United Liberty

The president and members of Congress claim that the uninsured must be held accountable for their care by imposing a substanial tax because they fail to take out coverage, despite only accounting for 2.7% of total health spending. However, a study published by the Journal of the American Medical Association in October 2008, says the uninsured are not responsible for crowded emergency rooms (emphasis mine):

The JAMA study also found that patients with public insurance, such as Medicaid and Medicare, are more likely to crowd into emergency rooms for minor complaints than are the uninsured. Only about 17 percent of E.R. visits in the United States in the last year studied were by uninsured patients, about the same as their share of the population.

That isn’t the only way people with subsidized insurance add more burdens to the system than people with no insurance at all. A 2007 study in the Annals of Emergency Medicine looked at charges and payments for 43,128 emergency department visits between 1996 and 2004. “What surprised us was that uninsured patients actually pay a higher proportion of their emergency department charges than Medicaid does,” reported co-author Reneé Hsia, a specialist in emergency medicine at the University of California at San Francisco. “In fact, 35 percent of charges for uninsured visits were paid in 2004, compared with 33 percent for Medicaid visits.”

This will now be my fifth post on the issue of health care over the last several weeks. I will recap these posts as they establish key principles for a more ideal health care system.

In the first entry, I argued that the business of insurance should not be regulated as a public utility. While the insurance industry may exhibit “too big to fail” characteristics which must be managed, it is a fundamentally profitable business model which does not require a massive initial capital investment like other infrastructure such as roads or a power grid.

The second post then focused on the concept of rights. A government guarantee of health care provision constitutes a positive claim right against either the health care providers and/or those who are forced to fund the guarantee. The state should not support or guarantee positive claim rights as this creates a state without limitless power.

I then turned to the concepts of human needs and the social safety net in my third post. In this I concluded that a social safety net is important to meet the human need of security by protecting those who have from those who have not. This introduces the potential need for state funded health services.

In my most recent post, I presented data gathered from the World Health Organization for a comparative analysis of national health care finances (public and private) as well as services and outcomes. My conclusion is that the U.S. system is inefficient as the costs do not justify the level of service - nor are Americans more healthy as a result.

Racist, Nazi, greedy bastard, angry mob, AstroTurf, brown-shirt, unpatriotic, goon, heathen, liar, rich, skinhead, moron, gun nut, ignorant fool, manipulator. Those are sixteen words and phrases used to describe me, used by the media, in person, on the phone, and on the Internet in response to my opposition to ObamaCare. I think that I should note that these are the ones I can publish due to the tameness of language. Of the sixteen, I find only two to be accurate: angry mob and skinhead (only because I cut my hair REALLY short). Friends and acquaintances who have seen or heard these suggest that I collect them as trophies for my efforts. Needless to say, I have a thick skin when it comes to name-calling, mostly because I know what it really means. It means only one thing: I. Am. Winning.

After attending several Atlanta area health care town hall forums sponsored by legislators in support of HR 3200, I decided to participate in one hosted by MY Congressman, Representative Phil Gingrey (R-GA, 11th). I should note that I did not vote for or against Dr. Gingrey in 2008, as I lived in Georgia’s 13th Congressional District then. The convenience of the location of August 31st’s event could not have been better, unless it took place in my living room (the Cobb Civic Center is across the street from my neighborhood), however a 5:30 PM start time made it difficult for many constituents to attend.

I arrived at the Civic Center shortly after 5 PM to find a parking lot approximately half-full, some cars present as early as 3:30 PM. Outside the venue, there were a few individuals and groups handing literature to those entering, including members of GOP gubernatorial candidate, John Oxendine’s You Can Stop ObamaCare. I expected police-enforced restrictions that I encountered at previous town hall events, so my only tool to capture and share media of the event was my cell phone.

Once inside, I noted many of Rep. Gingrey’s older constituents in attendance, as I expected from reports of his previous forums on the subject. I also expected that most in attendance would be opposed to the health care reform bill known as HR 3200, also known as “ObamaCare,” like their Congressman, Rep. Gingrey. There were a handful of

A few days ago, we discussed the concepts of insurance and public utilities. In order to advance the discussion on the health care debate, it is important to analyze the proper role of the state in the provision of health care. We’ll start with a discussion on rights.

The concept of rights is complex and, unfortunately, somewhat subjective. Western philosophy and political theory have struggled with the concept for centuries. Merriam-Webster’s dictionary defines rights as “qualities (as adherence to duty or obedience to a lawful authority) that together constitute the ideal of moral propriety or merit moral approval.” That is a mouthful and doesn’t help much. It is fair to say that the concept of rights is subject to broad interpretation and can be applied to many things. Thus, it is important to explore different types of rights - especially as it pertains to those which should be granted and/or protected by the state.

The English monarchy established one of the first and most influential documents which pertained to the relationship between rights and the state. This document is the famous Magna Carta which established that the King was bound by the law and that free men had certain rights which could not be violated by the monarch. This laid the groundwork for future constitutional law and an expanded discussion of rights during the Age of Enlightenment.

As I begin to explore the health care debate, I think it’s important to start with a review of insurance. Health insurance is the central point of the debate; President Obama has even modified his language to speak of the need for “health insurance reform” rather than “health care reform.” To illustrate, visit the official site of the White House or read this letter from Senior Advisor David Axelrod.

