An interesting take on healthcare reform

[batonrougesooner]

This was published in the wsj yesterday. He makes some excellent points on why the current debate on reform is both flawed and consists of several half truths.



By GEORGE NEWMAN

The health-care debate continues. We have now heard from nearly all the politicians, experts and interested parties: doctors, drug makers, hospitals, insurance companies, even constitutional lawyers (though not, significantly, from trial lawyers, who know full well "change" is not coming to their practices). Here is how one humble economist sees some of the main arguments, which I have paraphrased below:

- "The American people overwhelmingly favor reform."

If you ask whether people would be happier if somebody else paid their medical bills, they generally say yes. But surveys on consumers' satisfaction with their quality of care show overwhelming support for the continuation of the present arrangement. The best proof of this is the belated recognition by the proponents of health-care reform that they need to promise people that they can keep what they have now.

- "The cost of health care rises two to three times as fast as inflation."

That's like comparing the price of hamburger 30 years ago with the price of filet mignon today and calling the difference inflation. Or the price of a 19-inch, black-and-white TV 30 years ago with the price of a 50-inch HDTV today. The improvements in medical care are even more dramatic, leading to longer life, less pain, fewer exploratory surgeries and miracle drugs. Of course the research, the equipment and the training that produce these improvements don't come cheap.


Corbis
- "Health care represents a rising proportion of our income."

That's not only true but perfectly natural. Quality health care is a discretionary, income-elastic expense -- i.e. the richer a society, the larger the proportion of income that is spent on it. (Poor societies have to spend income gains on food and other necessities.) Consider the alternatives. Would we feel better about ourselves if we skimped on our family's health care and spent the money on liquor, gambling, night clubs or a third television set?

- "Shifting funds from health care to education would make for a better society."

These two services have a lot in common, including steadily rising cost. What is curious is that this rise in education costs is deemed by the liberal establishment smart and farsighted while the rise in health-care costs is a curse to be stopped at any cost. What is curiouser still is that in education, where they always advocate more "investment," past increases have gone hand-in-hand with demonstrably deteriorating outcomes. The rising cost in health care has been accompanied by clearly superior results. Thus we would shift dollars from where they do a lot of good to an area where they don't.

- "Forty-five million people in the U.S. are uninsured."

Even if this were true (many dispute it) should we risk destroying a system that works for the vast majority to help 15% of our population?

- "The cost of treating the 45 million uninsured is shifted to the rest of us."

So on Monday, Wednesday and Friday we are harangued about the 45 million people lacking medical care, and on Tuesday and Thursday we are told we already pay for that care. Left-wing reformers think that if they split the two arguments we are too stupid to notice the contradiction. Furthermore, if cost shifting is bad, wait for the Mother of all Cost Shifting when suppliers have to overcharge the private plans to compensate for the depressed prices forced on them by the public plan.

- "A universal plan will reduce the cost of health care."

Think a moment. Suppose you are in an apple market with 100 buyers and 100 sellers every day and apples sell for $1 a pound. Suddenly one day 120 buyers show up. Will the price of the apples go up or down?

- "U.S. companies are at a disadvantage against foreign competitors who don't have to pay their employees' health insurance."

This would be true if the funds for health care in those countries fell from the sky. As it is, employees in those countries pay for their health care in much higher income taxes, sales or value-added taxes, gasoline taxes (think $8 a gallon at the pump) and in many other ways, effectively reducing their take-home pay and living standards. And isn't it odd that the same people who want to lift this burden from businesses that provide health benefits also (again, on alternate days) want to impose this burden on the other firms that do not offer this benefit. What about the international competitiveness of these companies?

- "If you like your current plan you can keep it."

In other words, you can keep your current plan if it (and the company offering it) is still around. This is not a trivial qualification. Proponents have clearly learned from the HillaryCare debacle in the 1990s that radical transformation does not sell. What we have instead is what came to be dubbed "salami tactics" in postwar Eastern Europe where Communist leaders took away freedoms one at a time to minimize resistance and obscure the ultimate goal. If nothing else, a century of vain attempts to break the Post Office monopoly should teach us how welcoming Congress is to competition to one of its high-cost, inefficient wards.

- "Congress will be strictly neutral between the public and private plans."

