Asymmetrical Information

amen - well stated winterspeak!

Sounds like a good argument for government-funded drug research, n'est-ce pas?

I predict that we will eventually have single payer health care as more and more people will demand it. But that it won't be worth much because we can't afford much. Also, it will not replace the current system (as in Canada), because independant Americans who can afford it will demand access to private plans offering top quality care. The result will be a two tier healthcare system. A top quality tier for those who can afford it, and a low quality tier for those of lesser means. Since we're going to end up with a two tier plan anyway, I recommend we just bypass trying to give everyone top quality care, and go straight to creating the second tier of low-cost, low-quality healthcare for those with limited means.

I enjoyed the shot at my generation, the aptly named Baby Boom. They are the greatest cohort of con men in history, utterly convinced of their own moral superiority as they rake all comfort and the fruits of others' labor into their corner.

They intend to live very long lives, too, as though they deserve an expectancy greater than average. Bullies, unproductive cheats, and thieves, the majority of them. They call it being progressive.

Any research done on what administration adds to health insurance costs? I would think that self-insurance for first $1000 or for treatments and procedures under, say, $250, would save doctors and health insurers a big bundle. When you go buy a new tire, you whip out cash or plastic. NTW doesn't have to employ an army of clerks to code your purchase, figure out which of a dozen or more insurers to send the bill to, wait a long time to be paid, and then hassle back and forth over whether you should have been allowed to buy the tire in the first place. Runny noses, shots, stitching up a cut lip, physicals, should all be
treated like tire purchases.

Your linking of the current price of retroviral therapies to how much an HIV vaccine would have to cost to make it be worthwhile to develop is 100% completely and totally wrong. We're talking lump-of-labor wrong.

Any company not currently selling retrovirals has no revenue stream that would be threatened by an HIV vaccine, and if you compare the number of pharmaceutical companies in the world to the number of currently prescribed retroviral treatments, you'll find that the first VASTLY outnumbers the second. And any retroviral is going to be susceptible to a new one hitting the market with a better side effect profile, and if you ask a company whether they'd rather have their retroviral income decimated by their competitors retroviral or their own vaccine, they're all going to answer the same way.

Randy:

I believe the two-tiered system you predict is called the National Health Service. The problem with it is that private medical treatment is very expensive -- far more expensive than it is here.

Krugman is wrong again:

Fear of lawsuits drives doctors to prescribe procedures that are somewhat more effective but not cost-effective. They know they will be sued if the patient does not get better.

It is one of the reasons that tort reform would lower our medical bills by 30%.

He does NOT point out that this fix works by eliminating new (expensive) medical technology

With Krugman, honesty has its limits!

I don't see any reason to believe that an AIDS vaccine is possible. AIDS kills slowly, the human immune system has plenty of time to eliminate the virus if it were capable of doing so.

And there is no way a price of $100000 per inoculation could be justified on a cost benefit basis.

"An AIDS vaccine would eliminate the value of retroviral therapies."

What about all the millions of people who currently have AIDS? If you keep selling them retroviral therapies, they will live for decades yet. Which is about as long as your patent will last anyway...

"Since those are expensive now, an AIDS vaccine would only be worthwhile to develop if it could be priced high -- say $100,000 a pop."

Where on earth are you getting this figure from?

Jake McGuire nailed it.

I wonder if Winterspeak also believes that a cure for cancer exists but is stashed in the glovebox of the prototype cold fusion car in a top secret ExxonMobil vault.

I expect better from Asymmetrical Information.

An AIDS vaccine would eliminate the value of retroviral therapies. Since those are expensive now, an AIDS vaccine would only be worthwhile to develop if it could be priced high -- say $100,000 a pop.

Wrong on at least one count, possibly two. First, what Jake McGuire said. This is the same basic fallacy as the one that leads the left to say stupid things like: "Free-market medicine can never work because treating the symptoms is more profitable than curing the disease." It might be if you're the only game in town, but someone who isn't making any money from treatment has a very strong incentive to develop a cure.

Also, if the vaccine were prophylactic (i.e., you have to take it before infection, as with a flu shot) rather than curative (like those newfangled cancer vaccines that you don't take until you have cancer), the market for it would be orders of magnitude larger than the market for antiretroviral treatments.

However, the fact that a vaccine renders treatment obsolete does have another effect that you didn't mention: If company A (or the government) is working on a promising vaccine, company B is strongly discouraged from developing new treatments.

Firstly, we already have a two tier system. While some Americans are uninsured by choice millions are not.

