Health-Care Lies

by Don Boudreaux on July 31, 2009

in Current Affairs, Health, Myths and Fallacies

In his column today in the New York Times, Paul Krugman alleges that “private markets for health insurance, left to their own devices, work very badly.”  Apart from anecdotes about patients with acne and broken hearts being denied coverage, his only evidence for his claim is that “only around 70 cents of each premium dollar actually goes to care.”

So what if unsubsidized private insurers spend 30 cents on the dollar to supply coverage if that coverage is good?  I offer here real-world evidence from family friends that unsubsidized “direct” coverage is not only affordable and available, but also is better than government-subsidized and regulated coverage.

My friends, a couple in their mid- and late 40s, own a small business in D.C. and have two young children.  They purchase unsubsidized private health insurance – directly from the insurer – for a monthly premium of $212.  Their policy has an annual deductible of $10,000.  This means that their maximum annual out-of-pocket medical expenses are $12,544.  [($212 X 12) + $10,000 = $12,544]  (And note that my friend told me on the telephone this morning that he has never paid more than $3,000 for medical care in any one year; fortunately, he and his family are sufficiently healthy that they don’t approach the $10,000 deductible.)

Does $12,544 annually sound like a lot?  My family and I (who are about the same age as my friends, but with only one young child) get our health insurance through my employer (GMU), so it’s tax-deductible and subject to more government regulations of the sort that Krugman asserts are necessary to make private insurance work.  For coverage with a $25 deductible per medical event, we pay out-of-pocket a monthly premium of $144, while GMU kicks in monthly $974.  So the minimum amount spent annually to supply my family with health coverage is $13,416 – nearly $1,000 more than the purely private coverage that allegedly “work[s] very badly” compared to the government subsidized and regulated variety.

If income-tax advantages didn’t make employer provision of health-care insurance such a good deal for employees, I have no doubt that my annual take-home pay would be higher by approximately $11,688 — the amount that GMU pays toward my compensation each year now in the form of health-care premiums.

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James July 31, 2009 at 4:57 pm

Uh, Don, YOU can’t use anecdotal evidence. Only Krugman can. When you win your Nobel Prize, then you can make sweeping generalizations from personal anecdotes.

Daniel Kuehn July 31, 2009 at 10:03 am

Which is exactly why the tax privelege is so stupid and needs to go this year. I’m of the Mitt Romney “what’s the rush” view on a lot of the health reform, but this is one thing that can happen this year.

It’s interesting that Krugman doesn’t mention the information asymmetry, and the combination of fee for service with substantial outcome uncertainty in health care and health insurance – which is what really differentiates it from other insurance markets. He spends more time on that on his blog – I’m curious why it doesn’t really come up here.

Don Boudreaux July 31, 2009 at 10:05 am

An individual fact X whose existence challenges a claim that X is impossible or highly unlikely differs from an individual fact Y aimed at ‘proving’ that Ys are the rule rather than the exception.

David July 31, 2009 at 5:19 pm

I tried to read the Krugman article, but couldn’t get past this line-

“And that government involvement is the only reason our system works at all.”


Mark July 31, 2009 at 11:20 pm

I saw that too. And this guy is an economist?

Anonymous August 1, 2009 at 12:29 am

no, he’s a policy shill. he used to be an economist, and even that’s debatable.

David August 1, 2009 at 2:45 pm


Surfisto July 31, 2009 at 5:20 pm

Please listen to Russ Roberts early podcast from 2006.
“Intermittent Explosive Disorder: Mental Illness or Made-Up Malady” 6/16/2006
It’s only 24 minutes!

Is this what Krugman means when he says…
“And that government involvement is the only reason our system works at all.”

Anonymous July 31, 2009 at 5:44 pm

Exactly Don – this is why the tax privelege needs to be eliminated immediately. I’m very much of the Mitt Romney “what’s the rush, Mr. President” mindset on most health reform, but that’s something they can get rid of (or at least start phasing out – I imagine it would be quite a market shock) this year.

It’s odd how weak and heart-string based the article is. He’s not even mentioning the stuff he’s been talking about and citing on his blog as to the difference between health insurance and other types of insurance – oh well.

Healthy Markup July 31, 2009 at 7:15 pm

So here’s some of that brilliant argumentation by Krugman:

“And you can’t just trust insurance companies either — they’re not in business for their health, or yours.”

Just as home insurers aren’t in business to pay claims, but they do anyway. Plus, government providers aren’t in business for their citizen’s health either. They’re in the business of winning elections.

“This problem is made worse by the fact that actually paying for your health care is a loss from an insurers’ point of view — they actually refer to it as “medical costs.””

This point is literally retarded. Any form of insurance has the same dynamic. If my car insurer didn’t view payouts as a cost, it would quickly fail. This is almost as stupid as his description of the Austrian Business Cycle.

“This means both that insurers try to deny as many claims as possible, and that they try to avoid covering people who are actually likely to need care.”

So they don’t just open the checkbook with every claim? Do single-payers systems? And they don’t want to “insure” people who are already really ill? Shocking! Imagine a home insurer who refused to cover someone who built a house in a flood plain that flooded every other year. Shocking! Maybe insurers should agree to give full coverage at the usual rates to anyone who decided to buy insurance after getting Hodgkin’s.

“Both of these strategies use a lot of resources, which is why private insurance has much higher administrative costs than single-payer systems. And since there’s a widespread sense that our fellow citizens should get the care we need — not everyone agrees, but most do — this means that private insurance basically spends a lot of money on socially destructive activities.”

As we know from our experience with Medicare, the Iraq War, and any other government enterprise, the costs are being low-balled. And if Krugman wanted to see that everyone got care, he and his rich friends could pay for something themselves instead of free-loading all the time.

“The second thing about health care is that it’s complicated, and you can’t rely on experience or comparison shopping. (“I hear they’ve got a real deal on stents over at St. Mary’s!”) That’s why doctors are supposed to follow an ethical code, why we expect more from them than from bakers or grocery store owners.”

This is more raw idiocy. Has Krugman never heard of hospital rankings? Why does he think that patients go to Seattle from throughout the US and Canada to receive cancer treatments? Maybe they compared hospitals?

“You could rely on a health maintenance organization to make the hard choices and do the cost management, and to some extent we do. But HMOs have been highly limited in their ability to achieve cost-effectiveness because people don’t trust them — they’re profit-making institutions, and your treatment is their cost.”

STUPID. How can Krugman trust Toyota to make a road-worthy Prius? Doesn’t he realize that Toyota is a PROFIT-MAKING INSTITUTION and therefore doesn’t care if he rams into a wall at freeway speed? (Only non-profit institutions care about doing a good job.) His brakes are their cost! His crumple zones are their cost! His pyrotechnic pre-tensioners are their cost!

“Between those two factors, health care just doesn’t work as a standard market story.”

Because he and his ilk have sold a Utopian idea.

“All of this doesn’t necessarily mean that socialized medicine, or even single-payer, is the only way to go. There are a number of successful health-care systems, at least as measured by pretty good care much cheaper than here, and they are quite different from each other. There are, however, no examples of successful health care based on the principles of the free market, for one simple reason: in health care, the free market just doesn’t work.”

Krugman has already said before that we’re halfway to socialized medicine and the reasons are obvious: 46% of health care in the US is paid for with government-stolen money and the tax structure is FDRdiotic.

“And people who say that the market is the answer are flying in the face of both theory and overwhelming evidence.”

Right… people can’t make choices to exchange money for goods, insurance, or services more intelligently than Lynn Woolsey, Lynn Westmoreland, or Maxine Waters.

Anonymous July 31, 2009 at 7:18 pm

I don’t know if the retardation was literal so much as inadvertant or even opportunistic, but I definitely agree – this was a heart strings op-ed, not a solid analysis.

What’s weird is he’s been opining all week on the blog about misunderstandings regarding health care market failure – I don’t know why he picked such dumb examples in the op-ed, except to gin up political momentum, perhaps.

Anonymous July 31, 2009 at 7:21 pm

I just can’t believe this guy is a Nobel Prize winner. What the hell for? All I ever remember reading from this guy is how horrible capitalism is. What’s even more amazing is that they gave the award to Milton Friedman in 1976. That had to be a huge abberation.

Healthy Markup July 31, 2009 at 8:30 pm

I got those quotes off his blog, but the post is now gone. It seems his Op-Ed was just that post with a few whiny sentences added. If not for the fact that liberals and whatever you are are so overjoyed by Krugman’s output, I’d say he’s ripping off the NYT.

Beyond that, he’s made a couple arguments to which I referred that you didn’t seem to find any reason to comment about. Is this because you agree with Krugman that a PROFIT-MAKING INSTITUTION has no incentive to produce things or services of value? Is it because you believe like him that there’s no way to shop around for health care even though there are famous annual articles on the best providers of said? These arguments have nothing to do with “heart-strings.” They’re just really, really Krugman-level stupid.

(By which I mean: obvious nonsense that he doesn’t believe because he’s got a really high IQ even though he can’t understand the very simple concept of the ABC.)

Now, point to the solid arguments he’s apparently made all week because I can’t find them.

Anonymous July 31, 2009 at 8:41 pm

Haha – should I have gone through your post point by point? I said it was a crappy op-ed.

As for the profit-making institution thing, he said that was why people don’t trust them – which for all I know is accurate. Maybe that is why people don’t trust them. He didn’t say they have no incentive to produce anything of value, unless I’m mistaken.

If at this point you really think I have a problem with private providers of health care, you’re really not paying attention.

I was thinking specifically of the post he made with Kenneth Arrow’s article on health care. That has the good, essential, real market failures that do exist in the market for health care… I have no idea why they didn’t seem to make it into this op-ed, but that was disappointing.

Anonymous August 2, 2009 at 4:44 pm

Rush, what rush! We have only been debating this for like, uh, 100 years now. And most seriously for the last 50.

Anonymous August 3, 2009 at 9:59 am

Sure – and we certainly the people who have been debating this could probably craft several plans in a week and be ready to go with them.

But the country as a whole, and the Congress, hasn’t been debating it for that long in a purposive way. Some policy wonk could draw you up a plan in five minutes, and it may potentially even be a good one – but we have to argue about whether it’s a good plan, and since Congress will inevitably change the policy wonk’s plan, we need to think through whether those changes will have good or bad consequences.

People have been talking about this for quite a while – but the country as a whole needs to chew on it I think.

DKH July 31, 2009 at 5:57 pm

I agree with your overall point, but I find it surprising that your friends aren’t responsible for coinsurance past the deductible, increasing their maximum out of pocket expenses.

Anonymous August 1, 2009 at 12:37 am

High deductible plans typically have no coinsurance above the deductible. They are very inexpensive for insurance companies, because they rarely pay out. Because they rarely pay out, the coinsurance isn’t a significant economic factor.

Coinsurance is really more a way to try to control routine health care consumption, not catastrophic.

vidyohs July 31, 2009 at 5:58 pm

The first URL takes you to the obamahealthcare bill itself in searchable links. The second to the lies obama and his people are telling you about it.

Look for yourself.

Anonymous July 31, 2009 at 6:01 pm

Krugman’s health care columns remind me of a first term sophomore.

Surfisto July 31, 2009 at 6:04 pm

I am a healthy 29 year old male. I can get coverage for $52/month, with an out of pocket max of $5900/yr.
What is the economist argument against or for mandating me to buy that?
I choose not to because I don’t want to pay the $52 and prefer to buy other things, like many individuals my age and younger (Opportunity Cost). Probability wise my odds maybe I am correct not to purchase it.
If we were all forced to buy it (those who are not already on medicare or medicaid), would this cut the nations cost?

Anonymous July 31, 2009 at 6:23 pm

I think you see three basic arguments: public health/externality, prevention, and adverse selection. I don’t think any of them are that good.

Public health/externality – If you get sick with something communicable you put other people at risk. In other words, they pay a cost for something that you aren’t obligated to compensate them for. The market will underinvest in public health measures for this reason. I think it’s a bad argument for a mandate, though, because these problems pertain more to things like public provision of vaccinations (which I think does make sense) and covering your mouth when you cough – not exactly things that are best remedied by being forced to buy coverage.

Prevention – some sort of sense that bounded rationality or high discount rates, or poor information causes people not to take care of themselves given the choice when they’re young, which raises health care costs when they’re old. I also think that’s a pretty bad argument. Who’s to say people aren’t balancing health in their old age and in their youth adequately? I suppose this could make sense with respect to more expensive care – like regular cancer screening. But again, I don’t see why we don’t think people will make these tradeoffs themselves.

Adverse Selection – if you know you’re healthy but the insurance company doesn’t, it introduces information asymmetry. Insurance is a deal for people who know they are less healthy, and the insured pool is less healthy than the average population as a result. If the insurer doesn’t observe this, costs go up, premiums inflate, and more healthy people are driven out. The market is sub-optimal compared to a market where insurers had full information, and mandating everyone to join (some argue) is a remedy. Not an entirely convincing argument for me because they can pinpoint your health status relatively effectively even if some information is concealed.

One of the big reasons why I voted for Obama over Clinton in the primaries is that he opposed mandates, while she supported them. He continued to oppose them until June, when he didn’t exactly say he supported them – but he would concede the point to Congressional Democrats so long as there were exemptions. So that’s not exactly a good development from an economic perspective, but I suppose I won’t lose sleep over it either. That’s Washington for you.

