Archive for health care

How Third-Party Payers Drive Up Medical Costs

Caduceus Medical Symbol chromeMises Daily Monday by Willem Cornax:

The modern health insurance industry, a by-product of government regulation and tax policy, has led to a system in which the consumer of medical services doesn’t know the costs or final prices charged for services. Without a functioning system of price signals, prices cannot be contained.

What’s Next for Obamacare in the Courts?

CaduceusJacob Huebert, author of Libertarianism Today, summarizes the current situation:

Two federal appeals courts issued conflicting decisions about the future of ObamaCare on Tuesday.

In one, the Halbig v. Burwell decision, the U.S. Court of Appeals for the D.C. Circuit ruled that the Affordable Care Act means what it says: ObamaCare insurance subsidies are only available in states that have established their own health-insurance exchanges, and an IRS rule that tried to make these subsidies available in all states – even those, such as Illinois, which did not create their own insurance exchanges – is invalid.

In the other case, King v. Burwell, the U.S. Court of Appeals for the Fourth Circuit, which sits in Virginia, reached the opposite conclusion, ruling that Congress intended to make subsidies available in all states – even though that’s not what the law says – and therefore the IRS rule could stand.

The decisions are important because, as Newsweek has put it, if the IRS rule is ultimately struck down, the entire ObamaCare system “could come crashing down in the 36 states that have opted not to run their own exchanges.”

But what happens now, with conflicting decisions from different courts?

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Employer-Provided Health Care Is Not a Religious Issue

PayslipMises Daily Tuesday by Ryan McMaken:

Contrary to what proponents of government-controlled health care would have us believe, employer-provided health insurance has nothing to do with religion and everything to do with the free exchange of labor for wages.

Video: Peter Klein Discusses the Hobby Lobby Decision & Private Property

Peter Klein discusses property rights, privilege, and free markets, in light of the U.S. Supreme Court’s recent Burwell v. Hobby Lobby decision.

Profits Do Not Make Health Care Unaffordable

6768Rich Brents writes in today’s Mises Daily: 

In other, more free markets where government interference has the potential to impact prices, we see far less of the price inflation evident in the health care industry. When the minimum wage was raised nearly 40 percent from 2007 to 2009, we didn’t see a commensurate rise in prices from those industries most impacted by the change. The fast food industry, for example, might have been able to raise prices to compensate for the higher minimum wage, but any significant increase in prices would have sent consumers to more cost effective alternatives.

The fact of the matter is that government regulation and intervention have long been pervasivewithin the health care industry. Little of this is mentioned in Mr. Brill’s argument, presumably because he finds convenient the tired claim that greed is the source of all economic woes.

The VA Scandal and Socialized Medicine

Department_of_Veterans_Affairs_LogoThe Obama Administration has claimed to be outraged by the shabby treatment that veterans receive at the hands of the VA. But as Ron Paul points out this week, it’s a bit unconvincing when the administration claims to care deeply about veterans while simultaneously sending American soldiers to receive third degree burns and mangled limbs in far away lands that are no threat whatsoever to the Americans who are paying all the bills.

Indeed, as Lew Rockwell has noted, a great way to combat the abuse of veterans is to quit creating new veterans.

The other troubling aspect of this controversy is the VA health care system itself.

Why is it that government is so interested in the direct provision of health care? Why is there not a government clothing program or a government cell phone program? That is, why does no one ever say “I’m off to the VA clothing store!”  or “I’m going to the VA cell phone store.” Certainly clothing and communications devices are pretty basic and necessary.

If one felt that veterans deserved some sort of lifelong benefit for military work, one could simply provide veterans with a stipend that they could use to procure health care. But this is not done.

