Health Care and Society – Part 6

Julian,

I don’t want to belabor the medical insurance issues, because I’m much more interested in this new issue that we’ve stumbled upon. But a few brief comments about the Health Care Mythology article:

1. (Costs Are Soaring). Argument is misleading. Allopathic medicine has certainly made some big strides in the past 50 years. When I was a child (1960’s), people referred to cancer as “The Cancer” — it carried the definite article, and it was a death sentence. Yet here I type, about 10 centimeters shorter (in certain dimensions) — still pretty feisty and looking to be so to a ripe old age.

However, it doesn’t matter how much I get for the cost, if I can’t find anything I can afford. If I need a car, don’t tell me about how much more Bill Gates gets when he buys a Ferrari. I can’t afford a Ferrari; I want a used Chevy. Asness says dismissively that 1950’s care (the Chevy) is still available. It isn’t. I could write at length about this, based on our recent experiences.

American allopathic medicine is becoming a suburb — a thing that cannot function at all without a tremendous level of expensive and high-tech support. This is currently causing real problems. Like the suburb, it is going to cause a lot more hardship in the near future because, like the suburb, it is going to collapse when the economy enters the next stage of crisis (or the one after that).

2. (Canadian Drugs) My profession calls this NRE (Non-Refundable Engineering) costs. I’m very familiar with it. As a contractor, I charge this up-front, and it isn’t negotiable, because I need to money to do the work. Companies that have captive engineers generally budget for and carry the NRE themselves, out of their cash, or through borrowed money (stock issue, loan, whatever).

I don’t know what Big Pharma is doing. Asness doesn’t adequately describe what is causing this behavior, and most of this section is pure sarcasm: I suspect he doesn’t know, either. Normal practice is to uniformly lower the price over time as NRE is recovered through sales — lowered price increases the market size, and companies shoot for a maximum in the price/volume curves, balanced against NRE recovery, government tax credits, amortization of equipment, manufacturing scale-up costs, on and on. Throughout this, however, you have to be very careful with your distributor pricing, or you create back-channels where your distributors start poaching on each other. You could theoretically even create a black market for running product across national borders. That normally isn’t good business.

What Big Pharma is doing in Canada is bizarre, Asness’ description is weak, and I don’t know enough about what is really driving it to comment.

3. (Socialized Medicine Works) Disagree — this is a Red (haha) Herring. This comes back to the idea of financial ruin, and I’ll talk about it in a later e-mail.

4. (Cost per GDP) Long section, good logic and bad logic mixed. I’ll have to hit these one by one:

4.a. (Lower GDP Growth) Specious. How much GDP growth is enough? The US, of course, is chasing the exponential curve of the money supply, and we’re falling behind at an exponential rate. So no reasonable growth rate will ever be enough. A nation should be able to survive indefinitely with zero “economic growth” (above base population growth). Growth itself is inherently neither “good” nor “bad.” Are we still in a Cold War Race to Ruin with someone? If we win, do we get a toaster oven? [Sorry — End sarcasm alert]

4.b. (US Is Subsidizing World) Mostly agreed. If he’s right. He doesn’t know, and neither do I.

4.c. (Other Countries Are Healthier) This gets downright silly. There are no fast-food or exercise laws in any of the countries where he alleges people are healthier, nor does that alleged increase in general health translate into the 2X cost differential reported. If I were being equally silly, I would throw out the argument that American free-enterprise is what causes obesity, and as soon as we go to socialized medicine, people will stop stressing so much about their jobs and will start walking and eating better. [End silly sarcasm alert]

4.d. (US Could Be Better With A Simple Fix). So give us the simple fix, already. [He hasn’t got one.]

4.e. (End-Of-Life Care). Specious. This deserves an essay on its own. Since I just went through much of this process with my father’s senescence and death last February, maybe I’ll write about it at some point.

4.f. (Insane Tort Law) Agreed. But then, I actually know nothing about it, so my agreement means he’s probably completely wrong.

4.g. (Government Can’t Beat Private Enterprise) Specious and misleading. Markets cannot find efficiencies that are not there. In any enterprise that is fundamentally incapable of turning a profit, the government will do a better job, in theory and in practice. I believe economists call this the “economics of second best,” and I’ve read that they really don’t like to talk about it, for some reason having to do with the fact that it doesn’t follow any of their economic models. I seem to recall that health care is one of the textbook examples. Sounds suspiciously like what we’re seeing here.

5. (Public and Private Co-Existence) Agreed. The public option will kill the health insurance industry. IMO, the sooner, the better, which is where Mr. Asness and I part ways. Just because it’s called a “business” doesn’t make it good for individuals or society at large. This “co-existence” argument is a transparent political attempt to kill insurance while maintaining an innocent look. The alternative “fine” system is the counter-offer by the insurance companies to back down on pre-existing conditions if they are offered the government teat. It’s deplorable, but isn’t this how Congress “functions?” It’s why I’m not really a socialist.

6. (Rationing) Agreed. “Rationing” is a scare-tactic pejorative for what the medical community calls “triage.” Every ER practices it. Insurance companies do it. Medicare does it. Households do it when they decide whether to pay the mortgage or the heating bill. Unavoidable.

7. (Health Care Is a Right) Mostly agreed. But he sidesteps the critical ethical questions in a flurry of purple rhetoric.


I don’t know if these are really “myths” that actually drive misunderstandings, or if these are just straw men that Asness has ready-made sarcastic comments for. When I strip out all of the True Religion and the inflammatory comments about communism, freedom, and Norwegians, I’m mostly left with a feeling of, “Yes, and …?”

The core issue to which I have heard no answer is this: who cares for the sick? Give me an acceptable market answer to that question, and I’ll consider embracing the market. But I haven’t yet heard that answer. The tacit admission I’m hearing, even from Asness, is that the market doesn’t do this. Consider:

Finally, while again we may choose to provide a minimum standard of health care to our neediest, we should not be ashamed that better health care, like all material goods, comes with success.

Who is this “we” who are “choosing?” Who or what provides this minimum standard, and who or what decides when “minimum” has become “too much” or “too little?” I’ve never seen any evidence that the market does this or anything like it, from Dickens’ London through this modern retooling of the same issues. The market rewards only players. Illness sidelines you (as does, generally, poverty). When that happens, who cares for you?

More generally, how do we distribute the burden of hardship? I can pay for my own damn in-good-health check-ups, thank you very much. What scares me is what happens if an uninsured driver runs a red light, and I end up with a torn rotator cuff. Cut off from typing, I can’t work. Without work, I can’t pay my way — not medical bills, not insurance premiums, not groceries. Borrowing that kind of money leads to bankruptcy, which benefits no one. Yet without some professional care, I face a distinct possibility of never regaining my productivity. Time to shoot me? That’s the answer I hear from the free market. If that isn’t right, then tell me: who cares for the sick?

As with me, so for the country. We aren’t all going to get hit by uninsured drivers — caring and caring well for those who do isn’t going to bankrupt the country. But there is no way to predict which of us will, and which will not, and there needs to be some mechanism for sharing that risk.

What insurance companies are supposed to do isn’t such a terrible thing: they hedge against that risk. This seems to work reasonably well with homeowners’ insurance, auto insurance, property insurance. It isn’t working with medical insurance. Medical insurance premium costs are escalating uncontrollably, deductibles go up and up, coverage is getting severely flaky — including, with many companies, what appears to be overtly fraudulent breach-of-contract — and the entire enterprise simply isn’t there for you when you need it. That isn’t insurance.

What is the marketplace supposed to do when a product is this shoddy and overpriced? It’s supposed to breed competition that gives you better product at better prices, right? It isn’t happening. There’s lots of “competition” — all of it is garbage, some verging on confidence games, and all of it is unaffordable. My wife got stung by MegaLife, out of Texas, which took thousands in premiums and then weaseled out of nearly all of their payments, leaving us stuck with the major bills. This is quite commonplace.

I’ve yet to see any free market analysis that acknowledges this and satisfactorily explains why the market isn’t doing what it is supposed to do. Quoting again:

I blame this mostly on excessive regulation, a complex employment-based insurance system strongly encouraged by tax law, and litigation for the benefit of trial lawyers rather than patients or anyone else.

This is a gag-reflex, containing nothing of substance. I assume these are boilerplate free-market talking-points, so maybe there’s substance behind the code-words that I’m not aware of.

Pick a single specific regulation that needs to be rescinded to make this all work better. Pick the top ten. Or the top twenty. But show me why those particular regulations are creating this particular mess, and how rescinding them will fix the problem. That I’d be interested in seeing.

I’ve no idea what Mr. Asness is saying about employment-based insurance. There’s nothing complex about the employment-based part of it: as an employer, it’s just a number that goes right next to salary and the 7.65% FICA tax you have to pay as part of the total compensation package. I also don’t know what he’s talking about by “strongly encouraged by tax law.” Companies don’t spring for health insurance because of taxes — they do it because it’s customary and expected and therefore retains employees, or because they are required to do so by state law. It’s a hideous expense. Small companies don’t provide it at all. Large companies that must, do so grudgingly, but they also work around it by hiring “part-time” workers for 30 hours a week, or pay only independent contractors, simply to avoid the expense. Having insurance based on employment is completely wrong-headed, but it isn’t “complex.” What’s complex is finding an insurance plan that isn’t ripping you off.

The litigation may be a real issue. You’d know more about that than me. But isn’t that a little like blaming that darn Mr. Sun for all that sunlight? Do you have any suggestions for actually effecting tort reform? That seems like a self-contradictory task to me, given that tort law is almost entirely based on precedent (isn’t it?). Does it actually even make sense to say that the woman who was awarded the hot-coffee case against McDonald’s shouldn’t have been? She was, it’s now a precedent in case law, and we’re bloody well stuck with it. How do you “reform” that? Start reversing decisions? Pass billions of statutes that override case-law, case by case? What does “tort law reform” even mean?

