Sheldon Richman - Eric Hanneken on Diigo

02 Nov 09

Medical insurance has come to mean getting something for free. The receiver of a service need not ask how it is financed. It’s just taken care of. (Passive voice intentional.)
What’s that? The government is promising to cap our out-of-pocket expenses, require coverage for preexisting illness and free preventative care, and extend the same deal to absolutely everyone? And this will have no negative consequences whatever, such as limits on what we can buy or enlargement of the budget deficit or higher taxes for the middle class — but it will actually save money? Oh thank you, government!

21 Sep 09

ObamaCare: Status Quo on Steroids

fee.org/obamacare - Preview

health insurance regulation government politics Sheldon Richman

World War II was a bonanza for the industry, especially Blue Cross Blue Shield. Government economic controls prohibited firms from attracting or keeping workers with higher wages. So someone hit on the idea of supplementing wages with noncash compensation, specifically, health insurance. The government said okay and the rest is history. Employee insurance was untaxed, creating a bias toward employer-provided health plans.
Under the old-style indemnity plans (which individuals shopped and bought for themselves), contracting a catastrophic disease triggered a fixed insurance payment — to the policyholder – according to an agreed-on predetermined schedule. The money was hers. If she could find services that cost less than the insurance payment, she pocketed the difference. Of course, this provided an incentive to be cost-conscious in buying medical care. Homeowners’ and other types of insurance still works like this.

In contrast, under the Blue Cross Blue Shield model pushed by government — which began not as insurance but as a prepayment plan for doctors and hospitals — the policyholder never sees a dime. Treatment simply sets in motion a process in which the insurance company sends a check to a hospital, lab, or doctor. No treatment, no payment. The individual has no reason to shop around (there can be great variation in prices), or to question whether a test or procedure is necessary, or to even ask what anything costs.
6 more annotations...
- In most cases employers pay for their workers’ coverage with money that otherwise would have largely gone into cash wages. To the workers, it looks like free (or pretty cheap) coverage. Because of competition among employers and the rigged tax laws, coverage has become more luxurious, including services for situations that are not even insurable.
- To make matters worse, state governments have mandated that all “basic” policies include coverage for situations that are either uninsurable or unlikely to affect most people.
- You and I could evade the mandate plague somewhat if we were free to buy policies offered in low-mandate states. But — under the federal McCarran-Ferguson Act — we aren’t free. That 1945 decree shelters the states — and the insurance companies — from the interstate competition that might have reined in their regulatory regimes.
- We have mandates because the providers of those products and services wined and dined enough state legislators to get these special-interest bills enacted.
- State regulation also sets up barriers to entry in the insurance industry.
- None of this justifies what President Obama and his ilk call healthcare “reform.” They merely propose more of what we already have: more “free” insurance for more people, more coverage for more uninsurable situations, lower out-of-pocket costs — all of which means less cost-consciousness and higher prices, which seeds the ground for price controls and rationing. In the name of creating competition, Obama would further suppress it, rather than dismantling the current anticompetitive regime.

08 Sep 09

From 1944 to Nineteen Eighty-Four

Sheldon Richman replies to George Orwell's review of Friedrich Hayek's <em>The Road to Serfdom</em>.

fee.org/...1944-nineteen-eighty-four - Preview

George Orwell F. A. Hayek socialism politics Sheldon Richman

“[A] return to ‘free’ competition means for the great mass of people a tyranny probably worse, because more irresponsible, than that of the State.” It’s hard to believe that someone so familiar with Stalinism could have written that. Even without knowing much economics, could he really have thought that what goes on in market-oriented societies, even during depressions, could be worse than the famine Stalin inflicted on the Ukrainians, the show trials and executions, or the labor camps in Siberia?
I think that part of the problem for Orwell is that a truly free market is not among the possible options. For him and many others, the choice is between a system run for employers and one run for workers. (The preferable alternative is not obvious.) In this view, the former is capitalism, sometimes dressed up as “the free market,” and the latter is socialism.

24 Aug 09

Obama’s Health-Insurance Cartel

fee.org/...obamas-healthinsurance-cartel - Preview

health care health insurance socialism Hayek competition profit economics Sheldon Richman

We’ll use HR 3200 as our guide.
No insurance policy would be deemed qualified unless it satisfied the conditions imposed by the government. This is important because under the bill, every individual would be mandated to have a “qualified” health plan. A sub-standard plan that nevertheless satisfied a particular consumer — such as low-cost high-deductible catastrophic coverage — would be forbidden.
6 more annotations...
- The point of this tedious recitation is to convey to the reader how precisely the government would define private insurers’ business practices and products. To varying degrees state governments already define these things; this is part of the corporate-state bargain in which companies get cartel rents through protection against new competition in return for complying with various regulations that they take a hand in writing. But this would be the first time that the national government would dictate what minimum health coverage would include and other company practices. For that reason, such a law would effectively create a national health-insurance cartel. Big Insurance, which has been working with the Obama administration behind the scenes, has no problem with any of this.
- The immediate question that should arise about the public option is why — if it must support itself through premiums — the government needs to set it up in the first place. What’s the point of having one more entity selling the same thing private insurers must sell under the same pricing constraints?
- Based on experience — the Postal Service, Fannie Mae, Freddie Mac, and the federal flood-insurance program, among others — we can expect that the public option will be bailed out by Congress when it runs into trouble.
- Obama’s plan shows no appreciation for competition’s discovery role. He and his experts claim already to know — or will later decide — what insurance products should be offered and what business practices should be used. The bill would permit no variation — that is, no competition. There would be none of the free market’s entrepreneurial trial and error, in which firms offer competitive products, and consumers render verdicts on them.
- The tipoff that Obama can’t really be interested in competition is his disparagement of profit.
- Obama shows no sign of grasping the communications role performed by profit and loss in a market.

