Schwartz on Mandates

The January 17, 2008 Rocky Mountain News has published the following LTE by Brian Schwartz explaining why mandatory insurance is wrong:

Politically controlled insurance is a disease
Brian Schwartz, Boulder
Thursday, January 17, 2008

Health care reform commission Chair Bill Lindsey's recent comments show that he either misunderstands why insurance is so expensive or deliberately misrepresents fundamental issues ("Mandatory health plan participation opposed," Jan. 10).

He wants to force Coloradans to buy politically defined insurance because "the market for health insurance isn't working." But as my free-market proposal to the commission explains, it's not working because government controls have crippled it.

Federal tax policy deeply discounts employer-provided insurance. This locks us to our employer and the costly insurance plans they offer. Hence, insurance companies need not please us, as they know we must change jobs to buy a competitor's product.

Likewise, mandated benefits laws force us to buy expensive policies with benefits we may not need. For example, a widowed wife must buy a policy that covers marital therapy, prostate cancer and maternity. In Colorado, these and other controls add between 20 percent to 50 percent or more to premium costs.

Politically controlled medical insurance is a disease masquerading as its own cure.

Trevor Leed LTE in Colorado Springs Gazette

The January 15, 2008 Colorado Springs Gazette printed the following letter to the editor from reader Trevor Leed:

NO FREE MARKET
Blame government meddling for high insurance costs

As enthralling as Chris Reimer's assertion that the insurance industry is run through shady, backroom collusion is, it is far from reality ("Insurance companies aren't in a free market," Letters, Jan. 9). While all businesses use all manner of charts and graphs to assess and guide, no product or service is worth more than what consumers are willing to pay for it. If anyone feels that they're not getting a good deal, there are an array of companies offering similar and different services at varying rates. You could even go without: that is the free market in action.

I do agree that the insurance market isn't entirely free, but that's not because of greedy executives, it's due to regulation. Let's say I were to go around and sign up people and start my own insurance company by charging a small fee that goes into a pool until someone gets sick. I would have half a dozen local, state and federal bureaucrats at my door charging me fees to make sure I'm legitimate and legal. The regulatory cost the medical industry suffers is added to the cost of treatment, creating the need for a deeper pool. Soon my small, market-decided fee, would be artificially inflated.

No, I still put my hope in the free market instead of elected officials. They have a long track record of overpaying, under-delivering and inflating costs. "Free" universal health care would stamp out what's left of the freedom the market garners us.

Trevor A. Leed
Colorado Springs

Matthews on the Massachusetts Plan

Because the Colorado 208 Commission is almost certainly going to propose a plan that is very similar to the Massachusetts plan, it's worth looking at some of the critiques that have already been made about this plan. One noteworthy analysis can be found here, by Merill Matthews. Here are some excerpts:

Is Romney's Healthcare Plan Conservative?

...Massachusetts was the first state in the country to impose an "individual mandate," which requires everyone in the state to have health coverage or face some significant penalties. Most employers -- those with 11 employees or more -- also face a mandate: Provide health insurance or pay a fine.

The criticism from other Republicans highlights one of the controversial aspects of the Massachusetts plan, which the state's Democratic legislature wanted in the legislation: Should conservatives support the government’s requiring people to buy health insurance?

The conservative Heritage Foundation does -- or at least providing some indication that an individual can pay his medical bills. Heritage analysts even played a role in developing the Massachusetts plan and is now selling it to other states. But most other conservative groups vehemently oppose both an individual and employer mandate, and it must be emphasized that Romney has not included the individual mandate in his presidential reform proposal.

Democrats Point to Massachusetts Model

Massachusetts' individual mandate has initiated a national discussion among many state elected officials, including California Gov. Arnold Schwarzenegger, who also supports an individual and employer mandate. Plus, Democratic presidential candidates New York Sen. Hillary Clinton and former North Carolina Sen. John Edwards have included an individual and employer mandate in their proposals, pointing to Massachusetts as a model.

Defenders claim that without the individual mandate, some people will remain uninsured. And when the uninsured get medical care, they can't pay for it, so those costs are shifted to those who have health insurance, driving up the cost of coverage. Therefore, the reasoning goes, by forcing all citizens to be "responsible" for their own costs (i.e., having health coverage), that will actually lower the cost of health insurance for everyone.

Since conservatives support personal responsibility, these defenders conclude, supporting an individual mandate is a conservative principle.

Ignoring Principles

But this argument ignores some other important conservative principles: one being that we don't like the government's micromanaging our healthcare.

Romney and others like to respond by noting that almost every state requires people to buy auto insurance. True enough, but the auto insurance mandate has been so unsuccessful that millions of Americans buy uninsured motorist coverage to protect themselves against uninsured drivers. The fact is that the auto insurance mandate is seldom enforced in most states, and when it is, the penalties are usually minor.

Not so with the Massachusetts mandate. Those who don't get coverage will face a $219 fine (tax?) for the first year (2008), but that fine will go up to at least $150 per person per month in the following year, according to the Boston Herald.

And that's why some of the other Republicans were chiding Romney: An annual $1,800 for each uninsured person can be a significant penalty on a lower-income family of three or four. So significant, in fact, that the state recently decided to exempt 20% of the low-income uninsured from the mandate.

One reason for that exemption was the cost of the plan. On the plus side, the uninsured are signing up in droves, faster than anticipated, although mostly for the subsidized part of the program. As a result, it appears the plan will have nearly a $150-million budget shortfall.

But wait! The whole justification for forcing everyone to have coverage was to avoid cost-shifting from the uninsured to the insured. And if you exempt 20% of the uninsured, haven't you just undermined the whole effort?

Moreover, expanding the health insurance pool apparently isn't lowering insurance premiums, as supporters have claimed it would. The Boston Globe recently reported: "Striving to hold down costs to taxpayers, a state panel [i.e., the Connector Authority, an unelected quasi-government body that governs the healthcare reform initiative] yesterday approved a range of changes for next year for the rapidly growing subsidized health insurance program. The changes will probably cut payments to doctors and hospitals, reduce choices for patients, and possibly increase how much patients have to pay."

The health plans are facing as much as a 14% increase -- higher than many health policies not associated with the Connector. So Commonwealth Care, the state-subsidized part of the Massachusetts reform initiative for modest-income workers, wants to cut healthcare provider reimbursements by 3% to 5%, according to the Globe.

Acting Like Medicaid

Said Connector Authority CFO Patrick Holland, "There's no justification to be paying more than Medicaid rates."

Wrong. At least one justification for paying more is that patients can actually see a doctor. Medicaid's low reimbursement rates are increasingly making it difficult for patients to see a doctor. The Connector wants to impose that burden on the Massachusetts plan as well. But, hey, if you're going to act like Medicaid, why not just call it Medicaid?

Several months ago, the Globe carried a story about Connector employees' salaries. Half of them made more than $100,000, and the head Connector made $225,000. I have been closely monitoring the papers to see how much their salaries are being cut in order to "keep the program affordable."

And I'm still looking.

The trouble with health insurance reform schemes is that the problems usually don't manifest themselves until a few years, maybe many years, into the new program. By that time the politicians who pushed them through have often moved on to higher office, maybe even President.

