The KGB Oracle Forums General Public Discussion (SPECIAL ACCESS) KGB Political Debate Central Healthcare - For Sinij

Ok, so I chopped some of the quote to attempt to make it more readable. Much of what was chopped I think is inaccurate, but lets focus on the core issues:

Basically what you seem to be asserting in a nutshell, is that a combination of price controls and subsidies can solve all our health ills. (pun intended) Historically speaking, that type of economic management has led to a bread line - but lets go point by point.

Point#1 - most of your assertion that were valid regarding this were at the end, what you wrote for point#1 was mostly regarding your point#2. So lets move on to point #2

Point#2 - There are a few key things you bypass and ignore here. First of all, if a new treatment is not much better than the old treatment as you assert is a norm, then why is there a moral deficiency present when some people cannot afford the shiny new treatment?

Second, costs are actually in reality constrained by what Govt and Insurance (whose rates tend to follow Govt because Govt provides them with legal cover) is willing to pay - not what individuals are able to pay.

You also seem to ignore the fact that Supply and Demand is not an "aspect" of a "market economy". Supply and Demand is an absolute. A mistake many people make when doing an economic/social calculus and you appear to make - is confusing Demand for desire. Demand represents ability and willingness to pay as well as desire to pay. All your desire for price controls accomplishes is artificial limitation on demand. This creates economic distortions - more on this later.

Point#3 - This is an unfounded assertion, first and foremost. In fact, even current paradigm has large pharmaceuticals selling bulk, at reduced prices to even the undeveloped world after initial high-end USA market profit-taking. It would probably be fair to say that the rich will in many cases get *first access* to new products. This is true in some instances. Magic Johnson did not survive HIV in an era when it was a death sentence by being a poor nobody. But in most cases, long term strategy of not using developed IP and Mfg capacity simply because it is not as profitable per unit is not a viable business strategy. This is a recurring theme in your posts, but is more a worry than a real issue.

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Regarding your first paragraph of part 2, re: my objection to single payer. You absolutely did not address my concerns regarding price. When I talk about the pricing issue, you do not seem to understand what I am talking about - hence my snarky response to your cross-posting of this response in the other thread ( that, and the fact that you felt the snarky need to cross post to elicit a response, even though you took 2 days to respond.)

When I talk about pricing mechanisms, and pricing distortion I am referring to the question of - " How does a central entity properly determine and set price?". Because it cant. The market pricing process is a democratic process, where people literally vote on what a particular product or service is worth. Think of it as the original crowdsourcing. This process sends a signal to the world as to what something is worth, which lets potential suppliers determine if and whether supplying can be profitable and at what degree.

When this process gets disrupted by men with guns who arbitrarily set one unified price, then problems occur. Because the people setting the price, are almost never accurate in assessing the real value. A couple quick cases in point - the current drug shortages that worsen by the year, and the gas shortages in the Sandy aftermath. In the Sandy aftermath, "price gouging" was forbidden. So instead of gas and supplies being very expensive for a day, then prices dropping as new supply rolled in - there were extended shortages. Because the price people were "allowed" to charge did not reflect the extra costs, times and trouble that made shipping and distributing in extra supply worthwhile. So people either suffered without, or payed exorbitant prices from illegal black market.

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Delivery of treatment is not a fixed cost. Many factors go into this pricing, including skill/schooling level required to provide, location, etc. Your groupings of cost types was also arbitrary and ineffective for the type of cost breakdown you attempted. You need much higher degree of granularity there to make it meaningful.

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Point#4 - R&D is indeed a large cost. You are also correct in that some money goes to researching treatments as opposed to cures. However, the conclusion that follows from that.... has many untenable aspects.

First of all, there is generally no such thing as wasted health research. Often times breakthroughs come from unexpected places - people researching one thing, will find something that actually relates to a different problem.

Secondly, I demonstrated the correct model why single-payer countries could obtain bulk rates, because they were purchasing from a larger market. If they were trying to arbitrarily set a price, as opposed to buying at market rates then the efficiency would drop dramatically. They would either overpay and be less cost efficient, or underpay and face shortages of supply/quality.

Your assertion that single payer, were it to envelop the larger market - and attempt to set pricing by fiat - would not create shortages is a fallacy. This has been demonstrated by every other attempt at centralized price controls. The idea that a bureaucrat can determine proper value better than a market is pure fantasy. Already drug shortages are rampant in cases where the Federally mandated payout is not sufficient incentive for the drugs to be manufactured.

You argue that the Canada model where forced removal of patents to force companies to sell is a good model. Well, even as you admit your system would reduce R&D... in your world, exactly what new drugs or treatments would be available to be nationalized? If you know ahead of time that the Govt of the previously largest market is simply going to either rip you off, either by underpaying or nationalizing your efforts... what makes you think anything would be developed in the first place?

All the formerly market activity would now devolve into a political battle over what was "fair". There is no way an economy can operate in that environment.

