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Regarding insurance in the USA, I saw a paper by Milton Friedman in the 1970s who was evaluating the impact of government involvement in the healthcare industry

by nirvana 15y ago

Regarding insurance in the USA, I saw a paper by Milton Friedman in the 1970s who was evaluating the impact of government involvement in the healthcare industry. Prior to 1901, healthcare in the USA was completely private (charities are considered private as well, since they aren't controlled by government.) Between 1901 and the 1970s the US government at all levels started to take over health care, by funding hospitals, and by regulating everything. He found that, as of the mid 1970s, this intervention had driven up costs 26fold, and had reduced availability, by an amount I can't remember. Since then I'm sure the impact is even worse. But if you just use that number-- a $100,000 operation that might bankrupt you would have cost $3,846.15 if government hadn't gotten involved. So the impact of government is going from a cost you could afford to put on a credit card to bankruptcy.

gcv 15y ago
Do you happen to have a link to that Friedman paper?
- nirvana 15y ago
  It was a couple of years ago, and so my memory is off, and I can't seem to find the exact article I read. It appears there was a study done in 1992 which had similar results (I wouldn't be surprised at either possibility: I misremembered it as the 1970s, or there was a different study done in the 1970s by Friedman, as the particulars I remember are a bit different, 1901-1970 instead of 1944-1989.) Found this, which gives a figure of 10X for a "hospital bed" "In 1992, the Hoover Institution published an essay by Milton Friedman titled "Input and Output in Medical Care," http://mises.org/daily/3793 http://mises.org/daily/3793 And also: "Some years ago, the Nobel-laureate economist Milton Friedman studied the history of healthcare supply in America. In a 1992 study published by the Hoover Institution, entitled "Input and Output in Health Care," Friedman noted that 56 percent of all hospitals in America were privately owned and for-profit in 1910. After 60 years of subsidies for government-run hospitals, the number had fallen to about 10 percent. It took decades, but by the early 1990s government had taken over almost the entire hospital industry. That small portion of the industry that remains for-profit is regulated in an extraordinarily heavy way by federal, state and local governments so that many (perhaps most) of the decisions made by hospital administrators have to do with regulatory compliance as opposed to patient/customer service in pursuit of profit. It is profit, of course, that is necessary for private-sector hospitals to have the wherewithal to pay for healthcare. Friedman's key conclusion was that, as with all governmental bureaucratic systems, government-owned or -controlled healthcare created a situation whereby increased "inputs," such as expenditures on equipment, infrastructure, and the salaries of medical professionals, actually led to decreased "outputs" in terms of the quantity of medical care. For example, while medical expenditures rose by 224 percent from 1965–1989, the number of hospital beds per 1,000 population fell by 44 percent and the number of beds occupied declined by 15 percent. Also during this time of almost complete governmental domination of the hospital industry (1944–1989), costs per patient-day rose almost 24-fold after inflation is taken into account." http://mises.org/daily/3586 http://mises.org/daily/3586 The 24 fold figure above may well be where I got the "26 fold" claim I made. Since the government has been running a deficit for a long time, including the period of the study, taking inflation into account is appropriate. Inflation is what happens when the government spends more than it take in, it prints the extra money. The impact of inflation on an economy is the devaluation of the unit of currency, causing a rise in the prices of everything denominated in that currency, including health care.
vondur 15y ago
Prior to 1901, healthcare was not very advanced. I'm guessing the rise of technology, doctor credentialing, and the development of most modern drugs may have something to do with the price increase.
- einhverfr 15y ago
  That can only account for half the increase, since the countries with the next highest cost for health care spend roughly 50% per capita compared to the US...... I would instead say the problem is: 1: Monopolies and oligopolies (patents, letting the AMA control medical school accredation, etc). Solution is to charter mini-AMA's to provide competition, and to enact compulsatory licensing of patents in medical fields. 2: The fact that the health care and health insurance markets are both entirely consumer opaque. Consumers don't have any control over their money in these markets and the common-sense protections are missing. For example, when I go to get my car worked on, I have a right to a written estimate before repairs are begun. Why don't I have a right to a written estimate before non-emergency medical care is provided? The first thing you have to recognize is that when Democrats and Republicans both talk about reforming our medical system to address these, they believe that more corporate power, and less consumer power will correct this problem. Unfortunately, pricing is a coercive negotiation, and so that will only accelerate the problem. Empower consumers. Disempower corporations. Bring prices down.
- nirvana 15y ago
  Advances in technology drive down costs, not the reverse. They prevent diseases, reduce the need for more expensive procedures, etc. Credentialling of doctors as it currently stands is an artificial guild system which restricts the number of doctors. It doesn't make medicine safer, but does increase doctor salaries. This is one of the ways government interferes with healthcare to artificially restrict supply-- the AMA did some effective lobbying once upon a time. Drugs also reduce the need for hospital stays and thus costs by curing or preventing conditions that would otherwise get worse.

