Saturday, November 28, 2009

Healthcare Is Not A Right

Healthcare is a right, not a privilege.

- Senator Bernie Sanders (I-VT)

With Barack Obama, we will break the old gridlock and finally make health care what it should be in America—a fundamental right for all, not just an expensive privilege for the few.

- Senator Edward Kennedy (D-MA)

I think [healthcare] should be a right for every American.

- President Barack Obama

The ongoing healthcare reform debate has been quite heated, polarizing, and educational. (I bear witness to the passionate "debating," as I had a front-row seat at Representative Jim Moran's Health Care Townhall, and saw hundreds of people yelling -- and not in a good way -- as he and Howard Dean entered the auditorium. Was I one of the yellers? I plead the Fifth.)

As almost everyone will attest, there is a definite need for "health-insurance" reform (not necessarily "health" or "healthcare"). [For the sake of clarity, when I refer to "healthcare," I mean the provision of services from others to improve or manage one's health.] My contributions to the debate can be found here, here, here, and here.

I believe the supporters of the various reform bills have managed to wrest the moral high ground by shaming opponents of reform as uncaring haves, who wish the sick and unhealthy (or soon to be unhealthy) to go without needed care. Of course, that is not the case, but just raising that straw man all but eliminates the ability to have a reasonable, objective debate about the issue.

In this essay, I argue that healthcare is NOT a right; that, in fact, asserting that healthcare is a right is indistinguishable from an explicit support of slavery.

Some ground rules must be stated, such as:

  • What are "rights," and what rights do we possess?
  • What role does the government have to support, or defend, our rights?

A "Right" Defined

A "right" is not granted by anybody or any body; it is intrinsic in the nature of man. (Thus, "rights" differ from "privileges," which are permissions granted by someone.)

I believe in the theory of "natural rights," that was espoused by the British philosopher John Locke (1632-1704) in his 1689 publication The Second Treatise of Government. In his Second Treatise, Locke stated that every man was entitled to his life, liberty, and property (his "natural rights") provided that exercising those rights does not intrude on others' rights, and that the role of government in natural-rights theory is to protect those rights.

Thomas Jefferson felt Locke was the most important thinker of liberty. Not surprisingly, the Declaration of Independence -- of which Jefferson wrote the initial draft -- echoed Locke by identifying our rights and the role of government:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed....

These rights, importantly, do not grant men the power to have a claim on anyone else. Everyone owns his life and liberty (no one can be a slave), and no one can take away another’s right to try to achieve the life he or she wants (the "pursuit of happiness").

Notice that the Declaration of Independence does not state that men have a right to "happiness"; we do not have the innate right to assume our preferred station in life, or to assume our ownership of any property to which someone else has a rightful claim.

One way to think about this distinction is to follow up the claim of a right with the question, "At whose expense?" According to natural-rights theory and the Declaration of Independence, the answer should be: "No one"; for no one may make a claim at the expense of anyone else.

Is Healthcare a Right, or a Privilege?

Messrs. Sanders, Kennedy, and Obama, and many others, claim that healthcare is a right, meaning it is innate and further that the government's role is to grant and to protect that right.

The assertion appears defensible on the surface, for which heartless person would wish his or her fellow man to be denied healthcare -- especially in the wealthiest country in the world?

Ask yourself the question, "Healthcare ... at the expense of whom?" [Healthcare meaning, again, the provision of medical services from others.] If healthcare is a right, then a sick or injured person can make a claim on a doctor's or nurse's services -- he/she can demand healthcare, whether or not the practitioner is willing to provide it.

Put aside the response that few healthcare practitioners would be unwilling to provide care. I am debating about actions that a person is required to do -- under threat of coercion by the State -- despite objections that he or she might have.

Of course, in America, all people have the privilege of healthcare, as the Emergency Medical Treatment & Labor Act (EMTALA), enacted in 1986, ensures public access to emergency services in Medicare-participating hospitals, regardless of ability to pay. (And, since almost every hospital accepts Medicare funds, we are talking about essentially every hospital in America.)