Secondly, anyone who thinks that tort reform will drop insurance costs by 30% is delusional. It hasn't happened in any of the states where "reform" has happened and insurance pricing is largely a state by state issue.

The interesting fact. There is no cure for arthritis. However, Celebrex can help reduce the pain, inflammation and stiffness of osteoarthritis and adult rheumatoid arthritis and ankylosing spondylitis

Quiz:

Company A has a promising AIDS cure/vaccine in trials. Company B has a promising hair growth remedy in trials. Which one do you invest in?

Another point: one way around the incentive problem is for governments or NGOs (here I'm thinking the Gates Foundation or the Global Fund to Fight TB, AIDS, and Malaria) to promise to buy X units of vaccine at Y price if it is ever developed. Then the governments / NGOs can dispense them cheaply or freely as they wish. I believe this idea has been bandied about a lot recently and may even be in the works, at least for tropical diseases for which there is no appreciable market because the victims of the disease are all very poor.

Are you suggesting hair isn't a fundamental human right? You're part of the hairist conspiracy to keep the shiny man down.

Here in Australia we have an effective two tier system.
Firstly, there is the public system which is funded by a notional 1% flat tax (although that covers possibly 205 of the cost). This gives every Australian;
• The right to see a doctor with most (or all in the case of those with low incomes) of the cost covered by the government. The doctors are free to set their fee so the actual cost varies – my doctor charges $15 per visit. Unlike the UK, you can go to any doctor you choose. Prescribed pharmaceuticals are heavily subsidised as long as they are on a government list – if they aren’t you pay full whack. The vast majority though would get their pharmaceuticals at around $20 per scrip.
• Absolutely free hospital care in public hospitals – you don’t pay a cent. The catch of course as AI readers would know is that in the absence of price rationing something has to take its place and that is politically driven resource allocation. It’s probably fare to say that anything that is life threatening will get done immediately and as well as anywhere in the world and free at the point of treatment. Anything that is deemed “elective”, however, can and does have long waiting lists eg hip replacements etc. Like any bureacractic system, those who know how to work the system can jump the queue. Get to see the health minister for instance and your 12 month wait can disappear overnight.
Dentistry incidentally is not covered at all and must be covered privately with the exception of a very limited essentially charitable dental facility.
This public system is backed by a private system, although it’s worth noting that taking up the latter does not remove your right to avail yourself of the former.
Health insurance is heavily regulated and insurers cannot reject people wanting to be insured or charge higher premiums based on risk (although they can impose waiting periods for pre-existing conditions). The only price discrimination permitted is via age – premiums are allowed to increase according to age of entry and then remain fixed, subject to regulated price increases eg if you join at 40 your annual premium will be locked in at a higher rate than at 35.
Health insurance is subsidised by the Government to the tune of 30% of premium cost. There is also a stick in that those earning above $100k annually pay an extra $1,000 tax if they cannot produce a premium number at the time of insuring.
This all applies to hospital cover. You insure separately for “ancillaries” (physio, dental, optical etc). Premiums vary with the excess and amount of cover required.
I have both hospital cover and ancillaries, which together cost about $1200 per year for a family of four. The hospital cover insurance is largely driven by the need to avoid the surcharge for not having health insurance and the insurance companies have produced a range of low cost hospital cover plans with high excesses (you pay the first $600) in the expectation that we would use the public system instead although the insurance is perfectly useable.
The system is not perfect but I suspect we may have got it righter than anyone else:
• Nobody is denied insurance on risk grounds and the rates seem reasonable based on international comparisons
• If you have a serious life threatening condition you will get the best care in the world, without paying a cent. The obscenity of having to sell your house to pay for your child’s heart surgery or leukemia treatment simply would not happen here (I assume that’s what happens if you have a house and are not insured in the States? I accept that if you are indigent you’ll get the treatment free)
• There are some reasonable incentives to get people into private health insurance where they can afford to and relieve pressure on the public system

cac

As a general rule in the US if you have a child with a serious illness, there are extremely good charity hospitals (St Jude's, etc) all over the country that provide treatment independent of ability to pay. Couple these with charitable lodging for your family (Ronald McDonald house) and a host of other similar benefits and effectively you don't run into the 'sell the house to pay for your childs heart surgery or leukemia treatment'. Basically, the US if quite charitable in the case of catastrophic childhood illnesses.

CAC,

That sounds pretty much like what I had in mind. Question, is private insurance allowed? Are all hospitals and clinics part of the national system? Do they have to be?

