Wednesday, March 4, 2009

C'mon Conservatives: Do We Have a Free Market Answer for Medical Care?

The conservative movement is going nowhere, fast. And, sad to say, it has already lost the health care debate. How did it lose? By never showing up --the empty podium is telling.

There is no question that American health care is horribly broken. It is not just broken for those people who cannot afford to access it --in fact, it is less broken for them (through Medicaid, SCHIP, etc) than it is for basically productive people.

And, it is broken because it is an entire economy that has been exempted from the rules of the marketplace. One can point the finger of blame at "greedy" hospitals, "greedy" doctors, or "greedy" insurance companies, but much of the blame falls at the feet of, you guessed it, Uncle Sam.

In fact, the whole system is a post-War relic. It is the relic of Uncle Sam fixing wages in the second world war that motivated companies, based on market principles, to offer "benefits" --untaxed income. Among those benefits was health insurance --then a tiny fraction of the overall cost of employment. So, the whole system is based on an anachronism --wage and price controls.

One does not have to look far to see how perverse this is. Your coverage is dependent upon who you work for. If you work for GM you have better coverage than if you work for a GM dealer. You can be a very successful independent businessman and have worse coverage than the Wal-Mart cashier.

This perversity is built into the system. Name one other industry, other than the health insurance industry, that is built around denying its product to the very people who most need it? It is not the well who need the doctor, but the sick!

Sorry, Sam, this one's personal. Our daughter has a pre-existing condition. She acquired this about the same time our denomination saw fit to cancel its health policy. Most of our pastors are young and healthy, you see. And, if you are sick, or your child is, then sorry folks, we're out of luck. We've got our cheap individual plans. The big churches have their own groups. You're stuck.

Which was okay in Virginia, because they have guaranteed issue policies. But not MS, oh no. We are in the insurance dark ages here. But, I digress.

As it stands now, the whole system is horribly prejudiced. Prejudiced against whom? The self-employed and the small business --those too small to form "risk pools."

The answer to this is NOT socialized medicine. Socialized medicine perpetuates the problem. It has no natural cost control mechanisms. It tends to set the costs of products artificially low --which inevitably must make other costs inevitably high, lead to a decline in services, or the decimation of capital (aka crumbling hospital buildings).

The only answer to bring down costs is the market. Why does not Hospital A say, "We offer the same great service as Hospital B, but cost 30% less?" THat's what Wal-Mart does. TJ Maxx does not have the amenities of Macy's, but the products on the rack are the same. If doctors, hospitals, drug companies and insurers had to compete, it would drive the inefficiency from the system.

Now, there are other issues to be sure. Malpractice insurance is one. The artificially lowered prices of the government insurance plans are another even larger issue.

BUt, unless and until conservative address this issue, without the me-too-but less that is all too common, we will never gain a nationwide hearing. It is a crisis headed towards catastrophe --one that could be averted, if conservatives would apply their ideals to the problem.


  1. Very good points. I don't have the answers -- haven't thought it through enough, but a little healthy competition would probably help. I feel very much the same way about conservatives in other areas. If you want to win something, get out there and fight for it! It has gotten to the point where I don't know what to call myself politically. I vote conservative based on my stances about abortion. But that's about it...

  2. Okay, maybe GM was a bad example.

    Farewell, Buick and Chevy!

  3. It is a sad day, if indeed GM closes shop.

  4. HA! Seriously? I'm tired of seeing Suburbans all over the place. I could stand to say bye-bye to GM... ;)

  5. I empathize with your personal stake in this Ken. My wife has a severe chronic pain condition. There is no cure, only management. Yet, the current system is all about finding a problem, fixing a problem,... "Next!"

    Your analysis here is good, but it unfortunately falls short of the complexity of the "health care landscape" if you will.

    Health Care seeks to take a scarce resource, good health, and make it less scarce. It does this by using a combination of common sense and technology. Insurance seeks to take a scarce resource, health reimbursements, and keep it scarce by having more income than outlays. So, the later model strives to keep change at bay, while the other strives to create change toward a better standard of living. As our standard of living has improved, we have edged out the low-hanging fruit regarding bad health, leaving us with only the most costly issues to still pay for.

    The temptation here is to believe that good health has become a commodity, something to be traded and sold, which is what government and the insurance companies believe based on their recent efforts in policy, lobbying and on the campaign trail. And in some ways, that is true under the framework of the existing solution, insurance-model health care. Hence, why your point of how large groups can negotiate better rates than the little guy is the reality. However, by continuing to rely on the healthy to pay for the sick (and free-market profits), we ignore that the margins continue to effectively shrink due to the cheaper health issues being resolved, leaving only the expensive health issues to be paid for. Throw in, the natural outgrowth of good health now being less scarce, fostering a cultural expectation that an ubiquitous utopia of good health is what Americans should expect in our society, and now you have a problem that has fundamentally changed.

    We are moving from a balance of risk and scarcity into a conflict of expectation and margin. So, we now have three problems-- 1) we have shifted from balance to conflict within our original solution, 2) we are deeper into the human psychology of expectation instead of the analytics of risk, and 3) we are no longer dealing with scarcity in a large pie, we are dealing with commodity in a small pie, effectively health care deflation.

    Namely, the dynamics are shifting beneath us, and we are still arguing the same old song. Complexity has not only shifted the pivot points of the argument; it has added subsequent problems to the argument itself.

    The great irony of this beginning of the health care crisis is this. What Americans fear about losing choice is already happening because of the gap between the original solution and the new problems spawned by the success of original solution, and ironically it isn't the government that is wagging the dog, it's the marketplace wagging us and the government. Fundamentally, our system is not failing differently than Canada or any other "socialist health care" ad nauseum. Ultimately, we are all failing because of the same problem, the crushing weight of complexity coupled with ignorance of our own prisons of thought and experiment.


  6. Ken,
    Conservatives stand at the podium, but no coverage is there to get the word out. Republicans have offered ideas and they are DOA. The Federal gov't created the monster by heavily regulating the Health Industry- providers and insurers. They cannot cross state lines in insurance to compete, insurance companies cannot offer competing plans according to what the market wants. Portability is not provided for, if you cross lines or leave a business, it is over until you find a new one. Hospitals cannot compete on most services as the law forces them to be the same. It does take lucre to do it though, a profit must be made or no one can do it. It may be why concierge service's popularity is growing, on a cash basis w/o the paperwork hassle. Seems to be cheaper for everyone. Deregulation will unleash the free market top meet the needs.
    On another issue- The denominational cutting loose was almost criminal and not very Christian or compassionate, hallmarks we are supposed to be known for. They first allowed RUF to scurry off and make their own deal, and that stranded the older folks in the old existing program just as they were needing it. And it killed the balance sheet for it's profitability. HQ won't cover that loss- So sorry, off you go; survival of the fittest you know, you are on your own... just breathtaking in it's hardness!! (As they are Taking Pontius' water bowl and splashing their hands)I was flabbergasted, and still saddened as our seasoned servants are left in the cold facing retirement on their own; if they are not connected to a generous or big church (or the blessing of a capable presbytery that takes it's duties seriously)I know ours skyrocketed as individual accounts while serving small churches. Just my 3 shekels.