FreeColorado.com, a journal of politics and culture.

Thursday, January 21, 2010

Dan Maes Gets Real; He and Acree Talk Health

"Some guy named Dan Maes also remains in the race, and he has about the same chance of becoming the next governor of Colorado as I do."

"Anybody who thinks Dan Maes has any chance of winning the Republican primary and beating Bill Ritter is simply delusional."

"Dan Maes doesn't have a chance in hell of becoming the next governor of Colorado."

Who wrote these nasty things about hard-working gubernatorial candidate Dan Maes? And what did Maes ever do to that vindictive SOB?

The lines are mine. And, while Maes has offered a pointed response, he's taken my needling well. And I respect that. An underdog who can't deal with people throwing scraps will never be anything more than an underdog.

Moreover, it seems like every political event I go to, Maes is there. I heard him give his stump speech last night at Liberty On the Rocks. I saw him Tuesday at the rally against Obama Care. I saw him last month at an Independence Institute holiday party, where Maes listened to my complaints for another twenty minutes or so. Maes takes questions -- and answers them.

Meanwhile, this is the only sign I saw of Scott McInnis (the other Republican in the race) at Tuesday's rally:



(In fairness, McInnis has given public addresses and uploaded some of these to YouTube.)

If memory serves, I first saw Maes June 27 of last year at an Aurora Republican Forum. What I recall from his speech that day is that there was nothing important to recall. LIghtweight, I thought. But last night I saw a candidate for governor. He talked energy. He can effectively challenge Governor Ritter's "New Energy Economy" with the Real Energy Economy. He talked Constitutional restraints of federal power. He talked low taxes. He spoke with passion. He spoke from the heart.

What's more, Maes is a genuine guy. He's fun to talk to. He's fun to listen to. He's even fun to make fun of. McInnis, on the other hand, is well known for his testy personality and media meltdowns.

True, Maes has suffered from lackluster fundraising (though it seems to be picking up a bit). However, Maes also beat McInnis in the unscientific, skewed poll put out by the People's Press Collective.

Delusional? No chance in hell? I was stunned that Ritter dropped out of the race. I thought Scott Brown didn't have a chance in hell of winning his U.S. Senate race. Well, it looks like hell is freezing over and political probabilities must be tossed aside.

I would like to see a Maes/Hickenlooper showdown because I'd like to see two real guys, two businessmen, have a serious discussion about the important issues facing Colorado. (I'm sure Hickenlooper would also love to face that showdown.) With McInnis, I get the feeling that his main purpose is to package his message and play it safe. (McInnis could easily change my mind on this point simply by providing straightforward answers to the Armstrongs' Colorado 2010 Candidate Survey). Moreover, last night I had a chance to chat briefly with Maes's delightful wife and elder daughter, each of whom could be a major asset to his campaign if willing to play that role.

However, Maes has some serious problems. His lack of political experience translates to difficulty raising funds. His ideological problems are more serious.

While Maes is friendly toward free markets for a Republican, generally Republicans suck on economic liberty. I worry about three things from Maes.

First, Maes is fairly strong on property rights but not as strong as I'd like. He said that eminent domain "is a constitutionally acceptable process and should be applied on a case by case basis. Application of the practice should only be exercised when there is a clear and convincing case for a purely public use and benefit." That's better than most politicians on the subject. But, for me, the right answer is that eminent domain is always and everywhere a violation of property rights.

Second, while Maes has admirably taken a stand against corporate welfare, he is amenable to discriminatory taxation. My view is that, while existing tax breaks should not be removed, otherwise we should seek to establish tax parity, rather than punish some businesses more severely than others with higher taxes. Maes said, "Our state constitution clearly states we are not to make investments in private entities. I want to honor the spirit of our federal and state constitutions. I do see tax breaks as viable incentives to spur our economy."

Third, while Maes opposed the federal health bills, he inconsistently advocates free markets in health. Here's what he said on Tuesday:



Here is the worrisome line: "We need to keep health care within the free market system. But we'd have to encourage private industry to get serious about pre-existing conditions. If they don't take on pre-existing conditions, then government has every right to do so. So I want to make sure private industry accommodates that need."

Maes's position is unclear to me. Either he is saying that insurance companies must be politically forced to ignore pre-existing conditions when accepting customers, or he is saying that tax dollars should fund government-run insurance that ignores pre-existing conditions (as Cover Colorado basically does now). The former position leads inexorably to an insurance mandate, as my dad and I have argued. (See also my earlier article.) I welcome Maes's clarification of the matter.

Again, Maes is mostly good on fiscal matters, and I have no doubt he would outperform any Democrat (and most Republicans) on economics. But Maes has a much more serious problem: social issues.

Maes has endorsed the so-called "personhood" measure likely to appear on this fall's ballot. This would ban all or almost all abortions if fully enforced. It would also outlaw forms of birth control (including the pill) and fertility care that may result in the destruction of a fertilized egg. Colorado voters overwhelmingly trounced the "personhood" measure in 2008, and Maes will make few political friends by supporting it.

Maes also said that marriage "is a privilege that is ordained in the Scripture." However, last night he granted that "civil remedies" can solve the problems of homosexual romantic unions. He said churches should not be forced to conduct gay marriages, and with that point I fully agree.

Maes strikes me as a common-sense kind of guy, so I will be interested to hear how he responds to concerns about the horrific and far-reaching implications of the "personhood" measure.

Meanwhile, all I've heard from McInnis is an ambiguous claim that he's "100 percent pro-life." Does McInnis want to outlaw absolutely all abortions? Voters deserve to know this.

As Paul Hsieh has written, independent voters, especially in Colorado, "want the Democrats out of their pockets and the Republicans out of their bedrooms."

For the first time I am very interested in following the Republican primary.

* * *

Also at Tuesday's rally, State Representative Cindy Acree offered her take on health reform:



Acree wants "tax equity at the federal level" to allow people to buy insurance with pre-tax money. That's fantastic. However, she also wants a "new delivery system for primary care all over the state with public-private partnerships." That sound to me like more tax subsidies and government controls.

So, while Republicans rallied against the federal Democratic health bills, they hardly advocate consistently free markets in health care. Hopefully advocates of liberty will continue to persuade them.

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Wednesday, January 20, 2010

Coloradans Speak Out Against Obama Care

As Massachusetts voters filled Ted Kennedy's former Senate seat with a Republican, Coloradans rallied against the Democratic health bill, vowing to pass a state initiative blunting the force of the federal bill -- should it pass and be signed into law by President Obama.

Neurosurgeon Sanat Dixit spoke out against the Democratic health bills:



Jon Caldara introduced the rest of the speakers and offered his own thoughts (presented here in a selection of clips).



I captured the views of some of the ralliers.





State Senator Shawn Mitchell adds his concerns:



Here Justin Longo offers the perspective of a young buyer of a high-deductible health insurance plan:



See the People's Press Collective for more.

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Friday, October 2, 2009

Health and the Empowerment of Payment

The following article originally was published October 1 by Colorado Daily and October 2 by the Denver Daily News.

What was the total cost of your last doctor's visit? If you're like most Americans, you have no idea, because somebody else is paying most of the bill.

Patients directly pay only about 14 percent of medical bills. The rest comes from insurance or government. This is the fundamental reason why health costs have skyrocketed. Patients have little incentive to monitor costs and look for good value, and sending routine expenses through third parties adds paperwork and administrative costs.

When somebody else pays the bill, many doctors think of their client as the insurer, not the patient. Likewise, insurers cater to employers, not you. The patient often gets cut out of the medical loop.

While Barack Obama pretends that insurance companies are at fault, the reality is that federal tax distortions drove insurance into the expensive, non-portable, employer-paid system. This tax distortion explains why Americans tend to use insurance as pre-paid health care, rather than to cover unexpected, high-cost treatments.

Even as Obama demonizes the insurance companies that federal policies have coddled and favored, his policies expand political favoritism. Obama wants to force you to buy politically-controlled insurance, on penalty of huge fines.

If you want to control your health care, you should advocate free-market reforms that expand medical competition, not more political controls. The experiences my wife and I have had with a Health Savings Account (HSA) and high-deductible insurance illustrate the benefits.

We pay $148 per month for high-deductible insurance. We buy it directly, not through an employer. It's not ideal insurance, but it's as good as we could find in today's politically stifled market. We save money for routine care through our pre-tax HSA.

I select my doctor based on who best serves my needs, not who my insurance company happens to like.

My doctor, who came highly recommended by friends, gives me a 20 percent discount for paying at the time of service. I payed $128 for my recent physical, an outstanding value for her high level of care.

Not only does my doctor knowledgeably answer all my questions, she's also sensitive to my budget. For example, she wanted to see blood tests for my cholesterol readings and glucose levels. Rather than order up expensive tests, she looked at my cholesterol readings I got at no cost at King Soopers just weeks ago. She suggested that I get follow-up blood work in three months.

