Monday, December 9, 2024

No Mandate, But Still a Mess

By Kevin D. Williamson

Monday, December 09, 2024

 

Reactions to the murder of UnitedHealthcare CEO Brian Thompson have ranged from the insipid to the illiterate to the despicable. The neurotic need to imbue health insurance—an ordinary financial services product—with some kind of grand moral significance is, of course, part of the problem: If you treat a financial tool as a matter of good and evil—and if the most powerful people in the country insist that the evil predominates—then you should not be surprised when people start to take the idea seriously and act accordingly. 

 

A little bit of understanding would do a great deal to lower the emotional temperature of the health insurance discussion. But, of course, Washington is packed to the rafters with people who are rich and powerful only because they have a gift for raising the emotional temperature of a situation. Witness the unseemly spectacle of Sen. Ted Cruz, who sleeps at night on a mattress stuffed with Goldman Sachs money, getting woke with Robert F. Kennedy Jr. about evil corporations desiring to “poison” our children’s food. Nobody wants to calm down, which is one way you know that everybody needs to calm down. 

 

A bit of context. 

 

Writing in that ghastly corpse that still insists on calling itself The New Republic, Matt Ford writes: “The majority of adults in this country are legally required to pay health insurers each month under the theory that their payments will help defray future medical expenses.” I may be missing something, but, as far as I can tell, every asserted fact in that sentence is untrue. There was a time when the majority of Americans were legally required, in theory, to purchase health insurance—that was the so-called individual mandate under the grievously misnamed Affordable Care Act. The mandate was never enforced, and it was effectively repealed in 2017, when the penalty for noncompliance was removed. Some adults in this country, but far from a majority of them, “are legally required to pay health insurers each month,” those being residents of California, New Jersey, Rhode Island, Massachusetts, and the District of Columbia. As with the defunct federal mandate under ACA, these state-level mandates are not very strictly enforced in most cases. California, for example, has been successful in reducing the share of its population that is uninsured, but it still has a higher uninsured rate than does, say, Iowa. For comparison, the uninsured rate in Texas is 2.5 times the rate in California. 

 

Why was there a mandate under ACA?

 

Short answer: Because a lot of people who were smart enough to notice that Switzerland has a very good health care system were not smart enough to appreciate that Switzerland is full of Swiss people, while the United States is full of ungovernable maniacs. 

 

The ACA was an attempt to graft the basics of the Swiss system onto the American system—but, of course, it was designed by Americans, which meant that the authors tried to do it on the cheap and without the hard and unpopular parts. In spite of the entirely fictitious nonsense one hears from a great many progressives and nonpolitical Americans, there isn’t a lot of “free” health care in Europe or anywhere else in the world. Single-payer systems are, in reality, pretty rare, found mostly in the United Kingdom and its cultural satellites, such as Canada. What most European countries have is what we have in the United States: health insurance that is heavily regulated and partly subsidized, complemented by public offerings for the very poor, the elderly, and the otherwise uninsurable. California has reduced its uninsured rate not through rigorously enforcing its mandate but by putting a lot of money into its public program, Medi-Cal, which insures about 15 million people. (California’s uninsured rate probably would be lower if the state did not have an unusually large population of illegal aliens, who are not famous for complying with loosely enforced government mandates of any kind.) There are better and worse ways to do that. 

 

One can see the attraction of the Swiss system, which offers a little bit of something for almost everyone across the political spectrum. For libertarian and free-market types, there is the fact that there is no government-funded or government-provided health care or health insurance in Switzerland at all. Switzerland has an individual mandate, and it is ruthlessly enforced: If you fail to sign up for an insurance plan, then the government will assign you to an insurer, to which you then owe money for the premiums you would have paid during the period when you were in noncompliance. As a result of the Swiss commitment to following through on the unpopular and difficult part of the mandate policy, compliance is practically universal. And that matters a great deal: If insurers are required to accept all applicants without financial consideration for pre-existing conditions, then insurance is simply not an economically viable financial product. (And I’ll get back to why it is important to remember that it is a financial product rather than a medical one.) 

