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A Background on Health Economics: A Message to Debaters
There are basically four visions of how to provide health care services that have been important over the last 25 years:
We suggest five background references that will give you a thorough grounding in health care economics in general and in the particular visions. We believe these five publications will give you a more thorough grasp of the issue than everything else written about health economics combined. We are anxious to know if you agree with this assessment and invite your email responses.
To fully understand the socialist vision and why it doesn't work very well, we highly recommend Twenty Myths About Single-Payer Health Insurance. This is about 90 pages and is available to debaters at our site in pre-publication form (you need Adobe Acrobat Reader to view this file). It is a survey of national health insurance schemes in countries around the world. There are more than 1,000 references. And although the publication is very critical of national health insurance, almost all the references are to government publications and other sources that are very supportive of the concept of government provided health insurance.
"Cost-Plus" is the term Gerald Musgrave and I used to describe the institutions that dominated the U.S. health care system for most of the second half of the twentieth century. It was a system of public and private institutions designed to suppress market competition and ensure that doctors and hospitals got enough revenue to cover their costs. For example, Blue Cross was created by the hospitals. Blue Shield was created by the doctors. In both cases, state legislatures gave these insurance plans advantages that allowed them to dominate the market.
The term "cost-plus" arises from the observation that we were literally paying for health care the way that the Defense Department pays for weapons systems, but without the same excuse. (The Defense Department excuse is that a new weapons system has costs that are unpredictable, because it's new technology rather than routine and off the shelf.) Under cost-plus finance, if Blue Cross patients accounted for one-third of the patient days in a hospital, Blue Cross would pay one-third of the hospital's costs - regardless of what was actually done for any particular Blue Cross patient. Other insurers paid the same way. So did the federal government and state governments. Under this system, the higher a hospital's costs, the more revenue it got. No wonder we had a problem of health care inflation.
Unfortunately, our analysis of this vision is not available on-line. A very comprehensive analysis of the cost-plus system is contained in Patient Power, a book Musgrave and I wrote for the Cato Institute. (This book is available for purchase from the NCPA Store .) Every well-rounded debater should have a copy of this book.
Beginning in the mid-1980s and throughout the 1990s the cost-plus system of health care finance was largely replaced by managed care. To fully understand managed care, how it really works and what its strengths and weaknesses are, we strongly recommend The American Experience with Managed Care (you need Adobe Acrobat Reader to view this file). This is another lengthy publication (about 100 pages) also made available in pre-publication form on this site.
Finding the free market vision is a lot more difficult. America has never had a free market in health - at least not in the modern era. A good description of all the major ways in which government regulation suppressed normal market responses throughout the twentieth century is my monograph for the Cato Institute, Regulation of Medical Care: Is the Price too High? Unfortunately, this book is out of print and hard to acquire. A lot of this material was later summarized in the unabridged version of Patient Power.
Looking forward, we recommend "Characteristics of an Ideal Health Care System" for a thorough analysis of how we can reform many of the tax and spending distortions in the current system and rely on competition, markets and individual choice. Some of the outcome of our thinking is reflected in the Do No Harm Affirmative Case. We are also making Designing Ideal Health Insurance available to debaters in prepublication form. It describes what a free market health insurance plan would look like.
I believe you will find that all five of these publications are genuinely unique. There is literally nothing else like them available anywhere. I feel certain that these publications will give you an advantage in debating this year's exciting new topic.
John C. Goodman
President
NCPA
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