A great deal of the current health care debate is centered on the economics of health care. The costs to both government and individuals for health care in the future is thought by many to present a crisis or near-crisis situation. Many feel that the situation should be addressed through applied economics. This approach often views health care as a sort of unique service or good. That is, many feel that health care is different from, say, automobile care because human beings are so very different from cars and it is both inaccurate and unethical to treat a visit to the doctor as though it is governed by the same economic principles as health care. After all, don’t people value themselves infinitely more than a car and take care of themselves in completely different ways from how they would care for their car?
My short answer to this is that the same exact laws of economics apply to health care as any other good or service. The same laws of supply and demand apply. The same concepts of elasticity of demand apply. The same concepts of substitutions apply. All of the many intricate concepts apply.
I think people get “caught up” and confuse health care as not falling under these rules for two key reasons: 1) there is such a high demand for health care – it really seems to dwarf the demand for anything else (I’ll explain in a moment that it doesn’t actually when one simply thinks of things like water, food, shelter, relationships, etc.); and 2) there are indeed some terribly tragic anecdotes and empirical evidence concerning lack of access to health car. I will address both of these.
1) Demand – Even if the demand for health care dwarfs the demand for any other good or service it still follows the same exact laws of economics. The only difference is simply that the demand is extremely high. “As demand increases, supply decreases” is a central tenet of economics (along with the several converse scenarios: demand decrease yields supply increase, supply increase yields demand decrease, etc.). I can still hear my first economics professor repeating this over and over as he lifted his right hand toward the ceiling and lowered his left hand in the direction of the floor.
But, as I said, I don’t think that health care necessarily dwarfs that of other goods and services. Water, food, shelter, and human interaction, are just a few examples of human demands that are arguably just as strong, if not stronger than that of health care.
2) Tragedy – The tear-jerking, heart-rending nature of human suffering creates a very strong impression that health care is unique – “it is unlike any other good or service and it is wrong to let anyone with badly needed care go without simply because he or she cannot afford it” is what many might say. Two things can help clear this notion up to improve the analysis. First, a great deal of health care is not of the “emergent and tragic” kind – rather, it is of the variety of yearly check-ups, preventative care, “better-safe-than-sorry care”, etc. So the response to the tragic nature of unmet health care needs should be taken with that in mind. Second, as tragic as unmet health care need is, there are plenty of other “equally tragic” problems in the world (and in this country). Here again, what about the tragedy of in-access to uncontaminated water, sufficient and nutritious food, sufficient shelter, human companionship, an attorney to free a wrongfully convicted criminal (or an affordable attorney in any horribly unjust situation)? What about the demand for travel in emergent situations to get to loved ones; what about the demand for a legal same-sex marriage when one is forbidden from marrying the one he or she loves; what about the demand for not losing a loved one to a military “back-door” draft? Aren’t any of these as bad as a health care situation?
Some might respond by saying “Well, those things don’t happen that frequently and there is nothing much we can do about them anyway.” My disagreement and response to that is “How do you know?”
I hope that I won’t be misunderstood here. I really do hope for a happy and healthy world without suffering. But I also think this requires realism: health care is a service or good just like any other and therefore any attempts to improve it or increase it by anyone will be governed by the exact same laws of economics. Some would say that to imagine what more public health care would be like, one should think of the Post Office or DMV – but that is perhaps a topic for another post on another day – perhaps.
My short answer to this is that the same exact laws of economics apply to health care as any other good or service. The same laws of supply and demand apply. The same concepts of elasticity of demand apply. The same concepts of substitutions apply. All of the many intricate concepts apply.
I think people get “caught up” and confuse health care as not falling under these rules for two key reasons: 1) there is such a high demand for health care – it really seems to dwarf the demand for anything else (I’ll explain in a moment that it doesn’t actually when one simply thinks of things like water, food, shelter, relationships, etc.); and 2) there are indeed some terribly tragic anecdotes and empirical evidence concerning lack of access to health car. I will address both of these.
1) Demand – Even if the demand for health care dwarfs the demand for any other good or service it still follows the same exact laws of economics. The only difference is simply that the demand is extremely high. “As demand increases, supply decreases” is a central tenet of economics (along with the several converse scenarios: demand decrease yields supply increase, supply increase yields demand decrease, etc.). I can still hear my first economics professor repeating this over and over as he lifted his right hand toward the ceiling and lowered his left hand in the direction of the floor.
But, as I said, I don’t think that health care necessarily dwarfs that of other goods and services. Water, food, shelter, and human interaction, are just a few examples of human demands that are arguably just as strong, if not stronger than that of health care.
2) Tragedy – The tear-jerking, heart-rending nature of human suffering creates a very strong impression that health care is unique – “it is unlike any other good or service and it is wrong to let anyone with badly needed care go without simply because he or she cannot afford it” is what many might say. Two things can help clear this notion up to improve the analysis. First, a great deal of health care is not of the “emergent and tragic” kind – rather, it is of the variety of yearly check-ups, preventative care, “better-safe-than-sorry care”, etc. So the response to the tragic nature of unmet health care needs should be taken with that in mind. Second, as tragic as unmet health care need is, there are plenty of other “equally tragic” problems in the world (and in this country). Here again, what about the tragedy of in-access to uncontaminated water, sufficient and nutritious food, sufficient shelter, human companionship, an attorney to free a wrongfully convicted criminal (or an affordable attorney in any horribly unjust situation)? What about the demand for travel in emergent situations to get to loved ones; what about the demand for a legal same-sex marriage when one is forbidden from marrying the one he or she loves; what about the demand for not losing a loved one to a military “back-door” draft? Aren’t any of these as bad as a health care situation?
Some might respond by saying “Well, those things don’t happen that frequently and there is nothing much we can do about them anyway.” My disagreement and response to that is “How do you know?”
I hope that I won’t be misunderstood here. I really do hope for a happy and healthy world without suffering. But I also think this requires realism: health care is a service or good just like any other and therefore any attempts to improve it or increase it by anyone will be governed by the exact same laws of economics. Some would say that to imagine what more public health care would be like, one should think of the Post Office or DMV – but that is perhaps a topic for another post on another day – perhaps.
in regards to the post-office analogy. see #2 at this link: http://www.salon.com/opinion/feature/2009/08/24/town_halls/index.html
ReplyDeleteInteresting that Obama dissed the post office - but contrary to what the author argues I think it is difficult to make a strong and effective argument that the post office is a good example to follow (for one thing I've never been a fan of dropping a letter in a box and not knowing with certainty whether it got through without talking with the recipient).
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