EMTALA is an example of the danger of accepting payment from a party -- the State -- which also writes the rules. With EMTALA, the government -- which should be protecting the rights of all citizens equally -- has taken sides with a class (patients) that can demand services from another class (providers).


I challenge anyone to explain how the innate ability to demand services (medical or otherwise) from another differs from slavery.

Is the government's role to ensure that all have equal protection to life, liberty, and the pursuit of happiness?

Or, instead, is it the government's role to protect the ability of people to place a claim on another's property (in this case, a lifetime of study, hard work, and expense honing his or her skills as a physician)?

More specifically, is the government's role to force healthcare providers to provide medical services to those needing care?

If you answer "Yes" to the last question, may I introduce you to a text that may speak to you from the heart? It is called Critique of the Gotha Programme, and contains your mantra:

From each according to his ability, to each according to his needs!

It was written by Karl Marx.

Tuesday, August 25, 2009

Don't Cover Doctor's Visits! (if you want a better healthcare system)

The debate of healthcare and healthcare financing continues apace, as we get deep into August. Our elected officials certainly knew there would be a certain level of disagreement, but I doubt they envisioned their town halls to become 2009's version of riots over civil rights and the Vietnam War.

You can now see why Rahm Emmanuel and Company wanted healthcare legislation signed and sealed before the August recess, though. Any 1,000+-page bill will have elements with which everyone disagrees, and it's just a matter of time before interest groups organize and solidify opposition to those elements.

Given that my Congressman, Jim Moran, is hosting his healthcare town hall -- accompanied by Howard Dean, presumably for moral support -- this evening, I thought it would be a good occasion to post my next essay on how I would like to see healthcare reformed.

My other commentary on reform appears here (each link should open in a separate window):

The "Public Option" For Health Reform Is No Option

When Discussing Heath Care, Paul Krugman Should See A Doctor

Copays, Premiums, and Risk-Pooling ... Oh, My!

The current essay recommends removing doctor's office visits from coverage under health insurance policies, and expanding the role of nurse practitioners.

The Problem

The financial structure of most health insurance policies encourages overuse and misuse of the healthcare system, with resulting increases in healthcare costs, as well as pervasive inefficiency.

One consequence of third-party payment is that the consumer of the service (in this case, the patient) is shielded from the true cost of the service. If you ask most people what a doctor's visit "costs," they will probably respond with whatever amount their copay is. The true cost is much higher -- probably $100 for a 15-minute visit.

As a result of this "cost-shielding," people are much more likely to see a doctor, for many more reasons, than if they had to pay full price for a doctor's visit. Many visits to the doctor are due to the common cold and allergy symptoms, for which very little can be done to alter the course of the condition except for rest, proper eating and hydration, and over-the-counter symptom control treatments.

Most common cold or allergy complaints do not require a visit to a highly-trained physician -- a nurse practitioner can treat the patient just as effectively, and at much lower cost. I would expect a comparable 15-minute appointment with a nurse practitioner would cost about $25.

The point is that many office visits to physicians are unnecessary, with money and time being wasted by the patient. Additionally, the physician could be using his/her time on much more sick or injured patients. But, since it only costs $20 or $25 to see "the expert," why wouldn't you? People would certainly think twice about making an appointment if it would cost them $100, especially if appropriate care could be obtained for a quarter of the cost by a nurse practitioner.

And why should office visits be removed from coverage by health insurance? Again, the third-party payment structure leads to overuse, as the consumer is not informed about the true cost of the service. The result is excessive, unnecessary use of healthcare services.

The Solution

I believe two changes affecting office visits would show dramatic healthcare cost reductions, with no lessening in quality: 1) remove office visits from health insurance coverage, and 2) increase the scope of services that nurse practitioners can provide.

First, the financial structure of health insurance policies. The vast majority of health insurance policies cover all office visits, with the insured only paying a modest copayment (typically $10 to $25). Office visits are, by far, the largest healthcare expense, due to their frequency.

Removing office visits from health insurance policies would render them similar in function to auto insurance policies: financial relief is available for highly expensive (or "catastrophic") needs, but less expensive services are wholly out of pocket. (This concept is actually available today as health-savings accounts (HSAs), but is largely unused.)

