Paul Krugman Stars as the Quacky Witch Doctor in Single-Payer Sex, Wild Economic Lies, and the Mad Mad Medical Monopoly Videotape

Print: Paul Krugman the Witch Doctor

Dr. Paul Krugman, prominent liberal economist, steadfast tireless advocate of medical reform, argues that universal coverage is affordable.

“The truth is that we can afford to cover the uninsured. What we can’t afford is to keep going without a universal health care system.”

Paul Krugman: “A Healthy New Year”, 1/1/07, New York Times

Dr. Krugman worries about a middle class which has seen its wages stand still for a generation. He wonders: What could we do to improve the lives of the middle class?

“An effort to shore up middle-class health insurance, paid for by a rollback of recent tax cuts for the wealthiest Americans — something like the plan proposed by John Kerry two years ago, but more ambitious — would be a good place to start.”

Paul Krugman, “Progress or Regress?”, 9/15/06, New York Times
1 medical care percent of budget v housing food clothing_resize 200

His argument for covering children is eminently reasonable to any and all with ears willing to hear. Nobody questions a child’s right to an education from grades K through 12. Why shouldn’t medical care be guaranteed to all children of the wealthiest country in the world?

“A child who doesn’t receive adequate health care,” says Dr. Krugman, “like a child who doesn’t receive an adequate education, doesn’t have the same shot — he or she doesn’t have the same chances in life as children who get both these things.”

Paul Krugman, “A Socialist Plot”, 8/27/07, New York Times

The pundits and the prognosticators from the right are deaf to this basic argument. I have never seen a conservative address this fundamental issue — of the logical equivalence of public education and public medicine — in approximately 300 stories (by Dr. Krugman and others) on medical reform I reviewed to prepare this posting.

I have read many of Dr. Krugman’s stories and postings on medical reform from the end of 2005 forward. I have edited his argument into one full and complete picture. I then present the counter argument from a conservative perspective.

Dr. Krugman, a recent Nobel laureate in economics, a star columnist at the New York Times, who blogs as “The Conscience of a Liberal”, has been persistent in his writing on medical reform. He may deserve to be called the leading advocate pushing reform to the left.

“The truth is that there’s no difference in principle between saying that every American child is entitled to an education and saying that every American child is entitled to adequate health care. It’s just a matter of historical accident that we think of access to free K-12 education as a basic right, but consider having the government pay children’s medical bills ‘welfare’, with all the negative connotations that go with that term.”

Paul Krugman, “A Socialist Plot”, 8/27/07, New York Times
pay how much % of GDP_resize 200%

“We offer free education, and don’t worry about middle-class families getting benefits they don’t need, because that’s the only way to ensure that every child gets an education — and giving every child a fair chance is the American way. And we should guarantee health care to every child, for the same reason.”

Paul Krugman, “A Socialist Plot”, 8/27/07, New York Times

If we are the only wealthy country in the world to deny all citizens medical care, shouldn’t we consider ourselves lesser for forcing the poor, including their children, to subject themselves to a system which automatically categorizes them as something less than the rest of us? Should the poor receive the same care as a standard-issue holder of medical insurance from a major carrier?

Why is it acceptable that 50 million persons are in a limbo without a formal policy and dependent upon emergency rooms and charity and out-of-pocket payments and the grace of God? Haven’t we made our country less than all of those other countries which have given every citizen medical care–some of whom have managed to provide excellent care to all citizens regardless of financial standing?

***

How do you argue with Dr. Krugman’s point when he faults conservatives far having little or no commitment to universal coverage?

“What’s still missing, however, is a sense of passion and outrage — passion for the goal of ensuring that every American gets the health care he or she needs, outrage at the lies and fear-mongering that are being used to block that goal.”

Paul Krugman, “Republican Death Trap”, 8/14/09, New York Times

“After all, every other advanced country offers universal coverage, while spending much less on health care than we do. For example, the French health care system covers everyone, offers excellent care and costs barely more than half as much per person as our system.”

Paul Krugman, “Help Is On the Way”, 7/6/09, New York Times

Instead of offering care to all, insurance companies are “working harder than ever at identifying people who really need medical care, and ensuring that they don’t get it. In the past, they mainly concentrated on screening out applicants likely to get sick. Now, it seems, they’re also devoting a lot of effort to finding pretexts for revoking insurance after they’ve already granted it. They typically do this by claiming that they weren’t notified about some pre-existing condition, even if the insured wasn’t aware of that condition when he or she bought the policy.” (Insurance Horror Stories, 9/22/06, NYT)

Instead of money going to medical attention for the sick, our insurance companies are avoiding people who need coverage “so a large fraction of premiums in the individual market goes not to paying medical bills but to bureaucracies dedicated to weeding out ‘high risk’ applicants.” (Gold Plated Indifference, 1/22/07, NYT)

We take money from care for the sick, and use it to deny people care: How could anybody agree, in an ideal sense, with this priority system?

As a fix, Dr. Krugman is inclined toward the simplicity of a single-payer plan for all. If a single-payer plan for all were adopted, all private primary-care medical insurance companies would go out of business. The private insurance market would be a minor factor in the overall scheme of things.

1 gdp cost national_Health_Expenditures_as_a_Share_of_GDP__1980-2040

“The clean solution to this problem is for the government to provide insurance to everyone.”

Paul Krugman, Notes on “Gold Plated Indifference”, 1/22/07, New York Times

With the change, according to Dr. Krugman, all can be covered. The price would actually be less, he says, than our current total outlay.

“If you do the math, it becomes clear that covering everyone under Medicare would actually be significantly cheaper than our current system.”

Paul Krugman, “Death by Insurance”, 5/1/06, New York Times
The Failure of the Free Market

The arguments against the use of a free market in medical insurance were best made, according to Dr. Krugman, by Kenneth Arrow in his paper “Uncertainty and the Welfare Economics of Health Care” (The American Economic Review, December 1963). The gist of the paper, according to Dr. Krugman, is that “health care can’t be marketed like bread or TVs.”

He describes two distinct aspects of health care, as defined in the Arrow paper, which make it unworkable as a free-market business.

“One (special aspect of medical care) is that you don’t know when or whether you’ll need care — but if you do, the care can be extremely expensive.”

Paul Krugman, “Why Markets Can’t Cure Healthcare”, 7/25/09, New York Times

Because none of us can afford major medical costs out of pocket, “this tells you right away that health care can’t be sold like bread. It must be largely paid for by some kind of insurance. And this in turn means that someone other than the patient ends up making decisions about what to buy” (my emphasis). (Why Markets Can’t Cure Healthcare, 7/25/09)

I believe Dr. Krugman is saying that since the consumer can’t know what he or she should purchase in a medical insurance package, as they don’t have experience dealing with major medical events, they can’t make an educated decision about what to buy. Thus “choice is nonsense when it comes to health care.” (Why Markets Can’t Cure Healthcare, 7/25/09, NYT). The buyer is ill equipped to make the decision.

Dr. Krugman also reminds us that medical care is as different for each person who must use it as are the number of diseases which may require treatment.

“The second thing about health care is that it’s complicated (my emphasis), and you can’t rely on experience or comparison shopping. (‘I hear they’ve got a real deal on stents over at St. Mary’s!’).”

Paul Krugman, “Why Markets Can’t Cure Healthcare”, 7/25/09, New York Times
2 compensation growth and net of health costs

Someone other than the buyer makes a decision about what is going to be purchased in medical insurance. The myriad of treatments which might be required make it a very complicated decision. You don’t know what you are buying, somebody else chooses it for you, and you don’t know how to compare the policies of different sellers because it’s too complicated to understand what has been chosen for you. This means that “health care just doesn’t work as a standard market story.” (Why Markets Can’t Cure Healthcare, 7/25/09, NYT)

***

He allows that socialized medicine, when a state pays for medical services, owns the hospitals, and employs and pays doctors and hospitals; or single-payer medicine, a partially socialized plan, with the state paying private hospitals and privately-employed doctors — that either of those two choices are not the only way forward.

Of all of the choices which have been tried, none of the choices, according to Dr. Krugman, would be described as being “based on the principles of the free market, for one simple reason: in health care, the free market just doesn’t work. And people who say that the market is the answer are flying in the face of both theory and overwhelming evidence.” (Why Markets Can’t Cure Healthcare, 7/25/09, NYT)

The dynamics of medicine work against a free market because, to an insurance company, paying for your care is a “loss” or “medical costs.” They can make money by denying as many claims as possible and by refusing to cover people who may need care. Insurance companies spend time, effort, and money to deny claims and deny coverage and rescind coverage—creating much greater administrative costs than a single-payer system. A private insurer, therefore, “spends a lot of money on socially destructive activities.“ (Why Markets Can’t Cure Healthcare, 7/25/09, NYT)

pay how much three charts usa v other countries

If regulation requires that insurance companies cover those with pre-existing conditions, the private insurance company will fail because “an insurance plan offered to everyone at the same rate would be a great deal for relatively sick people, a poor deal for the healthy. So one of two things happens to private insurance. Either plans go into the ‘adverse selection death spiral,’ as sick people flock in, driving up rates, driving out more healthy people, and so on. Or insurance companies spend a lot of the money they receive in premiums screening out “high-risk” clients, so that the system has huge overhead and the neediest cases are excluded.” (Gold-Plated Indifference, 1/22/07, NYT).

Conservatives continue to insist a free market can cure healthcare, says Dr. Krugman, even though there is no evidence of such success.

“In a way, this is the flip side of the persistent belief that the free market can cure healthcare, even though there are no places where it actually has; people also believe that government provided insurance can’t work, even though there are many places where it does — and one of those places is the United States of America.”

Paul Krugman, “Why Americans Hate Single-Payer Insurance”, 7/28/09, New York Times

“So when you hear people like (Representative Jim) DeMint — or conservative economists — preach the wonders of a market-based health care system, bear in mind that this is what it would look like: an America in which nobody who has ever had a major health problem, or had a minor health problem that for some reason bothers the insurance company, can get coverage. Believing that it would turn out otherwise is the triumph of ideology over experience.”

Paul Krugman, “Demint Offers a Teachable Moment”, 7/27/09, New York Times

Dr. Krugman attacks the primary argument from conservatives about their approach to the reform of medical care. The gist of the conservative argument is that medical costs rose high and fast because people who use medical care pay little or nothing for what they receive. Insurance covers the bill. So the medical-care user doesn’t care about getting a good deal or shopping around. The bill is somebody else’s problem.

cost of medical care family four

“What conservatives in the ‘consumer-directed’ health movement believe, however, is that the big problem is ‘moral hazard’ — people consume too much medical care, because someone else pays for it.”

Paul Krugman, Notes on “Gold-Plated Indifference”, 1/22/07, New York Times

“What’s driving all this is the theory, popular in conservative circles but utterly at odds with the evidence, that the big problem with U.S. health care is that people have too much insurance — that there would be large cost savings if people were forced to pay more of their medical expenses out of pocket.”

Paul Krugman, “Gold Plated Indifference”, 1/22/07, New York Times

How can anybody make the conservative argument when looking at a major medical event? Are the conservatives saying that a person undergoing cancer treatment takes inappropriate advantage of their insurance because they pay nothing beyond their annual deductible? Is a person who has fallen down the stairs taking advantage of their insurance company because their doctor recommends three days in the hospital – none of which the patient will pay for? It’s unreasonable. The moral hazard argument has a place in medical reform, but not as the center of what needs to change.

