Controversy rages over the Obama administration’s mandate that all employers – including Catholic hospitals and universities — include free contraception in their employee health insurance policies. Catholic officials object that since their church forbids contraception, the decree violates the First Amendment’ s protection of religious freedom. Others have joined in the protest, prudently anticipating that this violation of freedom of conscience could spread to other matters and other faiths.

Those raising the objection have an unimpeachable case. The precedent apparently set in the more than two dozen states that already have similar mandates is irrelevant. What’s immoral does not become moral simply by precedent. The principle that no one should be forced to finance that which he or she finds abhorrent is sound. In fact, it should be generally applied.

Changing the Subject

Defenders of the decree are quite good at changing the subject. Of course they are — what else have they got? To hear them, you’d think someone has proposed that contraception be outlawed. (Well, Rick Santorum does seem to favor that; but he’s pretty much alone.) Obamacare champions would have us believe the controversy is about “access” to certain products and services. All the decree does, they say, is provide insurance coverage for, and therefore access, to free contraception (along with other preventive services) for women who want it. But that just raises another question:

What has this got to do with insurance?

Access does not depend on coverage. We have access to many important things not covered by insurance. Weirdly, some say the decree actually affirms religious freedom. How so? Sens. Barbara Boxer, Jeanne Shaheen, and Patty Murray explained in the Wall Street Journal: “[T]he millions of American women who choose to use contraception should not be forced to follow religious doctrine, whether Catholic or non-Catholic.”

In other words, lack of insurance coverage for contraception is equivalent to being forced not to use contraception. That is some strange argument, but it’s what we’ve come to expect from members of the “world’s greatest deliberative body.”

Well?

So the question remains: What has this got to do with insurance?

“Access to birth control is directly linked to declines in maternal and infant mortality, can reduce the risk of ovarian cancer, and is linked to overall good health outcomes,” Sens. Boxer, Shaheen, and Murray write.

Fine, but what’s it got to do with insurance?

“[B]roadening access to birth control will help reduce the number of unintended pregnancies and abortions, a goal we all should share.”

Fine, but what’s it got to do with insurance?

“Proper family planning through birth control results in healthier mothers and children, which benefits all of us.”

Fine, but what’s it got to do with insurance?

“It saves us money too….”

Fine, but what’s it got to do with insurance?

“It can cost $600 a year for prescription contraceptives.” (That’s a high-end estimate; there are lower cost options, including Planned Parenthood for low-income women.)

Fine, but what’s it got to do with insurance?

“Some 99% of women in the U.S. who are or have been sexually active at some point in their lives have used birth control, including 98% of Catholic women, according to the Guttmacher Institute.”

Fine, but what’s it got to do with — oh never mind. I’ll answer myself: It’s got nothing to do with insurance.

Pooling Risk

Insurance arose as a way for individuals to pool their risk of some low-probability/high-cost misfortune befalling them. It shouldn’t be necessary to point this out, but coming of child-bearing age and choosing to use contraception is not an insurable event. It’s a volitional act. It may have good consequences for the person taking the action and society at large, but it is still a volitional act. It makes no sense to talk about insuring against the eventuality that a particular person will use contraception. Strictly speaking, contraception has nothing to do with insurance.

Unfortunately, we don’t speak strictly about health insurance. One reason we don’t is the tax code. Since World War II compensation for labor in the form of employment-based health insurance does not count as taxable income. (Money spent independently on health insurance does count.) The tax code thus creates perverse incentives to 1) depend on one’s employer for medical insurance, 2) shift income from liquid cash to restricted insurance benefits, and 3) define uninsurable events as insurable. Would someone care to explain how well-baby care can be insurable?

So we have taxation to thank for yet another feature of the modern world: the corruption of language. In the medical realm insurance no long means insurance.

Instead it’s a game by which we get other people to pay for stuff. Well, that’s not quite accurate. It’s actually a game in which we pretend that other people pay for stuff. Look, contraception, mammograms, colonoscopies, and well-baby care are not free. (See my “There’s No Such Thing as a Free Mammogram.”) They require labor and resources for which the owners wish – not unreasonably — to be compensated. Someone has to pay. If employers are compelled nominally to pay for the coverage, does anyone seriously doubt that employees will actually pay through lower cash wages? Employers are not charities. So even without a copayment, we all know deep down that we as workers pay for the coverage. (Which by the way is likely to be more expensive than the services would be in a freed market, since insurance companies will charge overhead and more for their trouble. Also subsidized demand raises prices.) Nevertheless, the truth is so obscured that people can pretend they’re getting something for free.

