Center for Business & Public Policy
Collaborative blog exploring the relationship between market forces and public policy.

This week I just thought I’d point to a few interesting health-related pieces I’ve come across this week.

The first is a blog posting by Gary Becker laying out what he sees as the problems with the new health reform bill and a reasonable conservative approach to addressing some of the problems with our health care system, which relies on moving toward a health insurance system that focuses on paying for catastrophic care rather than routine care and puts more of the burden of anticipatable expenses on consumers, who will then have an incentive to shop more for care.  I agree with the point in general, although with two quibbles.  First, studies have shown that when people face higher out-of-pocket cost of medical care, they use less care across the board.  That is, they cut back on critically important care and less important care at about the same rate.  So, if we’re going to ask people to make decisions about how to spend their health care dollars, we’re going to have to give them better information about the costs and benefits of various treatments.  Second, although high-deductible plans will lower the cost of health insurance, they will not necessarily reduce the cost of health care.  There will always be people for whom even high-deductible plans demand a very high fraction of income.  Some conservatives would argue that if people don’t want to pay for insurance, then they won’t have insurance, but I think this argument is a bit to flip and does a disservice to the idea of market-centered reform.  I raised this point when Michael Tanner of the Cato Institute was visiting the Center for a health care debate last month.  His response, which I found quite reasonable, was to say that if we think that poor people do not have enough money to purchase a basket of required goods, which may include food, shelter and health care, then we should consider redistributing money to them.  But, the way to do this isn’t through messing with the health care system.  If we want to make sure people can “afford” to buy health insurance, then we should redistribute money the way we always do – through the tax system, without further distorting the health insurance system.

Becker and Richard Posner blog together (or at least alternate on the same blog, aptly named the Becker-Posner blog).  Posner’s response is also an interesting read.  I’d like to point out that, although both Becker and Posner are critical of reform and advocate more conservative, market-based approaches, neither of them resorts to hysterical and incorrect cries of “SOCIAISM!”  This is undoubtedly due to the fact that both know what Socialism is and understand that for all its faults, ObamaCare is not socialism.

The second article is by New York Times economics writer David Leonhardt.  The article, entitled “In Medicine, the Power of No,” echoes a theme I’ve raised here before, namely that reducing the cost of health care in this country is going to involve doing less of some kinds of care, and Americans don’t like to say no.  Interestingly, Leonhardt points to a recent study that shows that when people are given more information on the costs and benefits of various treatments, they tend to choose less invasive treatments than doctors would choose on their behalf.  If this phenomenon is generally true, then it suggests that the combination of higher out-of-pocket costs and better information about the costs and benefits of treatment may actually be effective in lowering the cost of health care and slowing its growth.