The Non-Debate over Health Care Reform: Or, Why the Status Quo Will Prevail

Historically, health care in the United states has always been highly decentralized and forged on the basis of political action committees and paid lobbyists that represent specific groups: Medicare (the elderly), Medicaid (the poor, ) Children's Health Insurance Program (children), Veterans Health Administration (veterans), the Indian Health Service (native Americans), and Federal Employees Health Benefits Program (federal employees). Others are covered by employment-based private health insurance. All of these programs are tax-supported to various degrees. And all of them are either running deficits, infested with fraud, inefficiency, or a combination of all three. Despite shortcomings, these programs are also highly coveted by their respective constituencies, and therefore no one in Congress can reasonably propose replacing this patchwork with a single system. In other words, the health care reform movement in the United States is not about creating one single system, but rather adding other programs to that patchwork. The powerless constituencies that are currently left out this patchwork include: employees whose employers do not offer health insurance, patients with pre-existing medical conditions, employees that are under-insured (but don’t know it yet), and an undetermined number of young, healthy employees that choose to forego purchasing health insurance. Whatever happens under the guise of health care reform, I can promise you that none of the current programs will be eliminated. In other words, whatever it is that’s taking place in Washington under the guise of “Health Care Reform,” it is really about maintaining the status quo. At this point, there is no reason to debate the question of whether a centralized system is preferable to a decentralized one. That’s because no one in congress is really pushing for a centralized system. What's the problem? It's the way we go about forging public policy in the United States. Can we really afford to continue to allow Congress unlimited access to tax dollars and dole out political favors to powerful groups represented by well-paid lobbyists?

NON-COMPLIANCE WITH TITLE IX

This morning, an article in the Cincinnati Enquirer caught my eye: “Playing Field Still Not Level.” Basically, it exposes the fact that the state of Ohio does not enforce Title IX (1973), the legislation which mandates that public high schools offer male and female students an “equal opportunity” to participate in sports. Although I am both an avid “sports nut” and a supporter of gender equity, I am nevertheless puzzled by our disproportionate emphasis on sports in public high schools and the costs that are passed on to taxpayers; especially when most public schools are struggling to offer decent academic programs. Obviously, some sports are more expensive than others. Although I am a football fan, there is no good reason to offer this expensive sport in cash-strapped public schools (or any public school!). Without boring you with numbers I’ll merely point out that it’s very expensive to: build and maintain a football stadium, transport 75-100+ students to and from practice and games, buy equipment, pay coaches, and pay liability insurance premiums. It is the king of deficit sports. Unfortunately, football is also a “Y Chromosome sport,” and therefore any school that has a football team of, say, 150 male students, equality of opportunity would require 150 opportunities for females. This usually means that any school that takes Title IX seriously will not be able to offer other male sports such as wrestling, track and field, or lacrosse. If Ohio’s level of seriousness in respect to title IX is indicative of what’s going on elsewhere, public high school athletics is still overwhelming male dominated.

My basic argument is more subtle. I would argue that it makes more sense to offer athletic opportunities through private, non-profit voluntary associations than tax-supported schools. In fact, most communities already offer sports for pre-high school children outside of school, especially Pee-Wee Football, Little League Baseball, and AAU soccer, basketball, and track. In order to pay for these opportunities, parents pay a fee and/or raise money via bake sales, candy sales etc. Most coaches are parents that volunteer. The beauty of this arrangement is that the costs are incurred by those who receive the benefits. But today, these private endeavors are crowded out by public, tax supported high school teams. (Talk to any “select soccer coach!”) Now I can’t guarantee that football would survive privatization. It’s probably too expensive for most parents. In other words, football would not survive exposure to the free market, which is precisely why it is socialized. Think Amtrack…

One reason why I am a critic of public schools is that an inordinate amount of coercively obtained tax money is expended on sports and other extra-curricular activities. In fact, many schools that lack science laboratories, and/or air conditioning have a full array of expensive athletic teams. But then again, labs and air conditioners do not provide subsidized after-school adult supervision for mischief-prone teenagers!

