Health Care Conversion

It’s benefit enrollment time at work.  High deductible insurance policies coupled with a health savings account is all the rage. 

Incentives matter.  They matter a lot.  I can’t tell you the number of people who don’t believe that.  They don’t see it.  They don’t seem to understand just how much incentives matter and yet many of the decisions they make are driven by the incentives they face, and yet they don’t realize it.

The company has been changing the incentives on its health plans over the last few years to make the high deductible policies more attractive.  It’s a cube by cube battle to show the explicit benefits.  Homemade Excel models are being shared, people are giving impromptu lessons on the merits of the plan. 

In the end, seeing that a high deductible plan leaves you with more money in your pocket at every level of projected medical expenses and allows you to save up some health funds that you can own and take with is a big mind changer.  I love things that can sell themselves.

The implicit benefits for everyone aren’t as well understood.  As more of the medical payments are shifted back to first parties (that is, the person who uses the service writes the check for it) under the high deductible plans, we’ll all experience better and cheaper health care. 

Unfortunately, we may not get that chance to see these benefits before the tide shifts back toward third party payments based on health care reform being considered in DC.

Minorities Have Conservative Values

I heard a very impressive man on a local radio show, Live with Darla Jaye, this evening.  I need to get his name.  He claims that minorities live by conservative values, but don’t necessarily translate those values to the voting booth because they tend to vote with people in their ethnic group than for the candidates that best match up with their values.  He said to change the minds of minorities, Republicans and conservatives should focus on their values so the minorities can see that their values line up.

He actually said it much better than I what wrote, but I wanted to try to capture the essense. 

I run into similar views.  I have friends and family who live by conservative principles, but tend to vote Democrat for various reasons other than a lining up of values – they’ve always tended to vote that way, it’s cool, they’ve bought into the negative image of conservative parties and that the Democrats are for the little guys.  Sometimes they just like the guy or gal.  Likewise, I have conservative friends and relatives that are conservative more for the social benefits rather than a fundamental belief in the principles.

I recall the difficulty I had identifying all the flavors of political spectrum as I tried to figure out where I fell.  I’m still learning.  I’ve come a long way.  Unfortunately, I there are a lot of powers out there that would rather you not figure out where you fall on the political spectrum based on your values, rather take their word for it.  Believe what they want you to believe. 

Don’t take their word for it. Figue it out for yourself.  Focusing on values is very good advice.

Bad Engagement on Health Care Reform

I’m laying around the house with a fever today listening to two self described “moderate conservatives” on the Shanin and Parks radio program.  One topic of discussion is government health care.   Conservatives, these two included, are really, really bad at engaging in this discussion.  Really bad.  Not once did I hear them say something that made an opposing caller reconsider their position.

Here are a couple examples:

Caller 1 said insurance companies have messed up health care, paid 100s of millions of dollars of bonuses to their executives and denied people needed care which is the same as murder.

Their response – the government isn’t going to do any better.  And then it spiraled into discussion of whether they support murder or not.

A better response:

I’d ask if he thought there would be treatments denied under a government insurance program or if the government process for deciding on which treatments are effective and covered and who gets coverage would be subject to some politics.  For example, do certain treatments from companies that are “in” with the politicians and bureaucrats get preferential treatment?  What about the politics of who gets treatment?  No favors there, right?  All the decision makers involved will be altruistic and apply standards consistently.

Then I might fact check the person has done their homework.  Ask which executives, how much were their bonuses and how many claims were denied?  I might also ask how that comp compares with executives of companies of similar size and performance and how the denial rate would compare under government medicine.

Example 2:  Caller #2 told the story of a white collar, 51 year old friend who came down with bronchhitus and shortness of breath and went to the emergency room for treatment and racked up $3,900 in services and tests.  He can’t afford this.  He got scared.  Can’t we do better?

Their response – “Didn’t the guy have COBRA?”

My response:  A 51 year old white collar worker doesn’t have a regular doctor he could call for advice in an emergency?  I’ll assume he does and that his doctor recommended a trip to emergency or urgent care facility.

Next, does a 51 year old, white collar worker not have $3,900 in savings for a rainy day and emergencies?  Why not?

Has he not shopped a high deductible policy on the open market?  I have, they run about $200 per month for a family and they give you access to the insurance company’s discount on the expenses that you cover on the deductible.  My guess is that his $3,900 bill would have been reduce to about $1,800 – $2,300 based on the size of the discounts I receive on my insurance company’s discount.

