The Bigger Picture in Health Care Reform Vasos Panagiotopoulos (Orig 1993-94 with later changes) --------The health care system is flawed only because of government intervention in Medicare, the tax exemption of health benefits, the abolition of the medical baccalaureate, the tort explosion and excessive FDA regulation. The Clinton health card is an invasion of privacy. Global budgeting will lead to the rationing of life itself. The introduction of health alliances and a national board ignores the necessary reform and integration of banking, securities and insurance. However, a mandatory, privatised health insurance system may serve as the precedent for privatising and annuitising Social Security. ---------------- An insurer told how when the dentist said her son needed much work and she retorted that anything over $100 would cause her to request extraction, the dentist found her son's problem to be trivial. My retired former dentist (who turned down an Ivy professorship) charged roughly fourteen times the minimum wage for several decades. He had the same equipment and furniture all that time. Another dentist I've observed, with far inferior qualifications, increases his rates by half every two years just as he buys new equipment and furniture. What's more, I'm terrified to realise that my organic chemistry classmate who used a clamp rod to puncture my distillation column (so he can push down the class mean) is now a doctor. And yet, a famous doctor runs a reasonably priced clinic by using medical school dropouts as assistants to do preliminary examinations like taking temperture or blood pressure. On the other hand, doctors from better schools are better positioned to and do avoid joining managed care, as patients who can chose do not chose managed care. Two thirds of managed care users are under employer policies; Many others are forced in by politically correct community rating. Many savvy young doctors self-insure their patients by pooling their own capitation risk internally. The 1994 elections showed what people thought of managed (damaged) care: Folks want to chose their doctors themselves! Fundamentally, the left's view on nationalising healthcare are rooted in the same ideas that make them support abortion or want to supposedly protect the environment: they fundamentally think most of their flelow humans are expendable trash and only people who do not oppose the advancement of their ideas should survive; as such they are really Hitler and Stalin by other means. In these days of reduced inflation, education and medical costs are going through the roof because the feudal elites that control these professions restrain trade by inciting fear in their otherwise economically rational customers. But just as most economic trends follow a hyperbolic tangent diffusion pattern, so there can be leaders, herds and laggards in health care consumer activism. Very few leaders, rebelling against medical tyranny can start the trend, especially in the health care capital of the world, NYC. Individuals must rebel every time a doctor checks false, extra boxes on insurance forms. One mother of many children had three separate doctors: a cheap one just to prescribe antibiotics, and the best one for serious problems. The factoring and securitisation of medical receivables has enouraged multiple billing, such as an elderly heart victim who received three bills for the same procedure: from the doctor, the doctor's assistant's medical group, and the hospital; they persisted remorselessly until the patient informed the insurer of their intentional redundancy. Try, then, to tell this story to a doctor, and the doctor will try to brush you aside as if you imagined this "I'm a doctor, I know better." But AMA membership and power has shrunk as specialties have grown. Then try doing business with a hospital administrator and their secretary won't take a message, only your number. And when you finally get through weeks of telephone tag, this anal retentive will type up a ten page report on your past, with information irrelevant to your deal. Bluntly, only ineffective credentialist bureaucrats work there because they function like government. All well and good for their own job security, but your health depends on it; moreover, when they come for the bill, your house may depend on it as well. Bill Clinton's acceptance speech tells us government must emulate the 80's corporate restructurings, but these restructurings caused many parasitic and otherwise unemployable individuals to flee to the medical and education industries, where such restructuring is now therefore needed as well. (Mr. Clinton didn't actually expect a conservative Republican like me to actually remember his acceptance speech, did he?) Remember Carter-gone-sweater days, with calls of a dangerous international energy shortage? The Malthusians wanted to ration energy much as they now want to ration and nationalise healthcare. Carter himself ended up starting the hydrocarbon fuel deregulation that Reagan finished off - and then oil prices have great difficulty climbing until Al Gore's people and others who wanted to limit Newt Gingrich's deregulations put in place new bottlenecks. This, in itself proves that healthcare needs to be desocialised not socialised. Do we forget how, before Carter, there were artificial boundaries along which gasoline could not travel or be resold? This rationing only increased shortages and prices. Now they tell us, that contrary to economics, capacity and investment and skill cause increases in healthcare utilisation. Seymour Melman and Julian Simon agreed that innovation invariably make the plot of price of anything divided by wage into an assymptotically diminishing inverse hyperbola; hence any drug or equipment will conserve a doctor's time and make any procedure eventually better and more economical. Only by the perverse incentives of cost-plus (just like defense contracting) semi-socialised medicine do we have conditions where new equipment is used only to increase billing. Health insurance as an employment benefit started as a loophole to FDR wage controls, but the benefit later became so popular, it retained its tax exemption. (By giving in to unions and refusing to abolish this exemption, the Clinton plan allows a polarisation of the debate. Most Republican plans tax any health coverage beyond the minimum mandated standard.) Healthcare has likewise been socialised from the LBJ days which is why we must force Medicare and Medicaid to buy and apply private insurance policies for their wards. Different regulations have made healthcare more expensive, more open to malpractice, and more specialised. The FDA causes new drugs to cost a half billion dollars each. And