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This is what Free Market Health Care would actually look like

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August 17, 2009 – Comments (50)

There is no free market health care in America.  Therefore, blaming the free market for health care failures is quite silly.  The question then, if we can move past the free market mythology of the interventionists, is what would free market health care actually look like?  Once this has been established, then we can debate whether or not it is has any merit.  I respect the people, and these people are present on CAPS, who take the time to analyze the free market solutions and accept the realities of current intervention, but still prefer not to go the free market route.  Yet others insist on repeating or inventing free market mythology. 

On that subject Hans-Hermann Hoppe, professor of economics at UNLV (the learning annex at UNLV) has put together an example of how to enact free market health care.  Following from here, you'll see that free market care would bear no resemblance to the current mix of Fasicst (HMO, PPO, pharma, etc.) and Socialist (VA, Medicare, Medicaid) health care plans in America.  This is one example of a free market health care system. Now we can discuss its merits, rather than the free market mythology of the interventionists:

A Four-Step Health Care Solution by Hans-Hermann Hoppe

It's true that the US health-care system is a mess, but this demonstrates not market but government failure. To cure the problem requires not different or more government regulations and bureaucracies, as self-serving politicians want us to believe, but the elimination of all existing government controls.

It's time to get serious about health-care reform. Tax credits, vouchers, and privatization will go a long way toward decentralizing the system and removing unnecessary burdens from business. But four additional steps must also be taken:

1.  Eliminate all licensing requirements for medical schools, hospitals, pharmacies, and medical doctors and other health-care personnel. Their supply would almost instantly increase, prices would fall, and a greater variety of health-care services would appear on the market.

Competing voluntary accreditation agencies would take the place of compulsory government licensing — if health-care providers believe that such accreditation would enhance their own reputation, and that their consumers care about reputation, and are willing to pay for it.

Because consumers would no longer be duped into believing that there is such a thing as a "national standard" of health care, they would increase their search costs and make more discriminating health-care choices.

2.  Eliminate all government restrictions on the production and sale of pharmaceutical products and medical devices. This means no more Food and Drug Administration, which presently hinders innovation and increases costs.

Costs and prices would fall, and a wider variety of better products would reach the market sooner. The market would force consumers to act in accordance with their own — rather than the government's — risk assessment. And competing drug and device manufacturers and sellers, to safeguard against product liability suits as much as to attract customers, would provide increasingly better product descriptions and guarantees.

3.  Deregulate the health-insurance industry. Private enterprise can offer insurance against events over whose outcome the insured possesses no control. One cannot insure oneself against suicide or bankruptcy, for example, because it is in one's own hands to bring these events about.

Because a person's health, or lack of it, lies increasingly within his own control, many, if not most health risks, are actually uninsurable. "Insurance" against risks whose likelihood an individual can systematically influence falls within that person's own responsibility.

All insurance, moreover, involves the pooling of individual risks. It implies that insurers pay more to some and less to others. But no one knows in advance, and with certainty, who the "winners" and "losers" will be. "Winners" and "losers" are distributed randomly, and the resulting income redistribution is unsystematic. If "winners" or "losers" could be systematically predicted, "losers" would not want to pool their risk with "winners," but with other "losers," because this would lower their insurance costs. I would not want to pool my personal accident risks with those of professional football players, for instance, but exclusively with those of people in circumstances similar to my own, at lower costs.

Because of legal restrictions on the health insurers' right of refusal — to exclude any individual risk as uninsurable — the present health-insurance system is only partly concerned with insurance. The industry cannot discriminate freely among different groups' risks.

As a result, health insurers cover a multitude of uninsurable risks, alongside, and pooled with, genuine insurance risks. They do not discriminate among various groups of people which pose significantly different insurance risks. The industry thus runs a system of income redistribution — benefiting irresponsible actors and high-risk groups at the expense of responsible individuals and low-risk groups. Accordingly, the industry's prices are high and ballooning.

To deregulate the industry means to restore it to unrestricted freedom of contract: to allow a health insurer to offer any contract whatsoever, to include or exclude any risk, and to discriminate among any groups of individuals. Uninsurable risks would lose coverage, the variety of insurance policies for the remaining coverage would increase, and price differentials would reflect genuine insurance risks. On average, prices would drastically fall. And the reform would restore individual responsibility in health care.

4.  Eliminate all subsidies to the sick or unhealthy. Subsidies create more of whatever is being subsidized. Subsidies for the ill and diseased promote carelessness, indigence, and dependency. If we eliminate such subsidies, we would strengthen the will to live healthy lives and to work for a living. In the first instance, that means abolishing Medicare and Medicaid.

Only these four steps, although drastic, will restore a fully free market in medical provision. Until they are adopted, the industry will have serious problems, and so will we, its consumers.

David in Qatar

Private insurance is neither private nor insurance. Call it what it is: Fascist Mandatory Care.

50 Comments – Post Your Own

#1) On August 17, 2009 at 3:15 PM, devoish (99.07) wrote:

We've seen unregulated free markets in healthcare.

We created the word "quack" during that time period and had life expectancies of 47 years.

Then we created the AMA, regulation, and added health insurance and life expectancies increased to 67 years.

Then we created medicare and reduced the number of seniors living in poverty from 30% to 10%. (SSI reduced it from 50% to 30%)

A multitude of countries use Government to get better health outcomes at lower cost than we do.

Is there a country that actually makes free markets work?

 

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#2) On August 17, 2009 at 3:21 PM, Rehydrogenated (32.56) wrote:

You know what would be nice?

 If people would test some of their economic theories. We have this thing called the internet. We have computer games were mock economies are created and used by thousands, or in the case of world of warcraft, tens of millions of people. You can witness the natural creation of currencies and the value of items/products in those currencies. Economic shocks like conterfeiting (duping/printing money) or new expansion sets can be observed and the results databased and mined. 

I'm not convinced economics is as impossible to understand as people seem to think. But a free-market healthcare system is what I support. But I don't understand how everyone can sit around and argue about it while no tests are being done. 

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#3) On August 17, 2009 at 3:32 PM, jstegma (29.50) wrote:

This post is just libertarian nonsense. 

Competing voluntary accreditation agencies?  You mean like the ones that rated the "toxic assets" AAA?

It sounds about has helpful as a free-market police force or free-market voting rights.

Cockamamy. 

 

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#4) On August 17, 2009 at 3:39 PM, whereaminow (42.76) wrote:

jstegma,

I'm not saying that you're wrong, but are you positive that the AAA ratings came from "voluntary" accreditation agencies?  You might want to check on that.

David in Qatar 

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#5) On August 17, 2009 at 3:41 PM, whereaminow (42.76) wrote:

I thought the ratings agencies were a government regulated cartel.  Isn't that correct?

David in Qatar

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#6) On August 17, 2009 at 3:49 PM, whereaminow (42.76) wrote:

Credit rating agencies play a key role in domestic and international markets for fixed-income securities, and the use of their ratings is increasingly prominent in regulatory requirements. Only two firms, Standard & Poor's and Moody's, with Fitch as a distant third, "overwhelmingly dominate the business," as the Washington Post recently observed.[1] A central factor in this dominance is that the Securities and Exchange Commission limits new entry and competition. Thus the government both mandates demand for rating agency services and severely restricts supply. The result is lack of customer choice and (exactly as theory would predict) exceptional profitability for what may be fairly termed a government-sponsored cartel. Several steps should be taken immediately to increase competition in the rating industry, which would increase customer choice, price competition, innovation, and the variety of analysis available to investors.

A Notable Franchise

To be designated a "nationally recognized statistical rating organization" (NRSRO) by the SEC is an extremely valuable franchise. If granted, it allows entry into a cartel with only three U.S. members, which represent about 95 percent of sector revenues. Two of these agencies represent about 80 percent of the revenue.[2] Since it is common for securities issuances to have two ratings, they need not compete much against one another. Obviously, it is essential to the economics of the business that Standard & Poor's and Moody's, the dominant two, and Fitch, the third, have been designated NRSROs by the SEC; it is equally essential that other potential competitors have not been. The only other current NRSRO is a Canadian firm, Dominion.

Doubtless it was never the intent of the SEC to create a cartel or the related cartel profits, but this has been the result of its actions (and inaction) over the last three decades since introducing the NRSRO label in 1975. This designation is not a statutory requirement, but a regulatory initiative, originally a very narrow one: to specify which ratings could be used to calculate broker-dealers' required capital. The idea was subsequently picked up by various other regulators, which linked their regulations to the SEC designation. It is now embedded in large numbers of investment and capital regulations for securities firms, mutual funds, banks, thrifts, insurance companies, and government-sponsored enterprises.

