Get Wonky: Healthcare, Cell Phones, and Ben Shapiro

First off: That picture of Paul Ryan isn’t mine. I mean, obviously. Win McNamee/Getty Images.

So, by now you’ve heard that the Republicans in Washington have released their plan to replace Obama’s Affordable Care Act (ACA). They call it the American Health Care Act (AHCA). And also by now, you’ve heard that Congressman Jason Chaffetz (R-UT) said that if people were having trouble paying for their insurance, they should buy fewer phones:

Well we’re getting rid of the individual mandate. We’re getting rid of those things that people said they don’t want. And you know what? Americans have choices. And they’ve got to make a choice. And so, maybe rather than getting that new iPhone that they just love and they want to go spend hundreds of dollars on that, maybe they should invest it in their own health care. They’ve got to make those decisions for themselves.

Now, Chaffetz admitted that he didn’t make his comments “as smoothly as [he] possibly could,” so let’s be charitable and figure that he just misspoke. He wasn’t implying that there are a lot of people running around with the disposable income to buy either a phone or critical health care coverage (and that those people were choosing the former). Rather, he was trying to say (and this is speculative, but it is charitable speculation, so we’ll allow it) that citizens, as responsible consumers, need to make smart decisions with their purchases. And you know what? He’s absolutely right.

When a consumer is presented with options, especially high-value options, they have choices to make, and in a world of limited resources, that means opportunity costs, right? Spending resources on one choice necessarily means that the other choice has to be rejected. From an economic point of view, this makes sense: if it’s a choice between a cell phone or insurance, you need to make the most responsible decision, and it’s not the government’s job to make that decision for you.

Here’s the thing, though: Healthcare cannot be treated as a commodity, and for one simple reason: it doesn’t respond to supply and demand.

A simple example: as a smart consumer, I can make decisions between cell phones (keeping with the original terms). I can compare features, coverage maps, available accessories, and price. I can choose one over the other. If I pick the Android over the iPhone, Apple can decide to lower its prices to try and attract more consumers. If it drops its price low enough, it will sell out quicker, leading to scarcity, meaning that the price will rise. This isn’t hard, right? This is basic Econ. This is the most basic econ.

At it’s root, that little scenario is about choices, between Androids or iPhones. And that’s what Chaffetz, and, more broadly, the modern Republican party, is saying about healthcare. They want to give us more choices. They want to open up markets, reduce regulations, and eliminate taxes. Choice leads to competition, competition leads to lower prices. Consumers win. That’s true. We know that’s true. If you don’t believe me, look at the previous paragraph.

Here’s the thing: in that example with the phones, there’s a third choice that’s implied but unspoken: I can walk away. I can choose to pick neither phone. I can keep my money in my pocket, leave the store, and do something else. That’s not a choice I have with healthcare, and that’s what gets ignored so often in these debates. If I have diabetes, or cancer, or depression, or any number of medical problems, I can’t walk away (not if I want to maintain my quality of life). There might be any number of insurance providers, but there is a floor for prices, because at the end of the day, I can’t walk away. The demand is constant. It is always high.

The demand is infinite.

To put it another way, the demand is inelastic, which means that the demand does not change depending on the supply. Ben Shapiro makes this point about other utilities (specifically emergency services and the military) in an article for the Daily Wire. He writes that “Demand is also generally inelastic for police and fire — nobody calls the police and fire because they have access to them.”

Shaprio goes on to talk about how health care is elastic, because the level of health care you get is based on your access to it, but I think it’s pretty clear I disagree with that, and I think you will to as soon as you break a leg: your demand for a splint has nothing to do with what care is available. My demand for antidepressants is not determined by the supply of antidepressants. Does a diabetic need less insulin when he has no access to healthcare?

I could go on.

Shapiro is arguing from a point of fundamental divergence from me. He’s got very strong views about the role of government, and I have no doubt he’d be pretty disgusted with my opinions about it. Shapiro writes that

So what about health care? It is both rivalrous and excludable. If there is one doctor, his services are limited. And you do not have a right to his services. The cost to adding your health care to mine is double. It is a commodity more like a hammer or an apple than it is like fire service or police service. Health care is also the most personal good you can imagine, not a public good in any real way — every solution has to be individually tailored to you, or it will not work.

 

I don’t disagree with the individual nature of health care, at all. And I don’t even disagree with his statement about costs. Healthcare isn’t cheap (although if everybody in the country had it, say, through a mandate, it would be cheaper). But I think it is a public good. Here’s why:

I’m going to start from the assumption that we won’t allow people to die in the streets. I’m sure Shapiro would agree that that isn’t defensible, from a moral point of view. But more importantly, it’s indefensible from a practical point of view.

Since we won’t let people die in the streets, we have to treat them. But if they don’t have insurance, they can only access treatment when their condition becomes severe enough that they have to go to the ER. At that point, it’s more expensive to treat them than it would have been to prevent the illness in the first place (to be fair, it would be even cheaper to not provide the ER service at all, although maybe the street cleanup would eat into some of those savings). It’s the old “an ounce of prevention is worth a pound of the cure” kind of thing. Treating somebody for a gangrenous leg costs the taxpayer far more than simply treating the little cut in the first place.

