Cui Bono on Healthcare Reform

In his column today Nicholas Kristof asks a question, “Do we really want the status quo in healthcare?”:

Health care is on my mind partly because my eldest son, a champion high school wrestler, had his latest postmatch encounter with the medical system. You know you have a problem when the E.R. nurse immediately recognizes your son and discusses whether hospitals should give kids the equivalent of frequent flier miles.

Thirteen stitches and a serious infection crisis later, my son is on the mend. He had the help of an excellent, committed pair of doctors, his pediatrician and an oral surgeon.

Clearly, Mr. Kristof shares the view of most Americans: he’s pretty happy with the status quo. However, he doesn’t much care for what’s likely to be the new normal if present trends continue and in that I’m in full agreement with him.

I don’t believe that the reason that most people have misgivings about the plans that have made their way through the Congress is that they’ve been sold a bill of goods by oppositionist Republicans, acting cynically for political reasons, however oppositionist, cynical, or politically-motivated Congressional Republicans might be. I think that most people look at the bills (as best as they can viewed through the dark glasses of the media), consider who is benefiting by them, and recognize that by and large it ain’t them. They’re asking the ancient question Cui bono?

Beneficiaries of the plans are progressive politicians, the uninsured, healthcare providers, plaintiff’s attorneys, insurance companies, and pharmaceutical companies. The reason for this is quite simple. The reform plans are no revolution. Not really much in the way of change at all. They’re mostly plans to spend more money on healthcare covering more people and pledges to reduce costs at some point in the future.

If the pledges are never honored which, given past experience, would be the greatest likelihood, we will have spent more on healthcare without expanding the supply of healthcare. When there’s more money on the table for something, no functioning market to ensure competition among suppliers on a price basis or the discipline on consumers that prices bring, and the supply remains fixed, prices will go up. The cost basis of healthcare will rise which means higher costs in the future, too (simple cost of living increases ensure that).

Right now many people are concerned about the future. Proposing changes that don’t benefit them, do benefit others, and definitely increase healthcare spending does not assuage their concerns. Resisting such changes is to be expected.

As I have said for some time, it is simply not possible that patients will be able to get as much healthcare as they want and healthcare providers will be able to charge as much as they want. It is also not possible for healthcare providers to treat 15% more people. We simply don’t have the excess capacity.

That brings up a point I’ve intended to devote a serious, nicely documented, thoughtful post to but haven’t managed to dredge up the time to do it so I’ll just blurt it out. In developed countries the history of healthcare costs over the last ten years has been that the pay of GP’s in other developed countries has tended to converge to the level of that in the United States, for many years the highest bidder. That’s exactly what you’d expect in a competitive, mobile labor market and among physicians the market for general practitioners is by far the most competitive and mobile. That has a couple of implications.

First, it’s going to be increasingly difficult for us to solve our shortage of GP’s the way we have for the last couple of decades, by importing them. We’ve got competition now. And, second, our healthcare system is driving up the of healthcare in all developed countries, not just our own.

Yes, we need reform. But we need more dramatic reform than just bronzing the current system and throwing more money at it. Neither we nor the world can afford that any more.