Minimizing Coercion in Public Policy

[Darrell Hougen]

Hi All,

This notion has been sort of bubbling up in my recent thinking about the health care debate and other areas of public policy.

As Objectivists, we know what we would like to see. We would like to see a society that is free of coercion -- that is free of the initiation of force. However, if it is not possible to get all of the way there, that doesn't mean we can't get at least part of the way there. In that vein, I would like to suggest that public policy prescriptions be rated on how coercive they are. Naturally, less coercive policy prescriptions would be favored and more coercive policy prescriptions would be shunned.

For example, in the current debate over health care, there are several possible prescriptions for reform. One, that I would like to suggest is a voucher system in which poor people and people with chronic medical conditions would receive a voucher from the government to purchase insurance or to be invested in a health savings account (HSA). It would work as follows: An individual would be eligible for a voucher based on income and previous medical history. People that were poorer or had chronic medical conditions would be eligible for larger vouchers while people with a greater ability to pay or with no chronic conditions would receive less. The vouchers would be phased out at some point that would depend upon income and medical history.

For example, a healthy person with no income might be eligible to receive up to $3000 per year ($250 per month). That amount would be phased out at $20,000 in income. If the person had no income and was diabetic he would be eligible to receive $6000 per year. That amount would be phased out at $40,000 (i.e., at the same rate as the lesser amount). The cap might be set at $6000 for all existing conditions, so a person with diabetes and heart disease might receive the same amount as some someone that was just diabetic -- there would a limit to how much a person could receive from the government. (Individuals at higher income levels would be allowed to take a tax credit of up to a certain amount (which could also be $6000, say), but this is an aside in the current discussion.)

The voucher or income tax credit could be used to purchase insurance or be placed in an HSA. The money placed in an HSA could be withdrawn to pay legitimate medical expenses such as seeing a doctor or buying a medication. So, a person could decide whether he wanted to buy a comprehensive policy with a $10 deductible each time he went to the doctor or if he wanted catastrophic insurance and wanted to put the rest in an HSA that could be used to pay the doctor in cash for inexpensive procedures. The HSA could be rolled over from one year to the next and would be inheritable. The beauty of HSA's is that, because they are privately owned, people would tend to spend the money in them wisely, and that would help to drive the health care market to become more efficient thereby driving costs down and quality up. There have also been studies that show that people with HSA's and catastrophic care policies are happier with their policies than people with traditional insurance.

In this present piece, I am primarily concerned with coerciveness of various policies.

Public spending policies are basically coercive in two ways:

(1) They require the expenditure of taxpayer money, which is coercive to the taxpayers in proportion to the amount of money spent, and

(2) They can impose rules on the recipients of the money, either directly or indirectly.

Naturally, getting the government completely out of the health care system, neither collecting taxes nor spending money on health care would be the least coercive policy. However, such a solution is unlikely to be politically palatable in today's political climate.

Looking at the above proposal for health care reform, it can be seen that it is minimally coercive. It provides money to people that need it to spend on health insurance or save in a special health saving account. It would be coercive to the extent that the money provided in the form of vouchers could only be spent on health care. The money could not be spent on food, clothing, transportation or other needs or wants that the recipient might have. However, other than that restriction, no other restrictions would be placed on the manner in which the money could be spent (or saved) by the recipient).

The above proposal also places no restrictions on doctors or other health care providers, hospitals, clinics, pharmaceutical companies, or insurance companies. The individual receiving the money would be free to contract with any of those people or institutions in any manner he saw fit. In order to receive the provided money from the recipient, the afore mentioned people and institutions would simply have to be legitimate health care providers or health insurance companies. This might be viewed as an indirect restriction, but it is more of a restriction on the initial recipient than on the providers. Of course, there are other laws restraining health care providers, hospitals, clinics, drug companies and insurance companies, but those laws would have to be examined and modified separately from the current proposal.

The above proposal would, of course, be coercive to the taxpayer, but that is an unavoidable consequence of any public spending policy. However, one might argue that, by establishing a market in medicine that would help drive costs down, it would, in the long run also be minimally coercive to the taxpayer as it would require the smallest expenditure of public funds over the long run.

Using the coerciveness scale, the above proposal can be compared with current situation and other proposals being floated. For example, if one looks at Medicaid and Medicare, it is easy to see that they place thousands of pages of restrictions on health care providers and institutions. Those restrictions also impact patients who may not be able to obtain care. So, Medicaid and Medicare may be viewed as very restrictive.

The proposal of Universal or Single Payer health care is even more restrictive as it explicitly eliminates private insurance companies -- a big restriction on the insurance industry -- and forces patients, health care providers, and health care institutions to deal with the government. Such a socialized medicine scheme may be viewed as the most restrictive.