The second change, increasing the scope of services by nurse practitioners, is already gaining traction via some physician practices and urgent-care clinics. It only makes sense to have patients treated by a practitioner who is well -- but not excessively -- trained to provide the care necessary to heal the patient.

If you are hungry, in a hurry, and without much cash, it does not make sense to order a meal at a four-star restaurant; a fast-food establishment better meets your needs. However, if an important occasion is arriving, for which the added expense and time is worthwhile, then fast food might be counterproductive, and a fine restaurant is warranted. The same "triage" could apply to your choice of healthcare practitioners.

The net result of having the cost of office visits borne by the consumer/patient would be a greater ownership of one's healthcare. Office visits for (apparently) minor illnesses or injuries could be managed by a nurse practitioner. The nurse practitioner could triage the patient (via questions or observation), with potentially serious conditions being transferred to a physician.

From the physician's perspective, insurance compliance costs could be reduced, as fewer claims would need to be submitted and tracked. The physician would still "keep" the patient, but the nurse practitioner would be handling the majority of visits.

To continue the auto-insurance metaphor, having physician office visits paid by health insurance is akin to having oil changes paid by auto insurance. If that were the case, people would not look for shops offering the combination of high quality and low price that fit their needs -- they would be totally insulated from the "true cost" of oil changes. Additionally, people would not learn the most practical mileage interval at which to get their car's oil changed, and would end up getting oil changes much more frequently than is needed. ("If getting my oil changed every 3,000 miles is good, then getting it changed every 1,000 miles must be better!")


There are several impediments to these changes. The Powers-That-Be are not interested in fostering these changes. Insurance companies do not want to lose the premium revenue that accompanies insurance policies that cover everything under the sun. More rational health insurance policies would be much lower in cost, which helps policyholders, but certainly is not in the best interest of health insurers.

Similarly, the American Medical Association -- the governing body that largely determines which services can be provided by physicians (and only physicians) -- is not interested in having its treating authority diluted by other professions. It views just about any attempt by other professions to treat patients as an encroachment on their turf.

Skyrocketing healthcare costs might do more to expand the availability of creative health insurance policies, such as HSAs, and to increase the availability and treatment authority of alternative healthcare providers, such as nurse practitioners. It remains to be seen whether commonsense, cost-effective, minor tweaks to the healthcare system can garner sufficient support.

Wednesday, August 5, 2009

Copays, Premiums, and Risk-Pooling ... Oh, My! (First in a series on healthcare reform)

At the risk of causing eyes weary with healthcare reform to glaze over, I am starting an essay series to suggest various measures to improve the current U.S. healthcare system. The measures I describe include global changes, as well as tweaks, or modifications to the current system. Nothing I suggest is necessarily original -- the changes are discussed elsewhere in great detail -- but my blog offers an opportunity to have a discussion with those not steeped in the details of healthcare financing.

I have decided to make the essay much more manageable for readers by addressing one weakness and solution per day.

I have been a healthcare consultant for 15 years, with experience tracking the financing of patient care, medical technologies, drugs, biologicals, and advanced procedures for treating patients. Doing so has afforded me a birds-eye view of how the U.S. healthcare system intersects with patients, physicians, hospitals, and health insurance companies.

An earlier essay discussed the inherent problems with the so-called "public option," whereby the government will offer a health insurance plan to "compete" with private-sector insurance companies. An astute reader commented that, while he felt my piece was effective in identifying the structural flaws with the public option, I did offer any solutions of my own. (In other words, it is very easy to criticize without presenting alternatives.)

As everyone knows, President Barack Obama (here, here, here) and others have derided the free market for "failing" Americans in health care. That is, quite simply, false at best, and a lie at worst. The federal government has infiltrated itself into the health insurance market so deeply that it publishes approximately ten thousand pages of rules and regulations annually, just for Medicare and Medicaid. That does not even include regulations for private insurers, as well as legislation and regulations the state governments lard onto the insurance market.

So, the reader will understand if my recommendations to improve the healthcare system do not draw on anything Obama says; in fact, most of my suggestions run counter to anything he has said or believes. So, with that framework understood, let's jump right in.

