Finally, The Truth About Health Care

American Healthcare Before SC Finally, the Truth about Health Care

Nothing starts a fistfight like the health-care debate. The market for what is just a basic service has been contorted and mangled by government intervention for more than a century. The average person wouldn’t know a free-market health care system if they saw one.

“Life, Liberty, and the pursuit of Happiness” must include health care, say those on the political left. The alternative is barbaric, they claim. Never mind that someone else’s rights must be trampled upon in order to provide the “right” of health care. And never mind that the results will be seriously degraded for everyone but the elite.

But the political right is just as clueless. Who can forget the Tea Party member who protested loudly, “Keep your government hands off my Medicare!”

Health care is a political flash point for a very simple reason. As John C. Goodman points out in his monumental new book Priceless: Curing the Health Care Crisis, many people are opposed to the very idea of using the price system to allocate medical care. That’s the fundamental point that one hardly ever hears.

Medical care is a scarce good. It must either be allocated by force or voluntarily at a cost of either time or money or both. With the Supreme Court either striking down Obamacare, or not, or something in between, the Independent Institute research fellow focuses on the here and now and the immediate future. The author’s focus is what we pay in time versus money for our health care — and how that denies access for millions of people.

Whether you have paid close attention to the health care debate or not, you owe it to yourself to get this book and absorb its lessons. It clears away the fog of confusion, cuts through the political thicket, and gets to the heart of the economic issue. It deals with economic reality in a way that no other source does and thereby fundamentally changes the terms of debate.

This is more than a policy paper. Goodman has a firm grasp on the deep history of intervention to highlight the American Medical Association-funded Flexner Report of 1910, whereby the medical establishment gained the power to control the supply of doctors by regulating medical school admissions. At the same time, “The hospitals themselves also adopted a code of ethics that saw price cutting, quality competition, and quality comparisons as violations of professional ethics,” explains Goodman.

Even that early, the AMA ensured there would never be a glut of doctors. For Americans who think their health care system is just a little left of laissez faire, this will all come as a big surprise.

“Although many would like to think that our system is very different from the national health insurance schemes of other countries, the truth is that Americans mainly pay for care the same way people all over the developed world pay for care at the time they receive it — with time, not money.”

Those who advocate for universal health care believe we all have the same amount of time, and that those with more money have an unfair advantage in the race for health care, as if there is only so much to go around. Having us all wait for hours in doctors’ offices and hospitals is their egalitarian utopia.

Goodman makes the point that we are trapped in a dysfunctional system that keeps employees trapped in jobs they hate, scared to think they can’t obtain health insurance any other way. America’s health care desperately needs the innovation and inspiration provided by entrepreneurs to free the system and its prisoners. Tragically, what entrepreneurial gains are being made in health care are stifled by third-party bureaucracies that make the payments.

Innovative health care providers are punished for not playing by Medicare’s rules, when taxpayers could be saved millions by their entrepreneurial acumen. The author’s discussion of Medicare billing requirements for treatment of high-cost, special-needs patients will absolutely make your blood boil.

Meanwhile, in areas of health care where the patient actually pays directly for services rendered, technological changes are rampant, service levels are high, and costs are decreasing.

“The real price of cosmetic surgery has actually declined over the past 15 years,” writes Goodman. “The real price of Lasik surgery has declined by 30% over the past decade.”

So as much as the president and his followers preach that they want to force down the cost of health care, making it affordable for everyone, the author points out that Mr. Obama doesn’t understand that the price of health care is the symptom, not the problem. “Just as it would make no sense to try to treat a fever by lowering the body’s temperature,” he writes, “it makes no sense to try to control prices while ignoring why they are what they are.”

Goodman illustrates the problem deftly, comparing the cost of knee replacement surgery for a human versus knee replacement for a dog. The technology needed is the same, as is the human skill level; yet a dog can get a new knee at one-sixth the cost. What accounts for the difference are government regulations, malpractice liability, and third-party payment inefficiencies.

He makes reference to his previous book, Patient Power, in which he and co-author Gerry L. Musgrave point out that 250-bed Scripps Memorial Hospital had 39 government bodies and seven non-governmental bodies to answer to.

Malpractice liability costs layer on between 2-10% of costs, and the costs of health care payments coming almost exclusively from massive bureaucracies is unknowable, except to say excessive.