This is just an idea as this point. However, it would be nice/interesting if some free market institution were to take up ranking public policy proposals on a coerciveness scale or, perhaps, its inverse. Then, such rankings could be used to inform voters and drive public policy towards less coercive approaches.

One can also see that vouchers might be something that we should be advocating. Although they are not an ideal solution, they rate much better on the coerciveness scale than other approaches. So, for example, education is another area in which a voucher solution would be far less coercive than the current, government run school system.

Darrell

[kiaer.ts]

Darrell I understand your motive. My problem with any such schemes of payments is that like the earned income tax credit, which was originally meant to compensate low income earners who would otherwise be better off remaining on welfare that have a low wage job and pay income tax, it simply becomes another way to give people ever increasing direct payments from the public trough.

I would rather see an end to the regulation of health insurance at the state level. There are 1300 health insurance companies in the US, and only six may do business in California?

How about tort reform and a cap on pain and suffering?

How about an end to regulations that turn what should normally be a high deductible plan for catastrophic coverage into a monstrosity that pays for your every aspirin pill and by hinding prices from the consumer makes them spiral upward and upward?

Finally, how about some sort of triage for emergency rooms to redirect the uninsured with colds to local clinics rather than actual emergency wards? There is where any scheme for the uninsured should go, and not into voucher payments to individuals who will simply convert those funds as they do now every first of the month with food stamps to cash illegally for pennies on the dollar.

[Chris Grieb]

Ted; I like your ideas much better than Darrell's.

Another entitlement program is not a good idea.

One small point. Don't you mean a cap on payments for pain and suffering not a cap on pain and suffering.

I think it is important for Objectivists and others to offer suggestions on how improving health care can be done.

[Darrell Hougen]

Another entitlement program is not a good idea.

Hi Chris,

I'm not sure what you mean by, "another entitlement program." Perhaps I wasn't clear, but I had intended my idea as a substitute for Medicaid and Medicare as well as a method of making sure that people in the middle, say between $20,000 to $40,000 received some sort of aid in dealing with pre-existing conditions. That would take one powerful argument away from the proponents of more government interference.

As a general observation, it seems to me that freedom lovers fail to move the ball down the field. I'm not saying that every Republican is a freedom lover, but, between the two major parties, it is the Republican party that primarily opposes the expansion of government and the Democratic party that calls for more government. So, when the Democrats have the ball, as they do right now, they strive hard to move the ball towards their goal post -- socialism. When the Republicans have the ball, they just sit on it. I'm looking for ways to move the ball a significant distance down the field and I think my plan does that.

Yes, there are many other ways to improve the situation and Ted mentioned some of them, but his suggestions do not address the current mess we have with Medicaid and Medicare which are spiraling out of control or take away the liberals arguments about the uninsured or pre-existing conditions. Although the number of people with pre-existing conditions is relatively small, most people know someone with a pre-existing condition and empathize or sympathize with that person.

In the long run, I would like to see the system move towards one in which charities pay for people that can't afford or obtain care. But, in the mean time, we need to move the ball. We need to at least get a first down, even if we can't score a touchdown.

Darrell

[Darrell Hougen]

Darrell I understand your motive. My problem with any such schemes of payments is that like the earned income tax credit, which was originally meant to compensate low income earners who would otherwise be better off remaining on welfare that have a low wage job and pay income tax, it simply becomes another way to give people ever increasing direct payments from the public trough.

I would rather see an end to the regulation of health insurance at the state level. There are 1300 health insurance companies in the US, and only six may do business in California?

How about tort reform and a cap on pain and suffering?

How about an end to regulations that turn what should normally be a high deductible plan for catastrophic coverage into a monstrosity that pays for your every aspirin pill and by hinding prices from the consumer makes them spiral upward and upward?

Finally, how about some sort of triage for emergency rooms to redirect the uninsured with colds to local clinics rather than actual emergency wards? There is where any scheme for the uninsured should go, and not into voucher payments to individuals who will simply convert those funds as they do now every first of the month with food stamps to cash illegally for pennies on the dollar.

Hi Ted,

You have some great suggestions, but first let me address the notion that my suggestion would add to the current mess. Perhaps I wasn't clear but my plan was meant as a substitute for Medicaid and Medicare and a way of offering some aid to people in the middle with pre-existing conditions. This would, in my view actually reduce government involvement in the marketplace, both by wiping out most regulations and by eventually reducing the cost of medical care. In my view, the universal existence of HSA's would do more to bring down the cost of care than almost any other single reform. I would suggest reading David Gratzer's book, "The Cure, How Capitalism Can Save American Health Care".

The second most significant reform that could be made would be to end state mandates -- which you mentioned -- or to allow people to buy insurance across state lines -- which would have the same effect and which you also mentioned. The history of mandates is interesting. After Hillary Clinton's failed attempt to take over health care in the early to mid 1990's, many states went ahead and implemented many of her suggestions on the state level. Liberals like to complain about the spiraling cost of health care without acknowledging that they are largely the cause of the increase.

