Unhealthy Distortions

by Don Boudreaux on August 17, 2009

in Current Affairs, FDA, Health, Myths and Fallacies

Here’s a letter that I sent on Saturday to the New York Times:

Paul Krugman writes as if distortions, exaggerations, and lies issue only from opponents of Obamacare (“Republican Death Trip,” August 14).

He’s wrong.  Let’s look, for example, at Moveon.org.  According to that pro-Obamacare website, “Right now, big corporations decide whether to give you coverage, what doctors you get to see, and whether a particular procedure or medicine is covered—that is rationed care.  And a big part of reform is to stop that.”

Talk about a distortion!

In fact, right now corporations offer a range of coverage options to sell to you.  You’re free to buy or not to buy.  “Big corporations” no more decide whether to “give” you coverage any more than “big corporations” decide whether to “give” you a flat-screen t.v. or decide what size t.v. is most suitable for you.  It’s your choice.  Unfortunately, the range of coverage choices is restricted by government mandates that require that certain medical conditions be covered by each and every health-insurance policy, and restricted further by government-imposed limitations on interstate competition among health insurers.

Donald J. Boudreaux

Space constraints prevented me from listing other government interventions that reduce consumer choice — interventions such as drug prohibitions and prohibitions on practicing medicine without a government-issued license.

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Ryan August 17, 2009 at 2:25 pm

My wife has never walked into a store and been told “sorry, we won’t sell you any flat-screen TV’s, try the store down the street”.

Gil August 17, 2009 at 3:28 pm

Or they would say that to your wife if she couldn’t afford the TV . . .

Ryan August 17, 2009 at 3:35 pm

That would be fine, “we will sell you a TV with the features you desire at X price”. But, instead the response was equivalent to “we will not sell you a TV, but there is a store down the street that has a TV for people like you”.

Anonymous August 17, 2009 at 8:56 pm

You have a lot of experience, do you, with people not wanting to make money from “people like you”? Or is it instead that they simply don’t want to lose money?

Ryan August 17, 2009 at 9:01 pm

You’re missing the point. Insurance is not the same as TV’s.

Anonymous August 17, 2009 at 3:27 pm

They’ve just expanded the meaning of “rationing” to the point that it no longer means anything. I have to go now. McDonald’s is going to ration some burgers to me.

Methinks August 17, 2009 at 3:39 pm

This is exactly what we talked about earlier – expanding the meaning of “rationing” in the service of political deceit.

Anonymous August 17, 2009 at 4:16 pm

The only reason why people are pointing out that the market rations too is because the word was overused in the first place with respect to public “rationing”.

McDonalds DOES ration hamburgers to you. The pointlessness of highlighting that trivially true fact is the whole point of the exercise. As long as the public plan is just doing boring, normal claims management type stuff, it’s true that they will “ration” insurance, but it’s trivially true.

The meaning isn’t expanded by pointing this out at all (or at least no more than it was expanded when people first applied the word to the public plan). Insofar as the public plan will ration, private plans will also ration. There’s no expansion of meaning – simply a statement that if you’re going to use the word to characterize the public plan, you have to apply that definition equally to everything.

Methinks August 17, 2009 at 4:44 pm

As usual, Danny doesn’t understand the difference between a taxpayer subsidized public “option” that rations care because it limits supply and a private insurance company outlining what it is willing and what it is not willing to pay for in exchange for a certain amount in premiums.

When the government rations, there is no choice. When you sign a contract with a private insurer, it’s a completely different matter.

It’s not equal and doesn’t apply equally. It’s only equally in the twisted minds of statists. Yes, Danny – you.

Anonymous August 17, 2009 at 4:50 pm

We’ve beat around this bush before, Methinks.

Let me know if you’ve found any evidence of supply rationing besides a couple sensible rules applying ONLY to rural physician owned clinic that opt out of the restrictions on self-referals (pg. 317 and 318, if I remember right).

And for the umpteenth time, if you’re talking about a subsidized program like Medicaid you’re talking about something wholly separate from the public option anyway (which, by the way, people sign a contract for as well).

Marcus August 17, 2009 at 6:49 pm

“McDonalds DOES ration hamburgers to you. The pointlessness of highlighting that trivially true fact is the whole point of the exercise.”

