Archives: 10/2008

Is Barack Obama’s Health Plan a Prescription for Socialized Medicine?

Barack Obama’s health plan would enroll more than 50 million Americans in new and existing government health programs, effectively doubling the Medicare rolls.  It would increase taxes on nearly all workers.  It would give the federal government near-total control over health insurance, by letting Washington control prices and dictate the content of every private health plan in the country.  It would create a new government agency whose research would help government and private insurers ration medical care.  Harvard University and Harris Interactive recently polled Americans who claim to know what socialized medicine is, and found:

  • 79 percent believe that universal coverage equals socialized medicine,
  • 73 percent said that socialized medicine exists when “the government pays most of the cost of health care,”
  • 60 percent consider Medicare to be socialized medicine, and
  • 57 percent believe Obama supports socialized medicine.

Obama has repeatedly voiced his support for a single-payer health care system – the type of plan most people have in mind when they use the term socialized medicine.  Many who support Obama’s health plan, such as New York Times columnist Paul Krugman, do so because they believe the Obama plan would lead to socialized, single-payer system. 

So is Obama’s plan a prescription for socialized medicine? 

Somehow, respectable folks at the Urban Institute, The New York Times, The Washington Post, FactChecker.org, and National Public Radio still say no.  Their reasons boil down to these:

  • It’s only socialized medicine if the government employs the doctors and provides health insurance directly.  But that can’t be right.  There is little functional difference between health care system A, a public program through which the government taxes and spends your money on its health care priorities, and health care system B, a completely “private” system in which the government forces you to spend your money on identical priorities.  What matters is not whether health care is nominally “public” or “private,” but who controls the resources.  Even Center for American Progress scholar Jeanne Lambrew acknowledges that a (nominally) private sector is no barrier to socialized medicine: “the government role in socialized medicine systems [can include] public financing of private insurance and providers.”
  • It’s only socialized medicine if there’s government rationing.  But that can’t be right, either.  Barriers to access occur when the government limits spending below what is required to meet patients’ demand for medical care. To say that socialized medicine only exists when there are waiting lists or other access problems is to make the rather curious argument that socialized medicine would disappear if the government wrote bigger checks.

I offer a more reasonable definition:

Socialized medicine exists to the extent that government controls medical resources and socializes the costs.

In a Cato Briefing Paper released today, I use that reasonable definition of socialized medicine to show how America’s health-care sector is already more than half-socialized, and how Obama’s health plan would take us the rest of the way there.

All That and a 30-cent Mojito

This AP story, which ran in the Miami Herald, is an example of some shockingly bad reporting:

A communist experiment is letting average government workers in this eastern city enjoy a few things only foreigners and monied Cubans can usually afford: a good burger, a kicking jazz bar and stiff cocktails.

Across the rest of the island, average monthly government salaries of 408 pesos, about $19.50, don’t cover grocery bills, let alone a night out. But in Bayamo the central government has made a special effort to support peso businesses, giving the lowly currency actual buying power.

Along the stylish pedestrian mall known as Paseo or ”The Boulevard,” six blocks of restaurants, barber shops, ice cream parlors and department stores give Cubans a taste of tourist life at local prices.

Jazz bands jam for free until 2 a.m. at the Piano Bar, where mojitos go for just 5.50 pesos, or 30 U.S. cents. A 1950s-style diner serves up tasty meatball sandwiches for about half a peso – the equivalent of three cents – and four scoops of the richest ice cream in Cuba for about the same price.

”Almost everyone who comes in is surprised at first. The music is good. The cocktails are strong,” said Ernesto Aldana of the Piano Bar, where the Cuba Libre – copious rum pours with ice and splashes of cola and lime – costs 4.80 pesos, the equivalent of less than 25 cents.

The intended first impression, I suspect: Wow, 30-cent mojitos? What an enlightened country!

My actual first impression: You know a country is having problems when a functioning ice cream parlor makes the international news. And, like everything in life, the experiment comes at a price:

Huge government subsidies are needed. Paseo businesses here take in only 1,000 to 1,700 pesos a day, or $50 to $80. And the program only took shape after Bayamo communists asked central government planners for special autonomy and won the right to sell regionally produced items such as rum, seafood, beer, yogurt, beef, ice cream and cheese to local residents, rather than shipping them elsewhere on the island.

