One Economists take on Healthcare
 

I use the term "healthcare" advisedly as health care and health insurance are two entirely different things.

It might be interesting to discuss the economics of the health reform issues being put out by the politicos and the interest groups. Please note, if we stray off the path of the economics here, it will swiftly get political and this thread will be closed.

Anyway, here is an op ed from the WSJ last week:

The Wall Street Journal Online - WSJ.com Log In

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The health-care debate continues. We have now heard from nearly all the politicians, experts and interested parties: doctors, drug makers, hospitals, insurance companies, even constitutional lawyers (though not, significantly, from trial lawyers, who know full well "change" is not coming to their practices). Here is how one humble economist sees some of the main arguments, which I have paraphrased below:

- "The American people overwhelmingly favor reform."
If you ask whether people would be happier if somebody else paid their medical bills, they generally say yes. But surveys on consumers' satisfaction with their quality of care show overwhelming support for the continuation of the present arrangement. The best proof of this is the belated recognition by the proponents of health-care reform that they need to promise people that they can keep what they have now.

- "The cost of health care rises two to three times as fast as inflation."
That's like comparing the price of hamburger 30 years ago with the price of filet mignon today and calling the difference inflation. Or the price of a 19-inch, black-and-white TV 30 years ago with the price of a 50-inch HDTV today. The improvements in medical care are even more dramatic, leading to longer life, less pain, fewer exploratory surgeries and miracle drugs. Of course the research, the equipment and the training that produce these improvements don't come cheap.

- "Health care represents a rising proportion of our income."
That's not only true but perfectly natural. Quality health care is a discretionary, income-elastic expense -- i.e. the richer a society, the larger the proportion of income that is spent on it. (Poor societies have to spend income gains on food and other necessities.) Consider the alternatives. Would we feel better about ourselves if we skimped on our family's health care and spent the money on liquor, gambling, night clubs or a third television set?

- "Shifting funds from health care to education would make for a better society."
These two services have a lot in common, including steadily rising cost. What is curious is that this rise in education costs is deemed by the liberal establishment smart and farsighted while the rise in health-care costs is a curse to be stopped at any cost. What is curiouser still is that in education, where they always advocate more "investment," past increases have gone hand-in-hand with demonstrably deteriorating outcomes. The rising cost in health care has been accompanied by clearly superior results. Thus we would shift dollars from where they do a lot of good to an area where they don't.

- "Forty-five million people in the U.S. are uninsured."
Even if this were true (many dispute it) should we risk destroying a system that works for the vast majority to help 15% of our population?

- "The cost of treating the 45 million uninsured is shifted to the rest of us."
So on Monday, Wednesday and Friday we are harangued about the 45 million people lacking medical care, and on Tuesday and Thursday we are told we already pay for that care. Left-wing reformers think that if they split the two arguments we are too stupid to notice the contradiction. Furthermore, if cost shifting is bad, wait for the Mother of all Cost Shifting when suppliers have to overcharge the private plans to compensate for the depressed prices forced on them by the public plan.

- "A universal plan will reduce the cost of health care."
Think a moment. Suppose you are in an apple market with 100 buyers and 100 sellers every day and apples sell for $1 a pound. Suddenly one day 120 buyers show up. Will the price of the apples go up or down?

- "U.S. companies are at a disadvantage against foreign competitors who don't have to pay their employees' health insurance."
This would be true if the funds for health care in those countries fell from the sky. As it is, employees in those countries pay for their health care in much higher income taxes, sales or value-added taxes, gasoline taxes (think $8 a gallon at the pump) and in many other ways, effectively reducing their take-home pay and living standards. And isn't it odd that the same people who want to lift this burden from businesses that provide health benefits also (again, on alternate days) want to impose this burden on the other firms that do not offer this benefit. What about the international competitiveness of these companies?

- "If you like your current plan you can keep it."
In other words, you can keep your current plan if it (and the company offering it) is still around. This is not a trivial qualification. Proponents have clearly learned from the HillaryCare debacle in the 1990s that radical transformation does not sell. What we have instead is what came to be dubbed "salami tactics" in postwar Eastern Europe where Communist leaders took away freedoms one at a time to minimize resistance and obscure the ultimate goal. If nothing else, a century of vain attempts to break the Post Office monopoly should teach us how welcoming Congress is to competition to one of its high-cost, inefficient wards.

- "Congress will be strictly neutral between the public and private plans."
Nonsense. Congress has a hundred ways to help its creation hide costs, from squeezing suppliers to hidden subsidies (think Amtrak). And it has even more ways to bankrupt private plans. One way is to mandate ever more exotic and expensive coverage (think hair transplants or sex-change operations). Another is by limiting and averaging premiums and outlawing advertising. And if all else fails Congress can always resort to tax audits and public harassment of executives -- all in the name of "leveling the playing field." Then, in the end, the triumphal announcement: "The private system has failed."

- "Decisions will still be made by doctors and patients and the system won't be politicized."
Fat chance. Funding conflicts between mental health and gynecology will be based on which pressure group offers the richer bribe or appears more politically correct. The closing (or opening) of a hospital will be based not on need but which subcommittee chairman's district the hospital is in. Imagine the centralization of all medical research in the country in the brand new Robert Byrd Medical Center in Morgantown, W.Va. You get the idea.

- "We need a public plan to keep the private plans honest."
The 1,500 or so private plans don't produce enough competition? Making it 1,501 will do the trick? But then why stop there? Eating is even more important than health care, so shouldn't we have government-run supermarkets "to keep the private ones honest"? After all, supermarkets clearly put profits ahead of feeding people. And we can't run around naked, so we should have government-run clothing stores to keep the private ones honest. And shelter is just as important, so we should start public housing to keep private builders honest. Oops, we already have that. And that is exactly the point. Think of everything you know about public housing, the image the term conjures up in your mind. If you like public housing you will love public health care.