Now back to title IX… If Cincinnati decided to eliminate all high school sports, parents that want their children to participate in sports would have to pay directly for these activities. Interested parents and students would have to set up these voluntary associations and volunteer to help coach, sell concessions, wash uniforms, mow lawns, etc. If the parents of female students are less-willing to get involved, that is not “discrimination.” It’s called “parenting.”

Unfortunately, the cultural drift of American society makes it difficult for high schools to cut back on extra-curricular activities, because colleges and universities now base admission and scholarships on participation in these kinds of activities. High schools that merely offer top-notch academic programs do not compete very well based on this mindset. How many student play high schools sports, cheerlead, or march in the marching band hoping to earn a college scholarship? When the stakes are that high, those voluntary coaches and band leaders are quickly replaced by paid “professionals.” And finally, many public schools are so bad that students won’t show up for school unless they can play sports, cheerlead, or play in the marching band. Well, Professor Serafini, what do you have to say about all of this? And “HAPPY BIRTHDAY!”

Tragedy of the Commons, Part 3: Over-Pollution

The second manifestation of the “tragedy of the commons” is the problem of over-pollution. When human beings either extract resources from the environment or transform resources into artifacts a certain amount residual material is left behind. That residual material deposited in the earth, air, or water can be useless, useful, harmful, or harmless. We usually call the useless, harmful, residual “pollution.” Knowledge of whether that residual material is (in fact) useful or useless, and/or harmless or harmful is contingent upon conducting costly scientific research and acting based on that research. Moreover, in many cases the natural environment is capable of reducing or eliminating the harmfulness of pollution. Knowledge of Mother Nature’s timeline for the transformation of waste can often be discovered via research, but sometimes not. The holy grail of human extraction and production is to develop techniques that minimize; or, at least expel waste at a degree and rate within Mother Nature’s ability to transform it into more useful and/or less-harmful byproducts. Call it "sustainability."

The basic problem for the social and political management of pollution is how to provide incentives and disincentives that lead extractors and producers to conduct the research necessary to limit and or reduce pollution, and act based on this research. The “tragedy of the commons” predicts that political stewardship over the “commons,” is invariably inefficient and/or ineffective. Hence, when extractors and producers expel useless and/or harmful waste into “commons” there is little, if any incentive to conduct the research necessary to transform it, eliminate it, or act on that research. Here’s why. If it costs less to pollute than not pollute, extractors and producers will usually choose to pollute. They will invest in research to minimize pollution and/or convert it, if and only if, the cost of conducting that research, and the prospects of that research “paying off” is less than the cost of continuing to pollute with impunity. For example, it is difficult to extract minerals from the earth without polluting the adjacent air and water. If there is little cost associated with polluting the commons, mining companies will continue to pollute, and/or transfer the cost of cleaning up the mess to others (usually government). Therefore, pollution control policy is all about providing extractors and producers with incentives and disincentives that lead to acceptable levels of pollution.


There are two ways for societies to provide these incentives: one entails “more government” the other “less government.” Unfortunately, neither strategy is likely to succeed at a global level. There are two “more government” strategies that are often employed to raise the cost of polluting the commons. One way is to simply tax or fine polluters. This strategy entails that government "cap" pollution levels, monitor and enforce compliance with these caps, and either tax or fine extractors or producers that exceed those limits. This raises serious practical problems. At what level will government set those pollution limits? (Set caps too high and there will be no extraction or production.) How much will it cost for government to effectively monitor and enforce compliance with pollution limits? (It could cost more to monitor and enforce pollution laws than it would cost to clean up the mess.) At what level will the government tax or fine violators? (Set taxes or fines too low and there is no incentive to not-pollute, set it too high and black market polluters will appear.) Who pays the cost of monitoring and enforcement of pollution standards? (Taxpayers, polluters, stockholders, retailers etc.)

The second “more government” strategy is the policy now being pursued by the Obama administration, called “cap-and-trade.” The general idea is to “cap” pollution at a certain level, but then allow extractors and producers that generate pollution levels lower than the cap to “trade” or sell “pollution credits” to those extractors and producers that are unwilling or unable to meet those standards. This creates an artificial market, that in theory, provides an incentive to become a seller of pollution credits, and a disincentive to become a buyer of credits. Although, this resembles a free-market approach, it is really a contingent upon where government sets the pollution limits, how government manages the pollution credit market, and how much government spends doing all of this. Since the sellers of the credits are the primary beneficiaries of cap-and-trade, the question remains of how to pay for the army government watchdogs responsible for implementing this convoluted cap-and-trade system.

