Tyler's dire prediction

RE: Quote

"...A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy..."- Alexander Tyler

I chose this quote as something to focus on in exclusion of several other comments I wanted to make, regarding government intervention. This quote revolves, however, on related but very different philosophical disputes, and I thought it would be more interesting to engage for that reason.

I find a few things wrong with what is otherwise a solid though ominous prediction:

1. The idea of "democracy" tacitly referred to here is hardly an American democracy, which is far superior to the kind that would collapse under a "loose fiscal policy" of the sort Tyler is bemoaning. Notably, the American experiment differs from a standard or "pure" democracy in that it is a republic, first of all. Second, it has a strict and wide-ranging balance of power that still functions quite well today (Else why would we have reviewed the Vice President's energy task force using the Supreme Court?). Third, it has very antidemocratic features in some respects, especially in the organization of the law, which though based on Enlightenment principles of justice, fairness and liberty, is organized in an antidemocratic fashion. Hence, neither do we elect Supreme Court justices nor do they serve "at our pleasure," subject to dismissal or reprimand by the people. Furthermore, we have a deliberately malapportioned Senate, which preserves the character and power of the individual states (North Dakota would have zero power if all we had was a House of Representatives, but the way it stands they get to have some say in national matters because they have some very senior Senators in power). Fourth, and finally, the republican nature of our variation on democracy means that voters themselves rarely get to "vote themselves generous gifts from the public treasury" unless they live in a state like California, which has a ridiculous system of referenda and ballot initiatives that has hamstrung their economic governance to the point of snapping.
2. In our current, modern variation on democracy, the majority (because it is actually relatively educated, from an historic standpoint) does not in fact always vote "for the candidates who promise the most benefits from the public treasury." In fact, democrats and republicans have both been elected on government-restraint programmes, or re-elected after proving that they were capable of it (Clinton in 1996 winning a landslide after severely curtailing the entire Left Wing economic agenda and embracing previously "right wing" measures: NAFTA, welfare reform, and deficit reduction). There is a very keen sense today that it is our tax dollars at work in Washington, and our tax dollars funding military operations, welfare programs, medicine for the elderly and infirm, and commercial regulation. If these benefits were not widely accepted as necessary if expensive, then the citizenry would vote for candidates who promised to curtail or demolish such programs. And of course, this has happened with welfare, trade barriers (which could be viewed as a 'benefit' to some taxpayers), et cetera.
3. Perhaps #2 made the larger point that #1 began. While Tyler might be very, very accurate in his predictions for a more "pure" democracy with a "loose fiscal policy," I argue that we are just not that democracy. What government programs and "benefits" we have as citizens, we want. Or else we would get rid of them. This is perhaps the difference between Tyler and I on this matter: I have a much more optimistic view of the intellectual ability of our voting populace, even if that is tempered by a LOT. It is not that I hold an overly rosy view, it is that I understand that at a basic level, Americans are just too educated and well-fed by media (flawed though they are, and flawed they are indeed) so that I do not worry that we are voting ourselves too many benefits.
4. As further evidence, I could show you dozens of similarly advanced countries (mostly, though not all, in Western Europe) that have in fact voted themselves countless more "benefits" than Americans have. While I like our model and think they have sometimes gone overboard, none of those democracies have collapsed, nor will they anytime soon. So, yes
   

No "right" to a free market

RE: Free Markets

"Your comments about how much money we are spending on healthcare points to one glaringly obvious point. The government is not being responsible with the money we are giving them in the first place!"

Actually, government-run healthcare systems tend to be far more efficient than privatized ones, for a variety of reasons (as I have already pointed out). Medicare, the Canadian health service, and any other govt.-run system you can point at has a far better track record at spending money not on bureaucrats but on actual care, as opposed to HMOs and other private operations, which can spend upwards of 33% of their money on overhead! (Contrast spending under 5% on overhead, for Medicare/Canada, versus the average of 20% for HMOs)

Furthermore, Medicaid (for the poor folks) is a thoroughly means-tested, state-controlled operation that is also very efficient, and follows strict rules for disbursement. Is it as generous as some would like? Probably not, but at the same time I am willing to grant that it does a good job of achieving its goals.