In December 2002, a Shadow Financial Regulatory Committee statement pointed out that "the use of NRSRO ratings in federal and state securities laws and regulations has expanded dramatically." It continued: "However, the term 'NRSRO' remains undefined in SEC regulations . . . as has the process for obtaining NRSRO designation from the SEC."[3] This remarkable situation remains true, in spite of a lengthy report on the matter submitted by the SEC to Congress in January 2003, a subsequent SEC "Concept Release," and congressional hearings and concerns. At subcommittee hearings of the House Committee on Financial Services in April 2003, for example, Chairman Michael Oxley's statement and questions included the following:

There are also concerns regarding . . . whether anticompetitive barriers to entry exist for ratings firms seeking recognition by the SEC.

I am concerned that the commission may have allowed an oligopoly to exist.

What would prevent any of the agencies from exercising monopoly power or pricing for their services?

Our goal is to try to get more competition, more entries into the market [as] you have obviously heard from Chairman Baker, Ranking Member Kanjorski, and myself.[4]

So far none of this has brought any change.

Cartel Profits?

Professor Lawrence J. White of New York University, having examined the history of this issue at length, concluded that the results of the NRSRO regulation are that

Incumbent bond rating firms are protected, potential entrants are excluded, and new ideas and technologies for assessing the riskiness of debt (and therefore the allocation of capital) may well be stifled. This entry regulation is a perfect example of good intentions gone awry.[5]

Needless to say, competitive markets typically lead to innovation, economic growth, efficiency, and customer choice. They also lead to rates of profitability that tend to reflect the market cost of equity capital. If it is true that the rating agency sector is a government-sponsored cartel, we ought to see evidence of that in high rates of profitability at the dominant firms. Although the financial results of Standard & Poor's and Fitch listings are not publicly available in any informative way, since they are both divisions of larger companies (respectively, McGraw Hill and Fimalac, a French company), Moody's is a publicly traded corporation with standard SEC disclosures. Its exceptional profitability, detailed below, is fully consistent with our expectation. It is a fair assumption that the returns of Standard & Poor's are similar.

Moody's profit performance is outstanding by any measure. In 2003, it had operating income of $663 million on revenues of $1.2 billion for an operating profit margin of 53 percent. Its net after-tax profit of $364 million compared to a year-end equity account of negative $32 million (negative $327 million the year before). This makes the return on equity ratio (ROE) hard to calculate! But whatever you think it is, it is impressive.

Moody's total investment as of December 31, 2003, defined as non-current assets plus net working capital, was $509 million. The company generated a notable after-tax return on investment (ROI) of 74 percent. This is by definition an unleveraged return. Warren Buffett, who knows a good thing when he sees it, has Berkshire Hathaway owning 16 percent of Moody's common stock (as of March 2004).

The 2004 profit performance through September 30 is equally worthy of note. Operating profit margin was 55 percent. Net after-tax profit for the nine months was $302 million or $403 million annualized. The equity account became positive, averaging about $58 million, which leads to an annualized rate of return on equity of about 690 percent. The annualized after-tax ROI was 71 percent, while net operating cash flow was $378 million ($504 million annualized) and the company had accumulated cash of $451 million by the end of the third quarter.

There is no reason to think that the profitability of the other dominant rating agency is not also highly attractive, but there is good reason to doubt that such results could be sustained in a competitive market.

What Does "NRSRO" Status Confer?

To make the rating agency sector more competitive, the role of the NRSRO franchise must be addressed. In the first place, there is the term itself: "nationally recognized statistical rating organization." This implies some sort of market test, suggesting that the rating agency has achieved acceptance and credibility with a large number of investors and other financial actors by the quality of its ratings and their performance over time. At the time of its introduction, NRSRO did in fact reflect such a market test, but it no longer does. Now it really means only one thing: SEC-approved rating agency. So the term is fundamentally misleading.

As noted above, there have been very few approvals granted by the SEC, the criteria are not well defined, and the approval process, judging by the experience of potential competitors who have attempted to gain approval, is purely ad hoc.[6]

If you think back to the position of the SEC at the time of its first NRSRO regulation in 1975, it is easy to see why as a first designation of acceptable sources for ratings, it would be attractive to ask which rating agencies had met the market test and were widely accepted or already "nationally recognized." At that point, the concept was an endorsement of the market evolution of the past. But once any new competitor had as a prerequisite, before it could gain national acceptance by the market, to gain the approval of the SEC--once, in other words, all market evolution was heavily constrained by the regulatory restriction and granting of franchises--the logic of the original idea was turned upside down.

Simply consider that when John Moody published his first ratings in 1909, or when Poor's Publishing Company published its first ratings in 1916, or the Fitch Publishing Company issued its first ratings in 1924, they were not yet "nationally recognized." They all had to fill a market need successfully and compete their way into becoming widely used by financial market participants. But this competitive market opportunity and test is no longer available to a potential John Moody of today.

Today the NRSRO designation is embedded in the rules of multiple financial regulators, not only the SEC, as an essential restriction on investment and financial market decisions and an important factor in calculating capital requirements. No matter what the market might think, there is only one way to get to be an NRSRO: to be approved as one by the SEC. Many commentators have pointed out that this involves an insuperable logical problem or Catch 22.

The SEC's 2003 Concept Release on rating agencies states that to be approved as an NRSRO:

The single most important criterion is that the rating agency is widely accepted in the U.S. as an issuer of credible and reliable ratings by the predominant users of securities ratings.[7]

Nothing is more obvious than that under the current regulatory regime, it is not possible to be "widely accepted in the United States by the predominant users of ratings" unless you are already designated an NRSRO. But you cannot become an NRSRO unless you are already widely accepted by the predominant users! Here's a pretty problem in bureaucratic reasoning.

The same SEC Concept Release observes:

Some commentators believe that the NRSRO designation acts as a barrier to entry into the credit rating business.

There is no doubt that these commentators, which include the Department of Justice, are correct.

In March 1998, the Department of Justice submitted the following statement of position to the SEC:

The Department opposes . . . a "recognition" requirement, as currently formulated. According to this requirement, a rating organization would have to be recognized as an issuer of credible and reliable ratings by the predominant users of securities ratings in the U.S. in order to receive NRSRO status. The adoption of such a criterion is likely to create a nearly insurmountable barrier to de novo entry into the market for NRSRO services. For this reason, the recognition requirement is likely to be anticompetitive and could lead to higher prices for securities ratings than would otherwise occur.[8]

The Department of Justice commented further that "the recognition requirement might preclude the procompetitive benefits of de novo entry by smaller firms," and that "the commission's recognition requirement creates a problematic barrier to entry in an industry that is already highly concentrated."[9]

This position was certainly unambiguous and, it would seem, convincing. Yet five years later, the SEC Concept Release repeated the same anticompetitive, Catch-22 language to which the U.S. Department of Justice objected.

As a matter of corporate strategic analysis, the rating agency business has significant inherent barriers to entry in any case, including the need to establish reputation, reliability, and integrity; the prestige factor involved in the purchase of opinions and judgments; and natural conservatism in institutional risk management policies. To add to this a "distortionary entry restriction regime" (to use Professor White's phrase) insures a noncompetitive outcome.

Recommendations for Action

Accuracy in Labeling. The term NRSRO, with its implication that it represents a test of market acceptance--which it did thirty years ago but does not now--should be dropped altogether. It is clear that what NRSRO really means today is simply "SEC-approved rating agency." If the SEC continues to require its own approval of rating agencies for regulatory purposes, the designation should express the fact, viz.: "SEC-approved rating agency." This terminology would be accurate; it might also increase the incentive to adopt clear criteria for approval and a standard approval process.

Eliminate the Catch 22. If the SEC continues to require its approval of rating agencies, the anticompetitive criterion of having to be "widely accepted in the U.S. by the predominant users of securities ratings" in advance of having the chance to gain wide market acceptance should be eliminated. This was the recommendation so clearly made by the Department of Justice.

Independent Action by Other Regulators. Other regulators do not have to apply the SEC's rating agency limitations on competition. They could develop their own approvals--for example, "FDIC-Approved Rating Agency," or likewise for any other regulator, mutatis mutandis. This would add a healthy element of multiple regulatory perspectives, as well as encourage market competition.

Encourage New Entry by Specialized Competitors. In the consideration of rating agencies by any regulator, the approval of firms providing ratings for specialized purposes (as the SEC has occasionally done in the past) should be encouraged. Such specialization could usefully be an industry--for example, financial institutions; a country--for example, Japan; an instrument type--for example, residential mortgage securities; or any other logical domain defined by competence and knowledge.

