Health Care Reform: Counting on Fewer Choices at Higher Cost

“We will pass reform that lowers cost, promotes choice, and provides coverage that every American can count on.” - President Barack Obama, Press Conference, 22 July 2009

In his press conference last week, President Obama laid out the success criteria for health care reform: cost, choice, and reliability. It is instructive to weigh the various proposals in front of Congress against these criteria. A good summary of the proposals appeared in the Wall Street Journal (“Your Stake in the Health Overhaul”, 22 July 2009, http://online.wsj.com/article/SB10001424052970203946904574302401417970322.html). Some common elements are:

Mandated Coverage. The proposed reforms will require every American above some income threshold to obtain insurance. The government will provide subsidized insurance to those below the threshold. In addition, the government will dictate the services that every insurance policy must cover. Congress is still hammering out the details, but some of the mandates under discussion are maternity care, prescriptions, mental health, chiropractors, and abortion. Combined, these mandates increase costs by creating additional demand for medical services without increasing supply. Furthermore, mandates reduce choice by preventing consumers from opting for a lower cost policy that provides fewer services.

Reduced Out of Pocket Costs. The best way to lower medical costs is to increase out of pocket expenses, thereby rewarding consumers who control spending. The proposed reforms do the opposite by dictating maximum annual out of pocket costs – $5,000 per individual and $10,000 per family in one version. Furthermore, this idea is based upon a poor understanding of what insurance is for. You don’t buy insurance to cover out of pocket costs that you can afford; you buy insurance to cover the catastrophe that you cannot afford. The most rational choice, therefore, is to buy a policy with the highest deductible you can risk without courting financial disaster. If passed, the new law will prohibit you from making that choice.

Requirements for Employers to Provide Insurance. This proposal will raise costs and reduce options by taking the choice of insurance policies out of the hands of employees of all but the smallest companies.

Reduced Payments to Health Providers. This measure does have the potential to lower costs, but at the expense of choice and reliability. Doctors and hospitals aren’t exempt from the laws of economics – to continue in existence they have to charge enough to cover their costs. Those who cannot break even under the new government-imposed schedule of fees will have no alternative but to close their doors. Patients will not be able to count on them being there when needed. With fewer providers in business, there will be fewer choices and longer waits for their services.

In short, when measured against the criteria of cost, choice, and reliability, the proposals in front of Congress fail miserably. But then, how could they succeed? The criteria are in conflict with each other.

The Gates Arrest or Why Being a Jerk Shouldn’t be a Crime

According to the police reports, when Sgt. Crowley arrived at Professor Henry Louis Gates’ Ware St. home to investigate a possible break-in, the good professor loudly demanded to know “why, because I’m a black man in America?” He then went on to accuse the policeman of racism and shouted, “You don’t know who you’re messing with!” It was this “loud and tumultuous behavior” that led Sgt. Crowley to arrest Dr. Gates on a charge of disorderly conduct.

If all this is true (and it may not be), Dr. Gates is guilty of nothing more than being a first class jerk, an offense that should not be a crime in a free society. A great deal has been said in the week since then about the role race did or did not play in this incident. But the real issue is not race; the real issue is police power.

Bonnie Rochman, writing on Time.com (“When Disorderly Conduct Is a Cop's Judgment Call”, http://www.time.com/time/nation/article/0,8599,1912777,00.html) was one of the few commentators to touch on it. “In law enforcement,” she begins, “there are few situations that are clear-cut, and disorderly conduct is one of the fuzziest. As Harvard professor Henry Louis Gates Jr. now knows all too well, the misdemeanor charge can be used to corral people who are simply uncooperative or rude. State statutes are designed to help police officers maintain authority, and they are so broadly worded that divining what constitutes disorderly conduct is left up to the discretion of individual officers. ‘It's probably the most abused statute in America,’ says Eugene O'Donnell, a professor of law and police studies at John Jay College of Criminal Justice in New York City.”