But the Massachusetts healthcare reform plan is quickly shedding any pretense of being a market-oriented solution or public-private "partnership" for covering the uninsured. Instead, it is becoming a demanding, heavy-handed, top-down program that demands people have coverage and fines them if they don't.

Mr. Matthews Jr., Ph.D., is a resident scholar for the Institute for Policy Innovation.

These undesirable economic consequences are the direct result of attempting to treat health care as a right that must somehow be "guaranteed" to everyone. Instead, health care and health insurance are commodities that must be created by producers and traded by voluntary consent with consumers to their mutual self-interest. The Massachusetts problems are the predictable results of the entitlement approach to health care. When the government divorces the provision of medical goods and services from the free market, costs go up, quality goes down, and honest consumers and patients will no longer be able to purchase the care they need.

(Note: FIRM is not a partisan organization, and does not support any specific political candidates or parties.)

Compulsory Medical Insurance as Collective Punishment

The January 14, 2008 edition of TCS Daily has published the following opinion piece by Brian Schwartz:

Compulsory Medical Insurance as Collective Punishment

Remember how in grade school, the teacher would punish the whole class for the actions of just a few disruptive students? This is an early lesson in collective punishment, which is usually practiced during wartime or under martial law.

Collective punishment has now arrived with compulsory medical insurance. Known as an "individual mandate," politicians of both major parties have supported it. Compulsory politically-defined insurance is law in Massachusetts, is up for consideration in California and Colorado, and Democratic presidential candidates endorse it nationally.

Politicians peddle compulsory insurance under the guise of "personal responsibility." The story is that the uninsured receive medical care without paying for it. Their freeloading passes costs onto the insured, which increases premium costs. Compulsory insurance, say its supporters, can remedy this problem by forcing both the insured and uninsured to purchase medical insurance - as defined by politicians.

This rationale is flawed. First, freeloading from the uninsured does not significantly increase insurance premiums.

Paying the medical bills for the uninsured adds little to insurance premiums - and certainly less than Colorado's scheme for compulsory insurance. A study published in Health Affairs found that uncompensated care is "only 2.8 percent of total personal health care spending," of which our tax dollars - not increased premiums - fund at least 80 percent.

In Colorado, the Lewin Group found uncompensated care to be less than four percent of total medical spending. The portion of uncompensated care that can correspond to increased premiums is around $200 million annually. This is just $85 per privately-insured resident, or one percent of the average premium.

But the billion-dollar "cure" proposed by Colorado's Commission on Healthcare Reform would cost the insured more than $85. To encourage compliance with compulsory insurance, the Commission's plan includes tax-subsidized premiums and Medicaid expansion. Privately-insured Colorado resident, the tax increase would cost about $400.

Second, holding people responsible would mean punishing freeloaders themselves and allowing providers to prevent customers from skipping out on the bill. This is the exact opposite of compulsory insurance, which forces the innocent to purchase insurance policies determined by political interests, rather than their own needs. This is collective punishment.

What if we applied the rationale for compulsory medical insurance to freeloaders who leave restaurants without paying the bill? This certainly increases prices, but forcing all citizens to purchase "diner's insurance" punishes the innocent.

Third, government controls already punish the innocent - insured and uninsured alike - by making medical care and insurance prohibitively expensive.

The federal tax exemption for employer-provided insurance coddles insurance companies by tying employees to their employer's plans, effectively discounting insurance, and shielding insurance companies from competition. It also drives demand for more comprehensive insurance than would otherwise be purchased. Insulated from medical costs, patients behave like business travelers on a company expense account, so medical providers need not compete on price. Shall we further pamper insurance companies by forcing everyone to purchase their products?

On the state level, medical providers and disease constituencies lobby to force insurance to include benefits that many customers do not need. For example, Colorado law compels widowed wives to pay higher premiums for prostate screening, maternity, and marital therapy. These mandates increase Colorado premiums by 21 to 54 percent, which dwarfs the one percent increase attributable to the uninsured. Colorado's Chief Medical Officer states that 2,500 Coloradans lose insurance for every one percent increase in premiums. Nationally, the figure is 300,000 people. These controls also reduce wages and are responsible for up to twenty-five percent of America's uninsured.

Compulsory insurance further empowers politicians to determine what insurance is best for you. For example, the Boston Globe reports that under the Massachusetts plan, "more than 200,000 people with health insurance would have to buy additional coverage to meet proposed minimum standards under the state's new health insurance law."

When government policies increase insurance costs, the first to drop coverage are the young and healthy. Those remaining in the insurance pool are at higher risk to incur medical expenses, so premiums rise again, which again drives out the healthiest remaining customers. It takes some nerve to support policies that make insurance prohibitively expensive and then make it a crime not to purchase insurance.

Compulsory insurance is based on collective punishment, a perverted form of justice found where troops patrol the streets and spitballs go splat. It punishes both the insured and uninsured for the misdeeds of politicians. Legislators should stop scapegoating the uninsured for the mess they've perpetuated. They should repeal legislation that inhibits the free market from delivering affordable high-quality medical care.

Brian T. Schwartz, Ph.D. is an optical engineer and an aspiring professional policy analyst in Boulder, Colorado. His website is wakalix.com.

The piece is also mirrored here on Brian's website.

The Truth About Health Care Costs

The January 10, 2008 edition of Investor's Business Daily has the following excellent analysis of why health care costs so much in the US. The short answer -- government interference in the free market:

The Truth About Health Costs
By INVESTOR'S BUSINESS DAILY | Posted Thursday, January 10, 2008

Health Care Reform: Democrats claim high medical costs are a "failure of the free market," and they demand a government takeover. But a new study says government's to blame.

Public health programs account for almost half of the $2 trillion spent on U.S. health care, a Hoover Institution report says. An astonishing 80% or more of all medical-care pricing is based on government reimbursement rates set by Medicare.

As for private costs, they would be lower if government didn't interfere in the market. Regulations imposed on the industry cost more than $330 billion a year, Hoover says.

Perverse tax policies have created a third-party payer system. Patients no longer have first-dollar responsibility for medical bills thanks to employer insurance.

Someone else is paying, so inflation goes unchecked and unabated.

"Patients have no idea what their doctor visits, surgeries, diagnostic studies or other medical services — whether urgent or elective — will cost until the bill comes weeks later," said Dr. Scott W. Atlas, a senior Hoover fellow and chief of neuroradiology at Stanford University Medical School.

Even then, they seldom flyspeck the bill. Why bother, when they're responsible for just 10% to 20% of it?

Meanwhile, demand climbs higher and higher, and insurance premiums along with it, taking a bigger bite out of employer paychecks and putting health care completely out of reach for a growing number of Americans.

So if Uncle Sam made health care so unaffordable, why do so many voters like Democrats' plans to expand government control of health care? Because they've bought into the myth that the private sector has failed and begs for government rescue.

Democrats' solution to this failed government-heavy system is more government in the form of mandatory health coverage. Public plans offered by Hillary Clinton, John Edwards and Barack Obama all boast of "using government to lower costs and ensure affordability for all."

But if you think health care is expensive now, just wait until government makes it "free."

Hillary calls for expanding coverage through public health plans like Medicare or the Federal Employees Health Benefit Program. Yet Medicare already costs more per capita than any other industrial nation's public medical program.

The way to control costs isn't to expand a health care bureaucracy that already is divorcing patients from market-price decisions. The answer is letting them choose between health care and money.

