One of the things that Obama and his progressive cohorts disingenuously present in support of their health care "reform" proposals is lack of competition, which is typically a conservative's argument. This is yet another pathetic attempt to try to flip economic libertarian positions on their head; for instance, when we note that national health care systems in fact ration care, they claim that private insurers also ration care. If we talk about health care decisions being made by a government bureaucrat, they argue that policyholders are subject to corporate bureaucrats. Hearing this disingenuous nonsense is like listening to kids argue in an elementary schoolyard.
There is no doubt that doctors often have to deal with the idiosyncrasies of multiple private health insurers (e.g., paperwork, whether a preferred surgeon accepts the patient's insurance plan, and relevant vendors for diagnostic tests). But there are qualitative differences; ask doctors whom find their experimental treatments targeted by the FDA or have to subsidize the care for Medicare and Medicaid patients from the proceeds of private carriers and their policyholders. Ask the single-payer system seriously ill patients in Canada and Great Britain whom run into critical delays in getting seen and treated (in part due to unsatisfactory capacity planning) or are not prescribed certain effective medicines.
The partisan smears against the professionalism and integrity of private-sector health insurance companies, their management, employees, and ownership, are unconscionable. The fact is, most policyholders are happy with their private-sector insurers, including federal employees, something which would not be the case if they felt the quality of their health care was in question. But more to the point of the picture portrayed of private insurers as greedy, windfall-profit capitalists, let's look at Wall Street: if the average American stock on the exchanges sells at over 16 times price-earnings, many of the blue chip names in the sector (say, Wellpoint, Humana, United Healthgroup, Aetna, etc.), are selling maybe at two-thirds of that or worse.
After Obama singled out Blue Cross of Alabama in his Congressional address earlier this week as the poster child for monopolistic market share (by the way, Blue Cross is a NONPROFIT company which doesn't quite fit the profit-monger stereotype of the demagogues), Blue Cross was quick to fire back, noting that its policies cost less than the national average and it faces over 300 competitors in its markets.
The fact is, a health care exchange where the government is both the regulator and a participant is inherently corrupt: premiums and mandates would inherently be subject to activist political influence, not cost and actuarial factors; this would rig the market against private-sector insurers, which don't have the deep pockets (i.e., of inflation-causing government currency printing presses) behind them.
If the government sincerely wants to promote competition, it needs to look at barriers of entry--which in many cases involve differing mandates and regulations among states. But it also needs to man up and accept its responsibility for its actions and inactions in the space: e.g., the high cost of medical malpractice insurance because of a lower barrier of entry for frivolous lawsuits, reimbursing doctors some 20 to 30% less than market cost for Medicare/Medicaid patients, etc.
If the government sincerely wants to deal with high-risk/cost insurance risks, it should like at alternatives like guaranteeing enrollment in and strengthening state/region assigned risk pools. The big issue with high risk patients is that individual insurers don't want to get stuck with a disproportionate number of high-cost policyholders. The way assigned risk pools usually work is that policyholders generally pay a higher premium, which is capped and regulated; the remaining costs are covered by state premium taxes and/or government subsidies.
If the government wants to deal with capping out-of-pocket expenses or catastrophic losses (e.g., eliminating benefit caps), it should consider government reinsurance or catastrophic insurance. If it wants to deal with the majority of uninsured (i.e., small business personnel and their dependents), it should provide equal opportunity for a self-insurance association concept (which large companies enjoy) across states with exemption from individual state mandates/policies or a standard "barebones" basic health care insurance plan with a limited basket of federal mandates and policies, which any insurer could market in any state.
