Obama's most frustrating economic statement of 2015 (so far)

A good friend of mine who studies political science has been trying to convince me that President Barack Obama is a moderate. My friend knows more than I do on this topic so I take him seriously, but I just can't get the idea to gel, mostly because the president makes statements like the one he just did about Staples Inc. and the Affordable Care Act.

Clickbait website Buzzfeed recently sat down with the president about a number of topics, one of them was about how the office supply store Staples Inc. limits its part-time employees to 25 hours a week to avoid working a long week and passing the threshold where full-time benefits kick in.

Obama was told that those employees are having their hours limited to avoid having to provide health insurance as a result of the Affordable Care Act. Staples Inc. has since said that was wrong and the policy is actually a decade old and unrelated to the Affordable Care Act. However, look at the position the president took when presented with the scenario that his policy has given companies an incentive to cut workers hours instead of paying the high costs of the benefits:

...There is no reason for an employer who is not currently providing health care to their workers to discourage them from either getting health insurance on the job or being able to avail themselves of the Affordable Care Act. I haven’t looked at Staples stock lately or what the compensation of the CEO is, but I suspect that they could well afford to treat their workers favorably and give them some basic financial security, and if they can’t, then they should be willing to allow those workers to get the Affordable Care Act without cutting wages. This is the same argument that I’ve made with respect to something like paid sick leave. We have 43 million Americans who, if they get sick or their child gets sick, are looking at either losing their paycheck or going to the job sick or leaving their child at home sick. It’s one thing when you’ve got a mom-and-pop store who can’t afford to provide paid sick leave or health insurance or minimum wage to workers — even though a large percentage of those small businesses do it because they know it’s the right thing to do — but when I hear large corporations that make billions of dollars in profits trying to blame our interest in providing health insurance as an excuse for cutting back workers’ wages, shame on them.

This is a very telling answer, and it tells me above all else that the president is not a moderate, nor does he seem to understand that business owners who provide health insurance aren't giving their employees a gift. No, employers provide health insurance as a form of payment. They don't do so "because it's the right thing to do" but because they have to compete with other employers.

Maybe the president's brain just can't grasp economic reasoning, and if so he's far from alone, but let's be honest, his ignorance is left-wing ignorance, not moderate ignorance. Just look at the cliche he ended his statement with:

...But when I hear large corporations that make billions of dollars in profits trying to blame our interest in providing health insurance as an excuse for cutting back workers’ wages, shame on them.

The president is evoking the concept of infinite wealth, that a company that makes a large amount in profits should be able to provide unlimited expensive benefits to every one of its employees. However, most of those companies have huge labor forces and those expensive health insurance plans add up. It's telling that people making this argument don't list the actual cost of this course of action.

For what it's worth, Staples Inc. reported a net profit of $707 million in 2014, not actual billions like the president said, and actually lost money in 2013. I can't see a number of how many part-time employees it had, but total employees in 2013 are listed on Wikipedia as 83,000 people.

The president has made it more expensive for businesses to have full-time employees, and when told that businesses are responding the way conservatives predicted they would, his response is to blame the companies? Shame on them? No, shame on him and his infamous audacity.


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The flawed mind of Richard Horton

Tyler Cowen talked a big game when he recently shared a link to an editorial by Richard Horton with the introduction "The editor of Lancet is anti-scientific and full of mood affiliation"

Big words, and after reading what Horton wrote, I see Cowen is entirely right.

Pick up any economics textbook, and you will see the priority given to markets and efficiency, price and utility, profit and competition. These words have chilling effects on our quest for better health. They seem to marginalise those qualities of our lives that we value most of all—not our self-interest, but our humanity; not the costs and benefits of monetary exchange, but vision and ideals that guide our decisions.

What Horton is saying is that he does not have the stomach for pragmatism, and believes surface-level emotions are more important than thwarting actual hardships.

To take what he wrote seriously, one would have to believe that Horton opposes using triage in a crisis.

The simple triage model I'm familiar with pictures a hospital overwhelmed with victims of a massive event. Say there are a few dozen staff members on hand, but hundreds of victims in various conditions. Instead of trying to treat everyone, the medical workers divide the patients into three groups: Those with minor injuries that are probably not life-threatening, those with life-threatening that can probably be saved and those with life-threatening injuries that will most likely die or that require a massive amount of work to save.

The first group is set aside to be worked on later, the second group is treated and the third group is left to die.

That's the reality of the situation, unfortunately, and triage isn't simply about coldly letting patients die. It is about saving as many lives as possible, and attempting to set aside emotions that would cloud judgment and end up hurting more people.

