Final Healthcare Showdown: Government vs. Liberty

There’s Nancy Pelosi, Six Gun of State strapped to her side, the sun burning overhead. And there’s you, armed only with Freedom, thirty paces off. It’s a standoff! If you blink, it’s all over.

You have one advantage: all those non-deductible surgeries she’s had have made it impossible for her to squint against the noonday sun. You can still get the draw on her!

But the clouds are gathering. You’ll have to act fast. You have one more chance to be allowed to take care of yourself. Call or email your representative today, tomorrow at the latest. Put the fear of non-re-electability into ’em.

Obamacare, by rooting through your wallet, would provide many with insurance (and those gifted with your largess would be asked nothing in return for it). But having insurance is not equivalent to having health. Although some might mistakenly believe that they want insurance, what they really want is health. And the best way to deliver that is not via a government-controlled health-care bureaucracy. Here’s why.

Mr Obama has placed himself in front of many teleprompters and has been prompted to cast the most outrageous aspersions against insurance companies. The party line is that they are evil, incorrigible. This is so, the reasoning goes, because insurance firms refuse to provide some people health care, and because they receive a profit for their services.

Yet socialized medicine, we are assured, will, by dousing it with regulatory holy water, exorcise the evil from insurance companies. Begone vile profits!

But somehow, in that wisdom they are always touting, Democrats have forgotten that insurance companies do not provide health care. They provide money when they are on the losing end of a bet. You wager you’ll get sick, they say you won’t. If you do get sick, they pay out. If you don’t, they keep your money. A fair transaction entered into freely by both parties.

What would a rational bookie do if you were to say to him, “I’m already sick. I want to bet you that if I get sick, you’ll pay me a lot of money.”? He’d ask that you re-take your elementary math class, that’s what. Yet Mr Obama would require your bookie, the insurance company, to take your bet. He wants to guarantee that the insurance company pays out on what is a losing bet.

What necessarily follows from this? The insurance company must raise its rates. It must charge more to its other clients to make up for its guaranteed, government-mandated loss. The cost of insurance—to be perfectly clear—will rise.

Not only that, but insurance companies will be required to set up internal offices, well stocked with lawyers and accountants, to communicate to the government that they are following the complex regulations set over them. That costs money, so insurance companies will have to raise their prices yet again.

Government, too, will have to set up its own offices that talk back to the insurance companies and to the people it’s giving free money to. The feeding and care of these government employees cost lots of cash.

The money the government requires will come from you. You will not be allowed to refuse to pay it. The extra money the insurance companies must charge will also come from you. Ordinarily, you would be allowed to refuse to pay that. But the law will be such that you can’t turn the private insurance companies down, either.

What’s the worst part? Absolutely none of these vast amount of monies will go towards improving health care. Since all that money is necessarily funneled to a bureaucracy, less will be available to spend on health care improvements.

We have returned to the inevitable Progressive Law of Unintended Consequences. Government meddling, motivated by the best of intentions, when it tries to improve health care and make it cheaper, will cause it to become limited and more expensive.

Further—and perhaps its true purpose after all—it will create a dependency on itself. It will, by law, mandate reliance on itself. The health bureaucracy will become self-perpetuating. And since every bureaucracy ever known has become larger and less efficient through time…well, you can connect those dots.

My solution? Tax the health care money provided from companies to their employees as income. Make that money income. Let people know exactly how much of their own money they are spending on insurance and care. The major reason health care has become so expensive is that nobody knows what anything costs. This opacity has given birth to a private bureaucracy, and as we’ve seen any such creature drives costs up.

I don’t have space to convince you that this solution is ideal. But I hope I’ve shown you that Congressperson Pelosi’s solution is suboptimal. And we haven’t even discussed how, since the government will be paying the bills, they’ll use that leverage to forbid you certain activities (smoking, eating salt, drinking soda pop, etc.), or to require you to perform certain others.

Just remember what P.J. O’Rourke said: “If you think health care is expensive now, just wait until it’s free.”

Update An anonymous reader tells us of a Rally in Washington D.C. on the 16th. Details here.

