cannedjam

Which is more important, lowering the price of health care, or increasing the number of insured? The question is important because the answers can be mutually exclusive.

If everyone is insured, yet have little personal stake in funding the system (i.e. small co-pays or very low deductibles), prices can and will increase decidedly. When someone else is picking up the tab there is little incentive to seek out the lowest cost options. Efficiency takes a back seat to indulgence, and over consumption becomes the norm.

If you have a rich uncle and he is treating you to dinner, there is way more of a chance of you ordering the $50 lobster and $9 baked potato, than there would be if you were going Dutch. If your rich uncle is paying for your health care, there is way more of a chance of you getting a gamut of unnecessary and costly tests, than there would be if you were flipping the bill.

With the current insurance model, and even more so with the one proposed by Obama, patients and even doctors have little knowledge of what procedures cost. You pay your $15 dollar co-pay no matter if you come out of the office with some aspirin, or if you had a full body MRI and heart bypass surgery. When no one cares about cost, the only one left to reign in the spending is the insurance company themselves, who as a result are perceived to be heartless and without compassion.

If we used this logic in other industries, costs would be so astronomically high that our economy would come to a halt. Imagine if everyone had retail insurance and all clothing only cost $15 no matter the brand or quality. Everyone would be shopping exclusively at Brooks Brothers and Coach, people would be hoarding merchandise making it more scarce, and prices would sky rocket for the insurer.

In fact, the only sectors in the medical industry that are seeing higher quality at lower prices are in the elected fields. Lasik eye surgery and plastic surgery procedures continue to improve while prices continue to decline. These are also the only two sectors of the industry that fall outside of the grasp of the insurance model, and as a result are exposed to open pricing and competition. If you ask someone how much their corrective eye surgery cost they can tell you without skipping a beat, try getting an answer from them as to how much their last family doctor visit cost their insurance company. This is proof that a greater share of the responsibility on the patient leads to competition, which leads to greater efficiencies and lower aggregate costs for everyone.

In addition to a lack of shared responsibility, other cost increasing inefficiencies exist in the system. Cookie cutter pricing, known as “community rating” (as opposed to “experience rating”), mandates that everyone pays the same premiums regardless of expected cost. This is imposed out of “fairness”, however, it allows for an obese smoker who ignores his diabetes to pay the same in premiums as a healthy marathon runner who eats a balanced diet. There are no incentives for living a healthy life, and as a result the system inadvertently subsidizes unhealthy and costly behavior. With “community rating” men and women must be treated the same, even though women visit the doctor and utilize the health care system significantly more than men (I don’t hear much outcry over the fact that men pay higher auto insurance premiums than women). Someone who is 300lbs overweight cannot be denied coverage, and in addition is allowed to pay the same price as a 110lb yoga instructor.

When you don’t allow an insurance company to assess risks and assign costs appropriately, the least risky among us must pick up the tab. Fair? I am pretty sure someone would complain if the village drunk was allowed to pay the same amount for car insurance as everyone else.

As a result of these regulations, the perception of health insurance as a product, shifts to health insurance as a right, and once the core principles are abandoned, we are left with government subsidized health charity, operating under the guise of “insurance”.

This system can achieve universal coverage, but at what cost? It rewards unhealthy lifestyles and fosters preventable diseases, punishes the least risky among us, takes personal responsibility out of the equation, significantly increases price, and installs a huge government apparatus that is so cumbersome and bloated that it would be virtually impossible to reverse.

Off the top of my head I can think of a few easy, cost effective ways, using free market ideals to achieve systematic efficiency, and healthier Americans (without abandoning what makes us great as a nation);

1) Tax free health savings plans
2) Higher deductibles with lower premiums
3) Increasing competition by allowing out of state health insurance

These three things would be a good start.

JAM Economics, Politics Health Care

In the middle of a health care debate, what we are seeing is the attempted wholesale abandonment of the free market system that has propelled the United States to the forefront of innovation.

