Holt’s Elitism

Matthew Holt writes, “reform of the way Medicare pays for care, and the way variation in care is to be removed, are subjects that will be tackled by a group of elites who actually understand this stuff, out of the view of the public eye.”

So under Holt’s ideal medical system, the practice of medicine will be governed by elite technocrats, far removed from doctors and patients. Concerning this approach, one may ask:

1. Is it moral?

2. Is it efficient?

3. Is it politically acceptable?

I believe that the answer is “no” on all three grounds.

It is immoral because it concentrates power in the hands of an elite, and it takes autonomy away from doctors and patients. The news today reports of Art Buchwald’s death, and the obituaries mention his difficult decisions regarding terminating dialysis. Taking those decisions away from individuals and their doctors is simply wrong.

It is inefficient because the best decisions are made closest to their point of impact. Are consumers perfectly rational decision-makers? No. Do they have all the information they need to make perfect health care decisions? No. But the alternative to imperfect consumer choices is not optimal decision-making. The alternative to imperfect consumer choices is someone else making mistakes that are, on average, worse. One of the essential insights about markets is that they process information efficiently, by getting information to the point of decision.

Let us assume that “a group of elites who actually understand this stuff” can come up with really well-researched guidelines about whether I should get an MRI for a back injury. (In my book, I propose establishing a commission to develop those sorts of guidelines.) Then the most efficient way to process this information is to give it to my doctor and me, and then to let me decide whether or not to pay for the MRI. If the guideline says that I should not get an MRI, but my doctor and I prefer to go against the guideline, then I should be allowed to do so. Especially if it is my own money that is paying for it.

Finally, Holt’s version of single-payer is politically unacceptable. He wants to reduce the power of physicians, not only in the political process but in day-to-day decision-making about medicine. That is going to meet resistance not just from the medical profession but from the typical consumer.

Holt uses the slogan “Medicare for all,” but what he has in mind is nothing like Medicare today. His political strategy amounts to bait-and-switch. Promise people cake, and then serve them spinach. If you can pull that off, then you can make anything politically acceptable. But if you are constrained to be honest, you could never sell Holt-Care to the American people.

Health care spending is going to present us with tough choices, and we need to be up front with the American people about that. As spending rises, it has an impact on the typical American, whether it comes through medical bills, health insurance costs, shifts in compensation from wages to health benefits, or taxes. Insulation does not take away the impact, any more than not telling a patient about a serious long-term illness takes away the impact of that illness.

Also from this issue

Lead Essay

  • In this month’s lead essay, Cato Institute adjunct scholar Arnold Kling draws from his book, Crisis of Abundance, to argue that the health coverage most Americans enjoy is not insurance at all, but what he calls “insulation.” “The problem with insulation,” Kling argues, “is that it is not a sustainable form of health care finance… Insulation leads people to over-consume health care services. Americans make extravagant use of services that have high costs and low benefits.” Kling explains how real health insurance would work, and how it would help solve the crisis in health care, and explores how we could transistion to a system over time institutionally and culturally in order to resolve the inconsistent demand for insulation and affordable, effective care.

Response Essays

  • According to health care strategist Matthew Holt, Arnold Kling is correct that consumer insulation from the costs of “premium medicine” is partly responsible for the rising cost of health care, but Holt dissents from Kling’s solution. Holt examines what he takes to be the three main strategies for dealing with “the insulation and overuse of medical care in the U.S.”: a nationalized “single payer system; a system of “managed competition”; and “individual consumer control of spending at the point of service.” Holt argues that the latter two options face deep problems, and that a nationalized single-payer system “is the likeliest outcome in perhaps a decade or so,” even it is not politically feasible at present. “Kling has provided a decent analysis,” Holt argues, “but has proposed a solution that both ignores the political and cultural realities of the health care system, and probably wouldn’t even work in theory.”

  • Clark C. Havighurst agrees with Kling’s “diagnosis of what’s wrong with health care” in the U.S. “as far as it goes.” Havighurst goes further and digs into the reasons the U.S. health system “has evolved into an entitlement program under which everyone expects nothing less than the very best that ‘modern medicine’ has to offer.” Havighurst lays the blame at the feet of the government’s choice to subsidize the purchase of health care by “excluding the cost of employer-sponsored coverage from employees’ taxable wages and income” and lucidly details three different mechanisms by which the tax subsidy insulates workers, consumers, and voters from the costs of health care. Havighurst proposes that “something approaching [liberals’] goal of universal health coverage could be achieved by ending the current tax subsidy and offering refundable tax credits of, say, $6000 to families that spend at least that amount in health plan premiums or contributions to a health savings account.”

  • Jonathan Cohn, a senior editor at the New Republic, agrees with Kling that our current health care system doesn’t function according to the widely understood principles of individual insurance, but he doubts we’d do better at fighting rising costs and maintaining quality if citizens with “real” insurance were free to take price into account in their choice of care. “We have precious little evidence to believe that people can distinguish good care from bad care,” Cohn writes. And the notion that consumer choices will improve over time is, according to Cohn, “a lovely idea, but one that seems highly dubious.” Cohn argues that we need a broader notion of insurance – social insurance – to shield people not only against unexpected illness and harm, but against “genetic and economic bad luck.” Cohn argues that many nations do just fine in managing the cost/quality tradeoffs inherent in a state-controlled system of universal coverage, and that Americans would be happy with such a system “if only they knew how those systems really worked.”