 

Where health insurance is the primary means of funding routine medical services (which is itself a big part of the problem; again, more on that below), you need a pretty good ratio of healthy young people to sick and old people in the system to make it economically sustainable. (That is, it is worth keeping in mind, at least as true of monopoly single-payer public systems as it is of private insurance, which is why everywhere in the developed world from Japan to the European Union is facing demographic Armageddon in their benefits system.) There are two ways to solve that problem: One is to allow insurers to refuse sick people, or people who are statistically likely to get sick, or to charge them a great deal more money for insurance—and that has proved to be politically difficult. The other way is to tell insurers that they cannot take age or health into economic account and then require everybody to buy insurance—otherwise, the incentives practically ensure that people will forgo insurance while they are young and healthy and demand it when they are old or sick. Having lightly insured young people and heavily insured old people isn’t actually a terrible idea, provided everybody is willing to pay what that costs—which, of course, basically nobody is.

 

If the Swiss system sounds like a great free-market alternative, it is—up to a point. But it’s not all Milton Friedman. There is a minimum plan that all insurers are required to offer—and required to administer on a nonprofit basis. There are lots of subsidies and lots of price controls and tons of regulation. But filling out forms is the national pastime in Switzerland, more so even than shooting or skiing. (Culture matters: Our Second Amendment speaks of a “well-regulated militia,” but it is the self-regulating Swiss who have a militia-based national defense system, a nation full of guns and a vigorous “gun culture,” and a homicide rate that is about one-half that of the United Kingdom and one-11th that of the United States.) As with U.S. health insurance, there are deductibles and co-pays (10 percent above a certain threshold up to a cap) to discourage over-consumption of medical services. 

 

The United States is governed by cowards, and so the dirty work—putting downward pressure on consumption—is jobbed out to the health insurance companies, which, in turn, are run by the kind of finance weenies who weren’t smart enough to make it on Wall Street, abetted by bottom-shelf middle managers, and overseen by the class of businessmen who are not creative enough to start businesses and too lazy to sell real estate. Dealing with health insurance companies is, along with the humiliations of commercial air travel and trying to cancel a gym membership or an online subscription, the leading cause of anti-capitalism in the United States; insurance companies have created more de facto socialists than every English-language edition of the works of Karl Marx put together. 

 

And so the U.S. system is a mess. We have notionally private insurance, but the government decides who gets covered, the terms of coverage, how prices are set, etc. There is no individual mandate, but insurers still have to take everybody and are not allowed to reject sick people or those likely to get sick, nor are they allowed to charge such beneficiaries economically appropriate rates. Men generally have lower lifetime medical costs than women, but insurers are forbidden to take account of that fact. (Because we all care so much about facts!) The government even penalizes insurers for excessive … efficiency, forcing them to pay out rebates if they fail to meet the government’s required medical loss ratios (the share of premium revenue paid out in benefits and quality improvement). Insurance companies cannot use prices to organize their business activities, and so they create ersatz prices for consumers in the form of absurdly complex and cumbrous procedures for reimbursement and approval, wearing the consumer down until he accepts a higher real cost or a lower real benefit. Transparency is out, opacity is in. Another way of saying this is that we have intentionally created an insurance system in which exhaustion and frustration are literally monetized (i.e., they are used in lieu of money). Any time you have a system in which prices are not permitted to do their work—coordinating scarce resources—then you end up with a system in which something else is used to try to get at the same result. Using the wrong tool for the job is always and everywhere the short route to failure. 

 

Like any other business, medical practices and hospitals and clinics and laboratories and all the rest of the firms that make up the health care industry know who their customer is. And it is not the patient, but rather the party that pays them. Ideally, the party that consumes the service and the party that pays for the service would be the same party—that simplifies things and makes sure that the incentives of the provider are more closely aligned with the incentives of the consumer. In a better health care system, consumers would simply pay for routine, foreseeable services the same way they pay for cars or cheeseburgers or trips to Disneyland or mobile phone services or anything else. Where consumers have choices—and I can hear your objections before you’ve even voiced them, so hold your horses; I’ve been down this road before—then competition among providers puts appropriate downward pressure on prices, encourages investment, improvement, innovation, etc. The mobile phone in your pocket is hardly even the same category of thing as that Motorola brick Gordon Gekko was carrying around back in the 1980s, and competition is the reason such devices have grown better (Gordon Gekko couldn’t use his phone to order sushi or get directions or watch a video) and cheaper (that Reagan-era phone cost 1.35 times the price of a Rolex Submariner, or more than $12,000 in 2024 dollars) while American public schools … have not improved on the price or quality fronts, to say the least. 