After my wife's doctor's office ordered expensive blood work for her and then, against my wife's explicit directions, gave the lab our insurance information, I figured out how to get cheaper blood work directly. The King Soopers pharmacy normally charges $20 for a "finger prick" cholesterol test. Lab Corp draws blood for only $25.55 through PrePaidLab.com.

My doctor also recommended checking my fasting blood glucose levels a couple times with a home meter. I bought a meter at Walgreens on sale for $9.99, which was entirely discounted through a rebate. [Update: after submitting this article and neglecting to read the directions for the meter, I messed up the test and ended up spending another $9.99 for a new meter. I got the "no coding," smaller meter from Walgreens that's much easier to use.]

That is not to say that cheaper is always better. In 2006 I paid my Boulder dentist $925 for a gold onlay for a back molar. I could have paid somebody else less. But I love and trust my dentist, and his onlay is a work of art worth every penny.

In health care, as in much of life, you get what you pay for. If you advocate taxes and insurance premiums for politically-controlled medicine, don't act surprised when politicians and their insurance stooges call the shots. If you want quality care from your doctor, then fight for your right to pay your doctor directly for the routine care you receive.


Ari Armstrong is a guest writer for the Independence Institute and the publisher of FreeColorado.com.

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Wednesday, September 23, 2009

My Ideal Health Insurance Policy

Right now my wife and I pay $148 per month for high-deductible health insurance through Assurant. Our rate is locked in for three years.

I was just talking with an insurance broker in Boulder, and he mentioned that a three-year policy is actually unusually long. Usually one must renew every single year.

As my dad and I have discussed, various political controls have effectively outlawed long-term policies.

Of course it's difficult to predict precisely what products and services would become available on a free market. However, I have a good idea of what sort of insurance policy I'd like to buy.

Let's start with some basic facts.

1. Real insurance (as opposed to today's politically mangled health insurance) covers unexpected, high-cost treatments, not routine or expected care.

2. As one gets older, the risks of contracting a serious, high-cost disease approaches 100 percent, and this risk (on average) increases dramatically over the age of about 60. As one clever visual illustrates, one's lifetime odds of dying of heart disease are one in five, and the odds of dying of cancer are one in seven. Stroke is the third greatest risk, and then risks splinter quickly into many competing factors. See also the charts (page 5) from National Vital Statistics showing "percent surviving by age."

The upshot is that, in old age, the risk of high-cost care goes up dramatically. At that point, treatment is more or less expected, so medicine becomes increasingly less insurable. On the other hand, in one's youth and middle age, routine care is the norm and high-cost emergencies are relatively rare, which is a great scenario for insurance.

What I'd like to do, then, is purchase a term health policy with a locked in rate till I'm about 60. I'd like the deductible to start high -- around $10,000 annually -- and increase every year until it reached about $50,000. The increasing deductible should enable rates to remain low even though health risks will increase somewhat over time.

So what happens when the term health policy ends? The point is to pay a low insurance premium and then save money to pay for care when I get old. Just to take an illustrative example, if you're 35 years old and you buy term health until you're 60, that gives you 25 years to save for old-age medical expenses. Let's say a high-deductible premium costs $100 per month, whereas a "pre-paid health care" premium costs $500 per month. Let's further say you pay $100 per month four routine care. That gives you $300 per month to save, which adds up to over $200,000 at 6.5 percent interest. I think it would make sense to save somewhat more than that.

If the sort of insurance I'm describing became widespread (as could only happen if politicians stopped completely mucking up the insurance market), one consequence would be that the large majority of health expenses would be paid directly by patients. This would put patients back in control of their medical care, and it would give patients the incentive to stay healthy and look for good value for their health-related dollars. This would keep health costs under control while achieving good quality. Which is why most politicians won't even consider allowing it to happen.

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Monday, September 21, 2009

Gazette: Obama's Republican Health Plan

Today's Colorado Springs Gazette published my op-ed, "Republican plans for health care reform similar to Obamacare." (The print date is later than the online date of September 18).

I point out that the three core tenets of Obama's plan -- mandatory insurance, forcing insurers to ignore pre-existing conditions (and meet other political demands), and expanded subsidies -- have all been endorsed by Republicans.

Meanwhile, the "public option" isn't a central element of Obama's plan, as the other controls alone effectively nationalize the insurance industry. (And, as John Lott suggests via Brian Schwartz, something like the "public option" already dominates the insurance industry.)

Read the entire op-ed. And share it with your Republican friends!

Below is the complete text:

Republican plans for health care reform similar to Obamacare

Democrats pretend that Republicans are just a bunch of obstructionists when it comes to health proposals. Meanwhile, Republicans debate minor aspects of Barack Obama’s plan such as whether it subsidizes illegal immigrants and abortions.

The reality is that every key element of Obama’s plan either came from Republicans or arose with Republican support.

Obama underplays this fact because it is an embarrassment to his self-defined legendary status. This is the man who told Congress, “I am not the first president to take up this cause, but I am determined to be the last.” He wouldn’t have sounded as impressive had he admitted, “My plan cobbles together various Republican-endorsed policies.”

Republicans neglect their role in creating Obamacare because they like to pretend they support free markets and offer a real alternative to Democratic policies. More often than not, when Republicans are not “me tooing” the Democrats, they are taking the lead in expanding political controls of the economy.

The core of Obama’s plan is the mandate: he wants to force everyone to buy politically controlled insurance. But this has already been tried.

Mitt Romney, former Republican governor of Massachusetts and presidential candidate, worked with Democrats to push through just such a plan. Obamacare is little more than warmed-over Romneycare.

What were the results? Last fall Paul Hsieh, a Colorado radiologist, wrote “Mandatory Health Insurance: Wrong for Massachusetts, Wrong for America.” He found “the plan has increased costs for individuals and the state, reduced revenues for doctors and hospitals,” and fallen short of universal coverage.

Last month the Cato Institute’s Michael Cannon checked in on Romneycare. He found higher taxes, exploding costs for insurance premiums, longer waits to see specialists, and “the groundwork for government rationing.”

Obama wants to replicate this failed Republican experiment on a national scale.

Another key part of Obama’s plan is to force insurers to ignore pre-existing conditions. This is again part of Romneycare, but other Republican leaders also endorse the idea.

Colorado Rep. Mike Coffman wrote for the July 30 Denver Post that he wants politicians to “require health insurers to cover those with pre- existing conditions.” In his tepid response to Obama, Rep. Charles Boustany of Louisiana also praised the idea.

Of course, forcing insurers to ignore pre-existing conditions incentivizes people to wait until they get sick to buy insurance, so the position amounts to an endorsement of the mandate, too.

What both Republicans and Democrats like to ignore is that politicians from both parties have created the problem of pre-existing conditions.

Tax distortions push people into non-portable, employer-paid insurance. Ever-changing controls outlaw some insurance options and make others impossible for insurers to offer.

Various federal and state controls undermine the competitiveness of insurance companies, making them largely unresponsive to the needs of consumers. And politicians price some out of the insurance market by forcing up premium costs with special-interest favoritism.

Rather than violate the right to contract for insurance, government should get back to the business of preventing fraud and enforcing contracts, preventing arbitrary denials of claims.

In addition to mandates and insurance controls, the third major aspect of Obama’s plan, expanded subsidies, also came from Republicans.

Obama told Congress, “For those individuals and small businesses who still cannot afford the lower-priced insurance available in the exchange, we will provide tax credits, the size of which will be based on your need.” These “tax credits” in fact serve as outright handouts for some.

If Obama’s plan sounds familiar, it might be because you read the same proposal from Republican Sen. Jim DeMint. His “Health Care Freedom Plan” proposes the “tax credit” subsidies that Obama endorses.

True, most Republicans don’t support Obama’s “public option.” However, Obama seemed willing to deal away his public option in the spirit of faux compromise. Moreover, between the mandate and other controls, all insurance will be controlled by the federal government, anyway, so the public option isn’t the central element of Obama’s plans.

To their credit, some Republicans, including DeMint and Coffman, do have some good ideas. They support rolling back some insurance controls to make premiums more affordable and expanding Health Savings Accounts to let people buy insurance directly with pre-tax money. Tort reform is less important but still a useful idea.

Unfortunately, many Republicans seem deathly afraid to say what millions of Americans long to hear: that people have the right to live their own lives and pursue their values by their own judgment. That government’s proper role is to protect individual rights. That people should interact through voluntary exchange, not force.

When elected officials are able to articulate the message of liberty, and mean it, we might have something better on the table than different flavors of political controls.

Armstrong publishes FreeColorado.com. He and his wife buy high-deductible insurance and pay for routine care with a Health Savings Account.

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Tuesday, September 15, 2009

Restore Free Market to Address Pre-existing Conditions

The following article originally was published September 14 by Grand Junction's Free Press.