by nirvana 15y ago

gcv 15y ago

Do you happen to have a link to that Friedman paper?

nirvana 15y ago
It was a couple of years ago, and so my memory is off, and I can't seem to find the exact article I read. It appears there was a study done in 1992 which had similar results (I wouldn't be surprised at either possibility: I misremembered it as the 1970s, or there was a different study done in the 1970s by Friedman, as the particulars I remember are a bit different, 1901-1970 instead of 1944-1989.) Found this, which gives a figure of 10X for a "hospital bed" "In 1992, the Hoover Institution published an essay by Milton Friedman titled "Input and Output in Medical Care," http://mises.org/daily/3793 http://mises.org/daily/3793 And also: "Some years ago, the Nobel-laureate economist Milton Friedman studied the history of healthcare supply in America. In a 1992 study published by the Hoover Institution, entitled "Input and Output in Health Care," Friedman noted that 56 percent of all hospitals in America were privately owned and for-profit in 1910. After 60 years of subsidies for government-run hospitals, the number had fallen to about 10 percent. It took decades, but by the early 1990s government had taken over almost the entire hospital industry. That small portion of the industry that remains for-profit is regulated in an extraordinarily heavy way by federal, state and local governments so that many (perhaps most) of the decisions made by hospital administrators have to do with regulatory compliance as opposed to patient/customer service in pursuit of profit. It is profit, of course, that is necessary for private-sector hospitals to have the wherewithal to pay for healthcare. Friedman's key conclusion was that, as with all governmental bureaucratic systems, government-owned or -controlled healthcare created a situation whereby increased "inputs," such as expenditures on equipment, infrastructure, and the salaries of medical professionals, actually led to decreased "outputs" in terms of the quantity of medical care. For example, while medical expenditures rose by 224 percent from 1965–1989, the number of hospital beds per 1,000 population fell by 44 percent and the number of beds occupied declined by 15 percent. Also during this time of almost complete governmental domination of the hospital industry (1944–1989), costs per patient-day rose almost 24-fold after inflation is taken into account." http://mises.org/daily/3586 http://mises.org/daily/3586 The 24 fold figure above may well be where I got the "26 fold" claim I made. Since the government has been running a deficit for a long time, including the period of the study, taking inflation into account is appropriate. Inflation is what happens when the government spends more than it take in, it prints the extra money. The impact of inflation on an economy is the devaluation of the unit of currency, causing a rise in the prices of everything denominated in that currency, including health care.

vondur 15y ago

Prior to 1901, healthcare was not very advanced. I'm guessing the rise of technology, doctor credentialing, and the development of most modern drugs may have something to do with the price increase.

einhverfr 15y ago
That can only account for half the increase, since the countries with the next highest cost for health care spend roughly 50% per capita compared to the US...... I would instead say the problem is: 1: Monopolies and oligopolies (patents, letting the AMA control medical school accredation, etc). Solution is to charter mini-AMA's to provide competition, and to enact compulsatory licensing of patents in medical fields. 2: The fact that the health care and health insurance markets are both entirely consumer opaque. Consumers don't have any control over their money in these markets and the common-sense protections are missing. For example, when I go to get my car worked on, I have a right to a written estimate before repairs are begun. Why don't I have a right to a written estimate before non-emergency medical care is provided? The first thing you have to recognize is that when Democrats and Republicans both talk about reforming our medical system to address these, they believe that more corporate power, and less consumer power will correct this problem. Unfortunately, pricing is a coercive negotiation, and so that will only accelerate the problem. Empower consumers. Disempower corporations. Bring prices down.
nirvana 15y ago
Advances in technology drive down costs, not the reverse. They prevent diseases, reduce the need for more expensive procedures, etc. Credentialling of doctors as it currently stands is an artificial guild system which restricts the number of doctors. It doesn't make medicine safer, but does increase doctor salaries. This is one of the ways government interferes with healthcare to artificially restrict supply-- the AMA did some effective lobbying once upon a time. Drugs also reduce the need for hospital stays and thus costs by curing or preventing conditions that would otherwise get worse.