A Provocative Health Care Proposal

Karl Denninger proposes legislation, including

No government funded program or government billed invoice will be paid for medical treatment where a lifestyle change will provide a substantially equivalent or superior benefit that the customer refuses to implement. The poster child for this is Type II diabetes, where cessation of eating carbohydrates and PUFA oils, with the exception of moderate amounts of whole green vegetables (such as broccoli) will immediately, in nearly all sufferers, return their blood sugar to near normal or normal levels. The government currently spends about 25% of Medicare and Medicaid dollars on this one condition alone and virtually all of it is spent on people who can make this lifestyle change with that outcome but refuse. If you’re one of the few exceptions and it doesn’t work in your case you have the burden of proof. Nobody has the right to light their own house on fire on purpose and then claim FEMA benefits for same. This one change alone will cut somewhere between $350 and $400 billion a year out of Federal Spending and, if implemented by private health plans as well, likely at least as much in the private sector. That’s more than three quarters of a trillion dollars a year that is literally flushed down the toilet due to people being pigheaded and refusing to do things that would not only save the money but also save their limbs, eyesight and ultimately their life.

Pointer from Glenn Reynolds. This is not representative of the entire post. Most of his proposals are intended to bring about more market-based decision-making. Denninger especially wants to improve transparency and eliminate price discrimination in medical billing.

There are many industries in which fixed costs are high relative to marginal costs. Charging everyone the same price would mean either that the price is too low to cover average cost or it is too high relative to marginal cost. Price discrimination can actually be helpful in some cases. In fact, charging lower drug prices in Europe and Canada may actually help lower costs of selling drugs in America, because foreign buyers help to cover the fixed costs of developing drugs. So I disagree with Denninger that ending cross-border price discrimination for drugs would necessarily make us better off.

On the other hand, for hospitals and doctors, price discrimination is not used to find the people most willing to pay but instead is used to punish people with the least negotiating leverage. So there I tend to agree with Denninger.

Overall, I come back to the cultural roots of our health care mess. One of the points in that post is

Americans, and especially health care providers, do not want to think of health care as a commodity. The providers want to be paid, but they do not want to think of themselves as selling their services, so the payment comes from third parties and the price is hidden to consumers.

I believe that helps explain why pricing is opaque in health care, and why Denninger’s attempt to bring market discipline would not be well received, even by patients

Here is another of his proposals that I think would run into cultural problems:

All surgical providers of any sort must publish de-identified procedure counts and account for all complications and outcomes, updated no less often than monthly. Consumers must be able to shop not only on price, but also on outcomes.

The doctor is not supposed to be fallible. This sort of reporting would draw attention to the fallibility of doctors, making them and their patients unhappy.

This entry was posted in Economics of Health Care. Bookmark the permalink.

25 Responses to A Provocative Health Care Proposal

  1. collin says:

    Judging on these battles on healthcare maybe we should all agree to kill the employer based system. For all the complaints that Americans don’t save, most people are covered as part of a compensation package so this point misses the mark.

  2. Paul Power says:

    A provocative, but respectful, response:

    If the behaviour that is deleterious to health shortens lifespan, then it can save the government money overall. From memory, one study on smokers in the UK showed a net gain to the government of around £10,000 per year of life lost. The reason is that the expensive years are those after retirement, so the fewer of those the lower the net cost to government.

    Here in the European Union there are moves in various countries to bar people with “unhealthy” lifestyles from rationed medical treatment on various grounds (e.g. the lifestyle decreases the chances of full recovery/full benefit of surgery/treatment). This is in keeping with the idea that such people are a net extra financial burden on government. The cynic in me wonders why such people are not being given refunds on the taxes they have paid for government-provided healthcare.

  3. A Reader says:

    Does that mean the government will stop subsidizing foods that are bad for your health too?

  4. Ben Kennedy says:

    That is a terrible proposal, as it makes the assumption that your lifestyle is solely a product of your conscious willpower. It isn’t, I’d recommend Stephan Guyenet’s new book titled The Hungry Brain.

    This is one of the few areas where market processes have gone off the rails. I’m definitely in favor of people not starving, but since subsistence food has become so inexpensive, the market now selects in part for highly palatable, obesogenic foods to drive sales

    • Hazel Meade says:

      When your conscious willpower is not enough, it helps to add financial rewards/punishments.

