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Healthcare and Liberal Thought

It has been a while since my last post. Classes started a few days afterwards and have dominated my time outside of work. There have been lots of readings on Metaphysics and Epistemology, which are always tough with so many abstract concepts that must be absorbed. I promised a follow up on The Problem of “Other People’s Money”, but will preempt that for now in order to further refine philosophical views on the healthcare debate. In particular, over the past month, I have continually heard mostly emotional arguments from liberals in favor of government run healthcare or some form of a “public option,” with the arguments generally parroting that of the Obama administration, who argue that the rising costs of healthcare are unsustainable, and thus we cannot continue with the “status quo.” On the former point, I think most of us are aware on both sides of the political spectrum that the current path is unsustainable.  On the latter point, I can’t think of anyone who believes we should continue with the status quo. Somehow, however, Obama, Reid, and Pelosi can’t seem to separate the fact that someone who opposes their proposed solutions can also agree with them on those two points, yet this triumvirate conflates anyone’s opposition to their proposals with a necessary belief that those opposed don’t want to see things change. So far they have continued to repeatedly promote such flawed logic, demonstrating that the era of post-partisan politics has yet to begin.

In my last post, I discussed how charitable giving patterns indicate persuasively that liberals, who are particularly adept at making moral arguments as to why the government should do this or that to stamp out greed and bring equality to the people, give far less of their time or money towards charitable activities, regardless of income, that could actually help the human condition. They simply expect the government to solve all social ills, instead of rolling up their sleeves to help solve problems or opening their wallets to those who will. While there is no direct connection of charitable giving to the debate on healthcare, I would argue that a key relationship is their tacit belief that only government can solve the healthcare problem and that it will actually produce a viable remedy. The moral argument in this case is that everyone has a fundamental right to healthcare, but are being denied that right due to the greed of insurance companies who Obama likes to say are making “record profits” through unnecessarily high premiums. Yet as an industry, health insurance companies have only a 3.3% profit margin, less than the 4.6% average for all businesses in the country, as reported by Karl Rove in a recent Wall Street Journal article.  Rove goes on to note that drug companies enjoy an average 17% profit margin. But even that is less than software companies, which earn a 22% profit margin on average. So Obama is simply wrong on insurance company profits, just as he was wrong when he demonized oil companies for making “windfall profits” during his campaign. Yet I have not seen a single liberal challenge his dishonesty in either case.

I wonder if it has ever occurred to liberals that Medicare and Social Security are both going bankrupt, and that between these two government programs there is over $100 trillion (yes, trillions) in unfunded liabilities. Moreover, we have an unprofitable Amtrak train service and a Postal Service that is always flirting with bankruptcy. Yet they want the government to either take over or control an industry that represents roughly 1/6 of the entire economy? There must be other factors at work here than simply wanting healthcare for all Americans, since it would be foolhardy to believe that government, with its track record of failure, could become a viable and competitive player in health insurance. In fact, government regulations have inhibited competition in the health insurance market, thus contributing to the rising costs of healthcare. State regulations won’t allow insurance to be sold across state lines, so there tend to be monopolies within the states, lessening competition. There is also the need for tort reform so doctors don't pass the high cost of malpractice on to patients or order unnecessary tests playing defensive medicine. Another problem is that corporations get favored tax treatment that small companies and individuals don't enjoy. Further, states impose regulations that put specific mandates on what insurance companies must offer. This is why you can't pick and choose from a menu of choices that could lower your premium, as you can with car insurance. So even though there are a number of relatively simple things that can bring down healthcare costs without the government becoming a player and taking on debt, such commonsense measures aren’t even on the table.

