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Free Markets & Healthcare

Discussion in 'Med Business [ MD/MBA, DO/MBA, DDS/MBA ]' started by mward04, Nov 14, 2005.

  1. mward04

    mward04 SDN Moderator
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  3. Shredder

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    haw, needs a free trial registration. can you paste it? ny times is so biased to the left though

    another article by the same author advocating national health insurance, the obvious solution :rolleyes: :
    http://select.nytimes.com/gst/tsc.html?URI=http://select.nytimes.com/2005/11/07/opinion/07krugman.html&OQ=nQ3DTopQ252FOpinionQ252FEditorialsQ2520andQ2520Op-EdQ252FOp-EdQ252FColumnists&OP=633e92f8Q2FmbhQ25mQ27E(66Q27mQ3CQ3FQ3FkmeemQ3F1m6x3t36tmQ3F1s(Q7DQ60Q3EptQ2F7Q27Q3EQ3A

    another:
    http://www.pkarchive.org/column/082704.html
    "Does this mean that the American way is wrong, and that we should switch to a Canadian-style single-payer system? Well, yes."

    call me an extreme capitalist but i have a hard time believing free markets truly fail anything. historically its always been subtle govt interventions that have caused them to falter and outwardly give the appearance of failed markets
     
  4. SanDiegoSOD

    SanDiegoSOD Milk was a bad choice
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    It all depends on your point of view. If the current health care system excludes the working poor, an extreme capitalist would say that this is capitalism at its best, and the poor should work harder and contribute more to gain access to the health industry. Others would argue that this standard is inhumane, so if free markets exclude the poor, it is a failure of collosal levels as all humans deserve health care. You are correct that (not-so)subtle government interventions skew the current system and we dont actually have free markets, which is highlighted by the fact that nearly 50% of all healthservices are paid for by the government (or more correctly stated, paid for by taxpayers - the govt. doesnt really pay for anything). Regardless, what we have here in America is considered to be a market-driven health care system, and by nearly all standards (excluding your own), the system HAS failed the poor. Where do we go from here? Damn, that's a tough question. :)
     
  5. SanDiegoSOD

    SanDiegoSOD Milk was a bad choice
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    Op-Ed Columnist
    Health Economics 101

    By PAUL KRUGMAN
    Published: November 14, 2005


    Several readers have asked me a good question: we rely on free markets to deliver most goods and services, so why shouldn't we do the same thing for health care? Some correspondents were belligerent, others honestly curious. Either way, they deserve an answer.

    It comes down to three things: risk, selection and social justice.

    First, about risk: in any given year, a small fraction of the population accounts for the bulk of medical expenses. In 2002 a mere 5 percent of Americans incurred almost half of U.S. medical costs. If you find yourself one of the unlucky 5 percent, your medical expenses will be crushing, unless you're very wealthy - or you have good insurance.

    But good insurance is hard to come by, because private markets for health insurance suffer from a severe case of the economic problem known as "adverse selection," in which bad risks drive out good.

    To understand adverse selection, imagine what would happen if there were only one health insurance company, and everyone was required to buy the same insurance policy. In that case, the insurance company could charge a price reflecting the medical costs of the average American, plus a small extra charge for administrative expenses.

    But in the real insurance market, a company that offered such a policy to anyone who wanted it would lose money hand over fist. Healthy people, who don't expect to face high medical bills, would go elsewhere, or go without insurance. Meanwhile, those who bought the policy would be a self-selected group of people likely to have high medical costs. And if the company responded to this selection bias by charging a higher price for insurance, it would drive away even more healthy people.

    That's why insurance companies don't offer a standard health insurance policy, available to anyone willing to buy it. Instead, they devote a lot of effort and money to screening applicants, selling insurance only to those considered unlikely to have high costs, while rejecting those with pre-existing conditions or other indicators of high future expenses.

    This screening process is the main reason private health insurers spend a much higher share of their revenue on administrative costs than do government insurance programs like Medicare, which doesn't try to screen anyone out. That is, private insurance companies spend large sums not on providing medical care, but on denying insurance to those who need it most.

    What happens to those denied coverage? Citizens of advanced countries - the United States included - don't believe that their fellow citizens should be denied essential health care because they can't afford it. And this belief in social justice gets translated into action, however imperfectly. Some of those unable to get private health insurance are covered by Medicaid. Others receive "uncompensated" treatment, which ends up being paid for either by the government or by higher medical bills for the insured. So we have a huge private health care bureaucracy whose main purpose is, in effect, to pass the buck to taxpayers.

    At this point some readers may object that I'm painting too dark a picture. After all, most Americans too young to receive Medicare do have private health insurance. So does the free market work better than I've suggested? No: to the extent that we do have a working system of private health insurance, it's the result of huge though hidden subsidies.