The first measure needing reform is the tax structure of health insurance.

Tax Structure


The tax structure of health insurance is one of its most distorting features. A series of federal rules, enacted shortly after World War II and culminating in an IRS decision in 1954, resulted in employer-sponsored health insurance not being taxable income (and, therefore, payable with pretax income). However, health insurance purchased elsewhere (e.g., self-purchased) must be paid with after-tax dollars.

Predictably, the vast majority of Americans now receive health insurance through their employer. (David Blumenthal, MD, summarizes succinctly the origins of employer-sponsored health insurance in his 2006 New England Journal of Medicine article "Employer-Sponsored Health Insurance in the United States — Origins and Implications" located here.)

This tax preference for employers has several pernicious consequences. First, it means that health insurance provided by employers is much cheaper than health insurance purchased by an individual for himself and/or his family. As a result, simply having health insurance tends to tether employees to their jobs -- even if the job is less than desirable -- out of fear of being without coverage. This "job anchor" prevents many individuals from pursuing a better job (however, one defines "better," whether it be a higher salary, shorter commute, improved quality of life, etc.)

The second implication of employer-sponsored health insurance is that it constrains salaries. If a new employee already has health coverage from a spouse, he or she may not need to participate in the employer's health insurance plan -- thus saving the employer thousands (or tens of thousands) of dollars a year in insurance premiums. However, that economic benefit -- through no strategem on the employer's part -- accrues 100 percent to the employer. In other words, the employee does not participate in the economic benefits of forsaking health insurance, in the form of a higher salary or other benefits.


Removing the tax deductibility of employer-sponsored health insurance would help equalize insurance costs between employers and individuals. A likely result is that many employers would no longer provide health insurance as part of the benefit package.

Despite probable knee-jerk reactions about the horror of this possibility, this is not a bad development: As prospective employees start negotiating for jobs in the "new normal," and realize benefit packages no longer include health insurance, they should begin demanding higher salaries and/or other benefits (i.e., subsidized transportation costs, subsidized tuition, etc.) to compensate.

The provision of employer-sponsored health insurance was originally offered because the federal government placed a cap on salaries -- leading employers to search for other job benefits -- so the process of salaries increasing to compensate for the lack of health insurance is simply a reversal of earlier employment decisions.

Ultimately, shifting health insurance provision to individuals is a better arrangement, because employers do not (cannot, actually) offer employees the full range of health insurance options available, for the employee to select the plan that best meets his or his family's needs. Rather, in an effort to keep insurance premiums as low as possible -- while still offering employees a modicum of choice -- most employers allow employees either an HMO (health-maintenance organization) or PPO (preferred-provider organization) option.

Employees could use the resultant higher salaries to select from a much greater range of health insurance plans -- and the plans would not be linked to employment status (or lack thereof).

Granted, employers would still have a cost advantage due to pooling (i.e., large employers could "pool" together a number of employees, thus spreading out risk to reduce premiums). However, individuals would still be able to join risk pools, and benefit from the same premium-reducing activity. As a matter of fact, individuals could join pools structured around commonalities that may result in greater cohesiveness than employers, and potentially greater loyalty to insurance companies. These advantages might well result in lower premiums for pools that involve "families of families" and other cooperative arrangements, especially given the disloyalty that employers and insurance companies have toward one another. (Employers change health insurance companies approximately every two years.)

Monday, August 3, 2009

When Discussing Heath Care, Paul Krugman Should See A Doctor

On July 25, Nobel Prize-winning economist Paul Krugman wrote a column entitled "Why markets can't cure healthcare" in which he listed reasons for which the free market was unsuited for health care.

The tone of the column is condescending (or smug, perhaps? the difference escapes me), as he repeatedly knocks over the straw men he uses as "weaknesses" of the market in healthcare. However, I feel he mostly repeats the talking points uttered by those who favor of government-run healthcare, but -- as is typical -- without any data or sound analysis to justify his position. (Presumably, Krugman's Nobel Prize grants him immunity from having to provide supporting evidence for any of his claims.)

Sadly, the New York Times closed the comment period for this column, so I'll just share my thoughts here.