Restore free market to address pre-existing conditions

by Linn and Ari Armstrong

Barack Obama's most compelling examples of problems in health care involve insurers dropping coverage of people once they develop health problems. A related issue is the trouble some have in getting new insurance after they develop health conditions.

We agree that these problems of pre-existing conditions are serious and provide a compelling reason to reform health insurance.

However, Obama is totally wrong about the solution. The problem of pre-existing conditions is a consequence of decades of political controls of medicine. The solution is to roll back those controls and restore a free market, not introduce more controls and the worse consequences they will inevitably breed.

Obama and many others like to pretend that today's health insurance operates in a free market. It does not. Federal and state politicians have seriously undermined the competitiveness of insurance through gross violations of the contract rights of insurers and their customers.

Through tax distortions, federal politicians have driven most Americans into expensive, non-portable insurance funded through employers. Lose your job, lose your insurance.

Moreover, employer-paid insurance operates more like pre-paid health care than real insurance, again because of the tax distortion. Such "insurance" tends to cover routine, low-cost care but increasingly falls down when it comes to expensive emergencies.

By contrast, real insurance in a free market would tend to cover unexpected emergencies and leave routine care for direct payment, thereby keeping premiums much lower than what most pay now.

A major consequence of federally promoted, employer-paid insurance is to create problems of pre-existing conditions. If somebody gets sick and can no longer work, the person also loses health insurance and probably can't find another provider.

Politicians continually subject health insurance to changing controls, different from state to state. This effectively prevents insurance companies from offering long-term contracts, because insurers cannot know what political controls they'll have to deal with down the road. It also reduces insurance competitiveness, as a policy issued in one state is not valid in another.

Another way that politicians undermine competitive insurance is to outlaw insurance options that politicians and bureaucrats don't happen to like. In his article "How Freedom to Contract Protects Insurability," Dr. Paul Hsieh points out that political controls effectively prevent organizations such as church ministries from creating insurance.

"The only thing preventing individuals from creating their own contractually binding risk pools today is the government," Hsieh writes.

Yet, ignoring all the ways that politicians harm those with pre-existing conditions, Obama pretends that the fundamental problem is insurance profits.

In a free market, profit means that customers happily pay for some good or service. It is only outside of that market context that profit is bad. For example, a Mafia boss might "profit" by killing people, or a politician might "profit" by doing favors for special interests.

The fundamental issue is not profit versus non-profit, but freedom versus force. The problem with insurance companies is not that they seek to make a profit, but that they must operate as de facto agents of political overseers who call the shots.

On a truly free market, in which insurers and their customers were free from today's political controls, people would tend to buy insurance directly, rather than get stuck with the few non-portable plans their employer chooses for them.

In a free market, insurers would be free to offer more plans to more people, and consumers would be free to shop around, regardless of state boundaries. Politicians would no longer coddle insurers with protectionist controls and tax favoritism.

In a free market, insurers would compete on the basis of quality, security, and transparency of contract. Today, because of political controls, insurance companies face little real competition, and they would face even less under Obama's policies.

In a free market, insurance companies would be able to offer long-term policies that today are politically impossible.

The proper role of government is to protect individual rights, including the right of businesses and their customers to freely contract. The government's role in a free market is to prevent fraud and ensure fulfillment of contract. If government were doing its legitimate job, insurance companies could not arbitrarily drop people.

Almost the entire problem of pre-existing conditions was caused by political controls. Given that politicians have mucked things up so badly, the last thing in the world we need is for Obama to expand political controls of medicine.

We should instead fight for real freedom in medicine and health insurance, in which the problems of pre-existing conditions would be rare and easily handled through voluntary charity.

True, restoring a free market in the future will not solve all the problems of those who now have pre-existing conditions, no insurance, and ongoing, expensive medical care. Therefore, we support, as a transitional measure only, a tax-subsidized high-risk pool, such as Cover Colorado currently provides.

When it comes to problems of pre-existing conditions, the disease is political controls. The cure is more liberty.


Linn Armstrong is a local political activist and firearms instructor with the Grand Valley Training Club. His son, Ari, edits FreeColorado.com from the Denver area.

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Sunday, September 13, 2009

Denver 9/12 Rally: Freedom Forever



In my speech at the Denver 9/12 rally, I discussed the fundamental moral and political choices our nation faces. To illustrate these themes I described how the problem of pre-existing health conditions, and the resulting difficulties of buying insurance, is primarily a product of political controls, starting with tax-driven, non-portable, employer-paid insurance.



See People's Press Collective for the report.

Lu Busse, chair of The 9.12 Project Colorado Leadership Team, said the proper response to the cry, "health reform now," is "freedom forever." Of course, real health reform means reestablishing freedom in medicine, so the two goals are wholly consistent.

Chuck Moe:



Amy Oliver:



Jon Caldara:



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Friday, September 11, 2009

Obama Was Against the Mandate Before He Was For It

Back on February 26, 2008, Barack Obama criticized Hillary Clinton for offering the same health insurance mandate that he endorsed just two days ago. (Thanks to Adam Eidelberg for looking up the transcript of the primary debate.)

Obama was right to question the mandate when Clinton proposed it. I've written more about the matter elsewhere (such as here.) For now, as a prelude to the before-and-after Obama quotes, I'll summarize the main arguments against the mandate.

1. People have the right to choose which products to buy. It is immoral for politicians to force people to buy politically-controlled products.

2. The main reason some fraction of "the young and healthy" currently decide not to buy insurance is that politicians try to force the young and healthy to subsidize other people's health care through jacked up insurance premiums. This is especially true in employer-paid insurance, and it is also true for directly purchased insurance due to state benefit mandates.

3. Obama's pretense that the mandate solves the problem of forcing "the rest of us to pick up the tab" is laughable. The entire point of the mandate is to force some people to pick up the tab of other people's health care through higher insurance premiums. That's why Obama must force people to buy it. Without this coercion, Obama's other insurance controls would dramatically increase costs of premiums and thus the numbers without insurance.

4. Real free-market reforms would lower the cost of insurance premiums so that more people could afford it. Roll back controls that jack up premiums. Expand Health Savings Accounts so that people can buy lower-cost insurance (as well as routine care) directly with pre-tax money.

5. The main reason why some people rely on expensive emergency room treatment, rather than seek out less costly alternatives, is that the federal government forces emergency rooms to offer care without compensation. That policy is wrong, and it predictably introduces perverse incentives.

6. People without insurance do not necessarily force others to fund their treatment. Many fund their treatment out of pocket. Again the solution is to legalize insurance they can afford and want to buy.

7. Mandated insurance is expensive insurance. Obama wants to force insurers to cover more routine care, continuing the federal push to pervert insurance into pre-paid medical care. When routine care is "free" (or nearly so) at the point of service, patients have practically no incentive to monitor costs. Also, under a mandate special interests continually try to get more services covered, jacking up premiums, as has happened in Massachusetts.

With that background, let us turn Obama's position on mandates, then and now:

Obama then:

I have endured, over the course of this campaign, repeated negative mail from Senator Clinton in Iowa, in Nevada, and other places, suggesting that I want to leave 15 million people out.

According to Senator Clinton, that is accurate. I dispute it and I think it is inaccurate. On the other hand, I don't fault Senator Clinton for wanting to point out what she thinks is an advantage to her plan.

The reason she thinks that there are more people covered under her plan than mine is because of a mandate. That is not a mandate for the government to provide coverage to everybody. It is a mandate that every individual purchase health care.

And the mailing that we put out accurately indicates that the main difference between Senator Clinton's plan and mine is the fact that she would force, in some fashion, individuals to purchase health care.

If it was not affordable, she would still presumably force them to have it, unless there is a hardship exemption, as they've done in Massachusetts, which leaves 20 percent of the uninsured out. And if that's the case, then, in fact, her claim that she covers everybody is not accurate.

Now, Senator Clinton has not indicated how she would enforce this mandate. She hasn't indicated what level of subsidy she would provide to assure that it was, in fact, affordable. And so it is entirely legitimate for us to point out these differences.


The Democrats now have "indicated" how they would "enforce this mandate:" they would subject defectors to hefty fines.

While Obama claimed "the plan I'm proposing will cost around $900 billion over ten years," he wasn't specific about how much he would subsidize individuals.

Obama now:

For those individuals and small businesses who still cannot afford the lower-priced insurance available in the exchange, we will provide tax credits, the size of which will be based on your need... [F]or those Americans who can't get insurance today because they have pre-existing medical conditions, we will immediately offer low-cost coverage that will protect you against financial ruin if you become seriously ill...

Now, even if we provide these affordable options, there may be those -- particularly the young and healthy -- who still want to take the risk and go without coverage. There may still be companies that refuse to do right by their workers. The problem is, such irresponsible behavior costs all the rest of us money. If there are affordable options and people still don't sign up for health insurance, it means we pay for those people's expensive emergency room visits. If some businesses don't provide workers health care, it forces the rest of us to pick up the tab when their workers get sick, and gives those businesses an unfair advantage over their competitors. And unless everybody does their part, many of the insurance reforms we seek -- especially requiring insurance companies to cover pre-existing conditions -- just can't be achieved.

