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Warrencare
Elizabeth Warren recently rolled out her new “Medicare-for-All” plan with the strong claim that “Health Care Is A Basic Human Right.” She then backed up that claim with a story about how, when she was in middle school, her father had a heart attack and their health care expenditures nearly cost her family its home. From those two observations, she has crafted her massive entitlement system which will, when the dust settles, collapse. It will fail as individuals become unable to receive timely health care, and it will exacerbate the dislocations that plagued the Warren family. Why? Because her two points represent the worst way to think about health care, both on the revenue side and on the expenditure side.
On the first point, the stirring claim that health care is a “right” obscures all references to correlative duties. Under classical legal thought, a right to health care referred to the ability of a person to take his own money and spend it on health care with whatever health care providers that he chose. The correlative duties on the rest of the world were not to fund his care but to stand aside and let those contracts go forward as the parties chose. As in all areas of human endeavors, voluntary transactions normally generate gains for both sides. In health care markets, families and individuals are often unsure what contracts to make or why. But their best cure is to hire agents who can fill their knowledge gap, whether as personal advisors, employers, cooperatives, or religious or social groups.
Warren’s radical approach requires the negation of these traditional rights to acquire health care. Her positive right to health care necessarily imposes on someone else the correlative duty to supply that needed health care. But this broad task then faces two insuperable obstacles. First, on whom does the duty of provision apply? The Warren answer in large measure enables a government coterie to coerce employers, large corporations, and a select group of the ultra-rich to discharge that obligation. Once these payors are identified, the state will then set out the terms of coverage by running a planned economy, deciding what bundle of services will be provided, and through which institutions. Friedrich Hayek’s prescient warning about the abuses of centralized power is recklessly thrown to the wind.
Warren’s model also discards private health care insurer’s exhaustive research to determine what kinds of conditions to cover and to what extent. Left to their own devices, these private insurers know that they will not last long if they require customers to make—either directly, or indirectly through health care plans—expenditures that are worth less than they cost. But no such constraint cabins these positive rights when the recipients don’t need to use their own resources to fund the health-care benefits they receive.
Under a positive rights regime, plan recipients no longer seek to conserve resources. They seek instead to take advantage of the system so long as they receive a net gain from treatment, whose cost to them at the time of service is zero. The result is that low priority cases work their way into the health care system, so that under “Medicare-for-All” the total demand for services increases while simultaneously the net benefit from their delivery falls. Health care is not special in this regard; the dangerous overconsumption of positive rights also occurs with housing and education.
Warren’s second mistake is to use personal history as the basis for social policy. All private care plans limit coverage, both in the aggregate and for particular procedures. Those limitations necessarily mean that in some defined class of cases, individuals will come up short after the fact, when with hindsight they would have purchased more coverage earlier. But Warren’s story forms a data set of one case. To get a balanced picture of the insurance market, it is also necessary to take into account the many winners—those individuals who bought limited coverage at lower cost and profited because those policies provided them with all the coverage they needed. Insurance is a large-numbers business, and Warren’s carefully selected anecdote invites going far beyond the already woolly thinking behind the expansive minimum essential benefit plans under the Affordable Care Act, which itself has caused so many dislocations in coverage.
The looming shipwreck should not come as a surprise to any careful student of institutional arrangements who knows that the law of unintended consequences lays waste to such noble dreams as universal health care. This point becomes painfully evident by looking at Warren’s naïve optimism on both funding and expenditures. The initial Warren ploy is to claim that her major redo will result in “not one penny in middle-class tax increases.” Well then, where will this money come from? Even if we could just confiscate the wealth of all of the 400 richest United States citizens, this would generate less than a $3 trillion down-payment on her $52 trillion plan. And of course, this one-time “gain” would be offset by a shrunken capital base in future years, not only from that select few, but also from the countless individuals and firms with whom these financial elites do business.
It is also, of course, possible to raise the corporate tax rate again, a move that technically does not fall on the shareholders. But this maneuver ignores that trillions of dollars in corporate wealth is owned by pension funds whose ordinary beneficiaries would see their annual payouts shrink. Taxes rarely remain where they are levied, and are instead passed forward and backward in a complex array of maneuvers to other parties along the chain of production and consumption. And a rise in corporate tax rates would hurt in yet another fashion. Corporate investments and wages are closely linked, so that as investment lags, wages fall. The recent steady improvement of wages across the income spectrum will quickly become a thing of the past.
Warren’s plan will also divert about 98 percent of the employer cost of health care to the national budget, where it will no longer be devoted exclusively to the employees of the firm but instead be spread among all members of society, representing yet another huge de facto tax on middle class employees, brought to you by the same people who are unable to run the Veteran’s Administration.
