Insurance and Health Insurance

I’ve been meaning to write a post on health insurance ever since hearing Karen Tumulty on Fresh Air. (She was discussing her Time article on underinsurance.) I happen to think that a free market for insurance works pretty well in most circumstances (and I did co-found an insurance software company); for example, if you can afford the house, you can generally afford the insurance for the house. But it doesn’t work very well for health care, because many people are simply uninsurable under free market principles (expected health care costs exceed their income, let alone their ability to pay), and hence would be left to die. We think we have a private, for-profit insurance  system today, but we can only avoid its disturbing implications by hedging it in with public backstops and regulations.

Since the Senate Finance Committee is taking up health care reform this week, I finally wrote that post today for The Hearing.

By James Kwak

116 thoughts on “Insurance and Health Insurance

  1. It is wonderful to finally see a writer point out that “health care” and “health insurance” are two completely different things. The distinction is lost on so many people today, and it is essential to define those terms before any real discussion can happen.

  2. So why does the government need to provide the insurance? If people cannot afford the actuarially fair price of insurance, why cannot support be provided as a subsidy? a food stamp program does not require the government to grow food.

  3. This is (obviously) a very complicated question.

    However, I think it is a little disingenuous to talk strictly about “sick people” versus “healthy people”. I do not believe Americans have the world’s highest rates of diabetes and heart disease because we were born that way… And I do not see why I should pay the price for the predictable consequences of somebody else’s actions. Maybe if people had to pay for their own health care, they would take better care of themselves.

    On the other hand, some people were born with conditions I do not have, and I could easily have been in their place. And the elderly did not have much choice about becoming old. So I am sympathetic to the notion that I should be made to cough up some of my hard-earned wealth to help them out.

    So… Complicated.

    Of course, as with everything else in our society, where health care is heading is towards more socialism (not judging; just asserting a fact). We will wind up with everybody paying for everybody else’s health care, followed by laws against smoking, fatty foods, etc. to “reduce the burden on society”. (Although we will never restrict sugar because that lobby is too strong. Popular socialism or corporate socialism; take your pick.)

  4. You write, regarding actuarily fair health insurance with portability and ignorance of preexisting conditions:

    If that’s the case, then, insurers will have to boost premiums for everyone since they can’t charge differential premiums (unless they start evaluating your DNA when you are young, but let’s ignore that problem for now), and then no one is ever paying premiums based on his health – and we have something very close to social insurance.

    I don’t think that’s quite true: People would be paying premuims based on their health over their entire lifetimes.

    As long as the same insurer recieved that revenue stream for the customers lifetime, it should remain actuarily fair, correct?

    Personally, I’m in favor of a public insurance program for this very reason: You don’t have any problems with one insurance company recieving the benefits of revenue when the customer is younger and healthier, while the other bears the brunt of the costs when the customer is older, while allowing the customer to pay a (relatively) flat rate over their lifetime.

    Here’s a crazy idea that would allow multiple private insurance companies to exist where customers pay their lifetime health costs in a relatively flat manner: When a customer switches companies, the company moved from gives a sum of money equivalent to the customer’s premiums minus some amount for overhead, provided the company moved to doesn’t raise the customer’s rate. It seems very counterintuitive at first glance, but it could be feasible. Like I said before, though: Public insurance seems the way to go.

  5. Thanks for articulating this important distinction. I’ve long doubted the insurance model’s applicability to health care costs.

    I find it really helpful to get your take on this matter because so much of today’s national discussion is premised on tweaking but perpetuating that inappropriate model.

    On the other hand, if the US tried to switch to a British or Japanese style national health service, how could the US contain costs?

    It seems to me that virtually everyone in the US — and a large contingent of uninsured people from foreign countries — would pile into such a US system.

    Wouldn’t costs simply explode and break that model too?

    Is there some other health care model the US could try?

  6. Then, it would seem, the real problem isn’t whether or not health care can be insured, but why it costs so much. There would not be a problem if an MRI cost $20 or chemo-therapy cost $100 a month, right?

    Thanks for a great post.

  7. Nemo you missed a major point of his article.

    Health care is not expensive because of individual choices or habits. Even if you follow extremely good habits, the risks that you will have a serious illness in you old age is not much different–remember 80% of medical expenses is cause by people in their last year of life. You will probably have the serious illness at a later age, but you will still have that serious illness and need extensive care. It is like the argument that smoking actually saves the government money because smokers die young. The difference between health insurance and other insurance — auto, home owners — is that only a very small percentage of people who buy auto or homeowners will ever file a claim but virtually everyone who has health insurance will eventually file a very large claim. In auto or homeowners insurance 100 or 200 people pays $1 or $2 to pay $100 or $200 to the one percent of the policy holders who ever have a claim. But with health insurance virtually all of the 100 or 200 policy holders will need to collect on that $100 to $200 claim.

  8. Not only is there a difference between “health care” and “health insurance” – but there is also a difference between “health care coverage” and “health insurance.” Auto insurance & home insurance does not cover maintenance, oil changes, furnace filter changes, etc. We may decide as a society that “health care coverage” should include routine physicals, etc, but the model is not an insurance model.

  9. I find it somewhat funny that in this group I’d find this comment,

    “I do not believe Americans have the world’s highest rates of diabetes and heart disease because we were born that way… And I do not see why I should pay the price for the predictable consequences of somebody else’s actions. Maybe if people had to pay for their own health care, they would take better care of themselves.”

    While I’m sure this is true of some people, I strongly doubt it applies to most people because we really aren’t very good at looking into our own futures very well. On the funny part, if you apply this same logic to the banks, how did we get where we are?! Does anyone really think they even thought it could happen “to them”. I’m sure they knew the risks or had someone to tell them, but you see things like this happen to other banks (people).

  10. “However, I think it is a little disingenuous to talk strictly about “sick people” versus “healthy people”. I do not believe Americans have the world’s highest rates of diabetes and heart disease because we were born that way… And I do not see why I should pay the price for the predictable consequences of somebody else’s actions. Maybe if people had to pay for their own health care, they would take better care of themselves.”


    Isn’t this a good argument for Pigouvian taxes, rather than “laws against smoking, fatty foods, etc.”? That way, personal autonomy isn’t diminished, but the externalities of certain decisions are accounted for.

    I admit that spreading the tax revenues generated by accounting for those costs beyond the government and to private health insurers to the extent that they insure people (e.g. those not insured by gov-sponsored plans) who do/consume these things is problematic. Since IANAE, I will assume that someone better informed than I could come up with a method of accomplishing this.

  11. As I understand it, insurance is supposed to cover against random or unexpected loss. This works fine and dandy covering things.
    A persons health is not unexpected or random, for the most part. There are strong correlations between family history, age, and lifestyle with (expensive) health problems. Then, how does one define loss?

    The optimal health coverage is to have everyone paying in to cover all of the sick and injured plus routine maintenance (check ups). By dividing up the healthy people into subsets of policies, it increases the premiums and decreases the coverage for everyone.

  12. There are three industries as I see them. Healthcare, Health Insurance and then Pharmaceuticals. How do we determine the true cost of Healthcare when both the Health Insurance and Pharmaceutical Industries have worked to influence Healthcare? Health Insurance and Drug companies have worked tirelessly to incentivize the actions of doctors and healthcare providers. The desired outcome and often result has been increased profit and decreased value for patients.

    My Mom has often complained about charges to her insurance for services and test she never received by Healthcare providers. My father who retired from management of a large corporation often is faced with the choice of less care from his insurance provider who forbids him receiving other types of care out of network even though it would save him substantial personal money. His main gripe appears to be that he is charged higher prices for similar procedures a the same care provider because his insurance is a higher end insurer/policy. There are several retired people from church who’ve asked me to go over paperwork to help them understand what they’re being told and I can say that the whole system appears to be corrupt and not beneficial to the people its supposed to be helping? Often what I read makes no sense other than a profit for someone but not the patient.

    One of the things I love about being surrounded by my elders is having a larger historical perspective. Most that I have asked confirm that there was a time where doctors where not the rich and near affluent dynamos they are today. If we go back fifty years will we see that the salaries of doctors, that were on par with several other forms of employ who’s salaries didn’t keep pace with that of doctors today. Yes there is insurance and medical school cost a lot, still when you look at entirely near illiterate people in less developed countries that have been trained by surgeons to perform a host procedures, the question has to be asked how much are our discussions about medicine in this country fueled by the national pastime of capitalism? If there was a cap system enforced on procedures and prescriptions, both of which have a vested interest in keeping cost high, couldn’t they make up the loss just by being able to see more patients who can now access their services which in practice would be subsequently more affordable.

    As I see these industries, they appear dead set on maintaining an ever cancerous status quo, by charging an ever decreasing pool of the insured, more to make up for the loss of the formally insured. Maybe I am seeing this wrong, but its how it looks. When US citizens have to stay in this barrel like good fish for drug companies and pay the US price vs. crossing either border and getting the drugs at a reasonable price, I have to ask why. Does a six hour wait at a hospital, temperature and pulse check, with cough and now say ah, thrown in with ‘yes you have a cold’ take juice; all of five minutes resulting in a $350.00 cash bill really make sense.

    Free markets aren’t bad by any means, but lobbying isn’t about free markets its about undue influence. What’s free market about being told you can’t buy your prescriptions anywhere but here? What’s free market about being told that you would have to give up your insurance to get a better price? My Mom even had to call her Doctor because the pharmacist told her she had to be cleared to use a specific generic medication that required a clearance. Maybe things are different for those of us out here in California, but I would encourage anyone that has retired people at their disposal to talk to them about the choices they make and you may be surprised at what you hear. The stock market isn’t the only thing bankrupting folks in this country and when we have discussions about medicine we need to be certain that we’re not parroting the party line. In a country that can give you “Too Big to Fail” with out batting an eye, we need to be suspicious of anything that has a lobby.

  13. So… as my husband and I are both freelancers, we carry our own health insurance. As such, I am on the front lines of this war. For our family, our coverage is ridiculously expensive, carries a large deductible and covers very little.

    In my quest for health insurance over the years, I’ve observed several key healthcare issues that need to be resolved:

    1) Profitability for health insurance companies is dependent on taking in more than they pay out. To be profitable, they need to make sure they do not pay out claims. Thus, they make it very hard for medical practitioners to collect. They deny coverage for the stupidest of reasons.

    It’s a weird business model – you take money promising to pay it out when needed, but for your company to succeed, you have to make it exceptionally hard for the person to get coverage when they need it.

    I’ve spent far too much time wrangling health insurance companies to pay for covered expenses – I loathe the process.

    2) Determining the cost for any kind of healthcare procedure essentially requires a masters in accounting. It’s a bewildering maze of numbers that you get in the EOBs. When my husband broke his leg, the final bill was more than $20,000 and included charges for $80 ace bandages and the like.

    But then if you talk to anyone in “healthcare” you are informed that a bill like that is not “the real bill.” That’s the “real bill” only for the patients to see and those excessive charges would be paid only by the uninsured.

    People with insurance never see “the real bill” because that is something negotiated between medical practitioner and the insurance company.

    When my son was born, the health insurance company denied coverage for a particular procedure, though it was a covered procedure, according to the plan. The doctor billed me $250 for the procedure. The insurance company kept denying it for a dizzying array of reasons. Finally, they coughed up the money and I learned the doctor got $75 from the insurance company for a procedure she wanted $250 from me directly. The same procedure, vastly different bills. Why?

    Not much incentive for medical billing offices to fill out the forms right, when there is so much more money to be gained by billing the patient directly.

    3) Key to the healthcare problem – people who work for large corporations essentially have no clue how expensive their medical treatment truly is. (Though this is beginning to change in recent years.) Patients have $15, $25, $50 co-pays – and they think that is the cost. If you pay just a $15 copay for a doc’s visit, you have no concerns at all about visiting the doctor for the most minor sniffle.

