First Principles

In search of the Unified Theory of Conservatism

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SHOCK: Socialized Medicine Doesn’t Work!

October 18th, 2008 · No Comments

Who would have thought that a socialized medicine program would result in free riders, reduce the quality of care, and break the bank to boot?!?  Hawaii just got done learning the hard way:

Gov. Linda Lingle’s administration cited budget shortfalls and other available health care options for eliminating funding for the program. A state official said families were dropping private coverage so their children would be eligible for the subsidized plan.

“People who were already able to afford health care began to stop paying for it so they could get it for free,” said Dr. Kenny Fink, the administrator for Med-QUEST at the Department of Human Services. “I don’t believe that was the intent of the program.”

It’s amazing that anyone is surprised that when you offer a service for free, and (on paper) that service is comparable to something they otherwise would pay for, they’ll go get the free stuff.  Of course, it’s never “free” – someone has to pay for it in the end.  But when the payor isn’t the user, there’s no incentive to lower costs, embrace customer service, or innovate in order to remain ahead of the competition.

There were some very interesting comments on the article.  This one in particular got my attention:

My son was on an HMSA keikiplan, which we paid for ourselves but didn’t realize it was state subsidized. Because it was a quasi-governmental plan, it was automatically converted to the universal child care program when it was created. We received a letter in the mail stating that the next monthour plan was changing. We didn’t drop our private insurance to join this program – they changed it for us. We stayed with the new plan for a couple months but realized the new care is just horrible. It is more cost effective to pay for your own private plan. Of course in retrospect I should have realized a government-run program would suck. People complain about any government-run entity – the DMV for example. Why do people assume the government will do a good job with health care when they fuddle everything else?

Like many states, Hawaii is having a health care crisis of sorts. HMSA, one of the major insurance carriers in the state (equivalent to BC/BS elsewhere), charges astronomical fees but doesn’t pay out it’s providers very well. The result is doctors are leaving the state. They’re not being paid. We paid $650/month for an HMSA family plan for three of us. After two years we were paying almost $900/month and our dental plan was dropped. Of course we woke up from our stupor finally and cancelled the whole thing. Unfortunately people think the solution to this is a completely government-run plan. What is the saying – two wrongs don’t make a right.

Why should there be quality?  What are people going to do – go to another program?  Use another state’s program?  Even Canadians can drive south – Hawaiians are pretty much stuck out there.

If a program pays for all medical expenses, it can’t truly be said to be “insurance.”  Insurance works by spreading the expense of unlikely and/or unexpected risk across a large group.  If you pay an insurance company to pay for things you knowyou’re going to have to pay for anyway, and that everyone else also pays for, all you’re doing is paying someone to turn around and hand your money to the doctor.  Middle men of this type are unnecessary and expensive.  And yet, consumers demand more and more of this type of thing while complaining about the rising costs of regular appointments and doctor’s visits.  It’s unfortunate few people talk about this correlation.  It’s much simpler, though, for a politician to simply promise”free” stuff to people, and hope they don’t connect it up with the bill come tax time.

And who does the program purport to serve?

The Keiki(child) Care program aimed to cover every child from birth to 18 years old who didn’t already have health insurance—mostly immigrants and members of lower-income families.

[***]

While it’s difficult to determine how many children lack health coverage in the islands, estimates range from 3,500 to 16,000 in a state of about 1.3 million people. All were eligible for the program.

Even if the immigrants in question are legal, it seems highly foolish to have a program that actually encourages people from other places to come take your tax-funded services for free.  And to not have any idea (within a factor of 4!) how necessary the program even is…  That’s just plain budgetary incompetence. 

I must wonder how many of the children who qualified lived in houses withbig TVs, cable, video games, cell phones, etc.  What we define as “poor” in this country is extraordinary.  While I think it’s important for society to have a minimal safety net for those who very truly have no other option, I also think the people who qualify for such programs should be strictly controlled.  Having cable TV should be absolutely disqualifying, as should owning a TV that costs more than $200.  Having a cell phone with a full keyboard?  Don’t ask your neighbor to pay for your trip to the pediatrician while you have the money to whittle away on a more efficient texting machine. 

Also, since they are asking other people to pay for their medical expenses, their own health maintenance should be subject to government control.  No smoking or drinking should be allowed by parents who qualify for such a program – not only is the environment healthier without those things, they cost a lot of money (especially in Hawaii) that could better be spent on health insurance for the kids.  Spot checks should be authorized to ensure no junk food is in the cupboards. 

Of course, if they did those things, less people would sign up.  And that’s kind of the point.  As Hawaii learned, these types of programs are draining financially, even under the best and most deserving of circumstances.  Limiting these benefits to people who actually need them is important to ensure anyone can take advantage of it at all.  And ensuring people make actual sacrifices so that they feel like they actually are earning their benefits is an important way to preserve the dignity that is otherwise lost to welfare recipients – not to mention incentivizing people to get off of the program the very minute they can afford it!

It’s fortunate that Hawaii has a Republican governor who was quick to recognize the folly of this type of program, and axed it accordingly.  I can only wonder if the 50th State’s favorite son will learn this important lesson from the place of his birth before he foists some similar program on the rest of the nation if he wins this election with majorities in both the House and Senate.

Tags: Free Markets · Health Care