Coyote Blog

I have written a ton in the past on what I consider the fundamental problem in health care:  The taking of price-value tradeoffs out of the hands of consumers, first through encouragement of first-dollar employer plans and now through a Federal government takeover.  For example:

The computer keyboard I am typing on right now costs about $55 on Amazon.com.  Is that a fair price?

At some level, the answer must be “yes.”  Why?  Because I bought it – simple as that.  No one was compelling me to buy this particular model, so if I thought the price too high or the features too skimpy, I would have just passed on the purchase.  If I desperately wanted or needed a keyboard, I might have bought one of literally hundreds of others for sale at Amazon, priced from a low of $1.49 (used) to a high of $2400 (I kid you not).  After shopping through the various options, I chose my keyboard as the best match, for me, of price and features.

For decades, this seemingly prosaic act of individual “shopping” has been steadily eroded in health care with the growth of third party payers, particularly Medicare.   How much did you pay for you last doctor visit?  Your last x-ray?  Your last blood test?  Believe it or not, it is still possible to price-shop medical care — I do it myself, because I have a high deductible health insurance plan under which I pay all but the most bankrupting bills out of pocket.  As an example, three x-rays last month of my son’s ankle would have been billed to my insurance company at over $100, but I asked for their cash price and they pulled a separate book from a hidden place under the counter and quoted me $35.  I got a 70+% discount merely for caring about the price.

But my health plan, which includes this seemingly positive incentive to shop, will soon be illegal as high-deductible insurance plans, as well as medical savings accounts, are effectively banned.  Under Obamacare, virtually all individual payments for medical products and services will cease — the government and a few large, highly regulated insurers will pay for nearly every visit, drug, or procedure.  The government will be making price-value trade-offs for our care, and they will be doing it incredibly imperfectly, because by eliminating individual shopping they have cut off a, excuse the pun, priceless source of information.

And here:

If we are all forced to have the same, low deductible, first-dollar health plans, what incentive is one going to have to stay out of the health care system, even for something minor?  What is to stop you from going to the doctor every day because you are hypochondriacal, or you are lonely, or bored, or just because you want to save on buying your own subscription to Highlights Magazine?  The buffet will be open and everything will be essentially free – what’s to stop people from gorging themselves?

You might say that you are more responsible than that, and perhaps you are.  But think about this:  Twenty years ago we used to all complain about the 2 or 3 pieces of junk mail we might find a day in our mailbox.  That was when the each piece of mail cost real money to send.  Today, junk mail in the form of email is essentially free to send.  How many pieces of junk mail do you get today?  Even if you are not hitting the system up for free health care, you know someone else will be spamming the system, and eventually all of us as taxpayers will have to pay for it.

The only way to stop this behavior is for the government to create a department of “No” to head off this behavior — what Sarah Palin so famously called “Death Panels.”

Both Tyler Cowen and Megan McArdle discuss individual vs. the government in making price-value tradeoffs for health care in the context of Paul Ryan's proposal to voucherize Medicare.

McArdle:

Expect there to be a lot of angry back and forth over this in the next week or so.  But one thing to keep in mind is that this Medicare plan is not effectively very different from what the Democrats claim ObamaCare is going to do:  which is to say, cap the amount of money spent on providing health benefits to those who are not rich enough to opt out of the public system.  The Democrats want to do so by having a central committee of experts decide what our health dollars get spent on; the GOP wants to put those decisions into the hands of consumers.  But this is not an argument about who loves old, sick people more.  Both parties are promising to halt the rapid growth of government health care expenditures, which is definitionally going to fall hardest on old, sick people....

There are also the tradeoffs to consider.  It seems quite likely to me that vouchers are going to be better at controlling health care cost growth than a central committee.  Every committee decision that cuts off a potentially useful treatment (and I'm afraid it can't all be back surgery and hormone replacement therapy) will trigger a lobbying explosion from affected groups.  Each treatment is a decision with a small marginal cost to the taxpayer; it's in aggregate that they become expensive.  Which means that the congressional tendency is always going to be to override--and while there are supposed to be structural barriers against this in the bill, they aren't very strong . . . about like trying to quit smoking by hiding your cigarettes from yourself.