Nonsense. Congress has a hundred ways to help its creation hide costs, from squeezing suppliers to hidden subsidies (think Amtrak). And it has even more ways to bankrupt private plans. One way is to mandate ever more exotic and expensive coverage (think hair transplants or sex-change operations). Another is by limiting and averaging premiums and outlawing advertising. And if all else fails Congress can always resort to tax audits and public harassment of executives -- all in the name of "leveling the playing field." Then, in the end, the triumphal announcement: "The private system has failed."

- "Decisions will still be made by doctors and patients and the system won't be politicized."

Fat chance. Funding conflicts between mental health and gynecology will be based on which pressure group offers the richer bribe or appears more politically correct. The closing (or opening) of a hospital will be based not on need but which subcommittee chairman's district the hospital is in. Imagine the centralization of all medical research in the country in the brand new Robert Byrd Medical Center in Morgantown, W.Va. You get the idea.

- "We need a public plan to keep the private plans honest."

The 1,500 or so private plans don't produce enough competition? Making it 1,501 will do the trick? But then why stop there? Eating is even more important than health care, so shouldn't we have government-run supermarkets "to keep the private ones honest"? After all, supermarkets clearly put profits ahead of feeding people. And we can't run around naked, so we should have government-run clothing stores to keep the private ones honest. And shelter is just as important, so we should start public housing to keep private builders honest. Oops, we already have that. And that is exactly the point. Think of everything you know about public housing, the image the term conjures up in your mind. If you like public housing you will love public health care.

Mr. Newman is an economist and retired business executive.

Printed in The Wall Street Journal, page A13
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[OUHOMER]

this guy is on point. Seems like they should practice on the VA. From the stories I hear from our Vets, I dont want government sponsored health care.

When they fix the VA health plan, than they can come to the public and say we have a better deal for ya.

[MR2-Sooner86]

this guy is on point. Seems like they should practice on the VA. From the stories I hear from our Vets, I dont want government sponsored health care.

When they fix the VA health plan, than they can come to the public and say we have a better deal for ya.

You make a great point. My grandfather was in a VA Hospital, got dropped on his head and the building wasn't very clean or sanitary. It was in Oklahoma City in case anybody is wondering. Did the nurses seem to care about this? Not really. "Well, we'll have a talk with our staff to make sure it doesn't happen again." Yeah that's bull****. Not to mention I did volunteer work at a VA Hospital last month and it's sad seeing that environment compared to other hospitals.

Not to mention my friend from England I talk to, their healthcare system is ****, don't let the media fool you. Everybody uses the government system for a checkup but if you want something done then you go to the private sector.

Then we go up North to Canada where they have a healthcare system that's puppy dogs and rainbows right? Wrong. A man that was doing business with my father told me the story on how his wife had a tumor. If it wasn't life threatening then the soonest she could get in for surgery was 6 months. If it was life threatening then the earliest they could get her in was 3 months.

Yeah! That sounds like one hell of a system! Whoever is for this plan is as sharp as a bowling ball.

[Ike]

This was published in the wsj yesterday. He makes some excellent points on why the current debate on reform is both flawed and consists of several half truths.




Unfortunately, this article, rather than illuminate some of the more salient points about the healthcare debate really only seems to serve up strawman arguments for the point of being knocked down. I actually feel like this subtracts from the debate rather than adds to it.


By GEORGE NEWMAN

The health-care debate continues. We have now heard from nearly all the politicians, experts and interested parties: doctors, drug makers, hospitals, insurance companies, even constitutional lawyers (though not, significantly, from trial lawyers, who know full well "change" is not coming to their practices). Here is how one humble economist sees some of the main arguments, which I have paraphrased below:

- "The American people overwhelmingly favor reform."

If you ask whether people would be happier if somebody else paid their medical bills, they generally say yes. But surveys on consumers' satisfaction with their quality of care show overwhelming support for the continuation of the present arrangement. The best proof of this is the belated recognition by the proponents of health-care reform that they need to promise people that they can keep what they have now.


He would be making a good argument if most people actually paid for their own benefits out of pocket. But Instead we have this rather stupid system where employers pick up the tab...and they are being hit hard by rising premiums. My own company saw insurance premiums rise by 30% just this past year. But because most people don't see this number, they have no idea how much they are actually paying for the service they get. If they did, we might actually have an idea what people really support. They may see the effects of our nutty system soon though if some kind of change doesn't happen. Either through lost jobs or through decreased wages.



- "The cost of health care rises two to three times as fast as inflation."

