Voice For Liberty

Tag: Health care

  • Uninsured count needs explanation

    One of the problems in the health care debate today is lack of facts — at least facts that all sides of the debate can agree on. Without such agreement, without a basic set of facts and data to reason from, we’re not likely to make any progress.

    One example of a fact often used as evidence is the high number of uninsured in America. Often the number cited is 45.7 million, which is a substantial fraction of our population. The source of this number is the United States Census Bureau report Income, Poverty, and Health Insurance Coverage in the United States: 2007. Specifically, the table “People Without Health Insurance Coverage by Selected Characteristics: 2006 and 2007” (page 22) gives this number, along with some detail and breakdown by various characteristics.

    When we look at these breakdowns, we can start to see that while 45.7 million is a big number, it is not indicative of the large and pressing problem the raw number suggests.

    The table starts by giving the number of uninsured people as 45,657,000 (in 2007).

    Below this number, one breakdown tells us that non-citizens number 9,737,000 (21%) of these uninsured. Many people feel that non-citizens, especially undocumented aliens , should not be entitled to government benefits such a health insurance. (Not all non-citizens are undocumented.) The Obama administration claims that the plans under consideration will not cover undocumented aliens. But it includes them in the number of uninsured people.

    Other lines in the table tell us that 8,488,000 (19%) live in households where the household income is from $50,000 to $74,999. Another 9,115,000 (20%) live in households with incomes over $75,000. These people, especially the over-$75,000 households, may not like spending money on health insurance premiums, but they could, in most cases, afford their own health insurance, even if premiums are over $1,000 per month.

    There’s also the issue that many people are eligible for some sort of government assistance with health insurance, but they don’t take advantage of it. Yet, these people are counted as uninsured. As explained in The Top Ten Myths of American Health Care: A Citizen’s Guide by Sally Pipes of the Pacific Research Institute: “As many as 14 million of the 45.7 million uninsured—poor and low-income Americans—are fully eligible for generous government assistance programs like Medicare, Medicaid, and SCHIP. The problem is, they’re just not enrolling in these programs.”

    We can see that substantial portions of the uninsured are not really problems that require huge government intervention to fix. It’s not possible to tell exactly how many, as the categories listed above are overlapping.

  • Swiss system could be best of the big-government reform alternatives

    At a recent forum on health care in Wichita, the system of health care in Switzerland was mentioned as a system that we could learn from.

    Dr. Brian Michael, a physician at the Wichita Clinic, specializing in endocrinology, diabetes, metabolism and thyroid disease, outlined the basic characteristics of the Swiss system. Switzerland has no government health care and no employer-funded health care. Each person must purchase commercial insurance, and each person owns their own policies.

    (Michael also said that policies must be in effect for five years before changing carriers, but I have not been able to verify this feature.)

    A more detailed list of the features of the Swiss system can be found at Healthcare Economist.

    An article in the Wall Street Journal by Regina E. Herzlinger provides more detail about the Swiss health care system:

    • In 2003, health care costs were 12% of GDP for Switzerland; 15% for the U.S.
    • “[Switzerland has] far better health outcomes than the U.S., even when Switzerland is compared to socio-demographically similar U.S. states such as Connecticut and Massachusetts.”
    • “The sick … can afford to buy health insurance, and also pay the same price. Yet private insurers compete in the market because they are paid more for sick enrollees through various risk-adjustment systems.”
    • “The Swiss government accounts for only a quarter of the health-care spending versus nearly 50% for the U.S.”
    • “The Swiss system is consumer-driven because consumers themselves pay for their purchases.”

    Not all is perfect with the Swiss system, however:

    • “… the government limits insurance competition with requirements for extensive minimum benefit packages and considerable micromanagement of prices.”
    • “Even worse is the Swiss government’s micromanagement of medical care suppliers. Unwisely adopting the U.S. government’s Medicare payment system, it not only dictates medical care prices but also specifies the bundles of care for which it will pay.”