Goodman explains that there really is no understandable price system in health care. Nobody really knows what things cost. Doctors are not paid by prices determined by supply and demand, but by various reimbursement formulas. This is not that different from the Soviet Union’s communist glory days.

Mr. Obama would like everyone to be insured. But the legal system provides the incentive for healthy people to go without. Because insurers cannot adjust premiums for risk, rates are set higher than what it would reasonably cost to insure healthy people. These high premium costs force the young and healthy out of insurance, leaving the pools dominated by older, sicker policyholders. Insurance companies have every economic incentive to turn away people with pre-existing conditions. They can’t price for the risk.

The coming tragedy is that millions of Americans are counting on a system — Medicare — that is bankrupt. “For both Social Security and Medicare to be financially secure,” Goodman writes, “we need $107 trillion in the bank right now, earning interest, and it’s not there.” And there is no hope of it ever being there.

The author goes into great detail as to how Obamacare cuts Medicare in order to pay for covering younger Americans. But with or without these cuts, middle-aged Americans, not to mention those in their 20s and 30s, must think of other ways to be cared for in their old age. Like any Ponzi scheme, the first into Medicare do fine at the expense of the latecomers. Goodman points out that today’s typical elderly person comes out $55,000 ahead with Medicare, while the typical 25-year-old will be a $110,000 loser.

The cure for America’s health care crisis is quite simply the free market. Anything short of that will preserve rather than cure problems. Some steps in that direction: allow patients to choose and pay for services with their own money; allow doctors and nurses the entrepreneurial freedom to actually serve patients in the same way that supermarkets or iPhone providers do; and make cost and quality relevant in health care decisions.

I would like to see the entire interventionist apparatus uprooted. But while it’s easy to theorize about free markets, it is much harder to lay out a concrete plan. With Priceless, John C, Goodman has done the heavy lifting, providing not only a clear explanation of a crisis often portrayed as unfathomable, but also providing an understandable road map toward sanity in the healthcare market. It’s a realistic guide that has the market generating solutions while the government gets out of the way.

Photo credit: terrellaftermath

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How Ben Bernanke Screwed My Home State

Ben Bernanke SC How Ben Bernanke Screwed My Home State

It should probably be forbidden to start a column with Einstein’s “The definition of insanity is to do the same thing over and over again, expecting a different result.” As a lead, it’s the equivalent of fiction’s “It was a dark and stormy night.”

However, there is no better way to describe Federal Reserve Chairman Ben Bernanke’s latest program to lift the economy from its doldrums—quantitative easing 3, or QE3, or QEinfinity as most in the financial press term the plan.  It calls for continuous purchases of treasury debt and agency securities by the central bank until the nation’s unemployment rate is lowered to an acceptable level.

Based upon the results of QEs 1 and 2, plus Operation Twist, where the Fed sells short-term Treasuries and buys Long-Term government paper in an attempt to lower long-term rates, Bernanke’s latest plan is more of the same that will have the same result, which is to say, not the result the central bank brass is advertising.

What has Bernanke’s money creation done for Nevada?  Trillions in new money and ground-hugging interest rates, and Las Vegas headline unemployment is still 12.3 percent. Add the discouraged and underemployed, and the rate is well north of twenty percent.

The Fed’s dual mandate is to control inflation and create full employment.  For all the levers he’s pulled and buttons he’s pushed, the Fed Chair can’t take credit for either. So Bernanke is crowing that quantitative easing has led to higher stock prices. “This effect is potentially important because stock values affect both consumption and investment decisions,” he argues, implying that working people can somehow live on their 401k balances.

The Fed’s four-year easy money policy has been directed at improving the housing market.  Stomping down interest rates is supposed to lower mortgage rates, spur sales, raise property values, and stimulate construction.  During the Q & A after announcing QE3, Bernanke was asked, “How does boosting assets really help the economy?”

The Fed Chair didn’t really answer the question, replying, “There are a number of different channels: Mortgage rates, corporate bond rates, and increase in home prices and stock prices.”

So clearly, he has it in his head that inflating the money supply will lift values, lift spirits, and eventually lift employment.   However, there is no historical evidence that this plan will work.

Keynesians, like Bernanke, believe there is a simple positive correlation between total employment and the size of the aggregate demand for goods and services, leading to the idea that full employment is possible by maintaining total money expenditure at a level the wise ones at the Fed dictate.

