The Real Health Care Debate
By Arnold Kling
If you ever want to see a real debate on health care policy, schedule an event featuring Daniel Callahan and me. Callahan is very anti-market, but he and I start from a baseline level of agreement about what the health care issue is all about. What follows are some excerpts from his book, Taming the Beloved Beast, and my own comments.p.1
health care economists attribute about 50% of the annual increase of health care costs to new technologies or to the intensified use of old ones.
What he calls technology is what in Crisis of Abundance I called “premium medicine,” because I want to include the increased use of specialists as well as physical capital. Callahan would agree.
He agrees that Medicare is unsustainable in its current form. He agrees that minor changes to our current health care system, such as those being debated this year, are not going to do the trick. p. 15:
pursuit of such efforts can be likened to one of the endemic problems of end-of-life care, that of embracing hope and unlikely treatments and of refusing to grant the obvious fact that the patient is dying. Do not give up: provide one more round of chemotherapy. Do not give up: provide one more effort toward improving the efficiency and cutting waste in the health care system.
He agrees with me that other developed countries, including those in Europe, control health care costs by restricting supply. The techniques (listed on p. 76) include expenditure ceilings (global budgets), restrictions on the number of medical students and physicians, reduction in hospital beds and shift to outpatient care, control of licensing of expensive technologies, drugs, and devices, and of their diffusion, performance-related payment systems, and monitoring of physician use of resources. He does not attempt to sort out which of these approaches is most effective. He concludes (p. 77)
just about everything that can cost the government money is regulated in Europe…Technology is treated as just one more cost item, but an important one. Control everything else, the reasoning seems to go, and you will control technology as well.
The important point to note is that there is no magical efficiency that comes from eliminating private health insurance (in fact, many European countries use private health insurance). Other countries hold down health care spending by restricting supply, particularly of expensive medical services.
How do we know that it is the United States that is wrong and Europe that is right in its priorities? Callahan just says that we are wrong because we spend more. He does point out (p. 28) that
life expectancy of Americans over 80 years is the highest in the world
but he uses that to make a rhetorical point that Medicare is better than private health insurance, because our life expectancy under age 65 does not look good in comparison with other countries. But I would want to look at death rates from other causes, such as homicides and auto accidents, before making the attribution to our health insurance system. More importantly, the higher life expectancy of Americans over 80 would seem to suggest that our high levels of medical spending perhaps buy us something.
In addition to his willingness to tell Americans how much they should spend in the aggregate on health care, Callahan has some specific changes he would like to see (p. 160-161):
eliminate coverage for contraceptives, male or female (because a risk of pregnancy from intercourse is not a disease, illness, or injury); for assisted reproduction for women over the age of 35 (because a decline in fertility beyond that age is not a disease or illness either); for erectile dysfunction for men over the age of 65 (a normal pattern, not a disease); repeat joint or other surgery for men and women who, after the age of 65, want to continue an athletic recreation life…denial of mental health coverage for all but the most severe cases, not as a response to an unhappy life, a troubled romance, or difficulties raising one’s children.
I wonder if he would oppose coverage for abortion, given that pregnancy is not a disease, illness of injury. Of course, these are only collective decisions if we have collective health insurance.
I have left out much in the book that is valuable and provocative. But I want to get to the points where he and I disagree the most. Near the end of the book, he poses six dilemmas. The first dilemma is cutting Medicare costs without being cruel. He proposes (p. 214)
greater support at the lower levels of basic medical, economic, and social care with corresponding reduction of support for the most expensive hospital and critical care medicine…a health care system should help young people to become old, but not to help the old to become even older
Earlier, on p. 177, he writes:
After age 80…the priority should shift from the cure of disease and acute care medicine to the provision of good long-term and home care…
As harsh as this might sound, I think Callahan may have a point. Because we have government-provided health care for the elderly, it may very well be that in the United States we err on the side of spending relatively more helping the old to become older and relatively less helping the young to become old. However, I doubt that the solution for this is to turn even more control over to government. If anything, the demographics are such that voters are going to want to steer even more resources to the old and fewer resources to the young.
Callahan’s second dilemma is wanting to encourage needed innovation while controlling its effect on spending. p. 214:
We must shift to the use of a priority system for research and allocation decisions.
He doubts the ability of the market to set priorities. He does not think that consumers have the will to resist medical innovation. I disagree, of course. And I also doubt that government would set the right priorities–as he points out, we spend far more on cancer research and far less on other medical research than what likely makes sense from a cost-benefit perspective.
His third dilemma is government vs. the market. On p. 215:
In the end, government must answer to the public, forcing an accountability that is absent in private sector medicine.
Of course, I think this sentence is 180 degrees wrong. If you could summarize the difference between a pro-market and an anti-market person in one sentence, it would be that pro-market people believe that the market as an institution provides greater accountability than does government, and anti-market people believe the reverse.
His fourth dilemma is individual preferences vs. social needs. p. 216:
The traditional doctor-patient relationship, one of the core values of medicine, can be an obstacle to good health policy, invoked too often by many physicians to justify practices at odds with the control of costs.
I actually agree with this, but I do not think that the solution is to impose a top-down change. I think that government can help to provide more statistical information to consumers and doctors, but ultimately I do think it should be up to individuals to decide whether to go with the generic evidence or make a different call.
The fifth dilemma is how much spending on medicine is enough. On p. 217:
There is a need for a public and professional recognition of the finiteness of life and resources. That would mean a different set of underlying values about health, aging, and death–a truce with them in place of the present and increasingly expensive war against them.
So, we should spend less on medicine and more on….what? Big-screen TV’s? smart phones? professional sports? My guess is that if Callahan got his wish and medical spending were reduced, he would not be happy with where money is spent, and his desire for socialist control would only increase.
Finally, he notes the disparity between medical services for the young and the old. he points out that paying for the health care of the elderly by taxing working-age people means taking resources away from people with children. p. 218:
I believe the only reasonable approaches are to concede the greater importance of children and younger age groups for the future than for the elderly and to make certain the economic imbalance does not increase. I would hope the elderly would take the lead in lobbying Congress and their state legislators for good health and education programs for the younger generation.
Once again, the cure for a problem created by socialism (Medicare’s intergenerational effects) is more socialism. For Callahan, the road to serfdom is a joyride.
Despite these differences, I would recommend Callahan’s book very highly, particularly to people on the left. Compared with what so many pundits and policy wonks are saying, Callahan offers a strong dose of reality therapy.