Recently I received a Facebook message from a friend I hadn’t heard from in a while, which started off with “you have to be the most vocal person on my friend list about all things politics.” Intrigued, I read on.

My friend was concerned about the healthcare crisis, and he had a problem I’ve found all-too familiar with other friends I’ve talked to about the issue. There are so many contrary messages being put out by both sides it can be hard to distinguish between them.

The last part of the message read “I just want your opinion and feedback, I don’t keep up with the news or politics too much so I don’t know what details or lies have been proposed by either side.”

As I’ve spent a good amount of time looking into this, I decided to take the time and answer his question in a straightforward manner, with some level of depth, but without the technical language or assumption of shared knowledge/philosophy. After writing it, I felt I should share it with everyone as more people should be able to understand these issues. While it’s different from many of my other posts and has fewer direct links and less in-depth discussion, I feel it fills a need for straightforward talk about the healthcare situation.

So without further ado, my reply.

You’re right in that there do seem to be these two options, one- the nice sounding option where medicare forces the evil insurance companies to finally get rid of their monopoly and unfair pricing, and the other, where the government locks out all other options except from their own governmental Canada-style monopoly. The truth, as always, is in between the two options.

The truth is that the government is aiming to create something like the first option, where they believe that they will provide a lower level of insurance that works as a bare minimum for coverage. This will be heavily subsidized by taxpayer funds, and that money won’t come cheap. According to the think tank Heritage Foundation:

• Over the next decade (2009-2018), President Obama will spend $10.3 trillion on welfare programs. This includes cash, food, housing, medical care and targeted social services. Of this spending $7.5 trillion will be federal spending and $2.8 trillion will be state government matching contributions to federal welfare programs.
• President Obama will spend more on welfare in a single year (FY2010) than Bush spent on the Iraq war during his entire presidency.
• If total welfare spending were divided equally among all poor persons, each would get, on average, $16,800 in welfare benefits.

And that’s not the start of it. The problem is, with spending like this, it comes from somewhere, IE taxes. Here I articulate the general conservative song and dance, which goes a little something like this…

When government taxes companies, they pass that cost to the customer.
They also might lower the quality of their products, cut more corners, fire more employees, pay existing employees less, cut their benefits…
Thus, the need for government grows on itself because:
the more the government takes from the businesses,
the less the businesses can give their employees,
the more the employees need,
the more the government can says it needs to help the employees,
the more the government needs to tax businesses to pay for the benefits.

So the government grows larger and larger, replacing business benefits with government benefits. What’s the problem with that?

THE PROBLEM:

The government is inefficient. It has no need to watch itself, it has no corners to cut, it has no other burden on it other than to justify its own existence. And it does a great job of that.

Businesses are very efficient. They have a constant need to justify themselves to their customers, to their stockholders, to their own bottom line. Many accuse them of having no long-term vision, but having a long-term vision is in their own interest so they survive for longer. If they don’t have a long-term vision, they don’t survive, and another competitor will step up and take it’s place.

So businesses are always going to do a better job of providing their employees benefits than the government will, because they will be more efficient.

Freddy, Fanny and Healthcare-

Now that’s all fine and good, but what about healthcare? How will the government turn such a well-intentioned idea into a problem?

Here it get’s a little more tricky. We have to think back to what was called one of the biggest failures of the free market in recent history- the housing loan market failure.

People said it was because of government deregulation (which happened under Carter) that so many risky loans were made and justified. Therefore government involvement is good because it might have prevented all these risky loans.

However, what really happened was that the government mandated that there be a secondary system set up, called Fannie Mae and Freddy Mac, which would provide loans for those who would otherwise be ineligible or unable to pay for loans. This was supposed help everybody because these subsidized loans were supposed to encourage the private companies to reduce prices to maintain and gain customers.

Sound familiar?

If you think it sounds like what the government is supposed to be doing with healthcare, you’re completely correct. And of course, if you were following the news in late 2008, you know what happened.

There may have been a margin the private loan companies could have reduced their loans by, but that wasn’t enough for them to survive, thrive and make new customers. Instead, they had to make the risky loans themselves and justify them financially to survive.

This was deregulation- it was how the private companies were able to still compete with the government subsidized loans. They also gave out similarly risky loans to those who couldn’t afford them, but without the government’s seemingly-infinite tax dollars to help them keep paying the loans out, they had to find another way to find the cash, so they made them into increasingly risky toxic assets that were doomed to fail, but in a long time. Normally businesses wouldn’t make such foolish mistakes, but this was a matter of survival or failure.

How does this relate to healthcare? Isn’t it a different kind of system entirely?

Insurance vs. Healthcare
Well, yes and no. With the insurance and loan markets, you have the same kinds of regular payments, same kinds of rotating financial transactions, and the same incentives to stay in the black at the end of the day.

It’s in the differences that we start seeing the real threat in Obama’s public option.

With the loan market, either you keep your house or the bank forecloses. There’s not much of a middle ground with that. With medical coverage, there are a lot more corners to cut. You might pay a doctor less, use less medicine, charge more here, pay less there… ultimately decreasing the quality of healthcare coverage for everyone.

In fact, this already happens with Obama’s “gold standard”- Medicare. When you look at the doctors who cover medicare patients, they are paid much less by the government, and they have to make do. Many times, the waiting lists for surgery are much longer, the treatment is much lower quality, and the doctors covering them are few and far between.

Moreover, as people who could afford regular healthcare migrate to Obama’s plan, as is definitely certain, the existing insurance companies will run shorter and shorter on people to pay into their policies. They’re going to have to cut corners as well, and ultimately, the quality of coverage will drop for everyone. There may be a margin that can be cut, but as the biggest incentive of a private company is for them to survive and hopefully turn a profit to reinvest into their company, that margin will be small.

Again, the government has no such incentive. So their coverage will end up costing everyone more for the same treatment as it has to support the weight of a giant growing bureaucracy.

Ultimately, we may see either another form of “deregulation” which will result in a later crash, or worse, we may see private companies die off one by one and the government rise to take their place. As I said before, the one role of the government is to justify itself- we may not start off with a public option paying out tons of benefits, but when every other company starts dying off and there’s a demand, the government will rise to the occasion and start replacing those benefits.

Don’t believe me? Tom Price M.D., a former physician and US Representative from GA stated:

“When he was pressed on this notion that he says if you like your plan, you can keep it,” said Price. “Well, in fact, that’s not what the bill says that was introduced in the House and that’s not what the president has supported. What he clarified yesterday before the press was that if you like what you have, the government will not move you out, will not force you into another plan.”
“What he didn’t complete that sentence with,” said Price, “was the next clause, which is that the government may institute rules, will institute new rules that will force you out of your plan.”
“The public option in other things, for example, the housing market, the secondary mortgage market looks like Fanny and Freddie,” he said. “That’s a public option. It’s a disaster. That’s what happens when the government gets involved in these kinds of things that the private market can run so much better.”

Hopefully that clarifies a lot of the ongoing debate, and helps people understand the conservative position on healthcare. Feel free to share this with any friends asking the same questions!

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