    If you have to pay the $150 office fee up front, as we, the self-insured with enormous deductibles, must do, then you probably don’t go to the doctor, and sometimes this is turns a minor illness into something more major – like untreated bronchitis turning into pneumonia. Or, god forbid, a strange freckle ignored until it becomes stage 4 melanoma.

    4) The cost of treatment seems to be determined arbitrarily with no rhyme or reason. And the costs seem to increase dramatically each year.

    Our premiums went up 25 percent just this year alone. We did NOT have any medical events last year either that would account for such a huge increase in costs.

    Is affordable healthcare just a dream? Or can we figure out ways to make sure the cost of healthcare does not go up astronomically each year?

    5) People who are self-insured also know that if they were ever to use the policy, they’d most likely get bumped from coverage for all time due to the nemesis known as “the pre-existing condition.” Though they can’t just drop you for “pre-existing conditions,” they can certainly make it unaffordable to maintain coverage if you ever become ill enough to use the insurance.

    So you end up with the conundrum that the people who most need health insurance can’t afford it.

    Bush hailed the advent of “consumer-driven healthcare” as the solution, but if you looked closely, it was just a pretty name for a plan that made consumers pay more for healthcare.

    Frankly, I’d love to be able to check out the government’s health care plan. If I could tap into the power of federal government’s large group, my prices supposedly would be lower and I’d get more coverage.

    That’s something I’d relish. More bang for my buck when paying for healthcare.

  14. I have seen that statistic cited numerous times in the media – do you know where it comes from?

    At any rate, your arguments are not mutually exclusive.

  15. one thing that might be true is that your lifetime cost to health insurance might be independent of your choices or habits (everyone dies at some point) but the amount of premiums you pay over your life would be higher if you lived longer.

  16. your analogy breaks down here: an auto insurer can decide not to cover damages to my car if they were caused by malmaintenance. with health insurance there is rarely a clear reason like that. it’s true that i might be denied coverage if i intentionally cut off my arm, but otherwise causality is pretty weak.

  17. insured health care has to be rationed, or limited. that is, the insured part. If you want to pay privately, like you do for a mansion home or world travel, the sky’s the limit. Truth is, the over-insured are clogging the system through self indulgence. Hip and knee replacements for 85 year olds, …. as common as the cold.

    While we’re at it, the uninsured Mexican anchor baby emergency care expense is currently 68% of Denver Health’s emergency indigent budget.

  18. Your post was well put but it did not mention the hidden costs of medical law suits and litigation driving health care up. Unlike 50 years ago, we did not have the litigious industry eating away at reasonable costs.

    “The costs of litigation per person in the United States are far higher than in any other major industrialized nation in the world, according to the White House statement. Lawsuit costs have risen substantially over the past several decades, and a significant part of the costs from lawsuits goes to paying lawyers’ fees and transaction costs — not to the injured parties.”

  19. I need to make a disclosure: I am a Canadian.

    So why did I join a blog on the American economic crisis? Because when the proverbial “elephant in the room” rolls over … Canada is right beside it. In other words, if the US economy rolls over we get crushed.

    In Canada we have a great health care system! It is not perfect. But everyone gets medical care. It is unheard of for a Canadian to go bankrupt from cancer or a heart attack. We care for sick children regardless of family income. Generally , everyone gets equal quality of medical care.

    Furthermore — contrary to what some Americans may think — Canada is not a bastion of socialism. (Canada is both American and European in many ways.)

    Back to health care in America:

    I wonder if American reluctance to adopt universal health care is rooted in its history of slavery and racial inequality.

    Any takers on this one?

  20. Health care is an immensely charged question – dangerously so. Here are a few simple “facts”:

    – Health care is scarce.

    – All scarce resources must be rationed.

    – A resource, when not rationed in some manner, is ultimately debased or destroyed.

    – If not rationed with dollars, it will need to be rationed through another mechanism.

    – Unlike other rationed goods/services, the connection between health care and life/death is direct and immediate, and therefore difficult to ignore or obfuscate.

    – From a social perspective, a million dollars spent on pre-natal care and early childhood care is much more efficient than a million dollars spent on end-of-life care.

    – You _can_ attach a monetary value to life and death; the legal profession does this every day.

    – Some people are more socially valuable than others.

    – Income is not necessarily a good predictor of social value (i.e. investment bankers…)

    – Some people are born needing more care, and this need may be unrelated to their earning potential. At this level, incentives do not matter (unless you are speaking from an evolutionary perspective).

    Some near-truths:

    – The market is not allocating health care efficiently, under virtually any meaningful measure.

    – The administrative and legal costs of achieving this inefficient allocation are overwhelming, yet these costs are defended as being necessary to achieve “superior” free market outcomes.

    – The US spends more, but our life expectancy is lower than many comparable countries. (There are many explanations, but one recent study noted that even controlling for all known factors, people in the UK live longer… WHY?)

    – When it comes to health care, people are not rational. Many are not even capable of making decisions at all, depending on their condition. Pretending people are rational in this matter is insane.

    – The legal system is not effectively regulating malpractice; threat of lawsuit creates immense costs; it’s cheaper to settle in many cases than defend; it’s cheaper to overtreat than risk litigation.

    – Drug/instrument companies have a lot of political power, and they use it.

    It’s frustrating to even contemplate the sheer number of problems with the health care system. And I’m not even bringing the issue of social justice to the table.

  21. It might also be rooted in quaint notions of constitutionalism:

    “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”


  22. instead of wasting your energy trying to decide who you can and can’t feel sympathy for, why don’t you learn to empathize. People should not suffer because they don’t have insurance. There is plenty of money in the system, it is just a matter of allocating it in a manner that would allow the maximum (or everybody) access through health insurance. You can’t take all that “hard earned wealth” with you when you die dude.

  23. StatsGuy,

    100% agreement. In conversations on health care as work I often end up shouting “Someone has to decide that Little Timmy is going to die. Who here is going to do it?”



  24. Kwak says “So in an actuarially fair, free market system, he would be unable to get health insurance, would be unable to afford health care, and would . . . die.”

    And of course he will die, so will we all, but one of the main reasons he cannot afford health care is also that he is not allowed to fully capitalize the societal value of his unhealthiness by for instance having to pay less in social security as he is actuarially expected to live shorter.

    We are touching here on some fundamental issues and that are also very closely inversely related finance as for instance when some opaque credit scoring is used to trick some who should actually be paying lower rates into paying higher rates just in order to compensate for those who won´t pay within his supposed risk bracket.

    Do you know that when turning a fix amount into an annuity in England you can actually negotiate a higher payment if you are a smoker? As far as I know there is nothing of that sort in the more limited US free market.

  25. good dialogue… the bank issue is getting boring. let’s debate this. do you know how much in the black this country would be with a on spot healthcare system? my question,,,is it the doctors,,,insurance,,,pharma or the lawyers that is raising costs? technology can’t be that expensive.

  26. Well maybe there should be a constitutional amendment.

    Many people (including myself) find it shocking medical care should be treated like a commodity.

  27. As a health insurance broker, I know there are many things wrong with the system and many reasons why it is broken. Everyone wants to blame the carriers, the drug makers, etc., everyone but themselves. The fact is the main reason the costs are so high is because people refuse to take care of themselves. The obese have now overtaken smokers in costs incurred. I know how hard it is to lose weight (I have been fighting with the same 20 lbs since I was a child) but if people would do so, costs would drop dramatically. But why go to all that effort when you can just take a pill or two or six? There are so many to blame for this but ultimately, we each have to take responsibility for ourselves.

  28. Medicare makes those decisions now for many elderly, right? Society needs to decide. Not some bureaucrat in a cubicle.

    Medicare for all! It worked great for my Mom and it’ll work great for me.

  29. How does Canada keep millions of under/uninsured Americans, many financially bankrupt, from going to Canada and using its health service?

  30. I don’t think I said the government had to provide the insurance, but that might be the logical conclusion. The problem is that the amount of subsidy you need depends not just on your income, like with food stamps, but also on your health. There will be people with incomes of $20,000 and expected annual health care costs of $60,000 (dialysis, chemotherapy, etc.). So the degree of subsidy will have to be tied in part to your health. The insurer can charge you an actuarially fair price ($60,000); then the government will estimate your ability to pay and kick in a subsidy for the rest. That is getting very close to government health insurance, isn’t it?

  31. I like the point about “the predictable consequences of somebody else’s actions,” but I may not agree with you on the implication. For example, I suspect that a large part of our health care costs is due to poor nutrition. And I believe that the poor nutrition is partly due to subsidizing cheap calories (mainly corn – corn syrup, corn feed for all sorts of animals, etc.). I admit that I believe this because I’ve read Michael Pollan and don’t have the knowledge to think critically about his position, but let’s assume he’s right for a second.

    So the answer is that instead of subsidizing food that is bad for us, we should be taxing it (because of the health care externality) and we should be subsidizing leafy green vegetables. Of course, it’s hard to see how that’s a political winner.

    (One friend I said this to said no, I’m wrong: those unhealthy foods are actually good for the health care system, because they kill people off with heart attacks when they are relatively young, thereby saving Medicare all of that end-of-life care. In which case maybe the answer is even bigger subsidies for junk food, but I think that’s too cynical for most of us.)

  32. For the fence sitters and nay sayers on universal health care in America.

    It has occurred to me the — quality of life — for Canadians and Americans differ in the following way.

    1) Canadians are not burdened by worry over how to pay for their medical insurance. It is just not a major stressor. (There are premiums. But miniscule by American standards.)

    2) In the Canadian system — the burden of illness and dying — is not compounded by worry over how to pay for medical care.

    Believe me. It is not a perfect system. But I think you would like universal medical care.

  33. Is it “shocking” that food is treated like a commodity? Or shelter?

    Is health care fundamentally different from these? How?

  34. Most doctors will say that your health outcomes are 30% genes and 70% lifestyle. To be healthy takes discipline and wise choices — eating the right foods and not too much food, drinking modesty, exercising regularly, and living within ones means so as not to create a lot of unnecessary stress.

    I have absolutely no problem with taxpayers insuring for those diseases outcomes over which one has little or no control, i.e., genes. It’s a bit like flood or earthquake insurance. I have a great deal more difficulty saying that some taxpayers should support other taxpayers and non-taxpayers unhealthy lifestyles choices and lack of discipline.

    Sixty percent of Americans are fat or obese. Being fat or obese is a health cost nightmare. Why should people who have the discipline and make the choice to live a healthy lifestyle (which involves cost and sacrifice) be made to take care of people who don’t? That is unfair.

    What is fair? Medical and nutritional research has pretty much determined that saturated fat, sugar, and simple carbohydrates are very unhealthy. In fact, sugar and simple carbohydrates are as unhealthy, if not more unhealthy, as smoking. Why not then place high taxes on these ingredients and have the tax receipts deposited in a healthcare fund to take care of all the diabetics, cancer and heart patients that result from consuming these toxic ingredients. But that would not be fair. It is much fairer to tax high income people, who most likely lead healthy lifestyles, than to tax the food of those who over consume unhealthy foods. There should also be a healthcare tax on fat people.

    Whe I hear Obama talk about prevention I roll my eyes. Prevention does not come in a pill. Prevention is all about healthy lifestyle choices and DISCIPLINE, DISCIPLINE, DISCIPLINE.

    I would venture a guess that the number of people who consume more resources than they produce is probably growing at a faster rate than at any time in human history. Universal healthcare is going to add a major acceleration to this trend. I wonder what happens when consumption exceeds contribution. Does the system then collapse?

  35. Do your Canadian physicians use any procedures or prescribe any pharmaceuticals from the last 100 years? Where were those developed?

    Governments are not known for innovation. Free markets are not known for equal outcomes. Maybe the trade-off is worth it.

    Sometimes I worry that “universal medical care” will make every trip to the doctor feel like a visit to the DMV. Then I realize it already does. So what the heck, bring on the socialized medicine, why not.

