It's all about healthcare. Well, and signaling.

This afternoon I was sitting in the third row, right behind the woman who placed the winning bid -- $13,000 -- on the auction of Harry Potter's bow tie. Well, of J. Pierpont Finch's bow tie, Finch being the lead character of How to Succeed in Business Without Really Trying; Finch is played by Daniel Radcliffe, a talented young actor/singer/dancer (well, a bit weaker as a dancer, I thought, but I'm no judge) who will probably be plagued for the rest of his life by people who can't help but think of him as Harry Potter. And he and his co-star were trying to raise money for a Good Cause, namely healthcare, after the performance. (Okay, a specific healthcare cause, but I'm still fussing about healthcare in general.) So....

So I would call the winning bid rather impressive; I think most people would. Radcliffe commented that we were "well over the record", some time before the auction closed---I presume he does this with a fresh bow tie for each performance. But I couldn't help but be reminded of the cost of my own appendectomy, not quite a year ago: it was in fact a little over the bow tie's price. Consider what that audience pays for healthcare each year...the auction was a Good Thing to Do, an Exercise in Nobility, a demonstration of the Brotherhood of Man (that being the last song&dance) but as a contribution to healthcare it was a teaspoonful in a lake.

Yes, I understand that's not the point. It's not really about healthcare, even healthcare is not really about healthcare. Robin Hanson put it rather well, some time ago, in his argument that it's about Showing That You Care:

I can explain these puzzles moderately well by assuming that humans evolved deep medical habits long ago in an environment where people gained higher status by having more allies, honestly cared about those who remained allies, were unsure ... These ancient habits would induce modern humans to treat medical care as a way to show that you care. Medical care provided by our allies would reassure us of their concern, and allies would want you and other allies to see that they had pay enough to distinguish themselves from posers who didn’t care as much as they.

That makes sense to me as the beginning of a model, and it certainly isn't a criticism of the woman who paid so much for the bow tie. She evidently does care, and presumably cares that it's evident that she cares, and that's a good thing.

Nonetheless, if you want to use healthcare provision to show you care, I think it would be a good idea to spend some time looking for actual ways to provide actual healthcare; a few more teaspoons of water in the lake won't do it. So I'd like to go back over my proposal of a bit more than a year ago. I'd organize it a bit differently now, but I don't seem to have moved all that far.

If I were (heaven forfend) In Charge, I would crowd-source as much as possible of the decision-making by pushing it into a market, with participants being given as much data for decision-making as possible, and being simultaneously milked for as much data as possible. I want incentives for innovation, to reduce the death-rate for billions yet unborn; I also want incentives for good performance now, not for the sort of regulatory capture our current system maximizes. Specifically I would:

1. Allow unlicensed health care, wherever it's clearly labeled as such; it won't get public support but people can choose to spend their money on it. The argument against this is apparently that people will make bad choices. Yeah, some will, probably including me and you. So? I've never understood the way some people believe that they (or those they select) can make good choices for others; in fact I'm moderately cynical about licensure requirements as they are now structured, whether for medics or morticians or cosmetologists.
2. Require transparent pricing, uniform no-bargaining pricing, from all providers of licensed health care. (The services producing my appendectomy really don't do this.)
3. Require that "licensing" be independent of geography; if the best/cheapest supplier of a particular treatment is two states over or on another continent, that's fine. As I've said before, I believe that telepresence medicine can enable the specialization and trade that has made markets work in other contexts since before Adam Smith wrote about it, so I expect this as the usual case, not an exception.
4. Take away the employer-based tax exemption; health care shouldn't be an employment issue.
5. Add a universal tax-funded "insurance" policy (insulation, actually): if your expenditures for "proven procedures" from licensed health care providers exceed the overall 16% (of GDP) average, then the taxpayers contribute some. Maybe if your cost is 30% of your income, then the taxpayers kick in (30-16)/2=7%, half of the overage, and the maximum you can pay is 50% of your income whether that's $0/year or $10M/year. Is that too generous? Not enough? I dunno. The point is to combine protection from catastrophe (but not from serious pain) with making sure that market prices are set by people or groups who are actually bargaining in that market, i.e. the better-off people for whom procedure X will not be covered. I want to do that combination with some simple, less-than-perfect-but-better-than-nothing rule with which I can trust a government. (Democrats and Republicans trust government on different things; just figure you want a better-than-nothing rule with which you'd trust a politician of the party you despise.)
6. If you want "unproven procedures" and you can pay for them, that's fine too; the licensed health care providers should have a strong motive to come up with new stuff and document/publish that it works. The FDA should not be able to keep you from paying for these likely-to-fail treatments, but it should keep you from charging it to the rest of us. If procedure X has no accepted studies supporting it, then it's up to you to pay for it.
7. Whatever additional insurance/insulation you want to buy for proven or unproven procedures is just fine, and can be bought across state lines. It's your problem. You want to save your money in a special bank account? Feel free.
8. Any care that has been paid or partly paid by public funds goes into an anonymized public database, so that we learn more about which treatments have what effects on which conditions. Organizations promoting not-yet-approved treatments will be encouraged to contribute data.

And that's really it, for me. I'm even less confident of this than I was when I wrote the first version, but I still don't see anything else I like as well. I think that the market I'm describing would probably evolve rather quickly into a market in which people choose and buy packaged health plans from "insurance" agents, and web sites build up crowd-sourced ratings of those health plans; there would be quite a bit of overlap with the better parts of what we have now. I hope. And I care, and I suppose I'd like to signal that I care.

Or then again, maybe not.

update:I never actually mentioned that this post was prompted by thinking about Mark Thoma's Economist's View: Discussion Question: How Can We Reduce the Growth of Health Care Costs?

there is far too much discussion of cutting services, and not enough about how to control costs without affecting services (e.g., using the government's purchasing power to reduce the amount the government pays for drugs, reducing the cost of insurance companies fighting over who pays bills, etc.)

You see, I doubt the premise: if you use government power as I believe Thoma wants, you are increasing the incentives for regulatory capture, crony capitalism, rent-seeking... you are putting yourself on a path where you have signaled your concern but healthcare is not what you're rewarding. Of course government power needs to be used -- to collect the money for treatments which research results say are crucial and which markets say are expensive. And government power needs to be used to maintain a context for innovation (rather than squelch it, as I believe our recent trends in "intellectual property" law tend to do.) But if bargaining-on-prices-with-the-government is the multi-billion$ activity you focus on, then that's what companies will have to invest in. That's a bad bad bad bad thing. I commented here.

Well, it's Easter morning. Maybe we're all saved?

Or then again, maybe not.