By Donald J. Boudreaux Friday, October 16, 2009

Political discourse has more than its share of question-begging words.

For example, ponder the word “fair.”

“Fair” is perhaps the most misused word in all of politics. By definition, everyone this side of masochism and sociopathy favors “fairness.” No one believes that society would be a better place if only it were less fair.

The difficult question, though, is “What is ‘fair’?”

We have little difficulty distinguishing fair from unfair in small settings. If Mom bakes a pie and Junior scarfs down three-quarters of it before any other family members sit down for dessert, that’s unfair of Junior.

If I agree to mow your lawn in exchange for you washing my car and then renege on my part of the bargain after you wash my car, that’s unfair of me.

But distinguishing “fair” from “unfair” in large, complex settings is vastly more difficult than politicians make it seem.

Consider the distribution of income. Is it unfair that some people earn multiple times more dollars — often hundreds of times more dollars — than other people earn?

Seems unfair to many folks. Why should Sal the surgeon take home a salary 50 times larger than the salary taken home by Tony the teacher?

If Sal and Tony were assigned to their jobs by some authority and if that authority pays Sal more than it pays Tony simply because Sal has a more beautiful sister than does Tony, that would be unfair.

But in market economies persons aren’t assigned to jobs. Each of us chooses our career. If Tony chose to become a teacher, that means he chose not to become a physician.

Also in market economies, salaries are determined by impersonal market forces rather than by some authority.

So how can it be unfair that Tony doesn’t earn a salary as high as Sam’s? In a very real sense, he chose not to do so.

Tony’s reasons for choosing a teaching career (and avoiding a career in medicine) might be admirable or understandable. Perhaps Tony loves working with children. Perhaps he relishes having long holiday breaks and summers off. Perhaps he cannot stomach the sight of blood. Perhaps he was put off by the prospect of spending all the extra time in school required to become a physician.

Whatever his reason, he clearly gained — or expected to gain — by making the choice that he made. In Tony’s mind, when all the expected costs and benefits — monetary and nonmonetary — of practicing medicine were weighed against those of teaching, he obviously concluded that teaching offered him the better standard of living.

Of course, it’s true that Tony would have preferred to have all the benefits he gets from teaching — for example, long holiday breaks — and the higher salary paid to a surgeon.

But that option was never on the table — not for Tony, not for Sal, not for anyone.

It’s also true that Tony might come to regret having chosen to become a teacher rather than a surgeon. But so, too, might Sal come to regret his choice to become a surgeon.

Our imperfect capacity for making decisions, or for seeing the future more clearly, is unfortunate, but it’s no source of unfairness.

The bottom line is that looking merely at one aspect of people’s lives — the amount of money they earn — provides far too little information for determining if their lots in life are “fair” or “unfair.” All things considered (and it would be unfair not to consider all things!), Tony’s lower salary as a teacher does not seem unfair when compared to Sal’s higher salary as a surgeon.

Another possibility is that Tony wanted to become a surgeon, but he doesn’t have the brains to get into medical school.

Under these circumstances, we might feel sorry for Tony. But, once again, there’s no unfairness in the picture. No one broke the rules of the game. No one singled Tony out, or singled out the ethnic group to which Tony belongs, to prevent him from becoming a surgeon.

I wanted to play quarterback in the NFL, but I utterly lack the physical requirements for that job. All the desire in the world would never have enabled me to earn my living on the gridiron.

Feel free, if you wish, to pity me. But neither you nor I can find anyone or anything to accuse of being “unfair” toward me.

When politicians thunder about “fairness,” they too often focus on only a handful of facts, selectively chosen to portray eminently fair situations as being unfair. And that’s unfair!

via Fair’s fair — right? – Pittsburgh Tribune-Review.

Today, the Wall Street Journal has an article about the battle being waged between Wal-Mart and Amazon to be the dominate book discounter on the web.

Wal-Mart Stores Inc. launched a brash price war against Amazon.com Inc. on Thursday, saying it would sell 10 hotly anticipated new books for just $10 apiece through its online site, Walmart.com.

That was just the beginning.

Hours later, Amazon matched the $10 price, squaring off in a battle for low-price and e-commerce leadership heading into the crucial holiday shopping season. Wal-Mart soon fired back with a promise to drop its prices to $9 by Friday morning — and made good on that vow by early evening Thursday.

via Wal-Mart, Taking on Amazon, Launches Price War on Books – WSJ.com.

This is how the free market works without government intrusion. Competitors work to gain market share by delivering either a better mouse trap or a cheaper mouse trap. The winners are the ones, who can deliver it cheaper and better, and the consumer who gets to benefit from the competition. There is no market in existence that must be taken out of this type of economic activity in order to better deliver it to the people. This includes health care. Are we to believe if health care was opened up to competition that you wouldn’t have the Wal-Marts of the world stepping in to deliver solutions? Just because it’s health care doesn’t mean it’s market is different.

