Out of my depth on Healthcare . . .

But Vox does it, so I guess I can too. Ezra Klein, a conflicted Keynesnian, writes that American Healthcare Can Be Free Market or Cheap. It Can’t Be Both.

1. I think the most charitable way to reframe this article is that Americans have unsustainable expectations about healthcare. Paraphrasing Arnold Kling: we want the very best healthcare, we want it to be relatively cheap — subsidized, if necessary — and at the ready, but we don’t want to pay for subsidies and we don’t want to save. Healthcare costs 1/6 of our economy, but no one wants to spend 1/6 of their income on Healthcare.

2. The title of the Vox piece is literally gibberish. The best analog I can come up with is “You can either sit on the couch and be fit, or exercise and stay fat. You can’t do both.”

Markets optimize costs better than any known alternative. The only sense in which government ownership could conceivably make things cheaper is borrowing costs — the gov’t credit card has a very low APR, but it will creep up the more it borrows. So a gov’t can be flush with cash, but it’s terrible at all other parts of ownership.

A market cannot make things “more expensive.” Taking away a subsidy does not make things “more expensive.” A market will create a menu of prices ranging from Lamborghini to Kia, but so long as there is demand for a cheaper option, there will be supply and — more importantly — incentives to make things even cheaper. But taking away restrictions on supply (i.e. breaking up the government’s cartel) can only make things cheaper.

3. I think what Klein means by “cheaper” is fewer out of pocket dollars. So the claim is: if we backload our costs, then we will have fewer upfront expenses. Brilliant. That appearance of profitability is popular among financial frauds too. But paying for something later does not make it cheaper, and to state as much is highly misleading.

Klein knows this — he would never say “buying something with your credit card is free” — but Krugman specializes in this stuff, and Klein admires Krugman. Krugman calls the ACA “underfunded.” That’s true, if the goal of the ACA is “spending as much money as possible,” but then, of course, everything is “underfunded.” Krugman leaves that for the reader to figure out though. Most people will come away with the impression that the ACA is underfunded, in the sense that if it had more money, it would “work better.”

Again, in Krug-speak, “work better” means spend more, but other people understand spending more as a means to an end, and not an end in and of itself. Not so with Krugman. Spending is righteous, brah. Dig the ditches and fill them in. 

In a past life, Krugman was eventually purged by Stalin after a long and successful career.

4. Vox is an excellent example of every-man-on-the-street economics. Innovation? Sure, government can do that. Set prices? How hard could that be — when have price controls ever gone wrong? Rationing? Easy-peasy. That’s just crossing the t’s and dotting the i’s.

It’s like if government officials quit their day jobs to join forces with Vox’s staff, they could all found and manage immediately profitable and successful companies . . . because how hard is it to make something that people want at a price they are willing to pay? I mean, everyone knows that wealth is just handed to you on a silver platter by privilege.

In the real world, innovation, prices, rationing, etc. are extremely hard problems to optimize. Those aren’t the after-the-fact details, they’re everything. Subsidies (i.e. coupons) are after the fact details, until they very quickly start changing the way consumers behave, and then they too are front-and-center details. We certainly don’t know what optimal health care looks like any more than Bill Gates could have told you what Google would look like. The best we can do is commit to a process that works better than other processes: decentralized ownership under conditions where information and feedback are textured and subtle, i.e. PRICES, and incentives are aligned.

5. Klein’s reliance on the UK’s model is make weight.

Studies that show the UK and Canada innovate at a significantly lower pace than the US? Klein chooses to ignore those and just say “I’m not convinced.” Fine, everybody’s got studies.

That the UK (and Canadian) healthcare systems are in fact two-tier systems where only the most wealthy can afford top-flight, on-demand care, and everyone else muddles along in the breadline?  Klein says “that’s no so bad.”

But then why not have a multi-tier system with no breadline at all? *Blank Stare*

Klein knows that the platonic ideal of HEALTHCARE is something better than a Kia, but less than a Lamborghini. A free market would make it clear to consumers that there are a menu of options and that it may not always be prudent to buy the more expensive model. Since Klein knows that the *right* model is always the slightly more expensive one, then the free market makes healthcare more expensive, just like the free market makes cars more expensive because a Camry costs more than a Kia.

Klein would apparently be OK with a system where only Kias and Lamborghinis are allowed, but if there were a Camry, that would be “cruel” rationing. Two tiers = nirvana. Five, six . . . twenty tiers? Darwinian hell.

Klein’s Platonic ideal is a sad and dreary place, as Mr. Gorbachev would agree:

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