Keith Hennessy, Michael O. Leavitt, and Al Hubbard wrote an Op-Ed in the Wall Street Journal that supports the assertion I made earlier this week. in my post Health insurance is the problem. Since all appearances currently indicate that the so-called Government-Option is dead, many of our legislators are scraping the bottom of the barrel to find the policies that have broad bipartisan support, in hopes of passing some type of health insurance reform before the end of the year. Unfortunately, because of the urgency of passing something quickly (so that we all have time to forget what they've done to us before we have to opportunity to throw them out on the street), some of the provisions are subject to little debate.
The Op-Ed explains exactly how two of these provisions, Guaranteed Issue and Community Rating, "would create a massively unfair form of income redistribution and create incentives for many not to buy health insurance at all." (Not to mention that they would lead to dramatically higher health insurance rates for all of us!) Since their explanation is clear and succinct, I'll let you get it right from the horse's mouth, instead of repeating it.
In addition to having a number of unintended consequences, these two policies completely fail to recognize that the widespread use of insurance is part of what keeps health care costs increasing. Until we can separate health insurance from the issue of health care, we can not really achieve the goal of making quality health care affordable for all Americans, which is one of very few of Obama's (stated) goals with which I can agree.
Thursday, October 01, 2009
Wednesday, September 30, 2009
More Evidence: Global Warming is a Hoax
Senate Stooges Boxer and Kerry have unveiled the latest strategy to get the ill-conceived cap and trade bill passed, despite the fact that Obama's Treasury department has concluded that it will cost American households more than $1700 a year! (That's the equivalent of an annual 15% increase in the federal income tax!) So, what's their grand scheme? Change it's name: Instead of calling the legislation "Cap and Trade", they've decided to start calling it "Pollution Reduction and Investment", or PRI. So, we'll just dress it in some new clothes to cover up the smell.
New clothes indeed, considering that Steve McIntyre over at Climate Audit presented a recent report which effectively puts to death the famed "hockey stick" graph that is a perennial bad penny that keeps popping up in any climate change discussion. AJ Strata, in his analysis of the findings, is pretty direct in his conclusions:
These guys are going to have to do more than just give the policy a new name to sell us on it. To paraphrase Shakespeare: "A pile of horse manure by any other name is still just as smelly." It'll take more than just a new name to make this bad policy come up roses.
New clothes indeed, considering that Steve McIntyre over at Climate Audit presented a recent report which effectively puts to death the famed "hockey stick" graph that is a perennial bad penny that keeps popping up in any climate change discussion. AJ Strata, in his analysis of the findings, is pretty direct in his conclusions:
The real professionals ... have discovered that the source of all the recent global warming is not CO2, but bad data used in climate models which forces the models to show recent warming – where OTHER DATA shows there is no recent warming.
Let me repeat this. The statistical models used by the High Priests of Global Warming are using a newly identified and specific data set which wrongly produces decades of warming where none exists in the raw temperature data 0r other data sets.
...
I will let the authors be more reserved, but I find the results damning. To summarize, the infamous Hockey Stick (HS) warming trend that supposedly shows man made CO2 forcing the Earth’s temperature higher is in fact an artifact of one set of bad data.
These guys are going to have to do more than just give the policy a new name to sell us on it. To paraphrase Shakespeare: "A pile of horse manure by any other name is still just as smelly." It'll take more than just a new name to make this bad policy come up roses.