Update 2 Here, from The Hill is a list of the Democrats leaning on voting No. All Republicans are expected to vote no.

20 Comments

  1. Excellent article, as usual. I think the Health Savings Account mechanism is a good way to impose market discipline on the health care system. The government sanctioned third party system has become burdensome for exactly the reasons you put forward. The liberals all hate HSAs but can not give a rational reason for it.

  2. I don’t understand where I am supposed to get $12,000 a year to pay for my health-care tax. Speaker Pelosi has not yet enlightened me. (Or has she, and I missed it?) After I pay my city-state-and-federal taxes, rent, utilities, food, metro cards and put something aside for my old age (which social security isn’t going to be of great help by the time I get up there, if I’m allowed to get there), there isn’t really much there to grasp at. To be honest, like a lot of people, once the monthly expenses are paid out there is not a lot left over for such frivolities as clothing, books, movies, and meals out. It’s not a matter of cutting out one or two trips to Paris or reducing purchases of designer shoes or scheduling fewer spa treatments. If it were so simple, and we were all uniformly well-off, then this albatross would be a much easier sell.

    http://www.nypost.com/p/news/local/prognosis_new_york_z3qpwpR67SQv8qm7lNYkKM

    PS I like Health Savings Accounts, but only if you are allowed to carry over a balance. If you have to use up X dollars every year or lose it, someone is making money, and it’s not you.

  3. The original reason for “healthcare overhaul” was to reduce the cost of healthcare as a percent of GDP. The industry has three major players: Providers (doctors, hospitals, pharmaceuticals, equipment makers and allied health professionals); Third Party Payers (insurance companies and government) and consumers (that’s us). Of the three, only Third Party Payers have a stake in reducing cost.

    Why is the president attacking insurance companies for trying to keep total health care spending under control? He’s treating a symptom rather than the disease.

  4. Katie,

    Health, medical care and insurance are complicated by themselves. Adding thousands of unreadable pages of health care bill makes things worse.

    The New York Post article you linked to says …
    “Change: She and her husband have to have at least $12,000 in coverage; they’d have to make up the difference out of pocket.”

    The reference is to some minimum amount of insurance benefit, not insurance premium. Assuming the insurance that she, her husband and his employer pay for (I doubt they are getting health insurance for $160 per month) will cover at least $12,000 of annual medical bills there should be no additional cost to her. I don’t know where the Post got the $12,000 number — it may be buried deep inside one of the bills.

    Your are correct that health savings accounts are useful only if unspent funds can be carried over to the next year.

  5. Do the math.

    Note to Speed: I agree that the putative reason offered is to “reduce the cost of health care as a percentage of GDP.” But what I don’t get is why that ought to be a national goal. What difference does it make? The GDP is the gross sum of everybody’s expenditures. In a free country (theoretically) we get to spend our money however we like. If we all decide to spend our money on Snicker Bars, that’s our choice. It’s none of the government’s business.

    The government serves the public, not the other way around. We are not serfs who are told how to spend our money. People want to spend their dollars on health care. Fine. So what? What would the government like us spend our money on instead? More graft for the political elite? Leisure activities? Plastics? Rubber baby buggy bumpers?

    Bug out of my wallet, please. I’ll spend my money how I want to, and if that’s on my health care, then that’s my choice.

    The exuberance of central planners makes me sick. Want to cut down on ill-health? Get rid of all the central planners.

  6. Health Savings Accounts are carried over year to year, until at age 65, they may be spent for any purpose. My brother and I have calculated that if we had been able to use HSAs for our careers, we would not have 1-4 million dollars in the accounts.

    The accounts that you are thinking of are Flexible Savings Accounts, where the balance has to be spent each year or lost. This was a political compromise away from HSAs, because the Democrats did not want people to develope independent means to pay for their own medical expenses. Flexible Savings Accounts were a way to give a semi-credible way not to authorize HSAs.

    In Wisconsin, the State legislature authorized the tax savings of HSAs for State Employees twice, but the HSA option was vetoed by Democrat Governor Doyle both times.

