Tuesday, September 02, 2008

Health Care

The next item on my list of things that I suspect the Democrats will make worse is in the area of health care. I fear that they have a program that will drive the overall social costs of medical care even higher, without providing additional benefits, digging an even greater financial hole for the country and the people who live here.

In the area of health care we have a situation in which the people who pay for the service, and the people who use the service, are not the same people. It is a bit like taking your credit card and handing it out to some random person. No matter what charges they put on the card, they will never see the bill. That bill is going to come to you. If you do not pay the bill voluntarily, your wages will be garnished to cover the expenses. But the person who has your card knows none of these things. All he knows is that whenever he uses the card to buy something, he gets what he wants, and he never has to pay for it.

The consequences of having this type of system is that we would all fairly quickly drive each other into poverty. We will find other people paying for all sorts of things without making any attempt to economize – no worries about cost, no need to substitute less expensive options for more expensive options, no need take preventative steps to avoid high future costs. Because the agent never has to pay the bill.

What this huge level of demand means is that overall medical costs go through the roof. People use it as if it is free, but it is not free. Other people do, in fact, get the bill, and that bill has to be paid. It gets paid in the form of higher taxes (equivalent to garnishing your wages to pay the credit card that somebody else is living off of.

So, the next step is to take action to keep costs down. The way to do this is to limit services – to come up with a long list of regulations and requirements that tell people what they may and may not purchase. Actually, it is a list of things that people may not purchase. It is a set of restrictions on the use of the health care system.

In other words, we get red tape.

Red tape also costs money. The hope is that the money we pay for red tape is less than the money we save in the form of medical care not used.

But here we introduce another complication. What we have is a feeding trough holding hundreds of billions of dollars. We have a country full of businesses who know full well the profitability of being able to dip into this feeding trough at will. This “red tape” is not going to be laid out by doctors with an eye to the care of their patients. It is going to be laid out by agreement between lobbyists and legislators.

The cornerstone of a profitable business, then, will not be the ability to provide the best medical care at the lowest price. The cornerstone of a successful business will be the manipulation of the government bureaucracy in order to manipulate the flow of public funds. Medical facilities can expect to put their greatest efforts in that which provides them with the greatest profits. Lawyers and lobbyists will become the primary income-generators for these businesses. Doctors and nurses will simply be cogs in the machine.

Furthermore, legislators, when they hand out public funds or manipulate the flow of money through regulation, have one overriding concern. That is to funnel the money to those people who will then support their re-election, and away from people who oppose their re-election (who support the re-election of somebody else). The service that medical facilities will sell to the people who pay their bills will not be “the ability to keep you healthier, longer, and at least overall costs,” but “the ability to get you votes in the next election, or the money you need to advertise for votes.”

To whatever degree legislators control the flow of funds, to that degree the “job” of the medical industry will be the job of helping legislators get votes. Treating illness and injuries will be a side show – the means by which the medical industry pursues its primary objective of providing legislators with votes and campaign contributions.

One of the facts that we have to recognize is that much of our high national medical costs are due to lifestyle choices. Drinking, smoking, unprotected sex, over-eating, under-exercising . . . these are the choices that people make. However, when they make these choices, they make them with the idea that somebody else gets to pay the bill.

What type of car would you buy if you knew that somebody else was going to pay for it?

We have to have a medical care system in which the people who make the choice to use certain services suffer the costs of their decisions – where they are limited in their ability to buy these services on somebody else’s dime. To the degree that we are not able to do this, to that degree we will inflate the overall social costs of medical care, and create an industry more attuned to hiring lobbyists to manipulate the flow of money through Washington or state governments instead of investing in doctors and nurses who provide the best medical care.

Having said this, I want to remind the reader that there is an argument to be made against having a pure free-market medical system. From a desire utilitarian perspective, markets have a significant problem. They are inefficient at fulfilling desires. A person with a great deal of money can bid goods and services away from those who have little money, even though the person with little money has a more highly valued use for those goods and services.

My classic example is the case of buying bottled water after a disaster. The rich person can afford to buy water at $20 per bottle for trivial uses, such as giving her pet poodle a shampoo. Whereas the poor person whose sick child is suffering from dehydration might not even have $20 to spend. Whereas value exists in the form of relationships between states of affairs and desires, this system has some negative value. It is allowing the fulfillment of weaker desires and fleeting interests, while allowing stronger and more stable desires go unfulfilled.

The medical industry is one industry where the rich have the power to bid up the prices of goods and services – far above what poor people can pay. They are able to bid medical skills away from the practice of treating illnesses and injuries, and instead direct it towards cosmetic surgery, personal trainers, dieticians, cooks, and ‘spare no expense’ medical care. Plus, they have an incentive to do so. Rich people do not want to be sick or die either.

The argument that I have given above is not an argument for going with a completely free-market medical care system. Such a system will leave the rich to bid the price of medical services well above what the poor can afford to pay. However, it does argue that there needs to be something built into the system whereby those who use medical services pay something for that use.

Most importantly, I think, people need to pay the costs of medical care when it comes from lifestyle choices. A great deal of the demand for medical services comes from people who smoke, drink to excess, use other illegal drugs, have unprotected sex, over-eat, under-exercise, and the like. When people make these kinds of choices, it is particularly important that they pay the social costs of their decisions, and not force those costs onto other people.

In effect, when we have policies that allow people to engage in these types of behaviors without suffering the costs of their own decisions, we are, in effect, subsidizing these behaviors. For all practical purposes, the situation is no different than if the government were to say, “We want you to smoke, drink heavily, use illegal drugs, have unprotected sex, over-eat, and under-exercise. And, in order to encourage you to do these things, we will give you a special incentive in that we will cover whatever medical costs come up.”