Saturday, September 26, 2009
Health Care: Insurance is the Problem
The current debate regarding the future of our health care system in America is inherently flawed. Many of our politicians and the public at-large seem to be overlooking the biggest contributor to escalating health care costs, and as a result, the proposed solutions (from both sides of the aisle) utterly fail to address the source of the problem. Current attempts to reform health care focus on decreasing the cost of insurance* (or changing the source of insurance). But they fail to recognize that, in general, insurance is the problem! A system driven by insurance is a classic example of a Third-Party Payer System. If you're not familiar with the term third-party payer, let me explain:
A Third-Party Payer System exists any time a person paying for a product/service is different from the person who gets (or demands) it. Health insurance fits this definition nicely: After you purchase insurance, you can go to the doctor and pay some pre-arranged co-pay (or percentage of the cost of the office visit). The insurance company pays the remaining cost of the office visit. Thus, the insurance company is the third-party payer. Now why is this a problem? Well, consider the classic Supply/Demand curve from ECON 101. I've prepared a sample for you if you don't remember the beastie:
From the graph, we have this scenario: The insurance company covers your doctor's office visit for a $10 co-pay. At a cost of $10, you would demand 90 "units" of service. If you were paying the full amount for those "units" of service, you would have to pay the doctor $90. Yet, the doctor probably won't get $90. They'll probably accept some reduced compensation (because of a reduced rate negotiated by the insurance company), say $75 -- your $10 co-pay, plus $65 from the insurance company. Yet even at a rate of $75 in compensation, your doctor is only willing to provide 75 units of service -- not the 90 units you demand. Overall, the system is out of equilibrium (if it were at equilibrium, the quantity supplied would be equal to the quantity you demand, which would be 50 units, and you would pay $50 for it.) Because the system is out of equilibrium, and demand exceeds the supply, the price level increases in an effort to reach equilibrium.
Take this to its logical conclusion: because the price level for health care increases, the price level for health insurance is also rising. (The insurance company pays more money out in benefits, so they have to recoup those costs somewhere, typically in premiums.) Thus, we have an expensive cycle of increasing health care costs, and increasing health insurance costs.
Based on this evidence, I believe that Insurance is the biggest reason for the increase in health care costs. When people pay less than market-value for any service, they'll demand more of it, pushing the price up. (This is a principle that is widely accepted among economists.) Only by making the party who demands services also pay for those services (and giving them a means to do so) can we begin to apply downward pressure to the price level of health care (without compromising quality or rationing care). If we can do this, we will have a true market-based solution to the problem.
What do you think? Is my analysis correct, or is there another cause for high health-care costs? Is there another "elephant in the room"? Let me know your thoughts -- I'm interested in having a constructive discussion of the issue that can lead to solutions.
* Note that I am using the word "insurance" which would generally include all types of insurance policies. The astute observer would realize that my argument really only applies to health insurance policies with very low deductibles, or those whose first dollar of coverage begins with little or no out-of-pocket expenses. While I'm using the all-encompassing word, I mean to refer to the aforementioned insurance policies. For purposes of my argument, the term "insurance" does not include plans that have a high deductible (like catastrophic coverage).
A Third-Party Payer System exists any time a person paying for a product/service is different from the person who gets (or demands) it. Health insurance fits this definition nicely: After you purchase insurance, you can go to the doctor and pay some pre-arranged co-pay (or percentage of the cost of the office visit). The insurance company pays the remaining cost of the office visit. Thus, the insurance company is the third-party payer. Now why is this a problem? Well, consider the classic Supply/Demand curve from ECON 101. I've prepared a sample for you if you don't remember the beastie:
From the graph, we have this scenario: The insurance company covers your doctor's office visit for a $10 co-pay. At a cost of $10, you would demand 90 "units" of service. If you were paying the full amount for those "units" of service, you would have to pay the doctor $90. Yet, the doctor probably won't get $90. They'll probably accept some reduced compensation (because of a reduced rate negotiated by the insurance company), say $75 -- your $10 co-pay, plus $65 from the insurance company. Yet even at a rate of $75 in compensation, your doctor is only willing to provide 75 units of service -- not the 90 units you demand. Overall, the system is out of equilibrium (if it were at equilibrium, the quantity supplied would be equal to the quantity you demand, which would be 50 units, and you would pay $50 for it.) Because the system is out of equilibrium, and demand exceeds the supply, the price level increases in an effort to reach equilibrium.
Take this to its logical conclusion: because the price level for health care increases, the price level for health insurance is also rising. (The insurance company pays more money out in benefits, so they have to recoup those costs somewhere, typically in premiums.) Thus, we have an expensive cycle of increasing health care costs, and increasing health insurance costs.