    My employer and I together pay about $7,000 a year for my family HSA, of which $5000 is put into the debit card account to be used, and $2000 is for the major medical insurance, with a $2500 deductible(per person) $5000 deductible per family per year.

  7. I forgot to mention that the previous family account that I had cost my employer and myself about $12,000 per year, so even with my employer placing $5000 directly in the debit card account each year, we save about $5000 per year.

  8. I should edit more carefully before I post. I meant to say that if we had been able to use HSAs for our entire careers, we would each have had accounts at age 65 of between one and four million dollars.

  9. Re: Insurance profits.

    “In 2008, the top 10 health insurers combined had $264 billion in revenue and profits of $8 billion. A little bit of arithmetic shows that the combined profit margin for this group was 3.1%. The highest profitability among the top 10 was reported by Aetna: 4.5%.”

    ” … [the] top 10 pharmaceutical companies reported 18.4% profits in 2008 ($49 billion profit on $269 billion revenue). Interestingly, the top pharmaceutical company – Johnson & Johnson – earned ($13 billion) more than all top 10 health insurers taken together. Other “pharma” players were not far behind. Both #2 (Pfizer) and #4 (Merck) earned $8 billion each, or as much as the 10 top health insurers taken together. The highest profit was 37.7%, reported by Gilead Sciences.”

    Similar numbers are given for “medical products and equipment.”

    “Once you internalize these numbers, it becomes clear that any meaningful reduction of health insurance costs can only be achieved by reducing the underlying health care cost structure.”
    http://baselinescenario.com/2010/03/15/are-health-insurers-worth-bashing/

    I ask again, “Why is the president attacking insurance companies?”

  10. The president is bashing insurance because he can’t sell this non-sense on it’s face. Easier to demonize an industry (think “Big Oil”) and cast your bill as pay back for prior evil deeds.

    Liberal politicians don’t care about health or insurance; they want power. They are bribing 51% of the people with wealth created by the other 49%.

    Individuals should buy insurance, not employers. (I think that’s where Briggs was headed). Those transaction would provide proper market feedback hence facilitate optimization.

    Insurance should be freed of mandates. I think this is the intent of buying insurance across state lines. The point is that state governments ought not dictate what health insurance features must be provided – that’s for the market to decide.

    If the government wants to help, they could create a database of health care costs. Does anybody shop around for angiograms? Maybe we should? How ’bout that annual physical? If we could do effective comparative shopping, I’m thinking that would help.

    I wrote my reps in DC. I’m guessing it won’t matter and this thing is gonna pass – libs have way too much on the table to walk away. Question is, are conservatives willing to run on Repeal once the deed is done.

  11. Hi Mr Briggs,

    I agree with you on many things, most of all on global warming, but not on this issue. I’m canadian. We have a single payer system. I wouldn’t change that system for the US one in a hundred lifetime. In fact, the only reason I would prefer the US system is if I was multi-millionaire.

    Of course, there are some trouble with our system but when I compare it to the US one I consider myself lucky.

    My grand father died because he couldn’t afford a common heart procedures in 1953. His problem was a congenital one and he died in his 30s. This happened when we had a system that was similar to the US.

    Now, if I take the example of my mother, she has a problem with a kidney where she keeps developing kidney stone. She has now been though 6 operations to remove stone in the last 8 years. Considering how painful kidney stone are, my mother would really like to not have them, but the physician can’t find out why they form at such a rapid rate. For all of this, and the 6 times she was in the hospital, the only cost we had is the cost to rent a t.v. Considering that each operation cost at 20k, if not more, it suffices to say that we would now be bankrupt.

    I don’t know of a single canadian who prefers the US system. There is a lot of scare tactic used by conservative. The death panel being the most absurd of all. The reality is that health care in the US is much more expensive than in Canada. Sufficiently so that some insurance companies encourage the US citizen to get treated in Canada.

    Also there is a thing I found strange in the US, the us is very capitalist, and yet no one complain that some company are able to run monopole. Is there anything less capitalistic than that?