The conservative argument on moral hazard makes sense when you analyze the patient history of a hypochondriac. It makes little sense for the patient who has fallen down the stairs or contracted cancer. For major medical events the moral-hazard argument is a joke. We know it’s a joke because this has not been a problem with countries whose medical system works and works well with modest co-payments. You can’t make up cancer to get free cancer care.

HAVE YOU SEEN A MONOPOLY STATE?

Dr. Krugman also recognizes, in a matter crucial to the theme here, that politicians are blocking reform because the medical insurance market is controlled by monopolistic competitors. They rule supreme over state-wide markets.

“The essential point here is that Republicans don’t want any competition for private insurers,” says Dr. Krugman. “It’s not about free-market principles — in many cases, insurers are in effect monopolists. It’s about protecting the vested interests.”

Paul Krugman, “Republicans Who Say Ni”, 6/23/09, New York Times

Democratic politicians too are beholden to high-power local medical insurers.

“In fact, I may have a new hypothesis about the political economy of the health care fight. One thing that’s obvious, if you look at the balking Democrats I chided in today’s column, is that almost all of them come from states with small population. These are also, by and large, states in which one or at most two private insurers dominate the market. So here’s a suggestion: while the opponents of a private public plan say that they’re trying to defend market competition, what they’re actually doing is defending lucrative local monopolies.”

Paul Krugman, “Competition, redefined”, 6/22/09, New York Times

This is a point worth repeating. It moves to the heart of what we should be debating.

The hypothesis of this paper:

Fifty state-wide monopolies in medical insurance have ruined competition. The monopolistic medical insurers maintain illegal price controls by dividing a national market into 50 small pieces and by radically complicating competition with five systems of insurance — Medicare, Medicaid, VA, Group, Individual — to enforce high prices and limited supply. Imposing disruptive new regulation can break these monopolies. Create a national market by merging our five systems of insurance — Medicare, Medicaid, VA, Group, Individual — into one system. Start by requiring the top ten insurers to offer their best group medical plan to all buyers under identical terms in all 50 states. Model our new system on the one now used in Switzerland. We will reduce medical costs by 30% to 50%.

For Dr. Krugman, the answer for overturning the local monopolies is the public option. The public option is defined here as a medical insurance plan backed by the federal government.

“The truth is that the notion of beneficial competition in the insurance industry is all wrong in the first place: insurers mainly compete by engaging in ‘risk selection’ — that is, the most successful companies are those that do the best job of denying coverage to those who need it most.”

Paul Krugman, “Competition, redefined”, 6/22/09, New York Times
cost premium growth versus wage growth 1999 2007

He cites Arkansas as an example of a failed market which needs the public option to introduce competition.

“Arkansas is in effect a one insurer monopoly state, with no competition at all — unless a public plan is created.”

Paul Krugman, “Competition, redefined”, 6/22/09, New York Times

Medical insurance issued by the federal government will guarantee real competition for states dominated by monopolies.

“And those who prefer not to buy insurance from the private sector would be able to choose a public plan instead. This would, among other things, bring some real competition to the health insurance market, which is currently a collection of local monopolies and cartels.”

Paul Krugman, “Help Is On the Way”, 7/6/09, New York Times

Dr. Krugman accurately predicted, more than 2.5 years ago, the fight we now have about the public option.

“Conservatives will fight fiercely against these moves. They say they believe in competition — but they’re against competition that might show the public sector doing a better job than the private sector. Progressives should support these moves (for a public option) for the same reason. Ending the subsidies to middlemen (insurance companies), in addition to saving a lot of money, would point the way to broader health care reform.”

Paul Krugman, “First, Do Less Harm”, 1/5/07, New York Times

PRIVATE SECTOR ADMINISTRATION: A HIGH-COST FAILURE

A prime target and preoccupation for Dr. Krugman is administrative expenses. A public payer, he argues, has an inevitable advantage in the contest for low administration costs.

“Medicare manages to spend about 98 percent of its funds on actual medical care.”

Paul Krugman, “Death By Insurance”, 5/1/06, New York Times

He cites as an example of wasteful spending a program in Medicare in which seniors use government funds to buy a private-insurance policy.

“Medicare Advantage (the private insurance program in Medicare) now costs 11 percent more per beneficiary than traditional Medicare.”

Paul Krugman, “First, Do Less Harm”, 1/5/07, New York Times

The record on administrative costs of Medicare is very favorable, and, according to Dr. Krugman, points us in the right direction for controlling costs.

“Medicare, which is a universal health insurance program for older Americans, spends less than 2 cents of every dollar on administrative costs, leaving 98 cents to pay for medical care. By contrast, private insurance companies spend only around 80 cents of each dollar in premiums on medical care; much of the remaining 20 cents is spent denying insurance to those who need it.”

Paul Krugman, “Insurance Horror Stories”, 9/22/06, New York Times

Dr. Krugman is especially enthusiastic about the success and efficiency of the Veteran’s Administration, which practices a socialist model of medical care. The government pays the bills, owns the hospitals, and employs the doctors and nurses.

“The secret of its success is the fact that it’s a universal, integrated system. Because it covers all veterans, the system doesn’t need to employ legions of administrative staff to check patients’ coverage and demand payment from their insurance companies. Because it’s integrated, providing all forms of medical care, it has been able to take the lead in electronic record-keeping and other innovations that reduce costs, ensure effective treatment and help prevent medical errors.”

Paul Krugman, “Health Care Confidential”, 1/27/06, New York Times

At the VA, their only job is to take care of veterans. At a medical insurance company, one of their jobs is to make money. This means the person who needs care and the company paying for care have different goals. When an insurance company pays for treatment, they incur an expense. They make more money by denying treatment.

“This problem is made worse by the fact that actually paying for your health care is a loss from an insurers’ point of view — they actually refer to it as ‘medical costs.’ This means both that insurers try to deny as many claims as possible, and that they try to avoid covering people who are actually likely to need care. Both of these strategies use a lot of resources, which is why private insurance has much higher administrative costs than single-payer systems. … this means that private insurance basically spends a lot of money on socially destructive activities.”

Paul Krugman, “Why Markets Can’t Cure Healthcare”, 7/25/09, New York Times

THE ANSWER IS THE PUBLIC OPTION

Because the free market is a failure in medical insurance — because private insurers have high administration costs; because they have an incentive to deny claims when care was ordered by the doctor; because they try to rescind coverage following a major medical event; because they deny coverage to applicants if the person has past health problems; because insurers hide behind a complex myriad of legalese which is a medical care policy; because someone other than the buyer chooses what is included in the policy; because the complicated package of rights sold in a policy cannot easily be compared to the complicated package sold by another carrier; because all these failures are built in to a free market for medical insurance — the right way forward, according to Dr. Krugman, is a plan which embraces the power and simplicity of a state-run program.

pay how much gdp to medicine

“It’s very hard to regulate the insurance companies into providing the kind of service we want. The problem here is that this is one of those cases where market incentives are, in a fundamental sense, at odds with social goals; the invisible hand in this case happens to be on the wrong side. … insurance companies are in the business of trying to pay as little as they can. Rather than trying to bully them into not acting in their own interests, why not simply provide insurance directly from the government?”

Paul Krugman, “Insurance Horror Stories”, 9/22/06, New York Times

***

A state-centered plan, for this paper, is a liberal plan. A liberal believes in using the power of a federal or state government to solve a problem like medical insurance. They aspire to use the authority and wealth which a state body commands. A liberal is a socialist statist, meaning that they want to use the power of the state to provide for the material requirements of citizens; to provide social justice. The citizen, in turn, pledges loyalty and devotion to the state.

A conservative is an individualist, meaning that they want an individual to have the power to make his own decisions; about work, money, and the way to live life. He, in turn, is responsible for earning the money to pay for his own material requirements.

The primary goal of government is to protect an individual’s freedom to choose; to act as he sees fit. He is loyal to the state for protecting his freedom, but he typically holds a higher loyalty — a reverence for God. A conservative can live for his religion, even when his state fails. For a liberal, the state is his religion. A socialist has nothing without the state.

A conservative plan designs reform, for medical care or any policy, around an individual’s power to control decision-making authority. It especially emphasizes the freedom to choose in the marketplace from different alternatives – to choose between competitors. This basic dynamic is why you will hear, in the arguments of conservatives, the words “freedom” and “competition” and “choice”.

In this summary of liberal and conservative, you see the clash of ideas which raises great anger from both sides in the health care controversy. The argument in its simplest form is between the priority of state power versus the priority of individual power.

A conservative believes state power as the most dangerous force in human affairs. This conservative prejudice sees the human rights record of statist socialist governments in the 20th century. Approximately 160 million persons were murdered by their own government in socialist statist regimes. When socialists don’t murder their own citizens, their government will, after years or after decades, bankrupt the country they rule. Socialist governments typically employ both murder and bankruptcy.

The medical reform debate is far more consequential than a choice of competition versus single-payer. We will define, in its outcome, America’s future as socialist or capitalist, statist or individualist.

Leftist socialist states ruled in the USSR, China, and Germany. They committed the vast majority of 20th-century citizen murders. No right-wing state approached their record of murder.

Liberals embrace this murder record, the greatest crimes against humanity in the history of life, as the potentially dangerous consequence of winning state power. Conservatives reject liberalism as socialist governments end in bankruptcy.

In our war of ideas between conservative and liberal, the public option is a starting point for creating a single-payer medical insurance system and a socialist state. The public option is anti-conservative because, if it leads to single payer, then the individual has no choice about who will insure their medical coverage. More fundamentally, it cements socialist statism into American life; leading, if history repeats itself, to the persecution and jailing of dissidents, the bankruptcy of the state, and, in advanced stages, the murder of citizens.

When our American socialist state fails, and we have already adopted enough of socialism to guarantee our failure, separate from the management of healthcare, we will likely pass through anarchy — the loss of basic necessities, like food, water, heat, and a viable currency. Violence will increase. We may enter civil war.

Who can know what new government will be formed in the aftermath? We will have to rebuild as any country does after losing a great war. We will start with much less than we once had, but we will see that socialism is an evil dream, a murderous bankrupt reality, and a hate crime.    

***

The public option, according to Dr. Krugman, is an intermediate stepping stone capable of some day leading to a single-payer system. He recalls the argument which created the public option. It is a compromise. The single-payer system represents the true goal.

insurance type of coverage

“Also, and importantly, the public option offered a way to reconcile differing views among Democrats. Until the idea of the public option came along, a significant faction within the party rejected anything short of true single-payer, Medicare-for-all reform, viewing anything less as perpetuating the flaws of our current system,” wrote Dr. Krugman (Obama’s Trust Problem, 8/21/09, NYT). “The public option, which would force insurance companies to prove their usefulness or fade away, settled some of those qualms.”

Paul Krugman, Obama’s Trust Problem, 8/21/09, New York Times
1 medicare medicaid projected federal spending

The embrace of state power is arguably a means of controlling costs, both because it will be akin to public plans like Medicare, with its low administration costs, and also because it will force insurance companies to meet or beat the terms offered in a public option.