AT,

I think the immediate problem in the US is that emergency rooms are closing, or not being built in new hospitals. The hospitals simply cannot afford to provide ER care for free. But what if there were free national clinics attached to ERs? Staffed primarily by government employed PAs and RNs, long waits, basic care only, but free. This would provide much of the care that is actually needed for those with limited means, and take the pressure off of hospitals to pass along the costs of providing free care to those with insurance, thus lowering the cost of insurance as well.

Medical care is science, but its financing is it economic science or a contraption? Recently drug prices have been going up. A free market 'power to price?' Well, yes if you mean the government liability supported Medicare drug benefit? Merck will have a first in class cervical cancer vaccine this year? Do I hear $300, $330.. or do I hear the blog and all above? And if I do, why is there a vaccine?

Australia is 92% Caucasian and 7% Asian (according to the CIA Factbook). I wonder what the US health care cost would look like under the existing US system with the same demographic distribution.

The comparisons of the US to virtually all white Australia or Sweden are grossly invalid.

I would like someone to find a country as diverse as the US and has the same level of health care as Australia, then we may have a model to really discuss.

An AIDS vaccine would eliminate the value of retroviral therapies. Since those are expensive now, an AIDS vaccine would only be worthwhile to develop if it could be priced high

We've been watching Johnny Mnemonic lately?

Readers should consider the announcement of Celgene's pricing model for its new drug that combats the effect of myelodysplastic syndrome,Revlimid. It is rationalizing at a price point under the alternative cost of blood transfusions, the only other available therapy. The WSJ also reports that Celgene expects to push upwards the price of Thalomid,its drug for multiple myeloma, towards that of the Velcade alternative; the price of Thalomid was originally kept lower because its prime use was as a treatment for AIDS-related wasting.

One bit of the book that did not make the movie of Jurassic Park was the discussion of biotech as luxury vs. necessity. You can charge whatever you want for a luxury, say a theme park filled with dinosaurs. If you make something everyone really demands, say an AIDS vaccine or a cure for cancer, you intellectual property rights may not survive the week. I have always thought that was fair. People will gladly pay high prices for luxuries but complain bitterly when gas prices rise during a hurricane. Windfall profits tax on pharmaceutical companies, anyone? How dare they make profits of human misery, on the backs of the poor?

"Krugman correct identifies the main culprit: new (expensive) medical technology"

WRONG!

The main culprit is the combination of the Government and third party payers.

New technology does not stay expensive for very long. Perfect example -- Video tape recorders -- when they first were introduced only the major TV networks could afford them, now you can buy one for $69.00 or less.
Technology never makes things more expensive. First it makes things possible and then as it becomes more ubiquitous it makes them cheaper.

So your and Krugmans premise are (in his case once again) incorrect and any conclusions or remedies proposed on that premise are necessarily not worth a bucket of spit (warm or cold).

Nice try. Doesn't make the cut.

There is nothing that would help health care costs in this country more than getting rid of the current ineficient soicialist lite system we have now and go into the Free Market where doctors and hospitals would have to compete on the basis of quality, effectiveness and cost.

You would see after a short period of time a multi-tiered system akin to the hospitality industry where you can get accomadations from dollars per night to thousands of dollars per night. This would be the natural system that would follow getting the government and insurance companies out of the interface between the health care provider and the health care recipient.

thedaddy

Superdestroyer is right.

I do not see any possibility of a national health care system working in a country the size and the diversity of the US.

I spent three years in the Army. Here are my observations of the prototype US gov't health care:

I needed routine jaw surgery. I had eight surgeons involved, some flying in from as far away as Maryland. (I was in Tacoma.) For what I needed done, no insurance company in the world would have paid for eight surgeons for the simple fact that only two were needed. Only the government would waste that kind of money.

Less than a year later, my wife had a baby. She did not have an OB, she was assigned to a team of about six. Whichever OB was open was the one that she was assigned to for a visit. Whichever one was on duty was the one delivering the baby. As it turned out, we never saw the face of the doctor that delivered our son, because he had to deliver another one as soon as ours was born and he left the delivery room without taking off his mask.

It gets better. After delivery, the lucky mother was placed in a ward with approximately 60 other mothers. I've heard catfights that were more peaceful.

There you have it. Great care at a rediculous cost or horribly barbaric dehumanizing treatment that is barely effective. With a national health service, you get both.

You want to reduce health care costs? Tort reform will help. (The 30% mentioned by another poster is probably optimistic.) Also, Creech's analogy about buying tires is spot on. If oil changes were covered by car insurance, they would cost $200.

Fear of lawsuits drives doctors to prescribe procedures that are somewhat more effective but not cost-effective. They know they will be sued if the patient does not get better. It is one of the reasons that tort reform would lower our medical bills by 30%.