I think the reason why Congressional Democrats pushed for it had nothing to do with economic justifications. I think it had more to do with humanitarian issues, and concerns that low income families weren’t getting insurance from their employers. Seems to me the way you fix that is eliminate the tax privelege for employer coverage (which increases provision for high-income individuals compared to low income individuals, because it’s a bigger bang-for-your buck de facto tax shelter). You don’t institute a mandate to do that.

Wow… that was long. But good! And I really like you, surfisto! We need more actual discussion on here.

Anonymous July 31, 2009 at 6:29 pm


Why not have the government handle public health menaces like swine flu and leave the rest of our ailments to the market? I still don’t understand why I should subsidize health care for the obese. They did it to themselves.

Anonymous July 31, 2009 at 6:36 pm

ArrowSmith -
Exactly – wasn’t that the conclusion I essentially came to?

I think there are OTHER asymmetric information and uncertainty arguments that may or may not justify intervention (I just don’t know enough about it to say), but they wouldn’t justify a mandate.

The actual subsidization that I do support – things like Medicaid and Medicare (and I’m not really sure how much Medicare is actually subsidized… but I’m sure it is somewhat) – have nothing to do with economic arguments, and more to do with ethical arguments. Obviously there are problems with the way both those program are run, but I’m refering to the general idea of them.

But I certainly wouldn’t support subsidizing the care of someone who is obese simply because they have a tougher time because they’re obese – I agree with you completely on that.

Anonymous August 1, 2009 at 12:45 am

“I can get coverage for $52/month, with an out of pocket max of $5900/yr”

If you save the max $2900/yr into your HSA, and your top marginal tax rate is 30%, your tax savings is $870/yr = $72.5/mo.

In other words, your tax savings more than pays for your insurance premium. Therefore the only cost to you is that you must direct $2900 to health savings (but this remains your personal asset). If you are saving that much anyway, or it doesn’t matter to you to do so, then you are cheating yourself by not doing it.

That being said, I do believe it is your right to cheat yourself.

Surfisto August 1, 2009 at 7:11 pm

Thank you for the advise and I see the benefit, should we mandate Health Savings Accounts then?
I guess this gets into paternalism and you already said it is my right to cheat myself, but economically do “we” have a responsibility to keep people from cheating themselves?
I mean from the above example I now pocket 20 dollars a month imagine that times 100 million or more?

Anonymous August 1, 2009 at 9:41 pm

Mandate, no. But that leads to a different more fundamental discussion, though with practical economic consequences.

However, I will say this. Health care costs would be lower, and Americans would be a lot wealthier, if Medicare/Medicaid were completely replaced by mandated HSAs.

And when you say you pocket $20/mo. That’s not the most of it. Most if it comes from you knowing that it is your money. That encourages you to ask for prices up front and to shop around. If you can get a CT scan at one place for $200 less than at another place (all else equal), you have just saved $200.

And EVEN MORE, the place you denied business from suddenly realizes that it has to become more competitive and finds ways to lower its prices. That allows others to save money. And that same effect, stimulated by thousands or millions of shoppers will lower many or most of your other health care costs, even without going to the trouble of shopping around.

Anonymous August 1, 2009 at 9:44 pm

1. I don’t like the government engaging in paternalism
2. It’s true HSA account enable you to have more money due to it being untaxed income.
3. Progressives don’t like HSAs because it deprives the government of revenue for their welfare programs.

I think we have a very flawed system between government paternalism and individual responsibility somehow living side by side. Personally I’d rather see much smaller government, then we wouldn’t even need HSAs.

Anonymous August 2, 2009 at 4:50 pm

My son was a healthy 29 year old male, who was paying insurance. Out of the blue he got leukemia, was faced with paying $4000 per month out of pocket for one of his many prescriptions – and he had insurance. His family, namely me – his single mother, was forced to pay out of pocket nearly $100,000 for his care while he lived. What should I pray for? His death or bankruptcy? Or, a health system that had some bang with small contributions up front to handle catastrophes?

J Cortez July 31, 2009 at 6:08 pm

Why are you expecting intellectual honesty?

This is Paul Krugman you’re talking about.

Anonymous July 31, 2009 at 6:22 pm

Prof. Boudreaux:

I live in Seattle, in Jim McDermott’s district. On may to work during the Clinton health care dust-up, I listened to an NPR interview of McDermott. McDermott was touting the “single payer” plan as saving money over the private sector. Like Krugman, he blithely assumed ( and now assumes) that government health care has no overhead.

When I got to the office, I saw on my desk one of the flimsy weekly newsletters put out by BNA. The lead article was a comparison of overhead costs between the government halth programs (VA, Medicare, Indian Health Service, etc.) and private insurance. As I recall, the average overhead in the privates was about 17% of premium, The various federal programs were all much more expensive. Most were in the 35%+ range. That is to say, 35% of appropriated dollars were absorbed by bureaucracy and not available for benefits. One program was >40% — Medicare, I believe. I cannot believe things are any better now.

So, private insurance is evil because its overhead is now 30%? (Source for this?) The government, on the other hand, will take >40% and still give inferior service. This is a good thing?

Anonymous July 31, 2009 at 6:28 pm

I keep hearing leftist propaganda that Medicare overhead is like 3%. Can you cite some sources?

Anonymous August 1, 2009 at 1:50 am

Overhead and cost are two very different things. Medicare, or any company, could at almost a moment’s notice, cut overhead by almost any arbitrary amount. So why is there ever any overhead at all?

Anonymous August 4, 2009 at 2:39 am

I do not have numbers at hand. The numbers I quote are from memory
gong back to early in the Clinton Administration. Still, these
numbers should not be hard to come by. I am sure the CBO has the
numbers for the government end.

3% overhead is just plain fantasy. Medicare has, of course, exported
to the provider much of its overhead (one reason why docs do not want
to take Medicare if they do not have to). Even so, there is no
government bureaucracy anywhere that could operate at that level of
efficiency. I suspect someone is not counting everything.

As Disqus noted,

Anonymous August 4, 2009 at 3:08 am

I do not have numbers at hand. The numbers I quote are from memory
gong back to early in the Clinton Administration. Still, these
numbers should not be hard to come by. I am sure the CBO has the
numbers for the government end.

3% overhead is just plain fantasy. Medicare has, of course, exported
to the provider much of its overhead (one reason why docs do not want
to take Medicare if they do not have to). Even so, there is no
government bureaucracy anywhere that could operate at that level of
efficiency. I suspect someone is not counting everything.

As Disqus noted,

Anonymous August 4, 2009 at 5:34 am

I do not have numbers at hand. The numbers I quote are from memory
gong back to early in the Clinton Administration. Still, these
numbers should not be hard to come by. I am sure the CBO has the
numbers for the government end.

3% overhead is just plain fantasy. Medicare has, of course, exported
to the provider much of its overhead (one reason why docs do not want
to take Medicare if they do not have to). Even so, there is no
government bureaucracy anywhere that could operate at that level of
efficiency. I suspect someone is not counting everything.

As Disqus noted,

Anonymous July 31, 2009 at 6:27 pm

Look, most people will be responsible with their health and finances to do the right things. What this is about is the public option aka free health care for those who are too irresponsible in their health and life choices to afford insurance.

In my ideal world, the social safety net would only apply to those who through no true fault of their own found their way upon hard times. But even then, if a person is responsible they will have catastrophic insurance to pay for that. The real question is, what do you do with those born into the poorest rungs of society, destined to never rise the socio-economic ladder? They simply vote themselves our money.

Anonymous July 31, 2009 at 6:38 pm

Ah yes – the very poor… it’s a formidable voting bloc, to be sure ;-)

Anonymous July 31, 2009 at 6:42 pm

My point is that they guilt-trip wealthier liberals like you to support the vast welfare programs we have today. I can’t believe liberals still support the existing welfare state that LBJ basically created. “The Great Society” is such a dismal failure, that logic would dictate that we at least should have the discussion. Instead, libertarians get demonized for even bringing it up.

Anonymous July 31, 2009 at 7:02 pm

Haha – if only I were wealthy, and I’m glad I’m not liberal. I suppose I am wealth”ier”.

The Great Society has been changed radically, though. It’s a shell of it’s former self, and I think that’s for the best. Social insurance programs are the only thing that’s really survived intact, and from an economic perspective those are far less odious than welfare.

I knew exactly what you meant – I just thought the idea of the poor dictating their demands was funny, but I got your point :)

Anonymous July 31, 2009 at 7:06 pm

My larger point would be that it’s always so easy for the Democrat to prey upon people’s feelings. It’s always easier to say “let’s take care of the people without X, Y and Z” rather then do a cost-benefit analysis. Because cold, hard logic is too unappealing to young, hip voters. It sickens me how many young people today just don’t think things through whether in their personal lives or politics.

Methinks July 31, 2009 at 7:43 pm

Haha – if only I were wealthy,

Ha ha. Don’t worry, if the current administration has it’s way, you never will be.

and I’m glad I’m not liberal.

Not in the original meaning of the word.

John Dewey July 31, 2009 at 6:50 pm

ArrowSmith: “what do you do with those born into the poorest rungs of society, destined to never rise the socio-economic ladder?”

Who are these people who are “destined to never rise the socio-economic ladder”?

Would that be Bob Crandall, who grew up in a tiny home at the end of a potato field? and and who became CEO of American Airlines?

Would that be Wally Amos, who had to shine shoes as a youth to help his family pay the low rent in his impoverished New York City neighborhood? and who became the first African-American talent agent of the William Morris Talent Agency? and the founder of the Famous Amos cookie store chain?

Would that be Lee Trevino, who grew up without a father in a dirt floor shack? and who caddied for a few coins at the nearby country club? and who became the spokesman for Cadillac?

Arrowsmith, do you really know much about “the poorest rungs of society”? and about how many Americans who start there ignore the guilt-induced sympathy heaped on them by liberals?

Anonymous July 31, 2009 at 6:54 pm

I would like some firm statistics on socio-economic upward mobility, rather then a few anecdotes. Fact is I don’t really know too many people who rose from what we call “lower class” to upper middle class or higher. Even my parents who are Soviet emigres, came here with engineering degrees ready to make good money. There will always be people with enough drive to get themselves out of poverty, but the reality is that 90% don’t and continue to form a large base for the Democrat party as well as plague upon the conscience of Americans.

John Dewey July 31, 2009 at 7:46 pm

Where did you get this “90% don’t” figure? Do you have actual statistics on economic mobility? Or is this just your guess?

Your initial statement was:

“those born into the poorest rungs of society, destined to never rise the socio-economic ladder”

You are now saying that not every person in the poorest rungs of society is destined to never rise. So perhaps you’ve made progress in your thinking.

Methinks July 31, 2009 at 7:50 pm

Hey, ArrowSmith, you want one anecdotal example? ME and my entire family. I am a Soviet emigre and my parents had to go back to school and raise two kids because Ph.D’s in history from Soviet Universities were worthless here (for obvious reasons). My mother changed adult diapers in nursing homes to put food on the table. We came with NO expectations except that we would no longer have our heads thumped by the socialist hammer and then whacked off with the communist sickle.

Anonymous July 31, 2009 at 7:56 pm

I didn’t say there aren’t some examples of upward mobility. I wonder what the real statistics are. Perhaps we haven’t had a revolution in America because the underclass hasn’t been permanent with the breeding resentments over generations. The one obvious exception would be in the African-American community that has been a permanent under-class forever. We only haven’t had a revolution because they’re 12% of the population and not all of them are poor. But we have had riots(Watts, Detroit, Chicago, Rodney King).

Believe me, I’m totally on your side. I hate socialism.

John Dewey July 31, 2009 at 7:58 pm

ArrowSmith: “I would like some firm statistics on socio-economic upward mobility”

My first thought upon reading your request was “Well go do some work and find them yourself!” But I doubt you would have done so. So here’s a little bit of evidence from a 2007 U.S. Treasury analysis of economic mobility on the U.S.:

“The Treasury study examined a huge sample of 96,700 income tax returns from 1996 and 2005 for Americans over the age of 25. The study tracks what happened to these tax filers over this 10-year period. One of the notable, and reassuring, findings is that nearly 58% of filers who were in the poorest income group in 1996 had moved into a higher income category by 2005. Nearly 25% jumped into the middle or upper-middle income groups, and 5.3% made it all the way to the highest quintile.

Of those in the second lowest income quintile, nearly 50% moved into the middle quintile or higher, and only 17% moved down. This is a stunning show of upward mobility, meaning that more than half of all lower-income Americans in 1996 had moved up the income scale in only 10 years.”

If you need additional evidence, do some work and find it yourself.

Anonymous July 31, 2009 at 8:00 pm

I admit I was lazy to do the research, but then I remembered reading an article long ago that talked about how good upward mobility was in the United States.

speedmaster July 31, 2009 at 6:40 pm

Great points. Imho, Krugman long ago lost his last shred of credibility as an impartial economist.

Name July 31, 2009 at 6:46 pm

I calculated this for my self, 25 individual working at a university

max cost is $8184.80/yr with an annual minimum cost of $4684, but I have the worst plan. Add a child or spouse to it it almost doubles.

Anonymous July 31, 2009 at 6:47 pm

Another thing to note about the “Great Society” expansion of welfare. I don’t recall anyone ever talking about the obesity crisis among the lower-class back in the 1960s. But now obesity strikes hardest at the poorest members of society. If you go to a typical urban slum, you won’t find grocery stores stocked with fresh fruits and vegetables. You will only find fast food and convenience stores packed with cheap, carb-laden junk.

