Thursday, September 10, 2009

The Case Against Socialized Care: Why I'm a Heartless ANCAP

It's often very interesting to see how people react to ideas that would be considered unconventional. On the one hand you have a relatively small percentage of people who may be very receptive to looking at things from a different perspective and who may, in turn, change their views on any given subject if the evidence is strong enough. On the other hand you have the vast majority of people who, I believe, react in one of two ways that are often indistinguishable. These people will either simply refuse the evidence at hand and dismiss your ideas, or they will listen and engage, often conceding the inconsistencies of many of their views, and yet continue to espouse the views they were seemingly predisposed to originally.

I've often been puzzled by people in the latter group, which seems to encompass the behavior of most people I discuss various issues with. The confusion arises from an inability to determine whether they are feigning such concessions, which would push them into the former group, or if they truly acknowledge the folly of their beliefs and yet continue their advocacy in the face of it all. As someone who holds what I would consider to be an unconventional view, politically speaking, it's disheartening to think that so many people simply refuse to listen at the offset. But it's almost depressing to think that no matter how many times you dispel their their arguments, that they continue to press on with the same talk-shown questions, in the same incurious fashion...over and over and over.

So here, I would like to highlight some of the reasons I have come to view the world the way that I do. And I'd like to share these views by focusing them through the lens of the health care debate that is still raging on every TV, at every dinner table, and on every social-networking website. My goal is not to simply pull more people into my perspective viewpoint, but rather to set for the record straight on a world-view that is maligned only by the truly malevolent in the mainstream politic of today, but only when it is not dismissed entirely by the ignorant.

My primary objection to the state-run "public option", or any regulation of the health care industry for that matter, is primarily, and most importantly, anchored in philosophy and morality. But unfortunately moral and philosophical objections are never enough to dissuade thieves, whether writ small or large. However, there IS a large portion of the population who is more than willing to argue from the utilitarian standpoint. Therefore I will engage the arguments on both fronts and hopefully expose the consequences of a statist view.


Utility is probably the most prominent argument for and against the various proposed health care reform bills floating around. The pragmatist argues that his ideas benefit the greatest number of people in the greatest way...whether he be for or against such legislation. As stated previously, my true objections to such programs are in the realm of philosophy, but given the staggering unwillingness of those who support the currently proposed reforms to consider the consequences of such programs and even the cause of the current problems, it's very easy to see why people who are inclined to support free-markets are calling these people out on their inconsistent views. As I see it, the following items represent the main thrust of Obama-Care supporters, and I will address the problems I have with each.

  • There are 45 million un-insured Americans today. We must provide insurance for them.
  • 14% of our GDP is consumed by health care costs. People simply cannot afford to keep paying so much for such care.
  • Greedy insurance companies don't operate to give a service but rather to make a profit. A company seeking profit is in conflict with providing medical care.
  • Insurance companies do not provide cheap coverage, if any at all, for pre-existing conditions. This bankrupts families, especially in times of economic turmoil when people lose their jobs and often subsequently their employer-provided coverage

Would it surprise you that, to the degree that each of these points are true, government is largely at fault? Let's explore...

The Un-Insured

My first objection to the claim about the un-insured is the figure they use and how advocates for government intervention gather statistics for political influence. The "45 million un-insured" figure is simply a statistically abstracted guess as to how many people, living in this country at the current time, are not covered under any plans at this time. This may not seem like a consequential deliberation of the issue to most people, but consider this: For what reasons would someone not have health coverage? What purveyors of government intervention want you to believe is that we have 45 million people who are simply too poor to afford any type of coverage. What they don't tell you is that their abstract also includes young people who may have declined to purchase expensive coverage at such a young age, people who qualify for Medicaid already, and illegal immigrants. An estimated 20-30 million of these 45 million fall into one of these three categories. Now, this is not pointed out to disregard the 15-20 million people that really cannot afford coverage, but rather to illustrate how alarmists of all stripes will often inflate the issue to garner sympathy from those who aren't willing to be as cynical as they should be.

