Citizen Economists » Healthcare

Explaining the Latest Version of ObamaCare

Thomas Knapp — Wed, 09 Dec 2009 19:45:58 +0000

Simply put, it’s like this: If you’re a member of Generation X or Y or whatever the hell they’re calling the various post-Boomer generations these days, you are to be boiled in hot water until you’re nice and tender and your meat and bones have separated.

The insurance companies receive the meat (“individual mandate”).

The Boomers get the bones (“Medicare buy-in”).

Beautifully efficient as cannibalism schemes go, don’t you think?

Unlike the previously considered “public option” — which might have had loopholes through which a clever youngster could have navigated his or her wallet to some semblance of safety — the “Medicare buy-in” automatically gets the older, higher-risk types out of the insurance companies’ way while pushing the younger, lower-risk population right into their gaping maws with the “individual mandate.” Lower risks! Higher profits!

And watch for ObamaCare’s approval ratings to jump way up since that older, higher-risk group — the over-55 set, which almost certainly constitutes an absolute majority of voters — gets its health care subsidized by the younger, lower-risk group, too (through the payroll tax system, which is already tried, tested and and as escape-proof as anything the government’s ever come up with … just wait, it won’t be long before the younger group’s “insurance premiums” get folded into that scheme as well).

Canadian and U.S. Healthcare Systems Compared

Rok Spruk — Tue, 24 Nov 2009 19:53:21 +0000

A study by June O’Neill and Dave M. O’Neill (link) suggests that the U.S health care system provides more choice, efficiency, better delivery and capacity than the Canadian system:

“Does Canada’s publicly funded, single payer health care system deliver better health outcomes and distribute health resources more equitably than the multi-payer heavily private U.S. system? We show that the efficacy of health care systems cannot be usefully evaluated by comparisons of infant mortality and life expectancy. We analyze several alternative measures of health status using JCUSH (The Joint Canada/U.S. Survey of Health) and other surveys. We find a somewhat higher incidence of chronic health conditions in the U.S. than in Canada but somewhat greater U.S. access to treatment for these conditions. Moreover, a significantly higher percentage of U.S. women and men are screened for major forms of cancer. Although health status, measured in various ways is similar in both countries, mortality/incidence ratios for various cancers tend to be higher in Canada. The need to ration resources in Canada, where care is delivered “free”, ultimately leads to long waits. In the U.S., costs are more often a source of unmet needs. We also find that Canada has no more abolished the tendency for health status to improve with income than have other countries. Indeed, the health-income gradient is slightly steeper in Canada than it is in the U.S.”

Obamacare Is Not Possible

Russ Nelson — Tue, 17 Nov 2009 13:08:35 +0000

Folks, I have bad news for you. The Barack Obama Health Care Reform (shepherded through by Nancy Pelosi) will be, as written, an utter and unmitigated disaster. It attempts to do two things which are, in combination, impossible. First, it makes health insurance much more widely available through the mind-boggling deal it made with the insurance companies. To wit: the health insurance companies agree to insure everyone, and the federal government forces everyone to buy health insurance. While that’s a huge give-away to health insurance companies of your personal tax dollars, that’s not impossible.

No, the impossibility comes when you combine that with: Second, Barack is going to pay for this new plan by reducing costs. There’s two problems with this idea. A) if costs could be reduced, insurance companies would have already done it, and pocketed the money. B) when you pay less for something, you get less of it. This is one of the iron laws of economics, which is just as inviolable as the laws of thermodynamics, or the laws of mutual attraction (things fall at 32ft/sec/sec absent wind resistance).

So Obamacare will attempt to 1) increase the amount of medical care needed because you have all these newly insured people, AND 2) decrease the amount of medical care available by paying less for it.

No, really.

Stop laughing.

This is our PRESIDENT, and he deserves the same respect due to any other politician who is ignorant of economics yet tries to regulate markets: zero.

There can be only two results: either we’ll have less medical care (think you’re having a hard time finding a doctor now??), or we’ll pay a lot more for it (think your doctor’s visits are expensive now??).

