What’s In a Name?

Steven Taylor has published a string of posts on healthcare and healthcare reform over at OTB (here, here, and here) that, frankly, has me rather baffled. In comments Dr. Taylor writes:

Part of the question is whether good public health, to use Dave’s phrase, is a public good or simply an individualized commodity like an TV.

to which I responded that healthcare doesn’t fit the definition of a public good.

“Public good” is a term of art in economics. A “good” is something that can be bought or sold. A “public good” is a good that is non-rivalrous (meaning you and I can consume it at the same time; one of us consuming it doesn’t preclude the other from consuming it, too) and non-excludable (meaning that I have no way of preventing your consuming it). An example of a public good would be nuclear deterrence.

To my mind my response was completely non-controversial, no more controversial than correcting somebody when he or she refers to a Phillips screwdriver as a “thingummy” or, perhaps more accurately, calls a star screwdriver a Phillips screwdriver. I would think it’s just ignorance and, after the distinction has been made clear, the speaker would know. They’re different things; they’re intended for different things. The purpose of language is sharing ideas. In order to do that you’ve got to agree on meanings. Without such agreement there is no communcation.

However, the subject has spawned quite a bit of discussion.

So, let’s consider healthcare, private goods, and rights.

Although there are segments of our healthcare system that are public goods, e.g. sanitary sewers—clearly non-rivalrous, arguably non-excludable, and certainly only delivering its beneficial public health effects when their use is compulsory—in general healthcare is a private good. When you consume a dose of erythromycin I cannot consume that dose; if there is only one dose available some allocation mechanism must determine which of us gets it. That is by definition a private good.

However, the healthcare private good has beneficial side effects (the economics term of art for these is “positive externalities”) that cause everybody to benefit. When the poor are sick their diseases may spread to the rich. Ultimately, that is why public health departments came to be.

Can a private good be a right? I suppose it depends on what you mean by a “right”. If you assert healthcare as a right, do you mean a right like freedom of the press? That has never been construed as a mandate for the federal government to buy printing presses for everybody. Or do you mean something different?

If by a right you mean something that must be provided and paid for by somebody regardless of your ability to pay, we already have that, at least in the case of emergency care. Hospital emergency rooms are required by law to accept people in urgent need of care regardless of their ability to pay.

I don’t believe, however, that’s what people mean when they say “a right to healthcare”. What is meant? That’s not a rhetorical question; I genuinely want to know. If healthcare is a right (according to your definition), on what basis could you deny healthcare to someone? Note that if you can never deny healthcare to anyone under any circumstances at the limit case there either can be no such thing as property rights or there can be no rights of self-determination for healthcare providers.

Because healthcare, generally, is rivalrous and excludable some sort of allocation mechanism is necessary. The mechanism can be the market, it can be healthcare providers, or it can be some third party, e.g. the government.

I think that allocating healthcare resources via market reforms is likely to have adverse public health consequnces. If the allocation is to be done by physicians we must adopt some sort of capitation system coupled with a single payer strategy and total healthcare spending must be capped. If the allocation is to be done by a third party, we’ve also got to cap healthcare spending.

However, when healthcare spending is rising at 5% a year, the non-healthcare economy is rising at 2-3% per year, and the majority of healthcare is paid for via tax dollars it’s rather obvious that the situation is unsustainable.

28 comments… add one
  • john personna Link

    I add a bit to the infectious disease case in the OTB thread.

    Remember also that many of the infectious diseases that are now invisible to us in the advanced societies were defeated by public medicine, for the public good.

    (In both the strict and non-strict sense.)

  • PD Shaw Link

    I think I gave my stab at an argument for making at least some portions of healthcare a “right” a few years ago on this blog.

    1. By restricting the practice of medicine by license and education, the state has restricted access to medical care. Furthermore, the nature of illness and injury often leave people at the mercy of the nearest physician when the need for attention is immediate. Therefore the law should provide two rights or obligations on the physician: (1) the obligation to treat all comers, and (2) the obligation to charge a reasonable rate (i.e., not to take advantage of superior bargaining position).

    2. Certain infectious diseases are best treated at a community level due to variations in vulnerability, limitations in vaccine effectiveness and the importance of herd immunity. Vaccines also can cause harms to small portions of the community. Therefore the state should provide a right to free or subsidized vaccines against contagious diseases and provide economic redress for those injured by those vaccines.

