Thursday, April 8, 2010

The Tucker Perspective

Here is a nice summary and perspective from William Tucker on why the Democrats healthcare reform cannot be sustained long term. The American Spectator : Why Healthcare Reform Can't Work

Two weeks ago we smashed the side view mirror on our car and had to take it to the shop. We paid $250 for a replacement.

This week I went to my dermatologist to see if I had developed any more skin cancers (red hair and all that). The doctor took a biopsy on one spot and sent if off to the lab. If it's malignant, I'll have to go back and have a bigger chunk of my cheek removed. The cost of all this? Zero.

This simple comparison illustrates why healthcare "reform," as Congress has just adopted it, will probably bankrupt the country.

As far as auto insurance is concerned, we have it like almost everyone else. It covers major damage. A year ago I was in a fender-bender. The insurance paid a small portion of the repairs. Several years ago, we bought my son a car and -- typically -- he nearly totaled it within a week. The insurance company paid an astounding $8,000 in repairs but our premiums tripled and we spent several years paying the penalty. That's what "underwriting" is about. After one accident you get moved into a higher risk category. It's what you might call a "pre-existing condition."

At the auto shop, the mechanics have high school backgrounds with two or three years of on-the-job training and use basic hydraulic lifts and wrenches. I pay them $250 for parts and an hour of labor. At the doctor's office, the person who serves me has done four years of medical school plus another three or four years of hospital residency and uses sophisticated equipment. The lab that does the biopsy will have the latest technology. Yet because I have a part-time job with a major employer, I receive union "health benefits" that pay for everything. I would be happy to pay $80-100 for my visits to the dermatologist. After all, I pay a plumber $50 just to come to my house and look at my leaking sink. But because politicians like Nancy Pelosi have convinced people that even a $20 co-payment is an "insurance company rip-off," I get my medical services for free.

Not that I am unaware of the dangers of falling out of this system and going uninsured. A few years ago I didn't have coverage and was paying $500 apiece for these minor office procedures.
As John Goodman and Robert Musgrave wrote in their brilliant analysis, Patient Power (written in 1994 and still the best critique around), what we are calling "health insurance" is not insurance at all. It is prepaid medical benefits. Insurance is a way of pooling the risk for major expenses -- the kind you incur when you have an auto accident or suffer a serious illness. Prepaid benefit plans try to cover all medical expenses, no matter how small.

No insurance company could possibly provide auto insurance that paid the bills every time you changed a tire. The premiums would be impossibly expensive and people would abuse the system, running to the auto shop every time they felt they needed new windshield wipers or suffered a dent in their bumper. Likewise, no insurance company offers policies with 100 percent coverage of all medical bills. The premiums would be impossibly expensive and people would run to the doctor every time they had a sniffle or suffered a cut finger.

Instead, prepaid benefits plans were pioneered by the major corporations and their labor unions, plus federal, state and local governments and their labor unions, which are now the majority of union members and one of the principle players in this melodrama. Taking advantage of an IRS ruling that health and retirement benefits could not be taxed as income, major corporations and governments began funneling tax-free dollars to their employees as "greater take-home pay." Instead of income, employees got first-dollar coverage of all medical bills with no co-payments and no deductibles. In other words, medical care was "free." And of course people began to treat it that way. Writing in 1994, Goodman and Musgrave argued that it was all these people flooding into the system with cost-free health benefits that was driving up medical prices.

What corporations, governments and their unions had created was a mini-welfare state. We all know what happens to welfare states. When General Motors went under this year, it was lamenting that every car that came off the line had $1,500 in employee and retiree health benefits on board. When President Clinton tried to "reform" healthcare in the 1990s, one of the central initiatives was that the bloated healthcare commitments made by major corporations would be off-loaded onto the government.

Practically every state and local government in the country has the same unfunded employee pension and health benefits threatening them with bankruptcy. Medicaid is working the same way and now consumes 25 percent of state budgets. And of course the granddaddy of all is Medicare, which now has unfunded liabilities of $90 trillion over the next seventy years and will only be payable if the dollar loses about 80 percent of its value.

So what has Congress decided to do in order to "reform" this system? Instead of getting a grip benefits and substituting a policy of health insurance, the Democrats have decided to extend the same unrealistic benefits to everybody.

Last week in the Wall Street Journal -- where the run-of-the-paper is just as much a cheerleader for the Democrats as the New York Times -- a story ran under the headline, "Consumers Would See Benefits Soon After Enactment." (This was a sidebar to the story, "Pelosi Bids for a Place in House History.") The Journal informed us that once Obamacare passed, three big changes would materialize within six months:

• Insurers wouldn't be allowed to cancel policies just because a person became sick or to place lifetime caps on care.

