Several weeks ago, I provided a list of possible deficit-reduction moves the federal government could make and what their effect would be on the trillion-dollar-plus deficit the country is currently facing. My purpose was two-fold: first, to indicate how difficult, if not impossible, it will be even to approach a balanced budget without a major increase in revenues; and, second, to point out how out of touch the tea-bagger crowd is with reality.
As might be expected, my mail was full of scorn from the members of that movement and their cheerleaders in the Republican Party. (The two are morphing none-too-gradually into one, as more and more Republicans, either because they feel intimidated or because they are completely Machiavellian, embrace the movement’s talking points. That the movement is a product of Glenn Beck and his Fox News colleagues makes the morphing all the more plausible, since Rupert Murdoch’s cable network is also the most aggressive champion of the Republican Party.)
Some of the correspondence I received was respectful, along the lines of “damning with faint praise.” One writer lauded my rhetorical skills while dismissing the facts I recited as “obfucatory.” Another suggested Bush wasn’t a true conservative and that whether he was or not doesn’t change the fact (in his opinion) that Obama is a socialist. Others were just angry, at me and at Obama and the Democrats, because, well, just because, I guess; most of them didn’t provide much in the way of specific reasons.
That anger is certainly at the heart of the tea bagger movement. Everyday folks don’t go to rallies carrying signs like “Left My Guns at Home – This Time” unless they are very angry. How much less anger do they have collectively than Joe Stark (the guy who flew his private plane into the IRS building in Texas last week) had personally? Hopefully a good bit; but with some of the irrational things they purport to support (and oppose), you have to wonder.
But because most of them are everyday folks, the hope is that most of them can be educated. (I’ll mention only in passing the fear that they are far closer to Madame Defarge than Benjamin Franklin in their revolutionary zeal, thus being beyond reason and incapable of hearing rational arguments, let alone learning from them.)
And so, in an effort to educate those consumed with anger, here is a relatively simple reason (one among many that are all equally pressing and real) that explains why major health care/health insurance reform is necessary to contain health care costs.
Let’s start with an indisputable fact. Under the current system, wherein health care is largely regulated by insurance companies, costs are increasing at an alarming rate.
Just last week, as if to drive home the point, one of the largest healthcare insurance companies – Anthem – announced a 39% average increase in insurance premiums for its policies. Other companies are said to be on the verge of announcing similar increases, holding off only because of the impolitic nature of any such announcements. (Anthem was severely castigated by Obama and many commentators on the left and right almost immediately after it announced its plan; it has since pulled back on it to “study” the issue.)
So why are the costs of health care increasing? Part of the reason, certainly, is the nature of the for-profit system itself. Companies like Anthem exist to make money for their shareholders, their executives and, hopefully, their employees. It’s how things are supposed to work in a capitalist economy. You provide an essential service, you employ people who earn commensurate with the earnings of the company, and you survive because you continue to provide the service to a sufficient number of consumers to keep the business viable.
But there’s another, probably more significant, reason for the increased cost of health insurance, and it is far more invidious and far less containable in the current system. It’s called the “insurance death spiral,” and here’s how it works:
In order to make a profit, insurance companies must secure more in premiums than they pay out in benefits. In the case of health insurance, that fact means that companies must insure more individuals who don’t need health care than those who do. (The specific ratio will depend on a variety of factors, but the basic point is indisputable.)
Thus, if an insurance company’s customers are primarily a healthy lot, it can keep its premium rates relatively low and still make a profit. But if the company’s customers are primarily in need of medical care, i.e., if they are unhealthy, the company must increase its premiums to maintain a meaningful degree of profitability.
Now let’s juxtapose the reality of a struggling economy, with many, especially those likely to be most healthy (young people), seeking ways to make ends meet. They have absolute needs (food, shelter) that they will use their limited income to meet. One of the things they may decide they don’t need (or at least are willing to take a chance on not needing) is medical care.
And so the pool of healthy customers for the insurance company dwindles, while the pool of the unhealthy remains constant. To meet its profit goals, the company will have to increase its premiums.
