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Source link: http://archive.mises.org/11051/curing-virulent-health-care-myths-in-the-lvmi-forum/

Curing Virulent Health Care Myths in the LvMI Forum

November 18, 2009 by

In my last post on recent discussions in the Mises Institute Forum, I highlighted the “ardor for erudition” among Forum members. However, the Forum’s gaze is not only drawn to timeless truths and aureate authors. Hot-button issues are also given their due.

Regarding such issues, there are a great many virulent myths floating around out there in the internet leftyverse; it’s easy to get infected by one. So, many come to the LvMI forum as a sort of intellectual clinic for an argumentative antidote against the latest strain of strained state apologia.

One of the issues most stricken with fallacies, and thus most in need of curative care, has been health care itself. In the following, I will quote the three best recent posts on this topic.

Forum Member “Snowflake” reported the passage of Obama’s healthcare bill in the House with his own splendidly biting commentary:

220-215. 50.6% voted for the plan, 49.4% against. Rounding up the winners’ vote to 100% and the losers vote down to 0%, democracy is clearly of the people and by the people.

The Affordable Health Care for America Act will apply to everyone whether they want it or not because that’s just how it works this is a democracy case closed.

A short summary of provisions is posted on wikipedia, but I would like to add some clarifying notes for all those naysayers out there who doubt the wisdom and good will of lobbyists who spent millions of their own dollars pushing this bill through. All for our benefit.

They are as follows:

“prohibit health insurers from charging different rates based on patients’ medical histories or gender [and] prohibit health insurers from refusing coverage based on patients’ medical historiesBecause you have a right to the pooled resources of other people. They have NO right to deny you entry into their free and voluntary associations.

“repeal of the exemption for insurance companies from anti-trust laws” Because otherwise government would be in violation of anti trust laws, and government is NOT a monopoly.

“requiring most employers to provide coverage for their workers or pay a surtax on the worker’s wages up to 8%” Because those greedy employers hate poor people! If the government didn’t require employers to offer health benefits they wouldn’t.

“An expansion of Medicare to all low income Americans.Because what if someone needed pharmaceuticals or they’d die? We need to stop people from dieing so lets massively expand the pharm industry. It had an annual 17% growth rate before this bill, I wonder what will happen next? :D

“provide a subsidy to low to middle income Americans to help buy insurance.The subsidy will also be paid for by low and middle income Americans.

“a central insurance exchange where the public can compare policies and rates” Because that information isn’t available anywhere else!

a government run insurance plan (public option)” Because the free market isn’t competitive enough for some reason…

requiring most Americans to obtain health insurance or face penalties” Because people are dumb! What if you had an accident and didn’t have insurance? You should have bought insurance! For your own good you should be forced to buy some.

“a 5.4% tax on personal income over $500,000 (individuals) or $1,000,000 (families)” Because those people are rich and greedy! Don’t worry though, The valuable rich people of society like doctors and lawyers will more than break even under our expanded health care system.

“reductions in projected spending on Medicare by $400 million per year” Because we’ll spend less… eventually. But right now we need to expand the $#@! out of health care. We can stay on budget just like we always do.

a 2.5% excise tax on medical devices” Because we’re going to pay for health care by taxing health care…

Anyway, I hope this answers your questions! Libertarians just seem not to get it. Hang in there mises people, you’ll come around sometime ;)


In his thread “How Do you Talk to the Average Person about Health Care?” Forum member “Democracy For Breakfast” posed the following condundrum:

A lot of people buy onto the myth that Canada’s health care system is “flourishing”, I don’t know why but everyone seems to think that Canada has a great system.

“Poptech” responded with a mini-armory of some excellent resources:

This part is easy, have them watch these videos:

Health Care: Does Canada Do It Better? (Video) (6min) (ABC News)

Sick in America (Video) (41min) (ABC News)

And read the following:

Canadacare May Have Killed Natasha (New York Post)
Canadian Health Care (Ludwig von Mises Institute)
Wait times for surgery in Canada at all-time high: study (CBC, Canada)

In Canada, the average wait for a simple MRI is three months. In Manitoba, the median wait for neurosurgery is 15.2 months. For chemotherapy in Saskatchewan, patients can expect to be in line for 10 weeks. At last report, 10,000 breast cancer patients who waited an average of two months for post-operation radiation treatments have filed a class action lawsuit against Quebec’s hospitals.

In his thread “Why Is Healthcare So Expensive?” Forum member “jct181″ asked…

I understand why a universal healthcare plan will drive healthcare costs up. But why is American healthcare currently so expensive? What is going on in the current market that is keeping costs up?

