The Road to a Single Payer System

Watch Paul Ryan, "wipe the floor with Nation editor Katrina vanden Heuvel on health-care reform" (description courtesy of Mark Hemingway of National Review).



And then watch Barney Frank admit that the "public option" will lead to a single payer system.

Do Private Health Insurance Companies Have an Incentive to Reject Claims?

Bryan Caplan argues in this post that a profit maximizing insurance company does not necessarily have an incentive to reject expensive claims, because there is a reputation cost for doing so.

I wouldn't choose an insurer that was known to abuse or abandon its sickest customers. Would you? And why would word of mouth, advertising, and other conduits of reputation be less potent here than in other lines of insurance?

....

Insurance companies want a good reputation for taking reasonable care of their customers. However, they can live without a reputation for paying for everything, no matter what. Some companies might want to be known as "generous," and charge their customers correspondingly higher premiums. But most insurers prefer a reputation for decent but cost-conscious care. If that means affordable premiums, customers will happily buy cheap - then complain if their budget insurer makes them wait or tells them no.

Am I saying that health insurance companies never play dirty tricks on their customers? Of course not. It's a big world, lots of bad stuff happens. What I'm saying, rather, is that reputation works well even in industries where firms have big, lumpy liabilities. There are plenty of examples. What reason is there to think that health insurance isn't one of them?

I agree with this completely. The only problem is that the "reputation cost" factor is not as pronounced in health insurance as it is with other types of insurance because we have an employer based system, and as a result, people do not get to choose their health insurance company. By creating our employer based system, the government has interfered with what would otherwise be a healthy free-market check on the abusive practices of insurance companies.

To work toward eliminating the employer based system and putting people back in control of their own health care, see my previous post.

Letter to My Congressman on Health Care Reform

Dear Representative Klein:

I am opposed to the health care "reform" bill drafted by the US House. To address the rising costs of health care and the problem of the uninsured,I recommend the following:

1) Eliminate the tax discrepancy between insurance purchased by an employer (tax deductible), and insurance paid for directly by an individual (not tax deductible). This tax effect has created an illogical coupling between health insurance and employment. Why should the tax code encourage a system where I have health insurance when I am employed, but none when I am not?

2) Provide for the tax deductibility of health care paid for directly by the consumer by making HSA's available to everyone. Right now, if I don't have an HSA and I purchase health care directly, my medical care is most likely not tax deductible. But, if I pay for my medical care indirectly through an employer provided insurance policy, my medical care is tax deductible. In other words, the tax code encourages large insurance companies to become the middleman between the patient and doctor for virtually every single medical transaction, no matter how small or insignificant. If anything, shouldn't the tax code encourage exactly the opposite? HSA's at least level the playing field by eliminating this tax preference and putting consumers back in control of their own health care dollars. Consumer control, and getting the insurance company out of every single health care transaction is what will ultimately help bring down health care costs.

3) Allow for the purchase of insurance across state lines. The President says that he wants to increase competition between insurance companies. One easy way to do this is to allow groups and individuals to purchase health insurance across state lines. Right now, states have various levels of mandates that increase costs and are in effect political payoffs to various special interest groups. Allowing insurance to be purchased across state lines will provide competition, undermine these costly government imposed mandates, and bring down costs.

4) Tort reform. Law suits are extremely costly to our health care system, and any health care reform that is designed to bring down costs must involve tort reform. Proposals to cap punitive damages and institute "loser pays" rules should be considered. These types of reforms will discourage frivolous law suits and bring down costs without taking away a patient's right to their day in court.

Thank you for considering these ideas. I can assure you that I am sharing these ideas with people in my neighborhood and community -- your constituents.

Secretary Paulson, Shouldn't You Have Recused Yourself?

Good question.



As I said back then, when your Treasury Secretary is the former Chairman and CEO of Goldman Sachs (GS), and he allows GS's main competitor to go bankrupt, and a week later helps engineer the bailout of AIG, a firm that was on the hook for $13 billion to GS, the whole thing looks really bad no matter how good his intentions were.

Weak Effort

Of all of the things that are wrong with the stimulus, the House GOP produces a 90 second ad that implies that the only thing wrong with the stimulus package is the timing.



Where is the ad pointing out that the stimulus was not a stimulus plan at all, but a political payoff to Democrat constituents...paid for by our children and grandchildren?

Where is this graph?






This is only slightly better.

Why Not Audit the Federal Reserve?

Amidst all of the debates over health care and stimulus and the Sotamayor nomination is a surprising and growing movement to pass legislation that would authorize an audit of the Federal Reserve. Ron Paul's HR 1207 Audit the Fed bill currently has 277 co-sponsors in the House, including every House Republican, and the companion Senate Bill has 13 co-sponsors, including the self-described socialist Bernie Sanders and one of the most conservative members of the Senate, Jim DeMint.

