The Investor’s Business Daily reports:

The median household income, according to the data released this week, is $48,200. You might be surprised to discover that 38% of all the uninsured — that’s almost 18 million people — have incomes higher than $50,000 a year. An astounding 20% of all uninsured have incomes over $75,000. These are people who can afford coverage.

Is it really a good idea to tax working people to subsidize those who refuse to pay for a necessity they could easily buy? The answer, of course, is no.

The Census Bureau reports that “Spells without health insurance, measured on a monthly basis, tend to be short in duration — about three-quarters (74.7 percent) were over within 1 year.”  The same study reports that 44% of spells without insurance lasted less than four months.

Further, HealthCareBS pulls some choice observations from the Jeff Goldsmith at the Health Affairs blog:

Almost the entire increase in people without health insurance from 2005 to 2006 took place in families with incomes above $50,000.Two-thirds of the 2005-2006 increase was actually in families with incomes above $75,000!

The number of uninsured people in families whose incomes were below $25,000 actually declined by about 4%.

Now consider this question by economist Arnold Kling:

Question: How many American families have proper health insurance?

a) over 90 percent.
b) between 80 and 90 percent.
c) between 10 and 80 percent.
d) less than 10 percent.

Given that about 15 percent of American families do not have health insurance, the correct answer would appear to be (b). However, in my opinion, the correct answer is (d).

To understand his position, read his article here.

Lacking insurance is nothing to trivialize.  But the number of insured is not the problem itself, but the symptom of the main problem, government meddling in insurance and health care markets.

This smells like a phenomenon economist Bruce Yandle calls “Bootleggers and Baptists”:

Here is the essence of the theory: durable social regulation evolves when it is demanded by both of two distinctly different groups. “Baptists” point to the moral high ground and give vital and vocal endorsement of laudable public benefits promised by a desired regulation. Baptists flourish when their moral message forms a visible foundation for political action. “Bootleggers” are much less visible but no less vital. Bootleggers, who expect to profit from the very regulatory restrictions desired by Baptists, grease the political machinery with some of their expected proceeds. They are simply in it for the money.

Fo more on Yandle’s ideas, check out his EconTalk podcast.

Conservatives, Republicans, and free-market advocates often tout Health Savings Accounts (HSAs) as a means of controlling costs.  Yet, critics of HSAs will point to low customer satisfaction, or that patients with high deductibles might skimp on necessary care, or that they are ineffective. 

How does one respond to these criticisms?  There are two general approaches: support HSAs because of their good consequences, or because they are part of a more just, fair, and moral policy.  Both are useful, depending on your audience, but the moral argument is your best bet.

Consequentialist arguments rest on in-depth knowledge of policy details and the results of empirical studies.  For HSAs, I recommend this post by John Goodman and this Cato Institute policy analysis by Michael Cannon. 

This method has its place, but if you start arguing from the results of empirical studies, opponents will surely cite studies that allegedly to show the opposite.  There’s a good chance your audience will just be confused when each side claims to debunk the other with “the latest” study.

To avoid this, address the heart of the matter: ethics.  As I’ve written before, people often base their political beliefs on what they perceive as moral, rather than on economic consequentialist grounds.   How likely is it that people arrive at their opinion based on moral grounds, but then cherry pick data from empirical studies that validate their morally-derived position?  If that’s the case, it’s more honest and worthwhile to address the ethics straight on.

So here’s a moral argument for HSAs:

Why are HSAs even a political issue in the first place?  They are a symptom of an unfair tax code, which includes a tax exemption for employer-provided insurance.  Most of us have insurance through our employer because employers need not pay taxes on money they spend on our insurance policy.  But if you don’t like the few choices your employer offers and want to buy another plan, you face a stiff tax penalty.  Further,  you’re taxed on income you spend on medical care.

But that’s not fair.  Politicians should not dictate whether you buy insurance on your own, through a membership group, or through your employer.  But the tax code does just that. 

