3rd Party

Russell Roberts is debating John Irons at WSJ.com. I actually think that maybe they're trying to set-up a patsy for Roberts to kick around. Roberts puts all the blame for the problems of our health care system at the feet of the third-party payer:

Because of various government subsidies, out-of-pocket spending is a little more than 10% of total health spending (thanks to Alex Tabarrok at Marginal Revolution for the link). The rest comes from the government and insurance. Of course, if you don't have insurance or qualify for the government programs, you have to pay the full prices. Those prices have been driven up by the demands of all those customers who only pay a dime on the dollar. An elaborate bureaucracy of government and hospital employees tries to keep the system functional.

Not very controversial. Irons goes on to prove Roberts' point while maintaining that Russ is missing the boat:

Let me finally address your statement that patients are "spending other people's money." I think the out-of pocket expense is 14%, but that doesn't include insurance premiums. I realize you are making a point about the marginal incentive to consume, but most people pay quite a bit for their health coverage -- either through direct costs, in insurance premiums, or in taxes. For many people, the costs are enough to drive them into bankruptcy. A recent report found that 50% of bankruptcies were due to medical expenses. This is hardly a free lunch.

Irons seems unable to grasp the fact that when marginal costs are falsely low, total costs will be falsely high. Or actually, he acknowledges this fact, but tries to use this as a club to beat back Roberts when this is exactly the point that Roberts was making in the first place. Irons then, of course, goes on later to call for more third-party payment.

You'll also see Irons make my favorite statement: "the market for health care is different." Actually, we also learned today from someone who does understand third-party payment that the health care market has one sister: the market for library articles in the state of Utah. Apparently the third-party payment by the government for Utah Article Delivery (where anyone can order a copy of any article witin the state of Utah for free and the libraries themselves don't pay the costs) has caused so much use of the system that they have to shut it down.

But, individual libraries don't face that charge. Because UTAD is a service of UALC (Utah Academic Library Consortium) its costs are paid by the group - the third party. The costs to this third party are bound to be large because: 1) they've given demanders an opportunity to obtain more stuff than they would otherwise, 2) they've implicitly told suppliers not to discourage this through high pricing.

The generic result for third party payer systems is well known to economists, and discussed in many principles texts: relative to a (conventional) equilibrium, a third party payer system will have more stuff exchanged at a higher price.

So now that UTAD is dead, I guess health care is back to laying the lone claim in being "different."

Finally, on a related note, Men's Health has "8 Things Your Doctor Won't Tell You." A summary:

1. That a test may be unnecessary or low-yield

2. What a test or treatment costs.
3. That a given drug is not much better or equal to a placebo.
4. The role of nutrition in maintaing health.
5. That they receive incentives to include you in a clinical trial.
6. That a generic drug may be less expensive while equally effective.
7. Doctor's may push surgeries when they are shown to be less effective in some cases.
8. That they may have been disciplined by a state medical board.

It is interesting that numbers 1,2,3,6, and to some extent 7 are due in large part to the third-party payer system. John Irons, take note.

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Your post has inspired me to

Your post has inspired me to consider starting a blog called "The Deliberate Patsy" and use it as a vehicle for re-hashing some of the most outrageous arguments that the Left makes, garner a lot of love from that side of the issues, and then on one fateful day, burst their collective (ist) bubbles and tell them it was all a huge hoax. (I totally think that none of them will catch on to the title, which will naturally make the venture only all the sweeter.)

Of course, this would require my fake blog having far more success than my (since put-out-to-pasture) real one. But - hey - as long as I'm dreaming, right?

Good points, all. My real

Good points, all. My real question about the debate is about why they keep rotating one side but retain Irons. Every one of these I've read (though I will admit to having some biases) has Irons being either off the mark, snide, or just entirely limp in his arguments. While I tend to not agree with Iron's side in general, I think it'd be nice to see a stronger case made.

That's what I think. I

That's what I think. I usually think I could argue his side better than he can. I really wasn't joking when I thought he may be a dliberate patsy.

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