So the government-generated system treats us like children, and alas most of us seem happy to be treated that way.

Update

Under pressure, the Obama administration was expected to announce a “compromise” under which exempt Catholic employers would not have to pay for contraception coverage. Instead, insurance companies would provide the coverage directly to employees. Since under Health and Human Services rules, this coverage must be free, the Obama administration is in effect directing insurers to eat the cost. But insurers are profit-making companies, not charities, so we may expect them to pass the cost to someone else. But to whom? There’s only one possibility: nonexempt employers, which means in fact employees of nonexempt companies. So the grand compromise shifts the cost from a small minority of employees to the vast majority — all in the name of religious freedom. All workers in nonexempt companies and institutions will take a pay cut.

Update II

Perhaps I stopped the movie too soon. The Wall Street Journal writes, yes, there will be cost-shifting at first. But that’s not the last of it. “The balloon may be squeezed differently over time, and insurers may amortize the cost differently over time, but eventually prices will find an equilibrium. Notre Dame will still pay for birth control, even if it is nominally carried by a third-party corporation.”

Sound dumb?

Why is it any dumber than a law called the Patient Protection and Affordable Care Act, which promises to cover more for less money?

When Obamacare was debated, we free-market advocates insisted that no matter what the President promised, he and Congress couldn’t repeal the laws of economics. Our opponents in effect answered, “Yes, they can.”

Well, Obamacare has barely started taking effect, and the evidence is already rolling in. I hate to say we told them so, but . . . we told them so. The laws of economics have struck back.

Health insurers Wellpoint, Cigna, Aetna, Humana, and CoventryOne will stop writing policies for all children. Why? Because Obamacare requires that they insure already sick children for the same price as well children.

Sick Children

That sounds compassionate, but—in case Obamacare fanatics haven’t noticed—sick children need more medical care. Insurance is about risk, and already sick children are 100 percent certain to be sick when their coverage begins. So if the government mandates that insurance companies cover sick children at the lower well-children price, insurers will quit the market rather than sandbag their shareholders. This is not callousness—it’s fiduciary responsibility. Insurance companies are not charities. So, thanks to the compassionate Congress and President, parents of sick children will be saved from expensive insurance—by being unable to obtain any insurance! That’s how government compassion works.

In 2014, the same rule will kick in for adults. You now know what to expect.

This is just the beginning of reality’s backlash. President Obama promised that under his scheme no one will have to change medical plans, but some 840,000 Americans are already left without coverage because their insurer, the Principal Financial Group, decided to leave the market.

“[T]he company’s decision reflected its assessment of its ability to compete in the environment created by the new law,” the New York Times reports. “Principal’s decision closely tracks moves by other insurers that have indicated in recent weeks that they plan to drop out of certain segments of the market. . . .”

A recent bombshell was that McDonald’s may drop coverage for its 30,000 workers unless the Obama administration waives some rules. The central planners of the Obama administration decided in their infinite wisdom that all insurers should spend at least 80 to 85 percent of their revenues on patient care, a mandate aimed at minimizing administrative costs. It’s natural to assume that higher patient-care ratios are better for consumers, but there’s no proof of that. Health economist James C. Robinson explained years ago that “medical loss ratios” are just an accounting tool and were “never intended to measure quality or efficiency. . . . More direct measures of quality are available.”

The Wall Street Journal reports: “Insurers say dozens of other employers could find themselves in the same situation as McDonald’s. Aetna Inc. . . . provides [similar] plans to Home Depot Inc., Disney Worldwide Services, CVS Caremark Corp., Staples Inc. and Blockbuster Inc., among others, according to an Aetna client list.”

McDonald’s may get a waiver, but I like the Cato Institute’s Michael Cannon’s take on that: “Sorry, but I don’t find it comforting that Obamacare gives HHS the power to waive these regulations on a case-by-case basis. Power corrupts. We’ve already seen HHS Secretary Kathleen Sebelius use other powers granted her by Obamacare to threaten insurers who contradict the party line.”

