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Posts Tagged ‘Third party payer’

People sometimes think I’m strange for being so focused on the economic harm that results from third-party payer. But bear with me and we’ll see why it’s a very important issue.

If you’re not already familiar with the term, third-party payer exists when someone other than the consumer is paying for something. And it’s a problem because people aren’t careful shoppers when they have (proverbially) someone else’s credit card.

Moreover, sellers have ample incentive to jack up prices, waste resources on featherbedding, and engage in inefficient practices when they know consumers are insensitive to price.

I’ve specifically addressed the problem of third-party payer in both the health-care sector and the higher education market.

But I’ve wondered whether my analysis was compelling. Is the damage of third-party payer sufficiently obvious when you see a chart showing that prices for cosmetic surgery, which generally is paid for directly by consumers, rise slower than the CPI, while other health care expenses, which generally are financed by government or insurance companies, rise faster than inflation?

Or is it clear that third-party payer leads to bad results when you watch a video exposing how subsidies for higher education simply make it possible for colleges and universities to increase tuition and fees at a very rapid clip?

That should be plenty of evidence, but I ran across a chart that may be even more convincing. It shows how prices have increased in various sectors over the past decade.

So what make this chart compelling and important?

Time for some background. The reason I saw the chart is because David Freddoso of the Washington Examiner shared it on his Twitter feed.

I don’t know if he added the commentary below, or simply passed it along, but I’m very grateful because it’s an excellent opportunity to show that sectors of our economy that are subsidized (mostly by third-party payer) are the ones plagued by rising prices.

It’s amazing to see that TVs, phones, and PCs have dropped dramatically in price at the same time that they’ve become far more advanced.

Yet higher education and health care, both of which are plagued by third-party payer, have become more expensive.

So think about your family budget and think about the quality of PCs, TVs, and phones you had 10 years ago, and the prices you paid, compared with today. You presumably are happy with the results.

Now think about what you’re getting from health care and higher education, particularly compared to the costs.

That’s the high price of third-party payer.

P.S. This video from Reason TV is a great illustration of how market-based prices make the health care sector far more rational.

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America’s health care system is a mess, and we can assign almost all the blame on government. Simply stated, we don’t have functioning and efficient markets because Medicaid, Medicare, tax-code distortions, and other forms of regulation and intervention have created a system that is crippled by a third-party payer crisis.

There’s no logical reason to expect consumers to be smart shoppers, after all, when they’re only responsible for directly paying just 11 cents for every $1 of health care they consume. And providers have little reason to be efficient when they know that consumers are largely insensitive to price.

Let’s now apply these insights to the political controversy over birth control. Except, as I explained in July, there is no fight over birth control. As far as I’m aware, nobody is trying to ban birth control.

The real fight is whether the government should mandate that health insurance plans include coverage for birth control (and certain abortifacients).

Writing for Bloomberg, Megan McArdle explains that Obamacare’s birth control mandate is silly because a modest and routine expense shouldn’t be covered by insurance at all.

I am not very patient with the political fights over the Affordable Care Act’s contraception mandate. …Generic birth-control pills are a cheap, regular expense used by many millions of people, exactly the sort of thing that insurance is not designed for. All this does is spread the cost around a bit while adding administrative overhead for your policy.

Moreover, the better policy is to allow birth control to be purchased without a prescription.

In other words, address the issue by reducing government regulation rather than imposing a mandate!

…make birth-control pills available over-the-counter rather than a prescription item. This is an excellent idea. It was an excellent idea before Obamacare passed, and it will remain a fine policy even if Obamacare somehow vanishes into dust. Physicians assess the danger of giving you birth control by asking simple questions you can ask yourself: Are you over 35, a smoker or troubled by a family history of early stroke?

Seems like a good idea, right? Particularly since it should appeal to Republicans that want less regulation and also appeal to Democrats that want easier access to birth control.

The Republicans are on board, as Byron York reports.

