Libertarianism and health care

Megan McArdle has become sort of the libertarian spokeswoman against health care reform. Near as I can tell, her argument boils down to, "health care reform will result in the government setting prices for drugs, which will cut into Pharma profits, which will destroy the incentive to innovate, which will result in fewer new drugs, which will result in lots of people dying." This is a standard libertarian position: more government regulation = less private sector activity, which is bad for consumers. 

However, in the health care context, calling this "libertarian" is a little disingenuous. To see why, you have to understand what Megan appears to be afraid of: rationing of Medicare. The government already sets "market" drug prices because Medicare is basically Pharma's biggest customer, and because private insurers base their rates on those paid by Medicare. So the mechanism for getting to "less innovation" is the government eventually refusing to pay any price for all drugs (including experimental ones) into perpetuity--a policy that seems to be implied by all this talk of "bending the cost curve," the Administration's insistence that this won't translate into less care notwithstanding. But how is it possibly libertarian to want the government to go bankrupt paying for any and all treatment for a rapidly growing aged population? The problem is that in the health care context, because of Medicare, there is no real market for drugs. So the libertarian solution would appear to be reducing the role that Medicare plays in drug pricing. 

The fact that this option isn't on the table could justify Megan's opposition to health care reform; however, rationed care under Medicare doesn't appear to be on the table either. The economic hydraulics will probably force rationing at some point, but in the meantime, it's not clear to me what any of this has to do with expanding coverage to the uninsured through an "insurance exchange" or public option or what have you. The only thing I can think of is that a public option *could* give the government even more power than it already has in setting prices and eating into Pharma profits. Which, I have to agree, may be a problem.

Again, the solution to the innovation conundrum would appear to be facilitating a robust and functioning private market for drugs. The way things work now, the US government (through Medicare) is subsidizing innovation for the rest of the world. That's unsustainable in the long run. How one goes about creating this market, I don't know. But it doesn't seem to be a question anyone is asking. 

Asians again

This NYT article on interracial roommate relationships predictably focuses primarily on black-white tensions. It doesn't say anything especially interesting about interracial rooming until about halfway down the page:

Several studies have shown that living with a roommate of a different race changes students’ attitudes. One, from the University of California at Los Angeles, generally found decreased prejudice among students with different-race roommates — but those who roomed with Asian-Americans, the group that scored the highest on measures of prejudice, became more prejudiced themselves.

Um, lede buried! Asians are the most racially prejudiced ethnic group, and in turn make others more prejudiced? Such a statement demands at least a tiny bit more exposition, no?

I wonder if the UCLA study is skewed somehow by the fact that Asians are the biggest group on campus (we Bay Area snarks called it the University of Caucasians Lost among Asians). Under certain accounts, large concentrations of Asians tend to make educational environments extremely tense... and perhaps such concentration reinforces clubbiness within the group as well? Anecdotally, I've had Asian, white, Hispanic, black and Arab roommates, and I can safely say that everyone is pretty much the same when they're holding your hair back at 3 am. 

Health care and fundamental change

Any discussion of health care reform invites, as it should, comparison with foreign health care systems. These comparisons are obviously useful; for instance, I think the Dutch example offers some extremely important lessons for restructuring the US system. 

But it is of course just as important to point out very basic differences between those systems and ours in determining the applicability of foreign models. One of those differences is the role of doctors. As Atul Gawande points out in his seminal article on reigning in health care costs, "the damning question we have to ask is whether the doctor is set up to meet the needs of the patient, first and foremost, or to maximize revenue." The culture of medical practice is extremely different in European welfare states, and one of the reasons is that doctors in this country are given every possible incentive to treat the practice of medicine as a business rather than as a profession.

Is that because American doctors are naturally rapacious capitalists? Of course not. The most obvious cause of these differing approaches is the enormous cost of medical education in the United States. In 2005, the average cost of a medical education in the US was estimated at $140,000 for public schools and $225,000 for private schools. That doesn't include the opportunity cost of being an intern, resident, fellow or specialist for several years at minimum wage. It is also on top of any loans taken out for the mandatory four years of undergraduate education. The cost of medical education in Europe, which in many cases begins right after high school, is far, far less. American doctors are thus under immediate and intense pressure to maximize revenue, either through entering high-pay specialties or by practicing medicine a la the doctors in McAllen, Texas. Relatively less-financially-burdened European doctors have a lot more professional flexibility as a result, allowing them to develop a more patient-centered culture. It seems to me that unless you can figure out a way of reducing the cost of medical education, driving down costs in either the public or private health care sector (which inevitably means lower payments to doctors) is a fool's errand. Why else would the American Medical Association be so consistently, implacably opposed to health care reform?

