A brief post on the 'lack of insurance kills people' theme by mattsteinglass

A few days ago apparently Megan McArdle posted (which seems to be supplanting the verb “wrote” in modern usage) an argument along the lines of “we don’t really know how big an effect universal health insurance has on saving people’s lives.” This occasioned furious blogospheric responses from Matthew Yglesias, Austin Frakt and others. That in turn prompted Megan to explain that she wasn’t saying that lack of insurance doesn’t kill people, but that she doesn’t think we really know how big the effect is, and that the size of the effect makes a difference to arguments that ground the need for universal insurance in that effect. She sums up:

The mortality question is really important, but it doesn’t touch non-mortality outcomes, which are even harder to measure comprehensively.  It doesn’t touch on the financial questions raised by medical bankruptcies–I think they’re overstated by the Himmelstein/Woolhandler crowd, but that doesn’t mean I think they don’t exist.  It doesn’t address the social justice questions.  It just says, this is probably not the best grounds upon which to make the case for national health care, because we don’t have a good handle on the number.

As I understand it, the estimate is that lack of health insurance leads to up to 45,000 premature deaths per year.* [Addendum: Megan points out that the studies she cites find no increase in mortality at all. True; see below for more.] I have no reason to believe this figure is wrong and no time to investigate it, but putting that aside for the moment, the reason why people who argue for universal health insurance have often come to use the increased-deaths argument is that opponents of universal health insurance so often refuse to accept any other arguments. All of the things Megan notes above — the medical bankruptcies issue, the social justice issues, as well as others like the economic inefficiencies issues due to reduced labor mobility, the quality-of-life issues, the population health issues, the question of whether cost reduction is possible without universal coverage, etc. — these are all routinely dismissed by many conservative commentators. When I post on the impossibility of continuing as we are with our ridiculously broken health insurance system, I routinely get responses like: “Will people be dying in the streets? I think not.” For such people, one must demonstrate that people will in fact be dying in the streets, and are in fact dying in the streets, before any reforms will be countenanced.

It is, to me, obvious that the US’s health insurance system is a travesty. Health care in the US costs 150% or more what it costs abroad, and is no better; insurance costs three times as much in premiums (abroad, the rest of the cost is covered by taxes, which spreads the burden equably so that the poor get care when they need it); there is a serious risk in the US that you will lose your insurance because you get sick, which ought to be demonstration enough that the object you are buying does not work to do that thing it is supposed to do. But conservatives have spent the past 18 months working out ever-more-sophisticated arguments to convince themselves that the sun don’t rise in the morning, and by now they’ve just about got the job done. In the face of this, people who support universal health insurance have found themselves resorting to the quickest shorthand justification of its necessity: lack of universal health insurance kills poor people. It’s a solid argument because 1. you would expect it to be true, all else being equal, and 2. studies find that it is in fact true. But if conservatives want liberals to stop talking about it for whatever reason, they should do what Megan begins to do in that paragraph: they should start taking a serious look at all the other reasons to have universal health care (medical bankruptcy, social justice, labor mobility, increased ability to cut medical spending when benefits are distributed more equally, etc.) and evincing some willingness to achieve those goals and some serious approach for doing so. As I recall, Megan’s plan for doing this was universal government-paid catastrophic health insurance, which seems like an OK idea to me; I’d like to hear more about it.

I was wrong to write that I have “no reason to believe” the 45,000 figure is wrong: I have the reason that Megan cited studies saying it’s wrong. But the next part, about not having time to investigate it, is true. I have just enough time to point you to the posts by Ezra Klein and Austin Frakt supporting findings that lack of insurance leads to many premature deaths every year and has powerful negative effects on the health of the uninsured.

The US does not have a free market in pharmaceuticals* by mattsteinglass
Bowl of Hygeia

Image via Wikipedia

Essay question: The US’s drug market is at least as artificial and overregulated as the European one. But in the US, the regulations create higher drug prices, while in Europe they create lower ones. Discuss.