There are two answers that make sense to me, as to why the market isn’t working.

One is that the marketplace rules are inverted for health care — it’s an example of the “economics of second best,” or some other such thing that simply doesn’t fit the Free Market credo — and trying to let the marketplace sort this out is like letting a feedback howl run free. Instead of stabilizing at an optimum solution, it is driven to a bad corner-case solution. This is my hypothesis.

The other is that this mess is actually the best thing possible. The problem is unsolvable, and as it gets worse, it is simply reflecting the increasing impossibility. That one I don’t believe at all.

Either way, the market isn’t going to sort this one out. Time to turn to government. For now.

If your numbers are correct, it really doesn’t make much difference — it’s all pretty short-lived, and we’re going to have a whole different set of problems soon.

— Themon

Health Care and Society – Part 5

Themon,

The simplest and most obvious solution is a national single payer system paid for through mandatory progressive taxation? No. Occam’s razor would simply let the market sort it out. It is precisely because we dislike the simplicity of chucking blokes into the gutter to die that we want something else, something infinitely more complex, to meet our sensibilities. And the single payer system, my friend, is simple only in its eventual outcome: a complete failure of the healthcare system.

And here is where I begin to doubt that you read the article I referenced (though perhaps too briefly in a hyperlink). I might be wrong, and forgive me if I am, but you did not address it in your reply. Here it is in full. Before I get into the details of why the system you propose will not work under any circumstances, I thought I might send this again and see if you would change or add anything to your argument. I am also curious to know if you care to add anything about paying for such a system.

This takes far too much time, but I am rather enjoying it. You are one of the few people I know willing to engage in these long discussions. I love that! Take care.

Julian


Health Care Mythology

REVISED DRAFT
7/22/2009

Clifford S. Asness, Ph.D.
Managing and Founding Principal
AQR Capital Management, LLC
Comments welcome: comments@stumblingontruth.com
Related essays at: http://www.stumblingontruth.com

What We Know That Ain’t So

Will Rogers[1] famously said, “It isn’t what we don’t know that gives us trouble, it’s what we know that ain’t so.” So it is with the health care debate in this country. Quite a few “facts” offered to the public as truth are simply wrong and often intentionally misleading. It seems clear that no truly productive solution will emerge when these false facts represent our common starting point. So, this essay takes on the modest task of simply disabusing its readers of some untrue notions about health care.

I do not take on the harder task of prescribing how we should (and if we should) reform health care, though I offer a few thoughts. Important work must be done here by those who understand, far better than I, the details of health care provision. However, no details are necessary for this essay, and no animals (though perhaps some egos) were harmed in its creation. The fallacies I present are basic and it takes only a rational economic framework to expose them

There are large groups of people in this country who want socialized medicine and they sense that the stars are aligning, and now is their time to succeed. They rarely call it socialized medicine, but instead “single payer health care” or “universal coverage” or something that their public relations people have told them sounds better. Whatever they call it, they believe (or pretend to believe) a lot of wrong‑headed things, and they must be stopped. Step one is understanding how and why they are wrong. Step two is kicking their asses back to Cuba where they can get in line with Michael Moore for their free gastric bypasses.

Finally, please read my standard disclosure (though it’s more designed for something that might be construed as financial advice, it can’t hurt) and my admission of non-originality.[i],[ii]

Myth #1 Health Care Costs are Soaring

No, they are not. The amount we spend on health care has indeed risen, in absolute terms, after inflation, and as a percentage of our incomes and GDP. That does not mean costs are soaring.

You cannot judge the “cost” of something by simply what you spend. You must also judge what you get. I’m reasonably certain the cost of 1950’s level health care has dropped in real terms over the last 60 years (and you can probably have a barber from the year 1500 bleed you for almost nothing nowadays). Of course, with 1950’s health care, lots of things will kill you that 2009 health care would prevent. Also, your quality of life, in many instances, would be far worse, but you will have a little bit more change in your pocket as the price will be lower. Want to take the deal? In fact, nobody in the US really wants 1950’s health care (or even 1990’s health care). They just want to pay 1950 prices for 2009 health care. They want the latest pills, techniques, therapies, general genius discoveries, and highly skilled labor that would make today’s health care seem like science fiction a few years ago. But alas, successful science fiction is expensive.

In the case of health care, the fact that we spend so much more on it now is largely a positive. The negative part is if some, or a lot, of that spending is wasteful. Of course, that is mostly the government’s fault and is not what advocates of government control want you to focus upon. We spend so much more on health care, even relative to other advances, mostly because it is worth so much more to us. Similarly, we spend so much more on computers, compact discs, HDTV, and those wonderful one shot espresso makers that make it like having a barista in your own home. Interestingly, we also spend a ton more on these other items now than we did in 1950 because none of these existed in 1950 (well, you could have hired a skilled Italian man to live with you and make you coffee twice a day, so I guess that existed and the price has in fact come down; my bad, analogy shot). OK, you get the point. Health care today is a combination of stuff that has existed for a while and a set of entirely new things that look like (and really are) miracles from the lens of even a few years ago. We spend more on health care because it’s better. Say it with me again, slowly – this is a good thing, not a bad thing.

By the way, I do not mean that the amount we spend on health care in this country isn’t higher than it needs to be. Myth #4 covers that.

In summary, if one more person cites soaring health care costs as an indictment of the free market, when it is in fact a staggering achievement of the free market, I’m going to rupture their appendix and send them to a queue in the UK to get it fixed. Last we’ll see of them.[2]

Myth #2 The Canadian Drug Story

Ah … one of the holy myths of the “US health care sucks” crowd. This should be fun.

The general story is how you can buy many drugs in Canada cheaper than you can buy them in the US. This story is often, without specifically tying the logic together, taken as an obvious indictment of the US’s (relatively) free market system. This is grossly misguided.

Here’s what happens. We have a partially free market in the US where drug companies spend a ton to develop new wonder drugs, much of which is spent to satisfy regulatory requirements. The cost of this development is called a “fixed cost.” Once it’s developed it does not cost that much to make each pill. That’s called a “variable cost.” If people only paid the variable cost (or even a bit more) for each pill, the whole thing would not work. The drug company would never get back the massive fixed cost of creating the drug in the first place, and so no company would try to develop one. Thus, manufacturers have to, and do, charge more than the variable cost of making each pill.[3] Some look at this system and say to the drug companies “gee, it doesn’t cost you much to make one more pill, so it’s unfair that you charge much more than your cost.” They are completely wrong and not looking at all the costs.

So, let’s bring this back to our good natured friends to the North (good natured barring hockey when they’ll kill you as soon as look at you[4]). They have socialized medicine and they bargain as the only Canadian buyer for drugs, paying well below normal costs. Drug companies that spent the enormous fixed costs to create new miracles are charging a relatively high cost in the free and still largely competitive world (the US) to recoup their fixed cost and to make a profit. But socialist societies like Canada limit the price they are allowed to charge. The US-based company is then faced with a dilemma. What Canada will pay is not enough to ever have justified creating the miracle pill. But, once created, perhaps Canada is paying more than the variable cost of each pill. Thus, the company can make some money by also selling to Canada at a lower price; as it’s still more than it costs them to make that last pill.[5]

However, this is an accident of Canada being a less-free country than the US, much smaller, and next door. If we all tried to be Canada, it’s a non-working perpetual motion machine and no miracle pills ever get made because there will be nobody to pay the fixed costs. I’m a big fan of Canadians in general (particularly Wayne Gretzky and Mario Lemieux, who, if healthy, probably would have eclipsed Gretzky – but I digress), but when it comes to pharmaceuticals they are lucky hosers, subsidized by Americans. Drug companies in general sell their products to Canada at low prices, making a little profit, and reducing slightly the amount they need to charge us. This does create the silly illusion that the Canadian system is somehow better than ours because our own drugs are cheaper there. They are only cheaper to the extent we are subsidizing them by paying their portion of drug development costs and, unfortunately, we cannot subsidize ourselves (or we go blind).[6],[7]

So, what is the purpose behind those who tell tales of cheap Canadian drugs? They seek to imply that our system is broken, and delivers only expensive drugs, when the socialist Canadian system delivers the goods for its people. Thus, they implicitly argue that we need to have socialism here. It’s not complicated.

So, repeat after me. We could go with the Canadian system and have super cheap drugs, if only we can find a much bigger, more medically advanced, freer country right next to us to make miracle drugs for themselves, and then we insist that we pay them only a bit above their variable cost for our share, and then they in turn agree to let us be their parasite. Mexico, would you mind helping us out?

Myth #3 Socialized Medicine Works In Some Places

This is a corollary to the “Canada as parasite” parable above. The funny part is socialized medicine has never been truly tested. Those touting socialism’s success have never seen a world without a relatively (for now) free US to make or pay for their new drugs, surgical techniques, and other medical advancements for them. When (and I hope this doesn’t happen) the US joins in the insanity of socialized medicine we will see that when you remove the brain from the body, the engine from a car, the candy from the striper, it just does not work.

So, please, stop pointing to all those “successes” that even while living off the US still kill hard-working people who could afford their own health care while they stand in line for the government’s version (people’s cancers growing while waiting ten weeks for a routine scan, which these people could often afford on their own if allowed, is a human tragedy). Even the successes you gin up for them would not be possible without the last best hope of humankind (the US) on the front lines again making the miracles for the world.

Specifically, let’s also stop citing the Nordic countries as examples. The temporary success of (comparatively speaking) twelve herring-eating homogenous people is not an example that applies to anything outside of perhaps Minnesota, and they elected Stuart Smalley, so under any system they need serious free anti-psychotic medication immediately. Anyway, the Nordic country’s touted “success” is going to go the way of the Soviet Union’s plan to bury us, as their changing demographics (far more economic and social diversity and an aging population) change their culture and show the cracks in their utopian fantasy. As Milton Friedman (paraphrasing) said to a Swede bragging about how little poverty there was in his country “well, yes, I too have observed that among Swedes in America, there’s also very little poverty.”[8]

To put it simply, right now the US’s free system massively intellectually and financially subsidizes the world’s unfree (socialized) ones. That sucks. The only thing that would suck worse is joining them without anyone to subsidize us all.

