Patient Power

Why government cannot run a business

Some great points by John Steele Gordon in the Wall Street Journal:

The Obama administration is bent on becoming a major player in — if not taking over entirely — America’s health-care, automobile and banking industries. Before that happens, it might be a good idea to look at the government’s track record in running economic enterprises. It is terrible. …

There are a number of reasons why this is inherently so. Among them are:

1) Governments are run by politicians, not businessmen. Politicians can only make political decisions, not economic ones. They are, after all, first and foremost in the re-election business. Because of the need to be re-elected, politicians are always likely to have a short-term bias. What looks good right now is more important to politicians than long-term consequences even when those consequences can be easily foreseen. The gathering disaster of Social Security has been obvious for years, but politics has prevented needed reforms. …

2) Politicians need headlines. And this means they have a deep need to do something (”Sen. Snoot Moves on Widget Crisis!”), even when doing nothing would be the better option. Markets will always deal efficiently with gluts and shortages, but letting the market work doesn’t produce favorable headlines and, indeed, often produces the opposite (”Sen. Snoot Fails to Move on Widget Crisis!”).

3) Governments use other people’s money. Corporations play with their own money. They are wealth-creating machines in which various people (investors, managers and labor) come together under a defined set of rules in hopes of creating more wealth collectively than they can create separately.

So a labor negotiation in a corporation is a negotiation over how to divide the wealth that is created between stockholders and workers. Each side knows that if they drive too hard a bargain they risk killing the goose that lays golden eggs for both sides. Just ask General Motors and the United Auto Workers. …

5) Government enterprises are almost always monopolies and thus do not face competition at all. But competition is exactly what makes capitalism so successful an economic system. The lack of it has always doomed socialist economies.

Read the whole piece here.

• Politicians: save us from human nature!
• Obama: “Public health plan” would “keep insurance companies honest”
• Taxing your beer for politically-controlled health care
• Shopping for medical care
• No more speciality hospitals?

Posted in Policy - National | tags: competition, public choice
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Responses to Paul Krugman on economics of health insurance

In a recent post on health care, Paul Krugman writes (in his typically obnoxious smug style):

Both George Will and Greg Mankiw basically argue that we don’t need a government role because we can trust the market to work — hey, we do it for groceries, right?

Um, economists have known for 45 years — ever since Kenneth Arrow’s seminal paper — that the standard competitive market model just doesn’t work for health care: adverse selection and moral hazard are so central to the enterprise that nobody, nobody expects free-market principles to be enough. To act all wide-eyed and innocent about these problems at this late date is either remarkably ignorant or simply disingenuous.

Check out Brian Caplan’s response here. After making good points in response (government controls make the problems worse & that there’s advantageous selection), Caplan adds:

Unlike Krugman, I not going to dismiss everyone who doesn’t know these facts as “remarkably ignorant or simply disingenuous.”  What I will say, though, is that if you don’t know them, you have a lot to learn from nobody.

Thank you, Brian for demonstrating the class that Dr. Krugman does not.

Also check out David Henderson’s post: Krugman Misstates Arrow.  Here’s part of it:

if by “standard competitive model” you mean “perfect competition,” doesn’t work well even with gasoline stations and repair shops. When a company can invest in reputation, what Ben Klein called “brand name capital,” the perfectly competitive model goes out the window. But if you read just Krugman’s short post, you might think that Arrow is arguing for a government role in health care, as Krugman is, right? And I would bet that Krugman wants you to think that. Yet, nowhere in Arrow’s article can I find such an argument.

• Canadians Tell Krugman About Socialized Medicine
• Krugman: Ignorant, or a Liar?
• Health care: Individual or “Collective” Responsibility?
• More doctors drop Medicare patients
• Obama’s health care reform: road to single-payer serfdom?

Posted in PPC, insurance, tax code, HSAs | tags: economics, Krugman
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Democrats’ health-care proposals would entrench status quo

Economist Arnold Kling has an excellent essay at National Review on-line. I’ll quote only what Arnold himself has quoted from the article on his blog:

The debate we should be having is over whether restraint in our use of medical services should be initiated by government officials or left to consumers. The Democrats want to avoid that debate. Instead, they make it sound as if they can make excess health-care spending disappear by magic. But even if we were to stipulate for the sake of argument that all of the supposed savings from preventive care, electronic medical records, and eliminating the waste and greed supposedly inflicted by insurance companies and doctors will actually materialize, the excessive use of medical procedures would still be the main problem with our health-care system.