That's like comparing the price of hamburger 30 years ago with the price of filet mignon today and calling the difference inflation. Or the price of a 19-inch, black-and-white TV 30 years ago with the price of a 50-inch HDTV today. The improvements in medical care are even more dramatic, leading to longer life, less pain, fewer exploratory surgeries and miracle drugs. Of course the research, the equipment and the training that produce these improvements don't come cheap.


So why is it that the country that spends the next-most toward health care as we do spends approximately half as much money per person for health care for pretty much the same results? He's not wrong about the improvements, and the fact that they aren't cheap. But the notion that we are paying exactly what we should be paying for healthcare is pure BS.



- "Health care represents a rising proportion of our income."

That's not only true but perfectly natural. Quality health care is a discretionary, income-elastic expense -- i.e. the richer a society, the larger the proportion of income that is spent on it. (Poor societies have to spend income gains on food and other necessities.) Consider the alternatives. Would we feel better about ourselves if we skimped on our family's health care and spent the money on liquor, gambling, night clubs or a third television set?

I don't buy this either. Based on the end result, the health care in this country is not significantly better than health care in many countries that spend less than half of what we do.



- "Shifting funds from health care to education would make for a better society."

These two services have a lot in common, including steadily rising cost. What is curious is that this rise in education costs is deemed by the liberal establishment smart and farsighted while the rise in health-care costs is a curse to be stopped at any cost. What is curiouser still is that in education, where they always advocate more "investment," past increases have gone hand-in-hand with demonstrably deteriorating outcomes. The rising cost in health care has been accompanied by clearly superior results. Thus we would shift dollars from where they do a lot of good to an area where they don't.

Who exactly is making this claim? I have never heard it.



- "Forty-five million people in the U.S. are uninsured."

Even if this were true (many dispute it) should we risk destroying a system that works for the vast majority to help 15% of our population?


Make the "vast majority" for whom our system works pay for their health insurance out of pocket rather than completely hide that cost from them, and then ask them if our system "works" for them.



- "The cost of treating the 45 million uninsured is shifted to the rest of us."

So on Monday, Wednesday and Friday we are harangued about the 45 million people lacking medical care, and on Tuesday and Thursday we are told we already pay for that care. Left-wing reformers think that if they split the two arguments we are too stupid to notice the contradiction. Furthermore, if cost shifting is bad, wait for the Mother of all Cost Shifting when suppliers have to overcharge the private plans to compensate for the depressed prices forced on them by the public plan.

Both "left wing" arguments are true. Uninsured people, in general, wait until things are awful, and go to the emergency room and don't pay. Usually if they had gone to a doctor at the first sign of trouble, they could get whatever their problem is resolved for far far less than what it costs to fix the same problem at a later stage in the ER. Those ER costs get shifted to you, the paying customer.


- "A universal plan will reduce the cost of health care."

Think a moment. Suppose you are in an apple market with 100 buyers and 100 sellers every day and apples sell for $1 a pound. Suddenly one day 120 buyers show up. Will the price of the apples go up or down?


Since when has health care been a working free market? When was the last time you shopped for a doctor with a broken leg? Or when was the last time you shopped health insurance companies? Health care is not, nor has it ever been, a working free market.



- "U.S. companies are at a disadvantage against foreign competitors who don't have to pay their employees' health insurance."

This would be true if the funds for health care in those countries fell from the sky. As it is, employees in those countries pay for their health care in much higher income taxes, sales or value-added taxes, gasoline taxes (think $8 a gallon at the pump) and in many other ways, effectively reducing their take-home pay and living standards. And isn't it odd that the same people who want to lift this burden from businesses that provide health benefits also (again, on alternate days) want to impose this burden on the other firms that do not offer this benefit. What about the international competitiveness of these companies?

But US companies wind up paying 2x or more what gets paid in other companies.


- "If you like your current plan you can keep it."

In other words, you can keep your current plan if it (and the company offering it) is still around. This is not a trivial qualification. Proponents have clearly learned from the HillaryCare debacle in the 1990s that radical transformation does not sell. What we have instead is what came to be dubbed "salami tactics" in postwar Eastern Europe where Communist leaders took away freedoms one at a time to minimize resistance and obscure the ultimate goal. If nothing else, a century of vain attempts to break the Post Office monopoly should teach us how welcoming Congress is to competition to one of its high-cost, inefficient wards.

This bit may be true. But again, if most people actually saw the money that gets forked over for their current plans, they might not like them so much to begin with.



- "Congress will be strictly neutral between the public and private plans."