Last week in the race around New England colleges I missed a milestone of sorts - Coyote Blog crossed over 5 million visits.  I say "of sorts" because with feed readers, many readers of the blog do not hit the visit counter.  In fact, with over 2,000 feed subscribers who check this feed each day, that equates to about 3/4 million visits a year that don't hit the counter.

Nevertheless, all these numbers, however flawed, are far higher than I ever thought I would reach here (way back on September 29, 2004).  Thanks for the support.

PS-  Here was that first scintillating post 6-1/2 years ago:

This blog will often touch on the insanity that is the current American tort system. I don’t think there is any greater threat to capitalism, due process, or democracy than the growing power of the litigation bar.

Via Overlawyered.com, which should be an essential part of your daily blog browsing, comes this story. Apparently, after being sued by Okaloosa County for making defective police cars, Ford refused to sell the county any more of this type car. The County sued again, this time to force Ford to sell it more cars of the type it is suing Ford for being defective:

One of Morris’ attorneys, Don Barrett, has said the sheriff firmly believes the Police Interceptors are defective but he wants to buy new ones to replace aging cars because seeking other vehicles would be more costly.

lol. Unfortunately, in the service business, it is legally more difficult to exclude customers from the premises. We have several well-known customers who come to our campgrounds (plus Wal-mart and any other private retail establishment) desperately hoping to slip and fall and sue. In a future post, I will tell the story of a Florida campground that is being sued by a visitor for sexual dysfunction after the visitor allegedly stepped on a nail in their facility.

Gary Becker via Ilya Somin:

The toughest competition for basketball and football players occurs at the Division I level. These sports have both large attendances at games-sometimes, more than 100,000 persons attend college football games– and widespread television coverage.... Absent the rules enforced by the NCAA, the competition for players would stiffen, especially for the big stars...

To avoid that outcome, the NCAA sharply limits the number of athletic scholarships, and even more importantly, limits the size of the scholarships that schools can offer the best players....

It is impossible for an outsider to look at these rules without concluding that their main aim is to make the NCAA an effective cartel that severely constrains competition among schools for players. The NCAA defends these rules by claiming that their main purpose is to prevent exploitation of student-athletes, to provide a more equitable system of recruitment that enables many colleges to maintain football and basketball programs and actively search for athletes, and to insure that the athletes become students as well as athletes.

Unfortunately for the NCAA, the facts are blatantly inconsistent with these defenses....

I expressed many of the same thoughts in this article at Forbes.  In addition to making the same points as Becker, I slammed on the whole concept of the "amateur athlete" as an outdated holdover from the British aristocracy and their disdain for commerce:

University presidents with lucrative athletic programs will do about anything to distract attention from just how much money their Universities are making off of essentially unpaid labor.  Their favorite mantra is to claim they are holding up an ideal of “amateurism.”

The whole amateur ideal is just a tired holdover from the British aristocracy, the blue-blooded notion that a true “gentleman” did not actually work for a living but sponged off the locals while perfecting his golf or polo game.  These ideas permeated British universities like Oxford and Cambridge, which in turn served as the model for many US colleges.  Even the Olympics, though,  finally gave up the stupid distinction of amateur status years ago, allowing the best athletes to compete whether or not someone has ever paid them for anything.

In fact, were we to try to impose this same notion of “amateurism” in any other part of society, or even any other corner of university life, it would be considered absurd.  Do we make an amateur distinction with engineers?  Economists?  Poets?

When Brooke Shields was at Princeton, she still was able to perform in the “amateur” school shows despite the fact she had already been paid as an actress.   Engineering students are still allowed to study engineering at a university even if a private party pays them for their labor over the summer.  Students don’t get kicked out of the school glee club just because they make money at night singing in a bar.  The student council president isn’t going to be suspended by her school if she makes money over the summer at a policy think tank.

In fact, of all the activities on campus, the only one a student cannot pursue while simultaneously getting paid is athletics.  I am sure that it is just coincidence that athletics happens to be, by orders of magnitude, far more lucrative to universities than all the other student activities combined.

The importance of government largess to sports, including publicly-funded stadiums, has been a frequent topic on this blog.  Recently, the CEO of the Fiesta Bowl John Junker was fired for a number of alleged violations related to campaign contributions and favors for politicians.  This story is virtually inevitable.