”We would see products like powdered milk made here and sold somewhere else and we said, ‘How is this possible? If we make it in Granma, we should be selling it in Granma,”’ Alonso said.

However, rising global commodity prices have made Bayamo’s government subsidies more costly, while hurricanes Gustav and Ike in recent weeks dealt serious blows to Cuban food production.

The government recently ordered all provinces to contribute more food to all parts of the country and reduce Cuba’s dependence on foreign imports, said Humberto Rondon, technical director for production at a state cheese and ice cream factory outside Bayamo. In Granma’s case, officials will now have to ship about 80 percent of its cheese to points elsewhere in Cuba.

Despite the hurricanes and rising food prices, the Bayamo experiment is so successful that the central government in Havana is continuing to devote $10 million this year to reopen some peso businesses and cover operating expenses of those already established, Alonso said.

There are ordinary peso businesses all over Cuba, but the products are shoddy and service is mediocre. Shortages of everything from potatoes to pasta mean most of the dishes listed on peso restaurant menus aren’t available, while peso stores have long lines of customers for mismatched inventory on largely empty shelves.

Think this through: The state supplies the goods, supplies the money to “pay” for them, and supplies the money needed to keep the “shopkeepers” running their make-believe businesses. Generously, the state even deigns to let some privileged people occasionally feed themselves with slightly less supervision than usual. How kind of them!

It then declares a success. In reality, all that this “experiment” proves is that it’s possible to have a really good time on someone else’s money. But all good communists know this already.

What they really want from the “experiment” at Bayamo is not economic reform, but a steady stream of gullible reporters, each thinking that communism somehow magically produces something from nothing, at least once in a while. In that regard, the experiment has been a success: While our intrepid reporter appears to have gathered all the relevant facts, and even to have relayed them accurately, he never bothered to connect them, or to draw the picture as it really is. He reported on a fraud, relayed the facts that show it to be a fraud, and never once declared the thing for what it was.

One thinks of the old adage: Five minutes’ thought would have sufficed to solve this problem. But thinking hurts, and five minutes is a long time.

False or Misleading in Every Particular

Barack Obama currently has the following health-care ad in the field. 

It’s an effort to make Obama’s health plan appear moderate.  That’s quite a trick, considering the plan might give Washington more control over the health-care sector than the Clinton health plan.  So pretty much the only way they could create the appearance of moderation was to write a script that is false or misleading in every particular.

The ad begins:

Health care reform.  Two extremes.  On one end, government-run health care, higher taxes.  On the other, insurance companies, without rules, denying coverage.  Barack Obama says both extremes are wrong. 

Those are not opposing extremes.  In fact, Obama pursues government-run health care, higher taxes, and insurance companies denying coverage, all at once. 

  1. Obama expands government-run health care.  Obama proposes to create a new government-run health care program modeled on Medicare for people under age 65.  One estimate suggests that program would enroll 45 million Americans.  He also proposes to expand Medicaid and the State Children’s Health Insurance Program.  Those expansions would enroll at least another 6 million Americans in government programs.  He also gives government a great deal more control over private-sector health care.  (See below.)
  2. Obama pursues higher taxes.  Funding those government programs will require higher taxes.  Obama admits he would raise taxes on those earning more than $250,000 per year, but that’s just the tip of the iceberg.  Obama would increase taxes on (nearly) all workers.  His proposed “pay or play” employer mandate would take money out of workers’ paychecks before workers even see it.  Finally, Obama would require insurance companies to charge healthy 18-year-olds the same premiums as 55-year-olds with multiple chronic conditions.  That constitutes a further tax on young and healthy workers that would force them to pay far more in premiums than they generate in costs. 
  3. Obama encourages insurers to deny coverage.  If the average 18-year-old makes $1,000 in claims per year, the average 55-year-old makes $20,000 in claims, and each pays a premium of $12,000, whom will insurance companies court, and whom will they avoid?  By requiring insurers to charge everyone the same average premium, Obama guarantees that insurers will avoid and provide lousy care to the sick whenever possible.  That problem already exists in states with community-rating laws and the Medicare program.  It doesn’t even matter if insurers deny care to the sick deliberately or not; Obama would reward them even if they do so unintentionally.  Finally, Obama proposes a new federal agency whose very purpose is to help insurers deny care.

The ad continues:

His plan.  Keep your employer-paid coverage.  Keep your own doctor.