Nonsense. Congress has a hundred ways to help its creation hide costs, from squeezing suppliers to hidden subsidies (think Amtrak). And it has even more ways to bankrupt private plans. One way is to mandate ever more exotic and expensive coverage (think hair transplants or sex-change operations). Another is by limiting and averaging premiums and outlawing advertising. And if all else fails Congress can always resort to tax audits and public harassment of executives -- all in the name of "leveling the playing field." Then, in the end, the triumphal announcement: "The private system has failed."

This bit is probably true...



- "Decisions will still be made by doctors and patients and the system won't be politicized."

Fat chance. Funding conflicts between mental health and gynecology will be based on which pressure group offers the richer bribe or appears more politically correct. The closing (or opening) of a hospital will be based not on need but which subcommittee chairman's district the hospital is in. Imagine the centralization of all medical research in the country in the brand new Robert Byrd Medical Center in Morgantown, W.Va. You get the idea.

Perhaps...but depends on how things are structured.



- "We need a public plan to keep the private plans honest."

The 1,500 or so private plans don't produce enough competition? Making it 1,501 will do the trick? But then why stop there? Eating is even more important than health care, so shouldn't we have government-run supermarkets "to keep the private ones honest"? After all, supermarkets clearly put profits ahead of feeding people. And we can't run around naked, so we should have government-run clothing stores to keep the private ones honest. And shelter is just as important, so we should start public housing to keep private builders honest. Oops, we already have that. And that is exactly the point. Think of everything you know about public housing, the image the term conjures up in your mind. If you like public housing you will love public health care.

No, there really isn't enough competition among the private plans. In many areas, one or two companies dominate the market. The comparisons to food, housing, and anything else is completly disingenuous. Health care is not, nor has it ever been a working free market.


Mr. Newman is an economist and retired business executive.

Printed in The Wall Street Journal, page A13
MORE IN OPINION
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There are a lot of points to be made against a public option. Seriously. It's really unfortunate that Mr. Newman won't make them though.

[Ike]

Not to mention my friend from England I talk to, their healthcare system is ****, don't let the media fool you. Everybody uses the government system for a checkup but if you want something done then you go to the private sector.


This. This right here can actually save a bunch of cost. If a lot of people actually go to a doctor before things get out of control for them, that can save a whole lot of money. There is certainly a place for the private sector in health care, and they problably will do a better job of offering the big things than the government.

[picasso]

the government needs to stay the **** out of health care.

[Curly Bill]

the government needs to stay the **** out of health care.

Indeed.

[JLEW1818]

"People who are satisfied with their health care plans, can stay on their health care plans" - Obama

DON'T ****ING TELL ME WHAT PLAN I CAN STAY ON, OR CANT STAY ON.

You don't have to tell us, we can pick OUr own plans jackass..

[Vaevictis]

You make a great point. My grandfather was in a VA Hospital, got dropped on his head and the building wasn't very clean or sanitary. It was in Oklahoma City in case anybody is wondering. Did the nurses seem to care about this? Not really. "Well, we'll have a talk with our staff to make sure it doesn't happen again." Yeah that's bull****. Not to mention I did volunteer work at a VA Hospital last month and it's sad seeing that environment compared to other hospitals.

Next time, feel free to take him to a private hospital instead.


Not to mention my friend from England I talk to, their healthcare system is ****, don't let the media fool you. Everybody uses the government system for a checkup but if you want something done then you go to the private sector.

This isn't what's wrong with the British system, this is what's right with the British system. You get basic services through the public system, services you might otherwise skip but can save major bucks down the line, and at your option, you can choose between the public and private systems freely.

[picasso]

Next time, feel free to take him to a private hospital instead.

why? should he not expect his Grandfather to be taken care of?

[Vaevictis]

"People who are satisfied with their health care plans, can stay on their health care plans" - Obama

DON'T ****ING TELL ME WHAT PLAN I CAN STAY ON, OR CANT STAY ON.

You don't have to tell us, we can pick OUr own plans jackass..

Actually, he does in response to various people on the opposing side claiming that you won't be able to make those choices.

[Vaevictis]

why? should he not expect his Grandfather to be taken care of?

I didn't say he had to, only that he should feel free to do so.

If he doesn't like the VA system, he can shuttle grandpappy to a private hospital and get the services he wants the way he wants them. Right?

[picasso]

Actually, he does in response to various people on the opposing side claiming that you won't be able to make those choices.

actually, he's slightly changed his wording on how it might play out.

