Over at Reason.com Ron Bailey has a round-up of sorts of the studies of the various devices including community rating (under which everybody in the same geographic area pays roughly the same healthcare insurance premiums) and guaranteed issue (under which healthcare insurance must be issued regardless of previously existing health conditions), features of the Baucus fill making its way through the Senate, that are being proposed as mechanisms for curbing increasing healthcare costs. Hat tip: Glenn Reynolds
I doubt that it will be surprising to many of my readers that not only do these approaches not control costs, they actually increase them. Nor do I suspect that it will be surprising that various market-oriented approaches towards healthcare reform, aimed at promoting competition among healthcare providers and healthcare insurance providers or making healthcare consumers more cost conscious, do result in cost control. Ron’s article is worth reading.
BTW, why do so many people seem to believe that once you’ve identified a possible motive behind a study, you can dismiss it? That’s a version of the ad hominem fallacy. You need to address the study itself, not just point out possible motives those conducting the study might have for slanting their results.
If there are studies of U. S. conditions that reach different conclusions, I’d be eager to take a look at them. It would be very helpful if there were some real live domestic examples of successes in controlling healthcare costs as a result of things like community rating or guaranteed issue. Unfortunately, to the best of my knowledge all of the experiments conducted in the various states along these lines have been failures.
As I’ve written here ad nauseam, I’m in favor of healthcare reform and I’m in favor of it now. However, the reform we need is reform that reduces costs. Without that our healthcare system collapses soon and may well take our entire system of fiscal policy with it. And reforms that are based on experience and evidence are those that are most likely to work.
This isn’t the European experience. The European countries that have the largest degree of market-based influence also have the highest rates of cost growth, and vice-versa.
For that to be relevant, you need to draw the line between the European experience and ours. I see very little connection.
There are any number of differences between the United States and any country in Europe. We don’t define ourselves ethnically, they do albeit less than was once the case. They don’t share a long land border with a country with a per capita GDP a quarter theirs that doesn’t have universal healthcare. We do.
Other differences include that we are much larger and more diverse than any European country, our government is significantly less centralized, our government is much less representative, and we have a winner take all system.
How does any of that effect the cost of health care?
My study of health care over the past few months has driven me, inexorably, to the conclusion that markets are really lousy when it comes to providing health care in many respects. While I agree that the United States can’t just adopt European policies without adapting them to our needs, the fact remains that the United States has the most market-oriented health care system in the world, and it also has the most expensive health care system in the world with the fastest growing costs.
Much as it pains this former Libertarian activist to say it, empirically speaking, markets aren’t the answer to health care.
First, that’s burden shifting. It’s up to advocates of the idea that approaches that work in Europe will work here, too, to explain why that’s the case rather than those who don’t believe it’s the case to prove it.
Second, they’re intimately related. The social, economic, and political systems in Europe are sufficiently different to mean that we should doubt that their solutions will work well here. We don’t have the kind of national solidarity that the Germans or French do. That influences willingness to pay. The differences in our systems of government mean that centralized systems are less trusted here. Check our educational system.
We don’t have a class system of the sort that persists in much of Europe. That means we’re less inclined to accept the opinions of experts than our European cousins are. That also means that we’re less likely to accept the limits on spending that are required to control costs if the mechanisms for doing it are via a government plan.
Finally, if any European system has actually reduced costs I don’t know of it. The best they have done is reduce the rate of growth. We’re already too late for that to do what we need to do.
*The European countries that have the largest degree of market-based influence also have the highest rates of cost growth, and vice-versa.*
Data source, please? Because I’m looking at the OECD figures for annualized health care cost growth for the period 2000-2007 right now, and that’s not what THEY say. We do indeed have the most expensive health care per capita, but we do NOT have the fastest growing costs. US annualized cost growth for the period was 3.7% for the US. Which ties with Denmark and is behind the UK (4.7), Belgium (3.8), Greece (6.8), Ireland (6.4), Netherlands (4.5), Sweden (3.8), etc.
All of which, I note, have publicly-funded universal coverage.
*Finally, if any European system has actually reduced costs I don’t know of it.*
Me neither, and I’ve been professionally involved in health care for better than a quarter of a century.
*The best they have done is reduce the rate of growth.*
Which has generally been done by restricting service access and the deployment of new (expensive) technology and pharmaceuticals. IOW, overt rationing of one sort or another.
This is an emotional issue for many Americans. This so-called “public option†in Government run health care presents serious challenges for us. As Consumers we should be able to compare the cost and quality of health care services. How much is a specific surgery at one hospital, as compared with another? http://www.friendsoftheuschamber.com/media/
I’m not sure I agree with this. The Dutch system, for all intents and purposes, looks to be sustainable, and is one of the more market oriented systems. Similarly for the Swiss as well.
http://www.cato.org/pubs/pas/pa-613.pdf
And we have to keep in mind that things like community rating, government defined benefits packages, and a universal mandate is a public choice nightmare. To say that markets don’t work becuase you look at a system with those characteristics and some market based policies is really not a valid comparison.
“Finally, if any European system has actually reduced costs I don’t know of it. The best they have done is reduce the rate of growth. We’re already too late for that to do what we need to do.”
