Health Care Policy

Journal roman_mir's Journal: Health Care Policy 3

Journal by roman_mir on Thursday September 15, 2011 @07:36AM

Ron Paul was asked on CNN after the Tampa debate to talk about the response that he had on the question, "Do you let a healthy 30 year old die, if he is in an accident"? He was asked to provide the answer for himself and also for the audience.

He was also asked about the question a young man asked of the candidates, "how much money do I deserve to keep of what I earn?"

My take on these questions:

1. On the health care: You do not base the policy on corner cases.

In a free market economy, the unemployment is very low, anybody with a job can afford * health care and insurance, because those services are very cheap, just like they were prior to 1965 **.

For somebody in their 30s, not to have money to pay forï their care AND not to have insurance is a corner case.

You don't base policy on corner cases. In a free market economy there is enough money left to the people that they do charity on their own, this includes hospitals.

2. In a free society, a person deserves to keep 100% of his earnings. However he does not deserve anything if he is not willing to protect his earnings. The only way that a person deserves to keep 100% of his earnings is by him participating in the voting process and voting only for his liberties and always against any government intervention against his liberties.

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* On topic whether free market system allows a person to earn a decent wage.

In 1914 Henry Ford increased the productivity of his workers by spending enough capital to set up an assembly line that allowed him to produce more cars than anybody with least amount of labor

The first Model Ts were built at the Piquette Road Manufacturing Plant, the first company-owned factory. In its first full year of production, 1909, about 18,000 Model Ts were built. As demand for the car grew, the company moved production to the much larger Highland Park Plant, and in 1911, the first year of operation there, 69,762 Model Ts were produced, with 170,211 in 1912. By 1913, the company had developed all of the basic techniques of the assembly line and mass production. Ford introduced the world's first moving assembly line that year, which reduced chassis assembly time from 12Â½ hours in October to 2 hours 40 minutes (and ultimately 1 hour 33 minutes), and boosted annual output to 202,667 units that year After a Ford promised profit-sharing if sales hit 300,000 between August 1914 and August 1915, sales in 1914 reached 308,162, and 501,462 in 1915; by 1920, production would exceed one million a year.

These innovations were hard on employees, and turnover of workers was very high, while increased productivity actually reduced labor demand. Turnover meant delays and extra costs of training, and use of slow workers. In January 1914, Ford solved the employee turnover problem by doubling pay to $5 a day, cutting shifts from nine hours to an eight hour day for a 5 day work week (which also increased sales; a line worker could buy a T with less than four months' pay), and instituting hiring practices that identified the best workers, including disabled people considered unemployable by other firms. Employee turnover plunged, productivity soared, and with it, the cost per vehicle plummeted. Ford cut prices again and again and invented the system of franchised dealers who were loyal to his brand name.

a businessman without any unions, did the following for his employees due to market regulation that came in form of high turnover:

1. Paid them 5USD/hour with 5x 8 hour days. This means he paid them 25USD/week. The price of gold was just over 19USD/ounce, that means he was paying 1.25 ounces of gold. At current gold prices of 1853/ounce, that's 2316 USD/week. That's 120,445USD/year.

2. Without income taxes to pay, Ford's workers were taking home over 120K in current money, and that's without income taxes. So in today's equivalent and given the fact that health insurance was about $5/year per person and doctor's visits were paid out of pocket and so was education and pension savings, because all of those things didn't have gov't involvement and so they were very affordable, today's equivalent would have to be at least 2.5 times that much, over 300,000USD.

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** Now on topic of health care and insurance before it was usurped by government intervention.

EH.NET: Health Insurance in the United States

this is a good primer on this, the article comes to erroneous conclusions about the reasons for low medical and insurance costs (they see the reasons being that state of medical technology was rudimentary, which is nonsense, as it was state of the art for the time and prices were falling, just like prices on all and any electronics constantly drop in current market), but regardless, they can't do anything about the facts, they are as always stubborn.

A 1918 Bureau of Labor Statistics survey of 211 families living in Columbus, Ohio found that only 7.6 of their average annual medical expenditures paid for hospital care (Ohio Report, p. 116). In fact, the chief cost associated with illness was not the cost of medical care, but rather the fact that sick people couldn't work and didn't get paid. A 1919 State of Illinois study reported that lost wages due to sickness were four times larger than the medical expenditures associated with treating the illness (State of Illinois, pp. 15-17). As a result, most people felt they didn't need health insurance. Instead, households purchased "sickness" insurance -- similar to today's "disability" insurance -- to provide income replacement in the event of illness.

... then they had more erroneous conclustions that it was insurance companies unwilling to provide health insurance. This is an erroneous conclusion because they contradict it immediately with this:

popular support for the legislation was low because of the low demand for health insurance in general

- well OBVIOUSLY if there is no demand, nobody would be providing the product. It makes perfect sense, but the authors miss it due to their preconceived notions and ideology. But they have good data.

