Tuesday, December 29, 2009

Health care reform? Or just more of the same?

Lawmakers are currently attempting to pass legislation that will lower costs. A simple lesson in economics will show how their reform will actually increase costs. There are three main reasons why healthcare costs are increasing: the care is getting better, we are getting richer, and the patients are getting unhealthier. The reform, rather than fixing each of these, actually exaggerates these reasons.

If you compare the miracle of modern medicine to its grandfather of decades ago you will notice the drastic improvement due to technology and innovation. Better coverage comes at higher costs; to think that hospitals should be able to operate at the same cost today as they did even ten years ago, with all the technological advances and high-tech equipment they have access to now, is madness. Better care comes at a higher cost. Cutting costs would stifle innovation in the field of medicine. It inherently implies lowering the rate of return on investment of pharmaceuticals and machinery, meaning that people would not get much back for medical breakthroughs. This lack of incentive is enough kill innovation, decreasing the quality of our healthcare for all. The same goes for not just capital but also those in the profession, as salaries are slashed in an attempt to cut costs. Attempting to cut costs through this reform can only lead to decreased quality.

Healthcare has an income elasticity of 1.6, classifying it as a luxury good. This means that as people’s incomes increase they will spend a higher percentage of their income on healthcare. As I’m sure you have noticed America is continuing to get richer with GDP, and thus income, increasing about 3.3 percent a year. Thus, as our incomes grow over time the demand for quality healthcare is going to increase as well, driving up the price. This is not the fault of greedy insurance companies, but merely the work of the invisible hand. The reform would force every American to have insurance. Mandating that all citizens buy insurance would drive up the price of private insurance because of increased demand, crowding out those who could have afforded it but no longer can. This squeezes more people out of private insurance into the public option. There is no “choice” or “competition” in that.

We as Americans do not live healthy lifestyles. Obesity alone accounts for ten percent of healthcare costs directly, and a much larger portion of it indirectly. We fail to eat our fruits and vegetables that contain the nutrition we need to prevent cancer and other diseases. Poor lifestyle choices equates to a higher demand for healthcare, and once again higher costs. The Wall Street Journal wrote, “The prevalence of obesity rose 37% between 1998 and 2006....Obese people spent 42% more than people of normal weight on medical costs in 2006.” In encouraging people to choose healthier lifestyles we must provide the right incentives. Insurance companies can do this by offering discounts to those who exercise and eat their fruits and vegetables. On the other hand, by the government establishing a public option in which one can receive coverage at minimal cost to himself would incentivize continued unhealthy living, which only increases the cost.

Healthcare must be reformed, but we must do it the correct way. If cutting costs and providing healthcare for all is the goal then we must look at ending employer-based insurance. This would allow employees to have an open market and choose their own insurance, establishing real choice and competition. Creating Health Savings Accounts, in which people could roll a percent of their paycheck into a fund used only for healthcare like an IRA, would provide portability and security that we desperately need, without the $1 trillion expense of a public option and squashing innovation. Tort reform will decrease costs significantly by caping malpractice suits. None of these are in the current bills.

Sunday, December 13, 2009

obama's incredible threat

In his address at West Point last Tuesday, President Obama announced the deployment of 30,000 troops in Afghanistan. He also outlined his administration’s war strategy, announcing troop withdrawal beginning July 2011. Through the course of the evening, Obama also addressed liberal and conservative concerns regarding the course of the war.

Explaining the necessity of a 30,000 troop increase, he answered questions from the left regarding the legitimacy of America’s presence there, specifically noting distinctions between this war and Vietnam. Referencing al Qaeda safe havens along the Afghani-Pakistani border, Obama declared that the war in Afghanistan is an issue of national security, and that he did not want Afghanistan to become a hot bed of terrorist activity. President Obama also addressed conservative hesitancy in establishing an exit strategy and timetable for the war, arguing that a timetable will push Afghanistan to step up and assume responsibility.

Yet a major concern remained unanswered: If conditions in Afghanistan remain static or degrade further over the next 18 months, will the armed forces proceed with his strategy and begin withdrawing troops in July 2011? The answer offers insight into the real purpose of the surge and the actual effectiveness of a timetable. If yes, and the plan is to cut and run in 2011, regardless of success, we should withdraw now—suffering fewer losses and achieving the same results. If no, the timetable becomes obsolete. Either national security is the real objective, in which case a retreat would be ineffective and the answer should be no, or national security is not the true objective, and we should not send additional troops.

If the answer is no, however, then Obama’s timetable, becomes an incredible threat—politically opportune now, but irrelevant come 2011. The purpose of the timetable, as stated by Obama, is to provide a sense of urgency, encouraging Afghanistan to begin to take control. Yet Afghanis have no need to rush if the government recognizes that, if it is not prepared in 18 months, American troops will likely remain to safeguard national security. They will not feel the pressure, and the status quo endures.

Obama did reference this briefly. He stated that the number of troops withdrawn will depend on ground conditions, implying that the answer to my question is no, and underscoring his empty promise to withdraw. Let us hope, then, for the security of our nation, that this question need not be answered, and that troops can be safely withdrawn after 18 months of success.