Friday, January 15, 2010

ObamaCare In Critical Condition

In past posts opposing the centralization and federal management of health care, I've argued that public choice theory ought to cause us to be skeptical of replacing markets with the allocation of goods by legal command. The idea is that highly motivated insiders will hijack the political process and engage in rent seeking that diminishes social welfare. Some commentators have been skeptical. They have more faith in the political process to rationally and efficiently decide who should get what.

But doesn't the mere assembly of the health care package prove my point? It's full of rent seeking. We know hear that the unions are to be exempt - until 2018 - from the luxury tax on cadillac health plans. We've seen the Louisiana Purchase, the Cornhusker Kickback and the Florida Favor.

I can't get myself to believe that Scott Brown will beat Martha Coakley in Massachusetts next week. But if he does, this bill - as we know it - is dead. Or the Democrats will be in November.


Anonymous said...

Rick, here you go again. "Replacing markets with the allocation of goods by legal command"? This is complete and utter nonsense, and you ought to know better. Do you think when you deduct your mortgage interest on your tax return that means that the government has eliminated the mortgage banking market and replaced it with the allocation of mortgages by legal command? Or if you contribute to a grandchild's EdVest college savings account, and take the Wisconsin income tax deduction available to you, that the government has taken over higher education? Of course not. This is no different.

The health care reform bill will implement subsidies for people and small businesses that can't currently afford health insurance. They will still have a market in which to purchase health policies. The bill will impose taxes on millionaires or "Cadillac plans" or, most likely, some combination of the two. Neither of those taxes would replace markets.

There will be a mandate to purchase health insurance or else pay a penalty. Does this "replace markets with the allocation of goods by legal command"? No -- no more than the requirement that drivers carry liability insurance replaces the automotive insurance market with the allocation of car insurance by legal command.

Tax policies and government subsidies have impacts on market behavior (e.g. by increasing demand or supply) but do not necessarily replace markets. In this case, the reform is intended to promote market competition, among other ways through exchanges in which individuals and small businesses can purchase health insurances without some of the transaction costs that currently contribute to high health insurance costs.

Call it socialized medicine if you want (that is exactly what you are doing, of course). But a humane and wealthy society takes steps to make sure that all of its citizens will have access to health care. This reform works with existing market mechanisms to extend health care to tens of millions of Americans. And the rumors you keep attempting to circulate of its demise are, as Mark Twain remarked, much exaggerated.

Anonymous said...

If one starts from the assumption that markets lead to Pareto optimality and the maximization of social welfare, while conversely the political process inevitably reallocates goods inefficiently to rent seekers, the allocation of health care as a good according to political rather than market principles is inefficient. Market principles, as Swift observed and Gibbard-Satterthwaite and Duggan-Schwartz confirm, result in some being excluded from active participation as purchasers in the health care economy and therefore being burdensome rent seekers through political means. These externalities could be avoided through a more vigorous application of market principles. To wit, if the market for meatstuffs did not contain artificial restraints prohibiting the sale and consumption of juvenile members of the species Homo sapiens, those possessing a surplus of likely future subsidized consumers of health care (i.e., improvident poor parents) could trade their surplus of inefficiently utilized meatstuffs for cash, thereby reducing present and future demand for health care services (and hence its cost) while increasing the supply of food. Thus the cost of food as well as health care would decline and social welfare, i.e. Pareto optimality, would be maximized. All would be better off.

That is my modest proposal for health care reform, according to market principles and public choice theory.

Dad29 said...

Anony 1125, that's a fine example of Feingoldism--which is to say, meatily non-responsive.

The ' command' will occur b/c the Feds will command that certain goods be available through insured coverage, and that certain goods will NOT be available through insured coverage. They will dictate the terms and conditions of health insurance policies.

AND the Feds will (in due time) modify those terms and conditions based on 'health policy' panel determinations of economic Pareto optimums (i.e., old folks will please leave the land of the living. NOW.)

But nice evasion. You should write stuff for Feingold!

Rick Esenberg said...

Anon 11:25

As Dad29 points out, your description of the bill leaves out everything that causes me to characterize it the way I do. If all the bill did was provide subsidies for people to buy health insurance, my only concern would be how it can be paid for. But it does much more than that.

