Bruce Kesler: The Fannie-ization of Health Care

Column by Bruce Kesler

Health care could be the next Fannie Mae-type disaster. Similar forces are at work. Anxieties over the financial meltdown may increase Democrats’ power to further their statist agenda via appeals that exaggerate need and rights among the poor and feed greed by many of the rest of us.

The forces worked in the credit crisis through the appeal to provide home ownership to the poor and the consequent inflation of housing values that provided paper gains to the middle class and wealthy. Underlying these forces was a pyramid scheme profiting the political and financial elites, abusing trust in repayment of subprime loans by many without adequate means or stake.

Taxpayers and more careful consumers and investors are now required to pay off.

The appeals are similar in health-care schemes that promise expansion of coverage.

The need is exaggerated. About 20-25 percent of those uninsured are actually citizens in financial or underwriting need. The rest are the healthier young or reckless, those who can afford insurance but don’t obtain it, and non-citizens. The overwhelming majority of citizens are insured, and most poor receive taxpayer-funded health care.

The need is also exaggerated in terms of the impact of medical costs on the nation’s wealth and on individuals. Rising health-care spending is offset by declines in costs for other necessities. Further, the availability and advances in medical care have dramatically expanded life expectancies and quality of life. Over the past half-century, the share of personal expenditures has declined by over 40 percent for food, 20 percent for furniture, 38 percent for clothing, and the spending share of renting or owning are stable.

Meanwhile, spending on medical care has increased almost three-fold, to over 15 percent of our personal spending and gross domestic product. Other sharp increases have been in recreational type spending and services.

Individually and collectively we have decided in favor of sharply improved health care and its costs. As a wealthy nation, we naturally spend more on health care. Government-run programs in Europe and Canada see their costs inflating rapidly, their quality and access is generally second-rate to our own, and they free-ride off our technology and pharmaceutical investments.

Liberal politicians make illusory promises that we can have more government-imposed health-care plans at less cost. A vast government-run system or a pseudo-private one dictated to by Washington is not necessary to expand coverage for about 12 million who are actually in need. Incremental programs will address this need.

Going beyond that upsets everyone else’s apple-cart, through higher taxes, centralized bureaucracy interfering in personal choices and access, and imposing restrictions on the incentives to improved treatments. It is also bankrupting, as Hawaii just learned by extending government healthcare to every child, but finding that the program broke under the weight of already insured children being switched over to a “free ride” on taxpayers’ back, and the program having to be cancelled.

States that require insurers to accept anyone with an existing health condition reward avoiding coverage until needed. States that impose the same premium on all discourage the young or healthier from getting coverage. In both cases, costs are shifted on to the responsible, and premiums are sharply higher in those states. Similarly, Massachusetts’ experiment in mandated care experiences sharply higher spending than promised and increased charges to employers, both disincentives to economic growth.

The promise of a free ride evaporates. As with the housing credit bubble, the same forces are at work to create an unaffordable and ultimately bankrupting health care bubble. Even worse than losing part of one’s paper wealth is losing one’s real health.

Wall Street profiteered by arcane schemes that shifted its reckless risks into investors’ portfolios. Initially, until an uprising by individuals affected, giant insurers saw profit in Hillarycare by shifting underwriting risk to taxpayers while gaining lucrative claims processing contracts. They are playing the same game now.

To slow drains from health care on our national wealth while offering support to those actually in need, Republicans propose tax credits for the needy to obtain insurance and individual ownership of coverage to prevent gaps, while shifting greater coverage decision responsibility from employers to individuals to make personal choices whether some treatments are really needed. Both Democrats and Republicans promise nebulous efficiencies, most of which the free market are already undertaking anyway, but only individual self-restraint will measurably impact the inflation in medical costs that comes from overuse.

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