You are confusing rationing with ‘allocating resources’, they are not synonymous. Rationing is one method of allocating resources. The market is another method of allocating resources.

McDonald’s hamburgers and the resources to produce them are allocated through the market. They are not rationed.

Anonymous August 17, 2009 at 7:10 pm

Marcus -
You’re getting right at the heart of what I think is so ridiculous about this mantra that the public option is “rationing” care (although I’m sure you didn’t mean to encourage me in that way). Look – we can all embrace the idea that words can have multiple meanings. “Ration” is an appropriate word to mean the allocation of scarce resources – that’s it’s general definition. It’s also a word that’s used specifically to describe an involuntary fiat designation that everyone only gets a certain amount of a scarce resource (then again, “allocation” is a perfectly appropriate synonym for that fiat distribution too… “distribution” is another perfectly appropriate synonym for that matter).

So which definition of “rationing” is most appropriate to describe the public option – the general or the specific definition? Well since people voluntarily sign contracts for the public option with contractually stated information about what they’re entitled to, and since they can leave the public option, and since they pay premiums into the public option it clearly bears no resemblance to the specific definition of the word “rationing” – the one that’s used to describe WWII ration books or military food distribution. So even though the public option doesn’t “ration” in that sense, I am at least willing to concede (although I personally find it to be a trivial statement) that it “rations” in a more general sense – in the sense that it allocates scarce resources.

And it is that much more general (but still acceptable) definition of “rationing” – the ONLY definition that’s appropriate for describing the public plan – that is also so general it can describe McDonalds or private plans too.

If you really want “rationing” to stick as a meaningful descriptor, you have to understand the word “ration” so broadly that it applies to the market too. In other words, I don’t choose to equate “ration” with “allocate”. By applying it to the public plan, others force me to understand “ration” in such a general way if they expect me to accept or understand their nomenclature, because the fiat/war-time distribution definition of the term bears no resemblance to any public plan I’ve ever heard of.

Now – does public plan “rationing” use the same mechanism that private plan “rationing” does? Of course not. Private plans use the market/price mechanism which as I’ve said many times has big advantages over anything the public plan could hope to do. But any definition of “rationing” that you try to pin on the public plan is inevitably sufficiently broad to describe the market too. Why? Beacause the public plan just plain isn’t as scary as you’d like to think it is, however well- or ill-advised it may be.

sandre August 17, 2009 at 6:31 pm

All I need to know is the fact that “public option” is a trojan horse for single payer system. That’s the agenda. That belongs in Facts and Other stubborn things.

Anonymous August 17, 2009 at 6:45 pm

What happens when you absolutely NEED something? What happens when you are between jobs and you find your COBRA premiums to be exorbitant and unaffordable? What if you just proceed to the ER w/out insurance, where the Government mandates that all patients MUST be treated. You tell them you do not have insurance; then who pays? What about trying to find a plan to cover you with preexisting conditions, especially with mental health/substance abuse problems? What sort of bargaining positions are you in when you must have coverage?
I work in healthcare and have encountered all of the above situations, either personally or professionally. If you are forced to get healthcare in the ER and you do not have insurance, it will be provided, no matter what. Who pays for those who get their care this way and do not pay? Do they get turned away?

Methinks August 17, 2009 at 7:32 pm


Taxpayers pay. As of 1986, you cannot be refused treatment regardless of your ability to pay. If you work in healthcare, you probably already know that the vast majority of people seeking care in emergency rooms are insured. Where HMO insurance dominates, the primary care physicians are so booked up that the waits are either too long or they end up missing conditions, so people end up in the emergency room even if they have insurance. It’s a myth that emergency rooms across the country are filled with the uninsured.

Here’s a way to fix the health care system without government meddling – except to lift the restrictions on the market (thanks to underwriterguy for passing this along to me):


Anonymous August 17, 2009 at 7:59 pm

Very interesting link, thanks methinks.

I have an honest question… haven’t thought this through entirely:

IF they do enforce some sort of restriction on dropping people because of prexisting conditions and some sort of insurance portability, wouldn’t that result in a de facto health status insurance system, where premiums respond accordingly. I’m not saying that’s the best way to get health-status insurance. As I’ve said more than a few times here, I’m not a fan of most regulations on what private plans can offer. But if this specific reg were to go into effect, it would in essence be a mandated health-status insurance market that private firms compete in, would it not?