TomB July 31, 2009 at 7:01 pm

I am a relatively health 29 y.o. male. I take allergy medication daily. And some other daily medications, which I will not disclose. I have a private plan through Aetna. I just moved from DC to VA, and my premium significantly decreased. So your friend might get an even better deal if he lived in VA (which he might already).

I was paying $232/mo with a $1000 deductible (which I’m pretty sure includes drugs) for a maximum of $3784/yr. I am now paying $150/mo with a $100 deductible for a max of $2800/yr. My co-pays are not bad either, something like $20/$40.

My plan through work used to cost $280 per month.

Anonymous July 31, 2009 at 7:07 pm

Rush Limbaugh ran a clip of Barney Frank admitting that the “public option” is the gateway to single-payer. I think the GOP should pound this point all August. If the people still want it after that, fine.

Anonymous July 31, 2009 at 7:17 pm

Don, you are exactly right. My wife asked her company what they were paying in health insurance benefits, the answer was $7500 per year and we were paying an additional $156 per month. Considering we only used about $1000 per year of those benefits, she asked her company to pay her the $7500 in cash. They were only too happy to oblige to drop her from the benefits rolls. We bought an HSA and now we get to save the balance of what we weren’t using each year, about $6500. I love HSA’s and the freedom and flexibility they provide. It’s also a great way to both save and invest because you can invest the principal in a canned set of mutual funds if you would like.

Methinks July 31, 2009 at 7:28 pm

Well, than you’ll be happy to know H.R. 3200 basically outlaws HSA’s.

HSA’s are great. But, they give you choices, and that’s not great for bureaucrats and politicians whose power comes from controlling your life. Once you get into the government meat-grinder healthcare system and they refuse to provide treatment for your condition to save money (which they will have to do because taxing the “rich” will never be enough to pay for this and the middle class is going to scream bloody murder when their taxes go up), you will not have the option to pay out of pocket for the procedure. That’s how medicaid works now, btw, and the bill bans doctor owned clinics and facilities.

Make sure you call your elected officials and let them know exactly what you think of that.

Anonymous August 4, 2009 at 2:30 am

Yeah, I know it bans HSA’s and I am sick about it. They were so awesome, I
wish they had more time to take off.

I have to wonder, where in the constitution it allows the Feds to wholesale
take over industries and outlaw peaceful transactions by consenting adults.

My guess is that the right to enterprise is covered under the 9th amendment,
in the bill of rights.


Anonymous August 4, 2009 at 3:00 am

Yeah, I know it bans HSA’s and I am sick about it. They were so awesome, I
wish they had more time to take off.

I have to wonder, where in the constitution it allows the Feds to wholesale
take over industries and outlaw peaceful transactions by consenting adults.

My guess is that the right to enterprise is covered under the 9th amendment,
in the bill of rights.


Anonymous August 4, 2009 at 5:26 am

Yeah, I know it bans HSA’s and I am sick about it. They were so awesome, I
wish they had more time to take off.

I have to wonder, where in the constitution it allows the Feds to wholesale
take over industries and outlaw peaceful transactions by consenting adults.

My guess is that the right to enterprise is covered under the 9th amendment,
in the bill of rights.


Anonymous July 31, 2009 at 7:18 pm

Basically what Krugman is saying is that insurance companies aren’t in the altruism business and thus they are evil. What kind of an economist is this guy? I think he’d be happy being chief economic adviser to VI Lenin.

Methinks July 31, 2009 at 7:22 pm

Krugman is a monkey. This clip rightly belongs in the earlier post where he found – what was it? 2 Canadians who liked their health care system? – but, it’ll do here.

He asks his audience how many are Canadians and then how many dislike their health care system.

Anonymous July 31, 2009 at 7:26 pm

Yet whenever I go onto Huffington Post, they cites polls that show 90% of Canadians love their health care and only 40% of Americans like theirs. It’s always like that. Similar articles have also stated that only something like .1% of Canadians ever go to America for medical care.

Methinks July 31, 2009 at 7:37 pm

Yeah, I’ve “polled” very healthy 24 year olds about the Canadian health care system and they LOVED it – seeing as they’ve never used it.

I can also poll American patients who seem to think that Canadians are getting the same care for “free” or they’re expecting a $100,000 Hail Mary treatment which has a 5% chance of extending their lives another 3 months to be paid for by the health insurance company and they scream bloody murder when they are refused.

All polls are crap. Very few people have had the experience of being treated for the same illness in several different countries (I’m one of the “lucky” few), therefore very few people can make an adequate comparison.

The only relevant statistics are things like wait lists, and outcomes from the point of diagnosis. Overall population health has very little to do with the health care system in developed countries.

Anonymous July 31, 2009 at 8:40 pm

It’s true 99% of polls are crap. However it does show that most people don’t really oppose some kind of national health care. If you ask the average person they wouldn’t even be able to give a rational argument against it. That’s what the left-wing is counting on. Once they can debunk the Republican argument of “government health care is lower quality”, then all that’s left is “public option is the moral thing to do”. That will leave conservatives looking like Uncle Scrooge. Of course a recent poll showed that the American people favor capitalism over socialism by a 2:1 margin, so it will be interesting to see if the Democrats class-warfare rhetoric will make any headway in August-October.

Methinks July 31, 2009 at 7:39 pm

Similar articles have also stated that only something like .1% of Canadians ever go to America for medical care.

Is that 0.1% of Canadian PATIENTS or Canadians in general. The relevant population is patients – not all Canadians, who are mostly not sick at all.

Anonymous July 31, 2009 at 7:44 pm

I never bothered to check their “sources”. They simply make claims that Canadians are overwhelmingly happy with their single-payer system and that a few anecdotal stories of sick people crossing the border mean nothing. Single-payer to me is one of those core ideologies of the left, and doesn’t really need facts and logic to back it up. Sort of their view on socialism in general, it’s all about feelings.

Methinks July 31, 2009 at 8:19 pm

Well, by the time they change their “feelings” about socialist medicine when they or their family are crushed into the meat-grinder, it’ll be too late.

I agree with you. It’s a religion – all feelings and ritual.

Anonymous July 31, 2009 at 7:23 pm

The biggest thing the Democrats have going for them is the 18-27 demographic views corporate America as fundamentally immoral/evil. They have been successfully brainwashed into thinking that “profit is evil”. It’s only a matter of time before the boomers start dying out and the younger voters will create a true socialist majority like in Europe.

John Dewey July 31, 2009 at 9:32 pm

Arrowsmith: “The biggest thing the Democrats have going for them is the 18-27 demographic views corporate America as fundamentally immoral/evil.”

As a 20-year-old Vietnam War protestor in 1971, I viewed Republicans and corporate America as evil. But after a few years of cashing corporate paychecks, I changed my thinking. I now realize that good and evil exists side-by-side in corporations, in political parties, in neighborhoods, and sometimes even within a single human mind.

I’m a little more optimistic about the survival of capitalism.

Anonymous July 31, 2009 at 7:33 pm

Greg Mankiw has had two relevant posting recently, one on “Arrow on the Increasing Cost of Healthcare” and “Why is supply and demand so confusing?”

Thinking back to my doctor’s office in the 1960′s, it amazing to think that he was able to afford his own x-ray machine.

Now, with all the tests that are available, and under conditions of increasing demand for more and greater services, how could one begin to suggest that prices will fall in the face of increasing demand?

In his linked post, why is it so hard to see that changes in demand may have same, opposite or some other unintended result in price? And how can adding previously unsubscribed health care subscribers not end in a net increase in the amount of goods and services provided? And how can that increase in demand be met by something other than price signals?

I just wish I was able to subscribe to an insurance scheme that would allow me to choose which levels of coverage I prefer. But, the State of Oregon has outlawed that type of free market thinking.

Anonymous July 31, 2009 at 7:38 pm

Because as a society we’ve decided that the “health care product” is something special and holy compared to other products. Products that have little or no regulations send to correct signals to the market, but the entire health care system is so severely distorted due to government interference. Left wingers like to think that you can’t put a price on morality, but that’s simply not true. There is always a price since resources are finite, which is the #1 principle of economics.

Methinks July 31, 2009 at 9:39 pm

It is a special product.

From the perspective of human history, modern health care is a nothing but a luxury good and the ham-fisted attempt to supply same amount of the luxury good to everyone will mean none for anyone. Except congress. Just like your parents and I had it, ArrowSmith.

Anonymous August 2, 2009 at 1:17 am

“that prices will fall in the face of increasing demand?”

In general, you would expect increasing demand of something to increase its cost.

And demand in itself isn’t a problem, it just IS. The problem is that health care demand is hyperstimulated by government action. That drives prices up beyond people’s value for the services, but without a mechanism for those people to do anything about it except continue to pay, or to drop coverage entirely.

Thus government (by legislating third-party financing) is making health care unaffordable and driving people onto the roles of the uninsured.

And Obama/Reid/Pelosi want to create even more of the same, telling us it will solve the problem.

mesaeconoguy July 31, 2009 at 7:52 pm

Paul Krugman is an ignorant fool, and a liar.

Government destroyed the private market for healthcare and healthcare insurance long ago.

Krugman, and his illiterate ilk, have completely and totally failed to make the case that outcomes will somehow improve under a single-payer system.

Socialized Failure
Dissecting health-care data from Britain, Canada, and elsewhere


Does the U.S. Spend More on Health Care?

Taken at face value, international statistics show that the United States spends more than twice as much per person on health care as the average developed country. But these statistics are misleading. Other countries are far more aggressive than we are at disguising and shifting costs — for example, by using the power of government purchase to artificially suppress the incomes of doctors, nurses, and hospital personnel. This makes their aggregate outlays look smaller when all that has really happened is that part of the cost has been shifted from one group (patients and taxpayers) to another (health-care providers). This is equivalent to taxing doctors, nurses, or some other group so that others may pay less for their care.

Spending totals aside, the U.S. has been neither worse nor better than the rest of the developed world at controlling spending growth. The average annual rate of growth of real per capita U.S. health-care spending is slightly below the OECD average over the past four decades (4.4 percent versus 4.5 percent). It appears that other developed countries are traveling down the same spending path we are.

Do Patients in Other Countries Have Better Access to Care?

Britain has only one-fourth as many CT scanners per capita as the U.S., and one-third as many MRI scanners. The rate at which the British provide coronary-bypass surgery or angioplasty to heart patients is only one-fourth the U.S. rate, and hip replacements are only two-thirds the U.S. rate. The rate for treating kidney failure (dialysis or transplant) is five times higher in the U.S. for patients between the ages of 45 and 84, and nine times higher for patients 85 years or older.

Overall, nearly 1.8 million Britons are waiting for hospital or outpatient treatments at any given time. In 2002–2004, dialysis patients waited an average of 16 days for permanent blood-vessel access in the U.S., 20 days in Europe, and 62 days in Canada. In 2000, Norwegian patients waited an average of 133 days for hip replacement, 63 days for cataract surgery, 160 days for a knee replacement, and 46 days for bypass surgery after being approved for treatment. Short waits for cataract surgery produce better outcomes, prompt coronary-artery bypass reduces mortality, and rapid hip replacement reduces disability and death. Studies show that only 5 percent of Americans wait more than four months for surgery, compared with 23 percent of Australians, 26 percent of New Zealanders, 27 percent of Canadians, and 36 percent of Britons.

Entire article here:

vidyohs July 31, 2009 at 9:24 pm

Potent stuff, Mesa. Good post.

Seth July 31, 2009 at 8:01 pm

Last year my employer, provided plan cost $12,000 total (mine and employer’s cost) for change-the-oil, co-pay coverage. This year I switched to a high deductible, HSA option. About the same amount comes out of my pocket, but now I write the checks for medical care until I hit my deductible limit. I keep what I don’t spend in the HSA and roll it over for future use.

My behavior hasn’t changed. I do what we all do by second nature with everything we buy with money from our own pocket, we ask how much, is it worth it and what are my other options?

What has changed is my perception of what’s coming out of my pocket. Under my old plan almost anything was worth the $25 copay. Now I perceive my out-of-pocket cost to be the same as my insurer’s, which is closer to reality. I’m finding that I’m much more interested in finding ways to get the best value for my money. One a recent trip to the emergency room I found myself spontaneously asking, “What do you expect that x-ray to tell us and how much does that normally cost? What happens if we don’t get it?”

A final note, I still appreciate my insurance company because it gets me the good rates on medical care, I think (maybe I could get the same rates by negotiating directly with the providers). But, until I’m participating in a medical care market with others who perceive their out-of-pocket costs to be closer to reality, I imagine the list prices will continue to be about as ficticious as home prices four years ago. Amazing what happens to price of something when it’s bought with other people’s money.

Anonymous July 31, 2009 at 8:05 pm

The single biggest failing by most people is the inability to sit down, open up an Excel spreadsheet, put all the numbers down and see what’s reality. Instead everything is a “gut feeling”. Amazing how human civilization has advanced to this point on that principle rather then scientific approach.

Anonymous July 31, 2009 at 8:10 pm

An honest socialist admits that resource are finite, but insists that they should be organized/allocated according to a “public good” rather then leaving it to individual choice. Krugman is an honest socialist.

The dishonest socialists(Barack Obama) keep promising endless goodies without mentioning how he’s going to pay for them.

Seth July 31, 2009 at 9:15 pm

To Walter Williams’s point earlier this week, what part of the Constitution empowers government to do anything with medical care?