But there is a different way: free market health care. Reduce every possible barrier to health care. First, stop protecting the doctor’s union. Let anybody practice medicine, but give the doctor’s union a super-trademark on the term “physician”, just like the 4-H shamrock and Olympic rings are protected. If you want a graduate of a medical school, you can have one; just go looking for a physician. Second, stop treating us like children, and let anybody buy any medicine they want. Abolish the FDA. Pharmacies will compete to provide the safest and most effective medicines. Abolish the patent system. Drugs are only expensive to develop because of the FDA and don’t need patent protection. Testing can be provided by pharmacies. Stop expecting doctors to be medical deities. Greatly reduce the available torts to only those things that doctors have control over, like leaving sponges inside patients after surgery. I’m sure there is more government hampering that I’m just not thinking of right now. Oh, yes, stop the war on (some) drugs. Abolish the ONDCP.

Minimum Wage and Obesity

Rok Spruk — Wed, 11 Nov 2009 12:45:27 +0000

David O. Meltzer and Zhuo Chen explored the relationship between minimum wage rate in the U.S and body weight (link):

“Growing consumption of increasingly less expensive food, and especially “fast food”, has been cited as a potential cause of increasing rate of obesity in the United States over the past several decades. Because the real minimum wage in the United States has declined by as much as half over 1968-2007 and because minimum wage labor is a major contributor to the cost of food away from home we hypothesized that changes in the minimum wage would be associated with changes in bodyweight over this period. To examine this, we use data from the Behavioral Risk Factor Surveillance System from 1984-2006 to test whether variation in the real minimum wage was associated with changes in body mass index (BMI). We also examine whether this association varied by gender, education and income, and used quantile regression to test whether the association varied over the BMI distribution. We also estimate the fraction of the increase in BMI since 1970 attributable to minimum wage declines. We find that a $1 decrease in the real minimum wage was associated with a 0.06 increase in BMI. This relationship was significant across gender and income groups and largest among the highest percentiles of the BMI distribution. Real minimum wage decreases can explain 10% of the change in BMI since 1970. We conclude that the declining real minimum wage rates has contributed to the increasing rate of overweight and obesity in the United States. Studies to clarify the mechanism by which minimum wages may affect obesity might help determine appropriate policy responses.”

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And A Pony

Russ Nelson — Tue, 10 Nov 2009 13:11:22 +0000

The whole health care reform thing totally baffles me. Where do all these idiots (and yes, you ARE idiots) who support health care reform think the money is going to come from for all these improvements? Cost savings?? Sorry, idiots, but if savings were already available, insurance companies would have already gotten them, and kept them for themselves. Is that not completely obvious? Its GONNA cost more, and its GONNA cover less.

There is a way to get more for less, but it requires that people understand and accept that free markets actually work. And yet there are so many people who are convinced that somehoww health care is some kind of magic market where the laws of economics don’t fly, where pigs do fly, and where everyone can get all the health care they want for almost
no money.

And a pony.

Health Care: The Three Legged Stool

Dan McLaughlin — Mon, 09 Nov 2009 12:52:50 +0000

A few years ago, Arnold Kling, an economics professor at George Mason University, presented an interesting description of the type of health care system that Congress is planning to impose on all Americans. With Medicare’s unfunded liabilities in the multiple tens of trillions of dollars, it is like the Titanic sailing full speed ahead with icebergs all around. It is ultimately going to sink. There is no avoiding it on the current path. The proposed health system will add many trillions more in unfunded liabilities. It is the equivalent of adding more passengers to the Titanic and more icebergs to the freezing water.

The utopian vision underlying the plan is a world where everybody can have everything without paying the price. Dr. Kling described an “iron trilemma” in healthcare, but I think that it can be modified and generalized for any type of social program. It is like a three legged stool that needs all three legs to stand. The first leg in the modified version is access. The system must be designed so that nobody is excluded. The second leg is the goods. Participants must be able to get the latest, greatest and best quality stuff available. The third leg is cost. The overall financial burden of the system must be minimized.

It is obvious that you cannot have all three legs at one time. If everybody has access to everything, including the most expensive procedures, goods and services, then the cost will be sky high. If everybody has access and the overall costs are minimized, then, necessarily, expensive goods and services must be cut out, no matter how much some individuals desire them. If, instead, the system provides the expensive goods and services, then in order to keep the overall costs low, some people must be excluded from access to those services. Whichever pair is chosen, the stool must fall over. The three legs, universal access, unlimited consumption and low cost, cannot exist together. The claim that the proposed system will increase the number of people covered without decreasing quality and availability of medical goods and services to each and, at the same time, significantly cut the cost of health care in America is absurd. It is an impossibility. Something has to give.