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You talk about rationally distributing health care. The only rational method, is to get Govt out of the health care business entirely. Health care is not something that springs from nothingness, to be distributed by fiat. It is something that many people must work very hard to provide and those services are not worthless. If we want to continue to have health care available to anyone but the wealthy who fly to non confiscatory countries for medical tourism, we need to immediately reverse course.

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The Govt intervention in our system is the cause of our current mess. You talk like what we have now is a market system, but few things are further from the truth. Because we do NOT have a market system for health, and have not for some time- this is the cause of the present problems and spiraling costs.

Walls of text will be addressed when there is time to address wall of text.

“While what you say regarding consumers not being fully informed is true - it does not *need* to be true.”

Can you elaborate on this point? My understanding is if consumer is detached from the price of the treatment, and insurer operates on percentage margins, then by covering new and expensive treatments they are able to push overall costs up and by doing so increase their profit in absolute numbers without increasing efficiency of profit extraction. The only downward pressure is consumers having to pay higher insurance premiums, but with employer paying most of it, pressure is very minimal.

In traditional sense market would operate along the following decision-making lines – Treatment A(expensive) and Treatment B(affordable) are available. If I pay directly and I can’t afford treatment A, then I will go with treatment B. This puts market pressure on Treatment A to lower price to better compete with Treatment B. This is not how the system currently operates – Treatment A is picked every time, insurers pass the cost to employer who absorbs it into labor costs, and individual consumer has very little say in going with Treatment B. In turn, if employer wants to lower coverage costs, they go with an insurance plan that covers fewer conditions, has higher deductible or lower lifetime max; but if this cheaper plan covers a specific condition, they still go with a Treatment A.

This is why I think employer-sponsored insurance-pool health care is a dysfunctional system. Single payer system would be better. So is everyone paying out of pocket (and influencing prices via market forces) with only major conditions requiring insurance.

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“Also, you have not "demonstrated" that such a system contains cost. You have made that assertion, but have made no inroads in modeling such a scenario where that occurs. Large scale systems where this style of intervention has been implemented have failed without exception.”

This is not a falsifiable argument, as such it is invalid. See: No True Scotsman fallacy.

If I bring up examples of any other First World country, you will claim (and have in the past) that scale is too small. If I bring up other US-based cases, such as VA or Active Military health care, you will claim it is too different.

Formally: ‘US health care’ is not ‘Other health care’ for all healthcare that is not ‘Other health care’ is not falsifiable as defined.

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I am not denying that R&D will be affected. While I don’t think effects will be as drastic as you propose, I don’t want to focus our debate on this, and will concede that it will be reduced and leave it ‘reduced’ unspecified.

‘Silver lining’ of my plans is that under single payer employers will be largely free from providing health insurance, as such normalizing labor costs over part and full time. It will also lower overall employment costs, assuming that US is not an outlier and health care costs under single-payer drop to around 10%GDP observed in every other single-payer country. Additionally it will allow greater labor mobility, lessening ‘bennies lock-in’ and will afford more business creation, freeing individuals from concerns of finding individual health coverage.

I think your model of how insurance works is also slightly off, insurance companies do not want to pay more for the sake of paying more. In fact, their adjusters work extremely hard to work at paying less or nothing wherever feasible.

Contrary to what some people seem to think - health care costs are in fact negotiable in most cases.

There is no reason a person, often in conjunction with their primary care physician, should not be able and expected to make educated decisions regarding both insurance, and health options.

If we step back, and look at the entire picture - from a birds eye perspective of society as a whole, it should be clear that using private insurance as a delivery means for social services is silly.

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You are confusing two different issues here.

Ideally insurance wants to operate by providing coverage for any and all conditions, with minimum co-pays and deductibles and at the same time denying every single claim. This is rough model to maximize profit in ideal (to them) business environment.

We are not talking about denying claims here. We are talking about coverage. Coverage that insurance competes on. As such, I still stand by my assertion that chasing latest-and-greatest regardless of cost-effectiveness is forced on insurances by customer demands. This is mostly because customers are detached from individual purchasing decisions.

If you are paying directly, and in position to pay outright before the treatment, then yes, prices could be negotiated. Otherwise, not so much. Often times, the fact that you have insurance, even if they denied or only partially cover the treatment, locks you into inflated price due to how contracts for 'preferred provider' operate.

Anecdote - couple years back I had to get a treatment done. Insurance would only cover 50%. Doctor was not able to go down on the price as long as insurance paid any part of it. I negotiated direct payment deal that ended up saving me money over insurance coverage.

You can't claim this. Cost of individual coverage reserved to well-off and healthy. Majority of people are at the mercy of employer-provided health insurance plan. Your only choice is to opt in or opt out. As such, given that you are on the plan and have no choice about what this plan is, it is natural to consume up to the maximum within limitations of this plan and your personal health situation.

I agree. This why I see single-payer as an improvement over existing system. I also think that pure market driven system will happen to be improvement over status-quo (if you only consider monetary costs and ignore human costs).

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