So we talk a lot about the policy costs of different healthcare reform.  Personally I have said before that my solution and the solution that makes sense to me is that government can most lower the cost of insurance by deregulating instead of increased regulation.  A nationwide marketplace with a single set of regulatory laws would go a long way in reducing the cost of both med-mal for doctors (something I’ll bring up later) and health insurance for individuals.  Both through increased competition but also decrease administration costs at insurance companies who spend fortunes on state by state compliance with very complex state specific law and code.  Secondly, the federal governments push towards employer purchased healthcare through various incentives and laws like ERISA and the tax code on deductions are a couple of major problems.  The employer based health care is a nice idea but it takes the choice of coverage away from individuals and hides the true cost making it difficult for people to make their own choices based on their own needs and often leads to costs for coverage individuals don’t need and often gaps where they would like more coverage leading to a lot of inefficiencies.  But the issue with rising costs isn’t just an insurance issue we need to do more than just defeat the big bad insurance companies because remember the doctor bills are what is climbing as well and with rising claims insurance has to go up to cover the costs so there is a medical cost component as well as an insurance market component.   

 

But what else is there in this issue?  Well a lot.  1 big concern is why we are here in the first place.  I think that government tends to create many of the very problems they debate fixing.  For example when we consider why we are in this mess to start with let’s define the mess.  The mess is rising cost of healthcare at a rate twice the increase in wages and three times inflation for the most part.  So let’s analyze why this is happening.

 

From a simplistic point of view this problem is a simple supply and demand issue mixed with a high fixed cost problem so let’s address both separately and then perhaps together.  The supply demand issue is multi-pronged but can be boiled down to a few simple mistakes.  

1.)   Medicare and Medicaid.  These are great programs but with a rising number of covered individuals not bearing their own costs for medical procedures the demand for medical care increases greatly and has been since the programs where started.  I’m not saying they are good or bad, right or wrong, only that they are a major contributor to the problem.  What is the solution to that problem, well, when government budgets for programs like this they should consider the externalities which in this case is increased demand and ultimately higher costs to non-Medicare patients competing for limited services and try to compensate in some way such as never inventing government programs of that nature because they are unconstitutional or more simply subsidize supply as part of the budget to increase supply to match the new demand and eliminate that negative effect to everyone else.   

2.)   Tax incentives.  People who want to be doctors have choices to make and our tax system discourages people from going into fields like medicine.  Doctors incomes are based on massive initial investments of ¼ - ½ Million dollars in debt and the sacrifice of 8-12 years depending on the level of specialty.  That’s years where they could be working earning an income and having a life or starting a family all forgone.  When they finally start earning that income it is a high income but our tax system taxes based on income without regard to the investment they initially put in.  They might be able to write off the interest on the debt but not the debt or the lost time or the lost enjoyment of their youth.  Most doctors start and end their careers in a very high if not the highest tax bracket which means it is naturally less profitable than a job that makes a steady income over a longer period of time such as those initial 10 years that the doctor was in college because when you spread income out you pay a lower percentage in taxes.  Also doctors have a short career because involuntary retirement is a real threat.  A surgeon for example could have a vision problem, a stroke, tremors in his hands, o even something as simple as a broken wrist or hand that could limit or destroy their ability to continue that career.  This leads to an extremely short career.  Finally under tax law careers that require 40+ hours a week such as doctors who typically put in over 60 are punished for doing so because once they break certain thresholds they pay higher taxes as a percent of their income because government doesn’t care if you work 30 hours a week or 90 they only look at the paycheck and think people who make more should pay more regardless of the time, effort or investment involved.  This discourages people from entering the field and increases prices for 2 reasons.  The first is because supply is lower than it should be and so doctors charge more because their time is limited and it’s a market rationing mechanism but secondly doctors have to charge more to make a living plus pay their loans and other expenses with after tax income so a lot of that tax gets passed on to patients in the form of higher medical bills. 