Most of the Republican plans would help patients make that choice by expanding health savings accounts with high-deductible insurance plans. HSAs are tax-deferred accounts that patients set up to pay for routine medical care and to save for future unexpected medical expenses.

The key, however, is making the accounts attractive enough to shift incentives from the current employer-based system of insurance to the individual market.

Right now only about 17 million Americans buy their own health insurance. If 50 million did so through HSAs, we'd see at least a 30% reduction in medical costs, studies show, thanks to increased competition in the market.

By putting the patient back in charge of health care, making him a buyer as well as a user of care, a nationwide HSA rollout would create a large enough consumer-driven market to control costs.

Then the health care market would work more like a real market.

The medical costs Americans complain about were caused by government, not the private sector. This is a little recognized fact.

More government will not only ramp up costs, but deteriorate the one thing American patients seldom complain about — the quality of their health care.

As health economist David Catron so eloquently puts it:

The plight of the uninsured is a SYMPTOM. It is NOT the disease. If our attempts at health care reform do not recognize this fact, the real disease will continue to metastasize. What is the real disease? Perverse incentives caused by a series of government interventions in the health care market, not the least of which being misguided tax breaks for employer-provided insurance.

The International Physician Brain Drain

For some reason, far more physicians are choosing to come to the US from Canada, Australia, and the UK than the other way around:



From "The Metrics of the Physician Brain Drain", New England Journal of Medicine, Volume 353:1810-1818, Number 17, October 27, 2005. (The PDF version is here.)

The article does not state any conclusions about the factors that give rise to this result. Of course, my own guess is that the medicine is relatively more free (i.e., less socialized) in the US than in those other three countries, thus making it a more desirable place for doctors to practice and live.

Proposed Amendment to Ban Insurance Mandates

The January 10, 2008 Rocky Mountain News has this interesting story on a proposed Colorado state constitutional amendment which would ban the state government from mandating health insurance. This would essentially stop the state from imposing any kind of Massachusetts-like health plan in Colorado. Here is the article:

Mandatory health plan participation opposed

By David Montero, Rocky Mountain News, January 10, 2008

No one would be required to participate in a public or private health care plan under a proposed amendment to the Colorado Constitution.

Jon Caldara and Linda Gorman of the conservative-leaning Independence Institute are proposing the amendment and will meet with the Colorado Legislative Council staff later this month to discuss it.

The amendment, which Caldara wants on the November ballot, would not allow the state to mandate coverage for all its residents.

Coloradans would also not be denied the right to purchase private health insurance in any other state, and the proposal would allow people the option to purchase health coverage from out-of-state providers.

More than 790,000 people in Colorado are living without health insurance.

Gov. Bill Ritter has said it is one of his top priorities to find a way to reduce the number of uninsured, and a Blue Ribbon panel will make recommendations on how to do that to the General Assembly at the end of the month.

One of the recommendations from the panel is to mandate that every legal resident of Colorado have at least minimum health coverage - with an enforceable penalty if residents try to drop out.

The state currently spends more than $30 billion on health care, and the commission studied four plans and crafted a fifth in an attempt to reform some of the system's shortcomings.

Mandating coverage is not needed, according to Gorman, who sat on the Blue Ribbon panel, was one of three members who voted against its recommendations and who wrote a dissenting report.

There were 27 commissioners and 24 voted to approve the recommendations.

"We have a lot of experiments going on that are sort of intellectual fads, and one of those is requiring everyone to purchase health insurance," she said.

"We think that's wrong. There are more important things than health insurance - a car, a job - and some people are responsible enough to pay cash for their health insurance, and they have a right to do that. But the government should not require it."

But Bill Lindsay, the chairman of the panel, said there was a simple reason that the politically disparate body agreed to make mandated coverage a recommendation.

"The reason is what we see in the marketplace is that the market for health insurance isn't working," Lindsay said.

He also found the idea that people would pay cash for services to be unrealistic.

"The notion that people would pay cash for services is ludicrous because of the cost of health care," he said.

Lindsay is, of course, wrong for blaming the market for the fact that health insurance isn't working. Our biggest problem is that we don't have a free market but instead a massively distorted market caused by years of ill-considered government regulations. It is because of the government that people can't afford reasonable health insurance. The solution isn't more government, but removing the government restrictions and letting the free market actually work.

I haven't read the text of the proposed amendment yet, but I support both elements reported in the story -- i.e., banning insurance mandates and allowing residents to purchase insurance across state lines. Both would be good steps in the right direction.

Avner on Health Savings Accounts

The January 9, 2008 Denver Post published the following opinion piece by Jackie Avner on personal responsibility and Health Savings Accounts:

Inventions of prudence
By Jackie Avner

To what degree are we, as individuals, personally responsible for the health care crisis?

Americans blame insurance and pharmaceutical companies, doctors and the government — and perhaps rightly so. But curiously missing from the list of culprits is us. Are we to blame for skyrocketing costs, as well?

Some Americans choose to buy things other than health insurance. Nearly 40 percent of the uninsured reside in households with earnings greater than $50,000. Their health care costs are spread among everyone else.

Most Americans choose to overeat. According to the World Health Organization, 74 percent of U.S. adults are overweight or obese. Obesity contributes to expensive, chronic conditions such as diabetes, hypertension and heart disease.

Americans over-consume pharmaceutical drugs, tests and procedures from the buffet of health care options, including those our doctors think will be marginally effective. Our reasoning is, "If it doesn't cost me anything extra, why not try it?"

We over-consume emergency room services. One extensive study showed 74 percent of patients who sign themselves into the ER have health issues that could be treated by a primary care doctor. Most ER visits occur during hours when less expensive alternatives for care are available. When surveyed, patients explain their preference for the ER by citing easy access to diagnostic testing, higher quality of care, access to specialists, and convenience. There's little incentive to take overall cost into consideration.

Annual U.S. health care expenditures are $5,711 per person, far greater than in any other country. But spending the most money doesn't give us the longest lifespan. We rank 38th in life expectancy. Cuba ranks 37th — and has a per capita health care expenditure of $229.

All of us should be more responsible. We should acknowledge that death, pain and illness are a part of life and can't be avoided through copious consumption of health care services. We should have a living will so we won't be subject to treatments we consider inappropriate. We should show a greater willingness to care for our elderly parents at home, rather than placing them in expensive assisted living or nursing care facilities.

But we're all spoiled, and pointing it out isn't likely to transform our "health care consumer" mind-frame into a "good citizen" mind-frame.

Don't fight human nature

Our own history may offer a solution. America's founding fathers designed the Constitution around an ingenious concept: Don't fight human nature; work with it. Harness our selfishness with "inventions of prudence" such as checks, balances, and wide dispersal of power, and make self-interest work for the public good. Why not apply the same principle to health care reform?

In 1993, Congress introduced Health Savings Accounts, which provide financial incentives for people to make responsible, cost-effective health care decisions. My family signed up for an HSA last year. We now have a health insurance policy with a high deductible, and use our HSA to pay for all medical expenses we incur before meeting that deductible. Our annual costs and health benefits are exactly the same as before. However, each year we get to keep whatever money we contributed to the HSA but didn't spend. These savings will grow, tax-deferred, for us to use in retirement.

