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Tuesday, June 29, 2010

Taming the Beloved Beast: How Medical Technology Costs Are Destroying Our Health Care System

Daniel Callahan has written a bracing and exasperating book on health care policy. It is bracing in its realistic assessment of the tradeoffs and dilemmas facing U.S. policymakers, but exasperating in its assessment of the relative merits of using market processes or government intervention to resolve these issues.

Callahan, a senior scholar at Yale, makes the following major points:

  1. Americans spend an ever-increasing share of national income on health care.
  2. Much of that increased spending goes for procedures that use advanced medical technology.
  3. Medicare recipients are participating in this spending surge; as a result Medicare cannot be sustained financially without substantial changes.
  4. European governments control health spending by restricting supply in the health care industry.
  5. To incorporate supply restrictions in the United States, our cultural values would have to change.

On the last point, Callahan elaborates:

American health care is radically American: individualistic, scientifically ambitious, market intoxicated, suspicious of government, and profit-driven. I put changing those values within health care in the class of a cultural revolution . . . .

The medical model that needs change encompasses a combination of Manichean and utopian values: that suffering . . . is inherently evil; that death is intrinsically wrong . . . and that endless medical progress should be pursued.

Overall, this makes for a much more sober view of the health care issue than what was reflected in the recent debate over health care reform. During that debate policy wonks made frequent references to “bending the cost curve,” promising to make this a painless process with reforms such as electronic medical records and crackdowns on Medicare fraud.

Callahan argues that “such efforts can be likened to one of the endemic problems of end-of-life care, that of embracing hope and unlikely treatments and of refusing to grant the obvious fact that the patient is dying.” That is, we don’t know when to give up. Callahan does.

Although Callahan sees it as a serious failing that many Americans lack health insurance, he also believes that those who are insured have excessive coverage. His preference, to be imposed by law, would be to ban insurance coverage for many drugs and medical procedures he deems wasteful, such as reproductive assistance for women over 35 and joint surgery for individuals over 65 who want to continue an athletically active life. Callahan views the issue of insurance coverage as a concern for public policy—saving resources for the things he regards as most important—not a matter for personal choice based on market prices.

In Callahan’s opinion, we Americans spend too much of our health care money on the elderly and not enough on younger people. As he puts it, “[A] health care system should help young people to become old, but not to help the old to become even older.” He recognizes the role that Medicare plays in distorting the distribution of health care, by taking income away from working-age families and using it to subsidize health care for the elderly. Rather than recommend eliminating or reducing this distortion, however, his approach would be to use government policy to steer health resources in his preferred direction.

Unsurprisingly, Callahan has minimal faith in markets and maximum faith in government. He writes, “A regulation-free, unfettered competition offers no reasonable possibility of controlling costs. The attraction of technology for patients and physicians, abetted by energetic and relentless industry marketing, has shown itself capable of overwhelming the private sector’s control efforts.” He continues that the trouble with the free market is that it allows individuals to maximize their own well-being rather than the well-being of “the system,” therefore compelling government to force “an accountability that is absent in private sector medicine.”

Thus Callahan paints a picture of the private sector as a brutal jungle, with suppliers relentlessly forcing their expensive technologies on helpless consumers. Adam Smith’s famous observation that we do not need the benevolence of the baker to put bread on our table seems to have eluded Callahan. He certainly fails to perceive its relevance to health care.

Meanwhile he takes it for granted that government actors are sensitive to the general interest and accountable to the public. I would instead argue that accountability works better in the private sector, where workers are fired for making mistakes, unsuccessful businesses have to shut down, and investors who make unwise decisions suffer losses. I’d also note that when politicians make wasteful and harmful decisions, they rarely suffer any adverse consequences.

Taming the Wild Beast shows that market advocates and interventionists can agree on many features of the diagnosis of the health care dilemma. Still, our prescriptions are diametrically opposed, reflecting differences in our understanding of how markets and government operate and the importance of liberty.