Economists on Health Care

The latest issue of The Economists’ Voice is a special issue on health care reform. David Cutler explains the economics of health reform, while Mark Duggan and Robert Kocher weigh in on health-insurance exchanges. “Put simply health care reform will succeed or fail?based on two fundamental criteria: Do people?get the coverage that they were promised, and?that they want?” writes Cutler, who played a role in crafting the legislation. “And, do we change the delivery of medicine to promote high quality, lower?cost care?” [%comments]

Drill-Baby-Drill drill Team

We come up short in international comparisons of health care principally because life expectancy lags despite the highest per capita spending for healthcare.
For less than one dollar per capita we can employ several interventions that will lengthen life expectancy, increase happiness and decrease dysfunction.
We already fluoridate the water to prevent dental caries. And chlorinate to reduce bacteria.
We can use the water supply as a medication distribution network by introducing very tiny or trace amounts of medicines that have been known to reduce major diseases.
1.)Simple cheap aspirin dramatically cuts rates of strokes, heart attacks and now recently proven in a longitudinal study reduces cancer death rates by 20%. Put ASA in the water supply-if would be cheaper than flouride,
2.)High cholesterol is endemic and contributes to strokes and heart attacks. Just about everyone benefits from lower cholesterol. Put statin drugs in the water supply.
3.)Up to 30% of parents do NOT believe in the value of vaccinations and many act on this belief. Utilize water borne vaccinations in the water supply, such as the oral polio Sabin Vaccine. Put Folate in H20 to prevent neural tube defects in fetuses.
4.)Up to 40% of Americans will experience a diagnosable mental illness in their lifetime including depression, Alcohol abuse, Illicit drug abuse, Anxiety disorder, PTSD, Obscession-Compulsion, Eating disorders. Half of these will remain undiagnosed. And love ones suffer by enduring the mental illness like an affliction. Virtually all these maladies would benefit from Prozac type drugs which increase brain serotonin neurotransmitter. It is almost consider a vital tool in psychiatry: 'Vitamin P'. Put Prozac in the water supply and we will be less sad, less depressed and less dysfunctional
5.)Perhaps an effective future drug to treat or prevent Diabetes or Obesity-put it in the water.
6.)Ban Tobacco products, the leading preventable cause cancer deaths, heart attacks and strokes. It would cost nothing in health care but would literally overnight vault the US life expectancy over the #1. Japan.
7.)Restrict television broadcasts to 2 hours a night of quality programming from 8 pm to 10 pm. We get 24 hours of 1000 channels-99.999% is crap programming. It would force Americans to find other more healthy forms of recreation like walking, exercising, reading and even talking with each other.
8.)Make supermarkets reflect a vegetarian diet. 80% of floor space for produce. 10% for dairy. 10% for the meat department.
9. ) Tax Alcohol extremely regressively to the point that consumers have to hurt to make a purchase. They will value that little sip of brandy or Chardonnay even more. Make bottles much smaller at around 100 ml. Like a Coca Cola at the turn of the century: Medical amounts.
10.) To increase calcium in young persons, make all flavored beverages and hydration drinks MILK BASED. A milk based Coca Cola. Your skeleton will thank you decades later.

Make Public Health medication an automatic feature by incorporating it into normal plumbing. Let people OPT-OUT by buying their own water and we will have 95% participation. We now have an OPT-IN system for medicine that is not working.



Here's what I'd like to know from a Freakonomics perspective: statistically speaking, would you be better off spending $1200/mo for health insurance or spending $1200/mo on lottery tickets?

Eric Wilson

@Drill-Baby-Drill drill Team: I SERIOUSLY hope everything you said above was a joke.

I for one still want to live in an America where the government doesn't dope the water, tell me how much Cola I can drink, tells me what to buy at the supermarket, or tells me what I can and cannot watch on TV (1st amendment anyone?). But if you are ok with a police state in the name of reducing health cost, more power to you I guess.


It would depend on the health of the individual. Or did you mean for the average person?

According to the Kaiser Foundation (, "In 2008, U.S. health care spending was about $7,681 per resident." (I am curious how they are counting residents- undocumented workers, for example, are harder to count and include.)