“One purpose of the public option is to save money. Experience with Medicare suggests that a government-run plan would have lower costs than private insurers; in addition, it would introduce more competition and keep premiums down.” (Obama’s Trust Problem, 8/21/09, NYT)

Paul Krugman, “Obama’s Trust Problem”, 8/21/09, New York Times

Dr. Krugman’s first choice is a Medicare-for-all—a single-payer system in which the government pays all the bills. The higher priority for Dr. Krugman is universal care, whether it is configured around a Medicare-for-all policy, or around private insurance companies selling competing policies.

“In an ideal world, I’d be a single-payer guy,” says Dr. Krugman, expressing his preference that all private insurance companies be closed to solve medical reform. “But I see the chance of getting universal care, imperfect but fixable, just a couple of years from now. And I want to grab that chance.”

Paul Krugman, “Why Not Single Payer”, 10/07/07, New York Times

Dr. Krugman is attracted to the simplicity of the single-payer, and outlines the broad reform which liberals should seek.

“The generic Demoplan, which basically follows the template laid down by John Edwards, involves four moving pieces: community rating, requiring that insurance companies offer insurance to everyone at the same rate regardless of medical history; a mandate, requiring that everyone have insurance; subsidies to help lower-income people pay for insurance; and public-private competition, in which people have the option of buying into a plan run by the government. The alternative would be single-payer, aka Medicare for all: a payroll tax on everyone, and a government insurance program for everyone. Wouldn’t that be simpler, easier to administer, and more efficient?”

Paul Krugman, “Why Not Single Payer?”, 10/07/07, New York Times
uninsured population

He speaks with deep enthusiasm of the Veterans Health Administration, its socialist model, and against “President Bush’s unrealistic vision of a system in which people go ‘comparative shopping’ for medical care the way they do when buying tile.” (Health Care Confidential, 1/27/06, NYT)

“It’s very hard to regulate the insurance companies into providing the kind of service we want. The problem here is that this is one of those cases where market incentives are, in a fundamental sense, at odds with social goals; the invisible hand in this case happens to be on the wrong side. As a society we — at least, most of us — don’t want our fellow citizens to suffer from lack of medical care when they are the victims of acts of God, like a tumor in the jaw of a child. But insurance companies are in the business of trying to pay as little as they can. Rather than trying to bully them into not acting in their own interests, why not simply provide insurance directly from the government?”

Paul Krugman, “Insurance Horror Stories”, 9/22/06, New York Times
The Quacky Witch Doctor has a Fetish

We know after reform the practice of insurance companies “devoting a lot of effort to revoking insurance after they’ve already granted it” (Insurance Horror Stories, 9/22/06, NYT) is on the way out — if reform passes. Rescinding insurance will be outlawed.

We will eliminate “bureaucracies dedicated to weeding out ‘high risk’ applicants.” (Gold Plated Indifference, 1/22/07, NYT). Every American will have access to medical insurance regardless of health or age.

government policy spending

Access is a privilege which confers a new responsibility. It must be both a universal right and a universal obligation. If everybody is insured, the burden is widely spread. Does anybody argue that spreading the burden among 300 million persons will increase the risk of issuing an individual coverage? The more we have covered, the better we can cover large claims.

Universal coverage negates a favorite argument of conservatives. They are outraged that people who are sick should be allowed to buy insurance. We can cure that outrage. If everybody is covered, that means the sick are covered too. All of us want that if we know it’s possible.

Many wealthy countries have great universal plans including such high achievers as the Japanese, the Germans, and the Swiss.  Why do we ignore their accomplishments? Why don’t we demand the universal coverage that they have? Why don’t we want a system that never locks anybody out?

We don’t know it’s easy to do. We don’t know that others have done it.

***

The definition of health insurance will change after reform. We will all be obliged to pay for and we will all be granted the privilege of holding insurance. We will all hold a comprehensive policy.

who pays pays what

We can create an outstanding new world of medical care if these changes are made. When the ugly practices of insurance companies are outlawed, they will, paradoxically, be freed to pursue a more important agenda: How to provide effective coverage.

The changed regulation of insurance companies must encourage them to provide superior service at the lowest cost. Outlaw the practices of rescinding coverage, of denying recommended  procedures, of refusing coverage because of pre-existing conditions — which everybody’s version of reform does — and the new question for each insurance company is: How do we provide the same coverage at a lower price? How do we get the buyer to choose us?

After reform, a long-standing criticism from Dr. Krugman may no longer apply.

“Insurance companies are in the business of trying to pay as little as they can.”

Paul Krugman, “Insurance Horror Stories”, 9/22/06, New York Times

Insurance companies will always want to control costs. That’s the most important job they have. It’s why we need them. If we create a generous uniform comprehensive coverage package for each and every individual, and such a requirement is critical, then a funny thing will happen: Insurance companies will try to do a better job than each other. They will search far-and-wide for service providers who excel.

With mandatory universal coverage, insurance companies will be competing for an enormous $2.4 trillion market of 300 million individuals with a massive revenue footprint. I believe it is the biggest industry in the United States. Or close to it. They can’t attract clients by hurting them. They have to do a good job to attract new business and keep their current clients.

***

It will no longer be true that “market incentives are, in a fundamental sense, at odds with social goals; the invisible hand in this case happens to be on the wrong side.” (Insurance Horror Stories, 9/22/06, NYT)

With good new regulations we will make the following changes:

  1. Your insurance cannot be cancelled.
  2. Your insurance request cannot be denied.
  3. Your insurance must always be in place and active.
  4. Your insurance policy will be comprehensive.
  5. Your insurance will be paid — mostly by the individual, but by the government when necessary.

***

If we outlaw the socially destructive practices, and enforce these requirements, then the insurance companies either follow the law or they get sued and go out of business. If they make their customers unhappy, their customers will go somewhere else. Contrary to Dr. Krugman’s opinion, the reputation of insurance companies will be of great importance once universal coverage is in place.

Multiple-choice from different competing carriers is the essential missing ingredient under a single-payer system – which is the type of system Dr. Krugman wants. Where do you go if the single-payer fails you?

The fear of having no choice should help you make sense of the anger at public meetings.  If the single-payer “trap” inspires their anger, it is intelligent anger.

Here is the critical question for liberal critics: If everybody holds a comprehensive medical insurance policy, do you want each person to be able to choose from 5 or 10 different companies who promise to honor that policy? Or do you want a single-payer who you have to use to honor that policy? If you want 10 choices, then you are against the public option. If you want one choice, you are for the public option.

***

In a world of 300 million customers, all holding the same comprehensive coverage, the performance of insurance companies will become widely known and scrutinized and talked about and referred to in the same way we refer to the ranking of colleges.

The ‘adverse selection death spiral,’ which Dr. Krugman described as dooming private insurance to failure; there is no such thing when all are covered. Swiss insurance companies, for example, handle this issue by cross-insuring each other for hold outs who only sign up for insurance when it’s time for a major medical-care event. Since 99% of the Swiss hold insurance, it’s not a major problem.

sexliesvideo poster

Private insurance companies in countries with universal coverage do very well for themselves and their clients. The whole controversy of pre-existing conditions doesn’t exist. Everybody’s covered.

***

The administrative cost advantage — Dr. Krugman’s favorite argument in favor of a state-centered solution to medical care — that advantage goes away when regulation outlaws the practices which are expensive for private insurers to administer.

If the insurers cannot decline coverage for pre-existing conditions and if insurance companies cannot rescind coverage when somebody gets sick, then the expensive administrative jobs disappear. Those expensive jobs are going away under everybody’s version of reform.

***

Dr. Krugman says markets don’t work in medical care based on two arguments of Kenneth Arrow.

1. Someone other than the medical insurance buyer decides what is covered by the policy and who performs the services (“… someone other than the patient ends up making decisions about what to buy” Why Markets Can’t Cure Healthcare, 7/25/09, New York Times); and

2.The product being purchased is so complicated that one offering cannot be easily compared to the other (“… it’s complicated and you can’t rely on experience or comparison shopping.” (Why Markets Can’t Cure Healthcare, 7/25/09, New York Times)

Medical reform will defeat these free-market failure-makers by requiring a standard comprehensive package of coverage. If everyone carries a robust uniform package, buyers will easily compare one insurance company to the next. Comparison shopping will be simple and easy.

Yet Dr. Krugman made the opposite argument just this summer. He said that comparison shopping is impossible in medical insurance. He is not arguing about the system we are creating to honestly compare different reform alternatives. He is arguing against the future role of private insurance by imposing its current failures in the old system.

He wants to guarantee that private insurance companies cannot fix their mistakes. If you rely upon his honesty, you will be sure to believe that private insurance cannot work.

***

Since a standard comprehensive package must be provided by all sellers of insurance, reform mandates a critical change which ensures exactly what Dr. Krugman says the market cannot ensure. True, the buyer will not pick the package of what is covered — that will be picked by legislators. It will be a comprehensive package. It doesn’t matter if the individual doesn’t pick out what is covered. What is important is uniformity and comprehensiveness.

In our new world, buyers will easily compare what five or ten or 30 sellers offer. They will offer and sell the same standard comprehensive package, just as they do in Japan or Switzerland, where reputation and performance are essential for the survival of private insurance companies.

The generous coverage which Dr. Krugman wants for all holders of insurance–which is to say, the generous “comprehensive package” which Dr. Krugman has argued in favor of for years–the universality of that bundle of rights will make comparison shopping easy, smart, and simple.

Something else will happen too. Reform should require that we collect detailed statistics about all of the work a private insurer does. With the data we will judge and rank private insurers (See below. Money manager Martin Weiss ranks good and bad insurance companies.). Health care quality is easily measured, and as data is collected on the different providers, and they excel or fail in their obligation, a competitive market will emerge with winners and losers. They will be motivated to excel, not to deny coverage.

krugman insurance companies not all the same

The most important data point we will collect: “Are you happy with your insurance company?” And the second most important: “Did your insurance company make it difficult for your doctor to perform recommended procedures?”

Individuals will decide who gets the business; which is what a conservative reform of medical insurance requires. If we go to a public-option system, we will end with only one place to go for insurance. We can’t change plans if the public single-payer plan does a bad job.

Why will we have only one place with a public option? It is impossible for a private company, in my opinion, to compete, in the long run, with the federal government. Obviously liberals don’t care about that, or they say they don’t. If they don’t care, then they don’t care about what we know about how to make an industry run well.

***

Introducing a standard comprehensive package deletes the selfish arguments of conservatives who say the buyer of insurance should be able to pick and chose what they want covered and pay for nothing else. They live in a flat-earth world dumb to the opportunity which private insurers will be given if every person is covered and every person is covered with a comprehensive uniform package.

Dr. Krugman is right about criticizing free markets when there are a thousand sellers and a million offerings. Reduce the offering to one, which has always been Dr. Krugman’s desire, and free markets will thrive in medical insurance.

Yet just two months ago he said a market cannot work because a buyer cannot compare what two sellers are offering.

“The second thing about health care is that it’s complicated, and you can’t rely on experience or comparison shopping.”

Paul Krugman, “Why Markets Can’t Cure Healthcare”, 7/25/09, New York Times

If two sellers are offering the same thing, then it’s easy to compare them.

If we all have a comprehensive package, then what we are buying is no longer complicated but it is simple. Dr. Krugman said the free market doesn’t work in health insurance because a policy is complicated. So we make the policy simple—just as he always said we should. And condemn conservatives for favoring a complicated insurance-purchasing decision. They are closing off the way forward to a free competitive market.

Health care does work as a standard market story if every person holds a comprehensive package. Ask the Japanese. Ask the Germans. Ask the Swiss. Ask the Dutch.