3.)   Tort Costs.  In many states it is almost impossible to sue doctors because they are protected a million different ways to prevent discovery of mistakes.  We need to make discover easier and make more openness in the process but we also need to change the law so that doctors don’t face 10 million dollar pain and suffering verdicts.  I’m in favor of a comprehensive tort reform to make the process more open but also limit the top side risk to doctors in a way that will bring down the risk of doing business without removing protection from patients. 

4.) Illegal Immigrants.   Another way to help correct supply and demand as well as overall costs would be to remove the 15 million of those “un-insureds” we have who happen to be illegal aliens or the dependent children of illegal aliens.  That would take a huge burden off of our hospitals and lower the costs of services like Neonatal care across the board by a HUGE margin since treating illegals who are pregnant and their children is a major budget item! These are people here against the law who increase demand as well as cost because they have to be given care and they can't pay

So let’s look at the real problem.  Regulation creates both direct costs and indirect costs while also throwing supply and demand out of wack so isn’t it fair to say that government involvement is mostly responsible for where we are now?  I recommend that Medicare and Medicaid make an investment in doctors paying for their school in exchange for services.  This helps lower the cost to Medicare because they can require services far greater than the cost of medical tuition in repayment from the doctor while helping the supply side through reducing the upfront risk the potential doctor’s face.  There should also be a committee convened to look into making Medicare more efficient and to reward seniors for opting for their own medical coverage in lue of Medicare.  We need to lower the administrative costs of state by state regulation while increasing competition by making it a national market instead of a state market and we need to reduce the risk to doctors through smart tort reform.  Finally we need to address the inherent disincentive for higher education created by our tax system which punishes people who have a large part of their lives earnings cut into 15 or 20 year careers like doctors, lawyers, researchers and professors just to name a few.  There are many ways to do this but the best would be addressing it like a business allowing people who have long education to write off a little of that investment each year like a business would depreciate a building.  This lets them spread that cost over their career and makes it less of a disincentive.  Also I’m an advocate of setting any progressive tax to be based on hours worked and not annual salary because if I earn twice as much as you because I work twice as many hours as you we should pay the same tax rate.  THAT’S EQUITABLE!  I can’t imagine an argument that says we both earn $25 an hour but person A works 40 hours and person B works 80 hours so it’s fair that since person B makes twice as much as person A person B should pay 30% of his earnings in taxes and person A should pay 15%... that just sounds like punishing the person who wants to work hard and advance a very un-American idea.

So that’s my 2 bits on how to fix healthcare costs and health insurance costs without taking on more debt and without letting government have say in our health choices.  I think it is a win win. 

 
 
 
 
What chills me the most about the health care reform issue is not the clear loss of choice and liberty that will arise out of this bill and it’s not the economic problems, though they will be vast, that will arise from manipulating this market and spending on this level.  The real danger that chills my core is that these folks are willing to disregard fundamental rights to accomplish this illegal goal.  It’s bad enough that healthcare reform in almost all forms (there are a few legal ways to fix things that are being ignored) is unconstitutional but the real kicker is the attempts to squash debate through restriction of free speech!


The courts have been clear that government cannot burden or chill free speech under the 1st amendment and that such speech can be anonymous.  These government officials and their supporters are not debating this issue but instead attacking the speakers who this time happen to be normal Americans and not public figures!  Politicians are so use to trashing whoever opposes them under the guise that public officials are fair game that they don't know how to respond to valid concerns by the people!


The people are not public figures and do not deserve and in fact are protected from such aggression under the first amendment and yet the Obama administration is calling for supporters to report those who stand against them and forward to the Whitehouse a list of dissenters.  The congresswoman from California has called those who oppose her unpatriotic and others call them fear mongers and other horrible names.  These are citizens exercising their free speech!  Now they are being demonized and put at risk through public assault by political officials, pushed around by police and security on tax payer dimes... this is the government using our money to silence us and it is a scary prospect that not even the first amendment is sacred if it threatens their agenda!  


