Fixing American Health Care Funding

Seven years ago at VFR I addressed a question Lawrence Auster – may God rest his soul, the dear man – had posed about fixing health care in the United States. Obamacare was then only a rumor. Now it seems to be already on its last legs, and the Trump Administration is preparing to kill it somehow or other, and replace it with something better. The White House strategists are reported to be reading us Reactionaries. So I thought I’d trot this out again.

Lawrence wrote:

Scott Brown himself is one of the Republicans calling for new health care bill written along bi-partisan lines; and I think that’s been his position all along. He wants something done about making insurance available to everyone without having the government take it over. But how is such a thing possible?

I answered as follows (except insofar as I have amended it on account of writing better than I once did, or [changed text]):

Vouchers. The government takes over health care funding without taking over health insurance or health care. The government would not intervene in the health care industry [at all], except that it would act as a clearing house for payments in much the same way that the Federal Reserve acts as a clearing house for checks. Here’s how it would work.

  • Impose a new federal health insurance payroll tax equal to total health insurance premiums of all kinds (including [private insurance, Workers Comp premiums, Medicaid funding,] Medicare premiums and Medicare payroll taxes, which the new health insurance payroll tax would replace) collected from or for people of your age cohort in your county of residence, divided by the total number of insureds in your county of residence. So the payroll tax per capita per cohort is roughly equivalent to the cost of insurance per capita per cohort, in your area. Health insurance companies already charge by the county and cohort, so this is doable. The data have already been collected by insurers, all that is needed is for the government to collect it from the insurers and collate it.
  • [Because the new payroll tax would replace, and be no greater than, all the healthcare insurance premiums collected by all insurers in your county (including the feds), the delta to your take home pay should be nil.]
  • Issue health insurance vouchers to all citizens equal to the per capita [health care expenditures] for their age cohort in their county [plus a skoosh to keep the insurers interested in remaining engaged with the insurance business].
  • Vouchers [would be accepted only] by insurers; [you would use your voucher by applying] for health insurance. The insurer would send the feds a bill [for your coverage]; the feds would send the insurer the voucher amount. The voucher amount less the premium, if any, would go to the insured as a rebate. If the premium were greater than the voucher, the insured would pay the difference.
  • Solve the portability problem by a regulation that health-insurance policies must be guaranteed issue, except for costs already incurred.
    • The argument against this has been that younger healthier people would forgo premium payments until they actually got sick, destroying insurance companies. But with their premiums already being collected via a tax they cannot avoid, this temptation to the healthy would be eliminated; since they were paying the cost of the insurance anyway via the payroll tax, they might as well sign up for the coverage.
    • The motivation to do so would be provided by the proviso that they could not obtain insurance for costs already incurred; thus if they got hit by a car while uninsured, they would be able to obtain insurance coverage of costs for their ongoing care in the future, but not for [costs due to the car accident].
    • Everyone who is not mentally incompetent would sign up, pronto. [They would have paid for the coverage, and might as well use it. No “individual mandate;” no one is forced to do anything.]
  • Health insurers and health care providers could still compete on prices and benefits. The competition would be a lot stiffer than it is now, because the guaranteed issue provision would mean that we could switch insurers as easily as we now switch banks.
  • If competition drove premiums below the voucher amount, the insured could pocket the rebate, or invest it tax-free in a Health Savings Account (HSA).
  • Likewise, if the insured bought a high-deductible, thus less expensive policy, which cost less than the voucher amount, he could pocket the rebate or invest it tax-free in an HSA.
  • Make the health insurance payroll tax a non-taxable item, the way employer-paid group health insurance premiums already are. For most workers, the health insurance payroll tax would be something like the sum of the Medicare tax they now pay and the health insurance premium they and their employer now pay. They won’t notice much of a difference.
  • Receipt of rebates by insureds would be taxable to them as income (increasing their motivation to use HSA’s, which would increase the rate of capital formation).
  • Taxpayers who opted for Cadillac plans, the cost of which exceeded their voucher amount, would have to make up the difference from their own pockets – a negative rebate, as it were.
  • Negative rebates need not be tax-deductible, although the trend in federal tax policy with respect to employer benefits under ERISA has been to provide ways that employees can pay all their medical expenses with before-tax dollars. The idea is that health care expenditures should not be taxed at all, so as to increase the net motivation of taxpayers to take good care of themselves.
  • The health care, pharmaceutical and insurance industries would remain unchanged, and in private hands. The only thing that would change is that insurers would collect most of their premiums from their customers via the federal premium collection agency.
  • Regulation of insurers could remain in state hands, although federalizing insurer regulation would create a national market, which has a lot to be said for it: increased competition, consolidation of inefficient carriers, increased efficiencies and lower overhead, etc. Plus insurers operating in many states could slash their budget for regulatory compliance.
  • Employers might still provide health insurance as a benefit. If effect, they would be providing vouchers of their own. But my guess is that with the payroll tax in place, and the insurability and portability problems solved, most employers would elect to drop their group health insurance plans and allocate the savings to increases in gross employee compensation.
  • What about the indigent? Won’t premiums, and thus the payroll tax, go up when they are covered, even though they are not employed? No; in practice, all those people are covered already, and the cost of their care is already paid for by the premiums and taxes already paid by the employed.
  • What about Medicare beneficiaries? Ditto. This reform would enable us to get the federal government out of the health insurance industry

This model could be extended to all health, education and welfare benefits.

