 It's a delight to welcome Professor Richard Epstein to our seven-hour series on health disparities. Richard, as many of you know, is the James Parker Hall Distinguished Service Professor Emeritus at our law school, and currently is the Lawrence Tish Professor of Law at the NYU Law School. Richard has written widely on many topics, has published many books on the pharmaceutical industry, on medicine, a book called Mortal Carol, our Inalienable Rights to Health Care. But what some of you don't know is that this seven-hour series, which is in its 29th year, was started by me and Richard in 1981. We did a seminar that year called Medical Innovations and Bad Outcomes, which we published about four or five years later as a book on the legal, moral, and economic implications of bad outcomes from medical innovation. So this is really welcoming Richard back. He's been a regular participant in these seminars over the years for many of the 28 years of our series. So it's a delight to welcome him back, my friend Richard. Thank you. First of all, a few quizzical eyes going up, and if the eyebrows have been raised, I hope to keep them there for the rest of the afternoon. But first of all, I want to thank you all for coming. This is a huge turnout, and what it shows me is whenever I come back to Chicago, something which I've always known, but now come to increasingly treasure, is the enormous internal cohesion that the University of Chicago has as a university that at the time of lunch, you could get this kind of a gathering together. And I see there are a lot of familiar faces here, but there are many more unfamiliar faces here. No, no, it's Bill Meadow. He's always this way. It was that way in 1981. He will remain that way so long as we go together. But I'm going to put a ban on his speech until I'm finished by you, Case. The topic that I've chosen today is not one that most of you would find particularly appealing of. I have spent most of my time working in a variety of social systems of which medicine is only one. But I've also spent a lot of time trying to talk about the relationship between growth on the one hand and equality on the other hand in all sorts of areas. And the case that one is making with respect to disparities in medical care should not be understood as a discrete argument that it ought to be applied in that area and ought to be ignored everywhere else, rather the way in which this particular argument goes is precisely the opposite. What we do is we have a kind of an implicit understanding that some greater degree of disparity is tolerated with respect to income wealth and fortune than is with respect to healthcare. And what one wants to do, I think, is to try to get a kind of a unified theory which explains why it is, A, that you need disparities and B, to the point that you're uneasy about them, which is a peculiar issue of healthcare. Why it is the case and then try to figure out what the mechanisms are that will allow you to deal with that particular problem. And so in order to do that, I think what one has to do is to sort of figure out the tension that one has between two great values. One of those has to do with the question of general equality by, in this case, I mean not only of opportunity, but also with respect to outcomes, which in fact is a deeply held value in many places throughout the society. And one which perhaps a little bit surprising to you, I actually share at least in limited dosages. So I don't want to sort of simply say that half of this debate is irrelevant. But on the other hand, there's another element with respect to this debate, which is captured by the title of that 1981 talk, which is the issue of how it is in a system in which you care about equality, you manage to promote a system of innovation as well. And the question then is, why is it that you care about these two things? And how do you reconcile? The cheap way to try to win a debate is to always argue that the greatest concern of your opponent, in this case, those people who are against healthcare, they simply don't understand the world the right, and they are pumping for a value which has no particular relevance, and therefore ought to be disregarded. It seems to me that anybody who wants to make that particular case is making a very grievous mistake, that the reason the debate is hard is not because matters of equality don't matter, but because they do matter, and you have to figure them how to reconcile those with matters of innovation and growth, which also matter when you know to some extent that the two forces are going to start to move in the opposite direction. So, like most complicated social questions, you start off looking for formulaic answers of a deductive nature, and by the time you get yourself pretty much into the discourse, what happens is you realize that there are two key questions. One is what sort of tradeoffs you want to make between the two values that you have, and then what sort of institutional arrangements you wish to put in place in order to secure the balance for which you are favored. Now, let me start, therefore, with equality and explain to you why I think that it turns out to have an important kind of attraction with respect to most people. And this, in effect, is an economic explanation which I think has a moral substrate associated with it, so I don't want to go on one or the other situation, is that when you're trying to talk about the various measures of social welfare, there are two that you can put forward that are commonly conflated, but which are analytically distinct. One of those is simply a question of trying to figure out how it is that you maximize the total amount of wealth in any kind of society without regard to who has it, where you define wealth as simply the way in which various kinds of marketable commodities trade and the kind of prices they have. And nobody who looks at this would say, aha, when you're talking about wealth, you're talking about something that is truly irrelevant, because as we all know, unless you have a sufficiently large wealth base, you cannot engage in an intelligent program of equality. That is, you will simply not have enough to do the sorts of things that you would like to do. So everybody who wants to get equality on a higher plane has to worry about the wealth side. But there's also something else which is at stake, which is utility, which is essentially the levels of subjective satisfactions that individuals have, whether or not they start to trade in markets. And what I think most people tend to realize is that as an ideal measure of social welfare, utility actually trumps wealth. One is instrumental, and the other turns out to sort of be much deeper. And that the central challenge of welfare theory, not in the form of, you know, the Obama type transfer mechanism, but social welfare theory is a branch of economics, is how it is that you manage to deal with utilities by different individuals, when in fact they are all more or less subjective. And the general tests that are used go fall under the name of tests having to do with Pareto optimality and Pareto superiority. These are not terms which are household words with respect to most people in the medical profession, but I think it's important that you understand what they mean so that you'll understand where I'm coming from as an explanation of the tensions that are going on. And so when you start to talk about a Pareto system, what you're trying to do is to maximize the system by comparing the outcomes in two systems. And if you can say about one of these systems, that one person is left better off than he was in the other system, and nobody is left worse off in that second system, you would prefer the second system to the first system. And so essentially what the standard Parisian tries to do is to figure out ways that you could enter into either voluntary transactions on the one hand or coerced exchanges on the other which produce unambiguous social improvements when measured by that particular standard. When you then look at that, there are two kinds of transactions that you could worry about in the world. One of those is voluntary transactions between two individuals, and the third turns out to be coercive transactions whereby money or property or opportunity is taken from one person by state force and given to another. And the question is how do we want to think about these things? Well with respect to the first of these unvoluntary transactions, the way in which you correctly think about it in my view is that first you ask whether or not the conditions for voluntariness are satisfied, and I don't want to give a long philosophical discourse on this, but essentially the negating conditions on that are forms of physical duress or abuse, incapacity, fraud or misrepresentation. And if those things aren't present, we tend to call a transaction voluntary and given self-interested individuals, we presume that they now work for the mutual gain of both parties. So at least within that subsystem we have a Pareto improvement by every voluntary transaction, which is something that people tend to neglect in looking at this. There are also external effects to these transactions and you have to take them into account. And the general rule is most voluntary transactions between two individuals have what we call positive external effects. And that means in effect that A and B enter into a transaction in which each is wealthier or happier than they were before, that's going to create more opportunities for contracting by third persons with either A or B. So what this system has is a kind of a benevolent quality to it. If you can generate a higher volume of voluntary transactions, you produce increased gains both for the parties on the one hand and for the rest of the world on the other. So that for people who come on my side of the midway, essentially lowering the transactions cost of volunteerism is as a first approximation the best and surest way in which to increase wealth. Now this does not mean that all voluntary transactions should be supported because some of them have systematically negative externalities, which means that you need to suppress them. So contracts to kill third persons, contracts to enter into cartels would fall as an exception to this general rule. But the basic argument is in each of these cases, so long as you know that everybody is being better off by virtue of what's happening, you don't care about the relative amounts that are going to take place with respect to these transactions, you're just happy to see the train turn as fast as it can because there's nobody who will be left out of this system in virtue of the properties that I am talking about. So that the Parisian essentially takes the following very strong view, which is that if you run voluntary transactions which satisfy the condition of uniform