Free Markets, Free People

Daily Archives: November 26, 2010

The “right” to health care vs. the right to earn a living

More fallout from the ObamaCare monstrosity.  Reality begins to set in with a vengeance:

Want an appointment with kidney specialist Adam Weinstein of Easton, Md.? If you’re a senior covered by Medicare, the wait is eight weeks.

How about a checkup from geriatric specialist Michael Trahos? Expect to see him every six months: The Alexandria-based doctor has been limiting most of his Medicare patients to twice yearly rather than the quarterly checkups he considers ideal for the elderly. Still, at least he’ll see you. Top-ranked primary care doctor Linda Yau is one of three physicians with the District’s Foxhall Internists group who recently announced they will no longer be accepting Medicare patients.

"It’s not easy. But you realize you either do this or you don’t stay in business," she said.

For those slow on the uptake – when limited resources meet unlimited need, rationing is going to take place regardless of whether one wants it or likes it.  Rationing can take effect in many ways.  Two of the most common are by price and by availability (or a combination of both). 

Declaring everyone is “entitled” to health care doesn’t make it more affordable or available.  Because its availability doesn’t increase automatically on such declarations.  And that was the fly in the ObamaCare promise from the very beginning.   Then add in the absurd claim that you can get more for less and you’re where we are now with doctors and Medicare patients.

Reality is a harsh mistress.  Reality says that a person will do what is necessary in the business world to keep their business going.  We’ve seen that with the drop in employment during this recession as businesses cut back on headcount to survive it.  The same goes with the business mix of paying customers any business has.   If it takes a certain amount a month to maintain your practice, you have to ensure that is covered along with whatever profit (read salary) you want for yourself. The most common way a business does that, besides cutting expenses, is to raise prices.

But in health care you can’t really do that.  So?  So instead you change your business mix.  You begin to refuse to see those who pay the least in favor of those who pay the most, i.e. less Medicare patients and more private insurance patients.

If you’re a doctor, you spent 10 years of your life getting to the position you now hold and even more years building your practice.  You are, in fact, a small business owner who employs a good number of health care workers both directly and indirectly.

If however 40% of those you see are Medicare patients and those patient payments to doctors are being drastically reduced such that you’ll now be pulling in much less a month than you need to meet all your financial requirements, it is time to reassess the mix of patients you can afford to see.   Note the word – afford.  This is the only way a doctor can “raise prices”. 

There are those who claim that such a doctor has a responsibility to see whoever comes in the door.   In fact that doctor has many other responsibilities that preclude that – like his responsibilities to those he employs, the expense of his practice, malpractice insurance, student loan payback, etc.  He can’t see the first patient until all of those things are paid for.  And then he has to maintain his or her practice (thus the overhead) at a certain level to meet the needs/demands of the patients he does see. 

So when he looks at his mix of patients, he has to make a decision, doesn’t he?  And, as you see in the cite, many are beginning to make that decision.  He has to get that revenue stream back up to the level at which he can at least cover minimum needed to sustain his practice at a level he deems necessary.

Among the top points of contention is the complaint by doctors that Medicare’s payment rate has not kept pace with the growing cost of running a medical practice. As measured by the government’s Medicare Economic Index, those expenses rose 18 percent from 2000 to 2008. During the same period, Medicare’s physician fees rose 5 percent.

"Physicians are having to make really gut-wrenching decisions about whether they can afford to see as many Medicare patients," said Cecil Wilson, president of the American Medical Association.

But statistics also suggest many doctors have more than made up for the erosion in the value of their Medicare fees by dramatically increasing the volume of services they provide – performing not just a greater number of tests and procedures, but also more complex versions that allow them to charge Medicare more money.

From 2000 to 2008, the volume of services per Medicare patient rose 42 percent. Some of this was because of the increasing availability of sophisticated treatments that undoubtedly save lives. Some was because of doctors practicing "defensive medicine" – ordering every conceivable test to shield themselves from malpractice lawsuits down the line.

