Having been advised recently of some horrible truths about the condition of our healthcare system (by those that paid good money to see Sicko), I decided to see if anyone else was as discombobulated as I.
Lo and behold, the legislature in our wonderful state of California is in fact trying to push through a bill to address virtually all of the current problems (SB 840 proposed by Senator Kuehl). Naturally, the governor is opposing it, pero quiza si suficiente muchos hombres saven la verdad, actual progress may happen.
This is not the post to convince you of inadequacies of the current system (particularly in California). There are enough sources out there for that, not least Michael Moore's opus mentioned above. Start with the fact that 16% of the population is completely uninsured. For the libertarian in all of us, there's also danger of being denied payment by the insurance companies (which happens all the time for expensive procedures), denial of coverage for pre-existing conditions, loss of coverage with loss of employment, etc.
No, this post merely analyzes the said bill, as its ramifications are difficult to understate. I'm going to try go beyond the standard "think of the children vs. commie socialized medicine" bullshit and hopefully convince you this is something worth supporting. And support it actually needs, because despite an upcoming rally in LA
(http://upcoming.yahoo.com/event/226563/) the governator still seems opposed to it. So here goes.
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Note: (PP) below marks issues that are not resolved to my knowledge. Numbers like 140xxx refer to section number in the bill text.
A short summary is available here. Basically, "the bill creates one plan and one public trust fund which pays all health care bills and collects all the monies already being spent on health care and insurance plans, which is called a "single payer" system." (onecarenow.org) It replaces all insurance companies and creates a single insurance provider run by the state headed by the Commissioner ('the Comish'). It is funded by an employer/employee tax that replaces current premiums.
Select substantive provisions of the bill
Structure
The bill provides for a state-wide commissioner to head an agency and office that supervises a dozen regional directors who implement his policies. This does raise the specter of central planning. It is unclear if this is worse than the present insurance market in any meaningful way (where the plurality of insurance companies hold all the power - not the providers). The problem is particularly acute, however, in regard to capital investment - which would be directed from the center. (PP)
Healthcare delivery/covered benefits
"Covered benefits will be defined under the bill to include all medical care determined to be medically appropriate by the patient's health care provider," (Senate analysis) This includes dental care, acupuncture, chiropractors, vision. The bill excludes cosmetic medicine and providers not licensed by the state. It provides for the Commissioner to extend benefits not currently described/covered as funding allows. Primary care providers may apparently be changed at will (no stated limitations on this) - unless they are in "integrated healthcare provider" systems (like Kaiser?) in which case it is more difficult.
Those few service that are not covered (like elective cosmetic insurance) may still be covered by private companies (onecarenow.org)
Referrals are necessary to see specialists without co-pays/deductibles, unless that specialist is your primary care provider. It may be annoying, but this reduces costs and lowers fraud based on experience of other countries. It is also a standard practice in many current insurance plans.
The system will provide insurance for those who are temporarily out of state (unlike many current plans). For periods of greater than 90 days the Commissioner will determine eligibility.
All eligible residents (those physically present with intent to reside) will be enrolled – provided with identification that can be presented to healthcare providers.
"In the event of an influx of people into the state for the purposes of receiving medical care, the commissioner shall establish an eligibility waiting period and other criteria needed to ensure the fiscal stability of the system."(Bill Text). While nothing is really said about how eligibility will be checked, the question is really how effective could a verification system possibly be? (PP)
The bill itself does not specifically mention illegal immigrants. However, onecarenow.org writes
"[They will be covered]. It costs
More directly, this simply transfers and lowers the already hefty bill we're paying for the uninsured when they are treated by state hospitals and their emergency rooms. "Emergency rooms will no longer be crowded with uninsured patients who should be with primary care doctors, at a much lower cost. Rural and inner-city hospitals and trauma centers will no longer be closing because of high proportions of non-paying patients." This really happens, state hospitals run enormous debts because of having to treat the uninsured - which then fall on the tax payers of the state. "There will be no need to resort to collection agencies to collect bills. Patients will not be forced into bankruptcy by medical bills, at a loss to hospitals." (onecarenow.org)
One could say - why should we pay for the illegals and reward them, etc - but rationally, economically - it is simply the case that everyone would be better off.
There will be no deductibles or co-payments in most situations for the first 2 years of operation – after which these may be instituted. However, these combined, may not exceed $250 per year (!). In any event these may not be established for preventive care (the bill is touted as pushing preventive care - unlike the present system - as fiscally wise). I think lack of any co-pays is a serious problem, but hopefully this will be changed during implementation. (PP)
A number of exemptions are spread throughout the bill that diminish the monetary impact on individuals (i.e. waivers for collective bargaining agreements, etc).
Financing
Financing for SB 840 is explicitly provided by a separate bill (SB 1014 (Kuehl)) that will fund the healthcare system primarily via "a health care coverage tax on the wages of an employee that would be paid by both the employee and the employer" (Senate analysis) – which would be transparent to the employees as the tax would stand in place of current payments to insurance providers.
The plan is that NO NEW SPENDING (taxes) are created by the bill. The premium/funding structure is to remain roughly the same as now (with respect to gov't/employers/employees shares). The current expenditures should cover universal healthcare. In fact, a single statewide plan – instead of the current selection of 6000 plans - would actually cost $8 Billion less than the current expenditure of
“ 1. Reducing Insurer Administration by about 69%- saves $9.686 billion in 2006
2. Reducing Hospital Administration by about 22%- saves $3.56 billion in 2006
3. Reducing Physician Administration by about 30%- saves $6.614 billion in 2006
4. Bulk Purchasing of Prescription Drugs - saves $4.418 billion in 2006
5. Bulk Purchasing of Medical Equipment - saves $786 million in 2006
6. Increasing Primary Care - saves $3.408 billion in 2006
7. Reducing Provider Fraud - saves $783 million in 2006”
(onecarenow.org)
More details (mainly from the Lewin report) here.
