Tuesday, August 11, 2009

Health care factoids and suggestions

The health care reform debate is getting lively and that can only mean that the bills sitting in Congress are not going to pass. It's way too complicated. It's obviously a big expansion of government. Government can't run anything right, as Obama acknowledged today: "UPS and FedEx are doing just fine. It's the Post Office that's always having problems." It's going to be hugely expensive, like $1 trillion, at a time when we're already running trillion-dollar deficits. It's not going to help the economy at all, only add to existing and massive burdens, so why the rush? It's going to be mandatory. There is going to be rationing. It's going to cover abortions and all illegal immigrants. It's downright scary, and that's what has got people attending Tea Parties and Town Halls.

We need to step back from this debate about the details of reform and realize that our current system is not so broken that we need to transform the American economy. Here are some interesting facts about the uninsured, the ones who are the object of all this effort. I've summarized some key points from an article by Michael Cannon, and he's sourced all his facts if you want to check.

The claim that 46 million are uninsured is grossly misleading and very possibly fraudulent. The CBO has acknowledged that 40 million may be uninsured on any given day, but the number of Americans who are uninsured for an entire year is more like 20-30 million.

15% of those 20-30 million chronically uninsured are effectively insured because they are eligible for existing government programs.

As many as 75% of the chronically uninsured could afford coverage but choose not to purchase it.

13% of the uninsured are illegal immigrants.

43% of uninsured nonelderly adults have incomes greater than 2.5 times the poverty level.

60% of the uninsured are under 35, and 86% are in good-to-excellent health. Government intervention has made health insurance unnecessarily expensive for them, so these folks quite sensibly don’t want to be ripped off. Mandating that they buy coverage is really about hunting them down and taxing them.

To me, this fails the test of a crisis that is grave enough to justify a sweeping reform and government takeover of a major portion of our economy.

The biggest problem with healthcare is the way it's treated by the tax code. Only employers can deduct the cost of health insurance, so tax efficiency says that everyone will attempt to get their insurance from their employer, and employers will be pressured to offer policies that cover the maximum amount of things, in order to take advantage of the tax subsidy. The vast majority of Americans now have what they perceive to be free medical care, and no one has an incentive to reduce costs. Meanwhile, doctors and hospitals have an incentive to inflate costs whereever possible since the consumer of their services could care less. This is the "third party payer" problem that Milton Friedman warned us about decades ago.

So the first thing to change to fix this problem is the tax code. Either allow everyone to deduct the cost of health care insurance, or no one. This would eliminate the pressure for employers to provide healthcare, and put consumers back in charge of spending their own money. It would solve the portability problem, since the healthcare policy you purchase belongs to you no matter where you work. It's a proven fact (just look at the rest of the economy and how well it functions) that when people spend their own money they tend to do it intelligently and carefully. The cost of healthcare would become very transparent, whereas now only insurance companies and the uninsured really know how much things cost.

The next step would be to free up the market for healthcare insurance, by eliminating state-mandated benefits and restrictions. Let consumers buy any policy they want from any insurer in the country. I can envision the healthcare version of Progressive auto insurance coming out of nowhere with innovative solutions. Unleashing the power of 200 million healthcare consumers would surely transform the healthcare industry for the better.

14 comments:

Jay Norman said...

Scott:
I have heard that part of the plan is that a third party will decide if their will be efforts to try to prolong your life, depending on illness and age. If in fact Congress is exempted from the Plan, does that mean they will be the only ones that can avail themselves of life proloning medical practices.

Scott Grannis said...

My understanding is that the bill does provide for programs to assist people with end of life decisions. And of course there will be committees making decisions on which drugs are cost-effective, and this will mean that some people will be denied drugs or treatments that could prolong their life. It's all about taking away an individual's freedom and replacing it with a bureaucracy. There WILL be rationing of health care, without a doubt. It stinks.

CDLIC said...

Obama's facts are far, far of the mark. He can't even get this right. And this man is "leading" the nation?

AARP TELLS OBAMA: NO HEALTH PALN ENDORSEMENT YET. By RICARDO ALONSO-ZALDIVAR (AP) – 8-11-09

WASHINGTON — A group usually seen as one of Barack Obama's allies in the health care debate — AARP — says the president went too far Tuesday when he said the seniors lobby had endorsed the legislation pending in Congress.

AARP is sensitive to the issue because polls show that Medicare beneficiaries are worried their health care program will be cut to subsidize coverage for the uninsured.