Of course they practice preventive medicine because Congress has adamantly refused to address tort reform, so, in many practices the largest expense incurred per year is malpractice insurance.  And naturally that constant threat drives the medicine to some extent.  Additionally it is human nature to try to get what you believe your services are worth if you’re going to render them. 

Instead we have  an outside entity arbitrarily declaring what they’re worth.  It is has now  gotten to the point that providers have to make some decisions because they can no longer operate at the level they desire too with the payment structure in effect.  And, as can be seen, they are making those decisions.

Which brings us back to the point that was made on this blog many times before when the promise of health care for all at lower cost kept being thrown around.  You can’t have it both ways.  The fact that there is now going to be more demand on a finite product means that rationing is somehow going to exist.  The fact that you have insurance obviously doesn’t guarantee you a doctor. 

Of course the reaction to these decisions is predictable as well:

Still, even if primary-care doctors had to rely exclusively on Medicare’s lower payment rates their incomes would only drop about 9 percent, according to a recent study co-authored by Berenson, who is also a fellow at the non-partisan Urban Institute.

"The argument that doctors literally can’t afford to feed their kids [if they take Medicare’s rates] is absurd," said Berenson. "It’s just that doctors have gotten used to a certain income and lifestyle."

Got the implied argument there?  Whatever the income and lifestyle, they’ll just have to get over it and go along with the arbitrary price fixing government decides on. They’re probably among the “undeserving rich” Krugman was talking about below.  Oh, and note that a 9% drop in income also means a commensurate drop in the amount of overhead the office can afford – headcount in other words.  And that may mean poorer treatment.

You don’t get to decide what you’ll charge and let the market either reward or punish you for doing so. Oh, no.  The government will decide on what is acceptable, private insurance will go along because it is worth their while (they may not match the cost but they’ll lower their payout because the government has lowered its payout), malpractice insurance will most likely rise (you can’t do a better job with less staff and less time) and there you are, captaining a sinking ship.

Of course the reaction  being documented here is an immediate reaction to a flawed policy.  It is as natural as self-defense, because in a business sense, that’s precisely what it is.  Health care is a business, not a “right”.  And this is how businesses react to such intrusions in the market that could conceivably kill their chance at survival.

Long term the result will be even worse and more drastic.  And we’ve begun to see it already.  With all the turmoil and cost cutting in the health care industry, fewer and fewer are choosing it as a career path.  People like Berenson can sneer at doctor’s concerns now, but as almost every medical association out there has noted, fewer and fewer people are entering the profession.  And that’s across the board.  It seems, for whatever reason, our social engineers simply don’t understand economic basics and constantly and consistently dismiss them with disastrous results. 

Incentive is a wonderful motivator that has brought us all sorts of innovation and a better life.  Destroy that and you destroy motivation and the desire to excel.  That’s precisely what is happening here – with predictable results.



Krugman’s latest pearls of wisdom

I noted yesterday that one of the more prolific hacks left off of Alex Pareene list (link in previous post) at Salon was Paul Krugman.

QandO has a long history of examining Krugman’s political thoughts and finding them mostly wanting.  That’s not to say he’s a bust at everything he does – when he just talked economics he had some interesting things to say.  But his venture into political advocacy has, shall we say, not helped his overall reputation in the least.  One of the reasons is he’s prone to saying things like this:

The rich don’t necessarily deserve their wealth, and the poor certainly don’t deserve their poverty.

Don’t “deserve” wealth or poverty according to whom and by what standard, Mr. Krugman? 

Who gets to decide what is or isn’t “deserved” if earned or obtained legally?  And how does one make the blanket statement that “the poor certainly don’t deserve their poverty?”  That, in many cases, is demonstrably false. 

