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Impervious to Reality
Posted by: Dale Franks on Tuesday, July 17, 2007

Bruce's post on Ezra Klein's incomprehensible point about health care rationing prompted me to pop over to Ezra Klein's place and examine it.
I've grown convinced that many conservatives actually don't understand what rationing is.
Well, I don't know what "most conservatives" know about rationing, but, after reading the post, I'm pretty sure that Ezra doesn't know what rationing is.
They appear to consider it some sort of intrinsic quality of state-run health systems — national health care has rationing in much the way a car has doors. It's just there.

Of course, that's not the case.
But, of course, it is. It is an intrinsic quality of state run health care systems, just as it an intrinsic quality on free-market health care systems, or, for that matter, an intrinsic quality of the distribution of frozen peas.

Rationing is an intrinsic quality of every economic good it is possible to think of.

Human wants, or demand, are unlimited. The supply health care, frozen peas, or anything else you'd care to name are limited. Rationing is the only method whereby unlimited demand can be equalized to the prevailing supply.

In a free-market system, the rationing is done through the price mechanism. Prices for a good rise until the demand for the good is reduced to match the available supply.

In a state-run health care system, the price mechanism is eliminated. Since prices can no longer perform the rationing process, the supply is rationed in other ways, such as by waiting periods, or the elimination of benefits for "unnecessary" procedures.

If 100 people want a bag of frozen peas, and there are 90 bags of frozen peas available, the peas WILL be rationed. In a free-market system, the price of peas will rise until 10 people decide that they wish to forgo the purchase of peas. In a system without a price mechanism, 10 people will be deprived of peas through some arbitrary method. Or alternatively, all 100 people will receive 90% of a peabag.

But having the state take over pea distribution does not increase the number of peabags available, any more than having the state take over health care magically makes more health care available.

In every case, the fundamental reality is that if the demand for a good is greater than the supply, that good must be rationed. That is not an ideological position, it is a statement of reality.

Sadly, this point appears to be lost on the commentariat over there. The first response, in fact, was:
You lost me with comparing health care to frozen peas...
Translation, I don't understand your point, so I'll just ignore it as unimportant.

OK, but if so, then you really aren't qualified to comment on the issue. If you can't grasp such a basic point about supply and demand, then you simply don't know enough to have a useful opinion, and more than you are about quantum tunneling.

One fellow weighed in with:
It's kind of funny that you even try to make that argument since the health industry is widely considered a prime example of market failure...

Thank you for reminding us all why the market fails in he health industry.
Huh. Really? 'Cause from where I sit, it looks to me like the government already subsidizes about half of health care costs. Most of the remainder is paid for by a third party (employers) who aren't actually the consumers of health care.

So, we don't actually have a free-market health care system. We have an almost entirely subsidized one. You might want to think about the implications of that.

Ah, but the commenter went even further.
The simple problem with your analogy is that healthcare is not option. Normally the market moves towards equilibrium where if beef gets to expensive you eat chicken. However you can't choose whether or not you need insurance and you can't choose to not have your tumors removed when their cancerous.
The thing is, substitution of Good X for Good Y when Y becomes too expensive is a form of rationing, too. In that case, you stop purchasing Y—rationing it—and begin purchasing X.

If there is no X that you can substitute for Y, then Y must be rationed even more stringently, because the voluntary rationing method of substitution is no longer available.

Since this is so, what the commenter thinks is an objection actually is an additional supporting argument that makes my point even more forcefully.

If there are 1000 patients for bypass surgery, and only 100 chest-crackers, and there are no substitute procedures for a heart bypass, then bypass surgeries will have to be rationed even more stringently.

It doesn't matter how quickly the government is willing to pay for the surgery. It doesn't matter how much the surgeons want to perform surgery. At the end of the day, the resources for performing the surgery is less than the number of patients who demand it.