Methinks July 31, 2009 at 9:45 pm

Obama finds the constitution to be a pain in his butt. It’s too restrictive. So, he’ll either try to get around it, ignore it, or shred it.

An interview where he bemoans the limits of the constitution and lays out ways we can change it so that government can commence full(er) scale redistribution.

Anonymous July 31, 2009 at 10:35 pm

It’s interesting that the 10th amendment explicitly states that powers not stated to the Federal government are delegated to the states. The founders intended to let each individual state determine the level of socialism/capitalism they wanted. So the Federal government in essence has been in utter violation of the Constitution since Hoover’s proto-New Deal programs onward. Nobody but us kooky libertarians seem to care.

Anonymous August 1, 2009 at 12:48 am

“Obama finds the constitution to be a pain in his butt. It’s too restrictive.”

Less and less restrictive, it seems.

Methinks August 1, 2009 at 5:45 pm

In the interview, he clearly stated that he doesn’t think the courts are where we will be able to “correct” for this “inadequacy” (to redistribute). He says we must seek to do it through the legislative process.

hamilt0n July 31, 2009 at 10:06 pm

I don’t see why this argument isn’t made more often. I have similar, high deductible insurance and I love it. Why would anyone want to be forced to spend thousands of dollars on insurance when they could just pocket the difference? The expected outcome is to save a ton of money, and the worst case scenario is that you will only be as bad off as you were with employer provided insurance. The pre-tax subsidy of employer provided insurance doesn’t even come close to making it a good deal, imho.

Anonymous July 31, 2009 at 10:30 pm

Why a surtax to fund ObamaCare won’t work:

Because the rich have their tax shelters figured out. If leftists had any intellectual honesty, they would instead be saying “let’s go after their tax shelters”. Yet I don’t hear a single Democrat talking about it. Can anyone tell me when is the last time class warfare worked on a national level politics in America? Anyone?

Methinks August 1, 2009 at 2:00 am

One of the “tax shelters” is the inability of the federal government to tax state government and vice versa. This is why municipal bonds are exempt from the Federal tax – and it was a Supreme Court decision. It would take another multi-year supreme court decision to scrap that.

The most productive will just leave.

Methinks August 1, 2009 at 2:02 am

Oh, and the other option is to just become a whole lot less productive and take a lot more leisure time.

Anonymous July 31, 2009 at 10:32 pm

Obama seeks to demonize insurance companies to push through his agenda:

This is smart only if a majority of the American people hate insurance companies MORE then they hate Washington D.C. In the end it matters more what the voters in Blue Dog districts think then national polls. I wonder we’re not getting polls on individual swing districts? That would be a lot better signaling then all these CNN/Gallup polls.

Anonymous July 31, 2009 at 10:39 pm

Here is a more comprehensive list of how American government violated the Constitution from the early days:

Going back to the 1790s, the Congress has violated the Constitution:

While Jefferson did denounce the Sedition Act as invalid and a violation of the First Amendment of the United States Bill of Rights, which protected the right of free speech, his main argument on the unconstitutionality of the act was that it violated the Tenth Amendment: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

Thomas Jefferson sought resolution to this blatant violation:

To address the constitutionality of the measures, Thomas Jefferson and James Madison sought to unseat the Federalists, appealing to the people to remedy the constitutional violation, and drafted the Kentucky and Virginia Resolutions, which called on the states to nullify the federal legislation.

I can imagine these days Jefferson would be denounced as a right-wing Limbaugh-bot. How sad.

Anonymous July 31, 2009 at 11:38 pm

OK so this is all about being honest about how health care works?
Two questions then;

How much would your health care plan (the group plan via GMU) cost you if you had chronic renal failure?

How much would your friends private insurance be if he had renal failure?

You guys think private insurance would be affordable if you’re over 65 or have a chronic condition. You guys are NUTS!

Anonymous August 1, 2009 at 12:54 am

“You guys think private insurance would be affordable if you’re over 65 or have a chronic condition. You guys are NUTS!”

So you only want a government plan that pays for privately unaffordable care?

Methinks August 1, 2009 at 2:09 am

Hey, I’d watch out if I were you , Muirdiot.

The Obamessiah just blew the lid on you greedy doctors. Apparently, you’re all putting kids at risk to rip out their tonsils unnecessarily and robbing us blind performing masses of unnecessary procedures to line your pockets.

I’d watch your back, if I were you. The One has opened our eyes.

RM3 August 1, 2009 at 2:34 am


I have three questions for you:

1. Of the people who are now treated for kidney failure, what percentage are covered by private vs. govt?

2. Why do you continue to comment on a site where folks routinely call you an idiot?

3. How is it possible that someone with such deplorable grammar could become a physician?

muirgeo August 1, 2009 at 12:19 pm

1. Almost certainly the majority. Again apply for a private plan as someone with renal failure. I think you can do it online.

2. Because when they do so I know they have no answers to the good questions I may have brought up. I guess I find pleasure in confirming an ideologue for what they are as well as affirming my own positions on the issues.

3. Some of the greatest minds ever (Darwin for example) were terrible with grammar. I just pretend maybe I am like them. I put substance over form. I am so glad I have poor grammar and not illogic. I see some nicely written replies here with great spelling and grammar that are logically dumb as dirt. I think to myself when reading them, ” Wow what wonderful prose that dumb ass used.” Then my poor grammar (which I make no excuse for) doesn’t seem like such a handicap.

Methinks August 1, 2009 at 4:01 pm

I put substance over form.

If that were true, nobody would ever call you an idiot. Thanks for taking a break from ripping off your patients.

Anonymous August 2, 2009 at 1:11 am

“Again apply for a private plan as someone with renal failure. ”

I’m confused. Are you looking for insurance (a hedge against unexpected risk), or are you just looking for someone to pay your medical bills for you?

vidyohs August 1, 2009 at 2:11 am

How the heck do I get this disqus thing to leave me alone. It decided to start sending me all kinds of updates on who responded to what. I don’t need the clutter.

Methinks August 1, 2009 at 2:20 am

If you find out, let me know.

Anonymous August 1, 2009 at 2:34 am

Log in to disqus and you change your account options. I just did and turned off the notification alert feature.

Anonymous August 1, 2009 at 1:53 pm

thanks rsanjiv. ya…. that’s dangerous. it’s so easy to just click through the link. too much unnecessary temptation to continue to clutter up the thread.

i have to say, though – the tree structure helps with that. Does anyone know how to collapse different branches? that would be nice too.

ah… learning curves :)

Brian T. Schwartz August 1, 2009 at 5:24 am

How much profit do health insurance companies make? According to a recent study by PricewaterhouseCooper, just 3 cents on the dollar. 87% goes to medical services. See:

Anonymous August 2, 2009 at 1:35 am

That’s the usual story with “greedy” profitable industries at BHO and his ilk rail against. Those profits are always only a tiny fraction of the total cost, and applying 100% of those profits to reduce prices would have a negligible effect on prices, but would of course have a profound effect on the incentives for companies to produce.

Anonymous August 1, 2009 at 5:57 am

In the pre-agricultural hunter-gathering bands which our neuro-computational architecture evolved for, a sick or injured person was an opportunity to purchase some health insurance. My conjecture is that healthy people would fall over each other trying to offer aid, because the patient’s debt could be called in whenever roles were reversed.

This situation, I think, led to much competition among care-givers. To the patient, the perfect care-giver would be one that did not demand a return favour, but simply acted “out of the goodness of their heart.”

This “perfect care-giver” strategy would be vulnerable to free-riders, but suppose they most often encounter patients who felt obligated to return favours. In which case, the “transaction” can take place without anyone intending it to: the care-giver provides aid to the patient, and the patient feels obligated to return aid when their roles are reversed. Since both parties feel compelled to act without some cost-benefit calculation, the possibility of being cheated diminishes.

Unfortunately, this attitude toward health insurance seems to persist today. While it can work fine in a small group or family, it does not work in what Hayek called the extended order of human cooperation, where explicit cost-benefit calculations are necessary, however much they offend our evolved dispositions.

johnnyvenom August 1, 2009 at 7:16 am

Can someone give me info on how this would play out for someone who is chronically ill/disabled? I’m talking about HSAs and other consumer-driven healthcare products. You have many disabled people who end up on the government dole. Is there a more market-based system that could alleviate the situation? Thank you.

muirgeo August 1, 2009 at 12:05 pm

Johnny that’s the $64K dollar question. Don Boudreoux criticizes Krugman for using anecdotes and then proceeds to tell us how affordable health is for healthy people. He ignores that his subsidized plan is more expensive because it covers all his colleges even those with pre-existing conditions. No one here really likes to talk about how these things play out in the real world.

In a private market health care system old and chronically ill people get denied coverage and then they go broke paying for their health care and then they die. That’s how it works.

Anonymous August 1, 2009 at 12:49 pm

muirgeo asserted:

In a private market health care system old and chronically ill people get denied coverage and then they go broke paying for their health care and then they die. That’s how it works.

That is NOT how it was working prior to the introduction of Medicare in 1965.

Prior to the introduction of Medicare, doctors were very generously, and quite voluntarily, treating elderly patients who could not pay free of charge — and were happy to do so! What’s more, those pushing socialized medicine at the time knew this and admitted it.

For instance, the Prime Minister of the Canadian Province of Saskatchewan, Woodrow Lloyd, who instituted full-scale socialized medicine throughout his province in 1962, said at the time, “Doctors have a fine tradition of providing services without charge to those who are unable to pay….”

What, then, was the argument for creating these programs? What problem were they attempting to solve? The problem, according Lloyd, was this: “Many people are uncomfortable in asking for and obtaining something for which they cannot pay”. What they were “uncomfortable with” was the “means test” that doctors rightfully applied to screen out those who COULD afford to pay from those who truly could not.

In other words, what some of the elderly objected to was having to admit that they were charity cases.

As former president Harry Truman said at the signing ceremony where Medicare and Medicaid became law:

“These people are our prideful responsibility… (Oh, really, Mr. Truman? And just why is your grandmother my responsibility?) …and they are entitled, among other benefits, to the best medical protection available. Not one of these, our citizens, should ever be abandoned to the indignity of charity. Charity is indignity when you have to have it. But we don’t want these people to have anything to do with charity…

So the purpose of these programs was not to help the “needy” — such help was already being provided — the purpose was to help the dishonest “needy”, i.e. to help those who wished to evade the fact that they are charity cases.

Of course, it goes without saying that if an individual allows the taxpayers to pay his doctor bills, he is STILL a charity case — even if the government is helping him pretend he’s not.

So the facts are clear: Prior to the creation of Medicare, there was no crises with the elderly going bankrupt or being refused medical treatment — and even those pushing Medicare knew this and admitted it.

muirgeo August 1, 2009 at 2:10 pm

Michael you are just re-writing history. Before Medicare many many elderly lost their savings to health care cost.

Even NOW the second biggest cause of bankruptcy is health care cost. Often even for people who had insurance. But it is pretty rare to see a Medicare patient bankrupted by cost even though they are the highest risk of all patients.

You are simply denying the facts.

Anonymous August 2, 2009 at 1:09 am

“But it is pretty rare to see a Medicare patient bankrupted by cost…”

Hilarious! Instead it is bankrupting everybody! What a great plan!

Methinks August 1, 2009 at 5:21 pm

Excellent post, Michael Smith.

Yesterday, I went to my ophthalmologist. I have something in my eye that has a small probability of turning cancerous and I guessed out loud that if it does, I must be ready to be fitted with a glass eye. The doctor told me there is a new procedure and drug combination that will allow me to keep most of my vision and certainly all of my eye. What price would I be willing to pay for that? What price would someone ELSE be willing to pay for me since it will be me, not them, who derives the benefit but it will be they, not me, who bear the cost? It’s likely that they would be willing to pay just enough to spare me from dying of cancer, but not the additional cost to spare my eye.

This, of course, is why health insurance companies don’t cover the cost of all-you-can-eat health care. They must collect that money from premiums paid by the rest of the people in the insurance pool and if those insurance premiums rise too much, people will begin to opt out. Similarly, the government will also have to collect money to pay for health care entitlements, thus creating a disincentive to produce the wealth that is required to be taxed away to fund the entitlement. In both cases, these hard luck cases and the sick elderly will not get the health care Obama is currently promising them (although, he’s having a harder time lying about it, I notice).

The difference is that today, I can pay out of pocket to cover the additional cost of drug therapy and surgery to save my eye and part of my eyesight. The bill Obama is trying to ram through congress makes privately owned clinics and surgical procedures illegal. Paying out of pocket will be illegal, so it will be government, not me deciding how much health care I will consume.

Nathan Scott August 1, 2009 at 1:28 pm

Isn’t that what happens to the same people in socialized systems?

I have an Uncle who has smoked and drank heavily his entire life and can’t realistically be insured (30,000 a year in premiums). He needed heart bypass surgery that might extend his life another 10 years. He spent 100,000 out of pocket and wiped out half his retirement plan.

Under a government system that taxes him an extra 10% of his income he would be left without any retirement savings and denied the operation outright.

Once the government has control of health care you will be nothing more than a number. As soon as your future tax revenues are exceeded by the cost of your care the government won’t be returning your calls, unless of course you are friends with your local bureaucrat.

Anonymous August 1, 2009 at 1:12 pm

The first thing to understand is that there is no such thing as “the government dole”. All government spending is the spending of other people’s money that has been confiscated at gunpoint.

