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Monday, January 3, 2011

More on Death Panels

Death panels are back in the news. From the WSJ  (Dec 29, 2010) http://online.wsj.com/article/SB10001424052970203731004576045702803914780.html:

The office of Oregon Democrat Earl Blumenauer, the author of the original rider who then lobbied Medicare to cover the service, sent an email to supporters cheering this "victory" but asked that they not tell anyone for fear of perpetuating "the 'death panel' myth." The email added that "Thus far, it seems that no press or blogs have discovered it, but we will be keeping a close watch."
The regulatory process isn't supposed to be a black-ops exercise, but expect many more such nontransparent improvisations under the vast powers ObamaCare handed the executive branch. In July, the White House bypassed the Senate to recess appoint Dr. Berwick, who has since testified before Congress for all of two hours, and now he promulgates by fiat a reimbursement policy that Congress explicitly rejected, all while scheming with his political patrons to duck any public scrutiny.
But if Dr. Berwick's methods are troubling, the substance is more than defensible. Certain quarters on the political right are following the media's imagination and blasting Dr. Berwick's decision as the tangible institution of death panels. But the rule-making is not coercive and gives seniors more autonomy, not less.

While I am more of the conservative bent, I must admit that the diatribe from the right is more disconcerting on this topic than the usual moronic drivel which emanates from the left. It is unfortunate that the discussion fails to draw attention to the real issues which require to be addressed.

The fighting words which, when uttered, render all rational discussion ended are" health care rationing." When will people learn that in addition to the certainty of death and taxes, there is always also the certainty of scarcity. The cornerstone of the entire realm of economics is the assumption that there are legitimate wants which go unfulfilled because there is never enough stuff to fulfill all human wants. Economics is essentially the study of the allocation of scarce resources. With the exception of the air, basically all resources are scarce. All resources (including health care) need to be allocated (read rationed) via some sort of mechanism. The only real question is how to allocate wisely.

What constitutes wise allocation? Which mechanisms consistently allocate resources wisely? Any mechanism which takes scarce resources and blows through them as if they are limitless is likely unwise. Any mechanism which consumes resources in such a way to guarantee their absence in the future is also unwise. Resources such as those needed to deliver healthcare are dependent upon health of both the social/legal structures and the economic engines which drive the generation of wealth and productivity. Just look at the health infrastructure in places like the southern Sudan or the Congo.

Ultimately, the choice in terms of allocation (rationing) of health care resources falls into either the political realm or the market realm. The knee jerk reaction is to reflexly discount the market to allocate health care resources because health care is either "different" or "too important" to rely on market forces. This is a perfectly reasonable perspective is one is completely ignorant of human economic history. When health care constituted  a trivial fraction of economic activity and consumed limited resources, such an oversight was of limited impact. Using political mechanisms to allocate a small portion of scarce resources resulted in mis-allocation of of resources at the margins of the economy. That is no longer the case.  We are using political mechanisms to allocate resources in a growing segment of the economy that runs the risk of consuming the entire economy, this killing the goose that lays the golden eggs (not a wise allocation strategy).

Since we have no choice but make choices about allocation of scarce resources in health care, we might as well use the mechanism which has shown to be superior in terms of most optimal (not perfect) allocation, the market using market based pricing mechanism.  It is associated with the most flexibility and the best long term track record of any allocation scheme which has been devised by man in recorded history.

Medicine cannot live in a world where we consume scarce resources and yet believe we are immune to the forces which are required to optimally allocate and use them. Whether we like it or not, an argument can and will be made that there is a point where resources allocated to health care would benefit people more if allocated elsewhere. Commonizing increasing resources in state hands and placing these discussions primarily in the political realm will guarantee that the political fights will get increasingly brutal. As Hayek noted in The Road to Serfdom  even when the state tries to steer only part of the economy in the name of the "public good," the power of the state corrupts those who wield that power. Hayek pointed out that powerful bureaucracies don't attract angels—they attract people who enjoy running the lives of others. They tend to take care of their friends before taking care of others.

Avoiding some type of resource allocation is not an option. Not placing it in a political realm is.

4 comments:

  1. It is unkind, as has been said, that we are a nation of economic illiterates but that is an approximation of the truth. I agree that the rhetoric from the right here is disconcerting, taking advantage of the collective economic naivete when what is called for is the kind of education exhibited in this post. On the other hand Congressman Blumenauer's rider was clearly a provocative and meaningless exercise in symbolicly imposing the government's prerogative on end-of-life decisionmaking by endorsing payment for something that physicians do in any case and can always incorporate into a bill for other services. Few people make an appointment to discuss end-of-life decision making independent of other health issues and letting them know the office visit will be paid for if they do is not likely to motivate someone to do so; they almost certainly believed a priori that such has been a covered service in the past. The practical effect has been to inject the moniker "death panels" into the debate which at least has the effect of placing health care allocation by government direction at the forefront of the allocation issue, and in a pejorative light at that; at least a crude effort toward the economic education of the public.

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  2. While I did not think of this while I was composing this piece, it occurred to me after reading your comment... the question is why should this discussion be singled out for payment? What about other discussions? Will we end up with remunerated discussions vs. others which are not? Will it always require an act of Congress to decide which discussions will be paid for while others will not? If the discussion is not explicitly paid for considered a non-covered services? Can we bill for this like we do for other non-covered services?

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  3. For rationing you mean? I think yes. What terms are preferable to use when describing possible responses to the undeniable reality of scarcity?

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