They argue that the increase in utilization of the system would be offset by "$20 billion in administrative savings and $5.2 billion in bulk purchasing savings." (Assembly Committee analysis). Kuehl in fact claims that 30-50% of the money in the system is currently wasted or misspent (Assembly Committee analysis?)
It would be nice to find an evaluation of the Lewin group (PP). It has done many such studies across the country, but its accuracy is unclear, though it is regularly used by congress and other states, so presumably they're as good as it gets.
But the claim is fairly plausible on its own. True, normally we don't think of government agencies as being efficient, but when it comes to insurance, this is not necessarily true. Medicare actually has far lower administrative cost (the measure of efficiency) than private insurance companies. Even a critical study has found this to be true -- at most 8% for Medicare and at least 9% for the private insurance (Matthews 2006). Plus, the system will have the benefit of the insurance companies' profits. The last several years have been lucrative for the insurance companies, the five major HMOs have earned over $11BILLION in profit a year, spending over a Billion just on marketing in 2006 and donating over $3 Billion to politicians since 2001 (emaxhealth.com). The California Blue Shield by itself earned almost almost $400 million in profit in 2006 (blueshield.ca). Not to mention the spending on litigation. All of this money will now go directly to the health providers and consumers, instead of their share holders. Finally there are considerable gains to be made from the introduction of state-wide electronic infrastructure that will streamline the operation
Potential problems
(In addition to those marked throughout this post with ‘PP’)
Fraud detection
Any entitlement service provider must deal with the possibility of fraud. This is one of the weaknesses of the proposal (TBOMK). The bill does provide for the Inspector General (of the system) to investigate fraud, abuse/misuse of the system and its benefits. While this mitigates the threat of denial of coverage we face with the present for-profit system, it likely errs on the other side, creating the potential for extensive misuse, since the checks on it are so distant (performed by a separate branch of the service).
This is particularly problematic as the bill prevents co-pays outright in the first two years of operation.
Conflicts with federal regulations
The bill acknowledges there may be conflicts with federal regulations and the Commissioner is charged with resolving these. What are the potential conflicts and their impact?
Arguments against
One of the most telling arguments in favor of the bill is that the list of supporting organizations runs for 5 pages – but there are only about 2 dozen opponents, most of them insurance industry related and a few chambers of commerce. But let's consider some of the arguments made against the bill.
A. CMA makes two cogent arguments:
1. The bill allows a decrease in benefits (compared to current plans) to cover revenue shortfalls.
This is true - when a significant revenue shortfall is evident, a number of 'cost control' options are available to the commissioner, including - among many other less drastic measures - (sec 140203c):
"temporary decrease in benefits"
"postponement of planned capital expenditures"
"imposition of copayments or deductible payments"
If these are not sufficient in the longer run, premium payments may be increased.
While this is not surprising, given the present uncertainty of the future fiscal situation, no one wants to see "decrease in benefits" as an option.
However,that option requires approval of the legislature - and clearly will not be granted lightly (140203).
2. The bill concentrates all decisions about plans and policies in a single commission.
However, it does however establish several boards and advocacy groups for oversight. It provides for impeachment and removal of executive officers.
B. Opponents cite the following statistics about
"More than 1.3 million Canadians (out of a total population of 26 million) are waiting for medical services, including 212,990 who are waiting for surgical procedures; 45% of Canadians who are waiting for services describe themselves as being in pain; Canadian patients wait an average of six weeks after referral from a primary care physician to see a specialist, and then wait another 7.3 weeks on average before they receive treatment; and 63% of
Their system also tends to delay introduction of new techniques (thus it has a 1/10 of per-capita MRi machines of the
While some of this data is questionable, it is in fact common to have multi-month waiting periods for elective procedures (but everyone truly has access for urgent procedures).
However,
C. Verity of fiscal claims
Opponents also claim that administration costs will not be slashed and large taxes will be required.
However,
Arguments pro
- All
- This bill provides excellent coverage of high quality. Benefits covered are equal or better than virtually any plan on the market. There are multiple provisions for oversight of policies and care delivered, including the creation of a Chief Medical Officer who would head the Office of Health Care Quality. Everyone will have the chance to choose any primary provider they wish.
- Greater access to emergency rooms as the uninsured and under-insured are diverted to ordinary care providers.
- There are good reasons to believe the plan will actually save money for the consumers and employers over the current system.
In Sum
This is not a perfect solution. It brings challenges, from ensuring proper policies and sound investment by a central agency, to preventing an influx of out of state immigrants. While the financial outlook is good, economic predictions are inherently uncertain.
However, the bill goes to a great length to build incentives and checks within the system to combat the inherent problems of bureaucracy, and is flexible enough to deal with the inevitable unforeseen. It has been supported by an extensive financial analysis. It carries the support of most of the legislature and virtually everyone organization that is not tied to the insurance industry. It addresses a major and urgent social problem without increasing taxes - and it actually has a shot. Give it a chance. If nothing else, think of the children won't you?
References
Onecarenow.org. http://www.onecarenow.org/sb840.htm
Bill Text. http://info.sen.ca.gov/pub/07-08/bill/sen/sb_0801-0850/sb_840_bill_20070710_amended_asm_v96.pdf
Senate analysis. http://info.sen.ca.gov/pub/07-08/bill/sen/sb_0801-0850/sb_840_cfa_20070604_103241_sen_floor.html
Assembly committee analysis. http://info.sen.ca.gov/pub/07-08/bill/sen/sb_0801-0850/sb_840_cfa_20070702_100653_asm_comm.html
Matthews, Merill, Ph.D. 2006. Medicare's Hidden Administrative Costs. http://www.cahi.org/cahi_contents/resources/pdf/CAHI_Medicare_Admin_Final_Publication.pdf
Emaxhealth.com. http://www.emaxhealth.com/124/13925.html
Blueshieldca.com. https://www.blueshieldca.com/bsc/aboutbsc/download/A18066-OL_4-7AROnline2006.pdf
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I will attempt to resolve some of the questions marked above and post an update shortly. Until then, bad spellers of the world, untie!(Update 8/08/07)
32 comments:
Misha, I am shocked at your blatant disregard of the basic libertarian principle—sovereignty! I seem to think that this bill goes against every principle a decent libertarian believes in. How can you support the government meddling in people’s lives, even on a state level?