Critics of taxation, fines, and “cap and trade” argue that most serious problem with any strategy that involves setting, monitoring, and enforcing “caps” is that these standards are usually set by industry lobbyists rather than scientists, and therefore reflect political expediency and not science. Other critics argue that the cost of monitoring and enforcing the caps would require hiring an army of monitors and enforcers, which would require a massive tax increase, user fees of some kind, and/or increased borrowing from China! And, of course, all libertarians will point out that in recent years the United States government has proven to be less than reliable steward of the "public good" and an ineffective and inefficient monitor and enforcer of laws governing other undesirable forms of corporate behavior.

Libertarians therefore argue that the best “less government” strategy for the reduction of pollution would be to simply transform public property in private property, and thus eliminate "the commons." But private ownership of earth, air and water will not necessarily reduce pollution in the United States. If the short-term (or long-term) benefits of extraction outweigh the perceived costs of continuing to pollute, extractors and producers will continue to pollute. Moreover, if extractors and producers were required to pay the owners of the earth, air, and water, to clean up the mess, or purchase earth, air, or water from the owners, it would almost certainly reduce pollution levels, but where? If United States adopted this strategy, the most likely consequence would be that extractors and producers would simply move extraction and production to other countries that maintain “public property,” where government officials earn a handsome profit from graft and corruption. So when pollution is exported to nations that allow their governments to exercise stewardship over publically-owned earth, air, and water, “tragedy of the commons” predicts that pollution levels will rise in those countries. So although private ownership in the United States may reduce pollution levels in the United States, global pollution would continue to increase. In other words, global pollution will require global cooperation between nations and/or universal abandonment of "the commons,"which are both highly unlikely. Am I a libertarian or a cynic? What do you think?

Tragedy of the Commons, Part 2: Over-Extraction of Resources

One manifestation of the “tragedy of the commons” is that human beings tend to over extract resources. Resource depletion can often be blamed on the fact that we often have imperfect information, as to the exact quantities of available resources at our disposal and the natural capacity for replenishment. How many salmon can be extracted before the species is no longer able to sustain itself? I wish imperfect information was the only source of unsustainable resource depletion. Unfortunately, we all over-extract in order to reap known short-term benefits at the expense of the unknown long-term costs. As evidenced by the universality of this kind of behavior, I’m afraid that human beings (individually and collectively) are naturally predisposed to unsustainable over-extraction.

In a free market, one would expect that the extraction of increasingly scarce resources would become prohibitively expensive and, therefore, extractors would be incentivized to pursue less-expensive substitutes. However, technology extends the ability of extractors to find increasingly scarce resources, while other technologies make it possible to efficiently over-extract those remaining resources. Hence, technology also plays a role in over-extraction. Governments encourage investment in these technologies by offering tax write-offs and other less visible incentives.

But then again, we might question whether the long-term extinction of any one resource is necessarily tragic. Although the over-extraction of oil would be tragic to the oil industry and its stockholders, over the long-run, it would be a godsend to the coal industry and other alternative energy industries. If those alternatives turn out to be onerously expensive, we can always alter out consumption patterns. Unfortunately, this natural process is often short-circuited by governmental tax policies, subsidies, and licensing that provide perverse incentives that lower the cost of continuing to extract increasingly scarce resources at the expense of other potentially viable substitutes. Libertarians argue that viable substitutes must be discovered via free market competition. But welfare liberals cling to the false belief that government experts possess perfect information, and therefore can choose the best substitutes. When governments choose the wrong substitutes, we invariably end up with resource shortages, higher prices, and/ or higher taxes. F.A. Hayek called this governmental tendency to over-estimate its ability to manage markets, “The Fatal Conceit.”