…the GOP has a new policy response… The idea is to make the birth control pill available over the counter, to all, 24/7, without a prescription. It’s becoming a trend among Republican candidates in Senate races around the country. In North Carolina, GOP candidate Thom Tillis recently embraced it. So has Ed Gillespie in Virginia. Mike McFadden in Minnesota. Gardner in Colorado. And one of the leading proponents of the move is a potential 2016 GOP presidential candidate, Louisiana Gov. Bobby Jindal. …Gardner first rolled out the proposal in a Denver Post op-ed in June. The birth control pill has safely been in use since it was first approved 44 years ago, Gardner argued. “When other drugs have that kind of track record, we approve them for purchase without a prescription,” he wrote. “Name-brand drugs like Advil, Pepcid, Claritin, Prilosec and many others were once sold by prescription only, but moved to over-the-counter sale once they’d been proven safe and unlikely to be abused.”

But some Democrats are hostile.

Indeed, a columnist for the Denver Post is very upset that some GOPers are supporting over-the-counter access to birth-control pills.

Following the lead of Colorado U.S. Senate candidate Cory Gardner, a handful of Republicans in midterm races across the country are now embracing over-the-counter sales of birth control pills without a prescription. Don’t be fooled. It’s a disingenuous move that could actually make the pill more expensive for women… But women already pay for those pills as part of the health care coverage they purchase through employers. Why would we want to pay for them twice? …What happens, however, if birth control pills are sold over the counter? Insurance companies will likely stop covering them. That means women will keep paying health insurance premiums, plus an additional out-of-pocket fee for pills. …And free doctor visits to discuss birth-control risks could also be replaced with fee-based pharmacy consults to determine whether women have risk factors like smoking, hypertension or migraines that prevent safe use of the pill, reports the American College of Obstetricians and Gynecologists. That’s hardly a “cheaper and easier” alternative — which is why Politifact rates Gardner’s claim as “mostly false.”

I strongly suspect that the author simply wanted to make a partisan attack on the Republican Senate candidate in Colorado. After all, more substantive and serious people on the left, including those at both Vox and Think Progress, favor over-the-counter access to birth control.

But let’s assume she really believes what she wrote. In which case she would get an F from any economics professors because health insurance companies obviously include predicted costs when pricing their policies. So if the mandate disappears and birth control is available without a prescription, then insurance companies will be able to lower the cost of the policies they sell.

In other words, women wouldn’t be paying twice. Indeed, they’ll pay less, though that will only be obvious to those who understand that employer-provided health plans are part of overall employee compensation.

There is another reason, other than partisanship, for some on the left to oppose Republican proposals to allow birth control to be sold over the counter. And you won’t be surprised to learn that self interest is playing a role.

Writing for The Federalist, Ben Domenech notes that Planned Parenthood wants to retain the current prescription-only approach.

You may think Ben made a big mistake, or that I misinterpreted. After all, isn’t that contrary to the organization’s ostensible mission of reducing unwanted pregnancies?

Well, Ben points out that Planned Parenthood may be more interested in maximizing handouts than it is in reducing pregnancies.

…interestingly enough, Planned Parenthood is pushing back on over-the-counter contraception. Why is this? Why would Planned Parenthood want to decrease the availability of contraception, and require women to see a doctor in order to get it? That seems awfully paternalistic of them. …birth control is a major lead generator for Planned Parenthood, to the degree that they can’t afford to lose their existing purpose as a source of prescribed contraception without it hurting their status as an institution. …Now you can understand why they wouldn’t want potential customers to be free to go to CVS or Walgreens or Rite Aid instead of heading to Planned Parenthood – providing those and other services is worth a lot of taxpayer money, $540 million in FY 2012 alone. And if you don’t provide those services, you can’t bill the taxpayers for them. …That’s why they want to keep the government’s ban on over-the-counter birth control intact.

Here’s a chart from Ben’s article that shows “what percentage of Planned Parenthood’s “services” are related to contraception.” As he notes, “it’s over a third of their activity.”

So I guess it makes sense – at least from an amoral perspective – that the organization wants to limit access to over-the-counter birth control.

By the way, the GOP plan for easier access to birth control is not a move to uncharted territory.

Here’s a map from a pro-reform left wing group that shows that over-the-counter birth control pills are easily available to most of the world’s women.

Let’s close by sharing one final – and very persuasive – piece of information from the experts at Reason.

