Friday, August 21, 2009

The Problem Nobody's Talking About

WE NEED HEART AND BRAINS. Now that everyone's focused on health care, it might finally be time to think about it a little bit. Thinking isn't a usual by-product of political debate, but it could be helpful if somebody actually tried it.

The political question is, Do we want the government to be in charge of health care for everybody? Most of us, as we ponder the government's record, are coming down on the "no" side, because whatever government gets involved in typically becomes more expensive, not less, and poorer in quality than what free markets can manage. Additionally, when it comes to health, issues of personal liberty come into play more than on almost any other issue about which the government might want to legislate.

All the fears of a government-run system are justified. Even the darkest and most apparently unmentionable ones, like the suddenly proscribed term "death panels." If the government is responsible for healthcare, there will be death panels. Maybe not tomorrow or next year, but eventually, and they'll be as bureaucratically ruthless as the craziest protester imagines they will. The U.S. Veterans' Administration already has something pretty darn close in full operation.

BUT. And here's where the thinking comes into play. This worst of all possible outcomes will not be prevented by defeating Obama's drive toward universal health care. There is a unique problem with the topic of health care that makes it unlike most of the free market commodities conservatives keep comparing it with. And it's a problem that will be extremely difficult to solve in the long run, whether the chosen instrument is the government or the market or, as the case presently stands, a combination of both.

For much if not most of the services it entails, health care is a commodity. People will make their decisions at the margin based on a rational tradeoff between cost and benefit, similar to the way they buy a car, a house, a college education for their children, and other significant quality of life investments. But the analogy breaks down completely in matters of life and death. At the limit, health care becomes a "Cost No Object" requirement for individuals if not for institutions. Which is simply not true of other commodities. At the limit, people can pass up their dream house, dream car, and dream university as too expensive. Not so when the dream treatment is necessary to prolong life itself. This is the precise point at which the conservative "personal responsibility" argument breaks down. If your child needed an impossibly expensive operation or drug regimen to live, you would probably say anything, sign anything, promise anything, and tell every conceivable lie to procure it, which makes your word as an economic trading partner worthless. There's no such thing as a valid contract with such a person. Life and death is the choice that trumps all other values and codes. People do not regard death as a legitimate trading chip in free market bargaining.

There are multiple reasons why health care costs are rising faster than the rate of inflation. The government is already involved in subsidizing health care for a huge chunk of the population, and whatever the government subsidizes, it produces more of. I believe the record indicates that Canadians go to the doctor more often than Americans do. Americans on Medicare probably go to the doctor more than they would otherwise. Why wouldn't they? It costs them less cash than if they were paying for it out of their own wallets. Frivolous malpractice suits are another big contributor. Suing the doctor is a viable income alternative in this country. This drives up costs in a host of ways -- doctors pass on their malpractice insurance costs to all their patients, they perform tests and procedures they wouldn't otherwise regard as necessary, and they generate expensive additional paper trails that are purely defensive in nature. (No one, to my knowledge, has quantified the cost in quality of doctors practicing medicine with an eye constantly on the lookout for "cops" in the rearview mirror.)

Yet the biggest, deepest driver of increasing medical costs is the expansion of medical technology. There are more things that can be done to treat, cure, and prolong the lives of patients. Stuff the good old family doctor who once made housecalls could never do. (His pro bono kindliness, even if restored, could never make up the difference.) And all those things, especially the newest and greatest things, add huge increments of cost to the entire system. This phenomenon is entirely consistent with free market principles. The first VCR, the first microwave oven, the first iPhone, the first HD television cost a small fortune. As more competitors enter the market, the price falls. But consumer behavior does not follow the normal pattern in medical situations. No one says, "This new set of innovative cancer drugs is too expensive; I'll wait till the price comes down in a year or two." The definition of rational behavior in this circumstance is different. A rational economic decisionmaker could be dead when the price drops to reasonable levels. They have to have it now or it's no good to them at all.

This is not a political problem. It's a major economic problem, a fundamental disconnect between what represents rational behavior to the providers of medical innovations and rational behavior to the consumers of their products. All the ways of arbitrating that disconnect involve unacceptable costs. If we remove the economic incentive for being first to market with a breakthrough product, we will cease to get breakthrough medical products and our health care system will become essentially static. If we enforce sound economic principles on consumers -- pay the freight or don't get the product -- we will be condemning people to death for economic reasons; i.e., free-market "Death Panels."

What's interesting about the present system, the one that's supposedly so "broken," is that it has naturally evolved to handle the disconnect in a way that's actually pretty efficient given the scale of the problem, though still too expensive when we look at the long term. We treat most of health care as the commodity it mostly is. People pay for health insurance and are indemnified against the expenses they regard as most unacceptable. This part of the system works so well that most people are pretty satisfied with it, apart from all the normal grumping and complaining they also spout (if we're being honest) about the phone company, car dealers, their electrician, and their daughter's wedding consultant.

At the same time, everybody in the whole country is also walking around with a get-out-of-jail free card they can play the moment health care ceases to be a commodity and becomes a Cost-No-Object requirement. People with no insurance can go to the emergency room and receive in life-and-death situations the same care anyone else would receive. People who have insurance that can't cover a truly dire and expensive crisis can, when the bills for which they are personally responsible come due, declare bankruptcy. Of course, these additional, unanticipated costs are subsidized in the insurance premiums paid by the people who carry health insurance and by individual creditors, which means that they are already the "brother's keeper" Obama insists they still have to become. That's how the market is bridging the unique and hugely expensive divide between two vastly different definitions of rational behavior.

Overall, the personal costs entailed by the market's ad hoc approach are both rational and acceptable, however much individuals may complain. It may be rough to have to declare bankruptcy because of a life-threatening illness, but what were the stakes? Life and death. If you escape with your life, or with the knowledge that everything possible was done, it's worth the price, now isn't it? All the rest is kvetching. For those who never thought to invest in insurance, or couldn't afford it, there is still an excellent possibility of escaping with their lives. That's not a bad bargain. Is it?

It's the long-term institutional and economic costs that aren't addressed by the current system and probably can't be by a government system that heaps the additional costs of waste, inefficiency, human casualties and economic disincentives for innovation on top of the structural problem of evolving, increasingly expensive medical technology.

The dilemma is this. Doing nothing right now is clearly superior to what's on the table. But doing nothing will also not solve the real problem, which is that the disconnect between economic rationality and human survival rationality will eventually make medical care as we presently conceive it too expensive for both indviduals and society as a whole. Somewhere out there, something's going to break; either 1) people will be denied available care and trapped into early death choices for economic reasons, or 2) medical technology will adjust by ceasing to innovate.

This is the area in which people who are still capable of thinking should start thinking. Hard.

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