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I was reading a debate on healthcare in the recent Newsweek. The prominent Democrat supported some sort of national healthcare while the prominent Republican supported more of a free market approach. Most people will probably take sides based on their assumptions about government efficiency versus market efficiency.

An old joke that works as its own punch line goes "I'm from the government and I'm here to help." Most people in this country reflexively believe the government will screw up anything it touches. There's plenty of evidence for that view.

But I wonder if government can be more efficient than the free market in specific situations, specifically in situations where the service is more about software than headcount, and where nothing needs to be invented.

Imagine a situation where you are deciding if a particular service should be handled by the government or by a hypothetical free market dominated by three players. The government's incentive is to provide the service as cheaply as it can. Any company's incentive is to transfer the greatest amount of money from consumers to stockholders. And to do that in a competitive industry you usually end up with what I call confusopolies. A confusopoly is a situation in which companies pretend to compete on price, service, and features but in fact they are just trying to confuse customers so no one can do comparison shopping.

Cell phone companies are the best example of confusopolies. The average consumer finds it impossible to decipher which carrier has the best deal, so carriers don't have normal market pressure to lower prices. It's a virtual cartel without the illegal part.

The advantage of a free market system is innovation. The market has an incentive to try new things. Governments prefer to avoid risks. If you need innovation, you want the free market.

In the case of national healthcare insurance, I ask myself these questions:
  1. Is it more about software than headcount?
  2. How important is innovation?
  3. Is the free market for this service a natural confusopoly?


Before you call me a socialist, I don't have an informed opinion on national healthcare. But I also don't have an automatic bias in favor of a free market that gave us Enron, WorldCom, Madoff, derivatives, and mortgages to hobos. I think you have to look at the specifics.

 
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May 13, 2009
Webster, Sentient, et al.

Now that the screaming has subsided, and even Scott Himself is probably not looking here, let's have a calm, reasoned discussion about What's Wrong, and How To Fix It.

The biggest problem with the current Insurance model, free-market as it is, is the Confusopoly. This takes several forms:
1) People confuse the terms INsurance, ENsurance, and AS-surance.
2) Expectations. What the public basically wants is to have any trouble they have, regardless of whether accidently-, deliberatery-, self-, or devinely- induced, to be 100% cured, and if not,be provided with whatever means is necessary to give them as high a quality of life as absolutely possible. Oh, and they don't want to pay for any of it.

That's an impossibly high expectation to meet. No program, private or government, can deliver it, at least not universally. The only part of the "at no cost" that has so far been attained, is to hide the payment from sight, in the form of payroll deductions and employer-benefits.
Where the system is breaking down is that the cost of that 100% is rising, in part because more and more people are having EXPECTATIONS of getting it.

<<Insert here the red-herring topic of "Rationing Healthcare". It is a red herring, because limited resources are inherently rationed. They are currently rationed to the 'haves' is all. And the demand by the 'havenots' is what's causing the 'crisis'>>

Enter the insurance cos. They have a sort-of Ponzi scheme. Take in $X . Invest that to turn it into $X $Y. Shell out $X (or less), and keep the $Y. Simple, basic, brilliant. Before hedge funds, they were the single biggest player in the stock market. Still might be, which is why the Great Recession started with an insurance co.

Insurance cos. have other tricks up their sleeves to increase $Y. The following is taken directly from my most recent Explanation of Benefits report form my personal insurance co.
Presciption:
Charges Submitted: $151.30
Aenta's Agreed Price:$125.68
Your Plan Paid: 105.68
Your Copay: $20.00

Great, I paid $20 (to 'feel the pain' to encourage me to lower my costs to the company) and got what I needed.
But the phamacist needed $151.30 and only got $125.68. So where did the $25.62 go? Out of the pharmacist's pocket? Passed back to Merck? Did the pharmacist inflate his price?

You see the same with doctors' visits. Insurance doesn't pay the full bill, but neither do you. Medicare typically pays more poorly than most insurance cos., which is why doctors sometimes refuse to take Medicare. Which would imply that Scott's point that the Governement does a lower-cost job than the Private Sector is right.

But as many below have pointed out, the Governement is in the business of providing a service, regardless of cost. We go to war when we (feel we) need to, not because there''s a profit in it. When the government charges a fee, it does so to help manage both the amount of service provided, and to recoup some of their operating expenses, as opposed to the Private Sector, which must recoup all its cost, at least . As Scott might say, score another one for Government.

I'll break off here, and invite replies.
 
 
+2 Rank Up Rank Down
May 12, 2009
@Sentient

Socialism is most certainly a "red herring" within the context that I used it in my earlier comment.