Myth #4 Socialized Medicine Is Better Because Their Cost/GDP For Health Care is Lower

The favorite statistic of fans of socialized medicine is that in the US we spend more as a percentage of GDP on health care than in many countries with “universal coverage.” I do not argue with their statistics, but their logic is, as usual, way off. Warning, this list of why these cost/GDP numbers are misleading is long, here goes…

* Measuring cost/GDP is inaccurate as it leaves out most of the cost, the cost of lower GDP growth. As one would expect, countries with larger government sectors (including socialized medicine) generally seem to experience slower GDP growth. People are great at measuring costs that they easily can look up, but those are not all the costs!
* If I’m right about the US subsidizing the world of course their costs would be lower!
* Many of the countries we are being compared with come from, frankly, healthier cultures than ours. I do not think the government should be allowed to make, for instance, your health vs. fast food trade-off for you. If free Americans more often than others go for the Wendy’s Triple w/ Cheese like I do, our cost/GDP will be higher. Freedom sometimes ain’t sugar‑free. By the way, if we change our system to socialism, but these habits persist, our costs will still be higher. So, here come the diet and exercise laws…
* I do agree the US system could be better. I mention this again at the end, but I do not think health care should be tax-free if provided by an employer. Being provided by employers in the US leads to over-consumption (as it’s pre-tax and the marginal cost of service is lower to the consumer), and worse, does indeed help lead to the fractious less efficient organization of insurance (and the famous, and real, “portability” problem). I certainly agree that this structure raises costs, but if you have a simple problem like this, you fix it, you do not say “hey, let’s try communism.”
* A large fraction of health care costs are sadly in the short period before death from long-term illness. If socialized societies ration these costs then their total cost/GDP could indeed be lower than in the US. But, I can not see disallowing free people from spending their own money on their last few months of life. If people have what economists would call a “taste” for this (in this case the word seems callous but it’s accurate) then a free system could indeed voluntarily choose to spend more per GDP on health care. That is not a bad feature of the system. It’s a wonderful feature of the system, as it allows someone who spent a lifetime saving for retirement to use a little bit of that to live a bit longer if it’s their desire. Just because you (perhaps) do not agree with the choice does not mean you have a right to dictate to these people.
* As I mention again near the end, we also have a true cost problem in this country emanating from our insane tort system. Some argue that this is exaggerated as they measure the cost of the literal payouts to plaintiffs and say that while it is higher here than in other countries it is not enough to explain our cost differential. But, again, they only measure what they can see and fail to account for the massive cost of “defensive medicine” we force doctors to practice in anticipation of these tort lawyers. This indeed makes our cost/GDP spent on health care too high, but the solution is again not the gulag for us all, but perhaps only for half of the American Bar Association (ok, just cap their awards, that would be fine).
* I admit this is near a matter of religion for me, but do fans of socialized medicine really want to argue that if both were properly organized and not fettered with things like voracious ambulance chasers, that the government could deliver material goods and service, like health care and drugs, cheaper and more efficiently, for the same efficacy, as the private sector? Really? Wow, even writing this essay, I just didn’t think anyone could really believe that… And, by the way, by “religion”, all I mean is I’m really sure, it’s fact not faith based!

So, all considered, we should indeed be measuring our cost/GDP, and within a free system attempting to keep it reasonable through reasonable policies (like rational tax and tort policies). But a dictatorial socialist system is unnecessary for this purpose. It’s only necessary to enslave the population.

Myth #5 A Public Option Can Co-Exist with a Private Option

This one has been the subject of some hot debate. Let’s first define it. Part of the current administration’s plan is to add a “public option” for health insurance. That is health insurance provided by the government (actually provided by you and your neighbors – this is a good thing to remember whenever you find yourselves thinking anything comes from the government; really, if you take away anything from this essay, take away this!). They claim this “public option” can co-exist fairly alongside private health insurance, increasing competition and keeping the private system “honest,” and not deteriorate to a single payer (socialized medicine) system. They are not leveling with you, as in unguarded moments they admit that the single payer socialized system is what they really want. The New York Times disagrees with me, thinking the two can co-exist. But the New York Times still thinks Stalin was a pretty decent Joe.

Those advocating the “public option” say it’s just there to keep private enterprise honest. They point out that private doctors prescribe more expensive procedures than ones employed by the government, and then use that as evidence that the private system has inefficiencies (to get as inefficient as the government they’d have to prescribe enough CAT scans to turn you into Spider-Man if conveniently bitten by an arachnid along the way). It makes me want to ask them, “but then don’t we need that in every industry? Doesn’t the already massive competition in health care keep things honest?” Of course, this leads to the uncomfortable conclusion that by their logic the government must be a major player in every industry. Ah, just when you think you have them, you remember, they have you! This is in fact what they desire. Don’t throw them in the briar patch, remember, they are socialists! But, in our case they are mendacious socialists who know that if they are honest, the public will not allow them to achieve their massive imposition of state control on all aspects of life. So they are dismantling liberty piece by piece. Now, let’s get back to the idea that the government can run a fair “private option”, but not forget that there’s nothing special about health care.

The government does not co-exist or compete fairly with private enterprise, anywhere. It does not play well with others. The regulator cannot be a competitor at the same time. It cannot compete fairly while it owns the armed forces and courts. Finally, it cannot be a fair competitor if when the “public option” screws up (can’t pay its bills), the government implicitly or explicitly guarantees its debts. We have seen what happens in that case and don’t need a re-run.

The first thing the government does is underprice the private system. You can easily be forgiven for thinking this is a good thing. Why not, cheaper is better, right? Wrong. They will underprice private enterprise by charging less to the purchaser of health insurance, not by actually creating it cheaper. Who makes up the difference? Well, you and your family do if you pay taxes, or your kids will pay taxes, or their kids will pay taxes. The government can always underprice competition, not through the old fashioned way of doing it better, they never do that, but by robbing Peter to pay for Paul. They are taking money from your left pocket and giving you a small portion of it back in your right pocket. They do it every day before breakfast, and take a victory lap for the small portion they return.

Second, the government ultimately always cheats when it’s involved in “honest” competition. Try mailing a first class letter through Fed-Ex, or placing an off-track bet on your favorite horse with a bookie, or playing a lottery through a private company. Uh, you can’t, so please stop trying, I don’t want you to hurt yourself. Once the government discovers it cannot win, it changes the rules. You see, the government has the power to legislate, steal, imprison, and even kill. Those are advantages most private firms do not have, save Google, and you did not hear that from me (we all know the Google guy with one eye-brow would crush your larynx for creating a competing search engine).

I have friends who say that I can’t compare doctors to postal workers or truck drivers or bookies as doctors are tireless altruists (pretty damn arrogant no?). I respect the skills of doctors, but they are the kids in college who wanted good jobs with prestige and money, and worked damn hard to attain them, but barely a one was more altruistic than the average truck driver (ever have a doctor drive you from Cleveland to Spokane for nothing but your participation in a Captain and Tennille duet?) And anyway, those who want socialism want to enslave these altruist doctors while I want to free them, so I am not sure I need to argue this point.

Perhaps the best example of the destructive “public option” is our nation’s schools. Here we clearly have a government provided “public option” competing with (and in fact dominating in size) private schooling. But, is it fair? Does it work well? Not by a long-shot. To send your kids to private school (i.e., a school that competes with the government) you need to first pay your taxes for the public schools. Absent vouchers or tax credits, the bête noirs of the “socialism in education” set, if you eschew the “public option” you have to pay for education twice. Double payment is not only unfair, but the quality of the public product without competition is inhuman and a catastrophe to a generation of children the Left weeps tears over, but actively works to destroy (after all, the Left needs future customers). That the schools provided by the government pale next to the private options, which themselves pale next to what we would have with a full private system (even if publicly funded) is beyond sad, but not the direct point here. The direct point is a “public option” cannot exist without cheating – in this case making you pay for it even if you don’t use it (I’m pretty sure if a private company tried that it would be called stealing).

With a “public option” things inevitably would go the horrific way of our public schools. Instead of existing to please customers (patients and students, respectively) the “public option” in schools exists largely to benefit empowered stakeholders of the system (health administrators and unionized school employees, respectively), who will shamelessly pretend to give a darn about sick people and children. Watch the analogy play out if we go this route in health care. It will be like looking in a funhouse mirror and seeing a doctor where you used to see a teacher. All else will be the same.

Finally, let’s worry a bit about the end game. We are not here yet, but in a world where the “public option” replaced all private options, would we still be allowed, if we had the resources, to pursue private medical alternatives? Some socialized countries say yes, some say no. Imagine the answer is “no” in this country, where freedom is valued more than anywhere else in the world. Imagine a person is to be prevented from spending their hard earned money on their, or their children’s, health care, or a doctor was prevented from earning what he could in a parallel free system after all his training and work. If we get to this point, and I pray we do not, it’s time to skip all the Constitution but the second amendment (while we still have it), as it won’t be America anymore.

Let’s again conclude by asking why they are lying here about the “public option”? Well, the President has said if starting from scratch he’d prefer socialized medicine (he calls it something different, but it isn’t different). He also now insists that this “public option” is not intended to lead to fully socialized medicine, and accuses those who say it will lead there of, you guessed it, lying. Odd no? But it takes literally seconds to realize that this “public option” cannot co-exist with the freedom to choose and thus will indeed lead to full‑on socialization. Since the simplest answer is usually best, and the President has already declared his preference for a “single-payer” system, and since this “public option” leads there with near certainty, might I be forgiven for assuming he knows this and has a socialized medicine end-game in mind?