Mr. Newman is an economist and retired business executive.

Let me first say I'm not in favor of public options expanding (since the US already has 2 public options). But I see people arguing this issues from two extreme ends when the solution lies somewhere in the middle, or arguing about the Canadian "Straw Man" single payer when it's virtually impossible for us to quarter our health care spending per capita, force single payer, and end up with that system. The only good thing coming out of this is Republicans being amenable to hyper-regulation of the health insurance market, which in concert with tort reform and shifting the actual cost of health care back to the consumer would go a long way toward fixing this system.

- "Forty-five million people in the U.S. are uninsured."
Even if this were true (many dispute it) should we risk destroying a system that works for the vast majority to help 15% of our population?

Our system would not be destroyed. This is a slippery slope fallacy. There are no bills with any chance of passing that would create Canadian single payer or British governemnt owned health care. 46% of Americans are already on a public option, and it has not destroyed the private market. Yes you have to be old or poor, but those are two examples of how you can ensure the public option doesn't kill the private insurance market. Another is buy-ups, for example public option you have to share a room, private gets you your own room. Really, all you have to do is make sure a public option sucks as much as conservatives say it will and private options will stay alive and well. There are also provisions that prohibit companies from dropping their private insurance. I don't think we need a public option, but saying it will kill private insurance is a scare tactic, not a real argument. Yes, private insurance may look different, but dead? No.


- "A universal plan will reduce the cost of health care."
Actually single payer systems do slow the RISING of costs of health care simply because it's very hard to raise people's taxes en masse to improve the system. In Canada, people are older now and there are less people paying into than taking out of it when it was first introduced. Something had to give, thus the rationing. If Canadians spent as much per capita as the US, we probably wouldn't be able to use it as the health care straw man. Take Taiwan, which much more recently introduced single payer. People were already used to paying more, so the single payer costs are higher, and it is successful. For a while a while anyway, until they need to raise taxes and/or reduce care.

The bills in congress will likely raise the cost by not really addressing the core issues of consumers not really being aware of how much their health care really costs. In a way, single payer is more free market than the system we have now since single payers are a lot more aware of their higher tax bill than we are of the nickels and dimes extra we pay for everything as businesses pass the cost of employee healthcare back to the consumer.

Canadians want better care, but they don't want to pay more for it as a group. If Canada didn't OUTLAW private insurance (the only reason there are no private insurance competitors) they'd be much better off. There are 2 Supreme Court decisions that have just overturned laws that there can be no private insurance in Canada, health care there is about to get very interesting as well.

- "Congress will be strictly neutral between the public and private plans."

Again, slippery slope fallacy. Fedex and UPS may not be able to mail a letter for 50 cents, but they can provide far better customer service, and do a better job at moving bigger packages with sweet tracking systems. This could be analogous to health care where we make sure the public option sucks so you only go on it when you have to. I never stand in line at the DMV for example, I gladly pay the extra 4 bucks at a private company to do everything I can do at the DMV with better service and no wait.

- "Decisions will still be made by doctors and patients and the system won't be politicized."
Your (his) answer assumes government ownership of hospitals. Even in Canada doctors and hospitals are still private. Single payer means exactly that, only 1 insurance company, the government. Everything else is still private, and why are we even discussing this since it's so unlikely? There are more than just the two worst industrialized nation's health care systems to compare to. Switzerland or the Netherlands or Sweden or France are far better comparisons of what the US would be likely to look like, only ours would be better because it will cost at least twice as much. It won't likely be twice as good, mind you.

THERE IS NO SINGLE PAYER BILL WITH A HOPE OF PASSING!!!!

Some good points
 

Thanks for replying to that post--I thought it was a good article but it didn't generate any heat. You make a couple of good points and a couple with which I disagree. I'll try to get back and go over them all later.

One quick thing though. Fedex and UPS are prohibited by law from delivering the mail. They can be contractors for the USPS, but that organization has a monopoly given to it by the federal government. If you got rid of this barrier to competition I'll bet FDX and UPS, or some local outfits, would provide this service efficiently and cheaper than we have it now.

WW

I understand the point you are trying to make but there's no way that Fed Ex and UPS could pick up the slack. They are not set up to hit every residence, every day, like the USPS does. Their business model doesn't even come close to allowing that. There's really no money in delivering coupons and pizza flyers, not enough to justify a UPS guy's $30+ an hour.

This is very interesting. I'd never really looked into this before. Back in the 1800s when this law was written it seemed logical and noble - ensure poor rural Americans have access to affordable mail delivery by making profit from the city dwellers to compensate for the losses to deliver to rural customers. Seems a little outdated at this point with all of the alternatives rural customers can use, yet the the rural mail customer is still used as the primary argument against deregulation.

I think this ignores the proverbial "Law of Unintended Consequences." A law doesn't have to specifically require something for it to happen.

Suppose I run a small business. I would like to provide health insurance to my employees. I can't afford a plan that covers chiropractic care, acupuncture, psychiatric counseling, or has a $5 prescription copayment. But I would like to offer a basic plan that covers hospitalization and regular care, and perhaps a $20 prescription copayment.

