Obama Care, Not Even Wrong

The health care bill passed on Sunday, March 21st, 2010. A historic moment. It will be interesting to observe its consequences in the next decade, a potential gold mine for economists.

On the following Monday I had a lunch conversation with a colleague, and the issue of health care was briefly brought up. My colleague said that he just could not understand why anybody could have opposed the bill, why anybody would think that universal health care could be a bad thing. I was quite surprise by that statement, coming from a highly educated intellectual. Because nobody thought that universal health care was a bad thing, in the sense that it was morally unjustified. People opposed it for economical reasons. People opposed it because they had not been convinced that the benefit to the nation would outweigh the economic cost. My colleague's comment just made me realize that some supporters of the health care bill had only been considering the bill on moral righteousness, not on economical feasibility.

When I pass by a homeless person on the street, I also feel the moral obligation to help. Everyone should be entitled to a roof over the head, as much as everyone should be entitled to care in sickness. But there is no legislation for universal housing.

New York City has aggressively cut its subway services. Now I often wait twice as long for a train as before. No one could have thought that cutting subway service was a good thing. But sometimes it is the fiscally responsible thing to do. Policy making is not so much about doing the morally right as about setting the right priorities, and investing the resource where it will benefit the society the most.

There are many things that should be deemed universal rights, the "good things", but in reality are not available to everyone, for the simple reason that there is not enough of it to share. It seems strange to me that some legislators are arguing the health care bill on the moral ground: "If you think it is right, you gotta help us finish the fight." That seems like sports trash talk, not a cool headed argument. The morally correct is not always economically right.

If anything, better education for everyone makes more sense than health care for everyone. After all, people don't fall sick often, and most minor ailments heal by themselves. Poor education, on the other hand, hurts a person for life, day in, day out. A better education is not only essential to maintain United States' competitive edge, but it will also better equip the Americans to evaluate the legislative bills more rationally, instead of being swayed by politicians' hot-headed rhetorics.

I kept wondering: if universal health care was such an obviously good thing, why was Massachusetts the only state in the nation that independently enacted it? Why did all the other states choose not to follow suit on their own and enact their own universal health care for their state citizens?

Even if we limit the debate entirely to the moral ground, I cannot fully justify universal health care, since it is not truly universal health care, but only health care for AMERICANS! Majority of the world's population live in poverty and do not have access to many basic life's needs. I personally detest any entitlement from a privileged birth, even though I accept it as a fact of life. But please do not use it as the basis of a moral argument. It is plain hypocrisy!

Obama called the passing of the bill "what change looks like". I am very disappointed. What Obama promised on his campaign was bipartisan politics. What I expected to see was a pragmatic approach to tackling the nation's most urgent problems, not the old ideological bigotry. The health care bill was passed without a single Republican vote. It was passed not because it was resoundingly convincing to the majority, but through insidious political manouvres that would surely anger its opponents and further divide this nation. If this is what change looks like, it is not the kind that I can believe in.

Cheaper expensive

As I strolled down the Madison Avenue, a sense of indignation assailed me on full scale. The display of excesses in the row of boutiques like La Perla, Oliver Peoples, and Breguet struck me as a manifestation of social inequality. Is there any justice that a bra, a pair of sunglasses, or a watch should cost so much that they are beyond the reach of ordinary hardworking Americans? Why is there not a legislative motion to rein in the cost of luxury goods, to make them universally accessible to all citizens of this wealthiest nation in the world?

A person with even the faintest turn of mind in economics, like me, can predict what such price restriction would do. There would be no more La Perla bras, no more Oliver Peoples sunglasses, and no more Breguet watches. So far as we want to keep luxury merchandise around, there is no way to drive down their prices, for the simple reason that price is not the paramount factor in the purchase of luxury goods. Luxury goods compete in other dimensions: quality, design, and brand recognition. The rich buy what they desire, not what is cheap.

For the same reason it will be all but impossible to rein in the cost of healthcare without sacrificing the quality of care. When we go see doctors, the cost of treatment is seldom on the top of our mind. Money is no good to anyone who is too sick to enjoy spending it. There is no financial incentive for the doctors not to prescribe the best - and often the most expensive - treatment, and there is little financial incentive for the patients to turn down a costly but presumably efficacious prescription.  Healthcare is analogous to luxury goods in that the providers compete not in price but in the quality and effectiveness of care. This may sound heartless - how can something essential such as physical well-being be compared to a Gucci coat or a Hugo Boss gown! But economics is a cold-blooded reptile that knows only incentives and no morals. So long as there is no incentive from either party to control the cost at the consumption end of healthcare, i.e., when the patient sees the doctor, driving down the cost will remain political hot air.

The only check on medical cost comes from the insurance companies, which employ an army of medical consultants to review the necessity of the prescribed treatments and deny the ones that are deemed wasteful. This practice, unfortunately and perhaps rightfully, is often vilified in the public media; denial of care is invariably described as an example of corporate greed of the health insurance industry. 

The only existing mechanisms to make patients more cost conscious are the deductibles and the annual ceiling in coverage. By making the patient share part of the cost for each treatment, the insurance companies quite effectively prevent wanton visits to the clinic and abuse of the medical insurance. With a spending limit each year, the patient is more likely to reject unconscionably expensive treatment, in order to save for another rainy day. Yet, effective as these measures are in fighting insurance fraud, they do little in controlling the average cost.

Last summer I had a horse riding accident, and I was rushed to the ER in a nearby hospital, in the affluent town of Huntington. In retrospect, I sustained only a minor injury: a horse kicked me just below my abdomen and to the left of my groin - the kick landed squarely where my cervical bone was the hardest and, even though a nail from the horseshoe penetrated three layers of clothing and cut a deep wound in the flesh, it did not reach the bone. I remained lucid throughout and felt no discomfort in my internal organs. Nevertheless, when the doctors prescribed two CAT scans and one X-ray, just to ensure that there was no internal trauma, I was in no position to refuse. Sure it did not feel like that I really needed them, but maybe the pain in the cut wound was obscuring signs of hidden internal injury. Was it not better to be safe than sorry? Who was I to say what diagnostics and treatments were rightfully called for? That was the doctors' job. 

The total bill came close to $30000, of which I had to pay a deductible of $450. I did not learn about the amount of the deductible during my ER visit, and had I known about this sizable deductible, most likely I would still not have said no to any of the prescribed procedures. It simply would not be worth saving $450 to risk permanent organ damage, or in the worst scenario, my life.

I too support the call to rein in the medical cost; I am simply skeptical of the proposals stemming from moral arguments. Conscience is never as effective in improving the world as sensible economic policies. The only solution to reduce the medical cost lies in instituting policies that will place economic incentives for either the doctors or the patients, or both, to be more price sensitive, right where and when the doctors treat the patients. I suspect that it will be the private sector who can do it better than the government. Sadly, whatever measure there is and will be, it is likely to be branded as the most evil of all greed: placing money in front of human lives.