For what it’s worth.

24 thoughts on “Fixing American Health Care Funding

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  3. I think that the major problem we have is that various states require health insurers to cover procedures A thru Z, when what we need is for health insurers to provide a range of coverage: some plans covering A thru D, others A thru Z, and everything in between according to the needs of the insured.

    What to do about citizens who want to avail themselves of economical, minimum coverage plans (A thru D) in a national marketplace of such plans, while they reside in a state that requires purchase of “Cadillac plans” (A thru Z)? I would add this modification: states would need to pass a waiver to allow their citizens to participate in the national marketplace, and thereby receive the voucher. If they don’t, then the entire cost of health insurance is on the citizenry of the state. In this way, state sovereignty is preserved.

    • That seems reasonable. A roughly analogous situation obtains with respect to state-sponsored 529 plans (for college savings). Each state sponsors a plan, and citizens of any state can enroll in any state’s 529 plan, so there is national competition among the state plans. But some states offer tax benefits to residents for enrolling in their plans, and those tax benefits are not available to state residents who enroll in 529 plans sponsored by other states.

  4. This would be workable, but if the state is going to be the ultimate payer, I don’t see why you shouldn’t just cut out the middleman and have doctors and hospitals directly bill the government. The subsidiarity argument doesn’t apply, because insurance companies (unlike doctors) are just money changers. Their is no need to preserve their ability to run private businesses. Moreover, the argument based on price competition fails, because price competition is undesirable.

    • One of the things insurers do is figure out what sorts of services they are going to admit as medically efficacious, and therefore compensate. You don’t want the state doing that. You want providers and insureds to be able to take their disputes with insurers over what constitutes compensable medical treatment to an independent arbiter. That keeps the insurers honest. If the state itself is the insurance company, there is no independent arbiter, no court of appeal. And then you get Britain’s NHS, or the US VA.

      So we want independent insurers. One of the things that happens with independent insurers is that they end up insuring against costs of things like acupuncture and chiropracty, which seem to work even though medical science can’t come up with a satisfactory just so story that explains just why they work. Insurers, in other words, are simply better at figuring out what works than the government is. Consider: how would you like it if approval of the insurability of every single procedure had to pass through FDA approval? What do you think the rate of surgical innovation would be under such a regime? Ouch!

      This argument for independent insurers is really nothing more than a special case of the general argument that we don’t want the state providing goods and services that any other agent might competently provide.

      Price competition is undesirable? We *want* goods and services to be more expensive? Why?

      • Courts routinely hear disputes between the executive bureaucracy and private individuals. If they can’t be trusted to do that, why should they be trusted to hear disputes with insurance companies?

        Price competition is undesirable because one of its governing factors, demand, is irrelevant to what the just price of an item is. The scholastics held that the cost to the borrower, not the need of the seller, governs the just price of a thing. Moreover, with fixed prices providers would be required to compete on quality alone.

      • If [courts] can’t be trusted to [adjudicate disputes between citizens and bureaucracies], why should they be trusted to hear disputes with insurance companies?

        The courts may or may not be trustworthy, in either sort of dispute. But regardless, in a dispute with a public agency, the plaintiff’s first recourse is not to the courts, but to the agency itself – which, structurally, is interested in finding for the defense. Only the most injured plaintiffs are going to appeal a response from the agency to the courts. Almost all others are going to assume the position and take their medicine. And that’s where you get monstrous errors of triage such as are infamous with outfits like the NHS and the VA, or for that matter Kaiser Permanente.

        This, even though the bureaucrats and professionals of such organizations work at their jobs with the very best intentions for the good of their clients.

        In any case, it’s not the courts that are the most important arbiter, but the market. If people want acupuncture covered, and if one insurer decides that by golly acupuncture seems to work, and so covers the procedure, why then pretty soon most of the insurers are going to cover it. If the government is the only insurer, then the pressure to cover innovative procedures is going to be nil. Indeed, it will be negative – for all the best, most conservative reasons of good management of public administration.

        It is simply not true that the quantity demanded is irrelevant to the just price of a good. The classic example is an increase in the price of building supplies in the wake of a natural disaster. Such price increases are justified because as the quantity of a good supplied goes up, the marginal cost of providing it goes up too. E.g., the harder you must work the sawmill to meet increased demand for lumber, the more you must pay your mill workers for overtime, the more wear and tear you will suffer on your equipment, the greater your cost of transporting timber from ever more distant depleted forests on ever more inaccessible slopes, etc. This increase in costs ramifies out through the entire supply chain (to truckers, oil refiners, saw manufacturers, and so forth), and back to the health of the ecosystem. In the limit, the cost of the last tree standing is almost infinite; its destruction would be a terrible catastrophe for the entire planet.

        Such is the tragedy of the commons. Writ large or small, it ensues whenever prices are fixed. A fixed price that disregards the seller’s needs – that, i.e., disregards the costs of production vis-à-vis the quantity demanded – *just is* an artificial commons. And a commons is *always* abused, by any population large enough that the abuse can be perpetrated without discovery and consequent exaction of ostracism (which, NB, is after all sort of economic cost). E.g.: the price of driving on urban freeways during rush hour is in most cases fixed at $0/mile. What is the result? QED.

