Regarding the future, Dr. Zervanos is certainly correct that costs must be addressed. He repeats the widely held view that we should make “the patient the center of how money is spent for medical care.” Echoing the sentiments of many others, he suggests that much waste is due to patients going to doctors for “frivolous reasons,” and that they demand too much expensive and inappropriate care. Contrary to popular belief, these reasons account virtually none of the higher health care costs in the United States. (John Nyman has written extensively on the flawed application of the theory of “moral hazard.”)

European nations cover everyone at an average of half of the costs in the United States. Yet they have not had to use the policy of making patients “informed shoppers,” by being personally responsible for more than a token amount of their health care costs.

Our colleague, Joshua Freeman, today (1/20/12) posted an entry to his blog: “One thing to NOT worry about: paying for health care — in France.” He describes scenes from a Finnish/French movie, “Le Havre.” It is the story of Arletty, the wife of a shoeshine man, who suffers severe abdominal pain. Her husband’s main concern is how he will get her to the hospital.

Dr. Freeman writes, “What is not a concern is whether they can afford her medical care. As I am used to being in the US, to caring for people of limited means, of seeing people in the free clinic who cannot afford to go to the doctor or people admitted to the hospital when they finally show up in the emergency room with disease that is far gone because they haven’t sought care, I found this a bit jarring. I was waiting for Arletty to protest that it was ‘nothing’ (she has been in some denial already), for fear that they couldn’t afford medical care. But she doesn’t, and he says nothing about it, and goes off to find transportation. We could see the same thing in an American movie, and we would expect the same thing in our own lives – when your wife is really sick, you take her to the hospital, you worry about the bills later.”

“Except that wasn’t why. They weren’t worried about the bills. Because it was France. With a national health insurance system, where everyone, even the wife of a self-employed shoeshine guy living in a tiny house off an alley, has health coverage. In the film, Arletty is in the hospital for several weeks, but of all the issues that occur, how the couple will pay for it never comes up. Not at all. It is not even a thought in their minds. But it is a thought in mine, and I keep having to remind myself that it is not part of the plot because it is not an issue that French people have to concern themselves with. The illness, yes. Whether she will survive, yes. Whether he will earn enough money each day to buy dinner, yes. But not how to pay for several weeks of hospitalization. Amazing.”

http://medicinesocialjustice.blogspot.com/2012/01/one-thing-to-not-worry-about-paying-for.html

Dr. Zervanos states that he doesn’t object to a “unipayer government subsidized health care delivery system.” In fact, it is precisely because European nations depend on their own government stewards to supervise health care financing that they are much more successful in containing costs while ensuring comprehensive care for everyone, while depending heavily on a strong primary care infrastructure.

Our private insurers and the employers who purchase plans are depending more on controlling costs by erecting financial barriers (cost sharing) to largely appropriate care. Instead, we need policies to encourage appropriate care. We can control costs much more effectively through the proven tools of the single payer model, while actually improving our health care delivery system by realigning incentives to promote family medicine.

I suspect the strategists for the two major American political parties would agree with two propositions: 1) that federal policy had something to do with the crisis in housing prices and the subsequently the availability of mortgages and credit based on housing prices, and 2) that the federal regulatory apparatus proved inadequate to police what many describe as a “housing bubble”.

Of course, since both parties have been in positions of executive or legislative leadership at various times during the build-up of the “bubble” each strategist will be seeking the phrases that inflict the greatest political damage on the other party.

The ensuing battle of sound bites about government involvement in the private sector (the issues in the housing sector resulted in unprecedented federal involvement in the banking system and Wall Street) have caused anxiety for both those who wish to see something changed in health care and those who like the status quo ante. Of course, the sharpest of the political operatives on both sides have found a demand for their services at a time other than the even-numbered election years.

But the political debate has not provided the information to answer Brosnahan’s first question: “Where does all the money/profits go?”, nor to illuminate the “collateral damage” issues that Brosnahan somewhat hazily perceives (mothers separated from infants because their housing costs so much).