While, I think you definitely have the gist of the bill down this is why I am completely against it:
1. This creates a monopoly—which goes against the US Constitution.
Even if this bill passes all the insurance companies will unite and the lawyers will tie up this bill in court for years costing the state of California millions of dollars. Eventually the courts will rightfully decide for the insurance companies because the state of California is not allowed to create an insurance monopoly
2. How efficient is the DMV—this will be 10 time worse?
I strongly believe in small government and creating a giant state bureaucracy will simply cause even more headache than dealing with insurance companies. I have never seen an efficient government run agency. A good example of something controlled by the state is the DMV—enough said.
I have so many arguments against it that I can write an essay as long as this bill, but I will spare you.
Alina, perhaps you should write an essay - on the condition that you have actual arguments in it, not just words.
Basic libertarian principles? First of all why am I supposed to regard them? Meddling in people's lives? Why are uncontrolled for-profit corporations allowed to meddle and voter-controlled gov't not? Why is this any more meddling than FDA, or - say - the current Department of managed healthcare? Yes, if i was a strict libertarian I couldn't support this, but I'm not.
Now to answer your numbers.
1. Monopolies are not against the US Constitution (sorry, but what are you smoking?). Nor is this a monopoly in a commercial sense since this is a government agency. I don't see anyway you could call this unconstitutional (since it provides for the compensation of the industry employees) so it's unlikely to be challenged in court. What are you talking about?
2. Yes some agencies are not efficient, others are. In the post I give the example of Medicare - did you bother to RTFP? Any reason why would be worse than the DMV? (BTW, the santa clara DMV is quite efficient in my experience). Regardless, your example is irrelevant.
I also strongly believe in the minimal optimal government. The fact is, the suggested increase is outweighed by its benefits, and the reduction of the for-profit antagonistic bureaucracy of the insurance companies.
So if you want to contribute something substantive, I'm all ears.
oy...
Misha,
I was under the impression that you were a strict libertarian—you must have switched your views since we first met.
What you wrote is correct—the government already has many agencies that meddle in the lives people companies—all of whose existence I appose, such as the aforementioned FDA and the Department of Managed Care. It is not the government’s job to regulate companies; its job is only to keep the citizens safe from invasions and terrorists. (If it were up to me we would lose 90% of the current Departments and only keep the FBI, CIA and the various branches of the Armed Forces.)
Monopolies are VERY illegal!! While I though it was an amendment to the constitution (which was a mistake on my part) monopolies were made illegal by the Sherman Antitrust Act of 1890. The state of California will be monopolizing the health insurance industry in the entire state of California. Thus the bill should be rightfully overturned, which I have no doubt it will be.
Also in response to your comment about Medicare—yes I read the post. I am very much against the existence of Medicare. Since you brought it up, while yes Medicare is “efficient” on paper, it’s only because they have a set rates they will pay the doctors and most patients cannot see the best doctors because top doctors won’t accept patients with the basic Medicare coverage.
Since you seem to like the constitution, I should point out that it is indeed the job of the gov't to regulate companies. More importantly, it is naturally the job of gov't to regulate imperfections of the market (like the externality of pollution, which cannot be handled otherwise due to high transaction costs). But that's a separate discussion.
Again, the government is obviously not a monopoly in the sense meant under the Sherman Act - that concerns itself with companies, not branches of government.
Medicare is not just efficient on paper, it is in fact efficient (see the referenced paper). Why this is so is irrelevant, except for whether we can expect the same efficiency under the proposed system. You haven't suggested why we shouldn't. Please provide some sort of evidence or accurate argument for your claims.
Another major point that I forgot to mention in my previous posts, and this is something I should’ve started my augments with—this bill denies consumer’s the choice of what insurance company they would like to use. One will no longer be able to choose which insurance company they would like to buy their insurance. This bill limits choice and anything that limits choice is not good for the economy and the average consumer.
It's actually quite funny how often people use this absurd argument.
Insurance is at best a secondary good. You're right to the limited extent that some set of choices that a consumer got to make before has been eliminated. More importantly you're wrong (or at least its not immediately obvious) that its bad for the economy of the average consumer. In fact the whole point is that this plan is good for both. The shrinking of "choice" you're decrying is like saying eliminating 10 out of 20 jams now offered in Safeway limits consumer choice (studies show we only look at ~6). Or suppose you had 10 airlines and 10 resellers, with the airlines always offering the better prices. Suppose I then could lower the ticket prices by abolishing resellers - yes I eliminated the possibility of certain actions (buying from resellers) but what you really care about are the tickets not the resellers - and I made you better off in that respect.
Now what you could say is that I no longer have a choice of insurance plans/risk assessments - and that I now have to pay more than I think should for my risk/service consumption outlook. To the extent this will occur in practice, it is a regrettable cost, but one of the plan's main arguments is that no one (or very few) will have to pay more than they now do - in which case no real choice has been constrained
While your arguments are justified you're still eliminating choice and competition. I strongly believe and many economists constantly write on this issue—the market will set the most efficient price. When you take out the market, and the price of goods and services is set by an X party it is inefficient. You end up with an economic shortage or surplus, which eventually causes the system to fail.