I don't doubt that there is some defensive medicine involved and it costs a pretty penny but I have serious doubts that it is anywhere close to 30 percent of the cost or one of the primary cost drivers.

I think it bears repeating, especially to our non-American visitors, that nothing is ever free.

By "free" you can mean only "free to the consumer of the service", unless one chooses to enslave the doctors, and those who produce their equipment and supplies (and even then, the cost of such oppression won't be zero...).

One can decide to make every healthcare service possible "free" in that way, but someone's still paying for it, and their pockets are not bottomless.

I point this out only because the questions of "who pays", and "how much are they willing to pay" (or alternatively "how much can the State take from them, and what can the State provide with that") cannot be ignored in such a discussion.

The Right Answer (to whatever the question is) might well be to provide some level of free-to-the-consumer healthcare, but I, at least, am unlikely to be convinced it's so unless the preceeding questions are answered as part of the process.

The obscenity of having to sell your house to pay for your child’s heart surgery or leukemia treatment simply would not happen here (I assume that’s what happens if you have a house and are not insured in the States? I accept that if you are indigent you’ll get the treatment free)

What's obscene about that? If you're trying to game the system by putting your money into home equity rather than catastrophic-level insurance (which I gather is reasonably priced where the law allows it) and counting on the state to bail you out should you need it, why shouldn't you have to use your home equity to pay for the expenses against which you irresponsibly declined to insure.

It might be obscene to let the child die for his parents' sins, but there's nothing wrong with making the parents pay for them.

There's a simple, if draconian, solution to rising healthcare costs: stop funding medical research. (I say this as someone involved in such research.)

This "modest proposal" would guarantee that all existing medical treatments would become generic within a generation, with attendant reduction in price. That, plus tort reform, would do it.

thedaddy is right. Why has the cost of Lasiks gone down by an order of magnitude while other costs stubbornly stay higher. We need to get rid of the quasi-socialist system we have now and let the market take care of reducing costs. Right now, insurance "pays for it" and that removes any incentive to optimize the system.

This Slate article about another 'market-oriented' solution is interesting as well...

http://www.slate.com/id/2133355/

"...What's obscene about that? If you're trying to game the system by putting your money into home equity rather than catastrophic-level insurance ... and counting on the state to bail you out should you need it, why shouldn't you have to use your home equity to pay for the expenses against which you irresponsibly declined to insure."

Hmm, now I thought that's what we're really talking about when we discuss universal health insurance--please govt pay so we don't lose the house--without having to buy an *obscenely* expensive ins policy. That, and the fact that the uninsured tend to just not go to doctors except in emergencies, so rarely get Xrays or paps or other tests.

Isn't that what this is really all about? That's why I consider the pro-socialized medicine people the greedy ones, and us anti's the altruistic ones. My home is free and clear, but I figure everything's contingent until Medicare finally kicks in.

I think we may have to agree to disagree on the merits of people having to sell their houses to pay for medical costs although I'm reassured that, at least for children, this would not happen in practice.

But if you think this is if not a good thing at least not a bad thing as some commenters seem to think, why stop there? Surely any payment for health care except by the patient generates moral hazard and stops them from making adequate arrangements for their own care, be it insurance or self insurance? I accept it would be a more efficient outcome to let everyone make their own arrangements and for those who can't or won't to take the consequences. I just don't think it's something a civilised and wealth society should do. It's an interesting commentary on respective political cultures that here in Oz I'm considered a rabid right winger.

Finally, in annswer to Randy, private health insurance and hospitals are both allowed and an integral part of the system. People are encouraged to use both by various incentives but the public system remains as a safety net.

Admittedly it's an economically unschooled opinion. The Republican party has been the salvation of medical care in this country. After WII, Truman would have led us into national health inusrance. Not that the public sector doesn't play a very good role but this would have destroyed private sector initiative in medicine. The Republican party saved private medicine by fiddling with the tax code and giving ownership to many people of heatlh care before they would otherwise have it, thus giving allies to a defense of a market system. First I believe it was the pretax treatment of employer provided health inusrance. More lateley, Bush headed off, he hopes, price controls as part of a drugs for Medicare recipients scheme, at least some form of which seemed in the next grasp of fierce utopians. He hopes the health savings accounts will continue to keep market mechanisms in place. My modest psychiatric income does allow me to own a few stocks including VICL which has a vaccine prototype which, unusual for a potential AIDS vaccine, produces an antibody response.

"Assuming that the pharma company has some sort of patent and can price above marginal cost (which is a very reasonable assumption -- most drugs under patent are priced much higher than marginal cost), how high politically can the company price?"