His first whopper is that the "big bucks are in triple coronary bypass surgery, not routine visits to the doctor’s office."

Wrong, and not only a "little" wrong, but "a lot" wrong. As in "billions of dollars" wrong. In 2006 (the most recent year for which data is available), Medicare payments for all bypass surgery (not just triple-bypass surgery) totaled $2.9 billion.

By contrast, in the same year Medicare paid $13.5 billion for office visits of mild to complex decision-making. These office visits represent an enormous 12.2 percent of total Medicare payments to doctors for all services and procedures. In other words, one out of every eight dollars that Medicare paid physicians in 2006 went to Krugman's piddling office visits.

So, Krugman's unsubstantiated claim notwithstanding, the "big bucks" in healthcare are with office visits, which represent a dollar expense 450 percent greater than bypass surgery. (All data are from the CMS Data Compendium.)

Krugman later states that health care "must largely paid for by some kind of insurance," and that "[c]onsumer choice is nonsense when it comes to health care. And you can’t just trust insurance companies either — they’re not in business for their health, or yours."

Insurance is necessary for SOME -- but by no means all -- healthcare costs. And anyone who mentions "consumer choice" in the same sentence as "health care" is only displaying to the world how ignorant he is. Since the 1940s/1950s, employers have been given preferential tax treatment over individuals for purchasing health insurance, with the obvious result that virtually all Americans under age 65 obtain their health insurance from their employer. Most employers offer employees a limited number of insurance "choices" (in most cases, either an HMO or a PPO, and that is it), which do not even include some of the newer packages that are more appropriate for younger workers, such as health-savings accounts or high-deductible plans). So, the vast majority of "consumers" already have very little "choice" about which insurance policy they purchase.

Krugman's comment about not being able to "trust" health insurance companies is specious and meaningless. Does that mean that people cannot "trust" their auto insurance companies, their life insurance companies, their homeowners' insurance companies, etc.?

Insurance companies need to be regulated, to be sure. But, can you trust the government, either? And, if not, who is going to regulate the government? The answer: no one. Not when the government is making the rules that will govern oversight. I would rather take my chances with a greedy insurance company that has oversight -- rather than the government, which will have no oversight, is subject to political pressure, and can always justify denying treatment for the greater good (i.e., taxpayers).

People who conduct business transactions based on "trust" -- rather than on contracts -- are destined to get fleeced, whether they are purchasing insurance or are purchasing a car. No one relies simply on "trust" when transacting with an insurance company, so Krugman's claim is just utter, misleading nonsense that ignores every aspect of contract law, business, and economics -- which is ironic, since the statement is coming from a Nobel Prize-winning economist.

Krugman states that "private insurance has much higher administrative costs than single-payer systems."

The fact that private insurance companies cost more, administratively, than public-sector insurance is a convenient falsehood for those in favor of government-financed or -controlled healthcare.

In actuality, the so-called financial "advantages" that the government demonstrates over private insurers largely derive from outsourcing to private enterprises. As a result of the outsourcing, Medicare does not have to pay union wages, infrastructure costs, or leasing/rental fees. Additionally, Medicare spends very little on reviewing insurance claims, with the result that administrative costs are kept low, but fraud is rife in Medicare.

Lastly, Krugman states that "in health care, the free market just doesn’t work."

If Krugman wants an example of how free-market principles work -- and work well -- in health care, he need look no further than a medical treatment in which government regulations are minimal, and insurance coverage is almost non-existent: laser eye surgery.

When laser-eye surgery first hit the market, costs exceeded $2,500 per eye. Approximately ten years later, per-eye costs had dropped to $1,000 per eye, with greatly improved quality.

That is how the free market works when not strictured by excess regulation: lower costs, improved quality, continuing innovation.

Monday, July 13, 2009

Robert McNamara: Maybe The Brightest, But Certainly Not The Best

Robert McNamara died last week (July 6th) at the age of 93. For anyone under the age of 50, he is probably just another historical figure, jumbled together with all of the other "government types" that populated the bureaucracy in the 1960s. He is most well known, of course, for being Secretary of Defense under Presidents Kennedy and Johnson, and for being the architect of the U.S. involvement in the Vietnam War.

