Health Wars: The Empire Strikes Back
Not everyone is enamored of Health Savings Accounts (HSAs) or patient power. There are even people who dislike HSAs almost as much as they dislike the syllogism. Alas, they are legion. We are surrounded by them. Were righteousness and virtue not on our side, we would have been vanquished long ago.
Many of the complaints of HSA critics are forcefully argued in a new book entitled Health Care at Risk – which I take to be the Freudian counterpart to our own book titled, Lives at Risk.
The author, Timothy Jost, is a law professor at Washington and Lee University.
In a letter to me, he said his book is "fair and balanced." Compared to the usual screeds, he has a point. Jost actually reads what we write, instead of relying on the Newsweek summary. Still, all the book jacket blurbs are from people on the other side. Readers will have no difficulty understanding why.
Jost offers a lot of interesting institutional background on the consumer directed health care movement and the people involved before getting down to two main points. He says CDHC advocates, including yours truly, rely on the neoclassical economic model to understand the health care system (which is true), and he implies that there is some alternative model that could be used instead (which is not true).
Jost devotes quite a few pages to explaining why the market for medical care is not like the market for breakfast cereal. If you were otherwise inclined to think of those two markets as pretty much the same, his book is a good read. That's as a prelude to his finding fault with virtually all of economic theory.
Simple economic models, he says, ignore transactions costs, imperfect information, externalities, and anticompetitive behavior. Economists have learned to deal with these factors in more sophisticated versions of the model, he admits, but he doesn't say how. The case for the prosecution is so lengthy and varied, there is literally no time for the defense.
Jost doesn't even remind the reader that the model he is attacking is the very same model that is used to calculate the value of stock options and regulate the money supply; or that it is used by government agencies to forecast the effects of every bill before Congress, including all health legislation; or that it is used ubiquitously by the private sector to predict the effects of external shocks on markets, including all health markets.
I don't know any economist who thinks all markets are the same or that neoclassical theory is beyond reproach. The more important point here is one that even a lot of very bright people do not understand: There is only one social science model that allows us to think in a consistent, non-contradictory way about complex social phenomena. That model is economics. There are not two or three or four models from which one can pick and choose. There is only one.
Jost quotes from an email message I sent him, but without attribution. So I want to publicly own up to having said the following: "In all of social science – whether economics, politics, sociology, history, etc. – there is only one model that (a) is internally consistent and (b) can explain and predict. That is the model developed by economists. All the rest is gobbledygook. And more often than not, it is highly opinionated, value-laden gobbledygook."
Economic theory predicts that in any system in which all the actors find it in their self-interest to overuse resources, fail to improve quality and impede access to care, there will be system-wide problems of cost, quality and access. And this prediction holds not just for the United States, it holds for the health care systems of Britain, Canada and other countries as well.
Of course, people may some day come up with a better model to explain these problems. More power to them. But (I won't keep you in further suspense) Jost does not deliver. He doesn't even try.
May the force be with you.
To obtain a copy of Timothy Jost, Health Care at Risk, go to
Very nice e-mail, John.
The basic concept of MSA’s and HSA’s has always been economically sound! The problem is that they were never made to be empowering enough. A physician friend, who has a very high deductible and an HSA, summed it up by saying the problem with HSA’s is you cannot get a good buy for cash. I believe that could be corrected. That is why I retitled HSA’s and called them Health Financing Accounts. I did not want readers to think that the present restrictions on HSA’s would apply to HFA’s.
I especially like the next to last paragraph!
“All truth goes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.”
Arthur Schopenhauer, 1788-1860
The neo-classical model fails in health-care and in education. It is much more successful in other spheres of the economy. Why were Communist countries able to have good health care and education systems when the rest of their industries collapsed? A neo-classical theory offers little explanation. Why do major market-driven economies (Canada, Britain, Europe) have state-run health care systems that work at least as well as our own? Again neo-classical economics offers little insight. Why do most developed countries have state-supported education systems that function well? The neo-classical model tries to explain their successes away for it has no explanation for why they work.
By recognizing other forms of incentive and how they are greater or lesser forces in different spheres of the economy, economic theory can begin to bear on these conundrums. But to recognize these incentives is to acknowledge that neo-classical solutions to our present health care problems must be incomplete. If we can agree on that we may be able to have a less polarized and more constructive health-care debate.
I plan to use your book review of Timothy Jost in the next issue of MedicalTuesday unless you have some objections. By the way, congratulations for being on 20/20.
Thanks for making this site
To: StillaScot
Your points can only be taken if one agrees with your premise that those Communist countries’ systems you point out were better or on par with US counterparts….. save for the public school system (which is a socialist program) I do not accept your premise … I am sure I am measuring apples and you are looking at measures of bananas in comparison — in addition you demonstrate a total disregard for the intrinsic value of individual liberty – natural rights are what our society was founded on – please read John’s book.