Here’s the deal. In European countries, national drug price regulating bodies set the maximum price at which pharmaceuticals can be sold. They do so based on the average price at which the drug sells in other European countries. (For new drugs, the regulations are looser and based on cost-benefit analyses, to promote innovation.) Is this some kind of Soviet-style non-capitalist system? Of course not. There are still lots of different buyers of drugs; it’s just that these buyers have all banded together into cooperatives at the country level to leverage their purchasing power. And they all insist that they get the same price the other cooperatives (countries) get. That’s the same thing you do at the supermarket when you assume that you’ll pay the same price for a tube of toothpaste as the next guy in line, rather than have the cashier look you over and say “You look richer than him — for you, the price is ten bucks.” There are lots of markets in which the only buyers are a few large cooperative organizations. Iron ore, say. And the steel companies that buy iron ore presumably negotiate pretty hard to ensure they pay the same price as the other steel companies, without anybody accusing them of restricting the actions of the free market. The European market for pharmaceuticals is basically the same thing, but at the level of countries. It’s not an unfree market; it’s a free market with 25 large, powerful buyers (the EU countries) who each insist they get roughly the same price as the others.

Now, an iron ore miner could look at one steel company and say, wait, we’re not going to sell you ore at that price. You had much higher profits than the other guys last year, so we’re going to charge you more because we know you can afford it. But this obviously wouldn’t work. The steel company could just turn around and buy the iron ore from a middleman, another steel company perhaps, at a tiny markup from their low price. Similarly, if the cashier at the supermarket told you they were going to charge you $10 for a tube of toothpaste, you’d just ask somebody else in line to buy one for you for $1.50. And so you’d figure it would be impossible for pharmaceutical companies to charge Country A more than Country B — Country A would just start buying its drugs from Country B.

So how is it possible that pharmaceutical companies can charge more for their drugs in the US than they can in Canada, or France, or Germany? We all know the answer: because the US bars retailers or health care providers by law from reimporting drugs from other countries. That is a completely artificial market restriction that wildly distorts the prices of drugs in the US. No other commodity or manufactured good is restricted in this fashion in the US — it would be illegal under WTO rules. And the effect is to artificially jack up drug prices in the US, at the expense of US consumers and taxpayers, by allowing pharmaceuticals companies to price-discriminate against Americans.

Many people (not just Megan McArdle) argue that only the US still has a free market for pharmaceuticals, which is why pharmaceuticals companies can make such high profits here, and that the US market is thus underwriting all the R+D in new medicines. Whether the US actually is underwriting all the R+D is still something of a debatable question, but it’s absolutely false that the US has a free market in pharmaceuticals. The US prohibits anyone from buying drugs at low world prices. Meanwhile it pumps government money into buying drugs in the US, through Medicare (which is not allowed to negotiate for lower drug prices with manufacturers) and through the employer health insurance tax exclusion. The natural effect is to drive up drug prices in the US at consumer and taxpayer expense. It may be true that Americans are subsidizing R+D in the pharmaceuticals industry. But that’s because the government forces Americans to pay artificially high drug prices. If you believe free markets are the answer to high health care costs, you have to, at a minimum, allow US retailers to reimport equivalent drugs and medical equipment from Canada and Europe, where prices are lower. Then we can talk.

*Add: Megan points out in comments that this is the way it works for all IP. And she’s right. Good point. I should probably not think up posts on a Sunday while swimming laps. The market in pharmaceuticals isn’t as free as the market in, oh, apples, but it’s as free as the market in DVDs. This is in fact an unavoidable feature of an IP market and if the US went for David Vitter’s proposal to allow reimportation of drugs from Canada, you’d probably just end up with a lot of companies putting clauses in their distribution contracts with Canadian distributors that they’re not allowed to resell back into the US.