Thoughts on Mark Sanford

Is "rising star of the Republican party" the new "drummer for Spinal Tap"?

Conservatives, Title VII, and judicial activism

Either tomorrow or Monday, the Supreme Court will hand down its decision in Ricci v. DeStefano, a case that has gotten a lot of buzz because presumptive new Supreme Court Justice Sonia Sotomayor was on the panel that issued the decision below. But more important than her relatively unimportant role in the case (the opinion was an unsigned, unpublished, summary affirmance of a district court decision that was squarely within the 2nd Circuit's precedent) is the potential for the Supreme Court's conservative wing to gut Title VII, a vital tool in remedying discrimination, and one that emerged from a robust democratic process--unlike, say, the outcome of the Ricci decision.

The Equal Protection Clause of the 14th Amendment prohibits states from intentionally discriminating on the basis of race.  However, the Supreme Court held in 1976 that the Equal Protection Clause does not provide a remedy for state policies that may have discriminatory effects if those effects cannot be attributed to any intent or purpose by the state to discriminate. In other words, a facially neutral policy--say, a literacy test--does not violate the Constitution even if the results are completely skewed towards one group. But the Court, in holding that there was no constitutional cause of action for so-called "disparate impact," stated that Congress could create one. Title VII, which was already being interpreted to do exactly that, thus became the vehicle for remedying effects-based discrimination.

The primary theory behind disparate impact is simple: it is easy to create ostensibly neutral policies that quite effectively weed out members of certain racial groups, or women, as the case may be. So, under Title VII, when the disparate impact, or the weeding effect, is big enough, it can be enough to infer that the policymaker intended to discriminate against that group. The inference is left up to a factfinder--usually a jury. Title VII just creates the way for the plaintiff to get into court. The secondary theory of disparate impact is a little more abstract, and where the Supreme Court's conservatives will concentrate their fire: systemic discrimination exists, and even if it's a product of non-discriminatory intentions, policies that have a strongly disparate racial impact should be disallowed.

Either way, it was an uncontroversial matter to affirm the district court's rejection of Frank Ricci's claims in this case. He is a white firefighter who is challenging New Haven's decision to throw out the results of a test for promotion--a test that resulted in a large disparity between the white passage rate and the black passage rates. New Haven was quite rightly worried that this disparity could give rise to Title VII claims against the city. So the question before the Supreme Court is, does the disparate impact provision of Title VII--a law that has provided a remedy to victims of racial discrimination for over three decades--violate the Equal Protection Clause of the 14th Amendment?

Yes, say the conservatives, because the Constitution is colorblind, and any state policy that takes race into account violates that guarantee, even if the state is trying to prevent discrimination. Because white folks are a racial group too, under conservative logic, any policy that helps minorities at the expense of whites is discriminatory and thus unconstitutional. The extension of this is, of course, that it will become virtually impossible to develop policies to either foreclose or remedy discrimination against minorities other than just saying "don't do it."

Of course, not all policies are zero-sum: even in Ricci's case, there's no way of knowing that he wouldn't have ultimately gotten a promotion, since New Haven never got the opportunity to develop a more effects-neutral metric to replace the test it threw out. And it means that the Supreme Court, if the conservatives prevail and bar the use of race in any decision-making, will severely hamper local and state experiments in policy to figure out how to ensure equal opportunity for all groups.

The first problem with that relates to the first purpose of disparate impact--if the Supreme Court holds Title VII unconstitutional, disparate impact (even GROSS disparate impact) can't be used to show the possibility of intentional discrimination. That's great news for state employers who creatively use "neutral" policies to weed out workers on the basis of race or sex.

Problem two: It's delusional to think that systemic discrimination--discrimination at the very roots of our social structures, seeping in and poisoning the water--doesn't exist. Yes, we elected a black president. Woo. That hasn't changed the fact that it is, statistically, harder to be a black person in this country than a white one. No one (hopefully) intends that to be the state of affairs. But why should the Supreme Court step in and stop states/localities from trying to prevent it from being an effect of things we can't foresee?