"Proposed: The government take action to ensure that no one, or small group, of healthcare companies has a stranglehold on the marketplace."

This is precisely what I said would be so difficult. The problem is the nature of this market [health care] and not the nature of markets in general. Like I have said before, for most markets this would be a sound proposal. The problem with health care is that it seems you will never be rid of "small group[s]... [with] a stranglehold on the marketplace." But for that, I think I need to outline my thoughts on government intervention in the economy in general, and shift the discussion in that direction.

Free Market Economics: The point here is not to continue discussing health care (as the above facts are easy to look up) but the role of government in markets, vis-a-vis regulation, policing, and outright intervention.

"...the government is great at regulating, and terrible with money. I have seen very little evidence to show otherwise."

You say you cannot find examples of more efficient government operations that private enterprise could not do better, but I say that you are not looking hard enough. Why is it that I, a proponent of government intervention in only limited areas of the economy, can acknowledge the vast superiority of market forces in the majority of the economy, while you seem to imply that nowhere is government able to do better? This sounds more like faith in "markets" (a false idol) than openness and reason to me (twin yokes of the Enlightenment that produced our American government).

Consider that Milton Friedman, the strident intellectual father of libertarian economics in this country, did not promote adherence to "markets" as the default response to every policy problem: Friedman, for all that I find antithetical about his politics, believed that government did a decent job with roads, bridges, dams, and other things. His introduction to a piece about privatizing education is a good primer to understanding how we should intervene in markets with democratic government, and I say that as someone who disagrees with Friedman and his libertarian cohorts on many policy issues. I quote him fully here:

The role assigned to government in any particular field depends, of course, on the principles accepted for the organization of society in general. In what follows, I shall assume a society that takes freedom of the individual, or more realistically the family, as its ultimate objective, and seeks to further this objective by relying primarily on voluntary exchange among individuals for the organization of economic activity. In such a free private enterprise exchange economy, government's primary role is to preserve the rules of the game by enforcing contracts, preventing coercion, and keeping markets free. Beyond this, there are only three major grounds on which government intervention is to be justified. One is "natural monopoly" or similar market imperfection which makes effective competition (and therefore thoroughly voluntary exchange) impossible. A second is the existence of substantial "neighborhood effects," i.e., the action of one individual imposes significant costs on other individuals for which it is not feasible to make him compensate them or yields significant gains to them for which it is not feasible to make them compensate him--circumstances that again make voluntary exchange impossible. The third derives from an ambiguity in the ultimate objective rather than from the difficulty of achieving it by voluntary exchange, namely, paternalistic concern for children and other irresponsible individuals. The belief in freedom is for "responsible" units, among whom we include neither children nor insane people. In general, this problem is avoided by regarding the family as the basic unit and therefore parents as responsible for their children; in considerable measure, however, such a procedure rests on expediency rather than principle. The problem of drawing a reasonable line between action justified on these paternalistic grounds and action that conflicts with the freedom of responsible individuals is clearly one to which no satisfactory answer can be given. [My italics are added for emphasis]

Friedman gives an excellent description of how government intervention in the economy (in particular markets) should be directed, and I take it to be my launching point for thought about these matters (with a few caveats). The last sentence is perhaps the most important part of the 'graf, because most disagreement among reasonable, well-educated political thinkers of my stripe or yours on the matter of government intervention can be explained entirely in terms of this statement.

We have most water utilities, for example, run by the government. Why? The track record of privatized water utilities in Africa and South America is deplorable, with rapidly fluctuating rates that price people out of potable water, dirty/unsanitary water, and high levels of pollutants and carcinogens/terratogens in the water. The control of public water for a community is a "natural monopoly" and the profit-motive can do nothing to improve its delivery on the grand scale. Government control of this sector is therefore the most expedient and intelligent way of going about things. It is arguable how much other government-controlled sectors (say, Education) are like this, but the fact that we know some sectors are should give us pause to think before we conclude that markets are always "improvements."

On Competition in a Free Market

RE: Concluding Healthcare cost debate; comments on competition in the healthcare industry

"Healthy competition's is [sic] one of the backbones of this economy."