Virtually every time someone in the US points to the Canadian health care system as a possible alternative to the US health care system, those who are stridently opposed to altering the current US model inevitably level the "the S word" against Canada and its health care system -- as if to say (as you suggest) that adopting anything close to the Canadian health care model would represent a slippery slope toward "a loss of liberty" in America. Gibberish, at best. The misdirection of mindless ideologues, at worst.

The Canadian medical system is imperfect -- of course it is. But its fundamental quality and universal character is better than what a significant percentage of the American population currently enjoy.

I applaud your ambition to find a way to "better" the Canadian health care system ... given the vast resources of America, that should not be all that difficult. But spreading lies and distortions about the Canadian system will hardly further that goal. That was the central point in my comment -- along with explaining my view of why these lies and distortions are a common feature of the US heath care debate.

Webster

 
 
+4 Rank Up Rank Down
May 12, 2009
America: The Curse of the Political Ideologues

A number of the comments under this topic illustrate why the US debate on health care has been stalled for generations.

Throughout the debate, notwithstanding the obvious fact that the US "public" heath care "system" is dysfunctional and deteriorating, Americans (the public) have fallen victim to the inertia created by the strident voices (the never-silent minority) of those who would do and say anything (fabricate, distort, murder the truth) to defend and propagate their deeply entrenched ideology. This is true of the larger political scene in the USA, and it is true for any public debate that touches on the core ideological battle line that keeps America from finding solutions to many issues of public concern. This ideological battle line has existed since the formation of the Republic and is promoted by those who are determined to characterize all things "government" as "bad" (Un-American) and all things "private sector" as "good" (American).

America is in no way alone in finding itself with a citizenry that has differing views on the relative merits of public/social sector solutions and private sector solutions. The debate, in itself, is natural and healthy. But America has found itself in the unique position of allowing mindless ideologues on both sides of the debate to control the public debate -- in a fashion that thwarts all progress.

None of the above represents a fresh insight into what is going on in America -- the ideological battle that is preventing America from solving some of its long standing problems and accessing a better future. I firmly believe that the vast majority of Americans understand the nature of the problem. But the question of what to do about it remains.

That's why I called "nonsense" on the comments on the Canadian heath care system -- the "socialism" red herring that always comes to the surface in this debate -- because the comments are typical of the nonsense spewed by those who will do and say anything to maintain the health care status quo in America.

Like many, I was recently surprised, almost startled, to see that President Obama MAY have found a way to move the public health care debate away from the stranglehold of the ideologues and the vested interest. If that turns out to be true, I predict that this will ultimately be seen as his Administration's most important accomplishment.

Webster
 
 
May 12, 2009
Carrpe Geekem and charlesfunnish

Firstly GPs in the UK get very good basic salaries thank you (£90K). These are often supplemented by private work. Specialists ARE very well paid - I think you are just making this stuff up.

Private insurance is still available - I personally have job provided private health insurance and have never once needed to use it in 12 years.

Specific treatments can be refused at the discretion of local authorities. I would prefer to at least have a national policy, but accept there do have to be some limits. Personally I do not know anyone refused treatment though obviously it must be upsetting. I would posit that the treatment limits found are often less severe than those imposed by private insurance - we hear of so many patients in the US who get a second illness and lose their homes simply for company profit - this kind of scenario at least we can avoid here.
 
 
May 11, 2009
Carpe Deekem said ....

"The Canadian health care system didn't permit her to switch doctor ...

His average wait to see a specialist is A YEAR AND HALF, and in the interim he receives no treatment of any kind, because only a specialist is allowed to treat him ...

The Canadian health care system, like all similar systems, pays specialists too little for it to be worth their while to train in a specialty, leading to horrible shortages of specialists and insane wait times."

------------------------------------------------------------------------------------------------------------

ALL OF THE ABOVE IS FABRICATED ... COMPLETE AND UTTER NONSENSE.

Webster






 
 
+6 Rank Up Rank Down
May 10, 2009
In the Netherlands we have privatized insurance but a government that dictates
1) what is covered under every basic insurance,
2) insurance companies should accept everyone regardless of medical history

average cost is €100 a month.
1) to avoid the confusopoly
2) to spread the risk like insurances are supposed to do.

What is socialist? Insurance are socialist by default. You pay for others lack of money, short comings and un-fortune. With that you pay off any individual responsibility yourself as the others in 'the system' do the same for you. In communism the system provides for all as long as comply to the system you are therefore discharged of any individual responsibility. Horrible when applied to society, good humanitarian idea when applied to health care (or education).
 