If we agree we are the sum of our choices in life, and those who’ve made consistently bad choices (drop out of school, take up drug use, commit criminal acts) end up in poverty, how is it they don’t “deserve” what they now suffer?  Certainly I can think of examples of the poor who may be poor through no real fault of their own – the mentally deficient who haven’t the skills to earn high wages, etc.  But for the most part, if everyone is offered essentially the same opportunities as others and they choose not to take advantage of them, how does one relegate their descent into poverty as “undeserved”?  Especially when others in precisely the same circumstances make different decisions that raise them out of poverty?

What, in fact, that statement is meant to reflect is Krugman’s apparent belief that wealth is unequally distributed not because it is earned, but by an immoral and unfair system that needs to be fixed. 

The market, in Krugman’s world, arbitrarily picks winners and losers and rewards them at whim apparently.  Thus most of the rich and none of the poor “deserve” their financial status.

So this should come as not surprise:

Allow me to make a point: Economics is not a morality play. It’s not a happy story in which virtue is rewarded and vice punished.

The market economy is a system for organizing activity — a pretty good system most of the time, though not always — but not according to any moral significance.

Really?  So nowhere in such an economy is honesty, fairness, good customer service rewarded with business over competitors who exhibit none of those virtues?  Instead, it’s just a “system for organizing” where consumers buy from which ever vendor they first come upon without ever once considering those virtues as a reason for buying?  Does the system punish those who act in what one could consider an “economically immoral” manner – i.e. in violation of the laws of economics” or screwing over customers?  Does it not mostly reward those who act in a manner that most pleases their customers and helps their reputation?

How is that not evidence of a moral code operating within a given market?

Well of course it is – but such a code is inconvenient to the Krugman’s of the world, because admitting that markets, unimpeded by government intrusion, would reward or punish those who transgress its laws would mean the argument for more government intrusion would fall flat.  And certainly, admitting that the rich “deserve” their riches as much as many in poverty “deserve” their poverty would again admit to a morality that precluded government making everything “fair” by it’s attempts to redistribute that “undeserved” wealth.

Those key premises are what Krugman and much of the left base their criticism of capitalism on, never once admitting that a) capitalism as it should exist doesn’t and  b) the reason the markets may not seem to be “working” is because of the amount of distortion they already suffer from government intrusion.

Of course, it is the age old cycle many of us have come to understand – government declares something to be a problem, declares it is the solution, exacerbates the problem and again declares only it can fix it with even more intrusion. 

“Morality” is, at a base level, “good and bad”.  We label what we deem “good” as moral.  The bad stuff is “immoral”.  How one can observe real markets at work, where the basic transaction is a voluntary exchange of goods for money between two people (entities) and not recognize the basic morality of such an act wouldn’t understand morality if it bit them on the leg.   Billions of those transactions will happen on this, Black Friday.  Consumers will go to stores they trust from experience, buy from vendors with good reputations and the best customer service and reward them with their business.  That decision is one based in morality in which the consumer weighs the options and picks the vendor who best exemplifies their moral ideal in the marketplace.  If they’ve been burned in the past by store X, that store most likely will not get their business – a decision based on the moral judgment of the consumer.

How a so-called economist doesn’t understand the basic morality of markets seems a bit beyond me.  Which is why I put Krugman in the hack category.  That morality, which is plainly evident to me, is inconvenient to Krugman’s thesis that government must intervene in the economy.  He can’t really point to any success stories (well he tries by saying, finally, that massive government spending for WWII brought us out of the Depression and that’s suspect), so he’s left trying to explain why it is government’s job to save us from the inherent unfairness of the market.

You have to leave a whole bunch of stuff out to do that.  And you have to establish nonsensical premises like “the rich don’t necessarily deserve their wealth, and the poor certainly don’t deserve their poverty”, in order to advance your government intrusion thesis.

Thus the cycle repeats – government is again the only solution to the problem government created.  After all, the markets put us 14 trillion in debt, not the profligacy of government – or so I fully expect Krugman to explain in some future bit of nonsense in the New York Times.  It would make about as much sense as this nonsense.