So the issue is this: does being “chronically ill/disabled” endow the individual with a special right — that is, a right denied to everyone else — to initiate the use of physical force against other individuals for purposes of robbing them of however much of their money is required to pay one’s doctor bills? The answer is clearly NO. No amount of “need” on the part of one man endows him with the right to cancel another man’s property rights and steal his money.

Nothing changes when the government does the stealing on behalf of the “needy” and then dispenses the proceeds of the robbery under a government program.

The “needy” have a right to ask for voluntary help — to ask for charity — but no right to initiate physical force or accept the proceeds of a robbery done by the government.

And if you’ll see my comment below, prior to the introduction of Medicare, there was plenty of charity to help those who truly needed it.

Anonymous August 1, 2009 at 4:22 pm

All government spending is the spending of other people’s money that has been confiscated at gunpoint.

So the obvious conclusion is we should have anarchy. Grow up. Your’s is the position of some one with a victim mentality. It’s chilish. The government always and only takes from you… and with a gun no less. And apparently you have no recourse to move to another better country. That would be scarey if I where a 4 year old with an active imagination. Fortunatly I am a grown man and that whiney talking point is obvious cry baby BS from a person so self centered that he nevers stops to think about the fact that others are paying for his government expenses and that he regularly benifits from government programs.

Where do you get your health insurance Michael?

Anonymous August 2, 2009 at 1:06 am

“The government always and only takes from you… and with a gun no less.”

More is worse than less. And the ubiquity of state theft does not make it less immoral.

Anonymous August 2, 2009 at 1:04 am

“how this would play out for someone who is chronically ill/disabled?”

The more you spend on health care, the more you would benefit from lower health care prices.

Anonymous August 1, 2009 at 12:53 pm

The debate over socialized medicine has missed a key point.

Insurance does NOT pay for healthcare.
It is only the premiums that pay for healthcare.
Insurance is merely a service. If you hasve a one-in-humdred chance of a $100,000 illness, then insurance permits you to swap that for a certain $1,000 premium.
Insurance is not a source of money, nor is it meant to be a net wealth transfer.

The only proper social function of insurance is price discovery. The drunk old guy pays more than the fit young woman.

The only reason insurance is involved is that mistake in the WW2 era. To avoid price-controls, the government created a fake raise — employer health premiums are pre-tax.

But now that insurance is involved, it gives politicos and hacks the latitude to play un-actuarial games so as to hide the desired wealth transfers.

Cut the link. Make all premiums pre- OR post- tax, consistently. And especially encourage MSAs plus catastrophe insurance. You don’t insure oil changes for the car, or paint for your home. Don’t insurance sniffles with your doctor.

THEN insurance will be at its best — flattening the peaks of the real outliers.

Underwriterguy August 1, 2009 at 1:57 pm

I’ve posted this comment on other blogs, but think this crew might have some helpful insights. For the record, I am a registered Libertarian with what, I think, is a pragmatic streak. Here’s what I believe is needed in any “reform” legislation.

1. Tax health insurance premiums paid by employers as any other compensation. The current exemption was a reaction to Federal Government wage and price controls and did not evolve in a free market. The current tax treatment masks the true cost health insurance leading to distorted behavior at the consumer level.
2. Mandate that every resident of the US be covered by a health insurance plan whether employer provided, through a union or individually purchased. The controversies over “pre-existing conditions” and individual underwriting are resolved if everyone, from birth, has coverage. There are no “free riders.” The political process can decide at what level of poverty premiums should be subsidized by taxpayers.
3. Establish a minimum benefits plan. The Devil will truly be in these details, but without a minimum plan the issue of the underinsured will remain. Except for the poorest among us the plan should call for cost sharing for all but preventive care and the treatment of chronic disease. The focus should be on protection against catastrophic expenses, the kind that bankrupt families, rather than day to day expenses. The degree of personal responsibility (that is, how much you must pay yourself) could be established as a function of family income much as today’s medical expense deduction is.
4. Establish premiums using a “community rating by class” methodology (CRC). This provides for some recognition that medical expenses, in fact, vary by age, sex and geographic local. In addition, at the individual insured level, allow for “good health” discounts from the CRC premiums for those who meet certain standards shown to be consistent with lowered medical costs such as not smoking, maintaining an appropriate weight and following preventive care regimens.
5. Provide for risk adjustment pools among participating insurers. This protects any single insurer from attracting more than the “normal” number of catastrophic cases. Participating insurance companies would pay into this “re-insurance” pool which would be required to be self supporting (no government subsidy).
6. Abolish all State mandated benefits. There must be a single, national plan available to all. With the other provisions listed this will ensure that insurance is portable, freeing American labor to move to better opportunities without fear of losing insurance.
7. There is no need for a “Public Option” if these rules are implemented, but if we must have one it must be self supporting (no government subsidy) and adhere to the same rules as private plans. Furthermore, any fee schedule “negotiated” by a Federal plan must be available to any participating insurance company as well.

Anonymous August 1, 2009 at 3:47 pm

(Actuary by training, capital markets by long experience)

“1. Tax health insurance premiums…”

Tax is something of a distortion and getting rid of unfair treatment is good.

But the real distortion is the presence of third party payers. That is what destroys free markets. The way to avoid this is HSA plus catastrophe insurance.

You do not buy “oil change” insurance for your car. And the more you make, the higher you set the deductible for your collision insurance.

Same is true for health insurance. The HSA plus high deductible gets rid of the irresponsibility of having a third party pay from the first dollar. The high-level insurance protects solvency. THAT”S the true libertarian solution.

To repeat what I said in the initial post – insurance does NOT pay for health care. It merely lets people decide on their own risk trade-offs. Prefer the one-in-hundred chance of losing $100,000? Or would you rather “lose” for sure the $1,000 premium? Government has no business deciding that for you.

“2. Mandate…”

No mandates – that runs entirely counter to libertarian philosophy.

So-called “free-riders” get away with it because we have lost the habit of billing people for what they get. You don’t have free-riders in supermarkets, because that sector has not been perverted by “grocery insurance.”

For the poor, we offer welfare, but we integrate ALL such benefits–food, housing, health, etc– to provide a rational framework and avoid gaming of the system.

Oh, and forcing insurers to ignore “pre-existing” is just criminal, a violation of free markets in every way. You can’t buy death insurance after you’re dead.

“3. Establish a minimum benefits…”

First “Minimum benefits” presumes you can know what’s best for each individual. That is a liberal fallacy, not a libertarian principle.

Second, insurers are devastated by the constant stream of new and retroactive “mandates” like fake psychological conditions.

“4. Establish community rating…”

No real underwriter would accept “community rating.” If the price is too low, insurers will not sell. If insurers MUST sell, they will go bankrupt.

As I said in the original post, the only social function of insurance is price discovery. The right way to reward a fit person is lower premiums in the free market. Not some government kludge that will inevitably suffer gross intrusions by the left.

“5. Provide for pools…”

That risk adjustment already exists, as “reinsurance.” And government must stay out of reinsurance just as it must be kept out of primary insurance.

“6. Abolish all State …”

Final death knell of the 10th Amendment. Even MORE federal intrusion. Not libertarian.

“7. Self supporting Public Option…”

No public option under ANY conditions. ANYTHING public will with absolute certainty metastasize into a government-run, loss-making, taxpayer-subsidized monopolistic travesty.

Methinks August 1, 2009 at 5:30 pm

Robert Arvantis,

What do you think of allowing states to legislate as many mandates as they wish, but opening the health insurance market to national competition the way the car insurance market is open to national competition?

Anonymous August 1, 2009 at 6:16 pm


Interesting idea.

Key point about (current) insurance law. To sell to residents of a specific state, an insurer must comply with that state’s specific laws on (1) consumer protection–marketing, benefits, etc. AND (2) solvency and reporting requirements.

An example: As you might imagine, NYS is onerous on both protection and solvency regs. NYS ALSO says “if you can’t do it in NYS, you can’t do it anywhere else,” a sort of law-export regime.

Therefore most insurance holding companies have a special NYS sub which does business only in NYS, and a 49-state sub for all the rest.

For some time now, insurers have sought a “federal” charter that would let them sell in any state, without the local restrictions.

That “federal” idea has not taken hold in securities law. Most states maintain their own investment rules on top of the national (“SEC”) regs. That’s why NASD has Series 7 (general) and Series 63 (local) exams.

Since the federal law did not take hold in securities, it might be hard to force states to recognize a national charter.

So Minnesota for example will still try to pile on all sorts of mandated mental health benefits. Makes it hard for an insurer in Virginia to sell to Minnesotans.

If we DO get federal-chartered insurers, then the state efforts might well be a sort of “Consumers Reports” guidance for buyers. Since the subject may be complex, it’s nice to have a “look for this when you buy…” type advice.

Anonymous August 1, 2009 at 11:56 pm

“Tax health insurance premiums paid by employers as any other compensation.”

Careful! The pirates in Washington LOOOOOOOOVE raising taxes. What you should advocate is to replace the tax deduction on benefits with a REVENUE-NEUTRAL income tax cut. That would make it less tasty to the pirates, but more palatable to the working voters.


Stop calling yourself a libertarian. You’re not fooling anyone here.

“Establish a minimum benefits plan.”

Free the market and if there is a sufficient desire for such a thing, it will emerge. Governments have already proven themselves inept at insurance mandates.

“Establish premiums using a “community rating by class” methodology (CRC)”

My God, man. You are a freaking central planner, aren’t you?

“This protects any single insurer from attracting more than the “normal” number of catastrophic cases.”

Do you understand what a market does?

“Abolish all State mandated benefits.”

Essentially impossible. There are 50 states who all have the sole authority to write their own state laws, and no incentive to do what you say. What you SHOULD do, is encourage Congress to reassert the interstate commerce clause of the CotUS by merely issuing a law that no American citizen can be legally impeded from purchasing health insurance (or any other legal US product or service), from any other American.

That will open up the competition you seek, and make state-level insurance cronyism become irrelevant.


The vast majority of all US health care problems have to do with health care financing. And the vast majority of that (including 3rd-party payer financing) is the result of:

1. Tax-deductible employer benefits.
2. Medicare third-party financing.
3. Medicaid third-party financing.

It is a myth that the so-called 47 million uninsured are a burden on the system. Half of them pay directly for their care without insurance. And the total financial burden they place on the health care system is less than 2%. That is a level of cost-shifting that nobody complained about 100 years ago when physicians did it on their own.

The solution then, is

1. Replace deductible benefits with income tax cuts.
2. Allow the option of placing the Medicare payroll tax into a private HSA.
3. Replace Medicaid/SCHIP with HSA subsidies.
4. Optional: Have Congress reassert the Commerce Clause in insurance.

This is not the free market solution, but puts us on the road to it without any FURTHER government impositions. The effect will be less third-party financing and employer-linked coverage (although in some cases they may still be market winners). It will allow people to keep any health care dollars they don’t spend. That will drive down prices. And that will make any government health care welfare less needed (since more people could afford their own), and less costly when it is needed.

Anything else you want, like purchasing groups, you are free to do in the marketplace without any government involvement of any kind.

And people will not be denied their right to pay with cash. Remember, there is nothing immoral about paying cash for a service. Therefore it is quite immoral to deny someone that right. Insurance should never be legally mandated, any more than legal services, lawn services, auto services, or shoes are mandated.

Once costs have come down, remaining government impositions on our liberty will be seen as unnecessary. You may even find that there will be MORE uninsured, as more people find it acceptable to pay directly with cash.

Underwriterguy August 2, 2009 at 3:04 pm

Thanks to RobertArvanitis and vikingvista for their comments, especially the ones that didn’t call me names (smile). I had not seen the Cato article and found it thoughtful, but discouraging; discouraging in the sense that there are no easy solutions. VV, you are undoubtedly correct in many/most of your points, but your ideal world ain’t gonna happen. We are marching toward some form of national health scheme, and, as someone who once designed and built group health plans, I still think my basic points would make the result less onerous. I’ll go away now and think more about recasting some of the elements of the design based on your (and others’ input).

Anonymous August 2, 2009 at 8:10 pm

“VV, you are undoubtedly correct in many/most of your points, but your ideal world ain’t gonna happen.”

It isn’t my ideal world. It is a realistic recipe for moving toward it. You should be encouraged that HSAs are on the rise. Even many corporations are now offering an HSA choice to employees. The evil that Congressmen do may derail it, but you should also be encouraged that voter popularity for the Obama/Pelosi/Reid nightmare is plummeting fast. It isn’t a done deal yet.

There is MUCH misinformation out their. As you reformulate your thoughts, I highly recommended you review this list of health care myths:

Anonymous August 1, 2009 at 1:26 pm

I would like to know what insurance company your friends use, Don, since I am not provided insurance at my current job.

Anonymous August 1, 2009 at 11:16 pm

Shop at I picked up a Blue Cross/Blue Shield HSA plan there for $62/mo, with a $5K/yr deductible. I haven’t found a place yet that does not take BCBS. There are several HSAs available.

Don’t be afraid of HSAs. They are very easy to use. When you buy health care services, you just give the providers your insurance information and your HSA credit card. After your insurance company negotiates down the price, the providers just bill your card. It’s easy.

The hardest thing for most young people starting out is getting their HSA account filled up. You just have to make a plan to do so. Take your deductible and divide that by how much you can afford to contribute each year (but not exceeding the IRS tax-deductible allowance). That will tell you how many years it will take you to fill your account up to your deductible. Usually 2-5 years depending on your income and deductible.