        Then also, the contractor for the hurricane victims in Florida is in competition with other contractors with more fortunate customers in Arkansas. Who needs the lumber more? The Floridians. If the price is not allowed to move in response to the increased demand from Floridian hurricane victims, they will simply not be able to obtain the lumber they need. It will have been sold to other customers, whose need is not so great. The Floridians will not have been allowed to outbid the Arkansans, and so will suffer more, and longer, than they might otherwise have done.

        Competing on quality is fine; it happens in any case. But notice that the price of a good is one of the qualities thereof. If there is no competition on price, then there is no motivation to improve the efficiency of production. As efficiency of production increases to the limit thereof, the product is commoditized. It is about as cheap as it can possibly be, given current technology. And profit margins on it are very, very slim. Who benefits? The buyer. At that point, competition on other points of quality is the only way that a seller can justify a higher price than his competitors are charging.

        Finally: to rule that the needs of the seller ought not to be considered in setting prices is effectually to render the seller a slave to the buyer. And everyone is a seller. Consider the effect on laborers of the stringent application of this rule, that their needs ought to have no bearing on the price they charge per hour of their labor.

      • The scholastics held that the cost to the borrower, not the need of the seller, governs the just price of a thing.

        this was a mistype BTW. I meant that the cost to the seller rather than the need of the buyer determines the just price of a thing.

        It is simply not true that the quantity demanded is irrelevant to the just price of a good.

        Do I need to cite Aquinas, or are you aware that you’re rejecting the scholastic position.

        The classic example is an increase in the price of building supplies in the wake of a natural disaster.

        That is a textbook case of price gouging.

        the harder you must work the sawmill to meet increased demand for lumber

        Is compensated by the additional profit resulting from the extra sale, and in no way justifies or requires higher per unit prices.

        the price of a good is one of the qualities thereof

        It plainly is not. How much you paid for an item in no way affects how effectively it works.

        If there is no competition on price, then there is no motivation to improve the efficiency of production.

        Selling more results in greater profits. Greater quality results in greater sales.

      • … the cost to the seller rather than the need of the buyer determines the just price of a thing.

        This is more or less what I’ve been arguing. Not “determines,” mind, but “influences.” If it cost me a million dollars to make something that absolutely nobody wanted, then the just price would be nowhere near a million dollars. If absolutely no one wanted it, the just price would be less than zero: I’d have to pay someone to take it off my hands.

        It is simply not true that the quantity demanded is irrelevant to the just price of a good.

        Do I need to cite Aquinas, or are you aware that you’re rejecting the Scholastic position?

        Cite away. I’m not disputing Aquinas, I’m just refining his argument.

        If someone would be greatly helped by something belonging to someone else, and the seller not similarly harmed by losing it, the seller must not sell for a higher price: because the usefulness that goes to the buyer comes not from the seller, but from the buyer’s needy condition: no one ought to sell something that doesn’t belong to him.

        — Summa Theologiae, 2-2, Question 77, Article 1

        If we take Thomas at face value here, then no seller ought ever to sell any good for more than a buyer wants to pay – the amount that the buyer wants to pay being an index of the usefulness to him of the good. But every buyer would prefer to get every good for a price of $0. It’s a reductio.

        So we can’t take Thomas at face value in this.

        Notice that both sides of every transaction are sellers. I sell you a hammer, you sell me a few dollars in exchange. But I would like to buy your dollars for zero hammers. Deal?

        Then there is this: the buyer is not buying the usefulness to himself of the good that the seller is selling. He is buying the usefulness of that good (along with the good itself) *to the seller.* The usefulness of his hammer to the seller is something that belongs to him along with the hammer. And part of the use of a good is what can be got in exchange for it; the archetypal case being that of a unit of fiat currency, which apart from its exchange value is entirely without use. When I sell you something, I use it to buy whatever you are selling me in exchange.

        If you are offering me $10 for my hammer, and Thordaddy is offering me $12, then my current possession of my hammer is an option with a strike price of $12. When I sell you the hammer I am selling you the usefulness to me of the hammer qua hammer and the usefulness to me of the hammer qua option on $12, in exchange for $10. I.e., I am being harmed by $2, on the option price alone, and disregarding the cost to me of the usefulness of the hammer qua hammer.

        This is where that crucial qualifying condition added by Aquinas comes forcefully into play: “… and the seller not similarly harmed by losing it.” If I sell you my $12 option for $10, I am being harmed by $2.

        [An increase in the price of building supplies in the wake of a natural disaster] is a textbook case of price gouging.

        That’s not an argument. It’s mere rhetoric. Effective as rhetoric, perhaps, among hoi polloi, but not as a means to understanding. I’ve already explained the economic logic – the moral logic – of higher prices in response to increases in the quantity of a good demanded. The marginal cost per unit goes up as the quantity demanded goes up. This is basic economics. It is an iron law, because it constrains all operations when conservation laws obtain. Anyone with some of experience at the production of goods or services has experienced this. Working harder is … harder. It is more costly.

        [Harder work to meet increased demand is] compensated by the additional profit resulting from the extra sale, and in no way justifies or requires higher per unit prices.

        Sorry, this is just wrong. Labor is the most expensive factor of production. Ever heard of overtime pay? As the quantity supplied increases, the unit cost increases at an increasing rate. This is why the supply curve is curved. As the quantity supplied increases, the slope of the line of increasing unit costs goes to 90°.

