Health Care Quackery: Round 2 on Tierney Lab

My Forbes column attracted many comments — largely in the I-think-you-are-an-idiot vein — on New York Times’s Tiernery Lab blog. Here is the response I just posted and Tierney lab linked — you can decide if they are right 🙂

“Many readers of this blog post based on my column comparing America’s economic performance with countries that have universal coverage seem to have misunderstood the purpose of the piece. So let me just say for the record what I was – and wasn’t – saying.

But before I do, in the interest of full disclosure, I’ll put my biases on the table front and center: I think universal health insurance is a laudable goal — so long as it doesn’t involve using force to either make people buy coverage through individual or employer mandates – or to make providers and underwriters sell coverage at government-mandated prices. The problem of the uninsured in America is a serious one. But, in my view, the way to address it is by using markets and competition to lower costs by eliminating waste and generating innovations in medicine and the delivery of care so that no one who wants coverage is priced out of the insurance market. I am opposed, however, to using government coercion to achieve this end because it will do more harm than good.

That said, in the piece itself, I was not making a comprehensive case against universal health coverage – or for market-based coverage. All I was doing was examining a very specific claim that President Barack Obama has repeatedly made to justify universal coverage, namely that “we can’t fix our economy without fixing our health care system.” Hence the criticism of readers that I did not take into account whether or not universal coverage produces better health care outcomes is true but besides the point. There is, incidentally, no consensus on this issue. But the real issue from the standpoint of evaluating President Obama’s argument is whether universal coverage produces better economic outcomes.

For this claim, I could find no evidence in Canada, England, France, Germany, or Japan. On nearly every metric, America’s economy outperformed theirs: Americans make better wages (adjusted for purchasing parity); pay lower taxes; suffer lesser unemployment; and had a lower government debt as a percentage of GDP — at least prior to the latest spending binge in Washington. The only area in which America wasn’t at the top of the pack was in controlling health care costs. But even here, it was in the middle, not bottom, as one might expect given all the criticism. (More on this later).

Of course, someone could argue that the inferior economic performance of these countries has nothing to do with universal coverage; that, in fact, without it, these countries would be even worse off. My column did not definitely disprove that possibility — it only showed that there is no evidence suggesting that to be true. It is a challenge to Mr. Obama to give some evidence for this theory before using it to fundamentally reorganize the U.S. health care system. So far, no reader has come to his aid. No one, for instance, has presented counter data or offered different metrics or pointed to some other country – anything that demonstrates a positive correlation between universal coverage and a strong economy.

But even though it is difficult to make a defensible economic case for universal coverage, it would be possible to make a case from equality. President Obama and his supporters find it morally repugnant that so many people are uninsured in America. So why not make that the center-piece of the argument instead of cloaking their real motives in far-fetched economic arguments? The reason of course is that it would be politically very, very hard to justify trillions of dollars in new entitlement spending when the country is reeling from a recession and facing massive deficits as far as the eye can see. Hence President Obama is doing what politicians always do – making the argument that is politically sellable to advance an ideological agenda. This is no different from President Bush postulating the link between Al Qaida and Iraq’s non-existent weapons of mass destruction to justify the Iraq invasion.

But let me, before concluding, address questions that many readers raised regarding the data I used to compare the performance of countries in controlling rising health care costs. One, they asked, why I used the rate of cost increases instead of absolute cost increases. And, two, why I used the cost increases from 1990 to 2003. Those are fair questions.

The answer to the first is this: Absolute cost increases hide more than they reveal. A country can have higher total costs for reasons that have nothing to do with what kind of health case system it has. For instance, the basic health of the population; whether it has homogeneous needs; how geographically dispersed it is all can affect overall spending. Rate of increase data are not perfect. But they do abstract from these individual differences and shed some light on how the systems themselves are performing.

As for using the 1990-2003 data, there is no sinister reason for this. It came from a 2007 Kaiser Family Foundation study, “Health Care Spending in the United States and OECD Countries,” that covered two time periods, 1980 to 2003 and 1990 to 2003. The 1990-2003 was more relevant because prior to the mid-80s, Medicare, whose payment schedule set the standard for the entire health care industry, used to pay providers on a cost-plus basis. This meant that providers were paid a fixed profit over and above their costs. This effectively gave them an open invitation to inflate their costs and is one reason among many why America’s overall health care costs are so much higher than other nations’ today. Serious cost cutting in America didn’t begin till this system was ended and co-pays and deductibles introduced in the 1990s to incentivize some cost-consciousness on the part of patients. So it made sense to examine the post-1990 data.

No one disputes that America’s health care system has many problems – the high rate of uninsured; ridiculously high costs; lack of patient choice; un-portable coverage – and is in need of radical reform. Well meaning, reasonable people can disagree about whether markets or government are better suited to achieve that end. But everyone can agree that they ought to put sincere arguments on the table and conduct an honest debate (that doesn’t rely on ad hominem attacks). That, unfortunately, is not what President Obama is doing.”