And of course you can use your insurance plan at any time, even with an empty account. You can give your health care provider any credit card you want. It is just that if you don’t pay from your HSA, then you are paying with after tax rather than pre-tax dollars.

If you start young, and you set up a lifelong disciplined plan to contribute every year to your account, then it won’t take many years before you have a very sizable nest egg–something that you will thank yourself for in your later years when you really need it.

And if you never need it, then you can pay income tax on it (like an IRA) and spend it however you want. Or if you die, your heirs get it, which would give them a great start on their own HSA.

And one more thing…

You can use your HSA whether or not your insurance is accepted. The advantage of using it where it is accepted is that your insurance gets their negotiated discount for you. But, insurance or not, you get to spend tax-free dollars. The only conditions are that the expense qualifies according to the IRS. And the list of qualifications pretty much follows common sense, and is quite broad.

muirgeo August 2, 2009 at 12:00 pm

“ tries to provide coverage to as many applicants as possible. Unfortunately, because you have indicated that you (or your dependents) have or have had a substantial pre-existing condition, you (or they) may not meet the health underwriting standards of an insurance company.”

That is the message you get if you have diabetes or any other chronic disease. In a free market health care system you pay out of pocket.. you go broke, under treated and or die.

And you all think why should I have to pay for unhealthy people… because one day YOU WILL be unhealthy and uninsurable.

And your answer is that nice people and nice doctors will be charitable. You have no real world solutions and no idea how awful your free market health care would be.

Anonymous August 2, 2009 at 7:56 pm


You quite literally CAN’T insure against something you have. Real insurance NEVER applies to something with 100% risk, by definition of “insurance”. Nor would you want it to, because for a “insurance” company to profitably cover something for which you have an instantaneous 100% risk (meaning the event has occurred), the “premium” they charge would have to cover 100% of your health care costs plus the insurance company overhead. Meaning it would be cheaper for you to avoid the insurance company middle man and pay directly.

If an event has already occurred (you already have a condition, you already have a flooded house, your car has already crashed, your house has already burnt down) then you want to live in a world in which you can afford to help yourself.

No system ever conceived has done a better job of providing a variety of options at a variety of prices, especially low prices, than a world of individuals freely trading for their own self-interest–a free market.

The systems you advocate for, all of which involve third-party financing or coercive distribution, raise the costs of healthcare so as to make it more and more unaffordable for people to purchase directly. Either that happens by literally increasing the prices you are charged, as in the US, or it is made unaffordable because the government tells you that it is illegal for you to consume it at any price (rationing).

To keep prices down, you need a population of people actively shopping for services that provide them what they want at the lowest price. Once prices are driven low, those are the prices that are available to EVERYONE whether you have insurance or chronic condition or not. So it is to the advantage of EVERYONE who consumes health care, particularly those with chronic conditions, to have a large population of cost-conscious health care consumers.

HSA’s do that. The vast majority of the population, and almost everyone ever born for a large part of their lives, can easy get cheap catastrophic insurance in the form of an HSA. The population of people with chronic conditions is much much smaller. That means that the vast majority of the health care financing problem is easily and readily solved with HSAs. That is good, because it makes the rest of the problem, those with chronic conditions, small and easier to contend with.

And for many of those with chronic conditions, the downward pressure on prices by creating a consumer health care market solves the problem for them by making it affordable to buy. Placing less wage income into expensive 3rd party health financing schemes and more into the income stream of those people, further helps them. Now the problem is even smaller.

Freeing up insurance companies to design their own policies to exclude certain outcomes related to a preexisting condition, allows many of those people to insure, if they want, against events that haven’t already occurred. That further helps those people.

Do those things and you have a system that well serves almost everyone both with and without chronic conditions. It is a system where health care is much more affordable to be purchased directly without insurance (because almost all of it IS purchased without insurance), and it is a system where young people have more income and incentive to save for further health care expenses. It also encourages young people to buy their own portable insurance coverage for the unknown future chronic condition that they may develop.

Your focus on insurance coverage is misguided, because of what insurance is–protection against something you don’t expect to ever have. You need to focus on prices and availability of health care products and services, and insurance premiums will follow.

Instead, you advocate for a system that hurts EVERYBODY–raises prices, reduces availability, lowers people’s take home income, lowers quality.

It is like your irrational advocacy of Medicare. You are happy that seniors on Medicare don’t often file for bankruptcy, and are perfectly happy the the price of that is bankruptcy for everyone.

The consumer market solution dramatically shrinks the problem to a point where even the most villainous of central planners would see the target of a government solution as being quite small and affordable.

Anonymous August 1, 2009 at 2:36 pm

See my article “A Pure Free Market in Medical Services”

vidyohs August 1, 2009 at 2:36 pm

Well I am an computer illiterate dummy because i have no idea how i got on the diqus dist list and I can not find out to get back in in order to delete the notices.

I once had a page up that asked for my user or e-mail and a password. I tried everything in the world to get by that but since i had not been given a password and it didn’t like a damn thing I put in, I never got anywhere.

Personally there needs to some sort of clear cut signpost on this page right here, each thread that guides one to the disqus functions, and allows one to manipulate the instructions to the damn thing.

How do I get to where I need to go, I have tried everything that looks like a link to find an “account” assigned to me?

Anonymous August 2, 2009 at 5:26 am

Paul Krugman is an intelligent man who is capable of research, but his column is not written as an academic argument. It is written to provoke controversy.

It is a political screed that Krugman writes as an amusement. He may or may not believe what he writes: it matters not. What matters is the resulting commentary, both positive and negative. His target is the population of the beautiful-but-stupid, together with the connected-but-stupid, those whose world view corresponds with what he writes. They run (into the ground, of course) the corporations that have been the recipients of bailouts, and their wives run the salons in which Krugman, a man not especially physically attractive, is lionized by powerful but stupid men and beautiful but stupid women.

Many of Krugman’s target audience also run the world, inasmuch as they are members of the administration: Czars, Cabinet secretaries of questionable competence, economic advisors who have whored themselves to the President to the extent that they now deny their life’s work to argue the contrary for the benefit of their employer. Krugman treats them kindly, because he knows what the real game is. One who comes to mind smiles perkily for the camera, spouting platitudes about the improving economy, when her own scholarship indicates that the President’s policies are exactly wrong, and indeed, damaging to economic growth.

Krugman should be ignored.

Anonymous August 2, 2009 at 4:42 pm

You need to get a life. People who do not earn as much as you do, think that $12,000 is a lot of money. And you have not factored in what happens when you need catastrophic care – pretend that does not happen – then wonder who are the statistics that have cancer, AIDs, pandemic flu, pneumonia, COPD and all the illnesses that pharmas are advertising to on the TV. If you are healthy i.e. not using the system very much that’s great but remember we are talking about HEALTH insurance. We don’t need it unless we get sick and then it does not work well at all.

Anonymous August 2, 2009 at 11:55 pm

You are the one who is not aware of the statistics.

Death by AIDS in the US has become uncommon. Why?
Cancer survival for most types of cancer is considerably longer in the US than in any other country. Why?
Premature birth survival rates are higher in the US than in Canada. Why?
Life expectancies for those not suffering fatal trauma is higher in the US than anywhere in Europe. Why?
Duration of suffering for treatable diseases is shorter in the US than in Canada and most places in Europe. Why?

And if you ever worked even a day in any US hospital you would realize that much if not most of the care in the hospital is going toward the collection of diseases that you mention.

“If you are healthy i.e. not using the system very much that’s great”

That describes socialized medicine. The day after legislation passes, healthy voters FEEL warm and cozy being told that they no longer have to worry about health care. Not until they become one of the minority of voters actually experiencing the health care system do they realize they’ve been sold a bill of goods. Those whose health care taxes haven’t totally impoverished them, buy a plane ticket to the US to get care.

Anonymous August 2, 2009 at 4:56 pm

Here is a must-read column that exposes the madness of Obama’s health care “reform”:

Anonymous August 2, 2009 at 11:43 pm

“Rights, as the Founders conceived them, are not claims to economic goods, but to freedoms of action.”

Another lucid article by Yaron Brook. Thanks.

Underwriterguy August 2, 2009 at 10:33 pm

Hope you are correct. I have a form of HSA, provided by my former employer as part of my early retiree benefit (which is a form of deferred compensation). Another advantage of HSA’s is that you can buy medical services at wholesale. Based on personal experience i can tell you these prices are sometimes less than 50% of retail. And the best discount I have gotten is 50% for paying cash.
Keep up the good fight for a pure Libertarian solution. We’ll all benefit.

Anonymous August 2, 2009 at 11:34 pm

I’ve had the same experience. I had a test which the provider said would be $200 if paid outright without going through insurance (but of course I could still pay with my tax-free HSA). He said that in the past when he put it through insurance companies it usually came out to be around $400.

As long as people continue to focus on insurance coverage rather than health care prices, there will continue to be a health care financing problem.

Methinks August 2, 2009 at 11:39 pm

underwriterguy & vikingvista,

I’d love for you guys to weigh in on the health care blog we’re working on. If you’re interested:

Underwriterguy August 3, 2009 at 2:14 pm

Methinks, I sent you an email asking for more info. Hope to hear from you and that VV joins as well. He is a real stickler for Libertarian principles and has made me think about some of my “practical” approaches.

Liberal August 5, 2009 at 6:05 pm

I noted how Krugman’s evidence is ‘anecdotal’, whereas yours is ‘real world’! There are a lot of holes to poke in Krugman’s piece, as some of his lines come dangerously close to the textbook definition of socialism, but your ad hominem attack almost legitimizes what he has written.
The problem with what Krugman says is that there is less evidence and more thesis in his main statement is ‘works very badly’, which is hardly a substitute for logic. His statement that government intervention is paramount is not backed up by evidence or logic.
What really annoys me about your view on health care is that you never attack the fact that the salaries of doctors in this country are not market-adjusted. They are artificially inflated by the AMA as a lobbying institution. Doctors from other countries are not allowed to directly practice medicine here. Even experienced ones are forced to go through three years of residency, which is more of a deterrent than anything else. Government protectionism of markets is abhorrent; and a real fiscal conservative should be railing against this. I would love to hear your opinion on this.

Anonymous August 9, 2009 at 2:39 am

Most of the regulations your group insurance is subject to comes from state regulation, as only self-funded plans under ERISA are subject to federal regulation, unless you are over 65.
Further, your friend must be blessed with good health, and he must make a lot of money. Should he be struck by a serious illness, his out of pocket costs would be far greater than the $12,000 potential maximum you cite. The deductible is usually only the beginning, as there are copayments, coinsurance, and out of pocket expenses for things not covered. And remember, a serious illness can span a period of years, meaning he could spend a lot of money per year, trying to regain his health. Even $12,000 per year is what, 15-20% of an average American’s earnings? Most people could not afford to sustain these kinds of costs. And in the private market, insurance with a $1000 – $2000 deductible will cost a family a good $1200 / month. This is unsustainable.
Should you sustain a serious chronic health problem, you will understand how much money you can shell out, even with good coverage. And the claims mess, with incorrect filings, improper denials, etc, will be like a new full-time job. You’ll spend more time on the phone than you can believe trying to make sense of it all…..doesn’t matter who the insurer is. There is an inherent conflict of interest built into the system which involves for-profit insurers.

Anonymous August 12, 2009 at 5:18 am

Business people will always believe that profits cannot be won in a normal market by any means other than “just” means. They can’t help it. It’s part of the paradigm for
American capitalism. But I find myself rolling my eyes at the naivety of those who believe that the U.S. health insurance market is “normal.” It is not “normal.”

Normal markets

In a normal market, any person who wishes to buy the commodity for sale may
do so at the same price as any other person. In a normal market, price is
king. The product or service is available to any purchaser with the means to
pay the asking price. Supply and demand establish price; that’s a normal

The United States health insurance market is not, however, “normal.”
Insurers actually have the right to refuse to sell their product, health
insurance, to anyone they wish. And how do they determine to whom they will
sell? They refuse to sell to the feeble, the ill — the risky patient. This
is not a normal market. It is a manipulated market. It is a failed market.

Price is not king; medical risk is king. Insurers compete by insuring the
healthiest populations — by limiting the populations to whom they will sell
insurance. It is this limitation on the scope of the market that identifies
“market failure.”

Market failure

Market failure is recognized by this triad: 1. when prices go up, 2. when
profits go up, and 3. when availability goes down. The continued increases
in health insurance premiums are well documented (prices go up); the
profitability of insurers is well documented (profits go up), and the steady
increase in the number of uninsured is the manifestation of decreased

Insurers claim to compete in a very competitive market. And they do compete;
but only for the healthiest populations. There is no competition to see how
many diabetics they can enroll, or how many stroke victims they can insure.
The notion of “un-insurability” has become so much a part of our landscape
that willingly enrolling the ill in a health insurance plan sounds almost

And so I find myself both pitying, and disgusted at, those who believe
the U.S. health insurance industry functions in a normal market, or that its
profits are the result of normal competition. They are believing and
repeating the biggest lie in the business world today. It’s a subtle lie, to
be sure, but still a lie.

It amazes one even further, that the majority of American businesses, large
and small, who do compete in normal markets, have bought into the
misinformed perception, the hype, that the health insurance industry
functions in a normal market. Most American businesses work hard to make
their products available to as wide a market as possible. They do not single
out any populations as “unworthy” to buy their products. They go to work and
compete based on price; they build as large a market share as possible — no

But for whatever reason, they placidly accept the rhetoric of the insurance
industry as gospel and continue to pay ever higher premiums and accept ever
diminishing benefits. They struggle on, blinded by who knows what, believing
that insurers function in the same kind of market they do, a normal market.