This approach would allow new entrants to add competition where they are best able, to serve defined market segments with potential quality improvements or innovations, to have the opportunity to demonstrate their value to the market, and to grow organically if they succeed in gaining acceptance.

Financial Reporting by Rating Agencies. If the SEC continues to require its approval of rating agencies, it should require them to disclose regular financial statements on their ratings business. This would entail no change for Moody's, which files statements with the SEC already, but the addition of all approved ratings firms would allow the market to test the theory proposed by this paper: that an exceptional level of profit is induced by the government's structuring of the sector as a cartel. As new entry occurs, an equally interesting test of the effects of competition would be possible.

The Best Case. In the truly procompetitive and best case, not only would the term "NRSRO" be dropped, but the regulatory requirement of designation of approved rating agencies itself would be eliminated. That requirement has produced unintended effects never imagined when it was introduced in 1975, and it is time for it to retire.

In its place, the responsibility to choose among rating agencies and their services would belong to investors, financial firms, securities issuers, creditors, and other users of ratings--in short, to the market. Imagine that! Every firm for which it is relevant, especially those that purvey securities or deposits to the public, should have among its management and financial policies definitions of how it will use credit ratings and whose ratings can be used for what. These policies should be appropriately disclosed and would be reviewed by auditors and regulators, as appropriate.

Under these desirable circumstances, a competitive market test will determine which rating agencies turn out to be "widely accepted by the predominant users of securities ratings," and competition will provide its normal benefits of better prices, innovation, customer choice, and efficiency.

Notes

1. "Borrowers Find System Open to Conflicts Manipulation," Washington Post (November 22, 2004).

2. Ibid.

3. "SEC Standards for Designating Nationally Recognized Credit Rating Organizations," Statement of the Shadow Financial Regulatory Committee, No. 183 (December 9, 2002).

4. House Committee on Financial Services, Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises, "Rating the Rating Agencies," hearing on April 2, 2003.

5. "The SEC's Other Problem," Regulation (Winter 2002-03).

6. See the statements of Barron Putnam and Sean J. Egan to the House Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises, "The Ratings Game," hearing on September 14, 2004.

7. Securities and Exchange Commission, "Concept Release: Rating Agencies and the Use of Credit Ratings under the Federal Securities Law," 2003.

8. "Comments of the U.S. Department of Justice before the Securities and Exchange Commission," March 1998. Emphasis added.

9. Ibid.

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#7) On August 17, 2009 at 4:19 PM, DaretothREdux (49.28) wrote:

Rehydrogenated,

I like you video game idea, and there are games like WoW or EVE that have some what free market systems at work. The problem with both of these games is the inability to enforce private contracts. Yes, there are "contracts" in EVE, but they don't cover everything, and punishment for not obeying is usually in "game currency" so you don't have the threat of losing anything from your RL.

In EVE a player created a "player run bank" and then decided once he recieved enough money that he was keeping it all and would not return it. The ISK (that's the games currency) had a RL value of nearly $200,000 if sold to people on the internet. He estentially, "stole" that money from people and suffered no repercusions outside of having to delete his character...but he had already transfer or sold the money so he still gained $200,000....

Without the ability to enforce contract law there is no free market, there is no protection of liberty.

Dare

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#8) On August 17, 2009 at 4:19 PM, whereaminow (42.76) wrote:

devoish @ comment#1,

You didn't really make an argument there, but that's ok. In counter, I could point out that we have 4,000 years of wage and price control intervention that prove that interventionism does not work.

I suspect you're also not correct on your cause and effect logic, nor on your assumptions of licensing in the history of the medical profession and other professions for that matter.  They are pretty timeless policies.

As for jstegma in comment #3, perhaps libertarianism is quite loony. But instead of bashing a libertarian institution, you're anger is in fact directed at an interventionist institution.  You'll have to re-evaluate the role of government in the financial crisis, and then find a better example of "cockamamy" libertarianism.

David in Qatar

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#9) On August 17, 2009 at 4:27 PM, Darvo285 (83.80) wrote:

"This post is just libertarian nonsense" Really?

 Liberty means responsibility. That is why most men dread it. – George Bernard Shaw

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#10) On August 17, 2009 at 4:54 PM, devoish (99.07) wrote:

You didn't really make an argument there, but that's ok. In counter, I could point out that we have 4,000 years of wage and price control intervention that prove that interventionism does not work.

I suspect you're also not correct on your cause and effect logic, nor on your assumptions of licensing in the history of the medical profession and other professions for that matter.  They are pretty timeless policies.

Actually I feel like the argument that you keep using, that "free markets" have never existed anywhere is a pretty striong condemnation of the idea.

As to my cause and effect assumptions, they are as valid as anything you imagine, and I did exclude the discovery of germs which required the AMA and Gov't to regulate for sterile hospitals. The contribution from the first vaccine in 1930? came later.

Nothing changes the fact that "unregulated" is a free for all for criminals.

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#11) On August 17, 2009 at 5:25 PM, whereaminow (42.76) wrote:

devoish,

Cmon now big guy, you're better than that.  Google is an incredible tool.  You're not going to insinuate that the first vaccine came in 1930, and that without government we never would have had a vaccine for anything are you?

A country doctor named Edward Jenner develeoped the first "western" vaccine without government assistance in 1790 - for smallpox. So it took the government 140 years to do what Jenner did on his own?  Not surprising.

Before Jenner, vaccines in Asian and Turkish and many other cultures go as far back as 200 B.C. and probably further.

Wikipedia

What is this nonsense about criminals?  Have you lost your marbles?

David in Qatar

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#12) On August 17, 2009 at 5:46 PM, ajm101 (32.27) wrote:

@whereaminow

What metric of success is appropriate for a healthcare system?

@devoish

I read something this weekend that exposed me to the "No true Scotsman" logical fallacy.

I think that's at play there.  You can point out failures of free markets, but the response will _always_ be that it wasn't really free.

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#13) On August 17, 2009 at 6:23 PM, whereaminow (42.76) wrote:

ajm101 and devoish,,

My argument is not that free markets have never existed.  For brief periods of time, free markets have existed all over the world, and some even persist today despite the efforts of interventionists. 

My argument is that America does not, and has not had for many decades, a free market in health care, and that blaming free markets for health care failures is not very intelligent. 

Now, can you refute anything I have presented in this post?  If not, then continuing your rhetoric is an exercise in intellectual dishonesty. If you can, then do so, and I shall have to either refute it directly or rethink my position. 

David in Qatar 

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#14) On August 17, 2009 at 6:33 PM, whereaminow (42.76) wrote:

ajm101,

There is no single metric of success for any system.  The metric of success for a computer security system for example involves several factors, both qualitative and quantitative.  in the end, the decision of each individual computer user, each corporate CSO, etc...must be a subjective evaluation of the pros and cons of the various products and policies.

The same will be true for health care.  There is no single metric of success.  Just like any other product or service, both qualitative and quantitative measures can be ascertained with small margins of error, but the ultimate test lies in the subjective evaluations of the individual actors in the market place.

David in Qatar

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#15) On August 17, 2009 at 8:59 PM, rofgile (99.33) wrote:

David:

 In a free market model, the price of an item is usually determined by supply and demand and competition.

 This works, because you can normally live without whatever item is for sale.  I don't need to buy a flat screen tv, so I can wait till enough manufacturers appears that the price gets cheaper.

 The problem here is that your life and health are priceless quantities.

 A person without insurance, faced with a life threatening disease would pay whatever it takes to stay alive - since what does money or debt matter if you are dead?  

 If we had a totally unregulated health care system - the free market price for a lifesaving treatment would therefore = whatever you can pay the company till you are broke.  This is not an intelligent system.  You can argue that competition would help keep prices down, but a drug manufacturer typically holds a decade-long patent on their new lifesaving treatment, effectively holding a monopoly over their patent.  This is not a bad system, as it provides intellectual and monetary incentive to develop.  But, when your time window for getting the lifesaving treatment is months - this is not a system that allows for fair pricing or behaves as a free market.

 There is a reason why health matters are the leading cause of bankruptcy in the US.  The solution is universal health care. 

 -Rof 

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#16) On August 17, 2009 at 8:59 PM, rofgile (99.33) wrote:

David:

 In a free market model, the price of an item is usually determined by supply and demand and competition.

 This works, because you can normally live without whatever item is for sale.  I don't need to buy a flat screen tv, so I can wait till enough manufacturers appears that the price gets cheaper.

 The problem here is that your life and health are priceless quantities.

 A person without insurance, faced with a life threatening disease would pay whatever it takes to stay alive - since what does money or debt matter if you are dead?  