A huge factor in healthcare costs is the personal health choices that people make on a daily basis. Americans smoke, exercise too little, and eat too much. Thus, heart disease and diabetes are contributing to skyrocketing premiums as insurance companies try to cover ever higher costs, particularly as people approach end of life. As well, people demand more and more technology to keep them alive. This costs money and drives up premiums. So how come all of the blame is placed on the feet of the insurance companies, and none at the feet of the insured? Has it been conclusively demonstrated that all or most insurance companies are greedy and systematically bilking the insured? While I don’t believe that case has been made, I am fully aware there are some  insurance companies who attempt to maximize profits through the practice of rescission, and also “cherry-picking” the most profitable customers. Yet rescission is a violation of state laws unless the customer intentionally lied or omitted pertinent medical history. Cherry-picking is something the states should take action on. If an insurance company can bring in someone with a pre-existing condition and keep the actuarial pool integral, they should be required to do so. But they should not be forced to take on all customers, since this could destabilize the pool for all. For those that don’t qualify for insurance, high risk health insurance pools should be made available at the state level (as some states have done), which is a reasonable display of compassion provided by taxpayers.

I haven’t said much new in this post, but have mostly summed up thoughts that I have outlined over the past several posts. What I want to emphasize is that liberals should cease advocating government redistribution of wealth and being paranoid about greed in the capitalist system, particularly when they benefit from our capitalist system as do conservatives, even holding a slight income advantage. Instead of calling on government to do all of the heavy lifting, my admonition is if liberals truly want to make a difference in the health insurance market and are concerned about profits, they should be proactive and start non-profit health insurance companies themselves (which would have the added benefit of creating much-needed private sector jobs), instead of reflexively looking to government. Or instead of swallowing the government’s currently proposed solutions without any thought as to its far-reaching implications, ask what can be done to simply improve the existing system before advocating game-changing legislation that could do tremendous harm while doing very little good. This is not the type of legislation that should be crammed through along party lines, affecting each and every member of society, when the vast majority of Americans are happy with the healthcare system as it is now, but recognize there needs to be sensible reform. What is currently being proposed by the Obama administration and the Democratic-led Congress is far from sensible, if not downright irresponsible. And the rush to legislate only reinforces my belief.

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The Problem of “Other People’s Money”

This post is a continuation of my previous blog on who really cares about the needy, as I continue to work through the book Who Really Cares: The Surprising Truth About Compassionate Conservatism, by Arthur C. Brooks. I want to work through the third chapter, appropriately titled “Other People’s Money.” Brooks notes that as one might think, politicians are uniquely situated when it comes to handing out favors at no expense to themselves (in other words, at your expense but with no thanks to you). But he also notes that we see the same behavior in vast swaths of “regular” people as well. A significant number of Americans, and Europeans as well, consider themselves charitable simply because they support policies of income redistribution through taxation (my emphasis added). And this does have an affect on private giving. One would assume that those people most concerned and vocal about economic inequality would be the most likely to give to charity. But that is wrong. The data demonstrates that for many people, the desire to donate other people’s money displaces the act of giving one’s own. People who favor government income redistribution are significantly less likely to behave charitably than those who do not. Even if the policies they support do not come into effect, they are still far less likely to donate to charity. For many Americans, Brooks, argues, political opinions are substitute for personal checks, but people who value economic freedom, and who are opposed to forced income distribution, are far more charitable.

The reality is the political left is effectively conceding a tremendous amount of moral authority in deed to the right wing when it comes to charity, while their words indicate otherwise. In 1996, a large sample of Americans was asked to respond to this statement: “The government has a responsibility to reduce income inequality.” Forty-three percent of respondents disagreed with this statement; 33 percent agreed. However, when it comes to charity, these two groups were radically different. Not only were those who disagreed significantly more likely to give money to charity than those who agreed, they also gave away, on average, four times as much money per year on religious giving, and three and a half times as much to nonreligious charities. A 2001 poll asked respondents to agree or disagree with the statement that “the government has a basic responsibility to take care of people who can’t take care of themselves.” A large majority (75 percent) agreed with the statement. But the 25 percent who disagreed were more likely than the others to give money both to secular and religious causes. Even when controls are set for income, education, religion, age, gender, marital status, race, and political views, people in favor of forced income redistribution are privately less charitable than those who oppose it, regardless of how much money they earn.