I now shop for the best prices in dental and eye care. I buy generic drugs, and consider costs as well as benefits when choosing among treatment options presented by my doctors. My behavior is entirely different, and entirely more responsible as a result of a simple incentive from the government.

America's founding fathers would applaud the way the HSA plan can change individual attitudes and behavior without reducing individual liberty. Why can't the government offer similar financial incentives to Medicare and Medicaid patients, and to doctors and insurance companies?

Human nature may never change, but the right incentives can change human behavior for the better. That's health care reform.

Jackie Avner of Highlands Ranch (Jackie.Avner@gmail.com) worked in the U.S. Senate and is now a full-time mom. Her husband is a physician.

I liked her piece quite a bit. My only major comment is that I don't believe one has to justify encouraging rational self-interest in the name of fostering "the public good". Instead I would say that it is morally good for individuals seek their rational self-interest (which includes respecting the rights of others), and that this is justification enough, without having to also invoke any further collective good.

Yaron Brook on Health Care

Forbes.com has just published the following excellent opinion piece by Yaron Brook on health care:

The Right Vision Of Health Care
Yaron Brook 1.08.2008

With the primary season in full swing, the presidential candidates are fighting over what to do about the spiraling cost of health care--especially the cost of health insurance, which is becoming prohibitively expensive for millions of Americans.

The Democrats, not surprisingly, are proposing a massive increase in government control, with some even calling for the outright socialism of a single-payer system. Republicans are attacking this "solution." But although they claim to oppose the expansion of government interference in medicine, Republicans don't, in fact, have a good track record of fighting it.

Indeed, Republicans have been responsible for major expansions of government health care programs: As governor of Massachusetts, Mitt Romney oversaw the enactment of the nation's first "universal coverage" plan, initially estimated at $1.5 billion per year but already overrunning cost projections. Arnold Schwarzenegger, who pledged not to raise any new taxes, has just pushed through his own "universal coverage" measure, projected to cost Californians more than $14 billion. And President Bush's colossal prescription drug entitlement--expected to cost taxpayers more than $1.2 trillion over the next decade--was the largest expansion of government control over health care in 40 years.

Today, nearly half of all spending on health care in America is government spending. Why, despite their lip service to free markets, have Republicans actually helped fuel the growth of socialized medicine and erode what remains of free-market medicine in this country?

Consider the basic factor that has driven the expansion of government medicine in America.

Prior to the government's entrance into the medical field, health care was regarded as a product to be traded voluntarily on a free market--no different from food, clothing, or any other important good or service. Medical providers competed to provide the best quality services at the lowest possible prices. Virtually all Americans could afford basic health care, while those few who could not were able to rely on abundant private charity.

Had this freedom been allowed to endure, Americans' rising productivity would have allowed them to buy better and better health care, just as, today, we buy better and more varied food and clothing than people did a century ago. There would be no crisis of affordability, as there isn't for food or clothing.

But by the time Medicare and Medicaid were enacted in 1965, this view of health care as an economic product--for which each individual must assume responsibility--had given way to a view of health care as a "right," an unearned "entitlement," to be provided at others' expense.

This entitlement mentality fueled the rise of our current third-party-payer system, a blend of government programs, such as Medicare and Medicaid, together with government-controlled employer-based health insurance (itself spawned by perverse tax incentives during the wage and price controls of World War II).

Today, what we have is not a system grounded in American individualism, but a collectivist system that aims to relieve the individual of the "burden" of paying for his own health care by coercively imposing its costs on his neighbors. For every dollar's worth of hospital care a patient consumes, that patient pays only about 3 cents out-of-pocket; the rest is paid by third-party coverage. And for the health care system as a whole, patients pay only about 14%.

The result of shifting the responsibility for health care costs away from the individuals who accrue them was an explosion in spending.

In a system in which someone else is footing the bill, consumers, encouraged to regard health care as a "right," demand medical services without having to consider their real price. When, through the 1970s and 1980s, this artificially inflated consumer demand sent expenditures soaring out of control, the government cracked down by enacting further coercive measures: price controls on medical services, cuts to medical benefits, and a crushing burden of regulations on every aspect of the health care system.

As each new intervention further distorted the health care market, driving up costs and lowering quality, belligerent voices demanded still further interventions to preserve the "right" to health care. And Republican politicians--not daring to challenge the notion of such a "right"--have, like Romney, Schwarzenegger and Bush, outdone even the Democrats in expanding government health care.

The solution to this ongoing crisis is to recognize that the very idea of a "right" to health care is a perversion. There can be no such thing as a "right" to products or services created by the effort of others, and this most definitely includes medical products and services. Rights, as our founding fathers conceived them, are not claims to economic goods, but freedoms of action.

You are free to see a doctor and pay him for his services--no one may forcibly prevent you from doing so. But you do not have a "right" to force the doctor to treat you without charge or to force others to pay for your treatment. The rights of some cannot require the coercion and sacrifice of others.

So long as Republicans fail to challenge the concept of a "right" to health care, their appeals to "market-based" solutions are worse than empty words. They will continue to abet the Democrats' expansion of government interference in medicine, right up to the dead end of a completely socialized system.

By contrast, the rejection of the entitlement mentality in favor of a proper conception of rights would provide the moral basis for real and lasting solutions to our health care problems--for breaking the regulatory chains stifling the medical industry; for lifting the government incentives that created our dysfunctional, employer-based insurance system; for inaugurating a gradual phase-out of all government health care programs, especially Medicare and Medicaid; and for restoring a true free market in medical care.

Such sweeping reforms would unleash the power of capitalism in the medical industry. They would provide the freedom for entrepreneurs motivated by profit to compete with each other to offer the best quality medical services at the lowest prices, driving innovation and bringing affordable medical care, once again, into the reach of all Americans.

Yaron Brook is managing director of BH Equity Research and executive director of the Ayn Rand Institute.

A Warning For Colorado

The December 31, 2007 Rocky Mountain News recently published an opinion piece which stated that several of the health care "reform" plans being considered by the 208 Commission may be in violation of federal law:

A warning for Colorado: Court ruling suggests several health-care plans violate federal law

The prospects for dramatic changes in Colorado's health-care delivery system got a little more murky last week, thanks to a court order issued by a federal judge in San Francisco.

That's a positive development, in our view. As we said two months ago, presidential candidates are giving medical reform a prominent role in the campaign. So any state legislation enacted in 2008 may well be pre-empted by federal action in 2009.

Next month, lawmakers are expected to begin reviewing five proposals that were selected this year by the Colorado Blue Ribbon Commission for Health Care Reform. As they do, they should keep in mind Wednesday's ruling by U.S. District Court Judge Jeffrey White.

The decision suggests that any state-based measures that affect workplace benefits could violate federal law. And this ruling is no outlier; federal courts in Maryland and New York have recently come to similar conclusions.

The implication for Colorado is that our lawmakers might be wasting their time if they craft reforms that affect employer medical plans.

White struck down a universal health-care program that was to take effect Jan. 1 because the measure violated the Employee Retirement Income Security Act, or ERISA. That's the federal law that gives Washington rather than states the right to regulate workplace benefit plans. ERISA was designed to prevent companies from having to satisfy a hodgepodge of state regulations when they set up pensions and other benefit packages.

The San Francisco system would have required employers to either provide comprehensive medical benefits to workers or pay taxes to subsidize the uninsured.

