and efficiency is doing things right. He emphasizes that effectiveness is the top priority of leadership, not efficiency. Efficiency follows effectiveness. Too many leaders get absorbed in efficiency to the detriment of effectiveness and they fail. Other leaders are focused on effectiveness and they succeed, even if they aren’t always most efficient.
Drucker’s basic message to leadership is first focus on doing the right things and then on doing them better.
Drucker, then Deming.
Robert Kelly Reply:
October 21st, 2011 at 12:46 pm
@ESM,
I agree with ESM.
Health Care is tricky because single payer will increase demand greatly. Visit any city ER and witness what happens when a third party is paying the bill. Warren’s plan is good in that it keeps the incentives in the right place. Just “expensive” politically. The nightmare would be bureaucrats making medical decisions.
If insurance could actually be insurance (without all the various mandated coverage), we should be able to work something out without worrying about “death panels”.
ESM Reply:
October 21st, 2011 at 12:51 pm
@ESM,
@Warren:
“first, that applies to all govt purchases, labor included.”
No it doesn’t. It is possible for the government to pay market prices for goods and services (difficult perhaps, but certainly possible). And to the extent that the government fixes the price of the dollar to something (say, 6 minutes of unskilled labor under an ELR), it still doesn’t need to fix relative prices of goods and services.
“second, single payer reduces real costs that currently have a nominal cost of probably $1T annually.”
If you’re talking about administrative costs, they’re nowhere near that high, and in any case, administrative costs are the price we pay for competition. We could save administrative costs by merging Apple, Google, and Microsoft together too, but somehow I don’t think you would like that idea.
Also, I’m not proposing to keep the crazy system we have now. I don’t even claim that it is better than single-payer. I only claim that single-payer is not solving the fundamental problem, which is the lack of a free market in health care.
@Peter:
Health care is just too complicated and all-encompassing to establish as a right. Perhaps some small subset of health care could be. I think almost everybody in our society would agree that a person bleeding to death in the street should be saved regardless of his ability to pay for a tourniquet, stitches and the services of surgeon. But how about a person who (feels he) needs to see a psychiatrist or a chiropractor? Or somebody who needs physical therapy or medicine for acne? Or a terminally ill patient who wants to extend his life another month or two? This is 7-8% of GDP for even economies with socialized medicine, remember.
Also, it should be recognized that a right to healthcare is a positive right in the sense that it creates obligations on other people, necessarily infringing on their negative rights. If I have a right to have my bed pan emptied, then it means somebody else has to empty that bed pan, or at least pay somebody else to do it.
Negative rights are more fundamental (in my book) and easier to understand and protect. They’re also more in tune with the Constitution.
WARREN MOSLER Reply:
October 21st, 2011 at 3:30 pm
some 650 billion goes to insurance and other admin functions, and at least half that is spent by doctors dealing with insurance and other admin that would be eliminated with my plan, plus my plan probably doubles available doctor/patient time.
also,
health care can never be a ‘fair game’ re game theory, when a sick person absolutely needs attention and the provider only has to provide if he likes his return on equity.
and it’s hard for govt purchases to be at market when ‘market’ assumes both sides are price sensitive, etc.
Tom Hickey Reply:
October 21st, 2011 at 12:59 pm
@ESM,
In matters like education and health care the goal should not be to lower demand to lower prices if we are considering public purpose. Most people do have any great incentive to overuse either. IMHO, they should be encouraged to use a whole lot more than they are now, and with institutional redesign that would easily be possible in a more efficient way that either is now being delivered.
What I object to also is the monetization of what are essentially public goods. What we are seeing is huge rent extraction in the areas of health care and education, which is leading a huge number of people into debt peonage and also excluding a lot of people from what should be public services.
This would be good not only for the people involved but it would also strengthen society. It’s a win-win, and MMT shows that it is completely affordable as long as the real resources are available. With better institutional design, many resource issues could be reduced or eliminated.
The outcome would be a healthier, better educated, smarter and more productive society, which would contribute not only economically, but also politically and socially.
Peter D Reply:
October 21st, 2011 at 1:08 pm
@ESM,
ESM, then we can agree on single payer for basic health care – which would be still more than just not letting a bleeding man die, but not include the more advanced and expensive, “luxury” procedures – and then let the market provide the more expensive healthcare? How about that?
