Health care isn’t a fucking car.

April 5th, 2010 by alexm

Steve Levitt, who usually adds a lot of insight to my understanding of political issues, gets it really, awfully, terribly wrong today when he dips his toes into the health care debate on the Freakonomics blog. This post is a train wreck of broken analogies, unresearched bullshit, snide insults, and name-dropping.

Here’s the stinkiest part of the turd:

Imagine that you could show up at a car dealership and have any car you wanted, and as many cars as you wanted, for no marginal cost.  The market for cars would be in complete chaos, and people would have too many cars, and the ones they had would be too nice.

Hey Steve, buying kidney dialysis is a whole lot different than buying a fucking car.

Let’s start with the so-obvious-what-the-hell-are-you-thinking argument.  If you give me a free Lexus, I will take it. I will enjoy driving it more than I like driving my Civic. When I am done, I can resell it. But hospital trips don’t work like that. Think about it. WHO GOES TO THE HOSPITAL AND ORDERS FUCKING KIDNEY DIALYSIS BECAUSE THEY FEEL LIKE IT? Have you ever heard of anyone who does this? “Yeah, man, every week I go get my blood filtered and afterward I feel SO good!!!” Nobody. Does this. Ever.

kidney vs g37

If I offer you free kidney dialysis vs. a free G37, which would you pick?

Open heart surgery? Sure, sign me up! CAT scans? I’ll take three, I just love the way the radioactive shit they make you drink tastes. How about having a catheter shoved up your dick? Or a colonoscopy? Would you like fries with that?

Economic logic that makes sense when you’re talking about fucking donuts turns into bullshit when you’re talking about life-saving treatments.

The only reason anyone wants any of this stuff is because they need it to stay alive. Not because they’re not paying enough out of pocket. They can’t resell it, it’s not any fun, and they all wish they felt better and didn’t need any of it.

Christ, Steve, you’ve got a damned economics degree from MIT. What’s a demand curve look like for something that keeps you alive when you would otherwise die? If you’re reasonably young (meaning you might be affected by the new healthcare bill), here’s what it looks like: YOU’LL PAY YOUR ENTIRE SAVINGS TO THE DOCTORS TO STAY ALIVE.

Vertical. Demand. Curve. NOT like a fucking car. Except when you run out of money. Then you can’t pay, and unless you’re rich, you die.

You think this is great? And better yet, we need to make it so that people pay more out of pocket? So they end up running out of money faster and can die, denied medical treatment, without costing insurance companies so much money? Steve, what the hell are you thinking?

Now, since DeObfuscate holds itself to a higher standard – meaning I can’t skewer Steve without a little bit of analysis, I’m going to show you some real data. Something that neither Steve, nor Gary Becker in his “excellent blog post” bothered to look at before spewing out this trash.

Data driven health care economics.

The best data we have about how much we actually spend on different categories of medical expenditures in the U.S. comes from the Medical Expenditure Panel Survey from the Department of Health and Human Services. The reason that data is considered the most accurate is because they survey households, insurance providers, and health care providers to cross-check all of their data. The full survey reports are available at the link above.

In the next few weeks, we’ll be posting a more rich view of how health expenditures break down.  We will also hopefully be able to make a few projections of what we can really expect to change under the health care reform that President Obama signed into law.  But for the moment, let’s take a look at some of the data analysis performed by the Agency for Healthcare Research and Quality (the agency that runs the survey).  Here are some highlights.

Unlike on cars, most people don’t spend anything on health care.

Sure enough, just because people have health insurance that makes kidney dialysis cheaper, they don’t go take advantage of it.  It turns out that 50% of the population, combined, makes up only 3% of medical expenses.  The other 50% accounts for 97% of the spending.  The distribution is actually even more skewed.  The sickest 1% of Americans account for 22% of all total health care expenditures.

Health care isn’t like cars. If you’re not sick, you don’t want it.

distribution of health care costs

Distribution of Health Care Costs - AHRQ Report

Levitt implies that the sickest 1% are actually not the sickest, but instead just the most opportunistic. They are just the most eager to collect their Infinitis from the subsidized car dealer.  But let’s take a look at what conditions they are actually being treated for.

Treatment of just 15 conditions accounts for nearly half the health care spending

It turns out that health care and cars do actually have one important thing in common.  Did you know that treatment for auto accidents are responsible for more health care spending than any other condition, except heart disease?

Fifteen conditions, including heart disease, auto accidents, cancer treatments and high blood pressure, account for 44% of the total spending on health care in the U.S.  Not surprisingly, cancer is the most expensive per-capita disease, with heart disease right behind it.

The report includes a full table of the top 15 conditions.  The big deal in health care is not that people go to their primary care doctors too much.  It’s that when people get seriously sick, treating them is expensive.  Making them pay more out of pocket won’t help.  To prove it…

Spending distribution doesn’t change much with or without health insurance

The most compelling evidence that health insurance doesn’t behave like the market for cars is that health insurance barely changes the distribution of health care spending.  For people who don’t have health insurance the sickest 5% spend 60% of the health care dollars. For people who do have health insurance, the sickest 5% spend 51% of the health care dollars.

The big difference is that very sick people with health insurance can spend a lot more.  And they do.  We have rationing based on ability to afford care right now, just as Levitt wants it.

Even given that, 38% of the sickest patients have out of pocket health care expenditures that exceed 10% of their income (that number would be a LOT higher without Medicare).  They are already paying large amounts out of pocket, but the cost is not deterring them from getting care.  Why?  Because their motivation for getting care is that they need health care. Not because they are being greedy.

Make ‘em prove it.

Check back soon for some more interesting analysis of the data.  And the next time you encounter an economist pretending that the Tea-Party has the right position on health care because we can’t go giving everyone free cars and we don’t have government-run grocery stores, tell them to go try some kidney dialysis. I hear it’s fucking fun.

2 Responses to “Health care isn’t a fucking car.”

  1. rubenr says:

    Quite the passionate post. I just wanted to clarify / reiterate that even if you don’t buy into the cars-for-free analogy, it’s important to note that HCR does NOT have a public option or a some sort of give-healthcare-to-everyone-for-free scheme. Levitt & Becker’s criticism is that HCR doesn’t do anything to address what they see as the already existing “cars-for-free” problem (that consumers don’t pay marginal cost for health care). They aren’t criticizing the contents of the bill ala tea-partiers as if it were a “government take over”, since, well, no reasonable person can really think it’s a “government take over” a-la single payer countries.

  2. Belle says:


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