federal law requires emergency rooms to take all patients, even if they only need an aspirin, instead of arranging a system of walk-in clinics for such doctorless patients. Look for example at the trends for psychiatrists to convert their specialty to neurology, not because the latter is more accurate but because federal reimbursment is greater. Faced with the NIH being unable to retain qualified scientists who fled to private industry and universities, Reagan wanted to turn the NIH into a private, nonprofit institution; Now Clinton says drug firms fail to return enough of the benefits they obtain from NIH research - yet this would have been possible if NIH was independent. No wonder Clinton staffers feared healthcare would be their Vietnam. Meanwhile, drugs are the most cost-effective part of the healthcare package, because in many cases (as Melman and Simon showed for other resources) they replace expensive hospitalisation. We must wrest the trading of risk across time horizons from all the feudal elites, not just government. Might you remember early Reagan talk about antitrust action against both the AFLCIO and AMA? The AMA controls school admission and hence prices. Instead, we should return to the old medical baccalaureate for general practitioners, which would consist of combining nursing, physical therapy, chiropracty and pharmacist degrees. Four fifths of what is done in the average doctor's office could easily be done by a physician's assistant. Instead of criticising doctors who specialise, shouldn't we be asking if the extra educational costs they incur aren't the incentive for their specialisation. Moreover, we would not have been surprised if layed-off doctors, feeling persecuted by Clinton, started transforming the AMA into a labor union. Instead, applying the analogies that follow, the AMA might be turned into a self-regulatory organisation analogous to the NASD for securities. Doctors and professors have a unique economic leverage (analogous, perhaps, to the Georgist scarcity of land) to say "your money or your life" or "how can you put a price on life" and as such may constitute some sort of externality. Such an externality is especially the cause of the current health care crisis as it applies to long-term catastrophic care. It might be explored if, instead of revamping the entire system, that we might chose only to address the catastrophic aspects through some national policy - as even a subsidy for this would be far less of a market interference than some recent policy suggestions. Perhaps, instead of forcing patients to chose HMOs, we should allow them to chose primary care doctors, who either are the front-marketing end for an HMO (ie chose this HMO because your favorite doctor belongs). Or, alternatively, we might provide doctors with capitation insurance that would allow them to bill their patients by time period instead of by visit. Those who think, in the latter case, the doctor would encourage visits by hypochondriacs, haven't had to compete with a doctor on a golf course. The Clinton plans had certain features which did not reflect any major departure from either existing policies or free market ideas: portability, malpractice reform, antitrust reform, definition of a standard benefits package, introduction of corporatised "super-regional" economies of scale, and the federalist encouragement of the use of states as competing laboratories. (How curious that lawyers and acocuntants who favor managed care never suggest their own clients pay in a similar manner.) Being unable to take your insurance with you between jobs and careers is not a market failure but a regulatory inelasicity. Moreover, mandatory copayments are totally consistent with other regulations designed to ensure the competitiveness and solvency of financial systems. Global budgeting, however, allows an avenue for either inflationary neglect or a dangerous form of price controls and the rationing of life itself - the latter being the most dangerous precedent seen in socialised medicine around the globe. The use of a national health card and attendant databases would also allow a dangerous infringement of free speech via unproven soviet-style psychiatric theories of political correctness; It would be better to allow competing health cards as we now have competing credit cards and credit reporting agencies. (Credit reporting has enough problems with accuracy - imagine how worse it would be if monopolised - then imagine your life depending on it.) The introduction of health alliances, medical school regulation, and a national health board, however, ignore the necessary integration of such policies into the pending inevitable reform and universalisation of financial regulation, including bankng, securities, insurance, retirement and education finance. In structuring such financial reforms, we must carefully observe the lessons of Basle/ERISA/NAIC risk:capital ratios, the thrifts/RTC crisis, the eventual integration of FFIEC bank regulation (which originated in the 1790s Controller of the Currency and not the 1930s FDIC) and so on. One should also study how interstate banking has been restricted since colonial times, in part because local politicians like to be able to dip into local bank pockets -- will they do the same with alliancces?. (At a time when both parties had been scathed by Silverado and Whitewater, this was no moot point!) And we should observe how the decentralised, multi-constituent-sensitive Federal Reserve succeeded where two Banks of the US failed. Early Clinton-era hospitals were now in the sad financial shape thrifts used to be in shortly before the thrift crisis. Lastly, health reform will provide an interesting precedent for the eventual Chile-style privatisation and annuitisation of the current Social Security Ponzi scheme; even the Bush-Dukakis-era Heritage plan and the 1993 Chaffe bill suggested mandatory insurance (The question is who should be mandated to buy it: employers or employes, as anything that is employer paid is actaully a hidden, employment-hindering tax on wages and yet does not offer the employe any opportunity for cost control.) Eventually, such a system would also include a college savings plan, and only these socal insurance aspects (medical, retirement, college) of the new financial system would be tax-exempt, federally insured and regulated, while all other aspects of allfinanz would be deregulated the way "accredited investors" are currently treated. - - - - - Vasos Panagiotopoulos is an NYC conservative activist and businessman. A Columbia alumnus and former NY Federal Reserve analyst, he is listed in Marquis' Who's Who in Finance & Industry. His columns used to appear in the 1990 NYC Tribune.