As long as that is true, bypass surgeries will be rationed, either on a "first come, first served" basis, some medical determination of urgency, or some other criteria. The rationing itself, however, is unavoidable, because it stems from the reality of a difference between the supply and demand for bypass surgeries. It is not that we don't wish to perform 1000 bypass surgeries. It is that we literally cannot perform them.

You can't simply wish that reality away.

At that point, the argument changed to:
we don't dale- we simply don't think profit should confuse how we ration it.
That's just as silly of an argument, though it's silly in a different way.

First, why don't you advocate that food production be turned over to the government? Why is health care fundamentally different? I mean, You may have noticed that there isn't a waiting period for canned string beans. Do you ever wonder why that might be, what with the profit motive confusing the rationing function of prices?

Oh, you might want to want explore why our current system, where the consumer of health care isn't the purchaser of health care coverage isn't actually a free-market system.

And here's a thought experiment: if your employer paid for your food, and all you did was nip off to the supermarket and just picked out whatever you wanted, whenever you wanted it, do think the price of food would rise or fall?

Fundamentally, our current health care system isn't a free-market system. It has free-market components, but not those components that rationalize supply and demand.

In a truly free-market system, the purchaser of health care/health coverage would also be the consumer. The consumer would ration his own health care and coverage, based on the price. That's how the rest of the free-market economy works. But it isn't how health care works.

Which goes a fairly long way in explaining why health care doesn't work as well as it should in the US.

The most interesting thing about my experience over at Ezra's is the imperviousness to factual argument. The relationship of supply and demand isn't an ideological argument. It's simply how the world works. Yet there's just no interest in seriously examining how a state-run health care system deals with that reality. To the extent that they do examine the economics...they get it almost completely wrong.

More to the point, they don't really care about the economics of the thing. It makes them feel too good to be on the right side of a good cause to muck it up with minor inconveniences like reality.

Unfortunately, good intentions don't change those realities.
 
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About the person who simply blanked-out when you brought facts:
"OK, but if so, then you really aren’t qualified to comment on the issue."
That doesn’t matter.

That person is going to vote.

Do you understand the problem?
 
Written By: Billy Beck
URL: http://www.two—four.net/weblog.php
Overall I agree with your post, but given how much government is already involved in health care, and given that it seen by many as something akin to education or public safety, it is unlikely that a true market approach will ever emerge. In that case I see two options to avoid a big behemoth governmental bureaucracy: 1) create an opportunity for the private sector actors to develop a plan to assure real access to health care for the poor (i.e., not one that risks collection agents going after them or requires them to go to the ER), or to keep governmental programs at the state level where at least the bureaucracy will be smaller and closer to the people. It’s interesting that in places in Europe where more market forces are part of the health care system, the better the system is. The worst is the UK, which is a government bureaucracy, the best is arguably Switzerland, where Cantons negotiate deals and work with various actors.
 
Written By: Scott Erb
URL: http://faculty.umf.maine.edu/~erb/blog.htm
Oh, this is rich. In a post essentially concerned with reality, we now have the gratuitous insult of a fraud here to lecture us on the benefits of violating reality, in the name of reality.

A champion arrives.

{snicker}
 
Written By: Billy Beck
URL: http://www.two—four.net/weblog.php
Billy, you’re missing the point, which Erb stated, and then ran away from like a rat that’s just found out it’s on the Titanic
given that it seen by many as something akin to education or public safety,
(I guess we can invoke the rule that broken clocks tell the correct time twice a day.)
Most people don’t consider health care to be an economic good. They think of it as something fundamentally different from, say, frozen peas.
To them, the mere fact that person A should have a inferior quality of health care than person B because person A does not have the financial resources available to person B. Therefore, until you can get them to understand that health care is an economic good (and, for that matter, so are education and public safety) to which the normal rules of market trading should apply, and that it is moral for a person of lesser resources to receive less quality health care—until you can do that in way that makes them understand the point, it really is just simply pissing in the wind.
 
