Two Down

Mitt Romney and Newt Gingrich have both recently demonstrated why they are unfit to be the Republican presidential nominee in 2012.

Romney defended legislation he supported when governor of Massachusetts that vastly expanded the state's role in healthcare in Massachusetts, including mandating that state residents have health insurance and creating panels to oversee healthcare. If it sounds like ObamaCare, that's because it shares many similarities. Romney says he doesn't support ObamaCare, since it should be up to each state to impose Massachusetts-style controls. As if the loss of freedom is OK if a state does it but terrible if the federal government does.

Gingrich decided to lambast Paul Ryan's thoughtful plan to allow Medicare to survive its pending bankruptcy with reforms as "right wing social engineering". Ryan proposed allowing seniors who are currently under the age of 55 to buy insurance with a $15,000 subsidy by the government, giving seniors the ability to have a higher quality and/or more cost effective insurance then they currently have. Instead, Gingrich thinks the individual mandate to purchase health insurance is a good thing.

Gingrich's comments are already being used by Democrats to attack Republicans.

Romney and Gingrich have greatly undermined Republican opposition to the Democrats' efforts socialize healthcare. Since ObamaCare is such a fundamental issue in the 2012 campaign, Republicans have to look elsewhere for their nominee.

Real Healthcare Reform

Imagine there was a healthcare innovation that resulted in a 14% decrease in costs in the first year of its implementation while preserving patient choice (unlike socialist healthcare policies in Canada and in Europe that achieve lower costs through government controls, limits, and rationing of healthcare spending).

Given the intense public debate over healthcare spending, you would think this was a major news event, and that healthcare reformers would be excited to discuss this remarkable result.

Well, there is such an innovation. A few weeks ago, the Rand Corporation published a study of high deductible health insurance plans, which showed that healthcare spending by first year members was 14% lower than members in traditional health insurance plans.

If such a result could be obtained across all healthcare spending in the United States, the savings in 2010 would have been over $350 billion. Federal and state budget deficits would be reduced significantly as Medicare and Medicaid spending decreased. And all based on individual choices rather than government fiat.

How can this be?

High deductible insurance plans increase the incentives for consumers to be prudent in spending money on healthcare, since the consumer has greater out-of-pocket costs before health insurance kicks in. But the greater out-of-pocket costs doesn't mean the consumer loses out relative to traditional health plans, since these plans can be combined with a health savings account (HSA), where an employer makes a contribution to an account which pays for out-of-pocket healthcare spending, and amounts which aren't spent are kept by the employee.

As an example, imagine a traditional health plan costs the employer and employee $18,000 in premiums and has no deductible (the $0 deductible is not the norm today, but makes for an easier comparison - the point remains valid with more typical deductibles of $500 or $1,000).

Let's say a high deductible plan, with a $10,000 deductible, costs $8,000 - and the employer contributes $10,000 to a HSA to pay out-of-pocket costs. And let's also assume that the two insurance plans have the same co-pay for amounts above the deductible.

What's happened here is that the the $18,000 premium for the traditional health insurance plan has been split into two components in a high deductible plan combined with an HSA: the same $18,000 now funds the HSA to pay for out-of-pocket costs and pays the insurance premium to cover healthcare spending above the deductible.

If the employee has health costs greater than $10,000, the employee's net cost is the same for the two plans. But for health costs less than $10,000, the employee comes out ahead with the high deductible plan, since he can keep the unspent money in the HSA. And since the employee can keep the unspent money, he has an incentive to be prudent in spending money on healthcare if his spending for the year turns out to be below the deductible amount.

This is a long of saying that incentives matter, which is one of the truisms of economic life. People respond to incentives, and traditional employer-provided health insurance, Medicare, and Medicaid have little or no incentives for the consumer to incur less healthcare costs since a third party is paying almost all of the incremental costs.

The Rand study also showed that consumers in high deductible plans used fewer preventive services - even though by law high deductible plans have no deductible on preventive treatments like vaccines. Such consumers presumably didn't know that the cost for preventive treatments wouldn't come out of their pocket; this issue can be rectified with efforts to promote awareness of their new plans terms.

It is important to point out that Democrats have fought the introduction, and then expansion, of HSAs. Republicans for years tried to get HSAs into law, which the Democrats opposed.

