Psychoanalyzing My Colleagues

Health policy wonks are a very strange breed. They don't look at the world the way rational economists do. Consider the following:

Case I:
People pay for care with their own money, out of pocket, and health care is rationed by price.
Case II:
The government taxes away health dollars, provides care free of charge and health care is rationed by waiting.

To keep things tidy, let's assume that everyone gets the same care in both cases.  What do we think of these two alternatives?

To an economist, this is a no-brainer. Case I is far superior. Why? Let's say the value of care to the representative patient is $1,000 and that is also its cost. In Case I, the social cost and social benefit of the health care at the margin are the same. But in Case II, the patient must buy care with time as well as with taxes. Since the care is valued at $1,000, the patient will spend up to $1,000 in time to get it. This means paying twice: once with (taxed away) money and again with time.

So, is this the way most health policy analysts think about the problem? Not on your life. 


Enya: "Only Time"

  1. Typical health policy wonks think rationing by price is abhorrent, even if people have money to pay for the care.
  2. They think rationing by waiting, no matter how long the wait, is preferable. Choosing between health care and other uses of time is always better than choosing between health care and other uses of money.
  3. They think all the people in Case I are "uninsured," no matter how much money they have.
  4. They think all the people in Case II are "insured" (universal coverage), no matter how long they have to wait.

Of course, all this is hypothetical. Yet in the real world, U.S. patients are spending almost as much for their care in time costs as they are spending in out-of-pocket cash. [here] And if the policy wonks have their way, things will get much worse. Most of them believe that "fully insured" Medicaid patients, waiting all day for care in an emergency room [here], are better off than an "underinsured" person with a high deductible private plan, buying care out of pocket at a walk-in or urgent care clinic with no wait at all.

Surely this state of mind should have its own name and its own diagnostic (DSM-IV) code. Let's call it the DMV Syndrome, in honor of the Department of Motor Vehicles.

Comments (22)

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  1. Larry C. says:

    Good post. The real question is: why do so many people have the DMV Syndrome? Do you suppose it is an infectious disease?

  2. Joe S. says:

    I think it’s more like a plague, Larry.

  3. Bruce says:

    John, what you don’t understand is that people with a very low marginal product (because their pay is unrelated to what they produce and are in no danger of being fired) do not see time as particulary valuable. Time is precisely what they have a surplus of.

  4. Vicki says:

    How right you are, John. You never, ever hear the mainstream health policy people refer to patients in Britain or in Canada as “underinsured,” no matter how long the waits or even they never get care.

  5. Ralph says:

    Very interesting and well made point, John. Having lived in Canada and seen that the uninsured there get NO CARE AT ALL, I wonder how people can write bout things they have never seen.

  6. Bret says:

    The observation that people spend almost as much in time on their health care as they spend out of pocket in cash just blew me away.

    Think how often the Commonwealth Fund complains about people having to spend money on health care. Have you ever heard them complain about how much people spend in time.

    Obviously, the DMV Syndrome is rife at the CWF offices these days.

  7. Ralph says:

    You need only to look at how much we spend on our pets to see how we value good health

  8. Jeff says:

    It doesn’t seem surprising that we have this argument. Those who have plenty of money but no time prefer rationing by dollars. Those who have plenty of time but no money prefer the opposite. For most things in our consumer-based society, we ration by dollars. For government services, though, which tend to go to people with less money, we tend to ration by time.

    Assuming that we want to provide some basic level of health care as a right (and I know that opens up a whole different discussion), seems the real challenge is building a system that allows access both ways, rather than necessarily picking one or the other.

  9. Ralph F. Weber says:

    Very interesting. Your theory would explain why some think tanks still prefer managed care programs for their own staff over CDHC.

    I’ve always wondered why more people don’t work together on this cause and have never been able to figure it out.

  10. DoctorSH says:

    I have a high deductible for my family and office staff. The staff was told they could have a higher priced HMO plan, but that they would have to pay the difference in premiums. What do you think they chose?
    Only one employee, who was pregnant, switched to an HMO.

    Give people choices between money and time, and they will almost always choose more money!

  11. Larry Becker says:

    There is something intriguing about the trade off of time and money in the health care debate. Both exhibit the unique characteristic of any amount that is necessary for getting well when I am really sick. The dependent variable in this case being sick. They operate very differently when I am NOT sick (see smoking, preventive care, screenings, etc.). Of course this relies upon a rational market that values all inputs and outputs together including health care.

    When I am really sick, it is generally and largely someone else’s money (see co pays, and out of pocket maximums). My time is not a factor because when I am really sick I have no marginal free time.

    When I am less sick it is a larger proportion of my money and a larger proportion of my marginal free time which we continually demonstrate is generally more valuable than the health care being offered. Again see screening rates, diet, exercise, compliance with medication and other doctor’s instructions.

    So, the market is rational and unless I can get health care for ‘free’ (or almost free — see copays), I will spend my resources (money and time) on something else.

  12. John Goodman says:

    Response to Jeff:

    The idea that rationing by time would benefit those with lower wages (and therefore lower opportunity costs) sounds plausible. And it might actually be true if all that was involved was lining up the way people do at the DMV.

    In practice, however, wealthy peoplw tend to do as well or better in time-rationing systems as they do in price-rationing systems. Apparently the same skills that allow people to succeed in the marketplace also allow people to succeed in bureaucratic systems.

    So if you care about poor people, the best way to empower them seems to be to give them control over cash.