In the United States, the over-extraction of natural resources is also fueled by public ownership of resources, coupled with the government charging favored extractors ridiculously low license fees to extract publically-owned oil, coal, and timber. Sometimes these “sweetheart deals” can be attributed to outright corruption of public officials, but most often it’s a matter of legislators trying to protect extraction jobs in their districts by artificially lowering the cost of extraction and thereby fighting off viable competing substitutes offered by other districts. Hence, onerously expensive off-shore drilling for increasingly scarce oil is incentivized by government by lowering extraction fees, water pollution standards, and taxes etc. Despite years of tragic over-extraction, environmentalists continue to express unbridled faith in governmental stewardship over resource extraction, while in reality they are more likely to end up with “corporate welfare,” which is how governments make the “tragedy of the commons” even more tragic.

Environmental Policy and the "Tragedy of the Commons" Part I

Any libertarian-based environmental policy begins with a foundational principle called the “Tragedy of the Commons.” Let’s break it down into its basic components: “commons” and “tragedy.” In the Western world, the cultural origin of the concept of collective environmental ownership can be traced to the Biblically-based tenet that God gave the earth to mankind. Over the centuries this has been interpreted to mean that caring for the earth is our collective responsibility: call it “stewardship.” Unfortunately, the problem with collective responsibility is that we have repeatedly proven to be irresponsible stewards. That’s why when human beings assert collective dominion over the environment the consequences are inevitably tragic. Hence, the familiar libertarian mantra, “When everyone owns it, nobody owns it.”

Human beings utilize our common earthly environment in two different ways. We extract resources and expel waste. Throughout human history, environmental tragedy has resulted from our over-extraction and over-expulsion. In recent years, the over-extraction and over-pollution have become more problematic than in the past because we’ve become much more efficient extractors and polluters. The root of the problem is that, when given the option, we humans would rather reap benefits than pay costs. In the case of over-extraction and over-pollution the costs are usually transferred (shifted) to other humans, and most often to future generations. Most libertarians argue that the only way to avoid “tragedy of the commons” is to abandon collective ownership and stewardship in favor of private ownership. I’m not sure about that. Private ownership alone will not necessarily lead to non-tragic environmental policy. After all, individual owners are also prone to over-extraction and over-pollution of their own property, as they willingly risk less-certain long-term tragedy in pursuit of certain short-term benefits.

So the real problem arises when opportunistic owners over-extract and over-expel at the expense of other adjacent property owners. Therefore, other libertarians argue that private ownership must be accompanied by the empowerment of adjacent property owners to exact retribution. When my neighbor builds a dam upstream to divert water for his private fishing pond, why can’t I sue him for over-extraction? When the coal-fired utility plants along the Ohio River pollute the air over my property why can’t I sue Duke Energy Corporation for polluting my air? But it's not that simple. The two manifestations of the “tragedy of the commons” are so different that they require more detailed, separate analyses. Therefore, my next two blog entries will cover over-extraction and over-pollution, respectively.

The Cost of Health Care

Critics of our health care system point to the ever-rising cost of providing health care in the United States, in comparison to other industrialized nations. In 2007, the Kaiser Family Foundation reported that the cost of providing health care in the United States has grown from 7.2% of the nation’s economy in 1970 (or $356 per person per year), to about 16% in 2005 (or $6,500 per person). This is nearly twice the cost of providing care in Canada ($3,161), France ($3,191.), Australia ($3,128.), Japan ($2,358), and the United Kingdom ($2,560.). (Kaiser 4). But there are hidden complexities here as well. How much health care spending is too much for an individual patient, family, city, state, or a nation? Is it economically and/or politically undesirable to have so many Americans employed in the health care sector of the economy? What exactly is the quality of the health care that we purchase at this cost? So what does it really mean when we say that our health care system costs too much? Let’s take a look at that!

In the real world, the access and quality of a health care system cannot be separated from its cost, at least not for very long. How do we decide whether the “price is right?” In the Real World, that depends on how much we, as individuals, value health care products and services at the quality and price that they are being offered. For any other product or service other than health care (and perhaps education), when a product or service is priced too high, buyers simply refuse the offer and gravitate toward other sellers. Although I am a pro football fan, I have never attended a Bengals game. Frankly, the product being offered is not worth the ticket price. So I spend that money on other leisure activities that are “worth it,” mostly concerts. Even if the Bengals were great, I still wouldn’t attend a game at the prices offered today. I prefer to watch them for free on T.V. I might attend those games if they were free, or $10. But probably not. I hate the other "opportunity costs" such as traffic and parking problems. The Bengals will stay in business as long as at least a few fans continue to show up at Paul Brown Stadium on Sundays, and as long as the T.V. networks are willing to carry the games. In short, the Bengals must compete for our money. As individual buyers, we make purchasing decisions based on our beliefs about both quality and price. If I say that a new automobile is too expensive for me, what I’m really saying is that, the quality of the new vehicle does not justify the price that I’d have to pay for it. Hence, I’d prefer to keep my old car, or buy a less expensive used vehicle and spend those savings on the fulfillment of other wants and needs; perhaps a family vacation.