improvements across the board, you do not worry very much one way or another about the distribution of those particular gains. If you have a situation where everybody starts off at 100 and you turn the crank 10,000 times and the worst offer at 150 and the best offer at 10,000, what happens is there's nobody who's worse off, everybody is better off, you have a higher rate of disparity in wealth with respect to the system after you've turned the crank than you had in the system before you turned the crank. And so the simple intellectual case that you get for this particular model on the non-coercive side is that the disparities that you see in wealth are necessarily accompanied by improvements in the position of those individuals who turn out to be worse off, less well off under this new system than they were under the old system. This then brings you to the other half of the argument, which is one that you see all the time, which is what are you going to do about coercive transactions? And the general rule is that you do not want to treat the class of coercive transactions as empty, that is this is not a pure libertarian theory, this is a theory which says that government should be able to coerce individuals and the condition is such that every individual who is coerced is by the return benefits that he gets or she gets from the government program is rendered better off than they would have been in the absence. So the classic social contract theory is we all surrender our rights to kill one another in exchange for the security that the state will provide it by taxes that are raised pro-rata on the incomes of all the individuals in question. Why do you raise taxes on income instead of on utility? Nobody knows how to tax utility. People can only tax property and wealth, so you use the reliable proxy rather than simply let the system run down. When if it turns out you need the specific property from one person for a four or something like that you're allowed to take the property funded by general tax revenues and then compensate the party who lost the site for his particular property lost under a just compensation theory. So essentially what happens is if you put the universe of voluntary and non-voluntary transactions together the function of any sound state is essentially to make sure that every transaction is a Pareto improvement and if so under this theory you do not worry about the level of disparity that take place amongst individuals and you tend to basically not worry about the psychological disappointment of those people who are less well off relative to those who are more well off. Now that's one model of the world but the egalitarian model has a lot of power that's associated with it and how do we find what that particular power is going to be but what happens is we invoke another law of economics which is every bit as powerful as the first one on mutual exchanges and that's a proposition which says that we tend to think that over a very broad range of wealth there's diminishing marginal utility for each additional unit of wealth that you create so that what happens is the egalitarian case consciously exploits the difference between wealth and utility and indicates that they can find a way such that if you transfer the wealth to one person to another without requiring any compensation at all what will happen under all of these circumstances is that the total level of utility subjectively measure will be increased notwithstanding the fact that the total amount of wealth that you have in society will necessarily be reduced if only by the transactions cost of putting these deals together and by the political cost that it takes to figure out just how much is going to be transferred into whom and if you think those are small costs then you just have to look at the fighting over something like Medicare, Medicaid, Obamacare and so forth all of which contain very large and puts the transfer programs as part and parcel of the overall system but the condition for which the egalitarian is willing to live with is that if we can find some measure of subjective utility which means that the smaller pie in better distribution yields a higher sense of utility he is willing to allow that to happen whereas the Parisian turns out not to be willing to do so so the question is which of these two versions turn of the world turn out to be right and the answer is neither is completely correct but let me see if I could explain what the political situation is and why it is that in the end you want to put more of your weight on the first of these things the classical liberal model then you do on the second of these things which is the redistribution model well the first thing that one has to do about this is that if in fact you start to push the crank very fast and can get yourself even modest changes in overall levels of productivity if you accumulate these over time what happens is the aggregates are much larger than you might have otherwise thought in terms of the difference between this strategy and the alternative one so for example if any of you have a pocket calculator you could do the calculation that I will just discuss and assume that you could run two societies one which is heavily committed to some form of egalitarian redress as this current administration turns to be and then assume that it's going to drive the growth rate down by one percent the relatively modest number you cannot assume in my view the sort of pollyantish view that we are smart enough that if we wave our hands in presidential style over the pot we can have higher growth rates and higher levels of redistribution at the same time there's a tradeoff there you're kidding yourself if you think you could do it the other way so what happens is run this for 20 years and then take 1.03 to the 20th and then take 1.04 to the 20th and see what the numbers start to look like at the end of the day and you will discover that all of a sudden total wealth is probably you know different by a factor of two on these very small rates of growth once you do that you can assume if you're running these systems that there's always going to be something for everybody because the volunteerist system never excludes everybody and coercion is never allowed to make anybody worse off what you do is you have people whose worse off conditions they get some wealth and ironically the wealth that they get of course in utility terms given that they're relatively poor is very very hard so you run this system and you say what's there not to like about this particular system and in the long run the answer is nothing you have to be able to do this this does not mean you have no infrastructure doesn't mean you don't have courts doesn't mean you don't have a defense and so forth but you do this as essentially a way of trying to avoid the poverty problem by making sure that there's nobody who lives in a state of dire need if you do this you're then trying to conform to that version of redistribution which was congenial to John Locke but not to the modernist the Lockean view if you go back to it was that people who were in dire need are entitled to get the scraps from everybody else's property in order to survive as you're writing in 1690 or even in 1900 redistribution is not just a question of who gets a bigger television set they're very serious concerns as to whether or not those people who are on the short end of the stick would not be able to live until the next spring and so what you do is you find in primitive societies where the difference between getting a little bit more and a little bit less is survival or not survival they have all sorts of mechanisms to handle that one of them are various kinds of sharing and reciprocal methods so we have inefficient forms of production on the high side in order to make sure when people's agricultural land is hurt they're not wide wiped out so you give somebody a part here and somebody a part there and somebody where else and you spread them around so that if in fact one of their parts go bad the other two are still going to work even though the total output would be lower so essentially there is a strong redistributional coefficient in any of these situations where you know that a negative outcome in a particular period spells death or serious deprivation for individuals and voluntary arrangements take that into account which means in effect that you cannot say that it's only the redistributivist who cares about redistribution it's also the production character who cares in the same way the second mechanism that people try to use and this I think is what distinguishes healthcare from many of the other kinds of arrangements that we have to talk about is in fact that there's a very strong charitable tradition with respect to how giving will go either to institutions that help the poor or in particular cases arms and so forth because the folks who have a great deal of money understand the truth of the proposition of the diminishing marginal utility of wealth and they start to shift it around in one way or another there was about 10 or 15 years ago a great piece in the Wall Street Journal sorry to mention it by Bob Barrow and this is what he said you give me a billionaire this guy is going to engage in massive redistribution regardless of what he wants and the reason is there's just no way he can assume the fruits of his particular income he's going to have to leave it to somebody else and then you try to figure out well go out and buy yourself a Matisse that's not consumption even to spend 50 million dollars on it because the hardware is still there so all you can do is drink a lot of rosé wine every day in order to make sure that you got consumption and that's just not pimple on the wealth creation that you have so you look at Rockefeller and you see universities including this one named after him you look at Bill Gates you see centers everywhere going on I want those really rich people out there because if you don't look at income but rather look at distributional patterns they turn out to be highly egalitarian on the one hand and generally informed on the other so that the standard classical liberal says we don't have to worry about the political system for redistribution what you can do in effect is to try to create an environment in which for a whole variety of social reasons that people are prepared to engage in that behavior and the so-called philosophical term for this was a system of imperfect obligation where people recognize that they have to do certain kinds of things but there was no legal coercion it was a matter of conscience on the one hand and community and social norms on the other which is perfectly consistent with the libertarian view which says that you can't force anybody to do something but you could certainly smile at him if he does it and frown at it if he does not and