***

To conservative readers: Which one do you want? Do you want simplicity and genuine robust free market service providers attacking each other for market share? Or do you want to preserve the individual choice of a myriad boutique of coverage options?

If you want to pick and choose what your medical insurance will cover, you condemn a majority of buyers to confusion. And you doom the insurance companies to serving a fragmented market. And you doom the country to the insanity we have now. If all policies cover the same basket of goods, then insurance companies can compete on price and the quality of their service. Use high deductibles on these comprehensive plans to make them affordable and end the overuse of insurance.

***

If a comprehensive benefits package is established, that will make it simple to compare different insurance companies who offer the same policy. That means that health care, contrary to Dr. Krugman’s assertion, can easily work as a standard market story.

He has to decide for himself: Does he want a confusing world where insurance companies can offer a million different policies? Or does he want a world where every person has a great medical insurance policy? If it’s the latter, then the market can work, because all will be able to compare the same thing; and we shift from the study of the policy terms to evaluation of the service and the price of the service.

Dr. Krugman has never requested anything less than a comprehensive package in all of his writings.

***

While it is true insurance companies have sought to deny claims, under a universal package given to all, the practice of denying claims will send up a huge red flag that litigation attorneys and government regulators will use to make life difficult for the offender. And if we have detailed data on performance including customer satisfaction, then these kinds of fouls will lead to real losses in the marketplace. They will become an aberration, not a common practice.

***

Dr. Krugman refers to the practice of denying coverage for pre-existing conditions and rescinding coverage as the expensive practices which make private insurance unworkable. Yet he knows that under everybody’s version of reform, these practices will be outlawed. How can he be arguing against what is outlawed?

Dr. Krugman’s burns his straw man — the conservative argument in favor of free fair markets for private insurance companies — with past practices. It is false to say, after reform, “private insurance has much higher administrative costs than single-payer systems” (Why Markets Can’t Cure Healthcare, 7/25/09, NYT).

The tax payer’s position on medical reform.

Dr. Krugman argues repeatedly for the superiority of Medicare because of its low administration costs, but the expensive costs of administrating private insurance are going away with reform. If you can’t rescind coverage and you can’t deny coverage for pre-existing conditions, then you can’t spend all the money that you were previously on those “destructive social activities”.

“One purpose of the public option is to save money. Experience with Medicare suggests that a government-run plan would have lower costs than private insurers; in addition, it would introduce more competition and keep premiums down.” (Obama’s Trust Problem, 8/21/09, NYT)

Paul Krugman, “Obama’s Trust Problem”, 8/21/09, New York Times

Here again we have an argument made not three years ago or five years ago, but an argument made two months ago. And there’s a curious absence worth noting: While he is a consistent and devoted follower of Medicare’s low administration costs, an advantage which is going away after reform, he is blind to Medicare’s insolvency. That’s not a small miss.

***

Since he is an economist by training, it would make sense for Dr. Krugman to describe to us why, if Medicare is such a great success, then why is it a threat to the solvency of the United States? Why is it in the hole by $34 trillion, according to the General Accounting Office of the United States government.

Dr. Krugman never once, in approximately 40 stories and posts I read, never once does he refer to the insolvency of Medicare. It is widely seen as the most serious financial problem for the United States government. He mentions Medicare 42 times in the stories I read, but never once does he talk about its long term financial problems.

Krugman Out Damned Prejudice

There is another strange omission. Dr. Krugman never refers to fraud. 60 Minutes at CBS estimates the cost of Medicare fraud is $60 billion a year (Medicare Fraud: a $60 Billion Crime). Based upon a $440 billion budget for 2007, that equals about 13% of costs. I have seen other credible claims that 10% of Medicare expenses are fraudulent. I don’t know the likelihood of fraud in claims made to private insurance companies, but I’m guessing its lower. Who would be easier to steal from, a private company or the federal government?

Dr. Krugman loves Medicare for its efficiency, but he does not mention fraud or insolvency. These aren’t small omissions. He wants to make medicine affordable, but he never considers how litigation might be a source of unnecessary expense. He complains that private insurance companies are unreliable because they deny so many claims, but Medicare, his favorite program, denies more claims than any insurance company (see chart below on claim denial stats).

***

“So when you hear people like (Representative Jim) DeMint — or conservative economists — preach the wonders of a market-based health care system, bear in mind that this is what it would look like: an America in which nobody who has ever had a major health problem, or had a minor health problem that for some reason bothers the insurance company, can get coverage. Believing that it would turn out otherwise is the triumph of ideology over experience.”

Paul Krugman, “Demint Offers a Teachable Moment”, 7/27/09, New York Times

This statement is shockingly dishonest.

Every one of the proposals now in Congress will end the practice of denying coverage to those with health problems. Reform changes the rules and Dr. Krugman is arguing about the old world; not the new world that we are moving too. He wants to attach to private insurance its current problems so he can keep his favorite version of reform as the best version of reform.

He repeats these errors of logic over and over again. Here he is in June, tarring the future of private insurance by fixing to it a practice which will be banned after reform.

“The truth is that the notion of beneficial competition in the insurance industry is all wrong in the first place: insurers mainly compete by engaging in ‘risk selection’ — that is, the most successful companies are those that do the best job of denying coverage to those who need it most.”

Paul Krugman, “Competition, redefined”, 6/22/09, New York Times

“Risk selection” is outlawed under reform, but just last June he defines private insurance as unworkable and as using it in all cases when it is outlawed by reform. He is using a falsehood to deceive.

***

His true opponent is a free market for medical insurance – in which five or 10 or 100 companies compete against each other for business. He keeps what will be outlawed in his description of the future so that he can continue to say that free markets fail.

The prejudice behind these obvious errors? Dr. Krugman hates free markets; or at least he does in heath care.

“… in health care, the free market just doesn’t work. And people who say that the market is the answer are flying in the face of both theory and overwhelming evidence.”

Paul Krugman, “Why Markets Can’t Cure Healthcare”, 7/25/09, New York Times

Let’s look at the evidence challenging Dr. Krugman’s statement from July. If we define a free-market system of medical care as a system where private insurance companies cover individuals and the individuals go for care to privately owned hospitals and privately-employed doctors, then he is arguing that the medical system in Japan, Germany, Switzerland, and the Netherlands – he is arguing that all of them are failures. If you depended upon his column for both fact and opinion, then you would be completely unaware of these countries and their methods.

He doesn’t have the decency to make the bald statement that they are failures. He simply sweeps them under the carpet. He hopes that nobody notices four of the most successful countries in the world use free markets in medical insurance when he says “people who say that the market is the answer are flying in the face of both theory and overwhelming evidence”.

The overwhelming evidence from Germany and Japan and Switzerland and the Netherlands is that they do work. What a horrible thing for a journalist or an economist or a responsible adult to do. This is the most important reform debate of our life time, and he is shedding not light but darkness.

Dr. Paul Krugman blogs under the title: “The Conscience of a Liberal”, but his arguments for medical reform prove his conscience does not honor honesty or fairness.

***

If you haven’t had a chance to tally up Dr. Krugman’s deceptions, omissions, and errors, here is the list:

  1. Dr. Krugman tars private insurance with high administration costs when those high costs go away after reform.
  2. Dr. Krugman loves Medicare and wants a single-payer system, but he never mentions the huge losses Medicare takes due to fraud. If Medicare is better at policing fraud than private insurance, why does he never bring it up?
  3. Dr. Krugman extols the virtues and simplicity of Medicare while at the same time he never explains why the insolvency of Medicare fails to discredit its sustainability. How can the government pay for more coverage when they cannot make good on their current promises?
  4. Dr. Krugman wants affordable insurance, but he never once looks at malpractice litigation as a source of our current problems.
  5. Dr. Krugman argues that private medical insurance doesn’t work anywhere and never has, when it does work in very successful countries: Japan, Germany, Switzerland, and the Netherlands. His omission deceptively implies these countries don’t exist or that they don’t have private medical insurance.
  6. Dr. Krugman assigns private medical insurance to the scrap heap because buyers will never be able to comparison shop for a good deal. The truth is that a comprehensive uniform medical coverage policy for all, the robust coverage he has long argued for, it will guarantee that buyers can easily compare the offerings all sellers.
  7. Dr. Krugman advocates the public option and a single-payer system, when that choice violates the basic settled findings of his profession of economics, including what he teaches in his own textbook.
  8. Dr. Krugman claims private insurance companies spend a great deal of effort denying claims and faults them for it, but Medicare denies more claims than any major private insurance company (see chart above “In Denial”).

***

Before turning to Mr. Krugman’s textbook on competition and monopolies, I pause, for a moment, to tell the reader my prejudice: Based on everything I have read, the Swiss have an outstanding medical system which is perfectly suited to the United States (See the work of Regina Herzlinger. She is the leading advocate in the United States for the Swiss system.).

In the Swiss system, each person has their own policy. Every person is covered. You cannot be canceled. You cannot be denied coverage. Everybody pays the same price. Approximately 90 different private insurance companies compete to cover individuals. The poor have their purchase subsidized, but they have the same insurance everybody else has. The Swiss spend 10% or 11% of GDP to cover everybody.

We would save $850 billion dollars a year if we met this benchmark, and everybody would be covered. It’s mind boggling, staggering, immense. Reform is needed, much more badly than you can imagine. The Swiss know how to organize medicine. Buy one of their watches if you don’t believe me. They work.

***

Back to Dr. Krugman.

Have you seen a pattern of behavior for Dr. Krugman? Do you think I am constructing a straw man, or is he a builder of straw men?

“If you do the math,” says Dr. Krugman, “it becomes clear that covering everyone under Medicare would actually be significantly cheaper than our current system.”

Paul Krugman, “Death by Insurance”, 5/1/06, New York Times

First, Dr. Krugman never does the numbers. Not in any of the stories that I read. How can I judge his numbers if he never shows them to anybody?

Second, Medicare is bankrupt. How can expanding a bankrupt system to everybody else make it less bankrupt?

“The truth is that we can afford to cover the uninsured. What we can’t afford is to keep going without a universal health care system.”

Paul Krugman, “A Healthy New Year”, 1/1/07, New York Times

We would like to believe this hopeful statement Dr. Krugman, but where are your numbers?

***

My counter hypothesis says the fact that coverage is not universal is not the cause of our cost problems. Extending coverage to all now will simply increase the number of people who are charged an outrageous amount for their coverage. It will make things worse – by 47 million people times approximately $9,000. If we get universal coverage out of reform, it will cost approximately $400 billion more per year than we are spending now ($9000/person times 47 million uncovered persons).

Here the angry mob at town meetings has clear intelligence. If the mob says adding 47 million people to a system which is broke cannot make the system less broke, then who is engaging in “lies and fear mongering” (Republican Death Trip, 8/14/09, NYT) by saying that “what we can’t afford is to keep going without a universal health care system (A Healthy New Year, 1/1/07, NYT)?

***

The cost of medical insurance is unfairly high for everybody in the United States. Whoever is providing insurance — whether it is a private company or a government agency – they are all charging too much or being charged too much and doing a bad job — if a good job means the service is affordable.

The debate has failed to come to terms with the “why” of this failure. When persons like Dr. Krugman are guiding the debate–and he is without question a leading voice—is it any wonder that nobody knows the critical issues?

