g m g D e s i g n . c o m

It’s been a while since my last post. I’m hoping to get back into blogging—at least a couple a week. I’ll kick things off w/ news that my wife and I got food poisoning. I’ve had it before and know the symptoms well. I was fortunate to only miss one day of work (as a contractor, that day cost me). All evidence points to a Chinese restaurant called Red Dragon (in Research Triangle Park, in North Carolina) as the culprit.

I know there are different symptoms of food poisoning depending on the source, severity, etc. In my experience, it helps to have Ginger Ale on hand (or, if not Ginger Ale, some caffeine free carbonated beverage). The carbonation helps to settle the stomach and provides a source of hydration (water often leads to vomiting, whereas carbonated soda probably won’t).

Plenty of rest is a must, of course. And after the stomach ache subsides, prepare for the likely throbbing head ache that will ensue.

Reading and listening to the coverage and commentary on healthcare, it’s hard not to become cynical. On the Right, you have repetitive talking heads with no interest in adding depth to the debate, instead arguing bellicosely against what they see as government-run healthcare (a credible threat, I concede), but providing no additional insight beyond that. On the Left, we’re met with the supposed “reality” that the “market has failed”—as though the market is free and unregulated to start with—and that the government must step in and save healthcare as we know it, providing liability coverage (insurance) to millions of Americans.

Yet the truth is in between, and the visions of both the Left and the Right are at best useless and at worst dangerous. There are real consequences to failing to understand economic problems and issuing false solutions to those problems. Using the fiat hand of government to distort markets has led to many severe consequences, and a few catastrophic consequences as well.

Something must be done about healthcare. That much is certain. Idealistic libertarians—and I’m including libertarian-leaning conservatives* in that group—are wrong to discount the need for action—for “change,” if you will—in healthcare. We do need change, and simply blocking that change isn’t enough for conservatives as a political force nor for the country.

Liberals*, for their part, are correct that we need “change,” but they fail to understand the necessary change, instead opting for change that “feels better” and is politically easier to explicate rather than sustainable and fiscally responsible change. They look at the deplorable number of non-insured without ever asking the obvious question:  why is medical treatment so very expensive that even routine procedures are unaffordable without insurance? The issue of cost control is met with an outmoded response: use the coercive power of government to control costs via legislation; furthermore, compete directly with the greedy, heartless private sector via a “public option.” Neither pseudo-solution will lower costs in the aggregate, instead shifting the cost burden and likely increasing aggregate costs.

My own libertarian instincts notwithstanding, I feel like the only practical and politically feasible solution is to mandate that every American have some minimal level of healthcare. Call it catastrophic health insurance, if you will. It would be like a high deductible health plan (HDHP), but primarily intended for ER visits and other major events. Of course, Americans could get beefier or additional insurance as well, though tax incentives toward “premium” (or Cadillac) plans would be removed, as would tax favoritism toward employer-sponsored health insurance. That coupling would be weakened over time. To truly distribute risk—which is the intent of insurance in the first place—non-discriminatory laws would be enacted such that insurance applicants are not rejected for existing medical conditions. More people would have health insurance even as insurance itself was taking a less active role in medical treatment.

In fact, the problem with healthcare is insurance itself. That is not to say that high healthcare costs are primarily due to insurance companies per se, though they do share part of the blame. Government shares a significant portion of the blame, and of course the public and media share the remaining. I’ll leave room for blame toward other sources as well, but that’s beyond the scope of this blog entry.

Healthcare is the only insured activity where typical, quotidian expenses are expected to be paid—at least in part—by insurance. Imagine going to Home Depot, purchasing some new lamps, and then whipping out your home insurance card at the cash register. Or imagine asking the mechanic who just rotated your tires if he will file your auto insurance claim or if you’re expected to do it. What would happen? In either case, the person at the cash register or in the body shop would probably look at you as though you were completely bonkers. And yet, a visit to the doctor necessitates the use of insurance and the negative ramifications that go along with it.

