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Paul Hsieh

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Monday, November 17, 2008

Maximum Madness 

By Paul Hsieh

Categories:  Insurance Regulation, Massachusetts, Montana

The "universal health care" plan from Senator Max Baucus (D-Montana) is basically a nation-wide version of the failed Massachusetts plan.

The Baucus plan does include an individual insurance mandate (unlike the Obama plan, which does not, although President-elect Obama has stated that he "could support a mandate if the system proves impossible without one.")

In Massachusetts, the approach of individual mandates, employer mandates, benefit mandates, a state-run "insurance exchange", and state-subsidies has merely led to skyrocketing costs and long waiting lists. Individuals, insurers, and providers are prohibited from negotiating in the free market to their mutual benefit, but are instead forced to act against their own rational judgment and instead follow the state's requirements for health care and health financing. The bad economic consequences are a predictable outcome of this violation of the fundamental right to contract.

Adopting the Massachusetts plan at the national level would only multiply these problems 50-fold.

One definition of madness is, "Trying the same thing over and over again, but expecting different results." If that's the case, perhaps we should refer to this as the "Mad Max" plan...

Saturday, October 18, 2008

LaFerrara on NJ Health Care Reforms 

By Paul Hsieh

Categories:  New Jersey

The October 14, 2008 edition of the New Jersey Star-Ledger printed the following LTE by Mike LaFerrara supporting free market health care reforms in New Jersey:
Insurance freedom

A free market is a recognition of every individual's inalienable right to think and act on his own judgment, including entering freely into contractual agreements with others for his own well-being. It leaves him free from coercive interference by others, including government officials and politicians. Anything else is a violation of those rights. The health insurance crisis is directly attributable to the lack of a free market.

Assembly Bill 2767, the New Jersey Healthcare Choice Act, would be a huge step toward rectifying this injustice. The bill would open up New Jersey's insurance market to policies offered in any state. Individuals and health insurance companies from around the country would be free to contract voluntarily to mutual advantage. Unfortunately, a hearing on this bill is being blocked in committee, according to one of its sponsors, Assemblyman Jay Webber.

Insurance Committee Chairman Gary Schaer should end this blockage. If "government of the people" means anything, Trenton should end the rights-violating restraint-of-trade practice of forbidding state residents from buying out-of-state health insurance policies and enact this bill into law.

-- Michael A. LaFerrara, Flemington

This would be a good step in the right direction. Plus, state legislatures could easily implement this reform without permission from the federal government -- all they need is the political will.

 (Via FIRM.)

Tuesday, October 14, 2008

The Problems with "Never Pay" Requirements 

By Paul Hsieh

Medicare (aka CMS or Centers for Medicare/Medicaid Services) has now implemented a policy of not paying for certain bad patient outcomes that they call "never events". These include certain kinds of bedsores, post-operative infections, etc.

It's being portrayed as a measure to ensure quality and reduce costs. But physician-blogger WhiteCoatRants predict it will lead to some nasty unintended consequences:
1. You'll get diagnosed with a lot more illnesses so that it is very difficult to determine what care is not for a "never event" and what care is for the "never event." Then when you have to stay in a hospital longer because of a "never event," the hospital can allege that the extended stay was really due to a problem that was not a never event. That will mean more testing, more procedures, and higher costs.

2. If you develop a "never event," you’ll be more likely to get transferred to another hospital. CMS won't pay for never events if they develop in a hospital, but they will pay for treatment if you present with a pre-existing never event. Hospitals will develop unwritten agreements that certain specialists at each other's facilities are better suited to treat a certain patient's "never event." More transfers mean more redundant testing, higher costs, and more complications from the testing.

3. Testing and diagnosis of never-event conditions will diminish where feasible. That bedsore isn't a Grade 3 - it's only Grade 2. CMS will pay for those.
He predicts that these measures won't actually control costs. Then the government will propose to "rescue" the failing system with a complete takeover:
Enter the knight in the shining armor -- the same government that put us into this mess. "Let's try universal healthcare/single payor," the knight says from atop his noble steed.

...Whichever way you look at it, healthcare as we know it is about to change for the worse.

We're screwed.