 If we had a totally unregulated health care system - the free market price for a lifesaving treatment would therefore = whatever you can pay the company till you are broke.  This is not an intelligent system.  You can argue that competition would help keep prices down, but a drug manufacturer typically holds a decade-long patent on their new lifesaving treatment, effectively holding a monopoly over their patent.  This is not a bad system, as it provides intellectual and monetary incentive to develop.  But, when your time window for getting the lifesaving treatment is months - this is not a system that allows for fair pricing or behaves as a free market.

 There is a reason why health matters are the leading cause of bankruptcy in the US.  The solution is universal health care. 

 -Rof 

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#17) On August 17, 2009 at 9:06 PM, whereaminow (42.76) wrote:

Hans-Hermann Hoppe: "Because consumers would no longer be duped into believing that there is such a thing as a "national standard" of health care, they would increase their search costs and make more discriminating health-care choices."

This story highlights that point.  It concerns Tamiflu, the government sponsored and promoted swine flu drug in the UK.

"Having witnessed the damage wreaked by the drug at close quarters, we would never make the same mistake again.

It is difficult to explain the gutwrenching feeling of seeing your children suffer, when their pain is a result of your decision. And yet, like any responsible parents, all we wanted was to protect them.

In following the Government's advice, we thought we were taking the cautious route. How wrong we were."

David in Qatar

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#18) On August 17, 2009 at 9:35 PM, whereaminow (42.76) wrote:

rofgile,

I'm glad you brought a thoughtful opposing voice to the discussion. 

"This works, because you can normally live without whatever item is for sale.  I don't need to buy a flat screen tv, so I can wait till enough manufacturers appears that the price gets cheaper."

I admit being surprised here. You've actually nailed Marginal Utility right on the head. I don't know if you've ever read Principles of Economics by Carl Menger, but he would agree.  It's the subjective valuations at the margins that drive price formation.

Prof. Hoppe isn't trying to claim that your life or health have a price.  What he is hoping to show (and it needs a more detailed presentation) is that the "unintentional risks" can indeed be priced in the free market through insurance.  It's the stuff that we have control over that can't be priced in the free market.

Take for example, ALS.  I believe (but don't know for sure) that ALS is something you have no control over. (If not, then there are other examples I am sure. Parkinsons?)  The treatment for these diseases can be insured in a free market, and at a much lower price.  The risk of lung cancer due to smoking, however, can not because it involves personal choice.  And so those that choose to smoke will have to pay for their own cancer treatment in a free market. 

So while you may feel that the government should step in and fill that gap, the only thing I can tell you is that it won't work in the long run.  I understand that you won't like that answer, but know that I have very good reasons for speculating that it won't work.  As Hoppe points out, whenever we subsidize a behavior, we get more of it.

I understand that one pitfall of the free market is that some (maybe many) people don't like to take individual responsibility.  That's when the cracks start to show, as people look for a way to compel others to subsidize that which they feel they are entitled to.

However, Universal Health Care has a big pitfall too.  It's not Universal and it can never be.  There is no way to pay for every possible treatment, to subsidize every human behavior, and to make available every single resource to the people through price controls.  In fact, price controls always have the opposite effect, reducing the amount of goods.  So in the long run, UHC wil lead to a reduction in coverage, rather than an increase (at least relative to what a free market would provide.)

In the short run, UHC may be better than the Mandatory Care we know have.  But that's not really of any interest to me.  I don't wish to spend my time debating which of the two systems is least loathsome.

Thanks again for your comment. 

David in Qatar

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#19) On August 18, 2009 at 10:37 AM, DrAmateur (84.82) wrote:

WhereamInow,

  I am usually very impressed with your posts.  I too like to think fo myself as a libertarian.  However, as a physician I see some problems with the model that is proposed.  In an effort to have open dialogue I have included those concerns.

1.  Eliminate all licensing requirements for medical schools, hospitals, pharmacies, and medical doctors and other health-care personnel. Their supply would almost instantly increase, prices would fall, and a greater variety of health-care services would appear on the market.

Competing voluntary accreditation agencies would take the place of compulsory government licensing — if health-care providers believe that such accreditation would enhance their own reputation, and that their consumers care about reputation, and are willing to pay for it.

This would probably work well in urban areas where competition would almost be guaranteed.  My concern would be for rural areas where there is already a physician shortage.  The above model could lead to, as another member put it, "quacks" filling those voids.  Bad healthcare is no replacement for lack of care.

Because consumers would no longer be duped into believing that there is such a thing as a "national standard" of health care, they would increase their search costs and make more discriminating health-care choices.

2.  Eliminate all government restrictions on the production and sale of pharmaceutical products and medical devices. This means no more Food and Drug Administration, which presently hinders innovation and increases costs.

Costs and prices would fall, and a wider variety of better products would reach the market sooner. The market would force consumers to act in accordance with their own — rather than the government's — risk assessment. And competing drug and device manufacturers and sellers, to safeguard against product liability suits as much as to attract customers, would provide increasingly better product descriptions and guarantees.

How does an individual, certainly taking into account educational level, perform a risk assessment on drugs that pharmacists and physicians go to years of school to understand?  Would all over the counter medications become prescription or pharmacist recommended?  People with GED's or the like would probably need to rely on some professional to make the risk assessment.

3.  Deregulate the health-insurance industry. Private enterprise can offer insurance against events over whose outcome the insured possesses no control. One cannot insure oneself against suicide or bankruptcy, for example, because it is in one's own hands to bring these events about

I fully agree with trying to get rid of the pre-paid medicine model to a more true insurance model.  Dentristry is an example of something that does work well.  If you take care of your teeth it is reasonably cheap. 

Unfortunately, our society does not allow for an honest and open discussion of what we as a society feel we should provide the people.  It gets turned into what is necessary for political gain.  I appreciate the wide breath of views I find in fooldom.

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#20) On August 18, 2009 at 11:20 AM, whereaminow (42.76) wrote:

DrAmateur,

Thanks for the thoughtful comment. I can address each point.  In the end, I highly doubt that anyone would ever convince you that the free market would work better in health care.  You are in the system (perhaps this is an unfair assumption, and if so I don't mean it in a disrespectful way.)  However, the point of this post was to make it clear that the "market" is not the problem.  Government is the problem.  I am using a logical starting point - this is what the free market would look like (like it or not)- to take away a weapon from the Progressives: using the free market as the scapegoat to expand governmental power. 

@1.  Are you making the assumption that there are no "quacks" right now?  I am not directing anything deragotary towards yourself, but you can't honestly believe that every government accredited doctor actually is a quality doctor and not a sham.  There are plenty of shams among the licensed, plenty of phony licenses, and all shades of gray in between.

It appears that you are taking both a government-centric approach (all government licensed doctors are not quacks) and an urban-centric approach (the country folk don't have enough competition). I can dispute the second one simply. It is even less likely today, with modern technologies (WebMD, transportation, etc..) that a person outside the urban centers wouldn't find quality care than it ever has been.  Certainly for more serious procedures, they'll probably have to travel.  But is that really anything different from today?  With UHC people have to travel for procedures all the time.  A VA hospital in Philadelphia may be the only one on the East Coast that performs a procedure. 

As Milton Friedman might say, "who are these government angels that are going to bring health care to the country folk?"  If anything, the government puts their money where the votes are, in the urban centers (and of course wastes it all, as evidenced by the proponderous amount of decay in urban America.)

@2.  Is it up to the individual to understand the product or the company to show the individual how the product works and the risks involved?  In the free market, it is up to the company to take responsibility for the risks and to properly educate the customer.  I would say that its a combination of both. If the pharma company puts out a risky product, they should face unlimited liability.  Also, if they don't educate their customers, explaining how and why a product works, nobody will buy it.  On the other hand, if an individual takes 47 sleeping pills in a sitting, well, they get a long nap.  Why do we assume that free market pharma companies would operate any differently than free market grocers, fast food, or tech companies? 

I'm afraid you might be making the assumption that people buy a product without having the slightest idea how it works.  That's simply not true. If a company releases a product (Sony has done this a few times, as has Motorola) that no one can comprehend or understand how it works, it fails.  No one buys something they don't understand unless some authority has already given it its blessing.  That gets back to Hoppe's point about people being duped into believing there is a national standard for health care.  Of all the things Hoppe says here, I most agree with this statement.  It is a dangerous thing for bureaucrats to be giving their seal of approval on health safety.  I wouldn't even trust these people to wipe my dog's backside.  When the government's "brand" or blessing suffers, it faces no backlash, no loss of power, no loss of money.  When a free market "brand" loses its reputation, it is normally toast.