The court cited several ways the employer mandate ran afoul of ERISA: The benefit package would force some businesses to pay for medical coverage they haven't previously offered; the ordinance's record-keeping mandates would affect how employers managed their medical benefits; and the ordinance would require national employers to offer unique benefits to their workers in San Francisco.

If White is correct, then at least three of the five reform plans from Colorado's commission look suspect.

The single-payer proposal would establish a uniform package of medical benefits for every Coloradan and outlaw nearly all private insurance, invalidating health benefits offered by employers.

The "Plan for Covering Coloradans" has a "play or pay" employer mandate along the lines of the San Francisco system.

And even the fifth or hybrid proposal crafted by the commission might have ERISA issues because of how it lets workers deduct pre-tax money from their paychecks.

Several legal blogs have speculated that the only reason the medical plan in Massachusetts, which has an employer mandate, is still functioning is because it hasn't faced an ERISA challenge.

The lesson: Major policy fixes to the health care system will have to originate in Washington. And if Judge White's ruling stands, even small fixes that affect employers may need congressional approval.

The ERISA issue is not the fundamental reason that I oppose government-mandated "universal coverage". But if it forces our state legislators to think twice before they rush headlong into a bad system, then I'll be happy if they instead start considering genuine reform proposals that respect individual rights and allow free markets in insurance and medical care.

Colorado Springs Gazette OpEd on Health Care Reform

The January 4, 2008 edition of the Colorado Springs Gazette has published a good editorial on health care reform in Colorado. Both Brian Schwartz and myself were cited in their OpEd. Lin Zinser and Ari Armstrong also gave their editor (Wayne Laugesen) a great deal of background information, although their names don't appear in the piece.

Here is the full text of their OpEd:

Health care, ho!
State should avoid repeat of Massachusetts
THE GAZETTE January 3, 2008

For Colorado Democrats, a regulatory fix of the state's ailing health care system may seem irresistible during the upcoming 2008 legislative session. Imagine the attention major health care reform, or statewide "universal health care," would garner from the media in August, when the country's Democrats converge in Denver for the Democratic National Convention. Colorado could be held up as the example of how it can and should be done. Democratic leaders could be lauded for aiding 792,000 uninsured men, women and children.

House Speaker Andrew Romanoff, as quoted in The Gazette, says Coloradans are tired of waiting on a federal government that "cannot or won't fix" the health care crisis. The Blue-Ribbon Commission on Health Care Reform, appointed by legislative leaders and the governor, will present its recommendations to the Legislature on Jan. 31. The commission plans to recommend that all Colorado residents be mandated to buy insurance that meets minimum standards, and state subsidies would be extended to more of the state's poor.

Before politicians get too ambitious, however, they should take a closer look at the health care reform led by a leading Republican: Mitt Romney, the former governor of Massachusetts.

"The majority of the commission favors a government-heavy proposal," says Dr. Paul Hsieh, a Denver physician who has studied the new Massachusetts system. "They're crafting it similar to the Massachusetts model."

A year old, the Massachusetts system is resulting in rationing and shortages of care, and higher costs to taxpayers than originally expected. The Patriot Ledger newspaper tells of Lee Sampson, a 47-year-old unemployed medical transcriptionist. Sampson bought into Commonwealth Care, a state-subsidized insurance cooperative. She had to buy insurance by Jan. 1 to avoid tax penalties and fines.

But Sampson, like a growing number of other Massachusetts residents, is learning that mandatory insurance doesn't mean doctors will treat her. To receive benefits from the plan, Sampson must find a primary care physician. She reported calling 50 doctors' offices within a half-hour drive of her home. All rejected her. Most explained they were overwhelmed and accepting no new patients.

Massachusetts, like Canada, will learn that mandating health care as a universal right results in a demand for services that exceeds the supply. The demand for medical services under the new Massachusetts system has become so great, and so expensive, that state officials are cutting back on the compensation doctors receive for services, while raising patient co-pays. The medical community, struggling with high demand and inadequate reimbursement, is cutting costs by rationing services for patients like Sampson.

Ask Americans if they would enjoy free universal health care, like the Canadians have, and many will say yes. Ask the same folks if they'd like to wait several months for an MRI, a heart scan or chemotherapy -- as Canadians often do -- and they'll give a resounding "no way."

Yet one can't argue that our nation's health care system is well. As reported by The New York Times, health care costs are going up at twice the rate of inflation. With soaring costs come rising insurance rates, which fewer employers and individuals are willing or able to pay. Based on U.S. Census data, 10 million Americans were uninsured 15 years ago. Today, more than 46 million live uninsured.

While it's expedient for politicians to promise a solution in the form of a program, Massachusetts will continue showing us why it doesn't work. Government intervention, in fact, explains the failures of our current system. The IRS code drives most Americans to buy health insurance through employers. That means insurers don't have to compete for consumers, because for most Americans, shopping around for a better deal involves a career change. And because health insurance has been packaged as a "free" benefit from employers, patients have spent the past half-century consuming health care without challenging the price. For those with health plans, "insurance" has morphed into pre-paid service, seemingly paid for by someone else. Imagine a system in which large employers provided auto insurance. Would employees balk at the cost of this "free" benefit, demanding a better price? If the insurance covered routine oil and lube jobs, the way health insurance covers physicals, would consumers demand lower prices from Grease Monkey? Doubtful.

State legislators can't change the morass of federal regulation that has led to a health care system unrestrained by the conventional market forces that control other services and goods. But legislators can improve access to health care by eliminating most of the state controls that prohibit affordable coverage. State law, for example, requires that health insurance plans include coverage for childhood autism -- even for consumers with no prospect of children. Regardless of a consumer's personal needs, any policy he or she buys in Colorado must cover alcohol rehab, mental health and maternity treatments -- to name a few. Why not a law that says all cell phone plans must come with 80-channel cable TV?

Brian Schwartz, an Arvada-based optical engineer, proposed to the Blue Ribbon Commission a market-based health care reform package that mostly involved deregulation. Commission member Linda Gorman fought for it, but others scoffed.

"One commissioner said we already have a free market in health care, and it has failed," Schwartz told The Gazette. "But we don't have a free market. If you're a widow, you have to buy a policy that covers marital therapy, maternity and prostate cancer. You have no need for this, but if you want insurance you're required to buy it. Mandates raise your premium by 20 to 50 percent."

Government, as we're seeing in Massachusetts, can't make health care affordable and abundant. Market forces can and will -- if politicians ever allow them to.

Schwartz on Free Market Health Care

The January 4, 2008 Boulder Daily Camera published the following LTE by Brian Schwartz, PhD, on free market health care:

Free-market health insurance needed

"The goals of free market barons differ considerably (and obviously) from those of physicians. ...But given the powerful and wealthy forces arrayed against meaningful change, don't bet the farm on reform," writes Clint Talbott on health care (Editorial, Dec. 30). Mr. Talbott's second point is correct, but not in the way he intends.

Mr. Talbott tries to defile free markets by associating them with "barons," rich fat cats who care about profits -- to the exclusion of the general public. In a free market, greedy capitalists must satisfy customers, or else they go out of business. Customers could be physicians, or they could be patients, whom physicians serve.