But then a second wave of difficulties is likely to emerge as private companies who provide health insurance for their employees are also hit with the weakened economy. They, too, look for ways to make ends meet, and their employee benefit package, to wit: the health care benefits they provide, is also likely to be cut.
And those employees will now be faced with a difficult decision: Do they pick up the costs of insurance or go uninsured? With premiums escalating, many will choose not to insure, leaving the insurance company with even fewer healthy insureds, and with even more reason to increase premium costs.
The insurance death spiral is real. Anthem is just the tip of the iceberg. Private industry isn’t capable of solving this problem alone.
Health care reform is the only viable solution.
Well-said, Professor. No time to get into it now, but you are spot on with this. I used to be so hostile to the government getting involved in anything, but even I’ve come around. The “God-and-Guns” constituency don’t fully understand (like I didn’t).
Ironically, health care reform offers solutions to issues that this crowd agrees need fixing. Yet, these voters are violently opposed to a remedy that would address the very problems they are out there screaming about.
More later.
I no longer consider myself a Republican – the main reason being that I do not like the “God and Guns constituency” or the Sarah Palin faction – but as you well know I have been hostile to Barack Obama’s platform.
I read about the Anthem increase (which I believe was for CA residents only?), and I find it outrageous that a company can hike rates like that overnight. As an economics major at Vandy, I think that the concept of inelastic demand is really what this is all about. If someone had cancer and was told that they had to pony up $10,000 or else they would likely die, wouldn’t they also pay $100,000? $1,000,000? The fact is that with medical costs spiraling out of control, there needs to be some oversight on this industry. Governments regulate – but do not take over – utilities. That’s why companies like Duke Energy in Ohio and Time Warner Cable have to justify rate increases. If Duke were to pass a 39% increase in services, there would be a congressional hearing. I don’t think that government regulation is necessarily a bad thing. I sympathize with everyone who is against the public option. As President Obama said many weeks ago, this initiative is going to be one of the biggest since the SSA was created some 70 – 80 years ago.
My real issue is that listening to the State of the Union address, the President stated time and time again that jobs would be his number one priority. He acknowledged the outcomes of VA, NJ, and MA and stated that he got the message – that people are more concerned about their jobs and improving the economy than about his health care initiative. I think the President has forgotten that message already. Maybe when he addresses House Minority Leader Pelosi next year, it’ll finally sink in.
You’re right Ed (those were perhaps the toughest three words–four if you expand the contraction–that I’ve recently written) that health care reform is the only viable solution, i.e., the status quo is unsustainable. However, ObamaCare is not the answer. Getting government and insurance companies in the current incarnation out of system is the only viable long-term solution.
Contrary to your assertion, health care is not regulated by insurance companies. Instead, the products offered by insurance companies are directly controlled by government. So much so, that what we all call health insurance is nothing of the sort. Instead, it is prepaid health care. If we sold auto insurance in the same fashion, your policy would cover gas, tires, wiper blades, and oil changes, et al., all for an insignificant co-payment. You’re policy would cost you $500 per month rather than a $100. But the true economic evil would be the removal of drivers as every-day consumers of automobile supplies and services. Who cares what the price of gas is if I only have to pay my $5 per tank co-payment?
The end result would be a flurry of business regulation, insurance companies forming auto mantience organizations (AMOs) for everyone to hate, consumers forced to search for service stations within their “network,” and the uninsured having to pay a confiscatory and unmarket-tested price for gas. On top of that, the price actually paid by consumers via their “insurance” companies would be reflective of the overhead necessary to support this inefficient and unnecessary system.
What’s the answer? Deregulate or re-regulate our health “insurance” system. Let companies write the policies that consumers demand. A shift to high-deductable policies would dramatically drop premiums and would reintroduce consumers into the market. Let’s give it a shot. One thing it won’t do is explode government while adding a few trillion to what you advocate is an already incurable national debt.
I object to the use of the term “Health Care Reform”. Nothing about the current plans addresses the actual cost of health care upon which insurance rates are based.
These plans are about Health Insurance reform. Call it what it is.