 
-2 Rank Up Rank Down
May 8, 2009
mr tkwedgie

how old r u

how can u make such an assine unqualified open ended statement based on the relative merit of age - sounfs very descriminatory to me - they have laws against age descriminiation
 
 
-6 Rank Up Rank Down
May 8, 2009
charlesfunnish

Personally, I'd look down on anyone who wouldn't give up their personal care at age 50 for the benefit of someone under the age of 30. Unless they have dependents, I guess. Life is about making hard choices with the limited resources that we have. That's the entire point of life. We don't have endless healthcare resources. What choice do we have????? This isn't about compassion, it's about making hard choices.
 
 
-4 Rank Up Rank Down
May 8, 2009
RealityMonsterh

Actually, the market does a pretty good job of giving people what they want. You can buy health food, vegetarian food, unhealthy fast food, unhealthy slow food, you name it. People can say that they want to be healthy all that they want, but buying trends often show a different story. Capitalism is about providing people with what they desire, whereas socialism is about providing people with what the power elite "thinks" they "should" desire. You kind of set me up to make that point. Thanks.

And actually, according to one of your health nazi friends who made the jokeumentary, "Super Sized Me" (or is it "super size me," whatever....) Mcdonalds happy meals are about the size of what regular meals used to be. I don't know about you, but my stomach tells me when I'm full. I don't base that on memory.

Which reforms faster? Well, companies with bottom lines to worry about tend to reform as fast as they possibly can based on the desires of the market. The government always produces inefficiently (you hear about corporate lay offs, restructuring, and reengineering far more than you hear about government lay offs or re engineering). The government does reform sometimes, but usually for stupid or random political reasons that just lead to more waste of a lot of the time. The government, for example, was the first to start workplace drug testing, than corporations that worked with the government started drug testing, now everybody drug tests for the most part. Usually, government reform doesn't seem that useful, and the only government change that I've seen create higher productivity and less waste in government is less government and privatization. For the government to work properly, all of the stars have to align perfectly, but the free market is much more fluid and responsive to change all around, and it responds primarily to meaningful market signals, not political ones.

Read "Infotopia." Deliberation (how the government solves problems) only leads to a good outcome when someone in a position of popular authority already has the right answer. Markets are far more effective at making good decisions far more of the time, whether they are prediction markets or pricing markets, and once again the profit margin does serve a purpose. It's the opposite of waste. Profit is A GOOD THING.
 
 
0 Rank Up Rank Down
May 8, 2009
do you mean i should think instead of acting on slogans?

change u can believe in

or how about this one

yes we can

in 2010 u wont have voting by all the bozos y bimbos who didnt know what a speaker of the house was

i'll bet the senate will quietly shift the other way in 2010 - the house will lose some going the other way - u can c it already

and for those who make a metric statement - how do u back up things like 49% of mortgages or whatever - most things here are usualy hearsay or pointing to some blog that points to another blog for reference
 
 
-1 Rank Up Rank Down
May 8, 2009
charlesfunnish-

I wasn't arguing in favor of national healthcare necessarily, but i was arguing in favor of rationing healthcare. Why shouldn't we ration healthcare as any other limited commodity. We have controlled fishing standards so that we don't drive fish to extinction, why not have rationed healthcare so that the people who need it the most get it before somebody who is just trying to extend their life another few years? This is the real issue that nobody wants to discuss. The right doesn't realize how necessary these decisions are to make and left doesn't want you to know that the only way you can have nationalized healthcare is through rationing services. We just get pure propaganda from both sides.
 
 
-2 Rank Up Rank Down
May 8, 2009
Sorry, I forgot to mention that those areas where most of the job losses occurred during this recession also experienced most of the job growth during the last boom cycle, but it's worth noting that Texas gained a lot of jobs during the boom and lost few during the bust, meanwhile LA (for example) gained a ton of jobs but then quickly lost them all. Texas is more of a fast and steady grower (as opposed to slow and steady), while the major metropolitan areas of blue states have been on more of a roller coaster being kept afloat by borrowing and finance. Texas has real growth.
 
 
May 8, 2009
Yes the free market gave us Enron, but so did the government. The market doesn't really get to act freely anymore. Also, the free market destroyed Enron, and put an end to cheap money going to hobos. Why do you make more and more retarded points Scott? Nobody is arguing that every activity that occurs in a free market is good, but the bad ones have a strong incentive to disappear.

The real problem is that we can't really remember nationalized industries. There was a time when countries were nationalizing every industry under the sun, and usually they ended up bringing in less money than they were costing creating welfare industry. This was industry that didn't generate profit to encourage savings and investments, so all capital had to be raised by the public sector. You'd have to pump government money into building more infrastructure just to create more government losses in the future. Nobody remembers these industries well enough anymore, so now we get all of this talk about the market being a failure.