Based on this evidence, I believe that Insurance is the biggest reason for the increase in health care costs. When people pay less than market-value for any service, they'll demand more of it, pushing the price up. (This is a principle that is widely accepted among economists.) Only by making the party who demands services also pay for those services (and giving them a means to do so) can we begin to apply downward pressure to the price level of health care (without compromising quality or rationing care). If we can do this, we will have a true market-based solution to the problem.
What do you think? Is my analysis correct, or is there another cause for high health-care costs? Is there another "elephant in the room"? Let me know your thoughts -- I'm interested in having a constructive discussion of the issue that can lead to solutions.
* Note that I am using the word "insurance" which would generally include all types of insurance policies. The astute observer would realize that my argument really only applies to health insurance policies with very low deductibles, or those whose first dollar of coverage begins with little or no out-of-pocket expenses. While I'm using the all-encompassing word, I mean to refer to the aforementioned insurance policies. For purposes of my argument, the term "insurance" does not include plans that have a high deductible (like catastrophic coverage).
Saturday, August 15, 2009
Analyzing the President's Pitch
I haven't had much to write about the "healthy debate" that's currently going on regarding the President's cornerstone issue of his Presidency: Health Care. Now, those of you who've spent more than about two seconds with me in person know that I can't stop talking about it, and that (as with most things), my opinion runs deep. (I figure my silence on this blog is due to me heeding my mothers' advice: "if you can't say something good, don't say anything at all".)
On August 11, the President suggested that our disagreement about health care should [be]
For those wanting a summary, here are a few key points:
1. The President overpromises that everyone can keep their health plan.
6. The House bill would increase short-term, 10th year, and long-term budget deficits
7. AARP opposes the bill
9. Medicare is not a good example of government-run health care because Medicare is fiscally unsustainable
12. The pending bills would move more cost-benefit decisions from insurers to people chosen by the government
13. Guaranteed renewal and guaranteed issue
[I strongly recommend checking this one out. So much so that I'm putting a link to this specific item.]
17. The President trashes the U.S. Postal Service and undermines the case that government can run a complex health system.
20. There are 46 million people who are technically uninsured, but the target population is probably one-third to one-half that size.
On August 11, the President suggested that our disagreement about health care should [be]
... over things that are real, not these wild misrepresentations that bear no resemblance to anything that’s actually been proposed.In an effort to be fair, and focus on what the President's actually proposed (forgetting for a moment, the discrepancy between what he claims he's proposed and the actual legislation that exists), I want to draw your attention to a blog post by Keith Hennessey, former economic advisor to President George W. Bush. Keith has expertly taken the claims that the President made in his "Sales Pitch" for Health Care in Portsmouth, NH, and dissected them, providing a clear contrast between reality and the fantasy land enjoyed by Barack Obama. Check out the post here.
For those wanting a summary, here are a few key points:
1. The President overpromises that everyone can keep their health plan.
According to [Congressional Budget Office] CBO, the President’s statement is incorrect for a portion of these 6 million people who as a result of the House bill would lose employment-based coverage they would otherwise have under current law.
6. The House bill would increase short-term, 10th year, and long-term budget deficits
- CBO says the House bill would increase federal deficits by $239 B over the next ten years.
- CBO says the House bill would increase the deficit in 2019 by $65 B, meaning the bill fails the President’s “10th year test.”
- CBO says the House bill would result in increasing deficits beyond 2019, because the new spending would grow faster than 8% per year, while the offsets would grow only about 5% per year.
- The House bill would not just slow Medicare growth, but would also raise taxes on high-income individuals and small business owners.
7. AARP opposes the bill
After the town hall, AARP issued a statement including the following sentence:AARP: While the President was correct that AARP will not endorse a health care reform bill that would reduce Medicare benefits, indications that we have endorsed any of the major health care reform bills currently under consideration in Congress are inaccurate.