        Rev any engine hard enough, and the cost will be an explosion.

        If the seller is not compensated for these increased per unit costs by a higher price, then he is being harmed.

        [The price of a good is plainly not one of the qualities thereof.] How much you paid for an item in no way affects how effectively it works.

        Cost of ownership over the useful life of a good is manifestly one of its characteristics. And that cost is a function of its purchase price, the cost of maintenance and taxes, the cost of insurance, the cost of its inputs, the difficulty and cost of its use, its useful life, its resale value, and so forth. All of these in turn are partial functions of the material and formal properties of the good, vis-à-vis those of all other goods – what it is made of, and how it is made, compared to what other things are made of, and how. Jaguars were once famous for being characteristically costly both to buy and to maintain. Compared to the Volkswagens of the same era, they worked poorly. But they were gorgeous!

        The VW and the Jag were made of basically the same stuff, and in the same amounts. But they were different formally; and these formal differences made them differentially costly to own, vis-à-vis all other goods – especially each other.

        If you were to ask a Jaguar owner what his car was like, he’d say, “Expensive, fun to drive, but it always breaks down.” Ask a VW owner the same thing, and he’d say, “So cheap; and it always starts, no matter how cold it is outside.” I heard these sorts of responses myself. They were commentaries on the overall effect of the formal characteristics of the two cars.

        If there is no competition on price, then there is no motivation to improve the efficiency of production.

        Selling more results in greater profits. Greater quality results in greater sales.

        Even if both these points were simply true, they do not tell against the suggestion that eliminating price competition vitiates the motivation to improve efficiency.

        Neither of them are simply true.

        Selling more generates greater profits, but once economies of scale have been realized, the unit profit goes down with marginal increases in production, ceteris paribus. It goes down all the way to zero. It’s the Law of Diminishing Marginal Returns. Again, it is an iron law wherever the physics of our world hold sway.

        Greater quality costs more to produce, ceteris paribus. This is why greater quality commands higher prices. Higher prices tend to *reduce* unit sales.

      • If we take Thomas at face value here, then no seller ought ever to sell any good for more than a buyer wants to pay – the amount that the buyer wants to pay being an index of the usefulness to him of the good. But every buyer would prefer to get every good for a price of $0. It’s a reductio.

        That is not only a non-sequitur, it’s the exact opposite of what Aquinas said in that quote. He stated, explicitly, that the usefulness of a good to the buyer is not pertinent to its price. How you derived that buyers should set prices is beyond me.

        If you are offering me $10 for my hammer, and Thordaddy is offering me $12, then my current possession of my hammer is an option with a strike price of $12.

        This is antirealism. Real values are not based on counterfactual hypotheticals. The just price of an object is based on actual costs to the seller, not imaginary stories that the seller creates in his mind.

        Moreover, it’s also viciously circular. Literally any price could be justified based on this reasoning.

        Cost of ownership over the useful life of a good is manifestly one of its characteristics.

        This particular point has devolved into semantics. I differentiated between the price of a good and its quality (as in, the benefit brought to the buyer after purchase). You should address that point, not whether I should have defined the word quality differently.

      • If we take Thomas at face value here, then no seller ought ever to sell any good for more than a buyer wants to pay – the amount that the buyer wants to pay being an index of the usefulness to him of the good. But every buyer would prefer to get every good for a price of $0. It’s a reductio.

        That is not only a non sequitur, it’s the exact opposite of what Aquinas said in that quote. He stated, explicitly, that the usefulness of a good to the buyer is not pertinent to its price. How you derived that buyers should set prices is beyond me.

        Aquinas wrote:

        If someone would be greatly helped by something belonging to someone else … the seller must not sell for a higher price

        In the jargon of economics, this makes the seller the price taker, and the buyer the price maker. The seller can abstain from selling, but he is not free to set the price higher than what the buyer wants to pay.

        In practice, and under perfect market conditions (an admittedly rare circumstance), neither the seller nor the buyer can set the price. They must rather negotiate; or rather, the sell side of the market must negotiate with the buy side, with both of them generally getting less out of the deal than they might have wished. But if either side thinks that he will not profit from the transaction, then it doesn’t happen. No one then loses; but no one wins, either. If the transaction happens, it is only because both sides win.

        If you are offering me $10 for my hammer, and Thordaddy is offering me $12, then my current possession of my hammer is an option with a strike price of $12.

        This is antirealism. Real values are not based on counterfactual hypotheticals. The just price of an object is based on actual costs to the seller, not imaginary stories that the seller creates in his mind.

        No; in the gedanken experiment, Thordaddy’s offer is real; it is a historical fact. It’s an auction: you’ve bid $10, and Thordaddy has bid $12. The tickets are on the counter. I could pick one, or the other; that’s the only way that Thordaddy’s $12 bid is an actual option, rather than just my wishful thinking.

        Moreover, it’s also viciously circular. Literally any price could be justified based on this reasoning.

        No. The only prices that could be justified on this reasoning are prices that are at or below what the market will bear – i.e., what has actually been bid for the good in question (that bid being an index of the utility of the good to him who has the greatest need of it). If the highest bid price is $12, I can’t possibly sell for more; if I hold out for more, there will be no sale price to justify.

        I differentiated between the price of a good and its quality (as in, the benefit brought to the buyer after purchase).