But we don't have a free market in medical care or insurance. This explains common views of insurance companies as villainous "barons" unconcerned with patient welfare. Tax-exempt employer-provided insurance coddles insurers by tying us to our employer's plans. Insurers are committed to satisfying customers, which are employers, not you. Hence, they can afford to be stingy and deceptive: they know that losing your premium dollars requires that you change jobs.

What "powerful and wealthy forces" oppose changing this? Labor unions. Like Mr. Talbott, the AFL-CIO supports "single payer health care": politically controlled medicine with government as a monopolistic insurer. This is even worse than buying it through your employer. If you don't like what the government "health barons" offer, it's not enough to change jobs, you must move out of state to change providers.

If you like "single payer," don't worry that the 208 Commission on Healthcare Reform has not recommended it. They recommend an "individual mandate," which makes it a crime not to purchase politician-approved "insurance." Such compulsory insurance is essentially single-payer in disguise. Strict regulations on legal insurance plans severely limit competition, so insurance companies are effectively government contractors for politically-defined insurance.

BRIAN T. SCHWARTZ
Boulder

Hyde on Individual Mandates

The December 29, 2007 Rocky Mountain News has printed the following OpEd by Steve Hyde on the problems with the individual mandates advocated by the 208 Commission. Here are some excerpts:

An Unhealthy Cure

Health-care reform proposal won't solve underlying issue of escalating costs

The Colorado Blue Ribbon Commission for Health Care Reform, after soliciting and reviewing health-care reform proposals from numerous organizations, recently approved recommendations that were reported to closely mirror its own "fifth proposal." While this proposal has a number of beneficial features, its major recommendations would do little, if anything, to contain rising health-care costs, while significantly increasing both taxes and the regulatory burden on employers, health-care providers, insurers and consumers.

A big mistake

Some people believe this proposal has a chance of winning approval. But based on my many years working in the health-care field, I think that would be a mistake. A big mistake.

The commission recommends that all legal residents of Colorado be required to have health insurance, with basic plan coverage. But that's like requiring that we all have auto insurance that pays for oil changes and dent repair, but not for a totaled car. The basic benefit plan, with its emphasis on low-cost primary care, anemic hospital coverage ($25,000 maximum) and low maximum total benefits ($50,000), is not so much an insurance product as a prepaid primary care product.

Real insurance is intended for people to pay relatively small amounts into large risk pools to fund major, unpredictable and otherwise unaffordable events. But with acute medical conditions often far exceeding $25,000, the basic plan is anything but catastrophic insurance. People needing it most will be left high and dry, with huge bills to pay.

True high-deductible, catastrophic insurance would be no more expensive than this basic plan, but offer far better, real insurance coverage for the currently uninsured. As a bonus, those so insured would be eligible for significant federal tax benefits via health savings accounts...

Continuing a flawed system

Setting minimum benefits merely continues and further complicates the current, deeply flawed defined-benefit system of health benefits.

Such approaches have utterly failed to provide consistently high quality health-care at affordable prices to all our citizens. Getting the state out of the benefit-setting business and properly enabling a more market-based solution will allow the use of a more rational defined-contribution approach. That will allow the state to apply its subsidies in a much more precise and targeted manner to aid those most in need of assistance, while relying on market solutions to make health care increasingly affordable.

No matter how low one sets the level of basic benefits, even the most inexpensive plan will eventually become unaffordable if health costs and premiums continue to rise by two to seven times the rate of wage growth. We need reform that will truly contain costs, not just pump more money into the current, dysfunctional system.

There is nothing in the Blue Ribbon Commission's plan that will result in cost containment and much that will exacerbate the problem.

Steve Hyde is the president of Hyde Rx Services Corp., and former CEO of Peak Health Care. He is the author of the book, Prescription Drugs for Half Price or Less, and the forthcoming How I Destroyed American Health Care, And Why We Need To Do It Again. Reach him online at sshyde@hyderx.com.

Better to Be Equal Than Good

The government-run British National Health Service (NHS) has decided that it's more important for patients to be treated "equally" than for them to get good care. Hence, the monstrous spectacle of them threatening to cut her off from any government medical care if she chooses to spend her own money on cancer therapy outside of the government system:

NHS threat to halt care for cancer patient

A woman will be denied free National Health Service treatment for breast cancer if she seeks to improve her chances by paying privately for an additional drug.

Colette Mills, a former nurse, has been told that if she attempts to top up her treatment privately, she will have to foot the entire £10,000 bill for her drugs and care. The bizarre threat stems from the refusal by the government to let patients pay for additional drugs that are not prescribed on the NHS.

Ministers say it is unfair on patients who cannot afford such top-up drugs and that it will create a two-tier NHS. It is thought thousands of patients suffer as a result of the policy.

Citizens in the UK are told that they get health care as a guaranteed "right". But in reality, when the government takes over medical care, it decides who gets what care and when. So rather than being a right, it inevitably becomes a privilege dispensed at the discretion of the government. That has happened time and time again in countries like Canada and the UK that have implemented socialized medicine. The way they avoid having a two-tiered system (one good and one bad) is to force everyone into a single-tiered bad system. So much for the supposed moral superiority of government-run health care...

Where Are All The Doctors And Nurses Going?

Sandy Szwarc, BSN, RN, CCP, answers that critical question in her recent blog post:

Last month, my physician friend said he was shutting down his office practice and taking a job as a hospitalist. He’s a great, caring doctor who also volunteers his time each week to provide free care on the Indian reservation. I asked why he was making this difficult decision, but already knew the answer before he confirmed it: He’d had it with the avalanche of bureaucratic paperwork and reporting regulations that requires several full-time office employees to deal with, insurers who all had different ideas on how he should practice medicine that weren’t always in the best interests of his patients, ‘quality’ measures that weren’t about quality, third-party payers who were reducing reimbursements and requiring more of his staff to continually fight just to get paid, and he couldn’t afford the 10.1% pay cut that goes into effect next month. Practicing family medicine no longer offered a viable future.

Lots of Americans probably don’t realize that doctors are getting their pay cut 10% by the largest single payer in the country — Medicare — reimbursements that are already often lower than the costs of providing the patient care. Nor do they know about the lobbying interests shaping the evolving healthcare system and the practice of medicine, as well as making these cost-containment reimbursement decisions. Many doctors know this is just the opening salvo into what it will be like for them to become employees under a single-payer plan taking shape. Nurses learned similar lessons years ago, hence, the severe nursing shortages. But patients don’t know what it will be like to be patients. As babyboomers face years when they most need healthcare, these issues will affect them more than ever.

More government control of medicine is not the answer to America's health care problems; the free market is. (Via Arwen Morton.)

Update: The federal government may delay the Medicare rate cuts for another 6 months. Of course, this doesn't solve the underlying problem, it merely postpones it temporarily.

Schroeder Vs. Pramenko on Government Medicine

Dr. Michael Pramenko recently wrote an OpEd in the December 10, 2007 Grand Junction Free Press expressing support for government-mandated "universal coverage".

In response, Dr. James Schroeder wrote the following rebuttal, which appeared in the December 26, 2007 issue:

Here's your prescription

By Dr. James Schroeder
Grand Junction CO, Colorado
December 26, 2007

Dr. Michael Pramenko expressed his health care views via a series of false premises in his Dec. 10 column “Play doctor, help find a cure for health care reform.” Well I don’t just play a doctor, I am one. Allow me to give your readers a healthier perspective by analyzing some of these fallacies individually.