Women already have over-the-counter access to Plan B, which involves larger doses of the hormones that are present in birth control pills.

…the Food and Drug Administration (FDA) has been considering making oral contraceptives available over-the-counter (OTC) for more than twenty years. “Plan B,” an emergency contraceptive, became available OTC last year. That one-step pill is simply a more potent dose of the same hormones that make up regular birth control pills. There’s no good medical justification for the differentiation. Yet in America, regular birth control pills remain stubbornly behind the pharmacy counter and behind the times.

In other words, the usual pro-regulation argument is that prescriptions are necessary because consumers can’t be trusted to make their own decisions with strong doses of medicine.

But the government already has made Plan B available over the counter while blocking similar access to birth control pills. Go figure.

P.S. Planned Parenthood is not the only interest group that has behaved in a disreputable and dishonorable fashion.

P.P.S. If you want to know what happens to healthcare in the absence of pervasive third-party payer, check out this remarkable chart.

P.P.P.S. Since today’s topic was birth control, let’s use this opportunity to revisit our collection of Sandra Fluke humor. Just in case you don’t remember, she was the 30-year old college student who got her 15 minuted of fame by demanding that other people pay for her expenses. Anyhow, if you want to laugh, check out this great Reason video, this funny cartoon, and four more jokes here.

P.P.P.P.S. On a separate topic, I added my two cents late last year to a debate inside libertarian circles over whether America’s plethora of welfare programs should be replaced by a single “basic income” grant that would be given to all Americans. Sort of a guaranteed minimum income.

I acknowledged that the current system is a mess, but I suggested that decentralization was a better approach.

…it seems that nothing could be worse than the current system. …But what about the idea of trashing what we have today and instead offering everyone some sort of basic income? …I agree, but only sort of. I like the idea of radical reform, but I think there’s a better road to Rome. It’s called federalism.

But what if someone held a gun to my head and said federalism wasn’t an option and demanded that I choose between the “basic income” and the status quo?

There’s not an obvious right answer, but I suspect I would prefer the devil I know because of fears that we might get more redistribution and even bigger government.

And I’m not the only one to have that opinion. Here’s what a proponent of more redistribution wrote about the concept.

Basic Income, unlike the programs we have now, will be politically easy to raise once it’s in place. …if you have one big, high-profile redistribution program, you can get enough popular support to overcome the concentrated opposition of the rich people footing the bill. …by endorsing Basic Income, libertarians are walking right into a trap. Anti-redistributionists’ great fear has always been that the masses will use the power of majority rule to simply vote themselves more money. As things stand, the fragmentation of our redistribution programs makes it easier for the anti-redistributionists to punch holes in the safety net. If the fragmented system were replaced with one universal, high-profile program, the result would be a huge political gift to redistributionists.

But maybe I’m just a pessimist. Tyler Cowen has a different perspective.

…let’s say a historical accident swept Basic Income proponents into power for a term and they passed that legislation.  Over time those income transfers would prove larger, more visible, and they would at least appear superficially more anti-work than the public stomach for them.  I predict they would be restricted along a number of possible dimensions, starting with (partial) work requirements for the able-bodied. Under most plausible assumptions about the Basic Income level, most people would not be recipients, nor would they expect to be potential net gainers from the program. …So I think the “why send money to people who aren’t working?” intuition will crowd out the “I want to think of myself as someone who helps other people” feeling.

I guess it depends on how the “basic income” is designed. If the government sends checks to everybody (as some are proposing), then Tyler’s “plausible assumption” about recipients would be wrong.

Which reinforces in my mind that my original idea was right. Let’s go with federalism and get Washington out of the business of redistribution.

The decentralized approach has been very successful in Switzerland and its also the system that’s consistent with the Constitution.

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I’ve often explained that “third-party payer” is a major problem in our healthcare sector.

This occurs when consumers can buy healthcare with other people’s money. For instance, nearly half of all healthcare spending in America is directly financed by government. And a big chunk of supposedly private healthcare spending is actually the result of government policies that encourage and subsidize over-insurance (in which case, people may be buying healthcare with their own money, at least indirectly, but in a system akin to a pre-paid all-you-can-eat buffet).