“Bogart” came forward and answered with an excellent summation:

Here are my top 5 reasons in order of most significant to least significant.  These are all caused by government intervention in the marketplace for health care:

1.  Price/Payment Fixing by Medicare, CHIP, Medicaid, etc make it difficult for people without insurance to afford health care.  Moreover the government has laws about who care providers can serve and what they can charge if participating in these programs.  So health care providers have no reason to to compete on price as all the folks using these services have no incentive to economize.  The result of this fascism is predictable: Higher prices and Fewer Choices.

2. Regulation of the development, manufacturing, marketing, distribution, advertising, etc of medical devices, pharmaceuticals, alternative medicine etc only helps those large organizations who have expertise in managing the process over those other providers.  For example: Kellogs is removing a claim on cholesterol reduction under pressure from the FDA.  Why, who does this help, it certainly does not help consumers of food.  It does help cholesterol reducing pharmaceuticals.

3. Licensing of doctors, nurses, etc.  These licenses are extremely difficult to get.  They are given out by “accredited” agencies to people they favor only.  The medical industry would save billions by letting the licensing be done by private organizations.  Then people would have the ability to request the certifications of their providers.  You can have the following done by non-certified people: parenting, educating, communicating, manufacturing, producing food, etc.  Why does the government need to license doctors when it does not license who makes your food?

4.  Regulation of insurers, people are not allowed to buy insurance across state lines and insurers have lots of mandates on them that increase costs.  If the mandates were removed and people could buy insurance across state OR BETTER YET INTERNATIONAL boundaries then the price would be dramatically reduced.

5. Insane liability system for negligence.  This part is completely nuts.  There is a weird lottery where the whole system is at the whims of a jury.  How about a system where the two parties the plaintiff and defendant each select an arbitrator or agree on one to hear the case.  Then the arbitrators would pick a third who has binding authority.  This would not only save billions but would be much fairer to those who have been damaged.

Social democrats like to point to health care as one of “their” issues, because to them, the case for government-provided universal health care is a slam dunk. But a Misesian, armed as he or she is with the insights of the Austrian tradition, isn’t even given pause by such presumptuous preening. Whether the issue is health care, education, or even public roads, sacred cows are always on the menu in the LvMI Forum.

{ 23 comments }

K Ackermann November 18, 2009 at 4:37 am

The whole issue is a mess, and it is a wide ranging subject, but I’d like to throw out a couple of things.

The first has to do with the subject of charging a premium for people with a poor history of health. I’m not sure it’s really an issue. They couldn’t charge enough to profit from a sick individual. They have healthy people they make money from, and then the others. The premiums for healthy people will stay the lowest if insurance companies can purge the sick people off the rolls.

Now you are back to square one: when your child develops leukemia, then his ability to live rests on your ability to keep the insurance. If they raise your premium to where you can no longer afford insurance, then… what?

They will not be able to get enough money out of you to make up the difference. It all turns into pay-as-you-go, and the ability to keep a loved one alive might come down to how much money you have in reserve. Why buy insurance?

I know there are many lines of attack on what I am saying, but what I am saying cannot be lightly dismissed, either.

The other thing is the licensing issue with doctors. I’m not sure it’s practical to expect a person to sift through 500 different private accrediting agencies to see if their rating is reputable when someone needs emergency surgery.

Also, would a doctor feel compelled to become certified with every agency? What if the doctor became certified by an agency, and later the agency was found to have sold rating on the cheap? Now the doctor is certified by a disreputable agency.

It carries things too far, IMO. It’s rife with problems.

Seattle November 18, 2009 at 5:12 am

Ackermann, the point isn’t that removing Government from health care will magically fix everything overnight, the point is Government doesn’t solve any of these problems. And if Government doesn’t work, why not let the market try something else?

Gil November 18, 2009 at 5:31 am

Point 5 doesn’t make any sense. Unless a free market doesn’t allow people to sue or a private practice can get the patient to sign some sort of waiver then the results will be the same – people go to court and some sort of settlement is reached and will vary from court to court.

Mike November 18, 2009 at 5:46 am

Ackermann,

There are millions of parents who are worried about their children getting sick, and would like to insure against it in a meaningful way (in which the event they are insuring against does not cause them to not be able to afford the care they need). There is money they would be willing to pay, and plenty of profits to be made by offering this to the many parents, most of whom will not need to use it. Why don’t we have that already? Hard to say, but since it’s one of the most regulated industries in America, I’d guess it has something to do with they guys with all the guns.

