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.
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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.