The United States is rightly proud that it protects its citizens from arbitrary abuse by the constabulary by means of a “government of laws and not of men.” A statute that is “fuzzy”, “used to corral people who are simply uncooperative”, “broadly worded”, and “abused” has no place in such a government and should be revised. The Logic Critic gives Bonnie Rochman…

4 Blades - Flawless.

Grammar-tee Fair

“[T]hey presently saw a town before them, and the name of that town is Vanity; and at the town there is a fair kept, called Vanity Fair…Now, Christian and Faithful, as I said, must needs go through this fair. Well, so they did…One trader mockingly said unto them, ‘What will you buy?’ But they, looking gravely upon him, said, ‘We buy the truth.’ At that the pilgrims were taunted and mocked and some even threatened to strike them.” - John Bunyan, Pilgrim’s Progress, Chapter 6

The aptly named Vanity Fair magazine set its editors loose on Sarah Palin’s resignation speech and published the results (http://www.vanityfair.com/politics/features/2009/07/palin-speech-edit-200907?currentPage=1). This “Web Exclusive” consisted of a transcript of the oration, marked up in red (and green and blue) pencil like a middle school essay graded by an overcaffeinated student teacher. The exercise got some attention in the blogosphere, where the former Vice Presidential Candidate was taunted and mocked and some even threatened to strike her.

The trouble was, very few of the “corrections” actually improved the speech. Some examples:

Palin’s original text: “People who know me know that besides faith and family, nothing is more important to me that our beloved Alaska.”

Vanity Fair’s revised text: “People who know me know that except for God and family, nothing is more important to me than our beloved Alaska.”

Palin’s original text: “We took government out of the dairy business.”

Vanity Fair’s revised text: “We took the dairy business away from the government.”

Palin’s original text: “our law department”

Vanity Fair’s revised text: “our Department of Law”.

A friend of mine, observing the frivolousness of these edits, asked me “is there a name for this fallacy? False claim of authority?”

There is a fallacy called the Improper Appeal to Authority. This fallacy consists of relying upon the expertise of someone who does not necessarily have special knowledge of the subject. For example, “My barber recommends I buy stock in Microsoft”. However, Improper Appeal to Authority does not apply here – the editors of “Vanity Fair”, in theory at least, have knowledge of how to construct an English sentence.

I would go with a different fallacy: Distinction without a Difference.

Will the Real Judicial Activist Please Stand Up

“Judicial activism, n., A usually pejorative phrase implying that a judge is applying his or her political views, rather than basing decisions on law or prior precedent” – Webster’s New World Law Dictionary, 2006

“Given second circuit precedent, Bushey vs. New York State Civil Services Commission, the panel concluded that the city’s decision in that particular situation was lawful under established law.” - Supreme Court Nominee Sonia Sotomayor, 14 July 2009, explaining her decision in the case of Ricci vs. DiStefano, in which the Second Circuit refused to take on a case by a group of firemen against the City of New Haven

“She says, ‘Well, the Ricci case was decided on precedent.’ There was no precedent! … There was no precedent in the Ricci case that she could cite, yet that's her excuse.” – Rush Limbaugh, commenting on the Judge’s explanation, 14 July 2009

Who’s the real advocate of judicial activism here – the judge who bases her decision on precedent or the commentator who, in addition to making a factual error about the existence of precedent, criticizes the judge because the decision was unfair?

That's So Ignorant

An argument does not have to be about some burning national issue to be interesting. Take the case of comic book publisher Bluewater Productions. Over the weekend, WBZ radio in Boston interviewed a spokesman for the company about its “Female Force” series.

“Female Force” is a line of comic books about famous women like Michelle Obama, Sarah Palin, and Hillary Clinton. When told that Bill Clinton ordered several copies of the issue covering his wife, the interviewer asked whether the former President enjoyed the book. The Bluewater spokesman replied that he must have must because the company did not receive any letters of complaint from him.

This is a textbook illustration of the argument from ignorance. This fallacy consists of assuming a proposition must be true because there is no evidence that it is false. The Logic Critic gives Bluewater Productions…

2 Blades - Wrong.

Koan of the Week

“As you meditate,” Master Li Kim Grebnesi told the class, “observe your breathing, don’t control it.”
“But I can’t tell the difference,” Mindful Mindy objected. “When I try to observe my breath, I’m never sure if I’m controlling it or not.”
“Then observe your controlling,” replied the Master.

Master Li Kim’s Commentary: Sometimes, contemplating a paradox is an excellent way to clear the mind.

