Yesterday, Ron Paul reacted to the Supreme Court’s ruling that the Affordable Care Act passed constitutional muster. I doubt I’m giving anything away by saying that he disagreed with the court. He kept it brief, a mere three paragraphs, but he managed to be very “Ron Paul-like” in that span. I’m not going to go through it line-by-line (after yesterday’s formatting fiasco, I’m going to hold off on that for a while), but there were some choice nuggets that I can’t resist reacting to:
“Today we should remember that virtually everything government does is a ‘mandate.’ …The issue is that this compulsion implies the use of government force against those who refuse. The fundamental hallmark of a free society should be the rejection of force. “
I love this in the same way I loved making John Bolton the ambassador to the United Nations after he said that he did not believe that the U.N. was a real thing. Dr. Paul, a member of the U.S. House of Representatives, said:
1) Everything government does is a mandate.
2) A mandate implies the use of force.
3) Free societies reject force.
4) We want to be a free society (implied).
5) We shouldn’t have government.
I’m not going to comment on whether or not this is a good idea, but it is novel coming from a member of the government. This one, on the other hand, I will giddily label a Really Bad Idea:
“Only free market medicine can restore the critical independence of doctors, reduce costs through real competition and price sensitivity, and eliminate enormous paperwork burdens.”
No. Just no. This is not how it works. The market (and, having seen Robot Jox, I cannot write “the market” without giggling) is an effective way to determine value/pricing any many, many cases, but it utterly fails as a means for paying for health care. That’s an important distinction, by the way. This is about how health care is paid for, not how it’s provided.
As with car care, there are essentially two aspects of health care: preventative and emergency (because my neologism “postventative” never caught on). In this case, I use “emergency” as shorthand for “any care you receive when you’re already sick or hurt.” The more access you have to the former, the less you will need the latter, and preventative care is both less expensive and more predictable than emergency care.
It is not, however, free. The more income you have, the more likely you are to have access to and take advantage of preventative care. Likewise, the more income you have, the more likely you are to be able to afford emergency care when it is needed. The upshot of this is that the people who can least afford emergency care are going to be the ones most likely to need it.
Of course, there is some emergency care that is so expensive that almost no one would be able to afford it out of pocket. Cancer treatment would be almost unthinkably expensive, as would, say, the surgery, hospital stay, and rehab from a serious head injury. Health care usage is extremely spiky. One may have almost no need for health care services for years and then suddenly get hit with something that is financially crippling.
This is, of course, why we have insurance. Insurance is a reasonably good stop-gap to help smooth out the spikes in health care costs. It’s true that a even a person who takes good care of themselves and has access to preventative care will sometimes be unlucky and have a catastrophic health care emergency. The odds don’t tell you much about what will happen to an individual. But, the odds do work really well for large populations. If the odds are one in a million that a person will get, say, hit by a meteor, then an insurance company insuring a million people against meteor strikes can be very, very sure that they’ll only be paying one claim. This scales with size: The larger the risk pool, the more certain one can be of the odds.
Another wrinkle that makes the system less than perfect is that, when you buy insurance, you have to guess at what kind of coverage you’ll need. You can play the odds, sure, but there’s no way to know of or plan for what life may throw at you. The insurance companies have a big advantage here: They know the odds and, by pooling the risk, they can spread the risk across a large number of premium-paying customers. You, on the other hand, are stuck.
Now, insurance companies are for-profit entities and so they would like to do everything they can to maximize their profits and minimize their risks. There’s nothing evil about this. That’s exactly how a for-profit company should behave if they wish to remain for-profit. Unfortunately, this profit incentive does nothing to improve how health care is paid for and increases the overall cost of health care. The larger a risk pool is, the more efficient it is. However, it is more profitable to divide up the pool. You can target low-risk people and offer them lower rates and still make money. Then, in turn, you can charge more to the people who are more likely to consume health care and then fight tooth-and-nail when they expect you to make a payment. Again, I’m not saying that this is sinister behavior-this is how a for-profit entity is expected to behave.
Ok, maybe I’m lying about the “sinister” bit. Since we’re talking about “for-profit” here, the company paying for your health care has a very strong incentive to find a reason to deny payment. Obviously, this is even more the case when the annual claims are very high. If you have over $35,000 in annual claims, there is a 50/50 chance that your insurance provider will claim that you never actually had insurance in the first place. This makes sense for the insurance company, but it’s kind of a drag if you’re the one making the catastrophic claims.
Why all of this matters is that emergency health care coverage is frequently not optional. If you’re really sick, you go to whichever doctor will take you. If you get in a wreck, you are taken to the nearest emergency room. If you get cancer, you don’t really have the option to just stay home and live with it. For markets to function properly, the consumer has to be able to make choices.
Now, I understand that Ron Paul and his supporters don’t see it this way. If you lose a finger and you don’t have lost finger insurance, that’s just tough. If you can’t afford the care that will save your life, then you should just quietly pass away and stop bothering people. I think that’s a monstrous way of looking at human life, but at least they’re consistent about it.
Fortunately, most people do not share Dr. Paul’s view. As a backstop, we, as a society, will usually wind up picking up the tab when someone shows up in an emergency room, bleeding profusely, and without insurance or visible means of payment. I’m glad we do it, but it’s probably the worst way to go about providing health care. This system ensure that:
1) People who are at risk of needing emergency health care will be pooled with other high risk people and have to pay more for insurance (assuming they can find it).
2) People who cannot afford to pay for health care will get the least preventative care (cheap) and, conversely, need the most emergency care (expensive).
3) People who cannot afford to pay for health care will be required to actually fall ill or become injured and require emergency care before they will be assisted.
This system ensure the maximum suffering and the highest cost for health care. Essentially, it rewards the profits associated with low-risk individuals to private companies while it puts the costs associated with catastrophic illness on the public dime.
A “market” system doesn’t solve any of this. A person’s health isn’t subject to market forces. The single most efficient way to pay for health care is a single-payer system. This maximizes the risk pool, removes the incentive to deny payment to the catastrophic ill, and makes preventative health care available to those who can least afford to pay for catastrophic illness. Due to the absurdly high costs of emergency care, providing this preventative care for would lower the health care costs to the public right now, even if we weren’t to go to a single-payer system.
But we really should. The vast majority of large health care expenses are non-discretionary. The most efficient way to deal with this is for everyone to pay for everyone’s health care. I’m all for personal responsibility, but I’d prefer to restrict it to things one can personally control, you know?