President Obama’s Moral Hazard
April 8, 2009 25 Comments
This article was featured in The Bulletin (Philadelphia-area newspaper) on 4/9/09, and the Bucks County Courier Times on 7/5/09.
“Universal health care for every single American must not be a question of whether, it must be a question of how.”
-President Barack Obama
Perhaps you saw this shocking headline last week from the Associated Press: “9 Patients Made Nearly 2,700 ER Visits in Texas.” From 2003 to 2008, these patients visited the ER at an average of once every six days, each visit paid for by local taxpayers. With an average cost of over $1,000 per visit, these 9 patients alone cost taxpayers approximately $3 million.
Imagine if this occurred in your town, and at your hospital. Imagine if you saw your taxes steadily rising because a small group of people decided to abuse a vital service in your community. Imagine if your husband or wife desperately needed medical attention, but was held up because of someone else’s indiscretion. Now imagine this on a much larger scale, spanning across the country to each healthcare provider, doctor’s office, and community. That is the picture of socialized healthcare, a picture that must be addressed as President Obama’s budget moves through Capitol Hill.
The President’s budget, passed in different versions by both the House and Senate last week, includes $634 billion to move the country toward socialized health care. The budget proposal says that this massive spending is only the first step in the process: “The Budget calls for an effort beyond this down payment, to put the Nation on a path to health insurance coverage for all Americans. However, additional funding will be needed.” Most analysts believe the full cost of President Obama’s socialized healthcare plan, once enacted on a national level, will reach $1.6 trillion. To put that number in perspective, if President Obama decided not to fund socialized health care and to instead write a check to all taxpaying citizens, each taxpayer would receive approximately $12,300. Which would you prefer? Which would stimulate the economy more?
But the cost of the program is only the beginning of the problem with President Obama’s proposal. The more serious flaw with socialized healthcare is highlighted by the Texas ER case: Where there is no cost, there is no discretion. The Texas ER case is a fundamental example of moral hazard–the prospect that a party insulated from risk will behave differently than if it were fully exposed to the risk. If a driver, for instance, knows that no police officers are patrolling his road, he will be more inclined to speed. The risk factor of being pulled over has been removed, so he acts with little regard to the law. The same is true with the financial bailouts-if the downside risk of failure is removed, or success is guaranteed by the government, then investors will be inclined to take unreasonable risk to attain unprecedented profit.
Simply put, the nine patients in the Texas ER case abused the system because they had no reason not to. The government, by paying their bills, had removed the fundamental risk factor of healthcare: Cost. So, with a free medical system at their fingertips, and no disincentive present, nine patients used critical ER resources and staffing 2,700 times in five years.
President Obama’s healthcare proposal does not stray far in likeness or in form from the Texas ER case. Fundamentally, President Obama wants the government to provide either free or extremely cheap healthcare to all citizens. In function, all essential costs would be covered, with a sliding scale of government payment increasing for lower income individuals. Those using the healthcare system would have no stake in the system; moral hazard would almost demand abuse. At best, the reduction of the key risk factor of cost would lead to significantly impaired discretion.
The fallout from socialized healthcare would be immediate. The system would be flooded with appointments, procedures, and visits; some of them legitimate, many of them irrational. Cost for any abuse of the system would be passed directly to taxpayers, while healthcare as a whole would be buried beneath bureaucracy. America would suffer the same damage as our British and Canadian counterparts, where patients must wait up to three years for important procedures like hip replacements due to patient backlogs. There is a reason members of both countries continue to come to America for medical procedures. This all, of course, is not to mention the flaws in government control and price regulation, the disincentive for doctors to excel, and the exorbitant burden placed on state governments to run the programs.
At the base of it all, however, we are taken back to the Texas ER case. A system with no cost is a system without prudence–moral hazard always reaps abuse. Taxpaying citizens would pay for someone else’s healthcare, and worse, for someone else’s indiscretion. It is not only a fundamental redistribution of wealth, but a fundamental redistribution of risk and responsibility.