Since Rand's study is entirely predictable, based on the premise that people respond to incentives, why would the Democrats oppose HSAs and the cost savings they would bring? They did so because HSAs would be effective in reducing health care costs through individual choice and market mechanisms - instead, the Democrats prefer to promote the idea there is a healthcare crisis which can only be solved by increasing government's role in healthcare, such as ObamaCare.

A Modest Proposal

As I have discussed in previous columns on the health insurance market, one of the profound problems afflicting healthcare insurance is that many patients have an incentive to overuse healthcare services since the patient often faces reduced, or in some cases little or no, costs as compared to the full cost of the treatment.

Studies show that a high percentage of a person's lifetime use of healthcare services occurs in the last six months of life, as often very expensive healthcare treatments are employed to address severe health problems. If a person faces little cost for potential life-extending treatment, many will naturally want to the treatment. If Medicare has to pay hundreds of thousands of dollars, for treatment that perhaps extends your life by a month or two, you will be tempted to incur such costs and treatment if your out-of-pocket is a small fraction of the total.

Medicare has an unfunded liability of an estimated $60 trillion, dwarfing the nation's national debt. This liability measures how much more money it will cost the federal government to pay Medicare expenses than it will receive in Medicare taxes.

Suffice to say, the nation cannot afford a $60 trillion liability. The unstated significance of ObamaCare is to cut government spending on healthcare by controlling the healthcare marketplace. Many countries with socialized medicine spend a smaller fraction of their economic output on healthcare - not because they are efficient, but because they simply provide fewer expensive healthcare treatments. The use of waiting lists to delay surgery and denying introduction of new drugs and medical devices are some of the ways these countries reduce healthcare spending.

Sooner or later, America needs to change its healthcare system to either socialized model, such as the path ObamaCare would take us, or a model consistent with freedom and individual rights, where the patient bears a greater portion of the cost of treatment so they have an incentive to economize on spending.

One step in this direction would be to continue Medicare and Medicaid's practice of paying exorbitant costs for healthcare - but then charging those costs above a certain threshold to a person's estate. If a person is poor, they will little or no estate so they will experience little or no change in their financial position from this proposal. But for middle and upper income Americans, they will have to seriously consider whether the cost of expensive treatment is worth paying the price in terms of leaving less money to their children and grandchildren.

That Was Fast IV

Industrial giant 3M announced it will no longer offer group health insurance to retirees not old enough for Medicare, beginning in 2015. Instead, 3M will offer some financial support for such retirees to purchase their own insurance.

The reality of ObamaCare is making a mockery of President Obama's claim that people can keep their current insurance policies if they want: the government has changed the health insurance marketplace, making it difficult or impossible for companies and health insurers to continue with existing insurance plans.

While this may be an "unintended consequence", I believe it is exactly intended - with the goal of driving more people to government provided health insurance, since if ObamaCare destroys wide swaths of the private market, the government will expand its role in healthcare.

That Was Fast III

McDonald's has announced it may drop health insurance for 30,000 of its restaurant workers if certain changes are made to ObamaCare.

The specific provision that is causing a problem for McDonald's is the requirement that health insurance spend at least 80-85% of its premiums on medical expenses. Because of high turnover and low premiums for its health insurance for restaurant workers, administrative costs are higher than 15-20% of the total premiums.

McDonalds has requested that regulators waive the requirement so it can continue to offer health insurance to its restaurant workers.

Barack Obama said people could keep their existing health insurance policies if they wanted under his "reform". But ObamaCare has made it impossible for some health insurance, and uneconomic for other plans, to continue.

That Was Fast II

As I wrote in July, the Democrats' policies are so bad that in some instances the deleterious effects occur very quickly and clearly.

This isn't so with many government policies, where the negative consequences can take to manifest themselves and can be obscured due to the passage of time and the complexities of many economic issues.

So a policy whose negative effect is so clear and quick must really be bad to so qualify.

And Obama's healthcare debacle does so. This week, new regulations took effect requiring insurance companies to issue insurance for children without considering pre-existing conditions, known as guaranteed issue.

While that sounds nice, the result has been that most of the major insurers this week stopped issuing children's only health insurance policies.