Economics gives us a path to make life better for everyone, especially the poor and sick, and that path is made up of markets, efficiency, prices, utility profits and competition.

Keep in mind that the American health care system is racked with economics problems, and going forward with Horton's mindset of trying to provide health care like a cruise ship buffet has made it unaffordable for many people, and has leeched a lot of money out of the hands of ordinary citizens.

How many people have to die needlessly so that Horton can be emotionally satisfied?

Horton went on in his essay to quote left wing critics of mainstream economics. Here's a sample:

Clare Chandler, a medical anthropologist (also from the London School), took a different view. She asked, what has neoliberal economics ever done for global health? Her answer, in one word, was “inequality”. Neoliberal economics frames the way we think and act. Her argument suggested that any economic philosophy that put a premium on free trade, privatisation, minimal government, and reduced public spending on social and health sectors is a philosophy bereft of human virtue... 

A year or so ago, I perhaps rashly suggested (on twitter) that economics was the biggest fraud ever perpetrated on the world. Many economists, understandably, disagreed profoundly with that view. But, please, think again.

This is just political claptrap. Chandler doesn't like bottom-up approaches politically, so therefor approaches that use bottom-up methods must not really want to make the world a better place. Free trade and a constrained role for government are methods for making like better for eveyone, especially the poor. There has never been a greater tool for eliminating poverty than capitalism and the free enterprise system, but Horton doesn't find it emotionally satisfying so he opposes it.

To pile on with Cowen's anti-science accusation, Horton has been the head honcho of the Lancet since the 1990's, and was editor in chief when the famous Andrew Wakefield vaccine-autisim study was published in 1998. I can give Horton a pass for publishing a study that was only later revealed to be a fraud, but with all the attention it got, it shouldn't have taken 12 years to issue a retraction.

A few years ago Bill Easterly specifically called out The Lancet out for publishing multiple medical studies with flawed economic analysis. All of these studies were published while Horton was in place.

As Horton reminded us in the essay, eliminating poverty promotes the general health of the public. Economics gives us the best methods to do that, and it doesn't not involve the snowflakes and rainbow approach Horton finds emotionally satisfying.

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At least the title is honest

The U.S. Department of Health & Human Services' Healthy Young America video contest is over, which was a contest for someone to write a song encouraging young people to sign up for Obamacare, something they are legally required to do anways.

Announced this week, the winning song is titled "Forget About the Price Tag."

There's nothing I could add here that would be more scathing or humorous than that, so I'm going to say it again.

The winning song is titled Forget About the Price Tag.

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Obamacare pulls in the wrong direction

There are two major issues with health insurance in America. One is that it is too expensive, and the other is that it doesn't cover enough treatments.

Point one is universally understood and the clear winner in national priorities. Point two is secondary, and while still important, parts of it are up for debate. Unfortunately, the president's actions as a whole have addressed point two while making point one worse.

There are plenty of articles out there about Obamacare "sticker shock" for those who have just seen their premiums go up dramatically. Some see them go down, but more people end up paying more. Instead of linking to one of those pieces, I will prove the same point in a stronger way by linking to a pro-Obamacare website's defense:

ObamaCare Insurance premiums are a sore subject with many readers; however, ObamaCare insurance premium increases are a response to the protections contained within the law, such as the mandate for insurers to cover people with pre-existing conditions.

We need health reform to make it affordable. Unfortunately, the health reform we have has made it more expensive. The real problem is worse.
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Vermont is building a universal health care system

Good.

This is the power of states rights, where Vermont is making itself a Guinea pig for the rest of the nation to show what happens in an American universal health care system.

Similar experiments in Maine and Massachusetts failed to live up to expectations, and I imagine Vermont will as well.

While I think it will fail, I don't think it will fail much more than the rest of the nation. We have an over-regulated government control system with some of the trappings of markets, but no real market forces. Our system is so terrible it's possible a bad health care system run exclusively by the government would be an improvement.

I don't think Vermont is making a wise choice, but when they fail I will end up with another example to use. What we need to do now is record the specific goals and predictions of supporters to prevent them from finding a silver lining and saying they system worked based on new criteria, such as if the number of people covered increases or rates of disease X fall while costs spiral out of control.

Now if we can only get New Hampshire to try a deregulated market-based system so we have something to compare to.
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Raising the bar on bad health insurance regulations

I really didn't think the government could top the bad health insurance restriction forbidding companies from charging different rates to men and women because they use up different amounts of health care resources.

Then they outlawed charging smokers more for health insurance in certain geographic regions.