If I might chime in on a small point. I don't claim to argue on the other issues you guys are discussing. But, when it comes to markets... Economists do believe and I agree with them that a free market will set the most efficient price.
Efficiency is of course measured not in the proper distribution of wealth, and not in a "fair" (and we can argue what that means) distribution of the consumer/producer surplus. Efficiency is measured most of the time in terms of which combination of output and price will create the most utility on the market, and which combination of output/price cannot create more utility for one party without taking away utility from someone else, regardless of whether that utility is going to buyer or seller. I digress to this because the market will still be considered efficient even if the insurance company is raping the little consumer guy.
Anyway, my beginning point was - a free market is efficient, a free competitive market is efficient. The insurance company market is not a competitive market - it's an oligopolistic market, and it's raping the poor consumer over and over again. I don't yet have an opinion on whether this bill is the solution to our problems, i too am concerned for how it locks in consumers and takes away the choice of benefit coverage (what may be better for one consumer isn't necessarily better for another)...but in arguing for it's failure in the legislature, we should not ignore or underplay the problems our current system does hold.
Alina - LawyerChik hits on a good point - a perfect market is perfectly efficient. However the insurance market is a)oligopolistic and b) has various imperfections (information shortages, transaction costs, etc) - so it may be arbitrarily inefficient. For example the current distribution of hospitals and equipment, which has little coordination, will likely be improved by a central coordinator.
Tangential to this is the very important point of how much do we value fairness and minimum provisions in addition to efficiency.
I'm sorry if I seem "testy", but it becomes really frustrating to hear arguments from (pseudo-)libertarians for the virtues of abstract markets who don't seem to realize how far real markets depart from the theoretical optimum.
To reiterate a point - yes, the bill does limit the consumer's ability to pay less for less coverage. But the hope of the plan is that few people will be forced to pay more than they do now (and virtually no one will get less coverage than they desire). But I argue that lost increment of potential choice is a price worth paying for the benefits described.
We live in a world where airlines generally have two fairs - coach and first class. It doesn't have to be this way. They could charge less for end-seats, more for window seats over middle seats, etc. This would truly increase the consumer's freedom. They don't because that little bit of increased freedom would come at a greater cost to the efficiency of their operation and would probably raise all prices. It's a trade-off worth making.
(Note: actually they have moved in this direction to some extent - by making in-flight food a la carte. Am I the only one who thinks this is stupid and annoying? Don't charge separately for the food, make it edible!)
I disagree with the idea of universal healthcare in general -- whether federal or state... because it contradicts my libertarian ideals. That is not to say that the current american healthcare system doesn't need a serious overhaul.
So California spends $186 billion on healthcare, I assume the money comes out of tax payer's pocket. The whole big idea of this plan is to save a few billion of that money by creating a single HMO. Instead of a whole bunch of them, there will be only one. Doesn't it feel a lot like creating a governtment/state MONOPOLY? I'm sure mathematically it works out and it's possible to insure every Californian but the quality will suffer because the proposed plan eliminates competition among the many insurances... regardless of how bad they are. Ultimately this system will likely to deteriorate like most government agencies be it welfare office, INS or whatever.
There must be other ways to mend American/Californian healthcare system.
I agree with Leonad, thank you, finally someone w/ a similar point of view!
In response to Leonard's post, I too think that government agencies are in general not too efficient. They don't have the "fear of investors" put in to them and tend to be very inefficient in general. But I think the solution to the tendency of agencies to get ineffective is to design a charter for this agency which has proper incentives and proper checks - perhaps a system resembling that of a for profit firm with goals and repercussions if these goals are not achieved...the solution is not to never create another govt agency.
Your other point about creating a monopoly on insurance services - can you restate that. I see a problem with saying that a monopoly in insurance services causes a drop in quality - do you mean a drop in quality of insurance provision or a drop in quality of the medical services? Those are two different topics and you seem to be compounding them...one does not logically lead to the other. This "monopoly" on insurance services is intended to create a better insurance system. The hospitals and providers remain private and still compete for consumers - there is no monopoly there - the aim is not to achieve socialized medicine...
..I invite response.
There is nothing wrong with a regulated healthcare monopoly. Healthcare is a necessity, like power and water. Most of our utilities are already monopolies.
Government has the power to grant monopolies to promote the general welfare. Patents are monopolies granted by the government. Healthcare is not a free market, because your options are either pay whatever they demand or get sicker and die. It's about as "free market" as an armed robbery.
Also, the whole idea of this competition between insurers is a sick joke. For insurers to compete on price, they need to reduce costs by denying expensive care to the sick people. And that is exactly what they are doing. If your doctor orders an expensive test, he may be the best specialist in the field, but he can be overruled by some "doctor" working for the insurance company who has never seen you. That is how these insurance companies "compete." By picking and choosing who they insure and what claims they will or won't pay for.
By the way I am not for this bill right now. I think it's premature. I think we need grassroots political support for such a system to be politically sustainable, and the time is coming, but I don't think it's here yet. To act prematurely may set back health care reform like Hillarycare did in the 90s.
Plus I think we need a nationwide system, not a patchwork of state systems. States creating their own systems will remove pressure from the Federal government to act, and will create incentives for sick people to move to universal healthcare states and overburden public systems, while those states without universal healthcare would benefit from this shifting of healthcare burden to the taxpayers universal coverage states.
While "healthcare is a necessity, like power and water" it does not justify monopolizing them. Monopoly on power, water, telecommunications are all bad for consumers. It's even more alarming if such monopolies are government owned.
Government does not have the power to grant monopolies as this power is not listed in the constitution. Patents are not monopolies but "exclusive rights for a period of time" in order to promote intellectual achievement and coin the concept of "intellectuall property" -- the cornerstone of modern free society.