    And now I will truly demonstrate my ignorance. I simply do not understand why health care is so expensive. Patents expire after 20 years, right? So right now, today, a competitive market ought be be able to provide affordable health care that is state-of-the-art by 1989 standards. Why doesn’t it?

  36. They could also lower the barriers to entry into the field. Right now an MD needs 7 years of college, $350,000 of student loan debt, a 24 month internship, and an assignment to Podunk Idaho to start his family practice.

    Doctors, are alot like Financial Oligarchs in their own field. God given right to be multimillionaires within 5-7 years of being licenses to kill, eeerrrr, to practice.

  37. Society? Can we do it via popular vote?

    I vote LIttle Timmy dies. All in favor?


  38. Sounds grand.

    Another option is to lobby your states legislature for universal healthcare, and leave the other states to wallow in whatever sorts of barbarism they wish.

    Both are reasonable and, more importantly, constitutional approaches to the problem.


  39. David M, the cost of litigation has increased, you are right. The complexity of the procedures performed is nearly mystifying compared to a half a century ago and certainly creates more opportunities for mistakes to be made as well. Your post implies the need of a middle ground and I agree. Currently however, neither the insured nor the uninsured are receiving anything close to reasonable consideration from politicians, insurers and healthcare providers. The most unfortunate aspect of health care is that there continues to be an image of safety and certainty of coverage generated by insurers as long as no health emergency arises. Yet when one does, too often people who thought they were covered find out the hard way they are not and I do not think this is by accident. Moreover, insurers tend to behave as though you have no choice which results in a lack of diversity in health plans and most times, you end up feeling like your real choice is in which insurance package will cause you the least amount of discomfort, especially given that none of them is really about peace of mind.

  40. Tippy,

    It doesn’t matter if we’d like it or not. We here in these United States are, at least theoretically, ruled by a document called the U.S. Constitution. This document delegates all powers not expressly given to the federal government to the states and to the people respectively. The providing of healthcare is nowhere mentioned in the Constitution. It is, therefore, up to the states and the people to provide whatever healthcare they see fit. (Yes, medicare and medicaid are both, quite obviously, unconstitutional. This is entirely distinct from whether they are efficient, necessary, just or any other adjective.)

    I often wish that the founders had put the tenth amendment first. At the time they were fighting against states jealously guarding their own independence, and dealing with an ineffective and underdeveloped central government. Spelling out what was so patently obvious to them must have seemed silly.

    But, here we are.


  41. Nemo,

    You might find this interesting:

    We end up paying about 28% more per year than an “average” society would (if you think that an “average” western society could be scaled to the size of the U.S.)

    My totally oversimplified and probably wrong summary of the paper: our costs are higher because:

    1) We have higher incidence of diseases (IMO because we are rich enough to eat the food we like and live mostly sedentary lives banging away on keyboards when we should be in bed)

    2) Next because we pay more for drugs (because we subsidize drug research for the rest of the world, aren’t we nice?)

    3) Next because we pay medical employees more (though they see more patients.)

    Interestingly, much more of the differential in hospital care comes from nurse costs (apparently we have more than usual) not docs (by a factor of 3x) See page 13, Exhibit 3.

    I would note that the paper appears to have been written by lawyers and b-school types. The report estimates that the health care profession pays $20 billion in malpractice insurance premiums every year and that “defensive medicine” designed to minimize lawsuits exists, but make no attempts to quantify how much this ends up costing us. They also complain that doctors make too much money compared to “comparably trained” professionals, like *cough* lawyers. There is a hilarious chart on page 55 (Exhibit 38) that shows that lawyers have 7 years of education (it is mis-labled as 3) and doctors only have 8, but that doctors make a lot more. Oh, right and then 4-8+ more years also, but if we put it in this box it doesn’t count, right?

    Anyway, despite that, it’s the best paper I’ve read on medical costs.


  42. I have a modest proposal:

    All medical procedures are priced in % of total assets + income for the year in which the procedure is performed. Stocks way up? Housing market way up? Better stay healthy, bub. Stocks crashed? Housing underwater? Wanna smoke?

    Also, to increase healthcare efficiencies, we should eat the children of the indigent.


  43. “…For example, I suspect that a large part of our health care costs is due to poor nutrition. And I believe that the poor nutrition is partly due to subsidizing cheap calories (mainly corn – corn syrup, corn feed for all sorts of animals, etc.)…So the answer is that instead of subsidizing food that is bad for us, we should be taxing it…”

    Based on this line of reasoning don’t we then have to consider the 25 states they are now saying have rocket fuel (Perchlorate) in the ground water also found in the livestock and produce depending on the water and tax those that put it there? For the above reasoning to be sound it has to take public policy into account. The FDA allows farmers the use of any number of chemicals whose affects on the human body may be unknown for years or even decades. Let’s be clear. They have approved things only to reverse themselves after the deaths and illness start adding up. We’re now being fed genetically modified crops with the discussion turning towards cloned foods and the only question seemed to be whether we the consumers have the right to know the nature of the food we’re buying. Let’s subsidize all natural (real strict definition please) and tax the unnatural.

    For good measure lets throw in the post right here on The Baseline Scenario regarding factories, mills and steel (in its heyday) never being far from the abodes of humble minorities, the poor and the maybe uninsured. I jest a bit, but it is reasonable to suggest that when industry is allowed to take short cuts the cost associated with those cuts aren’t reflected on their balance sheets, but instead demonstrate themselves in the health sector. Human knowledge is entirely based on what we have experienced before only. So we’ll go on thinking that one amount of rocket fuel or hormone is safe. That is until folks show up with a lower tolerance and all of a sudden the people writing the rules, say ‘well up until now we’ve never seen anyone as sensitive to this and thought it was fine in this amount, uh our bad.’. When we legislate that there are acceptable levels of contaminants primarily because we’re shielding some human that put them there as in “not naturally occurring” its not right to try and hold any party responsible unless you hold all. Regardless how healthy you’re eating when we have schools right next to freeways and homes next to factories it still feels a lot like whistling past the graveyard.

    The real discussion is about America’s love affair with all things big. More local farming and regional grocers would free us of the monolithic conglomerates and may be the way to go. Wow, did that sound like I said ‘less AIG’ it felt like it. We keep looking for the biggest baddest, when the truth is being ridiculously extremely huge isn’t in the public interest. Having food grown closer to where its going to be consumed requires less travel and maybe a more responsive regional economy. Chickens and cows don’t need more chemicals to help meet demand, we just need more farms. Conglomerates and/or greed is another cause of soil fatigue. Soil needs rest and rotated crops, which conglomerates are less likely to do this as responsively as smaller farmers who literally have to depend on their soil and so tend to not deplete it. Conglomerates who can afford the expensive chemicals that force soil to yield go that route instead.

    Nutrition is a legitimate concern only if the food isn’t slow poison. As it stands, politicians, the FDA and the farmers have taken far too many chances with the food long before we get the chance to eat it.

  44. “…For example, I suspect that a large part of our health care costs is due to poor nutrition. And I believe that the poor nutrition is partly due to subsidizing cheap calories (mainly corn – corn syrup, corn feed for all sorts of animals, etc.)…So the answer is that instead of subsidizing food that is bad for us, we should be taxing it…”

    Based on this line of reasoning don’t we then have to consider the 25 states they are now saying have rocket fuel (Perchlorate) in the ground water also found in the livestock and produce depending on the water and tax those that put it there? For the above reasoning to be sound it has to take public policy into account. The FDA allows farmers the use of any number of chemicals whose affects on the human body may be unknown for years or even decades. Let’s be clear. They have approved things only to reverse themselves after the deaths and illness start adding up. We’re now being fed genetically modified crops with the discussion turning towards cloned foods and the only question seemed to be whether we the consumers have the right to know the nature of the food we’re buying. Let’s subsidize all natural (real strict definition please) and tax the unnatural.

    For good measure lets throw in the post right here on The Baseline Scenario regarding factories, mills and steel (in its heyday) never being far from the abodes of humble minorities, the poor and the maybe uninsured. I jest a bit, but it is reasonable to suggest that when industry is allowed to take short cuts the cost associated with those cuts aren’t reflected on their balance sheets, but instead demonstrate themselves in the health sector. Human knowledge is entirely based on what we have experienced before only. So we’ll go on thinking that one amount of rocket fuel or hormone is safe. That is until folks show up with a lower tolerance and all of a sudden the people writing the rules, say ‘well up until now we’ve never seen anyone as sensitive to this and thought it was fine in this amount, uh our bad.’. When we legislate that there are acceptable levels of contaminants primarily because we’re shielding some human that put them there as in “not naturally occurring” its not right to try and hold any party responsible unless you hold all. Regardless how healthy you’re eating when we have schools right next to freeways and homes next to factories it still feels a lot like whistling past the graveyard.

    The real discussion is about America’s love affair with all things big. More local farming and regional grocers would free us of the monolithic conglomerates and may be the way to go. Wow, did that sound like I said ‘less AIG’ it felt like it. We keep looking for the biggest baddest, when the truth is being ridiculously extremely huge isn’t in the public interest. Having food grown closer to where its going to be consumed requires less travel and maybe a more responsive regional economy. Chickens and cows don’t need more chemicals to help meet demand, we just need more farms. Conglomerates and/or greed is another cause of soil fatigue. Soil needs rest and rotated crops, which conglomerates are less likely to do this as responsively as smaller farmers who literally have to depend on their soil and so tend to not deplete it. Conglomerates who can afford the expensive chemicals that force soil to yield go that route instead.

    Nutrition is a legitimate concern only if the food isn’t slow poison. As it stands, politicians, the FDA and the farmers have taken far too many chances with the food long before we get the chance to eat it.
    BTW I love your blog!

  45. Why shouldn’t soda, chip, high-transfat, sugary, fast food, etc. companies be made to pay for what their products do their consumers?

    Why shouldn’t the tobacco & alcohol taxes go directly towards the medical costs of the illnesses that they cause?

  46. Health care is somewhat artificially scarce because of:

    1) limited number of doctors & medical schools and equipment costs.

    2) inflated equipment costs. (If hearing aids can cost $4,000, but Apple or Nokia can manufacture a hand-held computer which more complicated and has more technology in it for under $400, there’s excess.)

    3) patent protections. (I understand the if companies weren’t able to get patents then they wouldn’t innovate and healthcare would argument, but it doesn’t totally wash.)

    4) lobbying. We don’t have a free market. We have a regulated market, laws and regulations which dictate what can and cannot be done. Sometimes that’s good for the health of individuals and sometimes that’s good for the health of company balance sheets.

  47. So, I am taking away from this discussion the concepts of “actuarially fair price of insurance” and medical costs are associated with lifestyle choices.

    Given that most American’s use debit or credit cards and we are a technology advanced country.

    Why can’t health insurance costs based upon an individual choices. You want to smoke? Fine, here are the smokes and here’s the insurance rate for that. Consume mostly Pepsi? Fine, here’s the Pepsi and here’s the insurance rate for that too.

    Car insurance companies rate drunk drivers differently than a standard risk. Why can’t health insurance companies rate individuals differently based on lifestyle choices?

  48. “But the basic presumption that health care should be paid for via a health insurance system, in which insurers make money by charging premiums that exceed expected losses – and that’s how insurers make money – is part of the problem.”

    Thank you for spelling out what is basically a simple economic and math business problem with serious consequences.

    The serious advocates of a single-payer system have known that for a very long time. And it is not as if there were no viable alternative models out there:

    Now, maaaybe it’ll filter through the conscience of some people in this country that there might be a reason why every other advanced country in the world have chosen to have a public system that covers the basic (and in most cases, not so basic) health care needs of their citizens.

    Could it be that they have a point after all? (hint: they sure do)

  49. Another thing that bothers me is this.

    Most American’s don’t have dental insurance or pet insurance, and yet dental care and veterinary care are relatively affordable.