smiles and frowns turn out to generate more money in many cases than do coercive taxes not perhaps in today's society where the traditions have been lost but certainly this was the classical mob but now somebody's going to come back I mean everybody in this room I suspect and say the problem with you is that you do not understand what Winston Churchill understood Professor Epstein it's too little and it's too late and you really have to worry about the massive problems that we face now and so therefore you must do something to address those and this in effect is the other side of the situation where what you worry about is not how you maximize the total size of the pot but how you minimize the differences between top to bottom notwithstanding the shrinkage what happens is we have now had a period of you know since the progressive era of the 1910-1920 period of very ambitious efforts to try to figure out how you calibrate them and it turns out that you've discovered in the general case and in the particular cases you tend not to do very well in trying to implement those particular schemes so one of the questions you ask yourself if you're a great believer in redistribution is what's the optimal level of attacks that you have in order to make sure that there's redistribution that comes into the system without completely destroying productivity nobody really has a precise answer to that and you therefore run the danger that if you do too little I'm not getting much gain out of this stuff but you still have to put the whole apparatus into place or if you really ramp up the steepness of the progressivity curve what happens is you put a huge dent on productivity and one of the big debates that you have right now is that if you actually look at these numbers to the best that most standard welfare economists most of whom are not libertarian or classical liberal is once you hit 30 or 32% in aggregate taxes you're at the maximum revenue point and if you then start to go higher than that what you lose in productivity will hurt the redistribution more and so you've got to realize that there's a very low upper bound on this situation and right now the only kinds of tax increases that you could have at either the state or the federal level will in the long run be wealth destroying which means in effect you're solving the distribution problem for six months or for a year but three or four years later it's going to be worse than it was before if you increase the taxes to offset that again further decrease in publication I've been saying this since 1981 is our friend Mark remember and now when you see it finally hitting home with respect to what's happening at the state level and soon at the federal level we have unsupportable entitlement programs because the great danger of the egalitarian position is not that it's wrong on the institutional rather on the theoretical point of diminishing marginal utility of wealth it turns out that it's exceedingly difficult to calibrate that in political terms so that you get just enough of this kind of activity not getting too much the advantage of using voluntary markets is you get independent decisions by independent people with different amounts of wealth and since they're not coordinated they're not subject to the kinds of political pressures that you start to see today but for many of you who've been quite sympathetic to unions over the years you'll have to understand in a place like California the high priority that is given to union pensions has essentially gutted programs that are designed to provide infant care food for poor people school education and so forth it's just one huge situation in which you get the wrong form of redistribution because when the political forces are let loose it turns out interest groups dominate who gets what and the idea that you can find any interest group in favor of systematically helping the poor is a pipe treat what they're all interested in is helping themselves whether they be farmers on the one hand labor guys on the other oil drillers and so forth so you must understand that i want to be an anathema in every board room in the united states which is trying to figure out how it is that they could manage to cobble some subsidy for themselves whether it be in the form of the you know the wind power solar power or whatever they just don't get this stuff right so the essential problem at the largest area is in effect that the program on trying to run redistribution through coercive means turns out not to give you a very high rate of return in the very thing that you care about most which is redistribution based upon wealth under this diminishing marginal utility type of position now how does this stuff apply to health care and sort of bring it more concretely down to the particular system and i think in fact the history of this is rather instructive if you go back to the nineteenth century essentially the single most powerful force for charitable contributions lay in the ability of health care providers who wanted to get into this business to exclude anybody they wanted at will regardless of race creed color religion national arguments the power to have untrammeled rights to discriminate was in fact the way in which you got money into the more now the question you would want to ask is i don't quite understand this are you really saying professor that you are thrilled at an organization that is willing to allow a catholic kid to die on the street stoop because a jewish kid is sitting there and has to have a fingertip no i'm not saying that at all what i'm saying in effect is an institutional point not a moral point about the relative care of two people and the institutional point is this it is only the people who are in charge of the institution that can make responsible decisions on how these tradeoffs ought to work they're very complicated and it's the effort to try and oversee them by government coercion that leads to very very bad kinds of consequences because essentially you don't get this result there are some people in this room who happen to be around when we had to decide whether or not to continue our traumas services you remember those debates right mark and essentially what happened is they had a man downtown named lani edwards who did not understand how the bypass system work which was a voluntary device by all the major hospitals to figure out how it is that you manage to care at the middle of the night for people got gunshot wounds bar fights and so forth so he insisted upon a uniform requirement of first hospital must take all people who come to there and what happened is author rubenstein who is certainly no shall we say deep conservative eventually acquiesced and shutting down our contribution in this service because the price just turned out to be too high relative to other resources that we have it's just a classic illustration of what happens is private institutions know how to create limits on benevolence people do not go into medicine people do not give charitable contributions in order to be mean and nasty to people of different races or different creeds but they may have a priority to some extent for their own an anti-discrimination rule will rule that out but in practice a gentle priority in favor of your quote-unquote own kind will produce better gains across the board for everybody because a there'll be lots more institutions of this sort will come up and as they get greater wealth it means that for everybody in the distribution they will get more money so the worst thing that you can do in these cases to find some dramatic incident of what you regard as corrupt exclusion and then erect an entire program like him taller on the strength of it only to see the program game from beginning to end with respect to all the people who are participant in it so you have to have this awareness and the whole trick in this particular business on the charitable side is if you give the foundation freedom to choose you'll be able to get more revenues and there will be a lot of social pressures which will essentially hit at those things which you and I all regard as to some extent uneasy practices not illegal not a moral but simply something which is ill advised once you start to coerce this type of situation the forces that take over destroy these subtle kinds of balances and you result in in less care up and down the entire board so you have to be careful about the use of coercion in all these settings and people I mean who 25 years ago this is a Reagan initiative you remember him taller who thought that this would be an unambiguous cure to the problem have come to their great sorrow to recognize that the number of emergency rooms that are open and active is not independent of the rules under which it turns out that they have to operate and the real proof of the pudding is it's not the reactionaries who hate everybody who shut them down it's all the people who went into medicine because they have benevolent influences which find out that if they try to keep the program in place the entire intrusion starts to shut down as well and that's just with emergency care but what about with respect to voluntary care what happens under the egalitarian program is it takes a slightly different term it now says in effect when you're starting to look at weak and at poor what happens is the capacity to enter into transactions for mutual gain is no longer effective when it turns out that wealth disparities turn out to be large the most famous sentence in this regard in the legal literature is another one of these wall begun and misguided statements by Oliver Wendell Holmes and you know he was always wrong on a lot of these not always often wrong on these issues he says in effect that freedom of contract depends upon an equality of wealth which allows these transactions to take place nothing is a bigger mistake the only thing that you need to know about freedom of contract is that the property rights and labor on the one hand and goods and services on the other are secure so that people know who they have to trade with but if I'm a poor fellow has 10 and you're a rich guy who has 100 you can't even figure out who is likely to get the larger portion of the surplus if they engage in a transaction or who gets the larger increment in utility from the gains in question all you know is that there's going to be an equal improvement because the last thing you want to assume is that somebody who's really down on his luck is willing to enter into a transaction whose current value is a loss and whose long-term value is a loss as well that basically is crazy people are willing to take jobs including indentured servitude I might add which was a very powerful institution in this country where the long-term gains exceeded the short-term losses but that's of course is perfectly rationed and once you understand how