Although I hope he's wrong, I fear he's right. Hence, one important point that physicians and policy makers should keep in mind as this process unfolds over the next few years is to make sure that the blame for these unintended consequences is placed where it belongs -- on new government rules and regulations. If legislators recognize that skyrocketing costs are caused by the government, then they might do the right thing and repeal some bad laws. But if they are only told that the problem is "greedy" insurance companies or "greedy" physicians, then this will give them more reasons to press for full-bore socialized medicine.

We've already seen this in the recent $700 billion Wall Street bailout, where the "free market" was blamed for problems caused by government interference in the free market.

This must not happen to American medical care, otherwise we'll all pay a price (in both money and lives) that will make the current $700 billion seem like chump change in comparison.

Thursday, October 9, 2008

Health Care is--or Should Be--a Commodity 

By Paul Hsieh

One of the questions asked during the October 7, 2008 Presidential Debate was whether health care should be treated as a commodity.

Both candidates argued that it shouldn't, with Obama saying that it was a "right" and McCain claiming that it was a "responsibility".

Unfortunately, both candidates are trying to deny the obvious. Health care is a commodity in the broadest sense of that term: a good or service created by businessmen for trade in the marketplace. As such, the producers of health care (like the producers of any other commodity such as food, shelter, or cell phones) require freedom in order to produce. Government regulations that infringe upon that freedom will stop producers from creating this valuable commodity, as we've already seen in countries such as Canada and the UK.

The fact that modern health care is essential for human life makes it all the more crucial to allow the free market to work and to restrain the government from violating the rights of patients and health care providers. Any attempts by the government to guarantee health care as a "right" necessarily violates someone's actual rights -- either the providers or those forced to pay for others' health care against their will or both. Hence, Americans must reject the flawed notion of health care as some sort of "right" and embrace the fact that it is a commodity.

For the proper approach to thinking about this issue, I know of no better starting point than Dr. Leonard Peikoff's, "Health Care Is Not A Right".

Friday, September 19, 2008

In Opposition to Colorado Amendment 56 

By Paul Hsieh

Categories:  Colorado

This fall, Colorado voters must decide whether to require all businesses with more than 20 employees to provide health insurance for their employees (Amendment 56). Although voters may be tempted to say "yes," this is an immoral and impractical solution to the problem of rising health insurance costs.

It is morally wrong because it violates the rights of employers and employees to negotiate to their mutual self-interest in a free market.

Businessmen create jobs through rational thought and hard work. Consequently, they have the moral right to decide on what terms to offer those jobs to prospective employees, including specific wages and benefits.

Similarly, workers have the right to negotiate for any specific wages and benefits they desire, and the right to reject job offers that don’t meet their criteria. But they have no right to demand a specific salary or benefit from employers (such as health insurance) via government force.

Two motivations behind this proposed law are (1) the mistaken notion that health care should be a guaranteed “right," and (2) the desire to force businesses (rather than government) to pay for this supposed obligation. But health care is a need, not a right. A right is a freedom of action in a social context, such as the freedom of speech.

t is not an automatic claim on a good or service that must be produced by someone else. There is no such thing as a “right” to a car or an appendectomy. Any attempt by the government to guarantee a false “right” to health care can only be done by violating the actual rights of someone — in this case, business owners.

Forcing businesses to provide health insurance to employees will also cause serious economic harm to Colorado. Such a law would cause many businesses to fire workers, outsource jobs, or cancel plans to hire new workers. This will disproportionately harm unskilled workers and those at the lower end of the income scale — the very people the measure is intended to help.

According to Howard Roerig, owner of Seale & Associates, Inc. in Centennial, “This measure will have a chilling effect on all small businessmen. Although I don’t have 20 employees at present, I would make certain never to hire that 20th person. The costs would be so high that I would be better off starting another firm in a different state, and letting it do business in Colorado as an out-of-state firm.

"I would have to find some means of skirting this measure or else close my doors."

Other states such as California have driven away many businesses and jobs due to high taxes and heavy regulations. Colorado must not repeat these mistakes.

To "solve" the problem of high insurance costs by foisting those costs onto businesses would be just as wrong as "solving" the problem of rising gasoline prices by forcing businesses to pay their workers’ gasoline expenses.

Our current high health care costs have been caused by decades of government interference in the free market. Hence, the proper solution is not more government regulations, but instead free market reforms that addressed the problems caused by prior government controls.