So for the average American, $1200/month is quite a lot to spend. But healthcare use isn't spread out equally over all Americans- senior citizens, people with chronic conditions, etc., are using significantly more healthcare than, say, a young adult.



Of course, healthcare spending is much worse than spending on a lottery. The "loss ratio" that Obamacare requires of insurers must not exceed 80%, The loss ratio is the amount of premium dollar that an insurance company pays out for healthcare. The other 20% is attributable to profit, administration and other expenses, like advertising, which do not directly benefit the insurance victim.

The insurance victim actually gets less than this 80%, since some of those funds are spent on things like research, etc, instead of on his health care.

The return on lotteries and games of chance varies widely, but the return on Roulette, for example, exceeds 96%. So it makes much more sense to put your $1000 monthly premium on one spin of a roulette wheel than on insurance.

Unless you are old or sick. Then you should vote for Obamacare, since it takes money from your young and healthy compatriots and gives it to you. The problem, however, with Socialism like Obamacare is that (as Margaret Thatcher remarked) you eventually run out of "other people's money."



@Kai, your odds of winning the lottery are about 1 in 14 million (or 1 in 140 million if you play Powerball). Your odds of cancer are one in 7, heart disease 1 in 2. Now tell me where the money is better spent.

Drill-Baby-Drill drill Team

@ Nosybear:

Actually lifetime risk of dying from cancer is 1 in 4. (National Cancer Institute, SEER Longitudinal Survery).
Risk of Stoke 1 in 5.
Risk of Dementia 1 in 3.
Risk of Depression: --always increasing.

Ian Callum

Health care in the US is run by interlocking sets of monopoly operators. They will not allow costs to go down, and they have no incentive to improve quality. Americans will need to leave their country to obtain low cost high quality care.

Way out here

Jimbino ... So you're not going to be old and sick some day and you're not into all this sharing or being your brothers' keeper stuff. Here's what I don't understand about your position, which seems to be widely shared: Those conscientous about providing for themselves on their own (i.e., without sharing risk or costs) have to plan and save to cover worst case scenarios. If your house burns down, you pay for replacing it. If you get cancer, you pay for the treatment. Of course if your house doesn't burn down or you don't get cancer, you've saved too much. You should have retired to that beach in Barbados. Isn't it better to share those risks than to bear them on your own? Rather than save so much, why not contribute to a pool of resources (an insurance policy) to cover those who actually do lose their houses or get cancer. Maybe you get to Barbados afterall! Of course there's the case in which you choose not to adequately save or insure and tragedy strikes. If your house burns, you live on the street. If you get cancer, you die soon. But wait. What if you change your mind? What if you want shelter ... what if you want life? What if society as a whole has decided it's going to provide you with shelter or a chance at life whether you save for it or not? I guess your claims at that point become just like those you fear from potential free riders right now ... just another "externality" shifted onto the shoulders of the tax paying public.

Clearly there's fear that these programs may not be run well for some reason. And there's the moral hazard crowd that's fears any incentive not reflected in the law of the jungle. But why are these risks more daunting? Why is "Socialism like Obamacare" any different than other insurance schemes that spread costs across all potential "victims" of old age and health catastrophies? I guess you can argue that in a democracy there's a risk that we might elect someone who prefers a hands off approach, who administratively defangs the regulators and takes us back to the law of the jungle. But isn't that unlikely?



Health care for the general public will mean revamping of the entire delivery system.This will take time because of the entrenched special interests. Doctors and insurance carriers will scream. Drug costs must be brought under control, labor costs must come down, insurance costs must be regulated, priorities for care must be sorted out. All of this will require rethinking the system.
The benefits must be extended to all, not just to special groups. The real advantages of a healthier population and a lower cost system are not clearly understood now, they will become clear as the system is implemented, but it will be a wrenching adjustment to get there.
However the US should not have a wealthy only health system, it needs to change. It is actually behind many third world systems in terms of delivery now, mostly because these systems have their labor costs under control.


the us health care system is not about providing care but about exploiting and taking advantage of the sick and those who are afraid of getting sick...