So what is the “value” of health care and or “health?” Our assessment of the value of health care has been shaped by a four-party party payment system that fosters both quality-insensitivity and price-insensitivity. In today’s economic environment, many young, healthy, middle class Americans, that do not get less expensive health insurance through a fourth party (employer) value other goods more than they do health insurance. Therefore, they spend their paychecks on new vehicles, spacious homes, higher education, high-quality food, alcohol, tobacco, or extended summer vacations. Therefore, when we say that our health care system is too expensive, what we are really saying is that many Americans value health insurance (of unknown comprehensiveness) less than other things. If I choose to spend my money on a vacation at Disney World, I at least have a good idea the quality and price of my purchase.

So the fact of the matter is that all Americans have “access” to health care, they just are not willing to buy it at the quality and price that it is being offered. And of course, many young, healthy Americans will never buy health insurance, no matter how much it costs because they would rather spend their money on those other things. This underlying reality has inspired a movement to offer “free universal health care,” through a government program like Medicare or Medicaid. However, the fact of the matter is that these programs are neither free nor high quality. Indeed, libertarians argue that the best way to insure universal access to low quality health care (or education) at an unreasonable cost is to force all Americans to pay for it through taxation. Here's another blog entry on health care reform: http://freedomsphilosopher.blogspot.com/2008/10/health-care-reform.html

The Quality of Health Care

The most idealistic health care reformers tend to focus upon expanding access to products and services without reference to the quality, or costs associated with providing that access. In the real world, when we make a purchase we do so based on quality and cost and providers are forced to compete based on the basis of either quality or cost. Unfortunately, this mechanism has been disabled by the U.S. government and the health care industry.

Let’s agree that no one wants universal access to low quality health care. While this sounds reasonable enough, the quality of health care is notoriously difficult to measure. The word “quality” raises the question of value and is expressed as “good” or “bad.” A necessary condition for the determination of quality is the capacity of the buyer to judge between good and bad: call it quality- sensitivity. Access to reliable qualitative information is a necessary condition for quality-sensitivity. In health care the quality-sensitivity of individual buyers is shaped by many factors. However, patients actually have notoriously imperfect information about the quality of their insurance, products, services, and providers.

As stated in my previous blog, the quality of health insurance is usually measured in terms of comprehensiveness, and most Americans have very little reliable information at their disposal in respect to the quality of their health insurance policies. In other words, you usually become quality-sensitive to the comprehensiveness of your insurance AFTER your providers file a claim, it’s rejected by your insurance company, and you get a bill from a provider. Although in recent years insurance language has become a bit more penetrable, it is still notoriously difficult for buyers to make informed decisions about the quality of the insurance products they purchase. The ability of the insurance industry to disguise the quality of its products behind a wall of impenetrable jargon has produced an epidemic of quality insensitivity within that industry. Unfortunately, we do eventually become quality- sensitive after we discover that out health insurance lacks comprehensiveness.

If we lack sufficient information in regard to the quality of our health insurance, we are equally ignorant of the quality of the products and services offered by its providers. The quality of the products and services is based on “safety and effectiveness,” which are determined by scientific investigations supervised by an understaffed and under-funded Food and Drug Administration. We also lack reliable qualitative information in regard to the providers of health care; especially the quality of physicians, allied health professionals, and hospitals. Information in regard to malpractice lawsuits and infection rates of hospitals are systemically well hidden. Given the elusive nature of the quality of health insurance, products and services, providers, and institutions the quality of our national health care system is ultimately inscrutable.