I remain somewhat baffled as to why large American drug purchasers are unable to negotiate prices at levels close to those in Europe. Kaiser Permanente says it has over 8 million members. That’s larger than the populations of Belgium or Denmark. Maybe drug manufacturers figure a decision by Kaiser not to buy their drugs would result in Kaiser clients switching to other insurers, which means Kaiser has less bargaining power than Denmark, whose citizens are unlikely to move to Germany just because a few drugs are unavailable. Also, while Kaiser actually might get good prices because it’s an integrated HMO, I would imagine that more traditional insurers would have the problem of separation between the docs who are prescribing the medication and the insurance company deciding whether or not to reimburse it; the insurer, who would be most interested in negotiating the low price, would not actually be the one purchasing the medicine, and that mean there’s no one bargaining agent who has both the client numbers and the strong interest in bargaining down the price.

Let's just say you're not the first to think of doing this by mattsteinglass

Ezra Klein – The Ethics of Placebos .

Ezra Klein wonders why, given powerful evidence of the effectiveness of the placebo effect, doctors don’t figure out a way to use it:

There are no end of situations that might lend themselves to placebo treatments: patients demanding an antibiotic when they have the flu, or painkillers when they have nothing but unspecific aches. The placebo could do the patient some good and avoid them some potential bad (side-effects, antibiotic resistance, etc). This is, of course, unethical, not to mention an invitation to some serious lawsuits, not to mention ineffective once word gets out. But the evidence in favor of the placebo effect is really quite tremendous: It’s hard not to wonder if there’s notsome way to marshal that cheap, safe power.

Yeah, could that cheap, safe power be marshaled? Might it be possible? Or are “could” and “might” the operative words here? Would it be unethical for me to say any more?

Health care has a sticky plane, not a slippery slope by mattsteinglass

McArdle vs. National Health Care — Crooked Timber.

John Holbo has a more charitable reaction to Megan’s “Slapping the Camel’s Nose” post than I did:

McArdle’s opposition to national healthcare is based entirely on slippery slope arguments, arguments from unintended consequences, and suspicions that those who are proposing national health care really want different things than they say they do. Now, this is reasonable. But only up to a point. Because at some point we need something more, but McArdle is quite strident in her insistence that what she has said is enough.

But I still disagree with Holbo’s contention that Megan’s all-slippery-slope approach is reasonable, even “up to a point”. It might be reasonable in some other form in some other argument, but in this one, it just isn’t. Every one of Megan’s arguments is predicated on the contention that reform will lead to the effective disappearance of private health care, and complete government dominance of both the health insurance and health care markets. That’s what she means by the “camel’s nose”. The problem is this: countries that have the Bismarck model of universal coverage through regulated private health insurance do not move to single-payer government-controlled systems. Germany started the first Bismarck-style system 126 years ago. It still has it. France, the Netherlands, Switzerland—they all started with regulated private insurance backed by a public plan for the needy, and they all still have regulated private insurance backed by a public plan for the needy. Except for the Netherlands. They used to have a public plan for the needy, but in 2006 they scrapped it and moved to an all-private health insurance system, with subsidies for those who can’t afford private coverage. What they have, roughly and leaving some bits out for simplicity’s sake, is what the US would have if it passed the current House bill, then eliminated Medicare and Medicaid, and funded the system by handing out subsidies or vouchers so everyone can afford coverage. The direction that Megan envisions things “naturally” going is precisely the opposite of the way they actually went in the Netherlands over the past 20+ years.

The evidence shows that in the real world, there ain’t no slippery slope. There is, if anything, a sticky plane. And there ain’t no camel behind the camel’s nose. Ain’t even a nose, actually—that metaphor can’t even be tweaked to make it work. I mean, we already know that the health insurance systems in every other advanced economy work better than the US’s. But within the subset of those better systems that rely on private insurance, the evidence of a century-plus of experience is that they don’t eliminate private insurance. Let alone private health care providers. In the face of such overwhelming evidence, it is not “reasonable” for Megan to abstractly theorize that a Dutch or French system is really a stalking horse for a British system. If it were, the Dutch and the French would have the British system. They don’t. End of story. Refusing to talk about the real world and preferring to stick with discussions of theories that do not fit the real world is not “reasonable”, and it seems to me that this has to be the point of first engagement with what Megan is saying.