Fundamental Healthcare Deceptions

by Mario Rizzo  

There are two fundamental deceptions in the Senate healthcare bill. They are so elementary that they are often ignored in favor of more technical problems. They are: 

1. The various provisions do not take full effect until 2015 or so. Thus the ten year cost totals as estimated by the Congressional Budget Office are misleading, but deliberately so, on the part of the bill’s authors. Only one-percent of the costs are incurred in the first four years. Thus, a $849 billion bill becomes a $1.8 trillion bill when the trick is adjusted for.  

2. The elimination of an insurance company’s ability to deny coverage on the basis of existing conditions is an effort to provide a benefit to individuals while hiding the “tax” on the rest. Clearly, insurance rates must rise for most individuals if insurers cannot price according to evident risk. If this were an honest bill there would be an explicit tax to subsidize the premiums of high risk individuals. Costless beneficence is a mockery of the idea of “helping people.” (I do not address the issues of legislative or private alternatives.)  

Why should any honest and intelligent person be happy with this? Democracy becomes a delusion when government lies. Of course, this is the usual modus operandi.

Protecting Ourselves From Our Masters

by Mario Rizzo

I have previously blogged about healthcare “reform.” (One example is here.) Both the House and Senate bill attacked the tax-advantaged flexible spending account for healthcare expenses. Now there seems to be a move to reinstate it with a maximum of only $2,500.

I understand why the first instinct of economists is to oppose to such accounts. They enable people to put aside money from their salaries before taxes and use it to pay for deductibles, copayments and uncovered medical or dental expenses (for which most people’s insurance is terrible).

Flex Spending Accounts tend to lead to overutilization of healthcare because it changes the terms of the tradeoff between medical and other expenditures. A dollar spent on healthcare costs a person, say, $0.60 (The other $0.40 would have gone to Federal, NY State and City income taxes). A dollar spent on clothing costs him or her a dollar.

However, look at the world in which we live.

Get Real about Jobs

by Chidem Kurdas

Today President Obama is holding a jobs summit, with the professed goal of soliciting ideas to encourage businesses to hire. Short-term tax credits for employers are among the measures mentioned.

Yesterday here on ThinkMarkets Mario Rizzo pointed to the distorting impact of such proposals and cited Gary Becker’s argument that cutting income taxes is a better way to stimulate employment.  There is another type of distortion – related to the highly informative back and forth by Jerry O’Driscoll and Roger Koppl on Mario’s post – that should be spelled out. Even as the economy recovers, government-created uncertainty is going to discourage hiring.

Healthcare Constructivism: A View From My Window

by Mario Rizzo 

I have taken a quick look at some of the provisions of the recently-passed House healthcare bill. What I want to do here is determine how it will affect me and others in a similar situation. I do not think my own situation is exceptional. I urge others to determine how it will affect them.  

Unintended Consequences of Swine Flu Panic

 by Mario Rizzo  

Recently the Obama Administration declared the H1N1 pandemic a “state of emergency.” While there is a largely technical meaning to this, some people have understandably gotten nervous. All this adds to the extraordinary public concern about a flu that, so far, as proven milder than the seasonal flu – albeit with a different profile of people getting ill.  

The problem is and is going to be the stress on emergency room facilities with people who are alarmed but not really in need of ER services. There will be a cost to the swine flu precautionary activities. By increasing the waiting time and confusion in ERs some people with life-threatening problems will die who otherwise would not have.  

Will Obamacare Be Deficit-Neutral? Part 2

by Mario Rizzo

To much fanfare the House Democrats just revealed their healthcare plan. Three items from the CNN report caught my eye:

“The nearly 2,000 page bill — a combination of three different versions passed by House committees…”

A priori, I say this will be a nightmare to read and a mess to interpret.

“Pelosi’s office said the bill would cut the federal deficit by roughly $30 billion over the next decade. The measure is financed through a combination of a tax surcharge on wealthy Americans and spending constraints in Medicare and Medicaid.”

That is $30 billion over TEN years.  When have Congressional estimates of savings not been seriously wrong in the direction of greater spending?

“Medicare expenditures would be cut by 1.3 percent annually.”

Politically impossible under the current mindset.

I am astonished by the patently obvious nonsense that is being peddled by this Congress.  Let them admit that what they propose will cost a ton and add to the deficits. Then, at least, we could see if there are any counter-balancing benefits.

UPDATE: A few hours ago the House Democrats said the bill would cost $871 billion over ten years.  However they “misspoke.”  Oops. It has now been revealed that it will cost $1.05 trillion over ten years. (But now it will save about $100 billion over ten years.)  Stay tuned.

Planning And Democracy: Redux

by Mario Rizzo 

The Senate Finance Committee has filed its current version of healthcare reform. It is here.  

(HT: Volokh Conspiracy)  

It is 1,502 pages long and it is in legislative language. If passed, it will affect our lives in important ways. Let me suggest that you all read it carefully and then let your senators know what you think. 

Of course you won’t do that and neither will I. We are rationally ignorant and we shall remain that way. 

Will the senators, not on the committee, read it? I doubt it. They will be too busy giving their opinions on selected portions. However, special interests will know about the particular provisions that affect them. As to the senators on the committee, staffers will give summaries. How much they understand or care about provisions that affect the general interests in contrast to the interests that elect them is unknown.  

The welfare state makes a mockery of the rule of law and of representative democracy.

Will Obamacare Be Deficit-Neutral?

By Mario Rizzo  

If anyone doubts that this Administration and the Democrats in Congress live in bizarre fantasy world he should take a look at what is happening with the funding of Medicare.  

Fast Track To The Single Payer

by Mario Rizzo  

For some time I have been interested in the dynamics of public policy – specifically, how particular policies make further policies more likely. Glen Whitman and I explored this in general terms in our paper, “The Camel’s Nose is in the Tent”  and our own Sandy Ikeda’s book, The Dynamics of Interventionism offers a different, but largely compatible, general dynamic framework  

I believe that dynamic-tendency (or slippery-slope) analysis — if carried on in a coherent theoretical framework with plausible empirical assumptions — can be a powerful supplementary critique of public policy.

The healthcare area seems especially prone to the dynamics of the slippery slope. In this post I wish to point to several factors that will ensure that the current proposals, if adopted, will not constitute a policy-equilibrium. Thus, they will likely lead to more and worse intervention by the state. 

Delusions of Healthcare Policy

by Mario Rizzo  

The Wall Street Journal reports, mirable dictu, the latest Senate healthcare plan passes the Congressional Budget Office’s test for not adding to the deficit. In fact, the plan will trim the deficit by $81 billion over ten years. That is an average of $8.1 billion per year in a projected deficit that is so high I can’t remember what it is. This is your classic rounding error. Let that pass.   

What is the basic financing mechanism?