    Wouldn’t healthcare be forced to be more affordable if health insurance were not available?

    I would be interested to read an analysis of healthcare costs before most American’s had health insurance vs. after most American’s had health insurance.

  50. a healthy populace is a productive populace. Your healthy neighbor gets regular check-ups and nips any potential health problems in the bud. Your healthy neighbor keeps their job, pays their mortgage, pays their taxes, keeps the yard trimmed and consumes goods. He is a good parent since he is able to focus on his children without distraction of pain. He is a productive and valued member of society. A healthy neighbor does not worry, he is not ill at ease, ie., DISEASED.

    An unhealthy neighbor is unproductive. He misses work or performs poorly when he is working. He loses his job, fails to pay his mortgage and go into foreclosure. His yard is unkempt and shames the neighborhood. His home brings down property value. He defaults on his bills and loans and increases costs for the healthy. He is a poor parent because he is distracted by pain. His kids run rampant and drop out of school. His children resort less than legal avenues of income.
    An unhealthy neighbor is unproductive. An unhealthy neighbor lives in fear and pain. Disease thrives on fear and pain. An unhealthy neighbor is DEPRESSED. An unhealthy neighbor is a drag on society.

    I want a productive neighbor. I want to be productive. I want to be able to work and pay my bills and give my kids my full attention. I want to continue to contribute to the good of my society. But if I become ill I will be unable to do so.

    I am uninsured. I take care of myself, I go to the gym 4-5 times a week and eat as healthy as possible. I work my as off to provide for my children, 2 of whom are in college with full tuition. I have only one health issue: bad irish teeth. I need thousands in dental work. I cannot afford it. To fix one tooth is over thirty five hundred dollars. I need about 6 fixed. I had to go to ER this past weekend for antibiotics for an abscess. My mothers day was spent in serious pain. I brush till the cows come home but some things are beyond my control — like all the mercury put in my mouth between the ages of 10-14 which have since fallen away. I am 46 years old.

    A hundred years ago before the industrial revolution 1 in 10 got cancer. Now it is 1 in 3. Much of the food in the supermarket is poisoned with hormones and pesticides and anti-biotics. I cannot afford 100% organic. I cannot grow enough food to feed my children all year round. I expect to get cancer one day. I live in fear of that because I am uninsured.

    But for now, I’d settle for some affordable dental. They say many health issues stem from bad teeth.

    It offends my sensibilities that there are people who basically believe this:

    If you have health care it’s because you deserve it. If you don’t have health care it’s because you don’t deserve it.

    Much like the mindset of the conservatives: if you’re rich it’s because you deserve it, if you’re poor it’s because you deserve it.

    Every man for himself.


    We are all in this together.

  51. Talk about a really sure way to drive up over-head administrative costs!!

    These, in many ways, are at the heart of the problem and explains the differential in overall health care costs between European countries such as France, or our next door neighbor Canada and the US.


  52. “instead of wasting your energy trying to decide who you can and can’t feel sympathy for, why don’t you learn to empathize.”

    because it’s so much easier to despise your neighbor for having something they didn’t “earn” than to be happy for them.

    Jealousy. Resentment. Envy. Self-centeredness. These things are generally ingrained into the mindset from a very young age.

    The opposites:

    Goodwill. Benevolence. Magnanimous. Sympathy. Empathy. Self sacrificing. Altruistic.

    It may or may not be important which mindset you take with you when you die. ;-)

  53. I wish I were an expert on the Canadian health care system. They I could really debate this issue.

    With this disclaimer: I have a feeling there is a lot of — misinformation about universal health care —in the United States that is generated by a PR machine by the for-profit health care providers. Sorry to say this, but its brain washing, to scare people into thinking universal health care is some horrible expression of socialism.

    Medical care constitutes a kind of “luxury” in the United States. The more money you have the more luxury/medical care you can buy.

    Generally, in Canada, if you or a family member has a catastrophic illness — the kind that can bankrupt even well off Americans — in Canada our medical system takes care of you. You don’t pay anything other than your medical insurance premiums. You will not get the best medical care money can pay for, but it is going to be very-very good.

    Rhetorical question to the naysayers: How Americans can afford the kind of care that, every, Canadian has access to?

  54. Adding here: in Canada, our medical insurance premiums are simply miniscule compared to what Americans pay for.

  55. Typo correction:

    How many Americans can afford the kind of medical care, every, Canadian has access to?

    Our medical insurance premiums are miniscule by American standards.

  56. There is a crisis in healthcare payments, insurance, and ability to pay.
    The U.S. has a wonderful healthcare system of providers.
    The needs of the sick tied to management of access model is cumbersome, expensive and outmoded.
    It is a mystery to me why doctors and dentists skill/quality is completely divergent from their access/payments balance.
    Cost would seem to imply that a dentist is 7-8x less skilled, however he still can make the same amount of money in the economy without relying on premiums nearly as heavily.
    I however think that anyone who can understand the basics of human symmetry and manage the wide variance of human will make more money if i hurt less and can get my self diagnosed ‘including stuff i may not know about myself’.
    I think a dentist model for doctors ‘smaller shops more specialization, less systemic dependence’ is a wholly untried 21st century system.
    Health insurance should be abandoned for single payer. It should come out of our taxes so we can figure out what we really want as a health care system ‘we may be surprised what we can get for 20%GDP’. We pay for it anyways and the management costs are to the moon, everything is not for profit, and thats why IMHO its so expensive, noone knows what the cost is. There is an air that flushing money down the toilet in the name of healthcare is Patriotic and all American.
    Everything has to be worth something, but until it is properly managed chances are the geniuses that mark it up are wrong. Sometimes with catastrophic consequences ‘see banks and their push for transaction based profits’

  57. It offends my sensibilities that there are people who basically believe this

    No one believes that, it’s a total straw man.

    Economics is about the allocation of scarce resources amongst alternative uses. There are really only a few ways to do it and, typically, the price mechanism is the best way: it discourages over-consumption of the resources and signals where to allocate resources within the market. But that said, even the most doctrinaire free marketer doesn’t think that society should lack charity toward the poor. Should that charity be through local, social organizations or through some government (local, state or federal?) An interesting question, with, I believe, reasonable arguments on either side.

    With respect to the Federal govt. taking over our health costs, I must direct you to the tenth amendment. If you think government healthcare is a good idea, I encourage you to take it up with your state’s government, which is constitutionally entitled to do something about it.


  58. Why don’t we health-tax farmer for producing Spinach, too much of it can kill you!

  59. American health care began to go off the rails with Medicare. The sequence of events fueled by the interaction of government benefits and the private market goal of profit over time conspired to make health care unaffordable.

    It started with Medicare with its then guaranteed cash flow. For the first time , the hospital business could be looked at as a growth business. Hospitals began to compete on the basis of the quality of care, not price. Quality improved, but so did price. A lot. Studies have shown that in the first 20 years of Medicare the cost per day of a hospital room went up as much as ten times.

    Most Americans until relatively recently were well covered by their employers, so price rarely entered into the equation, except for catastrophic illness. Add in to the mix, the growing influence lawsuits and malpractice claims. Then add a growing elderly population with more and more benefits. Prices spiral upward. The lawyers force cadillac care for the dying, so by some studies, 30% of health care costs are spent on the last six months of the dying elderly.

    Then add additional guaranteed care for the poor. Then for most of the children. Pretty soon people start noticing that prices are getting out of control.

    So what does the government do? While still mandating coverage for the poor and elderly, it decides to pay less for that care. A lot less. And then it decides to pay many months and sometimes years late. So the doctors and hospitals need to get the money from somewhere.

    So now we have a system where the employed, insured taxpayers are not only paying for the health care for the rest of the population with their taxes, we the insured are also paying through the nose to fund indigent health care with our premiums too.

    The increasing doses of socialism got the health care system into this mess. Additional doses of socialism will not cure the we the patient, it will kill us.

  60. At the outset it was mentioned that health care and health insurance are not the same thing – then largely ignored. Viewed cross-culturally, health care is how societies cope with the reality of illness and health from conception to death.In this regard, all humans require health resources independent of whether they lead someone’s conception of a ‘health life style’ or not. We can note that there are quite different conceptions of how and what a society should do for its members (e.g. Spartans exposing unwanted infants) but all societies are predicated on some kinds of mutual obligations.These obligations (not contracts pace Locke) are typically based in generalized reciprocity. Sen and Nussbaum framed these kinds of problems in terms of capabilities (e.g. do people command food resources, do women command educational resources, etc). Like caring for dependent infants and socializing children (e.g. education), and caring for our kin as infirmity and then death ensues, these are crucial aspects not just of a good society but of every society.
    How you generate and allocate the resources necessary to do this is a linked but separate question. Insurance is a means of buffering risk – in exchange for profit if all goes well.
    We have viewed access to food resources as a sumum bonam, typically education to a considerable degree the same way. By and large we don’t shoot the elderly because the are inherently costly and unproductive

  61. My, that is a high horse. How’s the view?

    Spending your own money is “self-sacrifice”. Spending someone else’s money is merely exercising your power. Please do not confuse the two.

    You can spend your own resources however you please. Myself, I would choose to help someone born with a heart condition before I would help someone reaping the consequences of a lifetime spent ingesting tobacco and saturated fats. (And yes, it is a choice. None of our resources are unlimited.) Forcing me to choose the latter over the former could be described in many ways, but none of them would involve the terms “benevolence”, “goodwill”, “empathy”, or “self sacrifice”.

  62. I left the FIRE sector for four years to work in healthcare after 9.11.

    I worked on the lowest level of the totem pole, changing diapers of incontinent patients, cleaning out homeless peoples’ abscesses, etc. It was ER work, so there was an emphasis on cardiac and Diabetes Type II because of the income level of people we were getting, but we had a nice share of drug addicts and homeless. But not so much trauma as other ER’s would get.

    After this experience, I would like to put forward the idea that our society has essentially been subsidizing preventable illness, specifically Type II Diabetes and cardiac disease.

    In terms of long-term planning, I don’t see a big difference between the FIRE sector’s disasters and American health care. They’re both focused on the bottom line. They’re both grossly mismanaged. There are too many “best and brightest” who can’t see the forest for the trees.

    We need to move the money out of end-of-life issues (no, your 85-year-old grandmother does not need or want or deserve a hip replacement – and those invasive surgeries are not done for the patient – duh! – but for “billability”) toward prevention.

    Number one is early childhood education, and by that I mean training.

    Yes, you need to do something about the food supply, but I also live in a world of “toxic junk food” and manage to make wise choices. I do that, and I work out every day ONLY because I was trained to do that. ONLY. Also, I only do that because my neighborhood is safe to do that in, and I am big enough to go out on the street on my own – you can’t say that for a lot of the kids who are suffering from diabetes.

    Don’t even get me started on childhood asthma, which inhibits children’s activity, which leads to obesity and overweight issues, which leads to diabetes type II, which leads to heart disease.

    Diabetes Type II is not so “manageable” as pharmaceutical companies claim – but it is preventable.

    Dr. Dean Ornish of UCSF has proved in clinical trials that his lifestyle prescription for heart disease is more effective than invasive procedures.

    But we can’t bill the insurance companies for what Dr. Dean Ornish wants to do. Gym and yoga memberships are cheap, vegetables are cheap. Meditation is free. Thus, it’s not health care.

  63. What part of the federal government providing health insurance would be unconstitutional? The power to tax income is clearly constitutional, are you implying the power to buy certain types of outcomes with tax proceeds is delegated to the states? Something like the government can (constitutionally) take as much money as they need, but only if that money is going to be used to pay for defense and the other roles specifically delegated to them by the constitution? I’m really trying to understand the argument here…

    And, of course, you have to recognize that states’ rights is pretty much a dead issue, if you were ever able to actually get the federal government to stop doing all the things a this-strict interpretation of this clause imply they shouldn’t do, you’d just be setting the stage for a huge slate of amendments the next day. People want their governments to supply these things and there are serious problems with having them provided by states rather than some central government.

