Hawaii ends its Universal Healthcare for children... by RS Davis
(libertarian)
Wednesday, October 22, 2008
It's looking to be a sure thing that America is heading for Universal Healthcare. To get a good idea of where that path will lead, we need look no farther than Hawaii. They have just dropped the nation's only child universal healthcare program after only seven months, claiming to have already run out of money - and they were trying to be sensible about it, extending it only to those most vulnerable. They offered the free healthcare (with a $7 copay) to every child that wasn't covered, regardless of income.
And what happened? According to Dr. Kenny Fink, the administrator for Med-QUEST at the Department of Human Services, "People who were already able to afford health care began to stop paying for it so they could get it for free."
Of course they did. If all you had to do was drop your coverage to get it for free, wouldn't you?
But Dr. fink is only half right. Even if people hadn't dropped their private coverage, this plan would have been still way more expensive than they had originally planned. The problem that economists of every stripe have to deal with when discussing socializing any industry is the problem of the effects of price on supply and demand. As much as they'd like to, no one can bypass market forces.
A free market naturally works toward an equilibrium, providing goods and services in the most efficient manner possible. The price system gives people all the information they need to make a purchasing decision. It's an effective form of rationing - prices of scarcer things trend higher so that people limit their consumption, giving more people the opportunity to buy those goods or services. Prices of less scarce goods and services tend to be lower, because they are plentiful and people can pretty much buy as much as they want of them without limiting the supply to others.
Things are no different when dealing with a commodity that people think the demand for is relatively inelastic. (Inelasticity of demand preventing market forces from affecting price is a myth I dealt with here.) Sure, if you have cancer or something, the chances that you will forego treatment are pretty slim, but it is at the margins that you will make the decisions that most greatly affect price, and therefore, supply.
Say you have $50 in your pocket, and you are not feeling well. The choice you have to make is whether the $50 could be better used going to the doctor or being spent on something else - like gas, food, or The Dark Knight blue ray.
If you are terribly ill, the value of that $50 as a healthcare expenditure is very high, while the value of The Dark Knight is going to be very low. If you just have the sniffles, you might just take some Robitussin and curl up on the couch with your new movie.
But what happens when the cost to you of a visit to the doctor is zero? Without having to weigh the price of the doctor visit against the other uses you have for that $50, there is nothing preventing you from going.
On its face, that seems like a good thing. Everyone needs healthcare, right? And the healthier we are, the happier we are. If you don't have to pay for it, you will go to the doctor more..
And so will everyone else.
Demand then goes through the roof, and government suddenly can't afford what seemed so cheap before. Supply then dries up, and there are only a few ways of combatting this - waiting lists, rationing, or simply denying procedures altogether.
Or in the case of Hawaii, the best choice - end the program altogether. Some might argue that means testing, where you limit it to people making under a certain amount of money, is a way to combat this, as well. They think that perhaps Hawaii would've been a success if only they hadn't made it so easy to just drop coverage and affix onesself to the government teat.
Let's examine that.
To make it simple, let's say we put it at $20,001 a year. Anyone making under that gets free access to healthcare. And let's also say the average person spends $2,000 a year on healthcare. That means that a person making $20,000 actually makes $22,000 a year, and the person who is making $20,001 a year, after their medical expenses, is only making $18,001 a year. That's a $4,000 swing.
Wouldn't you like to put an extra $4,000 a year in your bank account without having to do anything for it? All you have to do is work less and make less money. It's a rational decision based upon the information available to you, but it creates a great disincentive to work, thrift, and production.
And what is the incentive for the lower-income people to make any more money, and become self-sufficient? In this example, for the one making $20,000 a year, any extra income between $1 and $2000 a year is a loss for them. So, they either have to go from sweeping the floors to general manager, or stay exactly where they are.
What kind of incentive is that?
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Posted By: Walt Thiessen
Date: 2008-10-22 05:14:27
Good article! I'd like to add that universal healthcare is supposed to be a form of health insurance. The problem is that insurance depends upon the idea that there is no normal, usual incentive to file a claim. In other words, claims are filed only because something happens which is bad for you and which you would normally avoid. Often called "moral hazard," this concept is unavoidable with insurance.
Make something an "elective," by giving people the option of being covered for something that someone would actually want to have, and the element of moral hazard enters the picture and drives demand through the roof. That's why most health insurance policies which offer health maintenance co-pays, which cover pre-existing conditions, or which cover things like pregnancy keep seeing their premiums going up, up, up!
Yeah, and health insurance has some of the same market-distorting features that Medicaid and Medicare do - namely, removing price from the consumer. That makes it so that people will go more often, and they will NEVER haggle over price - they don't even KNOW the price...
Excellent article. We have many of the same issues in Canada; unfortunately, socialized medicine is a sacred cow here, and no one will touch it. I got into many of the same issues in my July NC article, "Health Care vs. Pizza," but they are points that deserve to be made many times, not just once.
