Wednesday, September 09, 2009

A red/blue dialogue on health care

Twenty years ago I attended high school along with Colin Rule. He is as nice a guy as you could meet, with his trademark tag line "Rah!" Colin is smart, well educated, thoughtful, and well spoken. In high school he was the champion of the debate team, while I was the physics ace. After graduation, we went our separate ways, and only recently did we reconnect via Facebook. He has a degree in Peace Studies from Haverford College, which only increases my admiration for him: I could never have pulled off the coup of getting my dad to pay the tuition of a fancy private New England college to pursue a degree in Peace Studies. Colin describes himself as "A secular humanist Democrat, living in the Bay area, working at an internet company resolving disputes." You can read more about him here.

Last week, Colin was one of many people on Facebook who had a status message saying, "No one should die because they can't afford health care, or go broke because they get sick. If you agree, post this as your status today." I responded by suggesting that Congress should outlaw hurricanes while they are at it, because they could prevent untold damage, death, misery, and destruction. The point is that Congress can't just make problems go away by mandate, in defiance of the laws of physics or economics. Colin responded by saying that I am cold-hearted. The fact is that I am not cold-hearted in the least, but I am a realist. Conservatives define compassion differently than liberals. Liberals measure compassion based on how many people are on government assistance, while conservatives measure compassion based on how many people no longer need government assistance. I pressed Colin for a more specific explanation of how he thought the ideals in his status could be achieved. The discussion quickly outgrew the limits imposed by Facebook comments, so we decided to continue on our blogs. You can read Colin's first entry here.

We agree that there is plenty of room for improvement in the way that Americans get health care, but disagree profoundly in what specifically should be done.

In a previous blog post, Colin quotes a New York Times opinion piece which paints insurance companies as greedy, evil corporations making obscene profits by denying treatment to customers forcing them to seek treatment in livestock pens, to fund private jets and limos for their executives. It takes up the theme set by Colin's Representative, Nancy Pelosi, when she called private insurance companies "villains".

The image of people being examined and treated in livestock stalls is certainly compelling, suggesting that people are being treated like animals. It reminds me of Canada, one example of the reality behind the Utopian dreams of government-run health care. In Canada, MRIs are free, like all other medical services, paid for by the government. The only problem is that as with many procedures, there is a six to eight month wait to get a free MRI. But there are patients in Canada who can get an MRI right away. It is not free. You have to pay for the service, but there is no long wait living with the pain of an undiagnosed internal problem. However, to qualify for immediate service you must be an animal. Private veterinarians provide immediate MRIs and other services which people in Canada must wait months to receive. Socialist health care treats people worse than private health care treats animals.

The medical insurance industry as a whole operates at a 3% profit margin. Out of the 100 largest industries, they rank 82nd in profit margin. While insurance companies provide a service which people want and need, bought voluntarily by consumers at market prices, the government taxes insurance companies at a rate of about 24%. It is easy to attack insurance company executives for riding in jets and limos, but have you considered that Nancy Pelosi adds more to the cost of insurance with the 24% tax burden which she uses to fund her personal jets and limos? Do you think that she will give up her jets and limos when she starts rationing care? Has it occurred to you that the shareholders of the insurance companies may feel that they are getting their money's worth when they pay their executives? And if you are not a shareholder, why is their compensation your concern?

The Times article cited by Colin went on to criticize insurance companies for denying expensive treatments to patients. One wonders if Obama's proposed government-run system will do any better. The laws of economics say that it can't. That mantra from the left has been that there are 46 million uninsured people who will be given coverage by Obamacare, which amounts to about a 20% increase in the demand for medical care. Obama promises to cover all of those people without cutting quality or increasing the deficit. Even if the money to fund that promise was there (and it's not) the resources to deliver that medical attention do not exist. Congress can not magically create 20% more doctors, 20% more nurses, 20% more clinics, 20% more hospital beds, 20% more operating rooms, etc. This problem will only get worse with time. Countries where government has taken over the medical system have huge outflows of doctors. Many come to America to escape the government system. Who will want to spend 12 years pursuing a medical degree only to deal with a government bureaucracy determined to pay them less than market rates? The supply dries up in every one of the "industrialized countries" which have socialized medicine, and it will happen here if we go down that path.

