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In Soviet Union, Costs Administrate You

You know, I'd been wanting to write a post semi-agreeing with those questioning the massive savings to be gained by replacing the relatively high administrative costs of the private sector with the relatively low administrative costs of the public sector. But then Megan McArdle and Alex Tabarrok began making a lot of really weird arguments about the Soviet Union -- seriously -- and, sorry, but that's where I get off the train.

We live in a world with actual examples of national health-care systems. France, Germany, Britain, Canada, Japan, Sweden, Italy, Taiwan and Israel all have them. They are cheaper. With lower administrative costs. And comparable health outcomes. And they somehow exist within a largely private economy (Also: Read Jon Cohn!).

If, in that sort of a world, your new argument is "but the Soviet Union didn't work," and calling people "Hero of the Soviet Union, Second Class," did not prove an efficient replacement for the profit-incentive, then you've just taken yourself out of the argument. The only real question is when Godwin is going to get around to inventing a law for you. Megan, to her credit, at least nods at Europe in the final paragraph of her post, but doesn't seem to realize that it invalidates literally every word that comes before it. Alex doesn't mention this at all.

By Ezra Klein  |  July 7, 2009; 4:04 PM ET
 
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Comments

Amen.

Why is it that you guys take Megan seriously again? I keep trying to understand.

Posted by: Castorp1 | July 7, 2009 4:17 PM | Report abuse

So why don't Krugman's childish rants take him out of the argument? How can you criticize the sophistication of other people's arguments when you're just his xerox machine?

Posted by: fallsmeadjc | July 7, 2009 4:23 PM | Report abuse

1. I'm sorry. I must be a slow reader. I can't find any references to the Soviet Union - seriously or otherwise - in Tabarrok's piece. Can you please point out where the references are?

2. These cross-national comparisons are asinine.

a. To pick one, I've been to France. I like the place. But America it isn't. They drive tiny cars, they live in little apartments, many of the stores seem to have a random approach to business hours, etc. I could get used to all those things - I like the place - but I doubt the average American could. It also stands to reason that the French medical system has quirks that the average American would find intolerable.

b. You can't get there from here. Initial conditions - existing institutions - matter. We're not going to get the French system no matter how hard we try. We're going to get some variation on our current system.

c. As you well know, health has numerous important components utterly unrelated to the medical system.

Posted by: ostap666 | July 7, 2009 4:44 PM | Report abuse

I'm on board when all the Dems in Congress agree to be in the exact same system with you and me, and with no special privileges.

They already know.

Open you koolaid-stained eyes, Ezra.

Posted by: whoisjohngaltcom | July 7, 2009 4:49 PM | Report abuse

Let's blow apart two more of your ridiculous examples, Mr. Klein.

Average doctor's visits per person in the US, 8.9 per person per year. Average doctor's visits per person in Sweden, 2.8 per person per year.

Japan has employer based insurance and a public plan, and is beginning to face serious problems with overtreatment and hospitals closing down due to low fees set by government. However, you can at least purchase medicine at pharmacies without a prescription.

Let's not pretend we're talking apples and apples here.

Whatever solution is put in place, there needs to be a disincentive to overtreatment, and that means passing more costs on the consumer, through restructured insurance, probably by re-regulating the industry to allow for catastrophic coverage plans with high deductibles and/or co-pays.

Posted by: staticvars | July 7, 2009 5:09 PM | Report abuse

ostap666: give Ezra some credit, he has said on multiple occasions that the goal is not to become France, because it's not possible, but rather to improve our own system. He has also, on multiple occasions, pointed out that an improved US system would look more like the Netherlands or Germany than France (or the UK or Canada).

Posted by: Castorp1 | July 7, 2009 6:18 PM | Report abuse

"How can you criticize the sophistication of other people's arguments when you're just his xerox machine?"

Ezra is definitely not Krugman's xerox machine, especially on healthcare. If you would have been paying attention you'd know that.

Posted by: Castorp1 | July 7, 2009 6:20 PM | Report abuse

Whatever solution is put in place, there needs to be a disincentive to overtreatment, and that means passing more costs on the consumer, through restructured insurance, probably by re-regulating the industry to allow for catastrophic coverage plans with high deductibles and/or co-pays.

