FIRM Blog Archives

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This document archives Ari Armstrong's blog entries for Freedom and Individual Rights in Medicine.

More Problems in Mass. Utopia -- July 26, 2007

As many have warned, coverage does not equal access. In other words, just because politicians encourage or mandate third-party payment for routine medical care, doesn't mean that patients will be able to actually see a doctor. Just ask patients in Canada or England, where patients routinely wait for needed services. (Those duped by Michael Moore's claims to the contrary should read John Goodman's corrective.)

Now The Wall Street Journal brings us the latest problems from Massachusetts, where everybody (well, not quite everybody, it turns out) is "covered" by political force. Tamar Lewis is 24 years old. "Earlier this month, she signed up for state-subsidized insurance under a new Massachusetts law that aspires to universal coverage. The plan costs her $80 a month. But it takes a lot more than an insurance card to see a doctor in this state. On the day Ms. Lewis signed up, she said she called more than two dozen primary-care doctors approved by her insurer looking for a checkup. All of them turned her away. Her experience stands to be common among the 550,000 people whom Massachusetts hopes to rescue from the ranks of the uninsured. They will be seeking care in a state with a 'critical shortage' of primary-care physicians, according to a study by the Massachusetts Medical Society released yesterday, which found that 49% of internists aren't accepting new patients. Boston's top three teaching hospitals say that 95% of their 270 doctors in general practice have halted enrollment. For those residents who can get an appointment with their primary-care doctor, the average wait is more than seven weeks, according to the medical society, a 57% leap from last year's survey."

Yet various Colorado "reformers" continue to look to Massachusetts as a model.

What such "reformers" refuse to do is examine the actual causes of skyrocketing health costs. In brief, federal tax distortions entrenched high-cost, non-portable, employer-paid insurance. Federal politicians created Medicaid and Medicare, which now underpay doctors and push costs onto others. Then federal and state governments subjected insurance to a host of controls that further drive up prices. Political meddling resulted in insurance that a significant minority of Americans cannot afford. So, obviously, "reformers" argue, the solution is more political meddling. I'm sure there's a five-year plan to fix the newly created problems.

How Does Insurance Spread Costs? -- April 24, 2007

An April 24 article from The Denver Post, titled, "Senate tentatively OKs health-insurance bill," quotes State Senator Bob Hagedorn: "The purpose of health insurance is to spread the cost." Hagedorn is a sponsor of House Bill 1355, which would repeal moderate "ratings flexibility" for employer-paid insurance. Former legislator Mark Hillman, who backed the "ratings flexibility" in 2003, believes that the flexibility enabled more employers to offer insurance.

There is an element of truth to Hagedorn's statement. As I've written: "[P]erhaps it would be helpful to remind ourselves of why people started buying insurance in the first place. It makes sense to insure ourselves against unexpected, high-cost risks such as premature death, a costly disease, the destruction of our home, or a serious car wreck.

"The point of insurance is to get it before we know whether we'll need to make a claim. People pool their premiums, then whoever suffers the harm gets the payout. If everybody has the same risk, then everybody will be willing to pay the same premium. But people at a lower risk won't agree to subsidize somebody with a higher risk. For example, a safe and healthy 25-year-old won't voluntarily pay the same amount for a comparable life-insurance policy as is paid by an older person who has cancer and enjoys drag racing."

So insurance does "spread the cost" in the sense that people voluntarily pool their risks and their premiums. Then the costs of the damage suffered by a few are spread out among all the premium payers. That's the way insurance is supposed to work, and people voluntarily sign up for it.

But that's not the sort of cost-spreading that Hagedorn is talking about. After the federal government pushed most insurance into the high-cost, non-portable employer-pay system via tax distortions, the federal and state governments subjected employer-pay insurance to community ratings and guaranteed issue. The explicit purpose of these measures was to "spread the cost," not by allowing people to voluntarily pool actual risks and (individually adjusted) premiums, but by forcing those with lower risks and costs to subsidize those with higher risks and costs.

Thus, what Hagedorn is talking about is not really even insurance. It is a combination of insurance, health "insulation" (to use Arnold Kling's term), and coercive wealth transfers.

Though one wouldn't know it from Hagedorn's quote in the Post, there is all the difference in the world between voluntary cost sharing and cost sharing that results from political force.

Medicaid Reforms -- April 24, 2007

Brian Schwartz, Ph.D., gave me permission to post his following comments about Medicaid. Bear in mind that Medicaid is primarily a federal program, so states are limited in how they can reform it. In his proposal to Colorado's 208 Commission, Schwartz focuses on state-level reform. He writes:

"The Denver Post reports on April 19 that 'Colorado's Medicaid program... is among the worst in the nation.' Indeed. My proposal to Colorado's Commission on Healthcare Reform, FAIR: Free-markets, Affordability, and Individual Rights, shows that by the Commission's own standards, Medicaid fails miserably. It inhibits consumer choice, encourages recipients to forgo higher-paying jobs to maintain eligibility, and increases medical expenses for those not enrolled. Says former Maryland state representative John Adams Hurson: 'I am a Democrat, a liberal Democrat, but we can't sustain the current Medicaid program. It's fiscal madness. It doesn't guarantee good care, and it's a budget buster. We need to instill a greater sense of personal responsibility so people understand that this care is not free.'