One of the assumptions is that, under the government plan, waste and fraud will be cut out and greedy profiteers will be reined in. An obvious question comes to mind. If the government is able to root out waste and fraud and greed, why has it not done so with Medicare/Medicaid, the government monetary system, the military, banking, the education system, the bailout fiasco, cash for clunkers, and on and on. Politicians have not done so, and will not in the future, because they benefit greatly from fraud, waste and greed. Saying that government cuts waste and corruption is either a blatant attempt to distort the facts or it is an indication that they are totally out of touch with reality. Either one of those characteristics in our leaders does not bode well for the American people.

The overall cost of the present system is very high because of the interaction of the legs of the trilemma. Employer based insurance and government insurance programs cover a significant portion of the population. There is significant access. Government mandates on insurance plans have forced them to cover a host of very expensive treatments for uninsurable events and diseases. New, expensive treatments are being developed all of the time, which participants, insulated from the true cost, strenuously demand. The participants get the goods. Government’s injection of hundreds of billions of dollars into the health system has caused a rapid inflation in the prices of health services, and has distorted the supply and demand for them. The overall costs, the third leg, must be high.

The central planner’s paradigm is the fundamental error in the present health care discussions, the idea that some smart person can and should design a universal system which will fit every person in the country. In reality, health care is merely a market for goods and services. Nobody plans a market. It is made up of the billions of interactions of the participants as they attempt to achieve what they value the most. Since nobody can know what each individual values most, what sacrifices he or she is willing to make for the things desired, what goals they have for themselves and their families and the assumptions they make about the present and future environment, nobody can make decisions for them better than they can make for themselves. Individuals make tradeoffs every day about what they want and the costs they are willing to incur. The cost tradeoff must be on an individual basis. The aggregated cost of the system is absolutely irrelevant. When people make their own decisions, markets work; they attempt to get the most value for what they give. They try to maximize benefits and minimize costs.

Think about it. Our food supply system is incredibly complex, involving hundreds of millions of people with widely varying tastes and budgets, hundreds of thousands of separate farmers, merchants, traders, and restauranteurs, all with their own objectives and needs, and vastly different geographic areas. No central busy-body plans our meals for us, yet Americans get fed every day at a very reasonable price. The overall cost is low because individuals are responsible for their own expenses and decisions. The same could happen with health care if all of the government induced distortions were removed, including pretax employer based insurance plans that get dropped when changing employers, mandated coverage for all insurance plans, which eliminates low cost alternatives to consumers, anti-competitive and monopolistic government programs, and the use of hundreds of billions of dollars of tax money, which inflates prices and distorts the true markets beyond recognition.

Many people bring up the fact that there are families who are so poor that they cannot afford health care, and conclude that the health care system should make special provision for them. They are appropriate targets for the charity of individuals and charitable organizations, and through the centuries, those charitable people and organizations have cared for poor, the disabled, the destitute. Charity is most certainly important, and it is right and good for individuals and organizations to help the poor. Health care and charity, however, are vastly different entities. Mixing them confuses the issues of both and hurts the poor more than it helps.

Our three legged stool in health care is tipping over because it cannot possibly stand over time. If health care in America is to stand strong again, we must throw out the stool and the socialist ideals that support it. We must let Americans stand on their own two feet and take individual responsibility to pay for whatever level of health services and/or insurance that they desire and can afford.

What Individuals Should Do About ObamaCare

Thomas Knapp — Thu, 08 Oct 2009 15:43:08 +0000

To quote Nancy Reagan, “just say no”.

Specifically, just say no to this:

[U]nder my plan, individuals will be required to carry basic health insurance — just as most states require you to carry auto insurance. Likewise — likewise, businesses will be required to either offer their workers health care, or chip in to help cover the cost of their workers. There will be a hardship waiver for those individuals who still can’t afford coverage, and 95 percent of all small businesses, because of their size and narrow profit margin, would be exempt from these requirements. But we can’t have large businesses and individuals who can afford coverage game the system by avoiding responsibility to themselves or their employees. Improving our health care system only works if everybody does their part.