    In a policy paper The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World, the Cato Institute’s Michael D. Tanner wrote this about the Swiss system: “… it is notable that Swiss health care spending remains below that of the United States for nearly comparable care. Strong evidence suggests that the exposure of Swiss consumers to the cost consequences of their health care decisions has made them more conscious consumers and helped limit overall health care costs.” We should note that the public option plan favored by many in the U.S. would shield us from these costs, just as many employer-provided plans do now.

    The purchase mandate and a government-defined benefits package is a problem, too: “Public choice dynamics are such that providers (who would make money from the increased demand for their services) and disease constituencies (whose members naturally have an urgent desire for coverage of their illness or condition) will always have a strong incentive to lobby legislators for inclusion under any minimum benefits package. The public at large will likely be unaware of the debate or see resisting the small premium increase caused by any particular additional benefit as unworthy of a similar effort — a simple case of concentrated benefits and diffused costs. … That is exactly what has happened in Switzerland, leading to a growing expansion of the basic benefits package.”

    Will the Obama administration and Congress consider adopting Swiss-style health care, where at least some market forces are at work? In a recent Roll Call column that reports on Herzlinger’s research and recommendations, by Morton M. Kondracke writes: “But even more compelling than her acid evaluation of what’s wrong is Herzlinger’s recommendation of the right alternative. ‘Consumer-driven health care,’ she insists, can be universal, efficient and end up costing less money than the current system — or any system being considered this year by Congress.”

    Kondracke concludes: “Right now, most health care reform plans being considered in Congress don’t even give consumers a role in controlling costs. Letting them run the system is hardly on anyone’s radar screen.”

    It doesn’t seem that we’ll learn from the Swiss.

  • Health care talk gives alternative to big-government reform

    At a recent forum sponsored by the South Central Kansas 9.12 Group, Dr. George Watson of Park City, Kansas laid out a conservative case for health care reform. His message was different than that of most reformers: instead of more government involvement, we need less government.

    “Yes, we need change,” he said. He also said that a public option will result in government takeover of medicine.

    Watson’s plan for reform is this: Each patient or family owns their own policy. There are no mandates and no guaranteed issue. Permit purchases across state lines. Eliminate insurance company clauses that punish subscribers who go outside networks.

    Tort reform is necessary too, he said, and he noted that there is no tort reform in the current proposals by Congress or the Obama administration.

    Watson said he disagrees with rankings by the World Health Organization that place France first, and the United States comes in 23rd. He said that anyone with means comes to the United States for the best health care that money can buy.

    A problem, Watson said, is that “Every patient with a Medicare or Medicaid card has no concern for cost. They think the government will pay for it.” Adding more people to these ranks will drive up demand and prices, he said.

    What is the problem with existing health insurance? The problem, Watson said, is that workers don’t own their policies. The solution is simple: each individual should be free to purchase a health policy just like auto or life policies, he said.

    These policies should be high-deductible policies — $5,000 or $10,000 — he said.

    There are two questions that patients should be asking their doctors, but the current insurance model doesn’t provide an incentive to be concerned with them: What does it cost? Is it really necessary?

    Watson mentioned the organization Association of American Physicians and Surgeons, Inc. as an organization and advocates health care reform that will benefit patients.

    An interesting fact about Watson’s medical practice is that it doesn’t accept health insurance or Medicare. Instead, he says he charges patients a fair cash price. His office has no connection to any health insurance company computer or government computer.

    Watson mentioned Surgery Center of Oklahoma as an example of an organization that takes no government money, insurance, or Medicare. It also posts its prices for surgery on its website.

    I questioned Watson about pre-existing conditions, as this seems one of the thorniest problems to solve. He said that large employers have the clout to force insurance companies to insure all their employees. For individuals, however, it’s a tougher issue. We have to look at health insurance more like auto insurance, where choices that people make play a role in the availability and cost of insurance. Charity plays a role, too.

    He told of how the Wichita Independent Business Association opened up their health care plan to those who couldn’t get insurance. They got many people with pre-existing conditions, and the cost bankrupted their insurance plan.

    He also said that we could tell insurance companies that if you want to operate in our state, you have to take a certain percent of pre-existing conditions, but there should be no mandates. This seems to be a contradiction of sorts.