Socialized health care, like most social government programs, sounds wonderful in theory. Shouldn’t everyone have the ability to get reasonable health care? Shouldn’t the sick be cared for? We can’t simply throw the sick out on the streets and let them suffer, can we? That line of reasoning is certainly understandable, and justifiably evokes feelings of compassion for the needy. In the end, however, government is not meant to be run by emotion or even compassion. It is meant to be run on principle, prudence, and justice. And we must always remember that every government dollar spent is a dollar taken from its citizens. That action must always be met with prudence, and never moral hazard.
-Matt Benchener from TruPolitics.net
I’ve tried to bite my tongue for awhile as you continually bash the greatest person to ever happen to America. You bash his character, intelligence, and policies, all of which are infinitely better than his predecessor (remember the economy’s failings fall squarely on the back of the man). For our next trick, the great “O”dini will escape our economy from over 200 years of injustice.
I like how your logic is, we shouldn’t be compassionate to the poor because the poor are wicked and will abuse the system, unlike the rich. We should set up a system where the rich can be the only ones to be helped by health care (and they don’t even have to wait). Its like you want to give VIP passes to all the rich people at an amusement park and tell all the poor people to go ride the Ferris Wheel. You say you want justice, but how is it just that only the rich can ever get help.
As to the Texas case, do you really think it will be indicative of everyone in America, or just the poor. I like the fact that it happened in Texas…we already know nothing good comes from there (especially presidents!). They’re a bunch of lunatics, whos only virtue is that it functions as a bridge for Mexicans to enter into the land of promise.
I’m sorry to break it to you, but injustice is over. The “O”ne has come! The rich will no long be able to abuse the poor, Wall Street will no longer be able to screw everyone over. Justice will Reign, the One has come!
Jose, I appreciate your differing views, and it’s been good to have the opposite side of the story represented. You need to understand, however, that I’m not specifically bashing President Obama, especially in regard to his intellect or character. I do take issue with many of his policy initiatives, mostly because they are formed from a socialist, or at the very least, strongly liberal foundation. Recall that I’ve come out strongly against President Bush and the Republican Congress’ more liberal actions as well. I respect President Obama as our nation’s elected leader, but I do not view him as a savior, and I think he is deeply misinformed on his foundational policy.
I believe that small government is both more efficient and provides more liberty for all. This is no indictment on the poor, or support for the rich, but simply a measured view of prudent governance. Again, stripping the rights and private property/money of some to fund programs and welfare for others is far from just; it is in fact legalized theft.
You and I differ on our views of government, and we probably always will. But just understand that my views are not anti-poor or even anti-Obama. Rather, they support the liberty of Americans and the limited function of government which our founders intended and has made this country successful.
Jose- How do you propose that, as you stated, “…the great O-dini will escape our economy from 200 years of injustice” if all he’s proposed so far are huge spending initiatives of which the healthcare plan alone will cost upwards of 1.4 trillion dollars?
Additionally, you certainly can’t continue to believe that you’re open-minded if you’re willing to discredit an entire state based on one of its constituents. Ironically, the man you think can do no wrong is cracking down the hardest on Texas for illegal immigration. As one who’s mentioned that citizenship in America should be a “right” granted to all, I would think this would bring the “great and powerful O” down a peg or two in your worship of him.
First off, I’d like to thank people for replying to my assessment of the situation. Secondly Lynn, I get that 1.4 Trillion seems like a lot, but consider that people no longer have to pay all that money to those greedy insurance companies anymore. That saves a ton of money, and also the people who are going to be taxed higher are the greedy rich people.
Thirdly Lynn, I never claimed to be open-minded in my reply. But I am open-minded, and if anyone would look at all the facts with an open mind, with even a shred of logic and/or compassion they would most likely come to the same conclusion as me. Sadly it seems that many people on this site do not seem to have an open mind though because the facts are right there to give an obvious conclusion which is just ignored.
I like what Tim revealed about the Children’s hospitals. First, If we had healthcare then it wouldn’t be a problem for people to get the normal stuff from a regular doctor-which alleviates the wait in the Eroom. Secondly, I have a question: Do you guys really not see something wrong with the poor kids having to wait, while the rich get ushered in. You like to blame the poor for their poverty, when its the extra time they need to spend to get any medical treatment which keeps them from having the extra study time in school and these disadvantages are rampant throughout society keeping the poor down.