Market failure? Look at this last recession. Over a 20 year period, a billion people were pulled out of poverty worldwide, but because some Americans are losing big houses that they couldn't afford anyway, this is a disaster?

Also, if you look at the interactive maps showing job losses and gains in this last recession, who is responsible? Well, the free market areas in Texas had been creating hella jobs during the boom and have lost very few during the bust. This last recession completely originated in the major metropolitan areas of the coasts and the old Northwest (Detroit). It wasn't capitalism that caused this last recession. All of the major job losses originated in areas with high levels of government spending. Don't worry everybody, Texas will continue to be an economic backbone for the rest of the US. Our state government will keep saving money (we have a surplus) while you all try to borrow your way into a socialist paradise. It falls on our shoulders to keep things chugging along I guess......
 
 
-3 Rank Up Rank Down
May 8, 2009
Why do people keep making the same arguments? "Companies can't provide healthcare, because they only care about making money!" That could be said about the company that provides your hamburgers too. How come we can buy 5 hamburgers for 5 dollars and eat till we puke? It seems to me that the private sector works pretty efficiently there.....

Some things are "cheaper" when provided by the government, but you have to look at all of the costs. Yes that evil profit margin will cause you to have to pay more sometimes, but it also encourages development. If the government is in charge of power generation, it might seem cheaper, but what happens when they realize that they didn't invest enough money into growing infrastructure. Well.... you're taxes go up, and that's a cost. Even if only the rich have to pay it, they (the rich) will charge you more for the products they sell so that they can afford they're taxes. Okay, a privatized power company may charge high rates, but won't all of this money attract the right kind of infrastructure and talent to make that company more efficient? There are plenty of examples of government failure and private failures in energy production, but in a true free market only the private company has a real incentive to change.

Someone commented that middle managers have the same incentive as government bureaucrats to rationalize and expand there budgets purely for their own sake. This is true, but in the private sector middle managers lose their jobs ALL THE TIME. That's the glaring, billion dollar business.
 
 
-3 Rank Up Rank Down
May 8, 2009
Yes, private industry takes a profit margin, but they're overall cost structure is much lower. This is the ENTIRE PREMISE BEHIND PRIVATIZATION. Yes, the government doesn't take a "profit," but they overpay employees and maintain old and outdated processes. I hate it when people try to argue that the private sector is more expensive because of the profit motive. When a private company takes over a task which use to be accomplished by the government, they usually cut out all of the unnecessary costs and update old processes, so that they can accomplish the same task for less money even while taking a profit margin. Simple formula. Strip out government waste and turn it into a profit margin for the corporation plus an overall savings (or increase in productivity) for government and society.

And who says that the government already has things that they accomplish well? Social security? Well, kudos to the government for knowing how to mail checks on time. Post office? Well, show me that the private industry couldn't accomplish that task more efficiently. You can't. Police and fire? How are the police effective? Measured by what standard? What about all of the bureaucracy and overcompensation of employees? I know of a lot of states that are at least partially underwater due to generous police/fire pensions. I really think that a private security company could accomplish the same tasks of the police force (mostly surveillance and minor dispute solving) for half of the cost EVEN WHILE TAKING A PROFIT MARGIN.

Time and time again, we see government industries (such as the old British Coal mines that were costing the UK billions more than they were bringing in) privatized and made profitable while slashing overall costs. That is relatively good proof that the government sucks at running things. Maybe corporations are evil for trying to please shareholders (cause it's not like it's they're money or anything :)....), but government departments seek only to rationalize they're existence and spend as much money as possible. Cutting costs is innovation, therefore by even Scott's standards the private sector is far more efficient at anything, unless cost isn't supposed to be an issue (such as NASA, the Military, or Education).
 
 
May 8, 2009
A lot of commenters here seem to think that because the government runs something it is inefficient or bad. I would point out that we already have two fairly effectively government run systems that people seem to like - the fire and police departments. Fire departments were once private in this country and in some places still are. Most people don't like this because fire spreads. I want my neighbors to have good fire coverage because their house might catch mine on fire. Likewise, I do not want people to have to pay a for profit company for police service because that means crime will flourish even more in poor areas. If someone rapes your daughter I want that person caught before they get to my family. To this end I would point out the phrase in the preamble to the constitution "provide for the general welfare at hand". If something is for the general welfare of the community, the community has an interest in funding it. Take education - if my education dollar funds your kid getting a good education and becoming the engineer who designs an electric car that kicks Japanese hiney, I benefit.
How is this different than protecting my family from disease? If my neighbor has some nasty killer flu bug, do I want them to avoid hospitals because they cannot pay for them?
People say that privately run systems are more efficient, but in America this is untrue. Government run systems like the VA run with an overhead of 2%. Private outfits, when you get through with the hospital and the insurance companies run around 18% overhead and profit. The difference between these two figures is almost enough to insure all the uninsured in America.
This being said, I agree that innovation flourishes more in a private system. Say what you will about the USA, we invent 9 out of 10 new drugs in the world. Whatever we do, we need to keep this going. It is one of our crowning achievements.
 