Myth #6 We Can Have Health Care Without Rationing

Rationing has to occur. This sounds cold and cruel, but it is reality. A=A. If you have a material good or service, like health care, that is ever increasing in quality, and therefore cost, there is no way everyone on Earth can have the best at all times (actually the quality increases are not necessary for rationing to be needed, it just makes the example clearer). It’s going to be rationed by some means. The alternatives come down to the marketplace or the government. To choose between those alternatives you judge on morality and efficacy.

Everyone on both sides seems to hate the rationing word. People favoring free markets point to the explicit rationing that occurs in other countries with glee, while those favoring socialism point to the number of uninsured who get their health care through emergency rooms and the like (a form of rationing). Both sides are wrong to complain about rationing per se, that’s a fact of life. But there are differences.

It is an uncomfortable truth that tough choices will have to be made. There is no system that provides for unlimited wants with limited resources. Our choice is whether it should be rationed by free people making their own economic calculations or by a bureaucracy run by Congressional committee (whose members, like the Russian commissars, will, I guarantee you, still get the best health care the gulag hospitaligo can provide). Free people making their own choices only consume what they value above price, using funds they have earned or been given voluntarily. With socialized medicine health care is rationed by committees of politicians trying to get re-elected and increase their own power, and people consume as much of it as the commissars deem permissible. I do not find these tough alternatives to choose between.

By the way, nothing says that part of this rationing cannot include large amounts of charity, privately or even (and the libertarian in me quakes) publicly, but that still involves rationing. Sorry, we can’t suspend the laws of physics and arithmetic.

So, why do they lie about rationing, other than habit? Well, rationing isn’t pleasant news for those who don’t get that 2+2 will always equal 4. Telling optimistic innumerates that your plan does not include rationing wins support.

Myth #7 Health Care is A Right

Nope, it’s not. But we are at the nuclear bomb of the discussion. The one guaranteed to get me yelled at or perhaps picketed by a mob waving signs printed up with George Soros’s money. Those advocating socialized medicine love to scream “health care is a right.” They are loud, they are scary, but they are wrong about rights (as the 1980 kid in me resists the temptation to type “TO PARTY” – you had to be there).

This is more philosophy than economics, and I’m not a philosopher. But, luckily it doesn’t take a superb philosopher to understand that health care simply is not a “right” in the sense we normally use that word. Listing rights generally involves enumerating things you may do without interference (the right to free speech) or may not be done to you without your permission (illegal search and seizure, loud boy-band music in public spaces). They are protections, not gifts of material goods. Material goods and services must be taken from others, or provided by their labor, so if you believe you have an absolute right to them, and others don’t choose to provide it to you, you then have a “right” to steal from them. But what about their far more fundamental right not to be robbed?

In fact, although it’s not the primitive issue, the constant improvement in health care gives another good example of why the “right” to health care makes little sense. Did you have a right to chemotherapy in 1600 AD? You could have protested to Parliament all you wanted, but chemo just didn’t exist. Then, did you have a right to it the moment some genius invented it? You did not pay for the research. You did not make the breakthrough. Where do you get the right? How did it come into existence for you the moment somebody else created these things? I’m pretty sure you cannot have rights to material goods that don’t exist, and I am pretty certain that the moment some genius (or business, or even government) brings them into the world your “rights” do not improve. But strangely, many disagree.

Conundrums are easy to create. If a cure for all disease is discovered but it costs the GDP of Europe for each treatment, do we all have a right to it? Of course not. We can say we do, but it does not matter. We cannot have it (unless you agree with my forecast for Europe’s GDP and wait 50 years). But the absolute “health care is a right” position leads to a clear yes (you know those people bussed in by ACORN and the SEIU carrying signs saying “health care is a right”? Ask them what they think about this issue; I dare you). The smarter crazies might argue that they only mean the right to a reasonable level of health care. But then we have government running and rationing health care, as Congressional committee decides what’s “reasonable”? Health care is not a primitive right, but keep printing those signs.

So why do people scream health care is a “right” if it so obviously is not? If not a right it can still be willingly provided as charity by society. But those screaming “health care is a right” worry that this will not work out as well for them. In fact it would work out if all they cared about was good health care for all, and not power, but they do love that power.

Those seeking free health care could admit these are not rights but they simply want other people’s stuff, and be honest supplicants, or open thieves. However, they believe that guilt and the false moral high ground work better for them. Do not cede that ground. They are beggars with the government’s guns behind them. They are beggars you may, or may not, choose to help. I personally have chosen to help many (those with my views are painted as non-humanitarians but we believe our ideas will make everyone better off and many of us are willing to help). But that is your and my choice, not their right. When they ask you to help, please consider it, and do what your conscience and abilities suggest and allow. When they try to take it as their right, they are thieves, tell them “no.”

Finally, while again we may choose to provide a minimum standard of health care to our neediest, we should not be ashamed that better health care, like all material goods, comes with success. Capitalism is simply what happens when you mix freedom and economics. Capitalism says if you achieve and build more, you can spend more and have more. You can have a bigger TV, a bigger house, a hotter spouse, and shinier teeth for your pets (or a hotter pet and shinier teeth for your spouse). How on Earth did the notion that it’s “unfair” to spend the money you earned on your own health care, probably the most important thing to you, come about? Well, I know how it came about. It has been pushed by a far left academia, political candidates who don’t have a clue about economics beyond cashing a lobbyist’s check, trade union organizers pining for a workers revolution that just never came but now they’re trying to steal on the sly (but God forbid a secret ballot), and a biased media who just thinks they are smarter, better and kinder people than everyone else because they enjoy making snotty sarcastic comments about Republicans (and where is Jon Stewart going to get his health care under the new system anyway?).

But I digress again.

Ironically of course, as in all things, the profits made on allowing people to spend differentiated amounts of their own money on health care would fund so much better health care for all it’s sickening (pun intended). Think of the newly invented drugs and other advances that shortly would be cheap enough for everyone if companies were actually fully free to profit on them. It would be too long of an economics lesson to explain to my beret-wearing friends of Che that profits are a good thing, and that companies cannot charge whatever they want forever, as the essence of capitalism is not love of the corporation but love of competition. But, while I admit it looks dark now, everyone would do well to study up on those things as signs are beginning to emerge that they are going to be making a comeback soon.

Finally, to reiterate, calling something a “right” and holding up signs screaming you have that right just does not make it so. I once picketed NASA for a whole summer with a sign that said “Faster Than Light Travel Is A Right” and “FTL NOW!!” (it was actually a whole back and forth chant that went “when do we want FTL!!”, with the sing-song response,“now!!”, etc., but it was just me and didn’t work too well). Alas, those twisted fascist bastards ignored me and we still have not visited the Crab Nebula.

So, Why Are These Crazy Things Believed (Or, Pretended to Be Believed)?

I forgive individuals (not that they need or want my forgiveness!). Lots of people are scared and misinformed by their politicians and the media or else they would understand the whitewash that is going on here and reject socialist “solutions” to a problem best solved for their families by freedom. In fact, eventually I think they will (if Congress and the President don’t first intentionally jam through a bill they know cannot survive scrutiny by the American people). Now as to why the media and politicians say what they say, and propose what they propose, it is more complicated.

Actually the media is often just plain intellectually lazy, repeating tired leftist dogmas and looking down on anyone who believes in freedom as just a red state moron (trust me, they think that). How else do you explain free infomercials for Obama’s socialized medicine without rebuttal? How else do you explain the failed New York Times front page that’s less news and more editorial parody than Steven Colbert? Why the politicians do it is somewhat more complicated, and a bit more nefarious.

Some politicians may indeed just be idealistic dupes who actually want to help people but don’t realize they will harm them. I have sympathy for these people but they still should not win the day. Some just want to feel important. But let’s leave Ms. Pelosi out of this for now. Let’s talk about the smart ones who understand these issues. I do not think true confusion among the political and intellectual class is most of their problem. I do not think they believe for a second that socialized medicine will make people better off. How could they? I think most of the Congressmen for socialized medicine, Rahm Emanuel (and his boss), and the rest of the K-street gang are smarter than that. I think they understand that when the people’s power grows, theirs shrinks, and vice versa.

Lots of politicians understand that the simple free system leaves them out in the cold. No power for them. No committees to sit on to decide people’s lives. No lies to tell their constituents how they (the government) brought them the health care they so desperately need. No fat checks from lobbyists as the crony capitalists pay dearly to make the only profits possible under this system, those bestowed by the government. Libertarians are often accused wrongly of loving “big business,” but we don’t, particularly when corporate executives predictably turn themselves into crony capitalists who try to succeed by wheedling from the government. On the other hand the socialists love cronies of all sorts, ones who command large enterprises all the better. Liberals are far closer than libertarians to building and countenancing the all-powerful corporate state they claim to fear. Odd I know!

That an array of crony capitalists are lining up from Wal-Mart to hospitals to medical insurers (bringing back Harry and Louise – this time for socialism) hoping to cut the best deals for themselves before the iron curtain falls is sad. That they are being lauded by the administration as a sign its health care position is right is simply propaganda. Yep, when someone agrees to pay Al Capone protection, it’s a clear sign Al Capone was right to begin with….

We further see this predicted abuse of power as the health care proposals are already filled with freebies to the President’s friends – including exempting unions from onerous features. Gee, the same unions in whose favor he has re-written the bankruptcy rules and wants to exempt from the most American of ideas, the secret ballot. It’s good to be a friend of “the most ethical administration ever.”

For another example how this is about government power and the suppression of private liberty, and not about helping people, look no further than the fact that their proposed massive tax increase on the “rich” (which by leftist definition are never paying their “fair share” if they have enough left over to remain rich) is on pre-deduction income.[9] That means if you give all your money to charity you still owe Caesar his 5+ percent on money you did not keep and do not have, but gave away to a good cause. This might raise some revenue, but it is largely about the destruction of private charity. Barack and Harry and Charlie and Nancy and the other gang of four (yes our gang of four is much bigger than four) are about the people having to crawl on their knees to government (them) instead of anyone else, including private charity, not about helping people.