    State-level universal care is a perfect instance of this. If state X decided to provide free care for all its citizens, the adverse selection of having every seriously sick and uninsured person load up and move to state X would bankrupt it. There is a huge incentive for nearby states to free-ride on the generosity of X’s taxpayers, especially since the productivity of dying workers is generally pretty low, so what are you losing out of your tax base? X could set up residency restrictions, but this is basically saying that, at least for the case of healthcare, you no longer have a federal system but instead a collection of independent countries.

    Universal healthcare is a social good and one that can only be provided effectively by the central government. You can argue there is a legal hurdle to this in that it would require a constitutional amendment to enact. I disagree with you and I think I’m in the majority but really its beside the point… the question is whether the government should provide universal healthcare or insurance and then we can discuss how to legally make it happen.

  64. Carson,

    As someone who used to change “little” Timmy’s diapers, I suggest Little Timmy never needed to get sick in the first place.

    I believe California spent 22.7 billion dollars on overweight/obesity-related illness in 2003.

    We are subsidizing illness by refusing to institute common sense demands of our citizenry.

    Making demands of the citizenry to stay fit can only be done through education.

    Most people, even children, given the tools, would prefer to be fit rather than fat.

    The most expensive, fastest growth diseases are obesity and overweight related: Type II diabetes and heart disease. The two diseases work in tandem – you get T2, you’ll probably end up with HD.

    It would be a large government program, but it wouldn’t necessarily be an expensive one. Especially compared to what we’re already spending on otherwise preventable disease.

  65. I am one of the fortunate people with the managed health care of Kaiser. For all the belly aching i have heard about them over the years i have had nothing but perfect care. Years ago i developed a bone tumor in my skull that was not possible to determine if it was cancerous until the bone was removed. They carefully sent me to the appropriate departments to investigate including MRI, Cat Scan, Bone Scan etc. Never once did they question weather i should be treated.

    On the other hand yes they will question some operation procedures if they deem them unnecessary but isn’t that what managed care is about. You have to make some difficult decisions. Many people

    I cant help but feel that the Private managed care of Kaiser is the best model for the government to move forward nationally. They have to the best of their ability been able to work out a lot of unnecessary costs like a central patient database, experimental procedures, etc. There is great comfort in knowing that all my doctors have the exact same database on me and i do not have to hassle with ANY paperwork when i need help. I am sure my surgery costs 25,000+ and i saw no paperwork beyond my checking into the hospital. WOW!!

    I am not financially benefiting from this post, i just think this is the best direction to look for the solution.

  66. You know what I really hate, that my tax dollars go to pay for cops to repeatedly go and help out domestic abuse victims. These women have chosen again and again to be with men who treat them so poorly they need the police to intervene. Not getting the crap beaten out of you by your husband doesn’t come for free, it takes the DISCIPLINE to leave the guy and develop healthy relationship habits. There should be a living-with-assholes tax so that rich people – many of whom have higher-functioning relationships than poor people – don’t have to pay for the decisions of those who choose to over-consume unhealthy relationships.

    If you couldn’t tell, I was kidding. Social goods are weird and they will always involve free-riders and tragedy of the common type problems. We should work to minimize them, but we’ll never drive them out of the system completely. The focus on the least-deserving beneficiaries of a certain social good and then saying “I don’t want my tax dollars to go to that.” Is utterly beside the point. You get some irresponsible eaters with your universal healthcare.

    You can try to internalize the externalities through junk-food taxes and the like and I think we should seriously discus alternatives to do things like that. Markets should show people the true costs of their decisions when they make them. But at the end of the day in a free society you’re always going to have some guy who made decisions some parts of society don’t appreciate and the question is should he be able to get medical care in spite of that fact?

  67. Statsguy:

    “- The US spends more, but our life expectancy is lower than many comparable countries. (There are many explanations, but one recent study noted that even controlling for all known factors, people in the UK live longer… WHY?)”

    You’re usually a lot more specific.

    Did the study’s control of all known factors include obesity/overweight? Even if you told me it had, I and a host of other health care workers would be deeply skeptical.

    Trust me, there’s nothing like changing the diapers of your 19th, obese, incapacitated 36-year-old male who has Type II diabetes and heart disease to convince you that the definition of “health” as in “care” has been completely subverted.

    If you don’t get fat/inactive/smoke you don’t overtax the crappy health care system, which means there’s more health care for people with non-preventable illness.

    If you don’t get fat, the nurse won’t throw her back out trying to lift your pelvis to insert a catheter. And if you don’t get fat, you probably won’t need the catheter in the first place.

    The catheter is made out of plastic. The plastic is made out of petroleum.

    It has to go in a waste dump.

    Think about it. These aren’t isolated issues. And obesity/overweight related illness is not a small part of the picture by any means. Don’t believe me? Go hang out in the ER of your local hospital for a few days.

    The Greeks “starved” all through WWII, surviving on olives and grains and very little animal protein from goat’s milk. And yet, when the US Army docs came in to study them post-WWII, they realized these people were incredibly robust. They hadn’t been missing anything but satiety.

    Fast forward to the present: with a surplus of more “sophisticated” Northern European style foods (more refined grains, less vegetables, more meat), Type II diabetes and heart disease is now a problem in Greece.

    When did it become the right of citizens to let their bodies fall apart AND expect super-sophisticated and super-plastic-wasteful health care?

    Don’t even get me started on the pharma-medico-industrial-complex… that’s a whole other ball of wax.

  68. Subsidy has a tendency to distort prices in the medium to long run so this is not as simple as it seems.

  69. Also, if you want to outlaw slavery, let women vote, or have an income tax, you’d better take it up with your state’s government. Remember, tenth amendment! There is no way to get the outcome you’re looking for at the federal level! It’s impossible! Tenth amendment!

    Carson, this is an argument about how hard it is to get federal universal healthcare, not if we should or not. If I allow you the point that it will be politically difficult to enact this, can we get off the states’ rights thing?

  70. Apologies for the laziness in linking – here is a summary (I can’t find a free copy of the JAMA study).

    It appeared to be chock full of controls, which is what caught my attention – and none of them explain the differences. (I can’t say I looked deeply at the methodology. It was a retrospective epidemiological study, and therefore vulnerable to all the standard complaints, but it’s quite hard to ignore, and the differences were large – in spite of the fact that Britain spent less than half of what the US spends per-person on health care costs.)

    It’s studies like this that prompt the question – what they heck are we doing wrong? The rather frightening part is that we really don’t know. It could be some dietary factor that was not controlled (corn syrup consumption?), some unmeasured aspect of exercise (allegedly, they controlled for obesity – but who knows if they controlled for degree of obesity or simply rate of obesity), or lack of sleep (yes, we do sleep less, and WHO just classified lack of sleep as a known carcinogen), or workplace stress… Lots of theories.


    In your description of catheterization, you forgot to mention morbidity/mortality risk from urinary tract infections (especially with increasing antibiotic resistance)… :)

  71. Nemo,
    Europe has universal HC, and it also has many major Drug companies, you might have heard of a few of the Glaxo Smith Kline, Sanofi Aventis, Roche etc. Not every drug ever discovered came from Pfizer or Merck. Besides, most of the basic research is done by the NIH not by the drug companies. that being said, there is good reason to try to find ways to bring down the outragous costs of bringing a drug to market. Perhaps streamlining phase 3 trials of drugs in the same class as existing drugs or something like that. Drug companies on the other hand spend more on marketing than they do on research. I would welcome the outlawing of public advertisements of Rx drugs. Ok, you can advertise in the New England Journal of Medicine, but not on NBC. That would bring down the costs quite a bit.

  72. This is challenging – we graduate plenty of doctors compared to the rest of the world. We have more per capita (largely focused in specialties, some that are not really helpful in reducing mortality). Yet worse outcomes. And, our doctors work more hours.

    Also, scarcity is rarely a hard constraint – it means that we would need to sacrifice something else to get more doctors (perhaps, have fewer investment bankers?).

  73. lots of things in medicine travel across state lines (ie drugs) so would fall under the commerce clause

  74. if fido gets sick, you have him put to sleep. If you do that to Grandpa, its called murder. Allow people to put down Grandpa (and have a culture in which it is socially acceptable and I dont see that happening or favor it) and you would see the total cost of HC come way down, eliminates that “last year of life issue”

  75. I do not believe “health care” is scarce in this country. Access to health care is the problem. I can find a lot of doctors for a skin cancer check or for an annual check up – but whether or not they are in my “network” is usually what determines who I see.

    The way health care treatment is approved and paid for is a challenge. For instance – let’s look at type 2 diabetes. This is indeed, for many patients, a disease that is life-style related.

    Health insurance will cover the meds. It will cover insulin shots. But is severely limits (if it covers at all) any kind of treatment with a dietician. If you’re lucky, you’ll get three hours a year with someone who can help you make lifestyle changes that can limit the progression of the disease.

    Health insurance won’t pay, so most people stay on the meds and get confused about diet… and the disease worsens, requiring more expensive treatment.

    Same with something like ADHD. Insurance will cover meds, but not visits with a behavioral specialist who could help the patient develop appropriate behavioral strategies to limit the need for meds.

    The health care system in America seems as diseased as the financial system.

    And yes, obesity is an issue, but sadly, I know far too many people who did not smoke and who were not obese who died of cancer. So ill-health is not always the result of a “life-style” choice.

  76. Okay, I well remember when that study came out – one of the researchers was interviewed and mentioned an 85-y.o. patient in England who saw her doctor ONCE a WEEK. The interviewer asked, “What was wrong with her that she came in so frequently?” And the answer was, “Nothing. She comes in once a week and has her blood pressure checked, which is fine, and then she goes home.”

    The implication was that the social support that included this weekly check-up had been sufficient to ward off illness, which would have been more costly to treat.

    The inability to look at the system as a whole and to plan long-term is as consistent in the FIRE sector as it is in the US health care system.

    We don’t need more doctors and “specialists” any more than we need more hedge fund managers. What we need are Physical Education teachers. Busloads of them. And better nutrition and cooking classes. And a better healthy food distribution network.

    The answers are just embarrassingly simple. But you can’t bill for simple. You can’t be a hotshot doctor specializing in “simple.”

    It’s certifiably cruel to keep telling people we’re going to be able to continue to provide costly “cures”, which then gives them the false impression that the disease shoudn’t be prevented at all costs through lifestyle changes.

    Dr. Dean Ornish’s work is fascinating in this regard – diet and exercise is more effective than stents. Of course.

    But stents – those you can bill for!

    As for UTI’s, you’re right, I forgot to mention antibiotic resistance. I also forgot to mention the sheer outrageousness of the odor you suffer while helping to insert said catheter – woof.

  77. Anne:

    “And yes, obesity is an issue, but sadly, I know far too many people who did not smoke and who were not obese who died of cancer. So ill-health is not always the result of a “life-style” choice.”

    I totally agree. We need to do a better job of preventing the preventable disease, so that we have enough resources to take care of people who have non-preventable illness.

    I don’t think anyone gets the coming T2 Diabetes epidemic rolling down the pike. It’s budget-killing.

    And until we give phys ed teachers the respect and job security we give to Harvard-trained specialist physicians, we’re doomed.

    As for cancer: The thing that worried me as I threw out bag after bag of plastic-based medical waste – are we creating cancer with all the plastic we’re making to, uh, treat cancer?

  78. Excellent job at proving my point. Keep talking Nemo, it’s quite entertaining.

  79. It’s not a straw man. I speak with people like this every day. They say “why should i have to pay my money for some lazy slob, or chain smoker, or obese person to have health care? It’s my money and I earned my ability to afford health care, they didn’t. They don’t deserve my help”

    Nemo says as much upthread and every where else on the internet, and republican/conservative clients or mine say it too. It is offensive as all get out. It is ignorant and it is hateful or thy neighbor. It iscertainly anti-christian and it is certainly selfish.

