Wednesday, March 28, 2012

A Modest Health Care Proposal

Paul Scott Thomas
Edge of the World
The US Supreme Court has taken up the issue of so-called ObamaCare: the controversial plan to extend private health insurance to all citizens, with a stiff tax penalty for those who refuse to purchase private health insurance. I know something about it, since I live in Massachusetts, a state that adopted so-called RomneyCare, after Mitt Romney, who was our governor at the time, and is now running for president. ObamaCare is modeled on RomneyCare.

The Supreme Court wasted a day discussing whether the tax penalty is a tax or a penalty, a distinction that's relevant only in the context of some arcane law concerning the litigation of unjust taxes, but lost on everyone, because the penalty shows up on one's tax bill. This point was discussed ad nauseam, so I will not discuss it or any of the other issues relating to ObamaCare that everyone banters about endlessly. Instead, I will say what no-one is saying: Obamacare (and Romneycare) invalidates the notion of health insurance.

First, let's make sure that we are all clear on the concept of insurance. Insurance is generally taken to mean a promise to pay out a settlement (or coverage) in case of a certain event (fire, flood, sickness), in exchange for a recurring cost (premium) and, usually, a deductible (or self-insurance). Insurers weigh the risk of the event against the amount of the settlement. Thus, if the policy is against your spontaneous combustion, with a risk estimated as 1 chance in a billion per year, and you want to insure yourself for $1 billion, then your premium is $1 per year, plus whatever the insurance company wants to charge you for writing the policy. If, however, you are currently engulfed in flames, then the risk goes up to 100% and the premium would theoretically be $1 billion, same as the settlement, but no insurance company would ever write such a policy because the risk is too high.

Now, health insurance is a strange proposition to start with, because everyone dies, and nobody dies healthy, so most people require medical treatment at some point. (A few people spontaneously combust, I suppose. They are still none too healthy during the few seconds before they die, but that's not long enough for them to avail themselves of medical attention. But that's a very rare case.) The point is, if all houses burned down at some point, there would be no fire insurance, and if all houses flooded at some point, there would be no flood insurance. But everyone dies, and yet there is health insurance. How is that?

ObamaCare introduces the provision that health insurers are not allowed to decline insurance coverage to individuals with pre-existing health conditions. That is equivalent to mandating fire insurance for houses engulfed in flames, or flood insurance for houses slowly sinking while floating downstream. In return, insurance companies are assured that they will be able to spread the risk over the entire population, which will be coerced to purchase their product by being threatened with a stiff tax penalty.

Some coercion is certainly required for people to accept such a faulty product. My family's health insurance bill comes to nearly $15,000 a year, with a $2,500 a year deductible. That is, we have to consume more than $2,500 a year in health care before the insurance pays anything. If I am employed, then the employer has to pay 80% of the premium; if I become unemployed through no fault of my own, then the state picks up the 80% for a few months; after that, I have the option of paying even more for an individual insurance plan, or paying somewhat less for the tax penalty but then risk being bankrupted by a medical emergency.

Recently, I called my insurer to ask how much a certain elective procedure might cost. You see, under this system, the doctor bills the insurer, the ensurer “adjusts” the amount, and then I pay the adjusted amount. I wanted to know the adjusted price beforehand, but I was told that they do not give out this information. The adjustments are generated by an inscrutable computer program, which determines the numbers on the spur of the moment based on a set of formulas. Now, normally I don't do business with companies that refuse to quote a price before I place the order. That's where the tax penalty is most helpful to them: it leaves me no choice but do business with, and get robbed by, this company.

As Vladimir Nabokov once pointed out, nothing breaks the human spirit more effectively than consistent bad treatment. To this end, forcing everyone to navigate an infuriating bureaucratic maze with their very health held at ransom is quite an effective strategy. Another is to force everyone to abide a blatant falsehood, such as calling health insurance “insurance” (now preferring, I notice, the more abstract word “coverage”) whereas it is definitely not insurance at all but a tax. Yet another is to force people to make false choices, such as between Romney, author of RomneyCare, and Obama, author of ObamaCare, which are very similar. At this point, the American spirit seems very well broken, along with the economy and the political system, and I do not advise you to squander your precious energies in trying to fix the latter two. I do, however, recommend that you mend your spirit, and stop thinking it necessary to abide a falsehood: health insurance is not insurance.

