Friday, June 10, 2011

Krugman Explains (Inadvertently) How Medicare Distorts the Healthcare Picture

Paul Krugman writes:
...I know several people who are hanging on, postponing needed medical care, hoping that they can make it to 65 before something terrible happens.
Krugman writes this in relation to another topic, but he is inadvertently pointing out that government supplied healthcare distorts the demand picture for healthcare. Leaving aside whether the people Krugman knows are postponing "needed" medical care, one cam imagine how much non-urgent medical care is postponed until a person makes it to 65, when the tab ends up with the government. Indeed, how much care is sought in general after medicare kicks in than wouldn't have been sought at all, if the tab wasn't picked up by the government?

Bottom line: Medicare distorts the supply and demand picture for healthcare. It increases the demand for healthcare, while the supply of doctors is lowered as they are faced with more and more regulations.


  1. Thanks OGV, corrected.

  2. As Krugman's comment points out, when the financial burden of healthcare increases on individuals, the literal cost benefit ratio is altered, people will only seek medical care when moderately to severely ill; physician and hospital income proportionately decreases. After the 2008 crash, every doctor I know, in several states, saw a 20-30% drop off in patient visits, as people hunkered down and insurance companies raised rates and deductibles.

    As my experience is anecdotal, I would be curious to know if you or any of your readers are aware of a similar phenomenon.

  3. And, this analysis of your is only the tip of the iceberg, Bob. Just take into consideration the source of the money, and the valuations of the practitioners thereof, the marginal utility, the increased demand, etc.

    Government run "anything" will always increase the costs and prices of such, because it must necessarily increase the demand of the same. Sure, those that receive the benefits don't necessarily get better treatment, or treatment that they would otherwise demand, but it is all "free". And, of course, the doctors don't get the ultimate benefit of increased income from this entire dynamic.

    Individual valuations work in every other sector, but when that sector has to do with LIFE, well, doggonit, all of the sudden the market breaks down... Mmhmm. Sure it does...

  4. People were not meant to live into their 80s and 90s. At that age most have a fairly low quality of life. There are exceptions, but the general rule holds. It costs a fortune to keep people alive after they hit 80. For many it actually starts earlier. It is not possible to sustain the costs with the large number of boomers entering the system. The ONLY fix possible will be to make humane methods of ending your life available to anyone who requests it. It should not be forced or even suggested, but it should be readily available. A significant fraction will choose to end their lives peacefully and humanely and with dignity rather than suffer the protracted misery of "life saving procedures" that are available at great cost through medicare. Some, will choose to battle it out, and be carried by their family from the hospital back to the nursing home, and then from the nursing home back to the hospital, repeatedly, so they can lie in a bed with tubes in them and watch TV or sleep waiting for the event that can't be fixed; all the while driving the nation into bankruptcy. Some will be wealthy and can pay for that care themselves. Fine. But many will choose to avoid that misery and die with dignity.