        Again in the jargon of business, the “benefit of a good to the buyer after purchase” is the “net benefit” of the deal; “after” and “net” serve the same purpose in the two expressions. It is also called the profit on the deal: what it returns in benefit on the basis invested, which is the purchase price. To make a buying decision, I must weigh its costs and benefits; must, that is to say, calculate the amount of the net benefit, if any, after taking into account all costs.

        If a good does me no net benefit, then it is no good to me, no matter how well it was made, or what its other characteristics might be. It has lots of characteristics, to be sure, some of which have nothing to do with me. But its character as a good *to me* must account for all the costs I will suffer on account of owning it.

      • A fuller quotation from Aquinas on the topic of the just price:

        Respondeo: It is altogether sinful to have recourse to deceit in order to sell a thing for more than its just price, because this is to deceive one’s neighbor so as to injure him. Hence Tully says (De Offic. iii, 15): “Contracts should be entirely free from double-dealing: the seller must not impose upon the bidder, nor the buyer upon one that bids against him.”

        But, apart from fraud, we may speak of buying and selling in two ways. First, as considered in themselves, and from this point of view, buying and selling seem to be established for the common advantage of both parties, one of whom requires that which belongs to the other, and vice versa, as the Philosopher states (Polit. i, 3). Now whatever is established for the common advantage, should not be more of a burden to one party than to another, and consequently all contracts between them should observe equality of thing and thing. Again, the quality of a thing that comes into human use is measured by the price given for it, for which purpose money was invented, as stated in Ethic. v, 5. Therefore if either the price exceed the quantity of the thing’s worth, or, conversely, the thing exceed the price, there is no longer the equality of justice: and consequently, to sell a thing for more than its worth, or to buy it for less than its worth, is in itself unjust and unlawful.

        Secondly we may speak of buying and selling, considered as accidentally tending to the advantage of one party, and to the disadvantage of the other: for instance, when a man has great need of a certain thing, while an other man will suffer if he be without it. In such a case the just price will depend not only on the thing sold, but on the loss which the sale brings on the seller. And thus it will be lawful to sell a thing for more than it is worth in itself, though the price paid be not more than it is worth to the owner. Yet if the one man derive a great advantage by becoming possessed of the other man’s property, and the seller be not at a loss through being without that thing, the latter ought not to raise the price, because the advantage accruing to the buyer, is not due to the seller, but to a circumstance affecting the buyer. Now no man should sell what is not his, though he may charge for the loss he suffers.

        — Summa Theologiae, 2-2, Question 77, Article 1

        NB:

        … the quality of a thing that comes into human use is measured by the price given for it, for which purpose money was invented

        … the just price will depend not only on the thing sold, but on the loss which the sale brings on the seller. And thus it will be lawful to sell a thing for more than it is worth in itself, though the price paid be not more than it is worth to the owner.

  5. No “individual mandate;” no one is forced to do anything.

    Except for that little tax thing they are forced to pay. Which, ironically, Justice Roberts equates with a mandate, apparently.

    • Yeah, taxes are indeed a bummer. But they are already being paid, one way or another. The voucher idea I have proposed does not increase them, at least, the way Obamacare massively does. Rather, it consolidates them and makes them explicit.

      It would have been more accurate for me to say, “No one is forced to do anything they are not already doing.”

  6. I think Jim Donald has the right idea here. Free riders only get access to the local ‘public’ hospital. Where the experience is decidedly un-luxurious such that those able to would do what’s necessary to avoid it, such as purchase basic catastrophic insurance.

    Those who don’t pay shouldn’t be getting the same level of care as those who do (aside from those facilities funded out of charitable contributions rather than general taxation).

    • A lower level of service for the indigent that is mandated by law will never fly, politically. If however the indigent choose it for themselves, it becomes much more palatable.

      That should happen automatically if insurers are free to design policies that are demanded by the market, as they were up until a few years ago. One of the policies that they will design will be a bare bones policy with catastrophic care but high deductibles and out of pocket maxima, that will therefore have lower premiums. The premiums will be lower than the voucher amount. The only way that high time preference people will be able to pocket the difference is by using their vouchers to buy these bare bones policies. So they’ll be covered for the really big expenses.

      Spongers will still clog the ER, and ER staff will still have to engage in triage to turn them away. The only way that will ever change is if providers are allowed to garnish welfare transfer payments for reimbursement. So that there’s no free lunch.

      Ironically, the bare bones policies will appeal to the low time preference people, too. The difference being that they will allocate their voucher refund to their Health Savings Accounts, rather than to Cheetos and beer.

  7. The problem with the American system is that it is inefficient and inhumane. We spend more as a percentage of our GNP than many advanced nations with universal coverage. Because our system is inefficient, it is also inhumane, because it is too expensive for normal people to afford.

    The biggest problem is reducing health care costs, and getting them down in accordance with what things cost in say Australia, Germany, France, England, etc. Obamacare’s biggest sin is that it provides subsidies without cost controls. As we know from higher education, what you get is cost inflation, since the consumer is not paying for the service, the government is picking up the tab.

    If the government is going to be in the game (and it is in the game and has to be for low income citizens), then it needs to set cost control measures. The Swiss have a completely private health care system, but it is an all pay system in which the government sets the prices. Given the Randian bent to American politics, this would be the best option should anyone want to do something about the problem, and not just legislate give aways to corporate special interests.

