NOOO! Reactions to the Health Care Bill

The House Saturday took the first momentous step toward overhauling this country's health care system. The plan, advanced by our supposedly visionary and post-partisan president, passed by a margin of 5 votes. It brings the country precipitously close to an inefficient and oppressive health care regime.

I believe this video segment succinctly captures my (and millions of others') emotional response to the news of the bill's passage:

Ah, yes. My sentiments exactly.

I know what you’re thinking: contained herein are the rants of another rabid, rightwing lunatic. Well, think again. There are many valid concerns about this plan that have nothing to do with “death panels” or “socialism.” Here’s another preconceived notion you may have about my position that I should also dispel immediately: I believe this country is in dire need of health care reform, the sooner the better. So why the ululation?

The reason for my lamentations is two-fold. One, this current health care plan will not actually help anyone in the long run. Most importantly, it will not significantly reduce health care costs relative to the amount of money it will cost. Two, the health care bill represents discomforting government attacks on our personal liberties, since it includes an ‘individual mandate’ that forces- literally forces- Americans to buy health insurance.

I’ve divided this piece into two sections, one for each component of my thesis: the first is dedicated to the economics of health care, and the second to the politics.

THE ECONOMICS OF HEALTH CARE REFORM

I like to say that Democrats are good people. They mean well. And this health care bill is an example of that- health care for all is an honorable mission. But, as I also like to say, Democrats don’t seem to quite understand how economics work. Their honorable plan would simply not work in the real world, and would only worsen millions of Americans’ access to affordable, quality health care. There is a better way, and the Democrats who currently occupy the halls of power refuse to even consider it. Quite simply, market forces will more efficiently and effectively ensure that the mass majority of Americans receive quality and affordable care.

This no doubt will come as a surprise to some- Democrats have cast the current system as a free market system rife with insurance companies’ cruelty and avarice. But the health care status quo is far from a free market system. The status quo is rife with government regulations and mandates, and is totally unacceptable. It is maddeningly ironic that the House’s solution to this system is more government interference.

So if America’s current health care system isn’t guided by the free market, what drives it? The heart of our current system is the HMO. An HMO, or health maintenance organization, is essentially a private corporation that dictates what treatments a patient receives and what doctors or specialists they’re allowed to see. This is a disturbing set up- imagine, an HMO employee, sitting in some dark, cramped cubicle, deciding what type of care you receive based on maximizing the HMO's profits. It sounds like an example of a free market, corporately-biased health care system gone awry. But it’s not. Congress decreed this system into existence with the HMO Act in the 1970s.

So what’s a better alternative to our current system and the system proposed in the House bill? First things first: clear the way for a true health insurance free market. This has several implications for our current policy, the most important of which is the encouragement of perfect competition in the insurance market.

Congress must create laws that encourage competition in the insurance industry, or more importantly, repeal laws that stifle competition. Competition is essential; it is the lifeblood of a free market system, since it serves two important functions. It drives prices down, since companies lower the costs of their product in order to attract customers, and it drives quality up, again, since companies want to attract customers.

An example of how competition lowers prices and increases quality in the health care industry can be found in the field of laser eye surgery. Generally, Lasik is not covered by Medicare or HMOs. Lasik used to be an expensive and risky procedure, but today, is safer and cheaper than ever. This is counter to the trend in almost all other medical fields- in which prices have gone through the roof. The difference between Lasik and the rest of the health care industry is that laser eye surgery is not regulated by government-run Medicare or government-mandated HMOs. The industry was left to free market forces, and Lasik evolved into an affordable, high quality procedure.

I was recently the recipient of a polemic against insurance companies and free market competition: "Insurance companies only care about their profits; providing health care to their customers is secondary,” one educated man passionately informed me. And, sir, you are absolutely correct. It’s a three-hundred year old concept, first expounded by Adam Smith: because companies want to make money, they will lower their prices and increase the quality of their product so that consumers will spend their money on that particular company’s product. Self interest drives the system, which of course seems greedy, but the end result is beneficial to everybody's interests.