So why does support for government income redistribution efforts suppress charity? According to Brooks, the most straightforward answer comes when this support translate into policy—when governments tax away people’s earnings and pay for services that might otherwise be supported privately. The truth is government spending on charitable causes leads people to give less to charity. Not just liberals, but everyone everyone gives less privately when the government gives more. Brooks believes the most likely reason for this is because people tend to see government aid and private charity as substitutes. Economists, notes Brooks, have a name for this phenomenon: the “public goods crowding out effect,” which he states is a potent theory for opponents of “big government” because it suggests that taxing and spending may have less net impact on citizens’ welfare than imagined. Numerous studies have demonstrated that a dollar in government spending on nonprofit activities displaces up to 50 cents in private giving. The highest level of crowding out occurs in assistance to the poor and other kinds of social welfare services, and indication that government social spending for the needy benefits recipients far less than its face value. For a charity that is reliant on both public funding and private giving, this means that nothing is “free” about government support, as it not only lessens the effect of fund-raising efforts, but also makes an organization more dependent on the government.

“Crowding out,” notes Brooks, only explains lower personal giving if the government is taxing citizens and redistributing the income to people and organizations in need. Yet if increased government spending is only an idea or a political position, should it have no affect on giving behavior? In other words, I might stop giving if the government actually picks up support for my favorite charity, but would I stop just because I think the the government should do so? The evidence is that actions are based on beliefs, and not actual policies. It matters little whether the government is actually redistributing income and lessening inequality—what appears to displace charity is a person’s support for these policies. People who think the government should redistribute income more are less likely to donate to charity than people who don’t think so. Brooks argues this is nothing more than substituting political opinions for private donations. The opinions may or may not be sound, but the giving is conspicuously absent. Politically, this is a left-right issue—because income redistribution is a left-right issue in America. Although 77 percent of self-proclaimed liberals say the government should redistribute income more than at present, only 24 percent of conservatives say this. So Brooks further argues that substituting a political belief for personal sacrifice shows a lack of tangible personal responsibility toward others in need and represents a “deeply troubling relationship” between ideology and personal action on the political left.

So what is placing America’s far left so far outside the charitable mainstream and exempting so many of them from a sense of personal charitable responsibility? According to Brooks, the American hard left has developed a resistance to charity, as they believe the existence of charity is evidence of an unjust society, and should thus be made obsolete by government redistribution. The thinking is that in an ideal world, there is no charity because there is no need for it. Clearly, this is an unrealistic worldview, states Brooks, because our needs are constantly changing, and above basic subsistence levels, the perception of “need” has mostly to do with what an individual sees others as having. And history has not been kind to this worldview. Collectivist systems have been tried, most notably in Central and Eastern Europe, and they have failed. The governments of the Communist bloc ran inefficient systems that ultimately collapsed under their own bureaucratic weight. In some circles, particularly in American academia, a strong philosophy abhors charity as just another tool of power. Usually, according to Brooks, this philosophy stems from the core tenets of Marxism, which teaches: “From each according to his abilities, to each according to his needs.” The basic Marxist argument about charity is that the rich give charitably because they can, but their actions are inherently corrupt because their control over the resources they enjoy is illegitimate. The problem with this position is the assumption that givers are always rich, and recipients are always poor. It is a common assumption, but it is wrong.

Income inequality, argues Brooks, is a core liberal issue and this is the link between redistribution and charity. This is not to say that no one on the right cares about economic inequality, but it is is the issue that most strongly separates liberals and conservatives today. These differences on whether income inequality is a problem lead to differences in what to do about it, and whether to forcibly redistribute income or not is what represents the wedge between liberal and conservative giving. Those who see inequality in America as a major problem, which is more of an issue for upper-income liberals than lower-income people of all political persuasions, usually want to solve it through government action. In the next blog, we will continue discussing just why liberals worry so much about income inequality.

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Who Really Cares? The Surprising Truth.

I am currently reading the book Who Really Cares: The Surprising Truth About Compassionate Conservatism, by Arthur C. Brooks. Brooks notes that when it comes to charity, America is two nations—one charitable, and the other uncharitable. Most Americans are generous, compassionate people. However, he states, there is also an identifiable slice of the population that does not donate to people in need; does not volunteer; does not give in informal ways; does not even feel compassion toward others. Brooks was surprised and disturbed by many of the facts and trends that emerged in the course of his research. His analysis is based entirely on data from years of analysis on the best national and international datasets available on charity, computational horsepower, and the past work of dozens of scholars.

