Common Sense Government Blog

Insurance, Credit and Market Incentives

by John Eberhard

Democrats have now passed legislation requiring all Americans to have health insurance and fining them when they do not.

I want to talk for a bit about the overall nature of insurance and the effect this has on market forces and incentives.

My wife was at a gas station recently and some woman in a big pickup truck apparently wasn’t capable of seeing our car and bumped into it, making a tiny dent in the panel in front of the driver’s side door. It was a small dent, but we felt that it was someone else’s fault, so why should we have that dent in our car?

So we took the car in and got it fixed on that lady’s insurance dime. The final bill was over $1,000! To fix a dent that you could barely see. I was happy to have the car fixed, but I was beyond shocked at the amount.

I’m all in favor of everyone having auto insurance. But I want to point out that once no one has to pay that bill themselves, they are not overly concerned with how much it is. They won’t complain how much it costs, and they won’t shop around for the cheapest price.

So there is no market incentive for the owners of auto body shops to keep their prices low. So over time those prices go up and up and there is little to stop it.

When I was a kid when there was a dent in a car, the body shop hammered out the dent or maybe put that white paste stuff on, then repainted it. I don’t think they do that anymore. They just replace everything. Do you think they hammered out the dent in my car? No, likely they just replaced the whole panel. Does it cost more? Sure, but who cares? Insurance is paying for it.

I’ll give you another example. I went in for an eye exam recently, and afterwards they started showing me the glasses they sell there. The cheapest pair was over $500. That was not even looking at the designer frames. The last time I got a pair of glasses I worked for a company that had vision insurance. The glasses were over $400 then, but my co-pay was about $150 so I said OK. This time I am self employed with my own business, with no health insurance. That means I am paying cash for those glasses so I am shopping for a discount glasses place to get my glasses.

So without getting into a discussion about how maybe it is gauche for me to get my glasses at a discount place and object to the $500 price tag at the optometrist’s office, how did a pair of glasses get up to costing $500 for the cheapest pair?!

They got up to $500 a pair because of health insurance, and/or credit cards. If someone is not going to have to pay anything for the glasses, or if his co-pay is relatively small, or even if he just puts them on his credit card, that cost has a relatively minor impact on him. He’s not going to have any major objection to that.

But if every person walking in that office did what I did, saying that was too much money and they were going to shop elsewhere, it would have a major market incentive on that office to offer cheaper glasses. It would start to have a market incentive on the glasses manufacturers to find cheaper ways to manufacturer the glasses.

Some of you probably remember when the government broke up AT&T as a monopoly. Prior to that they were just that, one big monopoly. They owned all the lines, they owned your phone, they owned the long distance service. When they got broken up, it caused initial confusion because whenever you called one place about a problem they always said it was the other guy’s fault. Plus I really hated getting all those calls from Spring, MCI and AT&T all saying they had the best long distance service.

But look at the way it is now. After years of paying for expensive long distance service, we all have cell phones that have free long distance. And we now have free long distance for our land line through the cable company. Plus you can call overseas for free through Skype.

What brought all those costs down? It was market incentives. It was companies competing with each other, trying to find a way to win your business. It was competition and innovation driven by market incentives.

But insurance causes just the opposite effect. Most health care providers, unless they have a lot of cash business, have no incentive to find ways to keep costs low. The patients come in, and often don’t even know what the service costs. They don’t shop around, not for price anyway.

Can you imagine anyone not being concerned about the price they paid for their new car, for their new computer, for their appliances, for their furniture? So how come we aren’t very aware of and concerned about the price we’re paying each time we go to the doctor? Maybe you are and if so, bravo. But the insurance tends to insulate us from the costs, when someone else is paying for it. If we all had to pay cash, it would be a different deal.

So the new health care bill, it seems to me, is going to make this problem worse, not better.

Black Sunday

by John Eberhard

Today is a dark day for representative government in the United States. Today at 10:48 PM EST, the House approved the health care reform bill that was passed in the Senate recently, by a vote of 219-212. Not a single Republican voted for the bill in either the Senate or the House.

Recent polls have shown that a majority of Americans are against this socialist takeover of the health care industry. Few believe the President’s claims that it will bring down costs or improve the quality of care. There are plenty of concerns that it will bankrupt the country.

