Profit in Health Care

President Obama claims that he wants to see choice, competition and cost reductions in any health care reform bill. Of course, choice and competition lead to reductions in cost. If the free market were allowed to work in the health care sector, we would achieve all three of the President’s stated goals.

In the free market, a business will learn that its prices are too high when it sees a loss of customers to lower cost competitors. This holds business accountable without the intervention of the government. Unfortunately, under the system we have today, choice and competition are not allowed so the free market cannot work.

Americans are not allowed to purchase health insurance across state lines (A friend of mine lives in Wisconsin, but works in Illinois so all of his heath care providers are in Chicago. However, he must buy a Wisconsin health insurance policy even though all of the providers who receive the payments on his behalf are in Illinois.) Also, state governments mandate certain coverages in insurance policies sold within their borders. Recently in our office, we purchased insurance for myself and one my employees. We were the only two covered. I am having no more children and my employee was not of child bearing age. We, therefore, had no need for maternity coverage, but we still were forced to buy it. So much for our choice.

President Obama’s plan does nothing to increase either choice or competition and, therefore, does nothing to reduce costs. Competition is not having numerous companies offering the same thing at the same price. What consumers want only emerges through the free market process. It doesn’t emerge through government intervention and mandates. Politicians and bureaucrats cannot predict what consumers want, much less need.

Under the current health care proposals, government officials would define the available health insurance plans. As such, competition would be forbidden. Consumers who what to buy a high deductible policy would be unable to do so. Those who don’t want maternity coverage or fertility coverage would be out of luck.

On top of that, the so called public option would mean the end of private health insurance coverage. The government would be acting as a supplier and the referee. Since only the government has the power to print money, it would easily undercut private insurance carries to the point where none could enter the market. The cost public option would be underwritten by the government’s power to tax and print money.

Mr. Obama claims that the virtue of the public option is that there is no profit motive. Of course that is true by definition with any government plan. However, what the President fails to understand is that profit is what enables competitors to figure out what consumers want. If there is no profit, how will government bureaucrats allocate resources? How will they determine what consumers want? How will they produce a service without wasting resources? The President needs to learn that profit is the key to competition. Unfortunately, having never worked in the private sector, it is unlikely that he will learn the value of running a profitable enterprises. Without it, all that we are left with is the decaying system of our friendly neighbors to the north.

Commenting on Anonymous' Comment

Here is a comment from Anonymous on The Conservative Soldier's post last week:

Your optimism is impressive. It does not seem realistic to me. What would all of your conservative reforms do about policies with annual and lifetime benefit maximums, about cancellation (or non renewal) of policies when people get sick, about out-of-pocket maximums that do not apply to certain diseases? These and a number of other injustices in the current system have nothing to do with the problems you list, and everything to do with greed.

Inescapably, unless one believes that when it comes to the provision of health care everyone is entitled to everything then there must be restraints on care. Those restraints are determined either through the political system, the price system or a blend. In my lifetime there has been no unfettered free market in the delivery or financing of health care and there will not be one for the rest of my life.

Anonymous decries benefit maximums and recission. Nobody likes these things but those are two ways the price system allocates limited supply (of either dollars or doctors) across unlimited demand. A political system will face the same problem, the solution will just take a different form. Some people will pay higher taxes. Some people will have to wait longer than they do now. The price of new technologies will come down, but the cost of R&D risk won't, which means some technology that might have emerged also won't. Over time some outcomes which are choices, not insurable events, will be covered, if advocated by vocal special interests.

I think health care costs more than we want it to because we demand a lot of it, partly because we're rich, advanced, aging and lazy and partly because we've created the illusion that someone else pays for health care. Accordingly, I think health insurance should be personal, not corporate, property. I think government should fund a means-tested pool to pay for some of the uninsurable. I think people, not employers, should be required to buy health insurance. I think insurance companies should be allowed to sell mandate-free policies. I think there should be cross border competition. I think the government should subsidize health insurance for those who can't afford a mandate-free policy. I think the health insurance industry should be required to offer a national, irrevocable policy free of political mandates and actuarially sound. I think combat veterans should get whatever damn treatment they want, paid for by the rest of us. I think if you're a bigger risk, insurance should cost you more. I think health care providers should have to disclose prices. I think if you're here illegally no hospital should turn you away but eventually you should be sent back. I think an employer who hires an illegal alien should be punitively fined. I think all school age children should be provided basic inoculations.

I don't have all the answers but I know everyone can't have everything. Anonymous, how would you decide who gets what?

Krugman Essay Worth Reading

When Krugman isn't serving up dishes of raw, partisan red meat he's a very thoughtful thinker and writer.

Happy Labor Day. See you next week.

Government should retreat, not reframe

There is a viral movement afoot on Facebook through which well meaning communicators are directed to express their “status” (state of mind in the here and now) on health care “reform”. The pledge is this: No one should die because they cannot afford health care, and no one should go broke because they get sick.

That is like strong-arming people to declare that we should absolutely reject the drowning of puppies and kittens.

What’s to disagree about on health care with dignity? Among intelligent American citizens, there is no disagreement that targeted reform will elevate health care and help those most in need.

But the point of this exercise launched by the Obama Socialist movement is not to state the obvious. It is the opening chess move toward “re-framing” the health care debate. The Obamatrons want health care reduced to a war between Compassion and Indifference. Americans will reject this.

Why? No matter how angry my liberal friends might make me in the heat of debate, I would always die for them because they are Americans first. Let me say it again. I will give up my life for you. Were it down to me, Osama bin Laden and Teddy Kennedy, I would give my life in order that Osama was road kill and Teddy had the thrill of one more dry Gibson on the veranda on the family compound. Patriots never compromise. Teddy was right. The dream will never die. What matters is that we cling to the dream.

So, in that spirit, let us resolve together, as Patriots, that we will not be duped on this all important issue of health care.

If we rise up and demand that our Government, the IRS and the cloud of frivolous law suits step out of the way, stay clear of our lives, then we can be assured that an individual’s life’s work will not be measured by tax brackets, and that wealth accumulation will not be vilified. And when we arrive at this moment the likelihood of Americans facing death because they can’t write a check for comprehensive coverage or Americans going broke to pay physician and hospitals will be, at best, remote.

I am confident that when we allow productive Americans to control their income we will enter an era in which the few million Americans lacking health care will be protected and nurtured by the rest of us, through carefully managed and administered federal programs that can’t be exploited by illegal immigrants or by the “entitlement class”.

My pledge stands. If I will die for you, I will vigorously defend programs that sustain life with dignity.

We have common ground. It is called American soil.

Where Have I Heard This Before?

Today the Obama administration announced the settlement of a fraud probe, started during the Bush administration, into Pfizer's marketing of Bextra.

While entirely unrelated to the Overseas Contingency Operation formerly known as the War on Terror, this quote from Health and Human Services Secretary Kathleen Sebelius caught our eye:

“We don’t just want to catch crooks, we want to stop them before they strike..." Full quote here.

What a novel idea.