KILLING COMPETITION – OH REALLY??

Some critics of current Democratic healthcare reforms falsely assert that a public option entity would kill competition within the U.S. private health insurance market. This claim begs several questions. Is the private health insurance market really competitive? Should it even be based on free-market principles?

Several studies have shown that in most cases across the U.S. just one or two private insurance companies dominate any particular region or state. The current regulatory system does not provide for national coverage or portability, in part due to separate state regulations on private healthcare plans and concurrently for Medicare and Medicaid. Tens of millions of people simply cannot buy health insurance due to the cost – so even that fact challenges the private sector’s ability to cover everyone or offer competitive prices. There are arguments that favor economies of scale, in that larger entities can control costs better than a group of smaller companies that have less bargaining power with their suppliers and customers. However, they run contrary to those arguing we must preserve private competition when essentially none exists.

Some other argue further that millions of young individuals who consider themselves indestructible refuse to buy insurance and that fact distorts the very notion of risk-spreading inherent with private insurance. If basic policies really charged these individuals a reasonable monthly charge to cover their anticipated medical needs (including a reasonable profit built into the price) these individuals would likely buy those policies, but again that choice really doesn’t exist in the current healthcare insurance market. Huge deductibles and co-pays, and multiple exclusions often offset lower monthly premiums.

Furthermore, if we wanted to charge the young to cover their parents’ far higher medical bills, then we would set up a Medicare-type system of mandatory payroll deductions not based upon any personal attributes nor actuarial charges associated with their healthcare needs, but rather based upon the overall need to cover a much larger population. It seems we have already done this successfully in the U.S. via a huge public option for our elderly. Based upon extensive historical evidence, we should all be able to agree that 80 percent of the healthy people are destined to pay for 20 percent who are the sick ones under any public or private plan.

Others facetiously argue, including private health insurance companies, that if these young indestructible individuals were required to buy insurance, many of the systemic financial problems would go away. Unfortunately, most of the uninsured people work as independent contractors, consultants, or for small businesses that do not provide employer-based health insurance. And this large number of uninsured individuals consists of people from all walks of economic life and it includes all age groups, often people with pre-existing conditions. The potential huge revenue stream will not materialize unless the Government subsidizes excessively high private insurance premiums to private insurers.

Comedian Bill Maher recently challenged the narrow-minded notion developed over the past 30 years that if something does not make a profit, we should not bother with it no matter how important it might be for most people. Many on the right believe that any activity, including the social and economic needs of the general public that cannot be met by a private for-profit company, must simply be ignored. We have seen the apotheosis of such a societal worldview – our unregulated financial and banking sector where greed brought down an entire world economy and making money was the only objective. That system has also extorted our Federal Government to socialize its losses so the profits-at-any-cost business model can continue despite the long-term needs of the rest of the economy and the vast majority of citizens.

If we only did things based upon an expectation of future profits, we certainly would not have children, draw and paint, play musical instruments, exercise or play any sports for the fun of it, read books, cook for family and friends, go on vacations, write poetry, and engage in most all pleasurable human activities. Some kids and their parents aggressively pursue various extra-curricular activities with the sole mindset of future college scholarships (a quasi “for-profit” attitude) that it becomes utterly repulsive in practice. Some may counter these are personal activities unrelated to the for-profit necessity in the rest of life, such as business, providing education to our children, transportation infrastructures, environmental protection, or a competent criminal and civil justice system. These closed-minded arguments have only been used to pick and choose which governmental programs are to be funded more than others – not that anything is anywhere related to preserving a capitalist system or providing for the public good.

Others have facetiously tried to argue that healthcare is not that important to even be considered a civil right for every human being. Why bother with annual inoculations of children against various diseases? I mean these little people are just loss centers that produce expenses but no profits and they should be reduced by the annual onslaught of preventable diseases so we adults can concentrate on our for-profit ventures that define everything in life. To think these nihilistic ideas are actually espoused by ostensibly sane individuals gives one pause.

I am not a capitalist, socialist, communist, monetarist, or any other –ist. I do not subscribe to any particular economic or political system despite the claims of many critical commentators to my prior TMV posts. I cannot see any particular economic system enshrined in the U.S. Constitution. The document lets future generations pursue what works for them towards a “more perfect union” not just for the extreme enrichment of just a small minority of citizens. Those who claim to know the real “founders’ intent” are merely liars and control freaks. The constitution is meant to change and be amended over time, though it does require a super-majority that has been achieved 27 times over the past 200 years.

Some have claimed the 5th Amendment against governmental taking without just compensation as preserving the capitalist system. People read what they want to in any document but such an assertion is ludicrous and completely wrong. It is just a recognition that no governmental entity should simply take private property without providing “just” compensation – more enshrining an idea that is simply right and sensible – possibly reflecting one of the Ten Commandments admonishing humans not to steal. The founders simply extended it to the central government as well.