Now we have a government that will have the authority to limit out-of-pocket costs, and require certain things to be covered. Necessarily, a plan that has $5 copayments and a $100 deductible is more expensive that a plan that has $25 copayments and a $1000 deductible. If the government allows only a certain maximum out-of-pocket cost, (this is a key provision of the latest proposal) the plans that cover that will be more expensive. I may decide that I can't afford the plan with richer benefits, but the government doesn't allow me to offer a a plan that I can afford. So I drop coverage for my employees.

So much for being able to keep the plan you have if you are happy with it.

Or suppose I am young and healthy. My employer offers one plan with better benefits that costs $50 per pay period, and another one with more basic benefits that is free. I may decide the free plan is better for me. But if it doesn't cover what the government decides is a minimum level of benefits, it won't be available to me.

Maybe I'll decide to go without to save the $50 a pay period. Many of those 50 million uninsured are young people who make that decision. Or maybe the government will require me to take the more expensive plan, or to pay a penalty or tax. So much for increasing my choice and keeping costs low.

The result could be even more uninsured, and even more people in a government-run or government-sponsored pool. This is the slippery slope to a single-payer system.

Medicare/Medicaid are NOT examples of effective government-paid healthcare. Most healthcare institutions lose money on these patients (witness the fact that more and more doctors are refusing to accept Medicare and Medicaid patients). If everyone in the country was on medicare, and all hospitals and physicians were reimbursed for all patient care at Medicare rates, they'd go bankrupt. Many, many hospitals are already in dire straits precisely because medicare rates have not kept up with actual costs, and have been cut through various budget proposals and "reform" acts over the years.

More people in a "pool" that pays Medicare rates will put further strain on healthcare providers, increasing the calls for a single-payer system.

Interestingly, one of the latest "compromise" proposals would require "exchanges" to negotiate with healthcare providers (just as insurance companies currently do) rather than pay medicare rates, as earlier proposals of a "government option" were going to do. In that case, it seems they wouldn't be able to offer insurance prices any better than what an individual could get from an insurance company now. And since insurance companies would be charging higher rates to cover the higher level of benefits that the government will require, there wouldn't be much option for someone without group coverage.

Unless of course the government subsidizes the exchanges. Which runs counter to the argument that a public plan would compete on a level playing field with private insurers, and would increase the government's cost. Subsidies to a public option, which make it harder for private insurance to compete, would be another slippery slope to a single-payer system.

I'm not ignoring the unintended consequences, I'm just stating that it's not a FACT that we WILL 100% be a single payer system, and arguments that say we shouldn't do anything because we will look like Canada are fallacious and misleading and ignore the problems with the status quo.

So I drop coverage for my employees.

What if you can't drop it? Yes some small businesses may drop health care, but others won't be allowed to.

So much for being able to keep the plan you have if you are happy with it.
You should find someone else to argue this point with since I make no such claim. I'm sure they've thought of this somewhere in the 1000s of pages in at least 1 of the 4 competing bills, though. I don't care so I'm not going to look it up.

This is the slippery slope to a single-payer system.
This is like saying "This is my invalid argument". Look up where "Slippery Slope" comes from, and wonder like I do why all of the sudden it's been legitimized to mean one is saying something valid.
If it's illegal for a large company to have employees on a public system, how can there be no private system? (As I understand it, the public option is only for individual policies, not large groups, I could be wrong)

Medicare/Medicaid are NOT examples of effective government-paid healthcare.

I made no claim of the sort, I merely pointed out that they are government options that haven't killed private care.

Unless of course the government subsidizes the exchanges. Which runs counter to the argument that a public plan would compete on a level playing field with private insurers, and would increase the government's cost. Subsidies to a public option, which make it harder for private insurance to compete, would be another slippery slope to a single-payer system.

The subsidies are not for public option, they are for people who are mandated to buy insurance and can't afford it. You will get the subsidy whether you buy public or private. If the government does this right, public option would be very basic care. No one knows with 100% certainty that it won't be.

You've presented two hypothetical situations that single payer could happen, but you present no solid evidence other than speculation and a non-professional opinion and then frame them by stating they are logical fallacies.

If you address one thing from this post, answer this: Why are the majority of universal health care systems not single payer if single payer is so inevitable?

First of all, my post was intended to be a general discussion along the lines of what the original poster proposed. Not every argument was inteded to be a refutation of a specific argument made by "FighterHayabusa." However, I will respond to a few specifics of the most recent post:

I agree, it isn't a fact, and I fully understand that none of the current proposals will themselves set up a single-payer system. But there are many in Washington, and the president has said so much himself, who do favor a single payer system. I'm not saying we shouldn't do anything, and I agree there are many problems in the current system. But I think it is fair to say that current proposals could have some effects that will increase calls for a single-payer system in the future.

There are no proposals being considered that would not allow a business to drop health insurance coverage. You may be thinking of the proposals being considered to require companies who do not provide coverage to pay a fee or tax. But there's nothing to prevent any company of any size from dropping coverage in any of the bills currently being considered. And by the way, additional fees and taxes on small business, especially during a recession, could result in more businesses going under, or having more layoffs, which will increase the number of uninsured who will have to buy coverage on their own.

Fine, you didn't make the claim. Regardless, the possibility exists. A major claim that was made by the president was that if you were happy with your current plan, you would be able to keep it. These are precisely the questions that should be asked and satisfactorily answered by our lawmakers. "I'm sure they thought of this" and "I don't care so I'm not going to look it up" are precisely the attitudes that I fear the most.

Forget the rhetorical devices like "slippery slope." All I'm saying is that more people without group coverage who have to buy insurance on their own, whether they buy coverage through a public plan or not, will lead to more calls for more government involvement in the future.

