Thursday, February 25, 2010

Being both independant and dependant

The UK Guardian has had a very interesting series on Citizen Ethics, complete with the pamphlet Citizen Ethics in a Time of Crisis. I find it fascinating that a leading UK paper is taking such a serious matter head on, and can only hope that one way or another people everywhere are awakened to pay greater attention to ethics and morality in our times. While I have not read the entire series, and have not agreed with everything that I have read, I wanted to provide a couple of excerpts from a recent article by Mark Vernon on the intertwined combination of both the individual and the social components of human identity:

"The nation's morals are like its teeth: the more decayed they are, the more it hurts to touch them." So noted George Bernard Shaw in an observation that still rings true: if the word "moral" feels painful, the word "virtue" makes most people wince. That's striking because virtues are merely the skills that enable us to flourish, if we have them. Courage and kindness, good judgment and justice: they promise life lived well. So whence the rot?

The root problem, I suspect, is that our current moral discourse lacks a compelling vision of what it is to be human. Ethics has ceased to be a source of inspiration, and instead feels like a burden – a limitation. This is because it's become what has been said of economics: a dismal science.

On the one hand is the ethics of calculation, the weighing up of one person's interests against another. It's ethics as a cost-benefit analysis, a process that hands it over to accountants. This utilitarianism is an honourable tradition: the original utilitarians argued that something is right because it increases human happiness. The problem is that they had a thin sense of what human happiness entails – certain material needs and a decent dose of quality pleasures. That struggles to articulate any richer vision of what humans might be; it fails to make any profound call on our nature. Today, pleasures abound, at least in the west, and it's an approach running out of steam. We sense there must be more. It can't say what.

Then, on the other hand, is the ethics of regulation. This is ethics as a series of responsibilities to which we're tied as a result of a contract we're locked into because we live with others. It risks handing ethics over to the lawyers, and has a view of life that is bureaucratic. It makes personal ethics feel like corporate compliance, a burden – perhaps a necessary one – but never a source of vitality because, again, it does not have the capacity to inspire. It doesn't ask what we can be, only addressing what we ought to do, and often ought not to do.

An obvious, invaluable strength of a democratic culture is that it allows everyone to pursue their interests relatively freely. And yet, as Alexis de Tocqueville noted, the democratic individual can easily fall into the delusion that they are rich enough and educated enough to supply their own needs. "Such folk owe no man anything and hardly expect anything from anyone," he writes in Democracy in America. "They form the habit of thinking of themselves in isolation and imagine that their whole destiny is in their own hands."

He'd spotted an old problem. Pericles, the great champion of democracy in ancient Athens, praised individual initiative, but also warned against the citizen who lives only for himself. He said that such individuals have no right to be part of the city-state upon which their flourishing depends. And he had a noun for such folk too, idiotes – from which we get a well-known English word.

In other words, the tensions inherent in the language of rights and democracy highlight something of great importance. To be human is to be, at once, independent and dependent. We can only become independent because of our dependency, and vice versa.

This integrative view finds support in other areas of research. A striking one is neuroscience. Iain McGilchrist, in The Master and his Emissary, explores how the two hemispheres of the brain see the world differently, one as if we are independent, self-attending creatures; the other as if we are dependent, other-seeking creatures. His point is not that one is better than the other, but that both are required, one for the other...
To paraphrase in my own word, humans with a strong sense of their full identity, both as individuals and as members of positive social structures, live richer, fuller, more purposeful (i.e. happy) lives.

Let me be clear. I believe strongly that positive participation (via empathy, generosity, friendship, kindness, etc.) in social structures are required for human happiness and overall flourishing. I also believe strongly that government can do very little, either by design or dictate, to organize positive social structures. Empathy, generosity, and love can only elevate both humans and humanity when practiced through choice. Positive social institutions (family, church, neighborhoods, communities, etc.) can only be successfully created through private initiative, and only with much effort. This makes it all the more important that people everywhere are awakened to their importance, and committed to their existence.

Tuesday, February 16, 2010

UPDATED - Health Care - Let's See What Sticks

Update - Having read the comments to my original post, as well as doing more thinking and research, I have changed my views slightly. First, the individual mandate may be too extreme. A better alternative may be to give credits to households that qualify for government assistance that could be used to buy catastrophic coverage in the private market. Second, my desire to create a national market for health insurance would be two-fold, to make insurance portable for people moving or purchasing across state lines, and to allow greater competition at a lower regulatory burden for insurance companies. The ideas of individual mandates and national insurance markets are attractive on many functional levels, but I certainly wouldn't want to proceed in an unconstitutional manner. Aside from changing my first three point, which were certainly the most controversial of the bunch, and tweaking a few words here and there, I still thing these actions would be in the right step of moving people into a new era of viewing health care as a budgeted expenditure, and empowering them to make better individual decisions on the private market.

