August 8, 2007

No Free Lunches

Yesterday, I interviewed Dr. Ken Thorpe from the Partnership to Fight Chronic Disease on CQ Radio about the PFCD's efforts to fund preventive health care initiatives as a long-term cost saving initiative for Medicare and private insurance providers. The New York Times throws a dash of cold water on the underlying assumptions of the PFCD's claims today, claiming that preventive intervention will cost more in both the short and long run (via Memeorandum):

The current health care system doesn’t pay hospitals, doctors and nurses to keep people healthy; it pays for tests, surgeries and drugs. So Americans often get expensive invasive care of dubious medical benefit while missing out on sensible basic care. Millions of other people go without any care for chronic illnesses like heart disease and diabetes. If Medicare and private insurers paid for more preventive care, Americans would be healthier than they are today and live longer.

But the current presidential candidates go one step further. They don’t merely argue that preventive care delivers good bang for the buck. They argue that it delivers good bang for no bucks whatsoever. And this is where the candidates are overreaching.

No one really knows whether preventive medicine will save money in the long run, let alone free up the billions of dollars a year needed to help pay for universal health insurance. In fact, studies have shown that preventive care — be it cancer screening, smoking cessation or plain old checkups — usually ends up costing money. It makes people healthier, but it’s not free.

“It’s a nice thing to think, and it seems like it should be true, but I don’t know of any evidence that preventive care actually saves money,” said Jonathan Gruber, an M.I.T. economist who helped design the universal-coverage plan in Massachusetts.

This may be true -- as far as it goes. Even Dr Thorpe acknowledged that the plan relies on Americans to change their habits and take preventive steps themselves, even outside of medical supervision. Diabetics need to practice better dietary and exercise control, for instance, and all of the maintenance visits in the world won't help until they take those steps themselves -- and meanwhile, the maintenance visits cost more money.

The real solution to that problem is to expose the laggards to the costs of their decisions. Government-funded systems actually do this a little better than private insurance, which tends towards small co-pays, although that should encourage better use of preventive medicine. Unfortunately, how can a system be structured so that the costs of poor decisions gets borne by the decision-maker without making it seem punitive?

The best way to do that would be to encourage free-market health care rather than top-down management. In a free market, those decisions would lead directly to cost penalties or benefits. Insurance companies in a competitive market could structure costs based on the use of and adherence to preventive maintenance, and consumers could switch to insurers or providers that offered the best deal for the lifestyle they choose. It certainly would have less Big Brother implications than the government dictating cost for degrees of obesity, as an example.

Of course, others disagree. Our neighbor, Wisconsin, has decided to try the top-down method instead, and John Stossel warns taxpayers there of the consequences (via McQ at QandO):

The Wall Street Journal editorial-page editors are upset that Wisconsin's state Senate passed "Healthy Wisconsin", which will give health insurance to every person in the state. Of course, the Journal editors are right in saying that the plan is "openly hostile to market incentives that contain costs" and that the "Cheesehead nation could expect to attract health-care free-riders while losing productive workers who leave for less-taxing climes."

In addition, as the Journal put it, "Wow, is 'free' health care expensive. The plan would cost an estimated $15.2 billion, or $3 billion more than the state currently collects in all income, sales and corporate income taxes." ...

Does it never occur to the progressives that the legislature's intrusion into private contracts is one reason health care and health insurance are expensive now? The average annual health-insurance premium for a family in Wisconsin is $4,462 partly because Wisconsin imposes 29 mandates on health insurers: Every policy must cover chiropractors, dentists, genetic testing, etc. Think chiropractors are quacks? Too bad. You still must pay them to treat people in your state.

Stossel's last point underscores what I wrote above. When government interferes in private markets through mandates, price-fixing, and/or competition with private enterprise, consumers pay more and get less. It also creates artificial shortages and distorts supply-demand equations in ways that create gaps for consumers. One of Dr. Thorpe's points was that primary-care physicians are underpaid and we have a shortage of care at that level. In a free market, rates would rise to correct the imbalance -- but because Medicare shortchanges primary-care efforts and that comprises a significant part of the compensation available, physicians tend to specialize to get better compensation.

I wish Wisconsin the best of luck -- and hope that their experiment ends at the St. Croix River.


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Comments (15)

Posted by RobD | August 8, 2007 11:05 AM

My major problem with the Government and even Insurance companies getting into the preventive/punishment scheme is that they may decide that I must do something that I do not believe is good for me. For instance, most doctors want to prescribe statins(cholesterol lowering drugs) for just about anyone that has a raised cholesterol level. I do not believe the benefits of statins outweigh there cost or the possible side effects. Therefore I do not take my doctors advise on statins. Would I be punished for my choice? Also most doctors recommend a low-fat/high carb diet for diabetics and people at risk for heart disease. I believe that is bad advise and follow a low-carb diet that has allowed me to lose and keep off 50lbs of fat. Would I also be punished for not following the low-fat dogma? If so I don’t want any part of it. Will I be able to opt out?