Methinks August 17, 2009 at 8:10 pm

I have a hard time believing that you could have read that article in 25 minutes.

The short answer to your question is “no”. The explanation is in the article.

Anonymous August 17, 2009 at 8:13 pm

Of course not :) but he is a VERY talented introduction writer. I’ll spend more time with it tomorrow morning. But it seems to me if they are forbidden from denying coverage based on pre-existing conditions they’d have to price plans at somewhere around a health-status insurance price. Again, I’m not advocating that method.

Anonymous August 18, 2009 at 4:30 am

“you probably already know that the vast majority of people seeking care in emergency rooms are insured”

Great point. Among the many misconceptions out their is that health care costs are high because of cost shifting from the uninsured. The only estimates I’ve seen are that the uninsured results in less than 2% of health care expenditures.

The fact is that most cost shifting is from the INSURED–mostly the government insured.

Which is why if the government covered everybody, even those currently covered by the government would see a decrease in the quality of their care–there would be no private system to cost-shift from.

louh August 17, 2009 at 8:22 pm

We have rationing in the communications field. They restrict entry and create monopolies, or oligopolies where none would exist if their was truely open competition. From airport slots to communication licensing Big Brother tries to manage markets to ensure that unproductive rural markets are included at the expense of all others. Usurping the enrichment of some and reducing the liberty for all.

Max August 18, 2009 at 7:47 am

I think you misunderstood their idea of “decide whether to give you coverage”, by which they mean that coporations don’t want people that are unhealthy (or have a genetic disease that might get costly).
They don’t argue that there is no choice, but that people with pre-existing conditions or already sick people won’t get an insurance they can afford.

Though I see this rather as not a failure to insure, but rather a failure of welfare, because it is not insuring against a risk, if the event has already occured. But boiled down this is the major criticism of your opponents.

Anonymous August 20, 2009 at 11:46 pm

My original point was that health care is already controlled by the government, either overtly or covertly. When laws are passed mandating certain types of care, then someone must pay. This is reflected in our (including my own) premiums and copays. We are all sharing the cost of the uninsured citizens and non citizens already. Look at the history of State run mental health institutes and the aftereffect of deinstitutionalization. It was a boon for privately run correctional facilities as poorly treated patients were released to the communities and ended up with no infrastructure in place for adequate support. If a law is passed, there must be the will to back it up with resources. We must all agree to the consequences both public and personal no matter which way this issue goes.
Regarding market forces-end of life care, emergency care, care for chonic health conditions all take a great share of the existing health care pie. I don’t think the traditional economic principles apply in these situations. For example, when my car breaks down, I am inconvenienced, but I can find ways to get good car care at a reasonable price, because there are other ways to get around. When I wake up in the middle of the night with shortness of breath or a 103 degree fever, I’m in no position to call around and find the best deal. I’m not an economist, so I don’t know what this sort of model is, but it doesn’t strike me as a clear supply-demand model.

Methinks August 17, 2009 at 5:19 pm

Well, Danny, we go around the same bush because you can’t stop prostrating to the state. You also either didn’t read the the pages I gave you or you don’t know what it means and you ran to Daily Kos to get an explanation. Go find a doctor to explain it to you so that you can not listen to his explanation instead of mine.

The “public option” IS medicaid. It’s an expansion of medicaid. The language is, in fact, a cut and paste from medicaid. Medicaid prohibits people from paying out of pocket for anything not covered by medicaid to the same doctor who accepts you as a medicaid patient.

Only a good little socialist like you can claim that being forced to pay for and participate in a state-run program that transfers wealth from the healthy to the unhealthy and from the productive to the unproductive is a voluntary contract.

Keep dreaming of an Obama delivered Utopia, Danny.


Anonymous August 17, 2009 at 5:45 pm

I went to exactly the page you mentioned to me in the bill’s text at thomas.loc.gov. I think I’ve only been on Daily Kos once or twice in my entire life. Anyway – without the assistance of Daily Kos I was able to find a pdf copy of the bill, find page 317, and read the heading for that section, namely:

“Requirements to qualify for rural provider and hospital ownership exceptions to self-referral prohibition”

If you have an alternative as to “what that means”, then I encourage you to explain it to me.