    I don’t understand why some people are so closed minded about the public action. No one looses the right to choose its insurance. I mean if ones wish to keep its current insurance nothing prevent it. Plus, how much of those complaining are actually insured under medicare?

  12. I wholeheartedly agree with Sylvain in respect to the scaremongering about health care in the USA.

    I live in Australia but was for 3 years resident and working in the USA so I can make a comparison. I have private health insurance in Australia where I choose to top up a little with extras beyond the basic. In Australia we also have a centrally funded scheme which provides basic hospital care at no cost and subsidised medical care for all and free care for certain groups in our community. My private health insurance covers particular procedures includes dental care and private hospital care and surgery. Like all such schemes there is a copayment or if you look at it differently a rebate on the charges.

    There are two main differences between the US system and Australia.

    Australia has opted for a scheme where Generla Pratcitioner’s can ‘Bulk bill” for services and they get a guaranteed minimum amount for each service which is billed according to the time required and the skill needed. If the doctor chooses not to bulk bill then he or she is free to charge what they like but the patient pays and then claims a rebate equal to the ‘bulk bill’ price from the government. This scheme has the effect of controlling prices for medical services and we have relatively low costs for our heath charges. I do not know what the current charges are in the USA for medical services but I had an ongoing medical condition which first appeared when I lived in the USA and required additional attention when I returned here. GP’s in the USA charged about double what I paid in Australia when I returned and the cost of an MRI scan in the USA was about $2000 while in Australia it was $800.

    The other difference in Australia is that private health insurers offer coverage to all comers and there are no schemes which are confined to individual US companies. This means that the actuarial cost is spread over the whole population and is therefore not affected by the demographics of individual firms. I found this very strange that my insurance costs varied as the demographics of the firm for which I worked changed as we moved from construction to start up and the age structure of the employees went from mature to better reflect the whole population. There must also be a large cost for the administration of so many insurance schemes which must each be accounted for and reported.

    I also find it strange that someone should complain about paying for others health costs. Surely the point of insurance is to provide now for the possibility of your own requirements in the future. You are not actually therefore paying for someone else’s health costs but providing for your own.

    Incidentally you may be interested to know that my current annual health insurance costs now that I am older than retirement age are ~$1200.00 which is subsidised by government by 30%. If I were in fulltime employment I would pay a levy of 1% of my wages to the government scheme for basic medical insurance. So someone on average wages of say $60k would pay $600 annually and if they also elected to have private health cover they would pay a true cost of about $2250 allowing for the private health insurance subsidy.

    This is a far cry from the $12000 that another of your commentators mentioned. I should say that I loved living in the USA and would have considered permanent residence were it not for the health care costs which are astronomical compared to Australia for very similar outcomes.

  13. @Sylvain

    …except for canadian premier Danny Williams, who unapologetically traveled to the US for his heart treatment. Then again, he has a choice.

  14. Sylvain,

    There are many Americans, myself included, who believe in a limited government. Maybe you can provide some anecdotal evidence to show that Canadian health care is a better system than the present American system and maybe others can present anecdotes to the contrary but to me that is not the point. People like myself believe that the individual liberty to do with what is yours as you please is more important than ANYTHING else.

    The talking heads on TV and in the government(s) can argue about what is the best value in health care but nobody can force me to spend my money on their dreams of the way we can build the world and society.

  15. tmatsci, sylvain,

    Actually, of course, the healthy are paying the costs of other people, and not themselves, no matter what the time point. You are implying, tmatsci, that by the time their lives end, all will use the exact same amount of health care. Rather, that everybody’s lifetime cost will be equal. This is false. Some will use less, others more.

    There is no such thing as “free” care. The money to pay for it must come from somewhere. And you are arguing that these costs should be shared by all.

    Inevitably—not maybe, inevitably—this means that some people pay for more than what they receive, and that others pay little or nothing for what they receive. This, is called “fair.”

    You both are arguing that your neighbors should be responsible for paying your (and your family) bills. Presumably your argument is that everybody benefits from a healthier society, and so they unequal cost sharing is “worth” it.