Leonard Charlap

All other industrialized countries have some form of universal government run health care. They get better care as measured by all 16 of the bottom line public health statistics, and they do it at half the cost per person on average. If our system were as efficient, we would save about $1.3 TRILLION each year.

Do you think we might learn something from them>

Eric M. Jones

@9--Way out here:

You are far kinder and more reasonable with Jimbino than I was going to be. I was going to suggest he sell his heart because he obviously never uses it. He'd get a good price for it too!

Bless you.


Way out there--

You pretend that there are only two choices: Free-riding or Obamacare. That is a totally false dichotomy.

Of course insurance spreads risk. It is also used by socialists to transfer money or, in Obama's words, "spread the wealth around."

The whole idea of insurance is stupid. Can you imagine that those folks who do an attempt on Everest worry about insurance? Do you imagine that they can even get insurance? And if they could, would you expect a skilled climber to willingly participate in an insurance racket that charged him the same as a 9-month pregnant woman and gave her a discount for the young daughter she wants to bring along? Of course not.

paul grosjean

Enlightened self interest: The fact is humans are social animals. We depend upon each other; the rugged individual is a myth. We can not survive alone in fact the worst thing that can happen to a human is to be isolated from others.

The politics of divide and conquer have been used effectively for far too long and it is time to take care of each other. We have all the tools we could ever want right now to provide organization and cooperation.

First we must learn how to communicate the conditions and requirements of our social contracts in the most concise and clear manner possible and use legal advice to share risk rather than trying to avoid it.

If you think you can plan for every contingency and actually implement it by yourself you are delusional. The only future we have is the one where we work together. Why do you think FaceBook is valued at 50 billion?


I always keep a couple of core principles in mind. Insurance is like gambling. They are betting you will not get sick this year, your house will not burn down or get flooded this year, you will not be in a car accident this year and you will not die this year...and the odds are significantly in their favor. You, on the other hand, are betting that something will happen to you.

If you are on the cusp of winning, they can change rules or refuse to take the bet.

We've decided that our health care should be based on capitalistic principles: 1) Private companies get to "maximize profits" which means providing the least amount of service for the most amount of money. 2) If private companies can't make a profit on the bet, turn them over to the government (which is us - the taxpaying public).

Joe Smith

The only way to "square the circle" on health care is to make it more cost effective.

We need to bring down the cost of existing treatments.

We need serious research into the cost effectiveness of treatments.

We need more money for research on diseases like diabetes.

We need a national commitment to healthier livestyles.

Peter McCorison

As a non-economist and sort of an ordinary citizen, I wonder where our health care performance would come out if the statistics were controlled for the effects of obesity.


"And, do we change the delivery of medicine to promote high quality, lower cost care?"
Well, maybe we need to change the delivery of some other things, too.

Taxpayers provide $20 billion a year to subsidize the ingredients that go into fast food (wheat, high-fructose corn syrup, beef, corn) to keep costs down and profits up for the producers of fast food. Maybe we should let the free market determine the real cost of fast food, and invest that $20 billion in preventive care.


Here's how communities could fix healthcare....

Very simply, pay a high quality doctor's medical school loans (assume the repayments, etc.) in return for them serving in your community under some (or such as) the following criteria:

1. A nice home is provided free of charge (the community pays the monthly payments). The home will be the doctor's after 20 years of service.

2. Pay the doctor a set fee of $60,000, PLUS, say, 50% of anything that comes in over the associated costs (which may also include staff, office space, etc.)

3. Every person in the community pays X dollars a year to pay the doctor. In return, they see the doctor for a $20 "deductible." Those with insurance that wish to see this doctor, pay the normal rate.

4. Every person on this "plan" agrees to limit any malpractice to a maximum of, say, $1,000,000 beyond medical costs and lost wages. This keeps malpractice in balance.

5. A new car is leased every three years or so for the doctor.

This takes a great deal of weight off the doctor's shoulders. This would hopefully keep a doctor from ordering unnecessary things in order to "make the next payment," etc.

It's not perfect, but I've wondered why communities don't try it. I mean, if you build a house, you have 30 years to pay for it, right? And a doctor usually very much needs help with med school payments.

It's win-win, I think. (Of course, I'm sure I've overlooked a few things, but the general idea seems sound.)