Written By: jeffrey smith
URL: http://
Ahem.
To them, the mere fact that person A should have a inferior quality of health care than person B because person A does not have the financial resources available to person B
should have been
To them, the mere fact that person A should have a inferior quality of health care than person B because person A does not have the financial resources available to person B is wrong and immoral.
 
Written By: jeffrey smith
URL: http://
To them, the mere fact that person A should have a inferior quality of health care than person B because person A does not have the financial resources available to person B
And this is where you lose me. How is this different than clothes or housing or food?????

Isn’t the simple answer to this complex problem to take all insurance away from employers and give it to people. Why is that one thing so difficult?????
 
Written By: meagain
URL: http://
I agree that health care as other "commodities" can become rationed. But in the real world, where there is a national health insurance program, it may not be not so much the number of chest crackers as the allocation of funds to hospitals. Canada experiences this. An unanticipated rise in an area of need such as breast cancer surgery causes the regional hospital to have to ration care since the government finds it very difficult (politically?) to move funds and staff from one area to the ones in need. Thus, the women fly around the country looking for hospitals with the budget to perform the operation. We complain about HMO/insurance company bureaucracies mismanaging America’s health care, but just imagine if the government bureaucracy allocated funds and staff for our health system. I don’t care to engage in that imagery.
 
Written By: AMR
URL: http://
Meagain: If you give employees money instead of providing insurance, they’d have to pay taxes on it, it could lead to a massive tax increase to average people.
 
Written By: Scott Erb
URL: http://faculty.umf.maine.edu/~erb/blog.htm
A good chunk of it goes up for taxes, either way, either directly or indirectly. Don’t the corporations who run insurance companies pay taxes? Aren’t those taxes ultimately combined into the fees paid by policyholders?
 
Written By: Bithead
URL: http://bitsblog.florack.us
And this is where you lose me. How is this different than clothes or housing or food?????

Correct—it is not different. But people have a tendency see it as something that is intrinsically different. The fact that it is it so deeply involved with life and death changes its nature in their eyes. Which is where the problem is. Before you can convince people that something should be treated like a normal economic good, you have to show them that it is a normal economic good.
 
Written By: jeffrey smith
URL: http://
Dale, I for one don’t disagree with anything your main argument. And, frankly, I personally doubt that Ezra Klein does, either. (Skeptical? Email him!)

As I said to Bruce, the picture most conservatives paint (If you really want it, I’ll go find you examples, but maybe you’ve seen this yourself) for a government-run health care system is one of bureaucratic rationing. Not rationing in the sense of having to wait for care - although there are certainly accusations of that as well - but rationing in the sense of
"send your liver transplant request off to the government, who will probably decide in a few months if your liver transplant is serious enough to receive transplant permission".

In most of the hybrids proposed for the US, for sure, and even under single-payer as I understand it, that form of rationing doesn’t exist. Sure, there’s the fundamental rationing of availability vs. demand, but that’s, as you’ve mentioned, a constant function under all systems.

Well, not a constant function. Actually, our wait times are worse than most other industrialized nations.

Anyway, that’s this misunderstanding comes from - trying to correct a stereotype of rationing as unique to government-run health care systems. Which, of course, it isn’t. Which you created a whole post to point out. So, actually, you were agreeing with us before we were agreeing with you.

Which is really why I don’t get where you’re coming from with:

The most interesting thing about my experience over at Ezra’s is the imperviousness to factual argument.

Oh, come on. Look in the mirror. Not to single you out specifically, but how often have you, or any of your compatriots here at Q and O, changed your mind on an issue after the contrary arguments of your commenters? The only time I can remember was when Ace of Spades dropped in here and threw the world’s biggest hissy fit.
The relationship of supply and demand isn’t an ideological argument. It’s simply how the world works. Yet there’s just no interest in seriously examining how a state-run health care system deals with that reality. To the extent that they do examine the economics...they get it almost completely wrong.
This is unfounded. The knowledge level of commenters vary, but Ezra spends his every working day studying the economics of the health-care system. I’m pretty sure he’d demolish you in any empirical knowledge test on the subject you care to name. Why don’t you debate him on it?