The data indicates that political conservatives are, on average, more personally charitable than liberals (for example, in 2000, conservatives gave 30% more money to charity than liberals, spanning every income class, yet liberals earned an average of 6% more in income). He notes this a startling conclusion, but that's not the end of the story. Conservatives aren't more charitable than liberals simply because their politics somehow make them inherently virtuous, it is the worldview and lifestyle of charitable people that is usually more in sync with the right than they are with the left. This is based on four forces in modern American life that he has discovered are primarily responsible for making people charitable. These forces are religion, skepticism about the government in economic life, strong families, and personal entrepeneurism. Lest anyone think Brooks is biased, his expectation when he began his research was that political liberals would turn out to be the most privately charitable people. His political and cultural roots were decidedly liberal, but his research changed his views in his personal search for the truth. Like Brooks, my search is also for the truth, based to the best of my ability on evidence, rational thought, and natural law, all of which led me to my Christian faith.

Here is an excerpt from the book, which is highly instructive about who gives and who just talks a mean game:

Politicians are uniquely situated, one might think, when it comes to handing out favors at no expense to themselves. But we see the same behavior in vast swaths of "regular" people as well. A significant number of Americans (and Europeans as well) consider themselves charitable simply because they support policies of income redistribution through taxation. And this affects their private giving.

The relationship between charitable giving and ideas about income redistribution is by no means obvious. In fact, before I started the research for this book, I assumed that those people most concerned and vocal about economic inequality would be the most likely to give to charity. But I was wrong. Instead, I found a large amount of data all pointing in the same direction: For many people, the desire to donate other people's money displaces the act of giving one's own. People who favor government income redistribution are significantly less likely to behave charitably than those who do not. Even if the policies they support do not come into effect, they are still far less likely to donate to charity. For many Americans, political opinions are a substitute for personal checks; but people that value economic freedom, and thus bridle against forced income redistribution, are far more charitable.

In this chapter, we will see that charity and conservative views on forced income redistribution go hand in hand. As such, through its economic policies and preferences, the political left is effectively conceding a tremendous amount of moral authority to the right wing when it comes to charity.

So there you have it. There are those who put their money where their mouth is, and those who don't but are happy to offer up your money as a means for assuming the moral mantle. Based on their reported charitable charitable giving, President Barack Obama and Vice President Joe Biden fit the latter description, while George W. Bush and Dick Cheney have been exemplary in fitting the former, in contrast to what many believe. I would highly recommend the book, which is a short, quick read, and will post more excerpts as I work through the book. I'm looking forward to your comments on this post.

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Is There a Moral Argument for Nationalized Healthcare?

I want to give a shout out to Rich Bordner, a friend and fellow philosophy student at Talbot. Rich has a wonderful and insightful blog with a real edge. He is a young man who loves God, and making an impact on people's lives is his passion. He is currently a high school teacher, which provides him with insights that make for provocative and often humorous posts at his blog, The Pugnacious Irishman. Rich sees where society is going because he engages with the next generation on a regular basis. So be sure to check out Rich's blog, who is newly married and back from his honeymoon. He's also back to writing, but we'll have to forgive him if his blog production drops off for a while (or will it, Rich?).

Rich just posted a blog titled Breeding Passive Moochers, with a title indicative of his inimitable humor. In this post he provides perspectives on preparing for his marriage and  personal responsibility, which he then weaves into the current healthcare debate. Rich quotes a recent Facebook post from the Acton Institute that I wanted to also share because it rebuts the "it's the moral thing to do" argument that liberals advance as a reason to support government run-healthcare:

Here are a couple of reasons why nationalized health care is in fact not a morally pure as proponents would like us to believe.

Handing something off to the state so citizens don’t have to take responsibility for themselves and others doesn’t doesn’t really contribute to the moral fabric of a society.