14 Aug 09

The End-of-Life Rigmarole

No, there are no "death panels" in the big-government health insurance reform bills being considered. However, no bill can repeal the fact that medical resources are scarce. If the government is going to subsidize the consumption of health care, they must either a) allow the price of health care to rise (Proponents say this is out of the question), or b) ration.

sheldonfreeassociation.blogspot.com/...end-of-life-rigmarole.html - Preview

health care health insurance rationing socialism Sheldon Richman

The problem is not that the bill calls for death panels--it doesn't. The problem is that the expansion of medical coverage by government decree and taxpayer subsidy, along with a determination to keep prices from rising, logically requires rationing of medical services. How else can you expand demand without raising costs? Through government efficiency? Get real. (Price controls would lead to shortages and then rationing.)

17 Jul 09

Sotomayor, Freedom, and the Law

fee.org/sotomayor - Preview

law legislation politics Bruno Leoni Sheldon Richman

26 Jun 09

The Misrepresentation of Healthcare Reform: Should Congress Impose Health Care on Us?

The title of this article is misleading; it's actually about the fiction of democratic representation.

fee.org/...m-healthcare-misrepresentation - Preview

democracy representation people's romance noble lie politics government Sheldon Richman

Why should the people get something through government–that is, at the point of a gun–simply because they want it? We make that assumption reflexively, but why? Fifty-seven percent may be willing to pay higher taxes for universal health insurance, but let’s not overlook what else they are willing to do: tax the 37 percent who aren’t willing to pay higher taxes. (Six percent don’t know if they are willing or not. Sigh.)
The average congressional district has a population of well over 600,000 people. In Montana, one congressman allegedly represents the state’s entire population of 967,440. The populations of the states range from about half a million (Wyoming) to 36.7 million (California).

Honestly now, who really believes that anyone can actually represent such large and diverse groups of people?
1 more annotations...
- “The few who govern take care to nourish those opinions, and that is no easy task, for the opinions needed to make the many submit to the few are often at variance with the facts,” Morgan writes. “The success of government thus requires the acceptance of fictions, requires the willing suspension of disbelief, requires us to believe that the emperor is clothed even though we can see that he is not.” (Emphasis added.)
  
  In democratic countries such as the United States, those fictions include the idea of representation, as well as the idea that our “representatives” are mere members of the governed like the rest of us.

26 May 09

Misunderstanding Health Care Reform

fee.org/...medical-misunderstanding - Preview

health health care reform Sheldon Richman Medicare socialism

Another strategy is to blame “private”-sector medicine for the out-of-control Medicare program, which has a $35 trillion unfunded liability and is helping to break the federal budget. In the 1960s the national government took over funding of medical care for the elderly. Critics warned that, as a welfare program, Medicare would explode beyond all official budget estimates. When it did so, the advocates of Medicare (and fully nationalized medicine) blamed the (semi-)private providers of services, and now Obama threatens more control than they already endure.
The point shouldn’t be to cut the total bill regardless of the consequences. Waiting months for surgery or doing without because the government won’t pay for it is a cost, although it doesn’t show up in the budget. This in part is how other countries seem to spend less on medical care than we do.
2 more annotations...
- You know an industry is heavily regulated when politicians exhort providers to lower costs and they pledge to do so. No competitive industry would require exhortations or pledges.
- Eliminate all the ways that government causes medical price inflation. These range from supply-side interventions—including occupational licensing, certificates of need, the FDA, and patents—to demand-side interventions—including tax favoritism toward employer-based insurance, Medicare, and Medicaid. Third-party payment that makes medical services appear free or nearly so encourages overconsumption and raises costs indirectly for everyone, with particular hardship to those not participating in the programs.

Eric Hanneken's Library tagged "Sheldon Richman" → View Popular

The Welfare State Corrupts Absolutely

ObamaCare: Status Quo on Steroids

From 1944 to Nineteen Eighty-Four

Obama’s Health-Insurance Cartel

The End-of-Life Rigmarole

Sotomayor, Freedom, and the Law

The Misrepresentation of Healthcare Reform: Should Congress Impose Health Care on Us?

Misunderstanding Health Care Reform

Selected Tags

Related Tags

Sponsored Links

Top Contributors