Back in 1789, there was already a long history of despots, monarchs and even English nobles taking the land and property of common people without paying for it. That certainly does not endorse free capitalism but puts an important limit on extortion or stealing into our Constitution. It is unfortunate that our national and state governments have done so little limiting the interest charged by loan sharks – our modern-day extortionists called payday lenders. Of course our large banking institutions are now moving into these lucrative unregulated local markets in full force. That happens when a country does not regulate greedy and amoral sociopaths.

Returning to the healthcare insurance conundrum, a public option does not require a public or quasi-governmental entity to exist. I mentioned in a prior post that a nationally required and regulation minimum health insurance plan could be offered by each private healthcare company to the general public. The premiums, coverages and patient protections would all be set by law. Private health insurers could continue competing by offering additional benefits in supplemental policies. Switzerland already has a very similar system in place and they essentially have universal coverage with healthcare costs at 11% of GDP instead of 16% as in the U.S. Cost-containment is a separate issue from expanding coverage to cover all Americans.

It is sad that too many Democrats are being unrealistically demanding of this Administration to put into place some idealized national healthcare system by the end of this year. Republicans never admitted defeat when tax cuts were not large enough to meet original demands – they claimed victory for every small one that after time now is the source of over 30% of our current Federal fiscal deficit. When Social Security was enacted in 1935, it did not cover agricultural or domestic workers, along with many others, and the benefits were certainly meager. However, it was a major beginning upon which successive Democratic Administrations and Congresses built upon until it is now an unassailable essential part of American society.

Those who claim Social Security is another governmental failure because its revenues from payroll taxes will not cover total payments (expenses) in 10 years, conveniently forget that most Americans cannot look lovingly or securely to their private savings and 401K plans for any predictable retirement income – thanks to our reckless, greedy and unregulated financial sector. Social Security is an inter-generational contract that presupposes that there are more people paying into the system as younger workers than those taking out benefits after retirement.

To solve the Social Security long-term funding problem, the current withholding tax should not be capped at the first $106,800 of earned income. It should be imposed on all earned income as is the 1.45% payroll tax for Medicare & Medicaid. Yes, this will raise income taxes for the wealthiest 5% of Americans but that is necessary for the long-term benefit for the other 95% of Americans. Those who argue that most poor people do not pay any income taxes are also being disingenuous – usually when arguing against raising marginal income tax rates on the very wealthy 1 to 5 percent of the population. Payroll taxes are imposed after the first $600 is earned in a year. These taxes are levied against all earned income from actually working – not just bloviating on conservative talk radio or TV. Just calling them “payroll” taxes does not make them any less “income” taxes, particularly when all self-employed people must calculate them on their 1040 income tax returns.

I think Democrats should push to enact the 80% of proposed healthcare reforms that are not being contested, such as more patient protections, regulations on what private health insurers can refuse to cover or pay, and certain programs to determine what works best in controlling costs systemically. These and other healthcare issues can and should be revisited every 2 to 4 years so further incremental changes can be enacted. Democrats should not become disillusioned that complete healthcare reform is not achieved in 2009. They should be prepared to embrace the first major step towards reforming this large sector of the American economy.

Republicans, who merely want to defeat any and all healthcare reforms in order to continue their political and social war against Democrats and this new Administration, are doing this country a great long-term disservice. Of course a party that wrongly opposed Social Security, Medicare, Children’s Healthcare initiatives, the Civil Rights Acts, the 2009 Stimulus Act, and many other important national legislation when they were original proposed, that spent recklessly over the prior 8 years, went to war in Iraq on flimsy or fabricated grounds, really should never been considered a serious source of national policy or worthwhile ideas.

Many of the angry older white people screaming at Town Hall Healthcare meetings are simply sore losers who cannot accept the 2008 election results. Intentionally fabricating lies about healthcare proposals that have not yet been finalized is absurd. Exaggerated charges of Hitler, Nazism, and socialism denigrates the real evils those historical movements and person meant to many people. They are simply not appropriate references for normal disagreements with respect to national policy. Arguing that a few Democrats foolishly engaged in some prior branding in the past, does not justify the over-the-top, constant and concerted use of such lies by most Republicans who speak for their party, whether elected or unelected.

Democrats must understand that Republicans are masters of appealing to the base emotions of humans, and misleading many gullible and uneducated people. They must be prepared to enact healthcare, financial, environmental and infrastructure reforms with no bipartisan support. The discredited policies of Republicans have so damaged this country that it will take years to dig ourselves out of the deep pit in which they have dumped the country. They and their ignorant wing-nut supports have no credibility whatsoever and should be completely ignored until the necessary national legislation is passed and signed by the President.

Submitted on 8/16/09 by Marc Pascal in Phoenix, Arizona.