Levy, Kaplan Promote Politicized Medicine

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Levy, Kaplan Promote Politicized Medicine

by Ari Armstrong, July 3, 2007

The Denver Post published two articles about health policy on the front cover of its Sunday, July 1, Perspective section. (The articles, dated June 28 in their online versions, continue to inside pages in print.) One article proposes that Colorado subject medicine to more government controls. The other article, on the other hand, proposes that Colorado subject medicine to more government controls.

Apparently in the future the Post's editors will include the case for free markets and individual rights.

State Representative Claire Levy laments in her article that some who no longer receive employer-paid health insurance are thrown "into the prohibitively expensive individual market." What? My wife and I turned down employer-paid insurance precisely because we could purchase individual insurance at dramatically lower rates. The insurance is high-deductible and linked to a Health Savings Account. Not only does such insurance give us much better control over our medical care, but it is far more economical. Yet Levy prefers to pretend that such insurance does not exist.

Levy rightly points out that some Coloradans lack health insurance and that too many health-related dollars go toward administration. And what is the cause of these problems? Levy offers no explanation. The cause is a myriad of government controls, starting with the tax distortion that entrenched high-cost, non-portable, employer-paid health insurance in the first place. Brian T. Schwartz, Ph.D., explains the sources of such problems in his submission to the "208" Commission, "FAIR Health Care: Free-markets, Affordability, & Individual Rights." (I also summarize some of the key problems in an April article. Of course, the Commission rejected Schwartz's proposal in favor of four plans that dramatically increase government controls over medicine.) Levy totally ignores the causes of the problems she describes. And she totally ignores the obvious solution: repeal the existing government controls that created the problems. Instead, Levy wishes to impose more such controls.

Levy claims, "Other industrialized Western nations spend far less, yet our health indicators lag behind theirs." Oh, really? What "indicators?" Levy offers no explanation. If she means the "indicators" of life expectancy and infant mortality, for which statistics are often cited, her case has already been thoroughly debunked. The U.S. generally performs better in areas such as cancer survival, availability of medical technology, and timeliness of service. Medical policy in the U.S. should be reformed, but certainly not in the direction of more intrusive government controls.

At least Levy states her fundamental position:

We must begin with the premise that health care is a basic right. We implicitly acknowledge this already by the substantial government-funded programs that provide health care to children, the elderly, poor and disabled. Hospitals must provide emergency treatment to anyone who needs it.

If "health care is a basic right," as Levy claims, then people must have the legal ability to force others to provide their health care. Politicians must force some people to turn over their wealth for the health expenses of others. And politicians and bureaucrats must decide which health services shall be forcibly funded, and which shall not. Will the government mandate that smokers with lung cancer get treatment at your expense? That people have "free" access to cosmetic surgeries and "optional" treatments?

When politicians and bureaucrats decide which medical services shall be forcibly funded, government will tend to try to exert more control over personal behavior. That is why the Commission's selection includes plans that explicitly encourage behavior-modification taxes and health care administered according to behavioral guidelines. As Steve Schweitzberger writes in a recent letter, "If Michael Moore has a toothache, it is not my responsibility to pay for his dentistry. If it were, then I would have the right to tell him not to eat sweets." Control of sweets is just the beginning of the plans of the social engineers. And just wait until all the competing interest groups start warring about which services will be covered, which behaviors will be politically encouraged or discouraged, etc.

Stated simply, the plan of "reformers" such as Levy is the following. Step one: Dramatically increase demand for health services by artificially making them "free" or available to consumers at prices far below their actual costs. Artificially-induced demand tends to encourage thoughtless, uneconomic consumption. Step two: discourage doctors from practicing medicine, thereby reducing the supply of medical services. Anyone who has sat through half an hour of a real economics class can explain what happens when demand goes up and/or supply goes down: absent enforced controls, prices must spiral up. ("Prices" here means the actual costs of medical care, not the artificially reduced "price" charged to patients at the time of service.)

Political meddling has already artificially increased demand and reduced supply for medical services, resulting in existing problems; "reformers" such as Levy want to "solve" the problem by imposing more of the same.

