Youtube Idiot, Bait and Switch

If I were in love with the American model I'd go and live in America. This is not the case. I admire the social mobility of American society. You can start with nothing and become a spectacular success. You can fail and get a second chance. Merit is rewarded... On the other hand I’m not a great fan of the American social model. Social insurance is insufficient and unequal. I do not accept that someone must receive substandard health care or no health care at all, just because he is poor. - Nicolas Sarkozy, Testimony

I should have saved that quote for when I plan to write about what my vision of American social insurance is. However, it is a good lead in to again write about the deception going on around the public health care option. Exhibit A, the "Young Turks" whoever they are. If you watch the short video, the brainless commentator quips that Republicans are scared the plan will work too well. If this guy doesn't get it, there are probably millions more who don't get it as well.

This was really the heart of my Florida Insurance post. For the public option to be competitive and to put pressure on the private insurers, it must be priced less than private options. It therefore must be priced regardless of risk, or underpriced with respect to risk. This is false competition introduced into a free market. No private firm can compete with these prices. If anything, it will force private insurers to only insure the LEAST risky of all individuals. The YouTube video states that because people would dump private insurance for public then public must be the way to go. This is idiotic. Households seek to maximize utility and if a public option were cheaper than any private insurance, it would be a stupid decision on a household level to not choose the public option (unless the service provided by the private insurer provided more utility which the individual deems worth paying for). So what will happen is that more and more people will start dumping their private plans. Employers will stop paying for private insurance because it will be cheaper for everyone to just put them on the public plan.

Now, I just said "cheaper". You have to realize that you will at first be paying for the public option like you do for your normal insurance. But you are also paying for in taxes (if my current reader is successful enough to pay taxes). Regardless of whether you are on a public or private plan, you cannot get out of paying for the public option with your tax dollars.

"One of the virtues of it, though, is that you can at least make the claim that there is a competitive system between the public and private sectors." -Dr Jacob Hacker

"Someone once said to me this is a Trojan Horse for single-payer, and I said, well its not a Trojan Horse, right? It’s just right there." -Dr. Jacob Hacker

Dr. Hacker does not even try to coat this public option in the veil of politics. The end goal of this public option is to destroy, to put the private health insurance industry out of business. And we can see exactly how it gets there.

So what then? After a sufficient amount of people are attached to public insurance, the next logical step is to go to the UK model. Our own NHS (National Health Service) will be completely taxpayer funded (no premiums paid) and doctors, nurses, hospital staff will all work for the government. Here is the catch, though. Remember how risk in the public option had to be under assessed? For an American NHS to work, it will need more funding. It will need more taxes. The amount of these taxes will no doubt be HIGHER than any amount you were ever paying for private insurance. Again, politicians will seek to tax the wealthy but they will not find enough funding there. They will have to tax the middle class as well. The quality of our health care system will be reduced. Innovation will decline. And procedures and medicines will be denied based on government policy and saving the taxpayers money.

The rich need not worry. I am 100% sure we will see a two tiered system in this country. For the rich, who can afford it, there will still be private insurance and doctors NOT on the government pay roll. Rich patients will be able to get all the care they wish for regardless if the government thinks they are too old to be wasting tax payer dollars on for that operation.

The intent of this post is not to argue that the poor, the elderly, or the currently uninsurable should not receive medical care. As I said, I will try to outline later my views on setting a framework for what government's social responsibility should be (I do agree with Sarkozy). What I am arguing is that the public option is a BAIT AND SWITCH. The consumer is promised one thing (more affordable health care) and then is slapped in the face with a single payer system, less freedom, and much higher taxes.

Florida Insurers

Obama has said on multiple occassions that if you are on private insurance and are happy, he has no intention of taking that away. The state of Florida may have said the same thing when they created a state run option for hurricane insurance, no doubt to keep the private companies honest. The public option does not accurrately assess risk and therefore the premiums are lower than any private company could offer. Several private insurers have already gotten out of the business and Allstate looks to follow. Even though citizens are free to choose any insurance option they wish, they are making the correct economic decision for their households: Choosing the cheapest insurance option.

So what is the problem? People in Florida are saving money in insurance! However, since the state run plan does not assess risk properly, the plan is DRASTICALLY underfunded. If a massive hurricane were to hit, the Florida plan would not be able to pay out to its policyholders and would need a federal bailout. If the state run plan were to assess risk properly, I do not believe they could match the rates of private companies due to the inefficiencies inherent in government.