Anonymous said...

If your concern is over the government setting minimum standards for private insurance policies in health exchange for the currently uninsured, then you really have no need to worry, if you're market principles are correct. That is, if the regulation by the government in the health exchange -- that 'fed command' you fret over -- drives up the cost of private coverage beyond what it is outside of the exchange, free market theory tells us small businesses and individuals will turn there. Now that there's an individual mandate, which you yourself have said is necessary, even if evil, for health care, there won't be the option not to play at all and leave the cost to the insured when one actually needs care.

Rick Esenberg said...

Prior versions of the bill prohibited the sale of nonqualifying policies. At the very least, they won't satisfy the mandate. So what you suggest is highly unlikely.

Anonymous said...

Perhaps via the exchange, but not outside of it.

Anonymous said...

You can continue to rely on generalities but the reality is that the federal regulations in the House or Senate bills, designed solely for the individual and small group markets, are hardly dramatic or expansive. In fact, the regulations and minimums are specifically designed to bring the individual and small group markets in line with the commonplace standards that already exist in the large group market. To be sure, requiring plans to have a minimum 60% actuarial value (with an exception for a bare bones young adult plan) is hardly a sky-high minimum. What's more, both plans would require the Sec of Labor to survey large employers each year for the specific purpose of informing the minimums set for the individual and small markets covered in the legislation.

For more of the particulars, see page 12 here:

Anonymous said...

Link to the report here:

Rick Esenberg said...

There isn't going to be a market outside of the exchange because it won't be permitted or because it won't satisfy the mandate.

Nor is the question simply the actuarial value but the "essential benefits" that the plan must cover. Why do we need a centralized determination of what insurance policies ought to cover?

Beyond that -and with due respect for the supposedly "nonpartisan" Commonwealth Fund - the whole scheme - particularily the Senate bill - seems to set up powerful incentives not to insure since one can literally wait until one gets sick by paying a tax that will almost certainly be a fraction of what insurance premiums would cover and then buy a subsidized policy. This thing is a mess.

Anonymous said...

Why standardized benefits?

As the Commonwealth Fund report points out: "New essential benefit standards with three to four levels of cost-sharing and annual out-of-pocket limits would ensure that families do not become bankrupt because of medical costs. They will also encourage the use of timely preventive services and protect against catastrophic costs in the event of a serious accident or injury. Standardized benefits will also allow consumers to compare prices of similar health plans and provide incentives for insurers to compete on price. Uniform standards across markets will prevent adverse selection into the exchange, provide transparency of information for people purchasing coverage through the exchange, and ensure that the cost of premium subsidies paid by the federal government does not vary by the type of benefit package offered."

Or, if you prefer the Brookings Institute: "Governments should ensure proper incentives for non-group and small-group health insurance markets to focus on competition based on cost and quality rather than selection. Achieving this requires near-universal coverage and insurance exchanges to pool risk outside of employment, augment choice, and align premium differences with differences in plan costs."

And, sorry, in spite of their conclusions not aligning with you ideological predispositions or political hopes, it's not quite that easy to flick away the detailed assessments of numerous economists at not only the Commonwealth Fund but also the CBO, the Brookings Institute, the Kaiser Foundation, and a variety of other well-respected, mainstream organizations (we're not even talking the CPBB or Center for American Progress here) that have concluded the health reform bills will dramatically reduce the number of uninsured and significant government regulation of the individual and small group markets is central to that.

And -- aside even from CBO projections that out of the 32 million currently uninsured who will seek insurance under the health reform legislation, 9 million (almost 1/3) will do so outside of the exchanges -- the simple fact is that the vast majority of Americans will continue to get insurance outside of the exchange b/c they will continue to do so within the existing large group market.

Anonymous said...

We have shipped out to many jobs and got rid of to many pension plans. People fear government take over but also fear economic uncertainty.

I think there will be a plan.

Dad29 said...

the simple fact is that the vast majority of Americans will continue to get insurance outside of the exchange b/c they will continue to do so within the existing large group market.

...until the Fed regulators make provision of 'large group' policies unprofitable, which they will do.

We understand the term "incrementalism," Anony. And we don't like the consequences of it. We've seen it in Social Security, remember?

jp said...

