John Vandivier Comments for 10/1 Readings

Quote 1: "If there is any point at which you say, “No, an extra six months isn’t worth that much,” then you think that health care should be rationed."

Singer, Peter. "Why We Must Ration Health Care." New York Times. 7/15/2009.

• In the scenario Peter is referencing in the above quote, there is some rise in premiums from an expensive treatment for another person. He then states that if there is any point which we find ourselves questioning the value of the treatment, we must be for rationing.
• The rationing being discussed at the time was government healthcare rationing, which is non-voluntary and fundamentally different from rationing which occurs in the private world.
• When government regulates health care it is now free to kill and let live whom it pleases. At first we can imagine an attempt at fairness. Then there will quickly be the realization that not everyone can live and so decisions on who to kill will have to be made. Here's the problem - those decisions will be political and inescapable when the government rations health care. Disagree? Great, you get to be next in line.
• Public rationing of health care is second of all inefficient. Many needless lives would be lost.
• Government guaranteeing of health care is equivalent to slavery. They are claiming the right to coerce practitioners into supplying the good. Doctors and medical practitioners already have a hard life, and they are some of our best people intellectually and morally. It would not be right to enslave anyone, least of all these people.
• There seems to be the idea that no action is ever voluntary when it comes to health care. People are always willing to consume more, regardless of price. They are essentially up against a wall as it were, with no real choice. I think this is nonsense. People are willing to endanger themselves for various kinds of gains, whether financial or otherwise. This is the exact way we are able to calculate the economic value of a life by revealed preference, because people do reveal some preference for the risk of death.
• Furthermore, the implied idea that no person would ever sacrifice their own life for their neighbor is offensive. Did the author just imply that the entire human race is hypocritical and selfish? Maybe the author is, but I know men and women in our military, in dangerous but non-military peacekeeping roles, in health services, and in religious service, all of whom are willing to unselfishly sacrifice for the benefit of others.
• Finally, I do not appreciate the author's likening of the recipient of health care to prostitutes haggling about price. As previously mentioned, higher prices are equal to higher deaths in this industry, so haggling about price is not to be belittled. The author's comparison indicates that even to engage in the haggling is beside the point, from which it would logically follow that the number of lives saved is beside the point. I couldn't agree less.

Quote 2: \"If you’re a nonsmoker in the market for life insurance, you should be thankful for cigarettes. They help keep your rates down.\"

Landsburg, Steven E. (2007-11-01). The Armchair Economist (revised and updated May 2012): Economics & Everyday Life (p. 25). Free Press. Kindle Edition.

• I love this chapter! Landsburg does a great job of explaining one of the most powerful aspects of economics - indicators and signals - using plain English. This quote did puzzle me. Even though I am perfectly familiar with these ideas, I was admittidly confused by such an opening to the chapter.
• There is a key element of economics and of markets which is necessary for the ideas discussed in this chapter to function, and the author succesfully discusses this element. This is the element of voluntary action. For signals and indicators be correctly generated and utilized on the market, the actions in that market must be voluntary. This flies directly in the face of the first quoted article, \"Why We Must Ration Health Care\" because, as discussed, when health care is rationed via public policy rather than private arrangements it is not voluntary.

Quote 3: \"Retrospective reimbursement removes any incentive for providers to treat their patients cost-effectively.\"

Gruber, Jonathan (2012-12-01). Public Finance and Public Policy (Page 445). Worth Publishers. Kindle Edition.

• In the first place the statement is not accurate. Retrospective reimbursement is still constrained by the maximum reimbursement offered. It could be argued that the provider has no incentive to treat the patient at less than the cost of the maximum reimbursement, but this is also false, and even if it were not false it is very different from the original quote.
• The provider does have two additional incentives not to engage in unnecissary treatment. The first incentive is that unnecissary treatment drives away customers and the second incentive is reputation which may be improved or damaged by how a practice is handled, whether consumers leave or not.
• It also seems that there is no winning here for the private market. If the market produces an outcome of medical product which is tightly coupled with minimal prices then the market is being selfish, merciless against the interest of the sick and the poor. If it produces an outcome in which product is more loosely coupled with price then the market is still being selfish, trying to earn as much money as possible without caring about whether certain procedures are necessary! These problems do exist, but they are minimized through the private market rather than government interference.
• The book does well to discuss prospective reimbursement and other models of insurance. Each, including retrospective reimbursement, has unique benefits and problems. The deregulated market is in an information-maximizing position to find the best balance of which models to use, and also to allow maximum growth in innovation. The very fact that there is currently no good, single model should be a red flag to indicate that any particular public policy based in any particular modern model is bound to bring problems.