Aside from the statistical point, it's important in this debate that we remember that health care is not health coverage. We're having a discussion, for the most part, about how risk is pooled and medicine is paid for...not whether or not people are dying in the streets without coverage...we leave that to single-payer systems. As most providers are well-aware, a lack of coverage isn't going to automatically oust you from the ER. If you come into the hospital suffering a heart-attack or an aneurysm, they're not going to refuse you simply because you have no health insurance. In fact, as it stands now, that would be against the law. Case in point: My old roommate suffered from a sudden bout of appendicitis one night and rushed over to the hospital. He was in college working only part-time at the time and was not covered under any plans his parents might have had. The doctors proceeded to run various tests and blood work, set him up for surgery, and had his appendix taken out the next morning. He spent a couple of days recuperating in the hospital and when he was well enough he came back home. Later on he received his separate billing from the hospital, the anesthesiologist, and the surgeon. They were eager to work out almost any kind of payment plan with him. He told them his circumstances and they were very understanding and offered a low, long-term payment plan to get his bills paid off. Now clearly, because he was not insured, the entire cost of all the various procedures, services, and tests were ultimately his responsibility. If he was covered under some kind of plan, the costs on him personally would have been much less. But again, the price of coverage and the provision of medicine are two very different things. And if we are going to address the problems with health care, we need to focus on the real issue at hand: cost...and not simply obfuscate the issue by scaring people into thinking that millions upon millions of people are being turned down by ERs around the country simply because they lack coverage.

GDP Consumed

There are a couple of things with this line of reasoning that bother me. And the first is a personal point of contention given the economic viewpoints of Obama and those in his administration. As someone who enjoys reading about economic concepts (yes...go ahead and laugh), I find it almost painfully funny that Obama here seems to be insinuating that consumption might actually not be a good thing. I, along with various prominent economists, cringed in the same way when he fed us with rhetorical flourishes about American consumption leading to many of our current economic woes. It seems that on the one hand we are lectured about spending beyond our means. But on the other hand, the economic remedies his compatriots advocate over-consumption to "stimulate" the economy. Which is it? Should we be saving, as Americans are now doing, naturally I might add, in light of the current economy or should we simply consume more even in light of our debt? How can you malign families spending more of their income on health care when you encourage them to spend more of it on new cars (and only if they destroy perfectly good ones they had before!). By his own Keynesian beliefs, an increase in spending on health care should be applauded because it should stimulate growth and employment in the health sector. How can you reconcile these two very different beliefs?

The second point picks up where my comments regarding the un-insured left off. No one doubts that prices are very out of wack in the health sector. So how will these plans lower the cost of care?

The ugly truth is that they won't. And although I think people are bright enough to realize current prices are way too high, I don't think they've taken the time to figure out why or even how this plan will attempt to remedy the problem. Unfortunately I think what tends to happen, and maybe this is a symptom of a failing public education system, is that these people think the government is going to bring down the cost of care because individuals in the program will not have to pay as much as they did before. Of course, I think, that having someone else pay the bills does not lower the cost but rather shifts the cost onto another group of people.

As is often touted, there's no such thing as a free lunch. Even the school lunch program has a cost... even if you misconstrue it to somehow be "free." The government still has to pay someone to make, deliver, and prepare the food and the tax-payer at large writes the check. In the same way, Medicaid and other mandatory government programs are not free, even if the recipient perceives it as such to them. Simply having someone launder forced payments for goods and services doesn't change the price.

Now, supporters of such programs will make the argument that government forces providers to accept less for procedures when paid for by Medicare and Medicaid and this lowers prices. Unfortunately, and as someone who works in the medical billing industry I know better than most, this is definitely not the case. In fact, what it does is largely decrease the quality and quantity of care over all and raise the bar for people trying to purchase private plans. Simply forcing a doctor to accept less pay for his services does not change the bottom line. A doctor needs liability insurance, office space, tools, medical equipment, assistants, etc. When you force a provider to take less, and the relative capital cost (all the things he uses to run a practice) stays the same, one of three things happens. The insurance companies reluctantly re-negotiate payment schedules (passing the costs onto the privately insured and putting more pressure on insurance companies to defraud their own customers), the doctor sacrifices quality by seeing more patients in the same amount of time so that he can bill for more procedures to make up for his losses, or the doctor scales back his practice to a more maintainable size, decreasing the supply of care available and consequently raising the over-all price of medical care. And this doesn't even factor in the compensation for the government-funded bureaucracy that would have to manage such a system, which may end up costing tax-payers more per procedure, over-all, than the difference between the original fees and government-mandated ones.