OK, I’ll quote more. I like these parts especially:

Our health-care system is wasteful. … That would be of little concern if individuals were wasting their own money. However, because close to 90 percent of personal health-care spending is paid for by third parties, we are wasting each other’s money.

And:

…private health insurance should be deregulated. Affordable health insurance requires radical changes to the way health-insurance policies are designed today. In order to get there, we need less regulation of health insurance, not more. My hope is that the industry would come up with plans that pay claims to only those who fall within the top 2 or 3 percent in terms of health-care needs; those who need basic care would pay out of pocket. Health insurance would look like fire insurance. Few of us would make claims, and premiums would be affordable.

Read the whole thing, and tell Arnold what you think of it (hopefully positive) here.

• Medical insurance, not free health care
• Sign the Do No Harm petition on health care policy
• Does the U.S. spend too much on health care?
• The unfree market in health care
• Stossel, Sick in America, Part 2

Posted in PPC, Policy - National | tags: real insurance, regulation, spending
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The uninsured and lying with statistics

David Harsanyi has another great column in the Denver Post, this time how many people in the U.S. are uninsured. Some excerpts:

Did you know that about 300 million Americans went without food, water and shelter at some point last year?

I am a survivor.

If you were blessed with the prodigiously creative and cunning mind of a politician, that kind of statistic — meaningless but technically true — could be put to good use.

In the entertaining 1954 classic “How To Lie With Statistics,” Darrell Huff writes, “Misinforming people by the use of statistical material might be called statistical manipulation… (or) statisticulation.”

One of the most persistent examples of modern-day statisticulation is the sufficiently true claim that 46 million (it becomes 50 million when senators really get keyed up) Americans don’t have health insurance.

…

It is true that the 46 million figure is based on unreliable Census Bureau data. But even the less unreliable Congressional Budget Office puts the number at about 31 million. And even that number, former CBO Director Douglas Holtz-Eakin claims, is an “incomplete and potentially misleading picture of the uninsured population.”

…

In a study for the National Bureau of Economic Research called “Is Health Insurance Affordable for the Uninsured?,” [summary] Stanford economists say, “Based on a plausible range of definitions and assumptions health insurance is affordable for between one quarter and three quarters of adults who are not insured.”

Turns out that 8.4 million uninsured Americans are making $50,000 to $74,999, and 9.1 million more are making more than $75,000. Health insurance is just incompatible with their lifestyles, I guess.

…

These facts do not undermine the argument for nationalized health care. (History and common sense do that already.) They do, however, point out that many statistics, to quote Huff again, get by “only because the magic of numbers brings about a suspension of common sense.”

Read the whole article here.

• How many uninsured?
• Debunking “Dying for Coverage” (part 2)
• People who can buy insurance but don’t
• Medicaid strains ER more than uninsured
• Are the uninsured free-riding?

Posted in PPC, myths & fallacies | tags: uninsured, uninsured Americans
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Obama Care

We all agree that medical care should cost less and be available to more people. The problem is that most of the health care reform proposals coming from Congress and the White House are reforms designed to give government more control over your medical care. Though the politicians say otherwise, “Obama Care” will cost more, and make health care even more difficult to get.

One of the most popular forms of increasing government control is the “Massachusetts Model” — which is based on mandatory insurance and large subsidies. Those of us opposing such “reform” that involves yet more government interference, wish to see free market policies that incorporate more consumer choice and more competition.

Take a minute to watch this new video outlining just one of the many reasons the Massachusetts model has failed Massachusetts, and will inevitably fail us if implemented country-wide as “Obama Care.”

• What the Failure of the “Massachusetts Model” Tells Us about Health Care Reform
• Detailed analysis of Obama and McCain’s health care proposals
• The unfree market in health care
• Mandated insurance…runaway costs…price controls, political rationing
• “Colorado Guaranteed Health Care Act” doesn’t guarantee health care

Posted in mandatory insurance, single payer | tags: health care, healthcare, Massachusetts, nationalization, Obama Care, obamacare, single payer
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Tony Soprano and the “public plan”

If a government [health insurance] program were to be stripped of any special advantages it would cease to be a government program. It would be just another private insurer. Take away the violence and intimidation, and Tony Soprano is just an eccentric and earthy businessman. - Michael Cannon,  Cato Institute

Here’s his reasoning (emphasis added):

Consider what would be necessary to create and sustain a level playing field between government and private insurers.