complicated these labor markets are the idea that you're going to intervene in one particular element with a minimum wage law or a non-discrimination rule means that you mess up the entire system whereby people at the bottom through voluntary transactions can improve their overall life so if you want to think for example what a minimum wage law does well first of all for the youth it keeps them out of the market which means they don't get trainable skills which means that by the time they're 22 or 23 they're not in very good shape and it means in effect that for other people who are sort of at the bargains some will get them and some won't those who are above the line will do fairly well because they're in the labor force those who don't get that first job are now on a downward spiral so when you start to see these aggressive improvements in this case that's a mistake this of course has direct implications about the way in which you run something like obama can and you know just to sort of enthrall you with a huge surprise I think the program is a rather substantial kind of intellectual mistake and will turn out to be institutionally very difficult to run and let me explain what what happens is they don't start off with the question of what voluntary transactions produce mutual gain what they do is they start out with a very egalitarian assumption which is that the level of well health care that ought to be provided to individuals should be as well some minimum independent of the level of wealth that people start to have so nobody is going to say that if the richest person in the country indulges in all sorts of private health care services we have to provide it to everybody else what they're going to try to do is to force up the bottom in order to narrow the gap now a voluntary market will do exactly the same thing within some level precisely because of the perception that that first unit of wealth which may be the difference between life and death is a lot more important than that nth unit of wealth which is the difference between a 52 and a 44 inch cougar tv so you're going to see some of these pressures but the moment you try to start mandating the bottom the question is are you going to put that bottom in a sustainable place what i suggest that you all do is to take a look at the various obama care programs which are designed to guarantee the minimum standards that have to be satisfied by anybody who wishes to acquire health care insurance through the so-called voluntary exchanges that are going to be put into place and what you see there is essentially the quintessential wish list what happens is you kind of think of everything that you'd like to have you don't worry about the budget constraints you're going to give some kind of public subsidy and then the question is is this particular system to be sustained and it turns out that it is not the first point to understand about health care expenditures is it is a complete mistake if you understand how markets and how people work to assume that the only health care expenditures are those which are dedicated expenditures to health care yet all administrative programs necessarily have to make that expense so if i'm a physician and i have somebody under stress what i will tell them the best thing that you have to do is to take a night off and go to a broadways shop and you may think of that as being pure indulgent consumption but in fact if it eases the nerves and reduces the probability of going into a hospital there is a health component as well as a non-health care component that gets involved and what i suggest you do is to go through every expenditure that you make during the day and see if you could figure out what the allocations are going to be and you will discover that they're rather hot why are you buying a new pair of tires for your front wheels because the old ones are getting bold and you realize that if you don't change them there's a chance of getting to an accident which could have negative impacts upon your health and so forth the moment you realize that health care is not confined to one area the correct question to ask from the point of view of any person no matter how rich is whether the marginal benefits all conceived on one particular item are going to be greater than that spent anywhere else at the margin you'd like the net total benefits to be the same the moment you sequestrate health care in some narrow defense what you're doing in effect is saying all this soft stuff that i'm talking about doesn't matter because we can't measure it even though individuals can measure it and we're going to commit a disproportionate amount of wealth to this particular program the prediction that you will make is that the average level of health care in the united states will go down by virtue of the increased mandates with respect to the kind of health that you have that's been the experience we've seen with individual mandates all of which are misguided all of you start to think oh you're just now requiring this whether just keep the program in some cases they'll keep the program when they don't want the benefit because the gains from other parts of it are high enough but in other cases they'll drop the whole thing so this great system that we have now has created this problem because we've reduced by about 10 percent the number of people on employment employer health care plans precisely because we juice up the mandates to the point where it's no longer sensible for a firm to offer this kind of benefit and it's not a mistake that the president of the united states uninformed his ears on all these matters voted for every one of these mandates when he was sitting inside the illinois senate this is just not the way in which to run a system when it came to mental health care benefits this got through as part of the financial reform package and it's another disaster in the making because it's not the question of whether or not the benefits are as important for health care and mental care and anything else the question is whether or not when you take the institutional frictions involved whether you get the same bang for the buck in one area that you do in the other and the truth about the matter unfortunately is given the monitoring problems with respect to psychiatric cases that's an area in which collective expenditures are much more risky all the insurance companies understand that all the consumers understand that all the employers understand that all the politicians just draw a blank and in fact what happens is interest group politics starts to take over so we run these mandates then we have to run these subsidies and these are going to have to come out of revenues from other areas which is going to increase pressures on health from all sorts of untold sources then you got to get people to come in but you don't allow them to select their insurance you force them to take bundles that are defined by the united states government and this is again a terrible mistake because you want segmentation in market where insurers develop expertise with respect to one or another type of individual and they could handle those cases you start making them take in anything that wants to come across the transit what happens is they lose the coherence of their patient population which increases the inefficiency of the way in which they operate it is a common theme with respect to all of these folks that the people who do this know nothing about industrial organization i spend most of my life trying to figure out how it is that voluntary transactions start to work and why does that regulations don't and the only political thing that you hear about this is the kind of naive version which says that if we mandate x x will be provided and nothing else will be changed and you must understand that the moment somebody says that to you no matter what area for what reason they're selling you a complete bill of goods so what is going to happen my great fear with respect to the voluntary side of this market is that the markets will not clear you can create an exchange tomorrow in order for the sale of draw horses for farms but you're not going to see any sellers you're not going to see any buyers because there's no gains from trade that could take place on the exchange you put enough restrictions on what must be required and enough restrictions on the way in which you audit and monitor health care companies that come into the exchanges there won't be enough left for gains from trade one of the things that we know about this was of course a radical shift in attitude by the administration as the health care bill wound its way through in the early version mr obama was actually making a very nice pro market market sound if you like your current health care plan you can keep right but you don't know what the definition of a health care plan is you actually think it's the health care plan you had for 26 years at blue cross no what it meant by statute is a plan changes whenever they change a new customer whenever they change a rate or whenever they change a new treatment so you have been informed me in 446 million plans over the last 20 years only you were too dumb to know that and eventually they re-legged on that a little bit and gave you some flexibility you could admit a new dependent and not have to go out of plan but basically they did not give up on the larger advantage so that essentially all grandfathered exemptions from direct regulation are gone by 2013 or 2014 depending on how this happens now how do we know that this is completely unsustainable well don't believe me I'm just a theorist right but what you have to do is to look at what I call is another kind of phenomenon known as government by waiver and what government by waiver means is first you impose upon individuals a set of restraints that are so strong that they will destroy a voluntary market which you're trying to force it whether or not you have an exchange of disclosures or anything else and what typically happens is when people do regulation they always think of what they regard as the paradigmatic situation you know an employer with a stable workforce of 500 people or the kind of guy who applies this anyhow the reason it never works is that regulation always deals with the fringes who are brought into the statutory definitions even if they don't have the characteristics of the medium program this turns out to be devastating so there are these things known as the midi med plans which some of you may have heard of these are lousy coverage I want to make it very clear none of you would take a job with them but on the underhand none of you would work for seven dollars and forty cents an hour all right so what happens is these plans get it right which is they get the marginal rate of substitution such that the last dollar you plan on your midi med plan is