What liberals don’t get about health care

Howard Portnoy, Liberty UnyieldingJanuary 13, 2014

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The title of this post riffs on one by Ezra Klein at Bloomberg (“What Liberals Don’t Get About Single Payer”) that endeavors to school fellow libs on the topic of America’s health care delivery system. Klein’s point of departure is a fairly dopey New York Times op-ed by mockumentarian Michael Moore, which states in essence that the biggest flaw in Obamacare is that it doesn’t go far enough in socializing medicine.

Moore, like the president, longs for a full-fledged single-payer system, which would eliminate the greedy insurance companies who (gasp!) make a profit by selling their services. But Klein asserts that Moore is mistaken in his presumption that the insurance industry — despite its many deficiencies, which Klein enumerates — is the central problem. “Insurers,” he writes, “aren’t even where the big money goes.”

In 2009, Forbes ranked health insurance as the 35th most profitable industry, with an anemic 2.2 percent return on revenue. To understand why the U.S. health-care system is so expensive, you need to travel higher up the Forbes list. The pharmaceutical industry was in third place, with a 19.9 percent return, and the medical products and equipment industry was right behind it, with a 16.3 percent return. Meanwhile, doctors are more likely than members of any other profession to have incomes in the top 1 percent.

[Side note: Speaking of health care, Klein may want to get his vision checked. Moore does take aim at pharmaceutical firms that “overcharge,” identifying the particularly rapacious Novartis by name.]

But I digress. “The dirty truth about American health care,” Klein goes on, “is that it costs more not because insurers are so powerful, but because they’re so weak.” But the even dirtier truth is the need for doctors and other health care providers to practice defensive medicine. Another Forbes article, this one from last August, quotes Gallup as stating:

[O]ne in four … dollars spent in healthcare can be attributed to defensive medicine — about $650 billion annually. These costs are passed along to everyone, significantly driving up health insurance premiums, taxes to cover public health insurance programs, co-pays and out of pocket costs.

The article notes that the Affordable Care Act is likely to exacerbate this problem by adding more warm bodies to the ranks of the health-insured at the same time the number of physicians is in decline. “The practice of defensive medicine will escalate as more patients are cared for by people who are overworked, and increasingly they are seen in settings such as emergency rooms by people unfamiliar with the patient.”

The 800-pound elephant in the room is tort reform. Barack Obama wouldn’t touch it back when the ACA was being drafted because the Association of Trial Lawyers of America is a key donor to the Democratic Party. Tort reform, which would cap the size of awards in personal injury cases, a third of which is retained by the attorney, is far from a perfect solution. But liberals refuse even to talk about it.

By the way, Klein mentions that doctors are likely to be in the top 1% of wage earners. What he conveniently ignores is that the same if true of lawyers. According to the Occupational Outlook Handbook, published by the Bureau of Labor Statistics, the median income for lawyers in 2012 was $113,530 per year while for doctors the same statistic was $187,200 per year.

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