The worst part is, according to the Washington Post, my state of residence already has the rule in place:

The board charged with implementing federal health care reforms in the District has voted to prohibit insurance companies from charging higher premiums to cigarette smokers, adding the city to a handful of states rejecting such surcharges because of the effect they have on poor families who are more likely to smoke. 

The D.C. Health Benefit Exchange executive board voted Monday to join Rhode Island, Vermont and Massachusetts in eliminating smoking premiums in their health care exchanges. 

That means those additional costs will be paid for by other people. People like me.

I don't want to overstate my case or jump to an emotional reaction, but I can honestly say I've never heard of a single thing our government has ever done, ever, that has made me want to join a rebellion to overthrow the government more than this. Never ever ever has something come this close.

Do I even need to explain why this is bad? Why not drop the charade and invent a government program or tax rebate for smokers? This is why we can't have nice things.

Arthur Pigou, can you hear me? I'm sorry, but the progressives have abandoned you.
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Is this naive?

There's a lot of speculation that at one point, Chief Justice John Roberts was going to strike down the health care individual mandate, but switched sides at the last minute.

There's some decent evidence that implies the dissenting opinion was originally written with victory in mind, but no solid information has come forward to explain what motivated Roberts to change his vote.

I've heard theories about concern for his legacy, political pressure or even ninja assassins holding his family hostage. My theory is a little different.

Maybe he changed his mind because he found the arguments compelling.

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How I Learned to Stop Worrying and Love the Supreme Court Ruling

Like every last one of you, I was caught off guard today by Chief Justice John Roberts swing vote that upheld the individual mandate. This was the linchpin of President Barack Obama's health care legislation and as such, there was a lot on the line.

I realize I'm supposed to be upset about this result, but to be honest, I think Roberts makes a strong argument that the financial punishment given to people who do not buy health insurance is a form of taxation.

Don't hold your breath waiting for Obama supporters to update their lists of tax increases the president is responsible for, of course. I expect the president and his supporters to pull an explanation-free 180 and say yes, this was a tax the entire time before quickly changing the subject.

I also expect Obama critics to say he broke another campaign promise by bringing tax increases to the middle class. I expect they will say this a lot, even if they personally disagree that it was a tax.

I hear naysayers claiming that it was wrong for the Supreme Court to introduce the taxation justification when defenders never argued that point. I think those people would be right if they were judging a high school debate team, but this is a major Supreme Court ruling and the resulting legal precedents shouldn't be constrained by the competence of the lawyers it hears.

Count me among the legion of people who are glad that the ruling not only failed to uphold that vague and limitless interpretation of the dreaded Commerce Clause, but also set a precedent limiting it. I was prepared to write about how that bogus justification for unconstitutional laws has been an ongoing farce, but that angle has been covered by scores of bloggers already.

I do worry, however, that punitive taxes may become the new Commerce Clause. What's to stop congress from putting a tax on homeowners who refuse to house soldiers during peacetime, or large taxes on guns or abortions?

Constitutionality aside, we may have dodged a major bullet here. In a 2009 post about my healthcare wish list items I wrote in regards to pre-existing contions:

This is the big riddle in health insurance. Poor people who already have a health problem can't get coverage for something they already have, but simply forcing health insurance to cover these costs would drive up costs. Just like letting people buy car insurance after an accident, covering pre-existing conditions would discourage people from buying insurance. That defeats the entire idea of insurance. One solution is forcing everyone to buy health insurance, but that didn't work very well in Massachusetts. I don't know the solution to this problem.

While I've never liked the individual mandate solution, adverse selection is a very real problem and with the president's ignorance on insurance issues, there's a big change he would have gone ahead with his health care legislation anyway, only with the individual mandate neatly cut out.

If Obama critics turn out to be right and this ruling will create more problems then it solves, those troubles will fall short of the absolute disaster that would have followed if insurance companies were forced to cover ailments after they've occured.
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Glad to have Anthony Kennedy on the bench

I've never been this excited awaiting a Supreme Court decision. I am opposed to President Obama's mandate that all adults are required to purchase health insurance or face punishment. This is to prevent adverse selection and is the linchpin of his health care reform program.

I want health care reform, but I feel this version would make things worse. The Supreme Court is not going to decide if the president's plan is a good idea, merely if it is legal for the government to require Americans to purchase a product or face a fine.

I don't know how it's going to turn out. I both oppose the mandate and find it unconstitutional, but because there's a split in the court I don't know if it will agree with my interpretation.

At this moment in history, we have a Supreme Court with four liberally-biased justices, four conservative-biased justices and Anthony Kennedy, the swing voter who often breaks ties.