What is it then? “Insurance” that everybody is forced to buy as a legal precondition of citizenship? Where the risk pool includes the entire country? Where compliance is enforced by a federal agency, the Internal Revenue Service? (But where, if one does comply, the money goes to private entities, to pay other private entities.) What is that? Why, of course, it's a private tax collection service! Under ObamaCare, medical insurance companies become private tax collectors. Now, private tax collectors are not unprecedented in the annals of empire. The Roman senate bid tax collection contracts out to publicans, with mixed results: farmers often opted to abandon their land rather than farm it and have the grain confiscated to pay taxes. But ObamaCare takes private tax collection one step further: under it, the tax collectors not only collect the taxes, but also set the level of taxation as they see fit. That is, the medical “insurance” companies are allowed determine the “health tax.”

What makes this complex scheme of private tax collection so necessary? Its benefits include maximizing health industry profits, which can be recycled as electoral campaign contributions to elected officials who then protect the prerogatives of the health industry, keeping this private tax collection scheme running smoothly. But none of these benefits have much to do with keeping the population healthy. On the other hand, it creates a massive perverse incentive to maximize health care costs, while at the same time institutionalizing a private system of public robbery.

I therefore propose that the health tax be collected 
directly by the Internal Revenue Service.

Furthermore, in absence of any competent agency within the US that could be charged with administering a public health care system, I propose that health care be directly funded by the Internal Revenue Service as well, as part of an integrated strategy for maximizing tax revenue: the “Keep American Taxpayer Healthy” plan.

The unambiguous mandate of the IRS is to maximize tax revenues. This it will do by making sure that taxpayers are healthy, so that they can earn the maximum of income and pay the maximum of income tax. It will make it a priority to provide good health care to all children, who are IRS's “seed stock”—the taxpayers of the future. It will also make sure that the health needs of the working-age population are attended to, to make sure that they continue to work, earn, and pay taxes. It will also provide palliative care to the retirees, to keep up the morale, but certainly nothing as lavish as what is available to them now. Since their tax-paying potential is negligible, keeping them alive as long as possible is not a priority from a tax revenue maximization perspective.

Not being specialists in the medical field, but realizing that basic and preventive care have the highest health care ROI and specialist care the lowest, the IRS would probably want to dramatically simplify health care delivery. Huge hospitals and medical centers, with their teams of specialists, support staff, swarms of administrators, billing departments, medical labs, intensive care units and MRI machines, are too complex for the IRS to even audit, never mind administer effectively. It is far simpler to establish neighborhood clinics, and to provide them with a fixed fee per patient per year, to spend in line with the overall mandate.

Provisions would be made for some number of specialists, probably shared between clinics, but with the understanding that, from a tax revenue perspective, specialist care reaches diminishing returns rather quickly. For instance, a triple coronary bypass is hard to justify financially, because the patient's earning potential, even after a full recovery, usually does not cover the cost of the operation.

Also, the IRS might consider actually denying health care to rich people (those with net worth over $5 million) in order for the treasury to reap the windfall from estate taxes when they die. Such people (Mitt Romney is a good example) rarely pay their fair share of tax in any case, being able to hire accountants and lawyers, who exploit every possible loophole. And so, there shouldn't be any free heart transplants for Dick or free brain transplants for George.

Having the health care system administered by the Internal Revenue Service may seem rather inhumane to you. However, I hope I have succeeded in pointing out that doing so would still work better than ObamaCare. This health care system is so bad that improving it is not any sort of challenge at all: I submit to you that even the IRS would do a better job of it.


Glenn said...

Considering the very low Administrative costs of Medicare I might suggest they be put in charge of actually running the Health Care side of the house. But I think your "triage" priorities would be very helpful.

My donkey said...

The scary thing about today's satire (such as a health tax being collected by the IRS) is that it will turn into tomorrow's reality, the way things are going.