But it just ain’t so. Insurers don’t play by the same rules.

The remedy? A normal market.

Normal markets have been identified since before Adam Smith as having five
essential characteristics:

1. a uniform product (beans, steel, cotton, etc.),
2. universal availability (the product is portable and anyone who wants it at
market price can have it),
3. readily available knowledge of product and price (its easy to know what
you are getting, no fine print),
4. easy entry to and exit from the market (thus establishing an adequate
number of suppliers to make the market competitive), and
5. price sensitivity (meaning that suppliers compete on price and not on some
other measure, the way gangs compete for turf using guns, or insurers c ompete
for privilege using lobbyists).

Market protection policies

Simple health related policies would “normalize” the U.S. health insurance
market. At first they look like, and sound like, “patient protection
policies,” but in reality, they are “market protection policies.”

In order to have a uniform product, simply define a minimum benefits package.
Other packages may be made available, but a standardized minimum package of
benefits should be available to all.

In order to have portability and universal availability, simply enforce
guaranteed issue and community ratings.

(Enforcing guaranteed issue means that something must be done about
free-riders. In healthcare, as in few other industries, free-riders are
potentially very, very expensive. Free-riders refuse to contribute to the
overall expense, but then expect first class service when they need it.

The only real way around this problem is mandatory enrollment — an individual
mandate to enroll in a health insurance plan — even if it is in the minimum
plan. Most uninsured can afford to pay a reasonable premium. The large
majority of uninsured households have at least one employed wage earner.
Many have two. But because some cannot afford premiums, this means
subsidies. But even these subsidies will be cheaper than the secondary costs
associated with free-riders; the ongoing management costs of underwriting,
cost shifting, and so on, and the medical costs of inappropriately accessed
emergency care.)

In order to promote ready knowledge of product and price, once again, there
is a simple answer. It is to have a standard minimum benefits package. It’s
standard. There is no question about what’s in it. There are no hidden
exclusions, or deductibles, or caps on care. Everyone knows what’s for sale.

Easy entry to and from the market means we have an adequate number of
insurers to assure competition. Does the U.S. have an adequate number? Some
say yes, some say no. I don’t know what that number needs to be, but it has
to be “enough to support choice.” A better choice, adequate choice, often
means a better price.

Price sensitivity means, as stated before, that insurers compete on price and
not on the ability to discriminate against those with illness. Here again,
enforcement of guaranteed issue and community rating, along with mandatory
enrollment, eliminate the need to compete on parameters other than price. A
uniform benefits package means that insurers must provide the standard
benefits package at competitive prices.


Insurers are entitled to a normal profit provided they earn it in a normal
market. But they should never delude themselves that the present health
insurance market is a normal ma rket. Insurers can and do select the
populations they will insure. That is not the same kind of competition that
most businesses compete in. It results in a failed market.

The remedy is simple. It is “normalization” of the health insurance market.
This can be accomplished by assuring Choice, enforcing Mandatory enrollment,
Guaranteed issue, and Community rating, and defining a Uniform benefits
package. Almost any healthcare system that includes these five “market
protection policies” will succeed.

Sel Fillerup

Anonymous July 31, 2009 at 7:50 pm

Actually I’d call myself a classical 19th century liberal, except most people would laugh at me. The term has been corrupted over the last 70 years, so I go with libertarian. Problem lately is that libertarian has been hijacked by the antisemitic kooks and isolationists. So going into the 2010s I’m not really sure what to call myself anymore without being associated with crazies.

Methinks July 31, 2009 at 7:56 pm

I was talking about Daniel, but thanks for the info.

John Dewey July 31, 2009 at 8:18 pm

ArrowSmith: The one obvious exception would be in the African-American community that has been a permanent under-class forever.

You believe this? Despite all the Afircan-Americans in highly paid professional and management positions throughout our economy – despite all the African-American entrepreneurs in this nation – despite having an African-American in the most powerful office on the globe – you still refer to “the African-American community” as a permanent underclass? Do you realize that you insult millions of people when you refer to them as a permanent underclass?

Please reconsider your view of the African-American population in the United States.

Methinks July 31, 2009 at 8:41 pm

or perhaps it’s because the “underclass” here lives way better than the upper middle class in most of the rest of the world.

As for African Americans, the Great Society destroyed their families, then herded them into inner city ghettos. The middle class blacks in the North who were already upwardly mobile and educated were pretty much the only ones to escape theis great social experiment. As long as we keep increasing the minimum wage (which disproportionately hurts young black men), they will remain an underclass forever. That’s statist compassion for you. And just watch what happens when a black person forgets his place and rises to disagree with the Democrat party.

Anonymous July 31, 2009 at 8:25 pm

I often wonder why I’m wired to think through everything logically and others go mainly on feelings. Or it could be simply the way I was raised. My father is the same way, but how much nature vs nurture?

Anonymous July 31, 2009 at 8:29 pm

I consider myself to be what you get when a classical liberal incorporates 200 additional years of thinking and experience into their worldview ;-)

don’t read too much into that – just my take :)

Anonymous July 31, 2009 at 8:33 pm

I don’t even think it’s necessarily logic vs. feelings. Lots of people are logical, but a lot also just react in a knee-jerk way.

These surveys can phrase things to support either view. I wouldn’t put much stock in Huffington Post or the Krugman straw poll where they knew exactly what answer he we searching for.

Methinks July 31, 2009 at 8:37 pm

you’re the son of engineers. ‘Nuff said :)

Anonymous July 31, 2009 at 8:34 pm

Thanks daniel, you seem to be more thoughtful then some previous lefties who afflicted us like muirgeo. At least you are willing to engage in honest debate. That’s quite refreshing. OTOH, that probably means you are more of a centrist.

Methinks July 31, 2009 at 8:45 pm

Right. Let me know when you incorporate that thinking and experience. I’ll want to see that.

Anonymous July 31, 2009 at 8:37 pm

At least I’d prefer a more VI Lenin approach from the Obama’s of the world rather then the stealth approach. Give me an open, proud Communist any day. Obama knows you can’t be an open Commie in America, so he continues the incremental approach. Sort of like the “boil the frog by increasing the temperature very slowly”.

Methinks July 31, 2009 at 8:38 pm

Well, the funny thing about the video is he didn’t get what he was looking for in his straw poll.

Methinks July 31, 2009 at 8:42 pm

Ha! You’re right. Boil the frog, indeed. but obama did say that the fact that the constitution doesn’t require government to redistribute “a blind spot”. An oversight of the founding fathers.

But it wasn’t an oversight. Jefferson said that a government strong enough to give you everything you need is powerful enough to take everything you have. They saw Obama coming for over 200 years away.

Anonymous July 31, 2009 at 8:43 pm


Yay – July 31st will go down in history as the first time someone on Cafe Hayek acknowledged that I am a centrist/moderate, and that I am not, in fact, a socialist, communist, liberal, or progressive!!!!!

You’re my new best friend ArrowSmith – have a good weekend everyone.

Methinks July 31, 2009 at 8:47 pm

the first time someone on Cafe Hayek acknowledged that I am a centrist/moderate

Where did you see that? He said you’re more thoughtful than the other lefties. But if it makes you feel better to think of yourself as a moderate, fine.

Anonymous July 31, 2009 at 8:49 pm

Come on now, if Daniel were really a left winger he’d engage in ad hominems. He obviously supports more social welfare then the average Hayek-er, but he’s willing to negotiate a compromise. To me, that’s the definition of a moderate.

Anonymous July 31, 2009 at 8:49 pm

lol – give me my moment Methinks!

he said “that probably means you are more of a centrist”, which I’ll take! I presume by that he means “so you’re not really vindicating the true lefties after all”

Anonymous July 31, 2009 at 9:18 pm

Ummm… you do realize he was talking about slavery in that interview, don’t you?

I suppose emancipation was a redistribution policy of sorts – but as much as I have a general aversion to redistribution, there are obviously cases where I support it and outlawing slavery, needless to say, is one of the biggies for me!

Healthy Markup July 31, 2009 at 9:30 pm

“I was thinking specifically of the post he made with Kenneth Arrow’s article on health care. That has the good, essential, real market failures that do exist in the market for health care… I have no idea why they didn’t seem to make it into this op-ed, but that was disappointing.”

It’s probably because the whole Arrow piece reads like an artifact.

Forms of insurance Arrow whinges about the dirth of exist today. Medical tourism has become incredibly common, obviating the apparent need for government provision of specialists in non-dense areas. Canadians regularly are sent to Seattle for specialists that their single-payer system can’t seem to provide. The “market failures” to which he refers are obvious government failures. The number of people who can do physician’s work is lessened by government sanctions. There are examples of nurse specialists and physicians assistants doing lots of work that they didn’t in the 60s. I don’t know why you and Krugman think this is such a great paper. But then, I don’t think that the absence of perfect competition in an industry is any reason for a government to usurp that industry, unlike Arrow, Krugman, and (seemingly) you.

Anonymous August 1, 2009 at 12:39 am

I don’t think any failures like that are outright ‘market failures’ they’re failures based on a deeped government intervetion that has gone on so long it’s nearly invisible to the casual observer. By charging more for private insurers doctors are just responding to the facts on the ground: health insurance is a government supported localized oligarchy/monopoly.

Without the government saying that you can’t, for example, get out of state coverage you let the local yokels run the show and open up some room for misbehavior that would otherwise damage a reputation or two. This ‘local only’ phenomenon not only forces local insurers to take a monopoly, but they have to do it on the governments terms behind the scenes. Market forces are almost nowhere to be found. Now in certain demographics, (elderly and poor,) there already is a “government option” and how do doctors compete with that? They charge more to the privately insured to co-opt the skimpy government payments, which are jammed down their throats. Tell me again how this is ‘keeping them honest’ as obama proposes… Oh that’s right! For people like me, there is a tag line at the ready: Obama is leaving it to congress to come up with the details. And, when he’s on the stump, “We just can’t afford not to fix this!” Heads we lose, tails, you just think you won, and we all still lose.

Methinks July 31, 2009 at 9:36 pm

Ummmm… he wasn’t. He was talking about redistribution. It’s my fault. I sent the short clip.

Sorry, I can’t access tiny url right now.

Methinks July 31, 2009 at 9:48 pm

Right. He’s all for boiling the frog slowly. Very slowly. What’s centrism anyway? Either government controls something or the private sector does. Centrism seems like fascism – nominal private ownership and government control.

Have your moment, Dan. And have a good weekend.

Anonymous July 31, 2009 at 10:18 pm

I guess my overall view is that libertarians have to make compromise with the moderates like Daniel if we want to preserve social peace in America and forestall any possibility of a future Bolshevik Revolution.

The Tsar’s mistake was doing the opposite of that. If he had respected the Duma and had ceded real powers to the people instead of insisted on his autocratic ways, I think Russia never would have toppled by Lenin.

Methinks August 1, 2009 at 2:19 am


It’s pretty clear you learned your Russian history in America – that is you never learned any.

The bolsheviks were in the extreme minority. The proletariat was a minuscule percentage of the population and an minuscule percentage of them were even in the bolshevick party.

It’s difficult to boil down all the complex reasons for the revolution, but the biggest reason was that WWI drained the country and caused mass starvation. That created a giant vulnerability.

To make deals with statists is to allow the state to encroach on liberty little by little instead of all at once. The Tsar’s mistake was ineptitude, a refusal to abdicate (out of a sense of duty, btw), and the continuation of a war so unpopular it makes the Vietnam war seem like a golden period in history.

Once they learn they can steal more and more of your liberty by threatening your knee-caps, you’ve already lost. And notice that the only social unrest is in socialist countries.

Methinks August 1, 2009 at 6:13 pm

Obama’s plan is to correct this horrible outcome of the civil rights movement by redistributing via “health care reform”.

At a press conference with minority journalists last fall, candidate Obama was pressed for more detail on his reparations position. He said he was more interested in taking action to help people who were just getting by. Because many of them are minorities, he said, that would help the same people who would benefit from reparations.

“If we have a program, for example, of universal health care, that will disproportionally affect people of color, because they are disproportionally uninsured,” Obama said.

And that reparations – redistribution – is the true purpose of H.R. 3200. That’s why the bill is pure garbage. It’s merely a transfer of wealth from the private to the public sector and a confiscation of liberty. health has nothing to do with it.

Anonymous August 1, 2009 at 10:57 am

Well of course an article written in 1963 is somewhat dated today! Come on – can’t you just filter out those sections that are obviously irrelevant today?

What about the sections on “expected behavior of the physicians”, “product uncertainty”, “supply conditions” (this isn’t a market failure, obviously – but if we want licenses for other public safety reasons – and i recognize not everybody here will – we have to acknowledge that the negative impact on supply may have to be compensated for), “pricing practices”, “non-marketable commodities”, “increasing returns” (this relates to rural care – one of the big concerns about the Democrat’s plan raised by the Blue Dogs).

A couple of Arrow’s points are largely addressed – but don’t these sections in the paper still hold true? Am I missing something?

Anonymous August 1, 2009 at 2:14 pm

Methinks, please listen to both of your videos before you post them. The first clip doesn’t come up in the second clip, and the first clip is directly in response to a question about slavery in the Constitution (

Your second clip, added after my comment, does mention redistribution, confirms that he thinks that it’s not the court’s job to redistribute because the constitution does not guarantee the right to redistribution, he seems to assert that it’s the legislature’s constitutional duty, and doesn’t identify it as a flaw in the constitution at all – precisely because the legislature has the power to do it, but not the obligation to do it.