    National health insurance is more efficient than private insurance, because it allows the government to set national pricing, and eliminates profit. The entire idea that insurance is a “private industry” is a complete joke. Insurance is just redistribution. You put a bunch of money in a pot, manage it, and then administer claims. There is no reason why the government can’t manage an insurance pool any better than an insurance company, without the need to extract a 15% profit. Its all just hidden usury. But what is libertarianism if not the glorification of usury and other forms of unnatural congress.

    • The biggest problem is reducing health care costs, and getting them down in accordance with what things cost in say Australia, Germany, France, England, etc.

      No. Should gas cost the same at Tierra del Fuego as it does in Jeddah? What’s needed is to price goods in respect to what it costs to deliver them at the locus of their use, not what it costs to deliver them somewhere else altogether. This is not to say that there are not huge inefficiencies in the delivery of American health care services. There are.

      Obamacare’s biggest sin is that it provides subsidies without cost controls.

      The subsidies of Obamacare are indeed sinful. But Obamacare is also rife with sinful price controls – sometimes taking the form of regulations on what specific service may or may not be, must or must not be, provided in this circumstance or that. E.g., it forces everyone to pay for maternity costs, whether or not they can ever suffer them, by mandating that all policies must cover them. Pre-Obamacare, most policies included maternity benefits, but it was at least possible to opt out of them.

      As we know from higher education, what you get is cost inflation, since the consumer is not paying for the service, the government is picking up the tab.

      Yes. Under fully nationalized healthcare, this perversity would be maximized. It was already endemic under private health insurance, because deductibles were set too low, and so in the presence of insurance coverages there was no negotiation over prices of services between patients and providers. A friend went to fill a prescription at Safeway the other day. If she had claimed the prescription under her insurance policy, Safeway would have charged $600, of which her insurer would have covered all but $25. She paid for it without the intermediation of Anthem, and Safeway charged her $25. Almost all providers charge far less for a given good or service to the uninsured than they do to the insured.

      I know a man who sat in on the meetings where private businessmen cooked up medical insurance as a brand new product, at Aetna after WWII. It started out as catastrophic coverage. That’s what it ought to be, again. The principle of risk management through insurance is that you insure only against catastrophic risks that are not predictable. To spend premium dollars on anything else is a waste of money. If routine medical expenses, of the sort that one ought to be able to plan on happening in a normal year, were not insured, and people had to decide for themselves whether to spend their own money on them, prices would experience severe and pervasive downward pressure. Patients would shop, so providers would have to compete on price. For the last 40 years, they have not (they haven’t really competed on much of anything, including quality; such are the wages of vast subsidies). So medical services cost a ton. That’s what happens when there is no competition on price.

      If the government is going to be in the game (and it is in the game and has to be for low income citizens), then it needs to set cost control measures.

      It already does this, through Medicare. The big insurers reimburse at rates that imitate the reimbursement rates of Medicare. It doesn’t work to control costs, or prices. Government price controls prevent prices from falling, because they eliminate competition on price, which in turn eliminates competition in the efficient delivery of goods, from the patient all the way up the supply chain.

      National health insurance is more efficient than private insurance, because it allows the government to set national pricing, and eliminates profit.

      If communism were really more efficient than commerce, there would be no such thing as commerce. The exigencies of history would have edited commerce out of human society thousands of years ago.

      But everyone knows that state bureaucracies with no explicit profit motive are far less efficient than private enterprises with explicit profit motive. This is so basic. Viz., the DMV versus AAA. One of the things AAA does for members is deal with the DMV on their behalf. I invite you to compare the customer experience at both establishments.

      The entire idea that insurance is a “private industry” is a complete joke. Insurance is just redistribution. You put a bunch of money in a pot, manage it, and then administer claims.

      Compare:

      The entire idea that the auto industry is a “private industry” is a complete joke. Car companies are just redistribution. You put a bunch of money in a pot, manage it, and then ship out the cars to customers.

      The entire idea that commercial banking is a “private industry” is a complete joke. Banks are just redistribution. You put a bunch of money in a pot, manage it, and then send money to customers.

      The entire idea that show business is a “private industry” is a complete joke. Broadway and Hollywood are just redistribution. You put a bunch of money in a pot, manage it, and then provide entertainment to customers.

      Substitute in whatever good or service you please.

      There is redistribution, and then there is redistribution. The crucial difference is between transactions in a market that are uncoerced, and those that are coerced by state authority. The latter must proceed whether or not they make any sense. The former cannot proceed unless they make sense to both sides of each transaction. Transactions of the former sort therefore tend to make more sense than those of the latter.

      There is no reason why the government can’t manage an insurance pool any better than an insurance company, without the need to extract a 15% profit.

      Yeah; look at Social Security and Medicare, and the VA! The only thing standing in the way of eliminating profit as a motivator to actions is that pesky old thing, human nature, that seeks to optimize the good. But we can solve that problem. All we need is a New Economic Man, with a different nature. First thing, though, we have to kill all the kulaks and grocers …

      It’s all just hidden usury.

      Wait, what? A contract of insurance is a full recourse mutuum? News to me; last time I checked, my insurance contracts didn’t pay me anything, nor a fortiori did they oblige me to pay anything back. On the contrary: I plunked down a few dollars and the insurer agreed to pay millions back, whenever at some unknowable time in the future they became useful to me on account of my ill fortune.

      • In the Temple in Jerusalem, there were money changers.