 

Now, to take the stupid and obvious hypothetical that somebody who hasn’t read this far already has emailed me or written in the comments: It is true that if you are hit by a gravel truck or that if you have lung cancer, then you are not in a great negotiating position. You aren’t going to take out your (remarkably innovative and surprisingly affordable!) iPhone and call an Uber to haul you to the next hospital in search of a better price. I’ll get to those scenarios presently, but, to reiterate: We have lots and lots and lots of ordinary, routine, foreseeable medical expenses that we should be paying for as though they were a cup of coffee or a Honda Civic, and we would almost certainly have radically better and more affordable care in those areas if we did. If your complaint is that people can’t afford to do that, then you have a tricky question to answer: If Americans as individuals and families cannot afford to pay for routine health care, then how the hell are Americans as one big indiscriminate national lump supposed to afford paying for routine health care? If nobody can afford it, then how can everybody afford it? Even if you deduct private profit and corporate administrative costs and such from the equation (which is nonsense, but, arguendo), the math doesn’t get a lot better. If your answer is “My nurse practitioner is too greedy—she drives a Lexus!—and rich people don’t pay enough taxes!” then you are a very silly person who doesn’t deserve to be taken seriously. 

 

Now, about those gravel trucks. 

 

Properly understood, health insurance is—repeat it one more time!—a financial product, not a medical product. It is not a club, nor is it, as that dope from The New Republic seems to think, some sort of pre-paid medical-fee scheme. Insurance is a hedge. Which is to say, it is a way of transferring a specific (very specific! Read the paperwork!) kind of financial risk from yourself to another party, which charges you a fee for assuming the risk. Having health insurance is no more an invitation to consume medical services than having mortgage insurance is an invitation for someone to default on a mortgage. But we live in a fallen world, and these things happen. Insurance is prospective, not retrospective: You can no more meaningfully insure someone against a pre-existing condition than you can meaningfully place a bet on last year’s Super Bowl. The odds of things that have happened having happened are 100 percent. Nor does it make very much economic sense to insure against ordinary things that are certain or nearly certain to happen. I don’t know whether my insurance covers the price of (cover your eyes, RFK Jr.!) vaccinating my children, but I’m going to get them vaccinated and assume that it will cost me a few bucks. 

 

When my first son was in utero, there was a little something that turned up on a scan that was worrisome. (Turned out to be nothing.) The doctor said we could get a fetal MRI and possibly learn something, but it was unlikely that insurance would cover it. “Fetal MRI” sounds really expensive, but we live in an age of wonders, and it ended up costing a couple of hundred bucks. Yes, that’s a heavier lift for people who make less money than my family does, but forcing insurance to cover it wouldn’t make it any less heavy a lift—the underlying expense would stay the same, but it would be laundered through the insurance system, adding complexity (and probably cost) to the procedure. A couple of hundred bucks in the long-term expense of having a child is not a very big deal. One could imagine a financial product intended to sort of smooth out medical expenses so that, say, a $1,500 procedure could be paid out in small increments over a year rather than all at once, which would be a convenience (with a price attached!) for families on tight budgets. Some people imagine that this is what health insurance is—but it isn’t. You don’t pay health insurance premiums in order to offset medical expenses—you pay premiums for the benefit of offloading the financial risk associated with sickness or injury, which is why you get something for your insurance premiums even if you go through life never generating a doctor’s bill. 

 

Conflating the financial benefit with access to medical services is at the heart of our misunderstanding of what insurance is and is for

 

About every third trip to the gun range, I’ll see a guy trying to use a knife as a screwdriver. Guys who go to gun ranges tend to be the sort of guys who carry knives—and you’d think that they’d carry appropriate tools, too, or at least have a few needful things in the truck (guys who go to run ranges tend to be the sort of guys who drive trucks), but, nope. There’s that one guy, trying to use a Benchmade Saddle Mountain hunting knife (you know: in case you unexpectedly have to skin a buck) to turn a flathead screw on a scope mount or something like that. It is, as the wise men say, the most expensive and least effective screwdriver you will ever use. And using health insurance for a routine $400 trip to the pediatrician is more or less that: the wrong tool for the job, and an expensive one. 