9. Medicare is not a good example of government-run health care because Medicare is fiscally unsustainable
...Medicare is fiscally unsustainable. The President already said that earlier in the discussion. So Medicare is not a successful model for a new system, because we can’t afford it.
12. The pending bills would move more cost-benefit decisions from insurers to people chosen by the government
...Someone must have authority to decide whether additional care is “worth it.” That person must control the dollars. Ultimately, the health policy debate comes down to the question: Who should make the cost/benefit decision? The pending legislation would move some of those decisions from insurers to the government.
13. Guaranteed renewal and guaranteed issue
[I strongly recommend checking this one out. So much so that I'm putting a link to this specific item.]
Guaranteed issue + community rating + individual mandate = hidden income/wealth redistribution from the generally healthy to the generally sick.
17. The President trashes the U.S. Postal Service and undermines the case that government can run a complex health system.
He undermined the case for more government control, and especially for a public option, by pointing out that the government cannot deliver the mail and stay on budget.
20. There are 46 million people who are technically uninsured, but the target population is probably one-third to one-half that size.
Of those 45.7 million (uninsured) people:
- 6.4 million are enrolled in Medicaid or S-CHIP and just gave the Census taker the wrong answer. I’m serious. This is called the Medicaid undercount.
- Another 4.3 million are eligible for Medicaid or S-CHIP and have not enrolled. If they need care, the hospital or clinic generally enrolls them. They are protected against risk even though they don’t show up on the rolls as insured.
- Another 9.3 million are non-citizens. Different people come to different conclusions about what portion of this group should receive taxpayer-subsidized health insurance.
- Another 10.1 million have income more than three times the poverty line.
- Leaving about 15.6 million remaining uninsured, of whom about 5 million are childless adults.
Wednesday, July 22, 2009
How do we Restore the Concept of Citizen Legislators?
Last summer, I and my family visited Mount Vernon (George Washington's estate). I was struck by the fact that he didn't want to be President. After the Revolution, he wanted nothing more than to return home to Mount Vernon. He was a farmer at heart, yet when elected, he served his country out of a sense of duty instead of a desire for personal gain, as some of today's legislators have done. He was the quintessential Citizen Legislator (despite not being in Congress).
Nowadays, our politicians do their best to make sure they don't have to suffer the consequences of any laws they pass. (Case and point: Health Care legislation that explicitly exempts Congress from participating in the plan the rest of us are forced into.) But, instead of merely pointing out problems with "the system", I feel it my duty to propose solutions. So, let me ask (rhetorically, for the moment), how can we restore the concept of citizen legislators?
I think that career politicians are one source of the problem. Many of today's politicians don't have another job to which to return at the end of their service, so they don't want to leave the halls of Congress. Many of the rest of us actually have jobs that we'd have to quit just to run for office. (I sure wouldn't be willing to quit my job to run for office, even if I wanted to be in Congress.) So, I think we need a way to forcibly inject some fresh candidates into Congress, while eliminating some dead weight. What follows is my proposal, which I believe is one way to accomplish this: The Legislative Draft.
The Legislative Draft
We currently require 18 year-old males to register for Selective Service. So, let's require that every 25 year-old take a Civil Service (or other) exam to determine eligibility for the draft, as you want legislators to have a degree of intelligence. (25 is the minimum age that you can be elected to the House of Representatives. One wouldn't be eligible to serve in the Senate until age 30.) We would have to establish a minimum score for eligibility for the Draft (a detail which could be determined later).
Now, we need some seats in each legislative body to be filled by the draft. I propose expanding the size of each body by (roughly) one third: add 50 Senators, and 150 Representatives. (This also has the side effect of diluting somewhat the power of each existing legislator, and providing more legislators to represent the people.) And, of course, we have to add some more legislative districts.
And now that we've established the seats to be filled by the draft, we now need to address the manner in which the draft will be conducted. In my opinion, the best way to do this is by lot. Randomly select, from the pool of eligible candidates in a given congressional district (considering both scoring on the above-mentioned exam, as well as existing Constitutional requirements for eligibility), the individuals to serve. When your number comes up, you go and serve your Country for your term. When your term is complete, you can either run for the seat you just held, or you can return to your old life. (With laws requiring that your employer make your position available at the end of your (first) term, if you wish to return.)
