McCain has the Best Health Care Plan?

Shawn Tully, editor-at-large of Fortune Magazine, wrote a fantastic summary of each of the presidential hopefuls’ health care plans on CNN Money.  He reaches the same conclusions I have have as of late on this blog – we must get health care costs under control.

I haven’t spent a lot of time on the candidates’ plans yet…and this editorial says it better than I ever could.  McCain’s plan attempts to give the consumer control over medical coverage and health care decisions.  The creation of something resembling a free market will drive down the costs of care.  Hillary and Obama’s plans, being similar, seek to make coverage mandatory by forcing everyone to pay for it.  Two very opposite approaches to a staggering problem.

Having studied economics and worked in a market-based industry, I am incapable of wrapping my head around the Democrats’ plans.  How is forcing everyone to buy insurance going to make health care more affordable and accessible?  How does shifting all these costs directly to tax payers improve care and reduce costs?  I don’t understand this.  Can someone explain it to me?  The Democrats do have an advantage though, their plans, while more complicated than McCain’s, sound simpler.  Health care for everyone.   They win on political viability.

Read the article and let me know what you think…..

Read Full Post »

Health Care Costs Could End America

Robert Pear’s New York Times article about Hillary Clinton‘s and Barack Obama‘s health care plans has an alarming statistic.  Medicare and Medicaid, our two government-funded health programs, cost our country $627 billion last year – or 23% of all federal spending.  Many people like to criticize the Iraq War for its cost – proclaiming that it could bankrupt our nation.  Over the past 3 years, defense spending (that includes everything….not just Iraq) has accounted for about 4% of the U.S. Economy…the same percentage enjoyed during the “peace dividend” in the early 90’s after the fall of the Soviet Empire — a historic low.

If anything is going to bankrupt us, it’s the rising costs of health care.  According to the Congressional Budget Office, with no change in law or coverage policies, in 10 years costs will double, and Medicare and Medicaid will make up 30% of our annual budget. 

Not only is this unsustainable (we’ll be Greece), the notion of covering additional people under these programs…those not currently covered under either program’s mission, presents a fiscal impossibility. 

I could only draw one conclusion from these facts.  We must rein in the cost of administering health care in this country BEFORE we do anything else.  If we could create a market for health care, we could reduce costs through simplified billing and collections, and price transparency.  More people would be able to afford preventative care and wouldn’t need Medicaid.  www.doctorpricing.com. 

Heck, maybe if we pulled 30-40% of current costs out of the process through a well-oiled free market system, everyone in this country could be insured….and we could reduce government spending and taxation.  Maybe…

Expanding goverment medical coverage to cover more people without addressing the soaring oresent costs of administration will create a budgetary black hole.  Our country will collapse in on itself. 

Read Full Post »

The Great Compromise

A laissezfairehealthcare blog comment turns the raging American health care debate on its head by posing the question: what are Americans willing to do without.  In a country where food, shelter and entertainment are readily accessible to an overwhelming majority of the population (relative to other countries with our size and immigration levels), most American children are taught they can be anything and have anything.

This is a fantastic framework to create for children — build imaginations that can craft all the possible joys of life to come.  But there’s a caveat.  Perhaps the biggest lesson I learned once the my rose-colored glasses were removed…when I entered the real world…was the notion of compromise.  In this country, happiness, fulfillment and self-actualization aren’t promised and certainly aren’t guaranteed.  It’s the opportunity to pursue these things that we value.  This is a critical distinction that a surprisingly small number of people have made.  If you work hard and create opportunities for yourself to be lucky – you can have it all.  But don’t expect anyone to give it to you.  But…in order to take a specific path, you have to give up the opportunity to take other paths.  You have to make compromises…and without the benefit of hindsight.  This is the notion of risk and reward.

The comment on this blog discusses health care as a compromise, where we can’t have all of the following:

(1) quality health care that is affordable

(2) health care that is accessible to all

(3) health care which is unlimited

Read each of these as if they exclude the others.  E.g.  (1) is basic, non-comprehensive health care for most; (2) is low-quality health care for everyone; and (3) is comprehensive health care which isn’t necessarily accessible or affordable.  I would argue that “quality” is a very relative term.  We’ll assume for the sake of argument that “quality” means basic, preventative health coverage without resources for catastrophic health events.  “Unlimited” means coverage for everything.

Hillary Clinton and Barack Obama probably opt for (1) and (2).  This is where the “socialized medicine” argument comes into play.  Would Americans be willing to choose this path at the exclusion of others?  It’s difficult to analyze the argument in a vacuum…that is…a priori, without consideration of empirical data.  If we were to engage in the academic exercise…it would seem like a reasonable choice.  Everyone gets basic health care, without the bells and whistles.  And this is the card politicians play.  It’s a brilliant play, really.  The notion of “universal health care” sounds fantastic — I’m willing to bet it is great for a presidential candidate’s poll numbers.  But if we accept the notion of the exercise…that is…compromise, we need to look at what we would have to give up – and we can only do this with real world data.  Providing basic, quality health care to every person that resides within our borders…which is affordable, would take away so many bells and whistles that we could arguably acheive the same patient outcomes by distributing pamphlets about the dangers of smoking and obesity, and spend hundreds of billions less.  To make it affordable for everyone and maintain some semblance of quality and accessibility – the economics dictate that you strip it down to such a bare-bones affair – that a flu shot may not be covered.  Even with conservative estimates of illegal immigrants and low-wage workers, the endeavour would represent a tremendous transfer of wealth from the productive to the non-productive.  There are plenty of legitimate arguments for a “Robin Hood” approach in other scenarios…if it’s economically viable.  In this case, I can’t see how it is.  With the federal government acting as single payer and health care indemnity monopoly – all possible efficiencies are worked out and resources are wasted.  The second act of my economic argument is motivation.  It’s the classic confusion of the American Dream – guaranteeing the pursuit of happiness vs. guaranteeing happiness itself.  If you allow people to think that the government will always bail them out – they have no motivation to take reasonable, calculated risks.  They are working less efficiently.  Hillary Clinton is arguing for a 90-day moratorium on home foreclosures — obviously for political reasons.  If the government bails out Americans who borrowed more than they could afford to pay, it trains everyone to be wasteful and reckless.  If America chooses (1) and (2), resources will be transferred from the responsible to the irresponsible, and those who can truly afford (3), will create a second, private tier of health care anyway.  And the irresponsible have no incentive to become responsible.  But everyone is paying more of their income for a system that necessarily, empirically, gets less efficient and sustainable over time…until we’ve trained ourselves into a welfare state.

This is why a truly efficient market always wins.  As an American and an advocate for some form of consumer-directed health care, I believe picking (1) and (3) at the exclusion of (2), in a real-world, non-academic sense – is the appropriate compromise…because over time the economic incentives are in place to increase efficiencies, rather than reduce them…meaning if people learn to take enough responsiblity, we might get (2) as well.  The notion of investing your health care dollars into people with a reasonable chance to recover is unfair.  Many people with resources and no reasonable chance to recover will invest in hope…and choose to spend their resources however they see fit.  And if everyone in this country is responsible for some of their own health care risk…they will train themselves to either make more money or reduce their cost of care through healthier choices.  If Americans had an incentive to be just a bit more disciplined, we wouldn’t see skyrocketing cases of type-II diabetes.

Read Full Post »