Posts Tagged ‘Health Care’

Steve Forbes on the Crisis

December 23, 2009

In his December 10, 2009 Fact and Comment column, In-Credit-Able, in Forbes Magazine, Steve Forbes clearly communicated several points worth capturing.  Here’s on on the mortgage crisis:

Government-sponsored enterprises Fannie Mae ( FNM news people ) and Freddie Mac ( FRE news people), with their implicit government guarantees, were able to totally dominate the mortgage market. They could borrow cheaply and leverage up on a scale no private company could. When they went bingeing on subprime mortgages, they ended up twisting and then destroying the housing market. The private sector was quite capable of generating players that could have performed Fannie’s and Freddie’s roles. And because they wouldn’t have had Uncle Sam’s moral-hazard safety net, they would have been infinitely more cautious, even with the Fed creating floods of liquidity and the credit rating agencies forgetting their raison d’être. Yet Congress is determined to keep these beasts alive and under government sway. Washington is also taking over the student loan market.

This is not a well understood point.  Having the implicit guarantee of the government short-circuited the prudence that would take place in a free market.  All the bright bulbs that condemn free markets for causing the crisis, don’t seem very bright to me because they not only miss the true cause of the crisis, but they blame the very thing that could have prevented it.  Removing prudence from a free market through a government action will always end badly.

Here’s some clear thinking from Steve on health care:

The prospective government de facto takeover of health care will extend Washington’s reach into the credit markets. Health insurers will be reduced to federal vassals by being forced to offer policies at prices and terms dictated by Washington. As a reward they will have first call on the credit markets, with the same sort of implicit guarantees that once so benefited Fannie and Freddie.

It’s easy to forget, businesses like insurance companies are in business to make a profit for their shareholders.  If they don’t make a profit, there’s nothing forcing them to stay in business.

Amazing Hoodwinking

December 23, 2009

It’s amazing to me that we continue to let Congress go down this path of rushed legislation.  “We must do this now!”  “We have to sign it before Christmas!”  They’ve used the same pattern for every piece of rushed legislation this year since the initial TARP programs last year.   TARPS I and II.  Stimulus.  Overextended budget.   Cap and trade (though not signed yet).  Health care.  “We can’t afford to stop and think about this.  We must act now!”

It’s the same argument global warming believers use with the planet.  “It will only happen gradually for the 50 – 100 years, but if we wait 5 more minutes it will be too late.”

In a former job we had a lot of “fire drills.”  The bosses would come with these important pieces of work that had to be done now!  They would get us all frothed up so that we were cranking out absolute crud until 2:00 am.  I coined a term for those projects:  JALJA (Jumping Around Like Jackasses).  “Here comes another JALJA,” became common lingo in my group.  Most of us eventually wised up and realized the JALJA’s weren’t important and moved onto to work for bosses who could use their resources effectively.  The JALJA leaders couldn’t figure out what was important and what wasn’t, so everything was, even when it wasn’t.  They didn’t know what they were doing, so they did a lot of it to keep people guessing.

The Congressional pace over the past year reminds me a lot of those good ole JALJA’s.  People seem to be wising up, based on Obama’s declining poll numbers.  I hope it will translate into results at the 2010 Congressional elections to restore a balance of power in Congress.

At the very minimum, maybe we will get back to the days where Congressman and Senators would at least read, if not come to fully understand the stuff they’re voting on.  It seems like such a basic expectation.

“Seven Presidents Have Failed…”

December 14, 2009

On 60 Minutes last night, Barack Obama claimed that seven presidents have tried and failed to reform health care.  Follow-up questions I would have asked:

1.  Didn’t President Bush sign the Medicare Prescription Drug, Improvement and Modernization Act in 2003?

2. Wasn’t part of that act a provision to add pretax health savings accounts for working people so that people can control more of their health expenditures?

3. If you were to analyze this major health legislation, what parts would you say are having a positive impact and which negative?

