Bob Hayes Online

Reading this wiki article on Amtrak, it strikes me that we are likely to see the same type of deterioration in the health sector as we saw in the rail transportation sector over the course of the twentieth century. Rail transport was once the most vital and important American industry – its sad decline is a story of government error and mismanagement of economic decisions. If the Democrats succeed in passing their inchoate health care plans, we can look forward to a creaking, half-functional system that prevents private market actors from doing the job, while doing a poor job itself.

My friends on the left (and they are my friends) are angry and upset because so many Americans with employer-provided benefits (and even many without) are unhappy about the existence of a “public option” plan. These liberal folk say “the public option won’t take away your choices. You will be able to keep the insurance that you have.” And it’s true that the plan as drafted in its various forms and trial balloons does permit people to keep their existing plan.

Unfortunately, the plan as drafted will not be dictating the economic reality once the public option is in place. Instead, market forces will. And market forces will push millions of people out of the private insurance market against their will, and could well cause a near-collapse of the private system.

If the public option is in place, employers all over the country will jump at the chance to move their employees out of costly benefit plans and into the public system. The left themselves make this argument about corporations’ willingness to move social welfare expenses onto the public shoulders. Unless the plan is punitive towards employers who do that – and it won’t be, because that would be politically suicidal for Democrats – there will be an inevitable tidal wade into the public system, not by choice, but by expulsion. Leftists will tiredly (and tiringly) argue that “oh look, it worked in THIS Swiss canton for the eight years the study conveniently ran” – ignoring the uniquely American spin that often makes those studies of dubious applicability, at best. Mr. Obama won’t have personally taken away those millions of peoples’ health insurance – he would just have made it impossibly tempting for their bosses to do it to them.

The private insurance system will be further undermined by the fact that employer-provided healthcare has one of the best demographic profiles for health insurers. People who are working tend to be younger, in better health, and to take care of themselves. The customers it will be losing to the public sector will be the profitable ones – the ones who make up for the lady who gets cancer at 49 and spends a lot of money getting better to live to 80. I know, boo hoo for the insurance companies – but without profitable customers, the companies can’t stay afloat. If it takes 3 Healthy Harrys to keep one Ailing Alice going, then anytime the public option takes away a Harry it better take a third of an Alice as well – but a lot more of the workers in those pools and their families are HH than AA. So companies go under, and companies that want to provide healthcare coverage to their workers have a hard time finding a market. The fact is that the government can “fight” for those valuable premium-payers a lot more effectively than a bunch of mopes in Connecticut can – the government has money and tanks and Congressmen. All the company has is money.

There are 88 million Americans with employer-provided healthcare, and most of them like their coverage very much. There’s no reason they wouldn’t; while it’s not a choice I’ve myself made, the security of having medical expenses covered in case of disaster is surely reassuring. That security has value to the families who know Dad getting sick won’t be the end of the world.  Liberals were correct in gauging that there is public support for health care reform – but there is zero support for taking a great whack at the stability and viability of employer-provided healthcare financed through the private insurance market.

That is why people are getting hetted up at town halls. The people waving swastikas, if they aren’t plants, are flecks of crazyfoam on a genuinely large popular upswelling of sentiment. My liberal friends, saying “we don’t intend to do that” isn’t good enough; people don’t believe it’s up to you to decide if that’s what happens. People know that their choices are going to go away, and it doesn’t really matter to them that the cause will be an impersonal market mechanism, rather than the volition of some nervously smiling Congresscritters. The Congresscritters are going to get the blame.

So perhaps Congress – and the liberals in Congress – had better think about proposing some market-reality-recognizing mechanisms that will work to improve American healthcare, without wiping out people’s dreams and security in the process.

Scott Adams of Dilbert fame has a suggestion for asthmatics: eat lots of apples, pears, grapes, garlic, and onions. He claims it greatly reduced his asthma’s severity.

I have no inherent interest in asthma, but my mother sometimes suffers and it’s easier for me to post this link and tell her “check my blog” than it is to send her the URL directly.

Why not start health care reform with tax reform?

There are two key problems that everyone agrees exists with regard to healthcare. Problem one is that it’s really expensive to get old and die. Problem two is that it’s really expensive to have something terrible happen to you and need tons and tons of medical care. There is disagreement about *why* these things are problems, disagreements about motives, etc., but everybody agrees that these two things are problematic.