BTW, Congressman Rangel, the House’s chief tax writer and current tax cheat investigatee, said lawmakers targeted high earners because it “causes the least amount of pain on the least amount of people.” So does, in the short-run, imprisoning the rich and harvesting their organs for better health care for everyone else. Charlie, any thoughts on where you stop? When is enough enough?

Finally, if the above is not enough, the rush to pass a huge expansion of government now, and limit debate and discussion, is indicative of a group that knows it is wrong, and if people have time to think they will refuse to go along, but is attempting an exercise of naked power, to impose dictatorship before the people wake up. Paraphrasing Mark Twain, a lie can travel halfway around the world while the truth is putting on its shoes. They are counting on this, and they don’t want to give the truth time to be shod.

And In Conclusion

At this point you might accuse me of offering only complaints about the Administration’s plans, without constructive suggestions of my own. There is truth to that. But I make no apologies. If people believe crazy things it’s first and foremost important to change that before progress can be made. But also, I think we’re doing okay enough without radical changes, certainly not hastily panicked changes towards socialism, and also because I lack the expertise to recommend the detailed practical steps that would be productive (in contrast it requires much less expertise to see that the myths above are indeed lunacy).

I do understand people are frustrated at many aspects of the current system, and it is tempting to tear it all down and build something that looks shiny and new and perfect in the advertisement. Many of the complaints concern the complexity of getting insurance, treatment and reimbursement. I blame this mostly on excessive regulation, a complex employment-based insurance system strongly encouraged by tax law, and litigation for the benefit of trial lawyers rather than patients or anyone else. We do not need a single payer (socialized medicine) system to cut confusion and inefficiency. On the contrary we need unfettered competition and clear legal standards. Another major concern is provision of basic health care to the needy. This is an important issue, but not an expensive one in the scheme of things, and not one that should drive the trillion-dollar health care debate. You do not reorganize the entire housing industry and tax policy around the need for homeless shelters, you just build enough shelters and let the market take care of, and discipline, the people who can pay for their own housing. Finally there is the concern that health care costs make US workers too expensive to compete in global markets. As long as workers get full value for their health care dollars, it shouldn’t matter whether companies pay in cash or in health benefits. The competitiveness issue is an important one, but health care costs versus wages versus taxes to pay for public health care is a minor detail in it. The main thing is not how it’s divided up but total costs, and total value received by the worker. Costs are minimized, and value received maximized, by open competition. I recognize these are general prescriptions rather than specific health care reform proposals, but you don’t have to be a weatherman to know which way the wind blows (are non-Leftists allowed to quote Dylan?).

[1] A few commentators on my earlier drafts have pointed out that this quote is attributable to several different people, and it’s far from clear it’s really, or only, by Will Rogers. Interestingly these particular commentators went on to say that nothing I say has value because of this possible “oversight” of mine (while admitting that many others also attribute the quote to Rogers). The only possible response a gentle author like myself can have is that they can bite me.

[2] Some say health care advances are really an achievement of the government as the government funds university research. Wow. What a clear case of the government muscling in, taking over, and then pointing to their taking over of Poland as a success. We Poles feel differently.

[3] By the way, that companies try to maximize profit is not something they or I should apologize for, it is beautiful and fair and the reason why great things are created.

[4] FYI, your author is a hockey nut.

[5] Canada’s national healthcare does not cover all prescription drugs, just those prescribed in hospitals and drugs for poor people. But it imposes price controls and uses bulk purchase negotiations, and it recognizes less patent protection than US law. The net result is drug companies recover much less of their fixed costs per person in Canada than in the US. If the US imitated Canadian health policy, rewards for medical innovation would be much less.

[6] Truth be told this isn’t about just Canada but any group that negotiates en masse for prices that cover variable not fixed costs. But the general point is still valid. The success of some groups at this does not mean it’s a viable system for all, in fact it’s impossible to be a viable system for all. We cannot all be free riders.

[7] The true subsidy of the US does not result only from US companies producing most of the drugs, but free people in the US paying full price for drugs produced the world over.

[8] Note that doctors also get paid comparatively very little in these countries. This was a bait and switch on the current generation. It remains to be seen if it can be done again to the next generation, though one has to presume not. The best and brightest will choose other careers. Another reason why the future for the socialized medicine Nordic El Dorado is less bright than its current reputation.

[9] While not the subject of this essay, let’s put another widespread myth to bed. “The rich only give to charity for the tax deduction.” Please note, when the rich give substantial amounts to charity they end up with substantially less for themselves. The idea of the charitable deduction (which some libertarians may argue with as it subsidizes behavior the government finds “nice”) is that if you do not keep the money you earned, but pass it on to a good cause, you do not also pay taxes on it. That seems pretty reasonable as you did not keep it. That many, even most, think this is somehow a giveaway to the rich is a statement on the sorry state of understanding, and the dangerous level of class-warfare we already have in this country.

[i] AQR Disclosure

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of AQR Capital Management, LLC its affiliates, or its employees. The information set forth herein has been obtained or derived from sources believed by the author to be reliable. However, the author does not make any representation or

warranty, express or implied, as to the information’s accuracy or completeness, nor does the author recommend that the attached information serve as the basis of any investment decision and it has been provided to you solely for informational purposes only and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments, and may not be construed as such.

Cliff’s Additional Disclosure

This is Cliff speaking now. AQR’s legal department would like me to add that I am criminally insane and barred by an order of rhetoric protection from speaking on AQR’s behalf. Anyone trading on my advice, or a client, consultant, employee or Iraqi insurgent thinking he has been wronged by my attitudes or opinions can have a $250 out-of-court settlement right now if you’ll sign a waiver, otherwise we’ll break you. Oh, and we lied about the $250, but seriously, we will break you. Please note, nobody can predict where markets will go in the short-run and sometimes even the long-run. When I point out individual things in the marketplace that I think are strange, or wrong, it doesn’t mean I have the perfect answer or can easily make money from it for my clients, for myself, or certainly for you reading this essay! Furthermore, if you read one guy’s opinion and do anything based solely on that, you are an idiot. Next, as the legalese above alludes to, the actual funds and accounts AQR manages are run using models that may or may not agree with what I’m writing herein, particularly as our models will generally have a shorter time horizon than the things I’ll be writing about. Listen to me at your own risk! If you choose to read what I write please only use it as one input for you to critically evaluate in your decision process.

Finally, my style is to write very aggressively and passionately about what I believe. So unless you are a libertarian/objectivist, small government and free market loving, socialist hating, value investing geek you probably won’t agree with everything or anything I say. If you find the way I say it insulting, I’m sorry about the first few words you couldn’t help reading, but if you read a moment past that (in this disclaimer or later), it is on you. I agree we need to censor things occasionally but only to protect children and madmen (and of course the children of madmen). If you believe in censoring anything else short of a nuclear secret you’d probably look good in hobnail boots and the crooked cross. Thanks for listening.

[ii] I don’t claim any great originality here. Much, or even all, of what I’m saying has been said elsewhere. But, we’re still losing, so it’s worth repeating all this again with some new angles, a few new pieces of black humor, and perhaps a different font. In particular, and not even close to exhaustively, I can recommend recent pieces of Newman, Sowell, Stossell, Szasz , Will, and many by the Cato Institute that cover a lot of the same ground I attempt to re-take.

Health Care and Society – Part 4

Dear Julian,

Interesting. Polemics aside, it looks like once again, we are substantially in agreement, even though I am presumably coming from a socialist perspective, and you from a Libertarian. Major points of agreement:

  • Leaving people to bleed to death when they can’t pay for services is unacceptable.
  • Significant government involvement in health care is required.
  • Coverage needs to NOT be tied to employment.
  • Coverage needs to NOT recognize “pre-existing conditions.”
  • Coverage needs to be universal, and paid for by everyone.
  • Covered costs need to be contained in some fashion.
  • Covered care will probably need to be regulated/rationed in some fashion.

The simplest and most obvious solution is a national single-payer system, paid through mandatory (progressive) taxation. Medicare For All. I wouldn’t be utterly opposed to seeing it at the state level, but because the entire national pool splits into fifty pools that vary dramatically in size and overall health, there will be states where it sucks, and states where it’s great. Wyoming, which has no state income tax and a very small population (and therefore a very small pool), will suck. Louisiana will suck. Colorado might suck. On the other hand, state taxes everywhere will have to go up, so Wyoming might turn out to be a great place: they’ll impose in a 5% tax and cover everyone. California will try to raise their taxes another 2%, legislators will get death threats, and they’ll end up with an underfunded and completely broken system.

I acknowledge your instinct to turn to the market first, though I disagree with it — I am far less sanguine about the market than you are, as you are less sanguine about the government, probably for the same reasons (bitter experience), but we both seem to agree that neither health care nor insurance are governed by theoretical market principles.

So I don’t understand why you continue to push for market-based solutions. Market theory does not apply, and 50 years of supposed “free market experimentation” has led us directly to the current unacceptable dead-end. No marketplace can find efficiencies that aren’t there. Costs and prices never stabilize in a system driven by positive feedback. There seems to me no reason to continue looking in the private sector for solutions.

The “fines” approach you mention is a desperate attempt to retain private sector solutions no matter what, and it is deeply misguided: it misses the basic point that health insurance is unaffordable. You can’t fine people into paying for something they can’t afford in the first place. Are you seriously suggesting fining a household over $11,000 a year for failure to participate in a private health insurance plan? Because that’s what my insurance plan is costing me right now. Fine us $4,000 (as proposed in Washington), and I’ll pay the bloody fine and go uninsured, having no other realistic choice. The $7,000 I’ll save each year on the difference will pay for all ordinary medical expenses, and either way, I’m uninsured for larger expenses: that $11,000 coverage goes away completely the first time I miss a premium payment, which will happen the moment I get sick enough to need the coverage. It’s called bait and switch: sell me “insurance” and actually give me “oops, let’s just be friends.”

