Monthly Archives: October 2009

The ABC Dilemma of Health Reform

 

Today’s Wall Street Journal has two columns regarding the state of health care reform, here and here. The second link discusses health care ‘reforms’ in New York, and how the concepts of community rating and guaranteed issue, while noble in intent, distort the marketplace. Further distortions arise when states mandate fringe coverages that are neither necessary to a healthy life nor applicable to the majority of insureds. Add to the mix laws that prevent insurers from selling policies across state lines and it becomes clear that regulation stultifies the marketplace.

The first link is to an article so brief, and yet so profound, that one wonders why action has not been taken. That action has not been taken surely illustrates the yawning gap that separates those who wish to make their own decisions from those who wish to increase their reliance on the bounties of the government.

Since the WSJ now operates behind a pay wall, the first article is copied below. I hope Rupert doesn’t mind….

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The ABC Dilemma of Health Reform
 
By VERNON L. SMITH

There is widespread agreement with the principle that our health-care system needs to be reformed. But our representatives and our neighbors have much trouble in reaching agreement on the particulars. There have been many legislative bills offered and hundreds of amendments with no clear path to a resolution.

Health-care systems everywhere encounter cost overruns and rationing devices, like queues, in their diverse attempts to deliver products for which demand has long grown faster than other economic sectors. Why is it so difficult to find the private and public means, the combination of markets and government assistance, that enables a preferred outcome to emerge?

This question has a simple answer that plagues health care everywhere.

The health-care provider, A, is in the position of recommending to the patient, B, what B should buy from A. A third party—the insurance company or the government—is paying A for it.

This structure defines an incentive nightmare. You do not have to be an economist to realize that, when phrased in this way, nobody knows how to solve this problem. Hence the many experiments, all of which have been deemed less than satisfactory.

I don’t know whether this problem has a solution. If it does, I think it requires us to find mechanisms whereby third-party payment is made to the patient, B, who in turn pays A, supplemented with any co-payment from B for services. Hence, from the moment B seeks services from A both know who is going to be paying A for what is delivered. A and B each has need for what the other brings to the table, and this structure carries the potential for nurturing the relationship between A and B. B is empowered to become better informed about the services recommended by various A’s that he might choose among, and the A’s might find it particularly important to build good reputations with B’s.

—Mr. Smith, the 2002 Nobel Laureate in economics, is professor at Chapman University.

 

 

 

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Two Pages In The Wall Street Journal

Two pages in today’s Wall Street Journal encapsulate, for this observer, the dilemma our politicians face as federal spending spins out of control. 

Page A4:

Jobless Rate is Key to Fate of Democrats in 2010

…But one item may prove key: the national unemployment rate, which hit a 26-year high last month at 9.8%

…President Obama and the Democrats are all the more exposed on the jobs front because they touted the $787 billion economic-stimulus bill as a way to curb job losses.

 

It has been noted that the real unemployment rate in this country is currently 17%. Given the horror of that statistic, and the implications of long-term unemployment that crosses all demographic lines, one would think that getting people back to work immediately would be paramount.

Another article:

Arizona Sheriff’s Powers Cut

The Obama administration is curbing the powers of an Arizona sheriff who has led one of the most contentious fights against illegal immigrants.

Under an agreement involving local enforcement of federal immigration laws, Shefirr Joe Arpaio’s deputies will no longer have the authority to arrest suspected illegal immigrants in the streets in the course of their duty.

Unlike other participating in the program, Mr. Arpaio will be restricted to determining the immigration status of inmates booked into Maricopa county jails.

…Homeland Security Secretary Janet Napolitano ordered a comprehensive review of the 287g program shortly after taking office.

So the Feds are arbitrarily defining police powers in local jurisdictions. Hhhmmmmm

Page A5

Violent Deaths Shock Chicago Into Action

…Derrion Alberts, 16 years old, was beaten to death seven blocks from his school last month. A recording of the attack was posted online and widely viewed.

…Between September, 2008, and September, 2009, 398 Chicago students were shot…

…In response to the violence, Chief Executive Officer of Chicago Public Schools…announce a safety and security strategy that will target nearly 10,000 high-school students identified as at risk of becoming shooting victims. The project will connect some of them with mentors and part-time jobs in hopes of keeping the teens off the streets. The $30 million annual cost will be paid for by federal stimulus grants.

Stimulus grants for shovel ready projects? For infrastructure? Already committed, just not spent? Sounds like there is a pool of money sitting in a secret vault in Washington where certain social goals can be funded, regardless of their stimulatory (or not) effects.

FAA Stimulus Recipients Got Low Priority Ratings

More than $270 million in stimulus grants awarded by the Federal Aviation Administration have gone to projects that scored below the agency’s own threshold for weeding-out low-priority proposals…

The FAA typically steers grants to projects scoring above 41 on a scale from 1 to 100. For stimulus grants, the FAA raised the threshold to 62.

See above. This stinks, to me, of earmarks. Yet again, our elected officials cannot resist the urge to plunder our national wealth to reward their parochial minions.

From this man’s perspective, we have not learned from the lessons of the economic collapse.

Santayana was right…