The Cost of Healthcare (Part 1) - The Economic Case for Healthcare Reform

By the time you have finished reading this, more than one person under age 65 and over 18 will have died in the U.S. due to lack of health insurance. Every 12 minutes someone else becomes a number in that statistic. It is entirely possible that the best care in the world may not have saved that someone, but that family member, neighbor, friend, acquaintance, or six-degree-separated addition to that statistic was unable to know if it could have been the case. Ensuring the best possible healthcare is provided to members of our society who need it is an issue that has dogged the nation for over 100 years. Tinkering and baby steps have created institutions and programs such as the CDC, The VA Hospitals, Medicare and Medicaid, smallpox eradication, polio, rickets measles and other common disease minimization, flu immunization, and the End-Stage Renal Disease (ESRD) program among others; programs that sometimes work, and sometimes are bogged down by rules that contradict the objective of the program. Yet, over 160 million Americans every year have claims denied, problems with their claim or are outright uninsured, facing deteriorating health, bankruptcy and death. The cost of not reforming health care is greater than otherwise, and this case can be made in economic, moral and political terms. This is the first of a three part essay addressing healthcare reform on these terms.

The Economic Case for Health Care Reform: The Doctor’s Bill

In a free and unregulated market, public goods are monopolized by private providers that are driven to serve the most profitable segment with the lowest risk. Government has generally understood this “market failure” principle, as in the case of public education, an example of private, public, as well as non-profits mixing together in an effort to make education accessible to everyone. If no possibility of a publicly funded basic education existed, natural oligopoly forces would drive the price of education ever higher, while the same schools would try to lower their cost by being increasingly selective in their admission policies. Having a public option, makes private schools more affordable for those who want it, and guarantees access for all to an education that improves the intellectual and skill pool of the labor market: a productivity bonus for everyone.

The notorious “death panels” are alive and well, and get paid bonuses when health care is denied to those in need. Repeated cases of insurance companies engaging in this practice in order to increase profits are well documented. There is no control mechanism or regulation to make these private companies behave differently in their natural drive for profits, and it is entirely within the rights of these companies to seek to maximize their profits. In a free, unregulated market, their actions are perfectly understandable. It is the mission of these companies within our free enterprise system to seek to decrease costs and increase profits. It is logical then that they will try to increase the rates as much as they can, and drop as many expense creating liabilities (people in need of health care) as they can. If Big Company A is not as effective diminishing liabilities and increasing profits as Big Company B, the shareholders of A will not be happy, sell Big Company A stock, and buy stock in B. The end result of this market structure is that it skews to the healthier and the wealthier, a diminishing pool that eventually has limited growth for A as well as B. As people are dropped either actively, by coverage denial, or passively by the unaffordability of the premiums, they may get bombarded by Little Company C, D, E and others, with seemingly affordable rates and coverage; except that when they actually need the service, exclusions, limitations and deductibles are even more pervasive than in A and B.

The 46 million or so Americans with no insurance includes a great number that can afford it but do not get it because they think they do not need it; and to a certain extent that may be true. They are young and healthy, and live a healthy lifestyle. Insurance companies would very much like to mandate these people to buy policies to increase their market pool of healthy customers, especially when not competing with a player that focuses on healthcare as a public good, not as a profit market. The market structure as it exists drives the insurance companies to cater to the healthier and the wealthier. It is in society’s best interest to alter this structure so as to change the incentives.

The costs of the healthcare plans being discussed in Congress are astounding, in the trillions of dollars. But, let us be clear, that money will be spent, regardless whether it is by the government or by private individuals, unless nobody goes to the doctor anymore. This is the doctor’s bill for the nation, as charged by the whole of health services provided. The essence of health care reform is cost driven, in order to get the inefficiencies out of the system and so that we can all spend less in this essential public service, whether through the private market or as part of a public option. To focus on the great amount of money allocated by the government on healthcare for all Americans is to focus on the wrong issue. This is money that is simply shifting from one pool to another, and its sheer size just amazes us when we see it in one big number. The cost of health care, those trillions of dollars, is already being borne by all Americans by:

1. Paying private insurance. Sometimes paid from the insured’s own pocket or as an employee benefit; moneys which come from the stagnant wages of the employee and the company’s customer’s purse;
2. Subsidizing local, state and federal taxes health services for the uninsured, typically emergency and critical care, shifting from wellness management, chronic and preventive treatment to acute treatment, the most expensive of all treatment, and
3. Lost productivity in the economy, e.g., sick days and underperforming employees.