If the plan passes, there will be additional healthcare business for Mexican providers.

Anonymous said...

Hey, Dad29, how's that Medicare treating you? You never did tell us.

Anonymous said...

Rick: This bill is a serious piece of legislation incorporating the recommendations of people whose life work has been the study of health care economics and health care delivery systems. It is not an option simply to provide subsidies for people to buy health insurance. As you point out, the problem would be how to pay for it. Health care costs are going through the roof in this country even without subsidies for tens of millions more to buy health insurance. Subsidizing something increases demand and thereby increases price.

If you are honest, you will concede two things: (1) it is morally indefensible for a country as rich as this one not to make health care available to all its sick, whether they are rich or poor; and (2) the current trend in health care costs cannot be sustained and must be reversed or at least slowed. This bill is an attempt to address both these challenges.

The market for individual and small group health insurance is seriously flawed, in part because of high transactions costs and incomplete information on the part of consumers. That's why these policies cost so much. The market for large group health insurance is a more perfect market (and those policies cost less per covered person). The health insurance exchange is designed to address the inadequacies of the current system for individual and small group policies -- to provide a greater degree of transparency, and to reduce transaction costs (just as stock markets increase transparency and reduce transaction costs compared to a system in which no such exchanges exist).

Why must there be a centralized determination of covered costs? So that consumers can compare apples with apples, and not learn, after they actually get sick, that their health insurance policy doesn't pay for, oh, say, hospitalization for illnesses. This is simply common-sense regulation. And, by the way, it already exists at the state level.

A common Republican proposal is to propose that individual health insurance policies be allowed to be sold across state lines, while remaining regulated only at the state level. The problem with this is that state insurance regulation is typically ineffective, and allowing policies to be sold across state lines would create a "race to the bottom," in which insurers would rush to Alabama, or Mississippi, or whichever state had the least effective or competent or demanding regulators.

So this bill is a complex piece of government regulation designed to reduce the increase in health care costs while making affordable coverage available to all. It's complicated. It's change. These things scare people. People are anxious enough already about the current economy. But Dad29's suggestion of death panels and other similar scare tactics are not well-grounded arguments against the health care bill.

If your argument against the bill is that you've got health insurance, most Americans do, and it works well enough for 80% of us -- and who cares about the other poor schmucks, let them die without insurance, or show up at the ER if need be -- just say so. To be honest I think that is really what a lot of people against this bill believe: I've got mine, and to hell with the 45 million who don't; why, 12 million of 'em are illegal immigrants anyhow. And that is repulsive.

Anonymous said...

In 2006 22,000 people died in this country because they had no health insurance. And approximately 1,000 fetuses over 24 weeks were aborted. "Pro-lifers" mourn the 1,000 dead babies, but many of them oppose a bill that would save 22,000 lives a year. Where's the consistency?

Dad29 said...

the current trend in health care costs cannot be sustained and must be reversed or at least slowed. This bill is an attempt to address both these challenges.

ObamaCare (either version) will FAIL to "reverse...or slow" the increase in healthcare costs. It is impossible to add 30 million insureds AND 'reduce' healthcare costs; "disease management" is a dream, unsupported by any evidence whatsoever; 3rd-party payments encourage spending, etc., etc.

Other than that, you're correct. There is a moral obligation to assist. And in this country, that moral obligation is most often exercised by MD's, DDS's, and hospitals.

jp said...

It is estimated 5 to 10% of healthcare costs could be saved with tort reform (not in the bill).
A side benefit could be the reduction in the number of law schools and number lawyers.

Anonymous said...

OK, Dad, so docs and hospitals provide some charity care. Under Hill-Burton the hospitals have to. But the need remains. 22,000 die every year because they don't have health insurance. So what is your answer to that? You don't offer one. You, who do not appear to possess any expertise in health care economics, just say that adding 30 million new insureds will not decrease costs. (Well, yeah; that's why the bill has features that are designed to reduce costs!) You say that the health care reform bill won't work. So what is the morally acceptable alternative? Somehow I'm reminded of Churchill's comment about democracy being the worst form of government, except for all the rest. If you've got a better idea to make health care universally available while controlling its costs, let us know. Otherwise, shut up.