In a letter to the trade group America’s Health Insurance Plans, Sebelius wrote there would be “zero tolerance” for companies that attribute “unjustified rate increases” to Obamacare. “Simply stated,” she wrote, “we will not stand idly by as insurers blame their premium hikes and increased profits on the requirement that they provide consumers with basic protections.”

In other words: “We have repealed the basic laws of economics. Insurance companies must now give people more but not charge them for it. If you do charge more, you must not tell your customers why. Shut up, obey, and don’t complain. We are your rulers.”

Even the fervent libertarian Freidrich [sic] Hayek wrote that a system of comprehensive insurance may be necessary.

Hayek wrote “where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance . . . the case for the state’s helping to organize a comprehensive system of social insurance is very strong.”

Here is my letter to the editor in response:

J. Mick Tilford cites free-market Nobel laureate Friedrich Hayek in support of his case for mandatory health insurance (Sunday Perspective). Does that mean Prof. Tilford accepts Hayek’s case for laissez faire in virtually everything else? Perhaps like Hayek, Prof. Tilford overlooks some important matters. For one thing, mandatory health insurance requires coercion. Prof. Tilford wants individuals punished for defying the government’s orders to buy something. Why is this departure from freedom and civility justified by promised—though never delivered—efficiency? Moreover, an insurance mandate will be accompanied by controls on premiums. Obamacare dictates that sick people may not be charged more than well people, despite the fact that the sick need more medical attention than the well do. The history of bureaucratic price controls is a history of shortages, rationing, ever-more-pervasive mandates, and misery. If Hayek didn’t pay enough attention to the consequences of mandatory insurance, that’s no reason for Prof. Tilford not to. Yet Hayek feared for the individual’s freedom once the state intervenes in medicine. “Somebody must always decide whether an additional effort and additional outlay of resources [for medical care] are called for. The real issue is whether the individual concerned is to have a say and be able, by an additional sacrifice, to get more attention or whether his decision is to be made for him by somebody else.” Our already heavily government-managed medical system has too many decisions being made by somebody else. The Obamacare mandate will only push us further down the road to serfdom.

When did nature begin providing those services? How dare anyone charge us for what apparently is freely available in the wild?

By the way, if you’re thinking that the provision of those services, unlike many diseases, results from choices people make and therefore are not actually insurable events, that just proves you are a misanthrope who wants people to die.

Callahan, a senior scholar at Yale, makes the following major points:

1. Americans spend an ever-increasing share of national income on health care.
2. Much of that increased spending goes for procedures that use advanced medical technology.
3. Medicare recipients are participating in this spending surge; as a result Medicare cannot be sustained financially without substantial changes.
4. European governments control health spending by restricting supply in the health care industry.
5. To incorporate supply restrictions in the United States, our cultural values would have to change.

On the last point, Callahan elaborates:

American health care is radically American: individualistic, scientifically ambitious, market intoxicated, suspicious of government, and profit-driven. I put changing those values within health care in the class of a cultural revolution . . . .

The medical model that needs change encompasses a combination of Manichean and utopian values: that suffering . . . is inherently evil; that death is intrinsically wrong . . . and that endless medical progress should be pursued.

Overall, this makes for a much more sober view of the health care issue than what was reflected in the recent debate over health care reform. During that debate policy wonks made frequent references to “bending the cost curve,” promising to make this a painless process with reforms such as electronic medical records and crackdowns on Medicare fraud.

Callahan argues that “such efforts can be likened to one of the endemic problems of end-of-life care, that of embracing hope and unlikely treatments and of refusing to grant the obvious fact that the patient is dying.” That is, we don’t know when to give up. Callahan does.

Although Callahan sees it as a serious failing that many Americans lack health insurance, he also believes that those who are insured have excessive coverage. His preference, to be imposed by law, would be to ban insurance coverage for many drugs and medical procedures he deems wasteful, such as reproductive assistance for women over 35 and joint surgery for individuals over 65 who want to continue an athletically active life. Callahan views the issue of insurance coverage as a concern for public policy—saving resources for the things he regards as most important—not a matter for personal choice based on market prices.