Through years of research, experimentation, and tremendous amounts of risk taking the American drug industry has emerged as the world leader. Everyone is told that if you work hard enough you will be rewarded, but what they fail to tell you is that if you succeed in creating something that is vital, it will be taken from you, and those who should be praising your innovation will turn on you when they feel entailed to your product.

The Obama administration is seeking to further limit the amount of time drug companies can hold onto their patents before cheaper generics can be manufactured. Sure, if you pay out of pocket for a drug that is $5 a pill, wouldn’t it be great if someone else could make it and sell it to you for 50¢ a pill? Never mind the $5 goes toward recouping the billions of dollars worth of research and development costs, the billions of dollars in current R&D costs for future drugs, and establishes a financial incentive for people to invest in emerging pharmaceuticals. Never mind that limiting the reward for the risks of developing drugs, limits the incentive to create new drugs, never mind that, no, let’s focus on the fact that there is a pill that will let you keep shoving doughnuts in your pie-hole while keeping your cholesterol down - and it’s too expensive for you to afford.

I guess the free market is good enough to foster the development of breakthroughs, but evil once it comes time to cash in on them. We would never be where we are if not for the profit motive, but now that we have arrived, let’s turn our back on it. Sounds good to me, seeing that we have already cured every disease that has ever and will ever exist. Pack it in boys, let’s start handing this stuff out. Job well done.

Okay, okay, I know what some of you are thinking, “wow this guy is an ass, I can’t believe he is sticking up for the drug companies who have us all by the short hairs”. Well, believe it, I believe unless you can do it yourself, you are at the mercy of those who can. I paid $3000 to have my apartment rewired because I don’t have the skill to do that myself. So unless you have some centrifuges, mass spectrometers, and electrophoresis gel hanging around your living room, and the knowledge, time and skill to develop your own medications, then I guess you will just have to pay for it.

I fail to realize how just because a product is for your health, it is not expected that you to have to pay for it, or those who sell it are demonized because they make money. I don’t know about you, but I am pretty happy lock smiths make money, because the one time I needed one he was still in business, and I was willing to pay him pretty much whatever it took to get in my house. When the cable company refused to give me the cable package for what I was willing to pay them, I said, “I understand your position, but understand mine, I am not willing to pay this and I am willing to go without cable if this is what it will cost”, they called me back and gave it to me for what I was asking - this is how a price is established. If I was going to die, and someone invented a pill to keep me alive, I would pay whatever it cost and chock the rest of my life up to bonus time. I for one am grateful that people make money by saving other people’s lives, because the alternative is a lot more costly.

JAM Economics, Politics Health Care, Obama

How to get us out of the recession in three easy steps (and maintain a straight face while referring to America as the land of the free):

Step One

Temporarily cut all income taxes across the board to 15%. This tax cut would last for two years; 2009 and 2010. Since most tax paying entities are realizing massive losses during this time, the effect of drastically lowering the tax liability for these two years has much less of an impact on revenue. It also essentially gives a grant to all companies for two years to help them maintain productivity and prevent layoffs. This temporary flat tax would also prevent tax payers from selling any assets at a loss to take advantage of the tax benefits (it would make more sense for them to hold their assets until the flat tax expires and hopefully by then their assets will have recovered); preventing an asset sell-off which helps stabilize market prices. Compared to the trillions of dollars spent for the current “stimulus”, this real stimulus costs zero to implement, has no bureaucracy to set up, has zero potential for fraud and waste, and can be enacted instantly by simply letting people keep more of their own money. This temporary measure would also serve as a test for future overhauls in the tax system.

Step Two

Reduce capital gains taxes on any asset bought between Jan. 1, 2009 and Jan 1, 2011 to 5%. This reduction in capital gains taxes would last indefinitely for assets bought in that time period and would be paid only in the year the asset is sold. This would essentially create an artificial window in which an asset can be purchased with a front-loaded discount in the form of a future tax break (unlikely to ever be seen again). This would cost us nothing in the form of immediate revenue loss because the reduction in capital gains taxes would be absorbed over an indefinite period of time over which people decide to sell those assets. This would be a huge and immediate investment incentive that would instantly stimulate the economy (and save everyone’s 401k) with a clearly defined finish line, and it would cost the American tax payer nothing.