Japan has actually reduced costs a couple of years. I would be very leery of using 2000-2007 as a basis for statistics. Much of that was a boom period for stocks. You ought to look at costs over longer periods when possible.
“First, that’s burden shifting. It’s up to advocates of the idea that approaches that work in Europe will work here, too, to explain why that’s the case rather than those who don’t believe it’s the case to prove it.”
Agreed. Of course they at least have working models. There is no working model that uses the free market model. That should impose an even higher burden I believe.
Tanner’s article is good, but I think Reid’s book is more helpful even if it does not cover as many countries. One of the things that becomes clear is that other countries are much more cost conscious than we are. It is also interesting that places like France post the price for every procedure in the doctor’s office. Taiwan and Switzerland had major overhauls in their systems relatively recently and opted to stay away from an American like system. You might find it interesting that having the system set fees, at fairly low levels by our standards, has made physician offices very competitive. They stay open 12 hours a day to attract the volume of patients they ned to be viable. The IT in France, Taiwan and Germany is way ahead of ours also. Admin costs are much higher than free marketers want to think also in our system compared with the rest of the world.
Steve
Steve
What do we make of the American Cancer Society decrying wasteful cancer screenings today? And, from what little I saw of the TV while cooking, the AMA going on the counter-attack? Does this support the thesis that there is waste, fraud, abuse and/or defensive medicine? Or does this tell us that actually reducing relatively unnecessary treatment will be politically impossible?
*I would be very leery of using 2000-2007 as a basis for statistics. Much of that was a boom period for stocks. You ought to look at costs over longer periods when possible.*
Not going cherry-picking on anyone’s behalf, thank you. It’s the most recent data and thus the most applicable data, as we’re looking at current conditions and not two decades past. Any market “booms” tend to extend transnationally in developed nations and are mostly self-leveling for cross-national comparison purposes. Extending the period would include periods that one could make just as many objections to, if not in fact more. EX: In the early ’90s the implementation of managed care resulted in much lower health care cost growth rates in the US than in other periods, a condition that did not extend to other nations. EX: Many of the OECD nations have substantively changed their HC systems in the last two decades, and even somewhat in the last decade. We’re already comparing apples and oranges. There’s little point in comparing apples and potatoes.
BTW, the OECD average growth rate in health care for the period cited was 4.3% We’re running under average for the OECD. Our problem is the higher baseline — we have historically been willing to spend more than other nations, and for very good reasons. We’re richer than most other nations and we’ve been the center of technological medical development for decades. We’ve spent those decades plowing money into health care.
Health care demand past the very basic is inelastic by nature — it comes into the spending pattern after basic survival needs such as food and shelter have been satisfied, so every percentage increase in disposable income produces a larger percentage increase in health care spending. That’s why HC spending growth in excess of GDP growth is generically apparent in every developed nation with increasing GDP and national wealth levels. (Developing nations tend to show higher than average growth rates versus developed nations as their per capita national wealth increases at faster rates.)
I should extend: We do indeed have an inefficient system for many and varied reasons, and we can certainly realize some considerable efficiencies with various reforms and restructurings.
What I am saying is that once those efficiencies are realized and a new baseline equilibrium reached, excess cost growth will resume, albeit from a new baseline. The current “reform” is not aimed very much at realizing efficiencies. It’s aimed at putting the system under government control. Your own mileage as to the motivations therein.
The ONLY way to “bend the curve” more than slightly is through overt rationing.
Some concerns with Bailey:
Well, yeah. That’s not really surprising – high-deductible policies tend to be the “cheap” plans offered to people with low health risks, so community rating is pretty much guaranteed to spike the price of those if you’ve now got a bunch of sick and sick-prone people buying them.
The problem with Suderman’s point is that he doesn’t really perform a comparison. How high and/or fast were Massachusetts health care premiums growing before the reform? Were they already high and growing fast, for other reasons? Are there other states with similarly high and fast-growing premiums but without the program to do a comparison?
There are two questions with that. First, are these companies doing it successfully? It’s not enough just to say, “They’re trying to reduce fraud”.
Second, is it worth it? Or rather, are the savings produced by these efforts significantly greater than the enforcement costs incurred by having the bureaucracy to combat these problems? If they aren’t significantly higher, than what’s the point?
On a slight side-note, I find this argument slightly amusing. He’s basically saying that it’s okay for insurance companies to muscle down on providers and have this big health insurance bureaucracy to go after every little penny spent by the doctors, but he’d probably scream bloody murder if the government was that intrusive.
The only problem with that is that the companies have a strong financial incentive to do “patchy” stuff if they can get away with it – insurance plans that cover things without really covering them and allow them to get out of payment when it comes up. Since their business model is based around bringing as many paying-in customers as possible and excluding payments outwards, that’s a little different than the comparison Bailey makes.
I’m not particularly enamored with this idea, particularly without a set of national regulations to replace the state level regulations that will then become effectively meaningless. For one thing, think of what happened with the financial sector when this was put in place – you saw credit card companies, etc all moving to the states where they could get away with minimal liability and minimal regulations. I expect it would just do wonders combined with the “patchy” plans I’m predicting.
