The problem with Michael Moore's policy ideas.

Health and medicine explained.
July 1 2007 11:55 PM

Michael Moore and the Beige Bomber

He's got the indictment of health care right, but not the fix.

Michael Moore's shtick cracks me up. As entertainment, most of his movies are great fun. In Sicko, though, he goes beyond his usual ranting. After spending the first half of the movie railing against the American health-care system, he actually puts forward a policy prescription. Moore thinks the United States should adopt a free, single-payer, national health system like Canada, the United Kingdom, France, or Cuba—socialized medicine, in the words of his critics.

So, how does the movie stand up on policy grounds? Moore is right in his indictment of the American health-care system but overhasty in his readiness to blow it up. 

Moore begins by blaming the profit motives of health-insurance companies for the main ills of U.S. health care. While it's easy for free-market types (and I consider myself one of them, mind you) to dismiss his critique of a profit motive, in the case of health care he isn't so far out there. He has a bead on one of the classic examples that economists use of market failure. 

If you set up a market-based health system, allowing insurance companies to pick and choose who and what they will cover, you give them overwhelming incentives to dump, deny, avoid and neglect the sick people. And when you operate the system mainly through employers (as we do), you impose intense costs on U.S. industry and you ensure that the pool of people without insurance tends to include the unhealthiest, costliest cases around. Economists call this "adverse selection" and when there is too much adverse selection—when the health of the people in the uninsured pool is extremely different from the average person in the country—the market may fail completely. Insurance companies may just deny people coverage entirely. 

This is a problem at the core of our health care woes. Moore finds scores of examples—people with tumors, heart problems, lost limbs and digits, you name it. And in each case the insurance company finds a way to deny paying for people's illness even though the people actually have health insurance. He also shows people who simply cannot get insurance because they have pre-existing conditions, are too heavy, are too light, and on and on. 

Without any rules against cream-skimming, the insurance companies have every incentive to keep dumping the sick people—often retroactively, after they become sick. Moore shows the insurance companies literally giving bonuses to the reviewing doctors who deny the most claims. If you can pay premiums to your insurance company for 30 years and then they can just drop you when you have a stroke, the system is seriously broken. 

So first half, so good. Moore's public policy indictment is pretty much on target. And it's easy to buy his thesis that it persists because of the massive political contributions by insurance and drug companies. His telling evidence: The 14 congressional aides who left to become lobbyists following the recent Medicare changes; the $100 million spent to defeat President Bill Clinton's reform proposal in 1993; former Rep. Billy Tauzin's jump from helping to move the prescription drug bill through Congress to heading a major lobbyist drug company association, at a salary of $2 million a year. 

Addressing cream-skimming is at the heart of every responsible program for U.S. health-care reform, in states like Massachusetts and proposals from presidential candidates John Edwards and Barack Obama (to whom I'm an economic adviser). These plans take aim at "pooling," for example, by allowing insurance companies to insure an entire state or region as a whole in exchange for serving everyone in that pool—no dropping, no denials, no shenanigans. The insurance companies get the certainty that the group they insure has the same level of health problems as the general population; they give up the cream-skimming.

For Moore, though, the answer is not reform of the current system. It is having the government run it all. He sets out on a worldwide tour to show us how great a single-payer system is in countries that have it. And here's where his policy prescription goes into overdrive.

At the most simplistic level, giving free health care to everyone costs a lot of money.  Especially since people tend to use things more frequently when they are free. Let's say the universal and free coverage part cost an additional $200 billion a year. How do you pay for it? This is the vexing question for single payer. Most advocates counter that health costs in single-payer countries are dramatically lower than in the U.S. private-care system. Switching to a U.K.-like single-payer system would cost a great deal of money initially, but if it would eventually get our costs down to U.K. levels, we could afford it. 

But that's a big question mark. The U.S. system differs for a lot of reasons, and the insurance industry is only one of them.

Our doctors are paid substantially more than British docs, for example. To get costs down to a comparable level, a single-payer system in the United States would have to seriously cut doctors' pay. Moore seems to anticipate this critique and thus interviews a doctor in the U.K. who makes $200,000 a year and drives an Audi. But this time the anecdote is at odds with the data.

Nor do these countries have the same costs associated with malpractice lawsuits that we do.  A single-payer system here would have to also include some truly major rearrangment of the tort system to bring those costs down. 

You would also need to dramatically slash drug prices. Moore takes some neglected 9/11 workers to Cuba, and an inhaler that cost them $100 in the U.S. costs 5 cents there. The price differences are also present, to a less extreme degree, in Canada and the United Kingdom. The problem is that these places get cheap drugs only because they are free-riding off the massive profits made in the American market. If our government required medicine here to be sold at no more than the lowest price charged abroad, the drug companies would drive the costs up in the other markets rather than reduce them here. 

Each of these caveats is important. But the main problem with Moore's policy solution is that a national health system wouldn't fix one of our health care system's main flaws—one that people really hate—the denial of service. It just changes who decides, so that the government makes the call.

In one heart-wrenching case in the movie, a woman whose husband has kidney cancer is told by the insurance people that they won't allow an experimental treatment that might save his life. But that scene would likely play out just the same way in a nationalized health system. In those systems, cost-effectiveness decisions get made all the time. Care is rationed. That's what happens if you offer something for free—you have to make rules about who is allowed to get it. So, you forbid smokers from having heart bypasses, or, in a more recent debate in the U.K. about a new hay fever medicine, you just say the medicine is too expensive to be used. 

In Sicko, Moore tries to skirt the issue of rationing by going to a Canadian emergency room and finding that people have only had to wait there for 20 minutes. But that's not the relevant comparison, of course. The emergency room is less crowded in places where everyone has health care. The question is what happens for the vast majority of expensive procedures that you don't go to the emergency room for. And for those, patients in single-payer countries tend to wait much longer than in the U.S. and can easily be told that they can't have a particular treatment at all.

So, to do as Moore wants in the United States, you would need to do more than just overcome the insurance industry. You would need to cut the salaries of doctors, reform the legal system, enrage our allies by causing their prescription drug costs to escalate, and accustom patients to a central decision-maker authorized to determine what procedures they are and are not allowed to get. Unless every one of these changes comes together, Moore's new system would end up costing an enormous amount of money. 

You can see, then, why many reformers (like Edwards and Obama; Hillary Clinton hasn't gotten as comprehensive yet) argue that we should start by fixing the most glaring problems of our system without junking it and starting over. We could use pooling to move away from the dump-and-deny insurance we have now. We could reward doctors for doing a good job, the way they do in the United Kingdom. We could focus more on preventing sickness, the way they do in Cuba, to reduce the number of illnesses. These step-by-step changes would go a long way to alleviating the most damning problems with the U.S. system.

I used to have an old, old car that my friends called The Beige Bomber. It constantly had problems. Every time something went wrong, I had to decide whether to pay the $300 to fix it or shell out many thousands to get a new car. Eventually, yes, it completely died and I had to buy a new car. But I held out as long as I could. 

As the credits rolled on Sicko, and I still sat in Michael Moore land, I couldn't help but think that we've got ourselves a Beige Bomber of a health system. A lot of stuff goes wrong with it, but to replace the whole thing would cost a hell of a lot of money. Moore thinks the car is already broken down beyond repair. The metaphor isn't perfect, though, I realized after I left the theater. All cars have to be replaced; our health-care system, if improved, could live for a very long time. And so we shouldn't forget that Moore is glossing over the huge costs of an overhaul, in his urge to rush.

Austan Goolsbee is an economics professor at the University of Chicago Graduate School of Business and a senior research fellow at the American Bar Foundation.

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