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POLICY: Insurance–Huh! What is it good for? (to the tune of “War”)

I like Michael Cannon a lot, but I fear his (and Michael Tanners’s) book (unlike fellow Cato-ite Arnold Kling’s) was very, very weak on dealing with the problems of actually sick people. It devoted a whole three lines to the problem of what happens to controlling costs beyond the deductible–even though everyone knows that that’s the most expensive part of health care. Kling at least knows that covering them is a problem, although he never really comes up with answer either (he does dance around the edge of high risk pools for the chronically ill).

But  I just assume the liberal LA Times is carrying this op-ed from the two Michaels as part of its affirmative action program. Cannon and Tanner have amazingly discovered that universal insurance does not mean immediate access to any care anybody might want for free. And so they have decided that lots of people not having insurance is therefore OK.

There are two basic problems with this logic.

First, and this is barely worth saying, but care is rationed in the US just as much as it is elsewhere. if you don’t believe me, believe the capitalists at the Wall Street Journal—who ran a long series on it in 2003, and believe fellow free-marketeer John Goodman. So saying that people have to wait for care in Europe or Canada is true but not an immediate indictment of their health care systems. Of course rationing of health care may not impact Cato scholars or even hopefully liberal health care consultants in San Francisco, but it sure as hell impacts poor uninsured people waiting for care in (say) Galveston, Texas.

Second and this much more important—a universal health insurance system means that the insurance is universal. What does insurance do? Insurance ensures that if you are not financially wiped out from a disaster, such as having your house burn down or in this case, being sick.

There’s no point rehashing the bankruptcy statistics here—the point is that the key reason the Europeans, Canadians and Japanese support their universal insurance systems is because they know that a spell of illness does not  mean financial destitution. Here it is quite possible that it will, and in many cases it does–but don’t worry it’s only one quarter of bankruptcy cases. Barely worth bothering about, eh?

That the Cato boys couldn’t even address this—which is by far the most important problem with the US lack of universal health insurance—is presumably because the LA Times was too cheap to give them more words. At least I assume so. It can’t be that they think it doesn’t matter, can it?

CODA: Meanwhile I just found out that John Goodman has a blog.It’s called The John Goodman Health Blog. I’ve been there poking a little fun in some of the comments, including this one about the bankruptcy issue. I suggest you all go there to check it out too and join the intellectual giants like Pauly, Herzlinger, Pipes et al in the comments.

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Ann ScottvincentelliottgMatthew HoltTom Leith Recent comment authors
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Jack Lohman
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Gee, I hope asking Vincent his affiliation didn’t scare him away. When I’m investing time in a discussion I just like to know whether I am talking to a paid industry hack or not.

Ann Scott
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Ann Scott

From Vincent: “The price system is the most efficient modality to allocate resources. ” Uh huh…..so we are to (and do) allocate medical care on the basis of who has the most money in their pocket and NOT on the basis of (a) who is the most ill and can be treated with the most cost-effectivness (cancer treatment is more important than Botox injections, and chronic pain care supersedes face lifts and tummy tucks, and spinal disc surgery that works and costs $50,000 is preferred over heart transplants for infants that run nearly $2 million in care and will only… Read more »

Jack Lohman
Guest

Vincent, the 20% that are using 80% of health care are largely the elderly and end-of-lifers. What else would you expect, the reverse?
According to Health Affairs Vol 23:#3 ,2004, the US ranks first only in breast cancer and Canada ranks first in (a) childhood leukemia, (b) kidney transplant, (c) liver transplant and (d) strokes. The US is worst in kidney transplant and 4th in colorectal cancer. What’s this about free market medicine that is so great?
And for purposes of disclosure, I am a retired Medicare patient with no ties to industry. What is your affiliation?

vincent
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vincent

Jack,
Since we know that 20% of the population uses at least 70% of the resources, is it any wonder that 80% of the population likes the system. They are NOT SICK. They don’t need to use the system and therefore don’t have a problem with it.
A child I met while travelling summed it up quite well. He said, “DUH”.