The truth is the government is not in health care to better deliver a service. It is in the market for control. It wants to decide who gets what advantages, and who get what services. It wants to profit itself from the consumption of health care, and it wants to gain the power from that is derived from controlling access to health care. If you want to see health care flourish for all people and to deliver progressively better and cheaper mouse traps, get the government out of health care. We will all be better off for it.

In the first installment on free market health care reform solutions, I spoke of the problem with using third party payer in respects to health insurance and health care purchases. The effects of changing that one aspect of the health care industry would vastly improve our current system and would result in more jobs, better care, and a booming economy. To take the free market concepts even further, we must now look at how the uniqueness of the health care  insurance model makes it much more expensive than other insurances, how obesity is driving up health care costs for the obese and the fit, and how the market has already taken some steps to address rising costs.

Health care insurance is a very unique insurance purchase when compared to auto, health, or any other insurance product. When you purchase home owner’s insurance, you buy it in case of fire, flood or burglary. You do not buy it because you know you are going to need your roof replace, a new furnace installed, or your carpets cleaned.  If home owner’s insurance was treated like health care insurance, you would have to pay astronomical prices for the insurance because the providers of the insurance would have to cover maintenance, and in some plans would cover elective improvements like a deck or a finished basement.

To make it even more absurd, when getting your insurance through your employer, not only is your rate based on the amount of maintenance you use or the risk of your decisions, but they are also based on other individuals that you have no control over. Imagine if you invest in a security system, fire detectors and fire retardant building materials in order to lower the risk of your house catching on fire. This would be similar to exercising, eating right and having regular checkups. Currently, your home owners insurance would be reduced because of the responsible actions  you took. Now, if home owner’s was ran like health care, your rate wouldn’t be based on your actions. It would be based on your group’s actions. If a member of your group moves to a high crime area, has no smoke detectors and has very old wiring, your rates would need to take into account his chances of a fire. As you can see, you are punished for actions you have no control over. This model punishes the responsible and rewards the irresponsible. The effect is higher prices for all and no encouragement for good behavior.

As stated in part one of this blog, this third party payer model leaves you with a vicious cycle of increases in the price of insurance and cost of health care. With the removal of third party payer, we would be rated based on our own individual risk and behavior. By removing the group, you now  have an incentive to be responsible. Just like you may install a security system in your house to get a decrease in your home owner’s premium, you would be encouraged to get your BMI down to get a break on your health insurance. You cannot expect good health behavior patterns when people are shielded from the effects of their own actions by the group. You will also have the incentive not to frivolously waste health care services. You would not submit a home owner’s claim every time you need a shingle replaced on your roof, because your premium would rise to cover the risk of another shingle needing replaced. Your risk rating would be worsened by your continual submission of claims. Similarly, you would not run to the doctor every time you get a headache, and if you did you would be more inclined to pay out of pocket to prevent your risk profile being negatively effected. Paying out of pocket is a good thing. It cause you to shop and demand better prices, which results in more competition.

As you can see, the health insurance model is unsustainable as is. It must be allowed to move into the model of every other insurance plan we know of. People must be weighed on their risk. They must be rewarded with lower premiums for taking responsible action, and they must be punished with higher premiums for being irresponsible with their health.

Not being accountable for  your actions in respect to your health has helped lead to a large number of our population being extremely unhealthy. Currently, over 35% of our population is consider obese, and the number jumps to 65% when counting overweight individuals. What’s worse is the percentage has been climbing year after year. In 1990, no state had a over 15% of it’s population classified as obese. By 2008, no state had under 15%. Colorado is the only state with under 20%. The majority of the states now have over 25%. Does it surprise anyone with data like this, that we have a health care crisis? Obesity leads to diabetes, heart disease, cancer, stroke, sleeping disorders, and countless other health conditions.  Ten percent of our yearly health care expenditure as a country is for obesity caused diseases. This is a huge burden on the insurance industry causing higher costs for us all.

Previously, we explained how rising costs come about. If demand is increased without increasing supply, then price go up. With the data presented in the previous paragraph, it is obvious the demand for health care caused by obesity would undoubtly drive up the cost of health care. Demand for drugs is driven up astronomically, because the treatment of these obesity related diseases last the remaining years in the life of inflicted. Our society has a very destructive pattern of treating diseases instead of removing the cause of the disease.

Now, I am not saying the government should step in and force people to get healthy. That is not needed. I am a freedom loving capitalist. If you want to fill up on Twinkies and Jujubes all day while reclining to the Jerry Springer show, have at it big boy. What I am saying is you pay for your actions. Do not expect those who make the tough diet and exercise decisions to subsidize your bad habits. If the free market reigned, third party payer would be gone, insurance companies would base your premiums on your risk and all the high fructose corn syrup lovers would pay for the medical resources they consume. You would quickly see the obesity rate decline, because the obese would be punished by higher premiums. With this decline, you would have insurance rates and demand on health care resources decline. Hey, didn’t we say earlier you have to decrease demand to lower cost. Well, voila, you just did it. Now you have a much healthier society both physically and mentally. The economic effects are too vast to even get into. Let’s just say everything has opportunity costs, and when we put more and more money into health care, that money it held back from other economic activities. With that money freed up, it can go into other parts of the economy that would more than likely improve our lives.

