Philadelphia Reflections

The musings of a physician who has served the community for over six decades

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Reflections on Impending Obamacare
Reform was surely needed to remove distortions imposed on medical care by its financing. The next big questions are what the Affordable Care Act really reforms; and, whether the result will be affordable for the whole nation. Here are some proposals, just in case.

Adam Smith and Karl Marx

{William Bingham class=}
Adam Smith

Ever since the two revolutions, American and French, the Anglo-Saxon world has strongly believed there is no better way to determine fair prices than by marketplace auction. There are, of course, a few situations of market failure which call for government intervention. The continental Europeans tip their caps to this idea, but often revert to central planning of the Napoleonic variety, with its idea that if you have a very smart expert, you should listen to him. We are a nation of immigrants, of course, and so modern American politics quite often divides along lines of preference between market-set prices and central planning. Both systems occasionally fail us, but the native preferences of people mainly divide between faith in central planning and faith in "common sense" market solutions. Our present tangle of opinion about paying for healthcare brings out this distinctive divide. Most of us believe in the marketplace, but in a pickle half of us will give it up pretty quickly and look for expert guidance, while the other half grimly continues to believe "a thing is only worth what you can sell it for."

Karl Marx

Mitigated individually by compassion and charity, American healthcare prices were always market prices until health insurance made an appearance in the 1920s. The insurance company could employ accountants, but they could not adjust for either quality or personal hardship. The response has been relentlessly in the direction of setting prices as the cost of production plus a standard mark-up. When Lyndon Johnson gave us Medicare and Medicaid, he gave us the accounting approach, in spades. In place of the accounting approach as a check against market failures, he gave us a common sense as a check against accountant errors. For some years, hospital prices haven't seemed quite right. Increasing peculiarities were met by increasing administrative protectiveness keeping the public, even doctors, from getting a sense of satisfaction from increasingly vague responses. Some people are instinctively suspicious, and this sort of behavior brought it out in them. Maybe I'm just like that, but I prefer to think that my views are mostly colored by happening to sit in a congressional hearing room, while Brian McMahon explained the proposed DRG system.

Originally published: Saturday, September 07, 2013; most-recently modified: Monday, May 13, 2019