Posted by syn | August 8, 2007 11:33 AM

I was indoctrinated to believe that 'preventive maintainance' would prevent disease and death up until the day my father, himself a devoted believer in the 'preventive maintainance' theory for living a long healthy life, died from stage four terminal lung cancer (he didn't smoke, meditated, often visited the doctor, moderate wine drinker, ate the 'right' food, exersized) just three months short of his 70th birthday. Actually during those three months he went from a believer in 'preventive maintainance' to a believer in God.

I learned from that experience to accept the fact I am not immortal, stuff happens to our organic bodies and I pray God will give me the grace to deal with my fate.

That, and doctors and scientists are human too making them prone to all sorts of mistakes. Sometimes I think that constantly trying to avoid death at all cost is far more costly than just living life.

Posted by FedUp | August 8, 2007 11:58 AM

I have absolutely no faith that our government is capable of managing a universal health care program. Everything else they've touched has cost more money and given birth to behemoths of bureaucracy! (Soc. Sec., Medicare, Post office??)

Trouble is, politicians need a gimmick to get elected and by the time they are done, they've convinced a large part of the unenlightened that it's a good thing and then, we are off to the land of OZ! Let's face it folks, the government is NOT looking out for us, they are looking for money and power at our expense!

Posted by hermie | August 8, 2007 12:01 PM

The medical professionals consider chiropractic practices to be a form of quackery, yet the politicians have determined that their medical knowledge is far superior to that of those who actually have gone to medical school.

In Illinois, the state legislature once mandated laetrile as a covered treatment for cancer, despite the fact that no proof existed that it 'cured' cancer, as the proponents insisted.

Think that's absurd? Wait till the politicians decide that unproven and inadequately tested heart medicines be covered, then they turn around an encourage class action lawsuits for those who took the medicine and had adverse side effects.

Posted by patrick neid | August 8, 2007 12:38 PM

"Does it never occur to the progressives that the legislature's intrusion into private contracts is one reason health care and health insurance are expensive now? "

it occurs to them everyday, that's why they do it. health care, like so many other entitlements, are a means to an end. do they actually care about "health care" in the end, of course not. if by chance a policy actually did provide a temporary service that would simply be a bonus vote getter.

"The American people will never knowingly adopt socialism, but under the name of liberalism they will adopt every fragment of the socialist program until one day America will be a socialist nation without ever knowing how it happened" (Norman Thomas, 1936 presidential candidate on the Socialist ticket)

progressives = socialist = communist = stalinist = lennist = marx have only one agenda---state control of individuals. read marx, he clearly states the goals and methods. every opportunity must be seized upon to grab control of the means of production. if a person thinks the battle of capitalism vs communism ended with the cold war they would be sadly mistaken.

Lenin once said that "the way to crush the bourgeoisie [the middle class] is to grind them between the millstones of taxation and inflation."

radical islam is a mutant form of this conflict. as such it finds supporters on the left who think they can manipulate islam to help bring down free markets and capitalism. they assume in the end they will suppress islam much as stalin did in the central asian republics for 70 years.

environmentalism, via global warming, has the same goal. strict control of the world's economy. i don't know where i copied this but it says it the best:

"A strong centralised state which controls society’s means of production is – as Marx emphatically taught – the central feature of socialism. Tellingly, this is also the state of affairs toward which environmentalism inexorably inclines, and which it has been remarkably successful in effecting.
Environmentalism derives its impetus from an ominous insinuation:
Modern civilisation is headed for extinction as a result of self-inflicted environmental damage. The chief perpetrator is none other than the business establishment which in its relentless drive for profit devours natural resources while giving off poisonous derivatives of production.
The only effective way to safeguard our survival, then, is to bring wayward business under control by regulating its operation in order to minimise its destructive impact.
This kind of oversight, environmentalists argue, can only be carried out by a government with the power to implement the radical measures called for by the gravity of the impending crisis. One of them is production targets for various business sectors to ensure that the levels of pollution do not exceed acceptable standards. Another is to compel businesses to conduct their commerce in environmentally ‘friendly’ ways.
Since businesses normally resist these kinds of measures – as they make their operation more costly and difficult – government must have at its disposal extensive monitoring capabilities to ensure compliance. But most importantly, it must have the power to persecute and punish those who refuse to submit.
All environmental efforts thus lead – in one way or another – to a government that has more and more control over the private sector until it inevitably becomes its supreme arbiter. By incessantly expanding its powers at business’s expense, environmentalism is furtively realising the essence of socialism – a strong state which oversees and controls society’s means of production.
In short, a careful look at the policies and measures advocated by environmental activists cannot but lead us to the conclusion that the movement is being used as a cover for advancing a leftist agenda. "

everything that hillary and obama recite are based on this model. they are socialists---communists in drag. many repubs are no better.

Churchill said it best, "the state never gives you anything it hasn't previously taken from you".

Posted by LarryD | August 8, 2007 12:43 PM

The principal that hermie is getting at is this: when politicians get in control of something, decisions will be made on a political basis.