As you can see, both the first part and the second part of this blog really come down to one change. That change is removing third party payer. That one aspect of health care has caused this entire disaster we are now debating. The government cannot fix this by throwing more money at the symptoms. The free market is the only thing that can fix our health care system. It is the only thing that can fix any of our societal ills. Even though the government and the third party payer issues exist, the free market has already taken action to address issues with rising health care costs.

Let’s take a look at the regular doctors visit. Because of the demand for doctors, typically you have to schedule a doctors visit a few days out. When you do go to the doctors, you sit and wait in the waiting room. Then you sit and wait in the treatment rooms. Finally, when the doctor comes in, you see him for 15 minutes, and you’re done. This isn’t all just to have fun with you. This is because of the demand for the doctor’s services. The free market saw this an opportunity and developed the concept of walk-in clinics at your local pharmacy. These clinics are staffed by nurses that can take care of common illnesses. These nurses are schooled enough to address these issues and do so without the same cost of having a highly skilled doctor. Unlike government, the free market allocates resources based on the most efficient use those resources. When the power of the free market is released, it will create a plethora of solutions like this. Consumers will have many more choices and will be the beneficiaries of that horrible “profiteering”. Just remember profits are derived by someone developing and providing a solution to a need. Without that profit motive, that need would go unserviced.

While listening to the debate on health care, the problem seems so vast and complex. We really just touched the surface of the revolution  you would see if the free market prevailed. I did not even get into the disastrous effects the intrusion of the federal government has already wreaked on the health care industry. Hopefully, I’ve provided some food for thought and helped you realize just because a problem seems huge doesn’t mean that the solution has to be. The solution presented here is very simple, but the benefits are more than I can even touch on. As in any debate, seek the truth and use your logic and reason to come to a solution. Problems are exacerbated by those who think things are so complex that it requires “government experts” to fix it.

P.S. I’m sure as the debate progresses, I’ll have more topics to write about. Please provide feedback. Ideas are weak when not challenged. If you disagree, challenge my ideas, so I can either strengthen them or discard them. If you agree with them, share them with others.

While doing some research on health care, I found this little nugget on Youtube.

The health care debate has been taken to the next level since Barack Obama’s election. While I completely disagree with his approach to fixing health care, I must say it is a good thing to bring the issue to the forefront and try to come up with some solutions. As mentioned in an early post though, you have to look at the root causes to see what problems you need to actually address.

For those of you who might not have read my previous post, the problem with health care is the third party payer model we use, which blocks price signals from properly stabilizing the supply and demand of goods and services. In other words, we take actions that drive up the demand for more services and products while not increasing the supply of those services and products at the same time. We also add unnecessary costs on top of those services and products that then is passed onto the consumer or the insurance company.  A government take over will not address the issue of increasing demand without rationing of either quantity of services or quality of services. I know, “Hey fella, the Baucus bill doesn’t have a government take over.” The Baucus bill is leading the way to a government take over. It is creating a massive amount of increased cost on individuals, employers and medical companies. Once merged with other bills, we’ll probably end up with a government take over trigger. This is setting up a straw man that is doomed to failure. It shouldn’t be called a trigger but a lit fuse slowly moving to the bomb of government health care. Instead, we should see bills that address these problems with free market solutions.

So, what are the free market solutions? While I don’t claim to have the genius to provide all the solutions, I do believe there are some simple but hard solutions that can be implemented. Free market solutions must address the issue of rising demand that is the result of third party payer and the state of health for average Americans.

To address the third party payer problem, we must look at the biggest provider of health insurance, employers. Employers offering health care benefits was originally used to compete for employees. It quickly evolved into something that was encouraged by the government and expanded by unions. Government encouraged the expansion via the tax code and mandates. With this constant push towards more and more coverage, insurance began to take care of everything a person needs or wants in regard to health, dental, vision, and mental health.  One can quickly see that more and more people demanding ever expanding coverage only has one effect, increased cost of insurance. Then the very nature of insurance, where it takes the end consumer out of the value decision of the purchase, drives up the cost of the actual service or product. This must be addressed by fixing the root cause, which is third party payer of the insurance by the employer and the third party payer of the service or product by the insurance company.

The first step has already been enacted, but needs to be encouraged and sold to the public. Under President Bush, Health Savings Accounts, or HSAs, were passed into law to address the health care crisis. Like every other issue under Bush though, it was never sold to the public. It’s just not as sexy as “free” health care, even though it actually works.  The gist of an HSA is people purchase high deductible, low premium health insurance that would cover expenses after a certain dollar amount. In addition they can put tax free money into their HSA to cover the deductible. When they go for a doctor visit, they write a check to the doctor from their account. Once their deductible has been reached, the insurance company takes over.

