Wednesday, November 24, 2010

Two True Stories About America: Part 2

It order to understand the actions of the Obama administration you have to understand the mess he inherited. Critics of Obama ask when he will stop blaming Bush for all his problems. But it will always be true that the wars in Iraq and Afghanistan were started by Bush. It will always be true that Bush ignored the problems global climate change and exploding health care costs. It will always be the case that massive tax cuts and runaway spending meant Obama inherited a federal budget awash in red ink. We can never forget that Bush presided over the housing bubble and watched as his economic policies led a massive, systematic, economic collapse.

These things will always be true. We must never forget that.

Seen in their proper context, the actions of Obama administration were smart, aggressive, and necessary. However bad things are, we were saved from a fate much, much worse. Critics of government intervention need to consider what would happened if those interventions had not taken place. Think about the destruction of the automotive and insurance industries. Consider the insolvency of the institutions that own the homes of most Americans. With the entire banking system teetering on the abyss we were facing the death of the capitalist system itself. Without banks, without loans, without lines of credit, without mortgages, without capitol - every business in the country, every employer large and small would be facing bankruptcy, failure and collapse. The actions taken by the Obama administration were essential to securing stability and protecting our future.

Amidst this crisis it may be harder to see the urgency of reforming our health care system. But our safely net is unraveling. Dealing with soaring health care costs and creating a system where every American can afford health insurance is more important than ever. The Obama administration and congressional Democrats were right to act now. We won’t see radical changes. Many Americans will see hardly any change to their health plans. But once the local health monopolies are broken, once everyone has some choice about their health plan, when health care costs are no longer rising without competition or constraint, when our financial and family health is no longer dependant on the whims of an unknown underwriter, when we have options beyond clinging to what we have - then there will no going back. We will never miss the old, arbitrary, overly expensive system. We can be grateful that action was taken and look forward to a more fair, more secure, less expensive system of health care.

Dealing with the multitude of problems that confront us requires dedication, focus, and a willingness to confront reality. Only the Democrats have shown that focus. The Republican party has abandoned its principles and policies in naked pursuit of politics and power. The politicians and cheerleaders who lead us into this disaster have refused to confront it. Rather than work towards solutions, they have worked to thwart them. Instead of trying to alleviate disaster they have worked to prolong it. The Republican party and its supporters fanned the flames of discontent and disillusionment. They oversaw our economic collapse. Rather than recover from it, they seek to exploit it, and channel the anger and misery. Republicans seek to regain power without regard for the public good.

There is no way to stop the march of history. There is no alternative to confronting the issues before us. It is impossible to take our country back to some imaginary days of yore. We need to look to building a better future. We need to remember that things could have been, and could still get, much worse.

Sunday, November 21, 2010

Two True Stories About America: Part 1

As soon as Obama took office he turned on the money spigot. Hundreds of billions for the banks. More hundreds of billions in “stimulus” funds that went towards politicians' dream projects. Every few weeks they announced some massive bailout project that cost tens or hundreds of billions of dollars. Banks. Insurance companies. Car companies. Mortgage giants. It seemed like everyone who caused this disaster was getting a huge payout.  In two years the taxpayers got nearly $3 trillion deeper in debt.

On top of all this the Democrats passed their health care reform, which will cost another trillion dollars. They spent 12 months arguing amongst themselves, in the middle of this crisis, to pass a massive, expensive, unpopular bill. Most of us already had health health insurance. And it’s not as if this great law has stopped health care costs from shooting up. Since they passed their law, health care costs have been rising faster than ever. So, what was the point of that?

After spending all that money it’s not as if the Democrats have much to show for it. The unemployment rate still sucks. Jobs are impossible to find. Housing prices are still plummeting. Those same banks that got their big bailouts aren’t lending money. And they are busy throwing people out of their homes. Where did all that money go?

The jobs disappeared and it is not at all clear when, or how, they are going to come back. Manufacturing in the US has been dying for while. The housing and construction boom that kept blue collar families going is done and dead. People are watching their net worth evaporate just as they lose their jobs. We know people in other countries are willing to do what Americans do for half, or a fourth, or a tenth, of what we need to pay the bills. Not only that, but those same foreigners are now all over the US competing for same jobs right here. Now there are millions and millions of illegal immigrants, living is this country, working illegally, while millions of hardworking perfectly capable Americans can’t find jobs and are struggling to take care of their families.