 
Written By: glasnost
URL: http://
Look, Billy, I get your point, but I’m telling you right now... when I see comments from Ezra like "we simply don’t think profit should confuse how we ration it." I know that the real core issue for Ezra and his type is not health care, at all, but rather who is in control.

This is not a case of Klein not knowing what rationing is, it’s a case of Klein not CARING what it is. Their biggest bitch is, someone’s making a buck. (Gasp!)In other words, it’s not socialistic enough.

Forget that the ability to make a profit, has
produced most of the world’s advances in medicine over the years.

Dale, apparently someone annoyed with the process, asks why a food production isn’t earned over to the government... Apparently not realizing that’s next on the agenda.

The first clue to all of this, is that it’s Klein taking up the argument. The second is when you see Erb falling into line with it. When you see that parade forming, you can forget about mere facts having any effect on the argument.
 
Written By: Bithead
URL: http://bitsblog.florack.us
Meagin—

Private insurance dollars are not a big kitty of money to be redirected to individuals. They are a form of compensation and an inducement to employees to work at a particular firm.

Insurance is provided by companies and organizations as a tax-deductible benefit to their employees who receive it tax-free. Taxation of benefits is not a trivial matter.

Furthermore, large organizations have, over the years, dramatically lowered healthcare costs by group purchasing. Ultimately, the (price-taking) individuals would band together and things like Blue Cross would have be created all over again to do the healthcare purchasing for them.

Moreover, lacking insurance is not lacking in care. Go into any emergency room in an inner city in this country and you will see indigent people with runny noses. They cannot be denied care under the Stafford Act. Lack of insurance does not necessarily mean poor health or financial ruin—especially if the uninsured would do the sensible thing and put some damn money into savings.

All an insurance company does anyway is put money into long-term investments and try to match their investment returns to the actuarially projected futured claims. Private healthcare insurance is possible courtesy of the capital markets.
 
Written By: FA
URL: http://
Well, not a constant function. Actually, our wait times are worse than most other industrialized nations.
Sorry, no...

I live within spitting distance of the Canadian border... the Hospitals around here are doing a booming business, on Canadians who are getting sugary done here instead of in Canada. Would they be coming down here, to wait longer than in their native Canada? I don’t think so.
 
Written By: Bithead
URL: http://bitsblog.florack.us
So, Meagain, the answer is to forbid employers from providing health insurance to their employees? We wouldn’t be going down this road if government hadn’t set wage controls during WWII. But it strikes me that violating freedom of contract to cut away that dendritus is not a philosophically sound approach.
 
Written By: Jeffrey Quick
URL: http://
In a truly free-market system, the purchaser of health care/health coverage would also be the consumer. The consumer would ration his own health care and coverage, based on the price. That’s how the rest of the free-market economy works. But it isn’t how health care works.
First of all, you seem to be asserting that, in the United States, people don’t pay different prices for different care procedures or medical insurance coverages. This is undeniably false. I’m sure you agree. Therefore, unless you disagree with the prior statement, price undeniably plays a role in the rationing of care. Just because this isn’t a system completely uninvolved from government doesn’t mean that price isn’t the primary component of our rationing. It clearly is.

Second of all, for an insurance market to work - to genuinely perform the service expected it has to be risk-blind. That is, medical insurers have to offer the same prices to everyone. Otherwise, they will charge astronomical prices to sick people and dirt-cheap prices to healthy people. The result is, of course, non-rich sick people being totally unable to afford health insurance.

You don’t understand the implications of the lack of a substitution effect at all. Let me spell the argument all the way out for you. If you’re a poor person, you can buy the $1 menu at Mcdonalds. If you’re a rich person, you can buy $1000 caviar. That’s the substitution effect.