    Answering a question about our system where employer-based insurance is the way that most people get health insurance, Watson said we should level the playing field with regard to the tax deductibility of health insurance premiums. Presently, employees earn money, but the employer sends it to the insurance company.

    “First dollar” is also an important principle, going back to the two golden questions: What does it cost? Is it really necessary?

    Watson, to be sure, presents a conservative and not a libertarian plan for reform. My question about the elimination or relaxation of medical licensure, a proposal made by Milton Friedman in his work Capitalism and Freedom drew a chuckle from Watson. He said that we must have regulation, and that physicians must be licensed by the states.

  • Not all health care administrative costs are wasteful

    One of the issues discussed in the health care debate today is the allegedly wasteful administrative and overhead costs of private health insurance, compared to — again allegedly — efficient government processes. The Wichita Eagle today printed a letter from a citizen that made this claim.

    The article Comparing Public and Private Health Insurance: Would A Single-Payer System Save Enough to Cover the Uninsured? makes some useful points.

    First, “Administrative costs for private health insurance, defined broadly, are in the range of 11-14 percent of total premiums.” For Medicare, the figure usually cited is 3%. But when “combined with a proportional allocation of the costs of other federal government administrative functions” the number is actually 6%. So Medicare’s administrative costs are, in fact, higher than the usual claim.

    Then: “The lower reported administrative costs for Medicare are unsurprising, in that Medicare spends substantially less on such functions as marketing, risk evaluation, claims scrutiny, and compliance with the regulatory requirements of the individual states. This does not mean that the higher reported administrative costs of private health insurance are ‘wasteful.’ Instead, they serve the interests of consumers by reducing the extent to which insurance creates cross-subsidies among consumer classes; such cross-subsidies reduce the economic benefits of risk-pooling. Private administrative functions also impose discipline on the consumption of health-care resources, thus reducing upward pressure on insurance premiums. ”

    An example of what administrative costs can do is to combat fraud, which is a severe problem in Medicare. Low administrative expenses are achieved in part because Medicare pretty much pays any bill it receives without regard to potential criminality. As reported in the Washington Post last year on Medical Fraud a Growing Problem: Medicare Pays Most Claims Without Review: “A critical aspect of the problem is that Medicare, the health program for the elderly and the disabled, automatically pays the vast majority of the bills it receives from companies that possess federally issued supplier numbers. Computer and audit systems now in place to detect problems generally focus on overbilling and unorthodox medical treatment rather than fraud, scholars say.”

    A scholar cited in this article is Malcolm K. Sparrow, Professor of the Practice of Public Management, John F. Kennedy School of Government at Harvard University. In testimony before the Senate Committee on the Judiciary, Subcommittee on Crime and Drugs in May, Sparrow said that the amount of fraud is like $200 billion to $300 billion, and perhaps as much as $500 billion. His conclusion, after years of studying fraud, is this: “The rule for criminals is simple: if you want to steal from Medicare, or Medicaid, or any other health care insurance program, learn to bill your lies correctly. Then, for the most part, your claims will be paid in full and on time, without a hiccup, by a computer, and with no human involvement at all.”

    Another source of administrative costs for private insurers is “compliance with the regulatory requirements of the individual states.” Whether these regulatory costs are wasteful is one matter, but the fact is that Medicare does not pay these administrative costs that private insurers must bear.

  • What type of turf is a lie?

    The Lone Star Times reports how, at a town hall meeting in Texas, an Obama supporter claimed to be a physician when asking a question. But she isn’t: Obama camp plants fake doc, Che fan at Jackson Lee forum.

    (I wonder if this happened at the same Sheila Jackson Lee town hall where the Member of Congress talked on the telephone while citizens asked questions. Classy.)

    “Astroturf” is a term used to describe fake grassroots political activity. What type of turf is an outright lie?

  • Astroturf, Obama style

    At the recent New Hampshire town hall meeting, President Obama took a softball question from a young girl. It seemed innocent enough. Almost natural.

    The Boston Global article Question by a Malden girl becomes the target of conservative critics contains this: “The critics point to campaign donations and other partisan links of the girl’s mother, Kathleen Manning Hall, who was an early Obama supporter and donated money to his campaign. But a White House spokesman insisted that audience members are selected randomly.”