Medicine is not just a service or a science, but it is also an art. It's not right to reduce it to a "service." Healthcare is and should be a free market. If you are sick -- your options are many, ranging from picking a specialist, to getting a second opinion. In addition, in a capitalist society you have more ready access to expensive medical procedures such as MRI etc.
While "healthcare is a necessity, like power and water" it does not justify monopolizing them. Monopoly on power, water, telecommunications are all bad for consumers. It's even more alarming if such monopolies are government owned.
Government does not have the power to grant monopolies as this power is not listed in the constitution. Patents are not monopolies but "exclusive rights for a period of time" in order to promote intellectual achievement and coin the concept of "intellectuall property" -- the cornerstone of modern free society.
Medicine is not just a service or a science, but it is also an art. It's not right to reduce it to a "service." Healthcare is and should be a free market. If you are sick -- your options are many, ranging from picking a specialist, to getting a second opinion. In addition, in a capitalist society you have more ready access to expensive medical procedures such as MRI etc.
Your comments on competition between insurers are first of all wrong. The compensation schedules are available to the consumers that are picking the insurance plans. This is like arguing that the car manufacturers are denying you features to cut down on the cost. All you need to do is check the specification. For example, not all expensive tests are "cost effective" in the context of socialized healthcare. If you had universal healthcare, certain tests would not be covered by it because you're dealing with limitted financial resources. It may be a good test for the individual though. So, why shouldn't this individual have an option of purchasing an insurance that WOULD compensate for such tests?
As far as universal health insurance goes, we need to break it up into issues. There's one issue of medical insurance for the well-to-do people. There's a separate issue about medical insurance for the wretched and the poor.
As far as the middle class and up go, there is nothing preventing them from picking a medical insurance that will cover whatever you need. (If you like, I can provide you with links to good and affordable medical insurance underwriters) Your cost of medical insurance will be a lot less than the taxes that the California state has you shell out. So, had the have-nots not been a factor, it would not make ANY sense to tax your for medicine at all. Not anymore than taxing you for universal nutritional services -- hey food is a neccessity too, so lets all get lunches on wheels.
The reasoon why we tax for medical care -- regardless of whether the system is universal healthcare or HMO based or whatever is really to try and provide for the have-nots. Or at least for as many of the have nots as the system allows. This is why the glorious state of California raises $186 bln in taxes every year. It is not for the Malibu residents... who can probably opt to pay out of pocket. Why are we raising taxes for the poor anyway? If you're a left-winger, it is because those people have a G-d given right for medical care. If you are like me -- it is to make sure that there's no rampant disease or epidemics, ie in recognition of the fact that we all depend on one another. But again... we're really discussing what to do with this tax money. And/or how much of this tax money should be raised. Masha is simply saying that this money could be spent better if you eliminated the HMO's.
Again -- the middle class and the rich can afford to buy medical insurance. In fact, most of them get it through their employer like most people I know. It is also one's constitutional right not to have medical insurance at all.
On that note, I can promise you, Ilyas that universal healtcare on a federal level will be as sustainable as prohibition on alcohol in 1922 in the US, or prohibition on abortion in the USSR under Stalin. Such "nationwide system" would have a global fallout... such a fallout that Michael Moore would probably die from a heart attack because he's so fat and lipitor would not be available to him.
I'd be more than happy to elaborate on how universal healthcare would lead to such a fall out. & how in the case of the United States it would fail miserably like all utopian ideas in the history of mankind.
Leonard, that has not been our experience with energy deregulation in California. In fact, the only company to come out looking pretty out of that mess was the city government monopoly Los Angeles Department of Water and Power, which not only planned well enough to provide affordable power to the city consumers, but built in enough spare capacity to sell excess power to private energy companies who were experiencing severe shortages, and pass those revenues to its consumers. At the same time, private electricity generators planned well enough to supply enough power to maximize their own profits, and profits are nearly always maximized when there is a shortage to drive up prices. So turning over utilities to free markets is accepting that you will have shortages and underserved communities, which is exactly the situation we are currently seeing with healthcare. It is not a coincidence that most countries have not turned to a free market model for utilities or healthcare.
Patents are monopolies with an expiration date. The government gives the company a monopoly on the product for a limited time, because doing so serves a government interest of promoting "the Progress of Science and useful Arts." It can just as easily create another monopoly for providing health care to promote the "general welfare." It would be completely constitutional.
Healthcare is a free market is completely laughable concept to me. First of all, the consumer in question is under duress. He may be in pain, or he may be facing very negative consequences for his health and/or survival were he to make a free market decision of declining a procedure that his doctor recommends. Secondly, it's almost impossible for the consumer to estimate the price for his evaluation and or treatment and make the decisions that a consumer needs to make for free markets to work. You may go in for a simple physical only to have the price escalate by orders of magnitude based on factors beyond his control
Re: Lawyerchik :)
I go to an Israeli medical school. For the last four years, I've got to experience the universal healthcare mostly as a provider but sometimes as a patient as well.
In general the Israeli idea is great, in its original utopic format. In fact it's much better than what the Californian bill is proposing. Israel has very high taxes and the medical insurance is free. You even get to choose between something like 3 different government HMO systems -- Clalit, Maccabi and Meuhedet. Overall, I'd even say that the system works... but what's right for Israel or European countries is not right for the humongous United States.
To get back to the LawerChik's train of thought... indeed I was confounding two issues. The answer is drop in quality for both. A government monopoly of insurance services creates the following problems:
1. Because the system is 'for the greater common good' as opposed to 'for the greater individual good,' there is a number of services that becomes scarce. Many things that we take for granted in the US are not as easily available. E.g. MRI, certain cancer drugs (there was recently a big uproar about a colon cancer drug not being covered by the medical insurance...)