First, a new government program would have to be completely self-financing. No special subsidies for start-up costs or operating costs, and it would have to maintain real reserves just like private insurers.

Second, Congress could not leverage its market power to favor a government program by adopting Medicare’s payment rates or requiring providers to participate as a condition of Medicare participation.

Third, Congress and federal bureaucrats cannot be allowed to enact any regulations favoring the new program either deliberately or inadvertently. That means there cannot be even an implicit guarantee that the government would bail itself out.

Fourth, no future Congress and no future bureaucrats can be allowed to do any of these things, ever.

These conditions will never be satisfied because public-plan supporters do not want them to be. Indeed, they want to violate every single of them from the get-go. They want a new program to build on Medicare’s infrastructure, to use Medicare’s payment rates, and to receive special subsidies.

Read the whole piece here: A Level Playing Field? Don’t Make Me Laugh.  For more details, see Michael Cannon’s presentation from earlier this year (video, audio, and slides) here.

• The “Public” insurance plan’s huge market share
• Stimulating Welfare (RMN)
• Let’s hope Obama-care doesn’t treat us “NICEly”
• Rocky Mountain News on Obama & McCain’s health policy
• Obama-Care: pay more for insurance you don’t want

Posted in PPC, Policy - National | tags: Obama Care, Public Health Plan, public option
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MassHealth has higher claim denial rate than commercial insurers

From the Boston Globe:

The state government Medicaid plan known as MassHealth, which covers low-income patients who can’t afford insurance, was the slowest payer of health claims to Massachusetts doctors last year, averaging 56 days, and denied the highest share of claims, 23.8 percent, according to rankings set to be released today. …

…The rankings were prepared by Athenahealth Inc., a Watertown company that helps doctors handle billing and records electronically, in collaboration with the Physicians Practice management journal. …

On its ranking of “denial rates,” the percentage of claims rejected or sent back for rework, Tufts denied 4.9 percent, Harvard Pilgrim 5.4 percent, Fallon 5.7 percent, Blue Cross-Blue Shield 6.2 percent, and MassHealth 23.8 percent.

Read the whole article here.

Granted, some claims, such as fraudulent ones and those that do not fall under the specific insurance policy’s benefits, should be denied. But for the criticism I hear of commercial insurance companies denying claims, why do we not hear more complaints when government does the same?

Not to defend commercial insurance here, as they benefit from a tax code that discounts their plans, which shields them from competition. The point is that politicians should not be using policy to force us into dealing with any insurer.

(Hat tip, Pioneer Institute)

• NY Times: “Doctors Are Opting Out of Medicare”
• Will Massachusetts authorities ration medical care?
• Still waiting for medical care in Massachusetts
• Udall’s health care policy empowers politicians, not patients
• Medicaid: poor care, rampant fraud

Posted in Medicaid/Medicare/SCHIP, PPC | tags: coverage is not care, Massachusetts
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Congress & gov’t employees would be exempt from new insurance mandates

Quoting Donald Boudreaux: “Lies.  Special privileges. Par for the course.”

From the Wall Street Journal:

Last September Sen. Barack Obama promised that under his health-care proposal “you’ll be able to get the same kind of coverage that members of Congress give themselves.” On Monday, President Obama repeated that promise in a speech to the American Medical Association. It’s not true.

The president is barnstorming the nation, urging swift approval of legislation that is taking shape in Congress. This legislation — the Affordable Health Choices Act that’s being drafted by Sen. Edward Kennedy’s staff and the Health, Education, Labor and Pensions Committee — will push Americans into stingy insurance plans with tight, HMO-style controls. It specifically exempts members of Congress (along with federal employees; the exemptions are in section 3116).

