Paul Krugman has written several posts in the last week about medical financing, including his New York Times column about how medical spending requires limits/choice/rationing and how medical patients are quite dissimilar from people in their role as consumers of ordinary goods. He pointed out in his blog that this was basically reminding us of something the great Kenneth Arrow wrote in 1963. I suspect that readers in most of the world understand that these points go without saying, which is why the government needs to exert substantial control over medical financing and, by extension, limits on spending. But in the US the the debate goes on about whether or not we are going to do anything remotely rational about medical financing. (For those interested in other recent Krugman writings on the topic, they are here, here, here, and here – I understand that links from blogspot let you into nytimes pages even if you have used up your free articles for the month.)
To summarize, the most important reason that patients do not act as normal consumers – probably obvious to anyone who thinks about it, a category that clearly does not include about half of American commentators on the subject – is that they are not paying most of the bill. This is because if they had to do so for anything other than routine care, they would not be able to afford it, so insurance of some sort is needed, and there is no getting around how that prevents normal consumer decision making. A second reason is that the "consumers" seldom have the knowledge and confidence to make a decision, and often are in no condition to think straight, so someone else (neither the patient nor the payer) is also making the decisions.
As for the need for some kind of rationing, it is not possible for us to provide everyone with every beneficial medical treatment, a category that includes a lot of expensive treatments that will probably fail, but might offer a little benefit. We understand this for most goods, but the thing about medical care (this is my claim, not Krugman's) is that until recently the total cost of all beneficial treatments for anyone who might benefit from them was quite small. Moreover, during a brief period that included the formative years of most current American pundits, we were rich enough to afford all of those treatments for everyone in rich countries. That odd situation has changed. But our usual method for rationing consumer goods – making people choose what they want, constrained by what they can afford – does not work, so someone has to make the decision. It can be private insurers who are looking for any excuse to not pay for something, or it can be – gulp! – government.
Rationing is tough, but it would be better if we acted like adults and recognized that it was necessary, and best to do it in some sensible way. I had a conversation this morning with someone who is on Medicare (for those who do not know, that is America's efficient, popular, tax-funded socialized medicine, available to everyone assuming they survive their lack of health insurance and reach age 65). She told me about how she and her husband were constantly getting calls from companies trying to sell them (which means deliver for free and bill Medicare) motorized wheelchairs, anti-sleep-apnea machines, and various other boondoggles. She also recounted tales of oncologists making a fortune by selling the in-office chemotherapy delivery that they themselves chose to recommend over other options. I was aware of the latter of these but had not realized how bad the former had gotten.
Anyway, the point is not that much of American medical care is making a few people rich at the expense of people who just need basic care – that is not a very impressive insight. What Krugman's posts and that conversation got me thinking about is how badly backwards the entire system is when people are allowed to buy, at the expense of their insurance (government provided or otherwise), an electric scooter if they can get some scamming medic to declare that they have a medical need, but they cannot buy (to pick just three examples I have written about recently) soda in various public buildings, or caffeinated alcoholic drinks, or electronic cigarettes if the FDA has its way. The latter are legitimate consumer decisions where someone can understand the ramifications and make a choice about how to expend their money (and time and perhaps their thin waist or even a few hours of long-term memory if they so choose). We would not all make the same choices, but that is the beauty of functioning free markets: we do not have to agree and no one has to understand why. The same is not true for medical care, where someone often has to figure out how to choose for everyone.
The point is that it is not just offensive to liberty that "health promotion" busybodies (not to be confused with real public health advocates) try to restrict consumer choices about food, drugs, etc. and bastardize the epidemiologic science in the process. But since they often do so in the name of reducing medical expenditures, it is downright insulting (and bastardizes the economic science). People are told they must not smoke or otherwise enjoy nicotine because the resulting health costs increase government expenditures (which is not actually true, but let's run with it for now). But the aforementioned medical device companies and oncologists cost the system orders of magnitude more, but are allowed to keep acting the way they do. The burden is put upon the rest of us, and the victims are blamed.
Krugman waxes about how, because of the aspects of the relationship that are simply beyond the standard merchant-consumer interaction, medical providers have to be something more that just profitable producers, how they have to have super-human ethics and heroism. But, you know, I am not seeing that happening anytime soon after a few decades of this "consumer" attitude. The wheelchair makers are certainly not headed in that direction, and the millionaire oncologists probably did not choose that specialty because all the positions as a desperately-needed general practitioner in an under-served rural area were taken. So the only hope for reigning in these costs is – again, gasp! – aggressive government intervention. But this does not make it all right for the government to intervene to alter people's private possibly-health-affecting choices via any method other than education, suggestion, and perhaps a bit of nudging. More pointedly, the embarrassment of those in power over the government's failure to have enough ...um... let's say fortitude to stand up those who are getting rich providing needlessly expensive medical care – let alone the embarrassment of those who are providing that needlessly expensive medical care – is a pathetic motive (though one with understandable self-interested as well as pscyhological motives) for blaming consumers for the uncontrolled costs.