In Callahan’s opinion, we Americans spend too much of our health care money on the elderly and not enough on younger people. As he puts it, “[A] health care system should help young people to become old, but not to help the old to become even older.” He recognizes the role that Medicare plays in distorting the distribution of health care, by taking income away from working-age families and using it to subsidize health care for the elderly. Rather than recommend eliminating or reducing this distortion, however, his approach would be to use government policy to steer health resources in his preferred direction.

Unsurprisingly, Callahan has minimal faith in markets and maximum faith in government. He writes, “A regulation-free, unfettered competition offers no reasonable possibility of controlling costs. The attraction of technology for patients and physicians, abetted by energetic and relentless industry marketing, has shown itself capable of overwhelming the private sector’s control efforts.” He continues that the trouble with the free market is that it allows individuals to maximize their own well-being rather than the well-being of “the system,” therefore compelling government to force “an accountability that is absent in private sector medicine.”

Thus Callahan paints a picture of the private sector as a brutal jungle, with suppliers relentlessly forcing their expensive technologies on helpless consumers. Adam Smith’s famous observation that we do not need the benevolence of the baker to put bread on our table seems to have eluded Callahan. He certainly fails to perceive its relevance to health care.

Meanwhile he takes it for granted that government actors are sensitive to the general interest and accountable to the public. I would instead argue that accountability works better in the private sector, where workers are fired for making mistakes, unsuccessful businesses have to shut down, and investors who make unwise decisions suffer losses. I’d also note that when politicians make wasteful and harmful decisions, they rarely suffer any adverse consequences.

Taming the Wild Beast shows that market advocates and interventionists can agree on many features of the diagnosis of the health care dilemma. Still, our prescriptions are diametrically opposed, reflecting differences in our understanding of how markets and government operate and the importance of liberty.

Fine. But then the editorial writer adds, “In fact, the real choice with medical care, as with any good or service, is between rationing via politics and bureaucratic lines or via a competitive market and prices.”

Wrong. Markets don’t ration, for the reasons I explain here.

This is actually a very funny contention. One of the arguments against Medicare was that it would pave the way to greater government control of the medical system.

Does anyone now think that was a bad prediction?

Medicare has made $37 trillion in promises (over the next 75 years) for which there is no money. Even Barack Obama acknowledges that Medicare is responsible for a major part of the federal deficit, which is creating the huge national debt. To deal with the out-of-control budget, coverage for some services is being denied. The bureaucratic burden is prompting doctors to stop accepting new Medicare patients.

By paying for the medical care for retirees, the government program has stimulated the demand for products and services, pushing up prices for everyone. More expensive medical care means more expensive medical insurance. As the price of insurance goes up, many people are priced out of that market, adding to the number uninsured. (This is not the only factor in price inflation, but it is a big one.)

Higher prices and the growing number of uninsured — in large part a product of Medicare — fueled the effort to increase government power over the medical system.

So: Q.E.D. The predictions about Medicare were valid. It has led to deeper government control of medicine, which is to say, us.

Are we alarmists or realists?

How an issue is framed is crucial to how it is decided. Advocates of the package of health insurance regulations, taxes, and mandates known as ObamaCare managed to frame the issue as “reform versus the status quo.” But to call the Obama-Pelosi-Reid plan (OPR) “reform” is to beg the question by assuming precisely what needs to be proved: namely, that the legislative package would actually reform — that is, improve — the medical system. Therefore the debate should have been not whether reform is desirable  – real reform (improvement) is always desirable — but whether OPR is really reform.

A better framing of the issue would have been: real reform versus the status quo on steroids, for in the end OPR is little more than what Holman Jenkins of the Wall Street Journal calls a “doubling down on the system’s existing perversities.” For example, under OPR everyone will be forced to become a customer of the health insurance industry that the ruling political class just spent a year demonizing, and that industry will reap billions in taxpayer subsidies. Moreover, demand for medical services will be further insulated from true costs. That is already the source of so much of what’s wrong today.

Let’s look at the newly signed law from four perspectives: moral, fiscal, economic, and political.

Morality

For a century the foundation of medicine in the United States has steadily shifted from cooperation and competition to compulsion and management through government power. In 1910 the Flexner Report, financed by the Carnegie Foundation, set in motion the process by which medical education and practice would be regulated by a physician cartel deriving its coercive power from government primarily at the state level. While the need for such management was publicly justified as a way to protect patients, what doctors told one another when no one else could hear was that their incomes not their patients were endangered by too many medical schools graduating too many doctors. Over the next 20 years, many independent medical colleges were closed. Was it mere chance that women’s and African-American medical colleges were the first to go and that, as a result, the smaller, more lucrative medical profession was firmly white and male?

