Charlie Munger Tells The Truth About Health Care

SB562 does not.

Here’s what Berkshire Hathaway Vice Chairman Charlie Munger had to say at the latest annual meeting of DJCO, another company of which he is Chairman, about health care:

“The current [health care] system runs out of control on the cost side and leads to behavior that’s not just regrettable, but evil. There’s a lot of crapola that just causes us to run out of money. Other systems like Singapore and Socialist Western Europe use smaller amounts. It is out of control, and incentives are wrong. Take macular degeneration. Old people need a shot. I could give that damn shot. It’s not that hard to shoot a little goop in the eye. There are two substances for the goop that are both equally effective, and the one that’s pricier is used all over America. Many a man who is dying is like a carcass in West Africa. In comes all the vultures and hyenas and assorted carnivores who come in to feed to bleed money out of old people. It’s not right to bleed so much money out of our dying people. There’s not a hospital that’s not dialysising people to death.”

The issue raised by Munger — incentives that don’t lead to better health but rather to unnecessary and unnecessarily expensive services — are addressed in Robert Pearl’s new book Mistreated, which is summarized here. As Pearl puts it, “when we pay physicians more to take care of heart attacks or strokes than to prevent them in the first place, they value emergency intervention dramatically more than disease prevention.”

But now read the text of SB562, a bill sponsored by a health care provider (the California Nurses Association) to create what it falsely calls a “single-payer” system that is unlike any other single-payer system in the world. As explained here, SB562 is an attempt by a special interest to create an insurance company they and other healthcare providers would control and could further influence over time with political contributions and pressure.

Single-payer systems can work just fine. But to do so they require robust cost and utilization controls and must not be controlled by health care providers. SB562 heads in exactly the opposite direction.

In the meantime, California already runs a single-payer system, Medi-Cal, for 14 million of its residents. Despite a doubling in spending since 2010 — spending growth that is crowding out state spending on UC, CSU, courts, parks and social services — it does not provide great service to its customers. In fact, it has done a better job of healing the bottom lines of health care providers who are politically active in Sacramento. California’s legislature should fix Medi-Cal. There are plenty of ways to do so — eg, expand nurse practitioner scope of practice, co-locate Medi-Cal facilities at under-utilized public facilities such as fire stations, get more health from existing spending, reward those who actually produce better health, penalize those who don’t, focus on the small percentage of the population responsible for most of the spending, etc.

In a state like California in which more than 90 percent of residents already have insurance coverage, SB562 is a distraction from what Munger rightly describes as the “evil” behavior that’s producing better profits but not better health and causing us to run out of money. California’s legislature and governor can do better.

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