Of course, how could it be otherwise? Corruption and mismanagement will inevitably follow.

Posted by Wayne | August 8, 2007 12:51 PM

Don't give up on us cheeseheads, yet.

That cabal of pirates, traitors, commieqaeda douchebags, and psychos in the People's Republic of Madison haven't won this battle. The Republican-controlled house is still holding its line opposing this commie BS.

Given that this act of economic terroism will cost every working person in the state an average of $300.00 per month, you can plan for a serious revolt of it looks like this bunk might pass.

I and everyone I know are praying hard for the failure of thix pox.

Posted by Okonkolo | August 8, 2007 1:36 PM

Anybody see the guy who asked the question about health care at the Demo debate yesterday (the one who got a standing ovation)? He put a human face on some serious health care problems in this nation. There are lots of problems with just about every proposal, which is a great reason to do practically nothing. And while I certainly agree with statements about the ability of politics to corrupt things (of course!), things as they are cannot stand, and as more Americans get hurt by this system (particularly later in life when they have less ability to do anything about it) there will continue to be a growing desire to try something. I say good for WI. It takes guts to be a pioneer, and while they may stumble, they might help to lay groundwork for a better system that will help more Americans. It will be interesting to see how Presidential candidates deal with this type of question in specifics once we thin the herd.

Posted by Charles D Quarles | August 8, 2007 2:43 PM


Government isn't G-d, isn't inherently good or noble, and precisely because it is derived from flawed humans, must be strictly limited. Governments contain no more knowlege or wisdom than any other set of humans. In addition, governments face incentives and disincentives that virtually guarantee that governments cannot function as effectively as a free and unfettered market.

Our current medical care mess is exactly what you'd expect from a government dominated system. No "universal" medical care system works any better than ours; and, for the most part, they work worse than ours.

We need separation of state and social services as well as separation of state and economy :). Free peoples can make it without the "help" of government. To Hillary and others of her ilk, an on your own society does not imply a by yourself (as in an atomistic) society.

Posted by Papa Ray | August 8, 2007 3:42 PM

There is a shortage of doctors in the U.S., there simply are not enough of them, as well as nurses. Even hospitals are falling by the way in small towns because of uninsured patients not paying their bills.

Those three facts make up the quandry of American medical care.

I don't have to read it, to believe it. Where I live, despite bringing in doctors who hardly speak english, letting student nurses do things that only fully qualified nurses should do, and regular nurses do things that registered nurses should do, things are getting worse.

This btw does not effect me personally. I go to the VA hospital or clinic and get excellent care.

But my kids and friends can't do that and they get expensive substandard care.

And are starting to have to wait to get even that.

But of course, there is an overriding factor here that most people are not affected by.

The brown flood from across our Texas border.

Due in your city soon.

Papa Ray
West Texas

Posted by Dr Bob | August 8, 2007 5:05 PM

The preventive medicine talisman is one of my pet peeves. Basic preventive care (blood pressure checks, lipid checks, screening for diabetes) is already universally done by primary care physicians. The big issues -- which no preventive care initiative is likely to change -- are behavioral, many of which are compulsive or addictive in nature (overeating/obesity, alcohol use, smoking) or require significant behavioral change and long-term motivation, such as regular exercise. Anyone who thinks that some government or private initiative to talk to patients about such things (already being done, BTW) will save millions is smoking something funny, or lying to you.

And I doubt the effectiveness of financial incentives to change behavior; sin taxes on cigarettes and booze don't seem to have had any such beneficial effect.

Posted by mrlynn | August 8, 2007 8:13 PM

The secret to a healthy population is not government interference; it is education. Even people who detest schooling consume endless quantities of books, magazine articles, and TV shows on 'health'. And it works; the idea that one should have regular 'physicals' is relatively new, but now widely accepted.

BTW, Medicare (socialized medicine for age 65+) doesn't pay for physicals.

The Captain is exactly right: we need free-market health care, and free-market insurance (oh, and insurance is NOT 'healthcare'). More to the point, we must get third parties (government and insurance companies) out of basic health care.

The best approach would be tax-free Health Savings Accounts, coupled with 'catastrophic' (high-deductible) insurance. The truly indigent could continue to receive welfare (Medicaid). Medicare, which is going bankrupt, should be phased out.

/Mr Lynn

Posted by patrick neid | August 8, 2007 9:39 PM

without tort reform there is no hope for a working medical system in the US, free market or state run........

Posted by jr | August 9, 2007 7:21 AM

The human body is like any mechanical entity needs regular maintanence and like any mechanical entity that regular maintanence costs money. What it comes down to is do you want to spend the money up front in smaller out puts or in the end in larger lump sums. It probably is a wash as it is in car care for instance. If Wisconsin goes single payer it may just make Michigan more competative on a tax burden basis, but then again our legislature would never let that happen.

Posted by braindead | August 9, 2007 9:04 AM

A onepayer system (government control), will devolve into an HMO type of program. And we all know the popularity of HMOs.

So...who do we want to control costs. Private Industry or the Government?

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