And, even more specifically, he is most well known for his admission, published in his memoirs in 1995, that he felt -- essentially from the beginning of our country's involvement in Vietnam -- that the United States would be unable to win the war.

Yes, that's right.

The architect of the war, one of Kennedy's "best and brightest," the brilliant CEO of Ford Motor Company, felt from the beginning that the edifice he constructed was not durable like the cars his previous employer built. Rather, it better resembled a house of cards. (More like a cemetery of cards, actually.)

Why didn't he broach his concerns to President Johnson? Because he felt that he was simply a vehicle for LBJ's intentions and desires, and that he owed his loyalty to the president.

This is a pathetic, tired refrain that continues to this day. A recent example includes Colin Powell being a bagman for the Bush Administration, convincing the United Nations (and, by extension, the rest of the world) that Iraq was, indeed, developing and stockpiling weapons of mass destruction. Meanwhile, he was informed beforehand that George Tenet's "slam dunk" was a total fabrication. (Not, of course, that Colin Powell was a novice at being a tool of the Republican Party. He did his best to portray the My Lai massacre as a picnic.)

Alan Greenspan, also, waited until he was out of the government -- and, consequently, much less empowered to effect any change -- to inform everyone that one of the Bush Administration's major errors was abandoning fiscal restraint. (Meanwhile, Greenspan bears absolute responsibility for the Internet and real-estate bubbles, though he'd never admit it.)

Okay, I realize I'm getting sidetracked. Enough of Powell and Greenspan -- back to the ultimate government shill, Mr. McNamara.

I recognize that the pressures of politics are immense, and that standing up to the president would be an intimidating task. However, McNamara was strong enough to lead Ford, and I would think his forbidding intelligence could have crafted a way to communicate his doubts to LBJ. Guess not.

Apparently, he took his failure to make a stand quite hard, and "[o]n many occasions when confessing his errors regarding Vietnam, his voice shook or cracked and tears came to his eyes."

I find myself having a vanishingly small amount of sympathy -- or empathy -- for him. My father was drafted to Vietnam while his wife -- my mom -- was pregnant with me. Fortunately, my father returned safely, but over 58,000 sons, brothers, and fathers never did -- and McNamara bears a great deal of responsibility for THAT body count.

So McNamara felt himself a little weepy on occasion because of his inaction? He did live to be 93, so he might have had quite a few tears spill down his face. I doubt, however, that they outnumbered the tears shed by the mothers, wives, and children of those dead 58,000 soldiers. I hope the image of a different soldier visited him every day, and continues to do so. Wherever he is.

Friday, June 19, 2009

The "Public Option" For Health Reform Is No Option

Health insurance reform is in the Washington air these days. President Barack Obama gave a big speech in Wisconsin last week (which I plan to critique in short order), where he reiterated his belief and faith in a so-called "public-plan option." In the speech, he reassured the audience that, if one is happy with his current plan, he will be able to keep it.

He forgot to add, "...for now."

It is important to note that the phrases "health reform" and "healthcare reform" are conflated often, but they are not even what is being debated these days. What is being debated is health insurance reform. "Health reform" refers to modifying the physical well-being of an individual, and "healthcare reform" refers to the provision of medical and surgical services by hospitals, physicians, and other providers of healthcare. "Health insurance reform" is the financing of "health" and "healthcare." Of course, hearing the phrase "health insurance reform" is sufficient to cause one to be able to nod off on the middle of a rollercoaster, so it is not used.

In this post, I want to discuss the inherent problems -- from a liberty and economic standpoint -- with a "public-plan option." The public-plan option essentially means that, in addition to private-sector companies offering health insurance, the government will also offer a health-insurance "option" -- the purpose of which, it is touted, is that it will fill in the cracks where commercially-provided health-insurance plans fail to provide an option for certain people. (Typically, this means that commercially-available plans are too expensive for some people to afford.)

There are reams of information available discussing the problems with the government involving itself in health insurance, so I just want to highlight and briefly discuss the main reasons why I believe the public-payer option could, literally, ruin the level of quality, access, and cost of healthcare. (Not just health insurance, mind you, but healthcare.)

