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Jewish World Review
July 2, 2009
/ 10 Tamuz 5769
45 Million Americans Who Are Those Guys?, Part III
"President Barack Obama says that he can pay for his goal to
provide health care insurance for every American without it. Why isn't that
good enough for you?"
Elder: Yes, the President says that he can "pay for" his goal of
providing health insurance for every American without it. Care to bet on
When government proposes a program, the ultimate price tag
inevitably exceeds projections. In "Why Government Doesn't Work,"
libertarian Harry Browne wrote: "Most older people now find it harder to get
adequate medical service. Naturally, the government points to the higher
costs and shortages as proof that the elderly would be lost without
Medicare and that government should be even more deeply involved. When
Medicare was set up in 1965, the politicians projected its cost in 1990 to
be $3 billion which is equivalent to $12 billion when adjusted for
inflation to 1990 dollars. The actual cost in 1990 was $98 billion eight
times as much."
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Congress, from the outset, placed Medicare on autopilot because
of a growing, aging and longer-living elderly population. Congress, from
time to time, attempts to "rein in" increased costs by imposing fixed
reimbursement schedules. This simply creates an incentive on the part of
doctors and hospitals to schedule a lot of unnecessary tests or to
"pingpong" patients from specialist to specialist in order to evade the
artificial limits. This also forces doctors and hospitals to charge more
from private carriers to offset the low reimbursement rates provided by
Everybody gets hurt the elderly because the medical
profession becomes less efficient, innovative and cost-effective, and the
non-elderly because practitioners charge them more to offset the lower
reimbursement rates provided by the government.
"We need to require all employers to provide health insurance."
Elder: We end up paying more, not less. During World War II,
Congress imposed wage freezes. Business people who wished to attract
employees had little recourse but to offer non-cash benefits. The
government, recognizing business people's "plight," allowed business to
deduct the cost of health insurance as a business expense. This put, for the
first time, something between doctor and patient, distorting the traditional
fee-for-service system, used so successfully up until then. It also created
the incentive to get your medical care through your employer rather than pay
for it directly.
I once lived in a large apartment complex that included
utilities paid by the landlord. During hot summer months or cold winter
months in my previous apartment where I paid for utilities I turned
the thermostat off when I left the apartment and put on the heat or air when
I returned. Once I moved into the "utilities-included" apartment, I left my
heat and air on all day, thus ensuring a perfect climate when I came home
sometimes as long as 12 hours later.
Now, I knew that somehow I paid, but the cost would be
distributed over all the tenants in the building. So the conscientious
tenant who cut off his or her air subsidized my carefree use of utilities.
Eventually, we all pay, but the effect becomes gradual and diffused over a
number of people who have little incentive to "conserve."
This applies to employer-provided insurance. Employees have less
incentive to refrain from seeing doctors for minor reasons, less incentive
to watch and manage their own health, and no incentive to cost compare among
competing insurers and health care providers.
"I'm a supporter of free markets and competition, but that
doesn't apply to medicine. Improved technology and research costs just drive
the price of medicine up."
Elder: New technology in most any field initially costs a
lot. Consider the cost years ago of computers and calculators versus what we
pay today for equipment and applications far faster, easier and more
powerful. Remember the price of calculators 30 years ago? Today they are so
cheap some outlets give them away as gifts loss leaders to get you into
Government-imposed rationing sacrifices quality and innovation
while imposing long wait times. But you cannot control costs without
removing the incentive to improve and innovate. How many medical-care
breakthroughs occur in Canada? How many new drugs to improve patient outcome
come from Canada? Without the profit incentive, you get fewer entrepreneurs
and fewer investment dollars because you've diminished the likelihood of
Want efficiency? A friend of mine who serves on the board of a
hospital in Ontario recently wrote: "We have actually had to send money back
to the government because the surgeries scheduled months earlier
didn't occur because patients went to the U.S. for treatment instead.
Funding is specific to some procedures, and if not used, the money is sent
back. Right now we are losing the surgery money because we have a bed
shortage for folks who can't return home because of the level of care they
need, but there are no facilities for them to transfer to. Why, you ask?
Government regulations make it next to impossible for private people to make
a profit. And so the vicious circle continues."
Welcome to ObamaCare.
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JWR contributor Larry Elder is the author of, most recently, "Stupid Black Men: How to Play the Race Card--and Lose."
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