The HSA addresses many of the issues that result from the unique insurance model that is used by the health care industry. In no other insurance model, does insurance take care of everyday occurrences. Insurance is to guard a person or organization against risk. The best example is car insurance. We buy car insurance to make sure that we can get our car repaired or paid off if we are in an accident. We also get liability insurance to insure ourselves against a law suite if one is filed by the other party in a vehicle accident. We do not use our car insurance for oil changes, new tires, or even an expensive item like a transmission replacement. These are wear and tear issues that are guaranteed to happen, while accidents are not. If we are responsible, we plan for things that are guaranteed to happen, and we insure against those things that may or may not happen. This model of insurance is why you can get an oil change for under $20, but a new fender for some reason costs thousands. Notice the part of vehicle repair that is paid by insurance is much higher compared to the part that is paid out of pocket. When we pay out of our pocket, we shop around and demand better deals. When insurance pays, we could care less.

For some reason though, with health care, we ignore this model, and we buy health insurance for our human wear and tear. We all know we are going to get sick. We all know we’ll need check ups. If you have kids, you know they will need vaccinations. For these items, we should be planning financially to pay for these. What we should be insuring against are things like cancer, heart attacks, or situations that can lead to hospitalization. With this change, you will see consumers shopping around and demanding better pricing. With this change in behavior, medical companies would have to compete more fiercely for your dollars, which would drive costs down.

While this addresses the third party payer issues from the actual medical purchase side of the issue, it still doesn’t address the third party payer side of the insurance purchase. Just as employers were encouraged to add health benefits via the tax code, they should now be encouraged to get out of the health care business. Businesses waste vast amounts of resources on the shopping, buying, and administering health care insurance for their employees. Does this add to their business production and to the larger production of our country? No it doesn’t. If employers handed the health care insurance purchasing decision to their employees, they would then be able to focus on what they do best, which is grow their businesses. They also would be relieved of a huge (huge really doesn’t do it justice) expense. This massive reduction in expenses would result in more jobs. There is no doubt that the cost of health care insurance has resulted in many companies not hiring that extra person. It’s a return on investment hurdle that is much higher as a result of the extra cost. In addition, the reduction in the cost of doing business would result in lower prices of the goods or services delivered by the company. As Thomas Sowell points out in his blog, Magic Numbers in Politics, prices are interconnected and the reduction in the price of one good filters through the economy and lowers the price of other goods. He uses a great example.

What does that mean? It means that a huge increase in the demand for ice cream can mean higher prices for catchers’ mitts, among other things.

When more cows are needed to produce more milk to make ice cream, then fewer cows will be slaughtered and that means less cowhide available to make baseball gloves. Supply and demand mean that catchers’ mitts are going to cost more.

via Thomas Sowell : Magic Numbers in Politics – Townhall.com.

As you can see, there would be a butterfly effect in the cost of goods in our entire economy. This would unleash business and job growth. “Hold up there buddy,” you say, “ultimately the worker would carry the burden of health insurance.” This is true, but as explained above, insurance is not meant to cover those things that are guaranteed to happen. If workers buy their own insurance, they will make wiser purchase decisions. They will plan for maintenance, and they will insure against the unknown. This will drive down the cost of health care insurance. In a future segment of this blog, I will expand on this more, but for now you can see the effect of this when seen in conjunction with the interconnectedness of prices. Also, the end user making day to day “maintenance” purchases will drive down the cost of those purchases. In May 2008, Watson Wyatt Worldwide released a study that argues that the rising cost of health care insurance is a huge factor of why employee pay has been stagnant for decades. With the removal of health insurance from the employment process, salaries would undoubtedly rise. Salary increases will also be the result of higher competition for employees. Many employees pick a job based on health insurance. With that removed from their decision, they will choose to go where the work and the salaries are better. They will also not be trapped in a job because they can’t afford to lose their insurance. They will have picked their own insurance, and it would not cease in the result of a change in employment status.

In the next segments of this blog on health care solutions, I will address the unique issues of health insurance that make it much more expensive, how our country’s obesity problem is a major factor in rising health care costs, and how the market has already taken steps in the right direction to address the rising costs. As you can see though, removing the market distortion of third party payer would be better for every part of our economy and every participant involved in health care purchasing. As I said in previous posts, when listening to the health care debate, ask yourself how the proposed solution addresses the root causes of rising costs. A government take over does not remove the third party payer issue, it does not increase competition, and it will actually increase costs. With out fierce competition, the only way for costs to be driven down is by mandate. The end result is a reduction in the availability of services and/or the quality of services.

Yesterday, the Senate finance committee passed the Baucus bill, well wasn’t a bill, but a set of ideas. One only need to look at the new $507 billion in new taxes to see why government should leave the reform to the private sector. This bill will not only drive up demand, thus driving up costs, but it will also drive down supply and stunt job creation. Obviously, if supply is driven down, cost also go up, and without job creation people can’t afford health insurance anyways. Ok, so let’s take a look at these new taxes and see how they will affect the market. Below is a list of new taxes from CNSNews.com.