I see you again are mum about how you're liking Medicare.

Dad29 said...

22,000 die every year because they don't have health insurance

That's a 'correlation/causation' error. Keep up with the research.

Well, yeah; that's why the bill has features that are designed to reduce costs!

Such as? The "quality/quantity" argument is a good one, but NOBODY has demonstrated with actual numbers that it will "save money." It makes sense, but...

Oh--you mean the $500B cut in Medicare-provider payments? GOOD idea!

You mean the "sign up when you're sick" provision? Or maybe not?

"Disease management" is unproven, at best.

The money savings you speak of can only come from rationing care. Handy, if you're less than 50 years old and healthy!

Anonymous said...

Maybe you should keep up with the research, Dad. The 22,000 figure originates with Stanley Dorn's 2008 study for the Urban Institute, "Uninsured and Dying Because of It: Updating the Institute of Medicine Analysis on the Impact of Uninsurance on Mortality." A more recent Harvard study, "Health Insurance and Mortality In U.S. Adults," published on September 17, 2009, in the online edition of the American Journal of Public Health, estimated a higher figure of nearly 45,000 additional deaths in the United States after adjusting for socioeconomics, health behaviors, and baseline health. The seminal report, the Institute of Medicine's 2002 193-page report, "Care Without Coverage: Too Little, Too Late," estimated that there were 18,314 deaths annually in this country because of a lack of health insurance. (The Institute of Medicine is a prestigious federally chartered outfit affiliated with the National Academy of Sciences.)

These are rigorous, careful studies by experts in the field. They adjust for variables.

So what are your sources pointing out the supposed "correlation/causation error" in these reports? Sarah Palin say so on the Factor the other night?

Why should anyone question that a lack of health insurance would increase the risk of death? Doesn't it stand to reason that, by the same process under which the sustained lack of food tends to increase the risk of starvation, the sustained lack of access to health care tends to increase the risk of mortality?

Dad29 said...

It's also clear to me that the lack of a successful Fascist state does not prevent the Left from trying again.

Oh...and you forgot to mention the qualifying language in those reports.

"As the Urban Institute wrote: 'At the most basic level, the above estimates are not precise ‘body counts.’ Rather, the reader should view them as reasonable indicators of the general magnitude of excess mortality that results from

And you forgot to mention that:

The [O'Neill] study looked at data on persons aged 51 to 61 from the Health and Retirement Survey and determined the "involuntarily uninsured" had an 11 percent higher probability of dying; the number dropped to 3 percent when controlling for smoking as well as education and income. The “voluntarily uninsured” had a 2 percent to 3 percent greater probability of dying.

Yes, there's a difference between "involuntarily uninsured" and "voluntarily uninsured."

And of course, the Urban Institute has a distinctly Lefty history.

FactCheck is not hard to spell, is it?

Anonymous said...

No. Factcheck is not hard to spell. And if you want the facts I commend the readers of this blog to the article from which Dad29 very selectively quotes, "Dying from Lack of Insurance," Sept. 24, 2009, available at Let me quote somewhat more fully than Dad does:

Now, on to the tough question: Is the 45,000 figure accurate? We can't say for sure, but scores of other studies also conclude that persons without health insurance have a higher chance of dying prematurely than those with health insurance. A committee headed by Dr. John Z. Ayanian of the National Academies' Institute of Medicine reviewed nearly 100 such studies released since 2002. And in March he summed up the findings for Congress this way:

Ayanian's testimony to Congress, March 2009: Uninsured Americans frequently delay or forgo doctors' visits, prescription medications, and other effective treatments, even when they have serious disease or life-threatening conditions. . . . Because uninsured adults seek health care less often than insured adults, they are often unaware of health problems such as high blood pressure, high cholesterol, or early-stage cancer. Uninsured adults are also much less likely to receive vaccinations, cancer screening services such as mammography and colonoscopy, and other effective preventive services.