Referring to the examples above, what would happen if oil changes and tire rotations necessitated the use of insurance? Further, suppose due to custom or fiat legislation that auto insurance was required to cover such expenses; what then would happen? I suspect that oil changes and tire rotations would rise in price, perhaps over many years, until they were hundreds of dollars. In fact, you would likely blindly hand your insurance card to the attendant, never knowing before or after what the actual price of the tune-up (except your own co-pay). That is exactly what we do at the doctor’s office; and try polling hospitals in advance of surgery how much the operation will cost—you will likely be met with disbelief and non-committal estimates.

It doesn’t have to cost $2,000 to visit the ER. Routine or even advanced surgery doesn’t need to cost thousands or even hundreds of thousands of dollars. Staying one night in the hospital doesn’t need to cost as much as the accumulated mortgage payments for the entire year. While tort reform would lower some of these costs by lowering risk premiums, it would still not be sufficient to lower aggregate costs of medical care (though it would be a good start). More must be done, the objective being to increase price transparency and competitiveness. Ironically, that involves less insurance involvement, not more. The lofty goal of “insuring millions more Americans” is only a recipe for enslavement to insurance companies or to government itself for medical coverage, and even then it’s dangerously unsustainable.

There are solutions to our sick healthcare system, but time is running out. Solutions must be agreed upon by a majority in both parties, lest it be unwound later on. The solution isn’t a simplistic bullet point but instead a visionary, multi-faceted change; it must be phased in over time, not rammed through over a Christmas holiday. That’s the change I can believe in. Will the political class listen?

* Note that I’m using the modern definitions of conservative and liberal from the American vantage point.

In a move to prove how economically inept they are, the Times has editorialized their favoritism toward the much-discussed “public option.”

The last para espouses that, eventually, the “public option” be available for everybody.

I’ve written before about why I think the public option is a bad idea (and no, not because some conservative loud-mouth on “talk radio” told me what my opinion should be). The underlying reason is that our medical system as a whole isn’t very good, and additional activism by government will make it worse – in fact, cementing the current system in place for many more years to come.

We need reform, but the “reform” currently being proposed will further lead us astray if it includes the public option. I have a vested interest in cost control (that doesn’t decrease quality). Hence, my bias in this debate is in favor of real and substantial reform (again, something I’ve written about in the past).

The bottom line is this. Although government can make promises, such as liability acceptance for millions of people (via the provision of insurance), that does not mean that the government can guarantee outcomes. The government can promise that people will get insurance (and, by extension, medical care), but that doesn’t make it so. Government can’t guarantee that its own market interventions won’t augment the already-high level of market inefficiencies, leading to higher aggregate costs associated with medical care and treatment. Even if government covered everyone in this country, that does not mean that a) medical coverage would truly be affordable – imagine if income tax rates went up to 60% for most Americans, or that b) quality would be higher or as high as what we have now (imagine waiting months for time-sensitive surgery, or years for “optional” surgery).

Government can’t guarantee outcomes even though government can accept liability with the stroke of a pen. The role of government at various levels has rendered the medical insurance (“healthcare”) market less efficient, with aggregate costs much higher (and far less transparent) than they otherwise would be.

Greater inefficiency and higher aggregate costs (with likely lower quality of service) is a future worth avoiding.

Is obesity in America the real health care crisis? The fact is that the following contributes to America’s plump physique:

• wealth and abundance of food (in fact, the poor are fatter than the rich)
• high availability of processed foods
• high availability of sugar and enriched flour
• disincentives toward walking and other quotidian exercise

Non-surprisingly,  our O Wise Ones in Washington DC have given billions to corporate farms to plant crops of choice, favoring wheat and corn (predacessors of the ubiquitous enriched flour and high fructose corn syrup) and making more healthy choices less competitive.

My argument isn’t that government alone has “made American fat.” Americans would have achieved higher BMI regardless. However, the role of government is that a) they distort market forces, b) they make healthier food choices more expensive for the health-conscious. Oh, and then there’s this: c) agri-subsidies make it more difficult for recently emerging markets to transition from agrarian to industrial economies. That last point is important, b/c foreign development is important for a number of reasons, not to mention humanitarian reasons.