Yet the Democrats have now forced this measure upon us. There was no lack of evidence for them to see that the majority of U.S. citizens were against the bill. Every single poll showed a majority were against it. There were the town hall meetings last August. There was the September 12 protest march in Washington, DC which brought over a million people to the capital.

Edmund Burke, a member of the British Parliament in the 1700s, said that a representative of the people owed them his industry but also his judgment, and that he does them a disservice if he always goes along with their opinions. According to this idea, a representative doesn’t always have to do what the people want. He has to make his own decisions.

Even considering Burke’s concept, however, it strains credibility and belief in representative government for a far-left Democratic Party leadership that actually represents only 20% of the population (the 20% that identifies themselves as “liberal”) to force this socialist system upon us.

While it is true that 52% of the population voted for Barack Obama as President, the mainstream news media did a piss-poor job of informing the public of what he really stood for prior to the fact. They went out of their way to cover up what he really stood for. Don’t get me started on the media. I could go on for hours.

But doesn’t Obama owe the public some consideration as to what they want? Why would he and Democrats in Congress completely ignore what the public wants on this issue?

We have seen plenty of evidence that the President is narcissistic, arrogant, has an inflated idea of himself, and thinks he knows better than the rest of us. Apparently he is willing to risk the anger of the population at the polls this November, and in 2012.

Why would he risk that? Why would he risk losing Democratic majorities in both houses of Congress, and being thrown out on his ear in 2012? (And I believe both WILL happen.)

Well, first of all, Obama has been pushing health care reform so hard, it has become completely identified with him. It’s even called “Obamacare” now. In other words, he has a lot invested in it. If the bill had gone down to defeat, it would have made Obama look like a fool. His arrogance and narcissism would just not allow that to happen. He wants this as his place in the history books. It’s about his legacy. In short, it’s about him. And it’s about power. It’s about taking over one sixth of the U.S. economy.

Secondly, liberals don’t really care about what the majority in America wants. They know they don’t represent the majority of Americans. They never have. A recent poll showed that the percentages of liberal/conservative have not changed much in 50 years. 20% consider themselves liberal, 40% consider themselves conservative, and 40% consider themselves moderate.

So liberals don’t care what the majority of Americans want. They want to impose their will on the rest of us. They believe they know better than the majority. Typical elite think. That’s why they use the courts so much – you don’t have to consult the population.

Third, liberals care more what other liberals think of them than what the population thinks about them. They know that a number of other countries have socialized, government run health care. The fact that it works poorly everywhere it’s been tried means nothing to them. They’re embarrassed that they haven’t been able to enact it here. Embarrassed in front of whom? To other liberals in other countries of course. Mostly Europe.

What Now?

I think it is important for us to register our outrage that the Democrats have passed health care reform. Write letters to the reps themselves. Write letters to the editor of newspapers. Write blog posts. Post it to Facebook and Twitter. Spread the word.

I think it is also vital to remember Black Sunday, and don’t let other Americans forget it when November rolls around.

Last I heard, 36 states are set to file suits contesting the Constitutionality of the U.S. government forcing citizens to purchase health insurance. It only takes one to make it to the Supreme Court and overturn this.

But conservatives, those who oppose socialism on the principles that it rewards non-production and penalizes producers, have to take the long view. We have to realize that although once a government program is started, it is hard as hell to stop it, that that is our road. We have to figure out how to continue to get out the conservative message – limited government, lower taxes, less government control and intrusion in our lives. And we have to put up good leaders who have integrity and who will roll back the welfare state. That is our future. And it is the future that will ensure the future of the United States.

The Health Care Debate

By John Eberhard

There is of course quite a bit of debate right now about the health care reform that Democrats are trying to pass.

Liberals have been wanting to pass some form of national health care for 20 years or more. They want it. They want it really bad. And they had to suffer through 8 year of Reagan, 4 years of George H. W. Bush, a failed attempt under Clinton, and 8 years of George W. Bush. Because a very socialistic program like national health care runs deeply counter to conservative philosophy.

Why do liberals want it so bad? Simply because it fits with their view that to be compassionate, a society must offer free health care. Liberals concentrate their attention and priorities on the lowest members of society, who can’t afford medical care. They feel that concern for the lowest members of society should drive nearly all policy.

