The free market offers no incentive to give health services to people who cannot pay for it, or don't know that these services will reduce hospitalization by 33% and costs by 22%.
Basic health care is not McDonald's because your mother does not die prematurely (and miserably, and expensively) for the lack of McDonald's. The core issue is not about some private business being 'customer-responsive' in the vein of Starbucks. You can, today, start private clinics which are more "customer-responsive" (leave a mint on your pillow, etc.) but how are you going to recoup the costs and in particular, how does that benefit the populace in aggregate?
> The free market offers no incentive to give health services to people who cannot pay for it, or don't know that these services will reduce hospitalization by 33% and costs by 22%
Amen to that. The major killers at the turn of the last century were tuberculosis and waterborne diseases, and the free market did nothing to improve living conditions or supply clean water to the urban population then. I am in Portugal right now, where Dr Sousa Martins, a physician who spearheaded the fight against tuberculosis, is considered a saint. Public health is always political issue. It is as true 100 years ago as it is now.
For the upper 50%, sure, but the free market failed and generally fails to give the lower 50% of earners access to sufficient resources to do proper sanitation. Treating clean water as a commodity rather than a public utility is a public health disaster. Each household needing expertise and equipment for water purification does not scale.
Define failure in this case. Yes the poor have less than the rich, but so what? What is the cost of clean water today? How much for a fridge?
As it turns out, 99.9% of us households have a fridge (http://www.eia.gov/emeu/recs/appliances/appliances.html). Those weren't really available in 1900, yet I don't remember any huge government subsidy for those (and by keeping your food fresh they prevent diarrhea and improve hygine). I do remember huge, private, factories making them, however.
But even then soap is likely also one of those things that really help prevent deceases through proper sanitation -- yet how poor do you have to be to not be able to afford soap?
> What is the cost of clean water today? How much for a fridge?
A fridge is much more expensive, but it's also much more a luxury. You don't need to refrigerator to avoid diarrhea, it just helps. Pure running water on the other hand is extraordinarily cheap and makes avoiding waterborne illness easy. (Due to the fact that running water is provided by public utilities, not free markets.)
I'm not saying the free market doesn't have a part to play in good hygiene, but trying to rely on the free market for a water supply and food handling regulations has been an unmitigated disaster everywhere it's been tried.
Public utilities aren't necessarily public companies. Private companies own and manage the lines, yes, but prices are fixed by the government, and companies are required to supply water to residents, often even in cases of non-payment. Hardly a free market, and definitely what I would call regulated public utilities.
There are many private water systems in the US- I own my own well and septic system, as do all of my neighbors. There are developments nearby that have their own private systems- and it works very well, so I really don't get the unmitigated disaster statement. Perhaps you could share some examples, because that has not been my experience.
The free market creates slums. "People are willing to pay for it!" is the phrase that defines the free market. And yes, people are willing to pay to live in slums… when there are no laws, or no enforcement of laws, to protect their interests, because they are powerless, ignorant, undocumented, poor.
>Basic health care is not McDonald's because your mother does not die prematurely (and miserably, and expensively) for the lack of McDonald's
It is indeed important to recognize where health care deviates from known "[market-]solved problems". But you haven't shown an important difference there. While mom doesn't die from lack of McDonald's, she does die from lack of food, and yet no one uses that a reason to make trite remarks about how we can't possibly allow a free market in food.
Rather, they would recognize that we should leave food production to the market, and simply have the government buy from producers, like we do with food stamps, and then concentrate on making sure that such a system doesn't have bizarre implications for the incentive structure.
>You can, today, start private clinics which are more "customer-responsive" (leave a mint on your pillow, etc.) but how are you going to recoup the costs and in particular, how does that benefit the populace in aggregate?
The problem is that you're not going to get reimbursed by the government, no matter how much better your service is per dollar than the existing recipients of the money. So no, it's not really anything like a fair competition where market incentives bring in new entrants where existing providers suck.
The things is, we are already using a market to provide health care to people unavailable to afford it; it's just that the payer is someone else.
