More Stupidity On Entitlements


Here come the campaign lies….

SEMINOLE, Fla.—Campaigning in a state that has long drawn retirees, President Barack Obama on Saturday promised to fight the privatization of Medicare and Social Security, the popular health and retirement programs for seniors.

In making the vow, Mr. Obama appeared to be implying that his Republican rival, Mitt Romney, supports Social Security privatization, which he doesn’t. Mr. Romney’s running mate, Rep. Paul Ryan, has been a leading proponent of privatization—that is, of allowing workers divert some Social Security tax payments into privately owned accounts.

Medicare has long been a major issue in the campaign, particularly since Mr. Romney picked Mr. Ryan, chairman of the House Budget Committee, to be his running mate. The two Republicans have proposed trying to slow the growth of Medicare spending by giving seniors a set amount of money, which Democrats call a voucher, to shop for insurance. Mr. Obama and other Democrats vow to fight that plan.

This will do exactly nothing.

Note that the cost of private health insurance has been rising faster than Medicare and Medicaid spending; that is, Medicare and (in particular) Medicaid effectively intentionally underpay providers compared to the private pay rate which then forces that price upward.

This sort of discriminatory pricing — where the price for a given good or service varies only depending on the means by which payment is made — is flatly wrong and in many cases is illegal.  Robinson-Patman says:

It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them

The law goes on to delineate exceptions where actual cost differences exist between customers due to the location of delivery or quantity delivered, or where no anti-competitive effects exist.

Virtually by definition health care has constrained competition, particularly when the care provided occurs in a setting where your ability to effectively negotiate is compromised or entirely absent.  If you’re having a heart attack there’s no opportunity for you to negotiate in advance the type and cost of your treatment!

So how do health care companies — insurance companies, doctors, hospitals and pharmaceutical companies get around this problem?  Good question.  One of the answers is that many health care organizations — at least the non-profit ones — are exempt from much of Robinson-Patman.  Another is that many of the constraints are imposed through otherlaws, such as those barring re-importation of drugs, making such legally equivalent to drug-running and thus a felony criminal offense.  Additional constraints come in the form of “CON” laws in a majority of states that force health facilities to obtain a license before opening, proving alleged “need” for the service(s) to be provided — and the board that makes such a decision has majority representation by existing providers of these goods and services.

The very premise of “need” turns the reality of a free market on its ear; by requiring proof of need to add a facility one guarantees a high price since it is excess supply that lowers price through competitive forces.  That is, if the existing centers to perform CAT scans can perform 50 scans per day in a given area, and 50 scans are being demanded, there is no excess supply and no incentive to lower prices.  Should the capability to provide another 50 scans come online suddenly the existing providers have a pricing problem — now someone is going to have an empty machine, and the entity that will wind up with the empty machine will (typically) be the one with the highest price for its use! These laws provide very effective rationing of supply — and drive up prices.

Then there is the practice by various entities of billing out services at ridiculous prices that nobody can possibly pay, especially to uninsured patients, calling this “usual and customary.”  When the patient fails to pay the facility then “writes off the bad debt” and takes that off its tax liability, claiming as an uncollected debt this is a “loss.”  The problem with such a scheme is that had Medicare been the payer it would have paid 20% — or less — of the “invoiced” price, and all would have been considered “ok” in the world by the provider.

Further, technological advances should (and do, in virtually every other industry) lead to lower prices.  But this is not true when it comes to health care; there improved technology instead leads to insane increases in cost.

We will never solve the health care entitlement problem — Medicare and Medicaid — until and unless we attack the root causes of this mess, which are simply not found in those programs but rather in the distortions and intentional obstruction of market forces that are endemic through the health system.  It is these distortions that lead to insanities such as childbirth being ten times or more the price that simply taking the cost in 1963 and multiplying it by the consumer price index change from that time to the present would imply.

Neither major political party, nor Gary Johnson, will take this issue on.  Instead all three issue polemics about “protecting Medicare”, “vouchers” or “block grants”, as if taking a $20 from one pocket and putting it into another will magically change the amount of money one has.

We the people must demand that our politicians cut the crap here and now on this issue, as there is simply no ability to contine to pay for these cost advances that are being shoved down our throats by these companies.

Our nation’s economic future depends on it.

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