I need to wrap up with one final detail: The above plan does nothing to give the career politicians the boot. So, I add one additional requirement: The seats filled by lot are rotated so that every seat in Congress is filled by lot every third term. This creates a de facto three-term limit, without expressly creating term limit legislation.
So, there's my grand plan, in a nutshell. Does it have it's flaws? I'm certain it does. (One being that getting this to pass would be nearly impossible.) But, I hope that maybe I got you thinking a bit. And I'd hope that maybe it could be the beginning of a constructive dialogue. We can't just point out problems without offering solutions. How can my idea improved? What other ideas can we put forth to help restore accountability (and make it easier to elect qualified individuals who want to serve) to Congress?
Nowadays, our politicians do their best to make sure they don't have to suffer the consequences of any laws they pass. (Case and point: Health Care legislation that explicitly exempts Congress from participating in the plan the rest of us are forced into.) But, instead of merely pointing out problems with "the system", I feel it my duty to propose solutions. So, let me ask (rhetorically, for the moment), how can we restore the concept of citizen legislators?
I think that career politicians are one source of the problem. Many of today's politicians don't have another job to which to return at the end of their service, so they don't want to leave the halls of Congress. Many of the rest of us actually have jobs that we'd have to quit just to run for office. (I sure wouldn't be willing to quit my job to run for office, even if I wanted to be in Congress.) So, I think we need a way to forcibly inject some fresh candidates into Congress, while eliminating some dead weight. What follows is my proposal, which I believe is one way to accomplish this: The Legislative Draft.
The Legislative Draft
We currently require 18 year-old males to register for Selective Service. So, let's require that every 25 year-old take a Civil Service (or other) exam to determine eligibility for the draft, as you want legislators to have a degree of intelligence. (25 is the minimum age that you can be elected to the House of Representatives. One wouldn't be eligible to serve in the Senate until age 30.) We would have to establish a minimum score for eligibility for the Draft (a detail which could be determined later).
Now, we need some seats in each legislative body to be filled by the draft. I propose expanding the size of each body by (roughly) one third: add 50 Senators, and 150 Representatives. (This also has the side effect of diluting somewhat the power of each existing legislator, and providing more legislators to represent the people.) And, of course, we have to add some more legislative districts.
And now that we've established the seats to be filled by the draft, we now need to address the manner in which the draft will be conducted. In my opinion, the best way to do this is by lot. Randomly select, from the pool of eligible candidates in a given congressional district (considering both scoring on the above-mentioned exam, as well as existing Constitutional requirements for eligibility), the individuals to serve. When your number comes up, you go and serve your Country for your term. When your term is complete, you can either run for the seat you just held, or you can return to your old life. (With laws requiring that your employer make your position available at the end of your (first) term, if you wish to return.)
I need to wrap up with one final detail: The above plan does nothing to give the career politicians the boot. So, I add one additional requirement: The seats filled by lot are rotated so that every seat in Congress is filled by lot every third term. This creates a de facto three-term limit, without expressly creating term limit legislation.
So, there's my grand plan, in a nutshell. Does it have it's flaws? I'm certain it does. (One being that getting this to pass would be nearly impossible.) But, I hope that maybe I got you thinking a bit. And I'd hope that maybe it could be the beginning of a constructive dialogue. We can't just point out problems without offering solutions. How can my idea improved? What other ideas can we put forth to help restore accountability (and make it easier to elect qualified individuals who want to serve) to Congress?
Saturday, July 18, 2009
Thank God for (some) Democrats
I never thought I'd utter the words of the title of this post. (And I certainly hope that they aren't premature.) However, I believe there is some encouraging news on the Obamacare front: The Hill reported yesterday that some 21 "Blue Dog" Democrats signed a letter drafted to Nanci Pelosi opposing her income surtax on the wealthy to fund the Health Care package. And, as I understand it, there are enough of these 21 Democrats in key positions that their opposition to the bill could be enough to kill it in its tracks.