Some examples of free market reforms include allowing Coloradans to purchase health insurance across state lines and eliminating mandatory insurance benefits. Patients should be allowed to purchase Health Savings Accounts (HSAs) for small routine expenses and insurers should be allowed to sell low-cost catastrophic-only policies to cover rare but expensive events. These measures could greatly reduce insurance prices and allow patients to purchase from the best offerings of all 50 states, thus making insurance available to thousands of Coloradans who want to purchase it but currently cannot afford it. Furthermore, the state legislature could adopt these reforms without permission from the federal government.

If Coloradans want to address the problem of high health insurance costs, they should reject the Amendment 56 and instead demand free market reforms. This is right for employers, right for employees, and right for Colorado.

(First printed in today's Rocky Mountain News) 

 

 

Friday, August 29, 2008

Remember Maine? 

By Paul Hsieh

Before Massachusetts implemented their "universal" health care plan, the state of Maine had attempted a plan to guarantee coverage for all the uninsured, called Dirigo.

Now, unhappy Maine residents are protesting yet another tax hike to fund their system, especially after the program was sold to Maine residents as not requiring any new taxes. Nor did the program do much to reduce the problem of the uninsured, as the article notes:

Dirigo Care has cost the state's taxpayers nearly $164 million in the four years since its inception. Although its intended purpose was to insure 128,000 people who had no health coverage, only 4 percent of that total, or just over 5,000 individuals, have been successfully removed from the rolls of the uninsured and into the state program, according to figures from the Maine Heritage Policy Center.

In 2007, the New York Times described Dirigo as "faltering."

In June 2008, others are using the words "boondoggle" and "failure":

DirigoChoice costs taxpayers $2,977 per enrollee per year just for the premium subsidy, excluding Dirigo Health Agency administrative costs.

As of April 2008, there were 12,637 individuals covered by DirigoChoice, less than 1 percent of the state's population.

Only 31 percent of DirigoChoice enrollees -- 3,917 -- were previously uninsured for at least 12 months prior to enrollment. That is only 3.2 percent of the state's uninsured population.

The marginal cost to state taxpayers is $9,603 to subsidize the coverage for one previously uninsured person through DirigoChoice.

Maine's uninsured rate from 2003 to 2006, the latest year available, is virtually unchanged - 128,000 uninsured in 2003, 115,000 in 2004, 132,000 in 2005, 122,000 in 2006.

The Dirigo Health Agency's administrative costs were $3.7 million in calendar year 2007.

Because of financial difficulties, DirigoChoice was closed to new enrollees on Sept. 1, 2007.

The 1.8 percent health care claims tax, which was included in the tax increase package approved by the Legislature, will cost individuals about $78 and families about $210 a year in higher health care premiums.

Without the $57 to $72 million tax increase, DirigoChoice enrollment is projected to drop by 4,000 individuals. Even with the tax increase, DirigoChoice enrollment still is projected to drop by 1,000 people.

The Dirigo Health experience has cost Maine taxpayers more than $100 million since 2005.

Dirigo Health was supposed to make health insurance more affordable and provide coverage for most of Maine's uninsured. In fact, it has done neither.

This is the predictable result of government-guaranteed health care.

Thursday, August 28, 2008

When 'Free' Health Care Isn't 

By Paul Hsieh

Categories:  Single-Payer Follies

Here's the ninth myth listed at BigGovHealth.org, which provides a lot of useful facts in the discussion of health care:

Fact: People in other health care systems often pay more than Americans do, sometimes in the form of taxes. And they may also incur high costs if they need a drug that is not covered by their health system or want to see a specialist.

In the US, a family of four with an employer-based PPO will have around $15,609 total this year in health care costs. Of this amount, $9442 will be paid by the employer and the employee will contribute $3,492 in premiums and $2,675 on copays, etc. [1] That's about 6 percent of average family income. [2]

In Canada, while the percentage of taxes used to provide health care varies, it is estimated that 22% of taxes collected went to the health system in 2004.[3] Several provinces, including Quebec, Ontario, Alberta, and British Columbia, also charge additional premiums.[4] Canadians also may spend money to receive private treatment for procedures or drugs that are not covered by the government system.

Citizens of the UK pay 11 percent of each pound they make in weekly income between £100 - £670 for the NHS, plus an addition 1 percent of income over £670 a week.[5] Though the copay for drugs is low, many drugs are not covered, often because they not considered cost efficient. And anyone who uses their own money to buy powerful but expensive drugs not paid for by the NHS finds him or herself shut out of the NHS for having gone outside the system.

