Flowers for the Sick
January 28, 2010
Margaret Flowers, M.D. responds to the SOTU in an open letter to Barack Obama:
There was an opportunity this past year to create universal and financially-sustainable health care reform rather than expensive health insurance reform.
Flowers is talking about single-payer or as she likes to call it (in a move I suppose she intends to be an argument in its favor) “Medicare-for-All.” This was followed closely by:
This poor value for our health care dollar is due to the waste of having so many insurance companies.
So on the one hand, Flowers gets that health care and health insurance are two different things. But then she thinks that health care value is bad because of health insurance competition.
Now ask yourself this question: do you feel that you have poor value car care because there are too many auto insurance companies? Even if I thought car maintenance was too expensive, I certainly don’t see what State Farm has to do with it. I suppose she might say something like “Well, the more insurance companies there are, the more different forms health care providers must deal with and administrators have a harder job keeping it all straight.” That may very well be true but – and this will be sort of a theme in this post – what is the other side of the cost equation? What do you lose on the other end (e.g. insurance premiums) by affecting the number of firms?
Speaking of what the number of insurance firms means for insurance premiums, how exactly does one come to the conclusion that too many insurance companies make for a bad value in insurance market? I suppose I shouldn’t be surprised since her eventual point is to argue for a monopoly but I don’t understand the economic principles behind such an argument. Here is the gist of it for Flowers:
At least a third of our health care dollars go towards activities that have nothing to do with health care such as marketing, administration and high executive salaries and bonuses. This represents over $400 billion per year which could be used to pay for health care for all of those Americans who are suffering and dying from preventable causes.
But this forgets a very important point: health care doesn’t spring from the ether. Despite being intimately tied to living and dying, it is a product of industry that must be produced and sold. Separating “production costs” from “selling costs,” as if the latter were optional, is fallacious, as Walter Block points out:
This is an entirely misbegotten view of economics. Unless and until the product is brought to the final consumer, it might as well not have been produced at all, as far as the latter is concerned. What is the good of producing shoes or cars, if they are not made available to the consumer, and this can never occur unless the product is actually sold, and this cannot take place in the absence of selling costs such as marketing or advertising?
Or administration. Does Flowers think that one doesn’t have to administer a single payer system and that doing so requires actual resources and the need to compensate administrative workers? Yes, one doesn’t really need to advertise in a monopoly context but if you are going to count those savings, you also need to talk about the costs of removing competition, both to prices and to innovation. You also need to talk about the costs of increased government paperwork which comes with little incentive to keep in down. Flowers doesn’t do that.
Flexing my lefty muscles, if the smell of money in the waiting room is making you nauseous, consider the informal sectors ability in a freed market to eliminate money and ad men from many of the day-to-day needs of health care that are closed off now.
You said that you wanted to “keep what works” and that would be Medicare.
As Sheldon Richman points out, can “a program with a $37 trillion unfunded liability…be said to be working”? But beyond that, it seems a failure on just about any measure except the superficial one that it provides health care. OK, but what kind and at what cost?
Remove all of the industries who profit off of the American health care catastrophe from the table. Replace them with those who are knowledgeable in designing health systems and who are without ties to the for-profit medical industries.
I think Flowers, like Michael Moore, doesn’t appreciate the difference between profit per se and the returns to power inherent in existing state capitalism. The conflation is at the heart of her argument and thus her argument is misguided. I trust we all think it’s a good idea to have shoes but would Flowers suggest a single-payer shoe system as the best way to tackle shoes. If so, I think she would have a hard time convincing people. If she wants to argue that there is a fundamental difference between producing shoes and producing health care, let’s hear it. If she further wants to help me understand how computer technology has gotten cheaper and better but health care can be expected to get worse and more expensive under a profit system, I’m very interested.
All of the benefits she wants, including less corporate influence, can be accomplished by other means once you get the confusion out of the way, such as those suggested by Roderick Long:
At a minimum a health care policy would have to include:
1. Repealing laws that have the effect of cartelising the medical industry (e.g., the licensure monopoly granted to the A.M.A.), thus artificially boosting the cost of medical care.
2. Repealing laws that have the effect of rendering the labour market oligopsonistic, thus artificially lowering people’s ability to pay for (and collectively negotiate for) medical care.
3. Repealing laws that shift health care funds from the 25%-devoured-by-overhead voluntary sector to the 75%-devoured-by-overhead coercive sector, thus decreasing the amount of health care that gets to needy recipients.
4. Repealing laws that transfer the power to make medical decisions for individuals from those individuals to centralised bodies, thus increasing the impact and scope of fatally bad decisions and suppressing the competitive signals that allow the identification of better and worse policies.
5. Repealing laws that wiped out the old mutual-insurance systems (basically HMOs run by the patients instead of by corporations) and empowered insurance companies at the expense of patients.
6. Repealing laws that suppress innovation and distribution in the pharmaceutical industry in the name of “intellectual property.”