This is a short overview of the economic structure problems in the healthcare industry, a structure that requires an extra player to at least balance somewhat its shortcomings in servicing the public good. The market structure as described favors the private sector profit motive, but ignores the character of public good (in the economics definition of the term) that is implicit in healthcare. Undoubtedly even relatively mild illnesses such as the flu cost our economy billions in lost productivity and therefore output. More catastrophic illnesses or medical needs, and death have also a direct economic impact. The loss to our economy of five lives per hour is not just in output lost, but in the increase of costs due to greater use of emergency and high cost procedures instead of preventive medicine. When our society is healthy, productivity is higher and there is an economic benefit for all.

• Link to Harvard study on deaths caused by lack of insurance.
• Link to Commonwealth Fund report "Losing Ground: How the Loss of Adequate Health Insurance is Burdening Working Families"

Selected Essays: On the Iran Election Protests

Our Sister's Keeper?

written after the elections in Iran, 2009

June 23, 2009

Against my basic instincts, and perhaps judgment, I forced myself to watch the video of Neda Agha-Soltan’s violent death. I could not hold back the swelling tears from my eyes as this young woman, a startled look in her face, was helped desperately by her screaming friends and blood started pouring out from her mouth and nose, as her lungs obviously filled up with it, and her life drained away into a blank stare. The common pain shared by us all when seeing a young life’s dream and potential cut short is insignificant compared to what her family and closest friends must be going through and, as best as I can, I convey my sympathies to them.

Such graphic and violent images have made Neda into an unwilling symbol of fratricidal warfare, the consequence of sowing hate and divisiveness between brothers and sisters purportedly out for the best interest of their country and people, but with particular views and agendas as to what is “the best” for their country. Either side of the multiple parties and positions in the particular case of Iran is undoubtedly supportive of the Islamic Revolution that has made this country into what it is now: a culturally rich society with aspirations to a better life based on mutual respect in a society of nations, except… there is that caveat: the evangelical drive to convert or violently reject non-converts.

Frida Ghitis (Theocracy Mortally Hurt, Miami Herald 6-23-09) reports that the constitution of the Islamic Republic of Iran includes the directive for “extending the sovereignty of God’s law throughout the world”. When interpreted by sectarian fundamentalists, this directive can and has resulted in international terrorism. When interpreted by tolerant pragmatists, this could result in cultural exchanges. The people of Iran have had their own voice on this matter in this election, and it seems that the pragmatists have gained the upper hand. However, what we are witnessing in Iran we are viewing through distorted, raw information that leaves ample room for misinterpretation. For those who would take sides at this time it should be noted that self-determination and the will of the people is very hard to assess with the knowledge we have. For all we know the riots and protests are being conducted by a very small group in a very limited, yet photogenic area of town. Maybe the whole of the countryside is revolting and large yet remote cities are in strife. Iran is not a society open to the free flow of information and all factions within will try their best to manipulate it in their favor.

President Obama’s hands off attitude to the situation at hand is the right action at this time. He, after all, already reached out with his hand to influence the hopes of reformists with his Inaugural Address, the Nowruz (Iran’s New Year) speech in March, Ankara, and his Cairo Address. We can only hope that the emerging side after this tragic turmoil will see the U.S.’ posture as one of respect for their own self-determination, not as one of indifference or one of interference. That is when diplomacy kicks in, and we have to remind ourselves of our moral standing as our Sister’s Keeper.

Selected Essays: On Right Wing Thinkers and Torture

Where is the Outrage from the Right?

April 28, 2009

In November of 2005 William F. Buckley, Jr., wondered if the administration in its carefully crafted language was adamant about not condoning torture, but perhaps was allowing it to happen, in its reaction to the 9/11 attack. Within the context of anti-torture statutes and laws being debated in Congress at the time, and that the administration did not seem to support (which later in December passed as the Detainee Treatment Act, subjected to one of those “signing statements” and explicitly overridden in Executive Order 13440 by President Bush), Buckley asked “Does the CIA require, for the success of its operations, a greater license than the military? Have we thought through the implications of anti-terrorist activity? If not, is Guantanamo a fetid creature of that confusion?” And he adds: “The administration has access to very bright and thoughtful civil servants, but they cannot shield the administration from the consequences of failing to think through the dilemmas they are in.” (William F. Buckley Jr., “It Can’t Be Said in Simple Words” The National Review, Nov. 4th 2005)

The present discussion related to the use of torture to elicit information from “high value detainees” is discouraging. We need intelligent, reasonable thinkers arguing on both sides of the political field in a way that can help us understand how the nation went astray in this straightforward issue, and to help lead us out of the quagmire. Torture is morally wrong, and there should be no doubt about this point.