The world according to Dr. Krugman says Medicare is solvent when it is insolvent. The world according to Dr. Krugman says Medicare is a model of low-administration-cost efficiency when it throws away 10% of its money every year on fraud.

In the world according to Dr. Krugman, private free markets in medical insurance cannot work, but they do work in Japan and Switzerland and Germany and the Netherlands.

What follows logically is a second hypothesis: The reforms proposed by both sides are so deficient in their analysis of the failure that we are doomed to failure whether reform passes or not. This is the bitter harvest of dishonest argument.

***

I want to take a look at a textbook, and see what it has to say about monopolies. I have a copy of Economics by Paul Krugman & Robin Wells.

I leave the reader with this introduction to the central issue of why and how our medical industry is hanging us out to dry and leading us to bankruptcy and destroying our way of life:

“And those who prefer not to buy insurance from the private sector would be able to choose a public plan instead,” said Dr. Krugman. “This would, among other things, bring some real competition to the health insurance market, which is currently a collection of local monopolies and cartels.”

Paul Krugman, “Help is On the Way”, 7/6/09, New York Times

The insurance market is a “collection of local monopolies and cartels”. This is why we spend 15 percent of GDP on health care and exclude 47 million from coverage (47 million / 304 million = 15 percent of the population) while Switzerland spends 11 percent of GDP and covers 100 percent of their population.

***

One thing I can assure readers: It never says in anybody’s economics book that the cure of a broken uncompetitive failed market controlled by monopolists is to create a new and more dangerous and more powerful monopolistic competitor. If you have a market controlled by monopolists, you either break up the monopolies or you change the regulations to ensure competition.

economics krugman wells

The public option, which will create a new and dangerous and more powerful monopolistic competitor, defies the settled findings of economics.

MONOPOLIES: And the Textbook Says?

On the other hand, we use monopolies every day. Frequently they do a good job. The good monopolies which I describe below are arguments in favor, in some sense, of socialized economies. They are also recognized as a necessity by any conservative advocate of free markets.

Roads are the obvious natural monopoly. If you want to understand why it is a natural monopoly, simply think of what it would be like to have more than one service provider. Could two companies provide two roads which auto drivers choose from? Think about the criss crossing intersections.

There are at least two very good reasons that there will never be more than one set of roads. First, there is no room for a second road. It’s impossible to create a condition where two competitors compete to provide a better service at a cheaper price. Our roads already take up more valuable real estate than we want to give them.

market share by state from business week

The second reason refers to a definition from economics of a natural monopoly: The service is provided more cheaply by one large firm.

“As a result, a given quantity of output is produced more cheaply by one large firm than by two or more smaller firms.”

Paul Krugman & Robin Wells, Economics, 2006, Page 337

Since the point of markets is to provide goods and services for the cheapest price and highest quality, if the price is better with one supplier, then the government should support the monopoly. It’s a natural monopoly. Sometimes the government itself will run this kind of monopoly.

The prejudice in economics is to create conditions of perfect competition, but that prejudice does not apply, and is abandoned, when the market is a natural monopoly.

Trains and train tracks are close cousins of roads and cars. In urban settings, it’s impossible to have two sets of competing tracks. Government agencies typically run urban train systems.

Think of the military. We could employ private armies, but we prefer the president has his own nuclear weapons, his own fleet of battle ships and tanks, and that he command his own fighting troops.

Think of the fire department and the police department in your town or city. Few of us question that the government should be the employer and controller of these services. It’s cheaper just to have one police department and fire department. It would be more expensive to have two competitors. All of these examples are natural monopolies.

“A monopoly created and sustained by economies of scale is called a natural monopoly.”


Paul Krugman & Robin Wells, Economics, 2006, Page 337

Dr. Krugman and Dr. Wells say that they prefer private groups to run natural monopolies if that is available, even though natural monopolies are the form of monopoly most reasonably owned and managed by a government body.

“Experience suggests, however, that public ownership as a solution to the problem of natural monopoly often works badly in practice. One reason is that publicly owned firms are often less eager than private companies to keep costs down or offer high-quality products. Another is that publicly owned companies all too often end up serving political interests – providing contracts or jobs to people with the right connections.”


Paul Krugman & Robin Wells, Economics, 2006, Page 350
concentrated markets crop jpeg

“In the United States, the more common answer has been to leave the industry (which is a natural monopoly) in private hands but subject it to regulation. In particular, most local utilities like electricity, telephone service, natural gas, and so on are covered by price regulation that limits the prices they can charge.” P 350.  “If the industry is not a natural monopoly, the best policy is to prevent monopoly from arising or break it up if it already exists.” P 349


Paul Krugman & Robin Wells, Economics, 2006, Page 349-350

Why do we worry about monopolies? They lead to reduced output and higher prices compared to a competitive market. The medical insurance market has a problem when it comes to price, which suggests monopoly could be the problem.

“Monopolists know that their actions affect prices and take that effect into account when deciding how much to produce.” … “(The number of firms in a market) depends on whether there are conditions that make it difficult for new firms to enter the market, such as government regulations that discourage entry, economies of scale in production, technological superiority, or control of necessary resources or inputs.” … “This kind of behavior is good for the producer but bad for consumers; it also causes inefficiency. An important topic will be the ways in which public policy tries to limit the damage.”


Paul Krugman & Robin Wells, Economics, 2006, Page 333 & 334

In a market like medical insurance, there are relatively few producers of long-standing in each of the 50 states. They cannot openly collude to set high prices and to limit supply, but that doesn’t mean it cannot be done.

“Since collusion is ultimately more profitable than non-cooperative behavior, firms have an incentive to collude if they can.” (p. 368). “When oligopolists expect to compete with each other over an extended period of time, each individual firm will often conclude that it is in its own best interest to be helpful to the other firms in the industry. So it will restrict its output in a way that raises the profits of the other firms, expecting them to return the favor.” (p. 376)


Paul Krugman & Robin Wells, Economics, 2006, Page 368 & 376
Blue Cross leads many local medical insurance monopolies.

What is bizarre about Dr. Krugman’s support of a public option and, in the long-run, a single-payer system, is that his stated preference in his textbook is to keep even natural monopolies in the hands of private providers. My assumption is that medical insurance in not a natural monopoly (it is not like roads or train tracks or police departments or utilities). If the assumption is correct, then the remedy is quite clear, according to the textbook.

“The best policy is to prevent monopoly from arising or break it up if it already exists.”


Paul Krugman & Robin Wells, Economics, 2006, Page 349

The conservative arguments against the public option and against a single-payer system are all based upon trying to make the market more competitive. They are following the settled finding of economics when they say unnatural monopolies need new regulations or anti-trust enforcement. Dr. Krugman strangely makes the case for a type of mixed market (a public competitor mixed in with private competitors) in his newspaper stories which is nowhere to be found in his textbook.

“Conservatives will fight fiercely against these moves,” Dr. Krugman said in his news column. “They say they believe in competition — but they’re against competition that might show the public sector doing a better job than the private sector. Progressives should support these moves (for a public option) for the same reason. Ending the subsidies to middlemen (insurance companies), in addition to saving a lot of money, would point the way to broader health care reform.” (First, Do Less Harm, 1/5/07)

Paul Krugman, “First, Do Less Harm”, 1/5/07, New York Times

He wants, according to his newspaper writing, a market with private companies competing against the federal government. It defies his argument about unnatural monopolies in his textbook. He is wary of giving the government control of natural monopolies. If logic reigns, he would be doubly weary of giving the government control of an unnatural monopoly. He never argues in his textbook for giving government control of unnatural monopolies, or even a place in the market as a competitor.

Which begs the question: Is medical insurance a natural monopoly? If we use our own best definition from Dr. Krugman, we consider: In a natural monopoly “a given quantity of output is produced more cheaply by one large firm than by two or more smaller firms.”

***

There will be duplication of functions if there are two or five or ten medical insurance companies competing for the business, but it isn’t duplication like trying to build two sets of roads side-by-side or two sets of train tracks or two militaries.

If we look at the classic features which make a market uncompetitive, they will help tell us if the monopoly is natural, or if it is a creation of competitors and government policy.

“Something must keep others from going into the same business; that ‘something’ is known as a barrier to entry. There are four principal barriers to entry; control of a scarce resource or input, economies of scale, technological superiority, and government-created barriers.”

Paul Krugman & Robin Wells, Economics, 2006, Page 337

There actually is a scare resource in medical insurance, although perhaps not by most economists’ definitions. If you are going to do business in medical insurance, you need relationships with huge networks of service providers. Who are all of these people? How do I get their name and phone number? How do I know where to set prices? What bills are legitimate? Can you trust this hospital? Is this doctor always conducting too many tests? Will the hospitals and the doctors see your patients? The people who have relationships in place have a huge knowledge and contact advantage which a new competitor must find daunting when they start from scratch.

The current competitors also have a huge advantage in economies of scale. They have so many established patients that their revenue will dwarf any new entrant. It would take a major investment in marketing to win away new business and have an appropriate minimum revenue.

The most important barrier, however, is likely in the area of government-created barriers. Here I will give you my speculation as to what they are. The truth is that in the hundreds of stories I have read, not one has provided any detailed information about what a state requires of a medical insurance company. I know states regulate medical insurance, and that each state has their own set of rules, but I don’t know much more.

The most important known error in current regulation, according to conservatives, is that individuals cannot purchase insurance across state lines. This is a major problem in the individual market. Dozens of conservative commentators say that this restriction on purchasing is the key to unlocking competitiveness in medical insurance.

It is likely also a factor in the group insurance market, at least for single-state companies restricted to purchasing within the state of their operation. Insurance companies wield a mafia-like fix in the market for individuals, small corporations, and single-state companies (Multi-state companies may be a different animal.).

insurance market concentration

The chart above (“Insurance Market Concentration: Ranked List (2007)”) shows market share of the leading competitor at a low of 24% in California and a high of 78% in Hawaii. Anything past about 20% for any competitor is starting to get unfair. The second chart, “Commercial Insurance Enrollment” (see below), although it is older data (2003), is the best and most complete picture on market share because it includes nearly complete data on all different types of individual and group policies.

insurance market share commercial (not public) insurance enrollment market share 1st one & 1st three

These are the two basic fact sheets which we all must start from. They are a Rosetta Stone.

The most corrupt states with the most broken medical insurance markets are listed at the top of the page of “Insurance Market Concentration”, but the market shares of all states indicate that literally every state has a competition problem.

Other barriers which affect entry are extensive licensing requirements for insurers. And then there is the abundance of 50 state regulatory regimes. There are 50 different sets of rules, one for each state, defining what medical insurance means and how the industry operates.

***

Dr. Krugman criticizes the Republicans because he says they only pretend to pursue competition. He believes they are supporting local monopolies in medical insurance; that their argument for “more competition” is a ruse.

“The essential point here is that Republicans don’t want any competition for private insurers,” says Dr. Krugman. “It’s not about free-market principles — in many cases, insurers are in effect monopolists. It’s about protecting the vested interests.”

Paul Krugman, “Republicans Who SAy Ni”, 6/23/09, New York Times

I agree with Dr. Krugman. I repeat my hypothesis of this paper:

Fifty state-wide monopolies in medical insurance have ruined competition. The monopolistic medical insurers maintain illegal price controls by dividing a national market into 50 small pieces and by radically complicating competition with five systems of insurance — Medicare, Medicaid, VA, Group, Individual — to enforce high prices and limited supply. Imposing disruptive new regulation can break these monopolies. Create a national market by merging our five systems of insurance — Medicare, Medicaid, VA, Group, Individual — into one system. Start by requiring the top ten insurers to offer their best group medical plan to all buyers under identical terms in all 50 states. Model our new system on the one now used in Switzerland. We will reduce medical costs by 30% to 50%. 