The basic concept of insurance is simple and widely used. As a formal financial product, it is actually relatively new. One can imagine the early beginnings of insurance when a community of citizens would offer to provide mutual assistance to each other if one had a disastrous event such as a fire. If you are interested in the history of insurance, check out this Wikipedia entry.

A simplistic description of insurance products in the private sector can be described as a service to pool risk. A group of people collectively pay a regular fixed amount (or premium) to the insurance provider who agrees to pay the costs of a certain event (or, in some cases a set amount of money). Economically, it makes sense that the price of the premiums would be correlated with the expectation of a payout from the insurance company - measured by the probability of the event happening times the size of the potential payout. There is a whole field of study on this called actuarial science.

Now, let’s turn to the concept of a public utility. I have previously discussed my limited support of public spending for large investments in infrastructure which serve a public good and the returns on investment are either difficult to measure or take a long time to be realized. This is often the case in situations which economists call a natural monopoly. Typical examples of such public utilities would be road construction, power grids, and sewage lines.

Should insurance (of any type) be viewed as a public utility? Let’s examine the characteristics. Insurance does not necessarily require a large investment in infrastructure up front with long, slow returns. The biggest start-up risk to an insurance provider would be a series of unlikely events which would require significant payouts before reserves could be established through the collection of premiums.

Here’s a simple example… let’s say that there are a group of people who want insurance to protect against an expensive and unlikely event. We’ll pretend there are 100 potential insurance customers who, for the purpose of illustration, must pay $1000 if they roll a 1-1-1 on a toss of three dice every Saturday. The odds of any one given individual in any given week needing to pay $1000 is 1/216. While this is unlikely to happen, the people want to avoid having to pay the $1000 so they seek insurance. The insurance provider offers to pay the $1000 on behalf of their customer in return for a monthly premium of $30. The potential customer will pay $360 year to protect them against a $1000 dollar loss which, over the long run, is likely to happen once every four years. In this simple example, the insurance company has about a 0.1% of going bankrupt (with no other expenses other than those from claims) and will operate with a 25% margin. This hardly qualifies as a public utility nor would it lead to a natural monopoly.

But, they could go bankrupt. Bad luck, tighter margins, or poor risk estimates could all plague an insurance company. And, when an insurance company does go bankrupt, they will not be able to pay out on claims which will leave consumers, who have paid their premiums, without coverage. Should the government backstop this risk? I would say that they should not since both parties entered the insurance contract as a way to manage risk. The consumer should know that there is a small risk that they will not be covered by their insurance if the provider itself goes bankrupt.

The analogous situation in our simple of a community joining together in an agreement of mutual assistance in the event of a disaster would be when the community itself suffers a disaster. If all of the houses burns down, then everyone will have to do the equivalent work of rebuilding their own home. This is, in essence, the same problem as “too big to fail” which has been so hotly debated in the world of financial services over the last year.

In summary, I think it is clear that insurance does not meet that basic description of a public utility as I have defined. This, in my opinion, does not make it a good candidate for public investment. There are risks; there are even “too big to fail” risks. These risks can and should be managed via regulations, competition and/or transparency for consumers and investors. It should not be turned over to the state.

I’m in agreement with Peggy Noonan:

What a disaster this health-care debate is. It strains, stresses and pierces, it unnecessarily agitates and is doomed to be the cause of further agitation. Who doubts the final bill will be something between a pig in a poke and three-card Monte?

Which is too bad, because our health care system actually needs to be made better.

There are government programs that help people get a grip on expensive things that are needed to succeed in society - Financial Aid for college, Medicare and Medicaid, etc. These programs are not omnipotent or overbearing and not just limited to the left-wing. Vouchers, as laid out by Milton Freidman, is essentially another one of these helping-hand government programs. Why not something similar to help the population at large get a grip on rocketing health care costs?

Perhaps all those concerns about a negative backlash against the town hall protests that would ultimately inure to the benefit of those pushing ObamaCare were overblown, because it looks like the public is siding with the protesters:

WASHINGTON — The raucous protests at congressional town-hall-style meetings have succeeded in fueling opposition to proposed health care bills among some Americans, a USA TODAY/Gallup Poll finds — particularly among the independents who tend to be at the center of political debates.

In a survey of 1,000 adults taken Tuesday, 34% say demonstrations at the hometown sessions have made them more sympathetic to the protesters’ views; 21% say they are less sympathetic.

This has been an interesting week, largely due to the reaction towards ObamaCare and these town hall meetings springing up all in different parts of the country. People are angry and they want to be heard. Whether politicians want to listen is a different story, as always.

Liberals and Democrats are correct to point out that they’ve previously been shut out of public debate on certain issues, such as the war in Iraq. Republicans mishandled and chided the anti-war crowd, sometimes questioned the patriotism, either directly or indirectly, of those speaking out against what they saw as a wrong.

Interestingly, government intervention in the 1960s introduced a third party (insurance co/HMO/PPO, etc) into the one-on-one relationship between doctor and patient. Prior to that, people paid premiums for medical insurance policies designed to cover catastrophic medical events like cancer, serious accidents and the like, NOT for physicals, check ups or routine visits. Instead, the DOCTOR and the PATIENT negotiated a rate for services based on the patient’s ability to pay on an individual case by case basis. The introduction of a third party shorts the doctor AND raises the costs for the the patient, as the third party must also be paid. Yes, health costs have soared, but further government intervention - especially a government takeover of a free market healthcare system - is NOT the answer.