As with all things economic -- and government promises, for that matter -- it is important to think through how the various incentives will ripple through the system, and what impact they will ultimately have. Politicians love to promise programs that have short-term benefits, but long-term, crippling costs -- most politicians have zero economic or business education, so they are clueless about the long-term results of their legislation. They also know they will be out of office by the time the short-term benefits have withered away, so they do not have to pay the consequences of their decisions. In other words, they get to enjoy the one-night stand, but are never subjected to the walk of shame.

Government Has Intrinsic, Nonmarket Advantages

Once government enters a market, it becomes the 800-pound gorilla that cannot be moved. It's advantage is so overwhelming that it makes the 19th-century oil trusts seem like mom-and-pop shops. This intrinsic advantage manifests itself in multiple ways.

Government as price maker. A fundamental tenet of economics is that market players are either "price takers" -- in which case the normal process of supply and demand will ensure the market provides good and services consumers want at an acceptable price -- or "price makers" -- in which case the market player (or players) are so dominant that they can dictate the price, because there is insufficient competition, or insufficiently-powerful competition.

This has already happened with Medicare and Medicaid (government health-insurance programs for the aged and disabled, and the poor, respectively). Almost all companies that offer health insurance base their pricing for services and supplies on what is called the Medicare "fee schedule." The government reimburses hospitals and physicians for Medicaid patients at such a low rate that most physicians limit the number of Medicaid patients they accept -- or simply don't accept any Medicaid patients at all.

The rates Medicare pays physicians and hospitals are below market, so that many physicians and hospitals must make up the difference by charging private insurers and cash-pay patients higher amounts. This, in turn, has driven up costs to employers, the insured, and the uninsured. Additionally, physicians cannot afford to see many patients with Medicaid, so those very patients have limited options.

So, the government setting below-market payment amounts for every Medicare and Medicaid patient has had a cascade effect of driving up costs, especially for the uninsured, who can least afford high healthcare costs.

With the government entering the "traditional" healthcare-insurance market (i.e., non-Medicare, non-Medicaid patients), it will then become a price-maker for the rest of the insured (and uninsured) market, with the subsequent effect of driving up costs for private health-insurance companies. Those companies will be forced to set their prices at close-to-government rates (i.e., below-market rates) ... but will have the increased costs due to physicians and hospitals trying to make up their losses elsewhere. The combination of below-market payment, and increased costs, will force many health-insurance companies to begin operating at losses, and then to close their business.

Of course, the government -- as a purchaser of health insurance -- will insist that it "provide value" and "be prudent" with taxpayer funds -- thus justifying its strangling price demands.

Therefore, the short-term benefit ("affordable" health insurance provided by the government to fill in the gaps where commercial insurance plans do not offer plans) inevitably withers away because commercial insurance plans are driven out of business as they try to match government pricing, leaving the long-term cost -- only the government will remain standing in the health-insurance market.

Another consequence is that many people considering medical school will be driven away by the combination of a low salary (due to low payments by the government and insurance plans) and enormous school loans.

Government has unfair financial advantages. A government health insurance program has enormous, market-corrupting inherent advantages over a private-sector health-insurance company:

  • Whereas a company must pay payroll, property, and countless other taxes ... the government can always raise taxes or deficit spend to offset any revenue shortfalls.
  • Whereas a company must pay rent or lease costs ... the government can place headquarters on government-owned property, thus eliminating those expenses. Even if a company owns the land and building on which it operates, it must still pay property tax. The government is not a taxpayer -- it is a tax-consumer.

These factors are never considered or mentioned when advocates tout that Medicare has lower operating costs than private health-insurance companies. Of course they do -- the have a completely different, cheaper, taxpayer-subsidized cost structure compared to companies that must operate under tight fiscal discipline.

These financial advantages for the government can have the same ultimate effect as its role as price-maker -- private-sector companies cannot hope to compete with the government when the rules are being set by the government. As a result, they will be driven out of business.