Paying the bloody fine, I will also, of course, curse the government from the depths of my soul and start seriously listening to talk about tax revolt. I’m sure someone will start one, and it won’t be a quaint little tea-party in funny hats on the steps of the capitol.

On the other hand, I’d happily pay $4,000 in new taxes for Medicare-level benefits. It’s a damn sight better than what is available to me through private carriers right now.

Yes, I understand the theory that by adding healthy people to the pool of the privately-insured, the cost of insurance will come down. What will actually happen is that insurers will split the difference, and pocket the excess. So if $4,000 (the amount of the fine) actually covers my large-pool averaged costs, and $11,000 is what they are gouging me now, I’d see a reduction to maybe $8,000. The insurance company will pocket the $4,000 profit over the actual cost of insuring me. If I drop out, the government will confiscate $4,000 through a fine, and I have no doubt this will make its way back to the insurance companies, even though they now provide me with absolutely nothing. So they are suddenly guaranteed $4,000 pure profit per citizen. Not per voluntary customer. Per citizen. And if I actually become seriously ill, I won’t be able to pay the $8,000 premium any more than I can pay the $11,000 premium, so they either get to drop me completely (and collect the $4,000 fine in return for nothing), or they get the government to pay my $8,000 through subsidies after I drop into official poverty. Clever bastards.

Because the positive feedback has not been addressed, costs will continue to rise. All the cozy relationships among big pharma, big health-care, big insurers, and big government remain completely intact, unreformed, unchanged. Clever bastards.

This is a tidy way for the insurance companies to get in on the Wall Street-style bailout business and start living off the government teat instead of the fickle marketplace. Very clever bastards.

Yes, of course any sensible government solution is going to destroy the health insurance industry completely. The only way to keep insurance companies luxuriously profitable in the style to which they have become accustomed is to subsidize them with tax money. All of these public/private hybrids being discussed are merely convoluted ways of subsidizing the insurance industry without admitting it. Surely that is clear?

So why are we still talking about private insurers? What possible advantage do they offer?

I’m also sensing an odd contradiction in what you’ve written. Is Medicare paying care providers too much or too little? Are they not meeting the “real costs” of health care, or do they need to cut back even further? I don’t get a clear read from what you’ve written.


I don’t know what causes the familial disruptions. I’m not even completely sure it’s a bad thing. It’s an observation.

There appears to be a generational lag in the effect. New immigrants tend to have stronger family ties than those who are more acculturated. There was a huge wave of immigrants around 1900, and the next generation would have reached adulthood around 1920-1925. The third generation would have reached adulthood in the 1940’s or 1950’s.

We just got back from San Antonio, where we met the new in-laws. Suzy is second-generation in a large, typical Mexican extended family — delightful people and a delightful family. Mom is the quintessential immigrant: hard-working (seven days a week, two jobs), debt-free, honest, big heart, a single-parent matriarch who has created a home in which sons, daughters, cousins, uncles, aunts, friends, and everyone else cycles in and out comfortably. She’s put every one of her kids through college, and her children sport a couple of master’s degrees and one PhD among them.

Suzy’s generation is still very close-knit. But I can see breaks: one son (the PhD) is working near Louisiana, one daughter (a Master’s) is working in Houston. The separation from family seems to cause them pain. The daughter talked openly about it, wanting to move back home.

The oldest in the next generation is four years old. When that generation reaches adulthood, Mom will be quite elderly, and when she passes, the family may well lose its center. It’s impossible to draw from a single experience like this, but I’m wondering if this next generation will have acculturated so thoroughly that they will lose their extended family. The four-year-old already refuses to speak or listen to Spanish — he’ll stick his fingers in his ears and start talking.

My own father’s generation broke up in the second generation, rather than the third, possibly driven by the Depression. His parents were European immigrants; Dad was born in 1913, and his father died in the late 1920’s, which threw the family into hard times right about when the whole world collapsed. Dad quit school and joined the CCC. By the time I came along, his family had become Christmas-card relatives, spread out on both coasts and us stuck in Wyoming. No one stayed in Manhattan.

My mother’s generation broke away from the family, too. Born in 1920, she left the farm in the early 1940’s for Wyoming: two siblings left for California, two stayed near home, one went to Chicago. Grandpa was not an immigrant, per se, but he was an “Okie,” one of the settlers in the Oklahoma territory right around its statehood in 1907. His generation was tight with relatives, and my mother’s was, too, though less so: she had dozens of cousins that I’ve never been able to keep track of. Their children all (I think) drifted away from each other.

If we go back to the post-Civil War period, the late 1800’s, the United States was a completely different place, and the American Dream was a different beast.

Hmm. Interesting: apparently the phrase “the American Dream” was coined in 1931 by James Trueslow Adams. Here’s an excerpt from Wikipedia:

The American Dream is a national ethos of the United States of America in which democratic ideals are perceived as a promise of prosperity for its people. In the American Dream, first expressed by James Truslow Adams in 1931, citizens of every rank feel that they can achieve a “better, richer, and happier life.”[1] The idea of the American Dream is rooted in the second sentence of the Declaration of Independence[2] which states that “all men are created equal”[3] and that they have “certain inalienable Rights”[3] including “Life, Liberty and the pursuit of Happiness.”[3]The “American Dream” has been credited with helping to build a cohesive American experience but has also been blamed for overinflated expectations.[4] The presence of the American Dream has not historically helped the majority of minority race and lower class American citizens to gain a greater degree of social equality and influence.[5] Instead, the American wealth structure has often been observed to sustain class differences in which well-positioned groups continue to be advantaged.[5]

In common parlance, the term American Dream is often used as a synonym for home ownership since homes have historically been seen as status symbols separating the middle classes and the poor.[6] This usage, though, while common, is generally considered a very specific use of a more general term.

It’s possible that what we take for granted as the “American Dream” was simply not part of the general culture at all prior to 1900. Combined with the fact that the United States was agrarian in the 1800’s, that may be sufficient to explain why American families were stronger in the past than they are now.

However, what I wanted to point out was that all of the potential causes for familial disintegration that you list are simply the American Dream dressed in different clothing. The modern women’s liberation movement is simply women saying that their social potential is unbounded, too. When you say “modern transportation,” you aren’t talking about Eurorail or the Chunnel — you clearly mean the automobile, which is an expression of personal freedom to go wherever you wish, whenever you wish, for any reason or no reason at all. The wealth destruction of the Fed began in 1913 when the Fed was founded, and is based upon putting debt and interest at the center of the banking system: this only makes sense when the economy is assumed to expand geometrically without limits. These are all expressions of the American Dream of endless opportunity. So you’re actually kind of reinforcing my hypothesis….

I also have to take issue with your wording: “Americans are entitled to the fruits of their own production.” Where on earth is this written?

Have you ever read an IP rights waiver that a salaried engineer or scientist is typically forced to sign as a condition of employment? Employees have an entitlement to the fruits of their labor? I don’t think so. Employees are serfs. They’re entitled to an exit interview, IF the company wants one.

The only way you can even dream of this is to own your own business. Running a successful business isn’t accessible to everyone, however. It requires a fairly narrow set of skills and talents which I have discovered the hard way that I do not have. I’m hardly alone in this. It also requires a big helping of luck. Most businesses fail. If I were entitled to the fruits of my own production, I’d be quite wealthy by now. But entitlement is not something you get in business. Your inventions get stolen, your business gets slandered by a competitor, you get bounced by “business cycles.” You get sued. A bank calls in a debt.

I don’t think this entitlement is anything but a dream, largely disconnected from reality.

Thank you again for thought-provocation.

— Themon

Health Care and Society – Part 3

From: Mises Daily
Sent: Friday, October 02, 2009 7:35 AM
Subject: A Free-Market Guide to Fixing Healthcare

Understanding the Costs of Healthcare by D.W. MacKenzie

Will increased government involvement in the healthcare industry cause more or less corporate lobbying? Both mandated-private and single-payer, nonprofit insurance proposals will likely increase wasteful lobbying. read more.


A Free-Market Guide to Fixing Healthcare

Mises Daily by Mises.org

Posted on 10/2/2009

It’s a near-universal assumption of the healthcare debate that the current system is a market system and it is broken, and hence we should try a government system. The people who assume this aren’t considering the last 100 years of healthcare policy. Government is deeply involved at all levels, from medical licensure and
patents, to direct subsidies and provision, to employee mandates and insurance-pooling controls, at all levels.

It’s been a steady path to medical serfdom all the way, under both parties, and this is precisely what accounts for most of the problems that people complain about. Meanwhile, the private dimensions of the healthcare system is what accounts for its merits.

So what are we doing? The very opposite of what we should be doing: more control instead of more freedom, more spending instead of less, more mandates instead of fewer. The logic of interventionism is taking over:
problems are being addressed by more of what caused the problems. The sick patient is being given more poison with the claim that it is the cure.

We’ve put together this healthcare reader as a means of providing a deeper understanding of cause and effect. This market is like all other sectors of society: it functions best under conditions of freedom rather than state control.