Again, this was part of a general discussion, not a specific response any claim you had made. Nevertheless, the only reason Medicare and Medicaid haven't killed private insurance is that they are limited to the elderly and the poor, who probably couldn't afford to buy coverage from a private company anyway. If a similar option were offered to the entire population, it would be a different situation.

That's why I said "unless." There are many different proposals that Congress in considering, and that argument relates to that specific hypothetical only.

You're correct, they are hypothetical. I can't predict the future. But I think we need to consider the possible consequences of potential legislation like this, and I think hypothetical scenarios are a perfectly reasonable way to raise questions that should be answered. I think it's perfectly reasonable to say "Wait a minute... what about this? What if this happens?" and expect a clear answer before supporting any kind of reform.

Since this is an airline pilot forum, I think any discussion on healthcare would be "non-professional." In my case, however, I am a CPA and a registered actuary who worked for several years in the healthcare economics department of a Fortune-200 insurance company. My department directly supported the pricing and provider-negotiation functions. I have also had several hospitals and hospital systems as clients, and I am intimately familiar with their finances, cost structure, and the details of how they are paid by Medicare/Medicaid versus private insurance. Currently I work in the finance department of a major hospital system, one of the largest in a major metropolitan area. When it comes to health insurance, and how healthcare is paid for, particular by Medicare and Medicaid, I am far from a "non-professional."

For the record, I admit that single-payer is not inevitable. I admit that no current proprosals in the US will establish single-payer.

However, Canada, the UK, Spain and Italy are all single-payer (i.e. no insurance, government pays for healthcare directly), and Germany and Canada are effectively single-payer (there is insurance but the government provides it). So I think it is fair to say that most universal healthcare systems in the industrialized, Western world ARE single payer.

And it is clear that there is significant support among the president and many in Congress for single-payer, if in principle only and not yet in any specific bill or current proposal.

Actually, I agree. If the government were to provide a public option that provided basic care for a low premium, that might actually be workable.

But what if that's not the case? What if it's a rich plan with low premiums, made possible by requiring providers to give care under Medicare rates, and/or by a taxpayer subsidy to the plan?

I guess you would say that's just a hypothetical. But the fact that it's a hyopothetical doesn't mean it isn't worth thinking about. Especially since just about every other federal entitlement has been over-promised, under-funded, and a major contributor to high levels of debt.

However, Canada, the UK, Spain and Italy are all single-payer (i.e. no insurance, government pays for healthcare directly), and Germany and Canada are effectively single-payer (there is insurance but the government provides it). So I think it is fair to say that most universal healthcare systems in the industrialized, Western world ARE single payer.

Not fair:

single payer:
UK -> though there is still a small private insurance buy-up market (see BUPA)
Canada - private insurance is ILLEGAL. This is important.
Italy -> Has a small % private hospitals and insurance
Finland -> I'll give you this one, there's not much of a private market here.

not single payer (with government options, all but U.S. are universal)
U.S.
France
Australia
Sweden
Norway
Luxembourg
Iceland
Germany -> I don't see why you are saying it's single payer??
Spain -> 15% hold private insurance and go to private hospitals??
New Zealand
Netherlands
Japan* - no it's not Western but I don't see why it should be excluded from this conversation?
Switzerland
Austria
Belgium


As far as I can tell, the only place that has 0 private insurance is Canada, where it's illegal. Yet politicians insist on comparing expansion of the public option to Canadian style health care?? C'mon. Seems like all you have to do is not make private insurance illegal for to still exist.

This is the game though isn't it? Republicans desperately want to make "Obamacare" a failure so they look good for 2010. What if, instead, they had a few dudes who decided to add some amendments to the public option to ensure it couldn't kill private insurance in exchange for their vote? In this climate there is no Republican who would dare, thus ensuring no passage (they hope) or passage (God forbid) of something way more left than it should be. If we could all just sit and talk sensibly about public option and how to ensure it does not kill private insurance maybe we could get somewhere.

I agree with you there insofar as the FDX/UPS competitors wouldn't deliver 2 pieces of junk mail to every address al over BFE. They would only deliever where they could make money.

That's one of the characteristics of the invisible hand--you don't know what it will look like when it is finished. It's a safe bet that it won't look like the inefficient government program that it is replacing.

To the extent that we are subsidizing the pizza coupon industry and rural mail delivery I am content to do without these services. If others want them let them pay what it actually costs.

WW

Your point about the slippery slope fallacy is correct. There are surprisingly few things/processes about which we have suffcient information to make bulletproof predictions about the outcomes. I have been as critical as anyone about bad arguments and public policy.

I am content, however, to let this one lie. What will happen is exactly what happened with schools. I will be forced to pay for an inferior product that I choose not to use. So I am going to wind up paying twice--once for me and my family and once more for non-producers.

If a bad argument saves me from this expense, I can live with that.

WW

I on the other hand will take some concessions to make sure a hard working, tax paying, long haul trucker/owner with a pre-existing condition isn't just SOL when it comes to health insurance.

OK, let's stipulate that this trucker's health insurance is more important than my right to the money that I earned with my time and labor. Let's also recall that money is fungible.

Does this trucker, or any of his covered dependents:

--consume more calories than the RDA?
--use tobacco, alcohol, coffee, or other drugs?
--have expenses for a pet?
--have expenses for a hobby?
--have a TV, computer, or other non-essential computer electronics?
--have expenses for cable, internet etc?
--Do the live in a house that is bigger than they need?
--do they have a car that is bigger than they need?
--do they have other, non-subsistence expenses?

Are any of these expenses more important than my right to keep my own money?