        You gave them money, they exchanged it for other money, but they took a cut. For this reason, certain “socialists” called them robbers in the temple, and one “extremist” took a bull whip and drove this parasite class out of the temple.

        Let us compare insurance. Insurance you pay into an insurance pool, then claims are made against the pool, and the administrators pay the claims. Also, the administrators take a cut beyond merely expenses and administrative costs, a so-called “profit” from simply moving flows of money around, not actually producing anything. From an Aristotelian perspective, this is classical usury. From a classical Christian perspective, this is usury. [Insurance companies were original organized as mutuals, not corporations, for this reason.]

        As far as the contention that “private insurance” is more efficient that “public insurance”, you can look at this data from the world bank:

        http://data.worldbank.org/indicator/SH.XPD.TOTL.ZS?year_high_desc=true

        America spent 17.1% of its GNP on health care in 2014. France spent 11.5 percent of its GNP, and it covers everyone and even provides spa treatments for its citizens (!). Germany, which I believe is private but similar to the Swiss, spent 11.3 percent. The UK, with a socialized medical system, spent 9.1 percent. Australia, with national health insurance, spent 9.4 percent and Canada came in at 10.4 % of GNP.

        Now, why is health care in America so expensive? Because the Usura’s greed is endless, and “conservatives” think leaving health care under the control of usurious financial parasite class is “conservative”.

      • The money changers were driven from the Temple not because they were arbitraging currencies (NB: arbitrage is neither usury nor insurance), or taking a profit from doing so, nor because they were doing business within the courts of the Temple. Their business was just as legitimate under the Law as that of the many vendors of ritually clean sacrificial doves and livestock who worked nearby (and who were likewise driven out). It was to buy foreign currency – Roman, Persian, etc. – from Jews coming to worship and make offerings in the Temple, and sell them Temple currency in exchange. Their customers were motivated to these transactions by the necessity under the Law of donating only Temple currency to the Temple, and not that ritually unclean Roman and Persian stuff. The money changers were taking a cut, of course – businesses must do that in order to pay the expenses of running a business and have something left over at the end of the day to take home. Nothing unethical about that.

        The problem with the money changers at the turn of the First Century derived from the fact that the High Priesthood of the Temple had been filled by the Romans and their collaborators among the Sadducees and the Sanhedrin with members of a collaborationist family that traditionalist Jews like Jesus knew was unlawful. The kingship of the Herodians was illegitimate in traditional Jewish eyes for the same reason: the Herodians were Idumaean, not Judean. The High Priest then, like Herod, was a collaborator, and an agent of a foreign power. And so the whole Temple operation was tainted by his ritual uncleanness, right down to the money changers.

        The money changers, naturally, had to pay the Temple rents in order to set up their banks in the Temple Courts. This was just like the fees that members of a stock market must pay to the owners of the market in order to do business within its precincts – or that corporations must pay a state in order to do business within its domains. There is nothing unethical about such market participation fees.

        The problem was that, the High Priesthood of the Temple having been corrupted, the Temple’s take from the market fees paid by the money changers – some of it, presumably, being like corporate income taxes a function of the profits earned in the arbitrage of the money changers – every worshipper who needed to donate money to the Temple – i.e., every worshipper, simpliciter – was forced to fund the collaborationist operation of the corrupt Temple High Priestly establishment. Cf. Catholics and Muslims being forced to pay taxes that support Planned Parenthood.

        That forced participation in ritual uncleanness – and the resulting corruption by ritual uncleanness of every single donation of money to the Temple – was a source not just of profound resentment among the Jewish people, but of supernatural dread. It ruined all their sacrifices. And this put at risk the whole Hebrew nation, whose survival – and with it, indeed, as they understood things, the maintenance of the whole created order – depended crucially on the daily round of effectual and ritually pure sacrifices in the Temple.

        Jesus drove out the money changers not because they were money changers making profits in the Temple precincts but – as he said – because they were thieves. They were exchanging bad money for bad money, and so failing to fulfill their proper commercial function, of selling good money. They were, in a word, selling what they did not possess: ritually clean money.

        YHWH was not pleased. So he drove them from his Temple. It was a forthright and public condemnation of the whole corrupt Temple establishment. And the Temple establishment later responded by arresting him, and having him killed.

        Let us compare insurance. … you pay into an insurance pool, then claims are made against the pool, and the administrators pay the claims. Also, the administrators take a cut beyond merely expenses and administrative costs, a so-called “profit” from simply moving flows of money around, not actually producing anything.

        Confer:

        Let us compare government. … you pay into a government pool, then claims are made against the pool, and the administrators pay the claims. Also, the administrators take a cut beyond merely expenses and administrative costs … from simply moving flows of money around, not actually producing anything.

        From an Aristotelian perspective, this is classical usury. From a classical Christian perspective, this is usury.

        Nope. Profit is simply not the same thing as interest on a loan (which is usury according to Aristotle). Nor is it a full recourse mutuum (which is usury according to the Church); interest on a loan collateralized by real goods is not usury (Zippy’s invaluable Usury FAQ is a comprehensive and most useful guide to the subject). Nor a fortiori is profit on transactions. Say you sold some dollars to buy a cup of wonderful coffee. You must feel as though you are better off owning the coffee than the money, or you wouldn’t have engaged in the transaction. Is your profit on the transaction – i.e., the difference between the utility to you of the money and of the coffee – usury? Of course not.