Basically, this boils down to this: yes, health care is an individual good, but it is in the best interests of society as a whole to have a population as healthy as possible. The sicker a population is, the more expensive it is. It might have more up-front costs, but in the long run, you save more money and run more productively.

It’s all about outcomes. All things being equal, a healthier society produces better outcomes than a sicker one.

Anyway, ACA had a lot of problems. And AHCA is going to create a whole lot more.



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7 replies

  1. Alternatively:

    “Yes, education is an individual good, but it is in the best interests of society as a whole to have a population as educated as possible. The more ignorant a population is, the more costly mistakes it makes. It might have more up-front costs, but in the long run, you save more money and run more productively.”

    Assuming that is true, you, an individual, look at the current panorama and decide that not enough education is being provided. You create a blog and try to educate the masses, all at a cost to yourself, that you hope will payoff, eventually. (“I will scratch your back now and hope someone will scratch mine later.”)

    Some days later, for whatever reason, you are at a situation that requires medical care. You call a doctor, you explain the situation to him. You say you can not pay with money, but you hope that, as you provided a public good on the past for free, the doctor may, in kind retribution, provide his public good for free to you. The doctor refuses, says he does not see any value on what you did and insists you must pay with money. What do you do then? He could be a liar, that read your blog everyday and liked it very much, but decided to negotiate strongly to his advantage, but he could also be telling the truth.

    But that is all conjecture that is being done now. Thinking like that, you could anticipate that you would be at a disadvantage if you provided things for free in hope of later payment, then you could go to the doctor now and say: I will provide education as a public good for free, if and only if you enter a contract with me with a clause that guarantees you will provide me your public good for free when the need arise. Also, you could include a clause that said you could kill him if he broke his promise. If you made that contract public enough, most likely no one would want revenge on you if you were to kill him for breach of contract (and they agreed that he was the party at fault).

    That kind of arrangement would work on a small village, or if you were happy to not wander to far away from the geographical area that doctor is able to cover. In other cases, for example, if you were a frequent traveler, it would be economically unwise to contact and negotiate with all the doctors of the country, as the negotiation costs would be way too high.

    On another level, anticipating that, you could then contract a insurance company to do the negotiation for you. It could even be a government, if you did not mind their use of compulsion.

    Sometimes I think that is the allure of the government: it can achieve an outcome more cheaply by using compulsion. Instead of “wasting” time with multiple rounds of negotiation, the guy with the gun may solve it all with a threatening pose and some edicts.

    I hope your your motto (“Infrequently Relevant. Occasionally Coherent.”) is not exclusive for the editor posts, as I think it could apply to some of my comments.

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  2. The motto used to be “Policy & Politics In Georgia,” but after the state legislature concluded, I started talking about other stuff, so I felt like I needed a new headline.

    …huh. I mean, I think I get what you’re saying, but fundamentally, I think we come to different conclusions about the State. Look, don’t misunderstand me, I know my history. I know the terrible things governments do. I know what terrible things MY government is doing right now, and trust me, I’m not happy about it. But I don’t have the inherent distrust of State power that you seem to. Really, it comes back to Hobbs for me. We need a Common Power to keep us from killing each other. If that’s something other than the State, I’m fine with that.

    Also, push back: isn’t your entire hypothetical scenario the way money works? A series of contracts and guarantees that don’t really actually MEAN anything, but everybody kind of pretends they do?

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  3. Kinda. Like when I say to you “meet me at the river tomorrow”, the word “river” needs not to be well defined, we both may have totally different ideas of what a river TRULY is, but our arrangement works as long as your appear where I need you to be.

    That “Common Power” does not necessarily have to exist. People only have to believe that it exists. That is why religion sometimes can compel people to not commit crimes.

    “Most censorship is self-censorship, because people know they might be watched.”
    “The threat of observation changes behavior, even if the observation could never happen.”
    –Bruce Schneier

    On my experience, it seems that most people who are attracted to carry that power you speak of are followers of ideas like:

    “If, though unjust, I acquire the reputation of justice, a heavenly life is promised to me. Since then, as philosophers prove, appearance tyrannizes over truth and is lord of happiness, to appearance I must devote myself. I will describe around me a picture and shadow of virtue to be the vestibule and exterior of my house; behind I will trail the subtle and crafty fox, as Archilochus, greatest of sages, recommends. But I hear some one exclaiming that the concealment of wickedness is often difficult; to which I answer, Nothing great is easy. Nevertheless, the argument indicates this, if we would be happy, to be the path along which we should proceed. With a view to concealment we will establish secret brotherhoods and political clubs. And there are professors of rhetoric who teach the art of persuading courts and assemblies; and so, partly by persuasion and partly by force, I shall make unlawful gains and not be punished.”

    I would be deceiving myself with some sort of gambler’s fallacy if I were to believe that things would even out in the future to counter-balance the previous stream of bad luck of having that sort of people on the power seats.

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    • Those are good points, and I’ll admit I don’t have a good response to that. Anyone who tries to argue that our leaders always have our best interests at heart is up against a pretty significant historical precedent arguing the exact opposite, so I won’t try it. The extent to which we should be ruled versus how much we should rule ourselves is tricky, and I don’t pretend to have all, or even some of the answers.

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