We were going to move the discussion about health care to an analysis of the health care consumer, but I need to do more digging into data in order to understand this issue better. In the meantime, I wanted to spend a few paragraphs on understanding the history of how the health care debate has been shaped. As I previously stated, everyone agrees on the need to "reform" health care. The conservatives (read: Republicans) believe that health care costs can be brought under control by letting the "free market" decide which providers are most efficient, and rewarding them for their efficiency. Cutting costs will be accomplished by spending less public funds, which will flow to the efficient winners, while being denied to the inefficient losers. Liberals (read: Democrats) on the other hand, believe that costs can be best controlled by a combination of more efficient delivery methods, increased emphasis on prevention and continued government regulation. This potent combination will, on its own, reduce the cost of health care and, hence, reduce government and private health care expenditures. Today's diary deals with the provenance of the liberal approach.
The liberal approach to health care policy is rooted in the conviction that even though we purchase health care services and products, this activity cannot be understood within the context of the free-market system. Even though more than 50% of current health care revenue is derived from private sources and an increasing percentage of health care services are delivered by providers employed by for-profit companies, certain factors endemic only to health care still make it a system, rather than an industry.
The origins of this argument, can be found in the article, "Uncertainty and the Welfare Economics of Medical Care," published by the Nobel Prize-winning economist Kenneth Arrow in...1963!! 1963? Yup, 1963. I am not sure if there is a single, other work on the intersection of economics and public policy that still influences any public policy debate about any subject which has quite this lengthy a pedigree. If there is, please let me know. But Arrow's article, from the liberal perspective, remains the mother lode.
How do we know that Arrow's analysis is still setting the argument's liberal fault lines? Because as recently as 2009, another Nobel prize-winning economist, Paul Krugman, referred to Arrow's essay as being the "seminal" paper which showed that the "competitive market model" for health care simply didn't work.
Before I go further, I would like briefly to explain my own bone fides, in order that nobody think my criticism of the liberal health care perspective is symptomatic of a deeper aversion to liberalism. To the contrary, I consider myself to be politically and socially to the left of most liberal thought, particularly as regards issues involving social welfare and economic justice. I believe that we should never put a price on the cost of helping the vulnerable, nor do I believe that anyone who falls into the vulnerable category - temporarily or permanently - should be made to feel like a failure.
That being said, I also think that unless we truly understand the economic and econometric issues involved in health care delivery, we will continue to fail to develop an effective response to the conservative assault on the role that government must play in ameliorating the abuses inherent in any for-profit system. The market economy, by definition, rewards the winners and penalizes the losers. But even if it rewards more winners than losers, we have an ethical and moral responsibility to utilize all necessary methods and resources to compensate those who lose out.
There really is no inherent contradiction between the moral imperative of the Hipocratic oath on the one hand, and the search for maximum profits on the other. We don't need to distort, disguise or deny the raison d'etre of the health care industry (profit) in order to justify healing the sick. What we do need to understand are the consequences of policy decisions, which cannot be fully or rightfully understood if we
pretend that the system for delivering health care is something other than what it really is.
Arrow's health care model, and the reason he believes that it does not qualify as a market-based economic model, is based primarily on the behavior of the consumer. In short, he argues that health care consumers do not behave like "typical" consumers because, at some point, due to trauma or life-threatening illness, they must enter the health care market whether they want to or not. The need for critical health services reduces the ability of consumers to choose whether to purchase health services, as opposed to purchasing other goods and services, thereby eliminating consumer choice which is the sine qua non of a free market.
But the fact is that the consumer has one available option that lets him control his entry into the health care market; namely, he can choose not to consume any health products or services at all. The health care services that drive the surge in health revenues and public expenditures are not services offered for critical illness or trauma. They are services related to the treatment of chronic illness and end-of-life care; the latter often a continuation and worsening of the former. Is there linkage between chronic illness and the refusal or reluctance of individuals to seek medical care before their condition becomes chronic? For the answer we need to continue our analysis of the health care consumer.