    Since these propositions are pretty close to the status quo in the U.S., I’m not sure they are that useful either.

  • Sam Link

    I think there’s a definite gray area between public and private good in emergency care. There’s no question we treat laser eye surgery as a private good, and it wouldn’t be a stretch to call all elective surgeries that. No one can shop for the best emergency care once they’ve been in an accident, though, nor could we be adequately prepared for a large scale emergency without public money. This is why my preferred health care system socializes emergency care insurance, but leaves things like well checks, hip replacements, and rotator cuff surgery up to private insurance.

  • sam Link

    “Can a private good be a right? I suppose it depends on what you mean by a “right”. If you assert healthcare as a right, do you mean a right like freedom of the press? ”

    The example I used here a while back was firearms. A firearm is a private good — its possession is rivalrous and excludable ( exactly like a dose of erythromycin). And the Constitution says that the right to own a firearm shall not be infringed,etc. More positively, the Constitution guarantees us the right to own a firearm.

    I don’t offer this as any kind of definitive argument that healthcare is a private good access to which is (ought to be, should be) guaranteed by legislation, only that here is a case of a private good access to which is so guaranteed (not strictly by legislation but legally). I fully understand that “has access to” need not mean “the government shall provide access to via subsidy”. Only the narrow point of a private good as a right in the sense in which you asked the question.

  • steve Link

    As a moral question, I think of health care as an obligation rather than a right. As an economic question, I think providing good, basic care a sound investment.

    As to the public good question, Dave’s definition is technically correct, but Taylor’s has become/is becoming a common way of looking at goods that overlap definitions. Think about major capital expenditures for things like MRI scanners, trauma centers and NICUs.

    Steve

  • steve Link

    BTW, ver good article about rationing recently in NEJM. Encapsulates a lot of our problems.

    http://healthpolicyandreform.nejm.org/?p=14128&query=TOC

    Steve

  • Dave,

    I understand the objection to the use of the term “public good” in this context, and will confess my initial application was done in a too casual fashion.

    I would be curious as to how you would classify education in this conservation.

  • john personna Link

    To me the “discounting infectious disease, there is no public good” relies a bit too much on the discount.

  • I would be curious as to how you would classify education in this conservation.

    As presently thought of education is a private good: rivalrous and excludable. I also think that it has substantial positive externalities, particularly in the case of elementary education (readin’, writin’, ‘rithmetic), and is a reasonable benefit that we should make available to everyone. Basic or elementary education is also limited in scope, something not true of healthcare. I sometimes wonder if those arguing that healthcare should be a right would be satisfied if the healthcare supported by the government were limited to basic healthcare. Somehow I suspect not.

    Something else about education that I think is worth considering: education beyond elementary education at least notionally could be delivered in a manner in which it is neither rivalrous nor excludable. I think that would make a very interesting subject for discussion.

  • Dave,

    Also: if we exclude the whole “public good” bit-which emerged in the comment section and not in the posts, are you still baffled by said posts?

  • No. Mostly I was baffled by the insistence that healthcare is a public good. To my eye it was like insisting that red is green or pigs have six legs.

    As to the Ryan plan for Medicare reform (which kicked the whole thing off) I’m not a bit surprised that what little support it has is waning. I think the direction that the criticism has taken is unfortunate: the ACA (if actually followed) destroys Medicare as we know it as much as the Ryan plan does. And my own gripe about it goes largely unnoticed, i.e. that it solves the federal government’s healthcare problem at the expense of the states.

  • Dave,

    Fair enough.

    More thoughts on this later, I expect. I have been giving this some thought, but don’t have the energy at the moment to translate said thoughts into the written word at the moment.

  • john personna Link

    FWIW, you can google “TB public health” and learn about progress around the world. Apparently “public private partnerships” are the rage.

    You know, as a way to deliver the public good.

  • john personna Link
  • Sam,

    I think there’s a definite gray area between public and private good in emergency care.