No, but they’re extremely close to several continental-sized areas with them, and that’s not counting the discrepancies in income between Western and Eastern Europe. You’d really need to compare immigration rates before making this point, Dave.
Some of those points are facile at best. Especially the last one (Great Britain has a winner-takes-all system), and even the first point is disputable; several of the major Western European states have large minority populations, which while smaller in absolute terms than in the US are large in comparison to their smaller populations (France, for instance, has an estimated 5 million muslims, mostly of Algerian descent, along with unknown numbers of African immigrants, mostly from their former colonies).
You’re attacking a strawman, Dave, since he said that European systems can’t simply be lifted wholesale. But as for his greater point, well, we have multiple examples of government systems ranging from heavy socialization on the demand and supply side (Great Britain) to single-payer (France and Canada), to the Dutch and Netherlands system. In contrast, a real “free market” system doesn’t really exist outside of the Third World, and mostly hasn’t in decades. I’d say the burden of proof is on you to show that it can deliver the goods, since it’s an unknown and technically a deviation from the overall status quo.
Do you have any proof of the above in the form of social mobility statistics comparisons? This strikes me more as a typical unfounded American “truism” rather than an established fact. As for whether or not this leads to accepting the opinions of experts – well, it’s not as if Western Europe is lacking in working-class movements (and they certainly have much more working-class pride than in the US). Wouldn’t the above actually lead to less of that type of elitism?
No, that probably has more to do with a sense of “togetherness” among the population combined with trust in that government’s effectiveness.
To be honest, this reminds of McArdle’s rather ignorant point about how non-US Developed Nation citizens just sit there and take it when budget cuts are announced. Aside from the fact that it’s bullshit, it ignores the whole swirl of politics in these countries around health care – just follow some of Canada’s provincial-level political fights over health care.
As for the greater cultural point, well, it’s partially true. France certainly has a much longer trend of centralization of power that makes their system work. Same goes for Great Britain. That’s less salient, though, in the case of Canada, which is as close in terms of culture to the US (in the english-speaking parts) as any state is. Even the governmental mechanism for administering the plans is similar – provincial level provision backed up by federal funding in exchange for accepting federal rules, similar to how the US funds a number of joint-federal-state programs.
Deterrence? Is the cost of prosecuting murders worth the cost? If not, why bother? You should factor in not only costs saved, but also potential costs not incurred. The latter is somewhat dicey to calculate. But if an insurance company decides to stop going after fraud, I’m thinking they will be the target of more fraud.
Also, for profit entities are cost minimizers at the profit maximizing level of output. This is true even for monopolists. Granted in practice that probably isn’t exactly the case and some gold plating might be going on by insurance companies, but I’m thinking there is at least something of an incentive to keep it from getting to be too big.
Suppose I come to buy something from you and haggle long and hard. Then I come back to buy something else and this time shove a glock up your nose and tell you the price I’m going to pay. Which is going to elicit more outrage from you?
This is true for all types of insurance….so why is health care different? Why don’t we see this with say home owners insurance, fire insurance or automobile insurance? Or do we?
Yes, and France has one of the highest health care costs when measured as a percentage of GDP. France also has a sustainability problem too. And we see that countries that have small and homogenous populations tend to either have those problems to a lesser degree or not at all (the Netherlands, Singapore).
But it isn’t working. Both of those countries are heading for the same health care debacle we are. The only real success stories are for countries that are wildly unlike the U.S., the Netherlands and Singapore. Can we transplant those models, and would they work? I’m skeptical on both counts. Its really funny people say, “Oh lets do it like the French.” Sure that would be an improvement, like slowing down as you speed towards a cliff. But you are still heading towards the edge of the cliff. It is possibly a good first step, but it is far, far from sufficient. Plus, we should recognize that it might actually cost more if we implement another countries approach.
I’ve harped on this before, but there are behavioral differences. We drive more in this country. We are told we are fatter. How about murder rates, deaths by shootings, and so forth. And yes, the diversity aspect might be a factor. Black people in this country have a lower level of life expectancy. Is it related to behavior, economic status, what? What about hispanics and asians?
The difference is that it’s more of a direct spending vs return comparison. It’s the same reason why companies are willing to occasionally write off some stolen merchandise rather than spending gobs of money going after every little theft.
I was making a point about the intrusiveness of it that you missed, but I concede that point. On a side-note, the public actually did resist some of that level of scrutiny and tightening when the HMOs tried it in the 1990s by restricting people to chosen networks of doctors and the like.
Well, there are a whole host of differences in what automobile insurance packages cover, but I think it’s mainly a matter of simplicity and cost.
My point was in response to Dave’s claim that ethnic diversity was a factor in separating the US from France. I pointed out that several of these countries do have large ethnic populations.
That’s if you see it as a cliff. As long as you ultimately reach solvency at some point, I don’t really care how high the percentage of GDP health care spending rises towards.
Those affect life expectancy, but I tend to look more at things like access to coverage, treatment outcomes, etc.
for them but they’re nothing by our standards. Our immigration rate is four times France or Germany’s.