(CNSNews.com) – The health-care bill that the Senate Finance Committee will vote on today will cost a total of $829 billion over 10 years, with $507 billion of that cost being covered by new federal taxes and fees, according to the Congressional Budget Office (CBO).

These new taxes and fees include:

– $201 billion in new taxes on high-premium health care plans.

– $83 billion in new taxes paid by workers who will receive less employer-sponsored coverage or lose that coverage altogether but will be compensated with higher wages or monetary benefits, which are taxable.

– $23 billion in penalty fees paid by employers who do not comply with the federal insurance mandate.

– $4 billion in penalty fees paid by individuals who don’t have health insurance.

– $16 billion in new income and Medicare payroll tax revenue due to changes in Medicare.

– $180 billion in other tax revenues items calculated by the non-partisan Joint Committee on Taxation (JCT).

According to the JCT, this $180 billion in new taxes would include: A new tax on prescription drug makers that would account for $22.2 billion over 10 years; a new tax on medical device manufacturers that would bring in $38.6 billion; and a new annual tax on insurance companies would net the government $60.4 billion.

Also, a provision that raises the threshold at which medical expenses become tax deductible, from 7.5 percent of income to 10 percent of income, would reportedly yield the government $15.2 billion in new revenue from sick and disabled Americans with high out-of-pocket medical costs.

via CNSNews.com – Finance Committee Health Bill Includes $507 Billion in New Taxes and Fees.

Now let’s take each one of these taxes and see the law of unintended (let’s hope they are unintended) consequences in action.

The first tax is $201 billion on high-premium health care plans. These are the Cadillac plans that many union guys get. You know, the blue collar guys that supposedly the Democrats love to help. So, one must ask why would you tax these plans and what is the effect of the tax. One only needs to look at the cigarette tax to see the purpose. You tax cigarettes because you want to make it more expensive to smoke and thus drive down the number of people that smoke. Similarly, taxing these high-premium plans will increase the over all cost of them and dissuade companies that offer them from continuing to do so. This is the first example of the socialist principle that if we can’t all have a candy bar, none of us will have one. Because we can’t all have Cadillac health care plans, none of us will. Who does this help? This surely doesn’t help the average Joe. Hmmm, wonder if this applies to Congress’s Cadillac plan?

The second tax listed is $83 billion paid by workers who will receive less coverage from employers or lose coverage, but in turn will get paid more because the employer doesn’t have the insurance cost. Here we go again, with liberals looking out for the common man. The plan drives up the cost of insurance, which is likely to cause many companies, especially small businesses, to drop or reduce the health insurance plans for their employees. “No problem,” says the Baucus bill, “We’ll just tax you the worker.” These taxes are what they believe will be higher wages. The government is showing its hand here. It knows that all costs of an employee lowers the employees wages. Keep this in mind next time the government wants to tax the corporation more. Ok, back to this tax. So, when your employer drops your insurance, the government is betting you get a raise. You better hope they are right, because you’ll be mandated to buy your own insurance or pay a fine.

The third tax is $23 billion in fines paid by employers who don’t comply with the almighty state. OK, so now the government is back to raising the cost of your job to the employer. If you are the employer, is this going to increase your likely hood of hiring or decrease? Also, if you are an employer, you are going to compare the cost of the penalty compared to your current insurance costs. If the penalty is less, you are going to go with the penalty. The difference between fines and insurance costs is insurance costs grow ridiculous amounts every year, and fines will be a fixed cost. From a business planning stand point, that is a plus for going with the fines. So now, not only do you not have health insurance, but money that could be going to paying your more is being sent to the government with no benefit to you.

The fourth tax is $4 billion paid by YOU! That’s right, buy health insurance or pay the government. Isn’t freedom great? So, let’s wrap our heads around where we are right now. If you have awesome health insurance through your employer, the government is going to make it more expensive by taxing it. When you employer drops that, they are going to pay a penalty. Then you  have to hope you get a raise of which you’ll pay taxes on. If you deem you can’t afford to buy health insurance yourself, guess what, you will now pay a fine as well. There sure is a lot of spending going on here, with the end result being you still don’t have health insurance. If you are younger, you may still be better off paying these fines though and holding off on health insurance, because you can just wait till you are sick to buy into health insurance. What the heck, the government is preventing insurance companies from turning down anyone for any reason. Hey, they are just looking out for the common man. Thank your lucky stars!

How many more taxes do we have to go through. I’m starting to throw up a little in my mouth. OK, push through it! The next tax is $16 billion in new Medicare payroll tax due to changes in Medicare. I’ve tried to determine what the hell this means, but have been unable to find exactly what’s proposed here. It sounds like they would raise the payroll tax. If it’s raised on the portion you pay, you just got a tax increase. If it’s raised on the employer’s side, companies just got another reason not to hire or to pay you less.