F.A. Hayek explained in his 1974 Nobel Prize acceptance speech the error of the Keynesian ways.  “Such complex phenomena as the market,” Hayek said “which depend on the actions of many individuals, all the circumstances which will determine the outcome of a process . . .will hardly ever be fully known or measurable.”

The latest projections from real estate analytics firm Fiserv indicate that home prices in Nevada will not return to their peak for another 40 years.  That assumes 2.3 percent annual appreciation, which might be optimistic given the large percentage of underwater homeowners and potential foreclosures there are in the state, and especially in Las Vegas.

Bernanke  may have been Time magazine’s 2009 “Person of the Year.” But he is no hero to everyday Nevadans (or Americans in general for that matter). His money printing has indeed pushed up stock prices for his friends on Wall Street, but average household income has fallen to 1995 levels.  Meanwhile, costs have soared.  The average price of gas in ’95 was $1.13, and today it’s $4.13; a new car in ’95, $15,500; today, $30,748; tuition, room, and board at a four-year university in ’95: $10,330; today, $21,189.

Bernanke can create money, but he can’t pinpoint where it goes.  The financial press acts as if the Fed Chair is Van Gogh working on a masterpiece. In reality, he is painting a barn with a spray gun.

“If man is not to do more harm than good in his efforts to improve the social order,” Hayek lectured, “he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible.”

Despite their continued failures, central bankers continue to be worshipped.  But a generation is suffering because these money manipulators don’t recognize their limitations.


Doug French is a former Nevada banker and a senior editor for the Laissez Faire Club

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Where The State Is Nowhere To Be Found

Dont Tread on Me1 Where The State Is Nowhere To Be Found

There were plenty of big names speaking at FreedomFest in Las Vegas last July. There were TV talking heads like Steve Forbes and Andrew Napolitano. Famous entrepreneurs like John Mackay came. Tea Party star Rand Paul attracted vast attention.

But it was an unassuming woman, a brilliant author who rarely leaves her rural home in Canada, who stole the show.

Wendy McElroy has been part of the freedom movement for decades. She is — quite simply — libertarian royalty. Many recognized her and her status, including event organizer Mark Skousen. At the final ball, to which she humbly thought she was not invited, she was swept up, put at the head table, and given rounds of applause.

Ms. McElroy spends her time thinking and writing, leaving the yakking to others. But as she delivered her speech as part of Laissez Faire Club Day at FreedomFest, you could have heard a pin drop. The audience could feel her passion and sincerity. Liberty for Wendy McElroy is not theory, but real life. It is a state of mind and heart.

For McElroy, everything in life begins with the individual. If a person has control of his or her person and property, that’s freedom; if not, it’s slavery. Hers is a clear and sophisticated voice for liberty that will thrill you in her outstanding new book, The Art of Being Free: Politics Versus the Everyman and Woman.

This is not a book about stirring up the Tea Party or political strategy. As the title denotes, politics is the enemy of the people. Real liberty lovers don’t play political games. The games will imprison you.

“I am not into electoral politics as a way to change society, so I don’t think in terms of competing with Republicans or Democrats,” McElroy told an interviewer. “I believe that lasting change comes from transforming the hearts and minds of people — freedom comes one person at a time — and the pulling of a lever every four years doesn’t have much to do with that process. I believe in grass-roots activism to improve the daily realities of people, not in electing politicians to positions of power. A politician has never improved my life, has never made me freer.”

After reading Ayn Rand’s We the Living at age 15, a year later, McElroy escaped to the relative safety of the streets and was immediately confronted with a harsh Canadian winter. She was able to secure a low-wage job and began building a life for herself.

This book is not the musings of a sheltered, out-of-touch academic. McElory’s clear and sparkling prose pushes the reader along at a furious pace — from theory to everyday issues to a discussion of the people who embody freedom and finally to a discussion about moving from an unfree world to a freer one — always with an eye for the rights of the individual.

While government seeks to protect children from exploitation with child labor laws, McElroy explains that these laws relegate some children to lives of homelessness and crime.

Those on the “left” and the “right” claim that public schools are required to educate the masses. They do no such thing. At best, children receive training that leaves them unmotivated and unquestioning. At worst, they are impoverished by the lies and hypocrisies they are told.

As government wages a destructive war on the drugs it deems illegal, it partners with the American Medical Association to form the therapeutic state. Some view a passport a symbol of freedom; McElroy sees these documents as total government control.