4. Do you think the parts that expanded government’s role in health care are positive or negative and why?

5.  Do you think the HSA’s are having a positive or negative impact and why?

6.  If I were Steve Kroft and I had just implied that the 2,000 page health care reform bill was a monstrosity and the President changed the subject by essentially saying, “seven Presidents have failed, but we’re close,” I might have asked, “Is this monstrosity better than failing to pass something?”

I understand there are a couple of dynamics at play.  You can’t upset the President too much or he won’t come on your show and you won’t get ratings.  Also, there is still a halo of infallibility with this guy, so journalists are having a hard time coming to grips with the fact that he is a human after all, and maybe, just maybe, it’s a bit much to expect someone to go from junior senator to legendary world leader in a year’s time.

Why Health Care Reform May Not be a Bad Idea

November 24, 2009

Free markets take an undue blame for many of today’s top problems, when the problems are rooted in government interference.  This is true for health care.  The cost of health care has risen faster than inflation for decades and is hitting that level where affordability is becoming a growing concern.

Many people reflexively blame free markets for the problem.  They think insurance companies and health care providers are just out to fleece us while the guys that run these businesses smoke their fat stogies in their posh boardrooms and spend all our money.

They neglect to consider the impact government interference has on the health care market.    Health care costs have climbed right along with the percent of medical paid by government programs.  Costs have also climbed along with the percent medical paid by third parties, driven by the tax advantage of employer paid health insurance and sate mandates on what treatments health insurance policies cover.  These alone cause enough trouble.  That doesn’t get to the supply constraints placed on the market by state and local governments  that regulate hospital beds or the AMA’s soft influence on the quantity of medical providers in the market or cost constraints placed on hospitals for not being allowed to turn away someone based on their ability to pay (someone has to pay those costs).

In fact, rarely are these things ever discussed.  The fact is the U.S. health care market is about as far from a free market as you can get.

Few people understand what a free market is.  Many people define a free market as one that has the presence of for-profit companies.  That’s wrong.  A free market is one that’s free from government intervention and regulation.  Our health care market is far from that.

I’ll take the definition of free market further.  I consider a free market to be one where a reasonable percentage of the costs are paid by first parties (i.e. the people using the service) through voluntary transactions.

Which brings us to another misconception about the health care market.  Some people argue that many medical procedures are not voluntary.  In other words, a person must get a life saving treatment or die, which puts health care providers in a more powerful bargaining position.

That argument seems sounds, but ignores the evidence that has piled up from markets in other goods and services that are relatively more of a free market than health care, that is  free markets are eventually great for everyone.  The innovation and competitiveness bring more choices and quality for all levels of budgets than less free markets.   How vital is food?  Very.  You need it to live.  Yet the percent of income we spend on food has fallen dramatically over the past century as our food processes have become more productive through innovation and competition.

That reduction in food costs gives us more income to spend on other things like cell phones, iPods and maids.  People in my family have maids that clean their homes twice a month.  Only the wealthy could afford anything like that when I was a kid.

Finally, that brings me back to my original thought.  Why health care reform may not be a bad idea.  If we eliminate all pretenses of a free market and health care blows up in our faces – along with the faces of other countries that depend on our innovations to keep their government medical systems serviceable – we will not be able to blame free markets any longer.

Mind Changer of the Week

November 21, 2009

The recent recommendation from the United States Preventive Services Task Force, a government-appointed group, to reduce breast cancer screenings seemed to get a few people thinking about whether government health care is such a good idea.

While the Left trips over itself to keep us from sliding down the slippery slope with editorials like this one in the NY Times (amazing that they can’t seem to so the same calming, let’s look at the facts and think about this demeanor with stuff from the Right), they may have trained the consumers of their propaganda media to well to react to headlines and ignore facts. 

For many people, the words that register are “government appointed group” and “scale back on breast cancer screenings” and they’re off to the races imagining a world where the government rations necessary treatments because of what appears to be b.s. opinions from so-called experts, a world where it’ll be the people vs. the government.

No Free Lunch

November 4, 2009

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.