I think there is a another question that precedes the Brosnahan question. “Where does all the money come from?” When it is understood how much of that is federal money, through Medicare and Medicaid, and how little thought is given to the policies (or lack thereof) or social consequences of how that federal money is spent, then there may be opportunities to develop a more rational discussion.

2. Just think what happens when you buy a house. A bank borrows our own taxes from the FED at prime (practically free), and then according to “fractional reserve lending” lends 10X that amount back to us with an amortization schedule that collects 95% interest for 20 years on a 30 year note. And this affects business, car, equipment, and school loans.

3. Therefore, the only way to gain principle is for the price of the house to go up. This is a major driver of inflation. And this inflation which affects all sectors of the economy put pressure on families for women to enter the work place.

4. With both Mom and Dad working full-time and noone home with the kids, kids are not having their emotional needs met which leads to addictive and self-destructive behavior, and they are not being taught basic life skills which is the true primary prevention. What doctors due is not prevention but detecting disease early which will make you live longer but all screening and treatment has a QALY. If you die in 6 months or 6 years, the cost of dying is the same.

5. We need tort reform, let doctors tax deduct charity care, allow consumers to buy insurance across state lines, and let doctors bill patients directly and have insurance companies reimburse patients. And set up a more equitable banking/lending system that allows people to barrow and pay back loans easily.

Back on the topic of making an omelet or raiding the fridge. It seems to me that raiding the fridge is more akin to raiding a refrigerated warehouse than a kitchen fridge. The more I hear about health care policy, the more it sounds like a diluted mess of regulation.

So, when it comes to economics, I guess the question now is can we even apply economic thought? If we go so extreme as to have government run health care (which, if the way Obama has been taking, will be cheaper than public and therefore drive it from the market should it be unable to compete), it would seem we don’t have market forces driving down prices, but government doing so. Let us not forget that nothing is free – when the government offers \cheaper\ health care, what they’re really offering is health care that costs less for a certain group of individuals (typically those on medicare/aid and the poor).

As a young individual who takes care of himself, exercises regularly, and has no health conditions, I personally argue for private health care (e.g. no health care if I chose, or whatever other kind of care I chose). The disparity that exists because not everyone is in my position (elderly, genetic disorders, druggies or other addictive types who have messed up their bodies) – this disparity begs the question of what’s fair. Should I subsidize the care of those who drink, smoke, and do drugs? Who should? Don’t get me wrong, I’m for helping people and giving second chances, but let’s face it…a system that can be abused will be abused.

So where’s the sweet spot between government aid and private health care? Let’s look around the world. Who has the best health care, options, etc? Well, we do, of course – but the problem lies in the fact that we spend SO MUCH more on our care than any other country.

Would removing some diluted regulation help? Possibly. Would more taxes help? I’d argue not. It’s like fighting fire with fire… we need to stop thinking about how to spend money to save money. Let’s get more transparency in our government and the regulations and policies that affect us.

Where are we at now? I guess we just have more questions to answer. Luckily some are partially answered. We have a more democratic/socialist (and I say this matter-of-factly, not to instigate argument) president/government now than in recent years. So it’s very likely that such policies that tend to the poor and the have-not’s will prevail, but my plea and hope is that we do so with more care and forward thought and planning to ensure we don’t dig ourselves a new, bigger hole for me and/or my kids to fix later.

Classical economics is probably the right place to start to frame the debate over proposals to “reform” the “health care system”. I think there are many points where the debate gets confused, and it’s quite a trick even to decide in what order to introduce these points into a discussion of the matter.

However, I do think early on that it would be useful to try to separate “what the federal government does” from the everything else that goes on in the health care system. Any Obama plan or plan by any individual member or group of members of Congress or, indeed, any advocacy group, should begin with a understanding of how federal laws, tax policies, health care reimbursements, and the like impact the system.

Perhaps both a free market classical economist or a socialist economist observing the state of health care in the United States will agree that it is not an efficient system, as “efficiency” might be defined by either the classical economist or the socialist.