If monopolies have destroyed competition in American medicine then the right way to cure this failure is by breaking up the monopolistic players or changing the rules of their markets. It is not creating a new super monopoly. The public option is by definition a new monopolistic competitor. You cannot put the full faith and power of the federal government behind a person place or thing without creating an entity which will destroy the competition. Dr. Krugman, nevertheless, argues for the public option.

“And those who prefer not to buy insurance from the private sector would be able to choose a public plan instead. This would, among other things, bring some real competition to the health insurance market, which is currently a collection of local monopolies and cartels.”

Paul Krugman, “Help is On the Way”, 7/6/09, New York Times

This suggestion violates all that we know about unnatural (unjustifiable) monopolies. There is not one instance in Dr. Krugman’s textbook in which a government competitor is created to make private competitors do a better job. My guess is there isn’t an economics textbook that would make such a suggestion. It is like suggesting that crystals and chants are valuable healing methods. So I call Dr. Krugman a Witch Doctor.

Dr. Krugman wants either a single-payer system or a socialized system (he speaks highly of both), but economics tells us that the proper role for government is to change regulation so that the barriers to entry are no longer effective. An honest economist would say: Let’s change the regulations and get rid of these barriers to entry. You create competition by changing the rules of engagement. Change the market from 50 individual states and 50 sets of rules into one nationwide market with one set of rules. The debate over the public option has co-opted the valid arguments we should be reviewing on how best to encourage competition.

Dr. Krugman would like to be the savior of medicine in the United States, but by advocating a liberal state-centered plan to govern medical care for 300 million people spending $2.5 trillion, he is arguing against his own writings.

“Experience suggests, however, that public ownership as a solution to the problem of natural monopoly often works badly in practice. One reason is that publicly owned firms are often less eager than private companies to keep costs down or offer high-quality products. Another is that publicly owned companies all too often end up servicing political interests – providing contracts or jobs to people with the right connections.”

Paul Krugman & Robin Wells, Economics, 2006, Page 350

You can’t put the power of the federal government behind an insurance plan without creating a competitor which destroys all others. And then when it has destroyed all others, it does whatever it wants to do. There’s no competition to force it to lower prices or increase quality or do a good job. You would be creating a patronage mill of a size never seen before.

***

There’s another explanation for all of this error. The strange truth is that Dr. Krugman admitted  recently in his column, at least four years into to his work on healthcare reform, that he has just now understood for the first time the problem in the medical-insurance market.

“In fact, I may have a new hypothesis about the political economy of the health care fight,” Dr. Krugman writes. “… So here’s a suggestion: while the opponents of a private public plan (public option) say that they’re trying to defend market competition, what they’re actually doing is defending lucrative local monopolies.”

Paul Krugman, “Competition, redefined”, 6/22/09, New York Times

Dr. Krugman has been treating a patient for at least four years (the first story I have by Dr. Krugman on medicine is dated November 7, 2005) without understanding the illness.

For an honest economist, your entire approach changes after this discovery. Dr. Krugman has written no mea culpa. Yet his words on the ailment are as plain as day. He has a “new hypothesis” and the problem is “lucrative local monopolies”.

To be fair to Dr. Krugman, the medical-reform journalism has been horrendous. The story on the market failure in medical insurance and hospitals has not been reported. My knowledge of it is limited, but the debate on reform appears to be far off the mark. It’s shocking if the monopoly hypothesis is correct. And the fixes, as suggested by basic settled rules of economics, are not complicated. A small number of simple steps would be revolutionary.

THE APPALACHIANS HAVE ALREADY WON

MAGNIFICENT CLUSTERING OF INBREEDING CORRUPTION

Why is the medical insurance industry failing? Why is our health care system broken? Who is truly responsible? Do we cover 85% of our population at a cost of 16% of our national income? Do other trade partners cover 100% of the population at @ 10% of their national income (Switzerland, Germany, Japan, France)? Isn’t that an amazing comparison? Our system costs 60% more than any of the others, and we block out of the system 15% of the population (almost 50 million people).

If we covered everybody, based upon current per capital expense for those who are covered, then 19% of national income would be used for medical care.

We would spend 19%. Our trading partners spend 10%. Round the numbers. We are paying twice as much for medical care compared to our major trading partners.

A free market system produces both superior quality and lower prices. Conservatives argue that people are using health care too much because their out-of-pocket expenses are limited (the “wedge” argument)? Is that why medicine costs twice as much in the United States compared to anybody else? Where is the logic in that argument if we are the only country with a wedge problem?

Let’s look at another number. The United States now spends almost $9,000 per person per year on health care for those who have coverage. Is there anybody who can honestly say that $9,000 is a reasonable cost for one person’s insurance?

This is unfair. The medical insurance companies and the hospitals and the doctors and state-insurance regulators and politicians and Medicare and Medicaid – they are conspiring to destroy our country’s finances.

***

The wedge argument suffers from a fatal mistake: It’s doesn’t make sense as the primary source of our ills. Making people shell out for treatment or drugs should be part of reform, but if it is listed as the first failure of the system, it misleads, and will prevent a systemic correction. Low deductibles don’t explain a market failure equal to 10% of GDP — a rough approximation of the amount we are being overcharged when compared to wealthy nations.

I know we have an obesity epidemic. I know we have a lot of old people. I know we have unique cancer treatments which are expensive. I know our medication bill is higher because we have the newest discoveries. I know we have a lot of KAT Scan machines to pay for. I know co-pays and deductibles are low in many cases. None of that’s enough to explain our massive expense.

The simple and correct answer is the one we have already suggested: The medical-insurance market in the United States is controlled by a quiet and perfectly organized mafia. Each player takes one state for themselves. It’s a monopoly times 50 states and each of the 50 states is dedicated to keeping their corrupt machine running perfectly. Don’t forget the massive duplication which employs five insurance systems — group, individual, Medicare, Medicaid, and VA — when all we need is one.

***

Let’s speculate on a perfect crime. In each of the 50 states we have a huge industry. In many cases the medical industry is bigger than any other industry in the state. It has to be given that health care is 16% of GDP.

Medical insurance and hospitals are a huge and important source of jobs. The medical-industry executives probably have more money than any other industry’s executives to endorse state, local and national politicians. And they have more important reasons to buy them. The fix is cemented in to place by state regulators. They keep their jobs if medical care is a state-by-state industry.

How many state regulators would lose their job if tomorrow we had one set of rules for health care and insurance for the entire country? Can you imagine the clout required to take out 50 state medical insurance departments who all live by keeping the current system alive? And they are colluding with 5 or 10 mega-power medical insurance companies. Assume there are 1000 medical insurance companies distributed throughout the 50 states. If we impose one national market probably 950 or 995 of those companies would go out of business.

Can you imagine the clout required to change the law so that 50 state medical insurance departments and 950 medical insurance companies will be erased? And those two powerhouse groups are colluding with mega-dollar hospital and doctor groups. And instead of having one medical insurance system, we have at least five: Group, individual, Medicare, Medicaid, and VA. And the regulators and insurers and the hospitals and the doctors and the five systems — they are all colluding with politicians bought and sold by this Rube Goldberg machine.

Maybe that’s why we can’t fix medicine in the United States. Ten to one odds says national bankruptcy must precede a restructuring of medicine. The power of the interests controlling the industry is too great for real reform.

***

Have you noticed that the Obama administration plan has a special limitation to its insurance “exchange” where uncovered persons will go for coverage? They are statewide exchanges. Each state has their own exchange. It’s a confirmation that insurance companies will cooperate with any plan that doesn’t disrupt the 50 corrupt states of colluding monopolists. (There is a plan in the house with a national exchange. It should be everybody’s high priority.).

***

Much dumber than the wedge argument is the horrendous public option. Here we simply refer to the basics of monopoly. When you have a failed market controlled by monopolistic competitors, you break up the monopoly. You don’t create a new superpower monopoly.

***

What the insurance companies need is competition. It seems reasonable to say the public option is the perfect way to guarantee this, but economics tells us what will happen once we set this in motion. The public option will do very well in the competition. It will, in fact, win the competition.

And after everybody else is gone, in five or ten years, the public-option employees will stop picking up the phone. They will turn out the lights early and there will be no other place to go. The public-option insurance company will close the hospital early and keep reduced hours. You will go to the emergency room and they will tell you to come back later when the emergency room is open.

Competition in a free-market society is widely used to produce two things. 1. Better quality 2. Lower prices. It produces both simultaneously. Our health care system can work if prices fall. The more they fall, the better it will be for everybody. It will be much easier to cover the poor.

A public option will, in the long run, kill insurance companies, but insurance companies are the best resource we have for correcting the pricing problem. They deserve criticism for their current role, especially if it is described accurately here. Yet they are playing the game according to the rules which we have given them. Private insurance companies will be indispensable for correcting the failure we are now stuck with. The real failure of our system has been created and upheld by the politicians.

The key to economic policy in medical insurance, from the conservative perspective, is to have 5 or 10 or 20 companies competing to do the best job with fair regulations which destroy the state barriers to competition.

***

Let’s review the liberal position on reform. The first mistake is their opinion that Medicare is a great success. It is a temporary success, but unsustainable. It is a bankrupting long-run failure.

Failing to see that it is a long-run failure will guarantee the failure of our country’s finances. It is a failure because we cannot afford it and it is bankrupting us and something radical must be done to change its cost structure. Pretending it is a success is a lie and it is a very popular lie among liberals. They simply don’t care about whether or not it is solvent.

The second and profound mistake says that the free market doesn’t work.

Doubting the validity and enormous success of competitive markets, especially in lowering the costs of goods and services in the last several hundred years, is far and beyond, in my opinion, the ignorance which either denies evolution or dismisses science.

The free market has worked by constantly pushing costs down and increasing quality in agriculture, chemicals, construction, computers, electronics, entertainment, food manufacturing, hotels, housing, mining, publishing, telecommunications, and transportation. Which of these major industries would have been improved had the United States government been the single-payer or sole provider? What justification do you have for treating medical-insurance and health care differently from cell-phone service or grocery stores or retails shops or French restaurants or agriculture or anything else?

***

In markets, every day and every hour of our day, we are served by “greedy” profit-seeking corporations in a free market who sell us clothes, food, computers, entertainment, travel, and anything you can think of buying. Walk around your house and look at anything in it.

Is there anything you see in your house which could have been done better if the United States government was the person who made it and sold it and backed it with customer service?  Do you wish you had a car made by the United States Car Company? Do you wish your windows were made by the United States Window Company? Would you like to switch your cell phone service provider to the United States government? Would they do a better job than Verizon or Sprint or ATT or T-Mobile? Has anybody hated a cell-phone company? Can you imagine what it would be like to have one cell phone company? Why is medicine different? What’s your justification for killing private competition in medicine?

***

Denying the success of free markets is equal to denying the validity of the scientific method. Only prejudice explains it. The scientific method is the greatest technology known to man, except it is inferior to the technology called free markets. Free markets have had wider influence and superior results in improving the material circumstances of life.

