Wednesday, February 09, 2005
Wall Street Journal debate on health care
[Russ Roberts and John Irons, "Does Bush's Budget Proposal Set Right Priorities on Health Care?," Econoblog, The Wall Street Journal, 9 February 2005.]
In an excellent debate on the future of health care, George Mason economics professor Russell Roberts takes on Center for American Progress economist John Irons:
Roberts - Because of various government subsidies, out-of-pocket spending is a little more than 10% of total health spending (thanks to Alex Tabarrok at Marginal Revolution for the link). The rest comes from the government and insurance. Of course, if you don't have insurance or qualify for the government programs, you have to pay the full prices. Those prices have been driven up by the demands of all those customers who only pay a dime on the dollar. An elaborate bureaucracy of government and hospital employees tries to keep the system functional.
Irons - [A] restaurant with 90% subsidized food would certainly attract many customers and serve more food. But is this the case with health care? Personally, I wouldn't be rushing off to get my appendix removed or to sign-up for the colonoscopy of the month club no matter how cheap the procedures. The demand for health care is relatively insensitive to price, and this is especially true for the kind of care that is exceptionally expensive, such as end-of-life care.
Roberts - [T]he real price effect isn't on quantity but quality. When there's no extra cost to me in the restaurant for being a glutton, I don't just order more food but more expensive entrees. In the case of medical care, I always want that MRI or the extra test as long as it isn't too physically painful. That's a comfort. But sometimes those tests aren't given to me because my doctor or my health insurance company thinks they're too expensive. I'd rather see those decisions made transparently with the patient having the ultimate say.
Irons - [L]et's get more concrete about this.
[I]t looks like Medicaid will be cut by $60 billion over 10 years, meaning fewer payments to states to cover benefits.
What should we be doing? The big, long-run issue is with the growth of health-care costs. The rising cost of care is leading to strains on federal services like Medicare and Medicaid, as well as on private companies who are providing insurance. There is a grand failure to address these issues in a fundamental way.
In the meantime, cutting benefits for those that need coverage is irresponsible.
Roberts - [T]he president's proposed budget, by my count, has a whole bunch of new or expanded programs to make health care more affordable, particularly for low-income families -- including a health-insurance tax credit, something called a traditional health-insurance tax credit, a health-insurance tax credit combined with a Health Savings Account and, my favorite, "An Above the Line Deduction for Certain Health Insurance Premiums." Who can't get fired up over that?
University of Missouri - St. Louis economist Lawrence White also weighed in on the debate at Division of Labour:
How, you might wonder, is such talk of a large cut in Medicaid consistent with the Congressional Budget Office’s projection of uninterrupted growth in Medicaid spending for the next few decades...?
Turns out it’s the oldest trick in the budget book: the proposed “cut” under discussion is not a real cut, but only a moderation in the projected growth path. As the San Francisco Chronicle reports:
Also Thursday, the nation's top health official fleshed out proposals to cut $60 billion from the projected growth of Medicaid in the next decade.
And by the way, $60 billion over ten years, or $6 billion a year, is a drop in the Medicaid bucket. According to the Washington Post, Medicaid “is projected to cost $324 billion this year”.
[Russ Roberts and John Irons, "Does Bush's Budget Proposal Set Right Priorities on Health Care?," Econoblog, The Wall Street Journal, 9 February 2005.]
In an excellent debate on the future of health care, George Mason economics professor Russell Roberts takes on Center for American Progress economist John Irons:
Roberts - Because of various government subsidies, out-of-pocket spending is a little more than 10% of total health spending (thanks to Alex Tabarrok at Marginal Revolution for the link). The rest comes from the government and insurance. Of course, if you don't have insurance or qualify for the government programs, you have to pay the full prices. Those prices have been driven up by the demands of all those customers who only pay a dime on the dollar. An elaborate bureaucracy of government and hospital employees tries to keep the system functional.
Irons - [A] restaurant with 90% subsidized food would certainly attract many customers and serve more food. But is this the case with health care? Personally, I wouldn't be rushing off to get my appendix removed or to sign-up for the colonoscopy of the month club no matter how cheap the procedures. The demand for health care is relatively insensitive to price, and this is especially true for the kind of care that is exceptionally expensive, such as end-of-life care.
Roberts - [T]he real price effect isn't on quantity but quality. When there's no extra cost to me in the restaurant for being a glutton, I don't just order more food but more expensive entrees. In the case of medical care, I always want that MRI or the extra test as long as it isn't too physically painful. That's a comfort. But sometimes those tests aren't given to me because my doctor or my health insurance company thinks they're too expensive. I'd rather see those decisions made transparently with the patient having the ultimate say.
Irons - [L]et's get more concrete about this.
[I]t looks like Medicaid will be cut by $60 billion over 10 years, meaning fewer payments to states to cover benefits.
What should we be doing? The big, long-run issue is with the growth of health-care costs. The rising cost of care is leading to strains on federal services like Medicare and Medicaid, as well as on private companies who are providing insurance. There is a grand failure to address these issues in a fundamental way.
In the meantime, cutting benefits for those that need coverage is irresponsible.
Roberts - [T]he president's proposed budget, by my count, has a whole bunch of new or expanded programs to make health care more affordable, particularly for low-income families -- including a health-insurance tax credit, something called a traditional health-insurance tax credit, a health-insurance tax credit combined with a Health Savings Account and, my favorite, "An Above the Line Deduction for Certain Health Insurance Premiums." Who can't get fired up over that?
University of Missouri - St. Louis economist Lawrence White also weighed in on the debate at Division of Labour:
How, you might wonder, is such talk of a large cut in Medicaid consistent with the Congressional Budget Office’s projection of uninterrupted growth in Medicaid spending for the next few decades...?
Turns out it’s the oldest trick in the budget book: the proposed “cut” under discussion is not a real cut, but only a moderation in the projected growth path. As the San Francisco Chronicle reports:
Also Thursday, the nation's top health official fleshed out proposals to cut $60 billion from the projected growth of Medicaid in the next decade.
And by the way, $60 billion over ten years, or $6 billion a year, is a drop in the Medicaid bucket. According to the Washington Post, Medicaid “is projected to cost $324 billion this year”.
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