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Slide 1 - Cato Institute

VIEWS: 4 PAGES: 42

									Health, Medicine & Liberty


                   Michael F. Cannon
     Director of Health Policy Studies, Cato Institute

                    Cato University
              San Diego, CA, July 24, 2008
 “For the federal government, rising
    health care costs constitute the
 principal challenge of fiscal policy –
no other single factor will exert more
influence over the long-term balance
        of the federal budget.”

     CBO Director Peter Orszag
  ‘Medical’ Restraints on
         Liberty
• Government spending
• Tax breaks
• Regulation
  – Medical professionals (state
    licensing)
  – Health insurance (state licensing,
    mandates)
  – Medical products (FDA, state
    certificates)
     Purposes of Medicine
•   Improve health
•   Reduce uncertainty
•   Signaling
•   Companionship
•   ????
         QUALITY
Health




                       COST

                   Medical
Health




         Aggregate Medical
             Spending




                   Medical
Health




              Discrete Medical Expenditures


         Most                               Least
         Productive                     Productive


                                      Medical
Health




         “Productive” medicine
         • Prenatal/NICU, heart
           disease
         • Uninsured don’t get
           enough (IOM: 20k lives
           lost/year)
         • Insured don’t get enough
                                Medical
Health



            Flat-of-the-
               Curve

         “Flat-of-the-curve”
           medicine
         • 30% of high-tech
           scans
         • Hospitalizations,
           doctor visits
                               Medical
Health



             Flat-of-the-
                Curve

         “Harmful” medicine
         • Iatrogenic injuries
         • Medical errors (IOM:
           50k to 100k
           deaths/year in
           hospitals alone)
                             Medical
Health




         Key points
         • Not chronological
         • How much of each
           type?
         • Where does stuff land?
         • Uncertainty dictates
           shape
                             Medical
           Satisfactio
           n




Literary
Health




         • RAND Health
           Insurance
           Experiment
         • Medicare
                  Medical
“How can it be that
‘the best medical
care in the world’
costs twice as much
as the best medical
care in the world?”

Princeton economist
Uwe Reinhardt
           What might reduce flat-of-
Health



         the-curve & harmful medicine?



             • Cost-consciousness




                               Medical
      Who Controls the Money?
                      Consumer    Other
                        26%      Private
                                   3%




          Employers
            28%
                                  Government
Source:                              43%
CMS
“Congress has absolutely no
interest in reducing …
dubious Medicare
expenditures. Let me repeat
that. The United States
Congress has no interest
whatsoever in reducing
dubious Medicare
expenditures…Why…? That
is to me a huge mystery.”

Princeton economist
Uwe Reinhardt
      Who Controls the Money?
                      Consumer    Other
                        26%      Private
                                   3%




          Employers
            28%
                                  Government
Source:                              43%
CMS
Health




         HSA         “Fre
         HMO           e”



               Medical
                    “Fucking
                       HMO
                    bastards,
                    pieces think
                   “Actually, I
                                of
                       shit!”
                     that’s their
                   technical name.”
Helen Hunt, As Good As it Gets (1997)
           What might reduce flat-of-
Health



         the-curve & harmful medicine?



             •   Cost-consciousness
             •   Data
             •   Prepayment
             •   More-with-less
                 innovation
                                 Medical
Health




         Medical
Health




         Franc             U.S.
           e




                 Medical
Health




         Medical
Health




         ...That Which Is
              Unseen


         Franc              U.S.
           e




                  Medical
A   B   C   D   E
Premiums



            E


            Avg
             .

            A

   A


           Time
                       Moral
                       Hazar
                         d




Healthy drop out



A         B        C   D       E
When Your Friends Say…

“Markets don’t work in health care because of
uncertainty.”

You Might Respond…

“Government exacerbates the problem of
uncertainty. Providers and patients invoke
uncertainty, not without reason, when demanding
that government and employers pay for low-value
services. Markets experiment with ways of
overcoming uncertainty to deliver more health for
less money. Government blocks market
innovations at the behest of inefficient providers.”
When Your Friends Say…

“Markets don’t work. Look at all those medical
errors.”

You Might Respond…

“Government locks in a form of payment (fee-for-
service) that encourages medical errors. It took
Medicare 40 years to announce it would stop
offering financial rewards for some medical
errors. Markets developed integration (to monitor
and reduce errors) and prepayment (which
penalizes errors) more than 60 years ago.
Government entitlements, tax policy, and clinician
When Your Friends Say…

“Universal coverage is a moral imperative. We
need to cover the uninsured.”

You Might Respond…

“Why are the 20,000 people who die each year
due to uninsurance a higher priority than the
50,000-100,000 who die from medical errors?
What moral code holds that some people are five
times more valuable than other people?”
When Your Friends Say…

“Medicare is efficient.”

You Might Respond…

“One-third of Medicare spending, more than $100
billion per year, purchases medical care of no
discernable value. In what sense is that
efficient?”
When Your Friends Say…

“Medicare has low administrative costs.”

You Might Respond…

“Medicare avoids administrative costs by
shoveling money out the door instead of
monitoring expenditures to ensure they improve
beneficiaries’ health. Medicare loses a lot more
to waste – about a third of Medicare spending –
than it saves by avoiding administrative costs.
Medicare avoids administrative costs because
that is what the provider lobby wants. That is a
liability, not a virtue.”
What Your Friends Say…

“Why don’t we just do what they do in France?
Their health outcomes are no worse than ours.”

What You Might Say…

“Perhaps the only way U.S. health care excels is
in medical innovation. We share those innovations
with the world. If we emulate France, we may all
get the same lower health outcomes, because that
would eliminate innovation. Less government
intervention, on the other hand, would bring more
liberty, innovation, health, and wealth.”
What Your Friends Say…

“Unregulated health insurance does not pool risk.”

What You Might Say…

“Unregulated health insurance pools risk often as
well or better than employer-sponsored
insurance, so long as people buy coverage when
they are still healthy. Premium controls make
insurance less affordable and cause insurers to
avoid the sick.”
What Your Friends Say…

“Okay, how would you reform health care?”

What You Might Say…

“Let individual consumers, rather than
governments and employers, control their money.
Let consumers choose their health insurance.
Eliminate licensing of clinicians and insurance, or
at a minimum let consumers choose which state’s
regulations apply. Those government
interventions protect incumbents and prevent the
market from making medicine better, cheaper, and
safer.”

								
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