Common Sense & Healthcare

We've been watching with a fair amount of alarm as Obamacare works its way through the House and Senate. The mantra from Democrats is that since something needs to be done we should get the government to do it.

To be fair, these guys have been campaigning on government run healthcare since 2006. So their rush to ram their socialized "public" insurance scheme down the public's collective throat is predictable if not understandable. Unfortunately, none of the Democrat's claims square with reality.

You don't even have to be an economist to understand that a government run program will be hugely expensive and fraught with waste and corruption. When has government done anything more cost-effectively than the private sector?

Government isn't subject to the harsh realities of the market place so it's insulated from the consequences of failure. To make matters worse, spending every last budgetary dime is encouraged. If governmental departments fail to spend their share of our tax loot, chances are they won't receive as much for next year. In other words, they are punished for their good behavior.

Supporters of the Public Option Insurance Co. love to claim that administrative costs for Medicare recipients are less than for the privately insured. They often quote the talking point that Medicare administrative costs are 2% of the total payout while private insurance administrative costs are in the 20% to 25% range.

Besides being absolutely counter-intuitive, the comparison is of the administrative costs as a percentage of the overall payout. Medicare's population is generally older and in poorer health than their privately insured counterparts. As a result, Medicare recipients generally cost (pay out) more per person than the privately insured.

Someone who's insured, healthy, and never sees a doctor has an administrative cost of 100% in the model used by supporters of Obamacare. In other words, all of the money paid out by the insurance company goes to administrative costs. If it costs $100 per person per year for an insurer to administer this person's health insurance, then the cost as a percentage of the amount paid out ($100) is 100%.

On the other hand, someone in the late stages of their life, who has multiple serious medical issues costs the insurer (in this case Medicare) thousands and thousands of dollars per patient making administrative costs seem low as a percentage of the total amount paid out for that patient. If in this case, the cost of administering the insurance is $100, but the amount paid out for medical care is $5,000, then the cost as a percentage of the amount paid out ($5,000) is 2%.

In reality, the cost for administering a privately insured person is about $453, while the administrative cost for a Medicare patient is about $509 (read it here). Medicare administrative costs are an average of 12% per person higher than private insurance. Now that makes sense.

A lot of folks complain about their health insurance. If you've ever had to make a claim due to some kind of illness, chances are you've run into a buzz saw of rules, regulations, and bureaucracy. Most of the time these experiences are pretty bad at a time when you're not exactly at your best. You might even develop a bit of animosity towards corporate America.

We think it's fair to say that many liberals (there's nothing progressive about self-labeled "progressives") both dislike and distrust corporations in general and health insurance companies in particular. However, it's nonsensical to believe that getting money for care out of the largest "corporation" in the world - the United States government - would be easier than getting care from one of the 1,000 plus private insurance companies.

When exposed to the market, bad insurance companies ultimately fail while a government insurance company has the closest thing to eternal life. Regardless of care, regardless of performance and in stark contrast to those it serves a "public option" government run and funded health care "option" would be almost impossible to challenge.

The 536 and a half board members of Public Option Insurance Co. not only run their insurance scheme, but have the ability to set the rules of engagement with their private sector competitors.

[Sidebar]
We say 536 and half because you have 435 members of the House of Representatives, 100 members of the U.S. Senate, President Obama, and Joe Biden. The Vice President only gets to vote when there's a tie in the Senate and if you've spent any time listening to Gaffster-in-Chief, you understand the half part. Perhaps they should consider keeping Biden in an undisclosed location? We're just sayin'...
[End Sidebar]

Common sense tells you that the referee shouldn't be a member of one of the competing teams. Although New Mexico's recent history seems replete with examples of competitors slipping the ref a few bucks for favorable calls... but we digress.

One of the issues that repeatedly pops up is - how are we going to pay for this intrusive and massive government program? Estimates put the various "public option" programs at anywhere from $1 TRILLION to $1.6 TRILLION of borrowed money. Democrats have numerous schemes designed to pay for the Public Insurance Co. that they claim will be "revenue neutral." However, none of them seem to be able to point to a TRILLION DOLLARS worth of savings anywhere and the dirty not so little, not so secret reality is that they will be raising taxes on big business and small business to pay for it.

Remember, when business costs rise (and taxation is a cost of doing business), they either charge more for their products and/or services or they stop providing their good and/or services. It's really pretty simple. Would you pay your employer to work for them?

If a business can absorb the new costs artificially imposed by government, they'll do it by charging more and lowering other expenses. That means they'll be trying to charge more and letting people go in order to protect their interests. Businesses cannot and will not pay you to provide their goods and/or services to you - which means you will pay their costs and taxes or they will close their doors.

The most vulnerable businesses are small businesses. Small businesses provide most of the jobs in this country. They also tend to fall into Obama's definition of "rich people" because they tend to be sole proprietorships, LLCs, or subchapter S corporations.

In Albuquerque, restaurants are a visible example of small businesses that cannot survive Obama's chopping block. They employ thousands of often relatively unskilled, somewhat itinerant workers and generally do not have the margins to allow their operators to provide healthcare.

If Obamacare with its "public option," penalties, and taxes, becomes the law of the land, many of these restaurants will not be able to keep their doors open. And it will be the local operators that will be affected first and worst. One local operator recently told us that should Obamacare pass, they will close all of their locations.

Obamacare will provide "public option insurance" to a bunch of people who because of Obamacare can't afford food or shelter. It doesn't take a genius to see that Obamacare will create an exponential downward spiral as small businesses shut down and government revenue drops across the board.

This doomsday scenario is not as far fetched as you think. The current economic crisis coupled with the borrowing and spending of Obamanomics has already stressed our economy to the breaking point. Common sense indicates that a massive spending program like Obamacare could easily send us over the edge into the economic abyss.

Alarmingly, the Gaffster-in-Chief and the Obama Administration as a whole don't seem to understand what they've done in a few short months and what could be the result of their actions.

“Now, people when I say that look at me and say, ‘What are you talking about, Joe? You’re telling me we have to go spend money to keep from going bankrupt?’” Biden said. “The answer is yes, that's what I’m telling you.”

- Vice President, Joe Biden (CNSNews.com)

The debate over healthcare has been astonishingly devoid of common sense. We currently have a system that isn't perfect but still manages to provide the best care and by far the greatest number of medical innovations in the world. Why we would throw the baby out with the bath water in order to insure a group of people who are already assured care is beyond belief.

Most tellingly, the very people (like Senator Jeff Bingaman) who are the most enamored with Obamacare want nothing to do with it when it comes to their personal healthcare. Every amendment that forces Congress to be the first enrollees of the Public Option Insurance Co. is faced with fierce opposition from the very people who would like the rest of us to end up on its rolls.

All of this leaves us with one very practical, common sense question... If it won't save money, we can't afford it, will end competition, and even the politicians who want this for us don't want it, why should we?