Why would the insurers do this? Because if a person is guaranteed to be issued a health insurance policy without taking into account pre-existing conditions, nothing stops the person from getting the policy until a medical condition arises. So insurance tends to be bought only by sick people, with those needing the most expensive coverage most likely to buy, driving up medical claims costs per customer. The insurance companies then have to increase premiums to cover the cost, which provides greater incentives for people to wait until a medical condition arises worth paying the increasing premiums. This is a vicious cycle, and leads to the destruction of the market.

And it just did for children's only policies.

To make this point more clear, let's use a very simplified example. Health insurance in reality is more complicated than my example, since there are many possible outcomes beyond two that I use for this illustration, and there are co-pays and deductibles. But this demonstrates the essence of the problem.

Imagine there are two outcomes for consumers regarding their medical costs for the next year: they either have no medical costs for the year or they have a major medical condition that costs $100,000. And let's say for the overall population that there is a 10% chance the catastrophic problem occurs and 90% chance there is no cost. And let's add that there is no way to test or screen to see if customers have this medical condition before they buy insurance - in other words, you only know you have this condition when symptoms develop.

If the insurance company can sell insurance to a broad, representative sample of the population, on average it will incur $10,000 of medical costs per customer, since $10,000 is the expected outcome (10% chance of paying $100,000 and 90% chance of paying $0).

Let's also assume the insurance company needs to add 20% to its medical costs to cover its overhead and earn a profit. So in this case, the insurance company would charge $12,000 for an insurance policy. Customers would have a strong incentive to buy insurance, since if they went without insurance they would have a 10% chance of facing a huge medical bill of $100,000. So insurance serves its fundamental purpose, which is to protect against large, uncertain risks.

But now imagine that the law requires guaranteed coverage and prevents insurers from using pre-existing conditions to deny coverage.

Smart customers will realize they can avoid paying $12,000 when they have no major medical problem and can instead wait until the condition develops - and then buy insurance for $12,000 to pay $100,000 of medical bills. That's a great deal for the savvy customer.

So after some period of time, the behavior of savvy customers will change the sample of people buying insurance - healthy customers tend not to buy insurance and those who develop symptoms rush to buy insurance - so now 20% of the insured population develops the major medical problem. The insurer's expected medical cost per customer is now $20,000, and now charges $24,000 for insurance coverage - up from $12,000.

Now the initially unsavvy customers - people who are representative of the overall population in terms of having a 10% chance of developing this major medical problem - buy less insurance, since the cost is now $24,000 but there chances of paying $100,000 are still the same 10%.

As these customers drop insurance, the percentage of actual customers who have the major medical problem further increases. If the pool is now comprised 40% of those have or develop the medical problem, the expected medical bills are now $40,000 per customer. This leads to higher prices for insurance, which then provides more reason for customers to only buy insurance when the medical condition arises.

The result? The insurance company stops selling guaranteed issue policies since the market breaks down.

And this is why the health insurers stopped selling children's insurance this week.

We can thank ObamaCare for this and many more gifts to come.

The Future of Healthcare

Due to lies and disinformation dished out by Obamacare supporters, you might not realize that, in many states, health insurers need state regulatory approval for rate increases.

That's right. Those big rate increases that Obama likes to decry only take effect after state insurance commissions approve them.

Insurance commissions have taken a tougher line recently in approving rate increases, which will ultimately have the effect of driving health insurers out of the marketplace unless the regulators allow rates to reflect rising healthcare costs, which costs will be increasing under Obamacare.

But then again, that is probably exactly what Obama would like to see happen - then he and his supporters will claim that is why a public option is needed. The Democrats have a long history of opposing healthcare reforms that might obviate the need for greater government control (such as the long fight against Health Spending Accounts). Destroying the market for private health insurance is part of the same strategy.

Junk Science

A British medical regulator revoked the doctor's license of Andrew Wakefield, the man who claimed in 1998 that there was a link between children taking the measles-mumps-rubella (MMR) vaccine and autism.

The regulator not only found that Wakefield had accepted payments from a lawyer representing parents who believed the MMR vaccine caused autism, but that he had engaged in unethical behavior in conducting his research - such as taking blood samples from children without appropriate approvals.

