The Sacred Right of Purchase

People can be and routinely are compelled to purchase things by government, but the voluntary nature of that purchase is preserved by tying the obligation to such things as owning or operating cars. Meaning that the purchase remains avoidable—if you are willing to do without a car. The compeller is the government, the seller, however, is an insurance company. This is not the case when we pay for a driver’s license or a passport—provided we want to drive or travel out of the country. In those cases the government sells us the goodies. There are slight differences present here.

Those of us old enough also paid for our Medicare—which is, in effect, health insurance—but here again the slight difference is vitally important—we didn’t buy it. We just paid taxes. And while it is our sacred right (seemingly) to purchase or not to purchase as we choose, it is the government’s sacred right to tax us—and we cannot refuse unless government-provided loopholes allow us convenient escapes.

Forcing people to purchase health insurance? Good Heavens, Shriek, Cackle. The heavens will fall in. Some truths are self-evident, among these equality in creation, and unalienable rights, among these life, liberty, the pursuit of happiness, and the sacred right to purchase or not to purchase as we choose.

How will the Supreme Court rule on Thursday? Will they uphold that sacred right? Probably. Would the health care bill have passed if it had imposed the cost of universal coverage as a tax? Probably not. My own view of that legislation has been negative all along (as documented on here and on the old LaMarotte) because it was a compromise. I wanted a much stronger law, entirely run by government. Congress imposed an indirect tax, in the form of a mandate to purchase, to keep the health insurance industry hale while escaping the charge that it was raising taxes. This law has been called “landmark.” It was nothing of the sort. Its crumbling began long before it passed—when its actual funding was turned into a finesse.

Buy or Tax

The reason why an individual mandate—to buy insurance unless you have it from your employer or from the government already (Medicare, Medicaid)—is part of the health care act is because the Obama administration blinked. The government has full powers to levy taxes. Indeed the federal government has been collecting money for Medicare and Medicaid since 1966. In effect we’ve had a single-payer and centrally controlled health care system since then (thus for 46 years), but only for selected groups. This is a conceptually straight-forward approach. To get a workable national health care system, all we’d have had to do was to extend Medicare to anyone who is not already covered. In this country, however, there is a deep-seated traditional resistance to centrally-managed anything. Therefore, feeling that resistance, the Obama administration caved—and still failed to get bipartisan support. In my simple black-and-white world, if you can’t pass a proper national health care act—why then you walk. You say, like Mrs. Clinton might have said a while back, “Well, I tried.” You can’t make the horse drink.

The compromise then produces the controversy now. The compromise was to “let the private sector do it”—but with a half-hearted attempt to make everybody use the private offering. The battle now is couched in the totally irrelevant context of interstate commerce—and whether or not the government can compel anyone to buy—anything. This the government may not be able to do. But it certainly can tax. But the votes simply aren’t there to solve the problem in a straight-forward manner—by taxation.

Now conceptually I see no real difference between forcing me to pay a tax on the one hand and forcing me to purchase health insurance on the other. In either case I have to cough up the dollars. But if this is seen as opening the door to government-mandated purchases in general, I’m not surprised that the Supreme Court seems skittish; reader russell provides some of the Court’s misgivings in a comment to the earlier post on this subject (link).

More realistically, an insurance-based approach is inferior to a central-single-payer system. It costs a whole lot more. A national system does not, per se, prohibit an insurance-based system to coexist with it. A national system will always involve some rationing—and an overlay of insurance-paid extra benefits will satisfy the rich.

It is for these reasons, needless to say, that you won’t find much praise for the current act anywhere on LaMarotte. It is flawed in conception—and now it might fail in detail. At best it will be upheld by a 5:4 vote. If it goes down, Medicare and Medicaid may follow. After all a designated tax—designated for health care—may in some future lawsuit be judged to be a mandate to buy something—which it actually is.

Litigation or Legislation

The lawsuit joined by twenty-six states under Florida’s leadership reminds me that workable democracy really does require a kind of minimal consensus in the nation. When such consensus exists, democracy is workable. When it does not, a spectrum of dysfunction appears. It ranges from stagnation at one end to civil war on the other. We are currently living in such a dysfunctional era—and this lawsuit makes it easy to see it. Here is a map of the states that oppose the Patient Protection and Affordable Care Act, aka Obamacare:

The states shown in pink are all headed by Republican Governors. The two states shown in purple are governed by Democratic Party administrations, but in each case the attorney general is a Republican; each has joined the suit, but each under protest; the governors and legislators in both cases assert that the AG is  not speaking for the state in joining.

If diplomacy is “war by other means,” so is litigation when it manifests in patterns such as this. This lawsuit is a symptom of another and more grievous condition—the loss of a national consensus. At its heart is the claim that it is unconstitutional to require people to spend money on health care. But of course in every state on this list, laws require individuals to spend money on auto insurance. Unable to see a meaningful functional difference between the two cases myself, I must conclude that this effort is at bottom political and has nothing to do with health care.

It’s strange to live in a country that is in process of exploding into fragments. The timescale of this explosion is very slow, but it is real enough. As John Edwards said a few years back, there are two Americas. They are hopelessly woven and mingled—and trying to separate. If a successful legislative initiative, such as health care, is not allowed to stand—if it is immediately undermined by litigation—and if such moves are indeed applied to every legislative action by the opposing party, and always along party lines, one is already living in the state of nature, not in a republic governed by laws.