See, these are obvious solutions to insignificant problems. The harshness of the conservative movement is being brought to light. Call it karmic justice, or just people getting fed up with the rich taking everything and leaving the poor with nothing, but this coutry is changing. There will be a leveling of the playing field, so that finally we will be ushered into a great society. In 25 years you’ll look back at Obama as the greatest president ever and be embarrased by your pettiness.
Jose,
I find it interesting that you claim the conservative movement has no sense of logic, when in actuality the items you comment on are the ones that are lacking in emotional appeal instead. Your arguments are emotional, not logical.
In a society where all are equal, what incentive does anyone have to work harder to fund this universal healthcare? What incentive do they have to become doctors, lawyers and engineers when working equally as hard will earn them the same healthcare, rights, and wealth? The problem is that if we all are receivers, none of us will have incentive to be the providers.
Lynn,
Its true that my arguments are definately compassion laden, but that does not devoid them of the supreme logic. Sometimes I talk over peoples’ heads, so some people miss it. Sorry.
As to your 2nd question about the benefit to work when all people are equal. I would first like to point out how you used the term equal. You used it to refer to the amount of wealth the person makes. Therefore you already have a pre-conceieved idea that the rich are superior and deserve more, whereas the poor are inferior and deserve less. That’s exactely what I’m trying to come against. That’s the thinking that makes conservatives think its ok to give the poor crappy public defenders with so many cases they can’t remember your name, in court, and discriminate against them with healthcare. If you argued the person is equal despite their wealth, there would be an argument, but you already lost the argument by stating that a person’s wealth is the equalizer.
As to you question about what would motivate two people w/ garunteed outcomes to work harder is their innate goodness that pushes them to do what is right for themselves, their country, and their neighbor
Jose,
Please don’t flatter yourself with your “supreme logic.” Your posts are a hodge podge of straw men, red herrings, false dilemma’s and many other logical fallacies.
I’m not going to defend Lynn’s post, but the assertion that conservatives look at the wealth of a person where as liberals do not is asinine.
Looking at the material one owns is the basis for the entire liberal philosophy. Nearly every Liberal issue is about giving money or material to some grievance group. This is what Obama is talking about when he says “economic justice.” They don’t care about true Justice, they want to look at everyone’s wealth before deciding what justice is.
Conservatism tries to level the playing field by getting the government out of the way so individuals can go as far as they want. Liberals seek to “level the playing field” by taking from one to give to another.
Also, mankind is not inherently good.
Ender,
The reason we need to give some money isn’t to make things unfair, but to allow the poor to compete. We want to open the opportunity for them to compete in this world. This spurs production as more people are able to start business that don’t automatically collapse as soon as that theif walmart comes to town.
Find some evidence man isn’t good. Why do we do so much good? How can man not be good and yet so many voted for Obama? People are putting aside their racism for the goodness thats in their hearts.
These are all excellent points- Americans would most certainly see a decline in the standard of care and timeliness of receiving procedures. Additionally, a single-payer system would enable the government to set its prices, dictating the profitability of medical devices and pharmaceuticals. U.S. companies, who have been on the forefront of R&D, producing the most advanced solutions utilized in medicine today, would take a hit to their profit. This decline would most certainly stifle the reinvestment in to further R&D efforts, resulting in a slower discovery of the cures for diseases like cancer that we so desperately need.
You don’t have to imagine this. It already happens. Maybe not at that level for so few, but the problem is so widespread in our local Children’s Hospital, that there are now two waiting rooms – one for those without insurance and one for those with insurance. Sometimes the insured patients get seen first (they certainly see the front desk first because that’s where the insurance card is presented). But sometimes, the uninsured tie things up. Academically, you might think this cruel to differentiate between the insured and uninsured as the hospital does, but for the times I’ve been in there with my own kids, I’ve made a couple of observations.
More often than not, the insured waiting room is full of people with obvious and visually identifable emergencies (the kids look sick or hurt). But the front waiting room, which is where everyone starts and where a lot of the uninsured wait, it’s clearly treated like a free clinic. I’ve talked to quite a few people in that waiting room over the years, and you have people coming in to get prescriptions or treatment for things usually covered by a regular doctor. But since non-emergency services are nearly impossible to obtain for free, the emergency room is the place to go.
Anyone who questions this need only head to a local metro hospital or two to find out.