“The other thing is the licensing issue with doctors. I’m not sure it’s practical to expect a person to sift through 500 different private accrediting agencies to see if their rating is reputable when someone needs emergency surgery.”

What’s the other option? It’s what we have now, one single “accrediting agency” that uses guns to prevent any others from springing up. The only reason you don’t have to find the most reputable now is because there is only one, and it is, by definition, the most (and the least) reputable.

Lucas M. Engelhardt November 18, 2009 at 7:20 am

One point that Bogart misses: Our current health insurance system divides cost from benefits because it is already largely socialized. Most people in the US are covered under group health insurance plans which are basically pockets of socialized medicine. As a result, when people get medical care, they only pay a fraction of the cost – the rest is paid by other members of the group. This creates an “excessive demand” for medical care which drives prices up. It’s not at all clear that, left to its own devices, the market would establish these group health care plans. In fact, if you look at the less regulated individual health insurance market, it’s clear that it generally doesn’t establish group plans.

Slim934 November 18, 2009 at 7:31 am

To Ackermann:

Who is to say they could not profit from charging higher premiums to sick individuals? This statement implies that you actually know exactly how an entirely free health insurance market would function. There are varying levels of sickness with varying levels of ability to pay.

Secondly, who would purchase a health insurance that would have an automatically skyrocketing premium when you get sick? A premium that goes so high that you can no longer afford it. No one, that’s who. The whole point of insurance is that when shit hits the fan you are not left out in the cold, but that is precisely the situation that you describe. If this were how insurance worked then nobody would buy it, they would simply take the money that would have gone into their premiums and instead put it into a liquid investment vehicle that they can liquidate should the need for health care money arise.

Slim934 November 18, 2009 at 7:39 am

As to private accrediting agencies and the idea that people will be helplessly on their own if they had to choose their own care: this is just silly. It totally neglects how the market functions.

If there is a service that people need to properly supplement another service, people will buy it. In the case of healthcare this would be provided in the form of private healthcare ADVISERS. We already have a functional equivalent of this in the form of automobiles and computer components. Go on to a search engine and look up different makes of cars and computer parts and you will find extensive critiques of various aspects of them. And these are the ones that can be had for free. In the healthcare sphere, people would seek out advisors (likely other doctors) who instead of treating patients themselves act as consumer agents to say “well this treatment is effective for this” or “no this is not going to work in this situation”. The reason we do not have these now is because people currently HAVE NO SEARCH COSTS IN MEDICINE. This would change in a very short period of time the minute that consumers were forced to find their own doctors and plan for their own health.

fundamentalist November 18, 2009 at 8:13 am

K Ackerman: “when your child develops leukemia, then his ability to live rests on your ability to keep the insurance.”

There are no hospitals or doctors in this country who will let a child with leukemia die because his family can’t pay the bills. All hospitals and doctors charge people with insurance more than their costs plus a small profit in order to take care of such cases. It’s a small reason that health care costs are high. Charity takes care of a lot more sick people than the media wants us to know about because they want greater socialism, not better healthcare. I don’t know of anyone who has quantified it, but working for a health insurance company, I am aware of a great deal of it.

Lucas’ post on employer provided insurance is one of the most important points of the entire debate. I’ve heard that the system developed as a way for employers to get around the wage restrictions of the New Deal. Whatever the reason, employees contribute from their check less than 30% of the total premium for insurance. As a result, most people who have insurance are very happy with it because they think it’s cheap. As Lucas wrote, it distorts the market and causes an excess demand while at the same time blunting any efforts at reforming the system.

The largest share of healthcare spending goes to hospitals. Doctors are second. Together they make up about 80% of healthcare spending. Last time I checked, net profit margins at doctors clinics was 50%, while the average profit margin in the US is around 10%. Unusually high profits like those for doctors clinics happen in a free market only with new technology, and competition drives those profits down to normal fairly quickly. If profits for clinics remain high, there can be only one cause–state intervention in the market.

Still, the area in which we could see the largest savings is hospital fees. They take up about 60% of all healthcare spending. Hospital fees are high because they have excess capacity in expensive diagnostic equipment and are protected from competition by the state.

Our current healthcare system is no where close to a free market. It’s not socialism. It’s more like the medieval guild system. At this point, I think pure socialism would be a major improvement.

fundamentalist November 18, 2009 at 8:21 am

PS, keep in mind that insurance is intended to protect against random events. People with pre-existing illnesses don’t face the prospect of a random illness; they have a certain illness. If health insurance were truly insurance, no one in his right mind would sell a sick person insurance. That would be like buying fire insurance after your home burned down and expecting the insurance company to pay for it.