    As for states rights, you’re a broken record as well myopic as the commenter above me points out.

    I can’t be around half the bigoted racist seniors in my neck of the woods because they are so offensive, but I still pay social security and medicare otherwise they’d be out on the street frightening the children and we can’t have that.

    It’s the right thing that my neighbor has health care even if he’s abusive of himself or others, doubly so for the woman/man/child struck with cancer through no fault of their own.

  80. If you have nothing to say, perhaps you could say nothing?

    It must be nice knowing that everyone who disagrees with you is motivated by jealousy and hatred, while you yourself are motivated solely by goodwill and manganimity. I mean, if I felt that way, I would never need to engage in self-doubt or critical thinking at all. Boy would that be nice.

    Once again: Giving up your own money is charity. Giving up other people’s money is public policy. Please do not confuse the two.

    Back in the real world, resources are finite. Therefore, some people will not receive the health care they need to stay alive. So health care policy is, in part, deciding who lives and who dies… Which is why it is very difficult to have rational discussion about it. Especially with certain types of people.

    You may have the last word.

  81. Well I don’t know about Americans storming our borders for free health care. You have to be a Canadian and pay medical premiums or qualify in some other way. It is against the law not to provide medical treatment to a citizen even if they lapsed in paying their premiums.

    As for prescription drugs. That’s another story.

    A few years ago there were bus loads of American seniors crossing our border to buy our prescription drugs. There was even a state or two that attempted to buy their prescriptions drugs from Canada.

    I can’t remember what happened. But it seems to have cooled off after hue and cry from US pharmacies.

    So why are prescription drugs cheaper in Canada? Because our governments buy in bulk and get a discount.

  82. Yes, I’d heard the last year of life creates 60% of healthcare costs. Is that right? It sounds high.

  83. Trae,

    I don’t think my argument is very hard to understand. But then, it’s not my argument. It’s the tenth amendment:

    “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

    the question is whether the government should provide universal healthcare or insurance and then we can discuss how to legally make it happen.

    I think that’s a dangerous philosophy, if it discards the rule of law in the name of the ends. That means we are ruled by men rather than laws. Think about what that philosophy would (will?) imply when people who you find less agreeable hold sway over our central government.

    Federalism is the freedom of every state to go to hell in it’s own way. California can be as socialist as it likes, and Oaklahoma can be as libertarian as it likes. Seems like a civilized compromise to me. Would there be problems? Sure. Crooked timber and all that. Would it be less efficient than other options? Absolutely, and by design.


  84. The commerce clause cited as justification for clearly unconstitutional overreaching by the central government? Boy, that came out of left field.

    Let’s see if I can play this game. Air crosses across state lines. Air is necessary for humans to breath. Therefore the commerce clause implies that the central government can regulate human breathing.

    This is fun!

    Given the implications, I wonder what, exactly the 10th amendment actually delegated to the states and people. Nothing, I suppose…


  85. Again great point. I also had Kaiser many years and am about to again. Being 23 or so at the time, I picked it primarily because its nearly everywhere in Southern Cal in addition to a few other states and I rightfully assumed that should a medical emergency arise there would be far less hoops to jump through versus the seeming more customized yet rigid providers out there, who seem to be regularly complained about. A girl who I worked with and subsequently ended up dating, years later left our common employer and moved to the City of Los Angeles, whose plans with Kaiser were not as encompassing as her previous employer. After the job switch, while at Kaiser for a cursory visit, she was asked for a copay. Upon requesting to know why it was necessary, I reminded her that though she was still with Kaiser, she was now under her new employer and perhaps a different type of plan. The lady at the desk took my card, which of course reflected my girlfriend’s previous plan and sure enough I would not have had to pay the co-pays that she was being asked for. The lady went on to intimate that my Kaiser coverage was the best offered by Kaiser and that the plan covering my girlfriend while pretty generous would require co-pays for some test and/or procedures.

    I didn’t really have any bad experiences with Kaiser that I can think of. Still while it should have been a given I was surprised to find that all Kaiser plans were/are not equal. Obviously I have no insider information, but would guess that a setup such as Kaiser probably has far fewer instances of exotic or varying cost for similar procedures. I do want to add that there was a Trust responsible for overseeing medical benefits across the various unions and management representative of the full body of employed at my place of business. Back in 2004 it came out that they were raising everyone’s contributions to cover Blue Cross having raised their rates. Those of us with Kaiser were upset because we felt that if Kaiser’s rates were either unchanged or merely not increased to the same extent as Blue Cross, then it was a wholly unfair endeavor to force us to subsidize people who had chose Blue Cross for themselves.

    They seriously attempted to keep people from finding out that this was going on and had actually occurred twice before. The logical thing would have been to appraise those who chose Blue Cross for themselves that their rates were going up and to see if they wanted to switch to Kaiser, the other PPO or bear the increase. There could also have been a decision to end our company’s ties to Blue Cross. I never understood why the Trust would do things as they did and I always felt that there was something unsavory if not outright corrupt going on with that. Was this an isolated bad decision or is this something that takes place often. How does Blue Cross have so much influence that people who chose not to have Blue Cross’ services were forced to subsidize those who chose it?

  86. There is no way to get the outcome you’re looking for at the federal level!

    To the contrary, there is a perfectly good way to get that outcome: amendments. Which, in all three cases (with a touch of coercion in the first case) is what we did.

    If I allow you the point that it will be politically difficult to enact this, can we get off the states’ rights thing?

    Not politically. Legally.

    And no, we can’t. It’s good for all the statists here to have someone around to challenge them. <smile/>


  87. American health care is completely dysfunctional because it is totally dominated by for-profit corporations.

    Costs are hidden by insurance companies and hospitals, poor nutrition is shoved down millions of throats daily by fast food companies and chain restaurants, drug companies relentlessly push me-too lifestyle meds on a captive market.

    There is a huge disincentive to reduce costs by these entrenched interests.

    In addition, since health care is really the only job driver left in the service-based American economy, there is a huge incentive for policy makers to create lots of useless private sector jobs, also increasing costs and decreasing efficiencies, with no obvious improvement in outcome.

    So, instead of a single payer, more and more hands touch the money as it changes hands.

    Welcome to the future. Here in the states, we call that “an economy”.

  88. 60% of Americans are overweight. 30% of Americans are obese. 90% of Americans do not exercise regularly. According to my cardiologist, only 1% of his patients lead a heart healthy lifestyle.

    Seems to me your social good is being supported by 10% of the population that leads a reasonably healthy lifestyle. According to the IRS, 10% of tax filers pay 70% of the income taxes. 40% to 50% of tax filers pay NO income taxes. I would venture a guess that the 40% to 50% that pay NO taxes will most likely be the largest consumers of health care dollars. The numbers are nothing like your occasional woman who has an affinity for a wife beater husband.

    As Americans we already do not pay for all the government services we receive. That is why the national debt keeps increasing. Just think when we have universal health care. At some point foreigners will stop buying our debt and we are going to have to pay our own way. At that point we are either going to print money (we are already printing money during this crisis) and experience rampant inflation or we are going to need to raise taxes dramatically, which will choke off economic growth, or we are going to ration. Rationing is a cool idea and is what is practiced in all counties with universal health care. If some yokel gets in line for a life saving operation before a physicist and the physicist dies before receiving treatment, the country loses a brain and the value that that brain can produce in return for saving the life of a yokel who will going on consuming national wealth but producing very little of it.

    Life is not fair nor does life come with entitlements. By trying to make fairness a national objective and by creating all sorts of entitlements, it is my opinion that this country will eventually go bankrupt, both morally and financially.

  89. Ron, I totally respect the opinion that socially guaranteed healthcare is too expensive or simply not a priority for your tax dollars. I personally think we as a society can afford it and it is something that is in our best interest as a people to do (and I think people recognize this deep down which is why we have the weird hybrid market/safety net system that is in place today). But all of that is definitely debatable.

    My point was that the examples both sides use in the debate focus on those ends of the spectrum everyone in the society would gladly choose to include/exclude from the system if we could target social goods… which largely we cannot. The flip side of your irresponsibly obese poor person is my single mother supporting young children, working three jobs, finding time to go to the gym every day, riding the bus 30 minutes out of her way to get organic produce on her way home from work but who can’t find money at the end of the month to pay for health insurance… I’m sure there are a couple of those out there or [insert your own heartwarming story here].

    You can say it’s too expensive to cover the single mother given all the irresponsibly obese and that you’re really sorry about that (or not sorry, there is no need for emotional content), but its disingenuous to say you only are against universal coverage because it would benefit mostly lazy fat people the same as it would be disingenuous of me to claim everyone should be for universal coverage because most people getting it would be yoga-happy uber-healthy-and-responsible single mothers. Both arguments ignore the nature of social goods and obscure the real terms of the debate.

    The rationing argument is a really weird one but I hear it all the time. I think it’s a symptom of our dual national obsessions with microeconomics as the explanation for everything and with the government as the last institution you want to do any job. In a normal market (let’s say for widgets) the tragedy of price controls is that at that price (assuming its below the equilibrium price, if its above, who cares?) producers will make fewer widgets than demanded (and the government has actually raised demand by lowering the price so now not only are there fewer widgets than can supply the set of people who originally demanded widgets, there are even more people clamoring for widgets than before). Typical rationing situation. Since the price mechanism no longer works for sorting out those who demand widgets, the government (or some function other than price) has to step in and determine who gets the widgets at the depressed price. One way to do it would be first-come-first-serve as in your yokel/physicist example. Another possible way would be to have a board set up to determine “future production of national wealth relative to consumption” and sort that way, but the point is the price mechanism is no longer a functioning way to determine who gets widgets.

    The reason I find this so weird is because its intuitively obvious that the price mechanism doesn’t work in the market for healthcare as it exists without price controls. If we have 2 heart transplants and 3 people who need them, we can’t raise the price until the first guy says “well, you know, at that price the utility of that heart transplant is less than the utility I can get buying a flat-screen TV, so I’m going to go do that instead, you guys enjoy your hearts.” People just don’t respond that way. So, without a working price mechanism we already have rationing, it’s just not the government doing the allocation. People like to believe we have allocation by what sort of job you have and if you were responsible enough to pay for insurance before you got sick. This is kind of a rough proxy for your “future production of national wealth relative to consumption” criteria. But, when it comes down to life-saving treatments the fact is we get first-come-first-serve with the added bonus that the uninsured yokel is financially ruined by the cost of the life-saving treatment. You can argue that we should institute a system where some group makes determinations of who should get hearts and who shouldn’t based on value to society, but don’t pretend we have a widget-like market for healthcare today (that healthcare/insurance doesn’t work this way is precisely the point of James’s article).

    [Way too long post already, but I have to acknowledge the arguments that the high prices for these operations will bring in new capacity in the long run that won’t come in if the prices are artificially suppressed… this mechanism definitely exists in theory, in practice I think it’s been perverted into coming up with ever-more expensive treatments to take advantage of the inelasticity of the demand rather than bringing in more capacity for good-enough life saving treatments]

  90. Carson, I’ll just combine responses here for this and the stuff below.

    We seem to not be getting each others’ jokes (the amendment thing was the whole point of my post below), so I’ll lay my thoughts out more clearly here.

    Let’s assume we have this national conversation and agree we the people want universal healthcare. For reasons I stated above, I don’t think doing it at the state level will be effective. So, we will want to do it at the federal level. How to do that?

    Hardest scenario: You’re right and the Tenth amendment really does make it unconstitutional to do this at the federal level. So we need an amendment. No discarding the rule of law, just a recognition that it is really hard politically to achieve this legal outcome. But the Tenth by no means precludes us doing this at the federal level if we really want to, it just makes it hard. Tyranny averted! Yay!

