1.
Is health care
different from other goods & services?
If so, how?
a.
Is health care a
public good? Definitely not, since
i. It is excludable; non-payers can be excluded.
ii. It is not jointly consumed; all of us do not consume
all that is produced.
iii. It is exhaustible; units of health care consumed by
Ben cannot be consumed by Betty.
iv. It does not have zero marginal cost in consumption; adding
another consumer requires additional production, and therefore, additional
cost.
v. And yet, health care does generate a positive
externality in consumption, because most people are unwilling to ignore suffering
of others; therefore, we all gain value from the consumption of health care by
others; most people are willing to pay something for the health care of people
who unable to pay for their own health care.
b.
Is health care
scarce? Definitely yes;
i. The quantity of health care available is insufficient
for everyone to have all they want without sacrificing something else they also
want.
ii. Production of health care requires the use of valuable
land, labor, and capital, just like other valuable goods. The owners of the
land, labor, and capital used must be paid the opportunity cost of their
valuable resources, which makes the supply curve of health care upward sloping.
iii. Because it is scarce, health care must be rationed
somehow; if not by willingness and ability to pay money, then what?
c.
Do people "need"
health care?
i. Health care is not a single, homogeneous economic
good; health care ranges from a band aid and an aspirin to heart replacement
surgery.
ii. If some quantity of health care is needed, how much?
People do not need any particular quantity and quality of health care.
iii. Substitutes for professional health care include
watching and waiting (human bodies have incredible recuperative abilities),
home remedies, and self care (although the possibilities for self care are substantially
limited by law).
iv. Different people want different amounts and qualities
of health care; people seek to maximize their own net benefit from consuming
health care, which means they attempt to find the quantity and quality for which
MPB=MPC.
v. Equal consumption of health care by everyone isn't possible,
and if it were possible, few if any would say equal consumption by all would be fair.
d.
Is health care a
basic human right, regardless of ability to pay?
i. If so, who has the responsibility to provide health
care, since a right for one always implies a responsibility for someone else?
Do not say "society" has the responsibility, because
"society" is not a person, it is a collective noun.
ii. If so, how much health care and what quality of health
care does everyone have a right to? Do not say "enough to stay
alive," or "enough to be well," because neither is definable or
quantifiable.
e.
Which economic
good is health care more like: cars or food?
i. Health care is more like food, so why don’t we have
all the same public policy issues with food that we have with health care?
ii. Why don’t employers typically provide a "food
benefit” as part of their compensation to employees?
iii. Consider the cost of food per typical person for a
year compared to the cost of health care per typical person for a year. Why is
health care so expensive, compared to food?
iv. Why do we not eliminate restrictions on the supply
side for health care?
v. Is asymmetrical information a serious problem with
health care? Not really; asymmetrical information is far more serious with
automobiles.
2.
What are
justifications for government intervention and obstruction of voluntary
exchange in health care? Do the conventional justifications offered by
economists apply to health care?
a. Not market power; nothing besides government laws and
regulations keeps health care from being highly competitive.
b. Not externalities; even though most people are
sympathetic and willing to help others who are suffering, we have no evidence
whatsoever that not enough health care will produced without government
intervention. We have ample evidence to the contrary.
c. Not the public good argument; health care has none of
the characteristics of a public good.
d. Not the incomplete or asymmetric information problem;
consumers know more about health care than they do about their cars.
e. Certainly not economic stabilization.
f.
What about
equity, fairness, and justice? (is there
an efficiency-equity trade off with production or consumption of health care?) No more so than for any other economic good.
3.
Does health care fit
the insurance model?
a. Yes, for catastrophic illness, we do have low
probability of high cost events, which are insurable events, but not for
routine health care.
b. Health care insurance generates moral hazard, as does
any insurance.
i. May influence eating choices (obesity, junk food), if
individuals do not have to bear the full cost of their choices.
ii. May influence life-style choices (lack of exercise,
smoking, speeding, riding motorcycles), if people do not have to bear the full
cost their choices.