Why are we inclined to believe that any government program, even if it's designed to ease the burden for some kind of product or service, actually lowers prices? What industries are the government most directly involved in regarding various subsidies and regulations? Medical services, higher education, and housing come to mind. Can you think of any industries where CPI-adjusted prices have been more out of whack? Do you think it's a coincidence that government now pays 55-60% of the total receipts to hospitals and private practices and prices have sky-rocketed since the advent of such programs initiated via The Great Society?

If you really want to cut prices, get consumers back in the market. The way things are set up at the current time, we end up dealing with third-party payers (be they government or private insurers) for almost every single medical service imaginable. Isn't insurance supposed to be for catastrophic ailments and trauma? Do you think it's odd that our grandparents used to be able to pay for births out of pocket and after fifty years of trying to "control the price of care" almost no one can afford to do that without insurance? How did we go from a system where competition in the health industry was so alive that doctors would make affordable house calls (that could be paid for out of pocket) to an industry where you have to wait in some sterile office waiting room for an hour to get an insurance-covered immunization that costs $500? Does that make any sense? There's a massive disconnect here that we have to look at more closely. We need to stop thinking that the solution to every problem is simply making the tax-payers eat the cost.

Profits and Greed

There's a point that's been made far too often lately, even by those who would usually be on my side economically speaking; since insurance companies operate for a profit, that they cannot provide cheap health care. I'll have to be honest, this point of view is utterly baffling in light of...well...just about everything around us. I think it's fairly safe to assume that ALL COMPANIES, and for that matter most individuals, operate for profit at least at some level. Is the public's understanding of capitalism so warped that they think this is bad or that it ultimately drives up prices? If that's the case, then there are some core misunderstandings that the layperson needs to deal with before assessing what he or she believes to be the best way for us to achieve affordable health care.

Do computer manufacturers operate for a profit? Do car companies work for a profit? Do clothing companies work for a profit? What about food producers and sellers? If attempting to maximize profits arbitrarily increases prices in a market, then why do the costs of such goods relative to quality and inflation go down over time? If companies that seek profits cause costs to go up, why does American purchasing power increase over time, even in sectors where wages remain stagnant? The answer is that, in a truly free market, profits perform roughly the opposite function of the misconceptions people hold. Profits, ultimately, lower prices and increase purchasing power.

To someone who doesn't understand economics, and particularly in the areas of capital and interest theory, such a statement can seem very counter intuitive. But when a person better understands the function of profits, it's easier to see why it's actually a good thing. Simply put, profits are the interest on capital and the difference between capital costs and the marginally subjective value of a good as determined by purchasers of the good. When a venture yields a large profit in a free market, profit acts as a signal that the given product or service is in high demand and subsequently attracts competition. Competitors give the shareholders and owners of the company incentive to re-capitalize their profits by investing in better facilities and equipment for their workers to decrease labor costs (by being able to hire less people to do the same work or to utilize the same workers to a greater capacity) and increase productivity. Recapitalization continues amongst the competitors who must decrease costs or increase quality in order to maintain or gain market-share in the given industry.