The court does not always vote 5 to 4 on issues, but it's probably going to this time. With Kennedy on the bench, the verdict is not foretold and we're forced to use logic and reason to argue a specific interpretation. It's not always going to be that way, and I will mourn when one political viewpoint gains an absolute majority on the court.

No matter how Kennedy sides on this issue, I'm glad to know he's out there thinking things over instead of responding automatically.
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Two villains and no hero

As a conservative blogger who writes for a liberal audience, I feel duty-bound to address this week's Rush Limbaugh quagmire, even though its a sticky issue I wish I could just avoid. In this tale, both sides are wrong in their own way.

Here's the narrative my dear friends on the left believe happened: College student Sandra Fluke spoke before congress advocating that all insurance plans should cover birth control, and conservative talk radio host Rush Limbaugh called her a "slut" and "prostitute" for being on birth control and advocating its use.

The real story is very different, but it still ends with Rush Limbaugh shamefully using the word "slut." I am not going to ignore the negative response I felt this week when I read the transcript of his full comment, which can be heard here. I do enjoy listening to Rush, Glenn Beck and Bill O'Reilly occasionally and I make no apologies for that, and I still feel Rush crossed the line here. This entry is not to excuse his words, but to put them in their proper context and correct the misinformation.

After initially being denied a chance to speak, activist Sandra Fluke spoke before congress advocating a federal mandate that all health insurance programs should be required to provide birth control to women without copayments. Then she made a claim no reasonable person could believe is true.

I've written several times about why I oppose health insurance mandates because they drive up the cost of health care, forcing more people to be uninsured. Insurance is about spreading out risk, not about creating a club where routine services are provided. My opposition is to the mandate, not the service being mandated.

Yet that's what the left is claiming this is about. I am being told that my stance is secretly against birth control and contraceptives. This couldn't be further from the truth, I support keeping those important services legal. When a person is told obnoxious lies about what's in their heart, the natural response is tribalism and my brain naturally drifted towards making a full defense of Rush. However, I was able to keep in mind how I felt when I heard his choice of words and I have resisted the sirens call.

An important point being left out is that Rush wasn't actually saying Fluke is promiscuous. He was mocking her for a whopper she told during her congressional testimony.

Fluke, who is about 30 and something of a lobbyist, told congress that women can spend as much as $3,000 on birth control during the three years they are in law school, and this price is too high. She gave no other numbers and tried to mislead the public into believing contraceptive costs $1,000 a year.

This is absurd. She made no attempt to prove this figure's validity and the numbers don't add up. Planned Parenthood lists a cost of $180 to $600 a year for birth control pills, and a report from U.S. News compared all rival methods and gave the range of contraceptives from $60 to $600 a year. Her numbers are inflated to the point of being a lie, and she made no attempt to explain them as outliers.

Parodies came out saying that in order to spend this much money, one would have to use massive piles of condoms. Using a high estimate of $1 for each condom, that comes out to using 2.74 condoms a day, every day, for three years.

Rush was pretending that Flukes absurd numbers were factual, not a lie, and called her that vulgar word because he saw her as claiming to be having sex several times every day with people she doesn't know well enough to ask them to chip in. He was pretending she was telling the truth and added to it, saying that if she wants other people to pay for her unreasonably high rate of contraceptive use, the public should be able to watch.

Rush issued an apology on his website, sticking to his point but apologizing for calling her a slut. I'm glad he did that. I see his only sin was being vulgar, as his joke was rational. It caught so much attention that some liberals even stopped mocking the recent death of conservative activist Andrew Breitbart in order to shame Rush for his lack of civility.

This was political opportunism, of course, and the issue has been twisted to say that it's anti-woman to oppose this new government mandate. President Barack Obama sprung this requirement on the public as a result of closed-door meetings with lobbyists like Fluke. There was no public debate on the matter.

Yet, the left has responded as if forcing all insurance programs to cover birth control is a given. Obama sprung this issue on the public, and opposing the mandate is not the same as opposing birth control. This was a story with no good guys, as one was dishonest and the other made a joke about it in bad taste.

Addendum: It just occurred to me that this is strikingly similar to when Congressman Alan Grayson called Linda Robertson a "K Street whore" on the radio. If you want to crucify Rush and still support the smug manatee, then you need to reevaluate your life.
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More mandated coverage for health insurance

I like my headline better: "Obama administration raises health insurance costs."

This week the New York Times wrote about the president forcing all health insurance plans to provide contraceptive services to women. But that's not all.

In addition to contraceptive services for women, the government will require health plans to cover screening to detect domestic violence; screening for H.I.V., the virus that causes AIDS; and counseling and equipment to promote breast-feeding, including breast pumps.

