The Insurance Industry

I am all for reforming the health care system, but using the insurance industry as villains is simple-minded and not particularly convincing. Sure enough, every day there are stories about an insurance company rescinding its contract with a patient after they discover that there was an unannounced (and possibly previously unknown) pre-existing condition. We hear about denials of treatment, and worse. Undoubtedly, one of the goals of any health care reform effort should be to get rid of some of these practices.

Nevertheless, the story that the big hungry profit-seeking insurance companies are to blame for rising premiums and mass deaths and bankruptcies is false. For one, the average profit-margin in the insurance industry is... 3.9%. Read here for more. That is far less than the profit margin in most US industries. Also, don't forget that Blue Cross and Kaiser are two large, nonprofit insurance companies.

The fact of the matter is that health insurance costs in the US are high and rising quickly because health care costs are high and rising quickly, not because insurance is in and of itself so expensive.

Get Out Your Nietzschean Hammer

...and pummel your emotional commitments to your ideology. The following article talks about how we tend to work backward from a firm conclusion to come up with a supporting argument. (You're supposed to do it the other way around.)

Read here.

Of Shouts and Lies

Read this for a good take on all the distortions and bad tactics (from both sides) in the healthcare reform debate.

What's at Stake: Your Freedom

In this article, Mark Steyn discusses why the healthcare debate, and the prospect of reform, is about much more than just "controlling costs" or "expanding coverage." It is about the fundamental right of people to have personal control over their medical expenditures, or in other words, the fundamental right to have personal control over the care of your body.

Three Good Healthcare Articles

"Why We Must Ration Health Care" -- no, I am most definitely not suggesting that we should let the government take over health care and tell us what treatments we can receive. However, this article does make a good point-- there must be some limitation to what the public purse is going to spend on health care. A line has to be drawn somewhere.

"Budget Analyst Assails Cost of Congress' Health-Care Proposals" -- This should come as no surprise. The House bill does little more than increase the federal government's responsibility to provide health insurance to everybody, at the sole expense of higher income people. Aside from the repugnant redistributionism of the bill, it in no way changes the incentives of healthcare consumers or providers.

"Massachusetts Takes Big Step Away from Fee for Service" -- An excerpt: "A commission recommended this afternoon that the state turn away from the traditional "fee for service" model of paying for health care -- piecemeal payments for each procedure delivered. Instead, the commission said, the state should shift toward a system under which health-care providers would receive a sum to care for a given person or family, thereby providing an incentive to deliver care in a cost-effective way."

Sound anything like my "health membership" idea that I mentioned in a previous post?

Shared Sacrifice for Reform

Today's Los Angeles Times has a piece here describing their take on the healthcare reform efforts going on in DC right now. Focusing on the financing of any reform, I completely agree with the Times that it should be funded by some sort of broad-based tax rather than a narrow tax aimed directly and solely at "the rich."

A healthy democracy is one in which everybody contributes to financing the expenditures of the government, rather than one in which certain subsets of people can vote for themselves more and more generous benefits at the expense of others. Beyond that, I won't even get into all the negative economic impacts of increasing the top marginal rates for people beyond 50%.

Fannie-Mae Healthcare?

This article examines the logic behind instituting a public plan, and some of the drawbacks to doing so.

Even Obama Agrees

WASHINGTON (CNN) – President Barack Obama said Tuesday that there is a "legitimate concern" about the ability of private insurers to compete with a public plan "if the public plan is simply eating (from) the taxpayer trough."

If that's the case, it'd be tough for private insurers to compete, Obama said. If, on the other hand, the "public plan must collect premiums and provide (good) services" like private insurers, then private insurers should have no problem competing with a public option.

Obama said he was hopeful that an efficiently-run public plan could help push private insurers to make similar cost-cutting moves.

The president made his remarks during a news conference at the White House.

Health Care Reform

I know it has been a while since I posted something here, but I wanted to give my take on the current health care reform as well as to link to a couple of good articles.

First, I thought this article and this article are very informative and contain some good points about health care reform and the public option in particular.

Here is my take: there must be some way that health care services are rationed. We live in a world of finite resources, so not everybody can get every treatment that they want or even need. In most markets, rationing takes place through pricing. If you cannot afford a particular good or service, you will not receive it. In the public school system, rationing takes place through local Board of Education decisions that dictate school budgets. There are pros and cons to both ways. The pricing mechanism is generally a very efficient rationing system, but it can be inequitable to the extent that somebody with very limited resources will have very limited access to these goods. The public committee rationing method can in principle be more equitable (though this is no guarantee), but tends to be inefficient, and leaves individuals powerless to alter their circumstances so as to obtain more of the particular good or service in question.

Personally, I believe that is very important that medical decisions be left in the hands of doctors and patients. Liberals will argue that such a worry is a red herring, and that their plans will not change this. Yet, as advocates of a single-payer system (including certain Democrats in Congress who secretly hope the "public plan" will turn into this) will readily admit, under a single-payer system some government body would be responsible for determining "global budgets" for hospitals, as well as what types of equipment they can purchase.

Translation: a government body would determine the total budget for a hospital, even if the hospital could effectively be using more resources, or if the hospital believed-- in disagreement with the authorities-- that a particular capital equipment purchase was justified. This is a very important feature of the health care system: the ability to dissent. Dissent is what gives rise to innovation, and enforced conformity squelches that. Therefore, while it may be true that the government might not (at least initially) tell doctors exactly what procedures they can do, it will determine the total budget that doctors have to work with, as well as the equipment available to them. That seems mighty limiting to me.

