The fight's not over

It seems that time heals all wounds, or maybe we just forget. Health care reform is back and being ramrodded through Congress. The good thing is that some Democrats are nice enough to keep this argument front and center. I thank them for yet another opportunity to point out the insanity of their plan. Paul Krugman sets out to dispel a report critical of the health care bill. You have to think even he doesn't believe the nonsense he writes. He starts with an acknowledgement of common sense:

The motivation for the AHIP report seems to have been the decision by the Finance Committee to weaken the penalties for individuals who don’t sign up for insurance, even as it retains regulations requiring that insurers offer the same policies to everyone, regardless of medical history. The industry worries that some people will game the system, remaining uninsured as long as they’re healthy, then signing up when they get sick.

This is, believe it or not, a valid concern. Many health-care economists believe that a strong individual mandate, requiring that almost everyone sign up, will be needed to make health reform work. And the Finance Committee probably did weaken the mandate too much.

Believe it or not! Oh my god, the critics have a point! Yes Mr. Krugman, if you guarantee that no one can be refused insurance, then why wouldn't you buy insurance at the point at which you get sick? DUH! Interestingly, the market solution would be not to guarantee coverage, thereby making people responsible. Of course, the average American is irresponsible, so let's force them to buy coverage. What's the reason for the low penalty, pure political calculation.

As I said, the individual mandate probably should be stronger than it is in the Finance Committee’s bill. But there’s a reason the mandate was weakened: fear that too many people would balk at the cost of insurance, even with the subsidies provided to lower-income individuals and families...

When your leaders deliberately put forward a bill that even the most liberal nut points out is problematic, it's time to wake up to their true intentions. Here is some more nonsense from Mr. Krugman.

One argument was particularly striking: the claim that attempts to limit Medicare spending would lead to higher insurance premiums. In fact, the report assumes that 100 percent of any reduction in Medicare payments to hospitals will translate into higher costs for patients with private insurance.

The only way to justify this claim is to assume that all hospitals are purely charitable institutions, charging as little as they possibly can. Now, some hospitals may fit this description. But all of them?

What’s more, this argument stands the usual logic of markets on its head: if you believe AHIP’s story, competition raises prices instead of reducing them. And it doesn’t matter where the competition comes from: anyone who gets a better deal, whether it’s Medicare or a private insurer, makes life worse for everyone else. I don’t believe that, and neither should you.

Now that President Obama has won a Nobel Prize, I can safely reduce it's prestige in the case of Mr. Krugman. In essence, his argument is that insurance companies are ripping people off. The private "greedy insurance industry" is evil and government good. Let's conduct a more rigorous analysis.

Ask yourself what is the minimum price a hospital can charge for a service. If you said, the cost of the service, go to the head of the class. What's the maximum it can charge? That's a tougher question. It wants to charge the profit maximizing price. Sometimes it doesn't charge that price; sometimes, it charges just a little above it's costs. Why you ask? Competition. The reason the report assumes that reductions in Medicare translate into higher costs for private insurers, is because health care companies are not making excessive profits.

Today, private companies are subsidizing medicare similar to the way Americans subsidize the costs of drugs for non-Americans. If a service costs $100 to produce and Medicare pays $90, then how is the $10 shortfall accounted for. Obviously this cannot continue for long unless we want doctors to go out of business. What happens is that the private insurance market pays $110 for the same service. That way the doctor's and hospitals can stay in business. For every dollar Medicare pays below what it actually costs to produce the service (profits are a necessary cost by the way) the private market must pay more. Otherwise, revenue will not cover the costs. The only way for Mr. Krugman's argument to hold water, is if the insurance company was making excessive profits for a service. In that scenario, they would eat the reduction in payments by Medicare (this also assumes that Medicare is charging the "right" price). This is not true. If it were, then non-profit companies, which already exist in the market, would dominate. They don't.

Don't stop the fight. Contact your congressman and urge them to resist this bill. There are better ways to improve things than a deliberate, stealth attempt for government control of health care.