“But wait,” you may rightly protest, “how is this situation different from that HMO accountant in his cramped cubicle restricting patients’ procedures and options based on profit?” The points outlined below address this valid concern.

Currently it is illegal to buy insurance policies across state lines. But in order for unfettered competition to drive prices down to rock bottom, consumers need many options to choose from, and by allowing Americans to buy insurance from another state increases the pool of companies competing with each other. An HMO is protected from out-of-state competition, and therefore is able to increase prices. This restriction on consumer choice must be rectified.

Related to the above point, it will also be necessary to ensure that the pool of health insurance companies remains, shall we say, sufficiently deep. Current decades-old (as in 1940s-old) legislation exempts insurance companies from anti-trust laws. By repealing this exemption, insurance giants will be subject to government-enforced trust-busting, ensuring that no company gains too large a portion of the market in order to artificially inflate prices. Unfortunately, our current administration is enamored with the “too big to fail” myth and refuses to deconstruct massive corporations that stifle competition (think AIG, Bank of America, JP Morgan, or an HMO of your choosing…).

“So then,” you may continue, “competition is good- that must mean a public option, which is supposed to compete with private insurers, will also be good,” you might now assert. This is incorrect.

Antithetical to competition is what we call ‘crowding out’ in the world of economics. Crowding out occurs when the government begins selling products that are subsidized by the American taxpayer alongside private companies’ products. This means the public option must not be implemented. The President claims it will augment competition by providing an alternative to insurance companies’ overly expensive policies. But a public option is funded by taxpayers and therefore has no incentive to lower costs or increase quality. After all, since the government has a virtually bottomless wallet filled with taxpayers' money at its disposal, there is no incentive for the government to cut costs. Additionally, in the real world, there is compelling historical evidence that demonstrates that the government is quite adept at driving private companies out of business: the case of Fannie and Freddie.

Fannie Mae and Freddie Mac are companies chartered by Congress in order to provide a “public option” in the mortgage industry. At the time, Congresspersons vigorously denied that these two entities would ever gain more than 10-15% of the mortgage market. They were merely intended to provide competition to the other banks in order to lower their prices- the same justification used in defense of the health insurance public option. But today, after the creation of the mortgage public option, Freddie Mac and Fannie Mae control over half of the mortgage industry, are bleeding cash at an alarming rate, and are at the center of the recent economic meltdown.

All in all, the economics of health care, and indeed just about anything, comes down to the fact that millions of individuals choosing between dozens (even hundreds) of competing products in a free market make better economic decisions and produce more desirable economic results than any sort of government regulation or mandates can.

THE POLITICS OF HEALTH CARE REFORM

Of course, besides the economic problems with the Democrats’ bill, it has serious and disturbing political implications for our freedoms. No, I’m not referring to pulling the plug on Grandma. I’m referring to the fact that this plan relies on government coercion (like any law passed by a state) rather than voluntary market interactions.

Most significantly, the Democrats’ plan includes the so-called individual mandate, which would require Americans to buy health insurance. Apparently, Congress has once again forgotten that the last time they foisted mandates upon the insurance industry (the HMO), the result was disastrous.

The individual mandate is necessary for the Democrats’ plan because it forces healthy people to buy into the system. With these healthy people now paying for health insurance, insurance companies would be able to afford to cover their totally unprofitable sick and dying customers (people who are typically denied coverage in the current system). But this is patently unethical. It would force the millions of Americans who voluntarily choose to not buy insurance into an exchange they want no part of. Why would some people not want health insurance? Well, for the same reason that some people don’t want umbrellas: if it doesn’t rain where you live, an umbrella is a waste of money. If I’m perfectly healthy, and choose to make the reasonable assumption that I will continue to be healthy for some time, then health insurance is a waste of money. I have more important things to spend my money on- like college tuition.