Liberals see other countries, like the UK and Canada, that have already passed national health care. They feel almost embarrassed that the U.S. has not done so. They search really hard to find statistics to show that somehow people are better off in other countries, and claim it is because of their national health care systems. They ignore the statistics and facts that show the long wait times, the rationing, the costs, and the higher taxes to support these systems. 

Most polls I have seen show a majority of Americans are against this national health care reform. Most of the town hall meetings in August were about the health care reform, and Americans showed up in force to voice their opinions against the legislation. Then there was the protest march in Washington, DC on September 12, where it estimated that two million people showed up. See the picture I’ve included.

Since then, liberal Democrats are in a quandary. They have a majority in both houses and have the White House, but they know that if they don’t bring about a change in public opinion, that it will be perceived, correctly, that they rammed this so-called reform down everyone’s throats. And if that happens, many fear (rightly I think) that they can kiss their offices and their majorities goodbye in the 2010 election.

So they want to be compassionate, they want to be like their socialist European counterparts, they want to be well thought of by the international liberal/socialist community, and they want to erase their decades long embarrassment. They could ram the legislation through, but they fear that they will be thrown out of town. And so some of the moderate Democrats (not the party leadership though which is anything but moderate) are having second thoughts.

So now enter the modifications. Numerous factions are trying to float new versions of the reform which will stick when they throw them up against the wall. Some have the public option. Some don’t have the public option. Some versions cost more, or cost less. One version supposedly will not increase costs. And Democrats are accusing Republicans of not having a plan of their own and just being obstructionists.

If you are paying attention to all these different variations and wondering if one of them will finally assuage your fears and make you feel good about it, and if you are wondering why Republicans haven’t come up with a good plan of their own, I think you are missing the point.

The whole point, really, is: Do you want the government to gain more control over an industry that amounts to one sixth of the U.S economy?

Do you trust the federal government to take over one sixth of the U.S. economy?

Do you believe the government is capable of running any industry (aside from things like law enforcement, military, etc.) better than the private sector? Think the Department of Motor Vehicles. Or Amtrak. Or the Post Office.

I’m glad the Republicans are acting as “obstructionists.” Because I don’t want any health care reform plan to pass. I don’t care whether there is a public option in there or not. Even if the bill seems more or less reasonable, it is an attempt to gain greater government control over our lives. It fits with power-hungry Obama’s goals and actions so far, taking over banks and the auto industry. And even if the public option isn’t in there, then this bill will just be a stepping stone to accomplish what Obama has stated in the past that he wants to do, create a single-payer, government controlled, national health care system.

So if you agree, then go to the web sites for your two Senators and your Congressman and the President, and tell them that you oppose ANY form of health care reform, and that if they vote for it you will vote AGAINST them in the next election. They have to hear from us and know we’re serious. Do it today. Thanks for your support.

Why Government Run Health Care is a Bad Idea

by John Eberhard

As you know, Congress is trying to pass a health care reform bill, which the President has vowed to sign. It has now been delayed for voting on until after Congress’s summer recess, but come September the proponents of the bill will be working hot and heavy to get it passed. And in the meantime the President, Congressional leadership and mainstream media are taking every opportunity to pooh-pooh and downright demonize the public that is speaking out against it.

There are a number of reasons why I think this bill in any form, no matter what final form it ends up in, is a bad idea and should be voted down. I won’t try to cover every reason but will discuss some basic reasons and some specifics.

Basic Reasons

1. Government never runs anything as well as the private sector. Think health care being run with the efficiency of the Post Office, Amtrak, or the DMV. Have you ever had fast, efficient service at the DMV?

2. According to FreedomWorks.org:
“The Congressional Budget Office has said the proposed government takeover of health care could cost $1.6 trillion. Other estimates put the cost much higher. Various officials have proposed raising taxes on soda and alcohol, a higher payroll tax, taxing current employer-provided health plans, and even a new national sales tax to fund this massive government program.”

3. Studies show that most Americans are overwhelmingly happy with their own health care -- including 70% of the 46 million Americans without insurance.

4. Government run health care is socialist. It is based on the Marxist principle of “to each according to his need, from each according to his ability to pay.” We already have a “progressive” (socialist) taxation system in America, where the bottom 30% of the population pays no taxes, and the top 5% pay the majority of the taxes. Government run health would be yet another socialist takeover of a major portion of American life, one fifth of our economy.