Obama says that he will extend coverage to 46 million people without increasing the deficit by making things more efficient and reducing waste. So point me to one big government social entitlement program which is not bogged down by waste, fraud, incompetence, bureaucracy, and corruption. Medicare? Social Security? Welfare? TARP? Porkulus? Cash for Clunkers? Government does not make things more efficient. On the contrary, whenever Congress has a big pot of money to manage, it invariably is wasted on administrative costs, used to buy votes, grabbed up by scammers, or as in the case of TARP, simply evaporated without a trace. Yet statists continue to cling with inexplicable faith to more government as the solution to our problems.

The CBO says that Obamacare will cost $1.1 trillion over ten years. But Congress has consistently underestimated the cost of medical entitlement programs. In 1965, the House Ways and Means Committee predicted that Medicare Part A would cost taxpayers $9 billion in 1990. It actually cost $67 billion, 744% as much as predicted. In 1967 Ways and Means predicted that the entire Medicare program would cost $12 billion in 1990. It actually cost $110 billion, 917% of the projection. In 1987, the CBO predicted that Medicaid’s Disproportionate Share Hospital payments would cost $1 billion. Within 5 years, the cost had passed $17 billion. Obamacare is sure to cost many times more than the predicted amount, not that $1.1 trillion is anything to sneeze at.

Colin claims that every other industrialized nation has universal coverage. That doesn't mean we should do it as well. People there wait six to eighteen months for the most basic treatment. Need surgery? It's free, but you have to wait a year. They come here to get the treatment they can't get at home. Why should we want to be like every other country? America has survival rates far above those of any of the socialist countries for cancer, heart attack, and diabetes. America creates the new technology that they rest of the world uses. The vast majority of new medications, new diagnostic tools, new surgical methods, etc. are invented in America by the private sector because we are the closest thing left to a free market system, where those who create new innovations can profit from them. The government doesn't create those life-saving advances. Companies, evil corporations seeking profit, people, private citizens all motivated by the opportunity that exists in America, the opportunity which will be squelched if government runs the medical industry.

Colin cites the much-repeated comparison between medical insurance and auto insurance. "And it's perfectly appropriate for government to require that we all participate -- much like auto insurance. We're all required to purchase auto insurance to protect against the risk of an accident. ... How is health fundamentally different?" Good question. Anyone who drives is required to show proof of financial responsibility. If you don't drive, there is no requirement. And financial responsibility does not necessarily mean insurance. Providing proof that you have the means to pay for the damage you may cause is sufficient. The requirement is not meant to protect you. Collision insurance is not required, and many people opt to not carry collision insurance, which would pay for their own car in case of an accident. Those people are choosing to self-insure rather than pay someone else to assume the risk to their own vehicle. The law is intended to protect the other drivers who you place at risk by being on the road. If you are at fault in an accident which damages someone else's property or causes injury, you must be able to pay for that damage. That is not at all analogous to your medical insurance policy, which only protects you.

Moving on to the biggest stink-pot in the bills proposed in Congress, the "public option." Obama claims that the intention of the public option is to "keep insurance companies honest" by adding choice and competition. It does neither of those things. Private insurance companies can not possibly compete with a government-run plan subsidized by our tax money. The public option, being a government agency, has unlimited resources based on the government's ability to tax, borrow, and even print money. Therefore the public option does not need to make a profit or break even, to stay afloat. In fact, the CBO estimates that it will cost $1.1 trillion over 10 years, meaning that it will be heavily subsidized by our tax dollars. As the bill is currently written, 20% of the cost of the public option would come from tax money. That means we are paying for it whether we use the "option" or not. If I choose to keep my private insurance, I am still forced to pay for the public option through my taxes. The public option can be priced 20% less than the private insurance because it is subsidized by my tax dollars. That is not competition, because private companies can't possibly win. Meanwhile, all sorts of new regulations are placed on private insurance, increasing their cost of doing business. The result is that private insurance companies will be forced out of business, and the "public option" will be the only option. When the private insurance companies go broke, Obama will be right there, just as he was with the auto companies, ready to nationalize the industry. Then we get to their ultimate goal: a single payer system. Obama admitted that this was his intention, in an unguarded moment. So where is the "choice" and "competition" in that?