Problem one we haven’t solved, but we have a quasi-kludge half-solution in place. It can and should be improved, but old people get their medical bills paid for more or less and they don’t have to bankrupt their families in order to pass away decently. So hooray, there, no doubt we’ll work on making it better, but let’s not **** with it right this minute.

Problem two is the problem of catastrophic care. It’s expensive. You get cancer, you lose your house. As has been pointed out to me, if something expensive were to happen, it would be a terrible financial blow. We wouldn’t go bankrupt, because there are assets, but it would surely suck. It would be far worse for people with fewer familial resources.

There are other problems that exist, but everybody agrees these are acute ones, so let’s focus on them for a moment.

Some people are lucky; they have nice health plans that cover even catastrophic events, while also providing good coverage for more routine and preventive care. Those plans tend  to be expensive, making those people relatively expensive to hire, so as a general rule, only people who contribute relatively large amounts of social capital to their employers are able to get this type of coverage. Most people make do with much less impressive plans which provide a partial shield, but still leave patients owing for large sums when disaster strikes. Ironically, the people with the gold-plated policies tend to be the people who could absorb a ten or twenty thousand dollar loss without grievous harm, while the people who are destroyed by such a debt are the ones with the sketchy pay-most-of-it policies.

Some people have no care coverage at all, reasoning (like me) that their best option for healthcare expenses is to pay for it 100% out of pocket for routine matters, and suffer the loss to capital in case of true crisis. Others pursue the strategy, though without the resources, owing to improvidence, ill fortune, or whatever. Some of these people tend to impose big costs on the system as a whole, since they tend to be the ones showing up at the ER. (Hey, I paid my bill.)

Right now all the people with employer-provided care are getting a substantial tax break, because they don’t pay tax on the large income that their plan represents. Some people propose taxing the benefits; I think that instead of doing that, we should extend the tax break to everyone, and we should count health benefits as income.

Anyone who purchases any health insurance plan, whether comprehensive or catastrophic, gold-plated or bare-bones, whichever they prefer – should get to write off 100% of that expense as a deduction from their income. People whose employers provide coverage stay status quo ante – they lose nothing. Their income has gone up nominally (“holy cow, IBM is paying $19000 a year for my health plan?”) but they get $19000 lopped off their income on the 1040, so they end up with no change.

People who buy coverage with their own money will get a whacking great tax cut, depending on their income levels. No idea what this would cost – tens of billions at the very least.

On the other hand, it would require no bureaucracy and no interference with private choice – and it would greatly encourage people to buy health coverage for themselves, particularly as their incomes rise. We WANT people like me to go out and buy expensive coverage which we then never use; it helps pay for the ER visitors.

This proposal doesn’t do much for the poor, I’ll grant you. Fine – let’s do a block transfer with another NIT-style mechanism and issue $1000 “health care credits” to people at 200% of poverty line. It won’t cost all that much, and again, it gives people an incentive to do something smart but doesn’t coerce their behavior.

The result of this policy would be a strong increase in the demand for private health coverage, leading to greater investment in health care capital, human and financial varieties. It requires no federal power grabs, no objectionable redistribution – no human among us objects in principle to helping very poor people see the doctor – and most lovely to those who care about freedom, no coercion or forced behavior. Although it can be sold to Republicans as involving a tax cut, since all these people would start getting a tax break, in truth we should recognize that it would involve a small but real nominal tax increase or reduction in services elsewhere, since we’re giving people money back on their existing tax levels, but I’ll forgive any liberals who choose to finesse that point. I think it’s worth the expense.

No, no, no, no, a thousand times, NO.

If my fellow citizens want to burden themselves with some horrific tax-and-spend nightmare of socialized medicine, they may. I’ll oppose it, but there’s a right to make stupid choices.

But I will not be coerced into buying an insurance product, whether public or private, to satisfy some bureaucrat’s desire that my spending choices reflect the ones s/he thinks I should make.

Hell, no.

If this atrocity becomes law, I will stand on the steps of the US Capitol and demand to be arrested for my crime of refusing to pay. We are not children subject to the whims of a babysitter, however benevolent. We are free Americans. I will choose the course of my own life, and I do not yield that power to any man or any state.

