By: Aaron Segal

In the United States, the land of the free, the champion of capitalism, and the pinnacle of innovation, you have to ask your competitors for permission to start a business. Specifically, a business that provides medical treatment to people. If you want to start a legitimate medical operation, you need consent from your biggest competitor, a written form admitting that your area needs your business. You’re smart enough that you don’t need to read an article to see how this could go horribly wrong. However, I’ll tell you why we thought this was a good idea in the first place.

These two pictures listed below are pretty self-explanatory. It appears that, with a few exceptions, states with a CON regulation make the list of highest costs of healthcare, while states without it make the list of lowest costs.

The people of the United States spend more on healthcare than any country in the world. The United States is also responsible for far more biomedical publications and innovations than any country, making up for 40% of the world’s share. And our state of New York has the highest healthcare costs in the entire nation, coupled with mediocre quality. However, the high costs of healthcare do not have to go hand in hand with a system that holds innovation on the highest pedestal, if anything, our innovation should drive prices down. Many argue that allowing companies to follow the profit motive in healthcare is immoral, as no person should profit off of the misfortune of another. This line of logic is absurdly childish, as people voluntarily pay to have their misfortune reduced effectively. Even if a socialized healthcare system existed, people with the ability to pay would still pay for private healthcare that could innovate and had to compete for customers, as long as such an institution would not be made illegal. This is the ideal of healthcare, one in which private entities compete fairly and honestly on the grounds of quality and price, in which a monopolistic company can be unseated by a tiny one that innovates better than it can.

In a truly free market of healthcare one company that refused to offer a cure for cancer and instead gave treatments that eased suffering would be put out of business by a company that found such a cure and sold it. If this company tried to charge exorbitant prices for its cancer-curing drug, a company could think in the long run and put it out of business by selling an improved version of the drug at a lower price. However, every sparkling advantage of a free market healthcare system is thwarted when long-standing healthcare enterprises have special interests in an oversized government. When the government has the power to choose which business succeeds and which fails, this only opens the gateway to companies that cannot succeed on their own merit to make a corrupt deal with the authorities to raise the barrier to entry so that these innovative businesses cannot undercut them and take their market share. In no place is this monstrosity of special interest more prevalent than in the Certificate of Need regulations, one of the greatest causes of inflated healthcare prices in the United States.

These absurd regulations state that for any healthcare facility to expand, acquire new equipment, or merge with other companies, they must pass a need screening, which requires that they prove that their community has a direct need for the services that their growth would offer, and allows locals, government officials, and most frighteningly of all, competitors to testify against their expansion. The initial passage of the CON laws was under the Nixon administration, becoming a requirement for federal funding in 1972. While they lost popularity during the 1990’s due to failure and misuse, they have remained as state law in 35 states despite being removed as a federal requirement and despite countless attempts to remove them by groups ranging from pro-consumer left-wing groups to far-right pro-business ones, and with Bob Lynn, an Alaska politician, acting as a voice for the charge against them. While the initial intent of the CON laws was decent, that any health facility could receive federal funding, and that this was being abused, so a facility would need to prove their necessity to secure this funding, this is no longer the case, and these laws are a vestige that has remained because it supports specific interests that hold power in government.

 A reasonable policy would have been to require a CON for funding, or to remove the funding altogether, but stating that making it so less healthcare facilities competing would reduce prices is a total denial of economics and reality. Many of the states without CON’s rank among those with the top cheapest healthcare, and vice versa, with notable exceptions of Wyoming and Oregon. While the CON regulations are framed in such a way that they allegedly keep too many businesses from starting and taking advantage of consumers, it is surreal to think that anyone would believe that there only needs to be as much supply as there is demand. Even if one city only requires a hospital that can treat one hundred patients at a time, there are numerous reasons why another hospital would be necessary and should certainly be allowed. Primarily that, in any sort of crisis, such as an epidemic of disease or the destruction of the main hospital, there would not be enough resources to treat everyone. However, a more realistic reason is much more serious, which is that an excess of supply is necessary to ensure selection. Even if one hospital could hypothetically take care of an entire area, it may not do so with the highest quality or the most competitive prices, in fact, it certainly will not.