equivalent in value to you over the last dollar you spend on food clothes and shelter and it's a crummy plan so what happens is you now tell them hey you can't do this you've got to get a good plan well that good plan is going to cost you four dollars more an hour and you've got to find that out of wages you get below the minimum wage the market now starts to blow up so what do you do if you're the government you can say you know we've got our strong ideological commitment that everybody has a right to health care and we're going to enforce it and the employers is fine you employ it and I will comply and I will go bankrupt and then you have got the great privilege of getting blood from the stone because if there's no wealth and I'm out of business these workers are going to be worse off so even this administration has enough horse sense to say you have to waive the conditions and let the old plan start the work and there have been thousands of these waivers given out but no public acknowledgement for the reason and they're not clean waivers they're waivers that may not be given may be given for a year but not for two years they may be given only if you do x but not if you do y and so forth so you now have a situation in which the ability to run these programs depends upon the whim of a government bureaucrat either to allow or not to allow the programs in question and what I submit to you is in the end after a while the whole waiver process becomes so grotesque and baroque that nobody knows where they stand and in addition you see exactly the same thing I had a debate with a woman named Judas Fader you can see it on the NYU site in 2008 or 2009 I think it was about the Obama health care plan and one would describe this debate metaphorically as spirited right um uh you could think of other terms it was a kind of a blood bath but um and one of the interesting features was if you looked at the original Obama health care plan they said of course you know we are not we believe in markets right so we're going to let you charge whatever prices you want so long as you come within the exchange and give you the subsidy and I said I don't know what that plan says and frankly I don't much care it's a price control system it's going to have to be because the moment you start to give a subsidy either you place some limitations on the price that you pay or the whole thing will blow up so now what we do is we don't see any explicit price controls in there but there are two sorts of things working and I'll talk about this for a second and then wind up for questions okay one of them is the single most important measure on the private side of the plan which is the so-called medical loss ratio and this is the number which somebody has dreamed up as the total amount that could be spent on administrative expenses undefined right and they set it at 15 percent for large plans 20 percent for medium plans and 25 percent for individuals all of which are below current market levels as administrative expenses are currently defined their view is there's some monopoly profit out there and they're going to squeeze it out by this device but they don't know what a monopoly profit is if they'd like dependent upon it I could assure you not a single person who drafted the bill is even minimally competent in antitrust or regulated industries in terms of the way these things start to go so you're going to force these people essentially to do this and they can't make it work that's what drives the waivers the second thing they do is there are reimbursement standards they're very complicated first they're set by the state but and then they or the state recommends something to the federal government which recommends something back to the state the state sets a rate the federal government then approves it does so you have seven thousand health care plans essentially having to go through a four-fold rate review process before they could put anything into effect where in effect I can assure you that your ability to challenge this in court is exceedingly limited and and what happens is the government now announces an advance any increase of over 10 percent we're not going to allow that's a price control system whether you say it or not but of course the administrative course of running these darn things given the new environment they're probably going to increase the cost of everything by 10 percent so either you put these things into place now then you have to waive them again all what you're going to do is to drive people out and in fact what's already happened is there's a large level of consolidation in the private side because the regulatory burdens are a fixed fee independent of size covered with variable costs for any small firm the fixed cost is so hard that they have to go out of business they've got customers so they merge their way out which means you now have more serious antitrust problems there's similar problems with respect to the government programs and the Medicare and Medicaid the republicans have come up with something today suffice it to say and I'll just end on this kind of a note there's no market solution to the current set of incurred indebtedness either under social security or under Medicare or under Medicaid these are social obligations markets only tell you how to make voluntary transactions work they don't tell you how to make historical obligations start to disappear so in order to get this to work you're going to have to break some and it will take place in one of two ways either if you do nothing which is likely given the current political division what will happen is that queuing will take place and you will find that people just won't be able to find doctors and we already know that medicare reimbursement rates many people just opted out of that system it's another form of price controls all what you could do is you have to let the thing run free and at that particular point you're going to have this terrible wrench because there'll be many people who banked on this who now will be caught in the transition so this is one thing to understand before you ever embed a benefit in a government statute which is when the thing starts to unravel the political struggles will be nightmarish you've seen it already is taking place with respect to public unions where you're trying to undo entitlements the ryan program which is coming through which is trying to voucher eyes roughly speaking medicare will prove the same thing again and you know it doesn't take guys like me to create the great rhetoric it's already out there so essentially this is what i would like to say which is care as you will about equality in the end either you grow yourself out of the current malaise or you fail so that we have put much too much weight currently on the situation of redistribution and much too little weight on innovation and growth medicare doesn't know how to deal with emails because these guys are such clowns they can't run anything in terms of the way in which they go so what you have to do is to switch philosophies and to follow what i like the call and i've done it in philosophical writings the program of redistribution last and what that means is first you clear up the productive side by getting rid of all the senseless limitations on either the ability of corporations to practice medicine mandates on particular situations the hippostatutes the malpractice liability get rid of them all that will liberalize production you'll get people back into the system so that when you come to the question of redistribution under this other model voluntary institutions which do this dollar for dollar far better than any coercive institutions can start to pick up the slack we have run on what i regard as a thoroughly discredible philosophy in organizing healthcare and i'm sorry to say that there are many too many people in the medical profession who knowing nothing about political economies theory preach this sort of world without scarcity and with abundance and has led us to the current state we were in for a very long hard slog and it's not because any of the programs that i have ever defended has had anything to do with the current outcome i've been a voice in the wilderness and at this particular point i do not wish to tell you i told you so i would only like to try to figure out how we can unscramble this particular omelet and go forward thank you okay i was just going to say that you'll remain a voice in the wilderness until we begin to have interdisciplinary discussions about innovative solutions because you have put up a beautiful argument that a lawyer will put up based on political economy but the reality is that you're dealing with human beings and physicians the way they are trained in this country have been trained in a medical model which is your sake you come to the doctor and we have a transaction right so it's worse than that okay i teach in mark summer program and i'm going to say it publicly what i've said to those groups the level of economic literacy that comes out of a medical program or legal one is absolutely appalling that's that's no that's too optimistic i'm is that i mean i can't you cannot work on this issue with people who don't know what the word equal marginal means you just cannot do anything the world if you're not comfortable with that term after we've said here you can't do health care policy let me put it to this i'm going to be blunt again all right no when you were with doctor what doctors know something about our diagnosis and procedure and there's a general rule the more you do a procedure the better you are narrow and deep becomes the model for professional expertise i want to get somebody to do a minimally invasive his surgery i want dr x because that person has done a thousand of them when you're doing that kind of training and mindset is absolute death but somebody is trying to figure out how you put comprehensive social systems together because essentially you never see indirect consequences coming out of anything so what happens is when we get the medical ethics center all of your procedural advantages are utterly relevant irrelevant to the situation the fact that she knows how to direct the beam of electrons to hit a tumor in the breast and not kill the rest of the tumor all she i need to know is that if there's a good technology with selective stuff she ought to use it if it's the right price i don't have to know how to do the damn thing in order to talk about how the system is put together so all these medical mount mount and sessions that we've had over 30 years the medicine is essentially the easy part to mess because you're not doing medicine you're talking about how medicine interact the hard part is social system there is not a single medical school to my knowledge in the united states which does this on a minimally competent way on this faculty the