Perhaps this case of the junk science surrounding the alleged vaccine-autism link will finally convince all parents of the critical need to get vaccines for their children. Enough kids and parents have suffered from believing otherwise.

Inconvenient Facts

Barack Obama has said he wants America's exports to double over the next five years.

That's certainly a laudable goal, but it is instructive to review the categories of products which were America's top exports in February 2010.

Pharmaceuticals were America's number 1 export that month, and medical products were the seventh highest.

It is ironic that ObamaCare, which will lead to restrictions on the development and growth of the pharmaceutical and medical device industries over time, will hurt important parts of our export industries.

On the other hand, the auto industry, which received unprecedented government assistance that will never be fully repaid, is no where to be seen.

So Obama attacks some of our most successful industries and assists some of our least successful ones. While that is a terrible investment strategy, it is consistent with government intervention in the economy, which seeks to aid troubled industries and hurts successful ones.

The proper government policy is one which plays no favorites, maintaining a level playing where success and failure are earned in the marketplace.

Healthcare, Lombardy-style

This Wall Street Journal article discusses the impact of private sector competition on the quality of healthcare in the Lombardy region of Italy.

Italy has a national healthcare system, including long waiting lists for critical care typical of socialized medicine. In 1997, the government decentralized authority to the various Italian regions to allow them to innovate. In Lombardy, the government encouraged private sector hospitals to compete with the public ones, who previously received all of the government funding.

The result? Healthcare quality has increased, while costs have been contained, in Lombardy relative to the rest of Italy. The Wall Street Journal quotes a local surgeon: "Up to 10 years ago my patients had to wait months for heart surgery. Now, in Lombardy, it can be done almost immediately, in both state-run and private hospitals."

The last point, about state-run and private hospitals both not having wait lists, deserves particular attention, because it highlights an often-poorly understand aspect of the free market. The competition and innovation that a private enterprise introduces into the market forces the government-owned enterprise to improve its operations - otherwise patients and customers will flee the government-owned facility for the private one.

This is critical to hospitals (85% of the hospitals in the U.S. are not-for-profits but the for-profit ones provide critical innovation and competition to keep the not-for-profit ones operating efficiently); and insurance (where studies have shown that the for-profit insurers drive innovation in the market that the mutual or not-for-profit insurers then emulate to maintain their competitiveness).

And it would be true in public education if a robust voucher system was implemented, where truly competitive education markets would improve the quality of public schools as they would be forced to be competitive with charter or private schools.

Obama's healthcare reform (and for that matter his efforts on education) are a giant step in the wrong direction. Obama is unleashing the power of government, and controlling private actors, in his healthcare plan. Quality of patient care will suffer.

Is Healthcare a Right?

The fundamental driver of the left's desire to create socialized medicine and pass Obama's healthcare legislation is the belief that healthcare is a right that the government must secure for all people. Specifically, this means that if a person can't afford to pay for healthcare themselves, the government should pay for it.

At some level, it sounds like the left is taking the principles of the Declaration of Independence and applying it to a new area of public policy. It is worth repeating here the critical passage from the Declaration:

All Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness - That to secure these Rights, Governments are instituted amongst Men, deriving their just Powers from the consent of the Governed.

The right to life can be thought of as a person owning their own life, that nothing is more precious than your life being your own to live and not to live at the dictate of another.

The right to liberty reflects the right to think and act for oneself, that the distinctive means by which a person lives is through the use of their mind, and that for another to control or limit the freedom to think for oneself is to subvert this most profound means of human survival.

The right to the pursuit of happiness reflects the need to translate your thoughts into concrete actions, that nature requires effort to achieve your goals, and that you should be free to pursue your own goals to achieve your own personal happiness.

While these may seem "self-evident" to us as they did to Thomas Jefferson when he wrote them, they reflect a radical vision of human existence as compared to the vast sweep of human history - where tribes, kings, emperors, and religious leaders claimed ownership of a person's life, the right to dictate what they should think and believe, and the right to control their actions.

One fundamental aspect of these rights is that they are held equally by all people (the "all Men are created equal" part articulates this), so for something to be a "right", it must not infringe another person's rights. As Supreme Court justice William O. Douglas said: "My freedom to move my fist must be limited by the proximity of your chin." Or in other words, Bill Gates has the same rights, no more but no less, as the poorest man in the country.

