By Larry Marsh, Kansas City Star Midwest Voices columnist 2009
To understand any economic system you have to understand the incentive structure. If you examine the incentives in our health care system, you can see why health care costs are out-of-control. The incentives for (1.) politicians, (2.) doctors and (3.) patients are currently designed to maximize wasteful, unnecessary health care spending.
(1.) A politician cannot run an election campaign without money. Consequently, politicians have designed our health care system to satisfy the medical lobbyists and maximize campaign contributions from the medical establishment.
(2.) Doctors really want to do what is best for their patients but are worried about malpractice law suits and end up ordering too many tests and procedures.
Market failure is not the fault of our doctors. It is the result of a poorly designed system with too much concentrated power and inadequate regulation. The "proof" that free enterprise can deliver desirable outcomes assumes free and equal information. It breaks down in the presence of special "insider" information such as that held by the medical establishment. Solving this problem is not easy, but the first step is to fully understand the problem.
Economic theory has traditionally assumed that all parties to a transaction have equal information. In an auction the seller and bidders have pretty much equal information about the item being auctioned off. In 2001 George Akerlof, Michael Spence and Joseph Stiglitz won the Nobel Prize in Economics for showing that asymmetric information can distort markets and result in market failure. The out-of-control costs of our current health care system provide a prime example of market failure due to (among other things) asymmetric information.
The classic example of symmetric versus asymmetric markets are the new car market versus the used car market. For our immediate purpose, we can substitute the health care market for the used car market to obtain an analogous comparison. A new car salesman would probably not try to convince you to buy a new car by telling you that if you fail to act today, your old car might fall apart at any moment. You obviously know more about your old car than the new car salesman does so there's no point in that strategy.
But what about your body? After all sorts of tests and procedures, the medical establishment knows more about your body than you do. Who are you to object to whatever they say you need? It is far from a normal economic market. With little private or public oversight, costs can get out of control really fast.
(3.) What about the recalcitrant patient who is unwilling to go along with unneeded pills, procedures and doctor visits because of the cost? Remember that the objective of the current health care system is to maximize the profits of the medical establishment in order to maximize the frequency and amount of their campaign contributions.
The way to solve the recalcitrant patient problem is to make sure that everyone has health insurance. That way, patients don't have to pay directly so they have nothing to lose except their time in going along with all the extras. Health insurance with no deductible and no co-pay serves to anesthetize the patient to ever higher health care costs.
What about all those television ads for every kind of drug imaginable? Are we being talked into drugs we don't really need or aren't really all that effective? President Eisenhower warned us about the military-industrial complex, but what about the medical-pharmaceutical complex? Does the prescription drug system go too far in transferring power to the medical establishment?
In summary health care costs are out-of-control resulting in "market failure" because:
(1.) Politicians are motivated to set up a system that maximizes the power of the medical establishment at the expense of everyone else;
(2.) Doctors are motivated to order all sorts of unnecessary tests, procedures and pills;
(3.) Patients are motivated to cooperate as long as it is all paid for by insurance. After all, it's all "free"!!!
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Also see:
We need to move beyond a one-size-fits-all health care system
To some libertarians even private health insurance is a bad idea
Obama fails to fully address perverse fee-for-service incentive system
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WHO IS TO DECIDE ?
So, in order to save money we are NOT going to provide care to the elderly? So who will decide? Will it be Obama the "empty suit" or some of his tax cheats? No we as free (for now anyway probably won't last unless we vote out this gang of miss fits) people should have available medical care that sustains a quality of life. The government
should take small and progressive steps to define the causes of the rising costs and set in motion action that corrects it. A government run health plan or any government plan is doomed from the start because of special interests and egos.
Get It Done
Obama is sounding exactly like a siding salesman, "Grab this great offer today or lose it forever!" It is obvious that grabbing a great offer today has never been to the advantage of the customer. It is also obvious that getting it right is infinitely of more importance than getting it quick!
The questions everyone SHOULD be asking...
Why will Obama NOT pledge to use ONLY the public plan, both for himself and all members of his family? (Obama has already publicly said he WOULD NOT do this).
Why will Ted Kennedy, poster boy for the bill in the Senate, NOT pledge to use ONLY the public plan, both for himself and all members of his family?
Why will Nancy Pelosi, Henry Waxman, and the remainder of Democrats in the House not pledge to use ONLY the public plan, both for themselves and their families?
Why will the remainder of Democrats in the Senate not pledge to use ONLY the public plan, for both themselves and their families?
Why has neither the House nor the Senate put language into these bills requiring immediate conversion to the public plan for all non-military Federal Employees, including staff members at the White House, and staff for both the Senate and House?
If this bill is going to 'save' so much money and be SOOO wonderful, why aren't members of the House and Senate lining up to be first to sign up for it?
I want answers to all of the above BEFORE they go any further with this.
apparently hr2454tax
apparently hr2454tax would deny Obama the choice that all other Americans would have.
Denying choices to Americans
That's what the right wing is ALL about...
On health care
I was doubtful, but that column on health care was good...lacking very little other than enough discussion about tort reform which has to be part of any cost containment system.
And one more thing. We are going to have to come to terms with the idea that health care is going to be rationed. No, we cannot allow 80 year olds to go from the nursing home to the hospital twice a month, spending more in the last few months of life than they paid into Medicare all their lives. That's not prolonging life. That's prolonging death!
Colo Governor Lamm talked about this years ago. No one in this PC world likes survival of the fittest. Now the TV stations have into thinking that WHATEVER IT COSTS, the most unable, disfunctional humans should be the best they can be. Even if they can't feed themselves for the rest of their lives!
Christians need to quit driving around with bumper stickers that say "Terry was Murdered." If they want to support life at any cost, let them pass the plate and pay for their convictions at $2500 a month. Moreover, they should not be so afraid of letting their people go meet their maker in their Heaven on time! God must surely be tired of us interfering with our drugs and CPR.
Fact is, half the people on the planet are starving and Terry's maintenance care would have given normal lives to a great number of other people conscious enough to do something with those lives.
My dad, in his nursing home, said many times, 'man should not live this long.' And he wondered if a few months more of barely living is worth the cost of his grandson's college education!
Same is true of us boomers. We already know no one's going to hire us...and my body's already telling me I need to work a 4 day work week, even for a bit less pay. And true, we can't eat ourselves into morbid obesity and then expect to nurse a heart condition and a handicapped license plate for thirty years!
So there's more to be done on this issue... but it's important we start NOW, not try to figure out the whole thing right now.
I'm for the federal health insurance option along with co-pays and the other things we know will start controlling costs. Oldsters know well that Medicare works... and what doesn't work is when the little 'supplemental' private policies dictate their care. The bad guy is big insurance bribing big politicians, just as you said.
Time for normal people, including talk show shillers, to quit feeling sorry for those who earn a million dollars a year!
We voted for Obama to do this, now let's pressure our Congressmen to see it through. We must not allow the right to torpedo this...and as you suggest, big Pharma needs to get its wings clipped and Congress needs to quit taking bribes to leave things as they are. Health care and all the rest of our excesses have priced us out of world markets...and we're heading towards becoming a third world power where the only people who have money are in health care!
Rman's Blog: http://radiomankc.blogspot.com/
"Free-To-Choose"
The Political Economy of Milton Friedman, Ronald Reagan, and the Republicans since the 1980's has been .... "Free to Choose"!
Last year when my health insurance cost went up $100 per month, I telephoned to the find out why. I was told it went up because of the group I was in. I didn't choose the group I was in, the insurance company did.
I choose to be in a group that includes the whole country. A larger group would lower the cost.