It also punishes people who preferred to partially self-insure by spending their own money on medical care instead of expensive low-deductible policies.  HSAs do partially address this, but they can be a hassle, and they still allow politicians or politically-influenced government agents to decide what qualifies as a medical expense.  But that’s none of their business, but it surely encourages lobbyists to “encourage” politicians to include their product as a qualified medical expense.

Using the tax code to influence our purchases is social engineering, where politicians treats us like lab mice in a cage - by punishing us when our values clash with how they think we should live.  As Yaron Brook of the Ayn Rand Institute writes:

Government’s job is not to dictate your values but to protect them. In a free country, you choose values and then use your own money as a tool to achieve them. But a value-rigged tax policy reverses this cause and effect–it uses your money against you, bribing you with tax breaks that let you keep some of your earnings in exchange for abandoning your preferred values.

Since tax policy should be neutral to how we buy medical care and insurance.  Legislators should eliminate the tax exemption for employer-provided insurance and lower tax rates commensurately.   Then HSAs would have no place under a neutral tax system (as they’d be a bias toward high-deductible plans) and should be phased out.

If removing the tax exemption employer-provided insurance is not politically-feasible, then a second-best solution is to extend the tax exemption to all medical insurance and expenses.   This is where HSAs come in.  They are a step in this direction, but they should be eligible to everyone regardless of their insurance plan (not just a qualifying high-deductible plan). Such “Large HSAs” (also here) would allow consumers to buy medical care and insurance with tax-free earnings.

Topics: background of health care debate, pitfalls of employer-sponsored insurance and third-party payment.

Legislators grilled the state’s health care agency Monday over multi-million dollar mistakes and the firing of a whistle-blower, but the agency denied there was any wrongdoing.

“A smoke-and-mirrors game is being played,” said Rep. Frank McNulty (R-Douglas County) on the legislative audit committee. “Something is dead wrong at the Colorado Department of Health Care Policy and Financing (HCPF) and we need to figure out what it is.”

The department was called before the legislative audit committee Monday after 9NEWS interviewed a state accountant, Annemarie Maynard, in early July who said the department tried to deceive auditors about owing Medicaid $8 million from programming and human accounting errors.

There’s more at Colorado Senate News. 

Incidentally, the Wall Street Journal recently reported that state governments use Medicaid as a money laundering scheme.

As I wrote last month when Colorado’s SCHIP was “a kind of mess,”

If the Children’s Basic Health PlanMedicaid were a non-government charity people would stop donating money to it. But since it’s government-run, the “doners,” i.e., taxpayers, would become criminals for choosing to donate the money they earn to a charity that actually deserves their donation.

If governments is going to run charities like Medicaid and SCHIP, they should at least compete fairly with non-government charities.  A charity tax-credit could achieve this.

(via Ari Armstrong)

…

OK, then.  Here goes…

There are degrees of individual freedom between how Medicare and Medicaid currently work and the free-market ideal of voluntary charities competing on a level playing field.  If you cannot persuade someone to your point of view, it’s not a lost cause.  Perhaps you can persuade that person to a view that is closer to yours.  That’s better than nothing, right?

Face it, the free-market ideal not a popular view.  But you can probably convince people that running Medicare/Medicaid like the food stamp program would be preferable to the current system.   That is, instead of a government acting as a insurance company, replace it with subsidies for private insurance.

Once you get that far, you could suggest charity tax-credits that would allow voluntary charities to compete fairly with government charities.  If the person you’re addressing is likes charity tax credits, then you can focus on whether politicians have any business telling you how much you should donate to charity in the first place.

Say you’re speaking to someone who thinks that

1. A proper role of government is to require that taxpayers pay for medical bills and/or insurance for the elderly and/or poor.   Taxpayers who peacefully refuse to do this face punishment.
2. Given (1) is true, therefore Medicare and Medicaid are justified.

But this reason (2) to support Medicaid and Medicare is a non sequitur .  It does not follow that if government should force taxpayers to subsidize medical care for the poor and elderly that Medicaid and Medicare are justified.