Mario Reply:
October 21st, 2011 at 1:15 pm
@ESM,
except people don’t “consume” health care services. They either NEED them or they don’t. Minus a logical annual or semi-annual check-up there isn’t any real potential increase in consumption. Therefore supply and “demand” don’t really exist. The level of demand for health care services is really based on the weighted average health of the population multiplied by the the size of that population. There’s not going to be much variance beyond that figure. There could be a tendency for the SUPPLIERS to create waves and bubbles and fads in health care services….(did you know how important your B levels are?!?! Get yours checked today!!….and everyone rushes to their doctor thereby stimulating more demand). However you can easily handle such bubble-creations by simply allocated a reasonable 1-3 fully paid for regular check-ups + subsidize all “normal and necessary” operations to keep a human citizen healthy and functioning (broken limb surgeries, organ issues, chronic disorders, etc.). Anything outside of the realm of “normal and necessary” can come out of the people’s pocket…like the lap band. This isn’t rocket science. Most things are not as complex and we humans sometimes like to make them.
ESM Reply:
October 21st, 2011 at 1:28 pm
@ESM,
@Peter:
I’m not against the government being involved in providing certain basic services. Certainly ones which are important for public health like vaccinations. As a rule, though, I prefer the government solve the problem of poverty by giving poor people money and letting them make their own consumption decisions, including decisions about how much health care to buy.
To a large extent, we already have guaranteed basic health care via the emergency room, since they can’t turn you down, and they can’t really collect any bills. I think the emergency room experience is a perfect example of what single payer health care will be like.
@Mario:
I disagree that health care is any more a necessity, or in any way more free from the law of supply and demand, than food, shelter, transportation, energy, or, frankly, an iPhone.
WARREN MOSLER Reply:
October 21st, 2011 at 3:34 pm
i prefer sustaining aggregate demand to the point where people can get good paying jobs rather than having the govt give them anything.
for me, welfare is not for the ‘able bodied’ but neither is unemployment
Peter D Reply:
October 21st, 2011 at 1:51 pm
@ESM,
>>I prefer the government solve the problem of poverty by giving poor people money and letting them make their own consumption decisions, including decisions about how much health care to buy.
But we know that a lot of people will not be wise or responsible enough to acquire coverage and the health of the society will suffer as a result. Basically, the solution is either to allow freeloaders or force a minimum mandate (which would probably translate to the same in the end).
>>To a large extent, we already have guaranteed basic health care via the emergency room, since they can’t turn you down, and they can’t really collect any bills. I think the emergency room experience is a perfect example of what single payer health care will be like.
I don’t think emergency room is enough. There are basic procedures that can increase overall health but would not qualify for emergency room. There are a ton of stories of people with no or bad coverage not going to the emergency room till its too late. In the end it costs society more, not less, in both nominal and real terms.
But, I think we are converging on a system that mandates a certain minimal level of healthcare (or, alternatively, allows freeloaders access to such a healthcare) and everything else in excess of that is supplied by the conventional insurance marketplace.
Tom Hickey Reply:
October 21st, 2011 at 2:07 pm
@ESM,
“As a rule, though, I prefer the government solve the problem of poverty by giving poor people money and letting them make their own consumption decisions, including decisions about how much health care to buy.”
Completely disagree. Downscale people aren’t the sharpest in the world, and giving them money for health care, unless it were a voucher, almost guarantees that the $ would go to something that degrade their health. I don’t think it is possible to trust a lot of people to make good decisions for themselves and their families, since they are just not equipped to do so.
They could be made better equipped by improving the educational institutional arrangements, but there are generations already beyond that possibility. Yes, a nanny state approach is needed in some instances, as much as I would like to see otherwise. But we haven’t prepared for it yet.
The ideal of education should be to produce self-sufficient, creative, knowledgeable and resourceful individuals who know how to improve their situation and that of society by increasing the adaptability rate through coordination and exploring options. Then they should be given access to an information rich environment and the necessary tools. That is only possible of key institutions like are redesigned to accomodate this.
Bucky Fuller laid all this out decades ago, using Bell Labs as a model. His contention was that provided with this kind of environment, one person in a thousand would be all it would take to produce the innovation that would make doing more with less possible on a grand scale, thereby improving productivity and use of real resources. (See Ray Kurzweil’s “Law of Accelerating Returns”)
Neil Wilson Reply:
October 21st, 2011 at 2:40 pm
And yet the evidence of Canada and even the UK shows that you can do public health care very well at high effectiveness.
‘Buying things is better’ is a religious belief. It ain’t always so.