Without a frame of reference regarding time and the stages of capital investment, it's easy to see how profits could be construed as something that's bad. But understanding the nature of capital investment, we can see how profit actually functions as a signal that there is high demand for a product or service and it is currently being exploited. It is actually the very greed so many people decry that draws competitors into bidding wars of attrition and refinement to drive the cost of the service down and increase their market share. This is why capitalism works and has provided the highest standard of living the world has ever seen. It harnesses our natural inclinations toward greed and self-preservation to provide ever cheaper goods and services to the masses. Getting upset about profits is like getting upset at an x-ray for revealing a fracture. You might not like the fact that you've suffered a fracture, but the x-ray is what lets other people know something is wrong and sets them on the path to make things better. Likewise, profits reveal something that is in high demand and low supply in the short run, but functions as a signal that more capital and labor must be devoted to this need which will increase the supply and lower the cost...and it can be fueled solely by greed.

The question we should really be asking is,"If profit and demand in the health insurance industry is so high, why is there not more competition and innovation driving down the prices?"

I hate to beat a dead horse, but again the primary culprit here is government. Earlier I discussed how, through forcing lower payments onto providers, government can actually pass costs onto private insurers. But this is only the tip of the ice burg.

It's often a joke in truly free-market circles that we are all shills for corporate giants and that we defend the stance of almost any given business...because we are gluttons for punishment I suppose. But that's not the case at all. In fact, because we somewhat uniquely hold the understanding that corporate empire owes much of its largess to government meanderings, we often find ourselves at odds with large corporations and businesses. This is often a point of frustration with many anarcho-capitalists, as we understand that, without government intervention, a company is only as solvent as its customers choose to make it. And in this way, free-markets are far more subject to the people then any representative government would ever pretend to be. And we also understand that a free market is not what we have now nor have had for quite a long time. Instead we have something much closer to a mercantilist system which unfortunately fuels the hatred for a system that isn't even in place, capitalism. And large corporations reap the benefit of our misgivings.

I'll give you an example: regarding this push for health care reform, Walmart came out in support of a government mandate that would force employers to offer coverage to employees or pay an 8% payroll tax. Now this stunned a lot of people considering Walmart doesn't currently offer coverage to its employees. It even stunned many people who are considered free-marketers. But it didn't stun ANCAPs (Anarcho-Capitalists). Of course Walmart would support something like that. Think about it. Walmart has the strongest bottom line among its competitors (K-Mart, Target, etc.). Is it possible that Walmart believed it could weather that kind of burden and maybe its competitors wouldn't be able to do so, putting them out of business while increasing Walmart's market share and subsequently their profits? Could greed actually be motivating their advocacy of government intervention or do you believe that maybe the company so many decry as being the center of all things greedy suddenly adopted altruistic motives?

The truth is that often large businesses favor government regulation and intervention because it stifles the prospect of competition. We pile corporate taxes and regulations onto companies because we believe them to be rich and greedy but do we ever consider how much this may increase the overhead and startup costs for new companies? There have been dozens of books written about how large corporations actually benefit from some taxes and regulations simply because it leaves them with a larger market share despite the initial burdens.

In the case of insurance companies, regulations abound. Each state has its own list of mandated treatments which these companies must cover by law. Health insurance cannot be purchased across state lines. Payment schedules are often, at least partially, negotiated according to various legislation at the state or federal level or even through government entities with various providers. Insurance companies and providers alike are the victims of some of the most agregious frivelous lawsuit cases the judicial system sees, inflating liability costs and increasing premiums for innocent customers. Even with profit margins peaking at 4-5% (and yes that's true...look it up), insurance companies enjoy what would almost be considered massive municipal monopolies largely because of such government involvement. The CEO's of some of these companies, even on the low margin, bring in BILLIONS in profits. If greed is so prevalent (even if you believe it to be a bad thing) competitors should be busting down the doors of the health insurance industry to reap the rewards, and subsequently provide lower costs through capitalization and competition. But instead, burdensom regulations and government intervention actually work to keep competition from ever truly forming and instead entrench corporate giants like Blue Cross Blue Shield, Anthem, and Aetna, who maintain borderline cartels and monopolies in virtually every state in the union.

Profits and greed do not inflate health care costs. The government intervention that stifles the response of entrepeneurs in a free-market to the carrion call of high profits and demand inflate health care costs. In a time of distress and emergency, you do not seek to cut off the lines of communication (profit signals), you remove the barriers (government intervention) impeding those who wish to satiate your wants and demands.