The fact is that government is PART of the problem, NOT the solution to the problem. It doesn't even do an efficient job recruiting all households eligible for Medicaid or SCHIP, yet continues to raise eligibility limits, i.e., government scope creep. already paying nearly half of health care sector costs. It doesn't provide equal opportunity to small and big companies, in that small companies are not allowed to self-insure and are forced to pay for high-cost individual state mandates and regulations (some of which are dysfunctional, e.g., allowing people to postpone seeking insurance until they are ill). It has done nothing to provide equal protection of tax-advantaged savings for households purchasing their own coverages with after-tax income. It has done nothing to promote malpractice tort reform, as legal costs drive doctors out of business. It has done nothing about deregulating the health insurance market across states (among other things, it would force states to rethink gold-plated coverages and regulations that make their own providers uncompetitive). And yet progressives have the audacity to lecture economic libertarians on the benefits of government "competition"? The fact is, they want to rig the market sector so everybody has to subsidize gold-plated benefits favored by special interests. In short, this is nothing more than a shell game involving old-fashioned liberal tax-and-spend.
The fact is, a health care exchange where the government is both the regulator and a participant is inherently corrupt: premiums and mandates would inherently be subject to activist political influence, not cost and actuarial factors; this would rig the market against private-sector insurers, which don't have the deep pockets (i.e., of inflation-causing government currency printing presses) behind them.
If the government sincerely wants to promote competition, it needs to look at barriers of entry--which in many cases involve differing mandates and regulations among states. But it also needs to man up and accept its responsibility for its actions and inactions in the space: e.g., the high cost of medical malpractice insurance because of a lower barrier of entry for frivolous lawsuits, reimbursing doctors some 20 to 30% less than market cost for Medicare/Medicaid patients, etc.
If the government sincerely wants to deal with high-risk/cost insurance risks, it should like at alternatives like guaranteeing enrollment in and strengthening state/region assigned risk pools. The big issue with high risk patients is that individual insurers don't want to get stuck with a disproportionate number of high-cost policyholders. The way assigned risk pools usually work is that policyholders generally pay a higher premium, which is capped and regulated; the remaining costs are covered by state premium taxes and/or government subsidies.
If the government wants to deal with capping out-of-pocket expenses or catastrophic losses (e.g., eliminating benefit caps), it should consider government reinsurance or catastrophic insurance. If it wants to deal with the majority of uninsured (i.e., small business personnel and their dependents), it should provide equal opportunity for a self-insurance association concept (which large companies enjoy) across states with exemption from individual state mandates/policies or a standard "barebones" basic health care insurance plan with a limited basket of federal mandates and policies, which any insurer could market in any state.
The fact is that government is PART of the problem, NOT the solution to the problem. It doesn't even do an efficient job recruiting all households eligible for Medicaid or SCHIP, yet continues to raise eligibility limits, i.e., government scope creep. already paying nearly half of health care sector costs. It doesn't provide equal opportunity to small and big companies, in that small companies are not allowed to self-insure and are forced to pay for high-cost individual state mandates and regulations (some of which are dysfunctional, e.g., allowing people to postpone seeking insurance until they are ill). It has done nothing to provide equal protection of tax-advantaged savings for households purchasing their own coverages with after-tax income. It has done nothing to promote malpractice tort reform, as legal costs drive doctors out of business. It has done nothing about deregulating the health insurance market across states (among other things, it would force states to rethink gold-plated coverages and regulations that make their own providers uncompetitive). And yet progressives have the audacity to lecture economic libertarians on the benefits of government "competition"? The fact is, they want to rig the market sector so everybody has to subsidize gold-plated benefits favored by special interests. In short, this is nothing more than a shell game involving old-fashioned liberal tax-and-spend.
Hypocritical Nature of Progressives Using the Competition Argument
The chutzpah of progressives is particularly apparent when they oppose (in zero-sum terms) legitimate educational competition to failing local schools, e.g., independent charter schools or vouchers for private schools. The way that GSE's like Fannie Mae and Freddie Mac rose their market share from single-digits in the 1960's to nearly half of the overall home mortgage secondary market (using exclusive cheap Treasury money as a competitive weapon against private-sector competitors) shows how fair a competitor the government is (and I suspect taxpayers are not happy over last year's bailout of the GSE's). Tell me--as businesses, state and local governments have had to lay off workers to meet budgets, when is the last time you heard of federal government employees being let go? Especially given an unprecedented $2T budget deficit?