5. The health care reform in its current form will include funding for abortions.

6. The health care reform in its current form will include full health care benefits for illegal aliens.

7. Ask yourself if you trust the government to make life and death decisions about your health.

Before I go on and before anyone assumes “Oh he’s against it because he has his cushy insurance,” I will say that I am self employed and don’t have health insurance.

I also want to say that I worked in the insurance industry, at an insurance claims company for several years. I believe all the rhetoric slamming the “greedy insurance companies” and with Nancy Pelosi demonizing the insurance companies is largely a bunch of baloney. Insurance companies typically operate (due to competition I might add) at one of the lowest profit margins of any industry in America. Insurance policies are written to cover what they cover and consumers agree to those policies and buy them. And for the most part, insurance companies cover the things that the policies say they cover. I believe often people don’t bother to fully understand what is covered when they buy the policy.

Tort System

I believe one of the biggest problems in the medical field today is our tort system, meaning the court system. Outrageous malpractice suits have caused doctors to have to carry expensive malpractice insurance ($200,000 a year for a doctor who delivers babies, just for a doctor starting out), and to order excessive and expensive tests to protect themselves from possible future lawsuits.

This new legislation does not address this problem at all, nor is it likely to, with the trial lawyers associations being one of the biggest campaign contributors for the Democratic Party.

Some Scary Specifics

Here are some specifics from the current bill. This information is from Economic Policy Journal:
http://www.economicpolicyjournal.com/2009/07/whats-in-healthacre-bill.html

Page 494-498 Government will cover Mental Health Services including defining, creating, rationing those services

Page 50 Section 152 – Health care will be provided to ALL non US citizens, illegal or otherwise

Page 127 Lines 1-16 – Doctors and the AMA - The Government will tell YOU how much money you can make.

Page 145 Line 15-17 An Employer MUST auto enroll employees into public option plan. NO CHOICE

Page 126 Lines 22-25 Employers MUST pay for health for part time employees AND their families. (These are the types of overly generous benefits that have bankrupted the US auto makers – JE)

Page 425 Lines 17-19 Government will instruct & consult regarding living wills, durable powers of attorney. Mandatory!

Page 317 Lines 13-20 PROHIBITION on ownership/investment. Government tells Doctors what and how much they can own.

Page 170 Lines 1-3 Any NONRESIDENT Alien is exempt from individual taxes. (Americans will pay)

Page 22 MANDATES the Government will audit books of ALL EMPLOYERS that self insure

Page 30 Sec 123 - THERE WILL BE A GOVT COMMITTEE that decides what treatments and benefits you get

Page 29 lines 4-16 - YOUR HEALTHCARE IS RATIONED

Page 42 - The Health Choices Commissioner will choose your health care benefits for you. You have no choice!

Page 59 lines 21-24 Government will have direct access to your bank accounts for electronic funds transfer

There’s more at the URL above.

Take Action

At this point it is clear to me that the Democratic Party leadership does not give a flying hoot what the American public want. I believe their whole strategy right now is to ram through as much radical leftist, socialist, Marxist legislation as possible that has been on the far-left wish list for decades, before the American public notices or can object. That is why they are in such a rush, and why President Obama hasn’t kept campaign promises to wait a reasonable time before signing legislation, and to put it up on the Internet so the public can see it before it is signed. And the Democrats have largely kept Republicans out of the process on much of their agenda legislation.

But one thing that still works in America despite having a far-left, liberal, socialist leadership in both houses of Congress and the White House, is that Congress at least is still accountable to the people, especially members of the House who face elections every two years (the next election is 2010).

So I urge you to send a fax to your representatives in Congress and to the President. I have read that faxes have more impact than emails. Go to Google and enter the names of your senators and your representative in the House and get their fax numbers.

We have a chance to turn the tide by speaking up.

Remember a couple of years ago, when Congress was all set to pass “immigration reform,” i.e. illegal alien amnesty? The public outcry against was so huge that Congress backed down, even with the full support of President Bush.

We need to do the same thing here. Every poll I have seen on the subject shows over 50% of the public against this (a poll on Facebook showed 75% against it). But Obama, Harry Reid and Nancy Pelosi don’t care. We have to make them care. This is our country. Let’s not allow the elites who think they know better tell us how to live our lives.