only person i know who specializes in this and even then a relatively narrow gauge that i'm talking about is david melzer was david are you here today that i could read no he's not thank heaven but because i mean he talks about you know relative efficiency to the hospitalist model let me ask the old party you may ask your question right because we all kept quiet as you did that but in fact in fact everyone everywhere else in the world has come to the conclusion that you have to train physicians to be team leaders to have interdisciplinary approach to medicine and the way i learned it was when i went to medical school it was preventive and social medicine it was not a medical model there is a new approach which is the system's approach that you are advocating that we all have to think about when i came to this country i went to cook county hospital and you may think that i was going to disagree with you but i actually agreed with you because i could not understand how a medical system could be organized where everyone had to come to see me at cook county hospital okay and it was supposed to be a benefit to the poor to have a hospital where you put doctors there in a system where they could not function they could not provide quality care to their to their patients they were it was beaming with patients all over the place so i think we have to yes obama care is something that says well at least have access to somewhere where you can have a doctor take a look at you but i think we have to change the discussion to be a little bit larger than that and i think academic medical centers like the university of chicago should be training people who can think in interdisciplinary ways whereby we're not sitting here to wait for patients to be sick and do procedures and make money but we're thinking about systems right what systems will get patients to now have to come here and would improve health so when you start talking about the labor the negotiations you're really not talking about a systems approach where we train administrators we train doctors the policy makers they're making these policies but they don't know why and the implications of the policies the policies in chicago that got us to have a city that segregated where all the american college of physician or college of sojourn as qualified sojourns are on the north side because that's where the money is and there's no one on the south side means that you're going to have inequities in even getting people access to care so i think your theory is fine because you've looked at it but you've looked at it from the legal perspective and i hope that what what this will come out of is at the university of chicago as scholars who look in an interdisciplinary way and pritzker pritzker is doing a better job with you know trying to get our students to be out in the community until we do that at a national level we're not going to bring costs down and we're not going to be able to actually elevate everybody's health anytime you talk about disparities and you know what i've heard about obama case you want to take something from people who have it no everybody's getting bad care even people who can afford it and pay for it no well let me say if i can give an answer there are two questions of social organization one of them is how you organize a healthcare system internal unto itself about which i've said relatively little about which i have very strong opinions i might add but that's just not this talk the second question is how the healthcare system is integrated with other social systems of equal size weight and importance and that question cannot be answered by understanding only the internal operations in a medical side let me just give you one illustration you look at the healthcare bill when you're trying to figure out how to make healthcare affordable to patients then you see in there the provision which says that all collective bargaining rights shall hereby be necessarily preserved for all workers or working hospitals and the truth about the matter is anytime you put a union into place in an institution the flexibility on the workforce goes down and the wages per unit output go up that's the battle that you have with respect to teacher how can you think that this is a system is going to work when in fact you take one of the major impediments to reorganization and embedded in the basic fundamental statutes and with the same thing with respect to minimum access to various kinds of treatments which drives people out of the system but but Dr. Olapati what you've got to understand about this is the level of government intervention has gone up the level of healthcare has gone down and the disparities have gone down um that the problem is you run let me just give you one illustration of this suppose you wanted to open up a south side medical clinic to take care of poor people and to provide them with surgeries what happens is you now have to face zoning laws minimum standard laws of one size or another certification rules and you're not going to be able to do that from a low class patient in terms of their income levels so what happens is given the high cost of getting into the system people locate in districts where they're high rent because otherwise they're going to remain closed this is the law of unanticipated consequences and what you need to develop is a model which stresses not government safety standards but relatively free modes of entry and so i want this committee to come on the south side no physician knows how to run a business they know how to do surgery the guys who know how to run a business a walmart and wargreens and god and cvs and you want them to be able to come in but the prohibitions on corporate health care essentially is going to block that form of innovation so i'm going to again say something more globally than you which i think supports what you want which is that rather than having restricted entity entry and government subsidies which is the modern program you want unrestricted entities entries and little or no subsidies the moment you get the point where these costs are low enough a people will start being able to pay for it themselves and also other individuals who know that the money that they give to an institution will be spent by that institution and not be co-opted by government regulation you'll improve it so you have to fundamentally reverse the mindset of the last years and you cannot do it i'm i'll give you one illustration you cannot find a single person in congress who's against mandatory coverage with respect to pre-existing conditions right it's a mistake and there are ways to handle this technically if you understand how long-term insurance contracts work and so you know you sort of look around here and you know i came up with this plan and i will this one of our fellows whose names slipped my mind at the business school john cochran about long-term contracting that solves this particular program we published it before hipper came out no one paid the slightest bit of attention to it and maybe you docs think that if hippers made you a much more efficient and responsive institution has lowered your cost increased your patient privacy or you could just regard it as a tangle of red tape but i know what you think about that because we agree right but we didn't get the guys to get it right if you got a hundred percent of the united states congress getting an issue like this wrong where they can't even understand what the other side to the argument is you have an educational deficit which runs far beyond your medical schools i mean you have a president of the united states who is totally uneducated on any of the things that you're talking about who's the leader on healthcare i mean i don't mean this is a preferably i mean it is a sense cannot sit down and give you a systematic account how the system works and he's joined by leaders on both sides of the political line because they start from a progressive worldview which essentially turns out to be unsustainable that's why i started at the beginning what you thought about whatever it was that took place in 1914 and 1932 with labor unions and minimum wages drives all the way through to modern health care stuff so worldview is what you have to change and that requires education far beyond the medical system anyhow more questions you've got to be thank you um kind of a comment about the um 10 000 turns of the the hand wheel approach is that part of a systemic problem i see in that is is that it relies on an intrinsic standard of measuring health and health care sort of you know better blood pressure better outcomes numbers for this whereas the way that i see people measure their health care is more extrinsically in relation to the health of the community around them and that by generating larger disparities across the spectrum you can generate a much poorer perception of of that actual health of the person at the bottom and it may not be meaningful to say to them that well compared to a hundred years ago these numbers look better if your subjective assessment of your health relative to your community is significantly poorer this is one of the biggest interactive draws of a of an egalitarian philosophy is what we call the problem of relative versus absolute preferences and that's what you're into and it's a serious problem with a with a nice sort of kicker at the end but the theory of absolute preferences said is you look at your endowments measured by material conditions subjective satisfaction and you do not feel poorer because somebody is richer than you in all these dimensions or better because somebody is poorer than you in all these dimensions so the only thing that you worry about is making yourself better off as an intrinsic individual and if it makes somebody else even more better off than you you're happy with it the theory of relative preferences is exactly what you say is i improve my relative standard by one and somebody else has improved his by three the gap is now two i now feel worse off than i did before because the gap is larger than has otherwise turned out to be the case and so therefore the pressure for equality is now designed to sort of ease the gap on the preference structure the point about this is it is always a powerful powerful force when it's very difficult to deal with one of the things however that you have to understand about it is that this is not a perception only of the poor person it's also to some extent the perception of the rich person and what you have to do is to try to embed as we've now lost because of mandated transfers the sense of those people are at the top end of this distribution that they will be greater level of social peace if they contribute towards the redistribution of the opposite end and this of course was the dominant trope with respect to getting wealth into hospitals 