The proper place to look for help for an existing illness is charity. Americans are extremely generous people. Total charitable giving in the US is about 2/3 the federal budget. Most of it goes to education, where most of it is wasted because everyone in education (except Hillsdale) is socialist. But with a little effort, much of that could be channeled into healthcare.

K Ackermann November 18, 2009 at 8:24 am

Slim934 (and others) points well taken, especially about the cost structure of medicine vs. premiums.

My point about accrediting agencies is not silly, and it very much takes into account how the market functions.

There are thousands of financial advisers out there, but do you want to know a dirty little secret? Not one of them has even come close to beating the performance of the S&P500 when measured over a twenty year period. They all chase the money, and move in and out of things, and advise trends and fads. It’s not their money they play with.

We just witnessed ratings agencies put AAA next to junk. When market forces are applied to accrediting, then good results becomes a point of view.

Market forces and medicine can be a damn tricky dance. If who lives and who dies is determined strictly by the market, then socialism will have its greatest ally.

K Ackermann November 18, 2009 at 8:28 am

fundamentalist, all points well taken.

Christopher November 18, 2009 at 8:33 am

Slim934 – “… The whole point of insurance is that when shit hits the fan you are not left out in the cold, but that is precisely the situation that you describe. If this were how insurance worked then nobody would buy it…”

Slim that IS exactly how insurance works. Happens all the time in with auto and homeowners coverage. The filing of a claim triggers an increase in rates or cancellation when it’s time for renewal (insurance is a contract which typically has a 1 year term) since your “risk” has been realized. You can drive without auto insurance and only pay a fine if your coverage is verified in a traffic stop. If you file a claim on your homeowners that’s not for a catastrophic event (ex fire) your rates will double or triple OR the insurance will not renew your policy.

Unfortunately health insurance is different.

Ron November 18, 2009 at 9:28 am

A couple of things that I wonder about are:

  1. When did people start to believe that having health insurance means that you should never have to pay anything but a fixed health insurance premium for your health care?
  2. Why don’t most people realize that the money paid by employers in the form of health care premiums is money that would otherwise be paid to employees in the form of wages? Why the distinction between “employer costs” and wages?

Beefcake the Mighty November 18, 2009 at 9:57 am

Am I the only one who finds that Forum to be a complete waste of time? Far, far inferior to this blog.

Chiporeo May 27, 2010 at 9:07 am

“Am I the only one who finds that Forum to be a complete waste of time? Far, far inferior to this blog.”

Nope. The quality members have left, been banned, or barely post anymore. It’s now full of knee jerk reactionaries who think they’re omniscient because they started reading LRC.

Slim934 November 18, 2009 at 9:58 am

To Ackermann. There is no comparable comparison to what a healthcare adviser and a financial adviser are advising on. A healthcare adviser is basically some one with specialized knowledge of a natural science: or something that is not going to change based on people’s subjective valuations. your endocrine system, for example, works in a definite matter. Finance operate based totally on subjective valuations as all investment vehicles do. The comparison is similar to the differences between mathematical economics and formal-logical economics.

To Chrstopher: Excuse me for not being more specific. I was commenting on the fact that Ackermann seemed to be alluding to an immediate drop in health insurance as soon as the disease comes about. I was not referring to a drop at a predetermined period of time, which yes I concur would be possible once a disease is found.

As to the comparison with other forms of insurance I do not necessarily agree with you. Auto insurance and homeowners insurance are normally one time events that can be repaired due to the mechanics of the risks and uncertainty with those things. For instance, in most cases (fire, automotive breakdown) these are 1 time freak occurrences that can be fixed afterwards. For health insurance this is not necessarily the case, as in the case of a chronic disease or some kind of injury which requires extensive physical therapy inorder to alleviate. On the other hand, given that these differences are apparent even to some one as ignorant of medicine as myself, it is obvious to me that specialized insurance which deals exactly with these sorts of conditions would likely come about in a truely free market for health insurance.

Joshua November 18, 2009 at 10:58 am

Ackerman:
“There are thousands of financial advisers out there, but do you want to know a dirty little secret? Not one of them has even come close to beating the performance of the S&P500 when measured over a twenty year period. They all chase the money, and move in and out of things, and advise trends and fads. It’s not their money they play with.