So it is worth asking: is government-provided healthcare a "right"?

To secure such a "right", either the government has to tax someone to pay for it or coerce a doctor or healthcare provider to provide healthcare services - but whether by taxation or coercion, another person's rights are violated (in this case, their own right to the pursuit of happiness) to make the "right to healthcare" a reality.

To paraphrase William O. Douglas: "the right to pursue my happiness by securing access to healthcare must be limited by the proximity of your wallet."

If you say in objection, isn't this an argument against all forms of welfare spending, the answer is: it is.

And that is why the left despises the founding principles of America, the Declaration of Independence, individual rights, and capitalism (as the economic system that reflects individual rights). A leftist wants to deprive some people of their rights, so the government can steal their money to give to someone the leftist wants to have it instead.

It used to the Democratic Party, under the leadership of Thomas Jefferson and Andrew Jackson, who most strongly believed these principles as the basis for governing America. It is one of the great tragedy's of American history that the party of Jefferson became the party that led the revolt against the principles of the Declaration of Independence.

The Laughs on Them

Obama's healthcare legislation means, amongst other things, that the U.S. healthcare market for pharmceuticals and medical devices will be smaller than it otherwise would have been.

Because the U.S. market is such a large part of the global healthcare market, this means drug and device companies will have less incentives to develop new products.

For years, advocates in other countries where socialized medicine exists have hoped that America would also adopt socialized healthcare out of intellectual solidarity.

But in reality, those nations have benefited greatly from the larger global market America's healthcare system provides - benefiting greatly the socialized healthcare systems of other countries. Moreover, many travel to the United States to get medical treatment. Canadians, who otherwise are subject to government-created wait lists, often come to the United States to get more timely care. That safety valve will begin to diminish.

Other nations may rue the day they got what they wished for with America adopting socialized medicine.

Obama's America

In the span of a few days, two seemingly unrelated events speak more to Barack Obama's view of an America that will be diminished: Obama signed into law his healthcare legislation, and his administration reached agreement with Russia to reduce nuclear weapons.

What came to my mind was Britain's decline in the post World War II period - a decline in economic growth as the country pursued national healthcare and a broad socialist agenda and a decline in global power as it reduced its military commitments to reflect its diminished economic prospects.

And now Obama is pursuing similar policies, with likely similar effects if not reversed in upcoming elections.

Intellectually, both socialized medicine and nuclear disarmament derive from leftist ideology and policies as espoused for many decades. Financially, the higher government spending on healthcare means less money is available for military spending.

I always thought it remarkable and sad that Britain voted for economic and political decline after World War II.

I don't believe that most Americans felt that was what they voted for in 2008 in electing Barack Obama.

But it is what they got.

Audacity of Power

Barack Obama was finally able to use the power of the Democrats' large majority in Congress to get his healthcare legislation passed. For months, many complained of Republican opposition to the legislation as the reason for it stalling, which ignored that the Democrats had it solely within their power to get it passed.

And they used that power, despite deep unhappiness in the country over the legislation, as manifested in devastating election losses for the Democrats such as Scott Brown's stunning Senate victory in Massachusetts.

For years, the Democrats scored PR points from the fact that many people do not have healthcare insurance, even though the lack of insurance has often been by choice due to a preference to spend one's income elsewhere and that the lack of insurance is not the same thing as being unable to receive healthcare services due to charity care.

Moreover, the Democrats for a long time fought genuine reforms that would have been very helpful, such as expanding Health Savings Accounts (HSA) and malpractice reform.

Instead, the Democrats wanted their socialized medicine and used their likely temporary large Congressional majority to achieve it.

There is no other way to say it, but many people will die in the coming decades who otherwise could have lived longer because of this law and its consequences.

Fewer new drugs and medical devices will be developed, as denial of coverage by government panels will reduce the willingness of companies and investors to spend the enormous sums of money necessary to bring new medical products to market.

The standard of care will evolve to less aggressive treatment to save money; the decision last fall by panel to recommend delays in getting mammograms will become more common and, in some cases, be driven by the government's desire to spend less on healthcare.