WW

I know what you're getting at (I'm a Dave Ramsey fan and my "hypothetical" trucker was a caller trying to get out of medical debt). The majority of people "hurting" have done it to themselves; an xbox 360 is more important than health insurance. This is not who I care about. I'm talking about a guy who can't get health insurance, not can't afford it. Wants it, but is uninsurable because of a previous heart attack. He could have that heart attack, and you and I will pay for it with higher premiums anyway. He goes bankrupt, we pay. How about we pay, he doesn't go bankrupt?

I make a very good living, I save way more than the average and after 8 years of this I have just reached the point where I can afford my first heart attack if I was denied insurance (damn Great Recession:mad:). How is this guy who might make half what I do supposed to not go bankrupt if no one will give him insurance? What's his motivation to not just give up, stop working and go on Medicaid?

Beans and rice. Rice and beans. I've heard him before--not a bad show, at least the couple I've listened to.

I'll get back to your trucker, by and by. There are two big problems with health insurance: one is that the government is involved in it to the extent that the market forces acting in it are badly distorted. The other problem is that health insurance isn't doing what insurance is supposed to do.

Insurance is purchased by consumers to cover big, unexpected, or necessary expenses if you become unable to pay these yourself. You take out mortgage insurance to pay off your mortgage should the collateral (your house) be destroyed. Same with auto insurance. If you finance your car you might carry insurance to repair it if it is damaged. Once you own it, you might reduce your coverage to liability only.

Health insurance, as it is used today, is used to pay for routine checkups, innoculations, simple prescriptions, etc. What if car insurance paid for your full service oil change (with just a $15 copay)? And the government, through the motorcaid program paid seniors oil changes at no expense to them. How much do you think the jiffy lube would be charging?

This model is imperfect as people, and their bodies, are not cars. But I think the economic point here is valid.

I'll try later to suggest what I would do to improve this system.

WW

Where to start? As a mod it is my job to kill partisan posts, but this is such a good example of the failure of partisan politics that I thought it best to let it stand.

What many of us don't understand is that both sides have dwelt in a fantasy of high debt and the extreme fantasy of unlimited resources. Of course the congress critters have their very own special retirement and medical plans, so they can't be counted on for an honest judgement.

Looking at the actual numbers, the US spends more money on health care as a percentage of GDP than any other country. You need to talk to some real Doctors to find out why this massive injection of taxpayer funding has driven medical costs through the roof.

First, government has no money, any money they get is derived from the productive sectors of society. Many equate "free" with government funded, and have only a primitive concept of money as a symbol of the generation of wealth. The ultimate goal of government health care is to eliminate competion and jobs in the private sector. Ask yourself how this worked for the post office, social security, public education, and medicaid. The results were dismal and no rational person would buy the product.
Elimination of profit is really elimination of value.

We could eliminate the illegal drug trade overnight by killing the profits and living with the human loss. An industry destroyed, but at what value? In this case an artificial value has been created by law and government intervention, much like the intervention in health care and other sectors.

Second. We need to understand that everyone can't have everything. The uninsurable will run out of money under any plan, a plan to serve the common denominater will provide less to half and more to half, but ultimately will fail to provide the unlimited resources you imagine.

The solution. We all have to live within our means, more government monopolies reduce competition and weaken the economy. Freedom of choice by reasonable humans will always result in better solutions. Ultimately it is a strong economy and the strength of our productive endeavors that strengthen this country, not government programs to confiscate and redistribute.

Imagine going to the MVD and the person behind the desk actually got paid by how many services they performed? Think they would would all take their breaks with 50 people waiting anymore? Unfortunately, pay for performance is rare and getting fired for lack of performance is less likely than being promoted for it - but does it really have to be this way?

Public schools where I live are great, by the way, as was the one I grew up going to. Not surprisingly, public school performance correlates very well with the numbers of unbroken families attending and wealth in the system.

As far as the "government leeches off producers and doesn't produce anything" argument (paraphrased). No, government does not produce anything material, but it does provide services - preferably only services that the private sector does not have incentive to provide.

Actually, the only way incentive is removed is by creating a monopoly and by killing any motive to conduct business with profit. It is blatant folly to proclaim that a government run monopoly created by fiat takes the place of honest competition.

Government has a function, unfortunately it has expanded that function well beyond all reasonable bounds and stiffled the private sector in direct proportion to it's expansion of monopolies. Many states have allowed private MVDs with very good results.

What we are seeing is redistribution and confiscation, not an honest effort to provide better service. Your public schools may be fine, but are all held to the same standard, is performance and merit equal to cost across the system? Could a private option do better? Why limit the right to choose?


How many of us would buy into the Social Security plan if not forced into it? How fast would the private company that offered such a plan be convicted of a felony and shut down?

If I had my way:
1. Caps on medical liability payments. Gross malpractice lands the doctor in jail, not just without a license. This could save 5% off the top and possibly encourage more into the field.

1b) New degrees in between nurses and doctors that can provide for most primary care without needing a doctor supervisor. Incentives for new doctors (one of Canada's biggest problems is a doctor shortage).

2. Term limits for all politicians.

3. Mandatory emergency and catastrophic coverage - subsidies for those who REALLY can't afford it.

4. Non profit co-ops backed by government in case the worst happens, or government money with private administration for high risk pools. Basic coverage only, but consumers can buy-up higher tier care with private insurance on top of this.

5. Term limits for all politicians.

6. Move the cost of health care back to the consumer, replacing employer based coverage with individual tax credits. Let the consumer know what they are really paying and they will get angry if the doctor opens a $500 "suture kit" to give you two stitches.

7. Laws preventing insurance companies from dropping customers if they become sick. No lifetime maximums. Maybe disallow pre-existing condition screening... not sure about this one.