The last part is a whopping $180 billion in other taxes. So what are these taxes? This is where you get some of the most ridiculous parts of the bill that will do the exact opposite of the the bill claims to do. So, $22.2 billion will be a new tax on drug makers, $38.6 billion on medical device manufactures, and $60.4 billion on insurance companies. So, let me guess, these companies are just going to swallow the crap the government just got shoved in their mouth. This is why politicians should stick to speeches and leave the market to the private sector. Companies don’t pay costs. Consumers pay costs. All of these taxes, drive up the cost of drugs, medical devices, and insurance. This is completely contradictory to what politicians say their goal is. Then again, maybe we just have their goals wrong. I’m guessing they know this, and in a few years they’ll come back and say, “See, the free market isn’t working. We now have to step in and take more control to bring these costs down.” If these taxes can’t be passed on to the consumer by some other legislation, the companies will not be able to meet their profit goals. If they cannot reach their profit goals, they will not make the products. Without the product, supply diminishes even more and drives up costs. So, you either have costs driven up by government induced cost burdens on the medical companies or you have costs driven up by a shrinkage in supply. Pick your poison!

The last one is just perfect. The government loves us so much that they want to make it more expensive if you have very high medical bills. If you have very high medical bills, chances are you are disabled or have a child that has a disability. Don’t worry the government is so compassionate, that is going to make you spend 10% of your income instead of 7.5% before you can get a tax deduction on it. Aww, they are so caring.

Hopefully, if you made it through this blog without vomiting, you see the that government is not trying to help people. They are setting up taxes and other penalties so later all the government zombies come back begging the government for more help. Of course, the government will gladly help out again until they get a nationalized health care system.

Why are we Americans moving away from self reliance to the nanny state more and more every year? Do Americans truly believe because something comes from the government, that it is free? Financially, it is much more expensive than the private sector, but the most disturbing cost of government control is the loss of liberty.

America was founded on the belief that the government is a necessary evil, but an evil that must remain small and restrained to prevent it from becoming an unbearable evil. We used to always be skeptical of anything the government said knowing that government always wants more power to control us. Now we just seem to take politicians at their word that they want what’s best for us. Skepticism is something we much pass on generation after generation if we are to last as a nation.

Let’s take the health care reform debate. So many Americans are fed up with the rising costs, that they are begging the government to step in. They believe the government will take over health care, and some how they will be relieved of that burden. Not so fast. With the government controlling your health care, they will control your life on a much larger scale than ever before.

As I said in my previous blog, the economics of health care is suffering from price being hidden from the end consumer. Because of this, demand is constantly driven up with supply not keeping pace. This drives up cost, and the only way to bring cost back under control is to bring down demand. In a normal market this is done naturally through price signals. In a government controlled economy this is done by rationing or by force.

Let’s take rationing first. If the government’s budget for open heart surgeries is X and with the total budget of X only N amount of surgeries can be peformed, how does the government make sure there are not any more open heart surgeries than N? The government will setup strict criteria on who can have open heart surgery. If they find that criteria is allowing more patients than N, they will then make it even more stringent. So, knowing that this is the case, one must ask what criteria will they use? Will you be out of luck if you are too old? What if to keep the number of surgeries at N, you need to have a chance of survival at 75% and your chance is only 60%? What if that is your child’s chance of survival and now yours? As you can see, this is a very scary decision for us to leave in the hands of the cold, lifeless bureaucracy, but what’s worse is driving down demand by government force.

The second way I mentioned the government controlling demand is by force. “Now, come on.”, you say, “You are really going over the top here. Our government would never use force.” While you may see force as guns and tanks, that is not the only force the government uses. Again, as I mentioned in my previous blog on the root causes of rising health care cost, one of the biggest contributors to the demand side of health care is the obesity epidemic in this country. So as the government, how do you control the rate of obesity?

Is it too far fetched for government to outlaw certain foods? How about as mentioned above using criteria to control you? If you want to have access to X, you have to have an accounting of what you eat, similar to doing your taxes. Surely, we can already see the possibility of the government taking your kids away from you if the government deems that you are feeding them too much junk food and they weigh too much.  How about forcing everyone to have a chip injected into them for ease of keeping medical records and driving down cost via efficiency? Even worse, how about forced DNA screening and alteration to minimize the chance of cancer or other diseases? Science progresses so fast, we really have no way of knowing what the government may require of us five or ten years from now as part of the “public good” and “cost containment” when it comes to health care.

If you think the IRS is bad, how about the how about the Medical Records Service (I made this up, I think). Is it possible that the government would require an annual accounting of all medical services delivered to you to insure you are having regular checkups, following the doctors orders, etc?

“No problem.” you say, “I’ll just refuse this “required” screening or this “required” procedure.” Really? Can you refuse to do your taxes? There are already provisions in the bill for not having health care under either a private plan or the public option. If you don’t have health insurance, you will pay a fine and face prison time. If the government isn’t getting the results it wants, surely it will increase the fines and the prison time.