So it's import to examine the process by which that money is given out, and whether it's encouraging waste, or if it has an incentive to economize on care to get the best outcome per dollar. And you don't answer that question by saying "this ain't the market" (because it largely is) or dismiss it by asking how they're going to get paid (because someone is already paying for these services).
> and yet no one uses that a reason to make trite remarks about how we can't possibly allow a free market in food
We do not have a free market in food. Even if you ignore subsidies entirely… Have you not heard of the FDA? Upton Sinclair? Health inspections for restaurants? Requirements to enrich certain food products, pasteurize others?
How about the pet food and baby formula from China (free market!) that was found to have melamine and other poisons in it?
A free market in food results in low quality, unsafe, non-nutritious food. Or things that masquerade as food but aren't.
On that note… History will look back at many of our legal "foodstuffs" of today and call them as awful as Radon Water:
Like slums (see my other comment) -- people will pay to live in slums, you know, the free market creates them --- a free market for food provides for a few and poisons the rest. Not unlike the healthcare situation in the US.
I'm not going to get into the rest, but it's always worth mentioning that Upton Sinclair's book was a work of fiction. Most of the more disgusting and dangerous scenarios in the book were stuff that he invented to make the book more exciting and make it work better as propaganda. In short, he took dramatic license.
And the FDA has quite likely killed more people than it has saved, and the USDA is essentially a way to subsidize the meatpacking industry by socializing some costs the industry would otherwise have to pay for itself. The net effect of such organizations on safety trends is, at the least, debatable. In the economic literature you often find that the rate of improvement decreases when a new regulatory institution starts managing some metric.
>And the FDA has quite likely killed more people than it has saved,
My immediate reaction is to say you're full of shit. But I'll hold off judgment and see if you can offer any shred of an argument that justifies this statement (not even asking for proof here).
>> And the FDA has quite likely killed more people than it has saved,
> My immediate reaction is to say you're full of shit. But I'll hold off judgment and see if you can offer any shred of an argument that justifies this statement (not even asking for proof here).
The result of the FDA's post-1962 efforts has been to dramatically slow the rate of introduction of new drugs with essentially no effect on the average quality level of the drugs that do get introduced. Some new drugs still get through, but less than half as many per unit time and the FDA approval process delays the use of those drugs and makes them vastly more expensive to develop. These extra delays and higher costs are estimated to have caused, at a minimum, hundreds of thousands of preventable deaths.
Good drugs save lives. Good drug information saves lives. The FDA often finds itself in the business of postponing the use of good drugs and preventing the dissemination of valid drug information. It has a powerful institutional bias towards inaction, but failing to approve good drugs in a timely manner kills people with at least as much certainly as does letting bad ones through.
The notion that the modern FDA on net hurts us more than it helps is a pretty common belief among those economists who have studied the matter. I'd start with this general overview of the issues:
Bryan Caplan summarizes the general state of opinion as: "The public thinks the FDA is great. Regular economists think it's pretty good. And economists who specialize in the FDA think it's pretty bad." (source: http://econlog.econlib.org/archives/2005/04/fda_public_econ.... )
Well, you certainly passed my low bar for rationale. I still can't agree though.
Any argument based on statistics is going to be strongly biased against the FDA's current procedure. It is impossible to predict how many deaths were prevented from keeping dangerous drugs off the market, so it is impossible to make a meaningful comparison. Furthermore, a simple utilitarian argument about the net lives saved is not how most people would comprehend the situation. The situation where a drug kills someone will be weighed much more gravely than the situation where a life-saving drug was kept from you because it couldn't be proven effective. So a net-lives-saved calculation simply doesn't capture the intuition that most people have.
Being biased towards conservatism is appropriate at the scale of approving drugs and advertisement towards an entire country. Most people do not have the knowledge (even considering the internet) to appropriately evaluate a drug. I would wager that even doctors are not equipped to make this sort of safety evaluation for their patients. This is exactly the sort of thing that scientists taking a conservative approach should be doing.
