The grand aim of all science is
to cover the greatest number of empirical facts
by logical deduction
from the smallest number of hypotheses or axioms.
Albert Einstein
Taking Romney to the Woodshed: Part 2
Let me start this discussion with an unlikely analogy. I'm overweight which reflects a combination of factors within my control (diet and exercise) and outside my control (e.g., genetic factors, a sluggish thyroid, etc.) The most important factors are behavioral in nature. I have always been self-conscious about going to all-you-care -to-eat buffets or restaurants. I do not doubt many, if not most overweight people eat more than is necessary, but I have eaten meals with much thinner people whom eat far more than I do. If you look at all those famous hot dog eating contests, the winner is never some 400-lb guy with a double-chin; it's quite often some short, thin person whom can eat more hot dogs in a few minutes than I've eaten in the past decade.
In fact, I can only think of once or twice over the past decade, outside of a work group scenario, where I've gone to a buffet place; I had been working late on a project near Milwaukee, I hadn't eaten dinner yet (near midnight), and there was a diner still open by the interstate.
But here's the point: for a low fixed price, you can revisit the food bar as many times as you want. I can't think of any lunch at a buffet place (e.g., pizza, Indian food, etc.) where most, if not all the people in the work group didn't make multiple trips to the bar (unfortunately, myself included). I know I ate more than I would have if I had ordered à la carte, but the price difference wasn't much. For example, in many hotels a small continental breakfast may cost up to $8, but (say) for $11, you get access to a full breakfast bar. I often rationalized doing the buffet, for example, if I was going through a long series of interviews with potential employers. Even though I was paying somewhat more, it was a higher quality breakfast, including maybe a 2 or 3-egg omelette.
Health insurance is a perversion of the general concept of insurance. Insurance is meant to spread the costs of reasonably catastrophic expenses, say, a fatal or crippling auto crash, a cancer diagnosis, etc. Auto insurance does not cover routine car operation and maintenance (gas, oil changes, tuneups, tire replacement, etc.)
Government is a big source of the problem because it provided a work around, in part to deal with another government perversion of economic policy: wage-price controls. Compensation=wages+benefits. Many if not all of benefits are tax-exempt or deferred. Instead of simply letting the supply and demand of labor relative to compensation work, government implicitly subsidized benefits--and gave unions and others an implicit incentive to shove as many ordinary expenses to the benefit side of the ledger. How do you think unions end up with health insurance packages worth over $20,000 a year, far above the national average? It's not that union members' family health conditions are that much worse.
Think if you have to call a plumber; his cost is not covered under your home insurance policy. But if a doctor's billing rate is, say $150/visit, as far as the policyholder is concerned, his real cost is any relevant co-payment (say, $10-15/visit). But imagine if the full cost of the discounted visit (say, $100/visit) came out of the patient's own pocket. Even any policyholder share of health insurance underestimates the true cost because a large portion is often subsidized in a hidden form by the employer, not to mention the fungible tax benefits.
All of this is perverse economics. Patients in a subsidized (i.e., via workplace) health insurance program only pay a fraction of costs, and there's an implicit high demand for services at an effective low cost. What's just as bad, if not worse, you have government regulators agreeing to tack on special-interest benefit mandates (you name it: mental health services, fertilization treatments, etc.) The patently absurd recent decision to include birth control as a mandated benefit under ObamaCare just demonstrates how progressives muck up health care. Not to mention perverse policies like "no preconditions/low premium" health insurance which effectively require a company to accept a policyholder, which loses money from day one, in effect socializing their high-cost health care cost on the backs of "good faith" policyholders and the insurer. (Note that the hypocritical government doesn't allow homeowners to apply for flood insurance once a hurricane has been charted to their area.)
It does not fall within the mandate of government to provide health services, anymore than it should provide food, housing, utilities, etc. We should not reward people whom have failed to act virtuously on their own behalf by failing to save for a rainy day, whom as heads of households do not buy life insurance to protect their dependents, and whom indulge in bad habits (overeating, tobacco, drinking, gambling or recreational drug use, among other vices).
I do think government policy should not lead to perverse effects. Let me provide examples. One of my best friends, an accounting professor in California was seriously dating a young woman in the 1990's; one day she was in a horrific traffic accident leaving her a quadriplegic. The state of California provides assistance, but if my friend was to marry her, the state would bleed his assets dry. The end result was it makes it almost impossible for someone under those circumstances to ever get married. A second example would be the case of a father whom abandons his family, not because he wants to, but he can't find work to provide the income his family would receive from the state afterwards. I believe government policy should be consistent with promoting our cultural ideals of marriage and family.
I think clearly a company must be able to manage its risks intelligently. Progressives act perversely by wanting to fix or cap the premiums but expose the company to ruinous losses. There are some cases where firms acting in good faith are faced with extraordinary losses (e.g., an act of God--say, a meteor collision, war, etc.) But say, for instance, if a company wasn't able to limit its exposure to high-cost individuals, it would soon find itself in bankruptcy.
