20.7.09

ALLOCATING SCARCE RESOURCES. It's obvious to economists, but sometimes it takes a controversial philosopher to get people thinking.
Health care is a scarce resource, and all scarce resources are rationed in one way or another. In the United States, most health care is privately financed, and so most rationing is by price: you get what you, or your employer, can afford to insure you for. But our current system of employer-financed health insurance exists only because the federal government encouraged it by making the premiums tax deductible. That is, in effect, a more than $200 billion government subsidy for health care. In the public sector, primarily Medicare, Medicaid and hospital emergency rooms, health care is rationed by long waits, high patient copayment requirements, low payments to doctors that discourage some from serving public patients and limits on payments to hospitals.
That puts Armed Liberal at Winds of Change into what he concedes is an unexpected position.

And there's the rub; we have a system which largely removes cost as a factor either because you're in a protected class like my father, where there are no costs - or because the costs are so great that they don't matter and they are an insurmountable barrier. There is no "this much and no more" in healthcare as it's structured today.

Should there be? Thinking about my dad, I honestly don't know. But we need to talk about it, and so I have to - grudgingly, holding my nose - tip my hat to Professor Singer.

There is a this much and no more in the allocation of resources to health care. It's not easy to see, and there are probably Pareto improvements. But third-party payments lead to undetermined costs on one hand and unrealized benefits on the other, and it's hard to see how a new insurance service operating out of some distant capital will change those things. Doug Bandow elaborates.
What people need is a medical system that allows them to make the basic rationing decisions: what kind of insurance to buy, what kind of coverage to choose, what kind of trade-offs to make between spending on medicine and spending on other goods and services.
There still, however, will be a rationing problem. We now know how to transplant hearts, but if there are five cardiac cases and four traumatic brain injuries ...

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