But of course the politicians and bureaucrats will not want prices to spiral even further out of control. If demand goes up, supply goes down, and prices are contained, there is only one direction the bubble can expand: rationing. When politicians and bureaucrats pay the medical bills (using forcibly confiscated wealth) or force people to purchase pre-paid medical services (as opposed to real insurance, which most people will buy voluntarily), the politicians and bureaucrats will decide who will receive what health care for what ailments. Within those confines, patients will line up for service, or die waiting for service, or figure out how to use their political connections to jump the queue. Government control of medicine means rationing, either by political pronouncement or by queues.

Philosopher Leonard Peikoff eloquently makes the case for why health care is not a right, and why the political presumption that it is can lead only to the deterioration of medicine.

Unsurprisingly, Levy offers no specific details on how she would further deform medicine. She writes, "The legislature is expected to enact major health care reform legislation in 2008... radical changes are necessary." She claims, "We must decouple employment and health insurance." "Our system must put health-care dollars into health care and allow doctors to focus on medicine." But by what (attempted) means? Through more liberty or through more political controls? It's clear which option Levy favors.

Levy closes, "If we spend according to a comprehensive plan instead of filling gaps, we can achieve the goal of universal health insurance." By "we," Levy means people as directed by politicians and bureaucrats. By "comprehensive plan," Levy means medicine as controlled by politicians and bureaucrats. By "universal health insurance," Levy means pre-paid medical expenses as required by politicians and bureaucrats, but, notably, without any honest guarantee that the "universal health insurance" will offer a ticket to anything other than a line for second-rate service (or worse). Insurance does not equal access, as Schwartz and others have warned repeatedly.

If Levy has read the other side of the debate, she has refused to acknowledge it in her article. Her analysis is superficial (to be generous); basically she regurgitates poorly-digested propaganda. And she is one of the people intent on making "major," "radical" changes to medical policy in Colorado.

Nevertheless, Levy is outdone by Gabriel Kaplan's misleading claims. Kaplan is grateful that the 208 Commission's selected plans "will take us a long way from the hands-off approach to the health care market we now have."

"Hands-off?" Kaplan's claim is the opposite of the truth.

What about the federal government's tax distortions which created high-cost, non-portable employer-pay insurance? What about the massive entitlement programs of Medicaid and Medicare? (Health & Human Services estimates that, in 2007, government will spend 47 percent of all health-care dollars.) What about the Byzantine maze of state and federal controls on hospitals, doctors, drug makers, and insurance providers? While medicine in the U.S. is not completely socialized, it is hardly a free market. Those who wish to get some sense of the history of political controls of medicine might start with the works of Linda Gorman or David Gratzer.

Kaplan writes:

An unregulated, free market in health care is unlikely to function in the way we expect other markets to. The underlying product, private health insurance, is rife with "market failures," and our society has no willingness to accept the consequences of a free market.

Kaplan's comments are complete nonsense. A free market in medicine, as opposed to today's mostly-controlled system, would function spectacularly well, offering high-quality health care at reasonable prices. Doctors and patients would be free to associate on mutually-agreeable terms. Patients would have every incentive to spend their health dollars wisely, and doctors would have every incentive to provide the best value for the money. Health insurance would return to its proper role of insuring against high-cost, unexpected expenses. The poor would receive health care through a combination of discounted service, donated service, and voluntary charities. The only failures with insurance today are demonstrably caused by political intervention in the insurance market. That's not "market failure;" it's failure of government.

Having set up his straw man, Kaplan proceeds to attack it with limp jargon regarding "information asymmetries" and the "lemon's problem." The pretentious Kaplan doesn't even try to explain what he means by "lemon's problem." I assume he's talking about the problem of avoiding (for example) the purchase of a "lemon" car. What does this have to do with Kaplan's point? Here's the phrase in context:

Absent a mandate for individuals and families to buy health insurance, only those with the greatest likelihood of getting sick will approach private insurance seeking health coverage. Unfortunately, this creates a "lemon's problem." Those requiring health coverage are also those who are likely to cost insurance companies the most.