2. Universal healthcare generally requires higher taxes. The bill's original proposal for not increasing taxes is not really realistic. At least not enough for the system to be trully universal (because most Californians don't tap into the $186bln -- as they get insurance through their employer or choose to buy their own) For when this system becomes universal, the middle class will also proudly declare that they are not fryers to pay out of pocket. As will employers -- for why would they provide such benefit, if the state if providing for it. --> taxes would sky rocket to about what they are in Europe.
3. The quality of medical care would suffer as well. It would suffer differently depending on the compensation scheme that such universal healthcare insurance would adopt. Most compensation schedules in socialized heathcare system are not based on visits or services provided. Instead, they are based on the number of patients that the particular doctor carries. For instance, for the government insurance compensation of roughly $36, and Israeli citizen can see their physician everyday for 3 months. The physician's salary is fixed with regard to that patient. His only way to increase income is to increase the number of patients with self-explanatory consequences.
Alternatively, a system that compensates based on services provided would have articifially lowered fees. Because no matter how you spin it, your universal healthcare is trying to optimize itself... to keep the already high taxes in check, and at the same time provide the greatest common good. This would lead to doctors performing unneccessary procedures that are covered by the insurance in order to maximize compensation... I guess this is the case in America today as well, but it would get even more extreme.
4. Because the inherent nature of universal healthcare is to provide the greatest common good, there will be some trade offs. Trade offs bordering on immorality. Who are you to provide a super expensive chemical therapeutic agent to patients that are doomed to die from colon cancer... when the system does not have enough moneys for both this drug and lets say immunization against influenza which would save more lives and have more significant effect on mortality and morbidity. Who is the government to play G-d? Why should it make such decisions? You know something... if I ever get colon cancer, I hope to have the option getting those drugs that would prolong my life even by weeks or improve my quality of life. This is why I would rather either invest my money into some well-performing mutual fund/money market account instead of paying into the common pot.
In conclusion: Universal healthcare for all = bad!
Instead: There should be "free" medical healthcare ONLY for those than cannot afford it. This means the poor and the lower middle class. The high middle class and the rich should pay out of pocket for their medical insurance in cases where their employer does not provide it.
Ideally: None of the insurances would be government owned. For the poor, the government would simply provide $ coverage that the patient could apply to a private insurer of his choice. Or alternatively it would be "subsidized" similarly to the way student loans are subsidized. I.e. the loans are private (!) but the interest is payed for by the government. This would create a laissez-fair environment while ensuring "social justice." It would also give some people the option of not getting any medical insurance at all -- which is by the way anyone's constitutional right.
Re: Ilyas
We're getting a little bit of tangent but ok...
I don't know enough to comment of California's energy situation. I have no expertise on the subject. I do have some expertise on the subject of medicine and medical care however. Once again... the parallel you are drawing is not correct. Medicine is not a utility. It is a service. It is an art. It is a product (as far as medications or medical devices go). It's a whole industry.
Most countries are not the Unites States of America. A model that works beautifully for Sweden or Israel will NOT automatically be right for the United States of America. What's right for California will not always be right for Arizona or Rhode Island. This is what Unites States of America is all about, no? State rights and all that...
On patents. The interest of promoting "the progress of science and useful arts" is not the interest of the government but the interest of the society as such. The other side of the coin however that you are overlooking is the interest of the individual. Good for the society/(government as you put it) -- fine. But the individual inventor will not invent or will be a lot less likely to invent unless he gets a patent. As Ayn Rand put it -- men live by mind alone. Intellectual property is the key concept here. This property is as real as having a dollar. It's not right to take away someone's invention -- that would be highway robbery.
On healthcare as a free market: You certainly have a point about the consumer being in distress. To give you an extreme counter argument, a poor person without a job or shelter without any food to eat is also under duress. Are you calling for universal meals on wheels? The problem you are raising really requires adjustment of the human quality of healthcare. Financial re-organization would not solve that problem. Patients have certain rights as deliniated by the "Patient bill of rights." The disease and treatment options must be clearly explained. There must be a real human element in the system which is very often missing. But we are not discussing that here... If anything, under universal healthcare system your patient would not just be blackmailed but would not have any options all! It's a take it or leave it approach. You're just saying that the government would treat patients more justly than private insurance companies. Well... you put a lot more trust into the government than it deserves.
For your last point -- look at my other post. Universal healthcare does not solve that problem. It only makes it worse.
By the way, we aren't even talking about creating healthcare monopolies from what I understand. Single payer system is entirely different from single provider system, and shouldn't be confused. We have a single payer system for a lot of federal spending, but thousands of private and independent contractors.
As far as health insurance is concerned, it ultimately comes down to a moral, not a political or economic question. Is it morally acceptable for people who cannot afford to pay for needed care to be left without care. For a free market healthcare system, the answer has to be "yes." Because in a free market, if you can't afford to pay for a good or service you don't get it.
Based on the fact that we mandate hospitals to provide emergency care to people unable to pay, it seems to me that the answer for our society is "no." And if that's the case, we need to drop this fake pretense of a free market system. If we are going to cover everyone anyways, it's better to do so before the ER.
"There should be 'free' medical healthcare ONLY for those than cannot afford it. "
But isn't that the point of insurance, to pay for things you can't afford to pay for out of pocket? That is, you set your deductible to what you can afford to pay out of pocket, and get insurance to cover the excess.
If the government will provide "free" healthcare beyond one's ability to afford it out of pocket, what exactly is the reason for health insurance companies to exist? Additionally, what would be the advantage for the government to buy insurance coverage for millions of people instead of self insuring them? Over such a large number of members, the government's average healthcare costs will approach the expected costs that the insurance companies will base their premiums on, so essentially, the government will be buying insurance for no other reason than to hand over a profit to the insurance industry. Again, I see no compelling reason for the health insurance industry to exist in the first place.