Actually, once Obama gives himself the power to dictate the price and content of every health plan in the nation, his first act would be to eliminate the most affordable 30-50 percent of health plans currently on the market.  At the same time, his National Health Insurance Exchange would set off the ol’ adverse selection death spiral, which numerous studies suggest would eliminate comprehensive health plans from the market.  An awful lot of Americans would have to switch health plans, and would lose their doctors in the process.  Those who go from private to Medicaid coverage are going to have an awful time finding a doctor.

Take on insurance companies to bring down costs.  Cover pre-existing conditions and preventive care.

Nothing in the Obama plan would “take on insurance companies to bring down costs.”  Covering pre-existing conditions would increase costs.  Obama proposes to force insurance companies to spend less on administration and more on claims, but that too would increase costs.  The insurance companies will just game and lobby Congress until Obama’s plan works to their advantage. 

Obama claims he would boost preventive care.  Yet his National Health Insurance Exchange would let people switch plans every year, giving insurers absolutely no incentive to invest in consumers’ long-term health.

Common sense for the change we need. 

Um, yeah.

“I’m Barack Obama, and I approved this message.”

Well, I suppose that part is true.

There is one ray of hope.  The beginning of the ad says that Obama thinks that “government-run health care [and] higher taxes” are “wrong.”  Maybe, with enough persuasion, we can turn him against his own health plan.

A Plan for Nation Building

To some fanfare, the Army has just released a new field manual, FM 3-07, Stability Operations [.pdf, 13.4 MB], which Lt. Gen. William B. Caldwell, IV, the commander of the U.S. Army’s Combined Arms Center, calls “a roadmap from conflict to peace, a practical guidebook” that “institutionalizes the hard-won lessons of the past while charting a path for tomorrow.”

Well.

Don’t get me wrong: it would certainly be a wonderful thing if we could figure out a way to achieve a peaceful world, but thinking that one has “a practical guidebook” to do so strikes me as naive.

I’m even more troubled by the presumptions underlying the new doctrine.  

In the foreword to FM 3-07, Gen. Caldwell writes:

America’s future abroad is unlikely to resemble Afghanistan or Iraq, where we grapple with the burden of nation-building under fire. Instead, we will work through and with the community of nations to defeat insurgency, assist fragile states, and provide vital humanitarian aid to the suffering.

I understand from a political perspective why it is important to differentiate the wars of the future from the wars of the present, especially Iraq. With 60 percent of all Americans believing the Iraq war to have been a mistake, you don’t get off to a good start by telling the public that the new doctrine will make it easier to fight future Iraq wars. Of course, FM 3-07 isn’t addressed to the public at large, or, to the extent that it is, one rationale for it is that had FM 3-07 existed in 2002, we might have avoided some of the mistakes in Iraq. Further, the public remains supportive of the mission in Afghanistan, despite our recent difficulties there, and the authors of FM 3-07 no doubt believe it will be useful there.

But how can we be so sure that future nation-building missions will not be conducted under fire? Are we so confident in the preventive measures set forth in FM 3-07 and elsewhere that we think we’ve discovered the secret to stopping wars before they begin? And with respect to working “through and with the community of nations” to fight common challenges, presumably this is the same community of nations that refuses to fight in Afghanistan, that shrinks by the day in Iraq, and that, generally speaking, has allowed its military capabilities to atrophy? (China and Russia being among the few exceptions). Count me a skeptic on all three counts.

The broader misconception underlying FM 3-07 is even more problematic. The manual asserts as a given that “the greatest threat to our national security comes not in the form of terrorism or ambitious powers, but from fragile states either unable or unwilling to provide for the most basic needs of their people.” Justin Logan and I took aim at this argument nearly three years ago, and again more recently, but the notion is now widely held across the political spectrum.

Notwithstanding the bipartisan enthusiasm for nation building, I stand by our original argument: most failed states do not represent a threat to U.S. security, and some threats emanate from perfectly healthy states. Given this, a blanket supposition that we must fix failed states in order to be more secure is badly mistaken.

Further:

If the costs of successfully administering foreign countries were low and the prospects for success high, the new strategy might make sense. However, a simple look at what it takes to “get nation building right” demonstrates that the costs of making nation building a core object of U.S. foreign policy…would greatly outweigh any benefits.