vincent
Guest
vincent

Elliot, I must thank you for calling me an “ignorant windbag”. Resorting to name calling only shows your intolerance and lack of true understanding. On to the facts. 1)Despite continued assertions to the contrary, longevity has long been debunked as a measure of a health care system’s results. 2)I never said “optimal”. I said most efficient. I never implied perfection, you did. Why do the defenders of socialism always resort to the “perfection argument”, yet patently ignore facts such as Canadians waiting 18 months for a hip replacement? 3)The US system is far from a free market. In fact, it… Read more »

Jack Lohman
Guest

Vincent, we don’t ration many things that are funded by the government; fire and police protection are a couple that come to mind. And under a Medicare-for-all system we wouldn’t have to ration care if we were politically willing to quit giving tax breaks to the wealthy. It’s a matter of priorities, and in our political system you change those with campaign contributions. Government doesn’t always increase costs, but when a particular agency is allowed to run wild that does indeed occur (the defense industry is a good example). The long lines in Canada that you mention is because of… Read more »

gjudd
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gjudd

elliotg makes a convincing case that healthcare models are likely to fall far short of satisfying his 4 fundamental conditions for optimal resource allocation.
Unfortunately, one is left wondering what mechanism(s) are markedly better at doing so – and perhaps more daunting, how to efficiently persuade “everyone” (would 50.5% of us be enough?) of their superiority

Stuart Browning
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I’m not sure that I understand the source of Mr. Holt’s confusion – aside from the fact that “Mr. Holt is just being Mr. Holt”. His whole “Browning thinks Canadians and Brits are evil” schtick is also amusing. I don’t know exactly who it is he’s trying to fool. I have no differences with John Goodman’s position for obvious reasons to anyone who has read my blog or my postings here. I – along with all the other free market advocates – oppose government rationing of health care via physical force. And yes – Mr. Holt that’s what it is… Read more »

elliottg
Guest

Vincent, what a fine screed with so much ideological purity that it makes me proud you are an American. There is so much to comment on in it that I simply can’t cover it all, but this one quote popped out at me: “Government fiat invariably increases the overall costs, oppresses individual freedoms, and misallocates precious resources. The evidence for these results are apparent throughout history.” Given that the Canadians enjoy better healthcare results at a lower cost, I am truly impressed that the evidence exists that shows they would enjoy even longer life at even lower cost by adopting… Read more »

vincent
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vincent

Economics is , in essence, the allocation of scarce resources. Scarce does not imply that there is not enough of a resource to go around, but simply that no resource is unlimited. Therefore, everything from bubble gum to healthcare must be “rationed” in some way. This is a simple and undisputable fact. The question, as always, is how to ration anything. There are two basic modalities, the price system or government fiat. The price system is the most efficient modality to allocate resources. If you disagree with this, then I would suggest that you investigate the economic results of communism,… Read more »

gjudd
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gjudd

Matthew, you do understand what I wrote – you just don’t appear to understand the implications of what you’re saying for cutting down the enormous ring of health system reform issues that we need to engage to make things better.
Add this to your reflection: if “‘insulation from the high costs inherent in care” (or some variation thereof) is your principal health system reform concern, you will never – ever – get there from here.

Jack Lohman
Guest

Gee, I didn’t know that stating an opinion was a problem. I’ll try to avoid that in the future.

Tom Leith
Guest
Tom Leith

> Tom & Jack–your enjoying yourselves too much.
Oh, sorry. I got carried away. Mea culpa, mea maxima culpa. It won’t happen again.
Now, where’s my cilice?
t

Matthew Holt
Guest

Thanks elliotg. Yes you’re basically right & I too think it’s a close call between those alternatives with a lot more government interference required than most on the free-market end would like. BTW this conversation will be picked up tomorrow over at TPMCafe

elliottg
Guest

I think what gjudd was saying is that healthcare reformation should not be insurance reformation. If I have read you correctly in the past, you see that insurance based reform is possible and the easiest way to get from here to there. This means you believe that the problems with insurers cherry-picking, refusing to underwrited, and denying legitimate claims are easier to solve than the problem of implementing a NHS type beauracracy. I think it’s a close call, but I tend to come down on your side in that argument.