Other preventive services that must be covered, without co-payments, include screening for gestational diabetes in pregnant women; DNA testing for the human papillomavirus as part of cervical cancer screening; and annual preventive-care visits.

The recommendations come from the National Academy of Sciences, which apparently does not include any experts in economic science:

The National Academy of Sciences said the Obama administration had told its experts not to consider “the cost-effectiveness of screenings or services” in deciding which ones to recommend. Insurers expressed concern that coverage for some of the newly required preventive services could be costly.

What an absolutely beastly thing to say.

How could the National Academy of Sciences agree to go along with such a perverse order? What they are focusing on is what actions will have any improvements on health. They are not considering what the costs of those actions will be, including any side effects.

When you make an insurance company pay for more things, they will always respond with raising rates. Those increases in rates will impoverish some people, and will push insurance just out of the price range of others. Those people will be harmed, but they will not know what drove the prices up. Those people are invisible.

But the people helped by the policy will be easy to spot. They will end up in campaign ads. They are visible, and the visible always have the upper hand in politics.

There are two results that will absolutely happen as a result of this increased coverage mandate:

1: Health insurance rates will increase.

2: Those increases will be blamed on the insurance companies who have no choice but to follow the law. The administration will not be blamed or accept any responsibility.
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We must put a price on human lives

I don't know how many times I've heard people speak out against institutions they claim puts a price tag on human lives. Both anti-corporation and anti-government activists accuse their foes of valuing money more than humanity.

When a car company declines to install a safety device, that's putting a price on human lives. During the 2008 debates Sarah Palin declared a national health care program would use "death panels" to decide which lives are worth saving.

But coming at these issues from the economic mindset, the real scandal would be car companies that install every safety device possible and the horror of a national health care program would not be in having death panels, it would be in not having them.

This principle of only saving lives if the cost is low enough is well accepted with most people, they just don't realize it. It takes three different forms I will focus on in decreasing order of popularity.


Risking lives to save more lives

At the cost of a few lives, you will save many more lives.

This is straight-up utilitarianism. If three hundred people have a deadly disease that will kill them in less than a week, and you have a drug that will cure it outright but also kill two or three of the patients, you give it to them.

This is a no-brainer. At the cost of a few lives you have saved hundreds. You're exposing people to a little risk to avoid a bigger risk. This is the idea behind vaccines, airbags, triage and a lot of other things. You're trading risk for risk, and on the average you win. There is little controversy when people properly understand what the stakes are.


Risking lives to save quality of life

At the cost of a few lives, you will improve the quality of many lives.

There are things that anyone can do to lower their risk of a specific cause of death. As oncologist Dr. David Gorski wrote, there's a lot of danger in riding an automobile, playing sports and even swimming. Foregoing these activities will increase safety, but is it worth it? What about eating salads for every meal, wearing a helmet at all times and never leaving the house?

Some of these actions will expose the actor to other risks, such as a weak body, malnutrition or poverty, but the main factor is the quality of life. Lenore Skenazy writes about how the obsession with child safety is ruining childhood on her blog Free-Range Kids. This principle was the focus of my recent piece on invasive searches for airline travelers. Sure, it may eventually save a few lives, but at the cost of harming the quality of millions of lives.

Now some people do think the harm of the TSA searches is worth it for the extra protection we get. I must ask, are they really disagreeing with the principle, or just the price? What if the searches were more invasive? I imagine terrorists would have a difficult time getting weapons on a plane if all passengers were naked and had no carry-ons. Would that cost be worth it too? If not, then they clearly agree with the principle I'm presenting.

Risking lives to save money

At the cost of a few lives, you will save a lot of money.

This is where people start to back away. Philosopher Peter Singer recently wrote that because most people can agree that extending someones life a month for the cost of millions of dollars may not be worth the price, they are therefore open to the idea of rationing health care:

Remember the joke about the man who asks a woman if she would have sex with him for a million dollars? She reflects for a few moments and then answers that she would. “So,” he says, “would you have sex with me for $50?” Indignantly, she exclaims, “What kind of a woman do you think I am?” He replies: “We’ve already established that. Now we’re just haggling about the price.” The man’s response implies that if a woman will sell herself at any price, she is a prostitute. The way we regard rationing in health care seems to rest on a similar assumption, that it’s immoral to apply monetary considerations to saving lives — but is that stance tenable?