We also have examples in the market place of what happens when companies fail to ensure the safety of their customers.  Unless they can dupe the public through some government bailout or subsidy, they fix or fail.  When a fast food company fears a backlash it alters its menu.  The variety among fast food is amazing. You can eat healthy for $10 a day.  McDonalds had to ditch the super size or lose market share.  Unless the government steps in and grants a privilege or monopoly (see Marlboro), the company corrects itself or fails.  Why do we expect pharma to act differently?  Because the Progressives have led people to believe that pharma has been a free market.   They have led people to believe that pharma is not in bed with, and directed by, regulators and politicians.  If they were to be honest it would throw a monkey wrench in their ideology.

@3. Agreed.

Thanks again for the discussion,

David in Qatar

 

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#21) On August 18, 2009 at 11:58 AM, jstegma (29.50) wrote:

David - Your posts are usually worth reading and tend to have a libertarian/free-market approach to things.  I'm fairly oriented to the approach myself, but I try to keep in mind there are natural limits on libertarianism and free markets.  Sometimes libertarians have a tendency to go off the deep end, because of course the depth of the water is only regulated by the free market and sometimes it might could use a bit more regulation if you ask me.

The big thing to keep in mind is that true free markets are for text books.  They don't exist in the real world.  You know that as well as I do.

When you get in a car accident, luckily you always remember to have your handy-dandy voluntary ratings directory with you, so you can figure out what health care providers are reliable.  Otherwise you would be totally screwed because there are no regulations whatsoever.  The first ambulance (unregulated ambulance of course) to arrive would take you to some quack who would charge you ten times what a normal hospital would for sub-par care. 

Of course drug companies and providers would never think to include all sorts of contractual language about how they aren't liable for anything.  So that way when you buy something from them you can be sure you're getting the real deal and that it's safe or at least reasonably safe.  Then of course if it's not safe, you'll be able to sue and recover damages and that will help to keep them honest.  Luckily, no one would ever run a fly-by-night company in a totally unregulated environment.  Also, let's keep in mind that very few people are gullible and likely to get ripped off, especially seniors who tend to need a lot of prescription drugs.

Not to sound too much like devoish and his "O Canada" approach to health care, I am sure there are many excellent examples of your "free market" approach to healthcare where the ordinary residents of the country can afford it.  It hasn't been tried here or in Europe or anywhere else I can think of, but I'm sure that's because I'm just totally ignorant.  So let's hear about some of them.  That way when our system gets Obamacare at least we'll know where we can go and get some high-quality cheap readily available healthcare in a totally unregulated environment.

The free market invented a word for ideas like this.  If you don't know what it is, read my previous comment. 

 

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#22) On August 18, 2009 at 12:38 PM, starbucks4ever (98.98) wrote:

My comments about your 4 points.

1. "Eliminate all licensing requirements for medical schools, hospitals, pharmacies, and medical doctors and other health-care personnel. "

I can't pretend that I know all the details, but I am not convinced that licensing requirements are overly restrictive right now. That is to say, if you can demonstrate that you must spend, say, ten million dollars, to win accreditation for your medical school, then I am fully with you. If, on the other hand, they just check your curriculum and course contents, then I don't see how that would be an obstacle for honest medical schools, and I hope these are the ones we are talking about. So at this point I need to have your estimate of compliance costs before I can agree or disagree with your proposal.

2. "The market would force consumers to act in accordance with their own — rather than the government's — risk assessment." 

Again, I can only partially agree. I would say that all drugs should be sold over-the-counter without the need for a receipt. I want the right to say that I have researched the effects of this or that medication and that I feel I don't need a doctor's approval and am willing to take responsibility for my choice. So in this regard I do want all regulations scrapped.

However, I must again point out that you cannot research something unless you have a reliable source of data to base your research upon. In order to say that drug X is working better than a placebo, you must be sure that the website which makes that claim comes from a pary that you can trust. With a private agency there is always concern that they might have conflicts of interest (look at Arthur Anderson and at those customers who trusted their advise...they seemed reputable at the time...unless you had a degree in accounting and months to research their auditing practices).

At this point in time, I feel that FDA, by and large, can be trusted. I would still allow private agencies to operate freely, but only under the condition that the FDA still remains with us and that any "alternative" pillbox sold in the pharmacy has a disclaimer saying that it's not approved by the FDA. So if some people are willing to experiment with their health in an effort to tell good ratings agencies from bad ones, let them go ahead and try, but for my part, I'll stick with FDA's official certificate.

3. "Deregulate the health-insurance industry"

Private insurance industry will always be a bad idea. You can be the best private insurer in the world, and yet you still can't escape the operating expenses that you face by virtue of being a for-profit insurer. Namely, you must determine the pre-existing conditions of your customers. The cost of doing this diagnostics and then processing the information to find what premium you should charge is an unavoidable overhead that will be incurred by every single private insurer and therefore it cannot be avoided by their customers as well. In a single-payer system this concern is nonexisting, so the public is spared from this expense. That is why the HMO industry is ready to approve any obamacare that comes from the White House as long as it does not contain a government option. They know full well that such an option will instantly make their business bankrupt. The private health care system can't withstand an honest competition with the Canadian system so their only chance is to kill the competitor.

4. "Subsidies create more of whatever is being subsidized. "

Not true. Subsidizing earthquakes, for instance, will most definitely NOT create more of them. Avoiding diabesity is probably within your power. Avoiding a tumor is a different matter.

 

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#23) On August 18, 2009 at 12:47 PM, ReadEmAnWeep (81.12) wrote:

Let me toss some opinions in here:

"Eliminate all licensing requirements for medical schools, hospitals, pharmacies, and medical doctors and other health-care personnel. Their supply would almost instantly increase, prices would fall, and a greater variety of health-care services would appear on the market."

Does this also mean eliminate college degrees for doctors? Most doctors don't really know what they are doing (especially the general physicians) after getting a doctorate from medical school. Over in Spain, you can be a doctor after 4 years of college. That is 2 less than I have, and that scares the crap out of me. Make sure that I never get sick in Spain.

 Also, I agree with the arguement that: "We've seen unregulated free markets in healthcare. We created the word "quack" during that time period and had life expectancies of 47 years."

But, then again who can really say what was the cause in the increase of life expectancy. It could have been licensing for our doctors, or it could have just been break throughs in technology. Look back 50 years and see what they believe in the medical world and that would probably make u thankfull you didn't live back then.

 

 

 

 

"I would not want to pool my personal accident risks with those of professional football players, for instance, but exclusively with those of people in circumstances similar to my own, at lower costs."

I agree with this, just because at the moment I am an extremely low risk customer for them. So I would get insurance practically for free. But what about when I am retiring, old, more of a risk (maybe poor, idk can't see the future, hopefully not). At that point in time I won't like that idea becuase health care would be extremely expensive under this format.

 

 

 

"Eliminate all subsidies to the sick or unhealthy. Subsidies create more of whatever is being subsidized. Subsidies for the ill and diseased promote carelessness, indigence, and dependency. If we eliminate such subsidies, we would strengthen the will to live healthy lives and to work for a living. In the first instance, that means abolishing Medicare and Medicaid."

This is a tricky subject. Similar to above, I love it now because I don't need it. But, this is also similar to welfare and food stamps and all that. You are right in the fact that people who get it lose the drive to work for themselves. I have met many people on welfare and food stamps who do not want to get  a job just for the sole reason of them losing the "free money" / "free food money" it is really a bad system. I think that there should be better systems for helping people when they need it and not create social leeches at the same time.

 

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#24) On August 18, 2009 at 1:03 PM, whereaminow (42.76) wrote:

jstegma,

Not only are you making unsupported assumptions about free market behavior, the consequences of wrongdoing in a free market society (we stress private contract - so yes, a person can sue and there is restitution and perhaps even retribution), one statement really stuck out:

The big thing to keep in mind is that true free markets are for text books.

Nothing could be further from the truth.  In fact, it's the opposite that is true.  Where did Keynesianism come from?  I need to suggest that you pick through Hayek's Capitalism and the Historians. 

Remeber that free market economics has never been embraced at the university level.  Even Carl Menger, a titan among economists in history, had difficulty securing a teaching post.  Mises was denied teaching posts in America after he fled the Nazis.  Keynesianism has its origins in the textbooks, as does Marxism. 

There may be no 100% free markets left in the world right now, but perhaps some that are so close to perfectly free the difference is inconsequential.  Did you pay for your groceries today, or did you steal them?  Did the grocer force you to buy them?  Of course not.  You both engaged in voluntary exchange based on private contract because you both percieved that you would be better off for the exchange. That is all that a free market is.

Unfortunately the story doesn't stop there.  Once we take an evolutionary approach to society, we see a historical pattern:

1. Banks and big business using their power to extract rent from the government.

2. A government happily engaging in the duplicity in order to reap a benefit and expand its power.

3. An army of intellegentsia arising to legitimize all this deceit ex post facto.

And thus are your origins of Keynesianism.  It is not the free market that is the text book science, my friend.

