The Electric Commentary

Tuesday, September 28, 2004

More on health care.

Tech Central Station has two good posts today. In the first, Sally C. Pipes and Benjamin Zycher take on Dr. Marcia Angell, author of a new book about how drug companies need to be regulated. The good bits:

No one would pay much attention to the views of an economist with respect, say, to the causes of heart disease. Why then are prominent physicians accorded prime-time attention when they pontificate on the economics of pharmaceutical development?

and

Apart from Angell's confusion between drug prices and total spending ("costs"), she complains that the U.S. is the only advanced nation that does not regulate drug costs, and that, accordingly, other nations spend far less on drugs than does the U.S. Angell forgets to mention that as a result of those foreign price controls, the foreign pharmaceutical sectors are in long-term decline, with diminishing investment, R&D spending, and therefore drug development. The ensuing implications for the future alleviation of human suffering are obvious, and Angell's silence on this score is loud indeed; so much for the children.

Read the whole thing.

One of my favorite economists is Arnold Kling. He does a great job of reducing fairly complex economic problems into real world example. Here are a few snippets from his column today:

Joan, a friend of mine who teaches in the Prince George's County, Maryland public schools, was bragging to me about her health care plan. Evidently, one of the options that she has is to pay a small fee -- I believe she said $15 a year -- to obtain coverage for eyeglass prescriptions. This coverage allows each person in her family to obtain new eyeglasses once a year at relatively little cost.

If you were to ask Joan where the money comes from to pay for her eyeglasses, she would answer "The insurance company," as if the company that administers the benefit program is some sort of Fairy Godmother handing out checks. In reality, the money for Joan's family's eyeglasses comes from one or more of the following sources:

Other school system employees, whose wages are reduced in order to help subsidize Joan

Students in Prince George's County, for whom fewer resources are available

The taxpayers of Prince George's County. They are subsidizing Joan, who lives in a wealthier county and who can afford to send two of her children to expensive private colleges and a third to a private high school in the area

Joan is not splitting the check. She is passing the buck. Someone else is bearing the cost, which makes Joan a winner.


and

One of the most serious impediments to rational debate on health care is the misuse of the term "health insurance." What we call health "insurance" in this country was never designed to insure the consumer. Instead, its purpose is to insure steady, reliable incomes for health care providers. True health insurance is the economist's equivalent of a unicorn -- we can describe it, but none of us has actually seen it.

If you're still interested, you can read his book, Learning Economics, online, here.

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