We love to talk about solidarity and the common good but too often solidarity gets turned into “let the state take care of it.” A broader and I would argue morally rich concept of the solidarity and the common good would look to human flourishing and a rich civil society and turn to the state only as the last resort.

It hurts the common good to have the state take over responsibilities that we should bear ourselves or for our fellow citizens. A large nanny state contributes to the “individualism” that Tocqueville warned about: a turning into self that isolates us from everyone but our nearest circle. If the state does everything for us then we don’t need to care about our brothers and sisters and fellow citizens. This means the breakdown of guess what–solidarity. Solidarity is the driving principle behind subsidiarity, voluntary organizations, and charity. Love of neighbor should prompt us to help each other not pass it it off to the state.

From a moral point of view, having the state take over health care breaks down solidarity and harms the common good.

This article echoes what I have discussed in previous blog posts regarding the Catholic social concept of subsidiarity, which argues that societal problems should be solved from the "inside out," with government, particularly at the federal level, being the problem solver of last resort that avoids encroaching on the solidarity of lower levels. We must first look to family, and then to the church and charitable organizations before looking to government. At times, there is a role for local and state government, but if we had a truly healthy society, there would be little need for government involvement in assisting those truly in need. There should never be a need for federal involvement because that means there has been a breakdown at all other levels, which should be a cause for serious alarm instead of an opportunity for the federal government to get involved in things for which it is limited constitutionally and is not particularly good at in the first place.

Honestly, I believe taxpayers who clamor for more federal government involvement do so because it's easier for money to simply disappear from their paychecks instead of them becoming personally involved in local charitable activities, taking the time to write checks to their favorite charities, or for those with the wherewithal, creating non-profits that meet community needs. They feel taking the moral high road is somehow consistent with being completely passive, leaving the responsibility on government to solve society's ills. What they don't realize is their lack of contribution in the first place is the missing ingredient necessary to building a better and more equitable society . In other words, it is the moral failure to deliver solutions at the local or state level that ultimately leads to the moral argument demanding solutions at the federal level. The problem is the moral imperative has been lost long before the problem winds its way to the federal level.

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“Public Option” Supporters Prove Ignorance Not So Bliss

I was recently involved in a Facebook conversation that involved ardent supporters of the “public option.” The reasoning was, as I expected, overly simplistic and highly optimistic that the government, by offering a public option, would simply provide one more “free market” option to a myriad of other existing options, thus stimulating competition and bringing down “absurdly high rates” (as one public option hopeful put it). When I asked specifically how adding this option to 1,300+ existing options would stimulate competition and bring down rates, there was no reply. Basically, I think those who support a public option have squishy good feelings about it, but lack an understanding of what a public option would entail, and other than knowing that premiums must be paid, have little understanding of how insurance works. For starters, a public option doesn’t have to compete, because it has the coercive power of the federal government to decide how much it will confiscate from the public through taxes to subsidize the option it is offering. Health insurance companies don’t have this luxury. They must offer a competitively priced product to consumers based on calculated risk and cost, which is purchased on a voluntary basis, and make a decent profit for shareholders (for the record, there is no truth to reported “record profits”). Furthermore, the taxes they pay provide the funds the government will use to subsidize its public option in order to compete against the insurance companies. If public option supporters don’t see that as a rigged system, then their ignorance is indeed not so bliss.

At this point, it would be instructive to offer a short primer on insurance as as a means to rebut the demonization of the industry by legislators and special interests promoting the public option. Wikipedia provides an excellent definition of insurance as “the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed small loss to prevent a large, possibly devastating loss.” Insurance is a form of risk management, based on statistics and probability, that pools together the premiums of the many insured, with the premiums used to fund accounts reserved for later payment of claims—in theory for a relatively few claimants—and for overhead costs. As long as an insurer maintains adequate funds set aside for anticipated losses (reserves), the remaining margin is an insurer's profit. The Wikipedia article sites seven principles of insurance, but I will focus on three that are germane to this discussion. First, the larger the pool, the greater the probability that actual results will meet with expected results, due to the “law of large numbers.” Basically, you need similar risk spread out over a large number of people in order to have a reasonable assurance that the number and amount of claims will meet the expected distribution, allowing the pool to maintain integrity.