They won't have the chance to charge anything. A patent on an AIDS vaccine wouldn't last a week before it's broken or, in this country, appropriated for a "public purpose." Brazil recently did it for several anti-AIDS drugs.

http://news.bbc.co.uk/2/hi/health/4059147.stm

I see a poster blaming the uninsured for not going to doctors until they need an ER. Um, could it be because they can't afford it? For millions of people that's the case. Medicaid is being hacked (Missouri has already passed a law eliminating it in 2008.) and there are also lots of people who fall through the cracks, unable to afford health care and pay the bills too, but not poor enough to get any kind of help with it.

Someone posts a comment about how every new technology always gets cheaper, no exception. Someone else is foolish enough to agree with him. Sorry, but that isn't some kind of law of nature. It doesn't always apply. It depends on the nature of the technology and it's relation to other purposes and how much demand there is for it or related technologies.

I see so much ignorance in these posts its really pathetic.

Jim

How many of these poor who can't afford medical treatment are pay $50 a month or more ($600 a year or more ) for cable tv?

Very often the poor have health problems because they value baubles (like cable tv) over preventative health care (like regular dental cleanings).

I think we may have to agree to disagree on the merits of people having to sell their houses to pay for medical costs....

I don't see any room for disagreement on this. Anyone who has a substantial amount of home equity can afford to buy health insurance. If you can afford to buy insurance, and you don't because you know the government will bail you out and let you keep your assets anyway, then you're enriching yourself at the expense of taxpayers. It's outright theft.

Frankly, I'm perfectly fine with denying government assistance to those who could afford health insurance but didn't buy it. We're not talking about indigents; we're talking about people who deliberately shirked their responsibility to insure themselves in favor of buying a bigger house.

I can see why you might disagree with just letting them die. But I don't see how you can argue that these deadbeats shouldn't be required to sell off their assets before asking the government to help them steal money from others who were responsible enough to insure themselves and had to lower their own standards of living to pay for it.

And yes, private insurance does create some moral hazard, but it's much less than under your plan (where there's basically no incentive to buy insurance), and it can be mitigated if insurers are able to set rates according to lifestyle factors.

I see a poster blaming the uninsured for not going to doctors until they need an ER. Um, could it be because they can't afford it? For millions of people that's the case

Millions of people cannot afford health *insurance*. Paying for preventative medicine is much cheaper than paying for health insurance, because the bulk of the insurance premiums go towards paying for catastrophic/emergency care and bureaucratic overhead.

And, of course, it depends on what you mean by "can't afford". As quadrupole noted, many of the people who "can't afford" health care seem to be perfectly capable of affording expensive luxuries. More Americans have cable TV than have health insurance.

Why does the US spend the most per capita on health care...and end up 47th in life span? Im curious about the spectrum of responces.

Gman:
It probably has something to do with the fact that the US leads the world in obesity. Modern medicine is a fine thing, but it can only do so much to counter unhealthful lifestyles.

TheDaddy has it exactly right. At least 50 cents of every dollar spent on health care in America goes to insurance or insurance-required overhead. Ask any primary care physician or pharmacist.

Better yet; ask your family doctor what it would do to his practice if he didn't have to deal with either insurance companies or Medicare.

Warning: don't ask unless you have an hour to listen to the answer.

M

Why does the US spend the most per capita on health care...and end up 47th in life span?

48th, actually (although that involves counting colonial territories as nations -- among real nations we're in the 20s).

The explanation is demographic differences. Most of US health care spending is spent by the middle and upper-income segments of the population. Middle-class Americans outlive middle-class citizens of most of the other countries in the world. However, the overall average gets dragged down by portions of the population, such as illegal immigrants, immigrants from third-world nations, and blacks, who (a) spend little on health care and (b) have much shorter-than-average lifespans.

In simple terms, the people who actually pay into the system enjoy greater benefits than citizens of countries with nationalized healthcare. The ones who don't, don't. However, even if the United States were to adopt universal health coverage, our relative average lifespan would still be pathetic compared to that of Europe, simply because we're next to Mexico and they aren't.

I don't see any room for disagreement on this. Anyone who has a substantial amount of home equity can afford to buy health insurance.

Brandon Berg: the overly sweeping nature of this statement renders it untrue. If any members of the family have preexisting conditions, they may not be able to buy medical insurance coverage at any price. Adverse selection is the great leveller in discussions about the American healthcare system. Of course one could counter this point by saying: "too bad -- it's not my fault if my neighbor's kid has was born with a defective heart, and it's not my responsibility to help pay to keep him alive through my tax dollars."