8, 9, 10 Term limits!

I don't know what to do about Medicare and Medicaid. I just don't see the private insurance market clamoring to cover people that a) can't pay for it or b) are very likely to be sick very soon. Medicare could probably start later now that people are healthier longer.

To bring back an old argument though - private schools have not been killed by public education, and social security has not killed private investment in your own retirement. I think Social Security strikes a nice balance in this country: not saving for retirement should hurt, but it shouldn't be a death sentence. I don't mind at all that it is the least generous public retirement system of any western country, but I don't think we'd be better off without it at all. I also think public education is a big factor in the growth of the middle class in this country, and that a healthy middle class is necessary for sustained economic prosperity. Does that mean government can't go too far? Absolutely not. But the whole thing is an experiment, and some things just need to be tried out to see if they work over time.

I think laissez-faire capitalists are no less Utopian than Socialists. The reason things work so well in this country is not because of the existence of one or the other, but that the system forces moderation so neither could ever get their way, and change must occur slowly.

"It has been said that democracy is the worst form of government except all the others that have been tried."

another economist
 

Thomas Sowell is one of the most brilliant men alive. Here is his column from today:

RealClearPolitics - Utopia Versus Freedom



"Eternal vigilance is the price of freedom." We have heard that many times. What is also the price of freedom is the toleration of imperfections. If everything that is wrong with the world becomes a reason to turn more power over to some political savior, then freedom is going to erode away, while we are mindlessly repeating the catchwords of the hour, whether "change," "universal health care" or "social justice."

If we can be so easily stampeded by rhetoric that neither the public nor the Congress can be bothered to read, much less analyze, bills making massive changes in medical care, then do not be surprised when life and death decisions about you or your family are taken out of your hands-- and out of the hands of your doctor-- and transferred to bureaucrats in Washington.

Let's go back to square one. The universe was not made to our
specifications. Nor were human beings. So there is nothing surprising in the fact that we are dissatisfied with many things at many times. The big question is whether we are prepared to follow any politician who claims to be able to "solve" our "problem."

If we are, then there will be a never ending series of "solutions," each causing new problems calling for still more "solutions." That way lies a never-ending quest, costing ever increasing amounts of the taxpayers' money and-- more important-- ever greater losses of your freedom to live your own life as you see fit, rather than as presumptuous elites dictate.

Ultimately, our choice is to give up Utopian quests or give up our freedom. This has been recognized for centuries by some, but many others have not yet faced that reality, even today. If you think government should "do something" about anything that ticks you off, or anything you want and don't have, then you have made your choice between Utopia and freedom. Back in the 18th century, Edmund Burke said, "It is no inconsiderable part of wisdom, to know much of an evil ought to be tolerated" and "I must bear with infirmities until they fester into crimes."

But today's crusading zealots are not about to tolerate evils or infirmities. If insurance companies are not behaving the way some people think they should, then their answer is to set up a government bureaucracy to either control insurance companies or replace them.

If doctors, hospitals or pharmaceutical companies charge more than some people feel like paying, then the answer is price control. The actual track record of politicians, government bureaucracies, or price control is of no interest to those who think this way.

Politicians are already one of the main reasons why medical insurance is so expensive. Insurance is designed to cover risks but politicians are in the business of distributing largesse. Nothing is easier for politicians than to mandate things that insurance companies must cover, without the slightest regard for how such additional coverage will raise the cost of insurance.

If insurance covered only those things that most people are most concerned about-- the high cost of a major medical expense-- the price would be much lower than it is today, with politicians piling on mandate after mandate.

Since insurance covers risks, there is no reason for it to cover annual checkups, because it is known in advance that annual checkups occur once a year. Automobile insurance does not cover oil changes, much less the purchase of gasoline, since these are regular recurrences, not risks.
But politicians in the business of distributing largesse-- especially with somebody else's money-- cannot resist the temptation to pass laws adding things to insurance coverage. Many of those who are pushing for more government involvement in medical care are already talking about extending insurance coverage to "mental health"-- which is to say, giving shrinks and hypochondriacs a blank check drawn on the federal treasury.

There are still some voices of sanity today, echoing what Edmund Burke said long ago. "The study of human institutions is always a search for the most tolerable imperfections," according to Prof. Richard Epstein of the University of Chicago. If you cannot tolerate imperfections, be prepared to kiss your freedom goodbye.

Do you think insurance companies are being dragged kicking and screaming into providing checkups and the like? I doubt it. The more money that flows through them, the better. If you don't believe me, try dropping the property tax and mortgage insurance escrow from your mortgage. Why do they want it? It's just money going in and out... or is it a free 0 interest loan to the mortgage company... hmmm...

Trying to end the practice of providing checkups will run you up against the same insurance company lobbies that are buying the "Canadian Style Health Care" commercials.

As far as the slippery slope to tyranny, I know I've seen that argument used before somewhere ...
Legislating Tyranny by Paul Craig Roberts and Lawrence M. Stratton

Why not allow vouchers for schools and let the public make a choice? Public schools have killed private options for most Americans. Forcing people to pay for two systems to attend a private school is really not a choice.

SS differs fom a Madoff scheme in which way? Forty trillion or so in unfunded liabilities makes Madoff look like a duffer. Why not allow the public to hold their own contributions and invest them as they see fit?

Laissez-faire capitalism has not existed in this country for a very long time. The politicos have had eighty years to regulate things to their satisfaction since the last great depression. The problem is that the regulators have gone completely unregulated and cause more mayhem then they prevent.

