Jul

1

Some non partisan predictions based on the ACA implemented as it appears it will be. Simple supply and demand tells me with an additional 30-50m people having subsidized access it must drive up health care costs. If there was a pure index on health care costs I would go long. Premiums on average will go higher as the costs are just passed through and the incentives are structured to consume more not less heath care.

Health insurance only companies I think will be driven out of business by two factors; they can no longer perform their basic function which is actuarial expertise. Second their gross margins are capped at 20% and most margins will be lower as premiums won't be able to keep up with the rising cost. I would not want to be in that business.

However, the more diverse companies like Wellpoint and United Health have a valuable asset. This is decades of health care record on millions on individuals. So these companies and other like them will convert themselves to care providers, administrators of self insured plans, and offer diagnostic or preventative care services. These I see as big growth areas. Retail companies with direct access to consumers like Walmart will expand further into providing heath care services to meet rising demand.

From the market reaction this week it seems the ruling was a non event. The added burden to large Fortune 500 companies will be passed on to employees in the form of higher co pays. As long as the expense deduction is there, providing health insurance is still a good way to transfer compensation to employees void of taxed. The middle range companies (50-100 employees) will do the same or can opt our entirely and pay a fine. Of all the articles I read in last two weeks I found Sowell and Asness had some insightful writings on the subject.

Stefan Jovanovich adds: 

The Armed Forces have been privatized. Conscription is no longer -politically - available. Intraservice competition among what are now 4 branches of the service - Army, Navy, Air Force and Marines - and the effective abolition of the draft have forced the official dealers in death and destruction to continue to innovate. It no longer requires 55,000 bullets to kill a single enemy (that was the effective kill ratio in the Viet-Nam war). If we had the "single payer" system David wants and the one Truman wanted for the defense department as well as for American healthcare, we would have seen the U.S. follow the disastrous path the Canadians and Europeans and now - sadly - even the British have followed. The budgets would have remained largely intact (as they have for NATO), but the ability to break things would have disappeared.

As with so many quasi-political arguments on the List, this debate really comes down to the fact that "yes, the conservatives want the government to cheat just the way the liberals do". As, I hope, David would agree, political conservatives like DeMint wave the bloody flag for freedom but still want the full-employment act for prison guards and cops (aka the drug laws). But, this is hardly news. Adam Smith observed the phenomenon over 200 years ago. The fact that Jim DeMint also argued for a monopoly system is hardly an argument in favor of autarky; it is a reminder that liberty - like virtue - needs to be practiced in the small things every day no matter how tempting it is to believe that cheating just this once won't really do any harm.

As for the defense contractors, they have been going broke since the end of WW II. The process has been masked - just as it has in American farming - by the fact that the losers have sold up to their larger, better financed competitors rather than simply sold off their assets at auction (that, too, has happened); if large medical insurers and hospital companies had faced the same competitive pressures, there would be - as there is in the weapons business - half a dozen suppliers, not the hundreds that not only exist but continued to thrive and prosper under a cost-plus system that would have made even the pirates at Ling-Tempco-Vought blush for shame.

P.S. American medicine still has conscription - for the customers. People are not allowed to sell their organs, to get pricing information about medical services in advance of purchase, to buy catastrophic only insurance coverage. The absence of fundamental liberty - for the providers and the customers - in the area of medicine is truly staggering.
 

And further, why is 20% of GDP the magic number for healthcare spending? Shouldn't people be free to spend their money as they choose? If people, as opposed to the government, want to spend half their incomes on everything from Botox to liver transplants, isn't that their choice?

There have, in fact, been numerous proposals to abolish single payer. Here is one.

As for no one having much trouble with Medicare, you have got to be kidding. No sensible doctor in private practice is willing to accept Medicare patients any more; they will - out of loyalty to their existing patients - continue to treat those who shift from private insurance to Medicare; but for new patients with only Medicare and no supplemental insurance, forget it. I know this because I have just gone through the process of finding a new cardiologist and internist here in North Carolina; if it is any comfort, this part of the nationalization of medicine has succeeded - my internist and cardiologist back in California told me the same thing years ago.

Very few people think we have a "high quality system" in medicine any more than we have a "high quality" system in plumbing fixtures. There is an awful lot of crap out there. What people know is that, if competition is allowed to flourish, the mediocre providers who are now sheltered by government monopoly protections - those at the VA and government hospitals and those in private practice who use government payers as their sole source of revenue - will have to face the intolerable discipline of the marketplace.

The arguments used in favor of drug regulation are the same ones used in favor of zoning, gun control and all other bureaucratic restraints in the name of the public good. They rely on the horror stories to justify restraints whose costs are far more murderous. A hundred times more people die every month now because they cannot buy organs from willing donors than died or were maimed from thalidomide. But no one takes photographs of their slow declines or charts their pain unto death. We can't let people use their money to save their own lives; that would be against the greater good - i.e the full employment of professional minders of other people's business.
 


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