Amid the legitimate debate about health/medical care—and it’s an important debate to have—it’s helpful to discuss the cause of a large chunk of healthcare costs—obesity, and its horrific consequences.

A stroke actually cured a man’s failing ability to see. Amazing.

The man had lost some of his sight due to an early childhood disease, and then regained it following his stroke!

Initially, he also lost his ability to speak, though he regained that ability. Oddly, although he can speak (English), he has not (yet?) regained his ability to speak French, a language that he was able to speak pre-stroke.

Weird? Yes. I normally associate strokes with sharply decreased cognitive function. This is definitely an exception.

As I’ve stated before, I am in favor of real reform in the medical/health sector. Like it or not, that reform will include:

• higher deductibles
• cap on tax deductibility and option for non-employer sponsored medical insurance to be deductible (i.e., employer-sponsored insurance is no longer automatically advantageous)
• mandated HSAs
• the freedom to go to a specialist without having to, absurdly, get a referral every time
• removal of the mandatory licensure regime (that reduces new entrants into the medical field unnecessarily)
• price transparency (ability to shop around for best price for procedures; think of how easy it is to do this for Lasik but difficult it is for heart surgery)
• reduction in role of Medicaid and Medicare (the government programs that have so radically distorted medical pricing and other areas of healthcare economics)
• mandated catastrophic coverage (our choices here are either a) mandated, or b) “universal,” so choose the lesser of the evils)
• mandated insurance non-discrimination (we will need a way to prevent people from just buying insurance when they’re sick, such as a substantially higher deductible for pre-existing conditions)

Did I miss anything?

Every time I see a headline like this one I am reminded of the verbal manipulation used by the media. We hear a lot about healthcare reform. Prior to the medical insurance debate, we heard a lot about the economic stimulus package.

Do you see the Orwellian thought manipulation here? It’s not outlandish government spending, it’s a stimulus package. I.e., the government is giving us something for free—like magic!—and it goes without saying that it will have a stimulating effect to the economy, all without any rational justification for this conclusion.

The even thornier subject of “healthcare reform” is fraught with similar manipulation. First, it’s apparently “reform” to introduce yet more government in an already heavily regulated system. Second, apparently, healthcare is synonymous with medical insurance.

Oh, and did I mention that those who rationally oppose the current Big Government effort to overhaul healthcare are extremists?

Great editorial on medical care (“healthcare”) and insurance here in the States. Editorial is very long, but worth reading, regardless of what side of the healthcare war you’re on (and, apparently, there are only two sides, both diametrically opposed to the other).

My summary of editorial (basically corresponding with my existing opinion):

The current system of medical care in this country is already broken. Notwithstanding all of the hyperbolic debate, the government is already deeply entrenched in medical care, from arbitrary regulations defined at the federal and state levels, to insurance regulations, to the government-operated medical insurance behemoths Medicaid and Medicare. The government-sponsored market distortions would be worse with “ObamaCare” (to use the admittedly more pejorative title), but the market distorting mechanisms already exist in our current system, hence reducing innovation and greatly driving up costs to consumers.

The system is broken, and the government-sponsored initiatives (namely a “public option”) would cement our broken system rather than reform it.

Read the article for more insight, including his proposed solution, which he admits would have to be phased in over a period of many years (decades, really). I’m personally very skeptical that his (reasonable) solution will get adopted. I don’t think fears of “socialist-style medicine” will happen either, at least in the short or intermediate term. I think there are too many people tied to the status quo for any substantial reform, so for now we’ll have our current (awful) system, only to be replaced with a more socialized system (a la Britain) in the years ahead, as people really reject personal accountability (“developed world complacency,” I call it) in favor of nanny-statism. So, enjoy the current system while it still exists, and stuff money into that HSA; you’ll need it.

Obama’s healthcare agenda scares me.