In Germany, coverage from a public sickness fund currently can range significantly in cost, from around 12.2 to 16.7 percent of income, with the employee paying a bit under half. As of fall 2008, premiums are to be standardized from the federal level and health care experts anticipate that they will be set around 15.5 percent.[6] Private patients can generally expect to pay more than they would in the public system.

In France, employees contribute only to 0.75% of their salaries towards medical care, but also pay a 7.5 percent General Social Contribution, the majority of which is earmarked for the health system. This base coverage reimburses people for the majority of costs for doctors visits and for a portion of the costs of medications.[7] On top of the government coverage, almost all French residents have supplementary coverage from a mutuelle, costing approximately 2.5 percent of salary.[8]

(See original article for references)

As always, these sorts of economic facts are tremendously helpful in reinforcing the underlying moral point that health care is not a right. Health care is a commodity that must be created by the thought and work of a rational mind. There is no such thing as a "right" to something that must be produced by another.

When a government attempts to guarantee health care as a "right", it can only do so by violating the actual rights of doctors and other health care providers, who are forced to provide that service on the government's terms and for the government's prices, rather than on their own terms in a free market.

The results we see in Europe and Canada are the result of this idea put into practice.

Wednesday, August 27, 2008

Malpractice Premiums Chopped for Concierge Docs 

By Paul Hsieh

Dr. Steve Knope explains that switching to a concierge medicine practice cut his malpractice rates by a whopping 55 percent. His insurance company gave him the following reasons that they were willing to offer him such a low rate:

  1. The fact that patients are willing to pay you directly for your services means that you have a good reputation in the community. We know that lousy doctors cannot sustain a concierge practice.
  2. Concierge practices are smaller than traditional practices. By sheer number, the risk of lawsuits is smaller. You have several hundred patients as opposed to several thousand.
  3. You have more time to spend with each patient. You are less hurried. You are able to be more meticulous and pay greater attention to detail. This lowers your risk of human error.
  4. Though you are capable of making a mistake, you actually have a relationship with your patients. You know them personally. You spend a great deal of time trying to do the right thing for them. Even if you make a mistake, your patients will be more likely to forgive you for human error.
  5. Finally, we have looked at over 200 practice years of concierge physicians. To date, we have been unable to identify a single judgment against a concierge physician.

This is yet another example where a free market approach benefits both doctors and patients. I recommend reading his entire blog post.

Tuesday, August 19, 2008

Guaranteed Rationing 

By Paul Hsieh

Categories:  Single-Payer Follies

Supporters of "universal health care" like to argue that under a government-run system, health care will be "guaranteed."

Unfortunately, the facts of reality show the exact opposite. Recently, the British government has ruled that its National Health Service should deny medical care if the cost is too high:

Patients 'should not expect NHS to save their life if it costs too much'

The NHS should not always attempt to save someone's life if the cost is too much, the medical regulator has ruled...

[T]he regulator says: "There is a powerful human impulse, known as the 'rule of rescue', to attempt to help an identifiable person whose life is in danger, no matter how much it costs. When there are limited resources for healthcare, applying the 'rule of rescue' may mean that other people will not be able to have the care or treatment they need...

This is of course, classic rationing.

In reality, government "guaranteed" health care means that health care is dispensed at the government's discretion, rather than on the basis of what a patient and his physician decide is best.

Do we really want that kind of system for America?

Friday, August 15, 2008

Myths, Ethics and Concierge Medicine 

By Paul Hsieh

Dr. Steven Knope addresses a few of the common untruths written and said about concierge medicine. In particular, he tackles the following four misconceptions:

  • Myth # 1: The only ethical way to save our medical system is to create a universal health care system managed by the government and abandon private medicine.
  • Myth #2: Concierge Medicine doctors only see wealthy patients, abandoning the poor and middle class.
  • Myth #3: Health care is a right! People should not have to pay for their healthcare.
  • Myth #4: Concierge doctors are only concerned with money. There is no reason that they cannot care for complex patients with multiple medical problems in an eight-minute office visit.

I recommend reading the whole thing, because Dr. Knope provides a positive moral defense of his profession.

Concierge medicine is a natural consequence of the free market, where physicians and patients can voluntarily negotiate using their rational judgment according to their mutual interest. Patients receive quality care for a fair price, and physicians are able to practice good medicine according to their professional conscience, and both sides win as a result.

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