I’ve seen a lot of political debate recently on FaceBook. Sometimes the discussion is civil and even enlightening, but more often than not it begins with unconsidered slogans and degenerates into ad hominem attacks. (I don’t have problems with slogans and witticisms as a starting point, but people need to be ready to defend or qualify them with rational argument.)

The following discussion between a close friend (and economist) and an old colleague/mentor occurred on my FaceBook profile. It’s a heated debate between people who disagree, but their tone is respectful throughout, and they readily point to agreements, carefully define terms when necessary, and concede when their opponent has a valid point. It’s difficult to find sound bites.

This, my friends, is how such political discussions should proceed.

John: No one should die for lack of medical insurance & no one should go broke because they get sick; the free market can’t fix either alone. [my Facebook status]

T: I don’t think anyone disagrees with this sentiment, John. The disagreement is really over the best way to remedy these issues.
Yesterday at 2:08pm

M: really? I’m not so sure people agree on even this much. If they did, wouldn’t we have a public option?
Yesterday at 2:52pm

T:
…

@M: Trust me. (Okay… You don’t know me from Adam, but as a pretty reasonable guy who opposes the public option…) Nobody wants these things. Really.

@Michael: So… Seeing as how auto insurance is *not* a federally administered program, sounds like you’re *also* opposed to the public option, right?

You’re absolutely right about the central problem though, Michael — the costs *are* outrageous, and they are *not* currently regulated by the free market, like auto insurance is.

The big debate (should be) about how to best achieve the cost control we’re all after.

…and your analogy is dead on, actually, in more ways than you may realize at this point.
Yesterday at 4:47pm

M: @T.. okay, if you agree with the statement, please explain how you expect to achieve it without a public option.
Yesterday at 4:50pm

John: : The health care economic sub-system, even when it’s dominated by private entities, does not operate like anything resembling an ideal free market (and historically, less regulated markets seem to favor corporations over consumers, which has made government regulation and intervention necessary in the past to protect consumer interests). In a complex market like health care, I see a vote against increased government involvement as a vote for increased (or status quo) control by large private groups, which often act against the public interest, which the public has less supervision over.
Yesterday at 4:59pm

M: Since this discussion is getting more wonkish, I’d like to draw a distinction between “free” and “competitive” markets, and to agree with John that neither exists currently or is likely to work. My initial point was that even a perfectly free market, which conservatives often claim to want, would not resolve the issues in healthcare. One reason is that healthcare appears to have increasing returns to scale, meaning it rewards big companies over small ones, so it would inevitably be ruled by large special interests. Healthcare is an inherantly non-competative market. The other is that ensuring everyon has reasonably priced access to healthcare is not the sort of thing markets do- it’s a moral imperative, not an economic one. If we want it to happen, we need regulation, and if we want regulators to have teeth we need to give them serious influence on the market. The most straighforward way to do that is with a public option.
Yesterday at 5:12pm

M: *competitive, not competative. argh my brain
Yesterday at 5:12pm

T: @M: I’d encourage you to study any of the several alternate proposals out there. I realize that you’ve thrown down a gauntlet, but I (personally) don’t have time to pick it up tonight. Sorry.

@John: You’re absolutely right about the health care market being unique. You’ll notice that I’ve not argued for complete deregulation. That said, efforts to actually move the health care market *into* an actual market where millions of people have incentives to understand and control prices with their individual choices (as opposed to the current situation, where individuals have very limited ability to make such decisions and the market *is* largely profit-driven) would have a much more long-lasting impact and be almost infinitely more sustainable than the plan currently on the table, in my opinion.
Yesterday at 5:13pm

T: Heh heh heh… Crossed posts with M there.

Again, almost nobody (certainly nobody here) is arguing for total deregulation or a “perfectly free market” here. This one is most certainly unique today — largely because of the way the health insurance industry has evolved over the last sixty or so years.