  13. Diana Furchtgott-Roth says:

    John, as always your comments are right on point. I hope President Obama and Congress will pay attention. In addition, under Case 1, competition in the supply of the service raises its quality. So, in Case 1, no waiting time, and a higher quality product. To me, that’s the scariest part of Obama Care. It’s one thing to wait and get the same quality. But we’ll wait and end up with worse care. Taking away competition in supply throughout the system, with more people on Medicaid, SCHIP, and other public programs yet to be devised, will permanently lower the quality of care and stop bright young people from entering the medical field and bright young researchers from creating new drugs.

  14. Ted Matthews says:

    We must not overlook the compounding of time as a cost, just as we could not ignore compounding of interest. The funding of any universal plan will have to be tax-based, and currently, the tax source, using Medicare as the exemplar, is payroll. Applying that assumption, the tax income needed to fund a time-rationed system DECREASES as waiting time increases, since people are forced out of wage-producing efforts into waiting lines at medical facilities. Even if the wait is not at the provider, but at work, untreated medical conditions are productivity-impairing. For some, the wait could result in job loss, not only reducing tax revenues but imposing a greater burden on the economic recovery efforts by increasing unemployment and eliminating that former worker’s ability to act as a confident consumer, refinance a mortgage, buy a green car, retrofit the house with solar panels, etc.

  15. Roger Beauchamp says:


    If you support the first scenario, please consider supporting the 180 Degree Approach. It is basically a no tax approach with a cap. It places citizens who earn the money back in control of the spending decisions to a very high degree. They are left in control of how to divide their earned dollars between direct payment for routine services and insurance payment. It grants the same tax treatment to money spent directly for care as to money spent for insurance. Thus it will do more to restore a competitive market than the tax credit approach will.

  16. John Goodman says:

    Comment on some of the points raised by Larry Becker and Ted Matthews:

    In this post I was using the term “waiting” as the unproductive use of time. But there is perhaps a more important way in which care is rationed by waiting: delayed receipt of care. The cost of this type of waiting is not idleness while the clock ticks away, but the pain and agony of untreated conditions, as well as the risk of worsening health, and even the risk of death, during the period during which care is being withheld.

  17. Bruce says:

    It’s not an either/or John. You can have both types of waiting at the same time — as I believe you have illustrated in several tragic cases at Parkland hospital in Dallas.

  18. James Elder says:

    Healthcare in America is governed by Health Insurers , who only open the door to Healthcare , and if you have any condition ( in grown toe nail )
    they can keep the door closed in your case . Healthcare insurers do nothing for our health , they take 25 % of all Healthcare dollars for nothing . These are the three goals of reform you should be discussing , Cost containment , we spend more and get far less than other countries , access to care for all Americans , not the healthy and wealthy only , and quality of care , measured by morbidity and mortality rates. We rank poorly in all ranks except monies spent .

  19. Jeff Munn says:

    Response to John:

    I agree that the wealthy do well under either system–they can hire expertise, or hire people to wait for them in a time-based system. So the issue is what is best for people who do not have money, but have time.

    People who are given money spend it less wisely than those who have the money to begin with (two examples of this are the “house money” phenomenon in Las Vegas casinos and the fact that a great deal of employer-funded HSAs have zero balances at year end). I see your point and agree with it to some extent, but to me it is still an open question how best to engage those with lower incomes in making wise health and health care choices. As Larry Becker and others imply, there is a market for time as well as a market for money, and people do make choices that trade one for the other. One thing we agree on is that there must be a market. Any reformed system must offer participant choices to have any chance of success.

  20. Linda Gorman says:

    Some of these comments seem to assume that only the wealthy are willing to pay extra to save time. This may be incorrect. Both the poor and the wealthy use the new urban toll lanes that guarantee a certain speed by raising and lowering the toll to use the road. If you are working hard and just getting by, it may be worth paying $5.00 to ensure that you make it to the day care provider on time and avoid the $15.00 15 minute late charge.

    Same with health care. If you have a minimum wage job and have to wait at a clinic 3 hours to be seen, you are not being paid and are incurring a loss that you might be willing to pay to avoid. Especially if the absence means that you get fired.

  21. David McKalip says:

    As I read this together with the NCPA piece today on rationing, I am reminded of two case studies I wrote when evaluating the effects of Pay for Performance on Patients.

    This is the kind of bold relief presentation Americans need to hear now.

    Here they are.

    Case Study I (2006)
    Care in the Patient-Physician Relationship
    “Mr. P walks into my office with a cane. His left side drags but he manages a smile on the still functioning Right side of his face. It has been 6 months since I last saw him, emerging from a coma after the brain injury suffered in the car accident. His battle in the nursing home and in the rehab unit has been fraught with challenges… all of them overcome. Behind him, his two young children watch the miracle of their father and seem eager for him to go to the baseball game later that day. On the way out after his visit, his wife cries and embraces me with thanks.”

    Case Study II (2015)
    Health Care in the new System
    “Mr. P takes his last gasping breaths in his hospital bed. Life saving medication and advanced medical treatment are denied to him. The din of the courtroom seems to echo here, reminding us all of the recent legal battle that still allowed his medical support to be withdrawn – against his family’s wishes. The family grieves at his impending early death and wonders where it all went wrong. His tearful wife glares at me, wondering – ‘why won’t you save my husband’s life’?”

  22. M J Valentine says:

    I loved your article! I can use the concept directly in my work as an automotive Process Engineeer. Also, I coach local Family Physicians and staffs in Value Stream Mapping for seeing waste such as waiting. I can quanitfy correction costs, but never waiting costs. Have you ever considered the cost of “approvals”? There is so much waiting of information for each level of approval. It’s getting worse with the current fear of spending any money. Thanks so much! Send me an email. We can share thoughts. Michelle