    It seems to me that this only works if you require something in return for the largess.

    And it also means an inexorable growth in government bureaucracy—which guarantees costs will rise.

    I take your point about scare mongering, which you won’t find from me.

  16. I have read that the health care plan is mainly to help the roughly 15% of the US population who have no health insurance and it won’t have significant effect on people with employer-provided group insurance. A simple calculation also shows that at the rate of 8% increase, my insurance will be qualified as a Cadillac plan in 2018. Forty percent on Cadillac plans seem outrageous.

    Anyhow, I am skeptical about all media reports, yet I am too lazy to sort through the bill. So why put forth a bill of thousand pages? It’s unsexy. Sometimes less is better. Plus a thick bill is indicative of micro management, and micro management is often mismanagement.
    Mr. Obama obviously hasn’t asked for my opinion.

  17. Health Savings Accounts are carried over year to year, until at age 65, they may be spent for any purpose.

    Sounds great, Pre Tax HAS ! I shall do some calculations; it might just beat the Tax-Deferred supplemental retirement plans.

    My native country has a single payer/national health insurance system. It’s affordable but not free for low income people. To reduce the cost (see Speed’s comment), certain drugs such as Viagra and diet pills are excluded from the plan. People can choose not to participate, but almost no one does due to its affordability. I believe everyone I know there is quite happy with the system.

    But then, as I always say, America’s got style in fashion, politics, murder, etc. So I am not sure it’ll work well here. Think of the Medicare, which is basically a single-payer system!

    When I purchase an insurance, e.g., a health insurance, it basically means that under the risk of being ill and hence possibly being hit by a sizable medical bill, I am willing to share the cost. It’s more of a contractual responsibility. If we accept the mentality of “why I should pay for other’s medial bill” and if there were no laws as how a group insurance should be issued, I don’t know what would’ve happened to the old people in our society.

  18. @kdk33

    Yes, there are some canadian that chose to go to the US. Most generally it is for experimental treatment not offered in Canada.

    Many canadian that live in the US come back to Canada when they get sick. I’m not sure why?

    @DaveK

    Liberty is my priority number one and I have no idea how I could be more free in the US then in Canada. When I get sick I don’t have to worry if I will lose my house to pay the medical bill or if I will still be able to send my children at the university.

    For rich people, the US system is probably better. But not everyone get to be rich, there is a large part of luck in that.

    The canadian health care system although governmentally run is much cheaper than the US one. Very few people complain about the system here. Which doesn’t mean that it couldn’t and shouldn’t be ameliorated.

    For example, some US commentators complained that Canada has waiting list. The reason for that is that the entire population has access to health care. It would be the same in the US if everyone had access to it.

    I would agree to let more space to the private in our healthcare as long as the universal system doesn’t suffer from it.

    @ Briggs

    “Inevitably—not maybe, inevitably—this means that some people pay for more than what they receive, and that others pay little or nothing for what they receive. This, is called “fair.””

    Yes, this is “fair”, since no one knows who are the one who will pay more than there share. Enterprise don’t end up with sinking insurance fee like it is/was the case with GM. Also the guy that is unable to get a job in a large company that offer huge benefit receive the same health care benefit than those guys have, except, maybe teeth and eye.

    Yes, it is worth it. Of course, there are some situations where the government can get huge and should be addressed, like the “commission scolaire” who are supposed to help school under there jurisdiction but end up with bigger budget than the school. But these things can be corrected.

  19. I guess you can boil it down to this:

    Some believe that if government – not private markets – controlled health care, more care would be provided to more people for less money.

    IMO (informed by my experience in the US) that believe is fanciful.

    All my other complaints are really either explanations for why I believe free markets are superior, or libertarian philosophical objections to big governments, or simply rants ’cause I’m mad.

    Maybe Canadians have better government.

    Since this is a numbers site:

    US population: 309,000,000
    Candian population: 32,000,000
    Australian population: 22,000,000

    That probably matters.

    Aplogies for the multiple, multiple, postings.

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