Since that time, coercive administration – primarily in the form of state licensing – more and more took the place of patient-driven contract, competition, and cooperation. When fraternal organizations tried to bring affordable medical care to their middle- and low-income members through “lodge practice,” the protectionist medical cartel struck back and eventually destroyed this promising alternative to self-serving institutional medicine.  During World War II the crucial, if inadvertent, step was taken toward top-down control of the payment mechanism. The tax code became the means of inducing individuals to rely on employers and insurance for medical services. Money individually and privately spent on medical care would be subject to the tax collector, while money that one’s employer used for the same purpose would not. The result, intended or not, was to accustom people to rely on big intimidating bureaucracies for the payment of medical bills. Health care appeared to be free or well below its true cost — as long as the relevant bureaucracy approved of what was bought. The entitlement/supplicant frame of mind was established, which served the cause of centralization and further control by the government-medical complex. OPR is another step, though probably not the last, in that process.

Meanwhile each state became a protectionist-regulatory insurance guild that limited entry and competition in return for compliance with mandates and price guidelines that let regulators masquerade as the people’s advocates, while saddling policy holders with expensive, unneeded coverage. Many people were priced out the market, giving politicians a cause: the uninsured.

Government then assumed direct control over a good portion of medical spending through Medicare and Medicaid, bringing us to the point where third-party payments account for more than 85 percent of all medical spending in the United States. As someone has said, the patient is only needed to sign the papers that prompt one bureaucracy to cut a check for another.

Viewed historically, then, OPR is merely an extension of the current force-based bureaucratic system. Its novel contribution is to mandate that people buy medical insurance, the first instance in which the national government will compel us to buy something from a private company. This is said to be consistent with regulation of interstate commerce, but no intelligent person honestly believes that. For one thing, interstate commerce in health insurance is forbidden by the national government.

Adding insult to injury, OPR falsely promises that we can have government-subsidized consumption of medical services, lower prices, and freedom of choice at the same time. In fact, those three things cannot coexist. Subsidies will boost consumption, which will raise prices. If government is serious about lowering prices, it will have to curtail consumption, that is, limit freedom of choice, explicitly through rationing or implicitly through price controls and standards of practice.

Fiscal Considerations

On the other hand, if the ruling elite gives up the objective of lowering prices, fiscal chaos will ensue. The medical “entitlement” called Medicare already faces a $37 trillion unfunded liability. It is a big component of the government’s budget deficit and growing debt. Imagine what will happen when the new entitlement explodes. The assertions that OPR will cut costs and lower the deficit are ludicrous, and no one really believes that. It is just a game played in Washington under rules that Congress carefully sets for its fig leaf Congressional Budget Office.

As a result, government borrowing will increase, if lenders aren’t scared off; interest rates will rise, squelching economic activity; more new taxes will be thought up, discouraging investment; and the money supply will expand, shrinking our purchasing power.

Economic Considerations

OPR will directly subvert what is left of the insurance market and indirectly subvert what is left of the medical market. Insurance is about pooling risk in the face of an uncertain future. But OPR requires that insurance companies cover people without taking risk or even certainty (preexisting conditions) into consideration. There are no grounds for calling this insurance. Rather, it is welfare mixed with prepayment for future services. (Not that the insurers are complaining; it’s a price they’ll gladly pay for the captive customers that the mandate will deliver.)

While OPR’s advocates extolled the virtues of competition for the last year, they were being either dishonest or ignorant. Competition does not mean a few licensed companies providing identical government-defined products to government-coerced “customers’ according to government-defined pricing rules. It means open-entry trial and error by sellers attempting to satisfy buyers who are free to say no thanks. OPR gives us anything but that.

Politicians and bureaucrats cannot possibly know what they would need to know to manage the insurance and medical industries. Yet they convinced themselves and enough others to get OPR passed.

