Poisoning our health care

Posted by Marc Hodak on January 9, 2009 under Economics | Be the First to Comment

Yesterday, the Commonwealth Fund report was summarized under the headline “Health care overhaul needn’t break bank:  study.”  OK.

Of course health care overhaul doesn’t need to break the bank.  Private sector firms overhaul their operations all the time, and it usually leads to some combination of improved service or lower costs.  But the government is not a private sector entity.  Social Security didn’t need to break the bank, but it has, several times.  After two major overhauls, it’s liabilities still exceed its assets by nearly $9 trillion.  We can’t even count that high on every finger and toe of every human that has ever lived.  Medicare didn’t need to break the bank, yet it’s liabilities now exceed its assets by over $31 trillion.

If a company kept promising viable businesses, and kept going bankrupt, what weight would an economist accord to the idea that its next business idea did not need to go bankrupt?

The Federal government, of course, is not bankrupt yet.  Unlike a bad business, the government can continue to take money from it’s “customers” by bundling bad businesses with social necessities, such as law and order.  The government can take away our choice about which services we wish to pay for from this bundle and, in an increasing number of cases, which services we wish to use.  If a private company had that kind of power, what would be the odds that it would even try to run its business efficiently?  But such considerations are credulously left out of the assessment that a huge new government program “doesn’t need to break the bank.”

The worst part of this study, proffered by a supposedly economically sophisticated firm, is not even its ignorance of public choice constraints, but that it’s just bad economics.  It’s not an economic analysis to say that if John pays Karen $90 instead of $100, then Karen will continue to offer the same benefit to John in the future.  No health care proposal is complete, or even meaningful, without addressing all three major health care trade-offs:  accessibility, cost, and quality.

The Commonwealth Fund’s report only addresses the trade-off between cost and access.  The impact on quality is ignored.  Personally, I would like to think that cancer treatments will be better as I get older, rather than the same or worse than now.  That will almost certainly not be the case when the world’s last bastion of innovation is throttled by mandates that increase access without raising costs.  The laws of economics are not subject to legislative amendment.