And while I give credit to those who make statements like this for their intellectual honesty and consistency, I think you would have to admit most people simply aren't open to such arguments because they are too risk averse. They don't want to rely on the possibility that a charity hospital might help them secure treatment in such a case. They want a guarantee. And know what? Increasingly, I can't say I blame them. I mean, would it be so terrible if the US Government eventually decided to look at other rich countries, chose some of the best and most sensible bits of their healthcare systems (while assiduously avoiding some of the not-so-sensible bits) and created some sort of plan that guaranteed universal healthcare insurance and did something about costs?

We know doing this is feasible, because every other OECD member besides Mexico had done it. I mean, a lot of Americans would suddenly have more freedom to start businesses or take jobs that make economic sense (which they can't currently do because they're too afraid to lose coverage). I see a lot of upside, and frankly am unpersuaded that waiting six months for a hip replacement when I'm 60 would be such a high price to pay. I mean, if we did reform right, we could preseve the safety valve of a robust private healthcare sector that would eliminate queues for those who can afford it. And I must say, last time I looked, Britain, Australia and Canada had robustly growing economies despite their whacky predeliction for guranteeing healthcare access to their citizens.

I guess what I'm saying is that although I can concede that a commited libertarian can make a moral case against a governmental universal healthcare guarantee, the purely utilitarian case is looking mighty shaky. And when both the waitress pouring your coffee and the attendees of a General Motors board meeting are starting to talk the same language on the issue, you can't rule out the possibility that government-guaranteed universal healthcare in the US is finally nearing the point of political feasability.

48th, actually (although that involves counting colonial territories as nations -- among real nations we're in the 20s)...The explanation is demographic differences. Most of US health care spending is spent by the middle and upper-income segments of the population.

Dan: Although I understand this argument, and don't doubt its veracity, I must say I find it kinda lame. Yes, there are demographic differences separating the US from other rich countries, but the US still spend a LOT more on healthcare than anybody else. One might hope that part of the value Americans receive for the exhorbitant sums their country spends on healthcare is a levelling of the effects such demogrpahic differences exert on indices of health. But unfortunately one's hopes in this instance would be in vain.

Greed does exist. I was on a patented medicine. In the final year before the patent expired the cost rose by roughly 1000%. It had been costly before but the cost was stable year after year. And I knew the cost would soon fall.

Even so there must be reward. And the patent system is subject to the market. If the cost is set too high then cheaoer alternative treatments will be used.

But there may be no alternative. Such cases are rare but real. And in that narrow arena good legislation can help.

It would also help if more terminally ill patients could receive experimental drugs and treatment before all trials are completed. Exactly what is gained by rules that virtually guarantee the patient has no chance whatever to recover?

Why must a government funded health care system exist on a national scale anyway? Those who point to the European states as a positive example of healthcare provision seem to be most impressed with Sweden, one of the least populous countries in Europe with a population of about 9 million. If 9 million is a large enough population to collectivize into a government health plan, why do the people in populous states like New York and California feel the need to push for a national plan? Seriously, why haven't any of the large and mostly left-leaning states develop state level plans modeled on the perceived wisdom of the European systems? Is border to border coverage a requirement to generate all of the positive effects that universal health care is supposed to generate?

> Seriously, why haven't any of the large and mostly left-leaning states develop state level plans modeled on the perceived wisdom of the European systems? Is border to border coverage a requirement to generate all of the positive effects that universal health care is supposed to generate?

I believe some states have already experienced what happens when they offer benefits that their neighbors don't. The poor of neighboring states (and often from even farther states) move in to take advantage. The same thing would happen to insurance companies that offer great benefits to all comers, regardless of prior medical conditions. They'd get a huge number of customers that everyone else didn't want to cover. Soon they'd be bankrupt.

P. B. Almeda:

Of course one could counter this point by saying: "too bad -- it's not my fault if my neighbor's kid has was born with a defective heart, and it's not my responsibility to help pay to keep him alive through my tax dollars."

Fair enough--I'm much more sympathetic to those who are uninsurable due to losing the genetic lottery than those who are simply irresponsible. But if the government is going to act as the insurer of last resort, it's important that it do so guided by an awareness of the distinction between the unfortunate and the irresponsible.

I've been working on an essay for Catallarchy that touches on many of the topics you brought up in your response to my comment, especially how government can help those who slip through the cracks without destroying the benefits the free market brings to the rest of us. I'm planning on posting it early next week, so I invite you to take a look and offer your feedback and criticisms once it's up.