So again, I have to ask, do you actually think anyone would buy Social Security if it was not forced on them, but offered as a financial investment or product by free enterprise? Could such a thing be offered without criminal charges against the business?

I don't know about vouchers. I'm sure it would work fine in middle class neighborhoods, and mean death to schools in say, West Baltimore (just finished the last season of The Wire - great show). Unfortunately I think the system needs people to pay more for the people who can't pay at all. Some of those people who had no money will take that education and end up being the people to pay more later. Take away all the people who pay more and there's no way that school is getting better when all they have is the poor kids with no parents. No I'm inclined to try to figure out a way to fix the system incrementally.

Social Security differs from Madoff BECAUSE we are forced to pay into it. The government can lower benefits or raise taxes, Madoff can't create something out of nothing. Also Social Security isn't really an investment vehicle at all, it's a tax that's spent immediately on today's old people so it's kind of silly to calculate a return on it. The government is quite open about this, whereas Madoff wasn't.

I disagree that regulators cause all the problems - yes, usually the regulators are always late to the party, and a lot of regulations don't seem to make sense because they were knee jerk reactions. But we also haven't had another Depression since the 30s. Laissez-faire capitalism was characterized by regular bubble and bust - huge depression style busts every 13- 15 years because of over-exuberance and then overreaction. I'm inclined to go with a compromise on this one and will sacrifice part of the bubble for a little softer landing in the bust. I'll be the first to complain about OVERregulation, but not regulation as a whole. I'd never put my 6 months of expenses emergency fund in a non FDIC insured bank, would you?

If Social Security WERE an investment, it might be part of a lot of people's portfolios. It is a very low risk, inflation indexed investment like TIPS which people buy all the time. But again, it only "works" BECAUSE we are forced to pay into it, not that we get to opt out. The fact that we have members of a giant population boom reaching retirement, and they decided not to have a lot of kids is kind of an anomaly that I don't think it indicates a completely broken system. We should import a million doctors and it would go a long way toward fixing two problems :D

A lot of people wouldn't have paid for the Iraq war, either. Should we give them the option of opting out of paying for the war? Wouldn't really work would it? It's kind of an everyone or no one deal. Social Security isn't for YOUR benefit as a payer, it's for the old folks that are receiving your money NOW. Someone deemed it necessary to not have a lot of old broke folks littering the streets and that everyone should be involved in paying for it. You should count yourself lucky that we live in the least generous Social Security country and be glad the idea of expanding benefits seems ludicrous in our present situation.

May I suggest you do a little reading on the history of SS? What it started as and what it mutated into are two different animals. What some bought into has had the terms changed so often that it has become a huge shell game.
Madoff couldn't create something from nothing, and guess what, neither can any other individual or entity.

In the end, if we wish to create charities, and lets face it these programs are just that-why not focus on the needy? Unless of course you start with the assumption that everyone is needy, which would bring us to our present situation.

A little thread drift here, but the principles are the same (or similar) whether you are talking about schools or healthcare.

In Friedman's Capitalism and Liberty he suggests a system where school taxes are collected and the revenue is divided equally per child. The tax money pays for the school that the parents choose. This honors our cultural value that children have a right to an education as well as our belief that children need such an education to be productive adults. I will not attempt to describe this system--I would not do it justice. The book is still in print if you are interested.

Anyway, that's one idea that would work for west baltimore, as well as for Biff and Muffy's kids out in the suburbs. How well are the children served in West baltimore by the system that they have now?

More later

WW

Where it comes from is irrelevant. Are you claiming that what I said it is now is wrong? You pay in, a portion goes into a government bond trust fund for the time when people paying can't meet the pay out obligations, and the rest goes to old people. Where is the government covering this up and playing a shell game? They are perfectly honest in when they think the trust fund has to start paying and when the trust fund will run out (and they will still meet 76% of their obligation if we do nothing). Social Security tax is taken from you and no longer becomes your money. There is no promise to give it back, or provide you a return or even give you Social Security payments in the future.

If you gave someone the option of not paying for Social Security, you'd have to tax them (or borrow it in Bush's solution) the same amount to pay for those currently receiving it. For what it's worth, I liked Bush's plan and disliked the slippery slope smear campaign that was played on that just as much as I dislike the smear campaign on health care reform now.

As far as whether it's a charity or not is a tangent. I'm proving the point that it's different than Madoff because it's wide open for anyone to see.

Actually I'll admit I didn't read about vouchers before posting. I'm a little more educated on them now. If you could prevent "Cream Skimming", where private schools deny all but the best students, and if parents did not have to pay more on top of the voucher to send their students to the private school I could go for it.

Otherwise it seems like a thinly veiled method to sabotage public schooling by taking only the profitable kids and leaving the rest. Then sitting back and saying I told you so when the public school inevitably fails.

Also teachers unions are against vouchers which automatically makes it look good in my eyes.

This is exactly why you should review the history of how the program was handled. How money paid in was used for many other purposes over decades and why the "fund" is nothing more than a debt and money going out is very soon if not now just the same or less than money going in, there is however a large stack of IOUs, which may or may not be worth anything. It started with the promise to never take more than 3%, but is now, with additions near 14.7% of pay. Again with no firm promise of any return EVER.

What you are seeing, and what exactly is on the books are two entirely different matters, and there has been a willful effort to hide this from the public along with the spending of much of SS funding on other pork.

Many people were given the option not to join and as a whole they have done much better at funding their own retirement as a smaller and more carefully directed group.

You have not proven anything other than mismanagement, a complete disregard for the public's funds, zero performance guarantee, and an attempt at defense of one of the most poorly managed and bloated examples of organized public fraud. A fraud where the rules of payout vary by whim and many of us are likely to be left holding an empty bag.