The redundancy and budgetary turf battles are legendary. Just to give a small anecdotal taste from my own experience: Over the past 5 years, I've worked on 3 federal projects under different agencies requiring public trust background checks. Agencies generally don't recognize background checks from other agencies, so I had to fill out the same tedious work and location information (since I have had 2 or 3 past employers whom have since gone bankrupt, I'm not sure how usable that information is; I've also done short-term assignments). One of my favorite stories about that is on two occasions, I was called back to have my fingerprints redone, because the first set "didn't take". On my last assignment, my project manager told me to check with the security office about the status of my background check (a prerequisite for my own badge and computer network account) because it turned out my predecessor colleague had not been contacted for 2 months after his application was approved. In my case I called in mid-February (about 2 months after starting on the project), and the security office implied something of an unspecified nature had been done 10 days earlier and an email had been sent to the sponsor; I had to contact the sponsor for specifics. The sponsor once again denied getting anything from the security office. I decided to bluff: I went to the security office, claiming that my badge was waiting for me, and they gave it to me.
This is an issue which almost undid Barack Obama's rise to the US Senate. The leading Democratic challenger for retiring Republican Senator Peter Fitzgerald's seat was Blair Hull, a wealthy financial services progressive whom ran most prominently on importing cheaper Canadian versions of successful American prescription drugs (Hull's campaign imploded when allegations of abuse of his ex-wife were raised in the local media). The prescription drug industry is a favorite whipping boy of purported corporate greed by progressives.
Any first-year economics student understands why prescription drugs might sell at different prices. Developing new drugs is enormously expensive, including the costs associated with products that never make it to market. The company must recover those costs to be economically viable, not to mention to cover corporate overhead, operational expenses, not to mention at least enough return on assets to attract investment. There are a number of factors that go into pricing, including volume and competitive products. To the extent that the marginal benefits (e.g.,price) exceed the marginal costs (of personnel, materials, energy, etc.) of producing the item, it is profitable. This is assuming that the fixed overhead costs (facilities, land, etc.) are already covered.
Basically, the Canadian government negotiates drug prices, essentially capping prices. It may well be that this price is less than the market price for the drug in the US. Why would the drug maker sell at a lower price, even if it means that Canadian patients don't pay their fair share of drug development costs? Most likely it's a strategic decision to maintain a presence and international market share. (We see a similar concept in other contexts. For instance, I sometimes get magazine subscription offers at "preferred professional rates", deeply discounted over normal subscription rates. Offering everybody the same price, including their bread-and-butter subscribers, would impact their business model. What would motivate them to make these offers? Basically to increase their readership, which affects their ability to sell ads.)
There is a legitimate concern here as to why American consumers are essentially subsidizing prescription drugs sold in Canada (although the real story is the lack of commitment of the Canadian government to free market principles: price controls never work--they simply result in shortages). But when politicians (including, unfortunately, some Republicans) demagogued the issue, looking to arbitrage the differences in prescription drug prices, the pharmaceuticals have to rethink their strategy, because the cannibalization of home market sales is not a viable business model. [Incidentally, I have no vested interests here, beyond exposing phony progressive economics; I personally do not take any prescription drugs, and I do not directly own shares in pharmaceutical companies.]
This is not to say I don't have my own industry criticisms here. I have concerns with some pharmaceutical sales tactics, including potential conflicts of interest between doctors and pharmaceutical companies, off-label use of drugs, and media commercials aimed at encouraging patients to lobby their doctors. I'm also receptive to good faith negotiations consistent with the pattern of other government vendors.
Muddled Thinking About Insurance and Accessibility to Health Care
I'm somewhat amused reading smug, morally self-superior foreigners reflecting on well-publicized events of Americans lining up for free health care. (They underestimate the American obsession with bargain-hunting, e.g., Filene's Basement's "running of the brides".) The fact is that American doctors and hospitals have always given away (or accepted below-market payment for) services for a number of lower-income patients (they just don't politically exploit their generosity). In fact, the federal government routinely underpays for Medicare and Medicaid patient services (e.g., between 20-30%). [That's why the Democrats talking about "paying" for their Trojan horse health plan by cutting already inadequate reimbursements are particularly disingenuous.]