* “Unfortunately, [taking government out of the equation] leaves a significant number of people without health care.”

There is a significant difference between health care coverage and health care delivery. Anyone (including my brother-in-law) can declare “health care coverage for all,” but if they can’t actually deliver services, it is an empty declaration. I know my brother-in-law doesn’t have the wherewithal, and I have my doubts about the government. Taking government out of the equation therefore would merely result in people not having governmental health insurance. We have yet to see in real life a government-run health care system without delays and rationing. The real question is whether more efficient use of health care dollars is achieved by government or by private entities. The other key variable is individual behaviors. How do we motivate individuals to use their primary care physician rather than the ER? Should the government try to modulate individual behavior in our best interests, or should we be responsible for making our own decisions? Dr. Pramenko seems to think that government is better suited to make those decisions by mandating individual purchase of insurance. I disagree.

* “The free market has chosen repeatedly to ignore the problem of the uninsured.”

We do not have a free-market health care system, so this premise is false from the get-go. The main causes for the expense of private insurance are unrelated to the free market. The tax code rules that originally allowed employers to provide health insurance as a tax-free benefit created a deeply entrenched connection between employment and insurance.

This led to employers controlling payroll costs by limiting the selection of plans while the employee was basically removed from the decision-making. It also meant that employees who changed jobs had a gap in coverage.

People who are temporarily between coverage account for about one-third of the total uninsured. Current government mandates force insurance companies to include services such as acupuncture, even if the policyholder has no need or desire for such coverage. Finally, individuals who buy health insurance must do so with post-tax dollars, effectively penalizing them. SOLUTION: We should reduce, not increase, government mandates. We should allow insurers to sell plans that are responsive to the needs of individuals and offer equivalent tax breaks for the individual insurance market. In other words, remove the government and employer from the market transaction between insurance provider and consumer. Wait a minute; that sounds like a free market!

* “We all pay for this unbridled use of the emergency room.”

The fallacy here is not that we all pay. The fallacy is that inappropriate use of the emergency room is because patients cannot access physician offices. The fact of the matter is that EMTALA legislation decrees that hospitals cannot deny emergency treatment on the basis of ability to pay. This has become distorted to mean that nobody can be turned away without fear of steep fines or penalties. Most Medicaid plans do not require a copayment for emergency room use. Thus, the current system actually makes it easier for patients to use the ER (convenient hours and no appointment needed!) for primary care. SOLUTION: We need to revamp EMTALA so that true medical screening can be applied and that patients without emergency conditions can be turned away. This should be a medical decision, not a financial one. Medicaid copayments should be reinstituted to serve as a deterrent for inappropriate ER use.

* “There is agreement on universal coverage, mandates on participation and … essential levels of coverage.”

“One thing is certain: More taxes will be needed ...”

These two comments are laughable. If there is already agreement and certainty in this discussion, the debate would be over. Far from any kind of consensus on health care reform there is ongoing active debate throughout Colorado. Many doctors feel, as I do, that government over-regulation has created a mess that cannot be fixed by expanding the role of government. More taxes are not the solution, but are inevitable if we continue to stumble down the path mapped out by the 208 Commission. The government’s role should be that of referee, not participant. Mandates are the problem, not the solution.

I have dedicated my career to the provision of high-quality medical care for children and truly believe that free market solutions are more sustainable in the long-run and more likely to benefit my grandchildren and yours. This belief is based on my own first-hand experiences in the health care system and my ongoing study of the issues.

Dr. Schroeder is in private practice in Grand Junction specializing in pediatric cardiology. He is a graduate of the University of Colorado and Tulane University School of Medicine. He completed pediatric cardiology training at Denver Children’s Hospital.

Massachusetts Plan Squeezing Doctors

The December 14, 2007 Boston Globe reports that much ballyhooed Massachusetts universal health care plan is costing too much, so doctors and patients will have to pay the price. Items in bold are my emphasis:

Mass. panel approves changes to subsidized residents health plan
By Alice Dembner

Striving to hold down costs to taxpayers, a state panel yesterday approved a range of changes for next year for the rapidly growing subsidized health insurance program. The changes will probably cut payments to doctors and hospitals, reduce choices for patients, and possibly increase how much patients have to pay.

The program is the centerpiece of the state's landmark effort to insure nearly every resident, and there is widespread concern about long-term funding of the initiative because of growing healthcare costs.

The December 14, 2007 Wall Street Journal points out the natural implications:

Mass. To Cut Payments to Docs & Hospitals
Posted by Jacob Goldstein

Massachusetts’s universal health-care plan is turning out to be more expensive than predicted. Now the state is looking at cutting payments to docs and hospitals next year to make ends meet.

That fiscal reaction, which some critics of the plan warned about, sends a stark message to those of us in the other 49 states. Massachusetts has become something of a model for the national plans proposed by Hillary Clinton and John Edwards, among others.

The state requires everybody to buy health insurance. A subsidized health plan offered to the poor as part of the program has proved more popular than expected, and that’s helping to push costs 20% over what the state had budgeted. The tab could run $619 million for the current fiscal year, $147 million over budget, the Boston Globe reports.

Now the board that oversees the plans has approved cuts of 3% to 5% in reimbursements for to health-care providers caring for those in the subsidized plan. The article suggests the cuts will bring reimbursement in line with Medicaid.

The next logical step after price controls will be rationing. The Massachusetts plan is fundamentally flawed, because it does not permit individuals and insurers to seek their own best interests through voluntary contract. There's no reason for Colorado (or the rest of the country) to adopt this bad idea.

Pipes on Insurance Mandates

The December 17, 2007 edition of the Rocky Mountain News printed the following opinion piece by Sally Pipes of the Pacific Research Institute, discussing the folly of insurance mandates:

Remove barriers to affordable health insurance
Sally C. Pipes

Ever wonder why health insurance costs so much in Colorado? Well, maybe it has something to do with the fact that every insurance policy in the state must cover all kinds of services — including professional counseling — deemed unnecessary by many.

In fact, Colorado has 37 of these mandates. Should a resident want to buy a policy that doesn’t cover, say, chiropractor visits, sorry — the government has decided that everyone must have that coverage.

Recently, enthusiasm for universal health-care coverage has swept the nation, with governors in Massachusetts and California leading the way. Maine and Vermont are currently revising their own systems of expanded health-care coverage, and at least eight other states are pursuing similar reforms.

Certainly, the approximately 47 million uninsured in America is a significant problem, but the proposals under consideration do little to address the primary reason for the lack of coverage — very expensive insurance.

And why are those costs spiraling upward, seemingly without limit? One major reason is government meddling in the market for health insurance, particularly through the imposition of restrictive mandates and regulations.

The average state has 36 mandates on an individual health insurance policy. And with each mandate, the cost to the consumer goes up. These mandates often stand in the way of making health insurance more affordable in the first place.

Just as options on a new automobile add to the total cost of the car, so too do insurance mandates.

If affordability and accessibility are the problems behind the number of uninsured, then why haven’t state governments removed the mandates for those who want to buy a basic policy? It’s not just the government’s desire to micromanage — it’s interest-group politics.

Acupuncturists, for example, certainly provide an important pain-relief service to many individuals. But is it really necessary for everyone to have acupuncture coverage whether they want it or not? It would make far more sense to give individuals the freedom to purchase policies that suit their specific needs.