To reduce prices, to spark innovation, and to ensure a standard of high quality treatments, a business must always have competition. Even if both hospitals have the capacity to treat the entire population, they both must exist, or even more than two, in order to keep each other from monopolizing the market. As long as there is no barrier to entry, people may always start innovative businesses to shatter monopolies. The problem with these monopolies is that regulations such as the CON keep companies from forming and growing to force them to be competitive. If we had a federal repeal of all CON policies, I believe that healthcare prices would massively drop, especially in states like New York, which has the highest costs of healthcare in the entire nation, and that quality would massively improve. To understand the repugnant corruption present in CON regulations and their administration, one must only view the situation of Dr. Mark Monteferrante, who had to spend $175,000 in legal fees and wait five years just to obtain a second MRI machine, as competitors and the public did not think he had a need for it. The same thing happens across the country when a long standing company can decide which companies can grow and which ones cannot.

The criticisms of healthcare that are often blamed on capitalism are generally attributable to the government’s service to special interests, which is clear here, and certainly not the fault of capitalism, but of a corrupt and overgrown government. The criticism that the profit motive keeps cures and cheap healthcare from being obtained is only valid when the profit motive is coupled with regulations like the CON laws, as the companies that provide this cheap health care and innovation could be shut down by a jealous competitor with the right connections. We can only hope that these regulations are repealed before they shut down the company that could cure cancer or heart disease.

The post Certificates of Need appeared first on Larry Sharpe, Libertarian.

By: Dan Smith

Our healthcare system is a mess. Anyone with eyes can see it.

Everyone agrees the system is too expensive, too complex and access to care is, at best, uneven.

While many have proposed tweaks to fix parts or providing yet more public money, few have taken a step back to look at the “system.”

At its most basic, healthcare primarily happens between a doctor and a patient. Yes, hospitals often need to be involved, as do nurses, etc. But why does my employer need to be involved? Why is an insurance company involved when I get a checkup?

Why, for heaven’s sake, is the IRS involved at all?

The “System”

The system exists for a reason. I won’t bore you with all the history of FDR’s wartime wage and price controls inspiring employers to provide health insurance which was later codified by the IRS, or LBJ’s Medicare laws which created our current fee-for-service pricing model which encourages all the useless tests and procedures that drive up our costs today, or dozens of other watershed moments.

But suffice to say that legislators and bureaucrats going back to Teddy Roosevelt have continually put forth more and more rules and taxes and subsidies, each time reacting to all the unintended consequences of previous iterations to eventually cobble together our current, but still-evolving framework in an attempt to run a $3.4 trillion per year system which consumes 18 percent of the entire U.S. economy.

18 percent!

The great philosopher and World’s first economist, Adam Smith wrote,

“The Man of System is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it.”

Smith goes on to explain that the Man of System thinks that the people in his system are like pieces on a chessboard, who exist for him to move about. He never sees their desire to move independently of him. And he is less than sympathetic to the misery and disorder he creates in society as the Man of System tries to push individuals about inside his system.

When you see our healthcare system through this lens, hopefully it gives you reason to question the wisdom of “the system.”

Our healthcare system is so complicated and cumbersome that it is not easily untangled. Every time someone tries, a Man of System puts a stop to it and tangles it even more—using fear and guilt as weapons to coax the public into submitting to his never-ending plans which always require more rules and more of other people’s money. Always.

Single Payer: the Biggest System of Them All

Some say the solution lies in having a single payer: the United States government—an all-powerful entity who will simplify and control costs. In other words, they want even more system—the biggest system the World has ever seen.

Such people say their system would eliminate the IRS’s involvement, eliminate states’ involvement, eliminate the health insurance companies and eliminate the waste that goes into advertising and lobbying, thereby improving efficiency and eliminating waste.

It sounds glorious.

But when have you ever seen the U.S. government make anything simpler or less expensive or less corrupt or more efficient with less waste? The suggestion should be considered ludicrous on its face. Savvier advocates of single payer point to other countries, but fail to see the enormous tradeoffs those countries have made, almost always including a much lower standard of living. They ignore American failed experiments in single payer, such as at the VA and Medicare’s unsustainability. And while they don’t suggest that it would be a healthcare paradise, they do not fully consider the enormous costs of the dead hand of government, sucking up resources, creating warped incentives and stifling progress and innovation. If they did, they’d surely set aside their dreams of a single payer system.

But that still leaves us with our current system and all of its waste, fraud and corruption. In fact, it’s worse than single payer, given its high cost and many of our health outcomes.

By its very nature, our system is inherently and dangerously flawed. Anyone who isn’t you or paid directly by you doesn’t have your best interests in mind. Why would they?

But maybe you need some concrete examples.