Second, premiums must be affordable. If the premium is so large relative to the amount of protection offered, then it is not likely anyone will buy insurance. The premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. This demonstrates that insurers are engaging in calculated but warranted risk. The premium is not solely based on charging as much as the market will bear in order to maximum profits, though the insurance company must obviously turn a profit which is in their interest as well as the insured who expect there will be enough reserves to ensure payment of claims. Finally, there must be limited risk of catastrophically large losses. In this case, if the same event can cause losses to numerous policyholders of the same insurer, the ability of that insurer to issue policies becomes constrained, not by factors surrounding the individual characteristics of a given policyholder, but by the factors surrounding the sum of all policyholders so exposed. So insurers must limit their exposure to a loss from a single event to a small amount of the insured. A classic example of this is earthquake insurance. With respect to health insurance, this may apply to people with the propensity for certain types of diseases that could produce exceptionally large claims. There are some that may take issue with this principle, but again, it is in place in order to maintain the integrity of the risk pool for the benefit of the insurance company and the insured.

Now there are some insurance providers that do unethical things such as: 1) dropping the insured who become sick and thus expensive, even though their premiums adequately reflect the risk for bringing that person into the pool, 2) refusing someone coverage for a predisposition to a disease they don't have now, when they have statistical room to bring that person into the pool without putting the pool at risk, and 3) refusing people with pre-existing conditions that could be brought into the pool with reasonable actuarial risk. This is where I think government does need to step in to ensure win-win scenarios, and no further. In the first example, this is clearly a win-lose proposition, while the last two are “judgment calls” that all too often deny coverage based ostensibly on maximizing profits. Yet many of those in favor of the public option believe government should force insurance companies to take all of those with pre-existing conditions and also cap premiums to some arbitrary multiplier, not considering how disastrous this would be for all the other members in the pool. This would further encourage people to purchase insurance after they get sick instead of getting into a pool as early as possible which would be in accord with the first principle of large numbers discussed above. Moreover, there would be no incentive for anyone to live a responsible and healthy lifestyle if they could simply acquire insurance at a an arbitrary, government-forced premium whenever they get sick, and then drop it when they get well.

Regarding the public option, there is already Medicare, Medicaid, and SCHIP coverage for children. So we already cover the truly needy, and a good number of the "47 million uninsured" are eligible for this coverage. So I believe society is already extending great compassion. It is arguable, though, just how many of the uninsured can afford to be insured but choose not to purchase coverage. There are myriads of choices that people make on a day to day basis that determine their ability to get coverage, so I would argue the best thing we can do is to look for ways that we can make coverage more affordable and accessible without resorting to a public option that will only bring the inefficiency, bureaucracy, and politicization that will be endemic to a government-run option. There are several commonsense reform proposals advanced by Republicans in Congress such as equalization of tax treatment between corporations and individuals or small businesses, wellness programs that will lower costs by avoiding disease, tort reform, medical-saving accounts, and allowing insurance pools to cross state lines. Against the rhetoric of President Obama, no one is suggesting that nothing be done. It simply makes more sense to implement sensible reforms to the existing market-based system than to create another government program.

A strong argument for not creating another government program is that there are few things the federal government can do effectively and efficiently. The military is one thing the government does effectively, but hardly efficiently. Other examples are the Postal Service, Amtrak, Fannie Mae and Freddie Mac (who played a key role in the current economic crisis), Medicare, and Social Security. Medicare will be exhausted (i.e., bankrupt) by 2019. It's not actuarially sound, and neither is Social Security, which is a glorified Ponzi scheme that will begin paying out more than it receives in 2017, ultimately going bankrupt in 2041. As I stated previously, the government doesn't have any pressure to be competitive, efficient, or actuarially sound because it has the power to tax. At this time, government should be spending its time fixing Medicare and Social Security, whose total unfunded liability is over $100 trillion, instead of trying to get in the game of a public insurance option when it has failed miserably at these two programs. The public options offered by the states of Massachusetts and Tennessee have not brought down costs, but costs have ballooned instead. So if the public option hasn't proven efficacious at the state level, why would we want to pursue this at the national level where there is no recourse if the result is bad? At least in the case of a state program, one would have the option to move to another state.

