Friday, May 14, 2010

Headed Down the Highway to Healthcare Serfdom

The following is a research paper written for an English Composition class.

On March 23, 2010, President Barack Obama signed into law historic change to our health care industry. It arrives as law with a reported price tag in excess of 900 billion dollars, and a bevy of new taxes reportedly necessary to pay for the legislation. The “Patient Protection and Affordable Care Act” makes many bold promises about its cost, its coverage 30 million uninsured Americans, and claims to lower the deficit. Although this law is reportedly the savior of America’s Health Care industry and our faltering economy, in reality it is a recipe for the destruction of the industry and economic collapse simply because the debt levels and end entitlement mentality are completely unsustainable.

In simple terms, a serf is a slave. To be more precise, a serf is a slave who is bound to the debt or land, to which they are enslaved. How does one become a serf in the land of the free? We become serfs by allowing something to go unchallenged and unchanged which will put this country, and by extension us, into financial servitude for generations. Alongside a host of other damaging legislation, the new health care law will push us all into becoming serfs to the debt left behind by federal government largesse.

There are many societal impacts of the Patient Protection and Affordable Care Act. According to a summary of the bill, approximately 30 million new people will be able to obtain health insurance coverage. The bill achieves this level of coverage through a number of mechanisms, some of which include: Health Insurance Exchanges, removal of any pre-existing injury or illness clauses, and individual mandates requiring coverage. This massive intrusion -into private lives and private industry is unprecedented. Never before has our government forced free citizens to purchase a private service.

America prides itself on its dedication to individual privacy, liberty, and personal responsibility. Perhaps that is why this particular legislation is so damaging to American society. Perhaps the most destructive part of this legislation is the “Individual Mandate.” This provision requires every American to purchase health insurance coverage or face a fine, defined by the Obama Administration as a “tax penalty.” The agency responsible for collecting this “penalty” would of course be the Internal Revenue Service. It is this “mandate” that sticks in the craw of every American opposed to the new legislation. At what point in this country did we authorize politicians to decide for us that we must obtain a private service at the point of the government’s gun?

Some will think that statement is outrageous. They will say, “There is no gun, the government, in its benevolence, is simply trying to ensure everyone can get medical care.” The “gun” referred to is that of a penalty, levied by the federal government, for not doing something they the government decide individuals must do. Not paying your taxes will get you put in prison; not registering for the draft can get you put in jail. Not buying, at your own expense, a health insurance plan approved by the mandating authority, well get you a penalty, paid as part of your taxes. Additionally, patients without health insurance coverage arrive every day in hospitals across the country for any number of illnesses and injuries and they are able to obtain treatment.

In fact, one of the problems facing an overburdened healthcare system is legislation passed that prohibits a hospital to deny care based on a potential patients ability to pay. Hospitals write off billions of dollars annually in emergent care costs and basic economics says that someone else has to pick up that costs. That someone is the American healthcare consumer and taxpayer. In order to operate for paying customers, a hospital has to offset the costs of “Free” care by increasing its charges to those same paying customers.

Ultimately, The U.S. Supreme Court will decide the constitutionality of the Individual Mandate. The administration and congress argue that the purchase of insurance is engaging in interstate commerce, providing the necessary constitutional coverage for their mandate. However, never has the federal government dictated to individual citizens that they actually engage in interstate commerce by forcing them to purchase a private service. Some of those arguing for the legislation in court point to the requirement to carry automobile insurance. However, as Stuart Taylor tells us, “The Analogy Drawn by some of the new laws supporters to state laws requiring car owners to buy car insurance does not survive scrutiny. You can avoid that requirement simply by not buying a car, and states have broad powers to regulate purely intrastate activities. . . “(3). American’s just do not like being told they have to do something “or else,” especially when a nanny state government is doing the demanding.

Perhaps the most damaging social aspect of the Patient Protection and Affordable Care Act is the entitlement mindset it creates. America is fast becoming the land of entitlements. Nanny state protections are in place to cover us in old age (Social Security, Medicare) an in our young age (Medicaid, TANF, SCHIP). Now, the federal government has created a mew entitlement for every American in between. Once an entitlement becomes popular with the public at large, that same public is less likely to do anything to take that entitlement away. Sadly, this has become true of the sacred cows of welfare and social security. This mentality is perhaps the most damaging to the social fabric of the United States. To date it has fostered programs, which have cost magnitudes of orders more than originally projected. However, the extent of economic damage that it will do is staggering.