The video below shows a speech recently made by Senator DeMint regarding this effort. {It's worth watching not only for DeMint's speech, but also to see how a rules gimmick can prevent an amendment from being voted upon).



I think we would all like to know what assets were purchased by the Fed with its trillions in newly created money, and just as important, from whom those assets were purchased. How anyone who claims to believe in free markets, limited government and decentralized power could not be in favor of this is beyond me, yet most mainstream Conservatives seem to be silent on the issue or opposed to the idea.

Health Care Proposal Outlaws Private Insurance

From Investor's Business Daily:

"Under the Orwellian header of "Protecting The Choice To Keep Current Coverage," the "Limitation On New Enrollment" section of the bill clearly states:

"Except as provided in this paragraph, the individual health insurance issuer offering such coverage does not enroll any individual in such coverage if the first effective date of coverage is on or after the first day" of the year the legislation becomes law.

So we can all keep our coverage, just as promised — with, of course, exceptions: Those who currently have private individual coverage won't be able to change it. Nor will those who leave a company to work for themselves be free to buy individual plans from private carriers. "

Just add this to the growing list of RNC ads that write themselves.

Obama's Rhetorical Excess

President Obama has an apologia for his economic policies in the Washington Post entitled "Rebuilding Something Better." Former Bush administration economic adviser Keith Hennessey responds with a point-by-point refutation. You must, must, must read this in its entirety.

Hennessey begins by analyzing Obama's claim that "Nearly six months ago, my administration took office amid the most severe economic downturn since the Great Depression."

Hennessey responds:

The President and his team use this language to lower the bar against which they are measured. The U.S. economy was quite unhealthy on January 20th, and it still is. Still, Donald Marron shows that, while the President’s statement is almost technically true, there is a big difference between “most severe … since the Great Depression” and “comparable to the Great Depression.” Here is Donald’s graph:

So, contrary to the President's claim, we're a looong way from the Great Depression. According to these figures, even after six months of more or less steady decline under Obama's watch, things are not quite as bad as in 1957-58. Really, you need to read Hennessey's article.

There is something in Obama that cannot resist rhetorical excess. Candidate Obama stated his administration would be, not just ethical, but the most ethical in history. (Interestingly, Bill Clinton made the same pledge). President Obama routinely accuses his opponents, not of making proposals he disagrees with, but of wanting to "do nothing."

These are examples when Obama employs rhetorical excess in service of political goals -- i.e., to puff up his own record, or to attack Republicans. But he also does this when it serves no obvious political purpose. For instance, take Obama's claim in the "Cairo speech" that if one counted up all of the Muslims in America, they'd represent "one of the largest Muslim countries in the world." In fact, we'd be 52d. There are more Buddhists in the U.S. than Muslims. We aren't even close to having one of the largest Muslim populations in the world, as anyone with an atlas or an internet connection can readily discover. Obama could not just say that America hates terrorism but has no beef with the Muslim faith, and that the U.S. is place where Muslims can worship in complete freedom. No, he (and his genius speechwriters) had to take it a step further, and make a ludicrous claim about population rank. I don't know why. It's almost like they can't help it.

A postscript: One of the commenters on Keith Hennessey's blog offers this great observation:

Two things BO can't speak without: teleprompters and straw men. The first makes him sound eloquent, the second makes him sound reasonable

Sounds about right to me.

Obama Speech in Ghana

Obama made a speech yesterday in Ghana and delivered some great lines, including this one:

No business wants to invest in a place where the government skims 20 percent off the top.

I completely agree. So why would a business want to invest in a country where the government skims 35% off the bottom?

Rich Lowry on the Stimulus

Rich Lowry released a column this morning entitled The Stimulus — The Anatomy of a Failure, and it is worth reading.

I had only two problems with the article, as summarized below:

1) It's not just that the stimulus is not working, it's that it is making matters worse. The sheer magnitude of government intervention in the economy is causing uncertainty except in one regard - the deficits must ultimately lead to higher taxes and/or higher inflation in the future. Both of these factors inhibit investment and economic activity and will only delay the market corrections that we desperately need to get back on the road to recovery.


2)I think it’s a mistake to accept the premise that the government is in fact capable of stimulating the economy. Yes, maybe the government can shift money around and make it appear that the economy has temporarily improved, but when it’s all said and done, the government has no resources of its own, so in order to spend anything, the government first has to confiscate the money from the private sector. For every dollar that the government spends, that’s one dollar not available to someone else 1) to spend, 2) to invest, or 3) lend (either directly or by putting the money in a savings account for the bank to lend out).

FHA Mortgages the "next bubble"

I saw a brief presentation this morning from a mortgage broker on the latest requirements for the FHA loan program. FHA, which stands for the Federal Housing Agency, provides mortgage insurance so that a lender is made whole in the event of a mortgage default. This insurance provides an incentive for lenders to make loans that the private sector may not otherwise make.