For Example

Here is a sample of health-related issues at the federal and New York state level which typify the system:

• Both the IRS and New York allow a tax deduction to employers for the cost of providing health insurance benefits, while employees aren’t taxed on those benefits. In turn, the IRS and NY state punish individuals trying to get insurance on their own. The result is that employers are compelled to provide such insurance, thereby separating patients from their doctors by putting their employer, an insurance company they didn’t choose, the IRS and the Department of Health and Human Services, among others, between you and your doctor. In other words, the system is making key decisions in your life.
• Health insurance being provided by one’s employer or the government means the patient doesn’t see all or even most of the cost. And employees don’t see the diversion of their wages to health insurance costs, which are reducing their wage increases when health insurance increases are as steep as they’ve been. People and the media complain about wages being stagnant, but fail to see how much of their compensation is actually growing—because so much of their compensation growth is going to the “system” and all of its waste.
• Health insurance should be for what all other insurance policies do: protect the policyholder against costly, unlikely events. And like life insurance, people would buy less of it as they get older (why they would do this is too complex for this forum). But our system does the opposite: it pays for routine costs and covers more and more as you get older, because the costs are not borne by the policyholder—they’re borne by taxpayers and employers, creating all kinds of unintended consequences, perverted incentives and pure waste, as doctors order up more and more tests and procedures and practice “defensive medicine”.
• In New York, we have the HCRA, which 20 years ago started as a way to bring efficiency to New York’s healthcare market, as well as a small tax on health premiums to help cover costs of the indigent. However, that tax has grown to $5.7 billion per year with indigent care being a small fraction of that and, along with similar federal taxes, is now more than 13% of private healthcare premiums in New York—all while efforts to make the market efficient have long been abandoned.
• New York is one of two states which has the pure community rating insurance rules, which make it illegal to charge insurance premiums based on the risk that you’ll use them—violating a basic precept of insurance, and which The Wall Street Journal credits for many of New York’s health insurance market woes. Vermont is the other state, and it’s no coincidence that we are the states with the two highest insurance premiums nationwide.
• Medicare and Medicaid are massive programs which consume $1.3 trillion of taxpayer money each year, 10-20% of which is estimated to be pure fraud, given the incentives and lack of fraud prevention. Their existence as the largest consumers of healthcare wield enormous influence on all healthcare pricing—often quite negative. And no matter which side of the “Medicare and Medicaid are broke” argument you are on, no one disputes they are unsustainable. The fact that reasonable people are discussing their potential failure should probably be considered a very bad signal.
• The critical shortage of physicians, especially in primary care, and all-too related issue of the high costs of physicians, are caused by government licensure and influence of the American Medical Association.
• The issues with New York’s ACA (“Obamacare”) exchanges range from glaring to insidious. So many problems persist. New York’s Obamacare insurance offerings are the most expensive in the nation, according to the Kaiser Family Foundation. And Obamacare is a political football, with patients caught in the crossfire. But beyond that, so many false promises keep getting made, including: the initial website issues, uneven access to quality insurance, the infamous being able to keep your doctor claim, as well as President Obama’s and New York Times’ claim in 2013 that New Yorkers would see a 50% drop in insurance premiums in 2014—something which clearly didn’t happen.

These are just a few of the drivers which make certain the system fails us all, while the Man of System keeps telling us we cannot live without it.

What Can be Done: Less “System”

Supporters of the system will always ask: what will replace these institutions, with all their important rules and money?

I don’t know. Fortunately, I don’t have to.

I’m not smart enough to conjure all the solutions, more “system.” In reality, no one is smart enough, especially bureaucrats and legislators who aren’t incentivized to improve the service your doctor provides to you or the cost you pay (or don’t pay).

No “system” can. That’s the point (in case you missed it).

When a doctor and patient face each other—for care AND for compensation, incentives are aligned and solutions come from everyone trying the infinite combinations of potential solutions to find out what works and throwing away what doesn’t.

It’s a fatal conceit for politicians in Albany or D.C. to believe they can solve our healthcare problems. They cannot effectively make rules for how other people live their lives and do business with one another.

And it’s dangerous for them to try, as lives are in the balance.

It’s trial-and-error-and-retrial. It’s often not about more money; and it certainly should not be about forcing people about the chessboard to do bureaucrats’ bidding. It’s about choice and the freedom to try new things.

Libertarians offer the wisdom to assure you that the absence of a central plan is not abdication to chaos. The empowerment of doctors and their patients will certainly lead to better access to quality healthcare, at a cheaper price. Empowerment of providers and consumers always does.

It just requires the bravery to allow individuals to work together to figure out the best path forward.

The post The New York Health Care Monstrosity appeared first on Larry Sharpe, Libertarian.