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The Foundry has an interesting article on the “Cost Control Myth” often cited for Medicare:

. . . a 2007 CBO report by Perter Orszag found that between 1975 and 2005, the real per capita cost growth in Medicare was 4.6%, compared to 4.1% for all other health care spending.

Ah, yes. It seems the proponents of a government takeover of health care . . . the Orwellian-named “public option” . . . don’t want to bother us with the details of their comparison of government and private health care insurance. The article points out how Medicare benefits are not directly comparable to private health care benefits, so you do have to dig a little deeper than the “top level stats”.

The other stat often cited is that Medicare spends only 2 – 3% in administrative costs, while private insurance spends 14 – 22%. The devil is again in the details, this time in how the percentages are calculated.

First, we have to remember that government agencies do not adhere to the GAAP (Generally Accepted Accounting Principles) or other standards that businesses must use. What is counted as overhead and administrative expense is likely far different in government agencies.

Second, the stat appears to be a simple calculation by taking the total payout and dividing by the administrative expense. Heritage fellow Robert Book explains:

Imagine, for a moment, that Fred and Jane each have a credit card from a different bank. Fred charges $5,000 a month, and Jane charges $1,000 a month. Suppose it costs each bank $5 to produce and send a plastic credit card when the account is opened. That $5 “administrative cost” is a much lower percentage of Fred’s monthly charges than it is of Jane’s, but that does not mean Fred’s bank is more efficient. It is purely a mathematical artifact of Fred’s charging pattern, and it would be silly to compare the efficiency of bank operations on that basis. Yet that is how many analysts compare Medicare with private insurance.

Finally, it would be good to remember that Medicare has done a lousy job of eliminating waste, fraud and abuse. There is a Medicare fraud task force, started in 2008, that is seeing dramatic arrests. But there is still staggering waste: authorities in Miami have prosecuted individuals for an estimated 2 billion dollars in fraud in that one city, since 2005. And that one city is one-third of all prosecutions, showing just how light enforcement is nationwide. Perhaps if Medicare spent more on “administrative costs”, they might actually do more than just throw tax payer’s money out the window.

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One of the most prominent arguments today is that health care costs have risen faster than the rate of inflation. That statistic alone is cited as an indicator that costs are out of control. But the other half of the equation is missing.

Cost and value should both be considered. In nearly every other endeavor, we consider both. When we buy anything, we consider the cost of the item and the value it brings us. A larger TV may provide a better viewing experience, an intangible value. A hybrid car brings better gas mileage, and may be a better value depending on the cost differential between it and a standard car (adding in your assumptions about the future price of gasoline, resell value, etc.)

When adjusted for inflation, healthcare costs have increased from $1,851 per person in 1970 to $7,026 in 2006, a substantial increase, as noted by Cato.org, in an article comparing the value received from increases in education spending and healthcare spending. The author, who is mostly concerned about education spending, ticks off several areas where we have received more value from our health care dollar increase:

• Neonatal mortality was cut by 2/3 between 1970 and 2005, from 20 to 6.87 per 1,000 births
• Fetal mortality rate (miscarriage) was cut by more than half: from 14 in 1970 down to 6.2 in 2003 (per 1,000 live births plus fetal deaths)
• Life expectancy at birth was raised by 7 years
• Limitation of activity caused by chronic conditions: 13.3 % in 1997, 11.6% in 2006
• There’s now a nearly 90% cure rate for a childhood leukemia
• Depression is far more treatable
• Fertility treatments are greatly advanced
• Prosthetics are dramatically better
• Lasik eye surgery was invented
• Gastric bypass surgery is now available for the morbidly obese
• Joint replacements are far more common and effective
• Reconstructive surgery is greatly advanced
• We now have vaccines for rubella, pneumonia, hepatitis A and B, chicken pox, lyme disease, and meningitis
• Smallpox was eradicated
• Numerous technological advances have made diagnostic and surgical procedures less painful and easier to recover from, including: arthroscopy, laparoscopy, MRIs, CTs, SPECT and PET scans

I’m sure there are more benefits derived from increased spending on health care. Suggestions can be added to the comments.

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The law of unintended consequences always seems to surprise our lawmakers. Democrats can’t seem to understand that a “public option” for health care insurance will compete unfairly with private insurers, even the non-profit ones like Kaiser and Blue Cross. And the costs of that public plan will exceed all estimates due to swelling enrollment.

Hawai’i's Keiki Care, intended to cover uninsured children not eligible for Medicaid, was abandoned in late 2008 after enrollment swelled far beyond the estimates. The reason? As KaiserNetwork.org indicated:

According to some state officials, many of the children enrolled in Keiki Care previously had private health insurance, the AP/Herald reports. Kenny Fink, administrator for Med-QUEST at the Hawaii Department of Human Services, said, “People who were already able to afford health care began to stop paying for it so they could get it for free.” He added, “I don’t believe that was the intent of the program” (Niesse, AP/Miami Herald, 10/17).

It isn’t just individuals that will willingly abandon higher cost private health care plans, but employees forced to move to the public option by their companies.

