Saturday, October 03, 2009

ObamaCare: Do the Required Reading

As a professorial person, we often receive questions from students and former students that prompt us to ask, Did you read and do you remember what was in the book or article that we assigned to you? Because the question inevitably evokes abject shame on the part of the questioner, we generally refrain from acting on the impulse to ask. Instead, we offer a summary response to the question and then suggest that for more information, the questioner ought to (re)consult the required reading.

Today, having for weeks blogged incessantly on the economic foolishness of the healthcare reform bills being actively debated in Congress, we point readers to the required reading.

The esteemed Wall Street Journal, which gives pause to those who say that the old media are finished, has provided an extensive index of its editorials and opinion pieces about ObamaCare. Those who read this blog know that we have linked several such articles. We assume that they have read them with the same alacrity as that of students tackling material listed in their college syllabi. We now recommend, even insist, that all who care about these issues, but especially those who think that it's simply a matter of a rich country doing what is self-evidently morally correct, actually read the indexed articles before opening their mouths again.

For those who still lack the fortitude to understand the issue, we summarize the essence of the matter as briefly as we can.

First, this matter is governed by the same economic principles that describe human behavior in other spheres. Hence, money is in general spent carefully by those to whom the money actually belongs, while money that belongs to someone else is in general spent profligately. Thus, if someone else--a patron, an insurance company, or a government--pays for something for me, I won't care about the cost relative to the benefit. If I pay, I care deeply. Readers who have insurance, not just for healthcare, will recognize this. We don't ask, What will it cost? We ask, what will it cost me after the insurance pays?

Thus, it is no surprise that insofar as Americans have left direct healthcare spending to insurance companies and the government, they have become indifferent to cost. They demand more service regardless of cost, and so as demand rises, so do prices. Because people most especially want to stay alive and healthy as long as possible, those prices rise steeply. The demand to spend other people's money to make oneself well can never abate.

Second, this awful situation has come about largely by accident. Americans started receiving health insurance from employers thanks to responses to WWII wage and price controls followed by lobbying for tax breaks from organized labor and others with a vested interest in 1950s. Hence, we have sheltered growing parts of our income from taxation by expecting health insurance to pay for more and more with "pre-tax dollars." Hence, we have a system where employers are expected to provide healthcare insurance that covers virtually every expense associated with health, and those who don't receive such insurance find themselves at a steep economic disadvantage thanks to the preference such plans receive in our tax system.

The result of this accident is the situation we have at present: costs that rise steeply, without sufficient connection to benefits received, coupled with a sense of helplessness on the part of a public unwilling to understand the causes of the situation or to imagine how a different approach would alleviate the inflation that threatens to bankrupt them. We just want to pay the rising costs with someone else's money.

Third, advocates of the present "change" insist, as politicians often do, that theirs is the only alternative to the awful status quo. In fact, it is not. If Americans are allowed to finance healthcare as they do other necessities--with savings for ordinary expenses, insurance for extraordinary expenses, and public subsidies for the genuinely needy--and to pay for them directly as they do for everything else (except education, which is an eerily similar phenomenon), one could expect a better match between demand and supply that would flatten the curve of healthcare inflation, the threat that everyone identifies as real.

Now, read the articles. Or if you understand and agree, recommend them to your benightedly ignorant friends whose Facebook statuses say things like, "No one should go ever go without healthcare, and no one should ever have to pay more than the cost of a tall latte for any health procedure. If you believe this, hold your breath until you turn blue."

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