    Private health insurance in America comes almost entirely in the form of employment-based coverage: insurance provided by corporations as part of their pay packages. The key to this coverage is the fact that compensation in the form of health benefits, as opposed to wages, isn't taxed. One recent study suggests that this tax subsidy may be as large as $190 billion per year. And even with this subsidy, employment-based coverage is in rapid decline.

    I'm not an opponent of markets. On the contrary, I've spent a lot of my career defending their virtues. But the fact is that the free market doesn't work for health insurance, and never did. All we ever had was a patchwork, semiprivate system supported by large government subsidies.

    That system is now failing. And a rigid belief that markets are always superior to government programs - a belief that ignores basic economics as well as experience - stands in the way of rational thinking about what should replace it.
     
  6. Shredder

    Shredder User
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    as in other sectors of the economy, the poor shouldnt/wouldnt be excluded, but they wont get the same level of service. its unrealistic to expect everyone to get high quality service--its like saying every student in a class has a grade that is above average. docs abilities and innate capacities vary. capitalism at its best means everyone wins, but some win more than others. no zero sum games or fixed pies.

    as for the system today, the reason its failing is too much regulation, intervention, taxation. public sector just cant get anything right. we should open the floodgates for the entry of docs into the market. i posted elsewhere around here about how the eyecare sector is super efficient due to the lack of regulation there. docs have a cartel over the supply of docs and it needs to be stopped. IMHO

    hmm ok finished reading the guy's article. its good to see an opposing point of view, and supposedly the guy is well reputed from what ive read about him. but still...given the public sectors track record, how can skepticism possibly be overcome? whenever the word "social this" "social that" (justice, responsibility, etc) come into the picture things get muddled. also he was expected to be one of kerrys top economic advisors if kerry were elected, and i cant put faith into that kind of person
    what experience is that?
     
  7. SanDiegoSOD

    SanDiegoSOD Milk was a bad choice
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    The difficulty with your argument is that it doesn't see eye-to-eye with those who are critical of your ideas. Personally, I agree that those with money should be able to purchase greater health care. However, many of those who advocate for a single payer/universal/socialized/whatever system believe that health care is a "right", and therefore everyone, regardless of income, should get decent medical care. So they argue that the private market doesnt afford the poor the level of care that they "deserve" simply by being human. These people argue that your "everyone wins" capitalism argument doesnt apply to the healthcare sector, as the poor are simply priced out of the system and cant participate at all (or participate at an adequate level), meaning that the poor actually lose, not win.
    In the end, whether or not your argument is actually correct, it is irrelevant in the eyes of your critics. Life's a bitch, isn't it? :)
     
  8. Shredder

    Shredder User
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    i try to learn not win petty arguments

    transforming healthcare into a right gets tricky. life, liberty, and property/pursuit of happiness are really negative rights--nobody can take those things away from you. but nothing in american history guarantees a right to health care. if healthcare is changed into a right, the quality of docs will drop. no doc wants to work for the public sector under govt whims. and consequently patients will be much worse off. altruism and benevolence are not strong enough incentives to attract the best and brightest to the grueling career of a doc.

    the poor would never be priced out of the system if the quality and price of docs were allowed to sink low enough. cruel though it may sound, some healthcare is better for them than none at all. again its how it works in every other sector of the economy. if only the medical cartels would allow it by removing price/quality floors. eyecare is the exemplar of the success of free market medicine

    politics is all about this group and that group demanding such and such rights. the only real rights are natural rights
     
  9. SanDiegoSOD

    SanDiegoSOD Milk was a bad choice
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    I hope you see that I am not trying to engage in a petty argument; rather, I am presenting a point of view that is contrary to your own (and also happens to be contrary to my point of view, although for different reasons).
     
  10. Shredder

    Shredder User
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    sorry, it was more of a defense than an accusation. its just a subject im passionate about. no hard feelings i hope+different viewpoints are a positive thing if well supported. as for healthcare being a right...its a subject of ongoing debate. personally i dont think it is. do you? i know some ppl do. the thing is that solving problems isnt so easy as declaring them as rights. that brings its own set of dilemmas, and i think it would be much worse than the present state.

    anyway it was a disclaimer that im not out to engage in petty arguments, in case that impression is ever given, which it might be. hmm now that i look at my prior post it did look like an accusation. sigh, the shortcomings of the written word
     
  11. CTSballer11

    CTSballer11 Senior Member
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    Speaking of healthcare as a right, I believe that it should be a right for all children. I do not care about adults, but a child born into this world has no control over his family's socioeconomic status and inturn his/her health coverage. (There is a correlation between the two). You cannot possibly tell me that a one year old baby who is born with a congential defect should be turned down an operation or the proper meds because of his/her parents. A helpless child should not be thrown to the wolves in any humane society.
     