Americans need to wake up and smell the roses.  This government and the Democratic Party (and many in the republican party for that matter) have decided that our rights are granted as favors from their hand to be repealed or ignored and oppressed at will.  That is not rule of law!  That is not protection.  We must stand now and forever and tell them that we will give in and we will shut up.  We will stand and claim those rights that are higher than any government and that any government which opposes those rights is subject to be ignored and if the situation becomes extreme overthrown for their disregard of natural rights of man.  They must know that we have the courage to do whatever necessary because if we don't have that courage we will lose those rights.  The founders warned us again and again... it's time to head the warning.
 
 
 
 
 
 
I think this bill is an absolute invasion of our privacy and a danger to our liberty.  This basically steps in on state territory and requires states to redo their system of driver’s licenses in a way to give federal authorities a biometric search database of every American…  This is a tragedy, it is dangerous for government to track every human in the nation and no real system good can come from it.  Historically national programs such as this simply give a means to perpetrate great wrongs against liberty and freedom and we should fight this program!  The bill went through in 2005 but states have stonewalled it now the Obama administration is trying to revive it and amend it to make sure the states comply.  Contact your congressmen and tell them to repeal in total the Real ID act and not to support any version or similar bill.  The real ID act opens a dangerous capability for the federal government that it doesn’t need and can’t use for any real wide spread beneficial purpose.  The risk of abuse of such a database is way higher than any potential benefit it could offer.  This would allow them to run a photo from a rally and ID each person via computer database biometric search and record and keep track of movements, behavior and many other aspects of privet life without our knowledge.  The government has done these things in the past and we can’t fool ourselves into thinking they won’t again.  Given the stance of the current administration given some of the definitions and warnings from the department of homeland security this system would make it a cakewalk to monitor movements like the T.E.A. party movement or the Minute man Project and other legal and just movements which have already been marked by some in this administration as “potential terrorist”.

I'm not a fear monger I simply asking that we realize the real possible risks here and compare them to any possible benefit.  
 
Quick link 08/10/2009
 
I really believe that the Austrian Economists have a lot of things right though maybe not everything... there is a lot to learn by listening to them.  I stumbled on this link to a confrence... its a few years old but you should have a listen if you get time some of them are interesting!


http://mises.org/media.aspxID=73&action=categoryweeblylink_new_window
 
 
So I talk a lot about how bad Keynes is and I talk a lot about how I disagree with the pseudo economics that has in large part run our government policy over the past century.  I want to explain briefly why these standing theories are so dangerous and why they are wrong.  Keynes spoke the mathematical economic speak and was thus accepted by the field.  Furthermore, he is a godsend to politicians whose rational person interest is to add to their power and the power of their branch.  This way of thinking, that government can manipulate and steady the economy through mathematical calculations and artificially set interest rates and money circulations allows government to vastly expand their role and power in this country making their positions of more value and thereby giving them an interest to follow this methodology. 

So what’s wrong with the ideology that government can act as a stabilizer in the economy?  Well basically the premises are wrong.  The first premise is the assumption that the interest rate that the market gives us isn’t the optimal interest rate.  I have found no proof that the market interest rate is faulty.  Secondly, they presume that they are capable of finding a better interest rate for the economy assuming already that one can be found.  This is not only unproven but beyond unlikely and against history since government central planning has never added to the overall wealth of an economy in the long run.  Lastly, the most important premise is that there is no adverse effect to this government control that outweighs the assumed benefits assuming the process is possible which of course I think it is not but giving them the benefit of the doubt if they are 100% correct they must still account for negative effects.  So what are the negative effects?