We have gone so far away in this country from what our founders believed, that they would roll over in their graves just at the thought of the IRS, and here we are today contemplating giving the decisions over our health to the government. Here we are begging the government to ration health care and force us into servitude so we can avoid going bankrupt or pay the family doctor out of our pocket for services rendered. We once believed that liberty was worth dying for in this country. Now it seems we don’t even think it’s worth being financially stressed for. Time will tell if we made the right decision, but I beg my fellow Americans to think this decision through with the worse case scenarios. Chance are those scenarios will come to fruition. Liberty is dear, so don’t give it away so cheaply.

Health Care reform has been a politically powerful, hot button issue in election cycle after election cycle. It appears to be coming to a head this year, with Democrats pushing a government run health care plan. Republicans on the other hand seem to be very splintered on what health care reform should look like. It seems many elders in the party believe Republicans should just capitulate to the Democrats because they don’t want to look like they don’t stand for something. They don’t want to look like they are a road block. This is why we have been progressively losing our freedoms and the state has been taking more and more control of our daily lives. Our supposed free market leaders just don’t seem to have the will or the insight to fight for the side of liberty and the free market.

The government constantly goes unchecked on their claims of why a system is experiencing issues. I consent to the fact that our health care industry needs some over haul. Surely, anyone who has had to take care of the health care of themselves and a family can empathize with those who say the system is broken. The question that must be asked is why is it broken? Once you establish why it is broken, you can then truly look at reforms that fix the system, reforms that actually get at the root cause of the ailing system. Why in our country and especially in our government do we always look at symptoms and claim they are the problem? This is a huge issue that will not be fixed by addressing some symptoms. One only need to look at the health of an individual to come up with the perfect analogy of how we are treating the health care “crisis”.

Say a man develops acid reflux. They start off treating it themselves with an antacid. This addresses the symptom. After continually taking over the counter medicine and bumping up their doses, they decide to see their doctor.  They go to the doctor and explain their symptoms. The doctor then explains that the stomach is tilted which results in acid coming out of the stomach into the esophagus. “Wow”, thinks the patient, “I can’t believe I have this condition. Can you prescribe something for me to fix it doc?” “Sure”, the doctor says, and the doctor prescribes an even more potent antacid that the patient will have to take going forward. Now, has the problem been solved? No, the problem has been masked. In the mean time, new issues are beginning, because the acid in the stomach, which is normal, is being suppressed.  So now, food might not digest properly, and the patient now has digestive issues. This is how we treat issues in our public policy.

What the doctor should have said is, “Look this ‘disease’ started because you put on 50 pounds, and the beer belly you now have is causing your stomach to tilt. If you want to fix the problem, your gut is root cause of your problem. Here’s a prescription to a healthier diet and exercise.” Instead, doctors many times treat patients like the government treats our societal problems. Diet and exercise are not as easy as popping a pill the rest of my life, so let’s just ignore the cause of the problem. The same goes for health care. Fixing the problem, because it involves real change, is much harder and scarier for people, so let’s ignore the problem and take the societal pill of government control. As with the patient, this will introduce new and probably worse problems in the future.

“So”, you say, “what are the root causes then big shot?”. Well, one must look at economics to understand how markets work. Everyone constantly talks about the rising cost of health care. What causes prices to rise? Prices are just a signal of where supply and demand are at in any given time period. So, if demand increases and supply doesn’t, prices go up. Contrary if supply increases and demand doesn’t, prices drop. What causes this not to function properly? I should rephrase that, because it does function properly, but it doesn’t function optimally when price is hidden to the end consumer and not taken into account when making spending decisions. So, the first big problem with our health care system is third party payer. If consumers don’t look at price, the demand side of the equation is going to unnecessarily grow. If price is taken into account, consumers may decide they don’t need this service or product at this price. They may also shop for substitutes. Both instances will work to drive demand down and thus lower the cost.

The second root cause of the rising cost of health care is the one who claims they are going to fix it, the government. We already explained why hiding price distorts the market and drives up cost. So what happens when you introduce a market behemoth into the equation. Now, you  not only have price signals being ignored, but you have the vast supply of government money thrown in to exacerbate the market distortion to the Nth degree. Government money always drives up costs. Look at all the money that goes into education and the cost of education. The most ludicrous claim of this whole health care debate is the claim that some how the government can drive cost down. Government control of health care can only lower cost by lowering demand. How would government lower demand? The only way government can lower demand is by refusing products and services to people via rationing.

The last root cause that I’m going to mention is what I explained earlier in my analogy between the person with acid reflux and the way government handles societal problems. Even though in general we live longer now than ever before, that doesn’t mean it doesn’t come with out a societal cost. Part of the problem we have is people live longer now with illnesses and sicknesses. How does this group effect the supply and demand curve. Of course, the more people you have dependent on pills to stay alive or to treat a condition, the more demand is driven up. I can understand that there are people with no control over these circumstances, but in many  more cases there are actions that people can take to fix their health issues themselves. In America, over 60% of the population is overweight, and roughly 25% of the population is consider obese. With excessive weight comes most of the illnesses that our population is dealing with and the popping pills at an every increasing rate. If we want to see a drastic change in the cost of health care and to see the demand side of the supply and demand curve driven down, we have to take action lower the percentage of populace that is overweight.