That's why under my plan, individuals will be required to carry basic health insurance -- just as most states require you to carry auto insurance. Likewise, businesses will be required to either offer their workers health care, or chip in to help cover the cost of their workers. There will be a hardship waiver for those individuals who still cannot afford coverage, and 95 percent of all small businesses, because of their size and narrow profit margin, would be exempt from these requirements. But we cannot have large businesses and individuals who can afford coverage game the system by avoiding responsibility to themselves or their employees.


As I have noted, it is the mandate (not the public option) that defines Obama's current policy. Mandated insurance is morally wrong and destined to generate bad consequences. We do not need more mandates. We need more liberty.

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Thursday, September 10, 2009

Mandate, Not Public Option, Defines Obamacare

Rather than "hope and change," Barack Obama offers a warmed-over Republican policy -- Romneycare -- that has already failed in Massachusetts. The core of Obama's fake reform (described most recently in his address to Congress) is not, as many conservatives suggest, the "public option." It is instead the proposal to force people to buy politically-controlled insurance. (For details on the Massachusetts fiasco, which Obama hopes to replicate on a national scale, see the articles by Paul Hsieh and Michael Cannon.)

It is the mandate that ties together the various tenets of Obamacare, particularly insurance controls (regarding coverage and pre-existing conditions) and expanded subsidies.

Regarding pre-existing conditions, I've pointed out, "Forcing insurers to ignore pre-existing conditions means allowing consumers to wait until they get sick to buy insurance... The logical consequence of forcing insurers to ignore pre-existing conditions is to force everyone to purchase insurance..."

Obama made the same point in his speech: "Unless everybody does their part [and purchases insurance under compulsion], many of the insurance reforms we seek -- especially requiring insurance companies to cover pre-existing conditions -- just can't be achieved." Just so.

Nevermind the fact that federal policies largely created the problems of uncovered pre-existing conditions.

Obama admits, "More and more Americans worry that if you move, lose your job, or change your job, you'll lose your health insurance too." But why is health insurance (and not any other sort of insurance) tied to employment for most Americans? It is because of federal tax distortions that drive expensive, non-portable, employer-paid insurance.

As I've noted (and again), the vast net of continuously changing insurance controls also helps to effectively outlaw stable, long-term policies that would remedy the problem of pre-existing conditions.

For more on this issue, please see Paul Hsieh's outstanding article, "How the Freedom to Contract Protects Insurability."

Obama wants to force insurers to ignore pre-existing conditions and also force insurers to cover preventative care (which would, incidentally, outlaw my high-deductible plan and force my wife and me to buy dramatically more costly insurance). The inevitable result of such controls is to jack up insurance premiums (leaving aside Obama's fantasy that giving people more "free" health care will somehow curb costs).

Mandated insurance requires expanded subsidies. After all, you can't force somebody to purchase a product that they literally cannot afford. If Obama follows the lead of Republicans, his "tax credits" will in many cases be direct subsidies.

Obama hopes to cheat a little on his mandate, claiming "there will be a hardship waiver for those individuals who still cannot afford coverage." (Whether you can "afford" this politically-manipulated "coverage" will be determined by the federal government.) Apparently Obama would subsidize these "hardship" cases through some combination of tax-funded welfare and tax-funded insurance.

With or without the "public option," the core of Obamacare remains the same: force everyone (or nearly everyone) to buy insurance, federally control what insurance people can buy (making it more expensive), and forcibly transfer more wealth to pay for health.

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NPR Gets Liberty On the Rocks Reaction to Obama's Health Speech

NPR reporter Jeff Brady watched Barack Obama's health address to Congress with members of the Denver Tech Liberty on the Rocks. He interviewed numerous participants and quoted three in his report.

Amanda Teresi, founder of Liberty On the Rocks, explained why forcing insurers to ignore pre-existing conditions runs contrary to the basic purpose of insurance: "The idea is that it's health insurance. And the whole concept of insurance is that you get it before you get sick, or before something happens to you. It would be the equivalent of not having any car insurance, hitting a tree, and then calling Geico and saying you want to sign up. It doesn't make sense."

(I've written a first and second article on the topic.)

T. L. James suggested that Obama's comments about tort reform won't amount to much. James told Brady, "Tort lawyers fund an important part of the Democratic power base, their funding base for their elections. There is no way that he's going to do anything that's going to turn them away from the Democratic party."

Finally, Orin Ray said he didn't think Obama's speech really changed anybody's mind.

Brady did a nice job with his brief report. However, I wish he had mentioned the more fundamental issues. The fact that Obama wants to force everybody to buy politically-controlled insurance is a huge deal, as is the fact that Obama wants to expand subsidies. Nor did Brady mention the political causes of today's problems in medicine, or that Massachusetts has already tried -- and failed -- to successfully implement Obama's key "reforms." (I discussed all of these issues with Brady.) Yet Brady didn't have much time for his portion of the report, and he was basically fair.

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Wednesday, September 9, 2009

Obama Wrong About Mandatory Auto Insurance

I watched Barack Obama's address on health policy tonight on television at Liberty On the Rocks at the Denver Tech Center. Both NPR and Fox 31 sent reporters to cover the speech and the free-market response to it. I'll have more to say about the speech in coming days. For now, I want to correct but one of Obama's remarks:

"That's why under my plan, individuals will be required to carry basic health insurance -- just as most states require you to carry auto insurance."

It is simply not true that states "require you to carry auto insurance." Rather, you must buy auto insurance (or face fines) only if you drive an automobile on politically operated roads.

For example, Colorado's statute 10-4-619 states that "compulsory coverage" applies to "every owner of a motor vehicle who operates the motor vehicle on the public highways of this state or who knowingly permits the operation of the motor vehicle on the public highways of this state."

In other words, if you don't own a motor vehicle, or you don't drive your vehicle on "public highways," you aren't required to buy auto insurance.

It is indeed interesting that Obama sees a politically controlled industry as the model for health care.

Obama's proposal to force everybody to buy politically controlled insurance is not like the requirement to buy auto insurance for public highways. Under Obama's proposal, there is no escape and no exception. If you don't buy insurance that politicians and their appointed bureaucrats approve for you, you face hefty fines. If you want to self-insure, or if you don't like the politically-approved insurance, that's tough. You will be forced to buy it. Because Obama is all about choice, competition, and freedom. And two plus two equals five.

September 10 Update: Wesword's Michael Roberts picked up on the NPR coverage of Liberty On the Rocks and also quoted this blog post. As I pointed out in the comments, this post made a delimited point quickly. I've written much more about mandated insurance elsewhere.

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Reid Errs on International Health Comparisons

Tonight President Obama will renew his pitch for more political control of medicine. One important part of the debate is how the U.S. compares to other nations. Recently the Denver Post republished an article from the Washington Post by T. R. Reid on the matter.

As my dad and I have pointed out (and again), the U.S. outperforms various European nations by measures such as cancer survival and access to technology.

As is also well documented, nations with the most severe political controls of medicine ration care (see also Patient Power). To take just one recent example, see the following article in the British Telegraph: "Sentenced to death on the NHS: Patients with terminal illnesses are being made to die prematurely under an NHS scheme to help end their lives, leading doctors have warned."

However, the fundamental choice is not between the current American system and some system similar to that of some other nation. The fact is that American medicine is already mostly controlled by politicians, and in that respect it already resembles the politically controlled systems throughout Canada and Europe. To the degree that American medicine fails, it fails because politicians have mucked it up. Where health care in other nations succeeds, that is largely to the extent that it retains some elements of freedom and borrows the successes of American innovations.

Reid definitely comes at the matter with the presumption that it's the government's job to ensure "universal coverage." It is not. Rather, it is the government's job to protect individual rights, including rights to offer and purchase health care and insurance on a free market, by voluntary exchange. The fact that government has violated rather than protected our rights is what has created the medical mess in which we now live. (For a historical survey, see the article by Lin Zinser and Paul Hsieh.)

If government would protect our rights rather than interfere in medicine, health care would be better in quality, lower in cost, and widely accessible. It is ironically the political crusade for "universal coverage" and care that leads to skyrocketing costs, rationing, and widespread difficulties in getting good health care.

Part of Reid's confusion is to treat politically controlled insurance and health providers as "private." If politicians control something, it is not "private" in any meaningful sense, even if the ownership is nominally so.

With an eye toward Reid's mistaken premises, then, let's evaluate his arguments.

Reid helpfully concedes that U.S. health is hardly a free market:

In some ways, health care is less "socialized" overseas than in the United States. Almost all Americans sign up for government insurance (Medicare) at age 65. In Germany, Switzerland and the Netherlands, seniors stick with private insurance plans for life.