The author is likely the only feminist speaking out for the rights of fathers and ex-husbands. She considers the payment of alimony slavery. She makes the trenchant point that fathers owing child support payments are denied due process and are essentially relegated to debtors’ prison.

What America has come to is that the average American is likely breaking three federal laws a day, leading the “land of the free and home of the brave” to resemble a police state.

What McElroy’s heroes have in common is their bravery in standing up to the state. Thoreau chose jail over war taxes. La Boetie said “no” to the state. Voltaire’s words created a backlash. Garrison fought slavery to the end, and R.C. Hoiles never abandoned his principles, while still owning and operating a successful newspaper empire. For example, the heroic Orange County Register owner was one of the rare few who championed the cause of Japanese-Americans who were oppressed during World War II.

Ms. McElroy challenges the reader to examine when and how he or she will withdraw consent from the state. For example, “Would you steal from or harm an innocent person if a state agent commanded you?” she asks. We know how Thoreau would answer, as well as McElroy’s other freedom fighters. What would you do?

Ms. McElroy believes we all should search our souls and determine where we will draw the line. She urges us to plan for a further heightening of the police state. Think through your limits, so you can act accordingly when confronted face to face with state terror, and “you should pay a price as soon as possible because it costs less overall,” McElroy writes. “It will never be easier for you to consider this question than right now, in privacy and comfort.”

We must plan not just for our safety, but also for our self-respect. At what point do we allow the state to strip us of our consciences so that we will willingly do the state’s bidding and aggress against our neighbors? Will we all be institutionalized by state power and bureaucracy? Our learned behavior being to obey and conform, with the end result a deadening of the human soul.

Can you say “no”? Will you say “no”? Let Wendy McElroy show you how.


Photo Credit: marsmet 541 (Creative Commons)

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Why Government Austerity Is A Blessing

Austerity SC Why Government Austerity Is a Blessing

Financial journalists are concluding that austerity is killing Europe’s economy, and they worry the same could happen to the United States. America’s various levels of governments are contracting, laying off workers, and cutting services.

The whole civilized world is doomed, they say, by this reduction in government. To their minds, an expanding government leads to an expanding economy, as measured by gross domestic product (GDP).

Does government drive the economy? How could it? Everything it has, it has taken from us. It produces nothing, but only exists to the extent it can feed off its host — wealth creation aimed at serving customers in the private economy.

Of course, the GDP is just another phony government number. The number doesn’t tell us anything worth knowing. It tells us nothing about prosperity.

Here in the U.S., private business is adding workers, but The New York Times reports that governments are handing out pink slips, and that is hurting the recovery. Some 706,000 government positions have been axed since April 2009.

More than a quarter of municipal governments are planning layoffs this year, the Times reports. Federal and state government support has declined, and property tax bases have been devastated.

Federal and state governments depend upon private sector economic growth that can be taxed. In turn, local governments are dependent upon that same economic vitality — none of which is generated by the government. It’s backward to think government jobs create economic growth when in fact government jobs can only be supported by economic activity in the private sector.

But President Obama doesn’t understand economics or cause-and-effect any better than those writing for the New York Times. He thinks the public sector must grow to compensate for the private sector not hiring.

This implies that all jobs are homogeneous. But a particular private sector job serving customers can’t be replaced in government doing something that consumers don’t want for the same effect.

The worker had that job because he or she produced more than he or she cost the employer in the pursuit of satisfying customers. Fewer customers means fewer jobs are needed. Less economic activity means fewer tax dollars going to government. Fewer tax dollars means government doesn’t have the resources to hire more people.

The idea that hiring more government workers stimulates economic activity stands reason on its head.

Economics professor Tyler Watts makes the point in “The Freemanonline”: “Perhaps we’ve been spoiled by hundreds of years of a generally prosperous and growing market economy into assuming that all workers necessarily add to economic output by exactly the value of their paychecks.”

But professor Watts quickly makes the point that government workers don’t provide the same value. There is no market test to determine if government workers are generating value. Only political rules apply.

The fact that government employment is shrinking is only a signal that economies worldwide are attempting to recover from decades of debt and malinvestment, which includes too much government.

Government austerity is, in the long run, a blessing to the rest of the population.

Photo credit: 401(K) 2012 (Creative Commons)

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