Master Li Kim’s Haiku:

The rhythm of breath
Provides a steady drumbeat
For a mindful song.

Krugman Strikes Again

Poisoning the Well – by far the most common tree in the fallacy forest that passes for our National Debate.

This fallacy consists of rejecting an argument on the grounds that one’s opponent allegedly possesses some bias, rather than on the grounds that the argument itself is faulty.

The latest offender is New York Times columnist Paul Krugman. Back in April, it took me three entries to catalog all the fallacies in his attack on the Tea Party movement (2009/04/fallacypalooza.html, 2009/04/fallacypalooza-ii-wrath-of-limbaugh.html, 2009/04/fallacypalooza-iii-final-tea-leaf.html).

Now Dr. Krugman strikes again. This time he takes on the excellent analysis of administrative costs in health care by Robert Book of the Heritage Foundation (the analysis I gave four blades last week). Dr Krugman begins, “Whenever you encounter ‘research’ from the Heritage Foundation, you always have to bear in mind that Heritage isn’t really a think tank; it’s a propaganda shop. Everything it says is automatically suspect.”

Like I said, Poisoning the Well.

The Logic Critic gives Paul Krugman…

1 Blade - Not even an argument (again).

For the full text of Dr. Krugman’s article, see http://krugman.blogs.nytimes.com/2009/07/06/administrative-costs/

For Dr. Book’s response, see http://blog.heritage.org/2009/07/06/medicare-administrative-costs-and-paul-krugman’s-propaganda-shop/

Greed: Noticing the Difference between Liberals and Conservatives (and Objectivists)

Recently, a reader left me a comment recommending Atul Gawande’s article in the New Yorker: “The Cost Conundrum: What a Texas town can teach us about health care”. (http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande?yrail).

In an engaging article, Dr. Gawande concludes that health care costs are high because doctors are greedy. Ordinarily I would parse the argument to identify any fallacies. But instead I will take the opportunity to make an observation about how people think about greed.

A conservative says, “Greed is bad, but that’s human nature. Market incentives should be established for doctors to channel their greed to the best interests of their patients.”

A liberal says, “Greed is bad, but human nature can be improved. Doctors should be made non-greedy.” (This is Dr. Gawande’s position.)

An Objectivist says, “Greed is good. If only barriers to greed could be removed, patients would be much better off.”

P.S. There is a fallacy in the New Yorker article. Anyone who sees it, feel free to comment.

The Administrative Fallacy

Since my last entry, a couple people told me that administrative costs (salaries, light bulbs, profits, etc.) for private health insurers are around 30%, compared to around 5% for Medicare.

I have long argued that a government-run health care program, of the sort currently under consideration by Congress, does nothing to address the high cost of health care and, in fact, raises costs by raising demand. So, on the surface, this statistic about administrative costs suggests I’ve been wrong, and that a government-run program has the potential to reduce costs after all.

Robert Book, Senior Research Fellow at the Heritage Foundation, looked beneath the surface (“Medicare Administrative Costs Are Higher, Not Lower, Than for Private Insurance”, June 25, 2009). He found that it is true that Medicare has lower overhead as a percent of total cost, but not because Medicare is more efficient than private insurance companies.

Percent overhead is equal to per-patient administrative cost divided by per-patient total cost. The reason that percent overhead is lower for a Medicare patient is not that administrative cost (the numerator) is lower. In fact, it’s higher - $509 for Medicare vs. $453 in the private sector (2005 data). The reason that percent overhead is lower for a Medicare patient is that total cost (the denominator) is higher - because Medicare insures primarily elderly patients who have more serious health problems. If the government took on large numbers of young patients, as proposed by the Obama administration, its administrative costs as a percent of total spending would increase and fall in line with the private sector. There would be no cost savings due to lower administrative costs, and quite possibly a cost increase.

It’s worthwhile to take a look at the data that Dr. Book uses to back up his argument. See http://www.heritage.org/research/healthcare/wm2505.cfm. The Logic Critic gives him…

4 Blades - Flawless.

For additional arguments that seek to refute the justification for government-run health care, see George Newman’s Op-Ed piece in yesterday’s Wall Street Journal, “Parsing the Health Reform Arguments” (http://online.wsj.com/article/SB124640626749276595.html).