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A health economist acquaintance of mine likes to joke that Paul Krugman is the first economist in history to receive the Nobel Prize posthumously. Since the award is given only to living recipients, his point is that Mr. Krugman’s apparent second incarnation as New York Times columnist and self-professed liberal-with-a-conscience shows no evidence of the intellectual rigor that enrobed him on the Stockholm stage. Even the Times’ own former ombudsman has lamented Mr. Krugman’s “disturbing habit of shaping, slicing and selectively citing numbers in a fashion that pleases his acolytes but leaves him open to substantive assaults.”
Mr. Krugman continued to prove this point in a recent Times column that purports to explain “Why Markets Can’t Cure Healthcare.” In it, he leans heavily on a 1963 paper by Kenneth Arrow (another Nobel laureate) entitled, “Uncertainty and the Welfare Economics of Medical Care.” Mr. Krugman said this paper “demonstrated—decisively, I and many others believe—that health care can’t be marketed like bread or TVs,” and that markets cannot be the answer to our health care problems.
President Obama just missed a perfect chance to save America’s prescription drug consumers a cool five billion dollars per year. In a recent speech on health care reform, the President said, “If there’s a blue pill and a red pill, and the blue pill is half the price of the red pill and works just as well, why not pay half price for the thing that’s going to make you well?”
If only he had changed the “blue” to “salmon pink,” the “red” to “purple,” and the “half the price” to “an eighth the price,” he would have thrown a bright light on one of the great economic absurdities of modern American medicine: people (and their insurers) paying $170 per month for the prescription acid-reflux drug Nexium when the nearly identical Prilosec OTC costs about $22/month—and without a doctor’s prescription. That’s right. There’s nothing in Nexium that isn’t in Prilosec OTC which itself used to be a major prescription medication before its patent ran out several years back. Every doctor I’ve asked says one works as well as the other for almost everyone. Taking Nexium? Ask your doctor. And save.
The average obese American consumes a beefy 42% more in medical costs than his normally-weighted neighbor. So says an article published today in the journal Health Affairs. Last year, such avoidable avoirdupois boosted health care spending by a corpulent $147 billion. That’s enough to buy comprehensive health insurance for more than a million uninsured families.
America’s infatuation with “weight loss” (I got 107 million Google hits on the term.) is exceeded only by its obsession with successfully avoiding it. In the mere eight years between 1998 and 2006, the obesity rate distended from 18.3 percent of the population to 25.1 percent. This progression of portly proportionality gives every indication of continuing until we all resemble the ponderous passengers on the movie spaceship in Wall-E—but without the anodyne of zero-g.
What can be done? Taxes on Twinkies? Measuring the obesity rate in “porcint”? Mandating spandex halter tops and sweatpants for Wal-Mart shoppers? No? Then how about a market-based solution?
In a 7/19/9 New York Times Magazine article “Why We Must Ration Health Care,” Princeton bioethicist Peter Singer argues that we need government to actively ration the amount of medical care Americans get, particularly as they near the ends of their lives. Unfortunately for his readers, his argument is riddled with false hypotheses, untrue statements, and faulty logic. It is also unethical.
He mistakenly argues that health care is both a “scarce resource” (which it is) and a “public” good (which it is not). An economist could have told him that a public good must be both non-excludable and its consumption non-rivalrous. That’s economic geek-speak meaning that it’s not a public good if its use can be limited to paying customers or if nobody else gets to use it when you do—whether you paid for it or not. Accordingly, national defense is a public good, but health care is an “economic good” which Dictionary.com defines as “a commodity or service that can be utilized to satisfy human wants and that has exchange value.” Thus, economic goods include anything for which the supply is limited and that somebody has to be willing to pay for–like medical care.
The government’s full-court press on health reform, epitomized by the awesomely inapt and inept Affordable Health Choices Act of 2009 (AHCA) now wending its way through the House, is trying to petrify in amber many of the myths that dominate so much of our thinking about health care. Here’s a brief look at some of the worst:
Myth # 1: Prevention and electronic medical records (EMR) will save money. Prevention is indeed a wonderful thing for extending people’s lives and allowing them to make more money, buy more stuff (including medical care), give more money to charity, and spend more time with their grandchildren. But it does not save any money on medical care! Here’s what the journal Health Affairs concluded earlier this year, “Over the four decades since cost-effectiveness analysis was first applied to health and medicine, hundreds of studies have shown that prevention usually adds to medical costs instead of reducing them. Medications for hypertension and elevated cholesterol, diet and exercise to prevent diabetes, and screening and early treatment for cancer all add more to medical costs than they save.” So forcing people to buy insurance that covers yet more preventive services (an oxymoron if you think about it) will drive premiums up not down.
I recently spent the better part of a Colorado summer Saturday reading the worst parts of something called The Affordable Health Choices Act of 2009. Purported to constitute health care reform, its thousand pages were introduced this past week by the chairmen of the three congressional House committees with jurisdiction over health policy. It is the single most egregious piece of health care legislation to cross my desk in four decades. Hillary Care (yes, I read that one too), nonsensical as it was, represented an order of magnitude more thought than this bill which is so blind to basic economics on so many levels that I marvel at the ability of the three chairmen, Speaker Pelosi, President Obama, and the AMA to praise it with straight faces.
It’s a typically cool, cloudless July 4th morning in Colorado Springs, so my mind inevitably wanders to…what else but health reform. When, oh when, will we have the market-based health care system we need so that I can move on to addressing simpler problems? Like world peace. But when better than Independence Day to ponder an important question of the day: Is health care a right?
I wish it were. It would be so much simpler if all Americans could exercise their right to medical care as they do their rights to life, liberty, and the pursuit of happiness. If health care were on a par with, say, the right to free speech, my right to medical care would not limit your access to the same thing. The supply would be free and limitless. Any question of violation of that right would be dealt with by the courts.
One of President Obama’s claims during his ABC News health care reform TV special last week was that a public health insurance option would have lower administrative costs than competing private plans. This, he claimed, would allow the public plan to offer lower premiums.
The only way that is going to happen is if the government significantly undercounts the costs it actually incurs in operating its health insurance GSE (government sponsored enterprise). Such book cooking is something that, despite the President’s pledge of a “level playing field,” is a virtual certainty.
To understand this, look no further than Medicare. It signals a dire warning that any government-run GSE’s actual administrative costs will be billions of dollars higher than will ever be reported or factored into its premiums. Despite Medicare’s published reports that it spends only about three percent on administration, that figure leaves out the costs of even more costly and necessary support services provided by other government agencies, such as the GSA and IRS. An apples-to-apples comparison shows Medicare’s administrative costs are actually about 8%, with private insurers running 16.7% (including profits). That’s still a sizable difference, but a highly deceiving one.