 

 

An $1,800 emergency room visit this past summer cost me $900 after my high deductible insurance company applied their discount.

Next, has this guy tried talking to the finance department at the hospital to see if he can get a cash discount.  Often those are in line with the same discounts they give to insurance companies.

No Free Lunch

Why I don’t hear more about Thomas Sowell in the media is beyond me.  Very few people can break it down like him.  His column, The “Costs” of Medical Care, is no exception.  It’s a fine piece of work.

We are incessantly being told that the cost of medical care is “too high”– either absolutely or as a growing percentage of our incomes. But nothing that is being proposed by the government is likely to lower those costs, and much that is being proposed is almost certain to increase the costs.

There is a fundamental difference between reducing costs and simply shifting costs around, like a pea in a shell game at a carnival. Costs are not reduced simply because you pay less at a doctor’s office and more in taxes– or more in insurance premiums, or more in higher prices for other goods and services that you buy, because the government has put the costs on businesses that pass those costs on to you.

Letting old people die would undoubtedly be cheaper than keeping them alive– but that does not mean that the costs have gone down. It just means that we refuse to pay the costs. Instead, we pay the consequences. There is no free lunch.

Providing free lunches to people who go to hospital emergency rooms is one of the reasons for the current high costs of medical care for others. Politicians mandating what insurance companies must cover is another free lunch that leads to higher premiums for medical insurance– and fewer people who can afford it.

Britain has had a government-run medical system for more than half a century and it has to import doctors, including some from Third World countries where the medical training may not be the best. In short, reducing doctors’ income is not reducing the cost of medical care, it is refusing to pay those costs. Like other ways of refusing to pay costs, it has consequences.

Any one of us can reduce medical costs by refusing to pay them. In our own lives, we recognize the consequences. But when someone with a gift for rhetoric tells us that the government can reduce the costs without consequences, we are ready to believe in such political miracles.

It’s a sad state of affairs that we don’t reward clear thinkers like Sowell with more of our attention.

I Like the Way He Runs the Country

Long ago I asked him what he liked about the then President.  He replied, “I like the way he runs the country.”

At the time, I didn’t understand what was fundamentally wrong with his statement.  Now I do.  Many today make the same mistake my friend made.

The President does not run the country.   He barely runs the government.  He commands the military, approves or disapproves of legislation from Congress, makes lower level appointments and nominates people for higher level appointments such as Supreme Court Justice, with Senate approval and makes treaties, again with Senate approval.

The oath of the President is: “I do solemnly swear (or affirm) that I will faithfully execute the Office of President of the United States, and will to the best of my Ability, preserve, protect and defend the Constitution of the United States.”

The fundamental mistake I encounter in conversation after conversation is this implicit idea that the President runs the country much like how a CEO runs a company.  That idea underlies such statements as: “Let’s give him a chance.  The other guy wasn’t getting things done.”  “There is no right or wrong, let’s just see if this works.”

The goal of the Office is to defend the Constitution of the United States, not to ensure that every pot has a chicken.

The goal of the Constitution of the United States is to protect citizens from the illegitimate exercise of power from others and from the government itself.

There is a right and wrong.  We shouldn’t be wondering if “this guy” will get things done.  It should be really, really clear.  The President is either preserving, protecting and defending the Constitution of the United States with the powers vested in the Executive Branch or he is not.  We should be able to trace each of his official actions, platforms, positions back to the powers enumerated to the by the Constitution or we cannot it.  It’s that simple.  It’s that clear.

We can choose to learn from the billions of other humans who have lived (and still live) under kings, dictators, despots and other forms of centralized authority or we can choose not to.

Bad Socialism Comparison

A writer of a letter to the editor in a local newspaper makes a common mistake in equating our public education system with socialism and with the proposed changes in health care:

While attending parent-teacher conferences for my sons recently, I marveled at the dedication of their professionally trained teachers. I considered all that my kids had learned, amazed at their progress. I thought about how convenient it was to have a bus that picks them up in front of our house to take them to school. I pondered the school lunch program and how it also provides free and reduced-price meals for low-income children.

Having mandated free, quality public education has been key to keeping the United States a major world power. Now I understand that some school districts have had challenges. But most deliver a quality product.