Meanwhile, the U.S. Department of Veterans Affairs is one of the planet's purest examples of government-run health care.


However, Reid seems to think this counts as a reason for expanding political controls in the U.S.

Reid grants that Canadian health features waiting lines. However, he claims, "studies by the Commonwealth Fund and others report that many nations -- Germany, Britain, Austria -- outperform the United States on measures such as waiting times for appointments and for elective surgeries."

Reid simply misstates the survey results.

Here's what the Commonwealth Fund actually says, contrary to Reid's summary: "The U.S. patients reported relatively longer waiting times for doctor appointments when they were sick, but relatively shorter waiting times to be seen at the emergency department, see a specialist, and have elective surgery."

The survey also notes that the difference is partly attributable to the fact that some Americans lack health insurance, and this is primarily a problem resulting from political controls of insurance, which drive up costs.

It would have been helpful had Reid pointed out some of the other findings of the survey.

On the matter of doctor visits, the question is "Waited 6 days or longer for a doctor appointment (last time sick or needed medical attention." Australia came in at 10 percent of surveyed "sicker adults," Canada at 36 percent, Germany at 13 percent, New Zealand at 3 percent, the UK at 15 percent, and the U.S. at 23 percent. Notice that this question pertains to a patient's scheduling of a doctor visit, not necessarily the availability of doctors.

On the question of waiting four or more hours in the emergency room, only Germany beats the U.S.

"Waited 4 weeks or longer to see a specialist?" The U.S. comes in at 23 percent, compared to 57 percent in Canada and 60 percent in the UK.

"Waited 4 months of longer for elective surgery?" The U.S. stands at 8 percent, while Canada is at 33 percent and the UK at 41 percent.

All that said, such surveys are inherently limited in reliability. For example, people in different cultures might have very different ideas about when a doctor's visit is "needed." And people are not likely to try to see a specialist or get elective surgery if they think their attempts will be fruitless, so the U.S. might perform even better than the survey results indicate.

But, again, it is not enough just to compare the U.S. against other nations. We have to get at the underlying causes of problems in the U.S. and abroad.

Writing for Reason, Shikha Dalmia points out:

The fact of the matter is that America's health care system is like a free market in the same way that Madonna is like a virgin -- i.e. in fiction only. If anything, the U.S. system has many more similarities than differences with France and Germany. [A]part from England, most European countries have a public-private blend, not unlike what we have in the U.S.


Dalmia points out that government pays for nearly half of all health care dollars in the U.S. and "directly covers about a third of all Americans through Medicare (the public program for the elderly) and Medicaid (the public program for the poor)." The U.S. also forces emergency rooms to provide care without compensation.

Dalmia adds, "This is not radically different from France, where the government offers everyone basic public coverage, of course -- but a whopping 90% of the French also buy supplemental private insurance to help pay for the 20% to 40% of their tab that the public plan doesn't cover."

Moreover, a significant minority of Germans "opt out of the public system altogether and rely solely on private coverage."

What about rationing? Dalmia points out:

Struggling with exploding costs, the French government has tried several times—only to back off in the face of a public outcry—to prod doctors into using only standardized treatments. In 1994, it started imposing fines of up to roughly $4,000 on doctors who deviated from "mandatory practice guidelines." It switched from this "sticks" to a "carrots" approach four years later, and tried handing bonuses to doctors who adhered to the guidelines.

Meanwhile, in Germany, "sickness funds" -- the equivalent of insurance companies—have imposed strict budgets on doctors for prescription drugs. Doctors who exceed their cap are simply denied reimbursement, something that forces them to prescribe less effective invasive procedures for problems that would have been better treated with drugs. But the most potent form of rationing in France and Germany—and indeed much of Europe -- is not overt but covert: delayed access to cutting-edge drugs and therapies that become available to American patients years in advance.


Cato's Michael Tanner has written both an op-ed and a longer policy paper about international comparisons. He points out:

Those countries with national health care systems that work better, such as France, the Netherlands and Switzerland, are successful to the degree that they incorporate market mechanisms such as competition, cost-consciousness, market prices, and consumer choice, and eschew centralized government control.

In France, for example, co-payments run between 10 and 40 percent, and physicians can balance bill over and above government reimbursement rates, something not allowed in the U.S. Medicare program. On average, French patients pay roughly as much out of pocket as do Americans. The Swiss government pays a smaller percentage of health care spending than does the U.S.


In his longer paper, Tanner goes into more detail on the health policies of particular countries.

Reid also argues that American insurance, which he laughably calls "free enterprise," has higher administrative overhead than other countries. I do not doubt that this is true despite the fact that Reid is probably ignoring the relevant administrative costs elsewhere (such as tax compliance). But this is only true because American politicians have totally screwed up the insurance market, turning insurance into expensive pre-paid health care. (See my article, "What is Health Insurance?"

Finally, Reid argues that it's "cruel" if politicians don't force insurers to ignore pre-existing conditions. I've addressed the matter in a first and second article. The upshot is that insurers and consumers have the right to enter voluntary contracts, and insurance controls create bad incentives and higher costs, leading to cries for more controls.

In general, Reid attempts to make his case by omitting the relevant facts.

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Thursday, September 3, 2009

Free Exchange Should Set Insurance Premiums

Should health insurance companies charge people with pre-existing conditions or known health risks more?

Lawrence Jones of Conifer wrote a thoughtful letter for the August 25 Denver Post arguing that higher rates are unfair for conditions beyond one's control. I thought Jones's letter deserved a full reply.

Jones writes:

Letter-writer William Hinckley [see the August 20 letter] thinks that charging higher insurance premiums to people with pre-existing medical conditions is akin to charging higher house insurance rates to dimwitted folks who knowingly choose to live in fire traps. People don't choose to get diabetes. People don't choose to have genetic predispositions to cancer.

Those who knowingly make risky life choices, whether to live in fire-prone shacks or to smoke tobacco, should certainly pay higher premiums as a result of their choices. But why should the boy with leukemia, the woman with breast cancer, the young athlete with diabetes? Why should the innocent be punished for wanting access to health care just because they actually need it?


Jones's fundamental mistake is to ignore the rights of insurers and treat insurance as a collectively owned good. Insurance is a product sold on the market that properly belongs to its producers. Insurers have every right to set the terms of insurance policies, including rates. And consumers are free to buy an insurer's product or not. The government's only proper role is to enforce insurance contracts and prevent fraud, whether by the insurer or the consumer.

Politically controlled insurance rates violate the rights of both insurers and their customers. The key characteristic of free markets is voluntary exchange. A producer cannot sell a product without a willing customer, and a customer cannot buy something that no producer wishes to sell. Producers and customers have the right to reach mutually agreeable terms, free from force.

What Jones ignores is that forcing insurers to charge unhealthy people lower rates means that insurers must charge healthier people higher rates, or risk bankruptcy. The typical result of Jones's policy is that young, healthier, less-wealthy workers trying to get ahead in life must subsidize everyone else.

Jones, then, implicitly means that he wants politicians to force insurers to charge healthy people more. Such political controls are a big reason why insurance premiums cost so much today, and why both Democrats such as Barack Obama and Republicans such as Mitt Romney call for mandated insurance. Some young healthy people decline to subsidize other people's health through politically-manipulated insurance premiums, so they must be forced to do it, the reasoning goes.

Jones misses a number of other points as well. For example, he ignores the fact that politicians have effectively outlawed long-term insurance contracts, as I point out in a recent article on pre-existing conditions.

Of course insurers should NOT charge people with health conditions higher premiums -- IF those people bought long-term insurance before they developed the conditions. But long-term insurance contracts, on the whole, simply are not possible in today's political climate. Real health reform entails restoring a free market in health insurance, so that insurers are more competitive, more responsive to customers, and more free to offer useful products.

The entire purpose of health insurance, as I've argued, is to allow people to voluntarily pool their resources to protect against unexpected risks. If a risk is expected, such as if somebody knows prior to getting insurance that they have cancer, then the risk is simply not properly insurable.

Jones suggests that the "innocent" are "punished" when politicians do not force others to subsidize their care through higher insurance premiums. But this presumes that healthier people are somehow guilty. They are not. A free exchange between an insurer and a customer does not somehow "punish" a party outside that exchange.

Does this mean that people with pre-existing conditions and no health insurance cannot get health care? Obviously not. The idea that all health care must be funded through health insurance is ludicrous. The wealthy may fund their own health care out of pocket. The poor may look for voluntary charity, whether provided directly by hospitals or indirectly through charity groups. (Obviously today people have access to a wide array of health welfare programs. I favor gradually replacing welfare with strictly voluntary charity.)

Jones is also partly wrong about which diseases are impacted by personal behaviors. He mentions cancer and diabetes as examples. Yet both cancer and diabetes are often largely caused by one's choices.

