Thursday, August 03, 2017

The Economics of Health Care or, the Return of the Repressed

The upshot of my last -- none Jays -- post is general and specific. General:  democracy as now practiced works in a way that creates a disjuncture between reality and image. Specific: in the case of health care in the US, this leads people to (a) see problems where their might not be, (b) draw the wrong conclusions about the character and nature of needed reforms, and (c) believe that they can "get something for nothing." What I'd like to pick up on in this post is to look at the idea of getting something for nothing and how it is presented in contemporary public discourse.  How is this idea -- that you can get something for nothing -- presented to people during election campaigns? How is it organized in public discourse? And, what is the effect?

"There is no free lunch." We've all heard the expression but, as my last post suggests, we don't actually understand what it means. If we use the concept of "opportunity cost" (see my last post), then we understand that it does not mean that you did (or, did not) pay cash for the lunch you just ate. It means that you paid something. The person buying you lunch may have wanted your time. They were willing to shell out for a lunch for you and you were willing to accept it because, heck, it was just an hour but that was the cost. You had to listen to them for an hour or could not take a nap or paint the shed or whatever else you were going to do.  In other words, everything has a cost, whether in cash or time or annoyance or incurred obligation or whathaveyou. Costs are not bad. They are part of life and, as adults, we recognize this. As kids, we might not. I remember my daughter saying "just go get more money out of that machine" when I explained to her I could not buy something because I did not have enough money. To her, at that age, money was magical. It came out of a machine and it was free for the asking. As adults, we know this is not true ....

And, yet, we let a bunch of people tell us it is true, at times on the basis of shockingly little evidence. Think about health care and premiums or taxes as an example.  Politicians running for election fall all over themselves to try to say "I have found a free lunch for you." They don't use precisely those words but that is the import of what they are saying. Every time someone says "waste is the problem" or "unneeded tests" or ... lazy doctors or nurses ... what they are saying is this:  I have found a way for you to get something for nothing. They say "we have to eliminate the waste" or "this is a case of government mismanagement" or "it is those sick people's fault that they are sick and so we should not really pay for them." Or, whatever stock line you prefer.

The key thing to note about this line of argument is that it is not new. I've been listening to "waste is the problem" my entire life. Governments have been "cutting the fat" (aka eliminating waste) as long as I can remember. In Canada, I remember Mulroney campaigning on it, Chretien, Harper. They don't always use precisely this language but this is the substance: the other guys have allowed too much waste, too many people feeding from the trough, and the like. Just about every provincial election carries the same discourse. Sometimes people say "this is typical state mismanagement" or something like that: "the private sector is more efficient." But, the substance is the same and the message sent to the electorate is the same: you can get something for nothing or, you are not getting something for nothing because someone else is ripping you off. (This discourse often takes on nasty xenophobic dimensions when immigrants or Mexicans or Blacks are blamed for economic malaise as if, if there were not so many Mexicans going to school, school would cost less.) And, again, it is not new. In fact, it is old.

I make the point about its age because ... well ... history is against this argument. Those governments that were most effective at controlling the debt (Chretien in Canada and Clinton in the US) tended to make less use of this discourse than their political opponents and tended to focus on other means to address the provision of state services (Chretien's government, for instances, downloaded a lot of them).  History is against this argument because people keep saying it despite the fact that repeatedly the great plan to address waste and make us all rich comes to naught. Real wages are not rising and have not been for some time, for example. Thus, for those interested in an empirical test, the idea that "waste is the problem" runs into an empirical problem. It does not seem to be true,

And, yet, people believe it. Or, perhaps, they want to believe it because the answer "you can get something for nothing" sounds preferable to "you have to pay for what you want."  There is, I think, a reason why no one campaigns on the "vote for me and your taxes might actually increase" line. If given a choice, people will vote for the person promising the free lunch, even after they recognize that that lunch is not free ... because they keep hoping that it will be ... one of these days.