• New insurance plans would have to pay full cost of certain preventive care and exempt such care from deductibles.

• Children could stay on their parents' insurance policies until their 26th birthday.

The last may help the insurance companies since young people are generally healthier -- except that people probably won't sign up until their children get sick. The first two items, however, are a recipe for insurance company disaster. The first will encourage people to wait until they're sick before buying insurance. The second will encourage extraordinary overuse. No longer do you have to be sick to visit the doctor. You can just go for "preventive" reasons. Preventive care increases overall costs in the system. Once in awhile an individual may catch a disease in an early stage, but hundred others will be checked with no impact. Preventative services are not that costly and would be best paid for by individuals. Universal preventive care will send insurance company costs soaring.

So will the companies will be allowed to raise their rates? Not a chance. While one foot of Obamacare is on the gas pedal, the other is on the brake, putting federal price controls on insurance company premiums. The results will be insurance company bankruptcies. At that point we'll have to have a "public option." There will be no one left selling health insurance.

The only way to avoid this road to bankruptcy for the entire country is to restore individual responsibility in the system. Let the insurance companies go back to selling insurance instead of forcing them to provide prepaid benefits. Allow everyone $3,000 tax-free savings account to pay for their basic medical costs. Then let them buy so-called "catastrophic insurance" -- which is really just ordinary insurance - to cover serious medical expenses. Premiums will be affordable and you won't have to clog the Congressional Record with rules telling insurance companies what to do. Such a system is already at work. It's called "health savings accounts." HSA's work very well in Indiana, where the government gives its employees the $3,000 but still saves money over providing open-ended "benefits."

We've just thrown ourselves into a deep recession through an ill-advised federal effort give everyone a home. Maybe if the Republicans take over next November, we can repeal yesterday's suicide pact and create something that provides near-universal coverage without tearing the medical economy to shreds. Otherwise, be prepared to see the country reeling down the road to bankruptcy.

10 comments:

  1. This makes perfect sense to all the conservative tax payers of the USA. But, of course, the 280 lawmakers in Congress that voted for Obamacare do not understand economics. All they want is power and to spread the wealth. Come on November.

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  2. Do people deserve access to AFFORDABLE health care, deserve, no I would think not.
    Are there millions of American Citizens who need access to AFFORDABLE healthcare? Yes there are.
    Do I think this was the right plan to fix the problem? No, not by a long shot, but by God it is a start. Will (unfortunately) the GOP take over the house and senate next election, probably ( I do nto think I am an indy anymore as I have been sickened by the actions and reactions of GOP members lately), will the health care reform get repealed, probably so.
    But I would really like those who repeal the law to personally show up at the doors of people who had be denied health insurance beacuse they had the unconstitutional nerve to get breast cancer, and could not get a policy, or brain cancer, or any other numerous illnesses that preclude a person from obtaining health insurance, and explain to them, your carrier gets to drop you again, so when you sit up at night wondering if the cancer is back, at least you will know that those you leave behind will not have to pay the co-pay bills on your health insurance because you got dropped again.
    This is NOT about healthcare, this is NOT about the constitutionality of health care reform, this is NOT about ensuring that all sick, weak, frail, and injured American citizens can have access to comprehensive affordable healthcare (where families go bankrupt after one serious illness or injury), no this IS about political partisianship. This IS about the GOP and conservatives getting their toes stepped on, this is about certain money hungry people scared that while John Q. Patient is wondering how the hell he can afford another trip to the doctors to get his diabetes under control, and to buy the medication, glucose testing supplies, etc, and still manage to provide food, shelter and clothing to his family, some good doctors who have lost what is the essence of being a care giver should be about is more concerned with the possibility of losing money.

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  3. Thank you Chris, excellent comment.

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  4. Chris and Shirley, you do not know beans about economics! Everything has a cost and a price. You can either let the market set those or you can try to dictate them. But try as you might, you will fail if you think you can dictate the cost, price, and distribution of care by your goofy definition of "fair".
    The western European nations and the USA are broke! They will either renege to their citizens, other debtor nations, or inflate currency, or some combination of all these. Adding more debt and mandated benefits will only hasten the decline.

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  5. How about having John Q Patient make better choices. HOw about not spending money on cigarettes, alcohol, cell phones, designer tennis shoes, cable TV, internet and all the other unnecessary items these people choose to buy and take some responsibillity to pay their bills and take care of their health

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  6. I can't believe that the guy who writes this blog is a doctor...someone who is supposed to help people yet it sounds like he only wants to help some people, those that can afford it. I heard about this blog, but thought is was some sort of joke...and it is, but just a sad joke. And this guy is in a leadership position at FLoyd Memorial? What a terrifying thought.

