Can Market Forces Solve Any Of Our Health Care Woes?

Sunday, April 6th 2008
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It’s no surprise that I’m not a fan of Paul Krugman. His dismissal of the potential for market forces to help reform health care is chief amongst my disagreements with his positions. In his most recent column, “Voodoo Health Economics,” he’s up to it again. His starting point is this claim,

Elizabeth Edwards has cancer. John McCain has had cancer in the past. Last weekend, Mrs. Edwards bluntly pointed out that neither of them would be able to get insurance under Mr. McCain’s health care plan.

The absoluteness of that claim might be a little far fetched. Both of these individuals have essentially unlimited financial resources and, at least in Mr. McCain’s case, could probably, with enough searching, pass the underwriting process somewhere and get insurance. Even if that insurance excluded cancer as a pre-existing condition and had extremely high patient side costs it would represent something real. The cancer screening, for these individuals, is the important thing. The poor outcomes for the uninsured with cancer are almost entirely attributable to the advanced stage at which cancer is found in the uninsured not in a lack of funding for the actual cancer care.

Mr. Krugman also brings up this age old claim,

[T]he United States has the most privatized system, with the most market competition — and it also has by far the highest health care costs in the world.

It seems to imply a cause and effect in a vacuum without admitting other contributing factors to the high cost of health care in this country.

I’m not disputing that the United States “runs” one of the least effective health care “systems” in the world but there is obviously more contributing to our comparatively high health care costs. Namely that, independent of access to care, the United States has the least healthy population in the western world (i.e. United States patients cost more on average than patients in any other western country).

And, he also praises the Veterans Health Administration. Such was in vogue recently. But I doubt Mr. Krugman has ever spent much time in a VA hospital. As most medical students I will raise my hand that I have. I’ve also had the privilege of hearing and actually speaking with (apparently former) VA Secretary Nicholson. I think I can speak for many, many medical students who have served at many, many VA hospitals in saying this is an incredibly inefficient system.

And I do mean medical students actually do something at the VA. Public health care generally runs easily whether medical students are there or not. Sometimes we even get in the way. I’m not sure that such can be said about some services at VA hospitals. There are many an example where things would’ve taken days longer to get done if I or another medical student hadn’t been there to do grunt work or make phone calls. The complete disregard for expediency, the often times lack of focus on basic patient safety efforts seems like a system wide problem despite some of the praise the VA system has gotten. With the wars in Iraq and Afghanistan dragging on such is finally getting some focus in the media,

VA hospitals are also receiving a surge of new patients after more than five years of combat. At the sprawling James J. Peters VA Medical Center in the Bronx, N.Y., Spec. Roberto Reyes Jr. lies nearly immobile and unable to talk.

[...]

Maria Mendez, his aunt, complained about the hospital staff. “They fight over who’s going to have to give him a bath — in front of him!” she said. Reyes suffered third-degree burns on his leg when a nurse left him in a shower unattended. He was unable to move himself away from the scalding water. His aunt found out only later, when she saw the burns.

Anecdotes of course but there is good evidence that such problems actually affect patient outcomes.

Measuring comparative outcomes in VA patients is difficult. VA patients are more likely to be homeless, to make far less use of care, to make use of care at a later stage of disease versus Medicare patients and just generally are sicker than their counterparts out in Medicare. That said, when trying to control for these there is some evidence that in several key disease states they do worse versus their Medicare counterparts. For example, heart attacks.

Yet Mr. Krugman extends praise over the system,

As I’ve mentioned in past columns, the Veterans Health Administration is one of the few clear American success stories in the struggle to contain health care costs. Since it was reformed during the Clinton years, the V.A. has used the fact that it’s an integrated system — a system that takes long-term responsibility for its clients’ health — to deliver an impressive combination of high-quality care and low costs. It has also taken the lead in the use of information technology, which has both saved money and reduced medical errors.

Sure enough, Mr. McCain wants to privatize and, in effect, dismantle the V.A. Naturally, this destructive agenda comes wrapped in the flag: “America’s veterans have fought for our freedom,” says the McCain Web site. “We should give them freedom to choose to carry their V.A. dollars to a provider that gives them the timely care at high quality and in the best location.”

That’s a recipe for having healthy veterans drop out of the system, undermining its integrated nature and draining away resources.

Draining away resources? What resources? These veterans aren’t (and rightly so) generally paying for their care. It isn’t like an insurance system where having healthy veterans in the pool subsidizes the sick.

Okay, the points above are, in some part, merely semantics but you have to wonder about the soundness of the rest of his arguments when Mr. Krugman makes examples like those above.

In reality, I agree that Mr. McCain seems overly optimistic about the power of the free market in health care. Health care is a relatively unique commodity, one that succumbs less to the ideal of supply and demand than other service industries. Admitting that I think there is a place for market based reform in health care.

My main complaint with the column, and the passion of liberals for universal health care, is the uncompromising nature of the arguments. I guess it would be appropriate to be original and call Paul Krugman shrill. I disagree with the absolute assertion that market reform has no place in ‘fixing’ health care.

My libertarian leanings mean I’m morally opposed to the government guaranteeing health care for all but I admit that market forces cannot fix some of the most heart tugging examples of the “broken” health care system in the U.S. What market forces can do is limited, but real. Despite Mr. Krugman’s claim I think market reforms can lower costs, especially for the large proportion of the uninsured who are relatively young and relatively healthy.