There seems to be a national consensus that continued increases in health care costs threaten not only the viability of the federal government’s two major health care programs, Medicare and Medicaid, but also the fiscal solvency of the United States itself. The government, having committed to pay for roughly one-quarter of all health care spending regardless of cost, will soon find itself overwhelmed if these costs continue to rise at their present rates. Meanwhile, in the other 75 percent of the market, more and more workers will find health care increasingly unaffordable.
Unfortunately, there is no consensus on the solution. While it is generally understood that the two parties have different approaches, few people seem to understand the difference in assumptions and goals that motivate these approaches. The assumptions behind one approach can be seen by a recent editorial by Paul Krugman in the New York Times. In it, Mr. Krugman criticizes the Republican’s approach to health care reform. But rather than focus on the details of their plan, he goes to something more basic: the assumption that patients should be treated as consumers. In his words: “the relationship between patient and doctor used to be considered something special, almost sacred. Now politicians and supposed reformers talk about the act of receiving care as if it were no different from a commercial transaction, like buying a car….There is something terribly wrong with the whole notion of patients as ‘consumers’ and health care as simply a financial decision.”
Another example of this dismissal of the average patient’s abilities comes from an editorial by Allan Sloan in the Washington Post who criticizes the idea that elderly Americans can be expected to choose from a range of health care options besides the standard Medicare program. His reasoning: “[M]embers of Congress are a lot better equipped to chose a health plan than Medicare recipients are. Congress members are surrounded by helpful staff and have ready access to experts. Most important, Congress members as a group are much more affluent than Medicare beneficiaries and don’t feel compelled to pick the lowest-premium, lowest-coverage policy because they can’t afford anything better.” Perhaps, but Mr. Sloan does not mention that even the youngest, least experienced government employees manage to make this choice, largely unassisted.
A central tenet of this view is that health is not like other markets or services. Patients lack the ability to make intelligent decisions and the consequences of a wrong decision are too great. Republicans disagree and it is important to understand why. In general the differences come down to two questions.
The first is who should make decisions. Mr. Krugman recognizes the need to do something about health care costs: “we have to find a way to start saying no.” Since the consumer is incapable of making these decisions, Mr. Krugman prefers the government. Having declared the patient/doctor relationship “special, almost sacred” he would immediately insert a government agency into the middle of it to say no. He has no choice. If government is going to control the money it spends on health care, it must make the decisions.
Mr. Krugman does allow for some limits on the government’s power. He is careful to point out that: “we’re not talking about limits on what health care you’re allowed to buy with your own (or your insurance company’s) money. We’re talking only about what will be paid for with taxpayers’ money.” This is disingenuous. Apparently private patients can intelligent decisions, just not those covered by Medicare and Medicaid. But what exactly makes these patients special (or inferior)? Mr. Krugman does not say. In fact, for Mr. Krugman’s approach to work, the government must make all the decisions. If private markets are allowed, the rich will always be able to afford better care, doctors will increasingly drop government programs that do not pay enough, and younger workers will not have to subsidize older ones. This is why Krugman ultimately favors a single payer system. It is why Canada initially forbid all private transactions until the practice was declared unconstitutional. It is why unions and large employers oppose giving workers vouchers to purchase health care. It is why the Obama administration is defending an executive order saying that any person who opts out of Medicare also has to give up Social Security. Individual choice in any part of the health care system undermines government’s ability to manage the rest of the market.
Conservatives, while acknowledging the complexity of health care markets, think that individuals can make better decisions about their care than can a government agency. And there is a lot of evidence to support them. The Internet has had an enormous effect on patients’ ability to get information on their conditions and to connect with other people who have the same diagnosis. Patients know their own circumstance, tolerance for risk, and life goals far better than any government agency or doctor could. Since these factors differ from individual to individual, there is no reason why the same policy should apply to everyone. And patients are fully capable of evaluating medical advice. Technology Review recently named Paul Wick its Humanitarian of the Year for helping to start PatientsLikeMe, a site where patients with the same diagnosis can interact with, support, and learn from each other.
The second question centers around the proper expectation for health markets. Because they believe that health care, though different from other services, still responds to basic market forces, conservatives think that one should expect both better service and lower prices over time: in other words steady improvements in productivity. Achieving such a dramatic change requires two fundamental changes to our current system. First, we need to subject health care to the market pressure exercised by millions of consumers making their own decisions. This will only happen if patients act like they are spending their own money. Second, we need to deregulate health care markets so that they can respond to this pressure. One way would be to establish a national license for health care professionals reflecting the fact that the proper practice of medicine does not differ between any two states. Another would be to allow lower-skilled professionals to use technology to do more procedures that currently can only be done by more expensive experts. Mr. Krugman seems to believe that this is not possible: that the best one can hope for is to control the cost increases associated with better technology and normal inflation. These different outlooks have tremendous implications for the affordability of health care.
The difference between the two systems can be seen quite clearly in a interview that Robert Fogel, another Nobel Laureate, gave in 2007. When asked about the dramatic rise in living standards over the past 50 years, he described his wife’s treatment for pneumonia in London:
“She was treated at one of the city’s top hospitals, Guy’s and St. Thomas’ Hospital, which is directly across from Parliament. Everything there was in wards, whereas in the United States rooms are typically private or semi-private. Americans today are used to having a phone beside their bed and 40 channels of television to watch while they are recuperating from an illness. That is unusual, even in other rich countries. Also, the way the diagnosis of her ailment was conducted was different from the typical procedure used in the United States. The doctors and nurses were very good but they never X-rayed her. They just listened to her lungs and came to the conclusion that she had pneumonia. If she had been in the United States, the doctors typically would have X-rayed her as a precautionary measure. So we make all sorts of investments that the British are not willing to make. They spend $1,193 per person per year on health care, while we spend $3,724.”
This is how Mr. Krugman would control costs. Republicans believe that it would probably be a good idea for U.S. hospitals to offer a no frills option to patients (consumers) who want one. But whereas in a competitive, consumer-driven market individuals would make the choice, Krugman would have government make it for you. Republicans believe that over time, this system will find a way to offer American-level health care at British-level prices through innovation. Mr. Krugman seems to think this is impossible. Yet it is not an accident that two of the sectors where productivity growth is lowest (and where vouchers are fiercely resisted by the existing providers), education and health care, are also sectors where the government control is greatest.
Assuming that Republicans are right: that a competitive market could produce lower prices and better quality, imagine the social gains in terms of higher incomes for workers and greater coverage for individuals. This result, which will never be produced by top-down planning, would be worth the uncertainty and risk of market forces.