Friday, July 24, 2009

How Is Kaiser Permanente Not Like Walmart?

Timothy Noah has an article in Slate today about health care reform, in which he laments the fact that, according to a recent poll, Americans are more afraid of the government having a larger role in determing what medical treatments people receive than they are of the role played by insurance companies. He writes:

The discouraging finding concerns a question that [the Kaiser Family Foundation] doesn't appear to have asked in previous polls. In his July 22 press conference on health reform, President Obama parried a question about the prospect that the government would ration health care by saying:

[T]he government already is making some of these decisions. More importantly, insurance companies right now are making those decisions. And part of what we want to do is to make sure that those decisions are being made by doctors and medical experts based on evidence, based on what works. Because that's not how it's working right now.

It's a powerful point: Wouldn't you rather decisions about your medical treatment were made by government-paid medical experts, focused on which treatment may help you get better, than by private insurance companies focused on maximizing corporate profits? Granted, once a treatment is approved, the government would probably pay less for it than a private insurer would. But, ultimately, government is answerable to the public. Insurance companies are answerable to their stockholders.

As often happens when I read Noah on health care reform, I was a bit boggled by this. Let's try a slight substitution:
Wouldn't you rather decisions about what types of cereal are available be made by government-paid consumer research experts, than by private retailers focused on maximizing corporate profits? ... Ultimately the government is answerable to the public. Retailers are answerable to their stockholders.
Now, it is somewhat clear (or so it seems to me) that medicine isn't really acting in the normal market way. This is probably because of the ways it's regulated already (e.g., the way we get insurance through our employers without paying taxes on it). So we can't really just choose a better insurer as freely as we can choose to stop in a different store. And, honestly, I don't want health care to just be a completely free market, because I think that would (overall) be worse instead of better. But it is certainly not obvious (and is quite possibly not true) that having the government decide what you can and can't have is going to be nicer than having a variety of private companies making those same decisions based on a contract between you and them.

Noah concludes with this even more bizarre assertion (emphasis added):
The larger point, though, is that evidence is growing that even the seemingly bumbling intervention by President George W. Bush's treasury secretary, Henry Paulson, helped the United States avert the onset of a second Great Depression. President Obama's maladroit stimulus probably helped, too. The same may be assumed of legislation that would increase government control over medical decisions. If it doesn't help, voters can make their legislators change it. What their legislators can't do is protect them from the rapacity of private health insurers should no health reform be enacted.
I guess we may assume, then, that any and all government intervention will "probably help," since growing evidence suggests that the bumbling and maladroit stimulus bills did. Perhaps the government really should step in and take care of that breakfast cereal issue. After all, if it doesn't help, we can make legislators change it, while what the legislators can't do is protect us from the rapacity of, well, Walmart.


Sally said...

His second point, about the stimulus package and health care, is one of the stupidest things I have heard an educated American of reasonable intelligence to say about economics.

Apparently, the inference is that since government intervention in the macroeconomy is not *always* a complete disaster, it may be assumed that government intervention in a specific (micro) market will be a success.

Since he seems to be unable to distinguish a reasonable logical argument from lunacy, it's too bad that he cannot think of a single counter-example - any time that government intervention in the economy was unsuccessful - to demonstrate that this is empirically untrue. Oh, but if it doesn't work, the people will just make their legislators change it. Riiiight. Like we have with outrageous farm subsidies to Big Agriculture.

While we're on the topic, would Noah support *additional* subsidies using this logic? "Does this country really need more farm subsidies? The World Trade Organization doesn't think so, and I'm inclined to agree." So saieth the man in 2004. Hmmmmm.

Also, I can't help but observe that the market for breakfast cereal is an oligopoly: the market is controlled by about 4 companies. Are there that few major health insurance companies?

Sally said...

P.S. Am I the only person who thinks the second quote would make an AWESOME "analyze the argument" prompt on the GRE?

I just can't get over it. One doesn't even need to know anything about economics or American government to realize it's not logical.

* X didn't seem to me like it should work, but it did.
* X worked another time.
* We can assume that X will work again. Oh wait. Not X. Y. We can assume Y will work in this specific instance. Y, which has questionable relationship to X.

Let's say Babe Ruth had a hit on his last two times at bat. This doesn't mean we can assume he will have a hit on his next time at bat, let alone that he is going to steal a base.

Also, I am posting a couple of Robert's observations:

(1) The government doesn't even have that great a track record when it comes to managing the macroeconomy. See: The Great Depression.

(2) Of the two biggest health insurance companies, one is run by doctors (Kaiser Perm) and the other is a non-profit (Blue Cross).

Tam said...

I can at least sort of understand his first point. We can set up a government agency of some kind and, based on empirical evidence and some kind of decision as to what a year of a person's life is worth (the same kind of calculation used in other regulatory decisions), they can decide something like that a 90-year-old person can't have [the governemt napy for] a kidney transplant but a 4-year-old can get an MMR shot, which is different from the system we have now, where insurance companies decide in a way that isn't completely transparent who gets what reimbursed.

I'm not sure it will turn out better, but I at least see the point.

But you're right, the "this thing kind of worked so it can be assumed that this other, different thing will work" part would be almost too easy of a GRE 'analyze the argument' prompt.

Jason Galbraith said...

Health care reform was dead the moment the CBO chief said it wouldn't control costs. We will get no meaningful reform this year or any year until life expectancy goes into reverse, demonstrating that a system where your contract can be rescinded leaving you with no recourse is too dangerous to entrust our health to. Long before this the majority of American extended families will have at least one member go bankrupt due to the costs of their medical care. It should already be clear that a system that costs each American $6,500 a year more than that in other countries and DOESN'T produce the world's longest life expectancy or the world's lowest infant mortality is too unproductive to entrust our health to.

Tam said...

I actually suspect it's the other way around - that the failure of health care reform (if it fails) won't be because it wasn't going to control costs, but because it wasn't sold properly, as security for the middle class. Insuring the uninsured is a good cause but I think the impact of health care reform that is most politically agreeable is that you [the insured middle class person] won't be in danger of losing your insurance if you lose your job.