We just witnessed ratings agencies put AAA next to junk. When market forces are applied to accrediting, then good results becomes a point of view.”

I’d like to point out that you are criticizing the participants in a politically skewed marketplace. You seem to see this as a damning example of bumbling in an unregulated market. This is unconvincing due to the aforementioned political influence. Strawman?

Slim934 November 18, 2009 at 11:08 am

Indeed.

You also forget to mention that the credit rating agencies are all essentially controlled by the government in the regulations that govern how the ratings system work.

There are plenty of instances of investment firms telling their clients not to put money into things which are highly rated. Like the Bernie Madoff scam for example. Private agencies had already seen he was up to no good and actually sent correspondence to the SEC as early as 2005 alerting them to his likely misdeeds.

The whole thing this episode has shown is that the rules governing the financial sector are worse than useless.

fundamentalist November 18, 2009 at 11:26 am

K Ackerman: “My point about accrediting agencies is not silly, and it very much takes into account how the market functions.”

Adam Smith worried (in Wealth of Nations) that government licensing would do nothing but act as a shield for charlatans. And that is pretty much all it has accomplished in the health care field. Like most insurance companies and HMO’s, we have doctors on staff who give the thumbs up and down to procedures. Most people don’t know that. They assume that accountants make those decisions. They don’t.

I just came from an hour long talk by our physician to overseas procedures and makes the final authorization and he said that many days he is ashamed to be associated with the medical profession because so many doctors are one stripe above a shaman in their abilities. He said the 8th largest cause of death is being in a hospital, and the cause is not the illness the patient went in for, but usually some virus the patient picked up while in the hospital. This doctor claims that much of what doctors do is worthless, but a lot is actually harmful. He said it takes 17 years for new findings in medicine to become common practice. So what has state licensing of doctors actually accomplished?

Shay November 18, 2009 at 12:20 pm

K Ackermann wrote, “The first has to do with the subject of charging a premium for people with a poor history of health. I’m not sure it’s really an issue. They couldn’t charge enough to profit from a sick individual. They have healthy people they make money from, and then the others.”

As long as the people they select for the pool have variations in health care costs, and most people don’t incur the higher costs, they can run a useful insurance pool. Obviously they wouldn’t cover routine expenses (since that wouldn’t be insurance), but they would cover unexpected large expenses.

“PS, keep in mind that insurance is intended to protect against random events. People with pre-existing illnesses don’t face the prospect of a random illness; they have a certain illness. If health insurance were truly insurance, no one in his right mind would sell a sick person insurance. That would be like buying fire insurance after your home burned down and expecting the insurance company to pay for it.”

Someone with illness A can still get illness B, so it would make sense to insure for things other than illness A (and any related conditions that is very likely to cause). In your burned home example, it would be like having your guest house burn down, but still keeping fire insurance for your main home, and still keeping health insurance for your family members. It’s not all-or-nothing; it’s insurance for a limited set of events which are unlikely to happen, but would “break the bank” if they did. The unlikelihood and number of people in the pool combine to divide the bank-breaking cost into something manageable for each member.

PirateRothbard November 18, 2009 at 1:46 pm

#6 on the list could have been “not being able to turn away those who can’t afford to pay”.

Paul Burke - Author Journey Home November 19, 2009 at 9:21 am

The fact remains that big insurance by refusing care to patients and reimbursement to doctors over typos has ticked everyone off. They have a monopoly over the whole process and a well financed lobby team (including Lieberman’s wife) and representatives on both sides of the isle.

A friend of mine recently laid off just he and his spouse is paying $2,500.00 dollars a month for his COBRA. Health insurance costs more than his mortgage. Anyone taking up the insurance industry’s cause doesn’t know what they are talking about.

If you think the insurance companies are going to voluntarily lower their cost while having a monopoly over the process – you are being disingenuous …Over 60% of all US bankruptcies are attributable to medical problems. Most victims are middle class, well educated and have health insurance – (The American Journal of Medicine)

The insurance companies and their representatives in Congress would love to perpetuate a business model that is crippling our overall economy – a bunch of great Americans aren’t they?

90% of the wealth concentrated in 1% of the population is no way to run a country but a heck of a way to establish a royalty ruling class. Yacht sales can not sustain 350 million people. I’m for the public option, competition and a level playing field or break up the big insurers like we did AT&T.

A slavish focus on profit margin might be good for the individual or a business, but it is one helluva lousy way to “govern” a Country. The GOP being a wholly owned subsidiary of Corporate America has a hard time with that concept.

Paul Burke
Author-Journey Home

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