At the town hall in Portsmouth, N.H., Obama said, "We have the AARP onboard because they know this is a good deal for our seniors." He added, "AARP would not be endorsing a bill if it was undermining Medicare."
But Tom Nelson, AARP's chief operating officer, said, "Indications that we have endorsed any of the major health care reform bills currently under consideration in Congress are inaccurate."

Like Obama, AARP wants action this year to cover the uninsured and restrain health care costs, but the organization has refrained from endorsing legislation. Nelson said AARP would not endorse a bill that reduces Medicare benefits.

A spokesman said the Medicare cuts that have been proposed so far would not affect benefits.
Copyright © 2009 The Associated Press. All rights reserved.

STS said...

Regarding the claim that it will cover illegal immigrants: Section 246 of H.R. 3200 (the House draft) states:

SEC. 246. NO FEDERAL PAYMENT FOR UNDOCUMENTED ALIENS.

Nothing in this subtitle shall allow Federal payments for affordability credits on behalf of individuals who are not lawfully present in the United States.


Regarding the end-of-life stuff read Republican Senator Johnny Isakson's comments in this interview explaining that this provision is about "putting the authority in the individual rather than the government."

I'd love to correct some of the other disinformation in this post, but I don't have that kind of time! ;) If you ask somebody who is massively biased against reform to confirm your own biases against reform, gee whiz, you find out you AGREE!! To hell with facts, they're so inconvenient.

Scott Grannis said...

STS: Thanks for your comment. I guess this goes to show that this document is so convoluted that it is all but inmpossible to decide what it means. I was referring to p. 50, Sec. 152, which provides that "health care and related services ... covered by this Act shall be provided without regard to personal characteristics extraneous to the provision of high quality health care or related services."

I'm not an expert in legalese, but it's not hard for me to interpret that to mean that health care cannot be denied to anyone.

Could the section you cite not be interpreted to mean that the govt. will not pay the premium of undocumented aliens?

As for the end of life stuff, it is not a stretch to assume that since end of life issues are specifically addressed in the bill, that this couldn't someday morph into a rationale for rationing care to the very sick?

The potential for a bill such as this to create unintended consequences is so huge as to be almost impossible to imagine.

I think bills such as this are monstrosities that can wreak untold damage in the future. I don't think you can possibly underestimate the ability of such a bill to produce unpleasant and unintended consequences. Government cannot possibly micromanage something so complex as health care for hundreds of millions of people. That is the ultimate in hubris.

Even if I were to grant that your point is valid, I would still argue that a bill such as this is the wrong thing to do, and it will lead to more and more problems down the road. At the very least, it is beyond the electorate's capacity (and probably that of most politicians who will vote on this) to fully understand the implications and all the potential consequences.

To paraphrase one politician, it would take many days and many many lawyers to figure out what this damn bill means.

MW said...

"Either allow everyone to deduct the cost of health care insurance, or no one."

Seems unlikely that will happen as the unions are against it. Of course, the official party line is that the Dems won't eliminate this tax advantage because they don't want to burden small business owners with a higher wage bill (which assumes the tax would not be passed on to the employee and ignores everything else they're burdening business owners with)).

Public Library said...

Take care of the current fiscal disaster before creating another one. Obama is biting off more than he can chew. Americans do not acre about health care reform when the unemployment rate is 9.5% and holding steady for years to come.

Just like the '92 campaign, "it's the economy stupid"

CDLIC said...

Some facts regarding the Obama health care reform plan

In Obama’s town hall meeting of yesterday, he talked about pulling the plug on grandma indicating there will be no death panels deciding to pull the "plug". In my opinion I do not believe Obama wants to kill the elderly, however, one must look at the possible effect of things being placed in the Obama plan to determine the future of health care.

Obama has stated he wants to reduce hospital costs by $220B; want to cut Medicare advantage for 10M people; wants to reduce the number of patient imaging studies; wants to reduce electric wheelchairs; wants to reduce advanced nursing care in medical facilities (mainly for the elderly).

There are two possible methods by which the plug can be “pulled” on grandma—by commission or by omission. By cutting costs one can clearly see that grandma’s “plug” may be pulled not by commission but by omission of needed care; not enabling grandma to live to the age where a “plug” would be necessary.