But you don’t control whether you get struck with a cheap disease to treat, or an expensive one. Thus, you can be a person making $20K a year who comes down with an illness that costs 500K to treat. It’s a literal impossibility that Mr. $20K can afford treatment. And there is no substitution available. So, either someone else pays for his medical care, or he dies in the gutter.

Conservatives are in favor of the "die in the gutter" option.

Unfortunately, the secondary consequences of the fact that disease is not a deliberate consumption choice is that Mr. 20K can’t get health insurance at all, not at a price he can afford, because the mere possibility that he could come down with a 500K disease leads insurance companies to charge him a lot more than he could afford just in case it happens.

That’s why the insurance market is an example of market failure: because the expense of what terrible medical event happens to you is not a consumer choice. It isn’t now, and it never will be.

 
Written By: glasnost
URL: http://
And this is where you lose me. How is this different than clothes or housing or food?????
This is easy, meganin. Cheap food doesn’t kill you. Cheap clothes don’t kill you. Not being able to afford your medical care often kills you.

Actually, it’s deeper than that. For many ailiments, there IS no cheap version of the medical care needed. If you get lung cancer, six months of chemotherapy has a fixed price in the five or six figures. There is no low-cost option. So you pay Rich People Prices, or you die.

That’s why health care is not like food or clothing.

Even in housing, prices scale down to affordability. Almost everyone can find a pricing level they can afford, even if it’s four people in an apartment. When people are priced entirely out of the market, they’re homeless, and liberals are no fans of that either.
 
Written By: glasnost
URL: http://
Bithead, read the link.
 
Written By: glasnost
URL: http://
In all this I see one large error:
"However you can’t choose whether or not you need insurance and you can’t choose to not have your tumors removed when their cancerous."

BS.

If you cannot afford the insurance/care/surgery/meds, you do without it and, yes, you die. People did it before we had the ability to keep you relatively alive.

People will continue to make very hard decisions about their health care based on finances. There is nothing wrong with that. Why do people believe such (admittedly coldly logical) decisions are so wrong?
 
Written By: LauraN
URL: http://
Bithead, read the link.
Ah, but I did, you see.

Another liberal who figures the only possible reason for disagreeing with a liberal’s POV is being uninformed on the matter. (Snort)



 
Written By: Bithead
URL: http://bitsblog.florack.us
we simply don’t think profit should confuse how we ration it.
I have a hunch that this commenter is not a doctor, but she may be employed. If so, I wonder if her take-home pay confuses her, or if it confuses the market for her employment.
 
Written By: Aldo
URL: http://
Ah, but I did, you see.
Oh? Then why did you post this?
Sorry, no...

I live within spitting distance of the Canadian border... the Hospitals around here are doing a booming business, on Canadians who are getting sugary done here instead of in Canada. Would they be coming down here, to wait longer than in their native Canada? I don’t think so.
My link says:


But a 2005 survey conducted by the Commonwealth Fund of sicker adults in six highly industrialized countries found that only Canada was worse than the U.S. when it came to waiting six days or longer to schedule a doctor’s appointment for a medical problem.
So: six first-world countries. The US system is more privatized than all the other five. Wait time performance is worse than four of them. The only one we do better than is Canada.

Thus, the problem with your anecdotal example.

Another problem with your anecdotal example is that we have no idea who those Canadians you refer to represent. We have excellent wait times for elective surgery, for example, which doesn’t help genuinely sick people worth a da*n. Are your Canadian boomers coming over the border for liposuction? You don’t know.

