Health Care Free Lunch
By Arnold Kling
Brad DeLong and David Cutler promise one, on behalf of Barack Obama.
As the reforms take hold, costs will drop. As costs drop, insurance will become more affordable. Millions previously priced out of the market will be able to buy insurance.
The first reform that will do this will be a $50 billion expenditure to try to improve information on which treatrments work and which ones don’t. I think it is worth a try (on a smaller scale at first), but the evidence is mixed on how well this has worked when tried elsewhere, notably in the UK.
The second reform is to change medical compensation from procedures to outcomes. Again, there is no evidence that this works, and the result of trying it in the UK was a dramatic increase in costs, as doctors quickly figured out how to game the system.
The third reform is to create insurance purchasing pools for individuals and small businesses. That is very unlikely to reduce health care spending.
The fourth reform is prevention. While there certainly are cost-effective prevention measures, there is no proof that dramatic cost savings are possible with prevention. Sally Pipes says that the notion that government prevention programs reduce costs is one of the top ten myths of health care.
DeLong and Cutler go on:
By contrast, Republican presidential nominee John McCain believes that the central problem in health care is that people have too much insurance and, because of it, consume too much medical care.
I agree with the position that they attribute to McCain. Because health insurance is not insurance, but instead is insulation, it does cause excess spending. Moreover, if you do nothing about insulation, then the only defense you have against excess spending is rationing.
I wish that there were an active betting market on what the DeLong-Cutler fee lunch promises actually would deliver, and I wish they could be forced to put up 90 percent of their net worth in that market. It would serve them right.