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Sunday, August 16, 2009

The Democrats' Health-Care Scapegoat -- and the truth

Barack Obama just launched a sleazy attack on many of the companies that make it possible for most Americans to have and pay for life-saving medical care - insurance companies.

While this is the now well-defined scapegoat, they are still trotting out some tired straw man arguments too.

1. Health insurance companies are the problem!

After talking about "health care" reform for years, Barack has found his scapegoat - insurance companies. Now the pitch is "health insurance reform". Never mind the thousands of pages of government regulation of insurance companies, the idea of insurance companies as 1800's-style robber barons oppressing the medical proletariat may be fashionable, but it's total bunk. Few industries are regulated as heavily as medicine and insurance.

Barack's new solution, to make it illegal for insurance companies to cancel plans for any reason, will obviously cause a rise in premiums - just as the regulations forbidding companies from filtering out preexisting conditions caused a rise in premiums.

2. Opponents of my health care reform efforts are for the status quo.

Barack ole buddy, we are opposed to Socialism, not reform. Since every year brings more regulations and higher costs, perhaps you should take responsibility for your role as head of government, take a hard look in the mirror and ask yourself if there's a connection between ever-increasing government intrusion into medicine and insurance, and ever-increasing costs.

3. The free market has failed.

Actually, the free market has never even been tried in modern medicine. From the very beginning, government has controlled licensing of doctors, regulated insurance companies for "the public good", forced hospitals to give away free care to indigents, and shifted costs by dumping the Medicare/Medicaid burden on the system yet only paying for a fraction of Medicare/Medicaid bills.

If you want to see the free market at work, take a look at the explosion of walk-in clinics. I call these the "Wal-Mart of health care" but they are a clear identification of market need - walk in to a clinic any time, and pay cash for services. No waiting, and you can have basic stuff diagnosed and treated quickly.

We need more of that, not less.

The fundamental problem with the medical industry is twofold but comes down to the same thing: patients are disconnected from the costs of their medical care. This means they are disconnected from the pricing mechanism and as has been shown over and over through history, when the pricing mechanism is broken prices will spiral out of control.

1. Individuals don't pay for their medical care, their employers do.
2. Individuals don't pay for their medical care, insurance companies do.

This scheme has been going on since the 1940's. When it was a company doctor, it made some sense. But now there are two tiers protecting patients from reality.

I will give one example of this: America is now the fattest nation on earth. Obese people have 30% higher health care costs than non-obese *1. Currently due to regulations on insurance companies, these costs are eaten by the insurance company and passed on to everyone else. So fat people have no financial incentive to change their behavior, and the costs these people incur are passed on to others. That's certainly good Socialism, but it's bad public policy.

The other item that bears consideration, is that insurance by its nature protects against risk. But if the risk is 1:1, that is, if an event is guaranteed to happen, then insurance simply doesn't work.

Insurance can protect against cancer, or getting hit by a truck. But it is not a useful tool if you're going to the doctor every time you get the sniffles. It is not a useful tool even for routine medical checkups, because these costs are guaranteed and cannot be shared out in a risk pool.

A start to a true free-market solution to health care would be something like this:
1. Eliminate all regulations on health insurance. This will allow insurance companies to do what they do best - identify at-risk populations, and identify the costs of long-term care.
2. Create a national market for health insurance by eliminating state-line boundaries to health insurance companies.
3. Encourage individuals to purchase insurance directly so that it is not tied to an employer, and thus becomes portable.
4. Encourage individuals to take responsibility for their own routine care, by allowing insurance companies to charge less to people who demonstrate good practice. Want to lower your premium? Stop smoking, lose weight, and come in for your checkups every year.
5. To help ease the transition to a truly private market, change Medicare/Medicaid to a direct cash subsidy paid to low-income individuals, merging it into the Social Security system. Phase out over a 10-year period, including elimination of the Medicare payroll tax. Private and religious charity (including many hospitals) will take over responsibility for this. It can't be any worse than fraud-ridden Medicare, stands a good chance of being better, and it will be back to voluntary charity instead of 'charity at the point of a gun'.

This provides a system where even if you lose your job or move to another state you can keep your insurance, there is built-in feedback in insurance pricing to encourage good health practices on the part of individuals, and government bureaucrats have no say in anyone's health care.

See Mr Obama, I am not opposed to reform. I am opposed to Socialism.


* 1.


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