 
Written By: glasnost
URL: http://
Meagain: If you give employees money instead of providing insurance, they’d have to pay taxes on it, it could lead to a massive tax increase to average people.
Then adjust the tax code to address this
Furthermore, large organizations have, over the years, dramatically lowered healthcare costs by group purchasing.
Can there not be large organizations that are private that accomplish the same thing?
So, Meagain, the answer is to forbid employers from providing health insurance to their employees?
The QUESTION is how do we get health insurance away from being an employer provided thing. Or, how do we make it so the individual has the option of choosing to get insurance on their own OR through their employer.
Actually, it’s deeper than that. For many ailiments, there IS no cheap version of the medical care needed. If you get lung cancer, six months of chemotherapy has a fixed price in the five or six figures. There is no low-cost option. So you pay Rich People Prices, or you die.
You are focusing on catastrophic ailments, whereas I am looking at basic health care.
People will continue to make very hard decisions about their health care based on finances. There is nothing wrong with that. Why do people believe such (admittedly coldly logical) decisions are so wrong?
I have no clue LauraN, but I’m with you.
 
Written By: meagain
URL: http://
As libertarians so often claim, markets often function poorly because of massive government penetration into them. Clearly the health care market in the US is not a free market due to that penetration and regulation. The rationale for that is that health care should be guaranteed in a wealthy society because without adequate health care you do not have equal opportunity (similar to the argument for education), and thus it advantages the haves vs. the have notes in a fundamentally unfair manner. Education and health care are different than televisions or most goods because not having "stuff" doesn’t prevent one from finding and exploiting opportunities to be wealthy. Not having an education or health care might.

Debate 1: Is health care fundamentally different than other goods due to the fact it could fundamentally limit opportunities for success (or children’s future success)?

Debate 2:, if it is, or if society in general believes it is, then what is the best way to assure adequate health care for anyone who needs it? Here there are three alternatives: 1) the status quo, which few people like; 2) some kind of national health care system, whether a single payer or hybrid; and 3) eliminate government involvement. Option 3 has to be dismissed because it is not going to happen. Are the two remaining options the best? Is there another approach that could work? Can a private sector driven approach create an alternative plan to assure coverage beyond going to the ER — which is very inefficient, avoids screening and other cost saving mechanisms, and is not chosen by many poor who fear collection agencies.

It seems to me that nobody should be happy with the status quo (especially not libertarian type thinkers) and everyone, including people on the left, should worry about the bureaucratic nature of a major national health care system. Maybe we need creative thinking (sort of like the example I gave in another thread of how Muhammad Yunus with micro-credit offered a kind of ’liberal structuralist’ alternative to the clash between neo-liberal orthodoxy on development and neo-Marxian structural alternatives.
 
Written By: Scott Erb
URL: http://faculty.umf.maine.edu/~erb/blog.htm
Thus, the problem with your anecdotal example.
(Chuckle) Not if you’re making the case that socialism is the cure for the problem. Which, as I recall, is why this conversation is occurring.

And by the way, do you have any other sources than the "commonwealth fund"? forgive me, but doesn’t the very name of that suggest a left leaning bias? From whence does this "fund" receive it’s... well... you know.. funding?

Some interesting names there, the sum of which is hardly the political center. Perhaps had you some other source for similar numbers...

And by the way; the figures here in the United States I suggest, would be far better, were we to remove what governmental interference there is now.
 
Written By: Bithead
URL: http://bitsblog.florack.us
Shorter Erb: "The ’Third Way’ is not dead; it just smells funny."
 
Written By: Billy Beck
URL: http://www.two—four.net/weblog.php
Pining for the Fiords.
 
Written By: Bithead
URL: http://bitsblog.florack.us
"Not being able to afford your medical care often kills you. "

No. Disease kills you. Your ability (or lack thereof) to fund your care is entirely up to you and your ambition. You would think the drive to live would also drive people to make healthy choices and remain solvent on their own.

Where did that ambition go? Rather, when?

Immediately following the institution of Social Security and Welfare, perhaps?
 
Written By: LauraN
URL: http://
"You may have noticed that there isn’t a waiting period for canned string beans. "

Move to Zimbabwe. Latest in a long line of examples (real, not theoretical) of how socialism fails.

 
Written By: SDN
URL: http://

 
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