The American Diabetes Association states, "Type 1 and type 2 diabetes have different causes. Yet two factors are important in both. First, you must inherit a predisposition to the disease. Second, something in your environment must trigger diabetes." What you eat can dramatically impact your likelihood of developing diabetes, as it can dramatically impact your ability to deal with the disease.

Likewise, cancer is partly genetically determined. For example, some women have genes that make breast cancer more likely. Nevertheless, our foods, activities, and chemical exposures can dramatically impact our risks of cancer.

I have two general points to make about this. To the extent that disease is impacted by personal behaviors, it is a very bad idea for political policies to encourage damaging behaviors. Laws forcing insurers to fund pre-existing conditions reduce the incentive of people take care of themselves. The inevitable result is more disease.

The second major point is that one person's unluckiness does not impose some sort of duty on a more-lucky person. The person without a genetic predisposition to get cancer is free to donate funds to treat cancer patients but should not be forced, under threat of imprisonment, to do so. The proper purpose of insurance is to protect ourselves against unexpected risks, not to equalize luck after the fact.

Health care is not a right. It is not some collectively owned good to be distributed by political whim. Health providers and health consumers have a right to negotiate mutually beneficial trades and to donate whatever they wish to charity. It is that right which government must consistently protect, if we value or lives, our liberties, and our health.

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Wednesday, September 2, 2009

How Republicans Can Win On Health Reform

"Republicans suck." I had heard that Jon Caldara began his July talk to the Denver Metro Young Republicans (DMYR) with that line, so I figured I'd repeat it when I addressed the group on August 25 about health policy.

I really like the DMYRs. It is a vibrant and passionate group on the whole truly committed to liberty. If the Republican Party of Colorado is to have a future, it needs to start with people like this.

I explained that Republicans have advocated bad policies in areas of insurance controls and health welfare.

It was Republican Mitt Romney, for example, who passed insurance mandates in Massachusetts, which the Democrats have now worked into their "reform" bill. I drew on the article by Dr. Paul Hsieh for The Objective Standard on the matter.

Michael Cannon has also written about the failures of the Romney model.

I explained that mandated insurance is inherently tied to tighter insurance controls and expanded subsidies. Moreover, Romney's plan didn't address the underlying problems, particularly the high costs of employer-paid insurance (driven by tax distortions) and capricious insurance controls.

The result of this GOP scheme? Skyrocketing tax costs and premiums, a damaged insurance industry, more political meddling, and doctor shortages.

Next I criticized Bob Beauprez's endorsement of mandated insurance and Mike Coffman's endorsement of insurance controls.

With respect to health welfare, I discussed Bush's costly Medicare prescription drug program, Jim DeMint's plan to expand welfare, and Michael Steele's endorsment of health welfare as a "right."

Then I turned to the positive portion of my talk. How can Republicans win on health reform?

First and foremost, Republicans must make liberty in medicine a moral issue. People have the right to control their own lives and resources, free from political interference. Republicans must answer the Democrats' challenge to address the moral argument. Republicans who try to make the debate all about budgets and cost are destined to lose.

Republicans must articulate the harms of decades of political controls in medicine. They must explain how tax distortions created the expensive, non-portable, employer-paid system. They must talk about how insurance controls drive up premiums and undermine a competitive, consumer-responsive insurance industry. And they must talk about all the ways that forced wealth transfers, via taxation and politically-controlled insurance premiums, drive up costs and reduce responsibility.

Finally, Republicans must advocate true free-market reforms. Expanded Health Savings Accounts would help offset the tax distortions driving employer-paid insurance. Rolling back insurance controls will restore competitiveness and bring down insurance rates. Tort reform will weed out frivolous law suits. And welfare reform will rein in expansions of various programs, control costs, and ultimately begin to move back in the direction of voluntary charity.

Many Republicans are trying to "me too" the Democrats on health reform by advocating more insurance controls and more health welfare. But is it not now abundantly obvious that Republicans cannot win on a Democrat-lite platform?

If Republicans wish to win on health policy and other issues -- and if they want to deserve to win -- they should start with DMYR's five principles:

* "The best government is a small, Constitutionally-constrained one."

* "A strong national defense is... vital to the preservation of our liberty."

* "Capitalism is the only moral philosophical system."

* Individual rights and personal responsibility.

* The Rule of law.

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Monday, August 31, 2009

Debunking Health Care Reform Myths

The following article originally was published by the August 31 edition of Grand Junction's Free Press.

Debunking health reform myths

by Linn and Ari Armstrong

Advocates of Barack Obama's health proposals claim they want to debunk myths surrounding the health reform debate. We're happy to oblige.

Myth #1: Opponents of Obamacare are the ones creating myths.

True, some have made exaggerated claims about "death panels." However, rationing is indisputably part of any political health program. More subsidized health care leads to more indiscriminate use of the health system, which leads to skyrocketing costs. The inevitable "solution" is rationing.

If you think that those running a political, tax-funded health system will never deny treatment to those who claim to need it, then you are either a liar or a fool.

Myth #2: Opponents of Obamacare are "anti-health care reform."

A recent article in the Huffington Post claims that "opponents of Democratic health care legislation" are "anti-health care reform," which is nonsense.

What Obama offers is not "reform," but merely more of the same sorts of political controls that caused existing problems in medicine. Continued tax distortions promoting expensive, non-portable, employer-paid insurance. More political controls that jack up insurance premiums. Probably laws outlawing low-cost, high-deductible policies. More forced wealth transfers.

Real health reform means respecting liberty and individual rights in medicine. It means respecting people's rights to control their own resources and enter into voluntary agreements. Politicians should neither compel interactions, as through insurance mandates, nor forbid them.

The proper role of government is to enforce individual rights, which means to protect people from force and fraud and otherwise leave them free to lead their lives according to their own best judgment.

Real health reform means recognizing the individual's moral right to his or her own life. Obama's fake "reform" means politicians and their appointed bureaucrats telling people what to do.

Advocates of real health reform want expanded Health Savings Accounts with low-cost, high-deductible insurance, rolled back insurance controls, containment of health welfare, and tort reform.

Ironically, Obama lied in the very sentence in which he accused his opponents of lying, when he called for "an honest debate, not one dominated by willful misrepresentations and outright distortions, spread by the very folks who would benefit the most by keeping things exactly as they are."

Don't let Obama get away with his outright distortion that the only alternative to the existing system is a more-politicized one.

Myth #3: Opponents of Obamacare are criminals, thugs, and mobs.

Early on the morning of August 25, two people smashed eleven windows at Democratic Party Headquarters in Denver. The windows were adorned with posters endorsing Obamacare.

Democratic Chair Pat Waak quickly lashed out: "Clearly there's been an effort on the other side to stir up hate. I think this is the consequence of it."

Clearly Waak jumped to conclusions to demonize critics of Obamacare. Unfortunately for Waak, Denver police caught one of the alleged perpetrators.

Police arrested Maurice Schwenkler, a Democratic operative, left-wing radical, and gay-rights activist. During the last election, a Democratic 527 group paid Schwenkler $500 to campaign for a Democratic state-house candidate. Who's "stirring up hate" now, Waak? (See PeoplesPressCollective.org for details about the story.)

It is true that some Obamacare protesters have gotten overly heated at public forums. That happens among the left and right. It is also true that the vast majority of those who oppose Obamacare are thoughtful, peaceable citizens exercising their First Amendment rights.

Myth #4: We need Obamacare to give everybody health care.

Most Americans already have great access to the best health care in the world. The biggest problem is that, due to political controls that have squashed competition and jacked up premiums, many cannot afford health insurance.

As Cato's Michael Tanner points out, of the roughly 46 million uninsured, 12 million are eligible for existing health welfare, 10 million are non-citizen immigrants, and "most of the uninsured are young and in good health."

Is it any wonder that some young, healthy people decline to purchase expensive insurance premiums through which politicians force them to subsidize the health care of others?

Americans understandably don't want to let people die in the streets without care. That's why we should expand Health Savings Accounts and roll back insurance controls -- then more people could afford insurance without busting the budget. We wouldn't need nearly as much charity if politicians would stop interfering with people's ability to get health care.

Extensive health welfare programs exist now. Government spends nearly half of all health care dollars, especially through Medicare and Medicaid. Cover Colorado subsidizes high-risk insurance.

Ultimately, we advocate a return to voluntary charity, which remains a strong force in America even though political welfare has largely displaced it. If you think others should donate to a health charity, then persuade them, don't hide behind armed IRS agents and threaten to throw people in prison if they don't pay up.

We want everybody to be able get good health care. We want politicians to respect people's rights. That is why we reject Obama's health reform myths.

[Update: Cato's Michael Tanner debunks a fifth myth, Obama's claim that "If you like your private health insurance plan, you can keep your plan. Period." Among other things, Obamacare would outlaw high-deductible plans.]