Economies of scale are not an inherently bad thing (often quite handy and efficient, actually…) nor are large corporations inherently evil — particularly when held in check by real competition, which can only be fostered by the ability of consumers to truly choose.

The moral imperative argument is great for shaming people into behaving a certain way in the short term in public situations, but long-term macroeconomics are very rarely driven by moral imperatives. In other words, just because it’s a truly morally superior idea doesn’t mean that people will (or should) voluntarily submit to the hardship it entails.
Yesterday at 5:24pm

T: In other words, there’s a really fundamental choice here about whether we will use “regulators with teeth” to force my Doctor to change his prices, or whether we will use a migration toward a truly competitive market to allow my Doctor to see that lowering his prices is the best way for him to maximize his business.

BIG moral choices are lurking in there, of course.
Yesterday at 5:29pm

M:2 issues with your response:
-I didn’t say economies of scale are bad, I said they make a naturally competitive market impossible, meaning regulation is necessary if the market’s as important as healthcare is. No truly competitive market is ever going to come about with regard to healthcare. Ever. Hence public option to compete with private ones.
-If people truly believe that no one should die for lack of healthcare and no one should go broke because they got sick, then the moral imperative exists. I’m not interested in shaming people, I want them to examine their own values and see if their politics measure up. In fact, I suspect that, if they’re honest, some people will find they have caveats on that sentiment. Hence stating it if you believe it is not meaningless.
Yesterday at 5:32pm

M:I’m not saying the government should unilaterally determine doctors’ wages. I’m saying it should be involved enough in the insurance system that private options have to compete with a probably more fair and transparent public one (sorry, mis-typed initially). I believe it will be more fair and transparent because it will be accountable to elected officials and thus, indirectly, to voters.
Yesterday at 5:33pm

M:Also, this is a side note but doctors aren’t typically determining their own wages. Insurance companies are setting them.
Yesterday at 5:35pm

M:oh wait, are you referring to the professional association thing? in which case, not exactly doctors themselves so much as a very specific group of doctors setting wages for all doctors, which I don’t see as being a good system… that’s a side issue, though.
Yesterday at 5:38pm

T:Gotta disagree with your assumption about economies of scale removing natural competition. The fact that almost every single town I visit for work has an Applebees, a TGIFridays, two Olive Garden’s and a Jack-in-the-Box (or Hardees, if you’re back east) would seem to be a rather strong data point for the contrary position. In fact, this situation (also) drives *my* choice to usually patronize more locally managed solutions, if you know what I mean.

I’m also not arguing that no moral imperative exists. I *am* arguing that the current proposal for “fixing” the system will neither fix it, nor solve the *other* moral questions that are raised by a coercive governmental solution.

I stand by the statement in question (and John’s original post) and I think that my values line up nicely with my politics, thank you.
Yesterday at 6:13pm

T:
>> I’m not saying the government should
>> unilaterally determine doctors’ wages.

>> …Insurance companies are setting them.

Good. Are you aware, though, that insurance reimbursement rates today are *directly* linked to the Medicare reimbursement rates? In that sense, the federal government *already* is unilaterally determining doctors’ wages to a large degree. That part is really not working *now*.
Yesterday at 6:14pm

T:
>> No truly competitive market is ever going to come about with regard to healthcare. Ever. Hence public option to compete with private ones.

No matter how you slice it, adding the federal government as a “competitor” (who incidentally makes all of the rules) will result in a single payer system in the end. In what other industries does the government have robust competition?

Mail service is one that comes up from time to time, but the USPS is actually *intended* to be self-sustaining, and not subsidized by any tax dollars (though they’re running a multi-billion-dollar deficit this particular year.) I don’t see *anyone* proposing that the new health care bureaucracy be self-supporting. Any others you can think of?