Saved by Insurance

While on the subject of health care, here is a bit of fascinating history. I bring three pie charts showing how health care expenditures were funded in 1960, 1980, and 2009—all courtesy of the Centers for Medicare & Medicaid Services, the National Health Expenditure Accounts (link). Clicking on the images enlarges them; Esc returns to the text.

Notice here what happens to the out-of-pocket category—that’s the ordinary person’s cash participation—over time. It goes from nearly half in 1960 to 23 percent in 1980 to 10 percent of total cost in 2009. Notice what happens to private health insurance. Its share increases by just 7 percent in nearly 50 years. So who is it that saves our rears? Why it is the federal sector.

Worth noting here is that in 1960 the federal portion is entirely defense related, Department of Defense and Veterans Affairs. By 1980 (but beginning in 1966), we add Medicare (the elderly) and Medicaid (selected categories of the poor). By 2009 (but beginning in 1998) we add the CHIP programs, thus the Children’s Health Insurance Program. CHIP covers one more layer of poor children, thus those that Medicaid does not reach. This means, in effect, that the poor-with-children, the near-poor children, and the elderly (those who’ve stopped working) are already essentially insured by the Federal Government. Yet that still leaves 49.9 million without any health insurance. These are the poor who don’t qualify for Medicaid.

To sharpen the extent to which the evolution of our mixed insurance system has helped the majority of us, we need to note how total spending on health care has escalated since 1960. That is shown in the following table:

	Total ($ billion)	% of GDP	Per Capita $
1960	27.3	5.2	147
1980	255.7	9.2	1,110
2009	2486.3	17.6	8,086

Thus out-of-pocket spending, while decreasing from 48 percent in 1960 to 10 percent in 2009 still managed to increase 23-fold in this period. Saved by insurance—even if, to be sure, we still pay the costs of it in various forms—as taxes, premiums, or as lower wages.

Footnote to Health Care Costs

These costs amounted to $2.49 trillion in 2009 and equaled 17.6 percent of GDP. Yesterday at a holiday-kind of dinner held by Brigitte’s swimming group, we learned of this interesting fact. Today a couple will travel some 104 miles, round trip, in order to undergo one neuro-muscular test and to see one specialist, this because neither (test nor specialist) is available anywhere else in the Detroit Metro area. We learned that it took three months of waiting to get this appointment.

Two CBO Projections



Hat tip here goes to Monique Magee (Marketsize). She alerted me to a Clusterstock or Chart of the Day. That led me to this Congressional Budget Office report, titled “CBO’s 2011 Long-Term Budget Outlook.” I have reproduced, above, the crucial chart. It shows public debt expressed as a percent of Gross Domestic Product, historically and then extended into the future based on two scenarios. The first of these is called the Baseline, the other CBO calls the Alternative.

The Baseline assumes that laws currently in effect will continue to hold force, as written. The Alternative, which CBO views as the more likely, assumes changes to current law. Baseline results in debt rising from 69 percent of GDP (CBO’s estimate) to 84 percent by 2035—which is, when you think about it, pretty grim! The Alternative results in public debt very near to 190 percent of GDP by 2035—which would be an ultimate record.

What struck me as most striking about this projection is that the grim but lower case assumes virtually no changes in law. As a consequence revenues would increase because the Bush tax cuts would expire and the alternative minimum tax provisions on the books would, as written, bring in increasing revenues. “At the same time,” quoting the CBO now, “under this scenario, government spending on everything other than the major mandatory health care programs, Social Security, and interest on federal debt—activities such as national defense and a wide variety of domestic programs—would decline to the lowest percentage of GDP since before World War II.” In other words we would allow taxes to rise and the health program on the books now to unfold as written, no new programs would be created, and the old programs would retain their funding at current levels. And that produces an 84 percent of GDP debt by 2035.

In the Alternative scenario, Congress will extend the Bush tax once again and take the bite out of the alternative minimum tax provisions. Minimum payments to physicians under Medicare—which would decline by a third under current law—would be permitted to remain at current levels. Further, shifting the burden for health care to the states, which is part of current law, will not take place as planned.

Now if you react as I did to the study of CBOs two cases, you might say, with Shakespeare—a plague on both your houses! The “good” case produces a ridiculously high rate of public debt. And the provisions that largely support it (letting tax cuts lapse, shifting burden to the states, and shorting doctors of their pay) are about as attractive as a sand-and-seaweed sandwich on the beach.

Revealingly, CBO lacks a third case, one that might actually produce really good results. It would have three legs. One would be increases in income taxes to the level of the early 1960s; two would be a Federal health care system applied with hard rules (cost control) and administered centrally rather than by insurance companies; and the third leg of this stool I’d gladly leave undefined. Any legislature with the guts and foresight to enact the first two could be trusted to get the rest of it right!

You wonder about the tax rates in the early 1960s? Check out this post on the old LaMarotte. Isn’t the current debt more like 98 percent of GDP? Well, I thought so too. But that number was for 2010. CBO, perhaps, has a sharper pen—and they’re projecting 2011 results.