    Slightly easier scenario: The federal government already has the right to levy an income tax, the argument that they constitutionally can’t use that money to provide certain types of outcomes seems weird. Repeating the amendment doesn’t really constitute an argument for your interpretation of the amendment, but I’ll give you the benefit of the doubt and assume you didn’t understand what I was getting at. Here goes: distribution of money to citizens for a particular purpose doesn’t constitute a “power” as described in the Tenth and so it doesn’t have to be cleared through an amendment. This is the path of federal power in the last many decades, for example in programs like Social Security. I imagine you’ll argue that Social Security is itself a violation of the Tenth amendment. Probably an interesting argument, but really really off-topic, especially in light of the fact that all it does is move us to the hardest scenario.

    My main point is we’re nowhere near the point of figuring out how to do this, still in the “should we do it?” phase. Claiming that while we’re discussing it we should keep in mind there is NO WAY WE COULD POSSIBLY DO IT FEDERALLY WITHOUT UTTER TYRANNY is both incorrect and unhelpful.

  91. We already have heath care rationing. It is rationed based upon economic value added. As we move away from this rationing system, we will end up creating a greater burden on those parts of society that are the value creators. It will have implications for future economic growth (reduce it) and personal freedoms (the right private property). Is it fair that 10% of wage earners already pay 70% of all personal income taxes?

    In a democracy, politicians, in order to get elected, will continuously seek to expand entitlements and the voters will continuously expect them to be expanded. That’s human nature. It was not too long ago that Americans were embarrassed asking for and receiving federal help. Today we have organizations that promote having Americans demand all sorts of payments from the government. In their minds, it is their right as Americans to have these benefits. This is where President Obama comes from. His mentality is wealth redistribution not wealth creation.

    Well, if it is their right to have an ever increasing buffet of benefits, then that right comes at the expense of my right to private property, which is where I think we are going. I see nothing in our founding documents to prevent confiscation of property, if a majority of “the people” vote for representatives who believe that for “the common good” Americans are “entitled” to an ever expanding list of benefits — social security, health care, food, mental health counseling, college educations, private homes so far, and what could be on the horizon — vacations, green cars, dental, a better diet, a better wardrobe (after all, if you are walking around with threadbare clothes, ones self image has to be negatively impacted), pet health care (after all, pets are positively correlated with better emotional and physical health). Will we then become a communist country in fact if not in name?

    As I said before, Americans have not yet had to pay for all the benefits they currently receive, and we are now adding more. At some point, when the 10% who support the 50% see more and more of their assets confiscated, I suspect there will be a large negative impact on work, investment and risk taking. We will then enter a phase where more wealth is being destroyed than created.

    I see this happening already. People I know are shutting businesses (even before the economic downturn) because the cost of litigation, regulation and taxes became too much of a burden. They now live modest lives but no longer have to spend over half the year working for others. What is going to happen to a country were you can earn a better living suing a doctor than being a doctor?

    I see myself. I am retired. For the past five years I have paid more in income taxes than it has cost me to live. I now earn a living taking stock market risk. If I lose moneyin a particular year, I bear 100% of the loss. If I make money, the government takes 40% of my profit.

    I know that for me I am going to get whacked once Obama gets all the social programs and income redistribution he wants. My reaction: I am not going to create an expensive lifestyle where I have to make a lot of money to live, since the more it costs me to live, the more I have to earn and, therefore, the more of my earnings get confiscated. In the end, the government and the economy will lose more than they will get from their increased level of confiscation both in terms of my consumer spending and total taxes collected.

    By the way, I started my life poor, with $700 in the bank when I got married. My father worked three jobs to put me through university and graduate school and my three siblings through university. At no time did he ask for any federal or state assistance. He never complained. We never ate out, we never took vacations, my mother sewed the clothes, we always had a second hand car and he did all the home repairs.

    Universal health care is one further step toward economic decline. I believe in equality of opportunity not equality of outcome. All men and women are not created equal.

  92. Trae,

    With all due respect, you’re talking about heart transplants.

    Ron’s talking about preventive measures that will eliminate the need for costly, dangerous and NOT VERY EFFECTIVE invasive procedures.

    You’re also talking about “organic produce.”

    Nobody who needs to lose weight needs organic, even if it would be nice. They do need vegetables, legumes and whole grains. Whole grains are cheap. They are accessible. And dry beans are cheap and accessible AT EVERY BODEGA. I also knew plenty of people in Harlem who stocked up on great fresh produce in Chinatown (WAY cheaper than the local Korean markets) once a week.

    A long walk from Harlem to Chinatown, but that was part of the point. Walking.

    But there’s no incentive. Because the medical-pharmaceutical-industrial complex keeps saying they’ll provide the answer AFTER you bloat up and get Type II Diabetes, which WILL lead to heart disease.

    Someone needs to level with the people. We don’t have the money to pay for Type II and its myriad attendant illnesses and infections. We don’t have the money for preventive illness.

    EVERY TIME the patient moves, just moves, he primes his body to make insulin. Walking is exercise, walking is free, so is running. So are pushups, which do more for you than a gym. No one needs a gym. Like organic, it is a nice-to-have, not a must-have immediately.

    You are making it more complicated than it is.

    A HUGE part of the entire cost could be effectively ameliorated if the President committed to a relatively inexpensive public campaign to get people walking/running/doing pushups and had a public education campaign about nutrition/cooking.

    It’s certifiably cruel to make excuses for people when you could be pushing for them to make lifestyle changes to keep them out of the messed-up hospital system. Don’t even get me started on big pharma which wants to invest in new insulin delivery devices instead of taking a tenth of the money for public education for how NOT to get to the point of needing an insulin delivery device.

    I’m as liberal as the next guy, but seriously, this isn’t partisan. It’s humanitarian. We have an epidemic of Type II, and yes, it is linked to heart disease.

  93. I’d also like to point out the Russell Simmons, the hip-hop impresario, was at one point working on a yoga education program for inner-city youth.

    This is important because not every mother feels comfortable letting her kid out to play on the streets; staying inside is a contributing factor in childhood obesity.

    I hate the thought of kids having to stay inside, but yoga is a pretty intense work-out, even for kids, and it has some interesting preventive applications.

    E.g., asthma. I have asthma, and have found a daily yoga practice is more effective than using the inhaler.

    Esther Sternberg, M.D. of NIH and NIMH has conducted research that explains the mechanism. Put simply: reduction of stress hormone output reduces overall inflammation. She cites arthritis and heart disease, but inflammation is a major factor in asthma.

    Sure, it would be better to ban air-polluting cars, but that’s a longer term goal. Most people can do yoga and exercise today.

  94. Ron,
    “We already have heath care rationing. It is rationed based upon economic value added.”

    The entire point of my last post was that this is observably not true. People cannot buy their way to the top of transplant lists. Life-saving procedures, where they need to be rationed, are rationed in precisely the way you derided in your yokel/physicist example, first-come first-served (with severity of needs and the like factored in).

    A direct relationship between ability to pay and quality of medical outcomes may be the way healthcare works in your Rand-ian Capitalist utopia, but not here. (I assume you mean “ability to pay” by “economic value added”. The claim that doctors look forward and figure out the NPV the treatment given the likely future production vs. consumption of the patients and then allocate treatment is too bizarre to consider). If you got rid of all government intervention in healthcare payment it still wouldn’t be the way healthcare worked because it’s not the way medical ethics work.

    Maybe if you could force the doctors to realize the way they do their jobs is harmful to Capitalism you can bring them in line too. Of course under this system, if you had had serious medical problems when you were young and some rich guy’s kid had the same problem and there was only one unit of the cure available, your dad would have gladly stepped aside seeing the economic justice and commitment to property rights of the doctor’s decisions, right?

    Markets based on the exchange of money are extremely powerful tools for a lot of allocation decisions, but they fall apart in some places. Healthcare is one of the places where this is most true.

    I’ll leave aside the whole screed about incentives and going Galt except to say that this too is based on the assumption that the description of the market for widgets is an accurate description of all other economic interactions in all cases and at all scales. A little bit of microeconomics understanding can be a dangerous thing.

    I’m with you 100% on preventative interventions and giving people access to healthier options rather than paying massive amounts to try to battle catastrophic outcomes when they occur. I think to avoid paternalism we need to do it mostly by pricing in the externalities of certain choices (e.g. Pigovian taxes on, for instance, corn syrup to recoup the likely cost of diabetes on the public healthcare system due to their consumption). This is hard, though, and requires a faith in government that is sorely lacking in society today, at least in the US.

    I also agree with you completely that powerful market players like pharma companies have more of an economic incentive to keep people sick than to help them get well and that is what they will continue to do because it makes them money. The problem is we have people like Ron who feel that any intervention by the government in the beloved “free market” is a step towards Communism. In their minds it is a perfect continuum from Free-Market Capitalism (on the right), through Socialism, over to the USSR (on the left, natch). Comrade. It was an understandable Cold War mindset and probably we needed something so black-and-white back when Communism was a serious threat, but it is actively hurting our country today.

    The fact is that the assumption that “free” markets (meaning free of government intervention) are efficient and complete is simply empirically wrong. This fact is obvious and around us every day but we are so blinded by simplistic economic explanations that it hasn’t seeped into the general psyche. This is why I say that a little bit of knowledge in microeconomics is a dangerous thing.

    For an example of a market that doesn’t follow the standard micro theory, I gave the example of heart transplants. I jumped to something stark because the economics are easier to talk about when the choices are stark, not because I think that’s the first time we should start to get involved in policy. Sorry for the confusion. Basically, though, most people are going to someday need medical care, no matter how much yoga they do, and we should also work to figure out policy on that.

  95. In the part of Canada where I live monthly Medical Service Premiums are:

    $54 for one person
    $96 for a family of two
    $108 for a family of three or more

  96. If you work for a successful company you have medical insurance coverage. Successful companies that are paying for employee health insurance, I presume, are creating economic value. If you are a successful professional, you can afford medical insurance. If you are successful gardener you can afford medical insurance.

    I understand that today in most universities students are taught that “we are our brothers’ keeper”, so maybe some day we will have a utopia that such teaching is striving to create, but I doubt it.

    I live in Las Vegas. I moved here from NYC because living in NYC did not allow me to earn for myself until after working more than half a year. I thought that outrageous, especially after reading in the NYT how 40% of NYS’s annual $43 billion Medicaid program is fraudulent — that’s $18 billion a year. NYS obviously doesn’t care. For a $43 billion program, it had only 3 auditors. The reason NYS didn’t really care was because the Federal government was paying 85%. NYS actually benefited from the fraud. I understand this type of behavior is prevalent in many states.

    When I wrote to Medicare about how a doctor I had selected when I moved here was gaming the system and, when I confronted her I was dropped as her patient, I got no response. They don’t care. It’s not their money and it’s too hard to do anything about it.

    I don’t gamble. Before the economic crisis, the gaming casinos were packed — packed with people who were obviously not well off, mostly overweight, 50% smokers, guzzling down supersize pop and beer. The gaming industry generates billions in revenue each year from these jerks.

    It burns me that I bust my butt five days a week in the gym, pay more for healthy food and every night cook a nutritious meal, deny myself all sorts of unhealthy but delicious foods and beverages, and I am going to be paying these jerks medical care as well. Why is it that people cannot set aside money when they are young and healthy in a health maintenance account for when they are old and less healthy, but they can spend on constant enjoyment for themselves?

    I like the Singapore system (where I lived for 10 years). The government mandates 20% of earnings be set aside in a retirement, health care account with a matching contribution from the employer. It’s a private account so when you retire you can do with it what you want. There are restrictions on how it is invested so people don’t gamble it away in bad investments. If you take good care of your health, you get to keep more of the account to enjoy life’s pleasures. If you don’t take good care of your health, you will spend what you have saved on doctors. I think that is a fairer system and it has better incentives. Incentives are big news these day and, while the government criticizes Wall Street incentives, it does nothing about creating incentives for leading a healthy life.