Obama said to look at the advisers surrounding him to understand him. The following quotes are by Ezekiel Emanuel—one of Obama's advisors and the brother of his Chief of Staff Rahm Emanuel. Ezekiel Emanuel said:
“Treating 65 year olds differently because of stereotypes or falsehoods would be ageist; treating them differently because they already have had more life-years is not.” Are Obama's health care bureaucrats going to make a determination if a person has had more life-years or not, and if it is determined more, will they merit care or not?

In January ’09 Ezekiel said:
“When implemented, the complete lives system produces a priority curve on which individuals aged between roughly 15 and 40 years get the most chance whereas the youngest and oldest people get chances that are attenuated. And infants, in comparing them with adolescents, do not yet have a personality capable of forming and determining long term plans whose fulfillment requires a complete life.”
(Continued below)

CDLIC said...

(Continued from above)
Here is what Obama said at the ABC town meeting on 8-11-09 regarding saving costs: “Maybe you are better of not having the surgery but taking the pain killer.” I ask who will determine such?

As stated above, Obama wants to provide health care to an additional 46 million people; at the same time cutting out Medicare advantage; at the same time reducing payments to hospitals by $220 B. So, if the plan is going to treat more people for less money—with Medicare being cut also—does one believe seniors will not be affected? Will health care be determined based on age? Should health care be based on a culture of life, not a culture of death? We know that 25% of all Medicare cost go to end-of-life car and we know the Obama plan and his advisers are looking to cut those costs.

THE HEALTH CARE PROGRAM IS GOING TO BE BASED ON DECIDING HOW TO ALLOCATE SCARCE RESOURCES, NOTHING MORE, NOTHING LESS.

It is claimed by the President there is nothing in the bill regarding abortion, and he is correct; however, the courts have ruled that when the law is silent regarding coverage (nothing about abortion in the bill) and when an abortion is considered to be a necessary medical procedure it must be implemented and will be covered. The politicians have explicitly left out anything to do with abortion so as not to create controversy now but allow the standing ruling of the courts to allow abortion to be covered.

The bill has in it a Benefits Advisory Committee to be appointed by the President and the GAO creating a 27 person panel assigned to make decisions as to who will be covered and presumably under what circumstances. In any system where the government allocates scarce resources to the population based on its own judgments about who is entitled to receive and not receive benefits brings up serious questions regarding who is and is not going to receive services.

No matter how hard Obama attempts to sell his health plan via his town hall speeches, I do not believe he will succeed. There is an old saying that may very well predict the outcome of Obama's push to sell his health care plan: A good speech cannot sell a bad plan.

Scott Grannis said...

CDLIC: Good points. I've tried reading the bill and it is very frustrating. The language is so obscure that it could end up being interpreted in unforseen ways. This is most definitely NOT the way to restructure a major portion of the U.S. economy.

Scott Grannis said...

MW: The unions represent a smally portion of the workforce and shouldn't be able to dictate national policy. But of course Obama is apparently willing to spend a lot of political capital to keep them happy. Once his well runs dry the dynamics could change.

Allowing everyone to deduct healthcare premiums shouldn't be too hard to implement. Who would argue against it? Only a minority pay their premiums now, and they would be thrilled to get tax relief. Businesses would end up slowly getting out of the business of buying healthcare for their employees, preferring to hand over the money they are spending now and letting the employees take on the task of buying their own insurance. It would solve a lot of problems fairly painlessly.

The one problem I see is that any and all tax subsidies are bad policy, but maybe the price we would have to pay for this would be less than the cost of a single payer plan.

MW said...

You won't be surprised to read that I agree with you about unions and policy. I suspect their power is derived from the support (money and votes) they provided to Obama's campaign.

Rick said...

Scott and STS - Sec 246 only applies to affordability credits that are reductions in premiums given to certain people who buy health insurance through the exchange. To be eligible for such a credit, a person must be ineligible for Medicaid and must have a family income less than 400% of the federal poverty level for a family of their size. Section 246 does not prohibit illegal aliens from purchasing health insurance. Nor does Section 246 prohibit illegal aliens from receiving health care benefits.

Scott Grannis said...

Rick: thanks for the clarification. One thing we should all be able to agree upon is that these healthcare reform bills are extremely hard to understand. They are so vast in size and complexity that they lend themselves not only to different interpretations, but to almost any interpretation in the future. It's like giving the government a blank check to create a new government program that is almost sure to grow like Topsy. Very scary, but thank goodness the public seems to be catching on.