To summarize, the most important reason that patients do not act as normal consumers – probably obvious to anyone who thinks about it, a category that clearly does not include about half of American commentators on the subject – is that they are not paying most of the bill. This is because if they had to do so for anything other than routine care, they would not be able to afford it, so insurance of some sort is needed, and there is no getting around how that prevents normal consumer decision making. A second reason is that the "consumers" seldom have the knowledge and confidence to make a decision, and often are in no condition to think straight, so someone else (neither the patient nor the payer) is also making the decisions.
As for the need for some kind of rationing, it is not possible for us to provide everyone with every beneficial medical treatment, a category that includes a lot of expensive treatments that will probably fail, but might offer a little benefit. We understand this for most goods, but the thing about medical care (this is my claim, not Krugman's) is that until recently the total cost of all beneficial treatments for anyone who might benefit from them was quite small. Moreover, during a brief period that included the formative years of most current American pundits, we were rich enough to afford all of those treatments for everyone in rich countries. That odd situation has changed. But our usual method for rationing consumer goods – making people choose what they want, constrained by what they can afford – does not work, so someone has to make the decision. It can be private insurers who are looking for any excuse to not pay for something, or it can be – gulp! – government.
Rationing is tough, but it would be better if we acted like adults and recognized that it was necessary, and best to do it in some sensible way. I had a conversation this morning with someone who is on Medicare (for those who do not know, that is America's efficient, popular, tax-funded socialized medicine, available to everyone assuming they survive their lack of health insurance and reach age 65). She told me about how she and her husband were constantly getting calls from companies trying to sell them (which means deliver for free and bill Medicare) motorized wheelchairs, anti-sleep-apnea machines, and various other boondoggles. She also recounted tales of oncologists making a fortune by selling the in-office chemotherapy delivery that they themselves chose to recommend over other options. I was aware of the latter of these but had not realized how bad the former had gotten.
Anyway, the point is not that much of American medical care is making a few people rich at the expense of people who just need basic care – that is not a very impressive insight. What Krugman's posts and that conversation got me thinking about is how badly backwards the entire system is when people are allowed to buy, at the expense of their insurance (government provided or otherwise), an electric scooter if they can get some scamming medic to declare that they have a medical need, but they cannot buy (to pick just three examples I have written about recently) soda in various public buildings, or caffeinated alcoholic drinks, or electronic cigarettes if the FDA has its way. The latter are legitimate consumer decisions where someone can understand the ramifications and make a choice about how to expend their money (and time and perhaps their thin waist or even a few hours of long-term memory if they so choose). We would not all make the same choices, but that is the beauty of functioning free markets: we do not have to agree and no one has to understand why. The same is not true for medical care, where someone often has to figure out how to choose for everyone.
The point is that it is not just offensive to liberty that "health promotion" busybodies (not to be confused with real public health advocates) try to restrict consumer choices about food, drugs, etc. and bastardize the epidemiologic science in the process. But since they often do so in the name of reducing medical expenditures, it is downright insulting (and bastardizes the economic science). People are told they must not smoke or otherwise enjoy nicotine because the resulting health costs increase government expenditures (which is not actually true, but let's run with it for now). But the aforementioned medical device companies and oncologists cost the system orders of magnitude more, but are allowed to keep acting the way they do. The burden is put upon the rest of us, and the victims are blamed.
Krugman waxes about how, because of the aspects of the relationship that are simply beyond the standard merchant-consumer interaction, medical providers have to be something more that just profitable producers, how they have to have super-human ethics and heroism. But, you know, I am not seeing that happening anytime soon after a few decades of this "consumer" attitude. The wheelchair makers are certainly not headed in that direction, and the millionaire oncologists probably did not choose that specialty because all the positions as a desperately-needed general practitioner in an under-served rural area were taken. So the only hope for reigning in these costs is – again, gasp! – aggressive government intervention. But this does not make it all right for the government to intervene to alter people's private possibly-health-affecting choices via any method other than education, suggestion, and perhaps a bit of nudging. More pointedly, the embarrassment of those in power over the government's failure to have enough ...um... let's say fortitude to stand up those who are getting rich providing needlessly expensive medical care – let alone the embarrassment of those who are providing that needlessly expensive medical care – is a pathetic motive (though one with understandable self-interested as well as pscyhological motives) for blaming consumers for the uncontrolled costs.