"The Colorado legislature should convert Medicaid to a consumer-driven program resembling Colorado's Consumer-Directed Attendant Support (CDAS) program -- with insurance vouchers and Health Opportunity Accounts. It should promote responsible consumption with co-payments and premium-sharing, and prevent people from hiding assets to qualify for Medicaid long-term care. Lastly, it should convert Medicaid from a monopolistic pre-paid health entitlement program to a voluntarily-funded charity that, because it must compete for tax dollars, has incentives to improve care and lower costs."

On pages 39 through 46 of his proposal, Schwartz discusses the many ways that Medicaid fails to meet the Commission's own criteria for proposals.

How HSAs Help Women (and Men) -- April 18, 2007

In an April 16 blog, John Goodman writes that Steffie Woolhandler produced a forthcoming study claiming that "women are punished by high-deductible, Health Savings Account plans because they have expenses men don't have: mammograms, pap smears, prenatal care, etc." While the study itself was not yet available, an AP story that Goodman cites discusses the study and quotes Woolhandler.

Goodman writes: "A glaring omission in the AP article: most HSA plans make preventive care a first-dollar coverage exception to the high deductible, and/or deposit funds in the HSA so that women can purchase care on their own."

In accordance with the freedom to contract, insurance companies and their customers have the right to mutually agree on a policy that both sides find agreeable. In a truly free market, likely some insurance policies would make "preventive care a first-dollar coverage exception to the high deductible," and some wouldn't. The government's proper role is to protect the right to contract, not force either insurance companies or their customers to accept particular sorts of policies.

My wife and I can attest to the value of HSAs for women. My wife and I were uninsured for several years, and only in recent weeks have we applied for high-deductible insurance in conjunction with an HSA. We simply couldn't afford broader-coverage insurance, at something like $4,000 per year. However, the high-deductible insurance costs us only around $1,600 per year. So, because of HSAs and high-deductible insurance, my wife and I have health insurance, when otherwise we would not. And that is a benefit to one woman whom I care about very much indeed.

The unaffordable, broader-coverage insurance wasn't that broad, anyway. It still required relatively high co-pays. It didn't cover my wife's single most expensive health cost, birth control. And it covered only 80 percent of costs, even after the deductible, without limit. So, for us, the expensive insurance was a terrible deal. (This is not surprising, given that employer-paid insurance is particularly rigged by federal and state controls to force people like my wife and me to subsidize others in the pool.)

Now that we have an HSA, we can purchase birth control with pre-tax money. Thus, my wife will now be spending less on her health care than she would have spent with the more expensive insurance.

Goodman writes that Woolhandler wants "Americans to adopt Canada's healthcare system." But that's not so great for women, Goodman points out: "The organization Cancer Ontario reports an average wait time of more than five months between the first abnormal mammogram and a diagnosis of breast cancer." He cites a Fraser study to the effect that, in Canada, women are forced to wait for treatment, and they have less access to machines such as MRIs, sonograms, and ultrasounds.

The situation of my wife and me reveals a few more facts. Many women are married, in which case medical bills for women impact the husband just as much. However, judging from the AP story, apparently Woolhandler just looked at male vs. female expenses, without separating out the women whose medical expenses are already pooled with those of men (their husbands). (Whether or not the study mentions this fact, the AP story does not.)

In addition, averages say nothing about individuals. Last year, for example, I suffered a cracked tooth that cost more than all of my wife's medical expenses for the entire year, combined. The AP notes the statistical averages found by Woolhandler: "The median expense for men under 45 in these plans was less than $500, but for women it was more than $1,200... [O]nly a third of insured men in that age group spent more than $1,050 in annual medical costs, while 55 percent of women did." Of course, if women over 45 were included, the median for women would go down, because pregnancy is fairly expensive (and it's also something that often happens within a marriage, in which expenses are shared).

This raises a much broader issue. Why is gender the relevant distinction? To rephrase the statistics cited by the AP, 66 percent of men in the age group and 45 percent of women spent less than "$1,050 in annual medical costs." That's quite an overlap. Obviously, gender is hardly the most important factor in health-care costs. The express intent of forcing everyone into collective pools is to force the less-costly people in the pool to subsidize the more costly people. Woolhandler wants to forcibly confiscate the wealth of some women (and men) in order to subsidize other women (and men). People such as my wife (who approved this line) who neither equate themselves with statistical averages nor approve of egalitarianism, but instead view themselves as individuals, will find such an outcome to be profoundly unjust.

What "market-based approach?" -- March 26, 2007

Ron Forthofer, former Green candidate for governor and Congress, complains about "the current failed market-based approach" in U.S. medicine. (See the March 24 Rocky Mountain News, business section.)

The problem is that all of the problems Forthofer describes are the direct result of government meddling in medicine, not a "market-based approach."

As I recently warned, "The advocates of socialized medicine... blame the allegedly 'free' market for the problems caused by previous and existing state interference in medicine, thereby generating a cycle of control that creates crisis that spurs calls for new controls."

Forthofer complains that the employer-pay insurance system is plagued by high costs. This is true. But the cause of these high costs -- and the employer-pay system -- is a combination of federal and state tax distortions and controls on the insurance market.

To address the problems created by government violations of individual rights in medicine, Forthofer calls for more such violations. He advocates a "single-payer system" of "public funding and [allegedly] private health care." He also calls this system "universal comprehensive coverage." His claim that completely tax-funded medicine can also be "private" is laughable. While medical facilities may remain nominally "private," in a tax-funded system the provision of medical services must be strictly controlled by politicians and bureaucrats. Forthofer offers Canada as a model -- without bothering to mention the onerous controls placed on doctors and the rationing of care for patients in that country.

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