The point of insurance is not to pay for things you can't afford to pay for out of pocket. Such system fails some fundamental law of thermodynamics. It addition to the main law of economics, namely -- no free lunch.
The point of insurance is to insure you in case something happens. Probably it will not happen but it might. To my understanding what makes insurance works as a concept is that overall s..t doesn't happen to most people but only to some. So it averages out, gives everyone peace of mind, and makes the insurance company very rich.
The reason for healthcare insurance compatnies to exist suddenly becomes apparent when you use my definition as opposed to yours. Private insurance companies provide insurance. Deep, ha? This is why they are called insurance companies. You can also get life insurance, home insurance, for that matter you can get any kind of insurance. Alternatively you could take the risk that your house will burn down, or that your health will deteriorate and you'll have to pay out of pocket.
Buying insurance coverage is synonymous to insuring. You're just proposing for the government to serve as an insurance company. You are going even further... you want it to become THE ONLY available healthcare insurance company. In other words, you want to force people to get insurance. & not just any insurance but government insurance on government's terms.
Why don't we ban other insurance services? Wanna nationalize the railroads too? Utilities? Manufacturing plans? Socialism, great! Hey... you are free to have liberal opinions. But I respectfully disagree with you.
What a complete dodge. You completely ignored the point I was making, and instead condescendingly lectured me on what insurance is, and went off on completely asinine and predictable socialism rant.
Read carefully and think, it's simple logic and math, politics aside.
What would be the reason for insurance companies to exist IF there already was "'free' medical healthcare ONLY for those than cannot afford it?" If the government already provided "free" care beyond what you can afford to pay yourself, it would already be doing the insurer's job. It would be no different that having insurance with the deductible set to what you can afford to pay. So why would you pay someone for it if it's already there for "free?"
Insurance is there for unexpected expenses. But with large enough number of people, it is extremely unlikely that the total expense will deviate largely from the expected value, it's simple statistics. Insurance premiums will already price this expected value plus an overhead, so what would be the financial point for the government of buying this insurance? It will simply introduce a middleman and cost more money with no real benefit.
IF the government provided free medical healthcare for those to cannot afford it would become a government insurance company. This is exactly what you are saying and this is exactly the reason i went off on my predictable socialism rant ;-) The reason why I think it's bad to have a single insurance company even for the poor is again a predictable anti-socialism rant. You can read it above.
On the model of having the government issue vouchers for private insurances. (which by the way is only one of the solutions. I'm not saying it's the only way to go) According to you, private insurance plans would than become middlemen and it's better to make the government itself the insurance company. The reason why your logic ridiculous becomes apparent if you apply it to other things and concepts. Lets say the food stamp program. The government issues a voucher that you can use to buy food. You buy the food from a supermakret which is not only a middleman but the last link in a chain of middlemen. So lets have a government owned food distribution center. It's possible. It exists in socialist countries... It is more cost efficient at least utopically. Another example, subsidized Stafford loans. Why doesn't the government loan them directly to students? Banks serve as middlemen. They make money off of it. If the government is paying off the interest while in-school, government could become a bank. Again my rant is predictable. Socialists what the government to be a nanny. It is a utopia.
Notice, I am arguing more than anything with your logic.
As a bonus point, private insurance companies too can be very effective and very good. If you created a system in which they competed for consumers and made information about compensation schedules, premiums etc simpler and more transparent for the average Joe... the costs would go down. As for a government-owned healthcare system costs inherently go up. At least it's difficult to control it from above because this control is artificial... as opposed to a free market mechanism. :) Your federal healthcare would become a mess like every other big government agency. It would become like INS, DMV, Medicare... :-)
I don't know about you, but I have federal student *direct loans* from the Dept of Education, and I like them very much.
Also, you are again confusing single payer with single provider system.
There is a need for many independent healthcare service providers, but if the federal government is the one picking up the tab for free medical care beyond one's ability to afford, what is the need for the insurance company middleman? Ultimately all it will be doing is taking money from the government plus a cut for itself and then distributing that money to providers. So all it accomplishes is adding unnecessary cost overhead to the system to pay insurance company to do nothing.
Corporate welfare, pure and simple. I thought libertarians were against it.
Re: Ilyas' last comment
Ilyas, who are your "direct loans" administered by? The Federal Government? I don't think so! They are administered by a third party such as Citibank or KHESLC (KENTUCKY HIGHER EDUCATION STUDENT LOAN CORPORATION) aka The Student Loan People, or whoever else. All of which are either public or private corporations—not the government.
Now, let’s get back to the issue at hand. The state of California wants to create their own health insurance company forcing employers and citizens to pay into it. The bill mandates a tax on each employer to pay for the health insurance coverage. How will this tax be determined? What about the companies that do not offer health insurance to their workers (such as restaurants) it seems they will now have to pay more taxes? The bill provides no specific answers to these questions. I don’t think it’s too far of a conclusion that knowing what we know of taxes and medicine—the amount employers would be taxed will be raised yearly, possibly on an exponential level.
Currently companies are leaving California for other states as is—without this new bill. (I can give you statistics if you like.) Because of the high cost of doing business many companies who employ minimum wage or low wage labor do not offer health insurance. Those who are for this bill will think—well isn’t it great that those workers will now be insured? It’s great for the workers ONLY SHOR TERM. Why? It is simple—most of those business will either simply close down because they cannot compete or move to other states or even overseas.
It is very likely that if this bill passes the poor and lower middle class would be even worse off in the long run because they will find themselves unable to find a job. They will have to rely on the help of the government, which will have to raise taxes to help the raising newly jobless population. New taxes will cause more business to leave the state. Do you see where this is heading?
Alina, not to worry. The terminator will terminate the bill if it passes.
What you're saying about taxes makes sense. However the counter argument that Masha made in the original post is that the taxes are not supposed to go up... at least not initially. Taxes would most likely have to go up however.