Don’t forget that poverty is the greatest medical illness known to man. Curing it is our greatest health plan (See chart below on GDP growth over the last 20 centuries.). If free markets create economic growth, then free markets are the greatest poverty fighters known to man.

36 gdp world gdp per capita year 0 to 2000

What do you say to a person who says the scientific method is a conspiracy and can be ignored as irrelevant? What do you say to a person who says evolution never happened and it should be banned from the schools?

You either send them to school or to a psychologist. What do you say to a citizen of the United States who says markets don’t work and their house and office and school and town and world are filled with what the market has made better faster and cheaper?

The psychological error which would produce this blindness is not difficult to guess. A liberal thinker says: “I want everybody to have the same thing and nothing is more important than everybody having material equality.”

This thinker would promote a single-payer, even if that option would bankrupt our country. If an inner voice says the priority of fairness is more important than the priority of looking at the world, and designing economic policy based upon human nature, and the hard factual evidence of experience, as opposed to using the aspiration for fairness, consider the possibility the ambition for fairness may bankrupt the country.

***

There is blame all around in the health care debate.

The economists deserve condemnation for failing to inform the public that the public option is a de facto creation of a monopolistic competitor and therefore a destroyer of the private medical insurance market. They should have explained that a monopoly is the last thing you want to create in a major industry. Or they should have explained why it is appropriate to create a monopoly. It’s one or the other.

If you want to lower prices, you break up monopolies or you change the rules of competition. These silent economists, who should have taken ads in major newspapers and signed their name, they allow frauds like Dr. Krugman to peddle their wares.

They have been condemned for failing to see the financial crisis. Yet seeing the financial crisis required real intelligence. Telling the world what a competitive market is, how it is retarded by monopoly, and that the public option is the creation of a monopolistic competitor—these are basic facts derived from settled findings.

***

Where are the journalists? Their facts guide the debate.

State monopolies in medical insurance markets are a straightforward corruption story – medical insurance business executives buy state and federal lobbyists who buy state local and federal politicians.

This corrupt circular enterprise is hidden in plain sight. It’s on nobody’s radar. It’s in nobody’s newspaper.

I stumbled on Rosetta Stone charts by accident, and it wasn’t in a newspaper or magazine (Here is a link to the chart.). I can’t adequately describe the collusive behavior of actors because I have not seen one news story on it. I don’t have a good news story on the insurance-provider monopoly either (Here is a second confirming chart supporting the hypothesis). The truth of the monopoly we are suffering from is a complicated failure born by collusion among insurers, hospitals, regulators and politicians.

***

Finally we have the conservatives. A procession of conservative economists and commentators are arguing about co-pays and deductibles and how this has destroyed American medicine. What a fantasy.

They distinguish themselves further by pretending its perfectly fine for poor people or others less fortunate to live in the greatest country in the world and go without medicine. The honest response is that medicine matters and all of us should have it and it would provide a common bond of citizenship if we all shared a good system, but if we do it the liberal socialist way we will bankrupt the country.

swiss matterhorn

If medicine was some unaffordable fantasy I would understand opposing it, but it isn’t a fantasy in the life of our trading partners. Many have outstanding medical programs which operate in perfect synchronicity with free market principles (Switzerland has the best system to match the American character and the dynamic creativity of free markets. Every Swiss resident has their own policy – all backed by one of about 90 private insurance companies. Regina Herzlinger is the leading advocate in the United States of the Swiss system.).

We need intense competition and an explosion of creative destruction. Competition is ten times more important than deductibles and co-pays. With competition we can pay the bill for medical insurance. Take a look at the state medical-insurance markets. Ask yourself: What will make them work? Take a look at Switzerland. Ask yourself: What makes it work?

***

For the record, and for all to see, there is a quick easy step to revolutionize medical insurance in the United States:

  • Require top providers of group medical insurance to sell the same policy at the same rate to individuals and groups all across the country.

It’s a one-sentence fix. It’s not a thousand pages. (Click here to see the work of Michael Tanner — the smartest advocate for creating competitive markets in American medical insurance.)

***

While the evidence is undeniable that Dr. Krugman lies, omits, misunderstands and misleads, he points in the right direction when he warns that medical insurance is too complicated to allow for a free-market solution – unless our rules make it simple.

How do we solve this? How can a street sweeper with a fifth-grade reading capacity make a good choice about medical care? You give the street sweeper what the liberals want. You give them a comprehensive policy. You protect the weak. You give that comprehensive policy to every person within our borders.

You do that because it’s the right thing to do on two important levels. You have made that less-educated person smart and secure in their decision about what to purchase for medical insurance. That’s what God requires you to do. Do something good for your less-fortunate neighbor.

And, you give those ugly unfriendly selfish greedy capitalists, those terrible medical insurance companies, you give them 307 million targets. Those 307 million targets represent a phenomenal business opportunity. The insurance companies can compete on price if they sell the same policy. Over time they will develop reputations – a very important way for competitors to differentiate themselves (see chart above from Martin Weiss “Not All Insurers Are the Same”). We can sell very high-deductible plans so that the cost for coverage is low. It doesn’t kill competition to make every person carry a comprehensive policy. It magnifies competition if its handled right.

Who, besides a liberal, has something against creating the most phenomenal business opportunity in the world? Is a customizable policy, where you pick and choose the services, is that more important than vigorous free-market competition?

***

Go back to basics.

We are spending $7,300 a person now on medical care when our cost is spread across the entire population.

Is $7,300 for every person in the United States reasonable? Is that a sensible number? Is it way too much?

There is some terrible hex on the insurance market. The bill of $7,300 per person is far too high. And it doesn’t cover the cost for almost 50 million persons. The true price per person (who is covered) is $8,700 (based on 2007 spending).

To cover everybody at today’s prices, we need to spend an additional $400 billion dollars a year ($8692/year per person * 47 million uncovered persons). The true cost is $4 trillion in additional spending for the next 10 years. The Congressional Budget Office is calling the tab for reform at under $1 trillion. God knows their calculation is too complicated for me to understand. I do understand my numbers and I stand behind them.

And there’s an obvious problem with my numbers: How much will the cost of medical insurance increase if demand for it increases by 47 million buyers? How much are prices going up anyway in the next ten years given the 50 monopolistic markets we have in place?

***

The price per person now is so high that it is bank robbery. A terrible force controls the market.

We have so much to gain by handling reform correctly. If there is one thing that Americans know how to do, they know how to make things better, faster, and cheaper. Why are we so incompetent at medicine?

If we use high deductibles, and if we reform medical litigation, and if we create competition in medical insurance pricing, by regulating away state-imposed barriers to entry and competition, and if we fold the five systems into one (Group, Individual, VA, Medicare, Medicard), if all of this can be done, we will make a complete turn around.

***

Free markets are miracles. This is true for everybody – rich, poor and in between. We want and need and must have ten companies or 20 companies fighting it out in medical insurance. They can figure out the best way to lower prices.

There’s a million different experiments and combinations they can try to get the job done right. A public option and a single-payer will kill this critical system of experimentation, improvement, cost cutting, and the mandate for better, faster, cheaper.

Liberals must consider the hypothesis that the ambition for improvement will be lost under a single-payer system or a fully socialized system. The public option should not be enacted. It will lead to a single-payer or a fully socialized system.

If you read the literature, you see liberal advocate after liberal advocate saying the public option is a means toward the end of single-payer or a fully socialized system. The public option as a means toward a single-payer, won with the argument that the public option brings competition, proves that the liberal side is comfortable lying to your face about their goals. Dr. Krugman is not an anomaly.


Conservatives argue against a state-centered plan like a single-payer system based upon their theory of human nature and based upon the settled science of economics. The argument says if you have no reason to do better, if you have no incentive to do better, then you will not try very hard to do better. If making something better is difficult, and you, as manager, gain nothing from the improvement, then you will not do the difficult job.

Can anybody imagine how hard it will be to change something in a system where a government agency runs public medical insurance for 300 million people? The Department of Defense spends a tiny little $615 billion. Our liberal advocates for single-payer public-option medical insurance are ambitious to create a hegemon clocking in at four times the Department of Defense.

***

Based upon the evidence of Medicare, any government-centered solutions will bankrupt our country. The public option and a single-payer system are government-centered solutions. Medicare and Medicaid, our current state-centered solutions, have already bankrupted our country. It’s senseless to follow a model which has proven to be bankrupting.

I understand a socialized plan like the VA system, or the British system, can work, but choosing those systems as the right way forward ignores the validity of free markets and ignores the scary reality of one federal agency running the medical world for 300 million people.

***

For conservatives, pull your old economics textbook off the shelf. Skim the chapter on monopoly. And ask yourself: “How do you guarantee competition in a free market?”

You break up monopolies and reform the rules of competition.

Since all reforms, both conservative and liberal, because both of them fail to make anti-trust monopoly-busting their central goal, it follows that reform cannot and will not succeed. We will take it on again some other time; probably after a national bankruptcy.

Liberally Lost
medicare johnson signs into law

President Obama’s reform cuts $400 billion from Medicare and Medicaid. The president says it will have no effect upon care for the elderly and the poor.  Yet 2007 spending on Medicare equaled $440 billion. Is the president wishing away a year of care for every person over 65? How can he take money from a bankrupt system?

reform cost overruns prediction versus reality_resize 250

If your economic philosophy is “God damn American”, then it makes sense for you to wave away with your royal hand $400 billion of expenses with money you don’t have, and sit back and watch the planes crash into the building.

The president will get his way. Reform will pass and bankruptcy will follow. Give it three or five or ten years. Without conservative reform, bankruptcy will follow.

The voices leading the debate are misleading. They are incompetent. The diagnosis is an error. We, the patient, the country, financially we will die.

***

Here I wish to turn to speculation about why the liberal side is so comfortable with dishonesty and bankrupting (“unsustainable”) solutions.

Earlier I described how a liberal might attach themselves to a philosophy of “fairness”. That philosophy may logically lead to a single-payer system. I counter the argument by saying: “We can assure fairness and use market forces to lower prices if we require ten insurance companies to sell the same policy you want the single-payer to provide.”

Still, the logic and simplicity of a single-payer choice uses reason.  The economics of it is, in my opinion, blind to the consequences of turning over health care for 300 million people to a government agency.  At least the prejudice is logical and in some ways defensible, with examples of success including the VA hospitals, Canada, and Britain.

***

I wonder what is the true motivation of the liberals? What if the prejudice is not a good bias like “fairness”, but an angry bias, like “hatred” or “contempt”? What if, by its nature, a psychological resentment drives the policy, rather than a logical argument?

At this point, I would like to veer off the subject of health care and try to understand President Obama’s proposal on reform. I want to understand what motivates him.

***

A person who never had a father is a perfect candidate for a contempt-driven personality.

For a man, the absence of a father is a loss you don’t get over. That loss is the center of any male personality. A father is the first teacher. President Obama, despite the optimistic title of his autobiography (“Dreams From My Father”), had no father, and had a difficult start to life.

Does he hate the world for never having had a father? Does he, unconsciously, hate himself, thinking that there was some reason he deserved to be abandoned? We don’t know the answer, but we do know he found a substitute father.

Naturally, without a father, you are desperate for direction. You are susceptible to the influence of any person who will teach you. In a tragedy of historic consequence, President Obama attached himself to a racist mad-man hate-filled lunatic freak (Jeremiah Wright). The preacher of hatred is his real father. What does it do to the president if he listened to and learned from and idolized this substitute father for 20 years?