    No, not really. If a doctor is treating you for a car accident, he can’t treat me for falling off a ladder. We’d need two doctors. We obviously cannot both consume the same doses of pain killers or anti-biotics. We can’t both lie in the same bed (well we could, but it would likely be more harmful than beneficial). We can’t both be hooked up to the same monitoring equipment (I suppose some sophisticated machines can handle X patients, but you’d still need X hookups and in this case it might fall into the sub-category of public goods–the club good subject to congestion).

    steve,

    As to the public good question, Dave’s definition is technically correct, but Taylor’s has become/is becoming a common way of looking at goods that overlap definitions. Think about major capital expenditures for things like MRI scanners, trauma centers and NICUs.

    There is no overlap in definitions just ill thought out positions and ignorance. An MRI is no more a public good than is your car or your home. An MRI might be a club good and as such a mechanism for allocating who gets to use it is needed. Most hospitals likely do it on a need basis as determined by a doctor vs. something like a price system. Problem is the doctor often straddles both sides of the consumption decision (they advise the one actually consuming the good–the patient–and they often control access–i.e. they play a role in supply–and they are receiving payment). Clearly there is a potential problem with incentives here.

    I would be curious as to how you would classify education in this conservation.

    I guess it depends. Some education takes place in large lecture halls. With the right technology you could have a very large audience. If education is basically imparting information. In that case it is probably a club good. There could be some congestion issues but if Dave and I are sitting in a lecture together we are, in theory, both consuming the “good”. So it is non-rivalrous. There is the possibility of excludability so it is quite possible for a fee to be charged for this. And there are likely positive externalities.

    In this case the market will likely fail to provide the optimal amount. The only time when that is not the case is when the fees charged suffice to cover the costs and take into account the positive externality. An unlikely event. So this is one case where some sort of subsidy would be a reasonable way to ensure an amount closer to the optimal amount is produced.

    And that might not be the only way to provide the good. Elinor Ostrom wrote quite a bit about how differing communities have come up with different ways to deal with these kinds of issues.

  • john personna Link

    The public good is protecting the general population from infectious disease.

    What a game, pretending an alternate reality to ignore that.

  • john personna Link

    (What I see you guys doing is breaking out the non public good part of medicine for discussion, then designing an overarching healthcare policy based on that subset, not the whole.

    It would for instance take research, regulation, and treatment to protect us from future infection by those antibiotic resident pig bugs. That protection is non-rival and non-excludable)

  • john personna Link

    For the really slow, to reduce my odds of getting a communicable disease you need to reduce the OTHER cases in my city.

    The treatment of those others is rival and excludable, but the public good isn’t centered in them. It is centered in the externality, in the (near)future reduction in infection rate.

  • The public good is protecting the general population from infectious disease.

    While that is good for the public it vaccines are not a public good according to the definition. Vaccinated people convey a positive externality, but that is not the same thing.

    What a game, pretending an alternate reality to ignore that.

    WTFAYTA? I’m pretty sure in the recent comment threads at OTB I’ve covered this. Oh looky. And again! And look what Dave wrote in the body of his post,

    However, the healthcare private good has beneficial side effects (the economics term of art for these is “positive externalities”) that cause everybody to benefit. When the poor are sick their diseases may spread to the rich. Ultimately, that is why public health departments came to be.

    The only one having trouble with reality here is you.

    (What I see you guys doing is breaking out the non public good part of medicine for discussion, then designing an overarching healthcare policy based on that subset, not the whole.

    It would for instance take research, regulation, and treatment to protect us from future infection by those antibiotic resident pig bugs. That protection is non-rival and non-excludable)

    Is a sewer system health care? Are sewer workers health care workers? I don’t think many would agree. Does a sewer system come with positive externalities and is a good likely to be under provided via a market mechanism? Probably, as such at the very least it should be subsidized. If its use is non-rivalrous/non-exhaustible then it is public good. If people can be excluded from using it and it has the potential for congestion then a users fee may be a good idea. And we see all this. So WTF is the problem?

    Most health care items on the other hand tend to be private goods. Vaccines? Private good. Hospital bed? Private good. Scalpels, sponges, bandages, syringes, stethoscopes, x-ray machines, and other prescription drugs? All private goods. If two or more people cannot consume them at the same time then they are private goods. The list of health care items that are private goods is likely to be very, very long. Those items that would fall under the category of private goods very, very short (I challenge you to name three more aside from sewers).