 
May 8, 2009
I'm sorry if these points were already made, but I'm late to the party on this one and didn't want to scroll through 5 pages of "you're a socialist" "well you're an idiot!" .etc.

Frankly, I'm not ready to have my health care as:
Efficient as the US Postal Service...
Compassionate as the IRS...
Easily accessable as the DMV.

Yes, the US health system is the worst in the world...except for all the other ones. And no, there is no one in America who has no access to health care because ERs cannot turn people in medical need away regardless of their ability to pay.

Sadly, most governmental interventions seem to "level the playing field" which almost universally means, "make (fill in the blank) equally crappy for everyone." Instead, we should be reaching out to the (relatively) very few people who are the perpetually screwed in America...the working poor. The people who make just enough money to not qualify for "free (ie paid for by people who work for a living)" healthcare, but don't make enough to afford health insurance.

Using Scott's measure of innovation, who do you think is going to invent new life improving/saving drugs? Do you think any government would have developed Viagra? Giving guys an !$%*!$%* who normally can't is like a licence to print money that can only have been developed by a company who stood to earn billions. Meanwhile in England the elderly are being denied Alzheimer's medication because it can only help to prolong the deterioration of the mental health of a population too old to contribute income taxes.

Anyway, kind of a moot point, the current president wants socialized medicine and has more than enough votes to pass it on through. So let's all just lay back and enjoy it! But if you're over 65, don't lay back too hard because you might have to wait a year or two before being approved for spinal surgery.
 
 
May 8, 2009
"The government's incentive is to provide the service as cheaply as it can. Any company's incentive is to transfer the greatest amount of money from consumers to stockholders."

[insert mad giggling here]

Statements like that are why you're my favorite comedy writer.

1) The government's incentive is always to remain in power. That usually means spending as much as possible, and arranging for that spending to end up in the pockets of the rich and powerful, who will later redirect a percentage of that money back into the politician's pockets for re-election. And that's when the politicians AREN'T corrupt. Efficiency only comes into play when there's not enough free cash lying around to assuage the flow of greed, so it becomes necessary to take away more from wastefully "beneficial" programs such as education.

2) The company's incentive is to transfer as much money into the pockets of corporate executives as possible. The stockholder's have little to do with it, because the price of stock has almost no relationship to how well the company is actually doing, or how much money it makes. Stock price is affected by the "perception" of how well a company is doing. Therefore if a particular stock is doing well, it means that company is probably employing the best liars. And they have the best liars due to incentives such as enormously inappropriate pay, bonuses, perks, and golden parachutes.
 
 
+2 Rank Up Rank Down
May 8, 2009
charlesfunnish -

I don't begrudge you your concerns at all. I think there are pitfalls with every system, but it's important to note that for every Canadian who received sub-standard care, you could probably find two Americans who received no care at all or who received sub-standard care because that's what their insurance companies dictated. But that's not really the point I was trying to make. I understand that the problem is extremely complicated and that it's important that any program be set up so that whoever manages it (government or private contractors) has the proper incentives to maximize quality of care while still trying to keep costs under control. Nevertheless, it's important to recognize that incentives can be designed properly regardless of whether the management is public or private. People who claim that government incentives are "always" to grow larger and create additional bureaucracy are speaking in generalities with no actual justification in the real world. One might as well say that private corporations "always" have the incentive to create monopolies and jack up prices. Sure, that may be the default position in a vacuum, but there are always ways to constrain the environment so that the incentives for the actor -- public or private -- are designed to maximize public good.

One last point -- we don't actually have a nationalized education system. We have a public education system that's funded primarily by local property taxes. If you only look at public schools in well-off communities (like the public high school that I attended), you won't see nearly the same problems that you see on a national scale. Are there institutional problems with the way our public education system is set up? Clearly there are, but they cannot be blamed solely on the fact that the education is not private.
 
 
May 8, 2009
another- All the same I think I'll stick with the evidence based stuff and leave the anecdotal evidence to those who find that kind of thing convincing, though I can't imangine why they would.
 
 
 
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