I am a Republican. I am in favor of Health Insurance reform. I am in favor of mandatory insurance for everyone, and of pre-existing condition coverage (the two go hand in hand). If we do that, and allow insurance companies to compete in all 50 states, we will have taken big bold steps to make health insurance more affordable. Not, of course for those who voluntarily carry no insurance. They account for roughly 1/3 of the infamous “47 million uninsured”. I wonder how they feel about it?
Then we could spend our time taking steps to lower the cost of the actual health care itself (gasp).
How could anyone vilify my favorite Progressive? Its only when my innocence is challenged by being called a Tea Bagger that I rise to the occasion to discuss control through welfare issues as the health care debate has become. In spite of having never hung around a bathhouse or found myself in a “69” position, it is kind of funny trying to picture over 1 million Tea Baggers on the Capitol Mall in such a state. At least they left the place clean after they left – can’t say that about the inauguration however. Comparative photos available.
Since the Church has been in the midst of the development of health care since the “Dark” Ages, maybe a few thoughts might help broaden the scope of the discussion. Fruitful dialogue between faith and reason cannot but render the work of charity more effective within society, and it constitutes the most appropriate framework for promoting fraternal collaboration between believers and non-believers in their shared commitment to working for the health of the human family.
The principle of subsidiarity is particularly well-suited to managing health care and directing it towards authentic human development and prosperity. In order not to produce a dangerous universal power of a tyrannical nature, the governance of health care must be marked by subsidiarity, articulated into several layers and involving different levels that can work together.
The principle of subsidiarity must remain closely linked to the principle of solidarity and vice versa, since the former without the latter gives way to social privatism (ELB), while the latter without the former gives way to paternalist social assistance that is demeaning to those in need (LEB). This general rule must also be taken broadly into consideration when addressing issues concerning any kind of aid. Such aid, whatever the promoter’s intentions, can sometimes lock people into a state of dependence and even foster situations of localized oppression and exploitation.
Health care certainly requires authority, insofar as it poses the problem of a common good that needs to be pursued. This authority, however, must be organized in a subsidiary and stratified way if it is not to infringe upon freedom and if it is to yield effective results in practice. This has to include religious institutions that have pioneered quality health care for all for centuries while respecting their moral codes; for community organizations dedicated to specific needs; and to the charity of people who are “poor in spirit”, recognize the needs and are willing to sacrifice assets and talents to help bring about solutions.
Government controlled health care facilities should yield to university hospitals and research facilities where the best minds and proximity are there to serve the populace. Government can and should support basic research, as this also provides the ideal setting for catastrophic care when needed.
Sadly, the federal government has violated subsidiarity and destroyed solidarity in reversing the natural order. If it is to have an ongoing role, it must be in coordinating the broader citizen efforts and in picking up the tab in major medical situations.
Institutions by themselves are not enough, because integral human development is primarily a vocation, and therefore it involves a free assumption of responsibility in solidarity on the part of everyone. Moreover, such health care requires a transcendent vision of the person, it needs God: without him, health care is either denied, or entrusted exclusively to man, who falls into the trap of thinking he can bring about his own salvation, and ends up promoting a dehumanized form of health care.
This is especially true when the system becomes overcrowded as, say, Boomers start to retire. Then a dehumanized system will find excuses to deny care to the weak and less fortunate, including the handicapped and the aged. Since 1973, when GE got $235 mil for shutting down its Fontana, CA small appliance plant and shipping it to Taiwan, costing 1,500 workers their jobs. The pace has only accelerated since then, including another wealth and opportunity draining act of insisting on buying most of our energy needs from sworn enemies. Both have driven up our debt to the current condition where we even have to discuss health care in this manner.
If we were to consider subsidiarity and solidarity in the argument, the Administration would invite some of the 1 in 10 Republican Congressmen who are physicians to the Blair House forum. They might also consider tort reform and removing the draconian paperwork requirements and the threat of prosecuting doctors who do pro bono or even extra wok on patients. Even charities are discouraged from performing services to the poor.
I fear the whole “emergency” is more to garner total control over the population than it is to improve health care. That certainly has been the Progressive goal since Teddy Roosevelt and Woodrow Wilson. Wouldn’t it be better to exploit the great reservoir of talent and charity found in the american people, rather than forcing a Marxist system on them?