Matt,
Good stuff dude. I have to say that your points make sense but they lack, well, heart. Will a compassionless government make the best decisions? I do not know.
Small government, with more state rights is the best way to go. The idea of a “universal healthcare system” honestly scares me. We have to look at the precedents before a nation like our own even considers taking on such a deep task. Lets look to the socialization of other countries like Western Europe… Ineffective. Why even consider such drastic socialization if it did not work in our brother countries across the Atlantic? I don’t get it.
Much Love!
Another in a long line of fantasies-packaged-as-policy proposed by the left. Just as they preach ‘never let a crisis go to waste’ they practice ‘never let logic, history, or facts get in the way of emotionally charged, ‘compassionate’ and economically ruinous attempts at utopia’. Yay liberalism!
I did business in South Africa. The Hyatt Regency in Johannesburg was taken over by squatters and paying guests were turned away. I was told that when the government was turned over to the Mandelas, they announced a policy of free medical care for all. The sick villagers poured into the city only to discover that there were no doctors or hospitals.
When people vote they should be asked one test question – “Do you believe there is such a thing as a free lunch?” Of course if you plan to attack anyone with more money than your average constituent, maybe, for awhile, there will be a free lunch. I have blue eyes, a black car, and I am a Christian – I’m a dead man.
I’m sorry I understand your point, but you’ve failed to mention that private health care and insurance will remain in tact but there will be the option of government aid for those who do not have healthcare. President Obama wants to lift some of the restrictions insurance companies have so that it isn’t as difficult for some to receive private healthcare. Back in November I read the entire health care plan and that was it in a nutshell. I don’t think it has changed since then.
Private health care and insurance may remain in tact in Obama’s more moderate proposal. In this case, however, you would still have the same problems as with total universal health care. A huge portion of the population would still be getting free health care with no incentive to act prudently. Hospitals and doctor’s office would be flooded with visits from people acting with little discretion, and incentive for doctors to go through years of training would be greatly reduced.
Add to this the important layer that taxpayers would be using money they earned and worked for to pay for someone else’s indescretion, and not much changes from his more extreme proposal. When thinking about justice, does it seem just to have a certain portion of the population pay the high cost of private insurance and then still pay the costs of universal health care for the remainder of the population?
Actually, Obama has been strategically vague in his descriptions of National Healthcare. The premise behind socialized healthcare has been to help those who cannot purchase or receive it on their own. Recently, it has been released that the U.S. is already paying for national healthcare for about 50% of the population through Medicare and Medicaid! Obama’s health Advisor recently said that the new plan would now offer coverage to middle class families as well. If we extend this care to about 95% of U.S. Citizens, you and I can expect to see our current Medicare / Medicaid contributions double on each paycheck (approximately 6% on each paycheck if you earn less than $102K). By the way, middle-class is typically defined as earnings less than $150K per household. Anybody earning more than that would be tasked to pay for everyone else, as well as themselves.
However, an interesting article in the AP today weighed the cost to us as a nation and stated:
“If a public plan was open to all… and paid doctors and hospitals the same low rates as Medicare, it would become the dominant insurer in the country… But if the plan were open only to individuals and small businesses, and paid rates similar to private insurers, its impact would be limited. In that case, the public plan would mainly be helping groups that now have a hard time getting private coverage. ”
If the goal, and the promises from the campaign trail were to help people who have a hard time getting private coverage, then it is unnecessary, costly, anti-capitalist and discriminatory to offer it to all but the “rich.”
Brittany,
I think the word you are looking for is “intact.”
Your summation of Obama’s health plan is grossly over simplified. You are completely ignoring the following:
1. The plan sets up a new program or in effect broadens the scope of Medicare and Medicaid, both of which are going bankrupt and are unsustainable. Making them larger or creating another cousin will only quicken the process.
2. The plan ignores the fact that Medicare and Medicaid have been taking money from the general revenue fund for years. They cannot exist on the paycheck deductions alone.
3. The plan also ignores how Medicare and Medicaid drive up the cost of regular insurance. They don’t have a real pricing model set up; they just tell the doctors what they will pay. Which shoves cost onto the private sector.
4. The plan creates a disincentive for employers to offer private healthcare. By taxing employers who’s health plan doesn’t meet the arbitrary standard set up by the government, it will encourage employers to drop coverage forcing people into the government’s plan.