There’s more argument for purchasing in education than healthcare. Sick people are not good consumers.
Mario Reply:
October 21st, 2011 at 2:49 pm
@ESM,
I disagree that health care is any more a necessity, or in any way more free from the law of supply and demand, than food, shelter, transportation, energy, or, frankly, an iPhone.
and I “disagree” with MMT that federal deficits aren’t a problem. That was so easy wasn’t it!!! Weeee!!!! Let’s play the “yes/no” game!!! Weeeeee!!!
Mario Reply:
October 21st, 2011 at 2:59 pm
@ESM,
@Neil
And yet the evidence of Canada and even the UK shows that you can do public health care very well at high effectiveness.
and don’t forget Australia too. I know from FIRST HAND experience. My wife is a cancer destroyer (PRAISE GOD!!!) and all of our services have been handled in AU by literally some of the best oncologists in the world, all at a very, very low cost, and very speedy process. ESM I’m sorry man but your obstinate refusal to look at the REALITY of these things is more than irritating and annoying…it’s personal and more than pisses me off to no end. I’d be less of a man if I said what I really think about the way you so stubbornly stick to your illogical and senseless “ideas” about health care. Grrrrrr!!!!!
Even if you INCLUDE the costs we have incurred flying my wife RT half way around the world to get her services in AU, it’s STILL a bargain compared to the US bullshit system. Fuck this shit and stop arguing against reality. It works. It WORKS!!! And I can’t tell you how much I THANK GOD that there are nations and societies that realize this stuff works and plan accordingly. THANK YOU GOD for saving my wife’s life with the aid and assistance of the AU health care system.
I hate when people are so perverse to put “theories” before real life flesh and blood let alone functional logic, reality, and truth.
Note: I am livid right now but still maintaining proper decorum as best as I can. Thank you all.
Tom Hickey Reply:
October 21st, 2011 at 3:48 pm
@ESM,
“I disagree that health care is any more a necessity, or in any way more free from the law of supply and demand, than food, shelter, transportation, energy, or, frankly, an iPhone.”
In line with conservative denial of the existence of public goods. That is a fundamental disagrement with liberals.
So what about the commons, public purpose, the general welfare, and public utility. Out too?
Greg Reply:
October 21st, 2011 at 4:43 pm
@ESM,
I have to chime in here on the ER claim cuz I hear it ALL the time. It is categorically untrue that people cant be turned away from an ER. It happens every day in lots of places. We treated someone in our hospital with a head injury that was helicoptered past four hospitals with neurosurgeons on call. They were injured 80 miles from us in the south metro Atlanta
area and ended up in our OR.
That is a myth that needs to die a fast death.
Senexx Reply:
October 21st, 2011 at 9:04 pm
@ESM, I like Mosler’s healthcare plan, it is appropriate for the US politics though it would be so much easier to just pinch Australia’s Medicare levy and surcharge system on income but I just can’t see that flying in US politics.
Just like I can’t see the STV (preferential voting) flying in the US even though it would be much more representative of the US public.
ESM Reply:
October 21st, 2011 at 9:14 pm
@ESM,
@Tom:
“So what about the commons, public purpose, the general welfare, and public utility. Out too?”
Tom, even the most extreme libertarians believe that the military should be a public utility. Certainly, no individual has a need for a cruise missile or a nuclear aircraft carrier, but they’re pretty useful at the national level. I consider myself a pretty moderate liberatarian, but I can’t see why a sector of the economy that is as large, as diverse and as individualized as health care needs to be controlled by the government. Course, I don’t think water or electricity should be either, so maybe I really am out of the mainstream.
ESM Reply:
October 21st, 2011 at 9:21 pm
@ESM,
@Senexx:
“I like Mosler’s healthcare plan…”
I agree. The catastrophic insurance part has to be nailed down a little better, but in general there is a lot of price feedback to the consumer, which I think will provide a more efficient allocation of resources.
ESM Reply:
October 21st, 2011 at 9:24 pm
@ESM,
@Greg:
“It happens every day in lots of places.”
Greg, is this allowed, or are these hospitals doing something illegal by rerouting patients elsewhere? If they’re acting illegally, then I would not consider my statement untrue. I mean I don’t think it’s wrong to say that you can’t kill somebody in the US for no good reason, even though it happens all the time.
zanon Reply:
October 21st, 2011 at 10:42 pm
@ESM,
An ER, cannot by law, turn a patient away.
So what greg says is illegal.