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Health Care and the Candy Store Called Socialism

6746Jim Fedako writes in today’s Mises Daily:

But the folks championing socialized medicine are always repeating tales of visits for simple cases of the flu or other travel-related illnesses. What is seen is the overflowing abundance of care at that level. This is the sugar, so to speak. Unseen are other types of care. The meat, eggs, etc. And this is where the failures of socialized medicine are as obvious as the lack of nutritious food in a Yugoslavian store.[1]

The stories from travelers paint a different picture from those told by people living in countries with socialized medicine. Many of these folks — those looking for meat — complain about either the unavailability of care or wait times that exceed the life expectancy of those suffering from the disease.

So we end up hearing contrasting stories: ones from visitors who are amazed by the candy, and others from residents who complain about no meat. And both are right.

Per Bylund on Obamacare in the ‘Wall Street Journal’

800px-Barack_Obama_reacts_to_the_passing_of_Healthcare_billPer Bylund’s column “What Sweden Can Teach Us About ObamaCare” is in today’s WSJ:

President Obama has declared the Affordable Care Act a success—a reform that is “here to stay.” The question remains, however: What should we expect to come out of it, and do we want the effects to stay? If the experiences of Sweden and other countries with universal health care are any indication, patients will soon start to see very long wait times and difficulty getting access to care.

Sweden is praised as a rare example of a socialist country that works. A closer look at its health-care system tells a different story.

The overall quality of medical services delivered by Sweden’s universal public health care consistently ranks among the world’s very best. That quality can be achieved by regulating treatments to follow specific diagnoses as well as by standardizing procedures. If ObamaCare regulations do this, the quality of American health care may not go down either.

Sweden’s problem is access to care. According to the Euro Health Consumer Index 2013, Swedish patients suffer from inordinately long wait times to get an appointment with a doctor, specialist treatment or even emergency care. Wait times are Europe’s longest, and Swedes dependent on the public-health system have to wait months or even years for certain procedures, or are denied treatment.

For example, Sweden’s National Board of Health and Welfare reports that as of 2013, the average wait time (from referral to start of treatment) for “intermediary and high risk” prostate cancer is 220 days. In the case of lung cancer, the wait between an appointment with a specialist and a treatment decision is 37 days.

This waiting is what economists call rationing—the delay or even failure to provide care due to government budgetary decisions. So the number of people seeking care far outweighs the capabilities of providers, translating into insurance in name but not in practice. This is likely to be a result of ObamaCare as well.

Rationing is an obvious effect of economic planning in place of free-market competition. Free markets allow companies and entrepreneurs to respond to demand by offering people what they want and need at a better price. Effective and affordable health care comes from decentralized innovation and risk-taking as well as freedom in pricing and product development. The Affordable Care Act does the opposite by centralizing health care, minimizing or prohibiting differentiation in pricing and offerings, and mandating consumers to purchase insurance. It effectively overrides the market and the signals it sends about supply and demand.

Continue reading at WSJ.

See also, Bylund’s Mises Daily articles on health care and Sweden’s economic system:

The Market is Taking Over Sweden’s Health Care

How Government Cutbacks Ended Sweden’s Great Depression

Video: Mark Thornton Dicusses the Collapse of America’s Health Care Industry

Mark Thornton explains why Obamacare is simply one more step along the road to health care serfdom.

Bylund on Resistance Radio

I’ll be on Resistance Radio 98.9FM WGUF at around 12:15 EST discussing Obamacare and Sweden’s health care. My take on the former is that it is much like the latter used to be, but that as America is going for public health care Sweden is going for markets.

Obamacare Delay: Good Politics, Bad Economics

Ace of heartsD.W. MacKenzie writes in today’s Mises Daily:

The Obama administration has in the same week admitted that the burdens that the ACA places on small businesses are onerous. The costs of the ACA will therefore cause smaller employers to demand fewer workers.

Economically speaking, there is not a real difference between workers supplying fewer hours of labor and employers demanding fewer hours of labor. In terms of the production of real wealth fewer hours of labor used in industry translates into reduced overall production. Politically, however, there is a very real difference between workers wishing to supply more hours, and employers demanding more hours.

