113. Who Can't Read? Who's Stupid?

What can’t the congressmen and congresswomen understand? Well, besides everything! My family just finished discussing government control of Health Care yet AGAIN. If you remember in a previous post, we received a letter from Unicare stating termination of business in Texas. Fortunately Master and wife have guaranteed coverage from Blue Cross Blue Shield thanks to Unicare negotiation. However, they also applied for even cheaper insurance with Humana. This all started a discussion about just how are the REAL medical care costs paid and by whom.

Thomas Sowell in his book “Applied Economics: Thinking Beyond Stage One” explained it best. The answer: YOU always pay. The smoke and mirrors Congress is using to get you to believe you will be paying less refers ONLY to what you think you will actually pay out of pocket ("perceived costs") and ignores the hidden costs. Look at it this way. If you were providing a service, your costs would include time and labor, goods and materials, travel, advertising, insurance, taxes, etc. On top of these costs you would appreciate a profit, say 20%, so you can grow your business and have needed reserves as a buffer in tough times. So, let’s say your costs are $1000, meaning you will charge $1200 for the service. If your client has no insurance, he gets charged $1200. Already you see that some people will pay full price – the uninsured. Unless, of course, they are poor and you the taxpayer gets to pay a portion of that $1200 bill.

To make you “feel” like you are getting a bargain, a medical insurance provider will negotiate prices (price control) with medical providers and maybe get the service for $1000 instead of $1200. Well, how will the medical provider grow without its 20% profit margin? No problem, the service now becomes $1500 for uninsured people to cover the negotiated price between the insurance company and medical provider. As you can see, there is always a tier-pricing scheme when a group negotiates price controls -- and you get to participate even more when they can't pay for it.

So far, so good? I’ll not get into risk pools within an insurance company which also shares the cost of people highly utilizing medical care versus those who seldom do – surely you can see that those healthy people paying premiums end up paying more than their share of the total premiums collected since they are getting nothing out of it. Instead, let’s now create a HMO and/or Government Health Care plan. Both would negotiate prices, as did the insurance companies. Again, both would get reductions in what THEY would pay equal to less than what the medical providers charge. Again, who will pay for the difference? Yes, YOU. How? Taxes are one way – these are hidden in an overall Income Tax and/or in surcharges/taxes on goods and/or services. The charges you “feel” are just the insurance PREMIUMS. We all know how much they go up every year. Want to guess why? The original charge for a medical service = negotiate price + difference. Additionally, your premium will now reflect the original cost + bureaucracy costs (insurance company, HMO, Government) + additional overhead costs (to follow). There are many ways to charge you without you even knowing it. Are we finished now? NO.

What happens when the “perceived cost” of a product/service (the cost you readily see disappear from your pocket at the time of the service) that is highly desired and demanded gets cheaper? Hmmm – more people demand it; the waiting queues increase both in a medical provider’s facility or the time-to-service-begin gets longer. Its no wonder, as in Sowell’s book, the Canadian had to wait 15 weeks for the same surgery that in America would be only 2-3 weeks. If you recall my previous post re his book, the cost of being out of work and being debilitated and/or in pain were additional “hidden” costs not factored in when the politicians push their agendas. Because the queues become so long, doctors start using more aides to see you instead of him/her (lower quality) and spend less time with you (lower quality). Now that things get rushed because queues continue to get long for the now “affordable” treatment, doctors halve or third the results of each visit and ask you to return (additional visit charge) and order more tests (additional charges). If the prices keep getting negotiated down, the doctors will have to weigh the consequences as they did in Britain – over 1/3 or its doctors had to be imported, i.e., not from in-country educational institutions, to fill in for those who decided to move elsewhere (yet another quality issue as well as a quantity issue). Who pays for this new ineffectiveness and inefficiency? YOU of course.

All price-controls do is shift the charge of service or good to others or to hide the charge in something you never think about, like withholding tax. YOU ALWAYS end up paying. As Sowell points out with facts, NO price-control system ever cuts overall, real costs of a product or service. They only HIDE the real cost and show you a “perceived” cost to make you think you are paying less.

You can do your homework now and understand this, or suffer a Government Health Care plan later. Oh, by the way, Sowell also informs you that price-control effects on the economy can take up to a decade to surface (i.e., to become a real pain in the butt) to where you now “perceive” them. Folks, that's 2 presidencies down the line. Thus, why the bills in Congress won’t begin until 2013! Would you want to explain crappy results before a reelection? The bills are 100% politics and 0% medical reform.

The clocks have fallen back early this morning. You now got your extra hour to sleep. It’s again time to face the facts and stand up for America.I am truly puzzled why the humans in Congress can't read! Maybe we need an educational program for them. Who's stupid? Does anybody really expect more than 10% of the doctors to take Medicare patients in 10 years? The percentage has been dropping yearly! Oh gee, Medicare is another one of those price-control government programs!