Dailies:

  1. “Understanding the Costs of Healthcare” by D.W. MacKenzie
  2. “Is Emergency Care a Failed Market?” by Eric M. Staib
  3. “What Soviet Medicine Teaches Us” by Yuri N. Maltsev
  4. “A Four-Step Healthcare Solution” by Hans-Hermann Hoppe (Also in MP3)
  5. ” Universal Coverage Means Suppressing Human Choice” by Eric M. Staib
  6. “Socialized Healthcare vs. The Laws of Economics” by Thomas J. DiLorenzo
  7. “Why Obamacare Can’t Work: The Calculation Argument” by Gabriel E. Vidal
  8. ” Private-Sector Health Care Leads the Way” by Chris Brown
  9. “The Relentless Process of Socializing Health Care” by D.W. MacKenzie (Also in MP3)
  10. “How Medical Boards Nationalized Health Care” by Henry Jones
  11. “Health Care for All!” by Christopher Mayer
  12. “Health Care Interventionism: A Case Study” by Christopher Westley
  13. “Bad Medicine” or Bad Economics?” by William L. Anderson

Journals:

  1. “Socialized Medicine, Take Two” by Jeffrey Herbener, The Free Market
  2. “Socialized Medicine in America” by Timothy D. Terrell, The Free Market
  3. Two Book Reviews by Dale Steinreich, Drury University, The Quarterly Journal of Austrian Economics Vol. 9, No. 3 (Fall 2006): 75-85 (PDF)
    1. Lives at Risk: Single-Payer National Health Insurance Around The World. By John C. Goodman, Gerald L. Musgrave, Devon M. Herrick Lanham. Rowman and Littlefield, 2004.
    2. Miracle Cure: How to Solve America’s Health Care Crisis and Why Canada Isn’t the Answer. By Sally C. Pipes. San Francisco: Pacific Research Institute, 2004.

Media:

  1. “Health Economics” by Walter Block, Mises University, July 31, 2009 (MP3)
  2. “Economics of Risk and Insurance: From Healthcare to Welfare” by Hans-Hermann Hoppe, Mises University, July 29, 2009 (MP3)
  3. Mises Blog: “Health care: the government is the problem” (Video)

Health Care and Society – part 2

Themon,

Wow. You cover a lot of ground. First, I might be interested in viewing that clan article you mentioned. I have a few theories on the proper or desirable roles of clans and families of my own. However, it is entirely theoretical, as society is no longer tied to any unit larger than the nuclear family, and even then only so long as children are home. For good or ill, that is the context in which we consider how best to fund and manage health care.

Now then, I will address one tangential point: your contention that the American Dream itself destroys families. This is simply not true. The American Dream, the belief that anyone can better his condition with hard work and effort, has indeed been an inspiration to people all over the world for the last 200 years. For all but the last 50 or so of those years, though, American families were strong and cohesive. How do you explain that? Many factors have gone into the destruction of the American family and the rise of a disposable consumer society. The feminist movement, the advent of modern transportation, and the constant wealth destruction of the Fed (which is the true source of the rat race you mention) are just a few factors that leap to mind. However, the idea that Americans are entitled to the fruits of their own production, and that if they produce enough of value that there is no limit to what they may achieve, is a source of hope for families. Have we been struggling for the American Dream as our families have fallen apart? Yes, but correlation is not causation. You could say that constantly seeking to improve technology has destroyed our families with equal validity.

Okay, so I know that is all a minor point in this discussion, but it disturbed me enough that I could not just pass over it. Now then, on to the crux of the matter: What should we do about healthcare?

My first instinct is always to rely on the free market. The Ludwig von Mises Institute has a few ideas on this matter, and I am sending a compilation of them onto you. They might even be very good. I haven’t read them (or at least not all of them) because I see a fundamental problem: I do not believe the medical field can ever be a truly free market system.

My family has quite a few members in the medical field as physicians, nurses, dosimetrists, dentists, clinical researchers, et cetera. Almost all of them are avid free market advocates, but they all acknowledge that the people of this country will never be comfortable looking at an uninsured trauma victim, who also lacks cash on hand or any charitable sponsor, and chucking them into the nearest gutter to bleed to death. Charitable institutions will also never adequately pay for all the non-payers. I agree with all of this. Therefore, much as it irks me, some form of governmental intervention is indeed necessary. But what form should it take?

While I am unwilling to chuck people into the gutter just because they are uninsured, I also do not think that everyone with narcolepsy should have access to the very latest, most effective, and most expensive form of medication whether or not they are uninsured. I do not think we need to keep people on life support in the ICU just because their uninsured families refuse to accept that there is no chance of recovery (you would be appalled to find out what a large portion of hospital budgets are flushed away by just such infuriating situations). Thus, before we bring in the government, I think we first need to precisely define the problems we are trying to solve.

As I look around now, I see very little agreement as to what the real problems in healthcare actually are. I also see many ridiculous myths popping up with annoying frequency in nearly all the policy debates on this issue. In my last blog post (sadly quite a while ago) I linked an article which amusingly eviscerates many of these myths. I strongly suggest you take a look at Dr. Clifford S. Asness’ article, “Health Care Mythology.” You will note that it directly addresses many of your concerns, especially your citation of other socialized governments and tax systems. As he makes the same arguments I have made for years, but manages to employ more humor than my own cynicism will allow on the subject, I like his arguments better and will not belabor them again myself.

To me, the problem with health care is that true costs are difficult to define under all the layers of insurance and Medicare/Medicaid regulations, as well as the refusal on the part of Medicare and Medicaid to pay anything close to actual value. That needs to be streamlined. Further, too much of insurance is tied to employment, making portability an issue. In addition, absent an employee plan it is almost impossible to obtain insurance if one has a preexisting major health issue such as diabetes, cancer, AIDS, et cetera. Private insurance rates also seem to fluctuate at alarming rates to levels which make it difficult to maintain. Finally, there are far too many entirely uninsured people. All of this needs to change.

So, with the problem defined, enough to at least chat about, the next question is how should government address this? Personally, I don’t see much justification for the federal government to address this at all. The ability to make a complete overhaul of our healthcare system is not granted by any of the enumerated powers in the U.S. Constitution. Congress has not bothered to address this little problem, but I imagine they would attempt to justify it through an extremely tortured reading of the Interstate Commerce Clause. The Supreme Court might even buy the argument. I, however, would leave the bulk of the issue to the states under the 10th Amendment. However, the Federal government could certainly help by reforming Medicare and Medicaid—if only they had the money to pay for it.

The states have the advantage of being able to experiment with a variety of options, emulate one another when they see workable solutions, and make adjustments as necessary to improve. I do not see this as inherently more expensive. Indeed, I see these experimental and competing systems as far less expensive than the monstrosity Congress is contemplating imposing upon our nation in totality.

In our state, the Blue Ribbon Commission on Healthcare Reform put out several interesting proposals. They are all still on-line if you care to review them. My own preference was for the 5th Plan. It addressed the uninsured problem by requiring insurance for all individuals and imposing penalties for being uninsured. It offered subsidies for basic plan purchase up to several hundred percent beyond the poverty line. It did not impose employer mandates, which would hurt business, but did offer access to purchase pools and other co-ops as well as easing the issue of portability. It also imposed reviews of rate hikes and mandated that no individual could be refused for preexisting conditions. Of all the plans offered, I thought this went the furthest to addressing the major problems while preserving, as much as possible, the competitive market. It is expensive, though, and I would probably reduce many of the programs and basic coverage levels. Even so, paying for it would be difficult. Nonetheless, it is the best option I have seen here in CO.

On the Federal level, the options currently being debated are utter garbage. Ted Kennedy and Hillary Clinton both had frightening proposals, and yet both were better crafted than the current abominations our president is touting so heavily. The last I read of the bill in the House, the single payer system would inevitably eat up all private insurance (yes, you could keep your private insurance, but if you ever tried to change it you were forced onto the public system). Its mandates and penalties on employers, demanding coverage rarely seen today, would serve only to cripple business. Further, massive invasions of privacy (combining financial/bank and medical records to be accessed by a government database), exemptions from judicial review, wage controls upon medical professionals, politically imposed rationing, and much much more all went into making this bill more horrifying than I could have imagined. Even England doesn’t have quite so oppressive a system. I know Mr. Obama has been trying to tell people this isn’t really in the bill, but I have read it and it was all there. I don’t think he has actually looked at it. Or perhaps he is just lying, but I know a politician would never do that.

Even if these foul little items were removed, however, there is still the massive cost to think about. The Congressional Budget Office has itself flatly contradicted Mr. Obama’s claims that the bill would reduce costs at all. In fact, the CBO estimates (usually quite conservatively) that the bill would actually increase the annual deficit by billions of dollars. Eh, but as long as the Fed is printing money like mad anyway, what’s a few billion more, right? So we have a dollar today that is worth less than five cents in 1913; who cares? Soon it will be two cents, and then I suppose we may really see what people think of our fiscal policy.

While I am all for healthcare reform, I hate the current proposals before Congress. They won’t work, we don’t want all that they would impose upon us, and we certainly cannot pay for them. I also don’t like the fact that these myths are still dominating the conversation. It prevents us from really discussing the issues honestly as a nation. There is a long way to go in discussion and education before Congress can get down to the business of good policy making. Until their proposals look a bit more like what I described, there is no chance that I would support them. Frighteningly, though, Congress and the Fed have indulged in financial mismanagement so egregiously for so long that any reform at all may be quite impossible for some time.

This is really long already, yet I feel like it is still cursory. Anyway, I hope it makes sense. It is my opinion alone. It is hardly pure libertarian, and it galls me to admit that, but I don’t see much of a way around it. Take good care.

Julian

Health Care and Society

Dear Julian,

It’s been a while since we’ve chatted, and I was curious as to your take on the health care brouhaha.

In this case I have some pretty strong opinions which are decidedly not Libertarian. In fact, I find myself becoming increasingly socialist. Unfortunately, I’m not sure that socialism in any form is compatible with our “cowboy” brand of democracy, which is (IMO) good for very little at all.

Here’s the nub of it: humans are social animals. It’s how we survive. The so-called “lone wolf” human simply does not do well in even a survival sense, much less in any sense of thriving. Most of those today who consider themselves “self-reliant” simply take for granted the smooth functioning of an immensely interdependent civilization around them. They are like the “low carbon footprint” environmentalists who look to the Internet for salvation, because “computers don’t take much electricity.” True, but a typical chip fabrication clean-room takes a whole LOT of electricity, and produces a whole lot of extremely toxic waste, all of which had to be mined using machinery that used petrochemicals and be refined using energy-intensive processes invented by people who were fed, clothed, housed, and entertained while they spent day after day doing nothing but thinking about matters so abstract and specialized that only a few dozen people in the world really understand them when they talk about their work…. The Internet has an unthinkably enormous carbon footprint.