I returned to that theme last year with Ben Friedman and Harvey Sapolsky, in a paper deconstructing the inordinate faith, also expressed in FM 3-07, that better interagency coordination holds the key to success in nation-building operations. We noted “The trick in politics is not having the right plans; it is having the power to implement them. And in societies our military occupies, the power of the United States is severely circumscribed.” We continued: 

The functioning of a modern state requires the participation of millions of people who show up for work, pay taxes, and so on. People do these things because they believe in a national idea that organizes the state or because they are coerced. In attempting to build foreign nations, the United States is unable to impose a national idea and our liberalism, thankfully, limits our willingness to run foreign states through sheer terror.

If the United States occupies a country where the national identity is intact and simply assists in the management of its institutions and in security, state-building may succeed. But success requires the cooperation of the subject population or a goodly portion of it. That is not something that we can create through planning.

If we are right, first, that security is still necessary (but hardly sufficient) to achieving success in nation building, and second, that even the most well-executed plans for nation building are likely to fail, then we are in danger of merely compounding our past errors: absolving other countries of their primary obligations to provide security for their own people, and placing the burdens squarely on the shoulders of all Americans, but especially on the American military. Meanwhile, we will have signed up for an overarching strategy that will be extraordinarily costly in money and lives, time consuming on the order of decades, not years, and that ultimately depends upon the cooperation of the population within the host nation, cooperation that often will not be forthcoming.

One final point: we have allowed others to free ride on our stated willingness to play the role of global cop, a posture that FM 3-07 accepts as a given. The manual ultimately can’t address that deeper problem, however, because our military’s missions are driven by the policy choices of our civilian leaders. That said, the new doctrine seems to assume too much about the nature of the fights we are in, and that we are likely to be in in the future. If those within the military establishment aren’t willing to sound a cautionary note, then that cries out for dissent from outsiders.

Colleges’ Other Big Dance

Colleges and politicians love the Big Dance, but not the one you’re thinking of. No, I’m talking about the constant, nationwide tap dance around the mere possibility that super-abundant student aid might fuel rampant tuition inflation. Case in point, a lengthy article in the Boston Globe this weekend that flitted and twirled around higher-education costs but completely ignored the possibility that ballooning aid might abet mega-inflation. The closest the Globe came to tackling that very real possibility was this bit buried deep in the article:

It must be said that parents are not entirely blameless. For their money, they demand amenities like state-of-the-art gyms and dormitories in a dog-chasing-its-tail spiral.

The real problem, of course, is that much of the money parents are waving around to demand the best isn’t theirs at all: it belongs to taxpayers, a little tidbit that got nary a nod in the Globe. In the 2003-04 school year (the latest with available data), 48 percent of undergraduates received some sort of federal aid, including grants, loans, work study, or some combination thereof. Overall, inflation-adjusted aid coming through Washington rose 77 percent over just the last ten years, from $48.7 billion to $86.3 billion. Add to that $7.8 billion in state grants in the 2006-07 school year, $26.3 billion in grants from institutions, and $10.2 billion in private/employer grants, and two things are abundantly clear: there are tankers full of aid dollars out there, and they have to be playing at least some role—and probably a huge one—in driving up college costs.

So when will the media stop taking the higher education/politician party line that aid is the key to college access and has no impact on prices? I’m not sure, but I have a bad feeling that lots of the enjoyable big dances will have passed before it starts to happen.

Punish Goverments, Not People

The Washington Post implicitly calls today in an editorial for the U.S. to “punish” those Latin American governments that have been dismantling democratic institutions and attacking U.S. interests in the region. According to the newspaper, the weapon the White House and Congress could use is removal of unilateral trade preferences that Washington currently grants to countries such as Ecuador and Bolivia. The Post even mentions the benefits Nicaragua and Honduras get under CAFTA, as if these countries could be expelled from the regional agreement if their governments continue their anti-U.S. rhetoric.

The Post gets it wrong. By granting trade preferences to Latin American countries (whether through unilateral programs or trade agreements) Washington is not “subsidizing governments” as the newspaper puts it, but dismantling barriers so that Latin Americans and American companies trade products and services freely. People, not governments, trade.

If the U.S. government were to remove trade preferences to unfriendly countries in the region, it would be punishing the people whose jobs depend on exports to the U.S. market, rather than punishing their governments. The effect would be just the opposite of what the Post intents: it would leave unemployed tens of thousands of Latin Americans who would then depend more on government to subsist. It would empower the region’s populist governments by extending their popular base. And, it would arm the populists with ammunition as they will point at yet another example of American “aggression” toward their countries.