Re: Ilyas. As far as Direct loans go, what Alina pointed out is correct. If you go to www.nslds.ed.gov I belive you can see exactly what bank your loans were issued by, who owns them now or something like that. Off subject.
Again, I thought I explained my point of view well. I am critical of having a single insurance provider. I explained in detail why. I guess you have exposed some weakness of my food stamps analogy. Granted. It's not an ideal parallel. But do you disagree that medical insurance is a service/product? The idea here is that having many of them is better than having one of them because competition improves efficiency and quality. You are right about the middleman cost because those private insurance companies are trying to turn profit. But to hit you back with the other side of the coin -- the very fact that the government insurance company is not trying to turn in profit will make it less efficient and more costly. As for the middlemen, they are a part of a healthy economic system. Again the key point here is not that the private insurance company takes the cut and then distributes but the fact that there are many different insurance companies that compete for customers. If you made those insurance companies more accountable, more transparent etc this could actually work. Ok... I think at this point we're already beating a dead horse.
Administration aspect is different from insurance aspect of the business. I don't particularly care if you have subcontractors for the administration aspect. Insurance is about getting paid to accept risk, but with a large number of people, the risk that the mean spending per capita will deviate from the expected value approaches zero. It's has to do with the Central Limit Theorem in statistics. I am simply stating that the government should not pay insurance companies to not accept risk. I don't see why this is so controversial.
It is not me, but you who said: "There should be 'free' medical healthcare ONLY for those than cannot afford it. "
I simply followed the logical implications of such a scenario for the insurance industry. If healthcare becomes "free" beyond ones ability to afford it, the role of the health insurance companies will be marginalized.
What a marvelous discussion! Definitely more than I have hoped for, too bad I couldn't answer until now, being in the recently-socialist pinko Spain (may be that's why they took my ham at customs!). But more on that later. Let me respond to a few of the new points below in a somewhat haphazard manner.
Leo:
Libertarians have this peculiar faith that competition is always ‘good’. This is a myth. When incentives are perverted, the most fit company will survive, not the one that is best for the consumer. In this case a state monopoly would be a good thing, as it would be more efficient and more responsible to the consumer. As Ilyas said in the beginning, be careful what the competition is for when championing it. And please stop taking Ayn Rand as gospel. Property rights are entirely products of their societies, from dollars to ideas. That a writer should be able to collect royalties for a 100 years on their product is no more an inalienable a right than universal food provision. It just happens to be good for society – as well as for the creator (perhaps). But that’s not necessarily true for all of our rights for all time.
Once we discard our preconceptions about the government’s malicious intent and inefficiency, the virtue of free market, coverage of undeserving immigrants, and even the moral imperative to provide healthcare for all (like abortion, you either agree with it or you don't), I think, so far, the only sound argument against the bill is the possibility of the level of average or peak coverage going down. So the question is largely financial (can the 186 billion being spent now provide equivalent coverage to all residents?). I myself am not convinced, but I think the evidence listed in the original post is cogently positive, and there is not yet anything solid to the contrary (aside from vague references to Israel and Canada). Plus, this is a matter of degree. If we have to suffer a 20% drop in the supply of MRI machines for the universal and *perpetual* coverage of all citizens, I think we should accept it.
When you start talking about the have and the have nots, you go astray (for reasons see the initial post), unless you define "haves" as millionaires in which case the discussion is pointless. We're talking not just about the uninsured, but those whose insurance is in various ways faulty, which is a very large percentage of the population (and good chunk of the middle class).
Btw, you're confused about the $186 bil - it is the total spent, not an amount collected in taxes, since California obviously doesn't tax for insurance right now (other than Medic*). So your financial speculations are unnecessary.
When something is a necessity, (a highly inelastic good) you want government involvement not because it will necessarily be more efficient, but because you want assured provision. If you're in a desert and there's a number of wells around, you don't want to privatize them, because companies can then charge arbitrary amount for the water (again, we're talking about a real, not a perfect market). You might want to regulate it and put caps on prices, but that's not always the best solution. By the way, the only reason there are no calls for "universal food" legislation is that the vast majority has no problem acquiring a reasonable level of nutrition. If with GDP of $13 Trillion we had many people at comparable risk of starvation, believe me, more than the CPA would be clamoring for universal food.
I am continuously baffled by the apparent irrational hatred and distrust of government. Why is it ok for the insurance company to play god, but not for the government? You actually have some measure of control over the latter!!! Can we set aside ideology for a minute and talk about reality? Leo, you give yourself away by grouping Medicare with INS - if you want to argue, get on solid ground and read what others say first.
As far as a federal healthcare - I'm curious about this fallout - presumably all developed countries but us are currently dying in their respective agonies? In any case, it's not something I'm now advocating - we're just talking about the California bill here. Though your prediction about it being ‘unsustainable’ is preposterous if you think about the nature of the good.
Healthcare is an art? Perhaps in a very ethereal sense. I’d like to see your patient’s reaction if you go into the waiting room and tell him you want to practice your "art" on him. It might be an art to you; to the patient (95% of the population) it’s a service.
Alina:
The bill actually does provide some answers about how those taxes will be determined. True, those premiums even if comparable now, may be raised in the future - but compare that moderate possibility with the fact that insurance premiums have risen something like 60% over the last five years in California. This is in part what is currently driving the companies out of the state. Do you really think it can get worse?
As far as the smaller businesses, yes, the bill specifies a smaller minimum size for a company to have to pay insurance premiums for the worker. I really don't want to turn this into a minimum wage debate, but the evidence I've seen contradicts your (and the usual) claims that businesses will run for the hills. They don't. And, by the way, the businesses that can afford to move (the larger ones) - already either do provide insurance or at least don't hire undocumented workers.
People should read this.
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