29 July 2009

Healthcare Reform: Rationing

The Objectivist
Rationing Healthcare
Dunkirk-Fredonia Observer
July 27, 2009

President Obama and Democrats in Congress are trying to reform health care. They claim doing so will drive down costs and increase quality.

Their concern over costs is a powerful one. They note that the United States spends more on health care than any other nation ($7,439 in 2007). Using 2004 figures, this is 92.7% more than any other G7 country (France, Germany, Italy, Britain, Japan, and Canada). The U.S. also spends a higher percentage of the economy (Gross Domestic Product or GDP) than all but one other member of the United Nations (in 2007 this was $2.26 trillion or 16% of GDP).

These costs wreck havoc on personal finances. One study by David Himmelstein of Harvard University found that medical expenditures caused 60% of all personal bankruptcies in the U.S. Prescription drugs are also more expensive than in almost any other country. Professor Peter Singer of Princeton University notes that there are still other troubles. He notes that the cost of health insurance is skyrocketing. It has doubled in the past decade, rising more than four times faster than wages. He also notes that in eight years Medicare will be in the red.

Despite all this spending, on some accounts, the U.S. healthcare gets bad grades. A 2008 report by the Commonwealth Fund found that despite all this money, the quality of health care in the U.S. was worse than 19 other developed industrial countries with which it was compared. The World Health Organization also ranked the U.S. 37th in overall performance and 72nd in overall health level in comparison to the 191 member organizations it included in its study. The U.S. does worse than other wealthy nations when it comes to life expectancy and infant mortality, although it is not clear whether this is the result of differences in the health-care systems.

The President and Congress have proposed a number of reforms. They propose to expand Medicaid (medical services for the poor), a credit to subsidize the purchase of medical insurance, a public health-insurance option to compete against the private ones, a new tax on individuals who don’t purchase insurance (2.5%) and on employers who don’t provide it (8%), a cap on out-of-pocket spending, and increased use of the collection and use of health-information technology. These reforms (specifically the Affordable Health Choices Act and companion measures) are estimated to cost anywhere from $600 billion to $1.6 trillion. For a government that already faces a staggering $1.85 trillion deficit (13% of the GDP), massive deficit next year (10% of GDP), and reeling economy, the new spending and taxes pose a real threat.

One interesting argument for these proposals is by Peter Singer. He argues that these reforms will involve intelligent rationing rather than the haphazard rationing that occurs today. Singer argues that health care is a scarce resource and like all resources it is rationed. In the U.S., he argues this is done by price. That is, you get what you or your employer can afford to pay for. He argues that in the public sector, specifically Medicare, Medicaid, and hospital emergency rooms, rationing is done by long waits, high copayment requirements, and low payments to doctors and hospitals, which discourage some of them from serving public patients. Singer argues that this haphazard way of rationing is too expensive and lowers the overall quality of health care by concentrating too much spending on less important cases.

Government rationing involves the government refusing to pay for inefficient treatments. Singer notes that last year in Great Britain for example, the National Institute for Health and Clinical Excellence (NICE) set a limit of $49,000 on the cost of extending life for a year. This prevents it from spending money on drugs that cost too much. He uses the example of Sutent, a drug that extends life for those with advanced kidney cancer for six months and costs $54,000.

Singer argues that the government already is engaged in trading off lives for other values and that this is no different. For example, he notes, in the U.S. the Department of Transportation does not recommend safety measures that cost more than $5.8 million per life. Similarly, the Consumer Product Safety Commission uses a $5 million per life figure in deciding what consumer protections to require. Others argue that because there a multiple good things in life and we can’t escape the need to make trade-offs. Life is one of those good things. For example, lowering the speed limit to 50 mph or keeping the blood-alcohol content level to the (current) 0.08% might save lives, but it does so at the expense of pleasure, liberty, and wealth. For example, the speed limit would increase driving time and decrease the efficient movement of goods. The alcohol-content law increases incarceration and police intrusion.

Singer argues that rationing need not prevent someone from spending their own money on inefficient treatment. Some countries (for example, Australia) permit people to purchase private insurance to supplement public plans.

One problem with government rationing is that some countries do not allow for private options. A single-payer system requires all healthcare to be paid for by the government and does not allow a private option. Under such a system, for most people, government rationing would be the final word on who lives, dies, or gets what treatment. Thus, the system could deny lifesaving surgery to the elderly or surgery to those who suffer from an array of health problems. The idea of government bureaucrats or our crass Congress making these life-and-death decisions is troubling. Singer would likely respond that such rationing occurs anyway and at least this way it would be done in a rational manner.

A second problem with government rationing is that in general the government tends to make things worse. It seems clear that if the government produced and distributed food, computers, and cars, prices would go up and quality would go down. It is not clear why we should think that healthcare is different. Singer might respond here by citing the international comparisons mentioned above.

He might also argue that healthcare is a different sort of good and hence less appropriate for market forces. Following Princeton economist Paul Krugman, he might note two differences between healthcare and consumer goods. First, unlike consumer goods, healthcare involves extreme costs (for example, bypass surgery is very expensive) and must be done via insurance. Second, unlike consumer goods, healthcare purchases do not allow for experience or comparison shopping (for example, it is not clear how one compares doctors). I find the Krugman responses unconvincing, but many would disagree.