  12. SanDiegoSOD

    SanDiegoSOD Milk was a bad choice
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    I don't believe that healthcare is a right. I see no reason why it should be. I do, however, believe that a society as rich as our own ought to provide healthcare for all of its citizens. I think it makes economic sense, especially if an emphasis is placed on preventive care. Healthy workers are more productive than unhealthy workers and create more healthy children, leading to increased production and fewer resources wasted on preventable care.
    I agree with you that declaring particular issues as "rights" is quite problematic. It is dangerous to label all good things as rights, as many people would like to do; healthcare, housing, employment, education, etc., are all declared as "rights" by particular groups and individuals. I think the debate should be reframed with "rights" being deleted from the lingo, and replaced by things that government ought to promote, not provide outright.
     
  13. Minion677

    Minion677 Senior Member
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    im torn on the issue of health care being a right. part of me says yes while the other part looks at people who smoke, drink, trip, eat junk food and dont exercise and says no. :) however i do agree with SanDiegoSOD in that as a world leader and civilized nation we need to be providing everyone with a chance at health care. i mean we all have the right to a lawyer but not a doctor? come on..

    what i have a problem with is the guy working 2 jobs at small businesses while trying to support his family who cant get medical care because he is just above 150% of the poverty line. (the poverty line was calculated in the 50s and most say its outdated anyways)

    im not a fan of single payer because then the single payer (government) will have the market power to set compensation. from what i understand, canada has single payer for a certain types of procedures, visits, etc. essentially the government doctors have a monopoly on certain types of procedures.

    i think the US should just require health insurance. have it all through private insurance companies (do away with medicare and medicaid) and have the government give insurance rebates to those who need it (poor and elderly poor). this will do away with some selection bias because the healthy cant choose to not have insurance. if the government enacts some laws so that private insurance companies cant weed out unhealthy patients (not sure how this would be done), it will remove all the selection bias and decrease administrative costs greatly.

    ps. krugman is probably one of the most accomplished economists of our time... the "experience" hes talking about is data. tons and tons of data showing that the market for healthcare is failing.. most economists are saying this now. how are all the administrative costs for insurance companies from weeding out unhealthy patients at all efficient?
     
  14. Shredder

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    you make a good point. not only with healthcare but with many other phenomena, you cant really hold little kids responsible. well, basically under 18 legally.

    i feel a lot of sympathy for those with congenital problems. i think its very unfair and that medicine should work toward preventing or treating those types of situations. im particularly drawn to the genetic aspects. but i hadnt really thought of young folks...its so easy to forget about them i guess, since they have no voice
    its a slippery slope when ppl start turning personal beliefs into legislation. not that youre necessarily advocating that, im just saying generally. lots of ppl believe society/govt ought to fund this or that, but i think that should be left for private charities and individuals. its not necessary to tax everyone, or even the minority, to finance the beliefs of the rest/majority. a libertarian way of thinking, pretty much. like everything, healthcare for all comes with a price tag, and that has to be distributed among whoever (/all taxpayers). and not all ppl would want to pay for that (not speaking for myself--im undecided but others may be firmly decided, and if they dont want to pay for others' healthcare i think that choice should be respected/acknowledged)
     
  15. Shredder

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    another good point. arent those lawyers considered to be lower echelon lawyers? similarly we should allow lower echelon doctors to serve needy but indigent patients, i think. right now there arent really any low echelon docs--the standards are set too high, in the name of protecting patients. regulations are always about protecting such and such individuals or groups, as if they cant look out for themselves. medicine is the only profession where you are guaranteed to be earning 100k...that should probably not be the case. it wouldnt affect people like us, as i doubt anyone on SDN would end up being that kind of doc. it would just be a win win situation--provide more jobs for aspiring but maybe not so highly qualified premeds who would be rejected otherwise, serve more patients who are in need, and lift burdens from the shoulders of other docs and society/taxpayers. i think opening more DO schools would serve the purpose nicely, objectively speaking
    this would be a disaster i think. america is the beacon for free markets and healthcare. govt cannot set compensation, just like it would fail to set prices and production as the soviets did. markets simply work better--all of the consumers'/patients'/hopeful docs' combined knowledge and information far surpasses that of any central planning authority
    dont insurance companies work by conducting actuarial operations? like weeding ppl out and charging different rates based on different risks? im wary of the Man screwing around with how insurance companies operate. requiring health insurance sounds all right--its how its done for auto liability insurance, eh? although that doesnt work perfectly, im sure its better than if there were no requirements for it. as long as the private sector, and not tax money, is shouldering the administrative costs, i dont think the govt has a right to dictate to insurance companies how to run. i really like the mandatory health insurance idea--any reasons its not in place?
    but who is the govt to talk about efficiency? the "market" for healthcare is failing bc its not a true market. im of the opinion that true markets never fail. if by experience hes talking about past "market failures" i.e. power crises, great depression, etc--analysis has shown that these werent market failures but actually subtle govt interventions that led to what seemed like market failures. i dont think theres ever been an example of a free market failing--theyre brilliant and wonderfully effective at satisfying everyone. maybe that sounds extreme but im open to discussion
     
  16. Jon Snow

    Jon Snow Senior Member
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    Heh, nice argument. A tax break is not the government paying for something. Businesses rarely pay huge taxes because they write everything off. Health insurance is just one more expense that business is allowed to write off. There's nothing wrong with that. This argument personifies leftist thought. Your money is really their money and they let you have some of it.
     