To forestall immediate descent into partisan Obama bashing, a brief digression: Obama cribbed the “individual mandate” described above from “conservative” Republican Mitt Romney, who signed it into law as governor of Massachusetts and then bragged about / defended it (rather than vetoing it as he did eight other provisions of the law, including an “employer mandate” similar to the one described above) in 2006. So please … don’t try to turn this into a “left/right” thing.

The insurance companies are drooling over this, of course, and their water carriers in Congress from both major parties will support it (while quietly gutting the “unicorns and ice cream for everyone” restrictions on pre-existing condition refusal, payment caps, etc.) if they can get away with supporting it.

So, the first thing to do is let your congresscritter know that (s)he can’t get away with supporting it.

The second thing? Obey little, resist much.

It just so happens that I am, at this particular moment, insured. And while I’m glad, at this particular moment, to be insured (I have dental coverage, and that coverage is saving me about $1200 on the mass extraction/denture procedure I’m getting ready for — for those who have been following the saga, I got the molds made last week and should get the teeth yanked some time in the two to four weeks), I’ve lived a good part of my life without insurance.

If the proposal described in President Obama’s speech is passed and signed into law, I’ll be returning to uninsured status ASAP — and giving anyone who comes calling to collect a fine a close-up look at my middle finger when I hold out my hands for them to put the cuffs on.

Anyone who’s in a position to do likewise, should.

The Utility of Physician Review Websites

J.C. — Wed, 30 Sep 2009 18:50:47 +0000

One of the recent comments on this blog was in response to my post about whether patients should be able to direct their care. The “cyberchondriac” patient who comes armed with the latest and greatest in treatment options also reminds me of the patient who has done lots of research about his physician online. The advent of websites that “review” doctors and “score” them based on patient-physician interactions, impressions of care, or outcomes are a new thing that many doctors do not know what to do about.

Now more than ever physicians are being faced with the complete 360 degree evaluation of themselves. This evaluation comes from all directions. Insurance companies evaluate physicians in the form of denials, hospitals evaluate physicians in the form of peer reviews, patients evaluate physicians in the form of outcomes and overall patient-physician interactions. And now, we are being evaluated on the internet for all to see.

The truth of the matter is that there is not much we can do about it. It is essentially the era of the consumer patient and the freedom of information on the internet is merely a confirmation of that. But the problem with most physicians is that we are a hypersensitive bunch. We have become physicians through a ton of hard work, several admissions processes, countless hours of study, and massive personal and financial sacrifice. We seek praise and thus we don’t like it when people talk about us publicly.

The problem with physician websites is that they are just like any other review site. Whether it be for restaurants or hotels, you will undoubtedly have the consumer who thought it was a messy hotel room and that the food was disgusting. There is also the rare but enchanted consumer who loves everything about his meal and stay. There is no standard “Zagat’s” score for the physician and even if there was, it would undoubtedly contain many metrics that physicians have no control over.

The main difference between reviewing other businesses and physicians is that patient outcomes often have nothing to do with a physician but more to do with the patient. Many diseases are incurable and chronic and human behavior and genetics are at the root of many medical problems. Thus, patients who do not have great clinical outcomes are not the biggest fans of their doctors or the medical system. Don’t get me wrong, there are tons of patients out there with debilitating diseases who do not get better but still love their doctors. However, this is not the norm.

Physician reviews? We as physicians must welcome both criticism and praise. We must always know that at the end of the day, not matter what patients do or say, whether they are nice or mean, we are the ones who are looking out for them. That is what we signed up for. We can’t take it personally. We need to view everything as constructive and drown out the background noise.

Can Private Health Insurance Work?

David Barr — Fri, 18 Sep 2009 12:29:43 +0000

Efforts to fix our health insurance system have found no found shortage of critical flaws in the “market”. I have yet to hear a coherent argument for the continued existence of private health insurance. Health care differs in three critical ways from traditional markets. Taken together I doubt that it is even conceivable for a private market to exist for health insurance.

In a true free market those who got sick and couldn’t afford care would be left to die or suffer the consequences of their conditions. This is a rational, yet morally abhorrent policy. Even the most die hard free marketers don’t advocate this. The unwillingness to condemn the poor to preventable death is the first significant obstacle to a functioning private health insurance market.