Pre-existing Conditions

This item of contention may be the most infuriating of them all as someone who decries government intervention. This is because government fault should be the most directly evident here. The problem that people are continually running into, and the effects of which are amplified by the current recession (depression?), is that people have a hard time getting cheap insurance when they lose coverage after changing jobs, being fired, or moving to a different state. Many of these people are therefore looking for either mandates on companies to supply such coverage (which is being done on a state level right now in many places) or a public option outside of COBRA in which they could purchase affordable care.

The first problem I have with this is that it seems to indicate that people aren't aware of what exactly insurance is. Insurance is a service that hedges against catastrophic occurences by pooling risk. You're essentially placing a bet that something bad is going to happen to you (as awful as that may sound). You pay a monthly fee so that if said catastrophe occurs, you are covered by the fees of others paying into the system. The insurance company is betting, and hoping, that such a thing will not happen to you, or that the premiums you incur over your period of coverage outweigh what they will have to pay out for you.

That being said, it's hard to grapple with the fact that so many people don't understand why they can't just purchase cheap plans from one of these companies after the catastrophic condition has already occurred. And while we understand the terrible condition these people are in, it shouldn't be that hard to explain why companies would deny coverage to such people. In racing terms, it would be the equivalent of asking someone to place a bet on a horse that lost...after the race was over. That doesn't quite make sense, does it? If you didn't have auto-insurance, would you expect to be able to buy a cheap policy to cover a car you just wrecked? If you didn't have home-owner's insurance, would you expect to be able to purchase a cheap plan to cover your house that just burned to the ground? Why not? Well, because pretty obviously you're just asking that company to pay for your house...they're no longer pooling risk for future events...they're eating losses for events that have already occurred. What would be the benefit of a company offering $200 a month coverage for someone they KNOW is going to cost an average of $5,000 a month? Would it be their urge to decrease profits, lower the wages of their employees, or increase the premiums for existing customers maybe? That's essentially what you're telling them to do. If you're going to simply make an insurance company pay for an illness that has already occurred, then you're not talking about insurance're talking about government-mandated wellfare...targeted on a single industry no less.

But this, of course, does not deny the existence of the problem at hand. Why do we have this problem with pre-existing conditions regarding insurance? When do people lose their coverage? Often it can happen when people move to a different state. Because of various state legislation and mandates, as discussed earlier, insurance is not really portable accross statelines. So in these instances, it is government intervention that causes people to lose their coverage. Given that, it's pretty clear to see that removing these mandates and restrictions would allow for more affordable and portable nationwide pools that customers could choose from and would allow them to hedge against losing coverage simply for moving. But what about other reasons that someone might lose coverage?

I think the thread tying the real heart of the problem together is our system of employer-based coverage. There is no shortage of sob-stories (and most if not all of them legitimate) about people losing their job and subsequently the coverage they had which was helping them live with a debilitating condition. But you rarely hear anyone ask why a person should lose health coverage based on their employment status. It's almost as if people are blinded by the obviousness of the question. We've all grown up with coverage paid largely by employers, but why is that the case? The truth is two-fold. Originally the trend started because of WWII era wage and price controls. The government put a freeze on wages and prices for a short time. Subsequently, companies began to offer the purchase of health insurance and various other benefits instead of additional wages to bid away labor. This practice was later bolstered and, need I say, perpetuated by the offering of tax-payer dollars through various subsidies to employers who offered health insurance to employees. In short, government has allowed your employer to compensate you for your labor, in part, at the expense of the tax-payer, instead of their own pockets, through employer-based insurance write-offs. So now, seventy years later, it makes sense from a market perspective for employers to continue to use coverage as a bargaining chip instead of compensating us in full, directly.