1875 1900 think of the names of all the great institutions you have and they got you know they got to see who was stanford right he wasn't just some pig farmer this is a robber baron right you know who is you know go back Sloan Kettering Institute you know who's Sloan and Kettering are and how many people in this room know who they are it's just wonderful because alfred's what no no that's the duke family that's the duke family that's the duke family the alfred slone was the genius who organized general modus and charlie kettering was the guy who helped them doing this by getting the batteries to work so what essentially happened is these guys took a bunch of dumpy lines and automobiles buicoles the early versions of Pontiac and managed to form a model of industrial organization that lasted from about 1925 to about 1965 1970 from which they made a bloody fortune virtually all which they gave away including to the Sloan Kettering type center and what you need to do is you got to get those sources sensibilities up there as opposed to saying well there's always a government appropriation that's going to handle that particular kind of problem so i mean you can persuade people i mean every bit of charitable activity depends upon the perception that you talked about right is that i am sufficiently well off that it's dawn right my time now to do something which will help it and you try to get these things done what happened is charitable giving with respect to health care became a much more difficult sale once you had guaranteed payment because as mark my father was a doctor and you probably remember those days it was common practice to give either very low price non-cash transactions free health care the people who could not afford it if you were just an ordinary physician so if you're trying to figure out what the level of transfer payments are it's not by just looking at dollar payments into hospital it's free contributions and services all which ended with medicare and you know you've got to remember that these hidden cause really matter and you've got to unleash that force that's why i say the stuff about relative preference really works because try and do the following thing we have to take up a welfare benefit program in order to make sure that warren buffett does not suffer the adverse effects of having lost a billion dollars in the stock market so you want each american to give him fifteen dollars so he feels better you're going to look at me like i'm a madman right as opposed to helping people who've been injured by categorical catastrophes it's easiest to get money to somebody who's run over by a tsunami because nobody says the reason this person got caught in this tsunami was sloth and indifference so i'm now subsidizing bad behavior that's why people like categorical emergencies because they're not worried about the moral hazard associated with their operation question the idea of volunteerism is very interesting and the idea that prior to medicare that physicians actually gave a fair amount of charity care but while true it doesn't explain the fact that there were still gigantic health disparities that existed prior to medicare that have only exacerbated over the last several years and i don't think it's necessarily due to the fact that now we actually have governmental payment for care that didn't exist before the idea of having people who run institutions kind of govern what's going to happen for the people who are served by those institutions and we have to depend on those people to make the right decision is really kind of difficult because if you're a person who needs a trauma center for instance and you're not getting one in that community you're going to want to have a trauma center there irrespective of the cost that brings to that institution now if you say the institution will close after a period of time that there's an immediacy that's involved with that when i'm the person shot on the midway i really want a trauma center next door as opposed to worrying it's going to happen next 10 years and you would hope that some other system actually comes into evolve itself to fix those gaps in between i don't know i think there's so much disparity that exists in the the differences between the poor and rich in this company with country between between ethnicities and of one type or another in this country that i can't depend on people who are in leadership to actually make a coaching decisions for me oh well i agree with that last point because they were making the decisions that i've been decrying let me go start back to the first point and talk about disparities and so forth but the single most interesting set of figures on this is that you take a look at sort of life expectancy some obvious measure of health care and do it by say the quartile or quintile in the united states and what happens is the ratios have pretty much been the same that is like a 10 to 3 ratio you're going to be you know that much more at risk at the bottom than at the top that number has been constant over 150 years but this is the difference it used to be that that ratio would be something like 60 to 18 and now it's 4 to 1.2 that is what you're getting wrong if you're looking at that over the broad suite is that even though the disparities existed in ratio terms in numerical terms the greatest percentage of health care advancement and improvements were all to poor people that is they managed to increase life expectancy instead of dying 60% of the time they're down down to eight the other guys are down from eight to four i know which one i would rather be in terms of the improvement side i'd rather be the rich guy in both systems but i much rather be the poor guy today than the guy that second thing is when you talk about this stuff you have to look at some of the life expectancy figures i don't know how many of you actually studied these charts but they blow your mind out essentially life expectancy in england in the united states just to take two places was for about in england 400 years and in the united states for about 150 or 200 years it hovered around 40 starting in nine 1850 it started to move up so that eight by eight by 1900 it had gone up to 46 in both countries roughly and most statisticians essentially thought this was a statistical blip which would disappear but of course they were wrong what they didn't understand is that the great achievements at those days were an indirect consequence of putting a sewer system in places like london and so forth and that these gains were essentially durable not transitory because there was now a mechanism which explained why it is that this work you separate your wastewater from your bathwater it's a huge social advance that dwarfs the fancy things that you guys do in laboratories today all right so everyone thought okay maybe 1900 1920 all of a sudden it goes from 47 to 54 and by world war two it's 65 and then it goes up and now it's sort of in 76 the most rapid increases in overall life expectancy took place in the periods of lowest levels of government regulation in part it's because you're working from a lower base and you get easier things but in part because you don't get these indirect effects that feedback in the opposite direction and slow you up through regulation so at the time that the progressives are just absolutely walling about the inequalities of wealth it turns out the equality of fortune is actually increasing radically take race what do you think the average life expectancy of a black individual in the united states was in 1900 when the median age for men and women was 46 or 47 do you know the number any of you know the number 32 okay and now in effect what's happened is they're not quite equal right but essentially the gap is narrowing basically a month every year or two so that by the year 2040 it will be essentially the same and the only differences will not be because of health care they will be because of sort of death of teenage by drums guns alcohol military involvement and stuff like that mainly on the male population now how's that stuff happening well it's got to be happening through something and somewhere and the answer is it is happening because the overall conditions of prosperity is such that you can make the good fixes that matter by giving people carrots so they don't get polagra and giving them oranges so they don't die of scurvy and giving them a simple shot so they don't die of diabetes and things like that and I people simply get it wrong if they think that the determinant of health care is whether or not when an emergency room operation is needed the rich guy managed to get the quadruple you know bypass and the poor guy doesn't in terms of aggregate numbers that's going to influence the difference by about 48 hours right over the entire spectrum what really drives health care system is essentially fundamental access to minimum kinds of provisions and that's why when you start getting higher unemployment rates for some minimum wages and a lot of work restrictions a bunch of other stuff that's where you're really hurting people it's not with respect to the things that you're talking about then you talk about neighborhoods and health care clinics that was dr olapati's point and what did she say what did I say I said you look around there are two things you can do about and you're thinking in the wrong universe you're thinking how can I get a subsidies for my guys to put this thing up next door I'm thinking how can I figure out what zoning restriction blocks a voluntary group from going in what certificate of need restriction bops them from opening up their door and I just beg and plead on bended knee that when you give that speech your first thing is not more subsidies which messes up every other part of the market but fewer restrictions so essentially I want everyone to say after me more entry with fewer restrictions and you will now have in four words 70 percent of what you need to know yeah but but it seems to me to require a leap of faith to think that we can stop coercing each other to take care of the poor and that voluntary contributions to take care of the poor will more than make up for that no I did look this is not a look I'm not saying you stop everything at the time b you kill the problem is trying to run a transitional system is extremely hard night in the dress that what I said in effect is that you could ease them the last point I made on this was every time you receive you ease a public restriction and allow entry this is what's happening getting more care at lower price which means that the unserved population is smaller and the wealth in the server population is larger so the net burden on redistribution goes down I don't think that's the same then the question is does entry worker does it not work and you know I'm going to draw evidence from anywhere and if you