Anyhow, one of the big downsides of this system is that third-party payer undermines market discipline and leads to higher prices and massive inefficiency in the health sector.

This then leads to a perverse outcome as politicians point to the higher prices and inefficiency and say this is evidence of market failure!! In a stereotypical example of “Mitchell’s Law,” they then propose more government to ostensibly deal with problems created by government (and people wonder why I have lots of gray hair).

We have the same problem in higher education, except it may be even worse if you look at these charts. Simply stated, government loans and grants have enabled colleges, schools, and universities to dramatically boost tuition and engage in massive bureaucratic featherbedding.

Interestingly, the Obama Administration has a proposal that sort of addresses this issue. The Department of Education is proposing “gainful employment” regulations that would, among other provisions, limit loans and financial aid on the basis of whether a school produces students with high student-loan debt relative to post-graduate earnings.

This sounds like it might be a good idea. After all, it would presumably lead to less government spending.

But there’s a catch. A giant catch, as explained by Brian Garst of the Center for Freedom and Prosperity.

…if it is truly needed to protect students, why are public and private non-profit universities excluded? For-profit schools only serve about 20% of all higher education students, and yet are the exclusive target of the regulation.

Yes, you read correctly. The Obama Administration is not trying to save money or impose accountability. Instead, it is seeking to undermine competition.

You may think I’m making this up, but a former senior bureaucrat at the Department of Education bragged, in a speech to a left-wing group, that the goal is to stamp out for-profit schools.

Here’s another excerpt from the folks at the Center for Freedom and Prosperity.

Former deputy undersecretary of education Robert Shireman, who initiated the Gainful Employment regulations, is currently under investigation for ethics violations and conflicts of interest relating to these effort. He has made clear through public comments that he sees eradicating private-sector colleges as his ultimate goal. In a recent speech delivered at the Center for American Progress, he said he does not believe that a business should own a college.

This fight illustrates why government intervention is so corrupting.

I don’t like any federal subsidies to education, whether for K-12 or for higher education. I don’t care whether the subsidies are for government schools, non-profit private schools, or for-profit private schools.

So I would like to cut off loans, grants, and other funds to for-profit schools, but that should happen at the same time that handouts also are being eliminated for other types of schools (Tim Carney has a very good explanation of why there are no good guys in this fight).

Let me close with an analogy.

I don’t want federal money in the healthcare system. So that means I don’t want payments of taxpayer money to private hospitals and private physicians.

But I would be even more agitated if the Obama White House said that it would “save money” by cutting off health funds, but only monies going to the private providers. The net result is that we all would be forced into VA-type treatment from government.

The moral of the story is to shrink government across the board.

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The new leftist website, Vox, has an article by Sarah Kliff on Vermont’s experiment with a single-payer healthcare system.

But I don’t really have much to say about what’s happening in the Green Mountain State, other than to declare that I much prefer healthcare experiments to occur at the state level. Indeed, we should reform Medicaid and Medicare and also fix the tax code so that Washington has no role in healthcare. Then the states can experiment and compete to see what works best.

But that’s a topic for another day. The real reason I cite Kliff’s article is that Ezra Klein tweeted this image from the article and stated that is was “The case for single payer, in one graphic.”

Vox Third-Party Payer

I don’t know if the numbers in the graphic are correct, but I have no reason to think they’re wrong.

Regardless, I certainly don’t disagree with the notion that our healthcare system is absurdly expensive and ridiculously inefficient.

In other words, the folks at Vox have accurately diagnosed a problem.

However, do these flaws prove “the case for single payer”?

It’s probably true that “single payer” has a lower monetary cost than the system we have today (assuming you don’t include the cost of substandard care and denied treatment), but that doesn’t mean it’s the ideal system.

Indeed, there is a better way to deal with the waste, inefficiency, and bureaucracy of the current system. third-party-2The answer is free markets and genuine insurance, both of which would help address the real problem of third-party payer.

Third-party payer, for those who are new to the healthcare field, is what you get when somebody other than the consumer picks up the tab. And because of government intervention, that’s what happens with about 90 percent of healthcare spending in the United States. Here’s what John Goodman had to say about this problem.