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  7. Anon April 10. So, you think you have a right to a doctor's services just because you were born and live in this country? You or someone else has the knowledge to determine the worth of another individuals time and knowledge? You are arrogant, ignorant, or both. You deserve the socialist country we are becoming. I however do not want it and I resent you imposing it upon me. This is not a democracy or at least is has not been before now.

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  8. "Anonymous said...
    How about having John Q Patient make better choices. HOw about not spending money on cigarettes, alcohol, cell phones, designer tennis shoes, cable TV, internet and all the other unnecessary items these people choose to buy and take some responsibillity to pay their bills and take care of their health"

    So is it your contention that if a person pays their bills on time, they will have a lower chance of cancers, diabetes, heart problems, etc?

    Yes, lifestyle modifications can help offset some of those things, but there is a little thing called genetics, accidents, etc...

    I will throw myself out there as a sacrificial lamb, I am a relatively healthy (other than smoking, and yes I pay my bills, and have health insurance), thanks to genetics I ended up with severe chronic venous insufficiency in my legs, just like other family members who do not smoke, and I exercise, and I hike difficult terrain carrying a 50+ pound pack... One oopsie during what was supposed to be a safe procedure on my leg, outpatient and up and around that same day, landed me in the heart and lung center for 6 days, 40 days off work, months before I was back to normal, costly prescriptions, lab tests, follow up visits, and a massive hospital bill for the surgeon, radiologists etc.. Even with insurance I had my choice, a huge debt to the hospital (which was calling my house to try to collect on the bills before I was discharged), opening a MAP card at over 20% and paying for years on that bill, thank God I HAD a good retirement account, which is now all but gone. My non-profit job does not offer short term disability, so I had to cover not only the copays, deducatbles, out of pocket costs, but I had to cover 40 days of salary....

    I am not rich, but I am above the curve, and this one oopsie would have destroyed any families financial stability that made less money than my wife and I, and would have if I did not have to take a medical hardship with drawal from my 403b.

    Please do not lecture me on economics regarding health care, because I would LOVE to invite you to my office and meet about 7000 "irresponsible" people who need help with affordable, comprehensive medical care.. (by the way, most of them are not smokers, a lot of them are small business owners, some are highly skilled workers who lost their jobs, etc...) Please do not try and play the " its their fault card with me, because I know better...

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  9. Chris, you no doubt have all the answers, so I ask....
    How much should a citizen be allowed to earn or own, or how little?
    How large a home should a citizen be allowed, or how small?
    What are the limits of medical care any one person can consume?

    These are the questions you must be prepared to answer if you continue down the road you advocate.

    Get a copy of Hayek's Road to Serfdom and read it a couple of times.

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  10. I do NOT, repeat do not advocate government giving a HAND OUT for medical care. I DO advocate giving a hand up.

    I do not advocate caps on capital gain for the individual or companies.

    I do NOT advocate limits on the individuals consumption of medical care.

    I DO advocate reasonable cost for medical procedures and goods.

    I DO advocate affordable, comprehensive medical care availble to ALL Americans.

    I DO advocate a stop gap insurance program sponsored by the government where the people who use the insurance pay a premium based on a sliding scale as determined by federal poverty guidelines.

    I DO advocate such insurance is not a given for life unless there are certain criteria met (disability, terminal illness, inability to obtain commercial health insurance due to pre-existing conditions)

    I DO advocate the expansion of FQHC programs through out the US, that can treat uninsured / underinsured patients in a complete manner, decreasing monetarily non-collectable ER visits, hospital stays, rehab, etc for persons with chronic illnesses. (which by the way would decrease the costs that hospitals have to charge paying patients to cover their overhead, which in turn could lead to lower commercial insurance premiums)

    I DO advocate caps on malpractice suits, and dismissal of frivolous malpractice lawsuits against doctors. Practitioners are practically being raped by the costs of malpractice insurance premiums, and they have no choice but to pass that on to the consumer of their services.

    Further I DO advocate voting each and every person out of office on both sides of the fence who had the shallow, carelessness to turn healthcare into a political issue. Both GOP and Democrats in Washington are so far out of touch with the average American that it is not funny.
    Sure the ultra liberals have their way now, and the judgemental pendulum is about to swing the other way, and we will now see a period of time coming when ultra conservative, right winged fundamentalist Christian Conservatives are going to do everything in their power to turn this country into a theocracy, where policies will be dictated by those with the most money and biggest churches.

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