My personal feeling is that if the government would reinsure insurance companies for high-risk policyholders, especially when any regulated caps fail to cover costs, it would go a long way to overcoming the reluctance to accept these prospective policyholders. I think probably the fairest way of the government to raise the funds for catastrophic health costs is through a consumption tax.
Government has been the problem, not the solution. It subsidizes high-cost insurance benefiting people whom pay a fraction of the cost (e.g., large corporations, labor unions, government employees) whereas others end up paying health care expenses from after-tax dollars. ObamaCare (and RomneyCare) mandate the purchase of an insurance product (including implicitly the cost of government regulators, government and/or insurance company). If all I need is a routine physical, I should only have to pay the cost of the office visit--but the doctor is probably passing along some of the costs of his Medicaid/Medicare patients.
So let's review a bit: the Congress, in terms of dealing with medical costs with its programs almost 15 years ago, decides to impose price controls, imposing cuts in government price lists for services, which are significantly less than market price. We now have Congress periodically having to rollback its automatic price cuts.We have policyholders only paying for a fraction of the cost of their own insurance... if name-brand prescriptions cost little more than generics, why settle for the generic?
Now let's review Romney's discussion: he wants to talk about "individual responsibility". He says tax credits won't do it, because some people (say, for example, unemployed people) don't pay taxes to credit against. A couple of responses here: that seems to imply funding via wages; there are a number of tax revenue methods, including a VAT or sales tax, excise taxes, etc. Second, the Obama Administration is willing to cut reimbursable tax credit checks.
He then talks about freeloader middle-class people showing up at the (very expensive but "free") emergency room vs. more cost-effective clinics. The general implication is that between jobs (or at least jobs with benefits) people decide not to buy insurance but then freeload off taxpayers and/or the insured.
First of all, I think people unnecessarily utilizing the emergency rooms is more a matter of public education; in fact, Dr. Mark J. Perry in his Carpe Diem blog regularly features news stories on the rapidly spreading, popular mini-clinics in malls and retail chains. Second, it's not clear to me why hospitals or the state cannot pursue cost recovery (e.g., after unemployed people find work).
Governor Romney, first, it is not clear to me why any particular form of insurance should be mandated. Where do we draw the line? (The case for auto insurance is different; for example, you could accidentally hit a pedestrian or cause property damage with a car.) I do think you can make a case for catastrophic health care insurance, but why force the public to pay for insurance instead of handling health care expenses out of pocket? And why should citizens be forced to pay for state-mandated benefits which reflect special-interest groups? What we have seen is an explosion of wait times and state budget issues... When you find patients unable to find physicians and long delays to see a doctor, it's a classic example of shortages under megalomaniac progressive government. Why didn't we see the governor open up the market to non-Massachusetts providers to provide more price competition in a state with among the highest health insurance rates in the country? Why didn't we see more affordable core health insurance options, shed of gold-plated benefits? You also need to explain why the concept of a mandate is more equal for the state of Massachusetts.
Word Games and ObamaCare
One of the things that really irritates me is the use of inflammatory rhetoric in a misleading manner. This is not a matter of nitpicking, but of fuzzy thinking and/or red meat rhetoric. Ron Paul recently pointed out that Michele Bachmann and Herman Cain was using the phrase "socialism" to describe ObamaCare when it might be more appropriately termed "fascism"
There's a subtle difference. But Ron Paul's description can perhaps be understood in the context of this description from Wikipedia:
Fascists advocate: a state-directed, regulated economy that is dedicated to the nation; the use and primacy of regulated private property and private enterprise contingent upon service to the nation or state; the use of state enterprise where private enterprise is failing or is inefficient; and autarky.Note that Ron Paul is not calling Obama a fascist; what he is saying is that there is a conceptual difference between the state owning major enterprises and heavy-handed crony capitalistic relationships, content with bullying companies (remember Interior Secretary Ken Salazar's "Our job is basically to keep the boot on the neck of British Petroleum"?), cutting deals with the pharmaceuticals and other industry segments during ObamaCare deliberations, nationalizing the college student loan market segment, and bestowing sweetheart deals on favored green energy companies while turning the EPA on more cost-effective coal power plants... We have heard Obama declare it is in our national interest to preserve the (heavily unionized) domestic auto industry, we can't afford to lose the solar energy race, we must "invest" in education, alternative energy, and infrastructure? No concept of Adam Smith's "invisible hand" here...
What Obama is doing is literally an extension of the progressive FDR--in fact, FDR wanted to do a health deal. FDR and Obama to a large extent have been influenced more by social democrat policies in Western Europe than by (during the Cold War) the socialist regimes of East Europe and Asia.
Musical Interlude: Nostalgic/Instrumental Christmas
Arthur Fielder & the Boston Pops Medley, "Here We Come A-Caroling/O Tannenbaum/I Saw Three Ships ". I loved preparing for my high school choir Christmas concert (some of our fellow students or critics thought we sounded a little flat); in part, that's why a couple of my selections in this series have involved choirs. (Look for a version of one of my favorites from the concern "Sleigh Ride" in an upcoming selection.) Let me recommend the Christmas Time TV Youtube channel which reprises performances from TV specials, classic cartoons and movies (at least some videos are not original clips from the shows themselves, but the music is unforgettable.)