Speaking of empty bags and criminal misconduct:

Fannie Mae seeks $10.7 billion in new US aid after posting $15.2 billion second-quarter loss
By Alan Zibel, AP Real Estate Writer
On Thursday August 6, 2009, 7:25 pm EDT

WASHINGTON (AP) -- Fannie Mae plans to tap $11 billion in new government aid after posting another massive quarterly loss as the taxpayer bill from the housing market bust keeps growing.




The mounting price tag for the rescue of Fannie and its goverment-sponsored sibling, Freddie Mac, is surpassed only by insurer American International Group Inc., which has received $182.5 billion in financial support from the government so far.

Fannie Mae's new request for $10.7 billion from the Treasury Department will bring the total for Fannie and Freddie to nearly $96 billion. Freddie is expected to report its quarterly results on Friday.

The government has pledged up to $400 billion in aid for the two companies, which play a vital role in the mortgage market by purchasing loans from banks and selling them to investors. They have been under government control since last September, when their near-collapse helped set off the financial crisis.

Together, Washington-based Fannie and McLean, Va.-based Freddie own or guarantee almost 31 million home loans worth about $5.4 trillion. That's about half of all U.S home mortgages.
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So, I think anyone can see the track record of government sponsored entities leaves a great deal to be desired. And it is far from over.

De Toqueville's quote "The American Republic will endure until Congress discovers it can bribe the public with the public's money" .....that day has come and went....... now Congress bribes the public with the money of the public's children and grandchildren.

Ah yes. I remember when Bush walked into the Social Security vaults and declared the bonds "worthless pieces of paper". That's when he won over the hearts and minds of the American People for his Social Security reform... er ...

I don't know what kind of super sleuthing you think you had to do to find that inter-governmental debt is not accounted for when deficit numbers are reported (no, Clinton did not really have a surplus), but it is actually public record so you've wasted your time. Your problem is with political spin, not a Madoff style rip off. The information is available for everyone to see, yet we never vote the bums out for "juking the stats". Iraq war funding was also not included in deficit reports. This is another reason why I'm a single issue voter at this point - term limits, baby.

You keep mentioning a name that tells us you can't be aware of all that went on for decades before. There isn't a spin, there is a mountain of debt, there is no fund and the terms are likely to change again many times in the future.
What is sad is that we have been dealt a losing hand on many of these programs for decades and will be forced to pay for decades for what we really didn't need at all.

SS and medicaid/care are the two largest components of Federal spending and by drawing in the population to these ponzi schemes a large administrative component has been created with very little benefit to the majority who pay into them.


The sad truth is that we have entrusted our hard earned money and our nation for decades to a group of people who have returned the favor by saddling us all with a staggering debt which will have an adverse effect on us for many generations. You really can't spin it any other way.

So let's get this straight, we elect an official that raises the social security tax from 3% to 15% and various other things that for the sake of argument are gross mismanagement. All of these things they do right in front of our noses. This is exactly equal to private citizen Ponzi saying he has a wonderful investment, the old investors are paid not by the returns they think they are getting, but by money from the new investors, and in reality it's just Ponzi spending it on luxury goods for himself? I'm sorry, sounds like a reach. The onus is not on me to look back to the past if you're trying to prove this claim, so you may as well enlighten me.

I'm sorry, you are correct, it's a great program and the mountain of debt built up by this and other programs is exactly what we deserve. We should be thankful that we can spend more of our time working to fund such things.
After all, what else would we do with our time? Surely others know best what we should do and be, it isn't a ponzi scheme, just a well run responsible way to make us all better.:D

Dude, seriously, I want to know what the heck you're talking about in past...

I don't think I'm claiming it's a well oiled machine, saying it's not a Ponzi scheme is far from that. But if you really want to be scared, take a look at the retirement system in Greece. At least we're not them.

Ponzi scheme: A Ponzi scheme is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors, rather than from any actual profit earned. The Ponzi scheme usually offers returns that other investments cannot guarantee in order to entice new investors, in the form of short-term returns that are either abnormally high or unusually consistent. The perpetuation of the returns that a Ponzi scheme advertises and pays requires an ever-increasing flow of money from investors in order to keep the scheme going.

According to this definition SS is a ponzi scheme. If everyone quit paying right now - do you think it would be funded adequately to get the money out that you put in (and your employer matched).

We are forced to contribute and at the end the Government hands the money out on their terms - how much and when you get it. Imagine if you had had that money the whole time to invest - at the end it's yours and you make the decisions what to do with it. Spend it all, or not, or jeez even pass some on to your kids!

And I've put an offer on a short sale on a house that's just sitting on someone's desk for weeks now. No wonder the housing market is such a mess!

Some good points - I've always said something similar to the term limits. We should re-elect no one. Make it the law. You can serve one term, then someone else would serve, then if the original person wanted to serve again, they'd have to run for re-election, but only serve one term again. It's a less efficient way for politicians to get in there and wheel and deal. And if their constituents felt they were well represented by that person, they could serve again at a later date.

I agree on limits on liability - I don't even know what a doctor pays (and therefore us) for liability insurance in a year. And insurance should be given back to the consumer. They could pick a plan that fits them. If you're a 60 year old woman, you won't need to be covered for pregnancy. My employer doesn't cover my auto insurance, my auto insurance doesn't pay for dings, just large accidents, so why not my health insurance. It would be portable, wouldn't need to worry about pre-exisiting. Still not a perfect world, but would prefer that to the government deciding what care I can and can not have access to, and the time frame in which to get access.