Read the links I gave. I wasn't expecting you to be convinced just by what I wrote above.
Before 1962, the FDA was tasked to verify safety but NOT to verify efficacy. Everything you just wrote only argues for that - for keeping drugs off the market that "kill someone" when they take it. It does NOT argue for keeping drugs off the market that we know are safe but can't yet conclusively prove work "better than a placebo" or "better than the standard treatment" in a study.
After 1962, the FDA was tasked with determining efficacy. That is the part where the main problem lies. It turns out that proving that a drug probably doesn't kill people is MUCH easier than proving that a drug "works" at a level better than some metric.
To prove a drug is safe, we have models and processes to calculate the LD50 and verify that people who take it at expected dose levels don't get sick. But to prove it's effective is hard. Hard enough that, in practice, insisting on it it kills hundreds of thousands of people. As one popular example, when the FDA approved beta blockers for use in preventing heart attacks, the FDA's own press release claimed that the newly approved drugs would save 10,000 lives per year, based on the results seen in Europe where the drugs had been in use for the prior decade. Economists look at that and notice that seems to suggest keeping that one class of drug OFF the market in the US after it had been approved in Europe killed on the order of 100,000 people all told. That is a very large death count. The worst death count we've ever seen due to drugs that "slipped through the cracks" prior to 1962 is a few orders of magnitude smaller than that.
> The situation where a drug kills someone will be weighed much more gravely than the situation where a life-saving drug was kept from you because it couldn't be proven effective. So a net-lives-saved calculation simply doesn't capture the intuition that most people have.
That is true, but in this case the "intuition that most people have" is WRONG. By any rational standard, killing a hundred people by preventing them from getting their medicine is MUCH WORSE than killing one person by letting him get his medicine...even if we know who the people affected are in the latter case and not the former. That is approximately the sort of tradeoff we're looking at.
> It is impossible to predict how many deaths were prevented from keeping dangerous drugs off the market, so it is impossible to make a meaningful comparison.
It is difficult, but probably not impossible. One might look at the death rates attributed to medicinal prescription drugs under various regulatory regimes. In the US, you can compare drugs approved pre-1962 versus post-1962 - if the FDA's extra testing in the modern era were really valuable, there should be a bend in that curve in the correct direction (hint: there isn't). One can also compare with other countries that changed their regulatory regimes to be stricter or looser. Sure, you can't get an exact number of deaths, but you can make a plausible estimate. And this calculation WAY favors the FDA approach, due to the "what is seen and what is not seen" factor - people who die from taking a drug show up in newspaper headlines blaming the drug whereas people who die from NOT taking a drug do not show up in newspaper headlines blaming the FDA. :-)
BTW, one simple huge improvement would be to just say that any drug approved for use by some other country's regulatory apparatus could be used here too with a mere "not yet approved by the FDA" warning label.
I read two of the links and skimmed the third. They weren't terribly convincing. You certainly have a point about beta-blockers, there was already a natural experiment being conducted on a mass scale in Europe. If it looked like it was safe and effective, there's no reason why that shouldn't have been used as evidence to expedite the approval process in the US. This isn't an indication that the entire process needs to be overhauled though.
As far as determining efficacy, I prefer this to the alternative. Simply judging rates pre-1962 doesn't really capture the potential for abuse that exists in our current media-saturated lives. Many European countries completely ban drug marketing towards individuals. If the FDA allowed drug makers to market unproven drugs in the US, that would create a huge clusterfuck of false advertising and manipulation. You cannot responsibly advocate both positions.
>By any rational standard, killing a hundred people by preventing them from getting their medicine is MUCH WORSE than killing one person by letting him get his medicine
Yes, using the severely biased statistics that are available. In an environment where proof of efficacy were not required, one can imagine that the drug making business (in the US where direct marketing is allowed) would be even stronger with greater pressure to push drugs on the general population. At scale, deaths rates due to drugs will show up that are impossible to discover using small scale testing. It is known that generic Aspirin kills a hundred or so people a year around the world. More widespread usage of drugs, which is the direct result of what you're proposing, would undoubtedly cause more such cases.