When one compares how we live today in America to the way we lived 100 years ago, the differences are astounding. Our capitalist system has provided us with transportation for virtually everyone, air conditioning, refrigerators, jet travel, vacations, including life-saving medicines and procedures. Yet we complain so much about what we don’t have as if we were meant to have everything we think we deserve, and believe we have an entitlement to the latest advances in medicine and technology simply because they exist. I don't understand it. We are truly blessed, yet when we can't get what we want, we automatically think that government can solve our problems when it simply can't. We must realize that everything that government gives is taken from people who could better deploy capital in a more efficient manner that helps themselves, their families, and their communities. That includes those who take the risk to start and run private insurance companies, which have provided outstanding, market-based solutions that have vastly improved our quality of life. Yes, there is much room for improvement of the current healthcare system, but it is something we should celebrate as a true blessing, instead of a scourge on society, while implementing measures that would provide lower costs and broader accessibility for all.

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Healthcare: We Have Met the Enemy, and it is Us

I’m sure that all who are following the debate over government-sponsored medical care have heard a plurality of pundits, so this post is designed to make a few points that I think need to be considered in the debate that aren’t discussed enough. There is a lot of scapegoating directed at the insurance industry by the current administration in order to sell the benefits of government-run healthcare, which is unfortunate, as it is the same old demonizing tactic used last year against the oil companies during the presidential campaign: the charge of “record profits.” In a capitalist society, profits are a good thing, with record profits being even better since it would mean the economy is growing and prosperity is spreading. In this particular case, however, health insurance companies aren’t enjoying profits that are setting any new records. And they are not the enemy even if they were. Just as with auto and home insurance policies, health insurance companies allow us to pool risk and gain access to medical care and drugs that would otherwise not be affordable except for the very wealthy. The current administration would have us believe that since the system is not perfect, it should be completely dismantled and run by government bureaucrats. Instead, I feel we should be thankful that we have a system which works well for most, but requires commonsense reforms such as those proposed by Louisiana Governor Bobby Jindal and Senator Mitch McConnell.

One problem with health insurance is that over the course of several decades a "middle man" (the insurance company) has come between the patient and the doctor, thus affecting market dynamics for better or for worse. Yet if government further gets in the middle it will only make things more complex, not less, because now you're adding a political component, and it doesn't take a rocket scientist to figure out what will happen when healthcare becomes political. Unlike house or car insurance, health insurance is highly personal and something we take advantage of on a more or less regular basis, depending on our current state of health. We have come to expect more and more things to be covered such as the latest medicines and procedures, and it has also become a game of nickel and dime things instead of just big things. Patients and doctors apply pressure to insurance companies to cover sex-enhancing pills, massages and other elective options that are probably better paid for out of pocket. Naturally, premiums rise as insurance companies cover more medicines and procedures. So insurance companies, which must have enough reserves to pay claims and make profits that allow them to invest in their businesses are in a damned if they do, damned if they don’t proposition when it comes to setting practical limits for what they can cover and what they can’t.

A huge issue is the fact that many Americans don't lead healthy lifestyles, yet expect the modern miracles of medicine to save the day. Moreover, we expect these miracles to cost nothing more and have come to feel we have a "right" to new medicines or technology simply because they are available. Yet when the insurance company won’t pay for these miracles or raises its premiums to do so they are at fault when in large part we have brought many illnesses on ourselves through our own poor choices. I am so tired of people complaining about how greedy insurance companies are, because if we didn't have them, we would have to pay these costs out of our own pockets, which most of us couldn’t (or wouldn’t) do. Yet it is us, when we abuse insurance through poor life choices, that have caused premium costs to increase since we demand more while living unhealthy lifestyles that drive up those costs. In fact, preventable illnesses are at the very core of spiraling health costs in America, most directly related to smoking and obesity (due to poor diet and lack of regular exercise). So instead of pointing the finger at insurance companies, I think we should begin pointing the finger at ourselves for living lifestyles that unnecessarily drive up healthcare costs. In large part, we have met the enemy, and it is us.