David in Qatar

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#25) On August 18, 2009 at 1:16 PM, whereaminow (42.76) wrote:

zloj,

Thanks for the comment. Thoughtful as always.

@1.  Licensing requirements are just another form of the age old workers guilds, which keep salaries for the workers artificially high.  Hoppe of course isn't arguing that licensing in all forms should be abolished.  He's arguing that licensing should be eliminated at the government level, since it is really just a rent seeking guild agreement to keep doctors pay above market levels.

@2  I think you make some good points. I just find that the FDA has regulatory expansion syndrome.  Perhaps the trap theory of regulation is true.  Or perhaps the relationship with big pharma is symbiotic.  Either way, there seems to be no aspect of the drug market that the FDA is unwilling to stick its nose in.  It is a nightmare for the consumers and the taxpayers.

@3 You're missing the point that Hoppe is making.  Insurance involves the pooling of risks by similar groups.  You can't pool the risks of Parkinsons with smokers.  You can choose to smoke more or less.  The free market insurer can calculate the coverage costs of Parkinsons but not smoking. 

Of course HMO's want their profits to be secure. That's the problem.  Ayn Rand refers to this as the anti-dog-eat-dog mentality in Atlas Shrugged.  Capitalists have this amazing capacity for becoming sniveling little weasels the minute they are threatened with competition.  "Oh whoa is me and my precious profits."  No company has a right to profits. Unfortunately, on the flip side, the HMO's business structure is dictated by the government, so who knows if they would ever survive a real market test. They have never been subject to one.

@4. This analogy doesn't work. You can't subsidize such an event in the first place.  You can't pay the ground to shake.

Thanks for the discussion.

David in Qatar

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#26) On August 18, 2009 at 1:31 PM, whereaminow (42.76) wrote:

I'm glad Hoppe has got some people thinking here. 

The point of this post was that you need to be wary when a group has to engage in outright deceit in order to push its agenda.  For years, Progressives have told Americans that the free market and evil unregulated capitalism is to blame for health care problems.

Yet, read the post and the comments.  The free market in health care would be so vastly different than what we have today that even fellow libertarians have difficulty conceptualizing it.  Our current health care system is so far from being a free market that it's amazing anyone would believe the Progressive rhetoric.

So we need to be wary of these people.  Why do they need to engage in such outright deceit? Are they trying to trick Americans?  If Socialized medicine is such a great concept, there should be no need to invent imaginary scapegoats for the current system's failures.

David in Qatar

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#27) On August 18, 2009 at 3:22 PM, ReadEmAnWeep (81.12) wrote:

This is off subject but it supports your "Private industries can do better than the government thing"

Nasa is going to be contracting out for the private company SpaceX to deliver its payloads to the International Space Station. This is because they are able to do it cheaper.

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#28) On August 18, 2009 at 5:00 PM, whereaminow (42.76) wrote:

ReadEmAnWeep,

This could lead to another interesting discussion.  This process is actually a form of economic fascism, not private industry.  The money given to SpaceX was taken from the private sector. It wasn't given willingly through the market place.  Is there a demand in the private sector for international space spations? Probably not, right now.  Should other people step in and force you and I to subsidize space exploration, no matter how cheaply it can be contracted out?  I strongly oppose that.  That doesn't mean I don't want to know what is out there.  But no collectivist plan will ever find the way.  It will come from individual achievement. Star Trek Socialism is a fantasy.

And really, why is that?  Well, you have to step back and really think about human nature.  Why are evil things considered evil?  Humans have learned throughout history that certain behaviors and actions led to terrible consequences, sometimes for only the individual and sometimes for all.  For example, counterfeiting is considered evil.  We know it's evil because it has a destructive effect on everyone else.  That's why printing money out of thin air is a bad idea.  Same goes for coercion.  No matter how noble my goal is, if I force you to pay for it, it's theft / extortion.  And we know that theft is evil because it has a destructive effect on society.  Nothing productive will ever come from theft, even if it is for the noble goal of space exploration.

David in Qatar 

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#29) On August 18, 2009 at 5:36 PM, starbucks4ever (98.98) wrote:

1. "Licensing requirements are just another form of the age old workers guilds, which keep salaries for the workers artificially high."

Potentially yes. In many instances they are just that. But we should still research the specific situation before we jump to the conclusion. We might be surprised to find that some of these requirements just make sense.

2. I think FDA's job should be to inform, rather than ban anything. Let anyone sell anything he wants. The only restriction: the pillbox must contain a warning, in capital letters, saying: "FDA is warning you that the guys peddling this medicine are quacks". Then, if you trust some private guru over the FDA, go ahead and enjoy your personal freedom of choice. Just don't count on being accepted to a state clinic if this medicine makes you sick.

3. "You can't pool the risks of Parkinsons with smokers.  You can choose to smoke more or less.  "

And here, may ask you for some details? How will your private insurer determine how often I smoke? This information is not written on my face. The Parkinsons, yes, they can probably figure that out. But smoking is not something that they will know unless I volunteer this information to them. Which I won't, as you can easily imagine. So in order to pool the risks, they will need to have everybody take nicotine tests every year. Now, my question is: who is going to pay for that and how will this system be more efficient than the one where such tests are not needed? You may of course, say that it would encourage responsible behavior, but plain ol' tobacco tax already does that.

4. "You can't pay the ground to shake."

True, but you can pay for the damage from earthquakes, so the analogy still holds.

Yours, 

-Z. 

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#30) On August 18, 2009 at 7:03 PM, jstegma (29.50) wrote:

The government and the ideal free market have a rather strange relationship. 

With no government whatsoever, you can argue that you have a completely free market.  However, Somalia isn't usually held up as a shining example, so there has to be some government involved that is inherently beyond a true free market.

Another theory would say that the government is always part of the free market.  So our government was chosen via market participants making economic choices.  But then of course we have a true free market regardless of the outcome and there is nothing to talk about as to how a free market system works.

So given those two choices, free markets are something that libertarians and economists like to talk about, but they don't exist.  In textbooks or just in the mind of a BSer on a barstool, free markets are purely fictional and hypothetical.

You addressed my assertion that free markets are the stuff of textbooks, but you ignored the other points about the trainwreck that your proposals would make of the current healthcare system.  It's probably the worst example of libertarian think run amok that I've ever heard of.  It's utterly ridiculous.

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#31) On August 18, 2009 at 7:13 PM, whereaminow (42.76) wrote:

zloj,

You can't pool the risks of Parkinsons with smokers.  You can choose to smoke more or less.  "

And here, may ask you for some details? How will your private insurer determine how often I smoke? This information is not written on my face

I actually think this would be pretty simple. They're going to find out when you have lung cancer and it's rather obvious that the black lungs you own aren't simply an accident.  Then no coverage for you.  Sue if you'd like, but good luck, because you committed fraud.  Fraud is an act of coercion and should be dealt with accordingly. 

I could find common ground with you on the FDA.  As a pragmatic step, I would be happy with that, and then we could see how that works.

I do know that the first act of licensing in the American dentist industry was an act of traditional "guildism," shutting down non-guild dentists that were performing routine procedures at reduced costs (much to the happiness of consumers.)  I'll look up the history of the AMA, but I already know what I'll find.  It's always the same story over and over and over and over again.

David in Qatar

 

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#32) On August 18, 2009 at 7:16 PM, whereaminow (42.76) wrote:

zloj,

Ah, and i glossed over your last point.  It's true that we subsidize people that live in high risk geographic areas.  In return, we get more people living in high risk geographic areas with million dollar homes and homeowners that get bailed out when the earth moves (as they knew it would - or they're just stupid).  In fact, wasn't there a big controversy about these very exact types of government insurance subsidies for homeowners with fancy new homes built on known California mudslides just a few years ago?

David in Qatar

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#33) On August 18, 2009 at 7:23 PM, whereaminow (42.76) wrote:

jstegma,

Somalia?  They call them "failed States" for a reason.  It's hard for me to take you seriously when every example you use is completely backward and then you couple these haughty assertions with insults.  You need to some more fact checking before you try to attack libertarianism.  First it was securities rating agencies (wrong), then it was universities teaching free markets (wrong), and now Somalia is a failure of the free market (wrong again.)

Wikipedia(Somalia) Note the history of foreign intervention, vying foreign States attempting to control their territory, religious war, and secular Civil War.  I don't think Somalis feel their problem is "not enough government."  Perhaps that was why they have refused a centralized government for the past decade, during which the horrendous standard of living has actually improved.

In the end, maybe I am a loony, but at least I don't couple misinformation with insults. 