Forget "marketing". Take that out of the equation. I don't care if you ban all marketing to individuals. (Well, I do, but that's an entirely separate argument, and a distraction from this one). The question here is just what drugs can legally be sold or prescribed, regardless of how people learn about them. Currently, "off-label" use is COMPLETELY ACCEPTABLE to the FDA! Once a drug is legal to use, you can use it for any condition at all, not just the condition it was proved efficacious for.
So we already have current widespread use of drugs that haven't been proven efficacious. It doesn't seem to have been a disaster. In fact, widespread use of drugs is one of the few forms of medical intervention that demonstrably makes people more healthy on net. Right now the rule is that it's legal to use drugs if:
(a) they got accidentally grandfathered in due to historical use (eg, aspirin and penicillin would NOT have passed the FDA's current standards), or
(b) they were patentable and turned out to be useful enough for treating SOMETHING that it was worth spending on the order of a billion dollars getting SOME use approved, even if it's not the use it's being prescribed for now.
Meanwhile, a drug that is just as effective but isn't patentable or treats a rare enough condition that it's not worth spending a billion dollars to get it through trials in the US...is not legal to prescribe.
Can you honestly justify that contrast?
If a drug has been legal in, say, Denmark, for five or ten years, has seen widespread use, and hasn't caused mass deaths THERE, why can't we just automatically make it legal to use here WITHOUT spending hundreds of millions of dollars redoing the same studies here? Do we think the FDA is somehow smarter and better at its job than its equivalent in every other country in the world?
The FDA faces the wrong incentives. It has no reason to take into account the huge cost of the harm it does, which is a matter of life or death to people with rare or serious diseases. It needs to be fundamentally overhauled or gotten rid of entirely. Yes, there would be costs to letting more people take more drugs...but every serious attempt to estimate it says the benefits would outweigh the costs. If you don't want sick people dying needlessly, you should be opposed to the FDA in its current form. It is an idea whose time has gone.
Gieringer (1985) used data on drug disasters in countries with less-stringent drug regulations than the United States to create a ballpark estimate of the number of lives saved by the extra scrutiny induced by FDA requirements. He then computed a similar ballpark figure for the number of lives lost owing to drug delay:
[T]he benefits of FDA regulation relative to that in foreign countries could reasonably be put at some 5,000 casualties per decade or 10,000 per decade for worst-case scenarios. In comparison, it has been argued above that the cost of FDA delay can be estimated at anywhere from 21,000 to 120,000 lives per decade. . . . Given the uncertainties of the data, these results must be interpreted with caution, although it seems clear that the costs of regulation are substantial when compared to benefits. (196)
In short, that paper estimates the FDA has killed more than twice as many people as it has saved.
The reference: "Gieringer, D. H. 1984. Consumer Choice and FDA Drug Regulation. Ph.D. diss., Department of Engineering-Economic Systems, Stanford University."
Here's another really good (and SHORT) general overview article that should address a lot of your concerns, "Economists Against the FDA" by Daniel B. Klein:
When I said that delaying good drugs and good drug information kills, by drug information I meant stuff like this (from the Klein article):
Today men with risk of heart trouble know to take half an aspirin a day. By 1988 it was well established that aspirin greatly reduces the risk of myocardial occlusion. But for years the FDA forbade aspirin makers from advertising that fact (the FDA still significantly restricts advertising
about it). The FDA surely killed tens, and quite possibly hundreds, of thousands of Americans by this restriction alone."
Sorry, I didn't see this post earlier. The paper you link to makes some good arguments about the approval process. While I absolutely can't agree that the legal system can effectively screen out dangerous drugs without an oversight agency like the FDA, I can agree that the approval process for drugs to treat acute deadly diseases should be expedited in proportion to the severity of the condition it treats. The problem I see with these arguments is that they're using the worst case scenarios to argue abolishing the agency altogether. Aside from cases of life-saving drugs, the FDA also works to keep drugs and devices to treat non life-threatening or cosmetic cases from being harmful or deadly. An argument that beta-blocker drugs should have been approved faster is not an argument that your typical diet drug should have been. If we can draw a distinction between these cases, I'm more receptive to the arguments you're making.