The Fiesta Bowl benefits enormously from being one of the four BCS bowl games.  In fact, the difference economically between being one of the four BCS bowl games and being one of the numerous other bowls is roughly the difference between the United States and, say, Peru.   To give one a sense, the prize money for winning a BCS bowl is about $18 million.  The prize money for all other bowl games varies from $325,000 to, at most, $4.25 million.

But the Fiesta Bowl would almost certainly not be one of the four BCS bowls were it not for the city of Glendale building a half billion dollar stadium to be shared by our NFL franchise and the Fiesta Bowl.  It would almost be shocking if a few tens of thousands of dollars were not directed to politicians given the stakes on the table.  And it should be no surprise that politicians in Glendale received many of the payments.

Postscript:  Junker's attorney's comments are telling.  This was all about doing what it takes to make the Fiesta Bowl a big player.   And I can tell you, from all the grief I have gotten for defending a Constitutional principle at the expense of holding on to a sports franchise, there is a strong public lobby for the ends justifying the means when sports are involved.  Anyway, here is the quote:

While Junker declined SI.com's request to be interviewed for this story, his lawyer, Stephen M. Dichter, could not resist issuing an e-mailed reminder that it was his client "who took the Fiesta Bowl from a postseason game created so [that] Frank Kush's ASU Sun Devils would have a game in which they could be showcased while they and the rest of the WAC were completely ignored by the national media to its present position as one of the four pillars of the Bowl Championship Series."

If Google wants to make the world a better place, they should consider throwing all the patents they pick up in this defensive transaction into the public domain.  And even better would be if the could entice Microsoft and Oracle and IBM and a few others to do the same.  The crazy web of really bad software patents is killing the innovation in this industry.

Google may say they are buying these defensively, but let them sit on their books long enough and someone is going to be sorely tempted to start mining them for $.  Just look at how far Micrsoft's position on anti-trust suits have come now that they are suing Google for anti-trust violations.

I know that this pathetic bit by Kevin Drum was done to death by blogs last week, but I was on the road and still want to get my innings.  For those who have not seen it, Drum said (in a post about Obama and Libyan war):

So what should I think about this? If it had been my call, I wouldn't have gone into Libya. But the reason I voted for Obama in 2008 is because I trust his judgment. And not in any merely abstract way, either: I mean that if he and I were in a room and disagreed about some issue on which I had any doubt at all, I'd literally trust his judgment over my own. I think he's smarter than me, better informed, better able to understand the consequences of his actions, and more farsighted. I voted for him because I trust his judgment, and I still do.

A few thoughts

1. Leaders on the Left have a strongly arrogant belief that they are smarter than ordinary citizens, and so it is their duty to make decisions for individuals because politicians will do a much better job of running people's lives than ordinary folks would themselves.  I have always supposed that for this governing philosophy to be successful, there had to be a deep parallel desire among the rank and file of the Left to be led, to put their own life in the hands of politicians who can be better trusted to make decisions for them.  This bit from Drum seems to be evidence of that desire.
2. I know of absolutely no one, politician or otherwise, whose judgement I would generally trust more than my own.  Seriously, this is just pathetic.  Sure there are folks whose judgement I might trust, based on long experience, over my own on narrow issues (e.g. my wife on restaurant choices or my son on who to draft for my fantasy football team).
3. Drum completely ignores the issue of incentives (as do most folks on the Left).  Even if a politician's judgement were better than mine on a certain issue, could I trust his or her incentives to make the decision based on the same goals I might have?  In the case of Libya, Obama has any number of incentives -- his poll numbers, reelection in 2 years, pressure from members of his own party, his legacy, his image in other countries, finding consensus among his advisors, etc  -- that might affect his decision-making but which I do not share.
4. What in God's name in Obama's pre-Presidential career provided the basis for Drum's staggering trust in his judgement?  Where have we ever, ever seen this judgement exercised in any meaningful way, particularly on an issue with this many chips on the table?  Even since he has been President, where has this judgement been evidenced?   As I have said any number of times in the last two years, having a really, really good speaking voice is not a proxy for intelligence.
5. To the extent that Drum voted for Obama based on his foreign policy judgement, Drum's perception of Obama's judgement had to have been based in large part on campaign statements and speeches Obama has made on foreign policy.  And those statements basically said that what Obama is doing now is illegal.  How can Obama have universally good judgement if he promised to do A in the campaign and is doing not-A today.  Both A and not-A cannot simultaneously constitute good judgement.