The size of these implicit taxes will be compounded by two other features of the Warren plan. First, she hopes to tax the unrealized appreciation of capital assets, an exaction that accrues without any sale of shares. That approach will force shareholders to either sell assets or borrow on them to pay their taxes. Second, taxing unrealized appreciation will present severe challenges of valuation for any financial asset without a readily determined market value. The ensuing administrative nightmare will be compounded if Warren imposes her perverse wealth tax—presently proposed at a rate of 6 percent at the top, double her previous amount. When added to the massive distortions that Warren has planned for labor and international trade, the entire system will quickly collapse under its own weight.
These major disruptions will also be felt on the buyer side of the market as well, where Warren once again attempts the impossible. She first wants to increase the amount of available coverage by offering everyone unlimited health care benefits, when and as they need it. At the same time, she will force tens of millions of people who like their current health care plans into an untested government network set up from scratch. Accordingly, physician salaries will plummet, and all sorts of other medical businesses, from practice groups to niche primary care operations like One Medical and CitiMD, will either close their doors or submit to government control. This creaky Warren edifice rests on the premise that the supply of medical services is wholly inelastic, such that if salaries plummet, the same number of physicians and other health care providers will soldier on as before, even if they can no longer make payments on their home mortgages.
Such passivity is not in the cards. Instead, there will be a rush to the exit. Senior physicians will retire in droves when faced with higher taxes on smaller earnings. Foreign physicians will return home or look for greener pastures elsewhere. Young graduates will bypass medical careers altogether. Toronto and Vancouver will become destination spots for Americans that still have independent means to pay for medical services. And for the rest of the population, the laws of supply and demand will lead to the formation of queues as a wasteful means to ration services. And with queues come gray markets filled with buyers and sellers willing to work outside the system.
Let us hope this fiasco does not come to pass, for if it does, we can be sure that Warren and her inner circle, like the pigs in Orwell’s Animal Farm, will cheerfully exempt themselves from the planned misery they will plan to impose on others.
© 2019 by the Board of Trustees of Leland Stanford Junior University
Published in Elections, Healthcare, Law
Simple point: you cannot create rights.
If you can create them, you can remove them. They are only temporary privileges.
A good point regarding unintended consequences (there always are some) – though (1) how do other economically developed countries (like Australia) manage these for Single payer, and (2) how does the US manage these for its current system?
And this is another Warren deception. Liz implies that it was the medical expense of her dad’s heart attack that was a strain on her family. But medical care was cheap 60 years ago. It was her dad not being able to work for “a very long time” that caused the hardship. She wants to destroy our country, because she was confused about the causes of her family hardship when she was 12. She lies too much.
If Warren had her way, the entire economy would be destroyed by capital flight before the ink was dry on her tax plan. When the Dow drops 80% and real interest rates go to 10%, China will swoop in and take what they want. Bernie will finally get to see the bread lines he dreams of.
Is she going to guarantee that she and her elite cohort will participate in the plan? Is she going to wait in the same ER waiting room as the average Joes? Or is she going to create special carve-outs for herself and elites so they don’t have to mingle with the rabble?
There is always a better house, better food, a better doctor and fancier car. In capitalist societies, the rich get those. In socialist/communist societies, the elite apparatchiks and party faithful get those.
If that plan is actually implemented, and Congress tries to exempt itself, they may get an unpleasant surprise. When Capital flees, Doctors will, too. Even the most highfalutin’ congress-critter may be unable to find adequate medical care. If there are no doctors, no one will have adequate medical care. And if everyone’s taxes increase, won’t theirs too? They, too, will take home a lot less than they used to, so they might not have so much money to throw around anymore.
As a nurse, I imagine a system in which health care is a “right” instead of a service. Will they shackle me to the clinic or institution where I am employed? I already stay later when clients need help; will I be allowed to leave at the end of the day? It’s always been hard to arrange vacation time, based as it is around client need and the shorthandedness of every institution for which I have worked. Will we ever be allowed to take off?
I imagine something like Jesse Pinkman being held prisoner to to the drug lords in the last episodes of Breaking Bad.
Why would anyone choose a career in the medical fields?
Are citizens entitled to police services?
Are citizens entitled to any Government services?
“Entitled” is not why we have police services.
They also allow private insurance, something Warren wants to ban. Canada has been returning to private providers to meet the needs of their citizens. England has private insurance/drs as do the Scandanavian countries. It is called two tier medical care, where the rich still get what they need, and for the rest it can be a crap shoot.
You can spend money is a few ways: your money on yourself, your money on someone else, someone elses’ money on you, and someone elses money on someone else. Guess what way is the most efficient and best value?
What if I don’t want what the government is giving me for my personal use? No right to seek my own solution to a problem? The Dems are 1/2 right, we spend too much money, but the reason is wrong. It is because government got involved in the first place. Same with education. Wherever the government gets involved, mandates and pays, they need more money and people to meet the mission.