Almost everyone believes there is an enormous amount of waste and inefficiency in health care. But why is that? In a normal market, wherever there is waste, entrepreneurs are likely to be in hot pursuit — figuring out ways to profit from its elimination by cost-reducing, quality-enhancing innovations. Why isn’t this happening in health care? As it turns out, there is a lot of innovation here. But all too often, it’s the wrong kind. There has been an enormous amount of innovation in the medical marketplace regarding the organization and financing of care. And wherever health insurers are paying the bills (almost 90 percent of the market) it has been of two forms: (1) helping the supply side of the market maximize against third-party reimbursement formulas, or (2) helping the third-party payers minimize what they pay out. Of course, these developments have only a tangential relationship to the quality of care patients receive or its efficient delivery.

And here’s some analysis from a study published by the National Bureau of Economic Research.

In most industries, higher quality is associated with higher prices. That is not true in medical care, however, largely because of the public sector. …Every analysis of medical care that has been done highlights the significant waste of resources in providing care. Consider a few examples: one study found that physicians spent on average of 142 hours annually interacting with health plans, at an estimated cost to practices of $68,274 per physician (Casalino et al., 2009). Another study found that 35 percent of nurses’ time in medical/surgical units of hospitals was spent on documentation (Hendrich et al., 2008); patient care was far smaller. …In retail trade, the customer is the individual shopper. If Wal-Mart finds a way to save money, it can pass that along to consumers directly. In health care, in contrast, the situation is more complex, since patients do not pay much of the bill out-of-pocket. Rather, costs are passed from providers to insurers to employers… About one-third of medical spending is not associated with improved outcomes, significantly cutting the efficiency of the medical system and leading to enormous adverse effects.

Here’s my humble contribution to the discussion, starting with an explanation of how special tax breaks deserves some of the blame.

…how many people realize that this bureaucratic process is the result of government interference? For all intents and purposes, social engineering in the tax code created this mess. Specifically, most of us get some of our compensation in the form of health insurance policies from our employers. And because that type of income is exempt from taxation, this encourages so-called Cadillac health plans. …We have replaced (or at least agumented) insurance with pre-paid health care.

I then explain why this isn’t a good idea.

Insurance is supposed to be for unforseen major expenses, such as a heart attack. But our gold-plated health plans now mean we use insurance for routine medical costs. This means, of course, we have the paperwork issues…, but that’s just a small part of the problem. Even more problematic, our pre-paid health care system is somewhat akin to going to an all-you-can-eat restaurant. We have an incentive to over-consume since we’ve already paid. Except this analogy is insufficient. When we go to all-you-can-eat restaurants, at least we know we’re paying a certain amount of money for an unlimited amount of food. Many Americans, by contrast, have no idea how much of their compensation is being diverted to purchase health plans. Last but not least, we need to consider how this messed-up approach causes inefficiency and higher costs. We consumers don’t feel any need to be careful shoppers since we perceive that our health care is being paid by someone else. Should we be surprised, then, that normal market forces don’t seem to be working?

And I ask readers to think about the damage this approach would cause if applied in other sectors of the economy.

Imagine if auto insurance worked this way? Or homeowner’s insurance? Would it make sense to file insurance forms to get an oil change? Or to buy a new couch? That sounds crazy. The system would be needlessly bureaucratic, and costs would rise because we would act like we were spending other people’s money.  But that’s what would probably happen if government intervened in the same way it does in the health-care sector.

This is probably more than most people care to read, but it underscores the point that we don’t have a free market in health care. Not now, and not before Obamacare.

So the folks at Vox are right about the current system being a mess. But I disagree with the notion that more government is a way to solve problems created by government.

The real answer, as I’ve already noted, is to get Washington out of health care. This means entitlement reform AND tax reform.

And if you want to get a flavor of why this would generate better results, watch this Reason TV video and read these stories from Maine and North Carolina.

So how do we get there? Repealing Obamacare is a necessary but far from sufficient condition. Cato’s Adjunct Scholar, John Cochrane, has a nice roadmap of what’s really needed.