The line between sarcasm and straight talk is blurring and disappearing as we speak, giving the people in control yet another reason to smile.

forrest said...

Much in agreement, except that this is the opposite of using private tax collectors; this is instituting private tax receivers! The government, by instituting a tax penalty, is not robbing us, but helping the insurance companies rob us.

Of course we should help Dick and George get hearts and brains; look how much their lack of these has cost us already!

Puzzler said...

Well that's one way to get to a single payer health care system.

Anonymous said...

This is just legendary. :-)

latheChuck said...

Outstanding analysis, but we expect that from Dmitri.

I've heard no one address the fundamental difficulty with health care insurance reform, which is that the horrendously high cost of health care, on the payer's ledger, is the wonderfully high income recorded on the receiver's ledger. Everyone has an interest in how the system gets restructured, but don't expect any reform suggested by the industry to cut back on its income (as a share of GDP). And if we could clap our hands and cut health care costs in half? Why, we'd cut at least 5% off of GDP right there, and THAT would put us back into Recession!

latheChuck said...

Another, truly modest, proposal: when informed of the value of a Living Will, Advanced Directive, or Do Not Resuscitate order, I believe that most people would like to have one. But relatively few go to the trouble of drawing one up. If we defined the legal "default response" to be DNR, then anyone who objects to the default could draw up a "Resuscitate Please" order. (Maybe you wear a special bracelet to make sure your wishes are known in an emergency.)

We could save a ton o' money on care for people who might actually prefer not to be tortured by medical technology for the last few days of their lives, but they never expressed a preference.

We could even make the order require annual renewal, so if you get forgetful...

Ozymandius said...

Classic! As an Accredited Health Care Provider (aka a physician) in the land of the yellow brick road, I feel your pain and share your frustration. Why not emigrate to Tasmania (bring your yacht) to get some relief. Better that than having to resort to the form of relief favoured by most politicians.

Anonymous said...

Living in Germany I find it all absurd though funny what you say here so I digged up the above link which compares various systems. I appreciate not being able to change USA's weird constitutional system which gives everyone the right to die sickly in poverty while some rich bankers get all the money from the government for their new yachts (unwritten but understood 28th amendment to the constituion-property rights are preeminent, i.e.-the golden rule-"he who has the gold makes the rules")

yvesT said...

Sorry off topic comment.

The call to french presidential candidates about peak oil has now been translated :

Signatures with messages in any language welcomed !

Yves (regular Dmitry's blog reader)

Ronald Langereis said...

Wonderful piece. It may come as a shock to most, but this is simply how European healthcare is organized. Health insurance participation is mandatory. In Holland, one pays about euro 100 pro month premium to a 'private' healthcare insurer. The first euro 220 pro year is to be paid as an extra, and wealthy people - say, earning euro 100K/yr and more - are taxed by the government to a max of euro 3K/yr.
Under these conditions, healthcare is free for everyone.

Calum said...

I uh, can't help feeling that the end result of this proposal would be very similar to the NHS in the UK, except with the requirement to pay a profit to the medical insurance companies. Just tell them to get lost and you might have a sort-of workable proposition...except of course that it would constitute socialism, and that just wouldn't do at all!

forrest said...

In those other countries where people are forced to pay private companies for their medical care-- as I understand it, those companies get regulated, are not for-profit operations!

Here, we could expect to see them regulating the government.

theblamee1 said...

Without wanting to necessarily pour gasoline on a very fine piece of satire the truly "limiting principle" being expressed here is trust -- the complete and total lack of trust that the American citizen has in our government, and its institutions, to manage the affairs of the people responsibly.

I mean, the fate of another revenue stream is about to be decided by a bunch of lunatics dressed up in dark robes who just got through granting personhood to corporations. If this isn't strange enough try talking with the average unemployed American who pays a monthly premium of nearly $500.00 to maintain their insurance under COBRA, while the Majority Leader Harry Reid was quoted as saying how a Senator only pays $45.00 per month for health insurance that fully covers a family of four.