Re: “The “public option” IS medicaid. It’s an expansion of medicaid. The language is, in fact, a cut and paste from medicaid. ”

Then surely you wouldn’t mind explaining to me why on page 119 the bill requires premiums to cover all benefits and all administrative costs, and how that would leave any room for subsidy with tax dollars. In what way is this anything like Medicaid???

RE: “forced to pay for and participate in a state-run program that transfers wealth from the healthy to the unhealthy and from the productive to the unproductive is a voluntary contract.”

What in the world do you imagine you’re going to be forced to do? Less hysterics and more citations, please.

RE: “Keep dreaming of an Obama delivered Utopia”

I don’t believe in utopia, and if I did I wouldn’t bet on Obama delivering it. Try not to have too many nightmares of a dystopia, though – because he won’t deliver on that either.

Anonymous August 17, 2009 at 5:47 pm

It’s really easy to search the bill:


Go to page 317/318 that you directed me too. I hope it’s clear. I don’t want to bicker about this – it’s all there.

Marcus August 17, 2009 at 7:41 pm

Please, let’s not confuse the issue. The market allocates resources through prices, it does not ration. I think you understand this point.

My question to you is this: does the ‘public option’ allocate resources through prices?

Sam Grove August 17, 2009 at 8:11 pm

Let’s look at it another way.

McDonalds provides hamburgers to all who are willing to pay. The customer controls hizzer purchase up to the exchange because the customer has the money under hizzer control up to that point.

Now, if McDonald’s were a subscription enterprise, we might see a different behavior. Having paid ahead, McDonald’s would now be in control of the money before the sale.

All well and good as long as there’s a Jack in the Box alternative, for if McDonald’s doesn’t provide to the satisfaction of the customer, he can go elsewhere.

But what if politicians were invovled in these transactions?
Would JitB and McD’s lobby politicians to require people to participate in fast food subscription plans?
How would that affect the business of non-corporate restaurants?
After all, if you have to pay for a fast food subscription, wouldn’t you have less $ to eat elsewhere?

The question is not over how resources are rationed, but who controls your entitlement to consume (read as “the money”).

Why would any sensible person desire to give other people absolute power to control hizzer money?

I say absolute, because when government is involved, the power is absolute. Absolute in that choice is removed from yourself and transferred to those that man the offices of government.

In a free market, the consumer rations hizzer spending. That is, the consumer participates in the rationing decisions.
When government is involved, the rationing decisions become rather more one-sided.

(hizzer is my substitute for “his or her”)

Anonymous August 17, 2009 at 7:46 pm

I thought I said quite clearly that the market allocates with prices – and that’s the advantage of the market. The public option obviously doesn’t allocate through prices. Was that not clear in my fifth paragraph?

That’s not where we differ.

Where we differ is that you seem unwilling to accept that “ration” has a general definition that is synonymous with “allocate”. If you don’t want to accept that, fine. Just don’t apply the more specific definition to the public plan. My point is – if you really want to use the word “ration” in this discussion, you really have to use the general definition if you want to make any sense.

And if we’re just using the general definition it’s all trivial and stupid.

Methinks August 17, 2009 at 8:25 pm


This is going to be an argument of semantics because economists talk about markets rationing scarce resources.

The issue, as you understand, is who gets to decide your personal level of consumption. The statist would like to sell you the lie that big bad industry limits your consumption and if that’s the case, why not let big bad selfless and saintly politicians instead of the fat cats?

Obviously, the statist doesn’t differentiate between you and the state when it comes to choosing your level of consumption. Greater good, social justice and all that, you know.

Marcus August 17, 2009 at 8:13 pm

You’re rationalizing (no pun intended).

Yes, I know what you wrote in your previous reply. That’s why I asked the question I did, because you already answered it. Then you try to spin your way out of it.


4. to supply, apportion, or distribute as rations.
5. to supply or provide with rations.
6. to restrict the consumption of (a commodity, food, etc.).
7. to restrict the consumption of (a consumer)

The market is by definition not rationing. It is an alternative to rationing.

How will the ‘public option’ likely ration health care? My guess: through queues.

Methinks August 17, 2009 at 8:26 pm

Hey! I just learned how to do the strike through thing and obviously it’s not working. Dang it.

Marcus August 17, 2009 at 8:42 pm

Hi Methinks,

I just did a search of EconLib’s encyclopedia for the word ration. In every case except one, the word was used to mean some form of allocating resources which did not use prices.