Some of the ideas in Hillary Care that have been passed by some of the states and are now up for debate again at the national level include "guaranteed issue" and "community rating" which are just variants on the same bad idea. The first guarantees that people with pre-existing conditions can buy medical insurance and the second says that the cost of insurance must be based on a community average, rather than individual differences. The effect of both is to drive the cost of medical care through the roof. In Vermont, where both guaranteed issue and community rating were tried under then governor Howard Dean, now head of the Democratic National Committee, the cost of insurance nearly tripled and most insurance companies left the state. Later, I believe those particular regulations were repealed. So, at least know that when you hear him talking about his successes with reform in Vermont that he is a bald face liar.

Of course, states also mandate that insurance policies provide all kinds of coverage, whether the buyer wants them or not. I saw or heard a laundry list of them the other day that was pretty comprehensive, but I don't remember what was on it, but I know that it included things such as psychiatric care, chiropractic care, and acupuncture. Unfortunately, business people are sometimes their own worst enemies. Once they see that the state is willing to pass mandates for this and that, they jump on the band wagon to make sure that their particular specialty is covered, thereby contributing to the overall problem.

Tort reform is also a good idea. Unfortunately, it is the only idea that I hear a lot of conservatives touting and it doesn't really get to the heart of the problem. Tort reform would help to eliminate defensive medicine and defensive insurance practices, which may increase costs by as much as 50%, but it doesn't really get to the heart of the problem. Tort reform would provide only a temporary reprieve. Even with tort reform, health care costs would continue to spiral upward because of the fundamental, structural problems with the current system -- tax policy that favors insurance over cash payments, intrusive government "insurance" in the form of Medicaid and Medicare, and grossly instrusive state mandates. My proposal above, addresses the middle of those three problems.

Until the three fundamental problems of the health care system are reformed, health care costs will continue to rise rapidly. In a truly free market, health care costs should actually drop over time and I believe my proposal for addressing the issue of Federal government intervention would allow the market to function in a nearly normal manner while also being politically palatable.

Darrell

[Selene]

Folks:

Sometimes it is best to give a clear example. If I live in Connecticut and I could buy a policy from Las Vegas, I would get a much less expensive policy because in the home state, Connecticut, there are mandated coverages which include in vitro fertilization and hair transplants for example. Well let us say that I am willing to take the risks for myself on those items, I would not be forced to pay for "insurance" on those items.

In fact, I would be able to put away tax free in the HSA account those monies for that contingency.

This is the major problem with the "insurance" exchanges or cooperatives because there would be a regulated dictatorship which would not look like the single payor or public option, but would be the regulatory foundational cornerstone for that event within 5 to 15 years.

Triage rooms would be an excellent idea. Alternative medicine being legitimized is critically important in my opinion. Additionally, similar to a clean driving record or the DDC [defensive driving course credit] incentives and rebates can be built into policies.

Good discussion.

I also believe that there is a pecuniary motive behind O'biwan and his marxist attempting to seize the health component of our economy and that is massive reserves of capital that the insurance companies live on.

Finally, seizing the 12-16% of the job market used in health care will insure millions of jobs for the government to fill.

Adam

[jeffrey smith]

Quick thoughts:

1) A voucher program might well increase health care costs by pumping in that much more money to chase after health care.

2) Don't forget the impact that our current health insurance scheme has on business--it can eat up revenues/profits, and impact adversely on employment choices (the person who has a chronic condition is that much less inclined to seek another job, or even start their own business, if they can't be sure they will get reasonable insurance in their new circumstances). My employer is a rather large company that has chosen for the last few years to self insure when it comes to employee health insurance, using a national insurance company only as administrator. According to the info they've just sent out in the lead up to this year's benefit enrollment, they stated that the company pays 75 percent of medical costs (that's costs, not insurance premiums), compared to employees paying (through their premiums, deductibles, and copayments) the remaining 25 percent. And they're gradually pushing more of the costs onto the employees. Our plans are changing for the coming year, the most important change being that the deductibles will go up. For a single person like myself, it will go from $750 to $1150. That's not a small chunk of change the company has saved itself there.

3) Speaking as a lawyer--tort reform is over rated (it doesn't seem to have helped in Texas), and "defensive medicine" is really another phrase that really means "tests and procedures the doctor should be doing anyway, instead of relying on his sense of what "probably" is going on with a person's health.

4) Shouldn't we be making the case for lessening coercion overall, not just accepting the least of the possible evils? In this case, that would less regulation and mandates, as others have outlined already in this thread.

[Chris Grieb]

Darrell; I'm sorry I misunderstood your proposal.

I wanted to say thank you to all of the contributors to this thread. There are some excellent ideas.