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Time And Space

How can anyone talk about healthcare in the current environment without carrying a lot of deplorable baggage? For instance, a lot of imagery involves the concept of single-payer healthcare versus the free market. But healthcare has not had a free market since the advent of Medicare in 1966; the federal government has manipulated and twisted the market in dozens of different ways. To see just a glimpse of that landscape, take a look at a summary of a health care plan that is supposed to minimize that manipulation. The number of workarounds to government interference boggles the mind. The direction for serious discussion should be to put the entire system in its proper context.

First, there are not enough resources (doctors, nurses, staffed hospital beds) to provide everyone in this country with the same level of healthcare. And the resources are not evenly spread by skill or geography. For instance, we have too few primary care physicians. And some parts of the country are worse off than others. With too few resources, government cannot help one group of people without hurting another.

Second, Medicare is price fixed, as is Medicaid. And, frequently those prices are at or below the actual cost. The only way to overcome this is to charge more for all other patients, those with non-governmental insurance or none at all. This overcharge amounts to a hidden tax of roughly $600,000,000,000 per year, money that never goes through the government but is taken nonetheless. Single-payer healthcare would require a tax increase of at least this magnitude plus an increase of government overhead.

Third, baby-boomers have not yet peaked in terms of healthcare; the peak for that group turning 65 is in 2020. So demand for healthcare through Medicare has not yet peaked. Regardless what government does, federal or state, insurance costs must keep going up as long as doctors and hospitals must compensate for the fixed price of Medicare, even if the actual healthcare costs remained fixed. Further, delays for care must get longer if the resources remain fixed.

Nearly eight years ago, the plan to modify healthcare was the Affordable Care Act. That law is a large, arcane set of directions, but it can be roughly broken down into two parts: financial and regulatory. The financial part came first in 2014 (with executive exceptions), with the regulatory part to be phased in with the more detailed part starting in earnest this year.

The financial part of the plan was part wealth redistribution, part taxation, and part borrowing from the future. First, the states were encouraged to expand Medicaid by expanding eligibility in several directions including income, and providing full federal funds through 2016 in order to draw the states into an expanded single payer system on the low end. Apparently, thirty states have opted to implement some form of expanded Medicaid, each with their own definitions of eligibility. However, a Supreme Court decision allowed the other states to maintain their lesser commitment to Medicaid. Nonetheless, Medicaid has become one of the major cost drivers in state budgets right behind unsustainable public employee benefits.

Second, the Act required that all insurance plans cover an expanded set of medical health benefits, thus guarantying an increase in insurance cost. Further, this kind of insurance was forced on all taxpayers by mandating either insurance coverage or a financial penalty administered by the IRS. In order to overcome this increased cost of insurance (not healthcare itself), the Act provided financial subsidies to an expanded set of low income households. The middle class, not covered by such subsidies, were forced to pay the increased insurance rates thereby increasing financial inequality with more wealthy citizens. Yes, that is correct, the ACA actually increases financial inequality in a measureable way.

Third, the Act provided various means to compensate insurance companies who lost money through the issuance of such healthcare policies because they must now include those patients with prior medical conditions. These federal compensations are widely viewed as insurance company bailouts essentially driving a de facto single payer insurance plan. Although there are arguments that the ACA does not compensate insurance companies, the heavy political pressure from the insurance industry during the current debates would seem to indicate otherwise.

Fourth, the Act increased taxes in a large number of arcane ways including a 3.8% tax on small business, which does not apply to businesses run by non-residents. It also provides a tax on businesses of 50 or more full time employees, a tax on excessive “Cadillac” healthcare plans, and a tax on those citizens who do not purchase health care insurance. The latter “mandate” was held as a constitutional tax by the United States Supreme Court.

Now, note that the financial part of the ACA does little to improve medical resources, the glaring problem of price fixing, or the growing demands of baby boomers. It does, however, increase the number of people dependent on government.

So the actual medical import of the ACA is in the regulations. Those regulations are mostly implemented by the Secretary of Health and Human Services, through the formation of dozens of small committees. While the regulations are not expected to ration healthcare to any great extent, they do call for consolidation of medical units, especially hospitals, and vastly increased documentation. Underperforming medical units will be penalized by reduced payments, thus increasing the actual cost to patients without government insurance again.

The net result of changes to the organization of hospitals was particularly difficult to hospitals outside of urban areas. Most hospitals are required to serve all who seek medical help, regardless of their ability to pay. Many destitute patients are in urban areas, especially those with concentrations of illegal aliens. Rural hospitals aligning with urban hospitals were forced to fund these patients through increased costs to patients without government insurance.

To give an example, before consolidation, a single medical procedure in a local rural hospital was billed at $1000 for an uninsured patient, $800 for an insured patient, and $250 for a Medicare patient. After consolidation with an urban hospital, the same procedure was billed at $3000 for an uninsured patient. (All dollar figures are rounded.)

The proposed regulations also call for denial of service through financial coercion of medical providers. Hospitals which incur too many readmittances will be paid less for Medicare patients. Doctors who provide too many referrals will be paid less for Medicare patients. Yes, this is a quota system on referrals.

Now, note that the regulatory part of the ACA forces increased cost on the non-single-payer part of healthcare using many mechanisms by emphasizing price fixing. It also reduces the monetary incentives for doctors through increased overhead, price fixing, and liability. Lastly, through denial of service, it reduces available medical care for baby boomers which will cause an increased frequency of death.

So what mechanisms are available to improve the market place for healthcare?

The first problem that requires consideration is the price of health care, or more precisely, our lack of knowledge of the price. The price of healthcare has been hidden by insurance companies, pharmaceutical companies, hospitals, and even doctors. In order to induce a market place for health care, open pricing must be required.

Hayek in his short essay, “The Use of Knowledge in Society”, said “The problem is precisely how to extend the span of our utilization of resources beyond the span of the control of any one mind; and, therefore, how to dispense with the need of conscious control and how to provide inducements which will make the individuals do the desirable things without anyone having to tell them what to do.”

In other words, none of us will treat healthcare as a true cost without having to know and pay real prices. For that to occur, healthcare insurance must be reduced to catastrophic circumstances much like life insurance. That simple piece of information alone should indicate why Congress does nothing in this area.

Further, healthcare must be treated as a service at cost, not a right. To treat healthcare as a right requires literally enslaving the performance of doctors and all other healthcare professionals. If single-payer becomes law, healthcare professionals must be working directly for government. Those people who propose treating healthcare as a right have not considered the theft from others at all. Such a position is morally corrupt.

In order for proper pricing to happen, price fixing must be phased out. And that means that Medicare must be on the same price basis as other healthcare. That also means that drugs are priced on an equable, worldwide basis. As a Medicare recipient myself, I am full well aware that most seniors cannot afford healthcare.

Yet many people do not realize that Medicare is not free, but requires monthly payments much like insurance. And such payments steal money based on means just like and as large as income tax: progressive taxation. Government must decide whether it really wants to support subsidized healthcare for seniors with open taxation and equal treatment of all seniors. The Medicare payments are currently unconstitutional.

More could be done in reducing actual healthcare cost as well, but with a situation made so complex by so many agenda, any more discussion seems fruitless. Simply attacking the problem of open pricing is enough to get started. And that would require, first, repealing the Affordable Care Act. After all, according to the Congressional Budget Office, the majority of people losing healthcare insurance in that situation are just those forced to buy it through mandate.

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