Those exist. Their major feature appears to be that they drive people bankrupt, and drive patients to make treatment decisions basically at random, regardless of whether they're smart longer-term investments.

Overutilization is one of the major problems (if not the major one, depending on how broadly you define it), but where do we get the idea that somehow patients are the ones for whom we need to tweak incentives?

Doctors always have been and always will be the decision-makers on health care, subject only to very weak patient veto/oversight, and Econ 101 says that if you want to change behavior, the actual decision-makers are the ones to target.

Pushing for a wholesale embrace of high-deductible plans, though, more or less boils down to rationing first by price, and then at random. And it has zero impact on people who are going to blow through their deductibles and reach their out of pocket max anyway -- that is, the chronically ill, who account for most of the costs anyway.

That doesn't seem particularly likely to work.

Posted by: Mike_Russo | July 7, 2009 6:45 PM | Report abuse

> Whatever solution is put in place, there
> needs to be a disincentive to
> overtreatment, and that means passing more
> costs on the consumer, through
> restructured insurance, probably by
> re-regulating the industry to allow for
> catastrophic coverage plans with high
> deductibles and/or co-pays.

So, um, how does that work in France? I have read several essays on French culture, by natives of France, which noted that the French tend toward a bit of hypochondria in their attitude toward medical care (particularly psychiatry). They have full walk-in access to their system, and no draconian "co-pays" - yet in the end they spend less than we do for about the same outcome level. Hozzat?

sPh

Posted by: sphealey | July 7, 2009 7:27 PM | Report abuse

"They already know."

They already know *what*, Galtroid? That large risk pools and community rating work?

Look at a random selection of Congress members or state politicians, and there's a good chance that they have been able to get health insurance through the state or federal system their entire adult lives. What they don't already know from personal experience, for the most part, is the vicissitudes of the individual insurance market, or the problems of portability with group plans, or the impact of pre-existing conditions.

As I believe Ezra noted last year, there are plenty of insurance companies who routinely deny care for the recurrence of cancers that afflicted John McCain and Rudy Giuliani. Fortunately, they were covered by federal and state plans.

"that means passing more costs on the consumer"

As many studies have concluded, the *patient* (let's cut the "consumer" crap for a moment) is generally not good at judging which medical costs are worth incurring. If you have a plan to give everyone a medical education, then please share it.

Otherwise, I'd suggest that the best way to avoid overtreatment is a small up-front fee at the primary doctor and smart triage. Got to be better than "everyone can go to the emergency room." Oh, and ban "ask your doctor about.." DTC pharma ads.

Posted by: pseudonymousinnc | July 7, 2009 8:04 PM | Report abuse

"Doctors always have been and always will be the decision-makers on health care, subject only to very weak patient veto/oversight, and Econ 101 says that if you want to change behavior, the actual decision-makers are the ones to target."

Decision-makers are not merely reacting to forces like malpractice liability?

Or do you propose that doctors overtreat just because of greed and bad economics, while presumably trial lawyers sue out of sympathy to patients...?

Posted by: whoisjohngaltcom | July 7, 2009 8:04 PM | Report abuse

"They already know *what*"

That the plan we will all have will not be as good as theirs. Are you actually so dense that you think it will be??? Seriously, are you actually that stupid, or do you just think everyone else is???

Try not to be such a shill. It's not just wrong, it's comical.

Posted by: whoisjohngaltcom | July 7, 2009 8:08 PM | Report abuse

Malpractice liability just isn't that important. Per the CBO:

"Several studies have found that various types of restrictions on malpractice liability can indeed reduce total awards and thereby lead to lower premiums for malpractice insurance. By themselves, however, such changes do not affect economic efficiency: they modify the distribution of gains and losses to individuals and groups but do not create benefits or costs for society as a whole. The evidence for indirect effects on efficiency--through changes in defensive medicine, the availability of medical care, or the extent of malpractice--is at best ambiguous.

...