They can have my taxes but they cannot have my conscience or my choices. Those are mine, now and forever.

End of discussion.

Greg Mankiw has the scoop. Bottom line: Medicare’s administrative costs are $509 per patient. Private plan administrative costs are $453 per patient.

If true – I’d be wary of such a strong claim simply because it is so strong, and I’d like to see the opinions of other economists – then it’s a huge blow to an underlying premise of Obama’s health care reform ideas: that the state can do it better, and thus more efficiently. That flies in the face of conventional wisdom, as well as decades of living experience. If the state-paid clinic can’t provide health care at better prices to the American people than the private sector…why switch?

…and Michael W. Chapman certainly does like to type “Dickey-Wicker“.

Drug reimportation is a hot idea these days.  It doesn’t work.  Here’s why.

Say you are a textbook publisher.  You have a line of college textbooks that you produce.  This is a complex and expensive process; you hire high-level scientists and academics to write the books, editors to fix their dreadful writing, fact-checkers to make sure it doesn’t say “e=mc³“, artists to create the thousands of diagrams and charts and pictures.  You pay for printing and warehousing and distributing.  You pay IT companies big bucks to maintain your catalog and run your online order system.  In short, every textbook represents quite a large investment of resources on your part.

You sell these books for $65 apiece to university bookstores across America.  You make decent money; some years you lose a little, most years you make a nice profit.  All is well.

Then one day you get a call from a university in Australia.  They’ve heard about your line of textbooks, which it turns out are better than the textbooks that they can print in Australia.  The university wants to buy books from you.  Hooray, you think.  Now, the problem arises that the Aussies don’t have as much money sloshing around their public university system as we do.  There’s no way, in fact, that they can afford to spend $65 per book.  They can give you $30 per book, no more than that.  You talk things over with your accounting folks, and they tell you:  good news.  It turns out that the marginal cost of producing another textbook and shipping it to Australia is $27.50.  Selling books to Australia won’t make you a fortune, but it will improve your bottom line somewhat without hurting your core business.  Everybody wins, and so the freighters loaded with copies of “Sociology And You” start steaming for Perth.

Until one day you come into your office and on your computer screen there appears a web ad offering copies of “Sociology And You” for $45.  You click on the ad, and it’s a company in Australia that is buying the books from you wholesale, and then reselling them to American college students over the Internet retail. 

Is this a problem?  Well, it’s not much of a problem if these folks are moving 10 books a week.  It’s a huge problem if they’re selling 10,000 copies a day.  As you’re preparing to address this problem, you turn on the TV and hear presidential candidates saying that the high cost of textbooks in America is an outrage, and that what we need to do is reimport these books from Australia, where they’re cheap.

But they’re only cheap in Australia because you are selling them to Australia as a marginal, peripheral business.  The main market for your product is the one subsidizing all the fixed costs of book production; those Aussie dollars are just a little bit of icing on the cake. 

So what happens if the government follows through on its promise of cheap textbooks for everyone?  Well, they pass a law making it legal and easy to reimport these books directly without tiresome Internet runarounds.  Eager wholesalers line up to make a fortune on this book bonanza…only to discover that there aren’t any books available from Australia.  Why are there no books available from Australia?

Because you, not being a complete idiot, have stopped selling Australia textbooks for $30 apiece.  Every book you sold to Australia would end up costing you a sale here in the US, and the US sales are where you make your margin.  Since the Australian sales are jettisonable from the point of view of your core business, you jettison them to save what’s important, the U.S. market. 

Drug reimportation works the same way.  The issues about safety and provenance are purely side issues.  The core of the problem is an economic question:  what does it cost to get this particular product?  It may be that the price is different in one place than another.  Price differentials do create a potential for arbitrage, but they don’t create a reality that the lower price is somehow the right price, or that everyone can get the lower price.  Attempts by government to get the lower price for everyone will simply end up removing the lower price option for the people who had it before.

All drug reimportation laws can do is hurt the availability of American pharmaceuticals in other countries.  You won’t sell textbooks to Australia when those textbooks are destroying your profit center in America; Pfizer isn’t going to sell drugs to Canada if the Canadian drugs are going to destroy their profits here.  It’s as simple as that.