David in Qatar

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#34) On August 18, 2009 at 7:41 PM, starbucks4ever (98.98) wrote:

Ok, they find out when they see my black lungs. Next step? They can report their finding to the insurance company, but they they will get no money from them. And since I don't have any money either, that means they won't receive any money. Or else they can report that my lungs look clean and earn their profit. So your insurance company must maintain spies in every hospital to make sure that the hospitals are honest with them. Wait a minute. Actually they do. It's a major overhead for all insurance companies - to employ people to check in which cases the requests can be denied. Then it gets even more interesting. I might smoke 1 cig a day, 2 cigs a day, or the whole pack; I might be a heavy smoker for one year, then kick the habit for the next 10 years, then be a light smoker for the next 2 years. Don't you think that the insurance company's model must either place me in the wrong pool, or else they must go nuts finetuning and adjusting their model until they employ so many Ph.D.s in Statistics that it defeats the purpose? 

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#35) On August 18, 2009 at 8:34 PM, whereaminow (42.76) wrote:

zloj,

What I'm trying to say is that they wouldn't get treated (I said covered - my mistake) because their insurance would be invalid, unless they could pay for it out of pocket.  It doesn't take a competent doctor very long to see that you're a life long smoker.  At that point, it's not a big leap for a hospital adminstrator to see that you're not insured as a smoker.  At this point, they realize they're not going to paid by the insurance company.  It's either out-of-pocket or get lost.  There is no need for hospital spies.  No hospital in their right mind would provide cancer treatment to an obvious smoker when it becomes clear that smoker filed as a non-smoker. That's terrible business. 

I would not have any remorse for a person that fraudulently claimed to be a non-smoker, then smoked even intermittantly, and demanded that I pay for his/her cancer treatment.

Will the medical insurance companies go nuts adjusting models?  Who knows?  They've never been subject to a market test.  What I do know is that catastrophic accident insurance exists in every other market, and has the same problems to deal with (fraud), and they don't go out of business from overemployment of statisticians.  They type of person you are describing is the exception, not the rule, and insurance companies have never gone out of business because of them.

David in Qatar

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#36) On August 18, 2009 at 9:14 PM, starbucks4ever (98.98) wrote:

" would not have any remorse for a person that fraudulently claimed to be a non-smoker, then smoked even intermittantly, and demanded that I pay for his/her cancer treatment."

The truth is, under the "Socialist" Canadian system you can't even make a claim that you're paying for his/her cancer treatment becuase their social secity is also socialized. By having a lower life expectancy, and yet retiring at the same age as you, they are essentially subsidizing your pension. Well, in return you pay for their treatment. If you consider all factors, you may find more justice in this socialized system than you give it credit for.

"Who knows?  They've never been subject to a market test." 

Well, we've had a market test already, only with the stock market and its derivatives. The investment banking business hasn't been regulated, and they did go nuts adjusting their risk models, so we are now bailing them out to the tune of several trillion.

 

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#37) On August 18, 2009 at 9:28 PM, whereaminow (42.76) wrote:

zloj,

You and I have argued enough about the long run outcome of Socialism.

The stock market is heavily regulated (the 2008 SEC Rules and Regulations is 4,006 pages long!), as is the investment banking business. This information you are giving is simply not true.  I advise all to check out Meltdown by Thomas  Woods, in which he dedicates chapter after chapter detailing the regulations and policies that influenced the derivative, housing, and stock markets.

Then we have the Fed, which has regulatory control every instrument created by investment banks.  They knew full well about derivatives and heartily endorsed them.

Here is a brief list of the Fed's regulatory controls:

Bank holding companies
State-chartered banks
Foreign branches of member banks
Edge and agreement corporations
US state-licensed branches, agencies, and representative offices of foreign banks
Nonbanking activities of foreign banks
National banks (with the Comptroller of the Currency)
Savings banks (with the Office of Thrift Supervision)
Nonbank subsidiaries of bank holding companies
Thrift holding companies
Financial reporting
Accounting policies of banks
Business "continuity" in case of an economic emergency Consumer-protection laws
Securities dealings of banks
Information technology used by banks
Foreign investments of banks
Foreign lending by banks
Branch banking
Bank mergers and acquisitions
Who may own a bank
Capital "adequacy standards"
Extensions of credit for the purchase of securities
Equal-opportunity lending
Mortgage disclosure information
Reserve requirements
Electronic-funds transfers
Interbank liabilities
Community Reinvestment Act subprime lending requirements
All international banking operations
Consumer leasing
Privacy of consumer financial information
Payments on demand deposits
"Fair credit" reporting
Transactions between member banks and their affiliates
Truth in lending
Truth in savings

David in Qatar

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#38) On August 18, 2009 at 9:33 PM, starbucks4ever (98.98) wrote:

Wow! That's plenty of regulation. I guess I must give up on that investment banking issue. 

:):):) 

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#39) On August 18, 2009 at 9:41 PM, whereaminow (42.76) wrote:

And what is the penalty when these regulators fail?  More power and more regulation :)

Maybe now you can see why I embrace the idea of competing arbitrators and competing regulators.

David in Qatar

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#40) On August 19, 2009 at 12:48 PM, PaulTomkins (< 20) wrote:

Wow.  Your prefessor needs to take some refresher courses in economics.  Perhaps he never took a course in health care economics. or chose to ignore what he learned as many do.  The very basic principles of health care inform us as to why free markets don't work for healthcare, either hypothetically or in practice. 

The basics:

People don't demand health or healthcare the same way they demand other goods and services.  You "demand" care because you are ill, not because you "want it" (leaving aside comsmetic surgery and so forth).   You might postpone buying a new flatscreen because you are broke, or buy a cheaper computer to fit your budget.  But the minute you put these constraints on comsumers, you find parents postponing care for their kids, old folks cutting their pills in half to save on Rx costs, and so on.

Second, a free market requires a simulacrum of a level playing field in terms of knowledge.  Promoting the idea that consumers will educate themselves, is as out-of-date and laughable as the long-disproved notion that markets and/or consumers are rational.  Most people in this country can't name the three branches of government!  There is an enormous asymmetry of information here, and NO enforcement or self-regulation whatsoever within the medical community.

Third.  There is almost no elasticity to be found in a healthcare market.  If your doctor tells you the price of your chemotherapy just doubled, are you going to postpone it?  And shop around?  Are you kidding?  If a doctor finds out you've been treated elsewhere, they often won't even see you, much less treat you. 

Fourth.  You can't demand healthcare anyway.  Try walking into a hospital and "demanding" a biopsy, or angiopasty, or anything else for that matter!  You really want consumers deciding what they get?  Even educated consumers? Do you think there is a legitimate doctor (other than Michael Jackson's) who would go along with that?  Do you think they should?

If you think doctos are bad now, un-regulate them and watch them go crazy. Somewhere between 50,000 and 200,000 people are killed every year from preventable medical errors. Hundreds of thousands more are injured or hospitalized, but not killed.  The reason we can't find out exactly how many?  Doctors and hospitals refuse to say.  You really think a free market is going to fix this?  By the time you figure out you've been injured,you will most likely be dead.  And of course, the libertarians will want to eliminate your right to sue...

The notion that government can't do anything right, is promoted by the Republicans and Libertarians who want to see government fail so that they can continue making money.  So they run for office and put people like heck-of-a-job-Brownie in place to prove their point.  The reason the SEC and other regulatory agencies failed in the last eight years, is that they were instructed to do so.

Want to unleash the free markets in the US?  Set up a pregnancy-to-grave single payer system.  Do another Flexner-style study of medical education across the US (the last one was 100 years ago), and reform medical education.  Create some expert panels to figure out what works and stop paying for things that don't work.  (everybody doesNOT need a bone-marrow transplant).  You would see a Renaissance of entrepreneurship like nothing we've seen before. Small businesses would flourish and big businesses would be able to compete with their international counterparts, whose governments already provide good healthcare.

Call it socialism? Fine, I'll take mine well-done.  I would start two companies tomorrow if I could get people covered.

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#41) On August 19, 2009 at 12:56 PM, starbucks4ever (98.98) wrote:

Exactly my thoughts! 

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=207746&t=01007422989251003253 

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#42) On August 19, 2009 at 2:14 PM, whereaminow (42.76) wrote:

PaulTomkins,

Thanks for the comment. I always like it when someone steeped in academic economics presents their case.  It makes for a good show. 