Loss of Economic Liberty Thus Results

It is axiomatic that, once the government inserts itself into a market, politics ALWAYS trumps policy. Politicians, always on the prowl for solidifying their power base and ensuring re-election, will exploit the government's role in health insurance to reward constituents and interest groups ... without regard to the impact on sound healthcare policy.

Thus mandates enter the equation. "Mandates" are government decrees by which that the private business sector must abide, or else pay large fines or get out of that business line. Federal and state governments are famous for introducing mandates into health insurance, such as all health plans must provide coverage for alcohol rehabilitation programs or for alternative treatments such as acupuncture.

At first glance, it makes sense -- don't all leftist, statist policies start out this way? -- after all, shouldn't alcohol rehabilitation or acupuncture be available? However, what is unseen is that such mandates drive up the cost of health insurance, and many people would just as soon not include those types of coverage, in favor of reduced premiums.

However, keep in mind that every wrinkle of the tax code, and every perturbation of government rules and regulations, was created by a politician. And most politicians did not introduce these "enhancements" (i.e., mandates) without them also satisfying important constituents, or donors (i.e., special interests).

Therefore, be prepared that, when the "public-option plan" is rolled out, politicians will be unable to stop themselves from "enhancing" and "extending" the insurance program ... all in the name of insured Americans, of course. (Never mind that said insured Americans will have no say in whether or not such "enhancements" are even needed for their particular situation.)

And, of course, the mandates will add costs to everyone's health insurance -- it is unavoidable. For someone who is barely able to afford health insurance for himself (or his family), a premium hike might be the tipping point at which he will have to apply for federal assistance via enrolling in the public option. And a private-sector health insurance company loses another customer through no actions of its own. Multiply this scenario a hundred thousand, a million, or ten million times, and one sees how health insurance firms will be forced out of business. (Thus forcing potentially millions of Americans to the taxpayer-funded public option.)

As choice goes, so goes liberty. As the private sector goes, so goes liberty.

Next up is a critique of Obama's speeches to Wisconsin and the American Medical Association touting his health-insurance plan ... speeches where he plays fast and loose with the facts.

Thursday, June 4, 2009

We Will Probably Learn Your Medical History

On Wednesday, June 3rd, the Washington Post reported that "a U.S. document containing sensitive details about hundreds of civilian nuclear sites across the country was posted online Monday, an apparently inadvertent security breach that had federal officials scrambling yesterday to remedy the mistake."

Turns out that a 267-page document, listing locations of facilities that store enriched uranium and other material used in nuclear weapons, was available for about a day on a Government Printing Office web site.  Inquiries from news organizations prompted its withdrawal.

How does this impact your health care?  One word:  privacy.  The Obama Administration and Congress want the federal government to have a dominant, potentially all-encompassing role in Americans' health care.  This role will include the need to collect and store MASSIVE amounts of sensitive information about almost every Americans' health.

Think that the list of U.S. nuclear sites being posted online is just an anomaly?  Here are some other breaches of sensitive information supposedly held "secure" by the federal government:
  • In March 2008, the U.S. National Institutes of Health (NIH) confirmed that a laptop containing unsecured information about 2,500 participants enrolled in a cardiac study by its National Heart, Lung, and Blood Institute (NHLBI) was stolen from the trunk of a researcher's car.
  • In May 2006, the Veterans Affairs Department admitted a theft of a VA laptop and hard drive containing sensitive data for up to 26.5 million veterans and their spouses.
  • In July 2006, a thief stole an Office of Inspector General Special Agent’s laptop computer from a locked government vehicle in Doral, Florida, near Miami.  This laptop contained individuals' name plus other identifying information such as Social Security number or date of birth for thousands of Florida residents. 
  • In August 2006, another VA laptop was stolen that contained thousands of unsecured records of VA patients that had been treated in Philadelphia and Pittsburgh medical facilities.
Mind you, these are events reported on the first page of a simple Google search for government security breaches.  My mindfulness of my readers' patience prevents me from listing page after page of supposedly secure sensitive information being released into the public domain.

Having a list of nuclear facilities and millions of Social Security numbers being accidentally released publicly is bad enough.  Having medical histories being posted on the Internet?  Terrible but -- sadly -- also probably inevitable.