Economically, the Patient Protection and Affordability act is detrimental to creating jobs and encouraging economic growth. The administration claims that this legislation will be economically beneficial, by lowering health care costs and ensuring greater coverage of uninsured individuals. However, the fact remains that it has actually done nothing to ensure either of these goals. Perhaps these laws authors are relying on the law of unintended returns. As the public is now beginning to figure out, the bill of goods sold with Health Care Reform was disingenuous at best and downright lying at worst.

Any discussion about lowering costs cannot begin without a determination of why those costs are elevated in the first place. It is really quite simple, to quote economist Thomas Sowell, “One of the biggest reasons for higher medical costs is that somebody else is paying those costs” (1). Logically this is understandable. If individuals obtain a service for which their payment is minimal or not required, they will use that service more. Increasing the use of a service without a significant increase in the availability of that service will increase its cost and reduce its availability. To clarify further, Dr. Sowell in his book Applied Economics: Thinking Beyond Stage One, states, “… Governments do not simply pay whatever medical costs happen to be, as determined by supply and demand. Governments impose price controls, in order to try to keep the costs of medical care from absorbing so much of their budgets as to seriously restrict other government functions” (70).

Here we come to the crux of the “cost” issue when applied to health care spending (which includes both spending on actual care and insurance premiums) as a whole. It is safe to say that government involvement to this point, whether through agencies such as Medicaid and Medicare, or through increased regulation on the insurance industry, has caused the dramatic rise in the cost of care and the cost of insuring medical risk. The President is telling us relentlessly that we are going to have access to a healthcare “free lunch” paid for by other taxpayers.

It stands to reason that if you add demand for a product or service, without adequate increases in the supply of that good or service, than the resultant shortages will cause an increase in the cost of that product or service. It also stands to reason that if you mandate an additional cost to an already expensive service provided by employers, than employers are going to have to cut costs to compensate for the higher imposed costs of government. Typically, that is done by either reducing the workforce or at the very least, not increasing it. Add in the loss of jobs at insurance companies forced to face the realities of lower net incomes and higher net costs, and you have a recipe for unemployment above 12% nationally.

There is no shortage of results from government interference in health care and health insurance. Close to home, our Canadian friends have fully socialized medicine, and often, Canadian Citizens, in their twilight years, travel to America to obtain lifesaving medical treatment denied them in Canada. This denial of treatment is due to a lack of supply offset by overactive demand. Let us be clear, Canadian citizens are not coming here for cosmetic procedures. They are making the trip to the United States for medically necessary treatment. The single payer system in Canada, as well as in other countries with similar government controlled health care systems is financially bankrupt. In an attempt to rein in costs, these aforementioned governments have had to ration care.

If this legislation is causing social and economic instability, actually raising prices and costs, how is it going to reduce the deficit? The short answer is that Health Care reform will not help reduce anything except the quality and availability of health care. Congress has asked the American people to accept, at face value, their promise to cut 500 billion dollars in Medicare through cutting fraud, waste, and abuse. We are supposed to believe that they will be able to do something no group of politicians in this country has been able to do since Medicare’s inception, cut fraud and waste. The truth of the matter is that we have yet to see the full impact of the baby boomer generation on Medicare. There are only two real ways to reign in Medicare costs, neither of which is palatable to most.

First, we should entertain an increase in the Medicare tax imposed on both employees and employers. The new health care law does not address this idea. Second, reduce the amounts paid out to physicians for services rendered. The reality is that we will likely need to do both to have any chance at reducing the federal deficit over the next 50 years. As Lawrence Kotlikoff and Scott Burns state: “First, we could raise federal income taxes, immediately and permanently, by 57 percent. Second, we could raise payroll taxes, immediately and permanently, by 79 percent. Third, we could cut the current level of real Medicare benefits by 83 percent and let benefits grow at their projected rate thereafter” (6).

