Deinonychus antirrhopus

The Triumph Of Socialized Medicine

Timothy Noah points to an article in the Washington Monthly and claims that Socialized Medicine has won hands down. Frankly I think Noah and Longman are over-reaching.

Right at the front of the Washington Monthly article written by Phillip Longman we have this,

Ten years ago, veterans hospitals were dangerous, dirty, and scandal-ridden. Today, they're producing the highest quality care in the country. Their turnaround points the way toward solving America's health-care crisis.

In other words, it isn't clear that socialized medicine has to be better than privately provided medicine. Longman even writes,

By the mid-1990s, the reputation of veterans hospitals had sunk so low that conservatives routinely used their example as a kind of reductio ad absurdum critique of any move toward "socialized medicine."

Now it is also quite true that it appears that the VHA has made big improvements. But does this always have to be the case? That is the primary conclusion of the both articles. Socialized Medicine will solve all our health care problems, or at least quite a few of them.

Fruther, this conclusion is based on one, yes one study.

An answer came in 2003, when the prestigious New England Journal of Medicine published a study that compared veterans health facilities on 11 measures of quality with fee-for-service Medicare. On all 11 measures, the quality of care in veterans facilities proved to be "significantly better."

Yes, it is a peer-reviewed article. Yes, the New England Journal of Medicine is prestigous and yes, it is hard to dismiss. But there shouldn't we at the very least get a few more studies before we run headlong into socialized medicine? It is often said in medicine that getting a second opinion is a good idea. Well, how about a second study? Guess that is too much to ask.

The other problem is that this looks at just Medicare patients and not the recipients of private medicine in general. I don't know if there are substantial differences between Medicare and non-Medicare patients in terms of payment that could account for some, all or none of the differences in care that veterans recieve. At any rate it seems like a reasonable question to ask, but apparently not for Noah or Longman.

Further, are the differences between VHA patients and non-VHA patients? Are VHA patients more likely to go to the various VA hospitals because they have more medical problems and thus, more of their problems are detected compared to somebody like me who is generally healthy and hasn't gone to the doctor in...well I can't remember the last visit?

Now there are indeed some good issues raise by Longman and pointed out by Noah such as the information technology systems used by private medicine providers and the VHA. Here is how Noah put the problem,

The costs [of upgrading IT systems] are all up-front, but the benefits may take 20 years to materialize. And by then, unlike in the VHA system, the patient will likely have moved on to some new health-care plan. As the chief financial officer of one health plan told [the University of Chicago's Lawrence] Casalino: "Why should I spend our money to save money for our competitors?"

Or suppose an HMO decides to invest in improving the quality of its diabetic care anyway. Then not only will it risk seeing the return on that investment go to a competitor, but it will also face another danger as well. What happens if word gets out that this HMO is the best place to go if you have diabetes? Then more and more costly diabetic patients will enroll there, requiring more premium increases, while its competitors enjoy a comparatively large supply of low-cost, healthier patients. … An idealistic commitment to best practices in medicine doesn't pay the bills.

A good example of an externality. The upgrading of an IT system at one provider of medicine generates a benefit for another provider down the road. One way to solve that problem is to internalize the externality via integration: one entity providing health care and medicine. Obviously we don't want a monopolist doing this, so we'll have the government do it. But is integration the only way of addressing the problem of externalities? No. The problem is that the quality of IT systems is "under provided". So to increase it you could offer a subsidy to private firms to upgrade their IT systems.

I'm not sure I see a big problem with the providing better care for a certain medical problem (Longman uses diabetes). So you get more high cost patients...so you raise your prices.

Part of the problem comes from the liberal view that risks should be spread over large populations. Noah quotes Arnold Relman from the New Republic [$],

Healthy, young families would choose the least expensive plans with the highest allowable deductible, and those with health problems would be forced to choose plans with the lowest allowable deductibles but higher premiums. The premiums or the required co-payments of the latter plans would spiral upward because of the greater use of services by sicker beneficiaries, so it would become even harder for those with the greatest need for insurance to afford coverage. In this way, one of the most important values of insurance—the sharing of risks over a broad population base—would be lost.

Basically it looks like the liberal view point is that the most desirable outcome is a pooling equilibirum. The pooling equilibrium has one insurance plan and everybody pays the same premium, but you end up having the healthy subsidizing the sickly. Not surprisingly in a competitive market, the pooling equilibrium is not viable since competitors will engage in "cream skimming" where they offer the high deductible/low premium insurance plans to lure away the healthy individuals/families.

Further, I'm not sure what this has to do with the provision of quality health care as it is a failing of the health insurance market. I'm sure this is something that always sets Victor to grinding his teeth. Health insurance is not the same thing as health care. It is like saying your car insurance is your car. For some reason many on the Left can't seem to see the distinction between health insurance and health care, but can see a difference between car insurance and their car.

Further, this problem seems to stem from some sort of view more common amongst liberals that people should all pay the same price for insurance, but only for health care apparently. For example, suppose we have a driver who is just reckless...a bad driver. He would have a high premium due to a history of tickets and accidents. Many liberals wouldn't have a problem with this guy facing a high premium for car insurance. But why doesn't this apply to people who are sickly? They are basically like the bad driver. If you are 55 years old, ate fatty foods all your life and didn't exercise you are probably going to be more likely to suffer from various medical conditions than the fellow who ate responsibly, excersized and so forth. Both individuals made decisions...one made decisions that were later costly, while the other did not. Why should the "responsible" individual have to pay for the "irresponsible" individual?

Another possible problem is that Longman doesn't like the market result since it doesn't correspond to what he thinks is the best outcome. Longman writes,

Here's one big reason. As Lawrence P. Casalino, a professor of public health at the University of Chicago, puts it, “The U.S. medical market as presently constituted simply does not provide a strong business case for quality.”

Casalino writes from his own experience as a solo practitioner, and on the basis of over 800 interviews he has since conducted with health-care leaders and corporate health care purchasers. While practicing medicine on his own in Half Moon Bay, Calif, Casalino had an idealistic commitment to following emerging best practices in medicine. That meant spending lots of time teaching patients about their diseases, arranging for careful monitoring and follow-up care, and trying to keep track of what prescriptions and procedures various specialists might be ordering.

Yet Casalino quickly found out that he couldn't sustain this commitment to quality, given the rules under which he was operating. Nobody paid him for the extra time he spent with his patients. He might have eased his burden by hiring a nurse to help with all the routine patient education and follow-up care that was keeping him at the office too late. Or he might have teamed up with other providers in the area to invest in computer technology that would allow them to offer the same coordinated care available in veterans hospitals and clinics today. Either step would have improved patient safety and added to the quality of care he was providing. But even had he managed to pull them off, he stood virtually no chance of seeing any financial return on his investment. As a private practice physician, he got paid for treating patients, not for keeping them well or helping them recover faster.

Stipping this down to its basic elements we have the following.

• If given a choice between a doctor who offers:
  • Inexpensive, but more risky care or
  • More expensive less risky care,
  patients opt for the former.

If this is the case, then what is the problem? One could argue that people don't understand the risks and perhaps think they are facing the same levels of risk in both cases. However, even if this is true it does not necessarily mean that health care has to be socialized.

The problem is that Noah, Longman, and many other liberals think that we should have the best care possible. However, this view suffers from a fundamental problem. We,--i.e. consumers/tax payers--may not want to pay that price and are willing to settle for lower quality care for a lower price.

Posted by Steve at March 15, 2005 10:18 AM | TrackBack