The law includes new taxes and will lead to further new taxes to pay for all the new spending it will entail. These taxes will reduce economic growth, as individuals and businesses will have less capital and incentives to work and invest.

As economic growth is reduced, America will experience permanently higher unemployment. Young adults, fresh from school and eager to begin their careers, will find diminished opportunities. The economic performance of western Europe the past 30 years, with higher unemployment in general and in particular for younger workers, demonstrates where America will head.

Last, but not least, the law is an affront to the founding principles of America. The Declaration of Independence speaks of the inalienable right to life, liberty, and the pursuit of happiness, held equally by all. This means that for something to be a right, it cannot infringe the rights of another person - otherwise there is no equality of rights. The taxes needed to finance, and the government coercion to force people to live by its healthcare dictates, demonstrate why there is no right to healthcare - since some persons' "right to pursue happiness" are denied so others can get their subsidized healthcare.

For all of this, it may very well be the worst piece of legislation in American history.

Incentives Matter

I thought it would be useful to make explicit one of the central themes that runs through many of my columns, namely that incentives matter.

This means that the incentives people, institutions, governments, and countries face heavily influence what they will do.

For example, if a person has a health insurance plan in which all or almost all costs are paid by the insurer, and no costs or almost none are paid by the consumer, then the consumer has an incentive to seek additional health care and no incentive to minimize spending. The result: health care spending explodes.

Likewise, if that person has an Health Spending Account, they do have incentives to keep costs down, and the result is lower health care spending.

If the government raises taxes, people have an incentive to work less and shift income to lower taxed areas. If taxes are lowered, the incentive to work increases. The empirical evidence shows this is true.

If consumers reduce their purchases of paper products, such as paper towels, then forestry owners have an incentive to sell their land, currently devoted to growing trees to be harvested and re-seeded for new growth, for other uses such as housing developments, golf courses, or industrial facilities.

So buying less paper products means there will be fewer trees in the world. That is not what the advocates of reducing paper consumption hope for, but since incentives matter, that is what will happen.

All collectivists run into this problem. Try as they might to direct people to act or live as the collectivist desires, people will be influenced by the incentives they face.

So tax-free health insurance leads to exploding health care costs; higher taxes leads to less work and economic growth; and reduced demand for paper leads to fewer trees. None of these outcomes are what the collectivist seeks. But it is what they create.

Three Letters that Make a Difference: HSA

Barack Obama and the leftists in the Democratic party are in a desperate struggle to ram their massive increase in government control over health care down through Congress. Never mind the staggering election defeats the Democrats have suffered related to the issue, never mind the plans deep unpopularity - Obama and the left are so anxious to force their radical expansion of government into health care that they are trying again.

They very well may succeed by bribing enough scared Democratic Congressmen with jobs and/or pork spending.

Meanwhile, Mitch Daniels, the Republican governor of Indiana, writes about his state's success with Health Savings Accounts (HSAs). HSAs help eliminate the distortions that government tax policy have long created in health care: by subsidizing employer-provided health insurance, the tax code has created health insurance policies that shield consumers from the real cost of healthcare. And in the process, driving up the demand for healthcare.

HSAs entail an employer depositing a certain amount of money in a tax-free account (the State of Indiana deposits $2,750). Employees use this $2,750 to pay for health care expenses. Amounts above that are covered by insurance with co-pays and out-of-pocket maximums. The employee keeps any portion of the $2,750 not spent on health care.

Under this system, employees have an incentive to be thoughtful in making health care decisions, since they bear the cost from more health care spending and reaps the benefit of spending less.

The result has been much lower health care spending, the accumulation of wealth by employees from unspent balances, without adverse health effects.

Sounds like a great outcome. And it is.

But the Democrats have been fighting a battle against HSAs for years precisely because they were and are afraid they will work - because HSAs help provide a market-oriented solution to the healthcare problem without further government control of health care. Instead, the Democrats have been positioning for years for the opportunity to expand government control of health care and have opposed ideas that would improve healthcare based on less government control.

The Indiana success story with genuine healthcare reform shows we have not really pursued policies to improve healthcare in America where freedom and the market are central to the solution. Let's use our founding principles on individual freedom, as reflected in the Declaration of Independence, be the source for solutions to our problems - and not the ideas imported from European-style collectivism.