Milton Friedman made a similar point when asked if its ethical for an automobile company to avoid installing a cheap safety device. He argued that he doesn't know if the cost of the device was worth the limited amount of safety it gave, and it should be up to the customer to decide how much safety they are willing to pay for. At the heart of his response, Friedman said:

Nobody can accept the principal that an infinite value should be placed on an individual life.

So in effect, arguing that a company should install a safety device to combat a specific amount of risk is haggling the price of a human life. It is not rejecting the principle.

Never assume your current level of safety is optimal, so that increasing risk is out of the question.

Say there was a device that made your home 100 percent safe from asteroids. Any space-borne rocks that hit your home will be safely deflected each and every time, and at a cost of $12,000 a year. Of course, asteroids do not pose a substantial risk to the public; a person's chances of being injured or killed by an asteroid in a given year is one in 70 million.

But say you already have the device in place and decided to discontinue it's use. You'd save yourself $1,000 each month, but you'd have to accept the principle that you are increasing your chances of an unnatural death in order to save money. You can't get around this fact, and that's what I mean by not assuming your current level is optimal. If it's right to avoid paying a big fee for a small amount of protection, its no different to cut big costs in exchange for a small increase in risk.

That was my point when I wrote that it doesn't matter if hiring more nurses, teachers or soldiers will improve outcomes if it comes at too high cost. It's possible we have too few nurses, teachers and soldiers, and it's also possible we have too many. We should always be open to changing the number we have, even if it means spending more money or lowering our health, test scores or national security.

It's also important to remember the opportunity cost of protecting ourselves from one threat could leave us vulnerable to another. I have added emphasis to something Carl Sagan wrote in The Pale Blue Dot:

Public opinion polls show that many Americans think the NASA budget is about equal to the defense budget. In fact, the entire NASA budget, including human and robot missions and aeronautics, is about 5 percent of the U.S. defense budget. How much spending for defense actually weakens the country? And even if NASA were cancelled altogether, would we free up what is needed to solve our national problems?

Imagine spending all your time collecting crosses, stakes and holy water only to be mutilated by werewolves. Still, buying one more clove of garlic will make you a little bit safer from Dracula. If we sink too much of our budget in one program, we have to neglect others.

Sacrificing life for money at all costs is indirectly sacrificing quality of life and other lives to save specific lives. Those are all costs as well, and money is just a stand-in for the resources that must be sacrificed. Increasing one form of spending too much will cannibalize the rest of the economy and make everyone worse off. The big question is where that line is drawn.

It's clear that its worth saving a human life when the only cost is the effort of throwing a life preserver overboard, and not worth saving at the cost of all the resources of an entire continent. The extremes are easy, but making decisions at the margin is tough. Finding the optimal point is beyond tricky: it's impossible. No one can discover the value of an unspecified person's life, and any number they come up with will be arbitrary.

Protecting lives comes at a cost, be it in terms of sacrificing other lives, the quality of life or money. This is a single principle, not three separate principles, and one must accept or reject them all.

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Nurses union claim strike is for the good of the patients

...and if you believe that one I have some oceanfront property in Montana for sale.

In Maine this week unionized nurses went on strike claiming that the ratio of nurses to patients is too high, and more nurses should be hired to bring the ratio down. I can understand why a union would want to use strikes to increase their membership levels (and membership dues), but what bothers me is that they are claiming their sole motivation is for the good of the patients.

It reminds me of when unions lobby for higher minimum wages. They frame it as a charitable act for non-members, when in fact its really in their own interest.

The real story is summed up in a 1988 paper by Matthew Kibbe:

As would be expected, labor unions are the main political force behind minimum-wage legislation. Although unions already hold privileged positions in labor markets, minimum wages further increase their gains by raising employers' labor costs. As long as union members earn wages above the minimum rate, their positions are made more secure by the government policy that eliminates those who might undercut the union wage. People willing to work for less than the government's minimum are not allowed into the labor market at all. Indeed, union leader Edward T. Hanley stated in a catering industry employees' publication, 'The purpose of the minimum wage is to . . . provide a floor from which we can upgrade your compensation through collective bargaining.'

So the obvious reason a hospital would not want to hire more nurses is that it's expensive to do so. Nationally, registered nurses command a median wage of $31.99. That adds up to $63,750 a year an hour plus benefits. That's a pretty expensive position to increase.

A friend of a friend was one of the striking nurses and said the following:

It is unsafe for nurses to be working past their 12 hour shift, but many nurses consistently work 16 hour shifts because we are so short staffed. Patients don't always get their medications on time because each nurse commonly has 5-7 patients, which is too many for one person to be able to take care of.

In addition, she said there are numerous studies that show a lower nurse-to-patient ratio results in better outcomes for patients. I completely believe her, but I think it misses a larger point.