According to one CCMC study, the average American family had medical expenses totaling $108 in 1929, with hospital expenditures comprising 14 percent of the total bill (Falk, Rorem, and Ring 1933, p. 89). In 1929, medical charges for urban families with incomes between $2,000 and $3,000 per year averaged $67 if there were no hospitalizations, but averaged $261 if there were any illnesses that required hospitalization (see Falk, Rorem, and Ring). By 1934, Michael M. Davis, a leading advocate of reform, noted that hospital costs had risen to nearly 40 percent of a family's medical bill (Davis 1934, p. 211). By the end of the 1920s, families began to demand greater amounts of medical care, and the costs of medical care began to increase.

So they understand that costs increase due to more demand, as health care is a normal good, it's not magical in any way. As the incomes of people grew, so did demand for health care. Of-course they fail to understand that incomes grew due to government inflation, more than anything else.

As the demand for hospital care increased in the 1920s, a new payment innovation developed at the end of the decade that would revolutionize the market for health insurance. The precursor to Blue Cross was founded in 1929 by a group of Dallas teachers who contracted with Baylor University Hospital to provide 21 days of hospitalization for a fixed $6.00 payment. The Baylor plan developed as a way to ensure that people paid their bills.

- $6/year insurance for 21 days in hospital. Done privately.

THEN the DISASTER struck:

The AHA designed the Blue Cross guidelines so as to reduce price competition among hospitals. Prepayment plans seeking the Blue Cross designation had to provide subscribers with free choice of physician and hospital, a requirement that eliminated single-hospital plans from consideration. Blue Cross plans also benefited from special state-level enabling legislation allowing them to act as non-profit corporations, to enjoy tax-exempt status, and to be free from the usual insurance regulations.

- this was the beginning of real gov't intervention. You know, to 'reduce price competition'.

You see, price competition had a role, as it always does, in hospital care. This was designed to destroy competition. Immediately the destruction of private market has began:

The enabling legislation freed the plans from the traditional insurance reserve requirements because the Blue Cross plans were underwritten by hospitals. Hospitals contracted with the plans to provide subscriber services, and agreed to provide service benefits even during periods when the plans lacked funds to provide reimbursement. Under the enabling legislation, the plans "enjoy the advantages of exemption from the regular insurance laws of the state, are freed from the obligation of maintaining the high reserves required of commercial insurance companies and are relieved of paying taxes" (Anderson 1944, p. 11).4 Enabling laws served to increase the amount of health insurance sold in states in which they were implemented, causing growth in the market (Thomasson 2002).

this caused more havoc and collusion in the market in form of physicians fixing their prices:

to protect themselves from competition with Blue Cross, as well as to provide an alternative to compulsory insurance, physicians began to organize a framework for pre-paid plans that covered physician services.

more collusion:

Within these rules were provisions that ensured that voluntary health insurance would remain under physician supervision and not be subject to the control of non-physicians.

initially plans were cheap:

In 1939, the California Physicians' Service (CPS) began to operate as the first prepayment plan designed to cover physicians' services. Open to employees earning less than $3,000 annually, the CPS provided physicians' services to employee groups for the fee of $1.70 per month for employees

there was plenty of competition in insurance market then, as the demand materialized:

the market for health insurance exploded in size in the 1940s, growing from a total enrollment of 20,662,000 in 1940 to nearly 142,334,000 in 1950 (Health Insurance Institute 1961, Source Book, p. 10).

and commercial private insurance won against the public 'non-profit' insurance in terms of total subscribers, and this was BASED ON PRICE!

So successful was commercial insurance that by the early 1950s, commercial plans had more subscribers than Blue Cross and Blue Shield. In 1951, 41.5 million people were enrolled in group or individual hospital insurance plans offered by commercial insurance companies, while only 40.9 million people were enrolled in Blue Cross and Blue Shield plans (Health Insurance Institute 1965, Source Book, p. 14).

THEN government started Medicare/Medicaide programs for various reasons, most of which was a popularity contest. Politicians wanted to be popular, so they wanted to throw a bone to electorate. Once these were in place, the insurance companies started lobbying the goovernment, as they saw these programs cutting into their profits because they were subsidized (same thing as with private rail and public roads,) and the insurance companies succeeded with Nixon and that was that. Now insurance is prohibitively expensive and it's employer based, so there are even less reasons for employers to hire Americans.

Medicare and Medicaid expenditures have grown as a percentage of total national health care expenditures since their inception in 1966. The figure points to some interesting trends. Expenditures in both programs rose dramatically in the late 1960s as the programs began to gear up. Then, Medicare expenditures in particular rose sharply during the 1970.

- the reasons are simple. Government colluded with insurance companies and health providers on one hand and it provided gov't subsidies through Medicare/Medicaide on another. The market was completely skewed, it had nothing to do with sound economics anymore.

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