In addition to that, torture is flawed: it is now known, for example, that it was a tortured detainee’s confession that gave the administration the information that Iraq had weapons of mass destruction and was in a secret alliance with Al-Qaeda; information used by Sec. Colin Powell in the UN to make his case for war against Iraq and to invade in March 2003. Neither assertion was correct.

On October 12th 2002 in Bali, Indonesia, simultaneous car and suicide bombs killed 202 people and injured 209 in an attack orchestrated by an Al Qaeda linked terrorist group, shattering what had been until then an idyllic tourist destination. On March 11th, 2004 Madrid was attacked by an Al-Qaeda inspired (and, possibly, trained) group, resulting in 191 people dead and over 1,800 wounded. On July 7th, 2005 London suffered a series of train and bus bombs also by Muslim terrorists killing 52 people and injuring 700; and in 2006 a plot was uncovered by British Intelligence to blow up US bound airliners and kill over 2,700 people over the Atlantic by smuggling and detonating liquid explosives onboard.

None of these attacks or attempts were thwarted by waterboarding Abu Zubayda 80 times in August of 2002 or Khalid Sheikh Mohammed 183 times in March of 2003, or the other 26 Guantanamo detainees with documented torture by the US Government and its agents. As for those tortured in foreign lands we do not know much except what came to light in Abu Ghraib, and sketchy reports about young prisoners freezing to death after being chained naked to the floor overnight in the “Salt Pit” outside Kabul, or the case of Dilawar, the Afghani farmer whose plight and death was dramatized in the movie “Taxi to the Dark Side”.

Unless the torture used somehow selectively weeds out plots directed to other countries, terrorists have continued to plot, carry out attacks and kill innocent civilians throughout the world. We are not safer because we allowed torture—possibly quite the contrary. For certain, our military is less protected, as the reasoning used to disregard laws, conventions and treaties will go both ways in asymmetrical warfare against thugs of all sorts.

We need a public discussion that does not automatically defend or attack the parties involved on account of political affiliation or past associations. The disservice brought by the so-called right wing mouthpieces to what our country is all about borders on being antipatriotic. The radio entertainers and TV talking heads defending torture as a necessary evil are distorting the face of America and the minds of their followers. I cannot believe that the likes of Mr. Limbaugh, Mr. Hannity or Mr. Beck truly are so against what America is all about, and I hope that it is only contrived opinions for the sake of superficial entertainment that makes them spout these distortions to our national principles.

Limbaugh, Hannity and Beck should also be equally outraged by the disregard of laws and distorted ethics that made Buckley presciently call Guantanamo “a fetid creature of confusion” standing on dubious legal ground. Their reasoning and arguments on air seem more of the knee jerk type than those of the thoughtful mind. Much the same can be said of those who call out from the left for the public disgrace and humiliation in the court of public opinion for many of those involved in this classic case of group-think rationalization.

Our pain on September 2001 cried out in anger and struck out in fear, seeking through revenge to punish painfully and physically anyone that we thought might possibly have had something to do with that attack. To avoid lashing out irrationally when under such duress we are a nation built upon laws. Breaking our own laws to pursue an understandable sense of vengeance was inexcusable. We are a republic, indivisible with liberty and justice for all, governed by laws, bearers, perhaps sometimes reluctantly, of a moral standard and ideal for the world to see; standards and ideals predicated on the notion that all men are created equal and have equally the rights of life, liberty and the pursuit of happiness. And we are a country founded on the rule of law, which requires that “justice for all” (not only for some) mandate to be pursued.

The potential complicity of current and past members of the political establishment on both sides of the aisle makes the appointment of an independent investigative body the only viable solution to examine this breach of trust by our government, and examine we must. If under the law, there is no criminal behavior found, so be it and it should be patently and clearly demonstrated. If, however, there are criminal charges to be made they should be brought so the world may be reassured that we do maintain a sense of justice within our perfectible system of government.