To understand what I mean here (and this should be of great interest to a medical student making future career decisions, such as choice of specialty), how do services get priced? In a market-based system they are determined by what the classical economist calls “supply and demand”, which, conceptually, can be identified by the classicist’s supply and demand curves.

A socialist economist would seek to price services “rationally”, perhaps bringing into the analysis a theoretical structure for maximizing the welfare of the greatest number of people in a “commonwealth”.

But American health care is not priced by either the market or by government planners. The person who was the highest ranking health care administrator in President Lyndon Johnson’s administration at the time that Medicare and Medicaid were enacted (Dr Philip Lee), has stated that every part of the American system is the unintended consequence of some particular public policy initiative or another.

The fundamental problem of the American health care system is that a high percentage of its revenue streams are based on federal policy – and if a given policy has unintended results, the revenue stream could be radically altered if intentions were suddenly brought into concert with policy (i.e., if suddenly the Feds said – this is what we want to happen, so this is what we will pay for).

The government role becomes even trickier to analyze when we begin to discuss “rights” to health care. In many private sector industries – take videogames, for example (as far as I know, no one asserts a “right” to access to videogames). You pay the price demanded for a popular game or you go without. If enough people go without, the price is lowered until demand is in balance with supply.

But in the U. S., there are certain implied rights to health care, or, at least, government imposed obligations for you to receive health care services, whether or not you can afford them.

Say, you collapse in public. Someone dials “911″, more likely than not an ambulance will arrive and carry you off to an emergency room. Not knowing who you are or why you collapsed, the E. R. staff will conduct tests to try to figure out what has happened.

In some urban areas, there are examples of persons who suffer from diseases related to alcohol abuse who would collapse on the street several times in a single day, each time requiring enormous amounts of public funds to transport them to health care. Perhaps there is no direct public subsidy for the emergency room services, but those costs are absorbed somewhere as “hidden subsidies”.

The curiosity of the current debate on “health care reform” is the disconnect between some of the rhetoric and the reality. It is one thing to say that everyone in the United States should be “insured”, but we have not even agreed as a society as to what “health care insurance” is supposed to be.

In the 1970s, as the apparent advantages of the Kaiser-Permanente health plan began to be appreciated, a movement accelerated for insurance companies, who historically were in the business of developing life insurance risk pools whose “premiums” were based on pre-determined actuarial tables, to take on the task of constructing risk pools for health care reimbursement, which would be packaged as employee “health care plans”.

Because most employers do not seek to assemble sick workforces, employee health plans seemed to be actuarily advantageous, and could be marketed at relatively low cost. However, we never as a society have had such large numbers of elderly people before, and, to the extent that these plans continue as retirement benefits of the previously healthy workforce, it is unknown what ultimately their actuarial costs may turn out to be. Actuaries might guess, but we won’t be reasonably sure until the baby boom generation moves into their 90s.

But the preceding remarks only relate to the “cherry picked” healthy employees risk pool. Here, the current political rhetoric gets particularly muddled. When one talks of “rights to health care” or “universal coverage”, especially in a plan that mandates that employers cover health care, one is talking (or more properly is not talking) about hiding costs, subsidizing large numbers of persons with whom the employer has no perceptible relationship.

We need to inform the debate with much more information on how things really work, and why they work the way they do. (We need to “follow the money”. We also need to understand precisely how things get “priced” in our current system.) I had never considered trying to apply classical microeconomic price theory to the health care system, and do not know for sure where such intellectual exercises might lead, but it might be worth the effort to spend some time there.

I suspect that, whatever one’s politics, that the “sound bites” distort that person’s position. This is a precarious time for those who desire an enlightened, informed debate, but it really should happen. Perhaps the Internet is the only place where some of that could occur.

Unfortunately, much of the political debate will not just be getting carts before horses – it is assembling convoys of carts, with all their horses asleep in their stables.

That is where you, Matt, with your classical economics training, should spend time articulating how that discipline can help us clarify our thinking as we try to decide “what is to be done?”