It costs money to increase the number of nurses, and that will mean higher health care costs, which will in turn raise the cost of health insurance. But don't hold your breath expecting the union to take responsibility for those increased costs: it will be blamed on the insurance industry.

Increasing the ratio of nurses to patients will probably have even better outcomes if two nurses look after on duty for each patient, but the importance of a cost-benefit analysis becomes even more apparent at that level. More nurses means better patient outcomes, but it is also prone to diminishing returns. There must be some optimal point for the nurse to patient ratio.

And I have no idea what ratio is optimal.

But I have to be skeptical when the people who to push or pull those figures will profit if we take their advice.

When the American automobile CEO's went to Washington DC to ask for a bailout, they didn't frame it as something good for their company. They said it was good for the American public. We knew they were a biased source, and we knew it was foolish to believe them.

I don't know how many nurses we should have at a given hospital, but I do know that the union is hiding behind the patients. I've never heard of a nurses union of asking to reduce the number of nurses when there are too many on duty, and I don't see them offering to lower the wages of nurses so hospitals can afford to hire more. I would rather hear it from someone who doesn't stand to gain from the action they advocate.

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Why is insurance such a difficult concept?

Do people not understand what insurance is?

With all this talk about health insurance costs, I find it hard to believe that most of public grasps the idea of spreading out risk - which is the entire idea of insurance.

Everyone knows the argument to force health insurance companies to cover pre-existing conditions, but there is no push to get car insurance to cover accidents that occurred before the policy was signed.

How many people are upset that their health insurance only covers catastrophes, and not routine checkups? Meanwhile, no car insurance company covers oil changes. If they did, you would see mechanics raise the price of an oil change. They know the customers won't shop around as carefully if they are shielded from the price.

The idea of insurance is simple. If there's a group of 100 people that are afraid a Very Bad Thing will happen to them, and the Very Bad Thing will take $1,000 to fix, but it will only happen to one percent of the people in the pool, than everyone can pay $10 into a pool, and the unlucky person will use that money to fix the Very Bad Thing. The risk is spread out to everyone, so no one individual bears the full cost.

It's a little more complicated than that in practice- there are operating costs to pay for the insurance program and profits to justify running it. Those profits are a lot lower than people realize. Some people are riskier to insure than others and plans don't cover just one Very Bad Thing, they cover different combination of problems. There's a lot of math, but the reductionist model still gets the basic idea down.

With health insurance, women tend to use more money from the pool. Insurance companies balanced that out by charging them more. It's the opposite with auto insurance, as men have more accidents than women, and insurance companies charge them more as a result.

But one of those is about to change. The New York Times reported this week, when it reported that health insurance companies can no longer charge men and women different amounts.

Or as the article put it, discriminate:

"In the broadest sense, the new health care law forbids sex discrimination in health insurance. Previously, there was no such ban, and insurance companies took full advantage of the void."

The article goes on to say that while a lot of changes in the new health care law won't happen until 2014;

"...some changes should actually happen much sooner, because the law’s overarching ban on sex discrimination takes effect immediately. The legalese outlawing sex discrimination is not easy to find or to parse, but it refers to existing laws, like the Civil Rights Act and Title IX, to say that the same protections apply to people seeking health care and insurance."

This is not discrimination, this is mathematics. Do health insurance companies discriminate when they charge smokers more? Do life insurance companies discriminate when they charge older people more? Do car insurance companies discriminate when they charge more to people with bad driving records?

Without a trace of surprise, the New York Times article does not mention if car insurance companies should charge men the same as women. It even acknowledges "women used the health care system more than men," which means women use more health insurance dollars than men do. Instead of challenging this decision with any opposition sources, the article repeats the activist slogan, "Being a woman is no longer a pre-existing condition."

I've seen a lot of anti-science on both the left and the right this decade, but this is the first case of an anti-math bias I've ever seen.

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Health care bill trade offs

Back in December I outlined what I saw as the major causes of high health care costs in America. While some of them can't be legislated away, like the increasing costs of new technologies, some were and some were not addressed by the President and the health care bill.

Stop covering routine checkups

This was not addressed. Our health care system will still suffer from the "cruise ship buffet" problem, where people consume more than they need.

Bring higher co payments into the equation

If this was in there, I couldn't find it. This would have been one way to thwart the previous cruise ship buffet problem by discouraging people from taking unnecessary treatments. In fact, it looks like it will be more difficult to have Health Savings Accounts because of the bill.

Allow people purchase health insurance from other states

This was not included, so states will still have oligarchy's protected from competition. However, this is not a federal law and there is nothing stopping individual states from changing this.

