Outside the Beltway

Bush a Commie Mole?

Steve Verdon · Sunday, November 13, 2005 · 6 comments

Maybe Nathan Newman is onto something here. Bush’s Medicare Prescription Drug Program (or as I like to call it the Blackhole) is not only going to be insanely expensive (when Medicare is already slated to run-up a huge deficit), but is also ridiculously complicated for those who sign up. Bush’s policies really don’t strike me as being overly market friendly in that he loves spending the government money not only collected today, but that will collected in future years (most people call this deficit spending).

Of course, one thing Nathan misses is that most government programs are usually like this. They are either mind staggeringly complex, or they offer no choice. Note the problem Nathan highlights,

Bush administration officials said Medicare drug plans were offering more benefits at lower cost than had been expected. But that does not mean that a person’s local pharmacy will be in every plan. “In some rural areas,” Ms. Lenker reported, “beneficiaries say: ‘There are 40 Medicare drug plans to choose from, but my pharmacy takes only one or two plans. How does that give me choice?’ “–link

In other words, the problem is that some people want choice, but they don’t get it because their pharmacy doesn’t offer that many plans. Nathan’s solution: simplify it. That sounds quite a bit like creating one single plan. That offers no choice either. I suppose one could make that single plan very flexible, but the problem is that such a plan would likely be very expensive.

The problem is that we are not talking about insurance or any other type of market activity anymore. Medicare and the prescription drug program that go with it are subsidy programs. If you have a pre-existing condition, no problem you still qualify. This means that a person’s “premium” should be equal to their treatment costs. With Medicare this is not the case and hence it is a program that subsidizes the consumption of health care resources (gee could this be one factor contributing to the rise in health care costs?). Offering a simple but “flexible” plan will simply mean larger subsidies. Or even more simply put, Medicare is likely going to run out of money even faster. And if you think Social Security running out of money is scary, please don’t look at the dollar figures for Medicare, you’ll likely soil yourself right were you sit.

But, it seems the liberals/Democrats have pretty much won this fight, after all even a whacked out conservative nut like Bush is going down the same road. My big objection is that the liberals and Democrats aren’t honest about it. They don’t say, “Look, we need to raise taxes on everybody and by alot to pay for these existing programs. Oh, and we’ll be back to raise taxes again when we propose new programs.” Instead they have this silly belief that if everybody has access to health care that costs will somehow decline.

Some fall for that bromide that an ounce of preventioin is worth a pound of cure. While true in some cases it isn’t true in others. How do you prevent leukemia, autism, breast cancer, Chron’s disease, etc.? Don’t know? Well don’t beat youseld up about it as doctors and researcher’s don’t know either. So this notion of lowering costs this way is highly dubious.

Some argue that administration costs can be cut. Really? You mean we’ll turn this over to government and we wont get a huge bloated money sucking agency? Personally I find this one to be a bit hard to swallow. The government usually excells at creating more administration not less. New rules for this, that, and the other thing. This means new forms, in triplicate, that need to be filled out. Government agencies, to put it mildly, are not usually thought of as the paragons of efficiency and cost control. After all, there is little to no incentive to be efficient or cut costs. A firm lives or dies by profit. Maximizing profits implies minimizing costs. There is no profit maximization objective for a government bureaucracy. One could argue that election outcomes provide some incentive, but that strikes me as weak. The seperation between voting outcomes strikes me as to far removed from the day-to-day operations of most bureaucracies.

The last argument I’ve seen that even with a subsidy people aren’t going to start going to the hospital in droves. After all, a triple bypass is not fun and people aren’t going to do it if they don’t need it. While this is true, there are two problems with this argument. First, it is an irrelevant argument in terms of reducing costs and/or the growth of costs. All this argument says, if it is true, is that people aren’t going to increase their usage. Or to put it another way, that subsidizing health care consumption for everybody wont increase costs. Of course, this latter conclusion is also dubious. After all, there was a recent report that people in the U.S. do put off medical treatment of ailments due to cost. Remove the cost barrier and those people will most likely seak treatment which will raise costs.

In short, the idea that we can reduce health care costs by subsidizing health care consumption (alone) sounds about as sensible as reducing one’s weight by overeating. Of course, we could still subsidize health care and reduce costs, but it would require another step or steps. Some possibilities would be to make some procedures effectively illegal as in Canada and fertility treatments. Another is to increase non-pecuniary costs such as longer wait times. A third is to simply set the health care budget at some fixed amount and when that is gone, then no more until the budget is set again. Of course, this would mean a decline in health care quality for the most part. My guess is that the Democrats/liberals will continue to plug some sort of health care reform without the need to raise taxes, and Republicans will continue to avoid looking for market based solutions, and in the end will end up with something really, really expensive and bad.