    So yeah, we are focusing on the private good aspect. The reason? That is where the troubles are. We have set up policies that are resulting in too much health care…or more accurately too much demand for health care and too many resources flowing into that sector. This follows from economics 1 level course. This isn’t some high flying mathematical theory its just basic supply and demand type analysis. If you allocate more and more resources to a given area of the economy the money paid to do so will have to go up as resources are pulled from other areas of the economy. This in turn will result in higher prices for the consumers. The reason for this is demand is not constrained by the consumer’s budget constraint.

    Note I’m not saying that we should have demand constrained by the consumer’s budget constraint, but that is the underlying problem. Our rationing/allocation mechanisms are broken. That is the fundamental problem.

    For the really slow, to reduce my odds of getting a communicable disease you need to reduce the OTHER cases in my city.

    Durrrr hurrrr durrrr…thanks for spelling out the obvious. By the way since you seem to be even slower, that is called an external effect. If you get a vaccine and are not spreading the disease you are providing a benefit to others for which you are not being compensated. It fits the definition perfectly. It does not, however, make vaccines a public good. The external effect is kind of like a public good, but the vaccine is not since it is exhaustible in use. Once you get shot it cannot be given to someone else, or to put it differently, one shot of a vaccine cannot vaccinate 300,000,000 people. That is the bar you need to clear for the vaccine to be a public good.

    As such we may very well want to subsidize vaccinations. So while the reduced chances of getting a disease are like a public good the only way to get that effect is via the application of a private good. Thus, it maybe that a reasonable policy response is a subsidy. For other health care goods/services that have a similar positive external effect subsidies may be the best course of action. There it has been said at least four times now. Would a fifth make you happy? Fine, it maybe that a reasonable policy response is a subsidy. For other health care goods/services that have a similar positive external effect subsidies may be the best course of action. Is that enough? If not, please copy and paste those two sentences as many times as you require.

  • And the same goes for vaccine research, just to cover all the bases. Such research probably should be subsidized. The reason is that there are significant sunk costs which would tend to deter entry into such research. Another reason is that our current intellectual property law systems sucks balls. If a cure is found for HIV/AIDS then provision of the vaccine, if left to drug companies, will likely be under-provided since they will be wanting to maximize profits not lives saved. If the research is publicly funded then I’d argue the drug formula should be made public. The marginal cost is virtually zero. Manufacturing the actual drug would also likely be rather low, and without any intellectual property law protection there would not be any monopoly pricing. Low marginal cost would mean a very large quantity is produced, or at least larger than if there is monopoly pricing.

  • john personna Link

    So? You wanted to name, compartmentalize, and then forget the “public health” aspects of “health care.” You get cranky when I point that out.

    You’re like “we noted infectious disease, why can’t we move on and think only about rival aspects of health care?”

    The really amazing thing is to return to those roots, and remember that “public health” is one of the most ancient responsibilities of government. Yes, it included digging sewers, but as soon as treatments became effective, they became part of the response.

    (And as we’ve covered, vaccines do not, indeed cannot, cover all infectious disease.)

  • john personna Link

    Shorter: “Yes yes, infectious disease control is a public good, but we want to talk about how health care is not a public good!”

  • So? You wanted to name, compartmentalize, and then forget the “public health” aspects of “health care.”

    Yes, I want to properly categorize different aspects of health care/public health so we can come up with reasonable policies which includes subsidies and even outright provision of the good by the government when appropriate (i.e. subsidies for goods that have positive externalities and outright provision for public goods*).

    Your depiction on the other hand is a flat out lie.

    You’re like “we noted infectious disease, why can’t we move on and think only about rival aspects of health care?”

    Well, let me see. We noted it at least 3 times and we’ve argued that it vaccines are a private good with positive externalities where subsidies would fall into the realm of reasonable policy measures. Are you pissed off because we covered the topic and did so in a rational way and thus leaving you with nothing to whine about?

    And my arguments all along have been stick with the f*cking definitions. Most of health care are private goods. Vaccines are private goods. I’d argue that many aspects of dealing with infectious diseases are private goods. Or to put it differently, why don’t you tell us what part of dealing with an infectious disease are public goods?

    (Hint: you have not so far, [positive] externalities are not public goods since they are benefits from private goods that do not accrue to the person who “owns” the private good, hence resulting in an under-provisions).

    The really amazing thing is to return to those roots, and remember that “public health” is one of the most ancient responsibilities of government. Yes, it included digging sewers, but as soon as treatments became effective, they became part of the response.

