One Economist's Thoughts On the Health Care Debate

You cannot visit an economics blog in the summer of 2009 without seeing a post on U.S. health care reform. I must admit, I have been been enjoying reading much of the back-and-forth, such as that between Bryan Caplan and Paul Krugman.

It is getting difficult to separate the signal from the noise in the health care debate as much of it is reaching Jerry Springer levels of arguments. A lot of the noise, though, can be reduced if you follow a few common-sense rules:

Common Health Care Arguments Which Are Unhelpful

• Couching the debate as free-market vs. government control is not particularly helpful. Health care in the United States is already very highly regulated amd government expenditures in the area are quite high. The debate is (or at least, should be) rather which types of government programs will yield superior outcomes. The argument is sometimes made to have government out of the medical arena entirely, but that is very unlikely to happen.
  
  
• Similarly, any arguments coming from obviously partisan source should be suspect, or at least examined very closely. For obvious reasons.
  
  
• Cross-country comparisons based on raw health data such as life expectancy are useless. Just because Canadians have a higher life expectancy than Americans does not necessarily mean that 'Canadianizing' the U.S. health care system will lead to improved outcomes. There are too many confounding factors such as demographics, culture, non-health care related public policy for this to be a meaningful yardstick.

There are, of course, a number of good arguments on either side of the debate. One is to examine what happened when a particular reform was enacted in a particular country. Suppose the United Kingdom introduced a health reform in 1995. We could examine health care outcomes in the pre-1995 and post-1995 periods in order to get an understanding for the effects of the reform. There are still difficulties with the approach - there is no guarantee that the reforms were the major driver causing the differences between the two periods. As well, a similar reform may have different effects in the United States as it did in the United Kingdom as there are differences in the countries.

The more I think about the problem, however, the more I wonder if health care reform is going about the problem the wrong way.

What Is the Purpose of Health Care Reform?

There is naturally a political purpose to the reforms. For the time being, however, we will ignore that and consider what the practical aims should be. This may be an overly simplistic view, but to me the problem is to maximize the health of the population while minimizing costs.

If that is the case, then I wonder if health care reform is the best method in which to efficiently improve the health of Americans. For instance, the Wall Street Journal reports:

"The findings were released at a conference on obesity held by the CDC in Washington, D.C. The prevalence of obesity rose 37% between 1998 and 2006, and medical costs climbed to about 9.1% of all U.S. medical costs, the researchers said.

Obese people spent 42% more than people of normal weight on medical costs in 2006, a difference of $1,429, the study found. Prescription drugs accounted for much of the increase."

Reducing obesity rates, ceteris paribus would both reduce health care costs and improve health outcomes. The WSJ gives one possible policy option:

"In his speech Monday, Dr. Frieden—who became CDC director in June—said measures that had worked to control tobacco, such as taxes and reducing exposure, could help control obesity, too. Those could include a tax on sugar-sweetened beverages. A 10% price increase on sugared beverages could reduce consumption 7.8%, he said."

Similar solutions can be had for problem such as air pollution:

"Every year, there are approximately 6,000 additional deaths in Canada because of short-term exposure to air pollution, and research suggests that 69 per cent of these deaths are from heart disease and stroke, the Heart and Stroke Foundation reported Monday in its 2008 report card on the health of Canadians.

A Pigouvian tax on sources of air pollution could reduce these deaths and may come at no economic cost at all if other taxes, such as income taxes, are reduced.

Another possibility would be to get rid of the public policies which are helping to increase public health bads such as obesity rates. Matthew MacLean from the Christian Science Monitor:

"We're producing way too much corn. So, we make corn sweeteners. High-fructose corn sweeteners are everywhere. They've completely replaced sugar in sodas and soft drinks. They make sweet things cheaper..."

"And we subsidize this overproduction... The great beneficiaries are the processors that are using corn domestically. We're subsidizing obesity.

Eliminating these subsidies would improve both economic efficiency and health outcomes in the United States.

There are a number of ways to improve the health of Americans. Although I am entertained by the current debate, I do hope economists can provide a helpful policy discussion free of partisanship and ideological bias.