[end Ayanian quote]

The 45,000 estimate is at the high end of estimates, but earlier studies also have put the number of excess deaths from lack of insurance coverage in the thousands:

Factcheck goes on to summarize the conclusions of seven serious scholarly studies showing various significant increased mortality risks from uninsurance, including one calling uninsurance the third leading cause of death among those ages 55 to 64. Then it goes on to cite the report cited by Dad, above, "published by the conservative Employment Policies Institute" -- an advocacy rag, not a serious scholarly journal of health care or health care economics -- noting that the "involuntarily uninsured" "had an 11 percent higher probability of dying; the number dropped to 3 percent when controlling for smoking as well as smoking as well as education and income. The 'voluntarily uninsured had a 2 percent to 3 percent greater probability of dying." Then Factcheck notes the bias of the publisher: "EPI, the publisher of the study, supports business interests and has said that the 'living wage campaign' is 'organized effort to force employees to inject a welfare mentality into the workplace.'"

Factcheck concludes as follows: "The Institute of Medicine's Dr. Ayanian . . . did tell Congress that research shows gaining coverage made a difference: 'Fortunately, our Committee also found good news to report: when uninsured people acquire health insurance they can experience both immediate and long-term improvement in their health."

No, Dad, Factcheck is not hard to spell.

Why do you people not care that lack of insurance is killing people? Are you not pro-life? Does it not bother you when you blatantly mischaracterize stuff that's publicly available, right here on the Web? Do you think no one will call you on it?

Anonymous said...

Hey, Dad, speaking of the Fascist state. Let's speak of the "Big Lie": a propaganda technique invented by the fascists. A lie so colossal that no one could believe that someone could have the impudence to distort the truth so grossly.

Do you think that your last post is a fair and accurate summary of the article "Dying from Lack of Insurance" in

OK -- so, who's the fascist?

Dad29 said...

Well, just for fun, let's concede that "lack of health insurance causes 45K deaths/year," which is logically inane but statistically supported. (Read between the lines).


You propose that ObamaCare insurance will reduce 'premature' deaths. At the same time, ObamaCare (Pelosi version) will ration care--beginning with a $500Bn reduction in Medicare-provider fees.

So you propose that ObamaCare will both: 1) reduce 'premature' deaths, AND 2) reduce spending on elderly-care.

Obviously, someone has determined exactly what age constitutes "premature."

Aside from the prima-facie contradiction, and the statistical sleight-of-hand, do you have anything else?

Being "pro-life", by the way, includes accepting death. But it's a matter of eschatology.

The religion of Humanism postulates that the final end is here.

Few others hold that belief.

Anonymous said...

Oh, Dad, there you go again. Since you seem to like, I refer you to it again. Check its August 14, 2009 issue, and discussion of myths about health care reform. FactCheck says: "False: Medicare Benefits Will Be Cut." Medicare benefits will not be cut. The anticipated savings of up to $500 billion (over ten years, by the way) comes from such things as reducing anticipated INCREASES to providers, not including physicians. It also includes savings from eliminating Medicare Advantage, which lines the pockets of private insurance companies. Medicare Advantage is popular with some seniors (like you, maybe?) because, for example, it often pays for sports club memberships. A nice fringe benefit, but as between providing health insurance to middle-aged folks with cancer and no insurance and a free YWCA membership for Grandma, I'll pick the former.

You'd think if the $500 billion savings in Medicare over ten years would be generated by imprudent reductions in health care for seniors, the organization that represents seniors, the AARP, would be opposed. Such is, emphatically, not the case. Check out its Web site, and in particular "Myths vs. Facts."

By the way, when President Bush proposed $200 billion in cuts to Medicare and Medicaid over five years -- I guess that'd be the equivalent of $400 billion over ten years, which is pretty close to $500 billion -- in his FY 2008 budget, I don't recall you objecting that this meant a rationing of care for the elderly. What's different now?

Are you just upset that you're going to lose your free gym membership with Medicare Advantage?

Dad29 said...


We win.

Your half-factual posts are now irrelevant, immaterial--and STILL half-factual.

AARP would have loved to increase its cashflow. Too bad.

Anonymous said...

Well, Dad, last I checked there are still going to be 59 Democratic Senators and a sizable Democratic majority in the House of Representatives. And, of course, a Democratic president. We will enact universal health care in all of these United States (just as Massachusetts did, with Scott Brown voting in favor). Thirty million more Americans will have health insurance. Lives will be saved.

This fight ain't over yet.

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