A third problem with government rationing is that there is a strong concern about liberty. The government already pays just less than half of all healthcare costs. Once it begins to pay a much larger figure, the costs can be used to justify a wide range of restrictions. The government might restrict what people eat, drink, and smoke, how often they drive, what recreational activities they engage in, etc. It might also involve the government collecting sensitive information on all of us in order to drive down costs. Singer would likely respond that if we are worried about liberty, then we should act to protect it rather than letting concerns about liberty bleed over into other areas.

I’m skeptical of government healthcare. Still, it is an interesting issue how government rationing stacks up against market rationing and whether the current hybrid system (roughly 50% government and 50% private) is serving us well.

09 July 2009


The Objectivist
Why Do You Love Your Country?
Dunkirk-Fredonia Observer
July 7, 2009

July 4th saw the usual outpouring of flags and patriotism. Patriotism is the love and devotion to one’s own country. Americans are very patriotic. In one 1995-1997 survey, U.S. residents were the fourth most patriotic country.

Patriotism differs from love of one’s group. This love focuses on things such as the group’s shared ethnicity, religion, culture, history, etc. One can love his group even when it doesn’t have a country. Examples include the Kurds, Sioux, and Tutsis. There can also be countries that contain vastly different groups. Examples include multi-ethnic and religious countries such as the United States and Indonesia.

Nor should patriotism be confused with love of small groups. These might include one’s neighbors, childhood friends, or platoon members. In these cases one knows and cares about particular people. Patriotism is nothing like that.

It is worth considering whether Americans should be patriotic. The United States is better than most of the other countries. Its citizens are one of the richest. Its per capita income is usually ranked between 4th and 20th in the world, with the specific ranking depending on what is measured (nominal dollars or purchasing power) and who does the study (International Monetary Fund versus Central Intelligence Agency). It typically ranks behind small countries such as Luxembourg, Norway, and Singapore. Its citizens are also one of the happiest, ranking 15th on one study of how people view their own lives as going. On some accounts, it is also one of the freest. It ranks 6th on the Heritage Foundation’s index of economic freedom. It should be noted that this index has received significant criticism.

It should be noted that even if the United States is freer than some of its peers, it still is run by people who hate liberty and who trample on our founders’ vision. For example, every year the United States takes more than 40% of many people’s income. That is, for every five days someone works, the government at all levels takes everything he makes on Monday and Tuesday. In the U.S., we currently incarcerate 1% of the adult population and keep 3% of the population under control of the criminal justice system (incarcerated or under probation or parole). To put this in perspective, the U.S. has 25% of the world’s prisoners, despite having less than 5% of the world’s population, and imprisons people much more often than do our peers (5 times the rate of Britain, 9 times the rate of Germany, and 12 times the rate of Japan). Given these facts, no reasonable person could be patriotic based on his love of freedom.

Even if you are a big fan of the various nanny laws, such as ones concerning seatbelts, drinking age, marijuana, guns, cigarette and alcohol sin taxes, etc., the above tax and criminal-justice facts are still disturbing. In addition, the country’s fathers (for example, James Madison, Thomas Jefferson, and Benjamin Franklin) would undoubtedly be disturbed by them.

Others claim that patriotism is not based on one’s country’s performance but rather on the fact that he has a special connection to it. On these other accounts, a citizen should love his own country regardless of whether it is the U.S. or Haiti, Iran, or Burundi. On this theory, patriotism doesn’t rest on how well one’s country stacks up against others. Rather, it should flow from gratitude, pride in the country’s history, or some other feature. The other feature might be that one’s nationality is central to his identity or the fact that his country is like an extended family.

None of these theories is very convincing. As philosopher Igor Primoratz points out, you owe gratitude to those who freely confer benefits on you. That is, you owe gratitude when someone gives you a gift. You need not be grateful to people who trade you certain things (for example, cable channels) for another (for example, money). The benefits that countries have given their citizens (for example, protection and roads) were paid for in full via taxes and citizens’ law-abiding behavior. You don’t owe your country gratitude any more than you owe your cable company gratitude.

History is even less of a ground for patriotism. Some governments have long and arguably glorious histories (for example, Britain and France). If patriotism rests on a country’s history, it has to be a good history, not just any history. But many governments have at best mixed histories (for example, various governments in China, Russia, Germany, and Cambodia were terrible) and others have a short and unimpressive history (for example, Zimbabwe). It is hard to understand why people in these latter cases should love their countries based on these histories. Even for countries with long and glorious histories, it is hard to know why previous good works should produce loyalty for a government that has lost its way. After all, the past is gone.

The notion that patriotism follows because one’s country is central to his identity is implausible. Central to a person’s identity might be his ethnicity, religion, or culture, but these are all distinct from his country. For example, the Romani (Gypsy) people are an ethnic group who take pride in their identity but lack a country. Even if this were not the case, merely because something is central to your identity does not mean you should love it or be devoted to it. For example, even if your identity is centrally linked to Maoist China, Third Reich, or Khmer Rouge, it’s still hard to understand why you should love those states, unless you’re in the funeral business. The same principle holds true for countries with mediocre governments.

A country is also nothing like an extended family. Families are constituted by people who are either closely genetically related to each other or who know and love each other and have a shared personal history. None of this is true of the millions of people who comprise modern nations. The talk of an extended family is a mysterious analogy and in any case not one that illuminates patriotism.

The July 4th style patriotism is a mistake. The United States is not a free enough country to warrant love or devotion. It is better than most, but that’s unimpressive. Patriotism also does not receive support from arguments based on gratitude, history, identity, or family. One might love the American people, but this is not patriotism. In any case, one can’t love the American people because one can’t love millions of people whom he has not and never will meet.