Organization: Penn State University
Date: Mon, 14 Dec 1992 19:43:44 EST
From: <DGS4@psuvm.psu.edu>
Newsgroups: talk.politics.medicine
Subject: Re: HIAA and Reform

In article <1992Dec14.141257.1@ssrl01.slac.stanford.edu>,
tcox@ssrl01.slac.stanford.edu (Tony Cox - (415)926-3105) says:
>
>In article <92347.091708DGS4@psuvm.psu.edu>, <DGS4@psuvm.psu.edu> writes:
>> In article <1992Dec11.153702.1@ssrl01.slac.stanford.edu>,
>> tcox@ssrl01.slac.stanford.edu (Tony Cox - (415)926-3105) says:
>>>
>>>In article <92344.115628DGS4@psuvm.psu.edu>, DGS4@psuvm.psu.edu writes:
>>>> In article <1992Dec8.171033.1@ssrl01.slac.stanford.edu>,
>>>> tcox@ssrl01.slac.stanford.edu (Tony Cox - (415)926-3105) says:
>>>>
>>>>>   If you were to choose 2, as I would hope, you may end up
>>>>>   concluding that a free market is the most effective means of
>>>>>   providing the diversity required.
>>>>
>>>> {DGS}
>>>> This presumes, of course, that a free and profitable market for
>>>> health insurance will continue to exist....
>>>
>>>  {TC}
>>>   Continue to exist eh? It doesn't exist now....
>>>
>>>   To show me that a free market system cannot deliver the goods,
>>>   first give me a free market. Otherwise you should perhaps drag your
>>>   ailing straw man somewhere else.
>>
>> I wasn't aware I was talking straw men.  I was describing the current
>> conditions in the private health insurance market.  I am curious why you
>> think a private market will work in health insurance.
>
>   Dennis. Your straw man is that the existing health care system is a
>   free market. Having decided upon this particular fantasy, you then
>   proceed to attack it using phrases such as 'market breakdown',
>   which are supposed to justify your preferred scenario, even greater
>   state interference in the market.

I think part of the problem is that you and other libertarians believe
that a free market, in the sense of no government involvement, could
exist.  I look at the current system and see that many of the
problems result from elements (asymmetry of information, adverse selection,
decision-making under uncertainty) which would exist whether or not the
government intervened or not, even if the latter were possible in practice.
I am not looking for more or less state interference in the market, merely
one which is better than the current type of interference.

You, on the other hand, compare the current state to some idealized,
nonexistant free market can conclude that government is the problem.
I'm quite willing to apportion blame.  Part of the reason for the
breakdown of the market is the increased use of state mandates, the
interpretation by the courts that ERISA allows employers to avoid
these state regulations, thus making purchased insurance uncompetitive
with self-insurance, and the increased use by Medicare of its market
dominance to lower its costs.


>
>   I cannot answer your question about why I think a `private market'
>   might work, because I have no idea what you might mean by the phrase.
>   My dictionary has a gaping hole between "private law" and "private
>   parts", and you have twice ignored my requests for clarification.

Why don't you start by telling me what you mean by a private market?
Frankly, I don;t recall seeing your requests for clarification.  Sorry, but
I don't read every post you make.

>
>>>
>>>   {TC}
>>>   What do you mean by market failure? Seems to me like the market is
>>>   responding in classic textbook fashion to the constraints placed
>>>   upon it.
>>>
>>>   o - Doctors, through the medical licensing boards, control the
>>>   qualifications and so indirectly the _number_ of new doctors
>>>   entering the field. This, and the state granted monopoly that they
>>>   enjoy, has generated salaries around 6x the average wage. (Cf.
>>>   Canada 4x and UK 2x, neither free markets BTW, but clearly such
>>>   practices never _decrease_ salaries).
>>
>> {DGS}
>> As I've noted elsewhere, licensing raises physicians income, but, in
>> theory, cannot be traced to an effect on medical care prices, since
>> it may also have an effect on the demand curve.  In practice, I would
>> agree that it has raised prices, thus raising the cost of health insurance.
>> By how much?  I don't know, but I should wouldn't want to base my
>> argument on this.
>
>   I love economists. Here for the layman is a translation:-
>   "Doctors can jack up their prices to such an extent that people
>   cannot afford to go to them anymore". If this isn't the populist
>   justification for the current `debate', I'd like to know what is.

Tony, if you are thinking of leaving your day job to translate
economics-----English, DON'T.  You have no future.

Has licensure raised medical prices?  If I had to fall off the fence, I'd
say yes, but there is very little evidence on the subject.  Is that what I
would base my arguments on why the private market for insurance isn't
working well?  No way.  There are quite a few factors I'd rank way ahead of
that one.

Dennis G. Shea, Penn State