Monday, September 6, 2010

The Serendipitous Socialists

Cross-posted from The Agenda on National Review Online.

Over at The Health Care Blog, one of the most thoughtful and rigorous health care blogs out there, Northwestern business school professor David Dranove has posted an intriguing piece entitled “The Accidental Socialists.” He writes:
Over the next few years, the U.S. healthcare system will be in the hands of academics from Cambridge, Massachusetts. New CMS Czar Donald Berwick was a member of the Harvard Medical School faculty. Joe Newhouse, who has been the senior adviser to Medicare for as long as I can remember, holds appointments in three different schools at Harvard. David Cutler, Dean of Harvard’s Undergraduate College, seems a good bet to lead the Independent Medicare Advisory Board. Countless of their colleagues and former students have taken key policy making positions in Washington.

I know most of these scholars. They are brilliant as a rule and are acting in the truest sense of public service. None of them are socialists in the usual sense of the word; they do not believe that the government is an efficient provider of most goods and services. I don’t think they want the government to provide health care either. They have never called for government ownership of hospitals or suggested that physicians join the civil service. But whether they realize it or not, they are the vanguard of a movement bringing socialized medicine to America.
Dranove is right to point out that most left-leaning academic health policy types don’t see themselves as ideologues, but rather as technocrats. But, perhaps out of professional courtesy, he is generous when he includes Donald Berwick in this group: a guy who speaks ominously of the “darkness of private enterprise.” Whether or not you share Berwick’s “romance” with the British NHS, the most socialized system in the developed world, Berwick’s view of socialism isn’t accidental. Indeed, Berwick is a smart guy, and we should give him the credit of being well aware of what he thinks and what he says.

Despite this unpersuasive start, Dranove makes some interesting points about the academics who will be charged with putting PPACA into practice:
[Conservative academics] like Stanford’s Alain Enthoven and Wharton’s Mark Pauly favor some sort of voucher or direct subsidy with which individuals can buy their own private insurance. Unfortunately, Wharton is hundreds of miles from Cambridge and Stanford is on the wrong coast. The preferred Cambridge solution is a combination of greatly expanded government insurance and a tightly regulated private insurance market. This is the essence of Obamacare.

But this solution does not end with a government takeover of health insurance. There isn’t a public or private health insurer anywhere in the world that doesn’t directly intervene in the delivery of medical care. Socialized insurance necessarily leads to socialized medicine, and if the government controls well over half of the insurance sector through Medicare and Medicaid, and tightly regulates the rest, it is only inevitable that it will also seek to control how health care is bought and sold. And I don’t think it will make much difference whether it is Democrats or Republicans in control. The temptation to set the rules for 17 percent of the GDP is too great.
Dranove hits on the essence of conservative objection to PPACA: that the downstream consequences of the law will be far worse than the law itself. Many on the left guffaw when conservatives fret about “socialized medicine,” but this is precisely this problem that they fret about.

Dranove also points out that academics are routinely overconfident about their ability to solve complex problems with clever-seeming, complex solutions. In 1988, when Harvard professor William Hsiao and colleagues published the “Resource-Based Relative Value Scale” as a way of controlling Medicare’s cost explosion, he was hailed by the health care mandarins of his time as a genius. A generation later, the data shows that his efforts (and his projections) were in vain. Dranove adds:
To take another example, I helped redesign a physician payment scheme in Alberta with the goal of increasing competition. The provincial government adopted part of the scheme and omitted key details. Now I fear that competition is going to be stifled.

The Obama administration has hired an army of academics to implement the new reforms. They bring with them the finest Cambridge pedigrees and promising ideas. They will write the first draft of the rules and academics everywhere will nod in approval at the cleverness of our colleagues. (Some of us may even enjoy seeing our own pet ideas turn into policy.) But in the fullness of time, the rules and regulations that will govern our health care system will bear the imprint of politicians more than academics. It is the nature of the beast.
It’s comforting, I guess, to blame politicians for messing up the brilliant ideas of academics. After all, politicians do often make a mess of things. But the much more serious problem arises when the ideas put forth by the academics themselves are flawed.

Dranove concludes:
My Cambridge colleagues do not favor socialized medicine. But I fear that the regulatory behemoth they have been entrusted to manage is too big for them, despite their talents. Ten years from now, we will look back at these days as the beginning of the end of market-based medicine in America. And my colleagues will only be able to look back, shake their heads, and say “it wasn’t supposed to turn out this way.”
The only thing is, when it comes to American health care policy, Dranove’s colleagues (and their predecessors) have been shaking their heads and saying this for fifty years. They remain ever-assured that, this time, they have it all figured out.


  1. 1) We need a commonly agreed upon definition of socialism.

    2) Most of the rest of the first world manages to achieve lower costs with roughly equivalent outcomes with a lot of government involvement. Most are not really socialist, using a textbook definition and not using it in a pejorative sense.

    3) There is wisdom in markets and mass experience. I think it should make you think twice when you realize that no one else has a health care system remotely like ours. No one else has a system that is a free market system, in its purest sense. Perhaps all of these other peoples are trying to tell us something. The people in these other countries have voted in and continue to vote for systems that use little market input. Yet ours is the one in trouble, before Obamacare one might add.

    Query-Does Pauly still support the individual mandate?


    4) No, I am not a fan of the NHS. I know few who really think we should go that route. However, suppose you wanted decent health care at half of our current cost? Might be the only way to do it. Hope we never get that broke TBH.


  2. Steve, most of the rest of the world also has unsustainable cost growth, so they are on the same disastrous path that we are. They have longer to try and figure it out obviously since they're starting from a lower base, but no one has really solved the problem yet.

    And no one serious is really calling for "a free market system, in its purest sense". Everyone realizes that there will always be some level of gov't involvement in the health care system, the question is to what degree and in what aspects of the system they intervene. Like I said above, the rest of the first world has the same cost growth problems, so it's not as if we should just copy one of those systems directly. If we're going to make dramatic changes we have to find a sustainable way to do it. There are definitely things to learn from some of the other systems, but there are good things about our own system that we ought to try and maintain as well.

  3. Hi Steve,

    I think most conservatives use the term "socialism" to mean increased government subsidization and/or control of the economy. I gather that liberals think of the term as equal to communism, or at least, of *total* government control of a given sector. That may be part of the issue.

    If you are arguing that we should have socialized medicine because lots of other countries do, I wouldn't consider that a strong argument -- unless you want the high tax rates, fiscal instability, and economic stagnation of those other countries as well. As you know, I'm an advocate of the Swiss model, which combines low HC spending with universal care. I wouldn't describe their outcomes as "roughly equivalent" -- there is a really wide range of health care systems and results in the rest of the developed world.

    Mark Pauly is still an advocate of the individual mandate, as far as I know.