The current system guarantees that everyone pays the highest possible price.

We are covered for things we don’t use. Or if we do take advantage of these mandated benefits, we don’t realize the full cost of the benefit because someone else pays.

But we all indirectly absorb those costs thanks to higher premiums.

The conversation about health-care reform is long overdue, but unfortunately for most consumers, it’s headed in the wrong direction.

Without addressing the high costs of health care, efforts to achieve universal coverage by legislative fiat will fail. Just look at automobile insurance. Even though it is mandatory in all but three states, one in seven drivers on our roads remains uninsured. There’s a better way to expand health-are coverage — through greater purchasing freedom and fewer regulations.

Let’s hope Colorado learns from the heavy-handed approaches of other states and opts for a more effective approach — like ending the silly requirement that all insurance policies cover things like marriage therapy, which most people will never need.

Sally C. Pipes is president and CEO of the Pacific Research Institute. She is a resident of San Francisco.

Olson on Universal Health Care

The December 13, 2007 Rocky Mountain News printed the following LTE from David Olson critical of "universal health care":

Krugman's stance 'nonsense on stilts'
Dave Olson, Westminster
Thursday, December 13, 2007

In his column of Dec. 3, "Obama's sorry plan," The New York Times' Paul Krugman wrote in support of universal health insurance, "letting people opt out if they don't feel like buying insurance would make insurance substantially more expensive for everyone else."

First of all, I consider it immoral to force people to pay for health insurance that they do not want.

Second, it is nonsense on stilts. Adding more people into an insurance pool will simply add their cost to the total. Dividing the insurance cost among more people will not save money, when their costs have to be accounted for as well.

Third, health insurance is not health care. It doesn't even insure health care. Its only purpose is to insure that people in the medical profession get their fees paid. It should not be the responsibility of taxpayers to guarantee a doctor's standard of living.

Fourth, a better approach would be to stop using health insurance to pay for minor medical care. When it's used for things like getting a vaccination, treating a hang nail, or having a routine checkup, that drives the costs of both insurance and health care higher for everyone.

Brook and Lockitch: Free The Market

Modern Healthcare has published the following piece by Yaron Brook and Keith Lockitch of the Ayn Rand Institute. The original website requires registration, but the piece is mirrored on the ARI website:

Free the market; Government interference hampers healthcare reform

By Yaron Brook and Keith Lockitch
November 26, 2007

The Democratic presidential candidates are agitating to have the government do something about the spiraling cost of healthcare, especially the cost of health insurance, which is becoming prohibitively expensive for millions of Americans.

Insinuating that the free market has failed to produce affordable health insurance, they offer a variety of government "solutions," including proposals for universal coverage that range from systems of mixed public and private insurance plans to the outright socialism of a single-payer system.

But these proposals cannot and will not cure our ailing medical system because they misdiagnose the disease: It is not the free market that has caused the healthcare crisis, it is government interference in medicine.

The notion that America has a private, free-market medical system is a widespread misconception. More than 45% of total spending on healthcare in 2004 was government spending. Our semisocialist blend of Medicare, Medicaid and government-controlled, employer-sponsored health plans-with its onerous system of regulations and controls on medical providers-is the opposite of a free market.

Our system is built not on the premise that each individual is responsible for his own well-being and healthcare, but on the premise that healthcare is the collective responsibility of "society." Our system aims to relieve the individual of the "burden" of paying for his own healthcare by coercively imposing its costs on his neighbors. Far from being consistent with American individualism, this is the essence of collectivism.

In a system in which medical care seems free or is artificially inexpensive, with someone else paying for one's healthcare, medical costs spiral out of control because we are encouraged to demand medical services without having to consider their real price. For every dollar's worth of hospital care a patient consumes, that patient pays only about 3 cents out of pocket; the rest is paid by third-party coverage. And for the healthcare system as a whole, patients pay only about 14%.

Government-run healthcare, in particular, has fueled explosive cost increases. Prior to the inception of Medicare and Medicaid in 1965, healthcare spending was less than 6% of the gross domestic product. Today, it is 16%, one-sixth of the U.S. economy-with Medicare alone accounting for half the growth in healthcare expenditures. As spending explodes, the government cracks down by enacting coercive measures: price controls on medical services, cuts to medical benefits and a crushing burden of regulations on every aspect of the healthcare system.

These controls and regulations make it harder to offer medical services profitably, burying doctors, nurses and other providers in bureaucratic red tape and ultimately driving them out of the field. Drug companies are forced to cut back on the development of new drugs. Insurance companies are forced to restrict their policies. The shrinking supply of medical services, combined with an artificially increased demand, drives costs and insurance premiums still higher. This leads, in turn, to cries for still more government controls, which cause even more problems, and so on and so on, in a vicious cycle of destruction.

The Democratic candidates' proposals are just the latest iteration of this cycle-an attempt to solve the problems in our healthcare system by enacting the same kinds of destructive measures that caused the problems in the first place.

Although the proposals are couched in such positive-sounding euphemisms as "guarantee universal coverage," "ensure better preventive care," "modernize record-keeping," and "reduce waste and inefficiency"-there should be no doubt that what they would mean in practice is a massive expansion in government interference and further distortions of the free-market mechanisms that keep quality up and costs down.

Consider, for example, the goal of modernizing the healthcare system. It would be one thing for hospitals, doctors' offices, and insurance companies to modernize their procedures and record-keeping voluntarily, because they judged it an effective way to boost their productivity. It is a very different thing to attempt to impose "modernization" by government decree. All it can possibly mean in practice is a new flurry of regulations forcing medical providers to adopt government-approved technology, whether they have a use for it, overseen by a new government bureaucracy with all of its inevitably attendant inefficiency and waste. This would be like putting Amtrak in charge of modernizing train service.

Or consider the issue of universal coverage. A proper approach to healthcare reform would address the problem of skyrocketing insurance premiums by uprooting its fundamental cause: the shifting of responsibility for healthcare costs away from the consumers of medical services. A proper approach would remove the bizarre incentives that created our current employer-based system; lift the regulatory chains stifling the health insurance industry; and inaugurate a gradual phase-out of all government insurance programs, especially Medicare and Medicaid. Instead, the Democratic candidates propose to force businesses, insurance companies and taxpayers to simply shoulder the extra costs of herding every single American into our current collectivist system.

The solution to the healthcare crisis brought about by our hyper-regulated, collectivist medical system is not more regulation and more collectivism. We must remove government from medicine and put an end to the system that forces us to pay for other people's healthcare.

In freer industries, such as computers or shoes, there is no crisis of affordability or quality, because people don't demand free computers or shoes as a "right" to be enforced by government decree. We need to recognize that the same should apply to medicine; there is no right to healthcare-to be provided at others' expense. We must reject the proposals to expand collectivized healthcare-the Democrat proposals as well as those of the Republicans, who pay lip service to the free market but offer no fundamental changes to our current collectivized system.

What we need is a true free market in medicine, one in which the government's only role is to protect the individual rights of doctors, patients, hospitals and insurance companies to deal with one another voluntarily.

Yaron Brook is president and executive director of the Ayn Rand Institute, Irvine, Calif. Keith Lockitch is a resident fellow at the institute.

Copyright © 2007 Ayn Rand® Institute. All rights reserved.

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