I recognize that single-payer is *exactly* what some folks are after in the end (not sure about you) but if that’s the case, arguing that the public option will only increase choice just becomes disingenuous. (Again, not saying that’s where *you* are coming from.)
Yesterday at 6:15pm

T:

>> …doctors aren’t typically determining their own wages. Insurance companies are setting them. [with a lot of help from Medicare]

Exactly. Total agreement. This is a totally critical point

This is perhaps the largest shortcoming of the current system. Consumers do not currently even *know* the prices for medical care, let alone engage in any comparison or choice. Changing this aspect of the system would have a far larger impact than price controls, as it would be self-policing, with powerful economic incentives at the individual level to make the right choices.
Yesterday at 6:16pm

…

M: T, I agree with a couple of your points, disagree with a few, and need to think/research some others. Here are my thoughts.

Regarding 1 big public entity: there are two ways government can drown out competition in a market; either they can regulate the others out of existence (legal monopoly) or they can out-compete due to deeper pockets and/or lack of profit incentive. The former is very common historically. However, in this case I think there’s no question that a government insurer would have to abide by all regulations and then some, so you must be concerned about the latter. (Yes, there’ll be some subsidization, but there will be anyway… we want to get poor people insurance, right? I’d be happy for the public option to be self-sustaining in other cases.)
5 hours ago

M:

I suggest that if the government out-competes other insurers there’s no problem from consumers’ perspective (at that point, all of us). A couple of reasons. 1) economies of scale 2) if they get inefficient, etc., enough to counter the benefits then some other company will have room to compete again.

I’m happier with government winning than with a private insurer because the private ones are really good at screwing people over in ways that would cause uproar if a public entity did them. They tend to be really vague on details of coverage and crap out just when you need them most. It’s in their interest not to pay the few who cost a lot, after all, even if that means they lose them as customers. This leads to the going broke because you get sick scenario.
5 hours ago

M:That last part is the reason I think it’s not just benign but vital to have a public insurer. We need an incentive other than financial reward in this market. Insurance is always sticky, but in something like auto insurance, someone who’s so awful they spend all their time in accidents probably just shouldn’t be driving anyway. It’s not problem if their rates go astronomical. In health insurance, we still want these people to live. For-profit incentives just don’t encourage that.
5 hours ago

M: I think I’ve missed replying to a lot of your comments (particularly on doctor reimbursement… I recommend this article: http://www.slate.com/id/2227082/) but I’ve tried to hit the ones that I see as most relevant to the issue. By the way, thanks for this debate! I’m sorry if I was over-aggressive initially. I felt that your initial post was a bit patronizing and anyway I’ve moved away from policy work because I tend to get too worked up too easily about this stuff. As it turns out, though, the discussion has been very interesting!

(whew! lots of posts! Facebook isn’t made for this stuff, is it)
5 hours ago

M:
Another thought, something you may not know about healthcare in the UK. I’m sure you do know it’s a government monopoly in general (taxpayer-funded, free care for all), and that it’s been getting (well-deserved) heavy criticism recently. The market has also responded. Private providers have sprung up, with private insurance plans, that cut wait times, etc. Employers looking to hire good people have taken to offering these plans. In other words, even intended government monopoly isn’t necessarily immune to market forces.
5 hours ago

M: Now I’m obsessing idiotically, but I also wanted to clarify I realize you meant your initial comment to be light-hearted, not patronizing! I was just paranoid.
4 hours ago

John: I wish I could respond, but my online time is limited today…but I’ve read every response, and wanted to meta-comment that this is exactly the sort of civil and well-reasoned conversation we should be having! You both are setting a great example, and subsequently rock.

What bothers me the most is that the audience for this specific conversation is so limited. I feel it would be a great service to let others in on it. Would you two mind if I lifted this discussion, and rebuilt it on mind on fire? (attributing both of you, or replacing your names if you’d like to be pseudonymous)
4 hours ago

…

T: … M, your comments from this morning are good, but as you might expect, I do want to respond to some of them.
3 hours ago

M: T, I look forward to your response! I realize that being a student has definite benefits when it comes to internet discussions
3 hours ago