    The girl’s mother denies that her daughter was a plant by the White House.

    Astroturf? (Meaning fake political activity, organized from somewhere above, passed off as the genuine action and concern of real, genuine people.)

    The Left takes great glee in portraying actions by those on the political right and by libertarians as astroturf. Doing this allows them to ignore the substance of the criticisms. Instead, they can focus on the personal characteristics of the critics and sidestep the issues.

  • The real right to medical care versus socialized medicine

    In 1994, George Reisman wrote a pamphlet explaining the problems with America’s health care system. He criticized the Clinton plan for reform, and offered an alternative based on freedom and markets rather than government interventionism. It is a brilliant work, and still relevant today: “I wrote this essay to help defeat the Clinton plan for socialized medicine. In all essentials it’s as valid today as it was then. It’s a demonstration that government intervention inspired by the philosophy of collectivism is the cause of America’s medical crisis and that a free market in medical care is the solution for the crisis. I urge everyone who wants to help defeat the essentially similar Obama scheme to read it.”

    You can read the pamphlet by clicking on The real right to medical care versus socialized medicine. It’s lengthy, at about 22,000 words. It takes a while to read. Part of what accounts for its length is Reisman’s explanation of every point he makes, which is very helpful.

    Reisman calls for more than simply defeating the Clinton plan, as we who oppose the Obama plan should be doing too. He calls for reform — radical reform — of America’s health care, and presents a plan.

    By way of introduction, Reisman writes

    … while the philosophy of Marx and Engels is dying, the philosophy of Locke and Jefferson, and Adam Smith, that is, the philosophy of individual freedom and capitalism underlying the American Revolution — the philosophy which, ironically enough, was the original meaning of the word liberalism — has been reborn. It has been reborn first and foremost at the hands of Ayn Rand in political philosophy and of Ludwig von Mises in economic theory, both of whom have enormously strengthened it. This philosophy of individual freedom, of the inviolability of individual rights, of the benevolent functioning of an economic system based on private ownership of the means of production and the profit motive — of capitalism — calls for a radically new political agenda. It calls for a political agenda that progressively rolls back the interference of the state and progressively enlarges the freedom of the individual. This is now what political philosophy and economic theory at their highest levels of development recognize to be the essential means of solving social and economic problems. Movement in this direction — in the direction of individual freedom from government interference — is henceforth to be regarded as the standard of what is to be considered progress in the realm of political action.

    It is on the basis of this newly resurgent, radically different political philosophy and economic theory — this philosophy and theory of individual rights and capitalism — that I explain the causes of the present crisis in medical care, criticize the Clinton plan, and present the appropriate solution and how to achieve it.

    The fundamental problem is this: “… the perverted notion of the need-based right to medical care — that is, an alleged right to medical care that entails a claim on other people’s wealth or labor, which must be met with or without their consent — is what underlies both the collectivization of medical costs and the concomitant loss of the individual’s personal financial responsibility. In this way, it is a perverted notion of the right to medical care that is fundamentally responsible for the rising cost of medical care.”

    Reisman goes on to explain, in detail, how the present system of purchasing health care leads to a variety of problems, such as “the potential for a limitless rise in the price of medical services” and “irrational medical malpractice awards and the practice of defensive medicine.” Most people seem to agree that these problems are present. He also explains how the present system is “perverting technological progress into a source of higher costs rather than lower costs,” how it is responsible for high drug prices, and how hospitals waste money buying costly equipment that is not needed.

    He also explains “bureaucratic interference with medicine and the rise in administrative costs,” characteristics of private health insurance companies that those who support government takeover rail against.

    Reisman then criticizes the details of the Clinton plan. These apply equally to the Obama plan.

    Then, Reisman proposes his solution. It’s not more government, which is what Obama offers. It’s less government and restoration of individual rights:

    The actual solution to the problem of runaway medical costs lies in the precise opposite of the direction chosen by the Clinton plan. It is not the final destruction of the individual’s rational right to medical care, which is what the Clinton plan would achieve, but the restoration and full implementation of that right — that is, the removal of all government interference that stands between buyers and sellers of medical care or in any way causes medical care to be more expensive than it otherwise would be.