OK, I have been backed into a corner and will go ahead and outline my basic ideas for health care reform. These are by no means original to me, I have just collected/plagiarized/adapted them from elsewhere. I will perhaps provide links to sources and statistics as requested, but I wanted to get this out there. To respond to the most recent criticisms leveled against me, I think you will see that I am not placing my trust in government for so large an enterprise as health care. I am asking for government to create a framework and get the heck out of the way so people and the private sector can take responsibility for their own health without the current set of government created problems.

The extent to which I am seeking government involvement is as follows:

1. Eliminate the restrictions on the interstate sale of health insurance. This is a removal of burdensome regulation. Encourage states to adopt a common set of standards for a basic level of catastrophic insurance that would be portable and could be purchased from any qualified insurance company.

2. Replace 50 sets of regulation with a single set. Encourage states to adopt common regulatory standards. Drastically reducing and untangling existing regulations can not really be seen as "additional" regulation, unless you mean addition (of value) through subtraction (of quantity).

The goals of items 1 & 2 would be a much cleaner and clearer framework for a national insurance market. Repealing state laws and regulations that currently prevent insurance companies from competing across state lines would result in a lower regulatory burden, increased market opportunities (good for insurers) and increased competition (good for consumers). If not dramatically lowering costs, it would likely stabilize costs while increasing options. (Side note - As I understand it, the Ryan plan does not address this issue.)

3. Once a national market is in place, mandate encourage the purchase of "Basic" catastrophic health insurance plans that all insurers could sell as a commodity and/or loss leader for purchasers of additional coverage.

This would (ideally) be a portable, stand alone line of coverage, and one could switch at any time to another carrier offering a better deal, but everyone would be required to have this basic coverage. PLEASE NOTE - I am not talking about health care coverage in the sense of paying for physicals, flu shots, and your typical medical expenses. This is insurance to cover the risk of an unanticipated medical event (severe trauma, emergency surgery, stroke, organ failure, stroke, cancer, coma, etc.) that would, without adequate coverage, likely lead to destroyed life savings, massive debt, and/or bankruptcy. Most Americans would carry multiple layers of coverage, with the “basic” level being mandated, and any additional layers remaining optional. (An imperfect analogy would be car insurance, where liability coverage is mandated, and GAP, uninsured motorist, comprehensive, and others are commonly purchased additional options)

As to what gets deemed catastrophic, I share JB's concern (in the comments of the previous post) that elected/lobbied politicians would be all to meddle to the point that everything could be viewed as potentially catastrophic, so keeping the scope of any mandated coverage limited to managing the risk of personal/household catastrophe is important. The idea is to treat catastrophic coverage as a math problem, targeting the premium payment on a percentage (around 5%) of personal/household income, and providing coverage for health costs above a defined percent (15-25%) of annual personal/household income.

Do I wish there was another way? Certainly. But, as researchers, think tanks and policy makers across the political spectrum have learned (although they refuse to agree on it), a mandate of some basic form of coverage seems to be the only way to reduce “free rider” or “wait until sick to purchase” abuses.

4. Either eliminate (my preference) all tax breaks/deductions that deal with health care and health insurance, or make the tax treatment and incentives the same for all, individuals and employers.

5. Allow employers and individuals to form their own risk pools as they see fit (business networks, church congregations, Facebook groups, neighborhoods, whatever).

6. For all “extended” health insurance, repeal government mandates regarding what insurance companies must cover. Allow market variety and competition to determine what level or premiums and co-payments people are willing to pay for routine and planned medical care.

We are now talking not only about “basic” insurance coverage, but also all the “extended” health insurance, discount plans, prescription plans and health benefits that everyone should be allowed to choose and purchase on the private market. We know that currently employer health benefits are fully tax deductible, but individual health insurance is not. Not only is this unfair, it creates a burden on both employers (administration, tax prep) and employees (health benefits often overriding other job concerns). Employers can continue to offer “extended” health perks as benefits, but would not have to remain the dominant source through which they are made available or affordable. People should be free to associate in any manner they wish in order to better negotiate for themselves.

7. Mandate that health care providers have pricing for all basic services and procedures in plain sight and available upon request.

8. Encourage Health Spending Accounts (HSAs) that allow people greater freedom to make their own decisions on health care.

Put the price mechanism back into the health care market! This is perhaps the greatest sign that the current health care market is completely broken. People, especially those without “extended’ health coverage, are smart enough to make better decisions on quality and cost. It is incredible to think how much less Americans would spend on health care if they only had the choice, yet so few actually know the itemized or total cost of their last doctor's visit. Hint, it was A LOT more than anyone’s co-payment.