 

If you want to fix the problem, you need the right tool. And moral hysteria isn’t it. 

 

And Furthermore …

 

Adopting a pet shouldn’t be this hard,” says the Salon headline. I always enjoy it when progressives discover things like burdensome regulation and unintended consequences.

 

Try starting a business, kids!

 

Words About Words

 

Ye gods. I’m not exactly Mr. Feminist Ally or Mr. High Levels of Sensitivity, but I don’t think I would write “Her first date felt off” as a headline description of an encounter in which a woman says she was drugged and raped.

 

But, yeah: off. I guess so, Slate.

 

Foundered, not floundered, New York Times: “As Their Business Flourished, the Marriage Floundered.” To flounder is to flop around, fishlike; to founder is to run aground on the rocky shoals of marital alienation and then sink. 

 

Economics for English Majors

 

DOGE discourse is giving me a headache. It has been suggested to me that the thing to do is basically fire the entire federal workforce and then hire people back one at a time as the need for them can be documented. Here’s an even better idea: Why not fire the entire civilian workforce and replace them with … nobody? I’m sure an AI or whatever could do the job. Surely that would balance the budget?

 

No, of course not. The entire civilian workforce accounts for only about 4 percent of federal spending, and that’s all-in: salaries, benefits, retirement, etc. Cut half the military personnel on top of that (and most of those civilian workers you’ve already cut are in DoD, Homeland Security, and other defense and security jobs) and you still barely make a dent in federal expenditures. That’s because the U.S. government is not like a private business, and most of its expenses are not payments to federal workers—they are payments to your grandma, with Social Security, Medicare, Medicaid, and interest on the debt eating up the biggest chunks of spending. (National security all-in is just under 20 percent.) There are places where the federal payroll can and should be reduced, but that is not going to amount to very much when it comes to the main fiscal problem, which is the deficit. As with the conversations around health insurance, moral hysteria is no substitute for doing the g——–d math.

 

And Furtherermore …

 

Congratulations to the New York Times and W. J. Hennigan for this fascinating and terrifying piece. This is what newspapers are for. 

 

U.S. military personnel at Space Command, in Colorado Springs, have kept a close eye on Cosmos 2553 ever since it reached orbit. Bathed in the bluish glow of their computer screens, they sit and watch what’s going across all of space day after day, tracking the latest information on satellite constellations, coming rocket launches and the daily operation of the space-based systems that shape modern life.

 

But Cosmos 2553 is different. It circles Earth every two hours in a region called a graveyard orbit. Only 10 other satellites are out there, and all of them have been dead for years. The area is rarely used in part because it’s inside the Van Allen belts, zones of high radiation that encircle the planet.

 

That’s why Moscow claims Cosmos 2553 is there — to test out “newly developed onboard instruments and systems” against radiation. But what it’s really doing, U.S. officials say, is testing components for a Russian weapon under development that could obliterate hundreds, if not thousands, of critical satellites. Cosmos 2553 isn’t armed, but it does carry a dummy warhead, one of several details being reported here for the first time. So while the orbiting satellite poses no imminent danger, the officials caution it does serve as a forerunner to an unprecedented weapon.

 

Idiocracy isn’t the only satire that’s starting to look like prophecy

 

In Conclusion 

 

Of all the things that Pete Hegseth should be embarrassed of, this Wall Street Journal headline ought to be near the top of the list: “I’ve Faced Fire Before. I Won’t Back Down.” Hegseth served honorably in the military, by every account I’ve heard. And that is nothing like being accused of the sorts of things Hegseth is accused of—or the things that are obviously more than mere accusations. There are very few things more pathetic than a veteran trying to hide behind his service when facing criticism for behavior utterly unconnected to that service. That is some shameful stuff. A man with any real self-respect wouldn’t have permitted it to be published over his name. 

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