Tuesday, September 01, 2009

Response in Health Care Debate

Much of the back and forth debate in regard to health care is narrowly focused.  Here is a response made to a fellow who thinks government has the information necessary to decide what care is best for the individual.

Open your eyes.  Everyday people die because they do not have the money they need.  They die of hunger, malnutrition, untreated disease and even untreated water.  Terms such as information asymmetry show that you have "book learning".  When will you recognize and acknowledge that "big government answers" are not about solving problems, but about giving wealth and power to special interests?  If your goal were to lower the death rate, you certainly would not be spending time trying to figure out who is entitled to incredibly expensive kidney drugs, where the money spent on one patient would pay for a sizable water treatment plant and save the lives of hundreds.  Thousands of children could be vaccinated,...

.... resulting in thousands of "life years saved" for the price of giving one person an extra 6 months of life with expensive drug treatments.              

Our government just bought 700,000 cars at an average price of about $4,285 and destroyed them.  Supposedly, this act will benefit our environment, but the total pollution reduction will be minimal if any.  The static calculation of savings is about 210 million gallons of gasoline per year (300 gallons per car) but, most likely, the 700,000 new cars will be driven many more miles than the 700,000 old ones would have been.  Some of the owners started car pooling or riding the bus months ago, but now, subsidized by big government, they are back on the road.  This program was small compared to the previous auto industry bailout.  Democrats talk about the environment and good health, but they subsidize their political friends who produce toxic fume machines.    
In my post of a couple of days ago, "Jobs To China" (http://stocksorbonds.blogspot.com/2009/08/jobs-to-china.html), I suggested that if our government were serious about the environment and about not sending high paying jobs to China, it would make an important change in our tax policy.   Since 1950, the Social Security Tax on high paying jobs has gone up by 400% (see chart on post).  If our government passed a clean, straight forward tax reduction on labor and substituted a clean, straight forward tax on carbon, the laws of economics would work for us instead of against us.  
Many a high paying job would stay in America, the people would reduce the amount of dirty fuel used and the health of the people would improve.  There would be fewer accidental deaths and fewer pollution related diseases.  
Unlike your proposals, this solution would at least be in the direction of a Pareto solution, in which some people benefit without hurting others.  While the static proposal is revenue neutral, the net cost to taxpayers would be negative, for two reasons.  Lower tax rates on labor would increase the amount of labor performed, causing the total labor tax revenue to increase relative to the static projection.  Higher taxes on fuel would reduce consumption, resulting in a lower increase in taxes collected relative to the static rate.  Indeed, the rich oil sheiks of the world would in effect pay part of our taxes for us, because the total price of imported fuel would not increase by as much as the additional tax.  Paychecks would go up by more than the tax paid on fuel.     
Health care solutions can be as simple as the above proposals.  The key is to tie the economic cost to the health care benefit.  Your proposals take away valuable individual indifference curves, making it all the more difficult to determine what care should be provided.  There will never be enough money to provide all the care desired.       
The distortions caused by making third parties responsible for payment mushroomed in 1954 when congress made health benefits deductible for corporations and non-taxable for individuals.  The resulting health care inflation accelerated in 1965 when President Johnson's programs gave qualifiers the incentive to get all the care they can get, no matter what the cost.  
Markets are like streams of water, they find the way down hill.  It has taken many years to get around the hyper health care inflation that was born in 1965, but dozens of retailers now offer generic prescription drugs for only a few dollars and they offer health clinic treatment for 40 to 80% off!!!  
The AMA's severe limit on education slots has been circumvented by rules that allow Physician Assistants and Nurse Practitioners to provide primary care.  The great inflation in medical care is finally winding down.  In recent weeks, more than 1,000 clinics offered school and sport physical exams for $29 and the patrons were pleased with the service.  Many a child was referred to an MD for treatment.  If the proposed bureaucratic nightmare can be defeated, the cost of medical care will, in real terms, decline.   Add in tort reform and there will be a significant reduction in the cost of care.  
By lowing the cost of primary care, additional funds will be available to drive the demand for new, expensive, advanced treatments.  Health care innovation will accelerate, life expectancy will soar and citizens from other nations will continue to come to America for expensive advanced treatments.   
Oh no!  democrats can't step on lawyers toes and go along with tort reform.  The benefits to the public would be great, but the coffers of  politicians would suffer.  No! don't tell me that you are interested in lowering the cost of health care until you are willing to stop paying lawyers and liability insurance companies billions of dollars out of our health care budgets.