The second critical obstacle is the great variation in expected health care costs. Insurance markets are designed to protect individuals from significant deviations from expected costs. Consider auto insurance, every driver faces some risk or an accident, but few expect to total their car in a given year. By pooling risk, the small percentage of drivers that do suffer serious crashes can avoid financial ruin.

But this logic in no way applies to health insurance. Many people suffer conditions that have high known costs. If you are HIV positive or have Diabetes or are paraplegic medical costs are not an unexpected catastrophe, they are a known expense of life. Only the richest individuals can cover these costs out of pocket. Insurance can’t solve this problem only subsidies can.

Timing is the third critical difference between health insurance and traditional health markets. For insurance to function a claim must be tied to a specific instance. A fire, a car accident, a death are all discrete events that can be placed at a specific moment in time. The bulk of health care spending is spent treating chronic conditions. Who’s to say exactly when a person developed high blood pressure or depression. Furthermore, health conditions incur costs that continue long beyond the length of an insurance contract.

Efforts to twist private insurance around these three restraints are destined to produce warped markets and twisted incentives. The regulations currently oozing through congress will make life better for many people, but they do not address the fundamental incoherence of private health insurance.

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The Right To Health Care

Dan McLaughlin — Tue, 01 Sep 2009 11:41:03 +0000

The existence of unalienable rights of individuals is an honored tradition in America, rooted in the philosophy of the classical liberal thinkers. The rights to life, liberty and property mean that nobody has the authority to take the life, liberty or property of anyone else. They apply to any person in any social arrangement.

This is opposed to modern liberal thinking, which is the negation of liberty of the individual and imposition of the will of society. Socialist mentality has introduced a whole host of additional positive rights which assume that society owes everyone a minimum standard of living and access to a full slate of services. Those additional rights deserve a closer look to see if they are truly universal and unalienable.

If two people exist on a desert island, both have rights, just as they do in an advanced industrial society. Neither has the right to injure or kill the other person, to enslave him or her or to take property that he or she acquired legitimately through his or her own efforts. These are the basic rules for all human cooperation and for societies based on true justice. It is legitimate to engage in voluntary trade that benefits both parties, but it is not legitimate to use force or coercion to get a benefit at the expense of the other person.

Does either person have a right to food, water or shelter? They do have a right to use their resources, their skills and strength to provide for their own needs, but neither has the right to have the other provide for them. Can person A legitimately force person B to give him medical care? Even if B was a doctor, the only way that A can enforce a right to any level of health care is to violate the rights of B. Thus, that positive right to health care is a spurious and illegitimate claim.

In any society, however, whether made up of two people or billions of people, all parties are better off if they cooperate. B can provide medical services, but A can provide other valuable services, and they will both benefit if they give each other value for value they get. They can each concentrate on the things they do best and depend on the other to provide for other things.

In the event that A becomes disabled and cannot provide any value to the relationship, does A now have a right to the services of B? The answer is unequivocally no. There is no right to violate the rights of others just because one cannot provide for oneself. That does not mean that that B should let A perish just because A has no right to B’s help. Charity and compassion are also important parts of the human condition, religion, tradition and ethics, and it is considered good for B to help A in time of need. The Good Samaritan is a famous and useful analogy that illustrates true charity. It highlights voluntary aid to others, using one’s own resources. It has nothing to do with A having a right to B’s property or service, but only demonstrates the good will of one person for another.

In a larger society, the rights of the individuals hold the same significance. The fact that advanced medical services are available on a wide scale does not mean that any individual has a right to any level of health care. Medicine is merely a valuable service that people provide. Voluntary cooperation is the essential characteristic of any free society, but no medical person owes anyone else medical service. It is based on mutual agreement about value given and value provided.

There are many charitable organizations and millions of charitable people who are willing to give of their time and their resources for the benefit of others. It is fitting and proper that they do that. It is not fitting and proper for organizations or individuals to use the force of the state to coerce others to do charity. Using the government to take money from others for enforced charity is still aggression against the rights of others. It is counterproductive and displaces true charity with violence.

There is no right to health care. The path to a prosperous society where the poor and disadvantaged are most likely to have their needs met is paved with respect for the basic unalienable rights of each individual, being bound only by the equivalent rights of others.