9. Enact serious Medicare and Medicaid reform and/or dismantlement.

10. Provide a safety net to this new system for those that can not afford it.

It is my position that if steps 1-8 were in place, several things would happen naturally as a result of human choice and market forces. First, the current level of health care spending by Americans would stabilize/decline as a much greater level purchasing decisions (of both coverage planes and health care services) would be placed in their hands to self-ration based on need, value, and return on investment. Second, the cost of services and insurance coverage will stabilize/decline. Giving individuals the ability to shop online for the doctor in town with the lowest prices (#7), and among insurance companies from across the country with the best rates (#1&2) enhances competition and choices.

Restoring basic functions such as supply and demand and price competition to the heath care industry are critical not only because our society will benefit from fewer bankruptcies (currently over 50% of bankruptcies are prompted by medical costs), increased access to care and lower costs of those services, but because we need to avoid the coming apocalypse of insolvency for Medicare, Medicaid, and Social Security.

Estimates range widely, but just using middle of the road numbers, current spending on Medicare, Medicaid and SCHIP is about $700B. To get to JB’s statistic of the US Government paying for over 50% ($1.2T) of all US health care expenditures ($2.4T), you have to add the active duty military Medical Corps and the Veterans Administration, along with a few other smaller programs. An important purpose of any meaningful health care reform should be reduce the government’s overall expenditures. Logic dictates that if everyone in America had “basic” catastrophic coverage, purchased in the private market, that private insurance would cover a much greater percentage of higher cost health care than it does today, reducing the government’s role as payer of last (or first) resort. And with a more prominent role for HSAs, individuals could also purchase a greater share of routine health care on a more open, price-sensitive, market.

Still, there are those that can not afford even the “basic” coverage or have much left over to fund a HSA. So how do we get from here to there?

First, I would favor a government plan that subsidizes the purchase of the “basic” catastrophic coverage outlined above for those that can not afford it. Current catastrophic insurance plans run from $1,200 per person to $3,000 per family. Basically, under may plan, any household making less than $60k would be expected to pay 3-5% of their income with the government making up the difference to purchase a plan. Again, using round numbers (and from 2006), there are about 70 million households that make less then $60k, so the government would step in and make up the difference between each of these household’s 3-5% contribution and the amount needed to purchase a “basic” plan. The cost would be a estimated $105 billion dollars. This is not an insignificant amount, but the question is whether this would reduce the government’s current annual outlay by at least the same amount, and hopefully by much more, whether we use the $700B (w/o military and vets) or $1.2T (with both) number. If so, we have achieved a form of universal coverage for a break even cost or better. I don’t have the resources to run definitive numbers, but I find it impossible to believe that is all medical costs above 20% of every household’s personal income were absorbed by the private market, from age 0 to dead, that government expenditure wouldn’t go down at least 15%. I am hopeful the savings would be great enough that a drastic overhaul and/or dismantling of Medicare and Medicaid becomes more politically viable.

Second, in order to promote HSAs, I would like to consider in greater depth a possible government match of HSA contributions for low and middle income households that would function much the same way of a company-matched 401k. Just a thought. I would like to see the cost to benefits numbers on such a program. Whether we are talking a 10% match for everyone up to a certain amount, or a greater (up to 25%?) match for targeted incomes, I would like more research on ways to encourage savings.

Is this welfare and redistribution? Sure, but I dare say it is less welfare, less redistribution, and would be loads more effective than the current patchwork of bloated government programs we are currently wasting money on. Are there other steps that I think can and should be taken? Sure, but I don’t know enough to have a definitive opinion on them, and I think the steps above would be a good first start. That said, I’ll leave you with a couple more suggestions that get thrown around a lot that would likely be worth considering.

11. Encourage a greater number of medical schools and enrollments. (Break up the AMA monopoly?)

12. Look as reform medical malpractice and tort laws. (Negligence should come at a price, but where are the limits?)

Monday, February 15, 2010

Healthcare: Further Proof

As if it is needed, more news of the current state of the Republican Party. I heard this story on NPR on the way to work this morning:

For Republicans, the idea of requiring every American to have health insurance is one of the most abhorrent provisions of the Democrats' health overhaul bills.

"Congress has never crossed the line between regulating what people choose to do and ordering them to do it," said Sen. Orrin Hatch (R-UT). "The difference between regulating and requiring is liberty."

But Hatch's opposition is ironic, or some would say, politically motivated. The last time Congress debated a health overhaul, when Bill Clinton was president, Hatch and several other senators who now oppose the so-called individual mandate actually supported a bill that would have required it.

In fact, says Len Nichols of the New America Foundation, the individual mandate was originally a Republican idea. "It was invented by Mark Pauly to give to George Bush Sr. back in the day, as a competition to the employer mandate focus of the Democrats at the time."