An important thing we must realize is that all of the new medicines and technologies that make us well or keep us alive cost money to develop. Pharmaceutical companies must literally invest hundreds of millions or even billions of dollars to bring a drug to market, and must absorb the cost of drugs that don’t make it to market. This is not purely science as drugs must go through painstaking clinical trials in order to receive FDA approval. If pharmaceutical companies were not investing their “record” profits on breakthrough drugs, then there would be no new miracle drugs. So we shouldn’t be upset that pharmaceutical companies make big profits if we are looking forward to the next breakthrough drug to cure or treat an existing or future disease. As well, if insurance companies don't make a profit, then they can't pay claims, and since insurance is based on actuarial tables that aren't perfect, there is always the chance that some new disease comes along (such as HIV/AIDS) that causes profits to go down and premiums to possibly go up. Or there may be a new “must have” breakthrough technology that makes premiums go up further. So we have to understand that insurance companies are taking on qualified risk and are not just kicking back reaping profits. It is a tough business.

In general, healthcare access and cost presents a very complex problem that requires sensible, yet imperfect, reform. More competition between insurance providers and sensible regulation is what is needed (such as not allowing insurance companies to simply “drop” existing customers because they contract a disease that is expensive to treat, when the whole purpose of actuarial tables was to account for this risk). I am deeply conflicted about forcing insurance companies to accept pre-existing conditions since these can "break the bank" actuarially and affect others in the insured pool adversely. If the government takes on healthcare, then taxpayers will pick up huge costs as there will be no practical limit to the care that people will lobby the government for since they see their fellow taxpayers as a bottomless pool of money. Of course, the government would have to ration care based on decisions from bureaucrats in Washington, instead of actuarial tables and competition in the open market. So this is all the more reason for the federal government to keep away from becoming an insurance provider beyond the current tax-funded Medicare, Medicaid, and SCHIP programs (in fact, it should get out of these programs altogether and remand to the states since this is not the proper function of the federal government in the first place).

Fundamentally, I think insurers should stop covering unnecessary things such as sex-enhancing pills and massages, to name just a couple. Insurers should offer a basic, catastrophic package for anyone, which would be attractive to young people that don't use healthcare very much and who are also willing to pay if they do need something other than catastrophic care. Yet these same people that can afford healthcare should not be able to simply go to an ER when they get sick and expect someone else to pay for it. It is a grossly inefficient way to receive care. So I would be open to an individual mandate such as that for car insurance, where you set the deductible level with a private insurer that provides some level of reasonable options based on risk profile. Those at certain poverty levels should be eligible for government assistance with premiums (where they would pay something, and never nothing), while those who are unemployed should keep their existing policy with government assistance, possibly at a lower level of coverage. The idea is that everyone gets covered and stays covered.

Finally, I believe that once someone is in an insurance pool, they should be able to stay in that pool without worry of being dropped, but still have the opportunity to move to another pool if it is more cost effective for them. This would at least set a baseline for moving forward so we can get everyone on some type of coverage without a government takeover. For those not covered with pre-existing conditions, possibly we could expand the Medicare and Medicaid pool on a one-time basis as a part of the baseline, instead of forcing them on insurers. Beyond that, as citizens we will be responsible for gaining access to health care among the private and existing public options available depending on the personal situation. Existing employer-provided plans should be portable, so that when one leaves the company their insurance goes with them at the same cost, and an option would be provided to move down to a more affordable level if the person cannot afford it, or whose next employer cannot provide the same level of benefit. Now I am realistic, as I don’t expect an ideal solution since humans are involved, but I do expect a better free market solution than the one currently available. Those who listen to the siren song of government are unfortunately, I believe, looking for perfection, but will only find disappointment when they find that what they’re hoping for won’t live up to expectations.

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