As you can see, these are real root causes. These don’t have easy to swallow answers that politicians like to use to address symptoms. It’s so much easier to say, “Oh no, you aren’t the problem. You don’t need to make changes. The government needs to take more action and help you.” Really? Do you think the government is going to fix the supply and demand curve to lower price? If anything, government control always lowers supply and increases demand, which, REPEAT IT WITH ME, raises prices. Do you think you are going to have the same freedoms after the government takes over? Not only will you pay for these programs in taxes, but you will pay a much heftier price in lost liberty.

I know, I know. “Well genius, it’s easy to stand on the sidelines and point out problems. How do you think we should fix this ‘crisis’?” As I said before fixes to all root causes are much more difficult to swallow than bandaids on the symptoms. The good thing is these fixes actually fix the problem, where bandaids just hide the problems. In my next blog, I will do my best to put out some ideas on how we can address the rising cost of health care. They will be fixes along the line of solutions to the root causes I laid out here. Until then, when watching the health care debate unfold, ask yourself when you here a so called solution espoused by a policitian, “How does this drive down demand or increase supply to lower price”. If it sounds like it will decrease supply or increase demand, you know the problem is only going to get worse with the prescribed fix.

This morning, our President woke up to the news that he is one of the few Presidents to have received the Nobel Peace Prize. It seems everyone is asking why it was awarded to Obama, who has only been in office for nine months and has had no accomplishments worthy of the award.

So, one must ask what does this award mean? In particular what does “peace” mean to those who choose the winner? While all Presidents hail peace and want to achieve peace, how is peace achieved? It appears there is a discrepancy between liberals and conservatives in regard to the definition of peace.

Conservatives believe that peace comes through freedom, which in essence is individual liberty and Capitalism. Even Thomas Friedman, who most recently praised dictatorships for their ability to take swift action, wrote in previous books that no two nations that have McDonalds have gone to war. What he is saying is that no two capitalistic countries have gone to war.

Liberals, on the other hand seem,  to believe peace is a matter of the status quo. The liberal peace, as well as Obama’s, is peace at the expense of liberty and freedom. This is more than likely the result of the liberal mind set that the state is above the individual in the hierarchy of existence. So in order to achieve peace, states must agree to not interfere with what each other imposes on their own people. If peace is not internal to a particular state, that doesn’t matter as long as peace exists between states.

With the Conservative definition, you must ask then how is peace achieved? It is achieved by freeing people. In this regard, Reagan and Bush undoubtedly would have won a peace prize. Reagan ended the Cold War and helped release the shackles of the Soviet Union over millions of people. Also, Bush freed 50 million people in Afghanistan and Iraq.

As you can see, those who choose the winner of the Nobel Peace Prize do not care about peace of the individual, freedom, or liberty. It’s no wonder a President who has accomplished nothing won. By accomplishing nothing, the status quo prevails, dictators survive, and the states can rule over the people.

Monica Crowley’s article in the Washington Times this morning highlights how completely upside down our government is anymore. Government’s first role is to protect the people militarily, and the Commander-in-Chief’s primary role is a military one. Lo and behold in the current administration, our foreign wars are the last thing that seems to get the attention of our President. The President and the Congress have no problem finding time for Health Care, which Americans don’t want, Cap and Trade, which will cripple our economy, or working on a subversive stimulus bill number two. Our representatives and our President need to read the Constitution as well as writings of Thomas Paine, John Locke, etc to learn what the purpose of Government is.

McChrystal goes rogue

“You might have a tough time getting President Obama’s attention unless you are a member of the International Olympic Committee (IOC), a golf ball or Jennifer Lopez.

Over the past few weeks, he has deposited a huge carbon footprint by jetting to Copenhagen, only to have the IOC unceremoniously dis him. He has spent five hours each Sunday on the golf course. He also has entertained celebrities including J.Lo and Arnold Palmer at the White House, not to mention schmoozing Oprah Winfrey on their ill-fated Olympic trip.

Given these self-indulgent presidential distractions, the commanding general in Afghanistan, Stanley A. McChrystal, can be forgiven for publicly airing his strategic and troop-level preferences. Appearing on “60 Minutes” and addressing a prestigious London think tank apparently are the only ways Gen. McChrystal can get Mr. Obama’s attention. It was the general as matador, waving the red silk, hoping the bull would turn and notice him.”

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The president has been busy chasing nationalized health care, an Olympic dream and his Titleist golf balls. Gen. McChrystal had no choice but to go public to get him focused on the realities of the battlefield and the dangerous world in which he, his soldiers and the rest of us live. The general’s responsibility is to keep us safe from attack. It’s a shame he had to remind Mr. Obama that it’s the president’s responsibility as well.