Transfering healthcare from future generations to the Boomers may seem like a clearly Good Thing to Krugman, but not to me.

You will pay anyway. Either this way or by taxes going to subsidies for elderly people's medication. If you have the government paying, you have a realistic chances of limiting medical malpractice damages. Otherwise the lawyer lobby will prevail.
And yes, infectious desease is a threat to the public. Funding for combatting it should be done the same way the military is founded.

James,

Massachusetts' legislature is working on a plan for universal coverage as we speak, although Mitt Romney is wary of letting Democrats accomplish anything positive before his Presidential run because it undermines his legacy. As someone else said, you do face a race to the bottom if you do something like this.

Jim S,

Just to clarify, I'm not "blaming the poor for using ERs". I'm saying that ERs are closing (or not being built in new hospitals) because of the fact that the poor are using ERs. Hospitals, particularly inner city hospitals, can't afford to provide free ER level service. I see this situation as the immediate problem. And to repeat, I think the immediate solution would be to attach "free" (i.e., taxpayer funded) clinics to the ERs - starting with the inner city hospitals.

"The Republican party saved private medicine by fiddling with the tax code and giving ownership to many people of heatlh care before they would otherwise have it, thus giving allies to a defense of a market system. First I believe it was the pretax treatment of employer provided health inusrance."

That doesn't give people ownership of health care. It gives their employers ownership of health care.

"I mean, a lot of Americans would suddenly have more freedom to start businesses or take jobs that make economic sense (which they can't currently do because they're too afraid to lose coverage)."

That problem can be solved by replacing employer provided coverage with individually bought coverage. Whatever terms that individuals ended up with in their coverage, their employment situation would have absolutely no impact on them, and changes to their employment situation would be completely unrelated to their health insurance coverage.

I really find it interesting that many people implicitly believe that individuals buying their own health insurance plans is absolutely out of the question, and the only acceptable alternative to employer-provided plans is government-provided plans.

Ken, that's because at an early stage of that debate someone mentions "adverse selection" where insurance companies find ways to cherry pick healthy young people and exclude the rest. So it's not that interesting, really.

"Ken, that's because at an early stage of that debate someone mentions "adverse selection" where insurance companies find ways to cherry pick healthy young people and exclude the rest. "

They're only going to profit by doing that if the most sensible course of action is prohibited; that is, charging low rates to healthy young people and high rates to the rest.

Either way, I don't see how this is worse than having employers finding ways to cherry pick healthy young people and exclude the rest. Being stuck without health insurance seems better than being stuck without health insurance and gainful employment...

I really find it interesting that many people implicitly believe that individuals buying their own health insurance plans is absolutely out of the question, and the only acceptable alternative to employer-provided plans is government-provided plans.

Well, I think this view is widespread among the single payer crowd. But among the more realstic advocates of health insurance univeralism, the concept of individual mandate (especially combined with a removal the tax code subsidy of employer-provided health insurance) is widely considered a realsitic posibility. Massachusetts may be headed down this path in the near future. But at any rate, it's hardly surprising that so many people look for "other people" to pay for their healthcare since the individual has mostly been a bit player in the American healthcare scene for the past six decades.

Gman: Because average expense per person is not directly linked to lifespan.

People being free (because there's no state control of medicine) and able (because we have lots of rich people) to pay huge amounts of money for medical care that would simply kill them otherwise (or, often, at end of life, simply puts off the end for a few more very expensive months) will cause the per-capita to go up.

(Not to mention, of course, the huge amounts of money spent on care and services and drugs via medicare and via insurance.)

However, apart from some preventative medicine, vaccinations, and so on, none of that has a great impact on average lifespan, which is more, as I understand it, based on lifestyle than medical expenditure.

Someone who keeps fit and sees a doctor regularly won't, on average, spend much on health care, and will live, again on average, quite some time. Someone who does not keep fit and see a doctor regularly for preventative care is both more likely to die younger, but more likely to spend a lot more on healthcare at the end.

In other words, to repeat myself, the two sets of numbers simply aren't strongly linked.

I must say I find it kinda lame. Yes, there are demographic differences separating the US from other rich countries, but the US still spend a LOT more on healthcare than anybody else.

Yes, but the people actually spending that money also live longer than pretty much anybody else. It seemed to me that you were trying to play some sort of "we don't get our money's worth" angle here. If so, you're barking up the wrong tree. The people who spend the money do get their money's worth. I spend more for my health care than, say, a French or English guy would, but I'll outlive them too.

