Elizabeth Warren has many plans. Chief among them is her plan to nationalize one-seventh of America’s economy, by eliminating private health insurance in favor of what she calls “Medicare for All.” According to her, she’ll manage this by taxing the snot out of a few billionaires, and not raising taxes on the rest of us. She figures to commandeer the premiums currently being paid to insurers by employers, but at a 2% discount, and to be more “efficient,” both because there’ll be one agency running everything and because there’ll be no profits ‘bleeding’ care away from beneficiaries.
There’s much to criticize about her proposal, and such criticisms can be found all over the news and all across the political spectrum. The aspect that made me snort my coffee this morning was the assertion that efficiencies can make up the giant gap between costs and funding projections.
Let’s consider government “efficiency.”
The feds burn $60B a year in Medicare/Medicaid fraud and waste. That’s triple the entire health insurance industry’s profit margin – a profit margin she qualitatively exaggerates by asserting that eliminating it will drive substantial care improvements.
The feds burn over $300B a year on “zombie programs,” whose authorizations have expired (often more than a decade ago).
No one knows how much waste, duplication, pork, and fraud is folded into defense spending, not even the DoD. The DoD spent twenty years and $400M trying to sort its books out, and failed. Everyone has heard tales of $600 hammers and $1100 ashtrays. Most people who’ve worked in Corporate America are familiar with the “use it or lose it” culture that infects big organizations at the end of fiscal years, and the DoD is notorious for it. It would not be in the least surprising, given nearly $700B in defense spending, if waste, fraud, duplication, and other abuses totaled north of $100B.
That’s ten percent of total government spending, and half the entire budget deficit, and that’s before we even get into BS programs, pork barrel spending, and DoD waste/fraud.
Our government is so large, convoluted, and cumbersome, no one can even tell us how many federal agencies exist.
Despite all this, politicians and pundits scream bloody murder the moment anyone dares suggest cutting spending, or trying to do better with the money they already have. The few politicians that point out all this waste are ignored as quixotic oddities.
Given this stark, irrefutable reality, what sane person can look at our government, today and in decades past, and actually believe that giving it more to do, putting more money in its hands, granting it total monopoly power over a huge chunk of our economy and our health care, will produce net-positive results?
People fear and decry monopolies, and demand that government intervene when a big organization gets too big. But, when it comes to government, those same people don’t believe there’s such a thing as too big. They ignore the colossal waste, the massive fraud, the duplication, the apathy, the selfishness and self-protection, and the staggering losses.
Is this remotely rational? Can anyone justify handing such an enormous amount of power and money to a government that has demonstrated so clearly that it cannot effectively handle what it already does and the money it already has? Even if Warren had the wisdom Solomon and the combined intellect of Newton, Archimedes, and Leonardo, which she doesn’t, she couldn’t pull this off. No one can. To think otherwise is to engage in a breathtaking degree of self-delusion.
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Beware of the argument she will be making down the road that the private market will continue working, that private providers will still be providing the services. That all sounds fine and good only it suffers from two fundamental flaws: one is that it doesn’t address the main flaw of the current overall healthcare system, namely that for people insured by their employers the price of services they see is effectively zero and therefore there is a tendency to free ride the system. For that reason alone it can be said that today there isn’t a private market where patients and doctors are concerned.
The other fundamental flaw is that it puts in place more direct government price controls. I don’t think I have to explain what that leads to. Suffice it to say that for services priced too low there will develop shortages, and for those priced too high it will develop surpluses and unwarranted profits for the doctors who market themselves better. This is actually a worse system than complete control like the VA because in the VA in theory you can at least measure the length of the waiting lines and hire accordingly, assuming there is a pool from which to hire which won’t exist if the system has gone national.
Today’s overall system is a hybrid where the government already effectively controls prices through the weight of its reimbursements volume. It shows many of the pernicious effects above with these affecting even the supposedly totally private markets. It does so through the insurance industry standard of reimbursing fees that are within 20% above the “usual and customary” average standard fee. Since Medicare is so large and their fees are included in that average, it tends to affect and distort the industry’s standard unduly. For one example see the footnote below*.
The only healthcare system that will ever work effectively is a pure market. Based on my looking at countries like Singapore and Taiwan where markets rule so effectively, for a few years now I have been proposing the following:
1. Health savings accounts that would be topped-off directly by government for the very poor and neediest.
2. Beyond the HSAs that people would use to pay for all routine medical services, true catastrophic portable health insurance.