However, as the country is already seeing, if legislation drastically cuts reimbursement rates, doctors will simply decide to stop treating Medicare patients as those reimbursements already fall well short of their actual costs of treatment. According to Dr. Sowell, “In the United States, the government has already reduced payments for patients on Medicare and Medicaid, with the result that some doctors no longer accept new patients with Medicare or Medicaid. That has not reduced the cost of medical care. It has reduced the availability of medical care, just as buying a pint of milk reduces the payment below what a quart of milk will cost” (1).

Included in the Patient Care and Affordability act is a whole range of tax increases on medical services, medical devices, and in some cases, medical insurance premiums. The implied reasoning for all these increases is to pay for this massive federal entitlement. However, as has been historically the case with taxation, revenues from those streams tend to drop off over time. The regressive and punitive nature of taxation causes this drop in revenue. Additionally, new taxes or increases in existing taxes tend to cause a rise in the cost of those taxed goods and services. This is at the heart of the discussion related to the claim that the health care reform law will reduce costs. If, in fact, the intent were to actually lower health care costs, there would be no need for financial disincentives, which actually cause an increase in the costs of doing business and treating patients.

Perhaps the most damage from this over reaching bill is that done to our doctors, nurses and hospitals. Part of the problem with health care costs comes from the fixed or negotiated rates paid to service providers via the insurance companies. This combined with the exorbitant cost of medical malpractice insurance puts health care providers in the position of trying to decide how best to treat patients, pay their bills, and not be financially destroyed should an unfortunate incident or death occur while a patient is under their care. Dr. Sowell, in response to the demand on the part of some politicians to cut the incomes of doctors and insurance executives said this. “What it would do is reduce the number of very able people willing to take on the high costs of a medical education . . .” (1).

This returns us to the problem of supply and demand. There is no relation to affordable costs and the costs required to produce something (Sowell). If the government takes which result in an increase in health care services, such as it has done with the new law, while at the same time taking steps that will result in a reduction of the suppliers of those services, the resultant costs will skyrocket. Government’s next logical step then, after creating new crises, is to take draconian measures to ensure adequate care. Those measures could include determining who can and cannot access life saving treatments, requiring a certain number of high school graduates attend medical school, or importing physicians from third world countries whose medical school standards are perhaps not as rigorous as our own.

In light of everything outlined in this paper, one has to decide whether the consequences from the Patient Protection and Affordable Care act were deliberate and calculated or just an over reach by politicians who actually believed the misstatements told to the public. Looking at the penumbra of the debate provides insight into that very issue. There were a number of politicians whose ultimate goal was a single payer system, run by the federal government. The President himself stated numerous times that he envisioned an America with a single payer system. It is hard then for a person to be sure that the actions taken in signing this bill into law were not a calculated attempt at pushing us over the edge into socialized medicine.

At the end of the day, only time will tell the real damage that this legislation will do to America’s healthcare system. It will not be long, provided the public at large do nothing, before we begin to see doctors leaving practice, refusing or dropping Medicare or Medicaid patients, and health insurance companies going out of business. A scenario, which poses dire consequences to the social, psychological, and economic fabric of this great country.

Works Cited

Kotlikoff, Laurence J., and Scott Burns. “The Perfect Demographic Storm: Entitlements Imperil Americas Future.” Chronicle of Higher Education 50.28 (2004): B6-B10. Academic Search Premier. EBSCO. Web. 19 Apr. 2010

Sowell, Thomas. Applied Economics: Thinking Beyond Stage One. New York: Basic Books, 2004. Print.

---, “Alice in Health Care.” JewishWorldReview.com. Jewish World Review 02 Mar. 2010 Web 13 Apr. 2010.

---, “The ‘Costs’ of Medical Care.” JewishWorldReview.com. Jewish World Review 03 Nov. 2009. Web. 26 April 2010.

---. “The ‘Costs’ of Medical Care II” JewisWorldReview.com. Jewish World Review 04 Nov. 2009. Web. 26 Apr. 2010

---. “The ‘Costs of Medical Care III” JewishWorldReview.com. Jewish World Review 05 Nov 2009. Web. 26 April 2010

Taylor Jr., Stuart. “Health Law Not A Sure Bet in Court.” National Journal (2010): 1. Academic Search Premier. EBSCO. Web. 19 Apr 2010

Campaign for Liberty

Creative Commons License