Why are our health costs so high? In part, because people spend large amounts of money on futile care – care for someone who has no chance of recovering, or only a very small chance. (For example, when someone is told they only have a few weeks to live and that there is essentially zero chance of recovery. There COULD be a miracle, though.)

It usually makes emotional and spiritual sense for individual people to make that spending decision. The emotional cost of not doing so would be far higher than the fiscal cost of going to the limit. However, this is not a policy that we can put in place for everyone, because the emotional calculus is different. I will mortgage my future and sell my soul to gamble on keeping my baby alive; I will not do so to gamble on an abstract group of strangers. Neither will anyone else; although levels of altruism will vary, and some people will cut deeper than others for strangers’ welfare, few-approaching-none will make the sacrifices for strangers that they will make for kin.

From a humanitarian point of view, then, it seems logical for decisions about such extreme measures to be left in the hands of individuals. Resources being equal, more sacrifices will be made and more care will be provided in desperate cases when decisions are made closest to the patient. This is undoubtedly a major component of why our health care costs are systemically higher than those of nations with single-payer or nationalized health care; Britain’s NHS isn’t spending a million dollars trying to keep Grandma alive, but in the US, Grandma’s kids are.

At the other level of care, I think the decision calculus might actually work the other way. Some individuals show a reluctance to rationally budget for preventative and maintenance-type healthcare; members of a more distant group, aware that they have a good chance of being stuck with the eventual enormous bill when Joe keeps skipping the physical exams (“that shooting pain in my left arm will go away if I just have another beer”), are probably more willing to pay for Joe’s doctor visit than Joe is.

On that humanitarian basis, I’d probably be more receptive to a public health policy that supported preventative and maintenance-type care, and left big-ticket items up to individuals to deal with.

A couple weeks ago, 3rd of 3 developed a high fever. Stoic dad wanted to let her gut it out on the couch, and save a few hundred dollars. Soppy mom insisted that she go to the ER (it was 9 PM). Guess who won that one.

The ER said she was coming down with a virus, beat them what it was because she didn’t have any other symptoms. They gave her Tylenol to get the fever down and recommended advanced medical treatments like keeping her comfortable and giving her plenty to drink. I brought her home a couple of hours later, having successfully shielded her from comprehending why the streetwalker in the next room was slurring her speech and talking about it hurting to pee.

A few days ago, we get the bill from the ER doctor. (I don’t know why, but this hospital separates the bills out, one for the ER itself, one for the doctor you end up seeing.) It was $204 – more than I want to pay, but in line with historical experience. I waited for the ER bill, which in the past has been around $100.

Today we get the ER bill. $1540. But, because the hospital loves us and wants to work with our financial situation, if we pay them by the 19th of March they’ll take 40% off, leaving it around 900 something. Cue my head exploding, wife quietly freaking, chaos reigning supreme.

So I get on the phone with the nice, calm lady at Centura who, I suspect, gets about fifty of these “wtf?” calls a day. She says the $1500 is for the ER service, is not a mistake, and that she can’t give me an itemized bill over the phone because of privacy regulations. But she can send me one – it will take a mere two business weeks to arrive. In the meantime, they want their money.

(Which, yeah. That’s going to happen. I wouldn’t pay $1500 for a whole child, let alone one ER visit. I won’t pay $1.50 to someone who hasn’t yet billed me.)

So a few questions for the hive mind.

1) Has something happened in the year since she last went to the ER, that the customary walk-through-the-door charge has increased fifteen-fold?

2) What’s my legal recourse here? In my surly 20-something days, I would have laughed and tell them to f*** off, and good luck collecting. (And the next time I visit the ER, it will be as Raoul Rodriguez, and try to prove different.) But these days I’m trying to buy a house, and trying to make all the red lines on the credit report read yellow or green instead.

3) Anybody got $1500 lying around they don’t need? (Oh, well, $950 if you can get it to me by 3/19.)

4) How is it possible for a commercial enterprise to legally demand money from people without presenting an itemized bill? (Technically, it’s not a demand. It’s an OFFER. That seems like thin cheese; if I were a judge in petty court I’d throw it out post-haste.)

5) WTF? I mean, what the F-ing F?