Similarly, if one thinks government should force taxpayers to buy food for those who cannot afford it, does not mean government should have a “Nutricare” program.  Here bureaucrats can determine how much they will pay grocery stores for a loaf of bread, and burden stores with loads of red tape and paperwork.   Instead, qualifying poor people receive money to buy food directly from retailers at market prices.

Last week’s Cato Institute podcast featured Michael Cannon.  He explains now such a system would be better than the current Medicare system:

Instead of having government tell seniors “here’s the package of benefits you’re gonna get, and here’s how much were gonna pay the doctors, and good luck finding a doctor if the reimbursement rates are too low.  Instead of doing all the and having the government micromanage everything from benefit decisions to pricing decisions, give the seniors the money government was going to spend on their behalf.

Give poor people a little more … give sick people a little more if that’s what they need to purchase a decent health insurance policy.  Decide how much you’re going to spend, divy it up among the seniors, and give it to them in a check.  Then let them decide what kind of benefits they want.   If they want an HMO that very tightly manages care, is very conservative about their treatment philosophy in order to weed out unnecessary services, then they can choose that kind of plan.  If they want a plan that provides very generous access to care, well then they can pay the high premiums associated with that plan.

The market forces that you’ll unleash there are going to solve these problems of how much we should be paying in order to get [a] given health outcome for a given senior.  They are also going to solve the problems of waste and unnecessary expenditures in a way that government is just not equipped to do.

Medicare is immoral for essentially two reasons.  First, it’s robbery because it empowers politicians to force taxpayers to donate money to a government run program.  Second, it also empowers politicians to dictate how doctors and patients interact.  If Medicare is run on the food stamps model that Cannon describes, yes, it’s still robbery, but in this case politicians will not be controlling the providers of the product nearly as much as they do now.

So if you cannot persuade someone that Medicare is immoral for both reasons, perhaps it’ll be more satisfying to get one of the two by suggesting the food-stamp model.

As a next incrimental step, you could suggest a charity tax-credit .  In the case of Medicare, say $500 of your taxes go to Medicare.  What if you could donate $500 to a Medical-care related charity of your choice, and pay $500 less in taxes such that Medicare would lose your “donation.”  Would you still donate it to Medicare?  Wouldn’t that be fair to voluntary charities, and also give Medicaid administrators incentives to earn your donation? 

If the person you’re addressing is likes charity tax credits, then you can focus on whether politicians have any business telling you how much you should donate to charity in the first place.

Many people will not interested in this final incremental step toward a more free, tolerant, and civil society, which people respect each-other’s right to live as they please.  Voters are often unwise and irrational.  You may not like it, it’s reality.  Given that, and if you can persuade someone part-way on health care, why not suggest the food-stamp model or charity tax credits for education.  That is, instead of government-run schools?  And then, how about a similar approach to replacing the entire welfare state?

I like Ted Kennedy’s slogan “Medicare for all.” It reminds voters that America already has a highly successful, popular single-payer program, albeit only for the elderly. — Paul Krugman, June 13 2005

How “highly successful” is Medicare?  Consider the following story from ABC News:

The Houston Chronicle reported last week that more and more Texas doctors are opting out of Medicare due to growing cuts in reimbursement. And the trend is not limited to Texas doctors. Primary care doctors from around the country have told ABC News that they too are either opting out of treating Medicare patients, or are preparing to do so if Congress once again OKs slashing reimbursement rates. …

“With the cost of running a medical practice only going up on a daily basis, and reimbursement taking a dive, how can doctors running a solo practice keep accepting a payer that only continues to cut its reimbursement?” said Dr. Gil Holland, a family physician in Chandler, Ariz. “This is problem is far reaching because as Medicare cuts its fee schedule, other insurance payers tend soon to follow suit. Many of my colleagues in Arizona are dropping Medicare.” …

According to the American Medical Association (AMA), reimbursements that have been reduced every year for nearly a decade have slashed physician payment rates by about 40 percent. Meanwhile, the cost of practice rises annually. The AMA estimates that this year practice costs will increase by 20 percent.

