I, along with everyone else, have been walking around hollow-eyed given the speed of the recent financial meltdown. One-hundred-year old firms disappearing in a weekend, markets roiling with every bit of news, experts clamoring about the greatest calamity ever in the recorded history of finance, and politicians actually working weekends to attempt to rescue the largest and most important financial system in the world.
This is serious business.
I have also been amazed at the Governments response to nationalize “key” companies – AIG, Fanny/Freddie, and probably a few others before it is all through. Several people have made the connection between the nationalization of financial companies with the potential nationalization of the health care systems. Actually the wealth-health connection is probably stronger than you think. Just as the current financial mess is related to the “toxic” subprime debt on the books of the eviscerated companies, hospitals are also being laden with “toxic” debt from consumers who are also leaving them holding the bag on their bad debt.
Will the bad debt get big enough that health systems begin to fail? Can you imagine Kaiser Permanent, Sutter Health, Geisinger or the Cleveland Clinic going down financially because of consumers bad debt?
Can you imagine what would happen if these organizations cash flow problems began to shut down hospitals, affect care, and the ensuing outrage that would follow. Given recent events, would the government come in and “take over” these hospitals by infusing capital into them, folding them into the Medicare system, or some other hybrid financing mechanism. Clearly, I understand the issue with sub-prime was the subsequent “securitization” of the risk which was how the “toxicity” was bought and sold. However, it does give one pause to consider the possibilities in light of previously unthinkable actions we have witnessed the last month.
Further still, it gives me pause to reconsider the capitalistic system running aground in a world wherein we are trying to outsource our brand of “economic progress.” It’s a tough sell, particularly with a very angry international environment not only for the perception of imperialism, but also how our system of capitalism is dragging the entire world economy into a vortex we created. Ouch. Might need to adjust those international travel plans.
In considering these issues and the sustainability of our capitalistic system, I read through a recent Newsweek article by George F. Will that helped to restore my confidence in the invisible hand despite the very visible recent carnage:
The spontaneous emergence of social cooperation—the emergence of a system vastly more complex, responsive and efficient than any government could organize—is not universally acknowledged or appreciated. It discomforts a certain political sensibility, the one that exaggerates the importance of government and the competence of the political class.Government is important in establishing the legal framework for markets to function. The most competent political class allows markets to work wonders that government cannot replicate. Hayek, a 1974 Nobel laureate in economics, said, “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” People, and especially political people, are rarely grateful to be taught their limits. That is why economics is called the dismal science.
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God awful commentary. Read an economics book. Or at least read analysis by a range of academics (across the ideological spectrum).
Scott, I wonder how economics would address the safety of loggers cutting down those trees, or the clear cutting that leads to top soil run off and water pollution, not to mention the terrible waste of resources, or the safety of the trucks hauling those trees to the mill, or the safety of the mill itself, or the air and water pollution the mill creates when it processes the trees, or the lead in the pencil that poisons our children and irreversibly damages their brain. And how does economics account for the lumber and pencil industry lobbyists that wine, dine, and cash support politicians to get them to ignore the social costs of producing those pencils? Does the free will of economics and the unorganized organization the market produces show us how these issues have worth?
Yes, we’re heading for a major crash, and here’s why:
(a) Federal tax breaks put (big) employers in the health care business.
(b) HMO’s become their agents.
(c) Like the parasites they are, HMOs extend their reach to virtually every corner of the health care system, diminishing the quality of care, increasing prices to pay for a self-sustaining bureaucracy, and – above all – destroying the ability of providers to accurately price their own services, while placing virtually all health-care spending under Soviet style centrally managed organizations.
(d) People end up trying to get service from a market so warped that, if a parallel ‘insurance’ arrangement existed in the auto insurance market, every gas purchase would be a ‘co-pay’, and ‘reimbursement’ (a fraction of monthly premiums) could be denied for using an ‘out of network’ gas station. Meanwhile, uncovered motorists would be charged $10-15 for each $4 gallon because they ‘lack coverage’.
No one in their right mind would consider that a free and open market – not when every interaction is controlled by a third party intermediary that no one wants to deal with, and yet, no one can avoid because government tax policy has given them an unfair and unearned stranglehold on the market.
People have been so beaten down by this that when they say ‘insurance’ they mean ‘access’. When we say ’47 million American’s lack insurance, what we mean is that 47 million lack access.
What we need is less insurance – a lot less, and it should be limited to things that are truly catastrophic, like ICUs for people in car wrecks, or chemotherapy, etc.
Regular medical care should be like anything else we need in life – openly available, hassle free, and dispensed on the open market at reasonable prices that can be quoted up front and compared before any purchase is made.
Health care financing has been a mess for over 15 years or more, and no one has bailed us out. Most medical practices are on the brink of bankruptcy and reimbursements continue to decline in the face of increasing utilization. The same can be said of financial markets….they have been melting for years and suddenly the ‘ice’ is gone and what remains has turned to steam. Is this predictive of what will happen to healthcare and/or insurance companies. Insurance companies have mucho dollars invested in markets, bonds, and real estate.