But if that means that our insurance plans are based entirely on employment, which we understand is not stable by definition, wouldn't it be a stupid idea to continue such practices? The answer is yes...and most people who have an understanding of what's really occurring understand that. But the truth is that government subsidies offered to business provide incentive for them to keep purchasing insurance for employees. If those subsidies were to be repealed, it would lighten our tax burden and we would subsequently be compensated fully through wages, allowing us to purchase our own insurance as we see fit, as we do for cars and houses. And you would no longer have to worry about losing coverage after you've contracted some kind of medical condition. Instead you'd be able to move wherever you wanted, quit your job, or even be laid off and still maintain a cheap catastrophic health plan that you would maintain through illness.


Spending quite a bit of time refuting some of the utilitarian arguments for government intervention regarding health care, let me address the moral and philosophic issue at hand by dismissing all the views previously stated as irrelevant. That isn't to say that the things mentioned above are not true (indeed, they are true) but rather that the utilitarian argument, although often seen as rational, is often inconsistent at the least, and offers attrocity after attrocity as legitimate answers at the worst.

As someone who prides himself in rational thinking, I will admit that listening to people quote from the bible or wax poetic about our religious and moral obligations to support government theft, violence, and coercion absolutely infuriates me at times. The bredth and width of that kind of irony is so deep that even as someone who is not religious, I can only be reminded of Jesus in a tormented moment of realization and enlightenment offering a prayer to his Father for those who effectively murdered him, "Forgive them Father, for they know not what they do..." I don't make such a reference as to compare myself to Jesus in any way but rather to illustrate how difficult it can be to watch the ignorant transgress upon the innocent and realize that they may never understand why what they are doing is so wrong. Jesus was capable of forgiving such people. I'm not sure if I'm so ready to forgive the violence that so many seem to be supporting today.

At first, when I was digging into politics, philosophy, and economics, I always thought that people just simply didn't realize what they were doing. But as time has gone on and as I have engaged more and more people on these issues, my sympathy and patience has quickly been eaten alive by their sheer unwillingness to rescind their violent behavior and at least listen to the few of us that see there is another way to approach the world's problems. And in that way, I've come to admire the likes of Ayn Rand and Murray Rothbard all the more. These were people who did not give victim's sanction to society's transgressors and spent almost every waking moment of their lives fighting back against the forces of tyranny and oppression. And although their movement is alive and well today, I stometimes feel like the impression they've made is but the tiniest scratch on the lense the world politic. But their message of love and peace still stands today, as do the words of Jesus and other prophets throughout the ages, regardless of how badly their words have been twisted and tangled. They promoted one simple truth...

Do not trespass against others.

It's really as simple as that when it comes to my philosophy. Do not fraud, steal from, murder, or maim other human beings. We can get swept up in the minutia of economics and civic law until we're exhausted but it will not change the simple axiom that man should not inflict violence upon his fellow man. There are not many people capable of reading this that would not claim to espouse this viewpoint. And yet we continue to use government as a tool for violence and coercion on a daily basis.

All government programs and interventions are ultimately paid for by forcibly collected tax dollars. I am not given a choice as to whether I want to participate in government-funded programs (as my recent audit from the Columbus Tax Division will etify). Those taxes are taken from me with the threat of force. This means that a portion of the fruits of my labor are taken from me by others every single day. One hundred and fifty years ago, we used to call having to labor for the fruits of another man slavery, yet today people can't seem to recognize it as such. Am I really that crazy for being appalled that so many people support it? In truth, I'm more appalled by the fact that these people are un-ashamed by their demands for such violence than anything else. Even if you felt that it pragmatically served a beneficial purpose, why are you unable to acknowledge that you are taking part in such a coercive act? And even at that, why, when presented with a problem, is your first reaction always to offer government-endorsed violence as the solution?

These are the questions that I ask myself almost every day when confronted by supporters of statism both on the left and the right. And contrary to coming closer to understanding such people over the course of time, I find myself actually becoming more perplexed and befuddled by their inconsistent views. If you really don't believe in perpetrating violence upon innocent human beings, then please walk the talk. It's one thing to have your narrow view of pragmatic utilitarian arguments for such actions fail miserably when exposed to the light of reason, but it's a whole other thing to hide behind a shifting veil of moral superiority while you seek to betray the very core of your supposed belief.

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