(To any of my readers that come here from my blog and only read my stuff, George's piece is an excellent jumping-off point to discover the many fine authors on the Chart...)
This is some of the goofiest reasoning I've ever read! Because everything is free, it gets overused?
In the first place, healthcare is NOT free. The difference with a universal healthcare system is that EVERYONE pays into it in one way or another ~ usually taxation. Additionally, it isn't just a matter of going to the doctor like you're going bowling. If something is the matter with you, you go. Why else would you go? Just to talk over old times? Plus, medical records are kept. If you're abusing the system, there are ways to deal with that.
However, this notion that just because things are free they're overused is about as ridiculous a concept as the idea that a Libertarian could ever be elected President.
The AIR we breathe is free, isn't it? Do you find yourself taking a lot of EXTRA breaths? Going to the toilet in most any restaurant you go to is free, do you find yourself going EXTRA times? The cost to you is no higher to watch "That 70's Show" than to watch something more substantive. Do you find yourself watching a lot of "That 70's Show?" Parking at the Mall is free. Do you find yourself parking there a lot of extra times?
Why don't you guys just admit that you HATE anything having to do with government, then you don't have to individually critique everything that the government does because we know you already hate it and disapprove of it. You don't have to write fatuous articles just to get praise from one another.
I thought you studied economics. Why do you not understand supply and demand?
The air is free, yes. It is also limitless. Now, if I were locked in a meat locker, you know I would be rationing my breaths to try and extend my life. But outside the locker, where air is plentiful, I don't worry about it.
It would be in our "common" interest to have some people go far, far away and leave the intellectualizing to those who are moderately educated, but we let some of the lugnuts contribute, too.
Game theory is a more accurate description than the "tragedy of the commons". I guess those who went to college have a little more grown up language. And, believe me, you have contributed NOTHING significant to the conversation..
The toilet at a restaurant is an unlimited resource. Healthcare is not. I will stipulate, though, that when I am at a ball game, and I have to go, I will wait as long as possible and limit my trips because there is a line. So, when that resource DOES become scarce, I DO limit my consumption of it.
"That 70's Show," as well as the rest of broadcast television is indeed free, so I watch whenever I want without concern. Movies, though, cost me money, so I limit my trips to the movies.
Some restaurants will not let you use the bathroom unless you are a PAYING CUSTOMER. So is not an unlimited resource. If the mall parking lot is CROWDED, you will either wait for a parking space or leave.
People abuse the health care all the time. A friend of mine was telling me that when he was doing his medical internship a heroin drug addict will come to thje ER almost everyday to get treated. Since the hospital cannot reject patients, they are forced by law to at least stabilize the patient and if they can't pay, they take the loss. This drug addict abused the system and came almost every day to get his FREE healthcare. Might not have been the best but FREE nevertheless.
Master C can't be polite. If you think different than him, he thinks you are an idiot. He won't respect your dissenting opinion. When he runs out of arguments on his side, he will resort to rudeness and ridicule of your comments. It is easier for him to be sarcastic and offensive rather than a gentleman. He wants you to think exactly like him or else you are stupid. He does not understand that intelligent opinions can be made on both sides of an argument. They are OPINIONS. Neither our opinions nor his can be proven proven scientifically. Whatever makes sense to us will not necesary make sense to him.
His leanings are fascist in nature. We, on the other hand, will respect and defend his right to be dissenting with us even as we will speak the opposing view. So let's not drop to his level and lead by example. Maybe he will learn something.
You are welcomed to keep commenting. We need dissenting opinions here. It can't be all one-sided. It allows us to think more and learn from each other. But in agreement with David it is better to be a gentleman is much better than to be rude.
I must admit that your inability to understand a simple principle that FREE DOES NOT MEAN OVERUSED seems too elusive for some of you. We are NOT talking about whether something is INFINITELY UNLIMITED at all ~ we're talking about if something is FREE.
I've just given you several very SIMPLE examples of things that are FREE but are NOT OVERUSED, and you keep rushing to tell me that they are NOT OVERUSED because they are UNLIMITED.
By YOUR argument, then, all we have to do is make HEALTHCARE unlimited, and people won't overuse it.
"We are NOT talking about whether something is INFINITELY UNLIMITED at all ~ we're talking about if something is FREE."
That you can't see the relationship between supply and price is very telling.
"By YOUR argument, then, all we have to do is make HEALTHCARE unlimited, and people won't overuse it. "
Yes, it's very simple. All we need is an infinite amount of doctors, nurses, emts, administrative clerks, pharmeceutical manufacturers, hospitals, x-ray machines, ambulances, etc...
Of course, if something is unlimited, people won't overuse it. It's a mathematical impossibility, as without limit, there is no such thing as overuse, from a scarcity of resource standpoint.