In addition, any public plan that relies on taxpayer dollars is thoroughly anticompetitive. For starters, even though Democrats like to portray such a public plan as an "option," it is hardly an option if your tax dollars are being spent on the plan regardless of whether or not you sign up. Secondly, if the public plan is the only plan that has access to taxpayer dollars, then it is competing on a very unfair playing field, which would likely lead to private insurers being pushed out of the market. Note that this would NOT occur because the public plan was so superior that everybody would flock to it. This would occur because EVERYBODY would have to pay the taxes to sustain the public plan, but those who chose not to join would also be paying the full premiums for their private health insurance? Who would like to do both? Nobody.

The question that arises, then, is what sort of system would I like?

I don't favor a complete laissez-faire pricing rationing system. Everybody should have access to at least basic medical care, independent of financial means. However, above and beyond this, individuals should be able to choose more expensive doctors or treatments if they can muster up the financial means to do so. We are far from having a competitive medical marketplace-- with third-party payers, asymmetric information, and a mind-boggling array of subsidies and mandates-- and I believe that moving more in that direction would significantly improve our medical system.

What might a competitive marketplace for health care look like? For starters, medical histories should be a private matter, and should not need to be disclosed in order for somebody to obtain insurance. Secondly, insurance companies should not be able to turn down any applicants for any insurance plans they offer. Thirdly, doctors and hospitals should have complete autonomy regarding what procedures they administer and how much they charge. Like it or not, medical care is an industry, and hospitals are a form of business. Just because an enterprise operates with money does not make it some lowly money-grubbing entity. Services are rendered, and mutually beneficial transactions take place. Just as every other business decides the prices of its services, so should medical institutions. Of course, just because they can do that does not mean they will get customers.

But wait. This is where a common criticism comes up: when somebody is sick (or especially if they are experiencing a medical emergency) they are not going to go shopping around for the hospital with the best price-quality combination. Similarly, when a doctor recommends a treatment, the patient cannot reasonably expect to do some sort of internal cost-benefit analysis to determine if the procedure is more cost-effective than other treatments. I AGREE.

Of course, the same could be said for people seeking out financial analysts or any other expert who knows more than they do. There is nothing inherent about price competition that says that patients would have to seek price information on every single procedure. I have an alternative. Let patients join (or become "members" of) a health network (namely, a doctor, connected to a hospital, and possibly other out-patient providers) to whom they would pay monthly premiums (or "membership fees"). The health network would then be responsible for providing medical services to you, with you making minimal additional payments. This way the true experts are in charge of what procedures to give you, and they compete in order to attract your membership. As with insurance companies, they would not be able to turn people away because of checkered medical histories.

Of course, there would be many details to work out. The role of insurance companies would be changed (and probably reduced) in such a system, probably relegated primarily to being a financial backstop in case you develop cancer or some other incredibly expensive-to-treat condition. Regulations would probably have to be put in place to ensure that the health networks would not unethically hoard your money (though competitive pressures would likely alleviate almost all of this). Etc.

As Competitive as a Rigged Game

If a public plan becomes part of any new health care bill, do not be deceived by those who call it a source of "competition" for private plans. It would be about as much competition as an athlete faces when his opponent is secretly doping up behind closed doors. To read more, go here.

Our Civic Duty

No, it is not patriotic to pay higher taxes, but it is even less patriotic to force a small minority of people to pay for all the goodies that you vote for. In short, everyone should pay taxes. Ari Fleischer makes the case here.

Well, At Least Coach K is Keeping Busy

Obama's Anti-Republican Defense Plan

In case you haven't heard, the White House will now have its own "kitchen garden." The catch? There will also be a beehive. What better way to scare off Republicans from going to the White House than to put guard bees there. I'm not sure if it would work, but it just might if I were an elected official...

Stem-Cell Reversal

President Obama has now reversed Bush's restriction on federal funding for stem cell research that would result in the destruction of embryos. Obama is entitled to do that. However, he went a step further by claiming that this was a sign that his Administration would not "politicize science." Translation: if you believe that there are moral boundaries for scientific inquiry, then you are basing your decisions on ideology instead of science. Interestingly enough, everybody, including President Obama, believes in moral boundaries for research. Somehow I doubt that Obama is in favor of certain forms of animal testing, for instance. Here is an excerpt from a piece from the Wall Street Journal today:

"The claim about taking politics out of science is in the deepest sense antidemocratic. The question of whether to destroy human embryos for research purposes is not fundamentally a scientific question; it is a moral and civic question about the proper uses, ambitions and limits of science. It is a question about how we will treat members of the human family at the very dawn of life; about our willingness to seek alternative paths to medical progress that respect human dignity."

Obama's New Deficit Claims

President Obama now claims that he wants to cut the deficit in half by 2013. By his calculations, since Bush handed him a $1.3 trillion deficit, Obama's goal is to bring that down to $533 billion. ...oh yeah, except there is one problem: The 2008 deficit was $1.3 trillion only because of the one-time $700 billion TARP bill. Without that, the deficits under Bush never even approached $1.3 trillion, and in fact, never even hit $533 billion. It is a good bit of political maneuvering if Obama can pull off this bait and switch.