        Insurance companies were [originally] organized as mutuals, not corporations [so as to avoid usury].

        The archetypal mutual aid society is the Church. Or the Essenes. Same thing.

        Many modern insurance companies were first organized as mutual aid societies (Travelers, Farmers, Teachers, Lutherans, Church Life, K of C Life, Fireman’s, MONY, Prudential, Geico, Medi-Share, etc.). But many others started life as companies (Aetna, Transamerica, AIG, Allstate, etc.).

        Regardless of whether an insurer is organized as a mutual or a stock company, though, it can engage in usury – in, that is, lending money under the form of full-recourse mutua. Such usurious activities would be restricted to their treasury operations – to, i.e., their investment of premiums paid in and of accumulated capital held against future claims, dividends (whether to policy holders of a mutual company or stock holders of a stock company), expenses, and so forth. Obviously, any corporation – viz., the Vatican Bank – might in its treasury operations engage in usury. But usury could not by definition occur in the conduct of strictly insurance operations – sales, underwriting, regulatory affairs, claims administration, and so forth – any more than it could occur in the strictly automotive operations of a car company – sales, R & D, marketing, manufacturing, distribution, and so forth.

        Now, why is health care in America so expensive? Because the Usura’s greed is endless, and “conservatives” think leaving health care under the control of usurious financial parasite class is “conservative.”

        You’re being absurdly sloppy with “usury,” throwing all sorts of things into that category that obviously don’t belong there, such as your profit on the purchase of your morning coffee. You would make trade per se all usurious, ergo sinful. That’s just ridiculous. You should be more careful with your terms.

        There are lots of reasons why health care in America is expensive, and I’m sure that greed and usury – NB that these are *different things* – are both factors. But there are lots of other reasons, most of which derive from misguided government policies, which have prevented the markets of health care from operating properly ever since the Federal wage and price controls of WWII forced companies to start competing for employees by paying fringe benefits. These policies have deformed competition on prices in these markets, radically reducing their efficiency – and jacking up profits to companies that know how to game the system.

        Remember: every time the state intervenes in the pricing system of a market – whether through subsidies, or excise taxes, or regulation, or price controls – it creates new opportunities (perhaps in some apparently unrelated market) to harvest economic rents by gaming the system, also known as arbitrage, also known as behaving rationally in respect to the economic incentives on offer. E.g., the wage and price controls of WWII engendered the fringe benefit movement, which enabled insurers to earn profits on a whole new category of customers. Fringe benefits were not unethical. They are *benefits.* They wouldn’t have worked if employees didn’t value them as such.

        The upshot was that the wage and price controls were defeated – in part, and at greater friction to the economy imposed by the extra transaction costs implicit in the group medical insurance business vis-à-vis direct price negotiations between patients and provider – by a dynamic and intelligent response. A whole new industry was created by the tax deductibility to corporations of their business expenses in supporting fringe benefits.

        NB that none of this would have happened if there had never been an income tax in the first place. If the US had not adopted the income tax in 1913, and instead continued to finance its operations as it always had – by customs duties and fees – then there would have been no such thing as a corporate income tax, or therefore a corporate tax deduction.

  8. Here is a nice piece on Usury in the history of Christian thought, with plenty of “socialists” like Pope Benedict XIV and Thomas Aquinas:

    http://distributistreview.com/is-usury-still-a-sin/

    On the other hand, usury has always been one of those “victimless crimes” like sodomy, appealing to the Protestant and post-Protestant ilk.

    The Muslim’s seem to have a pretty good grasp on the relationship between usury and insurance:

    https://islamqa.info/en/8889

    Of course, none of this forbids insurance per se, it simply suggests that insurance be either run by the state or by non-profit mutuals.

    • I am not inclined to take the pronouncements of Mohammedan writers as anywise authoritative for any sort of society other than those of their own faith. The linked piece may make a lot of valid points, to be sure; but it is low on my list of things to be read.

      The article from Distributist Review is fascinating. But it does not address insurance. True, early on it characterizes personal guarantees as contracts of insurance; but that is an error of diction on the part of its author. Nowhere in the article, so far as I can see, does it find in Magisterial teaching a contradiction of the Magisterial teaching that usury occurs in full-recourse mutua.

      Insurance, properly so called, is simply not a loan in any sense of that word; it is neither a mutuum nor a societas. Insurance cannot, by definition, instantiate usury; for, not being a loan in the first place, it can hardly be a loan of morally defective form. So the vast literature on usury has really nothing to do with insurance.

      There may of course be all sorts of moral failures on the part of insurers. And they may indeed be usurers *in addition* to being insurers. But they can’t be usurers by means of their contracts of insurance.

      How the arguments in the Distributist Review article imply that insurance ought not to be provided by stock corporations is not apparent to me.

      Usury could be ended almost overnight if the Commercial Code were amended to the effect that full recourse loans would no longer be enforced by the courts. This would force lenders and borrowers to collateralize all loans with real assets. This would have two salutary effects on the general economy: it would eliminate almost overnight the vast majority of debt speculation; and it would automatically link the money supply tightly to the supply of real assets actually present in the economy, thus greatly damping the cycle of booms and busts that – with the best intentions in the world, no doubt – the Fed has worked so hard to amplify.

      The elimination of usury would not of course too much affect markets relevant to medical costs.

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