Remember the controversy when large companies like Walmart started filling their ranks with part time employees, thereby avoiding the benefits that flow to full time employees? Public opinion was shocked to find out the companies were providing brochures explaining how the employees could get Medicaid coverage from the government to replace their missing company health plan.

The response from lawmakers has been to try and craft a “play or pay” provision fining companies that eliminate their in-house plans. But the temptation will still be great for a CEO to scuttle the in-house plan for other cost savings … reduced staff in HR, decreased uncertainty about future costs, etc. Because many companies ‘self insure’, with the insurance company acting as the plan’s administrator, health care costs represent a variable cost, just one illness away from spiraling out of control. Having a number you can budget for, such as the “play or pay” fine, means good management can just cut back a few more jobs, hire more part time workers, and eliminate the company health plan.

Robert Moffit, director of the Heritage Foundation’s Center for Health Policy Studies, explained the reasons a public plan simply won’t work in testimony before the House Education and Labor Committee:

Moffit dispelled popular belief that a government-run health insurance plan would compete on a level playing field. “There are a lot of ways to improve competition in the health insurance market without the public option. The public option doesn’t solve the current problem of consolidation — in fact, it makes it worse.”

A public option with any special advantages, such as being able to use Medicare payment rates, would reduce the number of private health plans, and thus further consolidate the insurance market, Moffit pointed out to the committee. This would worsen the very problem champions of the public plan in Congress say they want to fix.

To compete fairly, a public plan would have to follow all of the rules and regulations current health insurance plans face, including laws for malpractice tort and contracts. “It should be allowed to compete for business and fail, without artificial bailout from the government” if the public plan loses market share, Moffit said.

Massachusetts’s universal health plan, long discussed as a possible model for the nation, is facing budget crunch pressures. The solution? Eliminate “automatic coverage” for the poor, and eliminate dental coverage. This “limited coverage” rationing is a foreseeable result of any national “public option” plan, as the promised cost savings never materialize. As Democratic Treasurer Timothy P. Cahill told the Boston Globe:

“We’re all still waiting for the savings,’’ Cahill said. “Universal healthcare was supposed to eventually save us money.’’

“It’s a warning for the federal government as it looks to do something similar,’’ he added. “I’m not saying we can’t afford any of it, but it certainly doesn’t appear that we can afford all of it.’’

The public option is another lesson in the law of unintended consequences waiting to be taught. But, unfortunately, its a lesson our legislators are apparently unable to learn.

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The AMA has taken a position on the still-nebulous proposals for a “public option” health insurance program by the Federal Government. The New York Times reports the AMA

… is letting Congress know that it will oppose creation of a government-sponsored insurance plan, which President Obama and many other Democrats see as an essential element of legislation to remake the health care system.

H/T to Gateway Pundit.

I would like to see more doctor-patient coordination in opposing a Federal plan, and some movement toward adopting the kind of measures that put doctors, and not non-medical gatekeepers, in the primary role.

One proposal I like is to reduce the regulations giving consumers more choice over the types of health plans they can buy. Here in California, I am compelled to buy health insurance that includes coverage for chiropractic care, even though I believe it borders on medical quackery. My premium includes coverage for mental health services, some alternative treatments, and other items I would rather not purchase.

But, more freedom is not the goal of Democrats. More control is the goal.

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That pesky “Rule of Law” seems to be holding up the sale of Chrysler to Fiat, with an unusual stay of the sale issued by the Supreme Court on behalf of Indiana investors. I went on a tirade against the intervention in the auto companies on my family’s private email list, much to my embarrassment. I’m usually much more level headed, but I just couldn’t see how ignoring the protections of the law for bonded debt holders could possibly hold up without a challenge. Mark A. Calabria at Cato@Liberty reports on the State of Indiana’s objections:

As discussed in today’s Washington Post, these pension funds believe their rights were infringed by the Administration’s placing of junior creditors in a preferred situation to senior creditors. It doesn’t take Ms. Manners to remind us that cutting in line, whether in traffic, at the grocery store, or in a bankruptcy, is plain rude. To have the government re-order the line for you is even worse.

Calabria goes on to make the point that investors need to be able to rely on the rule of law in order to continue their investment activities. Who will buy corporate bonds if the government can, by small-f fiat, decide to change the law?

Heritage.org’s Blog makes the point that the temporary stay granted by Justice Ginsburg is very unusual, in that stays are usually for things like death penalty cases.

The Second Circuit already affirmed the far-reaching powers of the Executive Branch granted it by the TARP legislation, giving it unprecedented power to seize private property without any recourse:

Under the Second Circuit’s ruling, the government is free to seize private property to further its agenda. In effect, it left no limits to the federal government’s power under the TARP statute, because no party would have the ability to challenge any action that the government claims was related to the TARP. If the Supreme Court allows that ruling to stand, it will have a major impact on the economy and, in particular, on companies big enough to be bailed out by the government. Like so many of the Bush and Obama Administration’s economic interventions, this bailout could backfire by unsettling investors and raising the cost of capital to all businesses.

From The Heritage Foundation’s The Foundry blog.

The attempt to ignore the rule of law and socialize the auto companies may fail. We can only hope that the court ignores the crisis mentality of the Executive and Legislative branch, and gives serious thought to the idea that the rule of law should apply.