Colin correctly identifies the central issue: where does individual self-determination end and collective interdependence begin? He writes "We all have to jointly pay for our national security, we have to jointly pay for our food safety, we have to jointly pay to combat H1N1, we all have to jointly pay to protect the environment -- individuals cannot solve these issues alone, so we as a society have to work together to address them. The question is whether health care is one of these things. I believe that it is."

Each person can have their personal beliefs about where that line should be drawn, but ultimately the Constitution delimits the powers given to the Federal Government. Article One Section Eight of The Constitution explicitly gives Congress the responsibility and the authority to "provide for the common defense." The Constitution does not grant the Federal Government the authority to mandate medical insurance or run a public insurance company in an authoritarian system filled with mandates backed by force of law. The tenth amendment states that "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." Obama's attempt to create a national health care system exceeds the authority granted to the Federal Government by the Constitution, and that alone is adequate reason to stop it.

So instead of forcing us all into a government run mess, why not try to address the real issues and leave alone the parts of the system which are working?

We want to bring down cost? Why not make all medical insurance premiums tax deductible? That would eliminate a big part of the inequity between those whose employer provides insurance and those who have to buy it themselves. And it would reduce the cost for most people who don't have employer-provided insurance. Obama won't do that, because it doesn't advance his goal of increasing the scope and power of the government.

We want more competition? Allow people to buy insurance across state lines. Right now, Federal law restricts people to only buy insurance in the state where they live. Open up the market nationwide, and everyone instantly has many more options, and the competition will certainly drive down prices and improve quality of service. But again, Democrats won't do this because their goal is not more competition. They want control.

Medical malpractice insurance is a major driver in the cost of medical care. Some of the cost is legitimate, and some is based on frivolous lawsuits. Some attorneys make a lot of money by filing hundreds or thousands of frivolous lawsuits on a contingency basis. The doctors they sue spend huge amounts of money defending themselves, and that cost is passed along to patients. The attorney who files the suits is happy if he wins one or two out of every hundred. It costs him nothing to file the suits. If courts were given the option of finding a lawsuit to be frivolous and ordering the attorney who filed the suit to pay the expenses of the defense, those frivolous lawsuits would stop. But Obama won't do that either, because his administration is in the pocket of the trial lawyers, as was the Bush administration and every president in recent history. So Obama's big reform bill does not contain any tort reform, ignoring one of the biggest components of cost growth.

There are lots of ways we could improve the access to health care without destroying the best parts of the greatest medical system in the world by forcing everyone into a government-run system which rations care.


David H said...

Colin sounds like a well-meaning but mis-guided individual. You can boil it all down to taking any task you want done well and efficiently; do you let the government do it, or do you let private companies and individuals do it? The government option historically does not work. It works badly for Medicare, Social Security, Amtrak, Postal service, etc. We have to subsidize all these things because the government cannot run them competitively. Instead of fixing things that are obviously broke, they want to now add a much bigger thing that is destined for failure. In addition, the 46 million "uninsured" number being thrown around is a deception. It includes illegal immigrants as well as some well-off citizens who (gasp!) choose not to buy health insurance. Now the Democratic version of universal health care will actually penalize people for not buying health care; in effect, chipping away at our freedom of choice. George Orwell had a name for this kind of government...

Colin said...

David -- a well-meaning but misguided individual... wait a minute, have you been talking to my wife? :)

My response to Don's post is now up here:

I'm eager to hear your thoughts.