If economists are using the term ration to mean allocating resources through prices, then they need to be whipped with a wet-noodle.

Anonymous August 17, 2009 at 8:33 pm

I’m not trying to “spin my way out of it”! I stand by my answer.

Maybe it’ll be easier for you to understand if you think about it this way: in terms of a private but non-profit health insurance company. They have a budget constraint, but they are not a for-profit enterprise. They sell insurance packages to people who voluntarily choose to buy them. Since they’re not driven by the profit motive (although they still have to make budget) they aren’t REALLY following a price mechanism. Are they rationing? Maybe, depending on how broadly you want to interpret the definition of rationing you provided – “to restrict consumption”. But any definition of “rationing” that describes a non-profit firm selling policies is going to describe for profit firms too.

What changes in this if you make that non-profit company the government?

Also – “How will the ‘public option’ likely ration health care? My guess: through queues”

Common fallacy – they’re not going to ration health care at all – they aren’t even involved in that. They’re going to be involved in health insurance. I’m not sure how you would wait in a line to get health insurance. You don’t really have to wait – you just sign up for it and send in premiums.

sandre August 17, 2009 at 10:56 pm

Kuehn is a disingenuous spin master. However, he is much more polite, cultured and less of a hypocrite than that embarrassment known by the handle muirgeo – a.k.a George Ballela

Marcus August 17, 2009 at 8:47 pm

“Common fallacy – they’re not going to ration health care at all – they aren’t even involved in that. They’re going to be involved in health insurance. I’m not sure how you would wait in a line to get health insurance. You don’t really have to wait – you just sign up for it and send in premiums.”

Insurance isn’t an end, it’s a means. The end is health care.

Go to an emergency room and you will immediately become aware of what it means to allocate health care through queues.

Now, you may argue that the ‘public option’ will relieve the demand for emergency room health care services. Probably true. But that doesn’t mean the queues disappear. They just move to the doctors office instead.

Anonymous August 17, 2009 at 8:51 pm

“the bill requires premiums to cover all benefits and all administrative costs”

That’s pretty funny. Kind of makes you wonder why the government has to do it then.

Methinks August 17, 2009 at 9:02 pm


As long as everyone knows what is meant by markets rationing resources, it’s okay. It only becomes a problem when people conflate government rationing and market rationing. Personally, like you, I find it less confusing to use different words.

Methinks August 17, 2009 at 9:10 pm

Now, you may argue that the ‘public option’ will relieve the demand for emergency room health care services. Probably true.

I doubt this will be true. Almost everyone waiting in the emergency room has insurance and a primary care physician. the reason they’re in the emergency room is that (for example) they have symptoms indicative of a a urinary tract infection and they can’t get an appointment with their primary care physician for two weeks and the state has so helpfully prevented a Wal-Mart from opening a walk-in clinic to protect the state’s health insurance industry from competition after legislators loaded it with mandates.

The public option will run like an HMO and, since expanding medical facilities will require permission from the state, supply will not increase with demand and this emergency room problem will likely get worse. It’s very bad in Canada.

Anonymous August 18, 2009 at 2:08 am

The obligation for emergency rooms to serve anybody that comes has been law for a really long time. Sure that’s “rationing”. Are we arguing over that or health reform? It’s like that post the other day when people were jumping back and forth between arguing against the public option, the mandate, and single payer. These are different interventions.

Health reform deals with insurance – not care.

Marcus August 17, 2009 at 10:17 pm

I use to date a girl who didn’t have insurance. She made occasional use of the emergency room. I spent some time waiting in there with her (what a productive use of people’s time!).

Now, while sitting there I observed when people came in and how long it took to get waited on. Some people came in and got waited on in relatively short order while others waited and waited.

Now I never asked but I wondered if that wasn’t based on if someone had insurance or not. But that’s just speculation.

I certainly didn’t observe any evidence that it was in any way based on a person being in more need of immediate care.

Supporting that, not too long ago a co-worker, who has insurance, paid a visit to the emergency room and he mentioned that he got in right away with almost no wait.

My girlfriend and I waited for hours every time we were there.

Anonymous August 17, 2009 at 10:27 pm


I tried the strike feature on an earlier thread, right after the change-of-venue.