[picasso]

I didn't say he had to, only that he should feel free to do so.

If he doesn't like the VA system, he can shuttle grandpappy to a private hospital and get the services he wants the way he wants them. Right?

yes but his Grandfather served his country and is due these benefits. unlike us average types. So my point is no, he shouldn't have to go to a private care facility. should he?

And if he should to get better care then something is messed up right? Doesn't really seem that complicated.

[Vaevictis]

yes but his Grandfather served his country and is due these benefits. unlike us average types. So my point is no, he shouldn't have to go to a private care facility. should he?

He doesn't have to. He can use the VA system.

So, if the VA system is so much better than the private system, why use it?


And if he should to get better care then something is messed up right? Doesn't really seem that complicated.

It's not, and I agree with you. But it's tangential to my point: Despite the VA system being inferior, he continues to use it. Why?

[picasso]

He doesn't have to. He can use the VA system.

So, if the VA system is so much better than the private system, why use it?



It's not, and I agree with you. But it's tangential to my point: Despite the VA system being inferior, he continues to use it. Why?

because he chooses to? My father is a Korean War veteran and he chooses to use private care, never set foot in a VA type place.

we would like to keep our choices and avoid the impending bureaucratic greedy porked up D.C. nationalization cluster ****. thanks.

[JLEW1818]

because he chooses to? My father is a Korean War veteran and he chooses to use private care, never set foot in a VA type place.

we would like to keep our choices and avoid the impending bureaucratic greedy porked up D.C. nationalization cluster ****. thanks.

AMEN

[Vaevictis]

... and it seems to me that what's being advocated is a choice as well -- you can choose between a government run payment/insurance program and a private one.

What's being put on the table is more akin to the British system than the Canadian one. (For what it's worth, I don't like the Canadian one either.)

Also, why does grandpappy choose the VA when it's alledgedly so inferior?

[JLEW1818]

i hear govt programs work really well.:rolleyes:

[Vaevictis]

... and I know private ones don't when free market principles don't apply. Like say, in medical care.

[picasso]

... and it seems to me that what's being advocated is a choice as well -- you can choose between a government run payment/insurance program and a private one.

What's being put on the table is more akin to the British system than the Canadian one. (For what it's worth, I don't like the Canadian one either.)

Also, why does grandpappy choose the VA when it's alledgedly so inferior?

I'm not quite as trusting as you seem to be. They see a big pie and they want their nasty hands all over it. Just wait.:)

[Vaevictis]

I'm not trusting here. I know some of them want it nationalized. At the same time, I don't think sitting here with our thumbs up our asses spending twice the GDP% on health care as most of our peer nations is a good plan either.

[MR2-Sooner86]

This. This right here can actually save a bunch of cost. If a lot of people actually go to a doctor before things get out of control for them, that can save a whole lot of money. There is certainly a place for the private sector in health care, and they problably will do a better job of offering the big things than the government.

I got a better idea for you.

How about every Friday, Thursday, Monday, or whatever the doctor wants, he sees patients that don't have insurance. Those people he sees he can then take the cost he would normally charge and use it as a tax right off?


Also, why does grandpappy choose the VA when it's alledgedly so inferior?

My grandfather died in 1988 from cancer and he picked the VA because he served in WW2 and the Korean war and was in the army until 1965. He used the VA because he spent over 20 years serving this country so the VA hospital was a perk to his service. Don't you think? They took him to the hospital because they figured it be a nice place where he could peacefully go and be taken care of. Before then they were using private care to fight his cancer. Since the hospital was so ****ty my dad went and got him the hell out of there. He took him home and let him spend his last days with his family since it was better than some government ****hole. So before any of you guys start popping your mouths off about him doing this or that you better know all of the damn facts. That's all I have to say about that.

[JLEW1818]

exactly, people wont realize **** until stuff happens....

how did yall vote for this socialist only poor loving ****

[Vaevictis]

So before any of you guys start popping your mouths off about him doing this or that you better know all of the damn facts. That's all I have to say about that.

This is, of course, why my comment took the form of a question.

And if you think I doubt your grandfather was entitled, you are mistaken. I'm simply stating that he obviously chose it for a reason. Are you saying it was a matter of pride? Or was it a good enough choice for him at the right price?

That government "****hole" -- while less than vets deserve -- is more than some folks have. As inferior as the VA is, some of the poorer vets in my family are grateful to have access to it. Without it, they probably wouldn't have any health care at all.