Asymmetrical Information - Megan McArdle


Easy Choices On Health Care: There Aren't Any

If they were easy, we'd already have done them

Instead of "making the hard choices about health care", Matt Yglesias suggests that we make the easy ones:  

Actually making choices that are actually hard is, obviously, politically unpopular. But in a perverse way, talking about making them has become very politically popular. Yet this is obviously perverse. If it at some point becomes impossible to avoid hard choices, then needless to say they must be made. But the right way to think about reforming health care policy is to start with the easy choices. At least the relatively easy ones. In any kind of budgeting situation, you want to start with the moves that are the least painful.

Increasing the flow of immigrants to the United States, for example, improves the budget situation at negative cost to most native born Americans. So does monetary stimulus.

And you can make this particularly easy by focusing on specific areas. In the field of software engineering, for example, increased immigration leads to a boom in worker productivity. The tough choice is that it also creates some economic losses for incumbent software engineers. But if you increase the volume of skilled immigration across occupational categories—computer programmers, yes, but also health care professionals and lawyers and architects—then the gains swamp the losses and everyone ends up better off. That would be an easy choice. Improving the pharmaceutical R&D process through more reliance on prizes and open research and less reliance on patents and monopolies would also be a pretty easy choice. Demagoguery about "death panels" aside, offering end of life counseling to Medicare recipients so that we don't spend money on treatments that people don't even want would be an easy choice. Trying to improve the management of the organ transplant system would, I suppose, unnerve some stakeholders but if we can find ways to do it it's a pretty easy choice.

Few of these choices are "easy", in the sense that there is some simple rule you can pass that we know will really improve Medicare's financing.  End-of-life counseling for Medicare is probably a fine idea, but even under entirely unrealistic assumptions, it doesn't save the program.  The best end-of-life care is not necessasrily the cheapest (chemotherapy, for example, may be used to shrink tumors in order to make patients comfortable, not just to save their lives).  And while end-of-life-counseling can improve decision-making, it doesn't necessarily ensure that patients (or their grief-stricken families) will cease demanding expensive, probably futile, interventions.  We have no idea whether allowing Medicare to reimburse for end-of-life counseling would save even as much in health costs as it costs to employ all those new counselors. Especially since we don't actually have a huge reserve army of qualified end-of-life counselors waiting in the wings for the government to call them to duty. 

Immigration is even less "easy", because the main constraint on foriegn doctors is not visas, but residency slots.  While there are some less-desireable specialties that don't fill their slots, most are oversubscribed.  Experienced foreign doctors bristle at being told they have to come over here and go back through years of training in order to practice, which constrains the supply of exactly the top-notch, experienced candidates we'd like to bring over here to boost our health care system.  And even if they come, this will initially cost money, not save it, since residency slots are government-subsidized.

Similarly, "better management" of pharma innovation has been proposed for years, but there's not actually all that much evidence that prizes, rather than patents, would unlock a whole lot of development potential.  The constraints on development of new drugs are first, the very large cost of clinical trials; second, the lack of good drug candidates in key areas like Alzheimer's, where no one even understands the disease mechanism;  third, the lack of a large number of rich-world patients who need the drug (so that we get little development for, on the one hand, rare genetic diseases, and on the other, malaria and parasitic infections); and fourth, drugs that can't clearly be patented.  Prizes solve the last problem, but not the others, unless governments decide to invest a lot of money in researching treatments for diseases that don't effect many of their patients.  And to function as a serious alternative to patents, the prizes would have to be very large, which is again, not easy.

To be sure, I favor trying prizes, because why not? But prizes on the scale needed to replace the current model, or even substantially augment it, would be a painful financial committment.

Better management of organ donor registries would be a great idea, though it's obviously politically very fraught; people are horrified by the notion of paying for kidneys, even though donating a kidney is really very safe.  But that's actually beside the point, because as far as I can tell, this would cost money, not save it.  

Dying is cheap.  Even dialysis is cheap, compared to a transplant.  That's not to say we shouldn't do transplants--it's great that people can live more active, healthy lives.  But hundreds of thousands of dollars worth of treatment, followed by years on immuno-suppresive drugs (and the resulting infections) are not money savers.  

If there were genuinely easy reforms in heatlh care, we'd already be doing them.  The reason health care costs so much is that it's pretty much all hard.