I think you would find that, if we sat around and discussed hundreds of industries, sectors, and areas of the economy, we would be mostly in agreement that in the majority of cases, free market economics works pretty well to deliver goods and services in a dynamic way -- especially in the case of luxury goods (non-necessities). Which is clearly something the Soviets and other Warsaw Pact countries learned after 1989, when they realized that automobiles and color television were not luxuries in the West, but were in fact "light luxuries" that even poor people could easily afford to possess.

However we would find segments within 1% of the economy where the free market has been a failure, no matter how free market fundamentalists attempt to spin the facts. There are services and goods that private enterprise just cannot deliver at this time* at an affordable price. Several cases come to mind: the national park system, road management and medical care for seniors. Oh sure, you can use some private contractors to do some of the work on these projects/areas, but the whole planning, funding and development of it has to be done by the government, because no private group will take these projects on! (Incidentally, this was the impetus for the creation of Medicare in 1965 -- private insurers just did not want the risk spread that elderly folks brought to bear on them).

Segue on free market fundamentalists: Narrow-minded ivory tower economists like to pontificate about how, on paper, all industries work best when the "market" is left free of any regulations or laws or defining boundaries. Paradoxically, the existence of an economy is guaranteed by the action of government, and the operations of the market and the government are part of a one-sided symbiotic relationship -- while government can exist without a relatively free market (e.g. Stalinism), free markets cannot exist without a government to protect and promote them.
(who else will enforce contract law? bankruptcies, fraud, currency, bank security --> all guaranteed by a strong government presence. The countries that do not have these elements are third-world "libertarian" societies that the IMF and the World Bank effectively "run"... That's how free markets look without solid government to support and define them.)

So here we have, on the opposite end of the political spectrum, economists who keep looking at their calculations and theories on paper while reality has caught up and then passed them by -- sound familiar? This was the complaint always levelled at the erroneous supporters of Soviet Communism, and it was wholly correct. Except that now our utopian economists miss what is right under their noses, just as the Soviet apologists did during the Cold War: our devotion as a country to free market economics in every industry has left us with several industries which are non-competitive precisely because they are left on their own to develop "freely."

How this relates to healthcare: This is the case with healthcare. More competition looks like it could fix everything on paper, but in fact it is almost impossible to "generate" this competition. Healthcare is mostly oligopolistic and monopolistic corporations operating on a moderate level of regulation (there are industries that are profitable with far more regulation, as an aside). It will probably never be as "efficient" as most market theorists argue, because you can never get rid of the distorting effects of monopolistic and oligopolistic pricing, let alone collusion and cartels.

Since an unrestrained free market would take us back to the 1920s when even fewer people had healthcare coverage, and the elderly were not easily covered by any kind of plan, we would presumably see our health indicators as a nation plummet. But wait -- we are already behind most of Western and Nothern Europe, Japan, and Australia for many health indicators:

• higher mortality rates at almost any age group from infants to seniors
• in particular, infant mortality, where we rank lower than any comparative country
  
• life expectancy (either gender), where we rank below all of these countries
  
• Adult AIDS prevalence rate, higher than any of these countries

And yet, we are ahead of all these countries by a landslide in one category: spending/insured-citizen on healthcare.

One should not read too much into the United States' comparatively low rankings on international statistics, as these statistics have their own caveats and "X factors." Still, when we debate the role of government intervention in the healthcare system, let us not forget which nation pays far more for its healthcare while its nearest "competitors" pay far less for what resolves to treatment that is as good with roughly the same amount of waiting lists (we've been "rationing" for years, we just don't call it that! Which is perhaps why it took multiple people I have known more than a month to schedule consultations with GE doctors... horrendous!). And paying less for longer life expectancies, lower infant mortality, et cetera. And let us not forget why democratic governments in the 20th Century began taking over healthcare in the first place: the failure of private enterprise to deliver consistent, affordable healthcare to a vast citizenry.

The point is not to demonize our current system beyond what is already obvious, nor to promote a Canadian, German, or Swedish system as a panacea for our nation's health care problems. The point is that the federal government is in the best position of power to make compelling changes to our healthcare system, whether in the form of an expansion of Medicare, a comprehensive voucher system for the unemployed, or matching funds for Health Savings Accounts. There is no other corporation or industry group flexible enough, accountable enough to the people, or with as much sway as the federal government, no matter what the ultimate solution ends up being.

