Tuesday, August 23, 2005

Health Care

Via Tyler Cowen comes this Malcolm Gladwell piece on health care in the New Yorker. The only "new" argument he really makes is that there really isn't moral hazard in health insurance since people don't like being around hospital. As Tyler correctly points out, "the real problem comes from the other side: doctors overbill or perform unnecessary procedures." I don't know much about health care, but I do know what I don't know. I have seen the facts, as everyone has, that countries with universal health care spend far less per capita on health care that do we in the United States. But I haven't seen a good reason *why* this might be. Taking a very short look at universal health care might lead you to believe the opposite because of the moral hazard problems that Tyler mentions. Universal health care does avoid adverse selection, but health insurance markets do exist, so I don't know how much of an effect adverse selection has anyway. I would be very appreciative if someone (Isaac?) would explain the logic behind these facts. Until then I can't quite buy that France and Canada really do get the same quality of health care for half the cost.


Anonymous guerby said...

Like any other industry, why not look at productivity on a sample of standardized health care stuff in various countries (like Appendicitis removal)?

Some ideas and guesses:

- cost of medecine is much higher in the USA (strong intellectual property lobby, profit motivated doctors prescribing more expensive drugs)

- doctor salaries much higher in the USA. May be this is due to social factor, in the USA social status is much more determined by bank account than any other things, I believe doctors in old Europe earn in relative less money but have pretty good social status.

- I believe that in fully "free" market, price of healthcare should go to infinite, for example in life and death situation (or certain death in some time range if nothing is done), what is the value of the treatment to you? Everything you own for your life (or a life with less or no pain)? Unless a significant part of the population is a doctor to keep prices down, this won't work. Plus you don't have much room for negociation or choice in lots of situation, critical lack of information on quality, etc..

May be the old Europe social status vs skyrocketing prices works a bit better. I have no numbers of course.


4:12 PM  
Blogger henry said...

I agree with your (1) and (2), but they don't necessarily point to a universal health care system. To fix (1) you could just shorten patent lengths and (2) is largely due to the high cost of liability insurance, which requires tort reform. As for (3), I suppose it depends on how you value life but prices can't be "infinite" since there are, of course, limits to how much people can pay. I think there is still a trade-off anyway...if your life would be painful or getting an extra year would mean eliminating any inheritance for your kid's you may just choose to end it.

4:27 PM  
Blogger Isaac said...

Today is just one of those days...I tried to write a post explaining what little I know on the subject, but somehow it didn't coalesce (sp?). I'll try again tomorrow. And I had a beautiful idea for a post on tautness v. slackness in the economy, but when typed that made no sense, so...

Laurent is right: in France doctors are paid like $55,000 a year on average, far, far lower than in the U.S. The difficulty with looking at the cost of standard health care stuff is that you run into problems in the U.S. of the cost of x when who is paying. For the price varies. And treatment methods differ. Better would be to measure cost of a given diagnosis.

1:30 AM  
Anonymous guerby said...

(1) shortening patent lenght mean that pharma will increase their price, so I see minimal gain there.

(2) as well as not paying that much doctors, in case of problem legal payments are ridiculous for public hospitals, and not that much for private hospitals in France. A social factor.

(3) By infinite I meant from the client point of view, and the amount of wealth is finite anyway :). But as I said it's hard to make a rational decision in thoses cases and social norm will likely prevail, and be different for different countries.

I would bet on (2), but usually economists just discard these kind of non monetary things :).


3:15 AM  
Blogger henry said...

Shortening patent lengths should have little effect on price. A monopoly (pharmaceutical with patent) will set the price to maximize profit...since neither costs nor demand have changed, the price remains the same. If anything, you would expect the price to decrease since the shortening may induce some patients to delay their treatment until it is available as a generic (thus decreasing demand.) That's post the drug being developed. Ex ante, fewer drugs will be developed but I don't see this having any effect on the price of a particular drug.

3:50 AM  
Anonymous California Health Insurance said...

I agree with Gladwell on his discussion on health care. It is unfortunate to hear so many lack health insurance. We really need to improve our health care system. Health insurance is a major aspect to many and we should help everyone get covered.

2:41 PM  
Anonymous Blue Cross of California said...

Gladwell's piece on health care was wonderful. Great knowledge on health care and coverage.

1:38 AM  

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