Dumb Consumers Make Infallible Voters

In a recent Mises Daily article, Julian Adorney noted that a central tenet of the gospel of social democracy is that the majority of the people are too stupid to buy or consume the “correct” products and services without government diktat, but that when it comes to voting, the opinions of the majority are infallible and never to be questioned.

Here, we see a woman who claims a mandate to rule based on the opinions of the same people she declares too stupid to see to their own healthcare:

Video: “How Do We Stop Rising Healthcare Costs?”

Peter Klein articulates several reasons why our current “Healthcare System” is so expensive, and explains how only the free market, with transparent pricing and competition, can halt the escalating costs.

Obamacare: Repeal is not Impossible

NewDealNRAby Dominick Armentano

[, February 12, 2014]

Obamacare was sold to the American people as a humanitarian attempt to provide health insurance to the poor and to individuals with a pre-existing medical condition who had been denied coverage. If you were not poor, did not have a pre-existing condition, and already had health insurance and were satisfied with its coverage and rates, you were repeatedly assured that you could keep your plan and doctors. Right.

We now know that the selling of Obamacare was a giant con job. After all, if its proponents had really been sincere, they would have argued that the alleged poor simply be provided vouchers (similar to food stamps) to help purchase insurance; further, a simple one-sentence piece of legislation could have required that insurance companies not automatically exclude potential customers based on some pre-existing medical condition. Done deal. Instead, what we all got smacked with was a 906 page regulatory and tax monstrosity that amounts to a federal makeover and takeover of the entire health care industry.

Can we repeal Obamacare? Defenders of the law, and even some moderate critics from both political parties, assert that repeal is impossible at this point. After all, Obamacare was passed by both houses of Congress, signed by the President, and parts of the law were declared constitutional by the Supreme Court. Moreover, billions of federal tax dollars have already been spent on the bungled website and countless bureaucrats (including those in the IRS) to administer the new regulations and taxes. Thus, defenders assert, there is simply no precedent for repealing a federal law that’s this important and complex.

Nonsense to that. There is in fact major precedent for repealing important and complex federal law that destroys personal freedom and raises costs and prices to consumers: The Supreme Court’s de facto “repeal” of the National Industrial Recovery Act (NRA) in 1935.

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Another Way to Reduce Access to Health Care

Outlaw emergency rooms that aren’t owned by politically well-connected hospitals.

Politicians in Colorado have introduced a bill 

which would force the closure of already existing freestanding emergency rooms unless they are owned by a hospital. SB 016 provides an exemption for emergency rooms more than 25 miles from a licensed hospital…. the practical effect of the bill would be to give hospitals monopoly control of all emergency facilities.

Freestanding emergency rooms — some owned by hospitals and some not — already serve patients in metro Denver. They locate in areas that are underserved by the emergency rooms attached to hospitals. Different from urgent care centers, they charge more because they can do more. They typically have board-certified physicians on duty 24 hours a day, every day, and are equipped to diagnose and stabilize cardiac arrest, stroke symptoms and trauma.

Like other special interest groups, Colorado’s existing hospitals have developed a loyal group of state legislators who are willing to vote for them without regard for the harm that protecting hospital cashflows inflicts on ordinary citizens in need of health care.

Mark Thornton wrote last fall about some other ways that the state restricsts access to health care:

The mainstream perspective is that experts and technocrats should establish what the best medical practices are and then bureaucrats should enforce those practices on everyone. Practices deemed suboptimal, unproven, or potentially dangerous should be prohibited by politicians and the prohibition enforced by bureaucrats. This is a one-size-fits-all system with the state determining what fits and what does not.

Never shy about intervention, the government has provided monopoly privileges for doctors through licensing, for drug companies through patents and trade restrictions, and for hospitals, who can prevent competitors from entering their market through “certificate of need” requirements. The combination of monopoly suppliers and subsidized consumers is the primary reason for this era of rising medical costs and falling health care outcomes.

The Market is Taking Over Sweden’s Health Care

recession impact on young man and society in swedenPer Bylund writes in today’s Mises Daily:

In other words, we should expect to see markets wherever governments fail. Or, to put it more accurately, markets exist where government cannot sufficiently repress or otherwise crowd out voluntary exchange.