Though Vermont certainly is welcome to travel in the other direction. It’s always good to have bad examples and I wouldn’t be surprised if the “Moocher State” played that role.

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Obamacare may not be good news for taxpayers or consumers, but let’s look at the bright side. At least the law has generated some superb political humor, including funny videos.

*The head of the National Socialist Workers Party finds out he can’t keep his health plan.

*A creepy version of Uncle Sam wants to know about your sex life.

*Young people discover that they’re screwed by Obamacare.

*One of the biggest statists of the 20th century is angry that the Obamacare exchanges don’t work.

We have another addition to this amusing collection. This cartoon video employs lots of snark to expose the illogical underpinnings of Obamacare.

My one complaint with this video, though, is that it merely scratches the surface.

Yes, Obamacare is a cluster-you-know-what, but there are many other government programs and policies that cause inefficiency and high costs

Here’s some of what I wrote on this topic back in 2009, starting with an explanation of how government intervention in the tax code has distorted the insurance market and turned it into an inefficient form of pre-paid healthcare.

Insurance is supposed to be for unforseen major expenses, such as a heart attack. But our gold-plated health plans now mean we use insurance for routine medical costs. This means, of course, we have the paperwork issues discussed above, but that’s just a small part of the problem. Even more problematic, our pre-paid health care system is somewhat akin to going to an all-you-can-eat restaurant. We have an incentive to over-consume since we’ve already paid. Except this analogy is insufficient. When we go to all-you-can-eat restaurants, at least we know we’re paying a certain amount of money for an unlimited amount of food. Many Americans, by contrast, have no idea how much of their compensation is being diverted to purchase health plans.

I then ask readers to contemplate what car insurance would look like if government also intervened in that market. Or to think about the consequences if insurance for houses also was subject to government-caused distortion.

Imagine if auto insurance worked this way? Or homeowner’s insurance? Would it make sense to file insurance forms to get an oil change? Or to buy a new couch? That sounds crazy. The system would be needlessly bureaucratic, and costs would rise because we would act like we were spending other people’s money.  But that’s what would probably happen if government intervened in the same way it does in the health-care sector.

The best way of fixing the mess in health insurance, for what it’s worth, is a flat tax. This is because the “healthcare exclusion” is repealed and compensation in the form of fringe benefits is taxed at the same (low) rate as other forms of income.

This presumably will end the incentive for gold-plated Cadillac health plans since workers – once the playing field is level – will prefer a greater amount cash compensation. So health plans gradually will be scaled back so they offer genuine insurance.

This video from the Center for Freedom and Prosperity offers a good explanation.

You also should watch this Reason TV video that shows a real-world example of how prices fall and the system is more efficient when consumers are in charge of healthcare.

For the same reason, I also recommend this story from North Carolina, as well as this example of capitalism from Maine.

It’s also worth noting that there are a few tiny parts of our healthcare system where markets are allowed to operate and consumers are in charge of spending their own money, and in these areas – such as cosmetic surgery, laser eye surgery, and abortion (regardless of whether you approve or disapprove) – we find stable prices and rising quality.

Free markets work…when they’re allowed to function.

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Not counting humor-oriented pieces such as this and this, it’s been nearly a month since I’ve written about Obamacare.

To make up for this oversight, today we’re going to look at a way out of the Obamacare mess.

But the goal isn’t simply to repeal the President’s bad policy. That merely gets us back to where we were in 2009. We need to figure out how to restore market forces to healthcare, and that means undoing decades of misguided government intervention.

Fortunately, we have a roadmap thanks to John Cochrane, a Cato adjunct scholar and Professor at the University of Chicago. Writing in the Wall Street Journal, he explains how radical deregulation is the right approach.

He starts with an essential point that “settled law” doesn’t mean unchangeable law.

…proponents call it “settled law,” but as Prohibition taught us, not even a constitutional amendment is settled law—if it is dysfunctional enough, and if Americans can see a clear alternative.

And he points out that Obamacare will get worse over time.

This fall’s website fiasco and policy cancellations are only the beginning. Next spring the individual mandate is likely to unravel when we see how sick the people are who signed up on exchanges, and if our government really is going to penalize voters for not buying health insurance. The employer mandate and “accountable care organizations” will take their turns in the news. There will be scandals. There will be fraud. This will go on for years.