    The best way to accomplish reform, Reisman writes, is: “The simplest, most obvious method of achieving a free market in medical care would be at one stroke to abolish all government intervention that violates a free market in medical care.”

    Recognizing that this is not likely to happen, Reisman proposes some steps to take.

    The first is a change in the tax laws that would have the effect of “[having] employees realize that they were responsible for the cost of their own medical care, even if the employer continued to pay insurance premiums on their behalf. This is because the individual employee would know that he could have his share of the money his employer paid on his behalf, in his own pocket if he wished.” In other words, dissolve many peoples’ notion that their health care is free (or very low cost) just because they get it as part of their job.

    Next, end the idea that Medicare is a free resource: “… unless they can demonstrate a lack of means, individuals covered by Medicare be required to pay a substantial deductible before their coverage under the program begins and then to make a continuing copayment of a significant percentage of all costs beyond some maximum limit. ”

    To increase the supply of health care, “it is certainly reasonable to ask that medical licensing laws be liberalized — nothing so extreme, mind you, as their outright abolition, but merely their significant liberalization.”

    To control hospital costs, a radical reduction in the regulation hospitals face is required.

  • Health reform: look at Oregon

    In less than 90 seconds this video highlights the upside-down priorities of Oregon’s Medicaid system. Lobbying groups have used the political process to push coverage for special-interest causes like substance abuse and weight loss treatment ahead of treatments for some kinds of cancer on the priority list.

    Having decisions like these made by the political process: is this the type of health reform we want?

  • Eliminate all health insurance profits, and what’s left?

    Those who advocate government takeover of health care and the elimination of private insurance cite the “wasteful overhead” and “high profits” of health insurance companies.

    There’s a lot in this argument that doesn’t make sense. For one, most companies that are trying to earn a profit seek to eliminate as much waste and overhead as possible. Competitive markets force them to do so.

    It’s puzzling to me that those who rail against greed don’t acknowledge that it is a powerful motive for efficiency and cost reduction.

    While the health insurance market isn’t as competitive as it could be, due to tight regulation by the states, it still exhibits some characteristics of a market. If we would eliminate the practice of nearly all health insurance being purchased by employers, the market would be even more competitive.

    The weakest argument by those who advocate for government takeover is the high profits argument. Reporting in the Wall Street Journal indicates that profits in the health insurance industry are quite low.

    “For every premium dollar that they take in, about 83 cents goes out in medical costs — doctors, hospitals, and drugs,” says Carl McDonald, health insurance analyst at Oppenheimer & Co. The rest is spent on overhead. Net income comes to just a few cents per dollar of premiums.

    Consider WellPoint, the biggest private health insurer on Wall Street, which has about 35 million customers nationwide. Last year, it paid out 83.6% of revenues in expenses. Net, after-tax income as a percentage of total revenue came to a princely 4.1%.

    In other words, simply eliminating profits would only allow the public option to undercut the private sector by 4% or so.

    So much for profits being the cause of the high cost of health care.

    Keep in mind that in free, competitive markets companies can earn profits only when they satisfy customers, and do that efficiently. For a health insurance company, that would mean paying the claims it has agreed to insure at the lowest possible premium cost to its customers.

    The fact that so much insurance is bought by employers instead of the ultimate customers of the policies means that we don’t benefit from innovation and competition in this market.

    For example, one legitimate concern is that if someone is insured through their job and they become sick for a long period, they’re probably going to lose their job and their insurance. This would be at the same time they’re trying to recover from an expensive and debilitating illness.

    In the life insurance industry, policies may have an optional feature called “waiver of premium” or something like that. Under this provision, if an insured person isn’t able to pay their premiums for a covered reason, the policy remains in force.

    Do health insurance policies have this feature? And if so, does my employer offer this?

    This type of innovation is present in the life insurance market because it is relatively lightly regulated, and most people buy their own life insurance rather than relying on someone else to buy it for them.

    We can also look to the automobile insurance market for examples of innovation that aren’t present in the health insurance market.