Now, think about this in terms of a public (federally run) health insurance option.

Conditionally Contingent Health Care Reform

If you believe Michael Moore, health care in the UK and in France is absolutely perfect and those countries have none of the problems we have here. The United States is third world in comparison. The documentary, though, was a very narrow sliver of reality. A single payer health care system isn’t the end of the world but you must not sweep its drawbacks and problems under a rug. Many on the left say the right is trying to scare the public with words like rationing and waitlists. Under a single payer system, the price of consuming health care is essentially nonexistent. What if a movie theatre was purchased by the government and did not charge for tickets? The theatre would be full every night. People who could not previously afford to go, but wanted to, would now be able to. In addition, people who did not necessarily need to go would start going because it is free. This is exactly what happens with a single payer system. The demand for health care drastically increases whether you really needed it or not. I would like to see those who cannot afford health care have a real option to get the care that they need. I reject, though, Michael Moore’s and the left’s premise that health care is a human right. We have a constrained supply of doctors. They can only treat a finite number of patients and problems. If there are no doctors there is no health care. I do not have to depend on anyone else for my unalienable rights of life, liberty, and the pursuit of happiness. Health care for the poor is a social responsibility that should be debated in the public square. So let’s debate what is not being talked about.

The UK, France, and Canada all have socialized medicine. The idea is that if you cut out the administration costs, the total cost of health care will go down under this system. It is true that we need to focus on cutting out non value added paperwork and administration to cut costs. A single payer system seems like amputating an arm to cure an itchy mosquito bite. In the US, malpractice insurance is paid directly and indirectly by doctors. They must pay enormous premiums to protect themselves from lawsuits. In addition, every piece of equipment they buy from health care companies comes with the price of insurance built in to protect the manufacturer. The UK, France, and Canada do not have to pay these enormous costs. Why? Are their doctors just less prone to making mistakes? No. In those countries, the legal system is not a lottery.

Have you ever heard of contingency fees? Under our legal system, a lawyer can sign a contract with a client where pay is contingent on the outcome. If the lawyer loses the case, the client does not pay. However, if the lawyer wins, the client would need to pay 5, 10, 15% of the damages award (based on what the contract stated). For lawyers and clients, the legal system acts just like a lottery. Lets compare this to “Conditional” fees. In the UK, lawyers may write contracts which are also conditional on the outcome. However, their pay is a predefined fee or rate. They are not allowed a percentage of the outcome. They can though agree to a risk fee with the client (up to 100% of the fee). This risk fee is added on to the total fee and represents the risk to the lawyer of losing the case and not getting paid.

Take the example of a lawyer in the UK and one in the US. They sign conditional and contingent fees respectively with their clients. Both lawyers rack up $100,000 in fees and both win the cases with their clients being awarded $10,000,000. The UK lawyer had a risk fee of 100% and the US lawyer had a contingency fee of 10%. The US lawyer would earn $1,000,000 while the UK lawyer would only earn $200,000. This looks like all we have done is shaft the lawyer and make the lottery even greater for plaintiffs in the UK but there is one more trick up the sleeve of the UK (and other) legal systems. Loser pays.

If both lawyers had lost their cases the US and UK lawyers would not be paid. However, the client in the US is no worse off than they started. The plaintiff in the UK is not so lucky. They are financially responsible for paying the defendant’s legal costs. The message is: if you bring a frivolous lawsuit and lose, there will be consequences. In the US, it is often cheaper for insurance companies to settle cases out of court because win OR lose their legal fees might be just as high as the settlement costs. Rudy Giuliani once said the defendants of these cases lose even if they win and he is exactly right.

In all the debate we are hearing, the left wants a health care system like the UK, France, and Canada. Sadly though, there is no mention of tort reform to match what is in the UK, France, and Canada. Is it any coincidence that trial lawyers are the biggest donors to the Democrat party?

The cost of all of this weighs heavily on the costs of healthcare. If we truly want to control skyrocketing health care costs, these are simple reforms we could make. It would not involve new government programs and it would not cost the taxpayers any money. Trial lawyers and plaintiffs would be much more careful about the malpractice suits they bring and the cost of our healthcare would fall dramatically. That is a conservative solution for America.