A health-care economics primer for Dick Armey

Justin, great post...other than the political viewpoints, your post highlights the realities this country faces in terms of our health care system. I worked for a BlueCross BlueShield in the northeast, and I know how hard they are trying to push HSA's and other Consumer Driven Health Plans onto business and their employees, and to justify the 'control' that the employees will get with these plans, they offer 'Transparency' initiatives to inform employees better on costs, quality, etc. The reality is the information is limited, poor, or non-existent, and the decisions an employee is left to make is avoiding the doctor whenever possible, in order to maintain some funds in their HSA. Armey and others like him like to throw out terms like market-driven, the consumer as decision maker without understanding the fundamental nature of this industry which is designed to protect parties other than the consumer.
And of course they stick their head in the sand to look at those 2 critical points, about quality and costs. Again, great post.

Why o why are you compelled to answer a moron.He was an an economics professor at North Texas State.Do you think he turned down Harvard to work there?
Future economic historians will look at Milton Friedman as a blip on the radar screen and will wonder how an educated population took him seriously.Do not give me that nobel prize stuff.Henry Kissinger won a nobel prize.Milton Friedman is why CEO salaries are 500 times the average employees salary in a company.
Different forms of nationalized health care work in every civilized country on the globe and if corporations were not running congress we would have it here.You know why ?It is better for a larger number of people.Sure it has flaws but check out Michael Moores documentary "Sicko" and see if this systems flaws are not even worse.The real con job here is that not only millions of Americans have no health care but the ones that are covered will find out when they get sick that they really have no health care.Health care falls into to that special category that corporations are not qualified to handle because their emphasis is on profit.Please you are much too bright then to demean yourself by entering into a debate with Armey.

Armey just responded to you at Swampland.

Or rather, he evinced, for the first time, an awareness of the _existence_ of counterarguments and facts that don't fit into his thumbnail-sketch version of the world.

He even goes so far as to mention your point about information asymmetry, though he doesn't engage your point so much as wave it away.

Still, it's something. Baby steps.

Armey gets the benefit of the soft bigotry of low expectations for Republican intellectuals.

Justin...

Might I suggest that your sole response to Armey's nonsense be a demand for a citation for this statement...

"By one estimate, health care regulations leave us worse off by an amount equal to 11 percent of health spending."

I suspect that when we see what he is citing, the complete speciousness of his argument will be exposed for all to see. Because my guess is that it includes not only the cost of administering the FDA, but the costs incurred in testing drugs in order to abide by FDA regulations.

And given that Armey also has a problem with lawsuits against drug companies, that Armey wants to go back to the days when pregnant women could be prescribed thalidomide -- but couldn't sue when they had babies born without limbs.

Re: "For every $100 Americans spend on health care, we pay $11 to the regulator"

Here was my response to Armey on this (repeated from that comment thread with minor edits):

I guess I should congratulate you for sorta being empirical instead of reciting empty platitudes or circular arguments (Clinton "is no moderate" because, well, "she is no moderate"). But I was hoping you'd use real facts rather than made up facts.

Americans spend a little over $2 trillion a year on health care (about 16% of GDP). 11% of that is $220 billion (or almost 1.8% of GDP). That's how much you tell us "the regulator" (whoever that is) collects from Americans. By way of comparison, that's about 40% of the discretionary, non-defense federal budget. So I think we would have heard of this before if it wasn't a figment of your imagination.

And by the way that 16% is by far the highest of any industrialized nation, despite America being alone with significant numbers (47 million) of uninsured. By way of comparison, "health care spending accounted for 10.9 percent of the GDP in Switzerland, 10.7 percent in Germany, 9.7 percent in Canada and 9.5 percent in France" according to the OECD. And IIRC Britain is lower still.

Source:
http://www.nchc.org/facts/cost.shtml

And this in Armey's second post is pure up-is-downism:

"When individuals take ownership of their medical care ... the information asymmetries that worry Fox begin to subside."

Health care and health care economics are complex. Insurance companies with staffs including doctors, accountants, etc. are going to have a better handle on relative prices and efficacy of various treatments than ordinary citizens. That Armey would assert the opposite is just bizarre.

Justin, it'd be great to see your response to Armey. Those of us reading want to see intelligent debate, have it, especially with those figures he spewed.

Jay Carney actually just posted in response to Armey's bit on Lasik and such, with a very valid point:

Those are voluntary, elective things. Like CD players, we can go without if the price isn't right.

Not so with things like, say, cancer treatment, heart transplants, and other critical treatments.

No one, including the ever-popular young collectivist E. Klein, is addressing the real problem, only the symptom.

The real problem is not insurance, or lack of it, but the skyrocketing costs of the underlying healthcare itself. Why isn't young Klein concerned with why doctors are pretty much guaranteed to become millionaires in the US and why they are allowed to self-refer patients to facilities that they have equity positions in, all at the expense of the insurance companies??

It just seems easier and more esthetically pleasing to young liberals to only concentrate upon the insurance costs (symptom). It allows yet another way to transfer wealth from one class to the other as only a collectivist can.

It's all a crock. Go after the medical industry. Stop self-referral. Limit punative damages that encourages "defensive medicine" and for God's sake, make it easier to build more medical colleges. Use the market (force). Flood this country with physicians by allowing other disciplines in the club as we already have with Osteopaths and watch the underlying price of medical care drop.

Why not ask those who promote socialized medicine about Dr. Devi Prasad Shetty who designed a private healthcare system in a small town in India and can perform heart bypass surgery for $2,000 instead of the customary $100,000 and has a 98% survival rate? Dr. Shetty has incorporated systems much more efficient that don't involve golfing during the week.

When they are asked these questions, there is only the sound of crickets chirping...

Fred, while you do point out the issue with the underlying health care and the costs, the fact of the matter is your argument only supports the notion of a government regulated industry.

You have to realize that the market forces involved here are not the same as most consumer products, the motivation to purchase such service just isn't on the same level as buying a TV.

With that said, with universal health care, the government, as it does in many of the wealthy countries we repeatedly describe, sets pricing caps on common and preventive treatments, as well as salaries for practitioners - while still allowing for the consumer to purchase elective or enhanced care, giving the practitioner the opportunity to gain more. At the same time, such a plan would regulate such referrals to the facilities that will best meet the need of the patient, not as you point out, to where that referring doctor will gain a handsome profit.

Your points are all valid, but they speak more to how such a government regulated plan would be better to resolve rather than market forces which have repeatedly failed to reign them in. Again just looking here, VA supported plan is considered premier quality care and it has all those controls.

Of course the examples Army cites now are all for voluntary, elective things that rich people get. They prove nothing about how markets work for health care.

"Look at the healthy components of our health care system."

The ones that rate the highest patient satisfaction are, at present, the VA system and Medicare. Paragons of the free market both, no doubt.

"Why not ask those who promote socialized medicine about Dr. Devi Prasad Shetty who designed a private healthcare system in a small town in India and can perform heart bypass surgery for $2,000 instead of the customary $100,000 and has a 98% survival rate? Dr. Shetty has incorporated systems much more efficient that don't involve golfing during the week."

other than an argument for cloning Dr. Shetty, I'm not sure what this kind of tidy little anecdote has to do with the issue of health care in the USA.

Oh, and Fred is obviously an Armey acolyte. What he links to is something he wrote in E Klein's blog -- and what THAT links to is a wikipedia entry that makes no mention of bypass surgery at 2K a pop.