The Future of Healthcare?

The U.S. Preventive Services Task Force made a startling announcement this week, changing guidelines for screening for breast cancer. The group seven years ago recommended that women over 40 years old get mammograms, but have now issued revised guidelines advising women to get mammograms after turning 50.

It is certainly the case that new data can lead to a change in a diagnostic or treatment regimen, so the USPSTF's decision hopefully reflects their best current thinking.

But the worry is that the decision could reflect a desire to keep government health care costs down. Even if that wasn't the motivation for this decision, the mammogram controversy illustrates what may be a common occurrence under government-guided healthcare: to what extent will the advice, guidelines, or requirements be a function of the government's desire to cut costs?

The Anti-Stimulus

Johnson & Johnson announced layoffs of 8,200 people. This is just the latest announced job cuts in the pharmaceutical industry, where Pfizer (19,500 job cuts), Merck (15,930), and Eli Lilly (5,500) have recently announced job cuts.

Job reductions are unfortunately a normal part of companies and the economy more broadly reacting to changes in business conditions.

But one such changing condition is the assault being waged by the Obama administration and Democrats on the health care industry through its proposed health care legislation. If profits are tougher to come by, companies will cut jobs and costs to help offset their losses.

J&J went out of its way to say that its job cuts were not related to pending healthcare legislation, and while that may be true, it is certainly possible that they feel the need to say that as the company looks to garner favor with the government.

Think of it as a form of "anti-stimulus", with Obama trying to create public sector and make-work jobs with his "stimulus" bill while high quality private sector jobs in the pharmaceutical industry are lost.

"History Calls"

Olympia Snowe, the sole Republican on the Senate Finance Committee to vote for the health care bill, said of the bill she just voted for: "Is this bill all that I would want? Is it all that it can be? No. But when history calls, history calls."

It is a telling comment and speaks to the type of political leader who wants to "make history" rather than good policy.

In its more extreme manifestation, such sentiments lay behind other "monument builders" in history. The pharaohs of Egypt used tens of thousands of slaves and vast resources to build the pyramids, gigantic tombs to house pharaoh after death. Adolph Hitler dreamed of a "1,000 year Reich" and sought his vision through conquest and genocide. The Soviet Union had its succession of five-year plans, slaughtering millions in the process but sending men into space.

Of course, the health care legislation in Congress isn't likely to reach those levels of human suffering as part of its efforts to satisfy the dreams of its advocates, but it is a democratic version of the same principle: pursuing one's vision of society at the expense of individual rights and freedom.

Thanks to Olympia Snowe's desire to respond to "history's call", we know where she stands.

Health Insurance 103

One of the many myths that Obama and the Democrats are spreading about health insurance is that there isn't sufficient competition in the insurance market, and therefore either a government-run insurance plan or government-led insurance exchange needs to be established to create such competition.

Reality so differs from this myth, it boggles the mind. There are many large, publicly-traded health insurance companies in America that compete aggressively with one another. The biggest include: United Health, Wellpoint, Aetna, Cigna, Humana, Healthnet, and Coventry.

But there are many other health insurance providers, and remarkably, some of the biggest providers in any given state are not-for-profit Blue Cross Blue Shield plans.

That's right: not-for-profit providers are already some of the leading providers of health insurance in America.

Now, the reality is, the not-for-profit health insurers need to operate profitably, so they can maintain and grow their capital base and have the financial means to serve customers properly. But that is just another way of saying, a proper not-for-profit insurance system has to reflect market realities and not the whims of politicians.

Obama and the Democrats know this, since the prominence of these not-for-profits in health insurance is unmistakable. So when they claim the need for government-provided competition, it is their excuse for ultimately creating a government-only insurance market. Because rest assured, the government will underprice insurance (as it always does, as evidenced by government-provided car and hurricane insurance) and ultimately drive the private insurers out of business.

So the public option, or its weakened version in the form of health exchanges, would slowly but surely lead to full government control of health insurance in America. And when the government eventually pays all the bills, it will then exert overwhelming influence over all aspects of healthcare, from drug development to how hospitals and doctors treat patients.