But the law won’t collapse on its own. Indeed, its failures will be used as excuses for even more government.

Yet opponents should not sit back and revel in dysfunction. …Without a clear alternative, we will simply patch more, subsidize more, and ignore frauds and scandals, as we do in Medicare and other programs.

So what should be done?

Professor Cochrane points out that the healthcare system isn’t a free market now and it wasn’t a free market when Obamacare was imposed.

Instead, it’s one of the most heavily government-controlled sectors of our economy.

The U.S. health-care market is dysfunctional. Obscure prices and $500 Band-Aids are legendary. The reason is simple: Health care and health insurance are strongly protected from competition. There are explicit barriers to entry, for example the laws in many states that require a “certificate of need” before one can build a new hospital. Regulatory compliance costs, approvals, nonprofit status, restrictions on foreign doctors and nurses, limits on medical residencies, and many more barriers keep prices up and competitors out. Hospitals whose main clients are uncompetitive insurers and the government cannot innovate and provide efficient cash service.

He then explains how a market could operate – if it was allowed.

A much freer market in health care and health insurance can work, can deliver high quality, technically innovative care at much lower cost, and solve the pathologies of the pre-existing system. …We’ll know we are there when prices are on hospital websites, cash customers get discounts, and new hospitals and insurers swamp your inbox with attractive offers and great service. …Only deregulation can unleash competition. And only disruptive competition, where new businesses drive out old ones, will bring efficiency, lower costs and innovation.

If this sounds familiar, it may be that you watched this video from Reason TV on market-based hospitalization. And if you haven’t, you should!

Cochrane writes that deregulation will enable the “creative destruction” that brings progress in other parts of the economy.

We need to permit the Southwest Airlines, Wal-Mart, Amazon.com and Apples of the world to bring to health care the same dramatic improvements in price, quality, variety, technology and efficiency that they brought to air travel, retail and electronics. …Health insurance should be individual, portable across jobs, states and providers; lifelong and guaranteed-renewable, meaning you have the right to continue with no unexpected increase in premiums if you get sick. Insurance should protect wealth against large, unforeseen, necessary expenses, rather than be a wildly inefficient payment plan for routine expenses. People want to buy this insurance, and companies want to sell it. It would be far cheaper, and would solve the pre-existing conditions problem. We do not have such health insurance only because it was regulated out of existence.

Needless to say, Obamacare is the opposite of a free market. It assumes that you solve government-created problems by adding additional layers of government.

The Affordable Care Act bets…that more regulation, price controls, effectiveness panels, and “accountable care” organizations will force efficiency, innovation, quality and service from the top down. Has this ever worked?

Cochrane has the right diagnosis and right cure, but that’s the easy part. The real challenge is implementing the policies that would restore a functioning market.

That requires reforms to Medicare and Medicaid, not only to save money for taxpayers, but also because those are some of the steps that are needed if we want market forces to bring down the cost of healthcare.

Health care liberalization also means a flat tax, not only for the pro-growth impact of lower tax rates, but also because it gets rid of the internal revenue code’s healthcare exclusion, thus ending the distortion that encourages over-insurance.

It means state-by-state battles to get rid of regulations, mandates, and other forms of intervention that hinder competition and markets.

They say that even long journeys begin with a single step. That’s true, but it’s also important to walk in the right direction.

That hasn’t happened in recent decades, so it’s time to scrub the slate clean. We need free markets, not more government. We need more consumer sovereignty, not more third-party payer.

Since I’m a sucker for good political humor, we’re going to close with a great Michael Ramirez cartoon. As you can see, there’s a reason why he won my political cartoonist contest. Indeed, if I ever do another contest, this could replace his award-winning “Julia” cartoon.

Pajama Boy Move Out

It’s almost enough to make you feel sorry for Pajama Boy.

Maybe somebody should fix him up with Julia. I’m guessing they wouldn’t even know how to reproduce without intervention, handouts, and subsidies, so that would be an additional way of improving the gene pool.

And it would offset the reproductive advantage of the bureaucracy.