So it should be no surprise that, as The Local reports, Swedes en masse get private health care insurance on the side of the failing welfare systems. This is indirectly a result of the relatively vast liberalization of the Swedish economy over the course of the past 20 years (as I have noted hereand here), which has resulted in the “experimental” privatization of several hospitals (even one emergency hospital is privately owned). While previously only the political elite (primarily, members of the Riksdag, the Swedish parliament) had access to private health care through insurance, the country now sees a blossoming and healthy insurance market.

Healthcare: High Prices and Few Kidneys

8116080125_65eba38273_zStart with a simple proposition: America does not have a healthcare problem. The services provided are the best on this planet, and people from around the world travel to its hospitals and clinics to seek treatment. If they can afford it, that is.

If there is a problem it is not on the service side but rather with the costs. So, what is the main driver of these increasing costs?

Bad government policies force costs out of line with what they should be, creating a disconnect between supplies and demands. In few areas is this more apparent than in the case of organ sales.

It is illegal to sell your organs in the United States and most other countries around the world. In 2012 there were 95,000 men, women and children on a waiting list for kidneys but only 16,500 kidney operations performed. This translates to an implied waiting time of 4.5 years to get the simple organ.

Nor is this an improvement over recent history. Just a decade ago the average wait time was 2.9 years. With all the recent attention afforded to healthcare and the piles of money driven into it, this situation has worsened and those in need are worse off than they have ever been.

When supply is curtailed, as it is in the case of laws prohibiting organ sales, a black market develops to provide the good or a shortage occurs. Unfortunately, organ donation is not so straight forward and few are willing to trust a black market surgeon to perform the operation. This is unfortunate as our bodies come with a backup for most of our major organs just in case something goes wrong – a spare kidney, a portion of our liver, a lung or even an eyeball could all be given (or sold) to someone in need and we could still live a long and healthy life, except the law prohibits it. With no black market available to clear the market, those in need live in pain or die earlier than would otherwise be the case.

Besides the pity of the pain and suffering, this situation is a shame because it is just not very cost effective. The black markets that do exist around the world suggest that organs are not very expensive. At least, not relative to the cost of healthcare and support to people in need of them currently in the United States.

According to the World Health Organization, a kidney fetches around $20,000 in India, $40,000 in China and about $160,000 in Israel. In 2009 an American man offered one of his own on Craigslist for $100,000 and received several offers until the website removed his post.

These prices might seem high, but consider the alternative. The annual cost of dialysis is about $80,000. Multiply this by the average 4.5 year waiting period for a new kidney and you’re looking at $360,000. Tack on something for your pain and suffering, and you can see that the current situation is not very cost effective.

Exchanges are currently being pushed that try to match donors with those in need without a cash payment. This is a step in the right direction, albeit a very small one. The great thing about having a market price is that it simplifies the choice process immensely. Buyers can easily determine their opportunity cost to see if they would like to partake in a certain action, sellers can judge if it is worth their time to supply something, and best of all, supply meets demand – no shortages or surpluses! Though exchanges have grown in use in the United States since 2005 they still account for only 3% of all kidney donations. This isn’t surprising – using an exchange is like bartering for something, and as economists Gary Becker and Julio Elias note, “barter is always an inefficient way to arrange transactions.”

In fact, Becker and Elias think that the price of a kidney need not be as high as one might think to clear the market, provided there is a legal market to do it within. About $15,000, give or take $10,000 should just about do it. In Iran, the only country in the world where one can legally buy or sell a kidney, the price is around $4,000 and wait times are largely nonexistent. Singapore and Australia have recently relaxed regulations on organ sales to get closer to these results which are completely normal in other markets – no waiting and low costs – but seem remarkable to the uninformed in the organ market.

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Tens of thousands of Canadians flee Canada

220px-Canadian_parliament_MAMCanada is amongst the top countries in the world when it comes to safety and security. So what could be so bad that it enticed tens of thousands of Canucks to flee the country in 2013?