This is a sure-fire way to decrease overall public health and increase the overall social costs of medical care. These government subsidies to poor lifestyle choices already amount to billions of dollars per year, and are almost certainly going to rise under a Democratic health care plan.


Anonymous said...

The idea that seperating the payer from the benefactor can increase costs is not a new one, but it is a fairly weak argument against socialized health care. I'm not going to say that socialized, goverment paid health care is the best solution, but if you want to say something meaningful, there are a few points you need to address.

1) Our current system has this problem. Except that the insurance companies take the place of the fedral government in your scenario. The benefactor pays little to no out of pocket costs, and it unaware of the true cost of health insurance, as that is covered by the employer. So you are really arguing against our current system at least as much as you are against a government run system

1.5) Also our current system has some very high drawbacks. It only works well for people with a good source of health care, meaning people who work for government or for large companies. It's a system that stongly disfavors small businesses. You should realize that small businesses are a great benefit to our society, but one or two employees with a sick familiy member can raise the cost of healthcare for the business beyond their reach.

2) There are many efficiencies to be gained by increasing access to preventative care. Right now a lot of people only see a doctor when something is noticably wrong, and can even be afraid to have a doctor find something wrong given the cost and 'pre-exising condition' clauses in most insurance. This alone can trap someone in a job, or even cause them to lose coverage. Removing these disincentives with help catch things early and allow them to be treated more easily and reduce costs.

3) There are many other countries with national healthcare, and they use many different approaches. Sure, none are perfect, but if you want to highlight someof the problems you are listing with socialized heath care, there are plenty of examples for you to select from. How have the costs and services of health care in Germany, Japan, England, Canada and other countries with nationalized healthcare compare to us and to each other?

Healthcare is a complicated topic with many motivators, but trying to boil the problems to a seperation of cost and benefit helps no one.

anton said...

US America can be likened to a club, a Country Club! When you gain membership it is considered to be classless to look around the dining room and decide who doesn't belong in "your" club.

When you do this, you violate one of the things that the US Country Club presses on the the rest of the world as one of the benefits of belonging to the club . . . freedom and rights!

Now, if your club was to ban, for example, smoking, you would experience overall improvements in the health of your members and reduce your health care costs. At the same time, however, your club would have to accommodate all of the people employed in those outlets in US America that rely on tobacco as their primary source of income. Oh, yes, these corner stores also pay taxes, but who is looking at that! I would imagine that the same people who complain about the cost to society incurred by the obese, the smokers, the drinkers, etc. would then complain about the welfare rolls being swollen because so many people had to go out of business. And, of course, the smokers would claim that their rights were being violated.

US Country Club Rule Number One: Rights and freedoms trump everything else!

We can spend countless time creating "utopian" solutions but if the exercise is to have any validity, it must take into consideration ALL of the elements. US America may have to be dragged kicking and screaming into the twenty-first century realizing that "socialism" is not a dirty word. If you will notice, it is not the wealthy who are complaining -- only the middle and the upper middle class who see "paying their fair share" as one of the things blocking them from joining the "wealthy" ranks.

My very, very wealth sister used to be a proud member of the US Country Club. She would constantly boast about the wealth she had accumlated by being a member of the club. And then her health failed and her medical expenses started to nibble away at her fortune. (Actually, she would have to live to be 150 to spend it all.) Because she could, she came back to Canada to sponge off our socialised medicine. If I could have, I would have barred her at the border!!!

I treat her complaints, and her prejudices levied at "obese" people with the same interest I have in hearing US America Country Club members complaining about the high cost of health care, pharmaceuticals, taxes, etc. . . NONE!!!

When, oh when, will US American Country Club members ever realize how much it really costs to be a member of the club????

Andy said...

Here is an informative article written by the CATO Institute on McCain vs. Obama's health care plans.

Anonymous said...

Anon - very well said, Bravo!

Alonzo - I also was confused for a paragraph or two if you were talking about universal health care, or about our current insurance system, since they both have the same effect on anyone included in the system (which, under our current insurance system, is only those who have jobs that include such insurances).

The problem I have with our current system is that everywhere in the world, the wealthy will always get the best medical coverage that is available, regardless of what the health care system is like. However without universal healthcare the poor get little-to-no medical coverage. So changing the system won't affect the health of the rich at all, but drastically changes what the poor (and middle class, now) get. In light of your views on Economic Justice, and since almost everyone values their health greatly, wouldn't it be more consistant to argue for universal coverage?

It is an oft-quoted statistic that Americans spend more on health care (per capita) than any other nation, and yet have an average health that is lower than most developed nations. If this is the case, it implies that universal coverage is, if nothing else, at least better than what we have now. If our current system is both more costly AND less effective than the alternative, this addresses both your major objections to universal health care. Political corruption is obviously always a concern, but I think it's a seperate issue that must be dealt with seperately.

I think it is rather telling that in the US we already have universal health care, for a small subset of our population. Veterans get what is essentially free, universal health care. From the few veterans I know, they both say it is a stellar system and they wouldn't trade it for the world (figuratively). (Yes, I know this is a small sample set) There have been some recent scandals (Walter Reid, etc), but the fact that these are sources of public outrage and quickly corrected speaks volumes, in my opinion.

Hume's Ghost said...

The thing is that we already know that our health care system is more costly and less effective than other socialized systems in other nations. See here for instance.

The current American system creates a profit incentive do deny health care and it also it benefits (through already existing government subsity via employee healthcare being counted as non-taxable) the people who can most afford to pay it.

It creates a drag on our economy because we have milliions and millions of people who aren't as healthy and productive as they should be and because it creates job stagnation where people get locked into work out of fear of losing their insurance.