Step Three

Reduce Spending. This is the step most “conservatives” in congress seem to have had the most trouble with. All non-essential government spending should be reduced or eliminated. Any program that is not vital to maintain commerce, defense, or infrastructure, must reduce their budgets by 30% or be fazed out.

Viola. Now, despite a(n unused) degree in business, I am no economist, but I think we just got ourselves out of a serious pickle and without spending a dime. No trillion dollar deficits, no massive debt to be paid off by our children, no wild bureaucracies, no massive fraud. We kept businesses in business, which allowed people to keep their jobs, which eliminated their need for more government programs, which eliminated the need for business killing tax increases and country killing deficits.

That sounded almost stupidly simple.

JAM Economics, Politics Taxes, The Economy

I have always been conservative; it’s not that I grew up in an overly conservative house, I just think it is my default state. I am not overly religious, I respect religion, I respect the conviction of religious followers, however my conservatism is not derived from faith. Nor is it derived from my public school education, the media I consume, the city I live in. It can’t be pegged on books I have read, radio I have listened to, nor can it be contributed to an early indoctrination. Nope. Like I said, conservatism to me is my default state. I subscribe to logic, I apply that logic equally and judiciously to come to my conclusions. The same thought process I use to determine which toilet paper to buy, is the same thought process I use to decide how much of my pay check to put in my 401k, and both decisions share a stream of logic that is equally applied to my theories of social policy and which politicians I respect and which ones I despise.

Conservatism is my default state. Arriving at this state involved no affirmative actions, no teachings, no coercion, nothing like that; I did not seek it out, it did not find me, it has always been there. When I was a child, like most children, I had a sense of what was fair and what was not, and like most children I did not take “because I said so” as an acceptable answer. I guess unlike some, I never grew out of that. I am twenty six years old, and with every passing year the novelty of my conservatism wears a bit. As a teenager at family parties when the discussion turned decidedly political (as it tends to do), people much older than myself would marvel at my world view and appreciate how someone so young, despite the odds, could see the world with such realism.

I think it is that default nature of conservatism that makes “intellectuals” scoff. Unlike them, I did not have to seek my world view, I did not have to work at it, mine is not borne of academia, rather that of common sense, and there is nothing merely “common” about an intellectual. Their view is superior to mine because theirs is man-made, and man must triumph over nature. Their views have been bridled by wise men, men who in turn have made them wise; theories that have withstood the vigorous of hypotheticals and postulates; awards have been won, medals have been handed out, books written, and editorials penned. My views are not dazzling, perhaps they are even quite mundane; there is nothing particularly exciting about being personally responsible or spending only that which I have (and even being logical can sometimes get in my way, just ask my fiancee). However, I have never been a prude, I am not politically correct, nor do I take myself too seriously. I can watch the Daily Show and laugh or sit through a late night monologue without changing the channel (unless it’s David Letterman). In college, by day, I could be drafting a paper on the downfalls of affirmative action or the illogical position of abortion, and by night I could be organizing a keg race, or scouring the town procuring ping pong balls (all in the hopes of attracting the attention of the opposite sex, of which most would turn a concerning eye toward my Bush ‘04 campaign sign hanging on my wall).

Up until this point in my life I have always looked at liberalism as an illogical curiosity. An oft misplaced yet goodnatured philosophy that inevitably goes awry in Rube Goldbergian fashion. However, today I view it with scorn, before it was little threat, I never imagined the possibilities of my freedoms being so affronted, I never imagined group think en masse; now on the verge of insanity, our government has been overrun with nonsensical philosophy, and this time with the distinct possibility of it showing up on my doorstep; the pendulum has surely swung, and while I wait for Newton’s Third Law to firmly take effect, I can only sit here and make my voice heard, and vow to engage as many as I can in a serious conversation about our future.

I hope someone is listening.

JAM Economics, Personal, Politics conservatism