    Now to the extent genes create the problem, a government program to cover major illnesses or accidents is fine, but I have a hard time feeling sorry for someone who has lived a life of self-indulgence and then when payback time comes asks someone else to pick up the bill.

  97. Yes, healthcare is different from food and shelter, obviously. The cost of basic food and shelter doesn’t vary from person to person. THe cost of health care ranges from nearly zero (for lucky me, so far) to a hundred thousand dollars, for my less lucky brother.

  98. Health Spending and Stats compared

    15.3% GDP
    $6700 per capita
    84% population covered

    6.7 per 1000 infant mortality
    77.8 years life expectancy
    34% obesity rate

    10% GDP
    $3,600 per capita
    100% population covered

    5.4 per 1000 infant mortality
    80.4 years life expectancy
    18% obesity rate


    Click to access 38979719.pdf

  99. Ron,
    Sorry, I get worked up about the economics stuff sometimes, I didn’t mean to be overly harsh about it.

    I understand that you’re upset about what you see as the economic injustice around you and the feeling that others aren’t pulling their weight and are even taking from you when you’ve worked hard all your life. I’m generally more focused on bankers (I’ve spent too much time around a lot of Wall St. types) but definitely can relate to the feeling that someone is taking advantage of you through a massively unjust program instituted by the government that is supposed to represent you.

    On healthcare, I think we can do better on all counts (better health outcomes, lower costs, fewer tax dollars on last-ditch efforts to reverse years of health neglect, fewer people bankrupted by medical problems, more incentives for prevention) if we think through the system that will work best rather than grafting a social safety net onto a free-for-all Capitalist system.

    Singapore is an interesting example. Their Medisave program is part of their pension thing (33% of all income straight in) but part of that money goes to current care which makes sense. There is also Medishield and Eldershield which are government-administered health insurance programs that compete with private insurers. They also have Medifund for people who can’t afford to pay for their medical needs. Finally they subsidize about 1/3 of their healthcare costs through other tax money and have pretty stringent cost controls as well as co-pays and other systems to ensure patients don’t over-consume healthcare. At the end of the day, more affluent patients can pay completely out of pocket for uncovered procedures. Their health outcomes are among the best in the world and at a significantly lower cost than in the US or Europe.
    (This info from this site:

    We obviously can’t just port Singapore’s system over here and expect it to work, but I think it’s a good example of a system that recognizes the basic economic facts of the way healthcare actually works and doesn’t get too caught up on either Capitalist or Socialist mantra.

    I don’t think we’ll get a utopia by being thoughtful about the economics rather than the mantras, but I do have faith we can improve things for everyone, not just take from the rich to give to the poor.

  100. Trae,

    In the 1960’s, there was the President’s Council on Physical Fitness. Was it “paternalistic”? If it was, who cares? Children need to be physically trained. We need an enhanced version of this.

    As for the corn syrup that you and StatsGuy brought up: Corn syrup per se does not lead to diabetes. There’s no difference in how corn syrup and cane sugar are metabolized, as far as anyone knows. The problem is the QUANTITY of corn syrup added to SO MANY products.

    I’d vote for higher taxes on junk food, and maybe it will do some good, but the larger problem with Type II diabetes is inactivity. Physical activity, besides burning calories, primes the cells to make insulin.

    I don’t avoid sugar or whole-grain carbohydrates, although I should cut down on the former. (I either run 30 miles a week or cycle 200 miles plus per week, and whole-grain carbs are, as they say, on my menu.) I need yoga for other reasons, like arthritis and asthma control, but I could probably just do yoga and skip the running and cycling.

    The reason for all this activity, besides love of sport: I have always known that I have to stay active, because of my ethnic background.

    For some ethnic groups that are vulnerable to T2, you will actually see T2 show up in people who are normal weight. And in those cases, lack of activity is the issue.

    Some researchers in 2005 thought they had found the specific gene, but that was just for one of the vulnerable ethnic groups, and who knows if they were right. I told this to one of the doctors I worked for at the time, and he sighed and said: why don’t they just tell people to change their diet and exercise?

    He was entirely correct – the discovery of the gene would probably lead to a huge and costly pharma search for a genetically-targeted treatment, but, uh, the best thing is to stay active and eat healthy, not re-jigger your DNA so you can eat more garbage.

    This isn’t about the free market, although I think there are some free market approaches regarding getting more produce to inner-city vendors. (BTW, I’m thinking Adam Smith’s vision of the free market, which I don’t think Milton Friedman or his acolytes paid much heed to.)

    “Basically, though, most people are going to someday need medical care, no matter how much yoga they do, and we should also work to figure out policy on that.”

    Hold on a second. We spend a great deal more per capita on health care than other nations. And yet we have the most embarrassingly short life spans. And we’re some of the sickest people on the planet. So obviously, more health care isn’t going to change that.

    Are you underestimating how lethal T2 is? Have you crunched the numbers?

    Two quotes and links:

    1) “Three out of every 5 patients with Type 2 diabetes suffer from at least one significant complication of the disease, such as heart disease, stroke, eye damage, chronic kidney disease or foot problems leading to amputation.”

    2) “Beyond the impact on quality of life, health complications from type 2 diabetes also contribute to substantial national and individual healthcare costs,” said Willard G. Manning, PhD, Professor, Harris School of Public Policy Studies at the University of Chicago.

    “Regarding annual healthcare costs for people with type 2 diabetes, heart attack is the most costly complication, at $14,150 per person, followed by chronic kidney disease (3) ($9,002); congestive heart failure ($7,932); stroke ($7,806); coronary heart disease ($6,062); foot problems (4) ($4,687); and eye damage (5) ($1,785).*

    “As great as these financial burdens are, this is a conservative estimate, as it only includes direct medical costs,” adds Manning. “Costs attributed to lost employment or productivity, premature death and disability have not been included, and if we factor in those costs, the overall burden would be far greater.”


    Take JUST T2 Diabetes and heart disease out of the equation, and tell me how many more resources we will have for health care?

    MORE health care isn’t the issue. The issue is the efficacy of health care. How do we change it so that we can make more people healthy with limited resources?

    Moving toward prevention is a point that the left and the right should be able to agree on. For the right, it’s about fiscal conservatism, and for the left, it’s about treating people the best way possible.

    Also – don’t underestimate the benefits of yoga unless you’ve taken the time to read UCSF’s Dr. Dean Ornish or NIH’s Dr. Esther Sternberg.

    Lastly, I want to offer an anecdotal story, of the kind that are no doubt frowned upon at, but…

    I had a relative in the old country, who in her 80’s was still walking three miles over gravel roads into town every day to sell her hens’ eggs at market. She had never seen a doctor in her life. She died in her 90’s, which wasn’t SO unusual for her peer group. She had some arthritis, which she treated in two ways: 1) more activity (this is now proven to help prevent worsening of arthritis) and 2) a small shot glass of home-made plum brandy. Had she been provided modern medicine, she would have been prescribed Vioxx, which American members of my family were prescribed. Well, we all know what happened with Vioxx.

    Thanks, big pharma. But I’ll stick to old world activity levels and old world brandy. And of course, my old-world yogurt.

    People are meant to be active, to eat real food and drink real liquor in reasonable amounts. If those are not the control condition, your whole experiment will be bleeped, and you’ll have to start over.

  101. Comet,
    As I said in my last post, I believe the vast majority of your health claims and agree that if everyone lived like you, Ron, and your old-country relative the country would need much less catastrophic healthcare.

    The question is how to achieve this end in a free society? We can’t force people at gunpoint to eat only healthy foods. We could outlaw unhealthy things but, as you recognize, most things are fine in moderation. Plus, practically, we’d get a black market for junk food that would make the current war on drugs and Prohibition look like tea parties (or just have ultra-lax enforcement, which is the more likely option, but doesn’t do us much good).

    This doesn’t even get into the question of how to make people exercise.

    Education and inculcating healthy habits when people are kids will definitely help, but won’t get us all the way by any means. We can make the better choices easier to make and the bad choices harder to make through things like taxes. We can go nuclear and basically say to people that if they get sick because of something society thinks was their fault, they’re on their own (the furthest extension of this idea would be to not only refuse government support but deny even self-paid medical care for any self-caused harm, but that’s a bit insane to think through actually enforcing (back-alley quadruple bypass?)). I personally don’t think this would do much to curb excess because people are really bad at changing their behavior based on far-out (e.g. 30-year-out) problems and we would instead end up with the same sick people, just dying on the streets instead of in hospitals. But it’s an option and maybe the incentive would work.

    Really I think you’ve identified the best options:
    1) Teaching kids and adults about healthy habits
    2) Creating spaces and opportunities for people to exercise (this includes giving low-income workers the financial breathing room (and energy) to spend 30 minutes a day doing something other than working and sleeping)
    3) Stop subsidizing/internalize the true social costs of filler calories like corn syrup (and a host of others) and other unhealthy behaviors
    4) Fix food distribution systems so that healthy options aren’t so much harder to get than unhealthy options in poor neighborhoods (I’m very impressed by the folks that would walk from Harlem to Chinatown for produce, but wow, that’s a lot of overhead for good produce)

    Am I missing any broad buckets of ideas?

  102. Yes.

    I’m with you on the four points.

    But I would add a fifth.

    Get real with the next generation. We cannot and will not subsidize the treatment of preventable illness. That has nothing to do with people who want to pay for things themselves, but it will come at a steep price.

    To you, that’s going nuclear. To me, that’s realistic and humane, as long as it goes with a massive public awareness campaign.

    We can’t afford it. Literally.

    (And I’m actually surprised you tried to link the idea of saying “we won’t pay for it” with “you can’t have it.” That’s pretty far-fetched.)

    I wrote that long post because basically I get the sense that you don’t take the oncoming Type II diabetes epidemic and related health problems seriously.

    (Then again, no one believed me when I said there was a housing bubble, either.)

    I also think you place WAY, WAY too much faith in health care, period. I humbly invite you to spend some time volunteering at a local hospital. It will open your eyes.

  103. I don’t object in principle to your fifth point. I think it will be hard in practice to implement (what about people that were really genetically screwed from birth?) and I don’t think the incentive will actually have much effect… and at the end of the day I don’t think we as a society will have the cajones to go through with it, but long-term societal behavior is really hard to predict, so I could very well be wrong on all of that.

    I included the “you can’t have it” idea both for completeness and because of the weirdness with 100% inelastic goods like life-saving care (e.g. if someone was willing to literally enslave themselves to the state to get a life-saving operation, should we do it then? They’ve seen the light and won’t sin again (by eating bad stuff and not exercising), should we forgive them? I posit that a good portion of the population would be willing, at the moment of death, to choose enslavement over death. Should we let them work off the cost or just deny them the care? There are a lot of weird economics going on at this point in the discussion.)

    My response to this doesn’t have anything to do with faith in the healthcare system broadly and I’m sorry if I gave that impression. My responses stem from two beliefs:

    1) Peoples’ choices when faced with pain or death (for themselves or loved ones) have pretty much none of the qualities of “rationality” as required under traditional microeconomics

    2) As tempting as it sounds, giving the government the role of making rational decisions in these situations is a bad idea

    2a. (Corollary to 2) Giving any large bureaucracy, especially one whose motive is neither the best interest of the patient nor society (but, in the case of private insurance, profit), is an even worse idea

    Basically, I don’t have faith in healthcare, but faith in people to cling to anything that might stave off pain or death and the undesirability of assigning the role of telling them “no, you can’t afford that” to any large bureaucracy.

    I know I got us way off course with the econ stuff at the beginning (Simon is an academic economist, so I feel like this is somewhat forgivable, no?)… I hope we’re ok now.

  104. i simply blame it on the low cost grocery stores. high fat meats and high sodium (cheap) can goods. is it by design to keep the poor dying young. after all it is cheap. james kwak,,,,it boils down to the cost benifit analysis you wrote before. good post by the way. death is a determining factor in the analysis.

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