The 'Free-Rider Effect'

Pauly, a conservative health economist at the University of Pennsylvania's Wharton School, says it wasn't just his idea. Back in the late 1980s — when Democrats were pushing not just a requirement for employers to provide insurance, but also the possibility of a government-sponsored single-payer system — "a group of economists and health policy people, market-oriented, sat down and said, 'Let's see if we can come up with a health reform proposal that would preserve a role for markets but would also achieve universal coverage.' "

The idea of the individual mandate was about the only logical way to get there, Pauly says. That's because even with the most generous subsidies or enticements, "there would always be some Evel Knievels of health insurance, who would decline coverage even if the subsidies were very generous, and even if they could afford it, quote unquote, so if you really wanted to close the gap, that's the step you'd have to take."

One reason the individual mandate appealed to conservatives is because it called for individual responsibility to address what economists call the "free-rider effect." That's the fact that if a person is in an accident or comes down with a dread disease, that person is going to get medical care, and someone is going to pay for it.

"We called this responsible national health insurance," says Pauly. "There was a kind of an ethical and moral support for the notion that people shouldn't be allowed to free-ride on the charity of fellow citizens."

Republican, Democratic Bills Strikingly Similar

So while President Clinton was pushing for employers to cover their workers in his 1993 bill, John Chafee of Rhode Island, along with 20 other GOP senators and Rep. Bill Thomas of California, introduced legislation that instead featured an individual mandate. Four of those Republican co-sponsors — Hatch, Charles Grassley of Iowa, Robert Bennett of Utah and Christopher Bond of Missouri — remain in the Senate today.

The GOP's 1993 measure included some features Republicans still want Democrats to consider, including damage award caps for medical malpractice lawsuits.

But the summary of the Republican bill from the Clinton era and the Democratic bills that passed the House and Senate over the past few months are startlingly alike.

Beyond the requirement that everyone have insurance, both call for purchasing pools and standardized insurance plans. Both call for a ban on insurers denying coverage or raising premiums because a person has been sick in the past. Both even call for increased federal research into the effectiveness of medical treatments — something else that used to have strong bipartisan support, but that Republicans have been backing away from recently.

'A Sad Testament'

Nichols, of the New America Foundation, says he's depressed that so many issues that used to be part of the Republican health agenda are now being rejected by Republican leaders and most of the rank and file. "I think it's a sad testament to the state of relations among the parties that they've gotten to this point," he said.

And how does economist Pauly feel about the GOP's retreat from the individual mandate they used to promote? "That's not something that makes me particularly happy," he says.

As Reagan, Buckley Jr., and countless others have said, I didn't leave the Republican Party, the Party left me. I have always been an independent, but used to default to the Party of self-responsibility, fiscal conservatism, entrepreneurship, humble foreign policy, and individual civil liberties. I have no use for a Party that has made golden calves of Medicare, unfunded spending, parasitical banks, war, torture, and Homeland Security. And those that would scream "Tea Party!" are even worse. The movement started by Ron Paul has quickly dissolved into a terrible combination of populism, anti-tax shrieking, and jingoism. Just look at the competition Paul himself is facing for re-election.

With respect to health-care, of course I would in theory always favor market solutions over government intervention. However, when the last century's most brilliant free-market advocates see a clear role for government in health care where profit motives and markets fail, and their arguments have stood the test of time, I am inclined to listen:

A more radical reform would, first, end both Medicare and Medicaid, at least for new entrants, and replace them by providing every family in the United States with catastrophic insurance (i.e., a major medical policy with a high deductible). Second, it would end tax exemption of employer-provided medical care. And, third, it would remove the restrictive regulations that are now imposed on medical insurance—hard to justify with universal catastrophic insurance.

Milton Friedman, Hoover Digest 2001


Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance – where, in short, we deal with genuinely insurable risks – the case for the state’s helping to organize a comprehensive system of social insurance is very strong

…Wherever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make the provision for the consequences, such communal action should undoubtedly be taken.

Friedrich Hayek, The Road To Serfdom (Chapter 9)

Politics getting in the way of problem-solving, who could have guessed? If I were constitutional dictator, I would evoke the commerce clause to standardize health insurance regulations across all 50 states, the equal protection clause to end unequal advantages for employer-provided insurance, and the general welfare clause to provide/mandate catastrophic health insurance (with high-deductible) for everyone through competing private co-ops, non-profits, and for-profits.

Finally, as a society, we need to re-define the concept of health-care coverage and insurance. I am amazed that people complain of $20-25 co-pays while the national average monthly expenditures on coffee ($74), hair styling ($66), cable television ($60), and cell phones ($70) far surpass those co-pay expenses (take a look at this chart for how many things we spend more money on than health insurance). That, to me, is a problem of entitlement and priorities that government can not fix.