*Footnote 1: In a Star Trek-like future, ironically, it may be possible for a ridiculous number of things to be done more efficiently by private enterprise than by government, due to technological and scientific improvements. However, as of right now, there are many things in this world that just do not fare well as private ventures.

Proposed Direction

RE: rising costs of healthcare

Without allowing us to get too far afield here, I concede and/or agree to the following:

• We have dismantled the idea that medical malpractice reform would significantly reduce costs. It may help fix a system that needs fixing for other reasons of fairness, but it would do nothing for costs. The Republican-controlled Congressional Budget Office came to this conclusion as well, in comparing states with tort reform and states without it.


• You are correct: A government-run system would likely reduce costs in the short to medium range term, but it is harder to tell over the long-term. However, this would take an expensive period of setup and adjustment, which I'm sure you'd agree is the case.


• We are now arguing largely over whether the system can be fixed by government action or not. Clearly, we have agreed that healthcare is becoming unaffordable for many people who are working to support their families, and some options must be explored to help them with this goal (supporting healthy families).


• Doctors are better paid here than any other country, and under a government-run system that lowers or destroys profit-seeking motives, they would likely receive lower pay. This is actually why one of the largest all-time lobbying efforts occurred when President Truman attempted to create universal healthcare and the Amer. Medical Association stopped it cold dead.

But, let us not argue yet over the specific implementations of universal, government-run healthcare or even specific part-way government interventions (in the case of Kerry-Edwards, for example, neither of whom has proposed universal healthcare). Some of your nitpicking is over the particular ways that some countries have pursued their programs; we do not have to follow them, so this nitpicking does not address whether a program should be attempted in this country or not. Keep in mind that we may just do things better than Sweden, and solve a lot of their problems from the get-go just by using their experience as a guide, should we go down that road. This is America, after all!

There is a very relevant piece in The New Republic this week ostensibly defending Edwards against the smear of being a "trial lawyer" but the writer is actually strongly critical of "trial lawyers" themselves. It is worth looking at because although it does not go into the depth that I have, it also comes to the conclusion -- in agreement with the Republican Congressional Budget Office -- that "tort reform" as President Bush has advocated, would do virtually nothing to solve the problems of rising healthcare costs.

This is not actually a demerit for President Bush, and my point is not political -- actually, I am just making the conclusion that on this issue, the issue of "rising healthcare costs," Bush and the Republicans in D.C. have not articulated a strong position that has not been debunked by even their own CBO. This is important, because even if you do not agree with the Democrats' plan for healthcare reform, their ideas have not been debunked in this way, period.

This cedes the argument to the Democrats -- but not because they are correct. It cedes the argument because there is simply no Republican political argument, no programme, nothing. In effect, this means that if you want meaningful healthcare reform in terms of costs and access, then there are two paths -- Democratic politics and taking care of yourself and your family without the government. In as much as people believe they can handle the present system, they will vote with their feet when healthcare issues come to the fore. If they believe they cannot handle it in any way, shape, or form, they will vote for reform, and for Democrats. But this is assuming that they understand that the Republicans are not offering anything.

Which, for healthcare, they are not. I think we have proven that, relatively speaking, in our conversation. How? Because your arguments, while valid and interesting, have not issued forth from the Republican platform or the typical conservative line. The only things we have strongly debunked are, in effect, President Bush's proposals to curb the costs of rising medical care. Since he proposes nothing else to lower costs or improve access (no access is a very high cost indeed), there is nothing else to be said for him on this narrow issue.

Proposed: I think we have to take what we have learned and agreed upon and come to some preliminary conclusions. I am going to make reference to some Democratic proposals during the primaries as a way of differentiating between competing proposals. See what you agree with, from the following statements:

• Being that, all competing government proposals do not seem to address the spiraling costs of healthcare, the only proposals for action on the Government's part involve active involvement in the healthcare markets and industries, to a greater [Kucinich, Nader] or smaller extent [Kerry-Edwards, Lieberman].


• Given: That there are 10s of millions of uninsured children, families, and working citizens in this country, you must either conclude
  
  
  1. That they are already doing all that they can do to keep their budgets lean and provide healthcare for their families, whether their employer provides it or not.
  
