Hedge Funder Cliff Asness Returns To Teach You About Health Care
Libertarian hedge funder Cliff Asness, who we last saw thinking it was a good idea to pick a fight with union workers over their pensions, has returned to grace us with another screed. This time, he's mad about health care. His incredibly long essay can be boiled way, way down:
- We pay more for health care now than we did in the past because it's better.
- The reason other countries pay less for health care than we do is because health care companies charge Americans more to cover the fixed costs of developing, say, Viagra, but only charge Canadians et. al. based on the costs of each individual pill.
- Follows directly from (2): Our health care system provides all the innovation in the world. "Even the successes you gin up for [other countries' systems] would not be possible without the last best hope of humankind (the US) on the front lines again making the miracles for the world."
- By its very nature, the public option will cheat and force the private insurance companies out of business.
- We have to ration health care.
- Health care is not a right because only negative rights (i.e., freedom of speech) are valid rights.
- Liberals are rushing to expand health care because they "know they're wrong" and they want to expand their own power.
- Regulation, taxes, and trial lawyers are the real problems with health care.
None of these points are original, of course, and Asness admits as much: "Much, or even all, of what I’m saying has been said elsewhere." But it's worth responding to (some) of these points on their merits:
- Just because something is new and we're buying it doesn't mean we need it or it makes us healthier. We're actually overtreated (and rich people like Asness often suffer the most from that), and your health outcomes don't actually have much to do with how much you spend.
- A lot of those "development" costs include bribing doctors to prescribe pharmaceutical companies' brand-name drugs. Moreover, seventy percent of the drugs developed in the US represent no improvement over existing drugs. And actually, the main reason that drugs are so expensive is because the government grants patent monopolies to drug companies. Economist Dean Baker: "The country is projected to spend almost $250 billion for prescription drugs this year (more than $800 per person). In the absence of government patent monopolies, we would spend close to one-tenth of this amount. Those generic drugs that Wal-Mart can profitably sell for $4 a prescription are not chemically distinct from the brand name drugs that can cost several hundred dollars." Bottom line: "[P]atents are simply one option for financing research, not essential at all."
- Baker: "The story he's trying to tell makes no sense. Under trade law, if I do the innovations in Zimbabwe, I receive the exact same protection in the United States, Europe and Canada as if I did them in Washington, DC. Yeah, a disproportionate share of the research goes on here. Guess why? Because of socialism: the National Institutes of Health spends $30 billion a year subsidizing research."
- Baker: "If he wants to say private plans can't compete, I won't quarrel: public plans tend to be more efficient, for obvious reasons. They don't pay their CEOs tens of millions of dollars, they don't have to establish themselves through advertising. There are lots of reasons why they're cheaper... so they will tend to dominate. But if you look to other countries where they do have public systems and private systems side-by-side, [private plans] continue to exist. If he wants to argue that most people would opt for the public plan—yeah, I think that's probably true."
- Well, yes.
- Baker: "The fact is most people will say that when they see someone dying and we have the means to help them they think we should. Whether you want to call it a right or not, polls show that people behave that way. If it makes him feel better to say it's not a right, he can say that, but the fact is the overwhelming majority of people feel the need to help people who are in need of help."
- Asness thinks Chris Dodd, Rahm Emanuel, Barack Obama, and Barney Frank know "they will lose if freedom wins." Seriously? How about a little presumption of your opponents' good faith?
- Baker: "Insurance companies make money by avoiding insuring sick people. That's an easy thing to show because a relatively small minority of people account for the vast majority of health care expenses. If you deregulate the insurance market, that would mean the insurance market would find ways not to insure sick people, which isn't that hard to do." Baker agrees with Asness about the tax treatment of health care plans, but says it "doesn't have much to do with" the problems for health care in America today. He also points out that states like Texas that have limited malpractice awards haven't seen major decreases in health care costs.
The broader point is that we've heard a lot of these arguments before, and they're pretty easy to refute. But the libertarian argument about health care has one, broader, more fundamental problem. If we have, as they argue, the most "free" health care system in the world, and "freer" systems are better, why is our standard of care lower and our costs higher than other, "less free" systems? They want to move away from models that seem to work and towards new, untested free-market utopian systems. The burden of proof should be on them. Because what we have now ain't working.