@1  Do people demand food in a different way than they demand flatscreen tvs?  Absolutely.  If you don't eat you will starve.  If you don't buy a flat screen TV, you won't.  That's quite a different type of demand, isn't it?  You're playing a philosophical game here to provide "after the fact" justification for the government takeover of the health care industry.  Can you apply that justification for food and shelter as well?  People need a roof over their heads or they may freeze to death.  Isn't that demand different than the demand for a playstation?  Shouldn't the government then step in and provide low cost food and housing for everyone?  All the socialists are shaking their head in agreement right now, but the economists are cringing.  They know that central planning in housing and food do not work, that the market supplies these items with better quality and lower price to a wider demographic - the poor and the rich.  Such is the same case in health care.  You know this to be true.

Do parents postpone feeding their children?  Clearly not, so point one is discarded as obvious philosophical rubbish.  If they don't have the means to feed their children, then they don't have the means to get health care either.  They need to work harder or seek charity.  Americans (in fact, all humans) are very charitable people.

@2  Which free market economist has said anything about requiring a level playing field of knowledge.  That simply is not true, it has never been true, and it makes absolutely no sense. I don't know what Keynesian told you such rubbish, but it is simply that.  The free market requires each individual to make a subjective evaluation of the price of a good without fraud, force, or coercion from an outside.  That's all.  You've been lied to.  Read Carl Menger's Principles of Economics, Murray Rothbard's Man, Economy, and State or Mises' Human Action if you actually hope to one day understand what a free market "requires." 

@3 There is no elasticity in health care today,  Under a government controlled health care system, you have no elasticity.  You are absolutely right.  I'm glad you are able to identify the problem with your system.  Now, it would be nice if you could also realize that your system has nothing to do with the free market, as I've made so perfectly clear without a doubt in this post.  It is a Keynesian invention.  You'll have to take your complaint about the lack of elasticity up with them. 

@4  Yes, I do want consumers deciding what care they can get.  Someone has to decide it.  How draconian a measure must you be contemplating to declare which procedures a person can and can't have?  Who will make the decision for them?  Do you wish to be everyone's nanny?  Thanks, but I'll keep my right to make my own decisions. 

And who are these government and bureaucratic angels that can make these enlightened decisions that you will remove from the individual's choice?  LOL, what planet are they from?

@ Libertarianism

Where do you get the notion that libertarians don't believe in the right to sue?  That's just flat wrong.  I suggest you check out Chaos Theory by Robert Murphy, For a New Liberty by Murray Rothbard, or Power and Market by Rothbard.  Competing arbitrage doesn't mean the end of lawsuits. 

So, now that I've shown you to be wrong, will you at least investigate actual free market theory?  I hope so. It's one thing to consider libertarians to be loony.  It's quite another to do so based on beliefs that are completely erroneous.

(zloj, lol, you should have known better.)

Thanks,

David in Qatar

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#43) On August 19, 2009 at 3:48 PM, starbucks4ever (98.98) wrote:

Hi whereaminow,

No, I didn't say that litigation was against Libertarianism, even though I think banning malpractice lawsuits wouldn't be a bad idea. 

"They know that central planning in housing and food do not work, that the market supplies these items with better quality and lower price to a wider demographic - the poor and the rich. "

Here I disagree. My own experience with central planning in housing and food was very positive. I understand that we don't have free market in food and especially housing, but even if we take a very libertarian state like Texas, I am still ready to defend my claim that Texan free-marketers would do well to learn from apparatchiks.

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#44) On August 19, 2009 at 3:52 PM, whereaminow (42.76) wrote:

zloj,

I don't think we'll ever agree on that, and that's ok.  It's not the end of the world :) 

David in Qatar

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#45) On August 19, 2009 at 4:03 PM, starbucks4ever (98.98) wrote:

And I am not saying that market doesn't have its advantages :)

-Z. 

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#46) On August 19, 2009 at 5:00 PM, jstegma (29.50) wrote:

zloj,

I don't know where you're from, but you can keep your apparatchiks. We don't need any commies in Texas trying to tell us what to do.

David,

sorry you feel insulted.  The insults were directed towards your ridiculous post rather than yourself.  Your posts are normally a lot better than this one, and that's why I called you out on this cockamamy.  It's not up to your usual standards.

 

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#47) On August 19, 2009 at 6:25 PM, whereaminow (42.76) wrote:

jstegma,

I got ya. Fair enough and my mistake. (I jump to conclusions way too often,)

David in Qatar 

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#48) On August 19, 2009 at 7:17 PM, PaulTomkins (< 20) wrote:

Sorry I don't have enough time to get into all this in detail.

The simple truth about markets is that they work very well for SOME things, in SOME situations. Markets tend to work very well in the middle of the "playing field" and they work very poorly around the edges. Good regulation keeps the game going on in the middle of the field, avoiding monopolies, aggregation of power, exploitation, etc.

All components break down at their extremes: unions at their extremes have people getting paid to do nothing; management at its extreme forces miners in Utah to commit suicide by removing the last pillars holding up the ceiling.

Shopping for food and shopping for healthcare are nothing alike, save for the word "shopping."

wheraminow (David in Qatar), you have no more right or ability to decide what care you are getting than the man in the moon (who, by the way, has better insurance than I do). You might be able to find an unscrupulous doctor to give you "what you demand", but no decent doctor is going to perform some surgery you don't need.

As for good government, try checking out the National Institutes of Health; The Institute of Medicine; the National Academies of Science; etc. Want to see what the "free markets" do to science? Take a look at how pharmaceutical companies have manipulated non-disclosure agreements and the way they release study data to show what they want. Most university labs that have entered into contracts with the industry end up regretting it.

I do very much believe in free markets. For most goods and services. But it doesn't work for healthcare--and I don't think it ever will. If you think the "death panels" are a bad idea, try unregulating the healthcare market and you would see hundreds of thousands of people die. No exaggeration amigo. Maybe in time people would sort it out, but a whole sh*tload of stupid people would die along with their kids.

Most conservatives don't even think people are smart enough to read food labels. Not trying to lump you in a category here, but if you think people are smart enough to figure this out, you are naive.

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#49) On August 19, 2009 at 8:09 PM, whereaminow (42.76) wrote:

PaulTomkins,

I am making one suggestion to you only. Read Antitrust and Monopoly: Anatomy of a Policy Failure by Dominick Armentaro.  You will forever change your stance on monopolies and their relationship with free markets and government. 

Review
"For anyone wanting to know what’s behind today’s headlines . . . should be required reading by every Congressman." -- Yale T. Brozen, Professor Emeritus of Economics, Graduate School of Business, University of Chicago

"Should be on the reading list of every antitrust course. Clearly stated, rigorously developed . . . for professors as well as students." -- Donald Dewey, professor of economics, Columbia University

"Skillfully honed, eloquent . . . Professor Armentano’s book must be mastered by all who would be heard on this issue." -- Business History Review

"The . . . best book-length treatment of this issue . . . should become a, if not the standard in economics, history, and political science." -- Public Choice

"Written in a very clear, concise, and declarative manner, which makes it accessible to students as well as interested professionals." -- Antitrust Bulletin

Product Description
The stated purpose of antitrust laws is to protect competition and the public interest. But do such laws actually restrict the competitive process, harming consumers and serving the special interests of a few politically-connected competitors?

Is antitrust law a necessary defense against the predatory business practices of wealthy, entrenched corporations that dominate a market? Or does antitrust law actually work to restrain and restrict the competitive process, injuring the public it is supposed to protect? In this breakthrough study, Professor Armentano thoroughly researches the classic cases in antitrust law and demonstrates a surprising gap between the stated aims of antitrust law and what it actually accomplishes in the real world. Instead of protecting competition, Professor Armentano finds, antitrust law actually protects certain politically-favored competitors. This is an essential work for anyone wishing to understand the limitations and problems of contemporary antitrust actions.

David in Qatar

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#50) On August 27, 2009 at 2:17 AM, notadoctoryet (< 20) wrote:

4.  Eliminate all subsidies to the sick or unhealthy. Subsidies create more of whatever is being subsidized ...

What a strange twist of logic here.  I think the author thinks that we are subsidizing sickness, which is exactly backwards - we are subsidsing curing sickness.  It may be true "subsidies create more of whatever is being subsidized," but we're not paying for people to be sick - we're paying for them to get well.

I'm not sure how the author could have written item number 4, actually thinknig that, say, treatinhg cancer would actually cause more people to have cancer, or mending a broken bones will actually cause more broken bones, or treating pneumonia would cause more of the disease ... 

The sort of logic in this article - let the sick die, because they deserve it, and so the healthy can live - is cruel, selfish, and bizarre.

By the way, if you want to read an article that's not written by a borderline psychopathing free market looney (like the one above), check out the recent cover article in The Atlantic.  It's really good (and has very much a free-market bend to it), 

 http://www.theatlantic.com/doc/print/200909/health-care

 

 

   

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