Health care reform and policy sequencing

I know next to nothing about health care reform except for what I read on the internets, but President Obama had an interesting statement today on the subject that, well, provoked me. Answering a question about whether a "public option" (i.e. government-run health care plan that would compete with private plans) would drive insurance companies out of business, he said:

But just conceptually, the notion that all these insurance companies who say they’re giving consumers the best possible deal, if they can’t compete against a public plan as one option, with consumers making the decision what’s the best deal, that defies logic, which is why I think you’ve seen in the polling data overwhelming support for a public plan.

Huh? As he himself acknowledges, there is a legitimate problem in a public plan being subsidized by taxpayers "endlessly over time," since presumably having a competitor that is consistently operating at a loss will drive private insurers out of business. That seems "logical." But of course the extremely high risk that this is exactly what the public option will become is why anyone opposes it. While it's heartwarming to see liberals lecturing free marketers on why the public option is actually the "conservative" solution to rising health care costs, in the absence of any sign that the public option will be self-sustaining (i.e. not subsidized by taxpayers), I don't see how a government-created enterprise is going to foster real competition. 

Now, given that there are seemingly contradictory goals at play--cost reduction, expanded coverage, access to high quality care--"competition" may not actually be what the health care sector needs. If there was a public plan that was affordable and provided a fairly basic level of care, with costs controlled through rationing, "comparative effectiveness," etc., then it seems like there would still be a role for the private insurance sector to provide supplementary coverage that people could purchase depending on their anticipated needs. And because private insurance companies can charge more for more expensive care, the supply of super expensive treatments that are now easily accessible in the United States (but aren't available in places with nationalized health care, that strictly ration care) will be undepleted. 

It obviously makes sense to "bend the cost curve" of government-provided health care, since we just can't pay for the aforementioned super expensive treatments indefinitely. At the same time, if the government says it won't pay for expensive treatments, and the government is the only game in town, then there won't be a market for those treatments and they will cease to be provided. So now you can see why it's important for a public option not to put private insurers out of business. The following scenario seems plausible to me: (1) the government creates a public plan, (2) the public plan is affordable (thanks to taxpayer subsidies) but the government has not yet enacted cost controls or rationed care, (3) private insurers go out of business because everyone flees to the affordable public plan that seems to basically provide the same level of care, (4) government finally enacts cost controls and/or rations care, but now there is no private market to provide expensive or experimental treatments.

Of course, one might counter that (6) a new private market springs up, but putting an industry out of business and then watching it rise again seems like an inefficient way of going about health care reform.

Now, if the government can enact a public plan that already has cost-controls built in, and only covers a basic level of care (not including the aforementioned super expensive treatments), that seems like a way of expanding coverage (by making basic care affordable), reining in costs, and maintaining consumer choice by leaving private insurers in place to compete for the services that the government doesn't provide. 

The point is, it seems like the commitment to bending the cost curve has to happen before government-provided care swallows up the whole sector. Government-provided care will ultimately have to be rationed because otherwise it can't be paid for; so why not ration it at the outset and let the private insurance market pick up the slack? The downside is obviously that people who sign on to the affordable public plan won't get every possible kind of care; this is probably untenable to people who see that as a problem with the heath care status quo. But then, I don't know how you solve that problem without bankrupting the country. Health care, as with any other thing one has to pay for, involves trade-offs. 

Anyway, as previously mentioned, I disclaim any specialized knowledge, but seek only to counter the position held by liberals (including, apparently, President Obama) that any mistrust of a public plan is just not "logical." 

What liberals cling to

Mickey Kaus spazzes because, it turns out, as a Marxist, it turns out he's condescending like Obama. Being condescending is inherent to being a Marxist because of the belief that the cultural "superstructure" is determined by the economic "base"--i.e., if people had well-paying jobs and no economic anxiety, they wouldn't "cling" to silly beliefs in things like God and religion. His easy test for whether you're a "Vulgar Marxist" in this sense: (1) Do you believe China can remain Communist as it becomes capitalist; (2) Do you believe Islamic fundamentalism will fade when its adherents have better economic conditions. If you tend to think yes to both, then you're likely to think Obama was right that working class folks will think differently about cultural issues once they're better-paid.

Aside from the obvious problem that there isn't much of a correlation between poverty and belief in God and/or guns (you're telling me NRA lobbyists don't have food in their bellies?), this also assumes that the well-off don't have a cultural superstructure of their own. According to the Marxist account, we don't "cling" to anything because we have the enlightenment that comes with privilege! But rich urbanites cling to all kinds of silly things (not least of which is the belief that they know everything.) A short list of them can be found here.