Additionally, the insurance mandate amounts to nothing more than an enormous tax. A tax is money that the government takes from individuals or corporations and reallocates for some national service. When someone is forced to buy an insurance policy by means of the individual mandate, that money is used to subsidize the new health care regime- that is, the money forcefully taken from a healthy person is reallocated to pay for the health care of someone else. Taxes are of course necessary in many instances, but they are fundamentally offensive to our liberties, and always impede economic growth- therefore taxes should be especially avoided during perilous economic times like our own.

Lastly, the individual mandate allows the Democrats’ health care plan to reward those who make bad decisions. Want to start smoking? Go for it; your future respiratory diseases will be paid for by the government, via your fellow citizens who chose to not smoke. Like many of the Democrats’ policies, this health care bill sweeps personal responsibility under the carpet, creating perverse negative incentives.

There are ways to encourage people to buy insurance without coercion or taxes. One such example is the HSA, or health savings account.

An HSA works something like a retirement account- you voluntarily deposit money into this account so that you have money available to you should you have a medical emergency in the future. This seemingly radical idea is true to the very definition of insurance- having money to insure against the unexpected. Additionally, the existence of HSAs would lower insurance premiums for everybody (including people with preexisting conditions), since insurance companies can expect that most of their customers will be able to pay at least a portion of their medical care from their HSA- in other words, HSAs do exactly what the individual mandate is supposed to do, but without government threats and intrusions. HSAs have the additional benefit of working with the economic forces detailed in the previous section to drive insurance prices so low that every American would be able to buy some sort of health insurance.

Would the HSA system actually work? After all, why would Americans, being the spendthrifts we know they are, be inclined to put a portion of their paychecks into HSAs? The solution is simple: the government can encourage Americans to use HSAs by providing generous tax deductions for all money deposited.

So to wrap this section up, we see that not only is the new bill economically unsound, it infringes on liberties in despotic fashion. The individual mandate forces people who don't want to buy insurance to buy it, while using that money to pay for the bad choices of another person, thus absolving the citizenry of any responsibility and destroying incentives to live a healthy lifestyle.

CONCLUDING REMARKS

So, to recapitulate: everything in the bill is contrary to progressive ideas because it ignores economic theory and attacks personal liberty.

On the economic side of things, the most effective way of making insurance more affordable is to increase competition by leaving the health care industry to the free market. The government should repeal laws that prevent individuals from buying insurance policies from other states. The government should also repeal the laws that exempt health insurance companies from anti-trust laws. Lastly, the government should not attempt to “help” competition by offering its own public option.

In the realm of liberty, the House bill allows for new, unprecedented government intrusions into American private life and muddles ethical issues of personal responsibility and fairness. It also creates a tax, which is an affront to both economic growth and personal freedom. As an auxiliary to the economic system of perfect competition, the use of HSAs would encourage Americans to save money in order to defray future, unforeseen medical costs in a manner that is consistent with fairness and effectiveness. HSAs also save "evil" insurance companies money, which enables them to cover unprofitable sick or dying patients.

The President's most recent praises of the bill drew upon nonsensical and vague appeals to "history" and "the future," while totally ignoring the unresolved economic and political repercussions. Mr. President, this is not a bill that will go down in history. This is a bill that will live in infamy.

This post is already exhaustingly long. If you’re still with me, thanks for reading. Please, if you’d like to denounce any of my ideas, I strongly encourage you to do so. There is still so much more I could address about the disaster that is our current health care system, and the even greater calamity that will be the Democrats’ health care system, but I just can’t fit it all here- so comment away, bloggers.

The bill passed by the House still has to survive the Senate, where it will undoubtedly undergo major revisions- or preferably, be thrown out all together so Congress can start afresh on health care reform. I’ll leave you all with this last commission: if you don’t like the current health care system, and loathe the Democrats’ proposed system, tell them so. Congress (supposedly) listens to the American people. Protest the bill like your life and limb depended on it- because they quite literally do.