    Who is arguing against this? Who? Point to a quote, a post, something, or…anything.

    (And as we’ve covered, vaccines do not, indeed cannot, cover all infectious disease.)

    So…what? What does this imply? That MRIs are public goods (they are not)? That a scalpel is a public good (they are not)? That because you wish it all of health care is a public good? When there is a vaccine subsidize the production, distribution, and use of the vaccine. For those infectious diseases without a vaccine look into funding research, education and other public health policies that can limit its spread/impact*. WTF else do you want?

    *Along with the secondary condition where the subsidies and provision of the public good are cost effective. Paying $1 billion to get $1 million in benefit is probably not a reasonable policy.

  • john personna Link

    Or to put it differently, why don’t you tell us what part of dealing with an infectious disease are public goods?

    What is this, cognitive dissonance?

    You actually think that preventing infectious disease is a public good (as you say you have been repeating) but “handing them” is not?

  • john personna Link

    FWIW, I think that if you are going to have a public health effort, it will necessitate treating patients. You can’t simply fantasize a vaccine for everything, universally applied.

    This is why public monies now buy treatments for poor TB patients. Yes, it is partly to help those patients, but it is also to prevent further illness in the wider population.

    And once you’ve got this recognition in place, that someone has to be diagnosing, and treating, the indigent, for public health reasons, it’s quite a bit harder to (again) fantasize about a health care system divorced from public health.

    It is not overstating to say that every patient contact is potentially a public health issue. Though, with 200 years of public health in the West, we have reduced incidence of the dread diseases we would most fear.

  • You actually think that preventing infectious disease is a public good (as you say you have been repeating) but “handing them” is not?

    What, you make no sense. Is preventing an infectious disease a good thing? Yes. Unequivocally. Is it a public good as per the definition? No. Are there positive externalities associated with prevention? Yes, so subsidizing them, and the subsidy would likely depend on the severity of the disease, so the subsidy could be quite large.

    Nobody is disputing this. Nobody. What is your beef in simple terms. Nobody is saying hand out infectious diseases. Nobody is saying screw those who have the disease. Nobody is saying, don’t subsidize (possibly quite heavily) the production of vaccine. Even absent a vaccine I don’t think anyone is saying remedial measures should be subsidized. I just don’t see your beef. You seem to have made up a position for everyone else.

    FWIW, I think that if you are going to have a public health effort, it will necessitate treating patients. You can’t simply fantasize a vaccine for everything, universally applied.

    WTFAYTA? None of this transforms dealing with infectious diseases into a public good. Some aspects of it might be such as education. A public education campaign might fall into the area of a public good. However, a quarantine program is likely going to employ private goods.

    I’m arguing that if you want rational policy you have to properly categorize how you respond to these things. Which are public goods, which are private goods, which are private goods with positive externalities. Different policies for different types of goods. Context also matters I suppose and some might need rapid and wide spread implementation, those might be best supplied by government for that reason. But we should still keep in mind if such a response is a public private good so that policy if crafted in a rational way.

    That is all I’m saying. So stop with your bizarre fantasy of what you think I’m saying….oh forget it. Go to your doctor and tell him your medication isn’t working anymore and you need a stronger dose.

    Or let me put is this way, we largely agree shithead.

    Jesus.

  • john personna Link

    “Is it a public good as per the definition? No.”

    Really, I know my state has fought a TB resurgence.

    “Rival goods are goods whose consumption by one consumer prevents simultaneous consumption by other consumers”

    Does my consumption (of reduced TB infection rates) prevent simultaneous consumption by other? No.

    “In economics, a good or service is said to be excludable when it is possible to prevent people who have not paid for it from having access to it, and non-excludable when it is not possible to do so.”

    Do visitors to California benefit from reduced TB exposure? Yes. Can they be excluded? No.

    Idiot.

  • john personna Link

    I see that your game is to just not call the reduced exposures a “good.” But it is. It can be bought. When states spray for mosquitoes they are buying lower exposure rates.

    “In economics and accounting, a good is a product that can be used to satisfy some desire or need. More narrowly but commonly, a good is a tangible physical product that can be contrasted with a service which is intangible”

    If you want to split tangible physical products versus services, most of healthcare goes out that window.

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