  17. Minion677

    Minion677 Senior Member
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    shredder, the "perfect" world you envision with doctors of all calibers taking care of patients is already happening. PAs and NPs all see patients for the more mundane cases. these people arent "bad" doctors... they are just trained less. same with public DAs in law.. they arent trained enough and are looking for experience. your system would work if everyone was required to have health insurance. this way, the people with a lesser insurance plan could see these PAs and NPs for basic and preventative care. if insurance is not required, PAs and NPs wont see these uninsured because they dont make enough money as it is to do any pro bono work... the uninsured's only chance is ERs and free clinics (these things just sap money and resources from doctors in the current system).

    so this new system would also eliminate the ~30% of ER care that doesnt get paid for, gaining money for hospitals and making the job of ER doctor a lot more worthwhile (really cool job IMO)

    im telling you, the way to "fix" healthcare is to require insurance and give subsidies to the poor and elderly poor (not all elderly are poor, in fact most arent). it wont be perfect, just as auto insurance isnt perfect.. but as long as there is government there will always be government intervention into markets. there will never be a totally free healthcare market or any market for that matter, so we need to find a solution that will satisfy all parties.... btw thats the problem i have with most economists who give opinions on policy (i was an econ major). they deal too much with the ideal situation and rarely look to solutions that are actually feasible politically. i guess thats the politicians job
     
  18. Shredder

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    true...ideals should be kept but reality is what needs to be worked with. but if the perfect world is already happening, why is there so much fuss about doctor shortages? the AMA routinely makes sure that people like PAs, NPs, nurse anesthetists, optometrists, etc are not able to overlap too many duties with docs. its said that this is to protect patients, but really its to maintain docs stronghold on the market. i posted this article on another thread that discusses it

    http://www.mises.org/fullstory.aspx?Id=1749

    requiring insurance seems to make sense. yes, auto insurance isnt perfect as many ppl still dont have it. but they get in trouble for that, right? still, what about the healthy people who choose not to buy insurance? i guess the same applies to drivers though. ill look into this some more

    concerning politicians--where can you draw the line and say enough is enough, as far as interventions go? incentives in the public sector are nil, whereas the private sector appeals to humans deepest, greedy mentalities. i think healthcare markets should/could be totally free, if the burdens of the poor are placed on private charities instead of taxpayers. of course, the light way of putting it is that there arent any "bad" doctors--but the point is that docs/nurses whoever vary in their skills, abilities, education, training and etc; i.e. "lower echelon"
     
  19. pedsid

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    My two cents on the situation ...

    I do believe healthcare is a right ...

    I think free-markets have failed us, but I also believe single-payer is a bad idea. You only have to look at the problems with medicare to see why ... constant cuts in physician payment, crappy policies like the SGR and the stupid drug plan that leaves a lot of people out.

    That being said, free markets haven't worked either. The reason is that they aren't really free markets. Many of the markets are dominated by by a few (or one) managed care organization ... there is not, or very little competition. It's only getting worse as big companies gobble up smaller ones. These are oligopolies ... and is some cases I think they are flat out monopolies.

    The answer I believe is more competition, and more regulation. A real free market would call for a ton of small firms competiting with the same good, right? Maybe not quite the best idea for healthcare ... what about a ton of medium sized companies?

    I also think we have to get rid of the failing employer-based system ... and the $120 + billion dollar tax subsidy that accompanies it. That money could be better used elsewhere. Like covering the uninsured. Currently those who make more money a year, in a higher tax braket, get more of a tax break for their health coverage as well ... that's just wrong.

    If get rid of the employer-based system, and put essentially the whole country in the same risk pool ... and don't allow insurance companies to cherry pick the healthiest people. We would see more competition, and people would be able to attain better coverage.

    I'm a fan of individually mandated catestrophic coverage (a recent convert). Imagine if we could completely wipe-out medical bankruptcies. Again, we could create a situtation where companies compete for the coverage.

    Still have to have the safety net ... better funding for medicaid/medicare, elimination of the SGR, etc.

    I also a big fan of mandated coverage for kids ... and I think this is the first step we will see in the next few years.

    just my thoughts. I skimmed most of the thread (read the beginning) ... so maybe I missed some points ...
     
  20. kito

    kito Big Evil
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    :laugh:
     

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