And the change doesn’t end there. We’re told that just by driving our cars around -- to go shopping or go to work -- or because we’re trying keep our houses warm - we’re destroying the planet. They want us to pay even more for gas and more or heating oil. Even if we can’t see it, we’re supposed to believe that we’re destroying the planet. Not only that, but Al Gore has plan to fix this. And God Almighty does not.

When election time rolled around, the American people looked around. They could see all the money the government is spending. They could see the debt piling up. They could see an economy going down the tubes. They had had enough change. They had one word to say to the government and that word was “STOP”.

Saturday, November 6, 2010

Health Care Economics: A Personal Case Study

Our family has health insurance. But our plan has a high deductible. We pay for first $5,000.00 in medical expense each year before the insurance kicks in. Part of the reason we got a plan with such a high deductible is that it saved us money on premiums. The other reason is that, after watching our premiums soar up year after year, we wanted to be responsible for our own health care utilization. With $5,000 of our own money on the line we had an incentive to consume health care services wisely. We would be the change we were looking for.

But managing your health care bills is not so easy. We learned that the hard way.

The Case

At first our decision to go with the high deductible plan looked like a good bet. Other than routine checkups, we had minimal issues. Then I got the call. One day last spring Christine fainted at work. She felt woozy all of sudden and sat down. The school nurse checked her out, called for an ambulance, and called me. I ran over. I arrived in time to check in and see how she was feeling before the ambulance took her to the emergency room.

At the ER, we were mostly ignored while the staff dealt with more severe cases. Eventually a doctor appeared. They ran a few blood tests. They ruled out anything that was an immediate concern. Then they kind of shrugged and sent us home.

Over the next few days Christine’s wooziness and weakness came and went. She always felt a little “off”. Sometimes she was too weak to stand. She missed a lot of work. Christine visited her doctor twice. They ran a few more tests. Then her doctor suggested an MRI.

We scheduled the MRI. Christine started to feel better and we thought about cancelling. Then she had another dizzy spell. Whatever was causing these spells had been doing it for three weeks now. Something was wrong and we had no idea what it was. We kept the MRI appointment.

We didn’t hear the MRI results right away. Christine started to feel better. And the problem went away. Eventually, we learned that the MRI didn’t show anything interesting.

Whatever the problem was, it went away on its own. At no point did Christine take any medication or undergo any treatment. We never even got a firm diagnosis. In this case, the outcome was the same as if she had never gone to the doctor at all.

The Bills

The ride in the ambulance cost: $758.60

The visit to the ER cost: $2,061.38

The visits to the doctor cost: $524.49

The MRI cost: $3,367.52

Health Care Economics

Before we consider the economic factors at work here, I would like to consider this question:

Why do I have such a crappy television?

We have a old, not at all flat, and rather small television. I have considered purchasing a new television on several occasions. There are lots televisions available. There are many manufacturers. Sometimes there are sales. Each year the price of new 42” flat-screen gets lower and lower. Over the years we have spent lots and lots of money on lots of different things. But we have consistently chosen to not spend our money on a new television.

This is classical market economics at work. There is competition based on quality and price. Information is available on the cost and features of each model. Retailers compete to get me to buy from them. I can make an informed decision about whether the product is worth the cost. And I can decide not to purchase anything at all.

Notice that when it comes to health care, none of these basic market principles apply.

The school did not consult with us or get a quote from the ambulance service before calling for it. The minute you set foot in an ER the meter is running and nobody is going to tell you how high. As she handed over her credit card, Christine asked the woman at the intake desk how much her scheduled MRI would cost. The response was “How should I know?”. When you get the bill, learn what the MRI cost and decide maybe it wasn’t worth the three thousand dollars, you can’t return it for a refund. And since you’re dealing with your health, something more important to you than money, you can’t opt out.

The principles of competition and selection that control costs everywhere else don’t apply to American health care. In other countries the government is paying the bills and sets the price -- controlling costs by fiat. But not in the US. With neither market forces nor government price controls, the entire system is price-blind, and costs rise without constraint. Even if we can’t control these costs we still have to pay for them - through rising insurance premiums, higher taxes, and shocking bills that arrive in the mail.

Bringing our nation’s health care costs under control will require application of some basic market principles, stronger government intervention, and a cultural shift to recognize the costs and limitations of modern medicine.