A comprehensive study using 1984 data from the state of New York did not find a strong relationship between the threat of litigation and medical costs, even though physicians reported that their practices had been affected by the threat of lawsuits

...

More recently, some researchers observed reductions in health care spending correlated with changes in tort law, but [when CBO used the same methods on a broader population] it found no evidence that restrictions on tort liability reduce medical spending. Moreover, using a different set of data, CBO found no statistically significant difference in per capita health care spending between states with and without limits on malpractice torts. Still, the question of whether such limits reduce spending remains open, and CBO continues to explore it using other research methods."

http://tinyurl.com/kvmsk8

All the research on this issue suggests that medical malpractice liability maybe enters into this problem, but if it does, it's almost completely swamped by other factors (local culture, supply-driven demand, etc.) and the approaches that have been tried haven't brought down costs, while forcing injured patients to subsidize negligent providers.

Some approaches, like encouraging hospitals to say "I'm sorry" and engage with injured patients, actually do appear to have benefits in increased peace of mind and reduced incidence of litigation. I don't mean to dismiss those. But this just isn't a place where reforms can make a real impact on fixing health care, either in terms of cost, quality, or access.

Posted by: Mike_Russo | July 7, 2009 8:19 PM | Report abuse

Oh, Galtroid, you'd be amusing if you weren't such a pathetic shill for a state of affairs that keeps people sick and impoverished. As it stands, you're just sick in the head.

Posted by: pseudonymousinnc | July 7, 2009 8:42 PM | Report abuse

I am neither sick nor impoverished. Are you?

Nor do I want to advance illness or poverty -- I want to advance health and wealth through self-sufficiency. By what means do you maintain your health and wealth, lib -- through self-sufficiency like me, or through the welfare that you advocate?

Why do you not demand that others act more like you in order to be rewarded more like you? Why don't you hold them to the same standard to which you hold yourself? Do you think they can't also succeed?

Don't kid yourself, lib -- you're not that special. I'm succeeding just fine, and you no doubt think I'm stupid. Well, what do you know? -- Turns out you have more in common with me than with the impoverished masses you claim to fight for.

Anyone can make it -- all that's necessary is for people like yourself to get out of their way. Not to turn your back on them; but rather to set them free.

That seemingly foreign concept used to be called the American Dream. You no doubt have ancestors who came here for freedom like that -- how proud they would be to see you now, in all your socialist glory, huh? Yes, you are making great, progressive things with Amerika, comrade!

Posted by: whoisjohngaltcom | July 7, 2009 10:37 PM | Report abuse

Great post, Ezra. The arguments against health care reform get weirder by the day.

By the way, hilarious title.

Posted by: Nimed | July 7, 2009 11:53 PM | Report abuse

My favorite comment so far is that "no doubt, it stands to reason" that Americans would find the French health care system intolerable based on the fact that the French drive small cars.

As for the other comments:
This onslaught by Megan's Ron Paul, abolish the Fed, libertarian readers is obnoxious. They're only about half a step up from the birther crowd (and no doubt there is some overlap). I trust Ezra's tendencies to do actual research over the hollow faith in libertarianism and the need to instantly compare anything not 100% libertarian to the USSR any day.

Posted by: nylund | July 8, 2009 6:46 AM | Report abuse

"You no doubt have ancestors who came here for freedom like that--"

Uh, no. The chestnut comes to mind about what happens when you assume.

Your bleating mantra of self-sufficiency translates into a parasitism that you pretend doesn't exist by squeezing your eyes shut. Always the way with the Galtroids: they're still selfish, immature seventeen year-old boys at heart.

Posted by: pseudonymousinnc | July 8, 2009 11:06 AM | Report abuse

pseudonymousinnc,

Always the ad hom pot shots, never actual rebuttal. Not much actual reason in your quiver, eh?

Posted by: whoisjohngaltcom | July 8, 2009 2:37 PM | Report abuse

You're tedious, Galtroid. Go away and practice your "self-sufficiency" somewhere else.

Posted by: pseudonymousinnc | July 9, 2009 4:10 AM | Report abuse

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