I then thought about the raging health care debate going on today. If public education were just now being proposed, would it also be shouted down in defeat as a “socialist” concept?

How is education a right but health care is not? It just doesn’t make sense to me.

I’ve seen this mistake made numerous times with other services such as fire, police and sewers.  It usually goes something like this letter, “the Police in my area do a good job, socialism isn’t so bad.”

There are several problems with these comparisons.  The main problem is that none of these things – public education, fire, police and sewers – are true socialist models.   It’s an apples-to-oranges comparison.P

People putting forth such arguments assume these services are socialist because they are funded through taxes and controlled by a government.  What such people miss is that socialism is the ownership and control through a centralized government, or one government in a country- the Federal government.

That’s not true for these services.  They are owned and controlled by many, many local government-like groups that are checked and balanced by other government groups.

Consider public education.  In my home metro area, we have dozens, if not hundreds, of school districts that provide public education using the property tax-Board of Education model.  Each of these school districts, while considered a governmental body, are separate from other city, county and state governmental bodies.

So what?  Why is this important?  It’s important because this system leaves a considerable amount of important competition and checks and balances in place that a true socialist system would remove.  If I don’t think the school district that I live in is good quality, I can move to a better one.

My parents made that decision when I was in third grade.  They moved primarily to get my me and my brother into what they considered a better district.  When I purchased my home, I chose a community with a good quality school district for my children.  Good school districts attract families, bad school districts repel them.

What would it be like if we didn’t have that choice?  What if all schools were run by the Federal government?  Then, if your local schools weren’t that great, you wouldn’t have much choice.

In addition, controlling school districts bodies separate from other governments brings in another level of check and balance.  Just consider one example.  What if the police and schools were run by the same agency?  Think about the things that might happen.  In fact, we’ve seen this very thing happen on college campuses with campus police forces.  Since the same group of people control the schools and police, some crimes go unreported and unpunished.  Having police and schools controlled by separate entities reduces this risk.

So, not only are there many local school districts which keeps competition in the equation, but there are also a number of other checks and balances that could go away if a true socialist (i.e. centrally run) model were adopted.

Mind Changer on Local Talk Radio

One of the two “moderate conservative” hosts of a local talk radio program admitted yesterday that he changed his mind about liberal media bias.  That was quite an admission, because for years he defended the media and said that any bias was perceived by the reader and not perpetrated by those in the media.

While the other host of the program tried to claim credit for the conversion, he admitted that the blatant actions of two people changed his mind: Charles Gibson and Katie Couric.  I didn’t get to hear which actions.  I assume Gibson’s response to the ACORN break played a factor.  I don’t pay enough attention to Katie to know what she did.

I’m always interested to see what things can change a person’s mind (hence the name of this blog), so I’m glad he mentioned it.  It turns out that Saul Alinsky was right again.  Alinksy, an alleged influence in Obama’s life, suggests showing an enemy in their true light so people can see what they really are.

The guy who made the ACORN tapes found success with that tactic.  It looks like Gibson and Couric.  All I can say is keep up the good work.

To appear “smart” this guy continues to qualify his position.  He doesn’t believe there’s an organized conspiracy in media, but now he sees how individual biases, especially when a majority of people in the profession align idealogically, can influence the angles and the coverage.  I haven’t heard any support the “organized media conspiracy” theory.  That’s a straw man he’s set up for himself to knock.

All this reminds of a story from conservative journalists (some do exist).  I’m not sure who this came from.  This gentlemen was working late one night with one of his liberal editors when the topic of bias came up.  The conservative journalist said that 90% of the staff were card carrying Democrats.  He asked his editor if he could see why the stories were biased.  The editor replied that journalists are trained to be objective and professional.

The conservative journalist then asked, “well, okay then, since journalists are trained to be objective and professional, how would you feel if 90% of the staff were card carrying Republicans?”

His editor replied, “That wouldn’t work.  You can’t trust them to be objective.”

I think of that story every time I hear people defend bias in the media or pretend it doesn’t exist or pretend it only exists on Fox.  It is hard to see our own biases.

But, I think people are starting to see their bias.

Great Write-Up of Elinor Ostrom’s Work

John Stossel provides the best write-up for lay people of Elinor Ostrom’s work that I’ve read so far in his column today, Self Governance Works.  Elinor shared the Nobel Prize in Economics this year.