This is responsible government? While coverage under COBRA is electable, being able to call our government out on its B.S. is not. And now the government wants to mandate health insurance. And how much will our Senator's pay for their plans if this happens? I would imagine that the cost would be about the same as the free pensions Senators pay themselves while Social Security (another mandated government revenue program) goes bust, the same experience most Euro-based governments are going through today who do have government paid healthcare systems and are also placing the austerity pince on their citizens.

Allie said...

Bravo Dmitry! You had me in stitches.

izzit said...

"Insurance" also implies that, in the case of disaster, they would pay out. But already they do not. Not to insured homeowners after Katrina, nor to under-40 cancer patients for lifesaving treatments.
I wouldn't mind paying a mandated tax in exchange for mandated treatment.

Post Peak Medicine said...

Greetings from Canada! I seem to remember our healthcare system being called "evil" a couple of years ago? Well, it still works a lot better than the US system either with or without Obamacare, although it's not without its faults. Good points: almost entirely funded from general taxation; no exclusion for pre-existing conditions; nobody has to declare bankruptcy due to catastrophic medical bills. Bad points: because it's "free" at the point of use, there is an incentive for both doctors and patients to milk the system.

Slightly off topic question: could Dmitry (or anyone) post a couple of Russian words which have been bugging me lately. I've heard Dmitry speak about them in interviews. One means "I don't give a rat's ass" (about the Government, the Corporation, my employer etc) and is a way of managing stress. The other means "the store / office is now closed, but for you, it is open" which is a way of trading favours. Neither has a precise English equivalent. Thanks and keep up the good work!

Glenn said...

If you can judge a man, or a law, by it's enemies (The neo-cons in black robes and congress, not you Dmitry), Obamacare is looking better and better by the judicial gaffe.


Marrowstone Island

Draco TB said...

Governments can do health care better and cheaper than corporations. In fact, adding in corporations and competition actually makes it far more expensive.

New Zealand's healthcare is paid for in general taxes and costs about $2k/capita compared to the ~$6k/capita of the US. Yes, the two are comparable as far as quality goes.

Our ACC (Accident compensation) is arguably the cheapest and best in the world. This does have premiums added to general taxes based upon income and you type of work. Our government that we have ATM (Our equivalent to the Republicans) want to privatise it. To do this they first tried to discredit it by saying that it was out of money and then raised the premiums. A year later ACC announced record surpluses and so the government, facing re-election, dropped the premiums again. Then, once they got re-elected, they announced that they were going to open the work account to competition at which point they run into another problem - they were going to have to up the premiums again and take dividends just so that the private insurers could compete. Not surprisingly, this opening of the work account to competition hasn't happened yet.

You people who have only private insurance, yeah, you're being ripped off.

das monde said...

Is this IRS health care with "neighborhood clinics" different from the non-American systems? Of for that matter, from the Soviet health system?

Anotherplayaguy said...

Simplest solution to the problem (well, two, really): 1. Let people die when it's their time, 2) lower the age of eligibility of Medicare to zero.

Without Wax said...

Dear Dmitri,

You're one of the few sane people out there, who can see that the Emperor has no clothes.

Are you left-handed, by any chance? Reason I ask, is that I am, and we seem to see the world similarly, whereas everyone else I know thinks I'm just difficult!

Anyway, keep doing what you're doing, you're keeping us sane too...

k-dog said...

QuObama care is a disaster that if upheld by the Supreme Court will carve inequality in stone. The fascist coupling of government and corporation takes a great leap forward with quObama care. QuObama with the passage of time will be seen as the tipping point president who's maintenance of a status quo agenda at a time when change, progressive action and leadership was desperately needed destroyed America.

M said...

New Zealand has “socialised” medicine and this is funded from taxes and people do not hesitate to turn up at a hospital if injured. There is private medical insurance but the premiums are horrendous particularly for older people but for most of the populace the system works. The tax department also administers social policy in the form of collecting student loans repayments and child support from liable parents with the necessary enforcement procedures to ensure compliance.

I would not want to try to have to access health care in America because from all I have read it or bloated and corrupt particularly where insurance companies try to find every conceivable loophole to avoid paying out on claims – they never seem to have problems collecting the premiums though.