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Friday, August 28, 2009

Rationing IV: Politically-Controlled Insurance and Rationing

This is the fourth of a four-part series on rationing.
Rationing I: Price Distribution Is Not Rationing
Rationing II: The Definition and Application of Rationing
Rationing III: The Harm of Conflating Price Distribution with Rationing
Rationing IV: Politically-Controlled Insurance and Rationing


The Big Lie in the modern health policy debate is that the current system represents a free market and that our choice is between the status quo and more political controls. The modern system is emphatically not a free market, and advocates of liberty in medicine call for free-market reforms as the only just and practical alternative to existing and proposed political controls.

Not only do politicians spend nearly half of all health-care dollars today, but they extensively control the so-called "private" insurance market. Health care, and particularly health insurance, is already mostly controlled by politicians; proposed "reforms" such as those offered by Obama threaten merely to expand those controls.

Yet Obama repeated the lie, ironically, in the very sentence in which he accused his critics of lying. Obama said health policy "should be an honest debate, not one dominated by willful misrepresentations and outright distortions, spread by the very folks who would benefit the most by keeping things exactly as they are."

Obama steadfastly refuses to acknowledge those who seek to reform health care by restoring free markets and individual rights in medicine.

In today's mixed economy, health insurance companies are neither entirely private nor entirely controlled by politicians. Thus, health insurance is not characterized by the price distribution and firm contracts of a free market. It is characterized by political distortions. This significantly complicates the question of whether insurance companies ration care and whether this rationing is political in nature.

Before turning to particular claims about insurance rationing, it is useful to briefly review some of the major political distortions of the insurance market. (Many of these points are covered by Lin Zinser and Paul Hsieh.)

* Through tax policy, the federal government drives the expensive, non-portable, employer-paid insurance system.

* Because most people are locked into the insurance program offered by their job, there is very little market competition for health insurance.

* The federal government imposes various other controls restricting entry into the health insurance market.

* State controls also impede a competitive insurance market.

* Because of the tax distortions, employer-paid insurance has moved away from real insurance (see my previous article) and toward pre-paid health care, leading to exploding costs.

* Because politicians have driven "insurance" into pre-paid health care, today most people rely on a third party to pay for all or nearly all of their health expenses, rather than pay health providers directly for routine care.

* Federal and state politicians significantly control whom insurance companies must cover and which benefits they must finance. This again helps turn insurance into pre-paid health care, contributing to exploding costs.

* Because of political controls, some people wait to get insurance until they get sick, or they change to more costly insurance once they get sick. This drives up costs to insurance companies and premium payers.

* Because politicians have forced insurance into a pre-paid health model, insurance is increasingly used to pre-pay minor expenses but not cover (or not entirely cover) major ones. Thus, in some respects insurance has been turned on its head. Rather than cover only high-cost, unexpected costs, now insurance covers low-cost, routine care and not all emergency care.

* Because of ever-changing political controls at the state and federal level, insurance companies simply cannot offer long-term or stable insurance contracts. Stable contracts have effectively been outlawed. One result has been that insurance contracts have become partly vague and ambiguous. (See also my article on pre-existing conditions.)

* One consequence of the host of political controls on health insurance is that, to control skyrocketing and unpredictable costs, insurance companies have sometimes turned to capricious methods of rationing care. Insofar as they do so, they do so because they are, in effect, agents of political controls, not part of any free market.

Despite the fact that political controls have largely destroyed the free market in health insurance, Obama and his supporters use existing insurance as their foil to advocate more political controls.

Downplaying the many cases of overt political rationing of health care, such as Jacob Appel describes, and ignoring existing political controls on health insurance, Obama and his supporters pretend that the way to overcome the partial rationing of the mixed economy is to adopt the total rationing of politicized medicine.

Of course, Obama is coy about the rationing his proposals would entail. On June 24, Obama said, "Maybe you're better off not having the surgery, but taking the painkiller."

By August 11, Obama was pretending that everybody can get all the "free" health care they could possibly desire, an impossible promise. Yet, rather than outright deny the rationing of politicized medicine, Obama tried to turn the debate by tarring the status quo with rationing:

The underlying argument I think has to be addressed, and that is people's concern that if we are reforming the health care system to make it more efficient, which I think we have to do, the concern is that somehow that will mean rationing of care, right? -- that somehow some government bureaucrat out there will be saying, well, you can't have this test or you can't have this procedure because some bean-counter decides that this is not a good way to use our health care dollars. And this is a legitimate concern, so I just want to address this. ...

Another way of putting this is right now insurance companies are rationing care. They are basically telling you what's covered and what's not. They're telling you: We'll cover this drug, but we won't cover that drug; you can have this procedure, or, you can't have that procedure. So why is it that people would prefer having insurance companies make those decisions, rather than medical experts and doctors figuring out what are good deals for care and providing that information to you as a consumer and your doctor so you can make the decisions?


Here Obama conflates clear insurance agreements, by which consumers agree ahead of time which services insurers will cover, with arbitrary decisions by insurers to deny care in some cases. Thus, Obama attempts to treat any sort of distribution system, including the price distribution of a voluntary market, as "rationing." Only decisions that are ad hoc, and not specified by contract, plausibly count as rationing, and these are precisely the sorts of decisions driven by political controls.

An August 22 article by Michael Booth and Jennifer Brown of the Denver Post describes some examples of health-insurance rationing. The title of the article illustrates the strategy of Obama's "reformers:" "Health care reform advocates say insurance companies already ration coverage." The journalists write:

All health insurance plans, whether privately run for profit or financed by the government, rely on a structure where some services are not covered. From prescription drugs to experimental surgeries, patients face limits in a plan's fine print or from people paid to make choices in a process called "utilization review."

"No system is wealthy enough to pay for every single request that comes from doctors and hospitals," said Wendell Potter, a former national vice president with insurance giant Cigna who now argues in favor of sweeping reform.

"Insurance companies have corporate bureaucrats on staff who many times will deny coverage for something recommended by a doctor. It happens all the time, in the name of 'not medically necessary,' " Potter said.


The Denver Post article contains not a single mention of how existing political controls have fostered such problems, nor how true free-market reforms would restore competitiveness and accountability to health insurance companies. Instead, the "debate" is summarized as the (ill-defined) "rationing" of the status quo versus the rationing of Obamacare.

On a truly free market, health insurance companies would compete, in part, on clarity of contract (as Brian Schwartz suggested to me). Moreover, the government would resume its proper role of ensuring enforcement of contract and resolving contractual disputes.

However, on a free market, insurers and their clients have every right to voluntarily agree to terms. As with the fictitious Twentieth Century Motor Company, people could voluntarily agree to enter a system of rationing, such as one involving ad hoc decisions about medical necessity. Significantly, on a free market, people would also be free to exit such a system. No doubt practically everyone would prefer a stable, long-term, well-defined insurance contract -- if only insurance companies were free to offer one. Such contracts would involve no rationing when insurers declined to cover care explicitly not covered by the contract.

Today health rationing is carried out by government agencies that control vast tracts of health care. To a minor degree, it is carried out by insurers acting under severe political controls. A free market features no political rationing. Any rationing in a free market must involve people voluntarily entering into contracts that allow it, and in such cases people are free to exit the system.

The advocates of politicized health care ignore the nature of rationing. They try to turn any sort of distribution into "rationing," and they ignore the fact that existing rationing in health care is caused by political controls. Their goal is to promote the notion that health care is collectively owned by the nation and properly distributed by politicians, rather than owned by its producers and properly distributed through voluntary exchange.

Those who value their lives, their health, and their liberty won't let such "reformers" get away with their distortion of the language or their political take-over of health care.

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Thursday, August 27, 2009

Rationing III: The Harm of Conflating Price Distribution with Rationing

This is the third of a four-part series on rationing.
Rationing I: Price Distribution Is Not Rationing
Rationing II: The Definition and Application of Rationing
Rationing III: The Harm of Conflating Price Distribution with Rationing
Rationing IV: Politically-Controlled Insurance and Rationing


Whether price distribution counts as a type of rationing is not merely some semantic dispute. Conflating price distribution with political rationing obliterates the crucial distinctions between the two. A system of property rights and voluntary association is nothing like a system of political control of goods and services.

Price distribution on a free market rests on the right of producers to their property. If you produce something, using your own resources and in voluntary interaction with others, you have the right to exchange your product with others as you see fit. Generally on a free market people exchange goods and services using money as the intermediary, according to the principles of supply and demand.

Political rationing means that some governmental agency assumes command of some set of goods or services, in violation of the producer's rights to the product and of the consumer's rights to offer a voluntarily exchange. Rationing entails collectivism in ownership.

In her 1946 letter (see pages 320 to 327 of Letters of Ayn Rand), Rand writes, "Rationing IS coercion, that is, orders, and nothing else whatever. The essential distinction of a free market, as against any other kind of system, lies in the absence of coercion and in the method of exchange by voluntary choice" (page 322).