End mandated coverage requirements

Of course this one wasn't addressed. I realize it's unrealistic to expect Washington to push something through without having chunks of it compromised by special interest groups. Mandated coverage requirements, where insurance companies are forced to included specific treatments, are here to stay. My biggest fear is that alternative medicine hucksters will weasel their way into the state-run insurance plans.

Provide "death panels"

Doesn't look like triage teams will be taking center stage after all. Medicare will still be sunk into seniors during the last two years of their lives without helping them. Unfortunately, it would take a wizard to figure out when those last two years begin before the person actually dies.

Tax health care benefits

Yes! Finally a victory, but a Pyrrhic one at that. This was solved back in January, but with one fatal catch - it won't effect most of the people it should until 2018. Some wages were shielded from the taxman by taking the form of health insurance instead of dollar bills. I'm glad they closed this loophole, but I feel betrayed that union workers, including most government employees, will still enjoy that loophole for eight years. There was no logical reason for this exemption outside of the realm of politics and dirty deals.

Snag the freeloaders

I don't see anything direct, but the problem of people using the emergency room with no intention of paying for it may be solved by more people having some form of insurance. Thus, they will not need to do this. This will be rather simple to answer in the next five years - we will simply see if the rate of people doing this drops.

Cap malpractice insurance

Nope, tort reform was left out. I have heard plenty of lefties claiming that the right believes frivolous malpractice lawsuits are the main reason why our health insurance is so expensive, but I never once heard a conservative actually make that claim. It is a problem, just not the biggest one, and it still hasn't been solved.

Solve the pre-existing condition puzzle

They solved this in two ways. First, the formation of a high-risk insurance pool - this is an acceptable solution. Second, by forcing everyone to buy health insurance, and any company larger than 50 people must provide health care or get slapped with a fine of $2,000 for each person. This is an awful, crude solution. It looks like no one was clever enough to solve this riddle.

I've looked over the changes to our health care system that we should expect and there is one major problem I see. It's just more of the same top-down, over-regulated solutions, but now with a higher price tag.

Keep in mind Obama campaigned on a health care system that would cost less, and then once in office lowered the target to costing the same amount. It seems that's out the window too.

Still, as Greg Mankiw wrote, more people will be insured. This is the trade off for our lumbering, costly solution.

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We don't have a free market in health care

A great opinion piece this week from the Wall Street Journal on the problems with President Obama's narrative on health insurance.

"...the original sin was the exclusion of employer-provided health insurance from taxable income—imposed carelessly by the IRS in 1943 so defense contractors could compete for workers without transgressing Roosevelt-era wage and price controls...

Everybody knows this turned "insurance" into something else. Call it prepaid health care, as Milton Friedman did. Call it a giant tax Laundromat for the nation's private health spending.

It became a massive subsidy to third-party payment, an incentive to channel every ache and pain through an "insurance" bureaucracy. It became an incentive for the most economically competent Americans—the secure, high-earning employees of corporate America—to overspend on health care, treating it as a free good.

What a surprise that the medical-industrial complex reorganized itself in light of this central driver. Nobody was looking for price tags so price tags disappeared, as did any competition on price, and any clarity on price versus value. Voilà.

To Mr. Obama, however, such insurance is insurance—the way it's supposed to be, and anybody who doesn't agree must be smoking something."

If your theory on the cause of a problem is wrong, the solutions you propose will also be wrong.




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Obama missed the mark on health care tax

As I wrote back in December, the government needs to close the tax loophole of employer-provided health care.

Some employers agree to lower their workers' salaries a little, and in exchange buy them health insurance. Economists call this a non-monetary compensation. But currently this little accounting trick flies below the IRS's radar and the workers who enjoy this are not taxed for their health care benefits.

This came up in the 2008 presidential primaries, and I was glad to see that Obama reversed his opposition to this tax.

But that joy was premature, as the Democrats have caved in to union pressure and are exempting organized laborers, currently until everyone else has been taxed for five years.

As the New York Post put it:

The 40 percent excise tax on what have come to be called "Cadillac" health-care plans would exempt collective-bargaining contracts covering government employees and other union members until Jan. 1, 2018.

There really is no justification to give special treatment to government employees and cabal-organized workers. They have been on the wrong side of this issue, and their argument consisted of repeating their conclusion over and over again.

I really wanted to give Obama credit for something big. He's a really likable fellow, and our elected leader, but he screwed this one up. Instead of closing a silly loophole in our tax laws, he's given government employees and the already well-off union workers another advantage over everyone else. Shame on him.
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