Apparently Kaplan is referring to sick people as the "lemons." But what is the source of the problems that Kaplan awkwardly references? One reason that many people avoid buying health insurance until they get sick is that politicians have mandated "guaranteed issue" of employer-paid health insurance; another reason is that politicians have artificially increased the cost of health insurance with a host of controls and mandates. The reason that many people lose their insurance is that tax distortions tied health insurance to employment. Again, these are not market failures; they are failures caused by political controls. (It is worth noting here that the problem of buying lemons can be solved on a free market through a combination of laws against fraud, voluntarily offered warrantees, and third-party inspections of cars and dealers.)

Kaplan then equivocates on a central term:

[W]e still require ambulances to pick up sick or injured individuals, whether or not they have health insurance. We require hospitals and doctors to treat the most desperately ill among us, regardless of whether they can pay or not. And most health insurance policies do not have lifetime maximums, meaning that many individuals receive far more in benefits that they will pay in premiums over their lifetime.

In other words, America has already implicitly agreed to socialize the costs of health risks.

Kaplan thus lumps politically-enforced requirements to provide medical services with insurance as forms of "socialized" risk. But this conflates the term's distinct meanings. "Socialize" in one sense means that politicians seize control of the means of production, either by assuming direct ownership or by controlling nominally private property. In another sense, "socialize" means to voluntarily interact with others. On a free market, people often choose to purchase insurance in order to "socialize" risk. But that's not remotely the same thing as politicians forcing people to assume the risks of others.

Kaplan claims, "An estimated 19,000 people die every year for want of health care because they don't have insurance coverage." Kaplan's claim has been debunked. As Gratzer points out, the uninsured typically have access to medical services, and deaths among the uninsured generally can be explained by other factors. Nevertheless, it is true that too many people lack health insurance, and the reason for this is political interference in health insurance.

Kaplan writes, "Unfortunately, people tend to forgo necessary care when they have high deductibles, which can end up costing everyone more down the road."

Schwartz replies in the comments:

I'd like to know the source of [Kaplan's] information, as I've found the opposite: The United Health Care Group found that patients who use high-deductible health plans, also known as consumer-driven health plans "are more likely to make active and informed decisions about their own health and health care needs" and "Increased use of preventive care services [are] seen among CDHP [consumer-driven health plan] members as compared to PPO [preferred provider organization] enrollees." Google "Consumer-Driven Health Plans Continue to Stimulate Positive Changes in Consumer Health Behavior." Also search for "Consumer-Driven Health Care Spurs Innovation in Physician Services."

Kaplan also writes that "And there is little evidence that such plans reduce overall health spending." Is Kaplan aware of the RAND Health Insurance Experiment (rand.org/health/projects/hie)? This extensive study concludes that patients with high deductible plans spend significantly less on health care with negligible impact on patient health. I'm curious as to what studies Kaplan refers to. [The links are added and two typos are corrected.]

Of course, as I've pointed out, there are limited circumstances in which a person might fall into the problem that Kaplan describes:

If I have a high-deductible policy and pay for routine care out-of-pocket, my incentive is to pay for needed health care in order to avoid having to pay the maximum deductible or anything close to it. I also have an incentive to take reasonable steps to stay healthy, because my medical expenses will be lower and my quality of life will be better...

[However,] some people avoid routine treatment because it costs money, while they are guaranteed by government mandate "free" emergency-care treatment.

Insofar as a problem exists, it is entirely the consequence of political intervention in medicine.

Kaplan closes with the claim that "in health care there is a boat-load of data indicating that regulation and government involvement are the most effective and efficient means of addressing the most serious problems that plague our health-care system." But this boat is floating in a fantasy world of Kaplan's own creation. Kaplan fantasizes that today's politically-controlled medicine is a "free market" in medicine, the problems of which are to be addressed by more political controls on medicine.

Back in February I explained the basic strategy of people like Kaplan: "They blame the allegedly 'free' market for the problems caused by previous and existing state interference in medicine, thereby generating a cycle of control that creates crisis that spurs calls for new controls."

I have invited both Levy and Kaplan to reply. If they do so, their comments will appear below, along with my additional analysis.

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