As far as aspirin for heart attacks goes, I can see the logic in not allowing a drug company to advertise its use for this purpose. Were doctors made aware of this use and were they trained to offer it as medication in appropriate cases? If so, then I think the system worked as it should. If not then there should be a system in place that disseminates such information to doctors and other medical professionals. But allowing drug companies to advertise directly is a massive can of worms. I don't think it should be allowed at all, let alone for "unproven" uses. People are not knowledgeable or responsible enough to evaluate the use of a drug based on uncertain information.
I have read a lot about Upton Sinclair but never heard the criticism that his novel was unrealistic. References?
On the other hand, the inspectors assigned by President Roosevelt at the time…
> Learning about the visit, owners had their workers thoroughly clean the factories prior to the inspection, but [Labor Commissioner Charles P. Neill and social worker James Bronson Reynolds] were still revolted by the conditions. Their oral report to Roosevelt supported much of what Sinclair portrayed in the novel...
And Teddy Roosevelt apparently hated Sinclair, so somehow I trust his employees finding more than I trust you, random hackernewser.
>... excepting the claim of workers falling into rendering vats…
And as for that last bit, is it made up? Surely considering how many workers have accidentally been killed in other "crazy" accidents involving falling-into-stuff (e.g. ammonia/effluent holding tanks), which have been documented, it's not far fetched to believe that in an abusive, unsafe, and unsanitary environment, at least one person has died that way.
historians with an ideological axe to grind against the market usually ignore an authoritative 1906 report of the Department of Agriculture’s Bureau of Animal Husbandry. Its investigators provided a point-by-point refutation of the worst of Sinclair’s allegations, some of which they labeled as “willful and deliberate misrepresentations of fact,” “atrocious exaggeration,” and “not at all characteristic.”
Instead, some of these same historians dwell on the Neill-Reynolds Report of the same year because it at least tentatively supported Sinclair. It turns out that neither Neill nor Reynolds had any experience in the meat-packing business and spent a grand total of two and a half weeks in the spring of 1906 investigating and preparing what turned out to be a carelessly written report with predetermined conclusions. Gabriel Kolko, a socialist but nonetheless a historian with a respect for facts, dismisses Sinclair as a propagandist and assails Neill and Reynolds as “two inexperienced Washington bureaucrats who freely admitted they knew nothing” of the meat-packing process. Their own subsequent testimony revealed that they had gone to Chicago with the intention of finding fault with industry practices so as to get a new inspection law passed.
According to the popular myth, there were no government inspectors before Congress acted in response to The Jungle, and the greedy meat packers fought federal inspection all the way. The truth is that not only did government inspection exist, but meat packers themselves supported it and were in the forefront of the effort to extend it so as to ensnare their smaller, unregulated competitors.
Oh, and the fact that to you "it's not far fetched to believe" something does not constitute evidence for it. :-)
The phrases given do indeed appear as described. "willful and deliberate misrepresentations of fact" was in reference to the claim that dead rats and dried rat dung collected on meat that was then swept into the sausage/canning process.
It's interesting reading. The meatpacker rep really seems to know his stuff. Upton Sinclair's claims were indeed evaluated; they didn't hold up.
"Under existing law the National Government has no power to enforce inspection of the many forms of Prepared meat food products that are daily going from the packing houses into interstate commmerce. Owing to an inadequate apropriation the Department of Agriculture is not even able to place inspectors in all establishments desiring them. The present law prohibits the shipment of uninspected meat to foreign countries, but there is no provision for inspected meats in interstate commerce, and thus the avenues of interstate commerce are left open to traffic in diseased or spoiled meats."