4.
Why are employers
involved in health care insurance; they aren't involved in home insurance or
car insurance?
a. There is no philosophical or economic reason.
b. Employer involvement is an historical artifact of wage-price
controls during WWII, which kept employers from competing for employees using
wages.
5.
Is asymmetric
information a serious problem with health care?
a. No; in which economic good is information more
asymmetric: car repair or health care?
b. Are health care providers better judges of the marginal
benefit of health care than patients, and therefore better positioned to decide
the quantity and quality of health care someone should consume?
c. For most goods and services, consumers can and do use
price as a principal source of information about value, cost, and relative
scarcity; but not for health care, because unit prices for health care services
are generally nonexistent; health care providers do not compete on price, and
prices generated by voluntary exchange in unfettered markets do not exist, due
to government intervention.
d. If we don’t use prices (willingness and ability to
pay) to ration health care, then we also cannot use prices to give us
information about relative value and cost of health care compared to other
goods and services.
e. If we don’t use voluntary exchange guided by relative
prices to ration health care, how can we expect that MSC will equal MSB? We
cannot.
6.
What's wrong with
third-party payments for health care?
a. Third-party payments are payments made to producers of
healthcare by someone other than the consumer of health care.
b. For most insurable risks, insurance is not a third-party
payment system, since consumers generally pay for insurance they purchase
(e.g., auto insurance, property and casualty insurance, home insurance, life
insurance); but for health care, what is called "health care
insurance" is typically paid for by an employer or by tax payers.
c. What economic outcomes can we expect from 3rd
party payment for health care?
i. Excess demand for health care services.
ii. Shortage of suppliers of health care services.
iii. Rising cost of producing health care.
iv. Rationing of health care using some criteria other
than price, e.g.,
· Waiting in the doctors' offices and emergency rooms,
· Denial of insurance claims,
· Burdensome, bureaucratic procedures to get insurance
claims accepted,
· Doctors who refuse Medicare and Medicaid patients,
· Denial of medical procedures by review boards, and
· Limitations on eligible suppliers of health care
services (HMO, PPO).
7.
What behaviors
from employees can we expect, due to employers using health care benefits to
compensate employees?
a. Employees will demand more health care benefits, due
to obfuscation of who is bearing the cost.
b. Low-wage employees typically won't be compensated with
health care benefits (e.g., employees of McDonalds), because.
i. Health care is expensive as a percentage of low-income
workers’ wages
ii. Low-income workers don’t tend to stay with the same
employer as long as high-income workers
iii. Low-income workers need money, not health care
benefits, since they don’t get much income to pay for food and other goods and
services they want; in other words, low-income employees typically don’t want
part of their pay in the form of health care benefits.
c. Money wages of employees will not rise as fast as they
otherwise would.
d. Employees will consume health care services beyond the
point of MPB=MPC
e. Employees may be less mobile, remaining in current
jobs to avoid loss of health care benefits
f.
Employees may
delay retirement to avoid loss of health care benefits
8.
Can government somehow
achieve greater economic efficiency and equity by intervening in voluntary
exchange markets? In a word, no. In fact, the opposite is true.
9.
What does
economic logic tell us is the most efficient remedy, if we find someone who has
little ability to pay for health care, but we’ve decided that the person
deserves some minimum level of health care? Give the person some money or a health
care voucher.
10.Can
the U.S. health care “system” be “reformed" from where we are now? Probably
not.
a. We have no reason whatsoever to believe that
government operatives will bring us greater efficiency or equity in health
care, compared to voluntary exchange.
b. There is no “system” that suspends human nature and
the laws of supply and demand, both of which apply to health care, just as they
do for car care and food care.
c. Voluntary exchange in competitive markets gives us as
much efficiency and equity as possible, provided we make provision for the rather
small number of people who are unable to pay for even modest health care
services.