As I ponder this, I am reminded that our battle is not necessarily against a particular party -- but against the ideas that are most typically held by a particular party. In other words, Democrats aren't necessarily the enemy here -- liberal ideology is. (Granted, I realized that typically Democrats typically have more liberal ideology, and so they tend to be squarely identified as "the enemy"; but not always.) And, given the fact that Democrats can push this through without a single Republican vote means that Democrat opposition to this bill is currently far more important (and effective) than Republican opposition.
Overall, let us hope that these 21 do not cave on Obamacare the way that many Democrats did on the energy bill. And, in the interest of intellectual honesty, I will provide the names of the individuals who signed this letter below. If they represent your Congressional district, please let them know that you approve of their actions -- and urge them to hold fast to the principles they expressed in the letter.
Those who signed the letter:
Jared Polis
Eric Massa
Glenn Nye
Harry Teague
Frank Kratovil
John Boccieri
Steve Drichaus
Parker Griffith
Jim Himes
Tom Perriello
Bobby Bright
Dan Maffet
Mike Quigley
Paul Hodes
Gerry Connolly
Gary Peters
Betsy markey
Michael McMahon
John Adler
Ben Ray Lujan
Walt Minnick
Dina Titus
As I ponder this, I am reminded that our battle is not necessarily against a particular party -- but against the ideas that are most typically held by a particular party. In other words, Democrats aren't necessarily the enemy here -- liberal ideology is. (Granted, I realized that typically Democrats typically have more liberal ideology, and so they tend to be squarely identified as "the enemy"; but not always.) And, given the fact that Democrats can push this through without a single Republican vote means that Democrat opposition to this bill is currently far more important (and effective) than Republican opposition.
Overall, let us hope that these 21 do not cave on Obamacare the way that many Democrats did on the energy bill. And, in the interest of intellectual honesty, I will provide the names of the individuals who signed this letter below. If they represent your Congressional district, please let them know that you approve of their actions -- and urge them to hold fast to the principles they expressed in the letter.
Those who signed the letter:
Jared Polis
Eric Massa
Glenn Nye
Harry Teague
Frank Kratovil
John Boccieri
Steve Drichaus
Parker Griffith
Jim Himes
Tom Perriello
Bobby Bright
Dan Maffet
Mike Quigley
Paul Hodes
Gerry Connolly
Gary Peters
Betsy markey
Michael McMahon
John Adler
Ben Ray Lujan
Walt Minnick
Dina Titus
Friday, July 17, 2009
Congress: Put YOUR Health Care Where Your Vote Is
Health Care reform is big news these days, and I ran across an interesting detail on the current draft version of the legislation that will be voted upon in the next couple of weeks. The legislation contains a curious exemption: Members of Congress are exempt from participation in the lauded "public option". This "public option" whereby you and I can purchase our "low-cost" health insurance directly from the United States Government is supposed to be the answer to all of our health care woes. And yet, members of Congress will never have to deal with the effects of the legislation.
Fortunately, one member of Congress, John Fleming, seems to have his head screwed on straight. He has offered a resolution giving members of Congress the same "opportunity" we have to participate in this "public option". I think this is a great resolution, and I hope it is ultimately successful.
Either way, to Congress, I have the following to say: Put your health care where your vote is! If this "public option" is good enough to force the rest of us to use it, then I expect you to lead by example and enroll in it yourself.
Please join me in demanding accountability from Congress: that they live by the laws they pass for the rest of us.
Fortunately, one member of Congress, John Fleming, seems to have his head screwed on straight. He has offered a resolution giving members of Congress the same "opportunity" we have to participate in this "public option". I think this is a great resolution, and I hope it is ultimately successful.
Either way, to Congress, I have the following to say: Put your health care where your vote is! If this "public option" is good enough to force the rest of us to use it, then I expect you to lead by example and enroll in it yourself.
Please join me in demanding accountability from Congress: that they live by the laws they pass for the rest of us.
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