This is double edge sword of course as state also refuse to pay for many ER service. So, it means that state make slave of ER doctor
Matt Franko Reply:
October 22nd, 2011 at 7:27 am
@ESM, I came across this article by an economist looking to overlay Smith’s ‘Invisible Hand’ on Darwin’s “Natural Selection”.
http://www.latimes.com/news/opinion/commentary/la-oe-frank-darwin-economics-20111018,0,5949996.story
“It’s an important point, since the modern conservative’s case for minimal government rests on the presumption that competition always promotes society’s welfare. But our best understanding of how competition actually functions, as Darwin’s work makes clear, supports no such presumption.”
He makes the case that sometimes what is good for the individual doesnt necessarily lead to the good of the whole. For instance I could see how in some sort of unfettered ‘free market’, a bunch of for profit healthcare providers could end up competing with each other to make more money, and this would lead to worse healthcare for all… if the government didnt set up the regulations correctly. Resp,
Greg Reply:
October 22nd, 2011 at 8:59 am
@ESM,
And Zanon
Allowed?
The law has to do with acceptance of federal funds for health care, which virtually every institution does of course and “availability” of appropriate services. How does a hospital make a surgeon take call? Unfortunately, often a hospital “doesnt have anyone “on call for that service” So yes it is allowed while legislatively “illegal”
If there arent effective ways of enforcing a law what good are they. The point is our “system” doesnt in its totality provide basic life saving health care for all. And it wont until it becomes fundamentally different. Until that is a goal of the system
ESM Reply:
October 22nd, 2011 at 11:14 am
@ESM,
@Matt:
“‘the modern conservative’s case for minimal government rests on the presumption that competition always promotes society’s welfare.'”
This statement is both incorrect and woefully incomplete. The case for minimal government rests in individual choice and incentive.
Competitition creates incentives to work hard, lower costs, and innovate, but it is not the only factor. There is also the prospect of enjoying the fruits of your labor (which of course includes the concept of private property).
And choice is an extremely important part of the argument for limited government. Every individual is different, with his own set of preferences as well as tolerance for risk and pain and whatnot. The more decisions left to the individual, the greater the opportunity for individual optimization of utility.
Note that I am not arguing for no government. The optimal level in my opinion is quite a lot of government actually. Just happens to be a lot less than we have now.
WARREN MOSLER Reply:
October 22nd, 2011 at 5:01 pm
and anything short of ‘pure competition’ with monopoly at the extreme is problematic to the point of involving govt in some manner
Tom Hickey Reply:
October 22nd, 2011 at 11:42 am
@ESM,
“Note that I am not arguing for no government. The optimal level in my opinion is quite a lot of government actually. Just happens to be a lot less than we have now.”
I would say less government in some areas and more in another, depending on requirements. There are some huge imbalances now, and there is way too much corruption virtually everywhere in the world. One major problem with states is that their governments are rather easily hijacked.
As a radical libertarian of the left, I would prefer “no state” and I reject the authority of the state as either natural or rightful. While I am a philosophical anarchist, I am not naive enough to think that societies can exist and prosper without any governing principle. But I don’t think that the modern state is the only of providing this, and it is certainly not the best way for a lot of reasons that others have written extensively about, so I won’t repeat here. Obviously, I don’t think that abolishing the state is either possible or practical at present, but I look forward to the withering away of the state in the future, recognizing that this is likely some way off. In the meantime, we need to make do as best we can under the (awful) circumstances that prevail in the world to manage existing state power as democratically as possible.
Ben Strubel Reply:
October 21st, 2011 at 9:32 am
@Deus-DJ,
Hey, I still have *most* of my hair ;)
Reply
Tom Hickey Reply:
October 21st, 2011 at 12:49 pm
@Ben Strubel,
Ben, your post is one of the best summaries I have run across, and it touches all the bases. It’s a model of good composition and argument. I’ve shared it with my networks, and encourage others to do likewise.
Reply
Vincent Reply:
October 21st, 2011 at 2:00 pm
@Ben Strubel,
Ben,
You write beautifully about monetary operations, but how do you justify what you’ve said about medicine in the US. You don’t appear to have a handle on medical operations.
Reply
Matt Franko Reply:
October 21st, 2011 at 3:39 pm
@Ben Strubel, Ben echo Tom here great post man. Keep it up. Perhaps print it up and pass it out at the next Smorgasbord! ;) Resp,
Reply
Nicely put. MMT is getting around. Great to see.
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