As social animals, the issue of community is not how we live when things are going perfectly, the game and berries are abundant, when we’re young and strong and healthy, the sun is shining and the birds are singing. The issue is how we get through the lean times. That’s when we need community: when we can’t contribute due to age, illness, or injury, or when the harvest fails, or the game moves on, or the banks run off with all the money; when we must rely on the healthy to care for the sick, the well-off to share with the poor.

One answer to the issue is, of course, “Let them eat cake.” Who needs the hungry, the poor, or the ill? Let them fend for themselves, or die. We can’t afford to carry dead weight around. Remember the Grasshopper and the Ant. It’s their fault, anyway, for being (…fill in the blank…) Having experienced both serious illness (cancer) and now having been tossed around financially by circumstances only marginally under my control, I’d have to call this “fair weather community” concept amazingly dim. To say nothing of brutal, and ultimately self-destructive. What happened to Marie Antoinette? I forget.

Rejecting this Bourbonesque solution, then, the question is, where will our locus of community lie? At the family level? The municipal level? The state? The nation? The global human family? Where do we turn when times get tough? Who cares for us when we are sick?

There is an anti-social fringe that seems to want to keep it to isolated nuclear families. These are the folk who, should civilization collapse, will likely starve in their heavily-armed mountain redoubts while trying to figure out how to chew gunpowder. Good idea or bad, it’s far too lonely an existence for my taste.

Certainly my wife would be my first caregiver, as I would be hers. As I have been hers this last year. But it takes a toll on the caregiver, puts pressure on the care receiver, and if there are still kids in the house, it can be overwhelming. Caregivers themselves drop from exhaustion. The nuclear family is simply not robust enough to reliably survive lean times.

There is another group that wants to return to the clan. Jim circulated an interesting blog entry the other day on our drumming list, but unfortunately copied the whole article rather than posting a link. I can forward it if you are interested, or you can look it up using the information at the end of this e-mail. The blog is based in part upon the author’s reading of David Hackett Fischer’s book Albion’s Seed: Four British Folkways in America; he talks about the Borderers, whose cultural memes he believes have come to dominate the modern Republican party.

As described, the Borderer clan isn’t very much to my liking, either. Coming from the borderlands involved in the centuries-long power struggles between the English and Scottish kings, where outlawry became an honored profession, it’s pretty much the Wild West — or the Hatfields and McCoys — but where there is no difference between the black hats and the white hats. It is a culture that provides tremendous individual opportunity for the very, very few, and poverty, social chaos, and frequent death for pretty much everyone else. If you’re lucky, charismatic, unscrupulous, and persistent, you get to be the cattle baron. Otherwise, you work for the cattle baron and settle for dollar whores on your one night off a week.

The settled extended family has always drawn me, probably however because I’ve never experienced it. I have experienced the local community of happenstance (neighborhoods) and of choice (the drumming circle, the Druidic circle, or the local church in years past), but that’s where I’ve noticed something interesting: the American Dream destroys families and communities.

Let me explain that remark with an analogue to marriage — how well does a marriage do when both parties are constantly looking to “trade up” in partners? Obviously, not long: the grass is always greener on the other side, so instability in such a marriage is the rule.

The American Dream in its most generic sense, the sense that has drawn immigrants (legal or illegal) for centuries, is the dream of Opportunity — endless upward social mobility in a true meritocracy. “There’s always room at the top for talent” or “You can grow up to be anything you want to be.” All around the world, this is the mythology of America. Every individual raised here is trained from a young age to “trade up” at every opportunity.

This came to my attention when I was reading about the Dutch, who have a saying, “If you are born a dime, you will never be a quarter.” When I first read this, I thought it stultifying and pathetic. But then I started thinking about my own situation, my own neighborhood. I live in a townhome: I chose this when I was single and living alone because I wanted the sounds of other people and of human life around me. If I fell down the stairs, I wanted to able to scream and be found before I died of thirst. Neighbors come into this development — then as soon as their lot in life improves, they “move to the suburbs.” I’ve read articles written by people who grew up in the neighborhoods of Brooklyn in the 1950’s, true little communities with grandparents, children, the village idiot, and the town drunk, and the pattern is the same: add a little affluence, and people immediately move to the suburbs where they live mostly-isolated lives. Endless social advancement is the foundation of the “rat race” my father used to talk about, and the Peter Principle (“workers always rise to their level of incompetence”), and any number of the perpetual stressors that form the fabric of the American life I’ve lived. People from other countries talk about their belief that the streets of America are paved with gold; they are invariably shocked to find out how much and how hard Americans have to work for everything. We would be equally shocked to discover how little they work. Even the “industrious Germans” take six weeks’ vacation a year. Americans have no time for what non-Americans consider to be life itself.

We now have a little fair-weather community around my home, with some potential for foul-weather as well: Barb, the hairdresser with her in-home studio, Kathy the mail carrier, Zach who is always traveling on business, Lynette and her three kids…. If my income doubled, would I stay here? If their income doubled, would they stay here? It’s a sweet little place — a bit too small (what place isn’t?) but warm, manageable, and with beautiful energy, trees and neighbors. Why would I move? Yet with a doubled income, I would likely be shopping for a new house. We are imbued with the endless itch to trade up.

So I blame it on the American Dream itself — but whatever the cause, it’s a longstanding observation that for white people, the extended family is defunct. You still see the extended family in Hispanic and Asian immigrant communities, and some Black communities, although as each of these communities acculturate, the extended families tend to break apart. Something in American society destroys the extended family and local communities. So I really don’t see much hope there. It certainly would not apply to me.

Moving up in scale, we simply no longer have self-sufficient villages. That’s where most settled people have lived for tens of thousands of years, so it’s a reasonably stable level, and fits well with our ability to deal well with only about 100 people — much larger than that and we pass beyond our ability to rely upon oral tradition and elders, and start needing laws and leaders. It seems to me that villages are incompatible with industrialization, which is when they started vanishing — industrial technology requires a degree of specialization that takes more than 100 people to maintain. You can still have “bedroom communities” of 100 people (or less), but they are completely dependent upon a functioning larger civilization around them.

So that means the first viable level of true community in modern society is either at one of the levels of “taxing authority” — the city, the county, the state, or the nation — or the impersonal for-profit or non-profit institutions that provide goods and services for pay.

I summarily exclude the services-for-pay organizations, having had far too much unhappy experience with those lately. They are the quintessence of “fair-weather friends.” If you can pay, they are your dearest friend. If you cannot, they’ll set the dogs on you. They “aren’t running a charity.” They are, of course, happy to lend you money, at interest. Any debt incurred during a serious illness is almost certainly unmanageable.

So we’re pretty well stuck with tax-based levels of government, or nothing.

In principle, I have no overwhelming problem with keeping services below the federal level, but making Medicare state-run doesn’t make it any cheaper. It actually makes it inherently more expensive. So our current tax-burden would shift from federal to state, and would increase.

In practice, it would be disastrous, because the states as constituted aren’t really economically viable: we’d break instead into five or six superstates, meaning Colorado (and Wyoming and….) would be dominated by Texas, which I cannot see as a good thing in any light.

So to whom do I turn in hard times? Especially times of sickness, when I cannot pay my way, and may even incur a debt which can never be paid back?

In America, the answer is the federal government, the bad joke of “private insurance,” or no-one: pay until you go broke. If there is some other viable source of community succor, I’d sure like to know what it is.

Private insurance is economically upside-down, because it isn’t properly a business at all, but a community hedge fund. It is exactly the same as storing grain against a bad harvest. If emergency grain storage were run like private insurance, a) you would not be allowed to participate if you had ever been hungry (pre-existing condition), b) you would have to come up with your own grain for a month before they would open the doors (high deductibles), and c) you would have to pay enough grain into the fund (premiums) to allow the fund managers to run a profitable distillery (exorbitant medical costs and insurance profits).

Because the insurance and the health-care providers form a closed loop without regulation by anyone, neither has any incentive to reduce medical costs. Pharma can produce drugs that cost $25,000 per dose. Hospitals can charge $4000 for a visit to the emergency room. The insurance company likes to see this, because these astronomical costs make health insurance necessary — so they sell more, at higher premiums and higher profits. If basic medical costs dropped to even approximately affordable levels, people would drop health insurance like a burning hot potato — I know I would. Insurance companies would be forced to cut their premiums to get any customers at all, and profits would drop precipitously.

So the only place insurance is at all interested in “controlling costs” is by denying payment to clients through technicalities and loopholes. This was the whole twisted idea behind the HMO of Hillarycare in the 1990’s, and which I got to experience firsthand in the mid-1980’s in Denver with Cigna.

Just for reference, by the way, our health insurance premiums will be $900/mo starting Oct 1, for a policy with a $6000 annual deductible ($3000 each). That’s $11,000 we’ll shell out every year whether we get sick or not. That’s a massively regressive tax of 10% on a $110K annual income. If we do need the coverage (i.e., we get sick), it’s a 15.5% tax. I have to compare it to a tax, because in every other industrialized nation, it is completely covered (or nearly so) by taxes.

All of this completely inverts the economics of health care, and I even remember reading about this back in the early 1970’s, when I was in high school. Medical costs were starting to inflate back then, and people were writing about how the insurance industry was driving up the costs. Market economics simply don’t apply to the health-care industry under private insurance. They never have. Insurance companies will never control health-care costs. You might as well wish to squeeze orange juice out of a dairy cow.

So the proper solution to this, it seems to me, is direct government involvement, as is the case in every other industrialized nation. There are dozens of systems out there, from the German, to the French, to the English, to the Canadian, to the Swedish…. Or even our own Medicare.

Even the GP’s we see are passionately in favor of going to fully socialized medicine at this point.

Sorry for the long rant, but I hope it had enough substance to hold your interest. I’m curious as to Julian’s take (you don’t have to pretend to speak for anyone else :-)).

— Themon