Selected Essays: On Gay Marriage

Love and Marriage


Written shortly before the California Supreme Court decision rejecting the challenges to Prop. 8 in California, which banned Gay Marriage, but maintained legal the marriages before the passage of that electoral initiative


May 24, 2009


On Sunday May 17th, four days after being diagnosed with an aggressive form of Leukemia my brother-in-law’s sister, Jamie, died in an Oakland CA hospital, just after celebrating Mother’s day and making holiday plans with my nieces. That Sunday she felt weak, and on Monday entered the hospital from which she would not leave, felled tragically in the middle of her plans for life by a previously undiagnosed and asymptomatic ailment. She was 38 years old and is survived by her five year old daughter Phoenix and by her wife, Michelle. Jamie loved poetry, worked at a bank, graduated from UC Sta. Cruz, played music, loved her family.

In the Summer of 2008 a brief window opened in California that allowed long time life partners to marry each other. Jamie and Michelle took advantage of this opportunity and legally and socially sealed the bond that they already had personally. After 11 years together they could now be treated equally under the law, as a married couple. In the tragic circumstances of her death, this legal treatment allows for a better resolution of the burdensome reality now overwhelming her closest ones.

The modern US family incorporates all sorts of types, including divorced parents, step-parents, grandparents, and same sex couples with children, but our society should not put obstacles in the love that binds with the purpose of creating strong relationships and upbringing. As the California courts reconsider this week the constitutionality of Prop 8, we should all remember that the doctrine of “separate but equal” has long been shown for what it is: another form of discrimination. Equal protection under the law can only be truly equal when there is only one law for all who want to be bound by it.

Selected Essays: On the American Recovery and Reinvestment Act (ARRA)

Tax Initiatives That You Can Use Now


March 26, 2009

Despite the hoopla regarding how expensive to taxpayers the “Stimulus Package” (American Reinvestment and Recovery Act) is, a large proportion of it focuses on immediate tax relief, making up close to 40% of the estimated cost of the plan. When the total of $787 Billion is mentioned, that includes $288 Billion in tax relief and incentives. Of these, $237 B are tax cuts directed to individuals and consumers, and the following should be highlighted:

• Payroll tax credit $400 per individual, $800 per couple –This directly increases every worker’s paycheck by about $50 starting April 1st. It is automatic but individuals should check with their employer regarding W-4 allowances. ($116 B in tax relief).

• Expansion of College Tuition credits ($14 B in tax relief). Included in this provision is use of college tax-exempt fund plans (such as Florida’s 529) for the purchase of computers and technology as a qualified educational expense, by allowing tax-free withdrawals from the fund.

• Expansion of child credits ($15 B in tax relief).

• Other tax relief measures are targeted to middle and lower income brackets through the Alternative Minimum Tax ($70 B in tax relief) and the Earned Income Credit ($4.7 B in tax relief), and to giving a helping hand to the unemployed by not taxing their unemployment benefits (another $4.7 B in tax relief). For this group particularly, but benefiting others whose employers have dropped health coverage as part of their cost cutting, there is included in the spending portion of the ARRA the extension of COBRA health insurance coverage ($24.7 B in spending).

In addition, to directly stimulate spending by consumers, the tax stimulus (cuts) include:

• Sales and excise tax deduction for vehicle purchases (only this year, deductible in 2009 filing). The deduction is progressively applied as income levels increase, favoring thus middle and lower income buyers (estimated $1.7 B in tax relief, applied when filing tax return). This is in addition to the $2,500 to $7,000 credits for hybrids and plug in vehicles for which, by the way, each manufacturer has a limited number they can tack it on to, based on the number of vehicles sold. After they have sold a certain amount of vehicles the credit phases out, to encourage early adopters of the hybrid models—so hurry up and buy one to get that credit!

• Home improvement for energy efficiency tax credit, allowing deductions of 30% of the cost up to a $1,500 deduction. Homeowners that choose to improve the energy efficiency of their homes save energy costs and have a tax deduction to boot! This may include installing efficient water heaters and air conditioners, for example (estimated $4.3B in tax relief, applied when filing tax return). For alternative energy installations at home there is no upper limit on the deduction—so bring on those solar panels!

• First time home buyer credit of $8,000 for houses bought in 2009 (estimated $6.6 B in tax relief, applied when filing tax return), and also for some bought in 2008 (applicable in the 2008 return).

Other tax related provisions include $51 billion in tax relief for businesses and an extension of the Tax Rebate for the 2008 filing, cutting the amount owed for 2008 (applicable in the 2008 return) for some qualifying individuals.

It is true, cutting taxes increases the deficit, but right now these cuts and incentives are designed to help consumers during a critical recovery period for our economy. Take into consideration that no Republican in Congress except for three Senators voted in favor of these tax relief provisions.