I was surprised to learn that to qualify for an FHA loan, it is not necessary to have a credit score, it is not necessary to have money for any down payment (the down payment can be as low as 3.5% and that amount can be paid by someone else as a gift), and even borrowers in Chapter 13 bankruptcy may still be eligible for an FHA insured loan. Yes, you can be in bankruptcy, and the government still thinks it's an okay time to take on the biggest debt of your entire life.

The presenter pointed out that the FHA programs have been a "Godsend" for getting people mortgages and getting homes sold, but that the loans may be contributing to the formation of yet another "mortgage bubble". That sounds about right to me.

DOJ to "review" Apple's relationship with AT&T

Apparently, the Department of Justice is looking into possible anti-trust law suits against large telecom carriers.

From the WSJ:

"Among the areas the Justice Department could explore is whether wireless carriers are hurting smaller competitors by locking up popular phones through exclusive agreements with handset makers, according to the people. In recent weeks lawmakers and regulators have raised questions about deals such as AT&T's exclusive right to provide service for Apple Inc.'s popular iPhone in the U.S."

In other words, the government, under the authority of the Sherman Anti-Trust act, can tell Apple whom they are allowed to do business with and what kind of agreements they are permitted to make.

Anyone else see this is a direct assault on private property rights? Apple developed this product, they own it, and as far as I am concerned, they can do whatever they please with it. The fact that their product has been wildly successful is no basis for a lawsuit.

And even if this notion of illegal anti-competitiveness had any merit, the DOJ has chosen an industry that is highly competitive. Despite competition from Blackberry and Palm and many others, Apple took the risk of allowing only one carrier on its iPhone platform, and despite competition from Verizon and Cingular and many other carriers, AT&T agreed to pick up half the tab for every iPhone that they sell on behalf of Apple.

It looks to me like the market is functioning just fine, and if one thing is for sure, it is that in three or five years when any anti-trust lawsuit finally makes its way into court, the wireless market will not look anything like it does today.

Colin Powell on the role of government

Last week, Colin Powell generated some headlines when he expressed some concern that President Obama might be trying to take on too many issues at once. I think this criticism misses the point, but it is a fair criticism nonetheless.

Just prior to making that critique, Powell said something even more interesting. He argued that politicians and political parties who advocate "limited government" or "small government" are engaging in political sloganeering and empty rhetoric. He argues that the "right answer" is "give me a government that works".

First of all, how is "give me a government that works" not a political slogan?

Second, promoting the idea of "limited government" is not sloganeering. It is a political philosophy, and it happens to be the political philosophy on which this country was founded and operated under until early last century.

I wonder if anyone has ever pointed this out to him.

One of my favorite lines from the Declaration of Independence

"He (the King) has erected a multitude of new offices, and sent hither swarms of officers to harass our people, and eat out their substance. " - Thomas Jefferson

I'm not sure exactly what it means to "eat out their substance", but it sounds like something Congress is doing right now.

JFK: Independence Day Speech, 1946

I came across this nice speech that JFK delivered as a candidate for Congress in 1946. He discusses the components of the American character, which he describes as having religious, idealistic, patriotic, and individualistic elements. It's a speech that some people today might find too cornpone or -- gasp! -- conservative. I confess I miss the days (though I was not alive at the time) when Democratic politicians could talk like this without irony or apology.

You should read the whole thing, but here's a brief snippet from the section of religion:

Thus we see that this nation has ever been inspired by essential religious ideas. . .

Today these basic religious ideas are challenged by atheism and materialism: at home in the cynical philosophy of many of our intellectuals [When's the last time you heard a Democrat take a shot at "intellectuals"?--CSR], abroad in the doctrine of collectivism, which sets up the twin pillars of atheism and materialism as the official philosophical Establishment of the State.

Inspired by a deeply religious sense, this country, which has ever been devoted to the dignity of man, which has ever fostered the growth of the human spirit, has always met and hurled back the challenge of those deathly philosophies of hate and despair. We have defeated them in the past; we will always defeat them.

How well, then, has DeTocqueville said: "You may talk of the people and their majesty, but where there is no respect for God can there be much for man? You may talk of the supremacy of the ballot, respect for order, denounce riot, secession--unless religion is the first link, all is vain."

Fortune magazine ranks White House proposed spending cuts as one of this year's "Dumbest moments in business"

Fortune magazine just released an online article entitled Dumbest Moments in Business 2009...Midyear Edition, and it is just hilarious.

Scroll down to item 10 and you will find this:

You're eight months behind on your $500,000 mortgage, your bank is demanding a meeting, and you respond by telling them there's nothing to worry about. Why not? Because you just saved $40 by canceling your newspaper subscription.

That, essentially, is the kind of fast budget talk President Obama trotted out in April when he made a big to-do out of instructing his cabinet to cut $100 million from their budgets.