If waste is not faulted for the problem, mismanagement, immigrants, women, ethnic minorities, etc. are often faulted. Here in NB, about once a year someone will say "if we did not have bilingualism, we could save money." AKA, what they mean is that if French-speaking citizens were not treated equally, well, that would be cheaper than equality (because, I guarantee, none of the opponents of bilingualism are thinking about getting rid of English as an official language). Said differently, the argument is always that there is a free lunch if we just reign in women, immigrants, Muslims, whoever ... trans-gendered soldiers.  In my last post, I noted that this discourse periodically resorts to unabashed metaphysics when they start talking about things like "entrepreneurial spirit."  The private sector will save us money ... how? Asking this question, btw, is not irrational, socialistic, lefty or whatever. It is democratic. If I am going to vote for you or your party, I have the right to know how your policies are going to work, particularly if you are asking me to stake my health and that of my family on something as vague as "spirit". If someone cannot explain their policies to you ... I'd argue that you should reconsider voting for them because their policies might not be explainable.

Where does this leave the health care debate in the US? There are may reasons why health care costs money and saving on waste, limiting super-profits and the like are likely ethically sound and good policies to follow. I'd recommend them. But, they will not by themselves limit health care costs enough to make a difference. It is like getting rid of welfare bums, something else all political parties promise to do and something else I've been listening to my entire adult life. Yet, getting rid of welfare bums does not really help the bottom line of the state's budget does it? We've been getting of them for 30 years and governments are still running in the red.

And, I would argue, Republicans in the US know this. They know that the problem is not waste, state involvement, or Obama. They know that the reason there there are health care costs is sick people. That sounds simplistic, I know, but think about it. What causes medical costs? By and large: illness. I go to the doctor (incur a cost) because I am sick. I don't go to chat about our kids badminton team.  Better preventative medicine will help, too, but that is an immediate cost designed to save money long-term. It is not white and black, this will save money. There are costs involved.

Republicans know that they cannot save money through "entrepreneurial spirit," or better management or free markets, etc., in their hearts of hearts and this is why they are trying to de-insure people -- about 35 million at last count. They are trying to de-insure people because they know that this is the only way to limit health care costs: limit the number of sick people. And, in the US, the only way to do this is to deprive these sick people of health insurance.

Let me illustrate what I mean with an example. Imagine you serve sandwiches for lunch. There are 100 people and each sandwich costs $1.00. The total you need, then, is $100.00. Now, imagine you raise this $100.00 via taxes.  It is election time and the opposition says "$100.00 is too much. We will do it for $90.00 and you good taxpayers will get $10.00 back. You will get something for nothing. No service will be lost." And ... the opposition wins. They get into office and discover that there are reasons -- other than the previous government's mismanagement -- that sandwiches cost $1.00. They cost $1.00 each because that is what they cost. The bread costs so much, as does the cheese or jam and the people who make the sandwiches need to be paid. So, try as they might, they can't find a 10% saving on labour or resources. So, how do they solve the problem? Well, there is only one way: lower the number of people eating sandwiches. If they can get the number of people eating sandwiches to drop from 100 to 90 ... well, they save the 10%. This means 10 people go without sandwiches ... that is: are de-insured.

This is what is going on with Republican health care policy. The only way to get costs down is to cut people's access to health. This is why every Republican proposal for "reform" is also a proposal for cuts, or de-insuring.

Having a section of the population, in effect, without health care is the price of lowered costs. There are further implications to this. For instance, Republicans, I am sure, expect more people to use "free clinics." That is, they plan to off load costs because sick people will seek out medical care even if they are de-insured. They might rely on the charity of doctors: that is, to see how many people there are out there who will work for free or below market costs. But, make no mistake about it, sick people are the repressed and the repressed will return. Any proposal to reform Obamacare in the US will involve some cut, some section of the population that will go uninsured and, hence, without health care.  It is not just Republicanism but simple economics.

Don't believe me? ... watch.
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