The fact is that progressives are intentionally confusing people between health care access and health care insurance. First, hospitals cannot refuse emergency care based on a patient's ability to pay. Second, lower-income people are eligible for Medicaid programs, and senior Americans are eligible for Medicare. Then what about 46 million uninsured? Investors Business Daily provides a breakdown, but a substantial plurality of them are higher-income Americans (e.g., in small businesses) whom can afford to buy health insurance but choose not to do so.
This doesn't mean there aren't issues. For example, if a small business covers its employees and their dependents, and (say) a relevant insured patient has catastrophic expenses, the insurance provider has to cover its costs. There is an issue about rising bankruptcies due to catastrophic injuries or illnesses. (However, note that those costs are essentially subsidized by charges to other patients, the government and insurance companies.) There are ways to handle these problems without government micromanagement of health care.
The Use of Phantom Savings
Obama and the Democrats have gone out of their way to extol the virtual benefits and cost-effectiveness of preventive medicine. However, beware of sweeping generalizations and dubious promises of alleged long-term cost savings to share the costs of the proposed Obama expansion of the federal footprint in health care. Consider the following quote from a meta-analysis conducted Cohen et al., reported in the 2/14/08 edition of The New England Journal of Medicine:
[Presidential ]candidates have offered plans for controlling spiraling costs while enhancing the quality of care...Barack Obama has argued that "too little is spent on prevention and public health."...Sweeping statements about the cost-saving potential of prevention, however, are overreaching. Studies have concluded that preventing illness can in some cases save money but in other cases can add to health care costs...These results are consistent with earlier reviews but cover a larger sample of studies...Although some preventive measures do save money, the vast majority reviewed in the health economics literature do not.
The Use of Deliberately Misleading Statistics By Health Care Reform Proponents
There are so many ways that this is done. Most Americans who have not studied statistics or research design may not understand it, but let me discuss a few key points. First, we have to use standard materials and measures. Second, we must identify other relevant factors to explain an observed result.
The progressives have an agenda which is indict the US health care system by questioning its superior quality, which they attribute to the lack of government intervention in the sector.
One example is infant mortality. Investors Business Daily does a good job explaining the use of misleading statistics:
Official World Health Organization statistics show the U.S. lagging behind France in infant mortality rates — 6.7 per 1,000 live births vs. 3.8 for France. [According to Dr. Linda Halderman, a policy adviser in the California State Senate, these comparisons are bogus.] Halderman notes that in the U.S., any infant born that shows any sign of life for any length of time is considered a live birth. In France — in fact, in most of the European Union — any baby born before 26 weeks' gestation is not considered alive and therefore doesn't "count" in reported infant mortality rates.
A second example is longevity. The tacit assumption below is that the reason the US pays more per capita is because of the inherent inefficiency of our private-sector health care system, and comparative mortality statistics undermine the quality health care argument. But it turns out that our health care system is not responsible for the lower mortality, but explained other, cultural factors. Once again, Investors Business Daily makes the argument:
"We spend one-and-a-half times more per person on health care than any other country, but we aren't any healthier for it." ... We spend one and a half times more per person, true. But because our health care here is better... True, our life expectancy of 78.1 years — which is up sharply from just a decade ago — ranks us 30th in the world in longevity. But look a little closer at the data.
The U.S. homicide rate is two to three times higher than in other industrial nations. And we drive a lot more than others, so our auto fatality rate of 14.24 deaths per 100,000 people is higher than in Germany (6.19), France (7.4) or Canada (9.25). Add to this, we eat far more than other countries on average, contributing to higher levels of heart disease, stroke, diabetes and cancer.
When all those factors are figured in, according to a recent study by Robert Ohsfeldt of Texas A&M and John Schneider of the University of Iowa, Americans actually live longer than people in other countries — thanks mainly to our excellent health care.