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You know things are going poorly for the Obama White House when even the New York Times is writing about the “third world experience” of Obamacare.

Heck, it’s almost gotten to the point where I feel sorry for the President.

But I guess I must be a mean-spirited anti-government ideologue, because I can’t stop myself from mocking the President’s ill-fated healthcare scheme. Whether I’m sharing funny cartoons or sarcastic videos, I can’t resist the temptation to kick Obamacare while it’s down.

In this spirit of love and togetherness, let’s take a look at some recent news about the law.

McClatchy News has a big expose that reveals the magnitude of the President’s if-you-like-your-insurance-you-can-keep-it prevarication. Let’s review a couple of excerpts from the story, beginning with a comparison of the President’s promise and the staggering revelation that as many as 52 million Americans may have the rug pulled out from under them.

Even as President Barack Obama sold a new health care law in part by assuring Americans they would be able to keep their insurance plans, his administration knew that tens of millions of people actually could lose those their policies. …report in 2010 said that as many as 69 percent of certain employer-based insurance plans would lose that protection, meaning as many as 41 million people could lose their plans even if they wanted to keep them and would be forced into other plans. Another 11 million who bought their own insurance also could lose their plans. Combined, as many as 52 million Americans could lose or have lost old insurance plans.

Amazingly, the President continues to be truth-challenged.

Obama insisted anew Thursday that the problem is limited to people who buy their own insurance. “We’re talking about 5 percent of the population who are in what’s called the individual market. They’re out there buying health insurance on their own,” he told NBC. But a closer examination finds that the number of people who have plans changing, or have already changed, could be between 34 million to 52 million. That’s because many employer-provided insurance plans also could change, not just individually purchased insurance plans.

Now let’s examine an example of what this means. The Weekly Standard reports on what has happened to some citizens from flyover country.

McDonald's Obamacare CartoonIn North Dakota, only 30 people have so far signed up for Obamacare. Meanwhile, 35,000 people have already or will be losing their existing health insurance plans in that state alone.

But that’s not the only bad news for the President’s statist healthcare scheme.

It seems that Obamacare is a gold mine for crooks and con artists. Let’s look at parts of a New York Times story.

To the list of problems plaguing President Obama’s health care law, add one more — fraud. …State and federal authorities report a rising number of consumer complaints, ranging from deceptive sales practices to identity theft, linked to the Affordable Care Act. Obamacare Identity Theft Cartoon…Some level of fraud or abuse is predictable with any big government program… But now, the technical failures troubling the HealthCare.gov website, as well as the law’s complexity, threaten to make matters worse. …Authorities warn that in some cases the come-ons are merely a ruse to get people to divulge sensitive Medicare and banking information. …Medicare has also long been a magnet for swindlers, thanks to its sheer scale and complexity. The troubled rollout of the new health care law has amplified the problem.

By the way, this story doesn’t even mention the possibility and risk of hackers and identity thieves breaking into the massive government databases that will be created as a result of Obamacare.

And if you’ll allow me to briefly digress, the same danger exists if politicians create the huge tracking-and-monitoring database that would be necessary if state politicians get the authority to tax out-of-state Internet sales.

Returning to the topic of Obamacare, it’s also worth noting that the growing burden of taxes and spending isn’t part of the aforementioned stories. Yet can there be any doubt that the program’s failures will lead to even more spending?

Not that any of us should be surprised. That’s almost always been the case when politicians create new entitlement programs. Indeed, I would pat myself on the back for making exactly this predication about Obamacare, but anybody with a room-temperature IQ knew this would happen, so I can’t claim any special insight.

But this does give me a reason to share this new Lisa Benson cartoon.

Obamacare Cost Cartoon

Needless to say, I’m enjoying the ongoing Obamacare disaster. But not just for reasons of Schadenfreude. The cluster-you-know-what of Obamacare is good news because it increases our chances of repealing the law in a few years (just as I predicted back in April).

But not just our chance to repeal Obamacare. We may actually have a chance to deal with the larger government-caused problems in our healthcare system, all of which lead to third-party payer and undermine the efficiency and low costs that exist when there is a genuine free market.

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