Don't you see how ridiculous your contention is? If something is unlimited and free, people won't overuse it. If something is limited and free (not even free, as I pointed out ~ you just don't have to pay for it directly) people overuse it.
You're a real thinker!
Master C (who is done commenting on this article.)
"Don't you see how ridiculous your contention is? If something is unlimited and free, people won't overuse it. If something is limited and free (not even free, as I pointed out ~ you just don't have to pay for it directly) people overuse it."
If something is unlimited and free, people can't overuse it. It's impossible. And it doesn't matter that people pay for it in taxes - at the point of "sale," there is no cost, so there is no impetus for self-rationing. Even if everyone knows that using less will mean more for everyone, everyone also knows that no one else is going to be fair about it, so there's no point in rationing. It's self-defeating. It's called the tragedy of the commons.
You're a real thinker!
And you're a real jerk.
Master C (who is done commenting on this article.)
If you need three and you take five, that's OVERUSING something, regardless of how many there are. If you make unnecessary visits to the doctor, you're OVERUSING your access to the doctor.
You just seem to be unable to understand the distinction. And, anyone who uses the term "jerk" as a putdown to someone has about as much imagination and creative ability as the goon who drives around the mall parking lot thinking he's taking advantage of all the free parking! Have a great lunch in the asylum, nutcase!
If you need three and you take five, that's OVERUSING something, regardless of how many there are. If you make unnecessary visits to the doctor, you're OVERUSING your access to the doctor.
Yeah, and if you only need one hamburger, eating two is overeating. But we aren't talking about that. We're talking about economics - the effient distribution of scarce resources. When the resource is unlimited, overconsumption is impossible.
And, anyone who uses the term "jerk" as a putdown to someone has about as much imagination and creative ability as the goon who drives around the mall parking lot thinking he's taking advantage of all the free parking! Have a great lunch in the asylum, nutcase!
I wasn't using the term "jerk" as a putdown. I used it as a descriptive adjective. I am not looking to get in a flamewar with you. If you want one of those, come on over to my blog, and I'll put you in your place:
I think you're drooling on your nightshirt. Maybe you need some more of those meds you're taking.
You're not talking economics, you're talking jibberish. I even agree with you that you can overconsume hamburgers even though they are, from any consumer's standpoint, unlimited.
I'm not sure what the point is you're trying to make, but you sure don't seem to be making it.
Maybe you need to go back to NOT MENTIONING Sonic the Hedgehog in your articles that put him in the headline. That's always good for a laugh.
"It would be in our "common" interest to have some people go far, far away and leave the intellectualizing to those who are moderately educated"
Yep, I bend to your superior intellect which consists of insults and little else. I'll just go in the corner and cry now. My opinion means nothing because I don't have 8 Ph.Ds. I'll just give up and let some self-important academian nightmare named Master C strip the planet of individual thought.
"Game theory is a more accurate description than the "tragedy of the commons". I guess those who went to college have a little more grown up language. And, believe me, you have contributed NOTHING significant to the conversation"
Oh, grown up language like "lugnut," "goon," "Gomer," and "nutcase." I have a degree. I studied a little game theory. I studied economics. Can't I play in your little game of insults, too? Please, please?
I don't believe I've used the term "goon" before, but I do think that it applies in certain situations. This may be one of them.
Your having gone to (some) college ~ we don't know where, or for how long, or even what you studied ~ only confirms the supposition that college doesn't always IMPROVE upon what they're given to start with.
The article makes a purely rational point about the economics of health care, but unfortunately most people are not rational. Take me, for instance. I am paying for grad school instead of health insurance. I do this for several reasons, but the biggest one is that if I get a little sick I can deal with it on savings. If I get a lotta sick, I don't trust that insurance will cover it anyway. So basically, health insurance has both overpriced and undersupplied me right out of the market. However, I operate without a safety blanket save for the old-school family and friends kind. Which I'll probably get more and better care from than any PPO anyway, but the thought of becoming an unmitigated burden does not please me.
A few years ago, I had a Great Idea. I would be an organization that gave groups of people the legal/mediation, financial management, and evaluation resources in one place to pool their medical savings... I don't trust HMO's or PPO's or the government, but I do trust my family and friends. After some research, I found out that this is illegal. Let me repeat: it is ILLEGAL to jointly save with a group of your chosen peers for medical reasons. It was like going to the bank for a home loan, and being given two choices: either pay for your house up front in cash, or make payments on the bank president's (or governor's, or HUD director's) house and maybe he'll let you crash there if you can't pay rent some day. Furthermore, each piece of the puzzle - insuring legal form contracts, mediation, managing finance tools, getting credit reports - requires membership to a different guild by legal sanction. It's a nightmare of paperwork that ends up looking like... well, like a health care provider. We've fucked ourselves by making an intimately family-level enterprise corporate, and the idea that it will get better by getting even bigger and broader is laughable. But government is the last refuge for bad ideas.
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