How about socialized healthcare?

With public health services provided across the country, and private alternatives illegal in many of them, Canadians are not allowed to maintain their health by paying money. Of course the bills still need to be paid – after all, public healthcare is not a synonym for “free” healthcare. Some services and operations cost more than what the government remunerates doctors and hospitals for them, leading to shortages and waiting lines.

To deal with these shortages and long lines, nearly 42,000 Canadians opted to pay for their own operations by fleeing the country to seek services elsewhere. Waiting times for patients who had consulted with specialists increased to 9.6 weeks in 2013, up from 9.3 weeks the previous year. As the Fraser Institute recently reported , sick Canadians have fled the country to avoid “the consequences of waiting for care such as worsening of their condition, poorer outcomes following treatment, disability or death. And some may have done so simply to avoid delay and to make a quicker return to their life.”

No one would tolerate such wait times for something as simple as, say, buying clothes, so why do tens of millions of Canadians stand for it with something as important as healthcare?

(Originally posted at the Ludwig von Mises Institute of Canada.)

What You Were Never Told About Obamacare

170px-Caduceus.svgWhile the costs of providing health care insurance are beginning to skyrocket because of Obamacare, insurance company executives are sleeping very soundly. A respected consultant to health insurance companies, Robert Laszewski, reveals that there are two obscure provisions in Obamacare that guarantee that insurance companies will be subsidized and bailed out by Amercian taxpayers. Indeed the Congressional Budget Office estimates that $1.071 trillion will be coercively transferred from taxpayers to big insurance companies over the next decade.

This massive redistribution of wealth will take place via two programs stealthily embedded in the Affordable Health Care Act. The first is the Reinsurance Program under which large claims are capped for insurers offering individual plans under Obamacare. Insurers pay for claims up to $45,000, while the Federal government picks up 80% of the costs exceeding $45,000 up to a maximum of $250,000. This means that Obamacare is a public-private insurance scheme and that we are already half-way to the “single-payer” insurance program that Obama and his left-wing cronies so keenly pine for. Needless to say, neither President Obama nor the establishment media have publicized this provision of Obamacare.

Obama and his media supporters have also scrupulously avoided public references to the Risk Corridor Program that limits total losses for insurance companies via a complex formula. Basically, under this provision, taxpayers would be on the hook for 75%-80% of an insurance company’s losses. The enormous taxpayer-funded subsidization of costs and socialization of losses will make Obamacare more palatable to insurance companies and the public at least for a while, since insurance companies will not need to raise their premiums as much as they would have if they were forced to bear the full burden of cost increases and the risk of huge losses. This may give this destructive program time to take root and wreak havoc with what quality remains in the American health care system. Should Obamacare become permanent, Americans as taxpayers and as consumers of medical services will spend many sleepless nights worrying about how they will pay their tax bills and where they will find quality medical care.

Mises, Prices, and Australian Health Care

220px-Columbus_Fire_Medic_7In Australia, Judith Sloan points out that the “prices” for health care services set by state adjuncts are not really functioning prices at all:

Clearly, the bureaucrats who dreamt up this [healthcare-pricing-by-government-fiat] scheme had never read the Austrian economist Ludwig von Mises. If they had done so, they would have become very unsure about the value and impact of the onerous exercise of constructing thousands of “prices” across the Australian Diagnostic Related Groups undertaken by the number crunchers at IHPA.

According to von Mises, “prices are a market phenomenon. Prices cannot be constructed synthetically. Such fantastic designs are no more sensible than whimsical speculations. At the bottom of many efforts to determine nonmarket prices is the confused and contradictory notion of real costs. Economic analysis cannot help reducing all items of cost to value judgments.”

Stephen Duckett responds with the following claims:

1. Government agencies can create an “efficient” price that everyone can use as the standard for medical services.
2. Mises was wrong because he wrote a long time ago, and we’re much smarter now than people were in the 1940s.

He writes:

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