I guess that that particular HTML code isn’t recognized on this server, which is a pity. It’s a wonderful tool for illustrating the doublespeak that Statists are so fond of.

Methinks August 17, 2009 at 10:44 pm


It’s difficult to assess a person’s medical need just sitting in the emergency room watching people come in and out. It’s also difficult to assess what exactly they’re doing there. Sometimes it’s easier to quickly process a returning patient or equipment for their specific injury has freed up or any number of other things.

When I lived in NYC and had insurance, I sprained my ankle running. I knew exactly what it was and how to treat it, but I needed crutches to get to work. The medical supply informed me that I must go to the emergency room to obtain said crutches. Why must I suck some ER doctor’s time to get two sticks to lean on? I will never know.

When I cut off my fingertip in a kitchen accident (it’s fine now), the ER took me right away and asked if I had insurance only as I was checking out.

The story I told you is real – it happened to my cousin – and she sat around for hours before they finally tested her. She had insurance.

I’m assuming your ex-girlfriend wasn’t bleeding to death as she waited.

Methinks August 17, 2009 at 10:45 pm

rats! Thanks, brotio.

Sam Grove August 18, 2009 at 4:12 pm

Nope, I experimented and can’t strike.

Anonymous August 18, 2009 at 1:18 am

Because…they’re spelled differently? Because one you can plug into the wall? Because you think TVs are more fun? Because you can’t think of what you wanted to say?

Be a little more specific. You can do it. Actually make your point.

Ryan August 18, 2009 at 2:19 am

The point is comparing TV’s to health insurance doesn’t make sense, they are different kinds of markets.

Gil August 18, 2009 at 2:27 am

Of course McDonalds is rationing – they want to make sure all their burgers go the highest bidders. Or to put it another way McDonalds sell only to those who can pay for a burger regardless of how hungry they are. So would it be with privatised medical care. Some believe this would be a good thing as people stop doing stupid and risky practices because they can no longer afford to incur a serious injury.

Anonymous August 18, 2009 at 2:35 am

You are still not making a point. Any two distinct concepts have both similarities and differences.

What is it that is different about those two markets, and why is that relevant? This shouldn’t be hard. Just be a little introspective and ask yourself that question. Then tell me.

Sam Grove August 18, 2009 at 2:46 am

My wife buys McDonald’s gift cards to keep in the car to hand out to hungry people.

There are no people in the U.S. that starve for lack of food. Glide Memorial church, among many other charitable organizations takes a great hand in that.

OTH, in countries where the government is responsible for supplying food, people often starve because the food isn’t there.

Do you know the story of the early American colony that tried to practice communism in the production and distribution of food?

If you can remind us of the colony name, Don, I’m sure the story will be of interest.

Ryan August 18, 2009 at 2:52 am

Apparently, I’m confused about why you’re asking since it seemed so obvious to me. In a market for goods, such as a “flat-screen t.v.” (Mr. Boudreaux’s choice of product to compare) the buyer and sellers decide on a price for that good and complete the transaction. This is rather different than health insurance where the company will decide not to sell you a particular plan at *any* price because you don’t qualify. I’m not suggesting this practice is wrong, just that it’s not the same as TV’s.

If you’re in the LA area we should get together to discuss it, I’m sure you could help me understand economics better. And it would do you some good to get out from behind a computer screen and learn how to interact with people.

Anonymous August 18, 2009 at 3:02 am

It’s just that you have to actually make a point before I can respond to it.

If you go shopping, I think you’ll find that nobody will sell you a 3 mm thick 100 inch 240 kHz wireless HDMI OLED TV at any price either.

So I still don’t see your point.

It is impossible for any market to ever provide for sale every product or service imaginable to man. However, no system provides a greater array of choices at lower costs than the profit-driven free market.

Methinks August 18, 2009 at 1:26 pm

will decide not to sell you a particular plan at *any* price because you don’t qualify.

My understanding is that they will sell you a plan at some price but they a prohibited from selling a plan at a price high enough to cover their costs and that price won’t be much different from you paying out of pocket.

Since all conditions include some randomness, if you remain uninsured, you bear the volatility of spending on your condition. “Insuring” yourself merely reduces the volatility, I think.

Anonymous August 18, 2009 at 4:41 am

Considering the embarrassment he’s made of himself at the Cafe, I actually feel sorry for him being outed–if that really is him.

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