She continues:

If we accept the idea that a free pricing system is a form of rationing, the unavoidable logical implications and consequences are as follows: if a free pricing system is a form of rationing, then every person living under it has an equal claim upon and title to all the goods produced. (To ration means to share; a free pricing system is not based on the idea of sharing anything; a rationing system is.) But anyone can see that under a free pricing system everybody is not getting an equal share of everything. Therefore, this form of rationing is not working well or fairly. Why isn't it? Because the rationing is done by private persons in their own selfish interests. What is the solution? Another form of rationing -- which would be run by disinterested public servants for the common good of all.

Once the people's mind has reached this state of confusion, the rest is easy. The collectivists have won, because their basic premise has been accepted. ...

And here is the payoff: when the groundwork is ready, a collectivist says to the average American: "Don't fool yourself, brother. You've always lived under a system of rationing and always will. The only choice you have is this: Do you want to be rationed by selfish, greedy capitalists for their own private profit -- or would you rather be rationed by a public authority who will have no motive except your own good and the general welfare?" (page 323)


Either people have the right to control their produce and to make voluntary exchanges with others, or their property is collectively owned and rationed by politicians. That is the basic choice.

What is amazing is that 63 years ago Ayn Rand anticipated the precise nature of today's debate over rationing.

Read Rationing IV: Politically-Controlled Insurance and Rationing

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Rationing II: The Definition and Application of Rationing

This is the second of a four-part series on rationing.
Rationing I: Price Distribution Is Not Rationing
Rationing II: The Definition and Application of Rationing
Rationing III: The Harm of Conflating Price Distribution with Rationing
Rationing IV: Politically-Controlled Insurance and Rationing


Rationing is defined by three essential characteristics. First, rationing means that some central authority distributes goods or services. Second, the property rights to the goods or services are usurped or not clearly defined. Third, under rationing recipients have some recognized claim to a portion of the goods or services. (Note: Diana Hsieh, Paul Hsieh, and Brian Scwhartz helped me to clarify my understanding of rationing.) A closer look at each condition clarifies the meaning of the term and its application to various examples.

Rationing involves some central authority. Price distribution does not. In the usual cases this is unambiguous.

What about a more complicated example of distribution under price ceilings that cause shortages? Under such circumstances, generally two outcomes follow. First, the quality of the price-controlled goods declines. Oxford's dictionary includes an example from 1892: "The most inferior goods in the market are called ration-tea and ration-sugar." Second, sellers who cannot sell goods or services at market rates must sell according to other criteria, and often this takes the form of personal favors or prejudices.

Ayn Rand discusses this example in her 1946 letter on rationing (see pages 320 to 327 of Letters of Ayn Rand). Rand argues that it is "counterfeiting" to claim that "apartments are not rented by harassed, hogtied landlords -- but are 'rationed by favoritism.' Implication: a landlord has no right to choose the tenants of his own property, if there are more than one applicant."

The essential difference between such non-price distribution under price controls and rationing is that no central authority is involved in the distribution. An authority is involved in setting the price controls, and that is what unjustly disrupts market prices, but price controls in themselves are not an example of rationing.

The second characteristic of rationing is that property rights to the goods or services are usurped or not clearly defined. Under price distribution of gasoline, the gas is owned by its producer (or, later, the retailer), and a consumer's money is owned by that consumer. The two parties may voluntarily agree to a mutually beneficial exchange. Under rationing, the gasoline is treated in part as the property of the government, which replaces voluntarily exchange with authoritarian distribution.

This point has important implications for health insurance. Insurance is a contract; its buyers agree to pay a regular premium in exchange for coverage under certain conditions. No insurance policy promises to pay for any conceivable health expense. For example, under my high-deductible policy, my insurance company is not "rationing" care by declining to pay expenses under my deductible.

A car insurance company might not cover damage caused to a policy holder's car if the damage was caused by his drunk driving. A home insurance company will not cover damage caused by the policy-holder's arson. None of this is rationing.

An insurance company, for instance, may decide in advance to cover established cancer treatments but not expensive, untried new therapies. A consumer who agrees to this policy may not properly complain about "rationing" when the insurance company declines to finance the sort of therapy that is explicitly not covered.

The problem arises when insurance contracts are vague and subject to arbitrary case-by-case evaluations, a problem that I'll return to in Part IV of this series.

Under political rationing, some authority must make ad hoc decisions about the distribution of goods or services. The rationed goods may be distributed equally among the population or according to individual cases. Yet even "equal distribution" requires considerable refinement by the authority. Does every citizen get the same number of gallons of gas? Every family (and what is the definition of a "family")? Every vehicle?

In the case of health care, obviously an equal distribution of resources would be senseless. Some people never get seriously sick, others incur modest health expenses, and others need (or want) extensive and expensive health services. Thus, simple ration cards for health care wouldn't work. Instead, some authority must decide who gets what care, based on criteria established by the authority. For example, health care might be rationed according to what is deemed medically essential or necessary. When the rationing authority fails to ration with sufficient stridency, waiting lines serve the function.

In her 1946 letter, Rand defines rationing as "to distribute... by the decision of an absolute authority, with the recipients having no choice whatever about what they receive; it also means that all the recipients involved have an equal claim to that which is being rationed, and are entitled to an equal share."

Rand's definition entails the three characteristics discussed above; however, her point about "an equal claim" needs refinement. With food or gasoline, each person might be rationed the exact same amount. However, the example of food illustrates the problem with assigning an "equal share." Should a three year old infant get the same food rations as a 250 pound, hard-working man? That would be ludicrous. Rationing, then, involves not literally equal shares, but shares considered equitable according to some criteria. A grown man gets more food than a small child. A sick person gets more health care than a healthy person.

In her novel Atlas Shrugged, Rand describes the collectivized distribution of the Twentieth Century Motor Company, which institutes the Marxist doctrine, "From each according to his ability, to each according to his need" (see page 661 of the hardback novel). One of the company's owners becomes its "Director of Distribution," who decides what everybody "needs," and whose "gauge was bootlicking." (page 667). However, insofar as the Director of Distribution attempts to distribute supplies according to need, she is rationing, though primarily on a case-by-case approach. Rand compares this system to the rationing of a global egalitarian system (page 669).

Nobably, employees of the company voluntarily remain in this system (though the best employees quickly leave). Thus, the rationing at Twentieth Century is crucially different from political rationing. Under political rationing, exit from the system is forbidden or forcibly restricted. One may join a commune that rations goods according to need, but so long as one joins voluntarily and remains free to leave, that is a fundamentally different situation than political rationing, which one is not free to exit. Political rationing is the major form and most important type of rationing.

While rationing involves an authority's ad hoc decisions, rationing does recognize that recipients have some recognized claim to a portion of the goods or services, the third characteristic of rationing. A king who arbitrarily hands out loot to his favorites acts too capriciously for his actions to be considered rationing, and at her worst the Twentieth Century's Director of Distribution resembled such a king.

The requirement of a recognized claim shows that charity does not count as rationing. A food bank that restricts recipients to a certain amount of food is not "rationing," for the recipient has no inherent claim to the food.

Food stamps (which are actually debit cards now) forcibly redistribute wealth. However, if its recipients are otherwise considered akin to the recipients of charity, then food stamps do not "ration" food by limiting the amount of handout that recipients get or the type of food that recipients may buy through the program.

Does rationing apply to a recent case from Oregon? ABC News reported last year:

The news from Barbara Wagner's doctor was bad, but the rejection letter from her insurance company was crushing.

The 64-year-old Oregon woman, whose lung cancer had been in remission, learned the disease had returned and would likely kill her. Her last hope was a $4,000-a-month drug that her doctor prescribed for her, but the insurance company refused to pay.

What the Oregon Health Plan did agree to cover, however, were drugs for a physician-assisted death. Those drugs would cost about $50.


Jon Caldara characterized this as an example not only of rationing but of a "death panel."

The problem with ABC's account is that it counts the Oregon Health Plan as just another "insurance company." It is not:

The Oregon Health Plan (OHP) is a state program of health care for people with low incomes. This health care includes services for medical care, dental care, mental health and substance abuse treatment. Depending on which benefit package you are found eligible for, OHP benefits may... [r]equire you to pay a monthly premium for your OHP coverage... Some adult clients are required to make a monthly payment for health coverage. (pages 1 and 9)


So did Wagner pay anything for her insurance premium? That is unclear. If she did, then she had some claim to the benefits. If not, then she was like a recipient of food stamps.

If, in a free market, Wagner had sought out voluntary charity, we would not call it "rationing" if the charity did not fund every conceivable treatment for her. No charity can afford to fund every conceivable request of every possible recipient. The difference between a charity and political rationing is that the charity has rightful control over its resources, whereas under political rationing the recipients have some sort of claim to an equitable portion of the goods or services in question.

Notably, if people are forced to pay tax dollars to support a program that provides benefits, then any government restriction of those benefits with respect to those paying the taxes counts as political rationing.

Read Rationing III: The Harm of Conflating Price Distribution with Rationing

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