***

Imagine you are presidential-candidate Obama. Your step-father, your guide in life, your teacher, is revealed as the anti-thesis of wisdom and learning and fairness and leadership and courage. Everyone assumes you have learned what he is teaching. You cannot be elected if you share his philosophy.

Some leaders use hatred to promote their own glory. Some liberals use fairness to disguise their hatred. Rev. Jeremiah Wright is a perfect example of a person who uses hatred for his country and white people to denounce the unfairness of our society. All of it serves his vanity — the true object of his devotion.

You have a way out. In a speech before the entire nation you pretend not to know your step-father of 20 years. You didn’t know he was a racist, a mad-man, a hate-filled lunatic freak. By saying you didn’t know these things, you are saying you didn’t learn these things. You compare your step-father to your grandmother. By saying your grandmother is the same as the monster, you prove you will use anybody to get what you want.

Your capacity for lying is so advanced, and the madness of the crowd which rules your party is so fervently disturbed, that they idolize your lies. They turn your fiction about your life and your step-father into a brave historic speech.

They don’t notice you used your grandmother as a sacrifice. Any sane judge of character would write down to zero the man who sacrifices someone in his own family. And if a man sacrifices his grandmother, the content of his character is malign.

Suicidal Liberal: Bleeding Heart Murders Host

What is driving the madness of President Obama’s crowd? What qualification do they admire so deeply? What are his qualifications? First and foremost, he is black. His party’s platform is openly racist. It’s a racist platform and a racist candidacy by a racist party. His character, which Martin Luther King described as the key to a man, has no place in judging his qualifications because his character is disqualifying.

***

What does it mean if a man can lie to the entire country with a straight face on the subject of the man who is the greatest influence in his life? How do we explain his capacity to deceive?

He is a black who has spent a life in a white world. Whites see him as something to fear or hate or shun or patronize. He is a foreigner. The natives make out of your every word and every action a performance. You are always judged. You are always on stage. You are always playing to a crowd. President Obama’s entire life has been an act of pleasing an unfair audience. He has been practicing politics since day one.

***

Does President Obama hate himself for playing by the white rules? Does he hate the world for depriving him of a father? Does he hate our country because his step-father has taught him to hate it? Does he have contempt for the accomplishments of his country because he has never had to build anything?

***

I believe President Obama and Dr. Krugman play from the same book. They are twin personalities. They are blood brothers.

Vanity is their true God. Adulation is their goal. Egocentric gratification runs their life. They are always on message and always on the message of themselves. They are childish spoiled children.

These idolatrous pagans, and those like them, run our country. They will ruin it for fame. The fate of the country is irrelevant to their dreams of themselves.

***

Enlightened medical reform for conservatives requires intense, loud, angry opposition to any current plan. Defeat the know-nothing Democrats. Stage a sit in. Protest loudly. Provoke arrest and resist it.

“Half the harm that is done in this world is due to people who want to feel important. They don’t mean to do harm — but the harm does not interest them. Or they do not see it, or they justify it because they are absorbed in the endless struggle to think well of themselves.”

T.S. Eliot

The liberal ruling class is so psychotic they don’t believe in free markets. Their dishonesty about their goals is now so obvious that they promote a public option by saying it will bring competition to the market, when what they openly vow in writing repeatedly is that the public option is a means toward the end of a single-payer or fully socialized system– a system with no competition.

It’s hard to get through one story from a liberal saying that the conservatives are arguing unfairly, when the liberal position on the public option is openly presented in a deceptive manner, is contrary to settled findings of economics, and has thrown the debate off the true reform that economics tells us to pursue.

Every minute of every day they use what the free market has given them – their food on the table, their home, their smart phone magically connecting them to anyone anywhere with voice or text; their television program; their internet connection to find more information than any person in the history of the world; their quiet safe car; their flight to go on vacation; their hotel; the overnight package via UPS or FedEx; the software to organize their pictures; the camera’s phone. They have everything at a reasonable cost because of free markets.

Instead of a generous gratitude and respect for the miracles this system has given them, they denounce the system for its failures. They cluster around the unfairness of it.

***

The simple explanation for this mad reaction is that they know they don’t deserve all the things that they have been given. Why have others been given so much less? They know it’s not fair. This realization, about the unfairness of the world, it is not limited to liberals. It is an important moment for both liberals and conservatives.

For the young reader, searching for their direction in the world, there are two ways to handle this dilemma when you have to decide for yourself who you are and what you want to be.

The conservative says: God has given me more than I deserve. It is my job to make my family and my country stronger. My job is to protect the progress we have made. My job is to add my work to the sum of work which I have inherited. I know every street, and building, and business was built of blood, sweat and tears. It’s hard to build something.  I honor and respect the work which has been done.

The liberal says: This system has given me so much but given so little to others. I am going to fight against the deep unfairness until the system has given everybody what I have. I have a moral obligation to the less privileged. It’s an outrage the way the poor are forced to live. I will not forget them. I will fight the system to correct its failures.

***

One consequence of the liberal response: It may lead to a dislike of our country, of our military, of free markets, of any of our institutions, because the unfairness of the economy poisons all of these things. The president’s teacher is a perfect example. Jeremiah Wright proved hatred can be a guiding force for liberals. The president’s teacher hates his country. The president’s teacher hates white people. The president’s teacher loves hatred.

Grannie takes a bullet for the president.

As a candidate, President Obama, in March 2008, compared his grandmother (above) to Rev. Jeremiah Wright. “I can no more disown him than I can my white grandmother,” said Obama, in his famous race speech. The candidate then denigrated the character of his grandmother in front of the entire nation. He literally told all of the world she had made racist comments. He equated her words to Rev. Wright’s words. Six weeks after the speech he disowned Rev. Wright. Eight months later she died. President Obama has to this day never been questioned seriously about his conduct toward his grandmother. If the press doesn’t stick up for grandmothers, who do they stick up for? If the president doesn’t stick up for his grandmother, why would you want to have anything to do with him?

***

Nobody called the candidate a coward for betraying his mentor. Nobody called the candidate selfish for using his grandmother. He never apologized to her.

Nobody in his party thought to denounce his selfish use of a defenseless old and dying woman. The media avoided all judgment of right and wrong. Neither the Democratic Party nor the press wanted to spoil the candidacy.

They all climbed to the mountaintop. They loudly proclaimed their emptiness. They sang in unison their prejudice in support of the candidate’s race. They pathetically violated the American Dream. They made Dr. King a joke.

If you will use your grandmother, who else will you use?

The answer is obvious. If you will use your grandmother, you will use anybody to get anything.

***

Does the president hate the United States? Does the president hate being black? Does he hate white people? Does the president hold in contempt the people who believe what he says? Does he believe in anything besides himself? Did her ever grow up? Did he ever learn right from wrong? Does he hate himself for having no principles? Does he think it’s funny he is president based upon denouncing his grandmother?

“There are some that only employ words for the purpose of disguising their thoughts.”

Voltaire

President Obama and Dr. Krugman are destroyers.  Their word is a lie. Their bond is deception.

The country will suffer grave injury if their lies rule our world. In addition to their wholehearted embrace of deception, they don’t understand the first rule of business. They don’t understand the first rule of economics. They can’t understand either because they have never done anything.

They have missed the life-changing experience of starting and running a business. No economist or president can pass up this lesson. It’s a thousand times more instructive than perfect comprehension of ten thousand books.

It teaches you how hard it is to do something. Building a business is impossible endless work. Trying and failing fills you with awe for the successful. You respect what the country, through all of those individuals, both the successes and the failures, has already made. You don’t hate it. You don’t have contempt for it.

If you are a person who blames other people for your own failures, then you might hate it. If you place excess importance on your own importance and your own capabilities—you might disparage the work of others who have made your life and country and world.

***

What is the psychological basis for this error and cruel contempt for the accomplishments which we have all inherited? Is it vanity?

I believe self-importance motivates the liberal to demand fairness. The thinker wants importance, and fairness is a means to that end. Will an underlying hatred or contempt–will that make self-importance more necessary? Do contempt for others and unwarranted self-importance combine in one person, each impulse feeding off the other?

crosses on a hill

I think, in many cases, self-importance canonizes fairness. One may genuinely care for others, and each individual is different, but I see selfish ambition for recognition creating an ideology of caring. Those overly interested in themselves, and those who over value themselves, are triply blind. They incestuously couple hatred, contempt, vanity, fairness. This is an unholy alliance. Self-understanding will never be found.

***

This is how I see President Obama, Dr. Krugman, and their liberal worshipers.

They place their own importance above all. The redeemers are mad for themselves. Their disciples are mad for themselves. Each crowd member finds his own superiority in a great leader.

If this cost projection is correct, national bankruptcy is just around the corner, and the present reform is a pantomime of action.

Recognition for oneself reigns preeminent in this personal delusion. In last place are the consequences of thoughts and words and deeds.

It’s backwards. It’s wrong. It’s malevolent. It is sociopathic.

The thinker is so blinded to reason by vanity, they say free markets don’t work, when they live in a world burning brightly with the enormous wealth of free markets. It’s a rampaging disconnect from reason. A fugue state rules. The followers live in it.

***

President Obama and Dr. Krugman are pretenders. The spoiled children are witch doctors. Avoid these vicious quacks.

Listen carefully. They speak in strange tongues. Their languages are written by the devil. The message is hidden. The numbers are all reversed. Deception reigns in their kingdom.

The ink in their pen is a baby’s blood. Do not play their recordings backwards. You will be turned to stone.

We must oppose their nonsense. They are a cancer on our state. These mendacities are blood-sucking leeches. Their medicine does not work in our country. Condemn their malpractice. Vote them down. Send them away.

***

Michael David White is a mortgage banker in Chicago.

Post Script. January 2019. In thinking about this story for the last ten years, I came to see much more clearly the mechanics of medical reform. The obvious, and also most impossible, reform is that we must merge the VA system, Medicare and Medicaid, individual insurance, and group insurance. You have heard of duplication. We have quintuplification.

The plan is pretty simple but I couldn’t see it at the time of writing this post. I was lost in the extreme ongoing cluster something which is health care in America.

Insurers would sell a uniform comprehensive plan to any individual in all states for the same price and with the same coverage as their best group plan. I have updated the post to include this idea.

We start reform by converting individual policy holders to the group market. Phase in the same arrangement for users of Medicare, Medicaid, and VA. This change would revolutionize our health-care market — converting 50 state markets to one national market and converting five separate insurance systems to one system. Appalachian math says the system will be 250 times simpler than our current version.

The insurance companies can do all the hard work. The change in the law isn’t even very complicated, but the vested interests — insurers, regulators, corporate managers, bureaucrats, hospitals — who would be destroyed by its enactment is enormous.

The health care industry now takes about five percent of our national income above what it would earn with good competition. When you can legally steal 5% of GDP through regulation, there can be no serious reform because too many people make too much money from the system as it stands. The reform of health care, the bankruptcy of Medicare, and the bankruptcy of Social Security are the great jobs which America must manage in the 21st Century. They will not be changed in uninteresting times.

We have a way to guarantee competition in health care, break the medical monopolies, achieve great cost reductions, radically simplify the system, improve quality, increase affordability, and cover the poor, but this change only has a chance of being adopted during a time of extreme crisis. Do not fear. The progressives will create the opportunity for fundamental transformation.