  
  2. That they could do a significant amount of work themselves to reduce their healthcare costs and purchase healthcare insurance for their entire family, even within a failing system.
  
  
  
  If you conclude #1, the logical inference, I think, is that the proposals mentioned above are the only way to go. If you think the system is breaking or already broken, and you do not think that independent, decentralized action on the part of individual families will solve it (hands-off approach) then you must insist on government intervention.
  


• The debate is now whether or not individual families can do very much to change their behavior and choices to lower their healthcare costs or purchase healthcare when they do not have it (as 21-31 million citizens do not).


• I have plenty of arguments in favor of universal healthcare, and I have yet to find credible arguments against it that I take very seriously (for example, I do not believe that the best doctors are the highest paid ones). But that argument is without purpose until there is concurrence that universal healthcare is necessary.

Insurance problems with small scales

RE: rising costs of healthcare

feklr - Your last post proposed an interesting non-profit solution to part of our healthcare crisis. However, I think that there are a few caveats that make it less viable than it sounds on paper as a solution to this problem.

(1) Consider what we know of "insurance" schemes in general. They are less costly the larger the number of people insured, and they tend to cost less to the insured when there is no profit motive involved (for obvious reasons).

(2) These simple assumptions lead to a natural conclusion: That larger, non-profit/government insurance schemes deliver better benefits at a lower price for the insured.

(3) The key difficulty here lies in the fact that in most areas of the economy, although larger operations can become more efficient (scale efficiencies) or less efficient (bureaucracy, overhead) the assumption is that organizations with a profit motive tend to be more efficient. This because they supposedly have an incentive to increase productivity.

(4) This has actually been refuted specifically in the field of healthcare by numerous studies (Woolhandler S, Himmelstein DU. Costs of care and administration at for-profit and other hospitals in the United States. N Engl J Med. 1997;336:769-774.) of the overhead efficiency of private healthcare providers versus that of Medicare and the Canadian Govt.-run system(s). The average overhead as a percentage of total costs for these organizations were as follows:

• Private: 15-25% (varies based on companies, area of the country)


• Medicare: 2-3% (varied estimates in this range by several studies)


• Canadian: ~1% (all near 1%)

Clearly, the increased paperwork and the proliferation of different and ever-changing rules systems is one huge problem with privatized healthcare systems, but another webpage lists some other problems endemic to private healthcare delivery, namely:

Advertising expenses; duplication of equipment and services; promoting and providing unnecessary treatments; the administrative costs created by multiple payers, with many different payment plans; and the need to provide dividends to their shareholders

Returning: For your small-scale non-profit co-op idea, I think the benefits would be:

• Very efficient, low overhead


• Easier to control and adapt to serve the insured


• No profit motive; more money towards service instead of Wall Street

No cost advantage: However, you will notice that cost is not one of the advantages I see. That is because I think that its small scale (low number of participants) means it cannot spread nearly as much of the risk around as a larger operation. I'd be very skeptical that it could outperform either corporate or Government-run systems on the basis of cost/person over the long-term, although it may tend towards being more stable in cost variation than a corporate system.

Cherry picking problem: The other obvious problem is that making this small-scale operation work cheaply requires cherry picking. That is, you have to discriminate among who can be allowed to join your cooperative insurance scheme, because if you choose too many people with costly lifelong ailments or you choose to keep people with terminal illnesses alive as long as possible, then your costs skyrocket for the group.

Low bargaining power: Another issue is that smaller groups have exponentially smaller amounts of bargaining power for prices with larger healthcare organizations that you have to deal with, including -- especially -- pharmaceutical companies and medical specialists. Since the trend of healthcare is, more and more, towards using drugs and medical specialists to treat patients, this means that you will be last in line for bargaining on prices. A larger company can threaten to pull its millions of patients from an agreement if prices go too high, but your small co-op will have no such power to cry.

A key example of this can be witnessed in Canada's experience with prescription drugs. Since the government controls healthcare in the provinces at least at a monetary level (actually there is a significant amount of localized control in Canada, but that's for another day!) they bargain on drug prices for all Canadian citizens. If the drug companies charge too much, they potentially risk losing tens of millions of customers -- a large market! Hence, prescription drugs in Canada are offered at much lower prices, and there is more price stability in general. And the drug companies still make a profit in Canada.