One might hope that part of the value Americans receive for the exhorbitant sums their country spends on healthcare is a levelling of the effects such demogrpahic differences exert on indices of health.

Most of the money the country spends is on care for the elderly, and indeed among the elderly the demographic differences are minor.

But the overwhelming majority of US health care dollars are spent by private citizens and corporations, and are aimed exclusively at improving the health of the people paying for it. So obviously that's not going to level demographic differences, because you pay for what you get.

One additional note that I forgot the first time around -- most industrialized nations put caps on how much drug and medical technology providers are allowed to charge. Typically, the rate is set to allow a marginal profit on sales. This makes it worthwhile to sell existing drugs and technology in those nations, but not worthwhile to develop new ones. The United States is where companies recoup their R&D costs by charging high prices. So we do kind of get gyped in that regard. I don't think there's a solution to that problem, though; we could put in price caps, but that would have the effect of crippling medical R&D unless other countries raised their caps (which they will not). That's probably what we'll end up doing, just to placate the whiny-bitch Baby Boomers, but it is going to screw my generation and the ones following it...

Ken. The employer doesn't 'own the insurance' though you get paid in insurance in part and in that sense you own it like the dollars you are paid, admittedly the latter are more fungible. This is probably why it works as somthing you own for health care because, just given money, most people wouldn't accumulate it for health care, thus wouldn't have 'health care dollars.' But go over to Sam's Club and buy their small company health insurance as part of a business expense when self employment becomes more desirable, net of this expense, for you than being employed.

...or get an honorable discharge from the military and be covered by VA.

Thank you for the clarification, Randy and I can agree with you on that idea of the clinics.

The same insurance that I get through my employer would cost me over $800 a month if I tried to buy it on my own and that is a very conservative estimate. It was costing me $600 a month 8 years ago. Even if I cut back on the nature of the insurance it would still be very expensive. Lots of people couldn't afford it.

Brandon, just how much equity do you think people build up in a two or three bedroom house in a bad part of town? Geez, talk about a really bad argument...

"'Krugman correct identifies the main culprit: new (expensive) medical technology'... WRONG! The main culprit is the combination of the Government and third party payers."

When I was a boy and my grandfather suffered chronic knee pain and limited mobility because the cartilage was breaking down, the doctor guessed at the cause, then prescribed aspirin and a walking stick. When my father's knees suffered the same fate, the doctor ordered a CT scan to verify the diagnosis and prescribed a (then) patented and pricy drug that was much more effective than aspirin &mdash enough so that the walking stick wasn't necessary. Should my knees suffer the same fate, diagnosis would use an MRI that is much more expensive than a CT (but doesn't expose me to the same ionizing radiation), and at some point a doctor would likely prescribe knee replacement surgery.

No, it's not the technology, it's the darned government and third-party payment system that are driving up costs...

When the polio vaccine was developed by Salk and another guy it was immediately available at very low cost. why? What's the difference now?

When the polio vaccine was developed by Salk and another guy it was immediately available at very low cost. why? What's the difference now?

I admitedly know next to nothing about the economics of this aspect of the drug business. But just for the fun of speculating, I would aver that there wouldn't, or at least there need not be, much of a difference in today's world.

Let's suppose a big pharma company finally developed a true HIV/AIDS vaccine that conferred immunity from the dreaded virus to those not yet infected. Presumably, the demand for the vaccine would be vast. Nearly every HIV negative person on the planet would be a potential customer (in reality that would probably translate into "nearly every national government"). Now, let's suppose said big pharma firm spent $15 billion developing the vaccine, and another $5 billion ramping up production, for a total expenditure of $20 billion.

Under this scenario if the plan were to roll out the vaccine and innoculate everybody in the world over a ten year period, the profit potential would be absolutely enormous. They'd need only charge an average rice of say, $50 (perhaps cheaper in Third World and more expensive in rich countries) to gain a potential sale over a decade of more than a quarter trillion USD -- nearly all of it pure profit. Even if they couldn't get every single government and health authority world-wide to play ball, and ended up watching some of their profits dissipate via non-recognition of their patents, they would still be in a position to make a lot of money.

I guess my point is that, unlike the case with "orphan drugs" or treatments that would potentially appeal only to a limited market, a vaccine like that for HIV/AIDS or polio is potentially a veritable license to print money that doesn't depend on a high per unit price.

What ever happened to "make it up on volume"?

An effective AIDS virus is going to sell like hotcakes. Price it somewhat higher at introduction to get the "early adopters" (the affluent high-risk group) and then drop the price to close to marginal cost to get the 40 or so million "sexually active" people in the US who can be easily FUD'd into spending the money.

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