But NONE of that has to do with his “flawed” comment – which was only a reference to the failure to ban slavery.

Which I personally would contend is a flaw, and I don’t feel myself to be unpatriotic or unadmiring of the founders for thinking so.

David August 1, 2009 at 3:29 pm

I believe the proper response is a Rand quote- “There are two sides to every issue: one side is right and the other is wrong, but the middle is always evil. “

Methinks August 1, 2009 at 6:08 pm

Danny, being a true believer will make you a useful idiot. Obama very conveniently decides not to identify the “fatal flaw” that is with us to this day. He’s either uneducated or he’s pushing a political agenda because not making slavery illegal was not an oversight but a practical matter for the founding fathers. A matter Thomas Sowell writes about at length – a body of work you should seek to examine.

In the longer clip (not addressed at all in your link, btw), he chastises the civil rights movement for not venturing into redistribution of wealth or “basic issues of political and economic injustices in society”.

Obama goes on to claim that the Warren Court wasn’t radical enough.

Obama: “[the Warren court] didn’t break free of the essential constraints that were placed by the founding fathers of the constitutions……One of the tragedies of the civil rights movement was that it failed to bring about redistributive change and some ways, we still suffer from that.

Now, go convince yourself black and black is white (not a pun).

Methinks August 1, 2009 at 6:13 pm

I like it.

Methinks August 1, 2009 at 7:26 pm

Thank you for your response. As a securities dealer, I’ve been forced to pass both the 63 & 7. However, I thought that insurance companies were largely exempt from most securities laws. Obviously, I’ve only forgotten everything not directly related to my business.

You add an interesting perspective. I’m working with a doctor to set up a blog to inform doctors and patients how this legislation would effect them and to discuss alternatives. If you would like to contribute a post, a comment or just to read it when it’s up, please email me at

Underwriterguy August 1, 2009 at 10:31 pm

My “reform” thoughts may be more agreeable to your POV if you reread them with these explanatory notes.
First, while I am registered to vote as a Libertarian as claimed in my post, I did also confess to having a pragmatic streak. I probably will not “toe the line” as you note, but my compromises are concessions to my view of the attainable. If that disqualifies my post, so be it.

We agree on taxation and, I think, on the type of benefit design. What you know as HSA’s fit my definition (Point 3), do they not? “Except for the poorest among us the plan should call for cost sharing for all but preventive care and the treatment of chronic disease. The focus should be on protection against catastrophic expenses, the kind that bankrupt families, rather than day to day expenses. The degree of personal responsibility (that is, how much you must pay yourself) could be established as a function of family income much as today’s medical expense deduction is.”

I know an individual mandate is contrary to Libertarian principles, but I have not been able to find a practical way to prevent free riders since I doubt the laws requiring treatment at presentation in an ER without regard for ability to pay will be repealed. My point was that if everyone is covered from birth, by definition there is no pre-existing condition.

There is going to be some form of minimum benefit mandated by law. My hope is to make it truly “minimum.” Avoid the mandated coverage of every, what did you call them, “fake psychological conditions.” And if you don’t like my proposal to eliminate State Mandated Benefits (seems inconsistent with the “fake” point?), how about extending the ERISA exemption to these multistate plans? Then insured benefits would be on a level playing field with the ASO coverage that most (by number of covered people) private plans enjoy.

Believe it or not, I am a true underwriter (and product manager and marketer) or at least I made a good living at it for 30 years. But maybe we differ on “underwriting.” My reference is to true group coverage, defined in most states as 50+ lives. No individual underwriting involved. And I can do quite well with CRC rates, especially if we can discount for “standards shown to be consistent with lowered medical costs” as I noted.

Well, that’s enough point, counter point. Can you see anything of merit in these expanded thoughts?

Anonymous August 1, 2009 at 8:09 pm

1. A practical solution can still be a flawed solution.

2. There is a huge difference between “not radical” and “not radical enough”. Obama said “not that radical” – you chose to add “enough”. Later in the interview Obama confirms that the courts should stick to negative rights.

3. You’re mashing together the Warren Court and the Civil Rights movement. Obama said the movement itself should have pursued more redistributive ends, not just legal ends. He never said the court should pursue redistributive ends. In fact, he quite explicitly said that those ends shouldn’t be pursued in court.

I never understand why the useful idiots in the anti-Obama crowd latch on to this interview. It confirms his view that the constitution is a document of negative rights, and that courts shouldn’t redistribute and yet you try to misconstrue it to be the opposite.

Methinks August 1, 2009 at 8:54 pm

if you look up in the sky, the little dot way up there, is the point sailing over your head.

Obama believes that the lack of mandate to redistribute is an oversight in the constitution and, since that is the case, we must accomplish that end through legislation.

The tragedy of the civil rights movement is that it didn’t create the right to redistribute.

He wants redistribution and, if you examine all of the legislation this president and his buddies in congress create and try to ram through, that is what he is trying to do.

Redistribution is his goal.None of your sentence parsing and Obama worship changes that.

But, of course, you support redistribution. We all know that.

Anonymous August 1, 2009 at 10:26 pm

“then we wouldn’t even need HSAs.”

You are so right. Tax exempt HSAs are problematic in a free market, because the government is encouraging health care consumption, and that puts upward pressure on prices. But compared to the current government-created health care system, the incentives are far better.

And we must always be asking, “How do we get from here to there?” HSAs are key to migrating to a low cost consumer-oriented privatized free market in health care.

Methinks August 1, 2009 at 10:33 pm

Singapore’s health care system relies heavily on HSAs. Health care spending is 4% of gdp.

This is probably a minor point, but it seems that it’s not the HSA that is a problem for free markets but the distortion created by taxes.

Anonymous August 1, 2009 at 10:54 pm

Indeed, not HSA per se, but tax-free HSA (when other consumption is burdened with taxes). Again, it is about how we get from here to there.

I’m aware of the Singapore story. It’s not what I would advocate, but it is a health care financing system that puts any in Europe or the US to shame. And from what I read, the available quality surpases what is found in socialized Europe. And yet you don’t hear Demonrats advocate for “Singapore-style health care”.

That’s because, as I think you have written, to the Left, the health care debate really has nothing to do with health care.

Anonymous August 2, 2009 at 1:18 am

Thank you for the honest and fair analysis.

(First my own position – in early youth a libertarian, now tempered by a strong traditional conservative influence. As I got older I learned that however admirable we find John Galt or Howard Roark, such exemplars do not arise fully formed, like Athena from Zeus’ forehead. Rather, a person requires a family and broader social context to develop. That has given me an appreciation for tradition and the interdependence of people. A “pragmatic” streak, perhaps?)

It seems we have similar goals and may differ on tactics. You prefer to mitigate a perceived inevitable harm. I fear ever allowing the camel’s nose etc.

On the specific point of “free rider,” it is a non-issue. See for example a fine piece by Cato

Not only that, but let’s posit as a humane society we take care of the poor. So the poor get service at the emergency room. Shall we allocate that expense to the welfare part of the general tax collection? Or shall we nationalize the entire insurance industry solely to redistribute a few dollars to the poor?

The former is better, especially if we coordinate ALL that we do for the poor in one place. Better to have an explicit subsidy than to play games with what should only be a volatility-sharing financial service. One consolidated welfare system, taking care of food, shelter and medical for the poor. Imagine health vouchers similar to food stamps.

Note that a major part of the so-called “uninsured” problem is people eligible for benefits who fail to apply! Simplify welfare, make it more accessible to the deserving and at the same time less subject to abuse.

OK, we’ve handled the poor in the emergency room. Now there may remain a smaller problem, the “well-enough-off” who get care that hospitals must give, but who then stiff the bill. THAT free-rider problem is one of collections, no different than uncollected taxes, uninsured motorists, or any of the other cheats that an advanced society faces. I’d pursue them all the same way, vigorously. Of course, I’d FIRST go after Medicare fraud.

Congress has blatantly refused to fund anti-fraud measures for Medicare, even though the payoff is a hundred-fold. That’s the problem with short-sighted politicos. They have an incredible aversion to an un-sexy cost today, and get no career benefit from the savings next year. So the obvious is ignored.


On the point about community-rating, that draws inevitable government interference. If the private market can make a profit on CRC, I approve. But if it is mandated, we face risibly ignorant intervention for political-correctness. Do you recall the Arizona pension case some years back? A woman complained her annuity benefit was less than that of a comparable man (same age, pay, service etc.). Blatant sexism? Or sound actuarial science? Arizona eventually said to the feds “Expletive deleted – same lump sum payment to everyone, go buy your own annuities if you want guaranteed income.”


The elephant in the room. We cannot afford everything for everyone. If individuals self-ration, decide what to spend on health, what to just live with, and what to leave to heirs, we preserve our freedoms and protect our moral fiber. If government rations, we get ignorant analysis, political favoritism, suppression of medical innovation and terrible damage to our freedoms and moral fiber.

Think I exaggerate? Take that idea of “ignorant analysis.” One part of government values a human life so highly that we must eliminate arsenic to XX parts per million. Another part of government says we must save the snail darter at ANY price. A third part of now wants to cut off kidney transplants at age YY. Government is in its very nature dangerously incoherent, and must be held to a minimum.

BTW, I appreciate your ideas, a stimulant to set down long-simmering thoughts.

Anonymous August 2, 2009 at 2:15 pm

Wow – you’ve really convinced yourself of this, haven’t you? Of course I support some degree of redistribution, and of course Congress and the president have instituted some redistribution – because it is constitutional for Congress to do that, but as Obama observes – it’s not constitutional for the court to do that.

You show me where he says that the tragedy of the civil rights movement was that he said it didn’t create a right to redistribute. He didn’t. You, personally, have fabricated that in your own head. He said the tragedy was that the movement didn’t ACHIEVE redistribution – but he specifically said that redistribution shouldn’t be a chieved through an adjustment of constitutional rights. He wants it achieved through community organizing, some legislative action, and that sort of thing. Nothing in the whole interview suggests he wants to make a single change to the Constitution.

And again – the short clip you first put up is specifically about slavery. Whoever put it up just clipped it so you don’t know that – but I provided you with a link that shows the preceding dialogue, so now you have no excuse to pretend that he was talking only about slavery.

Your paranoia about this president doesn’t mean he has any problem at all with the current constitution (ie – now that the 13th, 14th, and 15th amendment has passed). I’m not parsing anything – you are. You have yet to provide a direct quote from the interview that suggests anything that you’re trying to convince me of. You’re doing your own paraphrasing and it bears no resemblance to statements he actually made.

Anonymous August 2, 2009 at 2:21 pm

Case in point – you just took the liberty of morphing:

“One of the tragedies of the civil rights movement was that it failed to bring about redistributive change”


“The tragedy of the civil rights movement is that it didn’t create the right to redistribute.”

You need to realize that you are personally so frustrated with this man – I don’t understand why, but you are – that you aren’t even willing to fight with him over things he actually believes. You feel the need to manipulate what he’s saying to make an even more severe case against him.

Look – there’s enough to argue about already. He likes some redistribution, you don’t. Argue about that – don’t dream up new conspiracies. You keep that up and I swear next you’ll be one of the ones telling me he’s not a U.S. citizen either.

I’ve criticized lots of stuff he’s done. Is that worship? Is there any point where you’ve felt positively about Obama? How is that not conspiratorial paranoia? Trust me – i’m no Obama-worshipper.

Methinks August 2, 2009 at 6:37 pm

“The tragedy of the civil rights movement is that it didn’t create the right to redistribute.”

Dan, if you’re going to quote me, at least copy and paste my quote so that you don’t do to MY quote what you accuse me of doing to Obama’s quote.

Uno mas: The point is he wants to change this country into the socialist mess that are European countries. Since he can’t do it through the courts, he will try to do it through the legislative process. The point is his stance on redistribution and dislike of the restrictions on his power in the constitution.

This reminds me of the Niemoller quote John Dewey posted. It sent you frothing at the mouth about the holocaust – completely beside the point.

Obama clearly says that since the constitution is too restrictive, he will seek to bring about redistributive change via legislation. Your straw man argument about changing the constitution is just that. You put The One on a pedestal and hear what you want to hear. Have at it.

Underwriterguy August 2, 2009 at 10:35 pm

See below. Somehow I miss applied my reply.

Anonymous August 3, 2009 at 12:24 am

Nothing to say. I’m just curious to see how squished a post can get with this new blog format.

Anonymous August 3, 2009 at 10:28 am

Haha – who’s the one frothing at the mouth now, Methinks? You’re the one getting apoplectic over the fact that I excluded “he said” from your quote, even though that didn’t change the substance of it at all (unlike YOUR changes to his quote).

Keep listening to the interview until it dawns on you – he does want to redistribute with the legislature. The only thing he ever said was wrong with the constitution was that it didn’t outlaw slavery. That’s what this whole thing started about – you whining that he thought the constitution is flawed. How is it a strawman or a tangential argument that I focus on what he realy said about the constitution?

Anonymous August 3, 2009 at 12:25 am

Hurry R2! The walls are closing!

Anonymous August 3, 2009 at 12:27 am

Try Nutrisystems new lbog weightloss program.

Methinks August 3, 2009 at 4:28 pm

dang. Can’t even read the thread anymore.

Nathan Scott August 10, 2009 at 4:29 pm

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