Once a government program gets going, it creates a constituency. Hence, “temporary” programs become permanent. Even die-hard free-market types dare not oppose programs with large constituencies. Hence, government becomes more bloated over time and the system becomes less “democratic republic” and more “social democratic.”

In regards to medical care (not to be confused with health care), I think that there are viable reforms that could be made. In fact, I think, in theory, what Obama is proposing (in regards to a public health ins option) could actually work! The government does have a justifiable role in involving itself in areas of the market where market forces have failed (this is a democracy, after all). However, that theory works out if the government’s involvement is situational, i.e., truly transient in nature.

And we all know that a “temporary” public medical care option will eventually spiral into government-administered “universal healthcare” if it is instituted. Remember that large constituency?

The economics of healthcare are complex, and hence the problem. Critics of the current system, myself included, contend that we pay too much and get too little. That’s true. Small proposals (some have passed, some haven’t) can go a long way to alleviate costs of medical care: HSAs, taxing employer-sponsored health ins above a certain amount, tort reform, etc.

Economics is tricky, and healthcare economics is no different. Proposals meant to achieve one objective have vast, unintended consequences not foreseen even by experts, much less by our clowns in congress. Obama should tread carefully. For while government can “guarantee” coverage and even provide funds, he can’t guarantee that the resultant level of care is better than alternatives, or even than our current system.

UPDATE 6-23: David Brooks (the token conservative of the NY Times) doesn’t like proposed “healthcare reform” either.

Here’s a great blog entry on Freakonomics that puts the swine flu in perspective.

Swine flu isn’t much more dangerous than seasonal flu, it just struck a particularly vulnerable population.

The “vulnerable population”—living in squalor in Mexico City—sounds similar to the squalor contemporaneous with the 1918 pandemic.

UPDATE:

FP lists 5 disease outbreaks that are worse than the swine flu. Maybe people will start panicking over cholera and HIV now.

The flu strain in Mexico could lead to a flu pandemic.

What to do? International cooperation and trans-national disease control mechanisms are helpful.

Apparently I’m already over the hill, if the BBC Health web site is to be believed. Drat!

Fascinating reading on flu economics. Note that if you get the “real flu”–and not a cold that you mistake for a flu–it will put you out of commission for about two weeks, in near-constant pain.

But Doyle says these health risks don’t motivate students enough to get a flu shot. So he makes a more economic argument.

“Colleges now are typically between $15,000 and $25,000 a semester,” Doyle says. “If someone is sick for two weeks, you can gut the core of your semester. You can have to redo or dump your courses for that time period — and lose $25,000.”

But there is a cheap insurance policy against such a devastating loss: a $20 flu shot. Some colleges and universities offer them for free.

Anything to motivate students, I suppose (btw, I found that article via a Freakonomics post).

I think I got my flu vaccine once–or maybe twice at the most–in college. College keeps one very, very busy, so colleges can offer the vaccine during “down” periods to boost participation. Now, about 6 years out of college, I get the flu shot every year (and no, I’ve never gotten the flu from the flu shot).

I’ve heard that if you skip the flu shot one year and then get the flu, it will be less severe provided that you tended to get flu shots in the past. I don’t have any references for that though.

Check it out. Per the article, the ADA is doing its part to make dental costs unobtainable for a portion of the population and more expensive for the rest of us. Teaser intro:

Q: What are the eligibility requirements to legally receive dental care from a therapist with a two-year degree?

A: Native American ancestry.

Some Alaskan native American tribes broke the rules for the sake of obtaining affordable dental care. It’s legal, per the courts, but the ADA doesn’t like it, since the “cheap dental labor” is bad for them.

This is analogous (but not identical) to the high price of healthcare in the US. Although the devil’s in the details, and more than one factor contributes to the price, my argument is that old fashioned protectionism raises the price substantially, primarily by constricting supply (i.e., limit the number of med graduates, making each one more valuable).

Classic state-supported protectionism, benefiting the few at the expense of the many.

From BBC Health:

If you are there is a chance fidgeting may be in your genes – and the good news is that you are less likely to be fat, according to the new research.

 Good news for me, since I’m a fidgeter.