3. Tort reform.
4. Do away with government designed insurance and state insurance barriers.
5. Do away with most government regulation but require transparency of pricing.
That would fully restore the market and allow a closer relationship between doctors and patients. The government would for the most part be out of the way. Costs would decrease because overheads would drop as the paperwork decreases. Doctors would be careful not to overload patients with costly tests and procedures.
No matter how capable and well intentioned doctors regulating other doctors from Washington are, they don’t know each individual’s case better than their own doctor so let’s learn to trust.
That comment about trust is not just a throwaway. I studied ObamaCare very carefully and the grand objective once the whole thing was implemented would have actually been something awfully similar to what I propose myself above, with one monumental exception and an also monumental flaw. The exception is that although its aim was to take us to a full market system where patients did their own bidding (that’s what the Cadillac tax was about), Washington didn’t trust doctors and the market and instead ObamaCare meant to put in place a monumental regulatory apparatus. At one point we used to hear about there being as many as 150 or more regulating committees or agencies of one kind or another.
The monumental flaw was in the sequencing and actual implementation of the various new components. Thus the center piece was to be the Cadillac Tax plan but that kept being pushed back because of how the exchange components were being delayed, and yet by postponing that tax they were assuring not only union resistance but in the event also patient resistance. What the Cadillac Tax intended to do is get rid of the main flaw of our current system, namely that patients are left out of the market and it is instead employers and insurance companies that do all of the negotiating and selection on our behalf.
That system came to be because during WWII wages were frozen and instead employers used tax deductible healthcare programs to attract workers. That has been the norm ever since but if patients are ever to truly participate in the market that has to be changed, and that was the intention of the 40% Cadillac Tax plan. By making employers, eventually all employers, pay a tax for company offered insurance then employees would be offered extra pay instead of a tax deductible healthcare benefit—and, yes, then workers would pay the taxes but, hey, it was a Democrat plan, what else would one expect.
That’s also why at the start the government didn’t bat an eye over the new high deductibles. The government knew that was inevitable if preexisting conditions, people out of work, and a long list of other things had to be covered. Eventually a new system would develop close to the one in points one and two of my proposed plan above, including with new types of higher deductible insurance or just plain catastrophic insurance. Some large companies are already offering those in their expanded menus of offerings to workers and employees.
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*The distorting effects of government pricing are easily seen. To cite one example, in its wisdom the government originally decided to pay family or primary care physicians (PCPs) less than specialists. Over time these began to drop out until some ten years ago there developed an acute shortage of PCPs. Today that has been alleviated but PCPs are no longer what they used to be and I can personally attest to a monumental problem that has created. The traditional PCP did what is called case management. He knew enough to know when he needed to get help from a specialist and did so. I know because I have been seeing many specialists for some 20 years.
My old PCP used to do it but because he wasn’t being reimbursed enough, towards the end of his life he was forced to see many more patients and could no longer do case management effectively. When he passed I had a rough time finding a new one. There was a clear shortage. Eventually I found a good one but she is fairly young (the older ones went into convierte services). I asked her about case management and she answered “what is that?” Worse, when they deal with specialist issues they don’t call them as my old PCP used to do.
I recently saw my new PCP for a common ailment and just to keep her on the loop I mentioned that I was having unusual breathing problems (I have COPD and take four prescription drugs for it). She immediately upped the dosage of one Rx. I resisted but because I was going to see my pulmonary specialist in a few weeks, I decided to humor her and went along. Well, when I saw the specialist he went into a long spiel about why the dosage for that Rx should not be increased. And yet specialists expect that the PCPs take care of routine problems even in their own specialties.
I could go on with countless examples but suffice it to say that the system is very broken and is likely to get worse the more the government meddles with it. We are at a point where like in my case one has to be very alert to what doctors are good for and what not, and the “what not” has unfortunately become the norm. I’ve suffered myself trying to find the right doctor and have gone as far as to walk the halls of a hospital asking for a doctor that can actually fix certain ailments, not just taking an aspiring or dunking an extremity in hot water but actually fix it—I was successful but had to drag an almost random physicians assistant to show me personally where I could be fixed.
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