This is similar to the case of the U.S. embargo towards Cuba. Even though the Post’s editorial doesn’t go as far as proposing to cut off all trade between the U.S. and these countries, the suggestion is analogous.

With respect to CAFTA, it would be quite damaging for the U.S. reputation if it were to denounce that trade agreement in order to “punish” two of its signatories. Such a move would also harm friendly countries like Costa Rica, Dominican Republic, Guatemala and El Salvador and taint the U.S. as a serious and reliable commercial partner. FTAs with the U.S. would cease to be predictable and permanent tools to liberalize trade. It’d be an ominous precedent.

Interestingly, the Post doesn’t mention suspending foreign aid to these countries as a more effective way to punish their governments. Bolivia, Honduras, and Nicaragua are or have been in the payroll of USAID and the Millennium Challenge Corporation in recent years. Ironically, the MCC was conceived as an effective aid mechanism that would reward countries that show a “commitment to policies that promote political and economic freedom.” Just the opposite happened. What a surprise.

Let the Government Do It — and Only the Government

In his acceptance speech to the Democratic National Convention, Barack Obama stirringly declared that all people are connected: “It’s that fundamental belief — I am my brother’s keeper, I am my sister’s keeper — that makes this country work.” And in his appearance at Rick Warren’s Saddleback Church, he said, “America’s greatest moral failing in my lifetime has been that we still don’t abide by that basic precept of Matthew — whatever you do to the least of my brothers, you do to me.”

And some conservative commentators like Rush Limbaugh suggested that it was hypocritical of Obama to declare his belief that each of us is ”my brother’s keeper” while his own half-brother lives at subsistence level in Kenya. Shouldn’t being your brother’s keeper start with, you know, your brother?

But maybe that’s unfair. This particular half-brother, George Hussein Onyango Obama, is 20 years younger than Barack Obama, and they’ve met only twice. Why should he be responsible for his half-brother’s welfare?

But then I noticed something else. Barack and Michelle Obama gave almost nothing to charity until their income skyrocketed after his election to the Senate in 2004. Between 2000 and 2004, for instance, they made about $1,218,000 and gave $10,770 to charity, a bit less than 0.9 percent. In 2005 and 2006, Obama earned much more from his books, and his wife’s salary at the University of Chicago doubled. In those two years they made more than $2.6 million and gave just over 5 percent to charity.

And then Joe Biden released his tax returns. And as the TaxProfBlog says, “the returns show that the Bidens have been amazingly tight-fisted when it comes to their charitable giving.  Despite income ranging from $210,432 - $321,379 over the ten-year period, the Bidens have given only $120 - $995 per year to charity, which amounts to 0.06% - 0.31% of their income.” The average American in that income category gives far more.

So Obama and Biden believe strongly that we are our brother’s keeper. They believe in redistribution of income to the poor and the middle class (and the Wall Street bankers). Are they hypocrites when they don’t give much of their own money?

Maybe not. They’re not hypocrites if they believe that it’s the job of government to take care of the needy. And that it’s not the job of anyone else. The traditional American argument for welfare and other transfer programs is that government should step in to take care of needs that can’t be met through self-help, mutual aid, churches, or other charities. But there’s another view in modern America, a view that says helping people is the job of government in the first place. Advocates of that view complain that we shouldn’t expect private charity to do the job of government, that caring for the needy is rightly and appropriately a collective task that should be undertaken collectively (and coercively) by government. That would seem to undermine the notion of virtue; I might consider my personal charity a virtue, but how can I think of myself as virtuous if all I did was pay my taxes as ordered? But there are clearly people who believe that faith, hope, and charity are attributes of government, not of individuals, churches, and private charities.

If that’s what Obama and Biden believe–that personal charity is no substitute for government welfare and foreign aid–then they’re not hypocrites. They’re living by their beliefs. But those are not the beliefs and practices of most Americans, who give more money to charity than Obama and Biden and who are perhaps unsurprisingly more likely to give and to give more if they oppose government redistribution.

But if that is Obama’s position, then he should not say “I am my brother’s keeper.” He should say, “You are my brother’s keeper,” or ”Everyone is everyone’s brother’s keeper, and I as a politician will tax you to pay for his needs.”