      • The Engineer says:

        Worse than that, nutrition is not a science. It’s almost as bad as economics. The replication crisis effect nutritional research just as much as psychology. I don’t think that we have any idea what a “healthy” diet really is.

        So… great proposal in theory, in practice not so much.

        • steve says:

          But we do know what an unhealthy diet as do most their refusal to cut back on “garbage or carbage” foods that virtually all researchers believe contribute to Type II diabetes.

      • Octavian says:


  5. Handle says:

    American politicians like to use European Socialist prices as an example that we could mimic. But international price discrimination means the low price countries get something akin to a subsidy from the lucrative American market. Under equal drug costs European systems would become so much more expensive than their governments can afford that they would probably have to collapse in quality in addition to raising taxes. They would be much less likely to inspire efforts at imitation.

  6. brian says:

    ‘Healthcare is not about health, it’s about showing you care’ – Robin Hanson.

  7. Michael says:

    Interesting point re providers not wanting to be paid directly. Many of them–and this might apply to other professions such as academics and some artists–would rather see themselves as the recipients of generous patronage grants and sinecures conveying their status, rather than payment for labor.

  8. Seth says:

    “The doctor is not supposed to be fallible. This sort of reporting would draw attention to the fallibility of doctors, making them and their patients unhappy.”

    Plus that may make it tougher to find a doctor willing to perform a riskier procedure for fear of the blemish on their results.

  9. jdgalt says:

    I’m with Paul Power — let the government bear the burden of proving that the lifestyle in question actually costs, rather than saves, the taxpayers money overall.

  10. spencer says:

    Making doctors publish the data on surgeries you suggest would lead to doctors refusing to do any difficult, experimental or complicated surgeries,

  11. mad_kalak says:

    HA! Government policy is partially why type II diabetes is so common. The push for lowfat/high carb diets, the push against meats and natural fats; many of the FDA guidelines were wrong and we are just finding it out now and coincided with the rise of obesity and diabetes in America. And before anyone says “correlation, not causation” we all know there is no control group, and the evidence strongly points towards causation.

  12. B.B. says:

    Why start with Type II diabetes?

    How much medical care (funded directly by government or indirectly through tax subsidies) is driven by treatment for the effects of tobacco use, alcohol abuse, and use of legal or illegal narcotics? What about lack of exercise? What about stupid, unsafe driving, causing crashes and severe injuries? What about diseases related to unsafe sexual practices?

    Let’s take the principle to its conclusion, or not go down that road at all. Just don’t pick and choose.

    • Harun says:

      Typ II diabetes is the largest single cost…its why its being mentioned.

      And actually, alcohol use is related to getting type 2 diabetes.

  13. steve says:

    “This sort of reporting would draw attention to the fallibility of doctors, making them and their patients unhappy.”

    A lot of this is already available. People don’t and won’t look at it. Wish they did (would help my network), but they don’t. Prices are also much more available than many realize, and people don’t respond much to them either. A lo of his other stuff would cost so much in terms of admin time most of the savings he thinks will happen will be chewed up.


  14. Dean Shepherd says:

    There is much lower hanging fruit to be had to lower healthcare spending. There are many procedures that are done, that have been shown to have no benefit, but are still done with alarming regularity. One example is arthroscopy for arthritic knees. Research back 10 years shows no benefit, but more than 75% of arthroscopies are for arthritic knees. Insurance companies could simply deny coverage for that reason. Imaging for non specific low back pain is another. The list goes on. IMHO- this is brought about by having too much choice for care, requested by uninformed patients, and providers who have financial interest in doing procedures.

  15. Lord says:

    Yes, why spend the small sums on keeping people healthy when we can wait until they develop severe complications from lack of treatment and can spend 100x just so we can blame them and feel superior. So much more gratifying.

  16. chedolf says:

    a lifestyle change…that the customer refuses to implement.

    How will Lifestyle Change Implementation cops investigate this? (I agree it would be great if practicable.)

    • Asdf says:

      Indeed. I viscerally hate type 2 diabetics, but if implemented we would likely see a massive “increase” in type 1 diabetics (or whatever designation they made up).

      The easiest method is to make sure your population is full of people who are mostly responsible even without strong incentives.

  17. Bert says:

    Don’t waste your time with proposals that have zero chance of getting off the ground. Most diabetics are a member of another protected class, e.g. minorities and seniors.

Comments are closed.