This from the mouth of a President who thought Sinclair was a socialist jackass. So, which source to trust… a first-hand source, who hired the inspectors and commissioned the report, who ran the country and was presumably informed about legal jurisdiction, who thought the original author was a jackass… or a magazine that has its mission statement to promote free market ideology 50 years later?
I'm not claiming Upton Sinclair's claims were unrealistic, I'm just claiming they were false. He said stuff that clearly was not true. The stuff about rats and dried rat dung going into the meat: false. The stuff about workers falling into the vat and, again, becoming part of the meat: false.
(there actually was one case one time of somebody falling into the vat, but the body was recovered and buried, not turned into sausage.)
Sinclair clearly invented stuff in order to entertainingly disgust his readers, which makes him an unreliable narrator, not a valid witness.
The fact that the government introduced new inspection laws to reassure the nauseated populace doesn't mean the guy whose lies nauseated them was correct. Nor does the fact that Roosevelt, like any politician, liked taking credit for the laws he signed and making grandiose claims for how much good those laws were likely to do.
> The free market offers no incentive to give health services to people who cannot pay for it
I'm not sure that's strictly true. For one, if the government is paying for those who cannot afford it (through medicare/medicaid, etc.) then there is money to be made, and thus some incentive. Even if its a relatively small amount, some model could be devised to capture the market as a sort of long tail. Much like Amazon has some incentive to sell even the cheapest, niche items.
> The free market offers no incentive to give health services to people who cannot pay for it.
That's why we balanced the market with limited regulations, such as requiring Emergency Departments to treat all patients regardless of their ability to pay. It's also why we established Medicare, Medicaid, and the VHA so providers can get paid for treating patients with limited means.
With the new health reform, it's why we are providing insurance pools so people who do not have benefits through work can benefit by shared risk and still buy health insurance on their own. Health reform also includes an individual mandate to incentivize everyone who can afford it to purchase health insurance.
> these services will reduce hospitalization by 33% and costs by 22%.
> how are you going to recoup the costs and in particular, how does that benefit the populace in aggregate?
> The free market offers no incentive to give health services to people who cannot pay for it
Yes, thank you. I've said it many times before - the Free Market cares about your problems to the exact extent that you can Pay for them. Any benefits that happen to flow to the impecunious are incidental (though still nice when they do occur).
> The free market offers no incentive to give health services to people who [...] don't know that these services will reduce hospitalization by 33% and costs by 22%.
Your argument proves too much. You might want to think through the logic in some other area of life. Maybe gas prices at the pump, or candy prices at the supermarket counter. Cheaper and better comparable products DO tend to win over time, do they not?
If X is 22% cheaper (while being better as well) than Y, the people who buy a LOT of this good, whatever it is, have a HUGE incentive to switch. In the case of health care, the big movers would be (a) health insurance companies, (b) other companies that offer health coverage to their employees.
Additionally, of those who buy health coverage or health care directly as individuals there are bound to be some customers who are unusually price sensitive or unusually anal about doing price comparisons. On the margin, THOSE people will switch, and their friends who look to them for guidance will also switch. Just that movement alone might put a company out of business and thereby protect everyone else too, but you also have to think about natural churn. Even if existing customers and existing big companies and existing insurers are all too lazy to switch, as NEW companies and individuals look for their FIRST contract, they'll do a comparison and see that 22% savings.
Last but not least, ignorance is somewhat curable. When X is 22% cheaper to provide (while also better) than Y, X can sell the service for less AND have a higher profit margin...and will use some of those profits (or expected profits) to ADVERTISE. They can TELL the people who "don't know" the stuff that they need to know.
I recommend putting up billboards near the competing hospitals. :-)
Basic health care is not McDonald's because your mother does not die prematurely (and miserably, and expensively) for the lack of McDonald's. The core issue is not about some private business being 'customer-responsive' in the vein of Starbucks. You can, today, start private clinics which are more "customer-responsive" (leave a mint on your pillow, etc.) but how are you going to recoup the costs and in particular, how does that benefit the populace in aggregate?