look at the standard corporatist model you see exactly what happens when there's no entry you get yourself a large corporation with a large labor union and a garage government regulator and technical stagnation and the only way that breaks down is somebody figures out how to enter so in the telecommunications industry it was MCI in the late 1970s which managed to break the thing and after a while the whole system came tumbling down and maybe you don't know it but a cell phone call today is rather cheaper than a long distance call was in 1979 and even this I mean you don't have to know about the telecommunications side of it but the way in which the FCC ran the auctions and the licensing for telecommunication frequencies and so forth is such an abomination that it is probably slowed up the level improvement by 50 percent from what it should have been if they had rationalized the allocation of the spectrum I mean entry entry entry any industry you talk about I could give you an entry story and the moment you guys sit around here and start thinking about how I can get larger subsidies from medical care by taxing some other segment of the economy you're no better than the agricultural guys who want to starve an urban population to make sure that the turn up subsidy and their sugar subsidy are up at ground levels you know what the sugar subsidy costs this country in terms of health care I mean it's just terrible what you do under these things and all of you understand that you could control you personally all of you know that you can figure out what to do in your own this in your own discrete area you're not prepared to think about how you unravel everybody else's subsidy I mean you want to improve health in the United States the single most important thing you could do in the short run is get rid of the ethanol subsidies for gasoline and I don't see any one of you guys how many of you know about ethanol subsidies right that's my job right and all I want you to do is to have it on faith that those things kill arable farmland increase the price of food reduce the level of health in this country screw up everything in the agricultural markets overseas and that you want to give archa midland Daniels an extra hundred million dollars out of this corrupt program be my guest I regarded as venial and corrupt beyond all possible measure and who's in favor of it well you got a lot of republican farm guys like grassy and you get the president and the things that well I'm always in favor of a transitional program to help support struggling farmers right transitional programs that start in one years and a hundred years later there's still another transition so we still have the same program you just have to kill these things root and break and that means that you guys have to go out there and say no ethanol for gasoline subsidies on the side that's what you have to be doing if you want to improve health care I don't see it happen but at least you can't be indifferent to those kinds of issues those issues are the ones that make life miserable for ordinary people and make no mistake about it the average family income the median family income is going down in the United States and there's a reason it's going down it's because essentially if you trust this thing up like a Christmas turkey right and after a while it's not going to be able to move do we have any more questions or I'm set enough there must be one more one more over here yes so at the end I was glad to hear you talk about some data and you talk about life expectancies and okay and so this country has lower life expectancy than some other industrialized country that have single-payer health care systems could you comment about yeah well I mean what happens is that the clear answer is a there's nothing about what I've said which says that the hodgepodge systems that we have are better or worse than the single health care system and in fact one of the things that you know is when you look at single-payer health care system the heterogeneity amongst them is much greater than is sometimes understood you know you get the opt-out model in England you don't get the opt-out model in Canada and so forth so that you have to code these things much more complicated than you would otherwise do the second thing that you have is if I'm correct about what I said on on what is the source of health care benefits or health benefits it's not health care exclusively is all these other institutional arrangements that matter as well and so you've got to figure out how you control for all of them before you put the coefficient on the third point I would say about the single-payer health care system is they will do better in the earlier years and they will do worse in the out years systematically and there's a very powerful explanation about it these things are political creature type systems and the voters who want their benefits today want them today because they know who their doctors are which means in effect you systematically stint on capital improvements until there's a complete crisis at which time you then put a lump sum in there which is too little and too late to handle it the great advantage about markets over single-payer systems is essentially shareholders discount future flows to present values imperfectly whereas politicians don't do it at all and so what you really have to do when you run this system is to make all of those kinds of corrections and then to understand that I'm not defending the current American system I spend half my time denouncing it right so the fact that you show that it comes out badly I agree but the question is hypothetically where you go and the moment we get everybody in the room to say the mantras they go back subsidy no entry yes we will make the largest that's the four words that the more than anything else that I could say or mention to rationalize a health care system because everything we do is in the opposite way restrict entry and increase subsidy and in the end that is the road to perdition okay so what I wanted to do is you know this interdisciplinary seminar is really sponsored by we're talking about health disparities local national and global and everything that you've said is really what's been discussed globally in terms of how do you elevate the developing countries to be able to help themselves and have sustainability and so in the age world everyone will say give subsidy give aid and you'll hear people making the argument that no you have to get people to help themselves so a cell phone technology was an innovative response to not being able to put cables all through these african countries and now it's innovate the innovation has been adopted globally everyone now uses a cell phone so the question is you're asking for innovation and we need instead of talking about it like you've been a voice in the wilderness I think we need to develop interdisciplinary teams to propose solutions right we have the opportunity to do that in a scholarly manner to say okay we've developed a health care system and by the way most of the advantages to improving you know average lifespan has been because there were discoveries that then were immediately disseminated as a public health policy okay can I comment on that in two ways let me finish because once you go so when those so right so so so what I'm saying is that somebody has to in fact do the discovery make the innovative proposition and then figure out a way to disseminate it and so we have a university that you engage in such scholarship but then we also have politicians and people who make policy and we need to be able to convince them about policies that in fact can improve public health that's the argument you've made let me give you my answer I hate university commissions because they always wrote a commission I don't want a commission I don't want to report I'm quite happy to say what I think without a superstructure let me talk about the innovation point I wrote a piece about four months ago after I went to the museum to understand the path of discovery of banding and best with respect to diabetes I don't know if any of you actually know this history you get this guy who is essentially fit for a mental ward this fellow banding right now for banding and he has a bright idea in a nightmare on how to isolate insulin in 1920 and by the time you got to 1924 three years later this stuff was in widespread use throughout the United States and the only role that the government played in this I want you to know is that when it came to the purification of insulin in the New York labs the prohibition meant that you couldn't use whether it's ethylene ethane whatever it is so they had to try methane or something else and it didn't work so they had to apply for the federal government for an exemption from the prohibition rule so they could run the purification process which took them a while to get there was not a public time and so essentially within two and a half years after three years you had widespread commercial distribution within another five years the price of this stuff had gone down by about another 10 fold and so forth and what happens today you try to do that stuff you'd still be in preliminary discussions with the FDA they were not a willing to let people die and you know if you try to figure out how you dose somebody on insulin with you don't know what the protocols are right and you don't know what the purity and the strength of this stuff has you're gonna kill a lot of people and you know they probably killed 20 people and then in the next year they probably saved 5,000 and every year more they're after so I mean there's there's a lesson in this I mean I teach the stuff on the FDA a larger collection of uninformed people on how it is that you structure clinical trials you cannot find because they just don't understand systems so I don't want any commitment I just want to denounce them right now and get somebody to change and on that note of cooperation with the medical establishment I'd like to thank you all one one one quick moment next week next week Ann Biel is coming Dr. Biel is the head of the etna the head of the etna foundation in Connecticut David Meltzer is speaking two weeks from today on disparities in response to patient preference by race on our own general medicine service and then on April 27 Vanessa Northington Gamble is coming from GW to talk about disparities without health and long life all else fails African-Americans and the history of the elimination of racial disparities in health and health care so the next three weeks should be very exciting weeks and I think as Richard says perhaps complimentary to to the talk today be aware of everybody from industry because what they do is they in the foundation even worse anybody who starts talking about the need for public-private partnerships should be sown the door