If I take fish from a common fishing area, I benefit completely from those fish. But if I make an investment to increase the future number of fish, others benefit, too. So why should I risk making the investment? I’ll wait for others to do it. But everyone else faces the same free-rider incentive. So we end up with a depleted resource and what Garrett Harden called “the tragedy of the commons.”

Except, says Ostrom, we often don’t. There is also an “opportunity of the commons.” While most politicians conclude that, depending on the resource, efficient management requires either privatization or government ownership, Ostrom finds examples of a third way: “self-organizing forms of collective action,” as she put it in an interview a few years ago. Her message is to be wary of government promises.

She has studied, for example, self-governing irrigation systems in Nepal and found successes never anticipated in the textbooks. “Irrigation systems built and governed by the farmers themselves are on average in better repair, deliver more water, and have higher agricultural productivity than those provided and managed by a government agency. … (F)armers craft their own rules, which frequently offset the perverse incentives they face in their particular physical and cultural settings. These rules may be almost invisible to outsiders. …”

“These rules may be almost invisible to outsiders…” reminds me of Adam Smith’s Invisible Hand.  The Invisible Hand is why we do what we do.  Smith wrote more about this subject in his Theory of Moral Sentiments.  In addition to economic incentives, our actions are influenced by prudence, propriety, benevolence and justice.   These four governors of behavior are under appreciated.  I consider economic incentives along with prudence, propriety, benevolence and justice to be the five fingers of the invisible hand.

Government intervention can screw up economic incentives and it can also screw up the other four fingers.  Something a German lady told me comes to mind.  She said that while East Germany was freed 20 years ago, the culture of a heavy handed slave master statist government is still there.  The people are rude.  They live to meet the codified rules and not much else.  The government rules replaced a person’s sense of prudence, propriety, benevolence and justice.  DMV anyone?

I also love this passage: “While most politicians conclude that, depending on the resource, efficient management requires either privatization or government ownership, Ostrom finds examples of a third way.”

By examples, he means real world examples.  Real world examples are all around us, yet I find that those examples are often under appreciated by people who box themselves into theoretical confines.   I’m the Elinor Ostrom of my workplace.  Whenever we have a grand new idea, I look for real world examples that are similar.  It is darned difficult to get people to accept those real world examples.  It’s also darned difficult to get those people to admit that they should have more carefully considered those real world examples when they get similar results.

On the Margin

Here’s an excellent podcast from Russ Roberts of EconTalk:  Munger on Shortages, Prices and Competition.

Listen to it.   This covers a gamut of topics:   Vaccines, minimum wage, organ donation, airline deregulation.  Roberts and Munger do a great job of explaining factors other than price that we use to allocate our resources on the margin everyday and don’t realize it.

For example:  FREE VACCINE!!! Great. We’ll all get it.  Right?  Nope.  Why not?  It’s still not worth it to many because there are “costs” involved.  Time waiting in line, getting there, having a chance to catch the illness while waiting in line to name a few.

I’m listening to the podcast for the second time as I write this.

If This Guy is Concerned…

…you should be too.  Thomas Sowell’s column today is titled Dismantling America.   The beginning:

Just one year ago, would you have believed that an unelected government official, not even a Cabinet member confirmed by the Senate but simply one of the many “czars” appointed by the President, could arbitrarily cut the pay of executives in private businesses by 50 percent or 90 percent?

He goes on to ask a few more questions like that.  Then ends with:

Nothing so epitomizes President Obama’s own contempt for American values and traditions like trying to ram two bills through Congress in his first year– each bill more than a thousand pages long– too fast for either of them to be read, much less discussed. That he succeeded only the first time says that some people are starting to wake up. Whether enough people will wake up in time to keep America from being dismantled, piece by piece, is another question– and the biggest question for this generation.

I agree.  Some people are waking up.  Are enough?  We’ll see.  It’s easy to get the wool pulled over your eyes when it’s “your guy” pulling.   I talk to a lot of people with the woolly eyes.  You may too.

If you want to lift the wool a little, first remind them that as long as free elections are maintained in the country their guy may not always be in charge.  Then ask them what they think about some else’s guy or gal doing some of the same things, like setting executive pay, taking over businesses, ramming large bills through Congress and so forth.

For me, that’s always been a litmus test to keep the wool out of my eyes.