Members of Congress “enjoy the widest selection of health plans in the country,” according to the U.S. Office of Personnel Management. They “can choose from among consumer-driven and high deductible plans that offer catastrophic risk protection with higher deductibles, health saving/reimbursable accounts and lower premiums, or fee-for-service (FFS) plans, and their preferred provider organizations (PPO), or health maintenance organizations (HMO).” These choices would be nice for all of us, but they’re not in the offing. Instead, if you don’t enroll in a “qualified” health plan and submit proof of enrollment to the federal government, you’ll be tracked down and fined (sections 3101 and 6055).

For a health plan to count as “qualified,” it has to meet all the restrictions listed in the legislation and whatever criteria the Secretary of Health and Human Services imposes after the bill becomes law. You may think you’re in a “qualified” plan, but the language suggests that only plans with managed-care controls such as the “medical home” will meet the definition

Read the rest here.

• Rocky Mountain News on Obama & McCain’s health policy
• RMN: Liberty is best prescription for health care
• Obama-Care: pay more for insurance you don’t want
• Obama: “Public health plan” would “keep insurance companies honest”
• The unfree market in health care

Posted in PPC, Policy - National | tags: Affordable Health Choices Act, Obama Care, Ted Kennedy
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The unfree market in health care

“The greatest trick the Devil ever pulled was convincing the world he didn’t exist.”

Remember this line from The Usual Suspects?  It surely applies to health care reform. As the Cato Institute’s Michael Cannon  has written:

To paraphrase Keyser Söze, the greatest trick that supporters of socialized medicine ever played was to convince the American people we don’t already have it.

Check out President Obama’s blaming the free-market for the problems with medical care and insurance in the Unites States.  The New York Times quotes President Obama as saying that the proposed government-run insurance plan (the “public option”) would “ensure coverage for people where the free market system fails,” …, “We’ve got to admit that the free market has not worked perfectly when it comes to health care.”

What free market?

Does Barack Obama seriously think that there’s a free market in medical care or insurance in Unites States?  Is he ignorant?  Is he trying to trick us?

Sure, there is a market, that is, people exchange goods and services. But it is by no means free from political mandates, controls, and prohibitions.  That is what a “free market” is supposed to be free from, where people interact on a voluntary basis. Government’s taxing citizens to pay for other people’s medical care, prohibitions and mandates on how insurance companies, hospitals, physicians, drug companies, etc. can interact with customers are all intrusions the market that make it less free.

As Ronald Bailey points out, “about 47 percent of all health care expenses today are paid for by federal, state, and local governments, e.g., Medicare, Medicaid, and State Children’s Health Insurance Program (SCHIP).” Both Medicaid and Medicare drive up insurance premiums, not to mention the taxes you pay for them.

And then there’s regulation.

Read the rest of this entry »

• Does Obama Support Socialized Medicine?
• The U.S. already has socialized medicine
• Dude, what free market?
• Obama and single-payer health care: Monopolies are bad, except for government monopolies
• The health care bailout of 2018

Posted in PPC, Policy - National, regulation | tags: community rating, guaranteed issue, Obama Care, regulation
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Health care cooperatives already exist

When politicians talk about “cooperatives,” they mean you cooperate, or else.

Supporters of the “public insurance option,” that is, government-run insurance that competes with commercial insurers sense opposition: People realize it’s unfair competition. You know, like playing basketball against a team of players who also function as the referees.  In response, some Democratic politicians have proposed, as the New York Times reports:

that the public plan could take the form of an insurance cooperative that would be owned and operated for the benefit of its members, but not run by the government.

Michael Tanner at Cato points out:

In fact, health care co-ops already exist. Health Partners, Inc. in Minneapolis has 660,000 members and provides health care, health insurance, and HMO coverage. The Group Health Cooperative in Seattle provides health coverage for 10 percent of Washington State residents.

If the new co-ops operate under the same rules as other nonprofit insurers, why bother?

And there’s the rub. Supporters of government-run health care have no intention of letting the co-ops be independent enterprises. In fact, Sen. Charles Schumer (D-NY) makes it clear, for example, that the co-op’s officers and directors would be appointed by the president and Congress. He insists that there be a single national co-op. And Congress would set the rules under which it operates.  As Sen. Max Baucus (D-MT) says, “It’s got to be written in a way that accomplishes the objectives of a public option.”

If a “co-op” is run by the federal government under rules imposed by the federal government with funding provided by the federal government, that is government-run health insurance by another name.

None Found

Posted in Uncategorized | tags: cooperatives
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