Our doctor would likely be shocked by the suggestion that she factor in the costs of tests and treatment. The doctor has a hard enough time sorting out sets of vague symptoms and trying to keep us healthy. She’s recommended the MRI because it might show something serious she can’t detect with a stethoscope. Her instincts, training, concern for her patients, concern for malpractice suits, and her own salary are all aligned. All of her incentives are pointing in the direction that says do more. But the doctor needs to recognize that, while we are deeply concerned about our health, it is not our only concern. She does us no favors by being blind to or concealing the costs. The patient is on the hook for the bill. The cost portion needs to included in the cost-benefit analysis.

We also need to recognize that, when it comes to our health, and the health of those we love, traditional cost-benefit analysis does not always apply. In an emergency, when dealing with a horrifying unknown, or with any serious medical condition - we will want more than we can pay for. The rational answer to the question of “Shall we save your life?” will always be “yes”. Cost be damned. You can’t take it with you. It is assured that some people will require vastly more medical resources than others. And at some point in our lives, most all of us are going required significantly more medical care that we can afford. We need private and public insurance plans to insure, at any given moment, the the large number of healthy people are paying in, and covering the costs of the few who need the most. Government regulation is needed to insure access and costs are broadly distributed. When market forces can’t produce an efficient outcome we require governmental intervention.

The major shift that needs to happen is cultural. Americans don’t like to talk about money. We don’t like to talk about our health. And we definitely don’t like to talk about, or even know about, our medical bills. But we are the ones who vote for the those who enact policies. We are the ones who either ask the questions of our doctors, or don’t. We are the ones have to pay the taxes, pay for the premiums, and pay the bills.

P.S. This isn’t really meant as a tale of personal woe. Paying out $5,000 sucks but won’t be an unbearable burden for us. In that other great American tradition, we recently refinanced our home to a lower rate. We took out a little extra to help cover the bills. Maybe we’ll even buy a new television.

Friday, November 5, 2010

With Great Power Comes Great Responsibility

It is easy to get wrapped up in elections and their meaning. In victory or in defeat it is tempting to conclude that in judging our candidates for office, a judgement has also been rendered on our nation, on our philosophy, on our selves. We can forget that politics is a means to an ends. And though we may disagree on the best means, we have a shared vision of those ends. The point of politics is not to grant power to Republicans or to Democrats. The point Democrats and Republicans, and politicians of any creed is to advance the causes of liberty and prosperity.

There are many factors that contribute to the mad mood swings of the American electorate - reason and propaganda, hope and fear, optimism and despair. Politicians are swept in and out of office on these waves. Sometimes their electoral fate is deserved. Sometimes it is not. Whether they are coming or going, our representatives are best judged by their accomplishments on our behalf.

Viewed through this lens, I’m sorry to see Carol Shea-Porter and Paul Hodes will no longer be representing New Hampshire in congress. They were both elected as part Democratic wave of 2006. In the past two years they’ve been active participants in Obama’s “do something” congress. Both supported the significant legislative accomplishments that provided stability in the face of economic calamity. They enacted essential and overdue reforms to our health care and financial systems. They were the rare politicians who were willing to engage with the real and serious issues facing this country. They served during a brief era when congress took on big issues and things got done. In all likelihood that era ended this week. I’m especially sorry to see Carol Shea-Porter go. She is someone I genuinely admired as a person and politician and is someone I hope to support again in future elections.

Shea-Porter and Hodes have been replaced by Republicans Frank Guinta and Charile Bass. In the senate Kelly Ayotte replaces retiring Judd Gregg. Their predecessors confronted a number of tough issues but left plenty of unfinished business. How will we restore robust economic growth? How will we put an end to trillion dollar budget deficits? What are we going to do about the millions of undocumented aliens living and working in this country? Will we confront the challenge of catastrophic global climate change? They sought and have been granted this power. It is now the responsibility of Frank Guinta and Kelly Ayotte to answer these questions.

Based on their election rhetoric and policy positions, I am skeptical that my new representatives have plans to confront the problems we face. I hope that this skepticism is not shared by the majority of New Hampshire voters. I assume that their supporters see opportunity where I do not. What solutions will they support? How do they plan to move the country forward? Our new representatives have the power and responsibility to legislate on our behalf. We’ve elected then. Now all of their constituents, especially the majority that voted for them, need to hold them accountable.