Moving Forward: If you have big objections to some of this thinking, please respond accordingly; otherwise I'd say use comments to point out smaller queries or criticisms. What I'm getting at is the economic reasons I think government-run healthcare has flat-out worked in countries where it has been implemented correctly, and especially the fact that we have myriad examples to choose from in implementing such a system here, even if it were only an expansion of Medicaid to cover those not covered by private healthcare. So if you accept most of this critique, I'd say start criticizing the only system I have left uncriticized: government-run healthcare.

If we can agree that a government-run system would not significantly lower costs to patients at the same relative level of care quality, then we can only agree to small level improvements of the existing system. However, I'm stating here that what I have seen so far in terms of data suggests otherwise. Have at thee!

4th of July

RE: God bless these United States of America



A break. We can debate our medical system any day of the week, but today it is Independence Day. Historically, it is the most important day (as a place marker) for the victory of democratic, limited self-government. It is, apart from many caveats, an extremely important and sweet day.

Under this flag we toil, under this flag we dream.

malpractice insurance

RE: rising cost of healthcare

Alright, but we return to my points about malpractice: We can rule out a non-existent "rise" in malpractice claims, successful suits, or in damages awarded, because they simply are not happening.

So, why then are doctor's malpractice insurance premiums going up? I think, quite simply, because they can.

It has been speculated that a lot of insurance companies were leveraged a bit too heavily towards the high-tech side of the stock market prior to the crash in 2000, and afterwards have been trying to make up for their big losses in ways lucrative to them where markets are inflexible: medicine is a natural target, and since doctor's have to carry malpractice insurance, it's a sure deal.

I think the fact that insurance companies have done really well in the past few years, after their stunning blow from 9/11 tells you a lot about their behavior: they have latched onto whatever will keep their stock price up, which means high profits, which means markets where the consumer (here, doctors) has little choice in the matter. Since big insurance is essentially an oligopoly and not market-competitive, that works out badly for patients, doctors, and everyone but stockholders of insurance companies.

Just a theory, but I think it is plausible. And it leads naturally to what I think are the foibles of a private healthcare system: market failures on multiple levels, monopolistic price control, and uncompetitive markets.

lawyers, doctors, and insurance companies

RE: malpractice bogeymen, and the real problem(s)

I completely disregard the common claim that "frivolous lawsuits" against doctors are driving up the cost of Healthcare. The other claims are more interesting anyway, and I've always resisted the tendency for our society to blame one group for all of a problem: in this case, lawyers.

FACT: Malpractice Insurance makes up roughly 1% of the cost of healthcare, as an aggregate, perhaps less in most instances ($6.4 billion was spent in 2000, and healthcare spending was $ in the U.S. that year).

FACT: Malpractice victories in court have given large sums to some people, and smaller sums to several others -- but the average settlement has neither increased nor declined in the past decade. Nor have these lawsuits gone up in per capita terms! ("There were 90,212 claims filed in 1995 and 86,480 claims filed in 2000".)

FACT: Most truly "frivolous" malpractice suits are thrown out by the hearing judge before they even make it to court -- and up to 90% may be dropped by plaintiffs before they are pursued into a costly court environment. In addition, most tort lawyers have a policy of only demanding payment for legal fees if there is a victory, thus encouraging them to only take cases they can win. Our justice system is not broken, and the majority of malpractice cases that end in victory for the plaintiff are probably actually cases of malpractice on the doctor's part.

Furthmore, doctors and their allied HMOs have far more resources to spend on well-educated experienced lawyer teams, whereas most individuals and families can only afford to hire a single lawyer from a local firm, who may or may not be all that talented.

Finally, it has been estimated by several studies (one cited here) that only 5% of doctors make up at least 50% of malpractice claims, and often these doctors have multiple claims on record individually! Self-policing by the medical profession could go a long way towards getting rid of this problem, without even involving lawyers.

This is what they do not tell you when they blame "frivolous lawsuits" for our healthcare costs. Given this list, I cannot possibly believe that "tort reform" or malpractice suit reform would lower healthcare costs at all.