And according to a 2007 AMA survey of 8,955 physicians in the United States, 60 percent of doctors said they plan to limit the number of new Medicare patients and 40 percent of doctors said they plan to limit the number of established Medicare patients that they treat if Medicare payment rates are cut by 10 percent in 2008.

And because the Senate failed to block the latest reduction, this year’s Medicare cut of 10.6 percent has already taken effect — and an overwhelming majority of physicians contacted by ABC News say this will force them to either give up on Medicare patients altogether or limit the number of new Medicare patients they can treat. …

“I anticipate that Medicare patients will see a work slowdown — delayed access to routine and planned care or consultation — access problems with fewer providers, and downright strikes among physicians, especially sub-specialists,” said Dr. Michael Pontious, program director of Oklahoma University’s Enid Family Medicine Residency in Enid, Okla.

(via FIRM)

See also this excellent critique of Krugman’s Medicare endorsement.

The linked post offers several reasons.  One simple reason follows from what an Investors Business Daily editorial pointed out:

An astounding 20% of all uninsured have [household] incomes over $75,000. These are people who can afford coverage.

Forcing such people to have insurance is merely a means of exploiting them, that is, forcing them to pay premiums that pay for other people’s medical care.

The government’s Medicaid program for the poor may put more financial burden on overcrowded hospital emergency rooms than the nation’s 47 million uninsured, according to a study published on Thursday.

Researchers at the University of California San Francisco and Stanford University found that the uninsured patients paid 35 percent of their overall emergency room bills in 2004, versus 33 percent for Medicaid.

“What surprised us was that uninsured patients actually pay a higher proportion of their emergency department charges than Medicaid does,” said Renee Hsia, an emergency room doctor and researcher at UCSF who led the study.

“This runs counter to the widespread impression that the uninsured are universally poor payers,” said Hsia, who noted that the ranks of uninsured include healthy young people who are employed full-time.

(via Health Care BS)

A long-awaited report concludes that 12 cents of every $1 paid for health insurance in Massachusetts goes toward 26 state-mandated benefits, from maternity and mental healthcare to infertility and diabetes services….

Insurers and small business groups said the findings show that mandates are helping to drive up costs, making coverage unaffordable as many businesses and workers struggle….

State lawmakers are now considering proposals that could require employers to add more benefits, including expanded mental healthcare coverage….

The report’s authors reviewed health studies about the various mandates and estimated that most of them are cost-effective. But they suggested that regulators may consider removing some that are not considered the standard of care, such as bone marrow transplants for treatment of breast cancer. The report also noted that just five of the mandates - maternity, mental health, home health, preventive care for children, and infertility services - account for 80 percent of the total cost of the mandated benefits….

Regardless of whether the mandated benefits are cost-effective, including them in plans is rightfully up to the insurance companies and the preferences of the customers for whom they design products.  (They would have to do this more if the tax code did not favor employer-sponsored insurance.)

That “maternity, mental health, home health, preventive care for children, and infertility services,” “account for 80 percent of the total cost of the mandated benefits” is also noteworthy.  Three of these concern having children, which, unlike illness and accidents, responsible adults choose, or choose to forgo (the failure rate of birth control notwithstanding), and hence avoid the related risks. 

The article continues:

The report did not calculate the cost of mandatory prescription drug coverage, which is being phased in this year.

Small business owners say that that mandate alone is likely to boost costs by another 3 to 4 percent.

“Legislators think companies are all big businesses who can afford to pay, and that’s not true,” said Bill Vernon, state director of the National Federation of Independent Business, which represents small business owners.

Vernon said small business owners are bearing the brunt of the state mandates because most larger companies are exempt from state insurance rules under federal law.

He said healthcare costs are typically the second- or third-largest employer expense and that mandates make it tough for small companies to tailor their coverage to the benefits that would most help their employees.

“Perhaps the employees want something else, like higher pay or more 401K contributions,” he said. “It’s the [lack of] flexibility that really irritates small business owners.”

(via Michael Cannon, whose comments are also worth reading.)