If someone tries to break into my house and I call the police am I entitled to a response?
Living in Australia I can tell you public hospitals are not bad (in fact there are no private emergency rooms), and that two systems are pretty intertwined (for eg doctors can work in both systems).
This Dickensian vision of dregs for the masses is not true here. FWIW.
The point is spending money together gets us a better bang for our buck per capita. That’s more efficient than any of the options you gave used solo.
It may be the duty of the police to respond, if they have the time and resources to do so. If they demur you may scream at them that you are entitled to a response, but that doesn’t make you entitled.
More efficient from a state-centric point of view.
More efficient from a state-centric point of view. Maybe not from a people-centric perspective.
If “healthcare is a basic human right,” it is interesting to hear in the news that government healthcare providers in the UK are claiming they should be able to refuse to provide it to “racist” or otherwise unlikeable patients in their care.
How complicated, expensive, inefficient, and ineffective massive government healthcare programs are! But Liz must have her plans for making the country un-great.
From a what I pay for my healthcare (directly or through taxes) point of view. I pay less than I would otherwise for a very similar personal healthcare product.
I do understand the mistrust of Government, sort of, but I am not sure that it doesn’t make people refuse to look at facts that do not align with ideology when it comes to this. Iow it’s moved into the realm of belief, where it sits with religion.
(I’m sure you could say the same of the mistrust of Corporations, in many cases.)
This is what it looks like to me, but I could be missing the facts based arguments wrt outcomes and costs.
Thoughts?
anything that costs money is not a right.
No one has a right to health care unless you can find doctors and hospitals willing to work for free
Calling health care a ‘right’ is a clever but deceptive way of avoiding ‘gop’ talking points like cost and benefit
yes to police
no to ‘any government service’
it’s quite insidious and stupid.
democrats limit supply while subsidizing demand then complain about rising health care costs and blame big pharma.
it’s a two year old argument
wrong
you can spend money together with your friends for a caribbean vacation but not for socialized medicine
can you provide an example of the efficiency of spending money together (while we hold hands)?
why are there only 4 likes on this post?
I’m very disappointed by the ricochet community lol
The police are one Government service.
Why them and not any others?
The US spends 18% of its GDP on health care, other industrialised democracies spend about half that %age for very similar results. (Australia spends about 10%.) They spend this in the context of significant Government intervention in health care – either by way of single payer (Australia) or by way or regulating insurance companies wrt what they offer and whether they can be for profit or not.
That looks like an efficient use of resources for the people of these countries, basically achieved because they pay for healthcare together and that gives them bargaining power.
That’s not the point of “spending money together”. How’s bang for the buck going for the tens of millions enrolled in Medicare and Medicaid? Hint: Not good. We don’t have government so we can spend money together. For background on the reasons why efficiencies of scale are almost never gained in large-scale government organizations, see Richard’s post, above.
Other countries’ models are informational, and interesting. Australia, if you don’t count wallabees, has a population of 25 million. The US population is 13 times larger. There’s a scaling problem that’s not easily transferable, even if exactly everything else were equal. And it isn’t. As an example, the US has 12 million illegal immigrants (as of 2015). Essentially, care provided for them is free, as most of them do not pay into health care plans, or live largely off the grid. Could Australia provide health care, for free, to half its population? Not for very long. Oi!
Anecdotes? I have lots. Friends in Canada waiting six months for an MRI to get a look at a lump. In the US, it’s 2 weeks, or less. Hey, roll the dice, move your mice, but comparing apples to chain link fencing does not provide a conclusion. And asking simplified questions, as if this is some sort of argument or defining moment of clarity, avoids all the complex problems that Richard details in the post.
But it’s easy to do, so that’s what we’ll get: the same magical thinking that gives us people like Elizabeth Warren, and a large population of folks who’d like to believe what she’s selling.
@machogrande – yes, I agree simple arguments for complex issues are not adequate. (Neither is dodgy maths – Australia probably could grumblingly afford to extend health care coverage to 4% of the population for free [if it doesn’t already do so]). That the US is too big for a version of single payer is, imho, one such argument.
Any scheme can be run better (public or private) but is there significant appetite among US Seniors to get rid of Medicare so that they can just spend the money buying private insurance plans? If not, that’s telling you something.
Similarly does the majority of the population in any other industrialized country want to exchange their own health care system for something like the US’?
And – we shouldn’t be too proud to learn from each other. The US has plenty to teach the rest of the world, but that doesn’t mean it doesn’t have anything to learn from the rest of the world as well.
I compiled this list in 2010, from James Taranto’s Best of the Web series on “Great moments in Socialized Medicine”.
This is what happens in Britain.