National reformers typically cite statistical data indicating that the U.S. system lags behind other industrialized nations in certain qualitative measures such as: infant mortality and life expectancy. But the basic problem is that national statistics mask local and regional variation: especially in large populous nations. Obviously, the United States has a much larger and has a more diverse population than Canada and European countries, and therefore, we would naturally expect to find a lot more local and regional variation in terms of infant mortality and life expectancy.

As stated in my earlier blog, national statistics also mask variation in access to health care between rural and urban areas. Based on commonly cited statistics, the United States (as a whole) ranks 32nd in infant mortality: with rate of about 6.3 per thousand births. Iceland ranks first with a rate of 2.9, followed by Japan at 3.2. However, this less than flattering statistic masks local and regional variation. For example, despite having one of the best neonatal intensive care units in the world (Children’s Hospital) Hamilton County, Ohio has an infant mortality rate of 13.9, or about twice the national average. Another problem with these rankings is the reliability of the reporting. In Cincinnati, the infant mortality rate says more about the lifestyles of mothers than it does about access to high quality of health care products and services.

As for life expectancy, the U.S. ranks 38th with Japan and Hong Kong ranked first at 82.6. Again, life expectancy in the United States is almost certainly influenced more by culture than the quality of health care. Highly variable infant mortality rates, murder rates, and cancer rates also tend to drag down life expectancy rates in the United States.

Certainly one indication of quality in any national health care system is its comprehensiveness; that is, the sheer number of products and services can be accessed in any geographical location. If sheer comprehensiveness were the only measure of quality, the United States would lead the world. However, comprehensiveness alone may not be the most enlightening measure of quality. Much of the comprehensiveness of the U.S. health care system includes both medical therapies that cure diseases (cancer drugs), but also medical enhancements that improve the quality of our lives (erectile dysfunction drugs, motorized wheel chairs, in vitro fertilization). Although this distinction between therapy and enhancement seems to be fairly objective, it is far from crystal-clear.

Another often-cited indication of low quality of health care is the incidence of medical mistakes, malpractice lawsuits, and the corresponding rise in the cost of malpractice insurance. However, the incidence of medical mistakes is highly variable. It is certainly true that some medical specialties are more susceptible to catastrophic error than others. Obstetrics, for example is especially prone to error, not because of professional incompetence, but because of cultural forces that encourage high risk pregnancies such as: postponed parenthood, poor prenatal care, and religious beliefs that expound the infinite value of fetuses. Our perception of medical mistakes also has a lot to do our overly idealistic expectations, coupled with a staggering number of predatory lawyers that stalk the deep pockets of health care providers. While it is certainly true that many medical mistakes are avoidable to the extent that practitioners can be better trained and facilities can be more fully staffed, these reforms are not costless. Not every mid-sized city can afford high quality neonatal intensive care units, cardiac units, or state-of-the- art trauma centers served by a fleet of helicopters.

Finally, there has been very little discourse concerning the relationship between the quality of health care products and services and the scientific research and development that generates those products and services. Characteristically, most qualitative appraisals of the health care system in the United States discount what we do best. To the extent that it makes sense to talk about nation states in a global scientific and economic environment, research laboratories in the United States still account for most of the comprehensiveness of health care worldwide. For better or worse, governmental agencies such as the National Science Foundation and the National Institutes of Health provide funding for most of that research. Moreover, many of the best medical schools and research universities laboratories are located in the United States. In short, if we bracket issues of “access” and “cost,” the U.S. has the most comprehensive health care system in the world. Indeed, that’s why desperate patients from all over the come to the United States for “state-of-the-art” medical treatment.

Much of the comprehensiveness of the “medical model” of health care in the United States is rooted in “heroic medicine.” But the quality of state-of-the-art heroic therapies is difficult to measure, especially in light of the variable quality of the Food and Drug Administration’s efforts to regulate the research and development of new drugs. As health care in the United States becomes increasingly “heroic,” we can expect a higher research and development costs and a higher incidence of treatment failure and more malpractice lawsuits.

In the United States, quality sensitivity has also been undermined by cultural forces that allow low quality providers (physicians, hospitals, pharmaceutical corporations, insurance companies etc.) to control the flow of qualitative information. Although, much of this machinery has been undermined by mass media, especially Internet sites (WebMd.com), it is still very difficult to access useful qualitative information on physicians, hospitals, and pharmaceutical products.