This will be my focus because the first two are relatively self explanatory to anyone with knowledge of history and economics unless of course you are already drinking the Keynes Kool-Aid in which case this argument is far more likely to capture you attention than the first two.  The largest adverse effect that I see in this big government scheme is found in the theories of time preference.  Interest rates are based on time preference.  Now time preference on an aggregate level is in a relationship with aggregate demand.  Future demand and present demand are linked through time preferences of consumers and that is a major component of market based interest rates.  So what does this mean for the economy?  In the economy people earn income and then from this income some they will spend in the present or short term but people attempt to level out their standard of living and plan for large purchases to allow for a similar long run standard of living and the purchase of large products like retirement and college for children and thus they save a portion of their income for future consumption during hard times and for large purchases.  This savings is determined by their time preference for consumption and represents a time function on aggregate demand because savings is essentially pent up demand.  That level of pent up demand is to some extent effected by interest rates and to some extent it helps determine the interest rate as the market rates move towards equilibrium.  Now the other side of this market is the demand for these savings.  There is demand for savings because savings are borrowed by industry to build capitol (and by other consumers but since we are talking in aggregates we will ignore that portion).  Borrowing for capitol increases is also a time issue because capital investments relates directly to future supply availability.  So, time preference for consumption determines savings rates and then savings rates determine capital expenditures which determine future supply right?  So then there is a link between aggregate supply in the future and aggregate demand in the future created through the process of reaching equilibrium interest rates, right? 

Wow, that means that without the process of setting equilibrium interest rates we will have the wrong amount of savings and businesses will invest the wrong amount in future production capabilities and therefore aggregate demand and supply won’t match up right in the future right?  SO what does that mean?  Well it will either be a shortage or a surplus of supply and since labor is the short run fix for inequality it means we should sweep from vast unemployment and depression to booms with very high unnatural employment.  While this is great for political gamesmanship it is bad for us the common people and if only everyone could understand how this worked we would run these Keynesian economic politicians out of Washington on the rail and demand a standardized money supply and a market controlled interest rate structure!
 
 
So can anyone out there tell me please how it can be said that borrowing money to buy and destroy privet capitol is good for the economy?  Thats what the government is doing... why don't we just buy forclosed houses from banks and burn them down to help the housing market?  Same principle... or buy up companies and close them... this is idiotic!!  It hurts us in every possible way.  It reduces total capitol, decreases net national savings by putting the government in more debt, hurts poor buy increases prices on used cars, hurts tax payors that have to pay for this, the only people who benefit are the individuals that buy new cars and the car companies... mostly foreign car companies... lunacy is it not?  Please someone explain this to me if you can I am dieing to understand it...
 
 
The 5 year survival rate for stage 1 prostate cancer is almost 100% in the US.  It is lower around 99% in Canada and about 77% in the UK.  The UK has had universal healthcare since WWII and the UK health program is the 3rd largest employer in the world behind only the Red Chinese Army and the Indian Railroad.  Healthcare is the top ticket item on the UK budget.  The price is high and the care is not equivalent.  Why would we want to mimic programs that nowhere are capable of equivalent care?  There are many methods that would drive down healthcare and the greatest perhaps is deregulation not more regulation.  Right now a significant portion of the problems with coverage is a negative tax structure and heavy and differing regulation.  Standardization and less regulation or simpler regulation would benefit the system.  Furthermore, Medicaid and Medicare are a drag on the healthcare system as it is.  With this infinite third party payer the demand by this segment of the population is huge especially relative to projections and the payout while massive on the taxpayer is often times barely above cost and below costs in some places.  The increased demand created by government involvement mixed with downward price pressure hurts the market scaring off new supply in the form of new investment and doctors and increases demand in the form of unnecessary healthcare.  This problem will be infinitely increased and the problem worsened by this type of government involvement.  
 

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    Ludwig von Mises: 'Used to the conditions of a capitalistic environment, the average American takes it for granted that every year business makes something new and better accessible to him. Looking backward upon the years of his own life, he realizes that many implements that were totally unknown in the days of his youth and many others which at that time could be enjoyed only by a small minority are now standard equipment of almost every household. He is fully confident that this trend will prevail also in the future. He simply calls it the American way of life and does not give serious thought to the question of what made this continuous improvement in the supply of material goods possible.' - Economic Freedom and Interventionism
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