Mailvox: correcting the prof

RS runs a recent column by an econ professor:

This is the email I received from an Econ professor about your most recent WND column:

To reduce “healthcare” to a simple supply and demand model is not very helpful. Will the demand for healthcare increase if everyone has insurance? Yes. But there will be less demand on expensive emergency services. Given the amount this nation spends on healthcare I’m not expecting “rationing” anytime soon.

I’m not buying it.

Pleading “complexity” is the usual dodge from an educated individual who is either too lazy to think through the implications or is politically disinclined to avoid them. It never ceases to amaze me how so many people are determined to explain why the law of supply and demand doesn’t apply to one thing or another, only to be eventually proven wrong like so many before them. While there are proven exceptions, as Veblen and Prechter have demonstrated, they tend to be more particular and circumstantial rather than complex. The professor is presuming here that there will be less demand on expensive emergency services because uninsured people will increasingly utilize preventative medical care rather than more expensive emergency services, which is a superficially logical assumption. It’s also incorrect.

End of life care accounts for 20 percent of all health care costs. That’s going to be completely unaffected by preventative care and will rise with the addition of the newly insured. But the more significant statistic is the one that says uninsured patients are only twice as likely to visit hospital emergency rooms than the insured. Since emergency care accounts for 17 percent of all medical visits, (9.9 percent of all ambulatory visits, compared to 49 percent for primary care), this means that the maximum total potential reduction in costs is 5.6 percent of the total cost of emergency room visits. This is not going to be anywhere nearly enough savings to cover the cost of millions of newly insured people going in for free primary care visits, especially since there isn’t going to be a one-to-one substitution between primary care visits and emergency visits. Uninsured people who wait for the emergency room don’t go in every time they get a minor sniffle, (this is by the definition of those who are making the savings argument, remember), so the ratio of Obamacare primary care visits to pre-Obamacare emergency room visits by the previously uninsured will rise and dilute the savings effect, possibly even eliminating it altogether.

And this doesn’t even take into account the fact that a percentage of the previously uninsured will live longer from receiving preventative treatment than they would have before and therefore require more treatment over time, so it is safe to conclude that the net cost of treating the previously uninsured at the primary care level rather than the emergency room will almost certainly cost more, not less.