5. The plan ignores every example of universal healthcare available to look at. Please read any honest article about Britain, Canada, and France etc. for more info.
I just really hope that these promises by the president would somehow be realized… that each of us will have health care benefits. I think we should also help the president to make these things become successful and realized.
Jose,
I see that I have struck a nerve with you, as you have resorted to personal attacks instead of logic.
Nonetheless, as seen in Matt’s latest article “Casey at the Bat,” Americans were granted three basic rights: Life, Liberty and the Pursuit of Happiness. You’ll note that this list does not include healthcare, wealth and prosperity. The government, and this nation, were never intended to guarantee those items. If any citizen is looking for those things from their government, he or she has chosen the wrong nation to call home. In fact, there are thousands of people waiting to gain citizenship- many of whom are coming from nations whose governments have sufficiently failed them by attempting to guarantee these items we are discussing here. My suggestion? Move aside, and let someone who so desparately wants to be a part of the good that we have established take up residence here instead.
Lynn, I definitely ascribe to those ideals, but you have to see that things like healthcare are aspects of life and liberty. People lose their lives because they can’t afford proper treatment. You can see the economic distinctions have stripped people of this right.
Don’t even get me started on liberty. You know that “there’s no rich man on death row.” The rich can get away w/ murder (literally) b/c they can afford some pricy lawyers, whereas the poor are screwed. The rich buy off politicians and have laws stacked in their favor so they can further oppress the poor.
Not everyone can pursue happiness with the odds stacked against them as the conservative desires for the poor.
Huge huge dilemma and what will become an epidemic.
No longer will we complain about 20 minute waits in the waiting room we will now wait weeks to even see if we can get the chance to complain about those 20 minute waits
Thanks for sharing. Doubt we’ll hear about this in the main stream media.
Having been part of an active duty military family for many years, I have already experienced the joys of “free medical care”. Waiting in the hallway of an overcrowded ER on a Friday night with my husband who had broken his collarbone while all the kids with colds whose parents either couldn’t or wouldn’t have them seen during regular clinc hours. Being told that although my knee was so degraded from osteoartritis that I couldn’t stand on it, I was too young to be considered for a knee replacement at 55. That’s just the tip of the iceberg. An emergency orthopedic appointment six months out for a friend who had fallen and could no longer walk without assistance. I could go on but I expect that you get the drift. Welcome to government managed healthcare.
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The military clinic example is invalid on seceral counts. Active duty military do not have the choice of a doctor. They also do not ‘pay’ because it is a condition of their military status. Why use this ‘overcrowded clinic’ mantra when clinics are not the issue. Why do you not use the the US Senate as an example. Never heard of them waiting in line at a clinic. (Maybe that’s why you didn’t use them as an example.) Maybe instead of demeaning a system that has not taken shape, you could advocate the same beneficial plum that they have secured for themselves at taxpayers expense.
I have government sponsored healthcare as a retired military veteran. I go to a doctor of my choice and any meds I need are approved by him. Although this care is an earned benefit, I have no reason to abuse it (where is the moral hazard?) In fact I reject any unnecessary costs because ultimately I am a taxpayer too. Although there are premiums involved , I believe them to be modest and necessary. Medicare premiums should be viewed constantly for sufficiency and for cost-cutting, as should Social Security and any other government sponsored plan. But when they require increased payroll taxes or premiums, or caps or age related adjustments, you seem to scream “no taxes” and your politicians quake at your wrath: where do you get the free lunch attitude? Where is the capitalist pay-as-you-go for what you get?? You remind me of those who wanted to irresponsibly privatize Soc.Sec. before last years financial disaster. Haven’t heard much about that lately!!
Personally, I doubt if ANY responsible healthcare plan can be devised in this country. By the time all the political compromises are made in deference (earmarks vs. re-election campaign funds) to the insurance & phamaceutical companys, and reaction to fear-mongering and skewed ideology, there will evolve the worst mess of a plan from all the greed and incompetance from our elected commercial representatives. Then you can say “mission accomplished” and “I told you so”. You will have missed an opportunity to promote a plan that suits your needs and that of your neighbors. Too bad. But the miscreants will be smiling like the idiots that they are.