Political Considerations

Finally, OPR puts another nail in the coffin of government transparency. Regardless of how much or little government (if any) people want, they should at least be able to see and understand what it is up to and how much it costs them personally. In every way OPR flouts this principle. The law’s 2,700 pages of impenetrable “English” was read in its entirety by few if anyone. But that only begins to describe the offense. The law leaves much to be defined in the future by government departments, boards, and commissions. Hundreds of rules and regulations have yet to be written – and who do you think will be right there offering counsel as the new insurance rules are formulated? The same insurance companies whom last week were said to be the devil incarnate. (And Organized Medicine and Big Pharma too.) That’s how the Washington game is played. And we’re the losers.

Moreover, huge costs that could have more honestly been placed on-budget for all to see will instead be hidden in various ways. People will have no idea what this “reformed” system really costs them.

The upshot is this: Today no one knows what the members of Congress passed and Obama signed, including them. Self-government? Representation? Democracy? What a laugh.

At best, this was a triumph of wishful thinking over sound thought.

As a long-time reader and supporter of The Freeman, I express my enjoyment in reading the articles by Dr. Thomas Szasz. I appreciate his critical thinking and his skill in constructing the written word in a most efficient and powerful style.

However, I take issue with part of his December 2009 article, “The Shame of Medicine: Conviction by Psychiatry.” He states that Brian David Mitchell is a “devout Mormon.” The word Mormon is a nickname for members of the Church of Jesus Christ of Latter-Day Saints. Given that Dr. Szasz claims to have obtained his facts “as reported in the press,” he apparently did not bother to read the reports of Mr. Mitchell having been excommunicated from the Church well before the Elizabeth Smart saga. He therefore was not and is not a “Mormon” at all, let alone a devout one. Whatever Mr. Mitchell is devoted to, it is obviously not the practices or teachings of The Church of Jesus Christ of Latter-Day Saints, which openly speaks out against child abuse in any of its forms, whose tenets deny the validity of self-appointments to the ministry, and which believes in obeying and sustaining the laws of the land without exception.

My statements are easily verified at http://tinyurl.com/byx5zv and http://tinyurl.com/
yb2qyso.

So Mr. Mitchell was denied his day in court. If that is a failure of the legal system and of psychiatry, Dr. Szasz’s attempt to vilify Elizabeth Smart is unfair.

The Freeman is great. Our country needs it now more than ever. Keep up the good work.

Thomas Szasz replies:

I thank Mr. Clegg for his kind words about my Freeman columns. His letter highlights the inherently and pervasively rhetorical character of everyday language.

Understandably, Mr. Clegg is concerned that the Smart story casts Mormonism in a poor light, an unavoidable consequence of any reference to it. My comments had nothing to do with the Mormon or any other religion. A Hungarian proverb wisely cautions, “If it’s not your shirt, don’t put it on.”

Every act of classifying a person—as Mormon or Muslim or atheist or whatever—enhances his or her image in the minds of some and diminishes it in the minds of others. Accuracy and fairness require that the writer inform the reader whether the classificatory category is an identity the subject assumes voluntarily or is one that the writer or others attribute to him. I should have characterized Mitchell as a “self-styled devout Mormon.”

Mr. Clegg asserts that because the Church of Jesus Christ of Latter-Day Saints had excommunicated Mitchell, “He therefore was not and is not a ‘Mormon.’ . . .” Was Baruch Spinoza, famous in part for having been “excommunicated” (an act for which there is no authority in Jewish law), not a Jew?

Characterizing Mitchell’s excommunication as having occurred “well before the Elizabeth Smart saga” is also an overstatement. From the evidence available, it is not clear when the excommunication occurred, not that it matters for the subject of my column. (See the official website of the Church of Jesus Christ of Latter-Day Saints, as well as www.tinyurl.com/ycfhwsl and www.tinyurl.com/yb2beda).

Mr. Clegg’s conclusion requires close attention. He states: “So, Mr. Mitchell was denied his day in court. If that is a failure it is a failure of the legal system and of psychiatry. Dr. Szasz’s attempt to vilify Elizabeth Smart is unfair.” I neither vilify nor glorify Ms. Smart. I am skeptical about her belated account of her life in “captivity,” as I am skeptical about nearly everything else about this baroque tale.

Mr. Clegg does not question my claim that “Mitchell was denied his day in court” and attributes that outcome to “a failure of the legal system and of psychiatry.” Institutional systems are set in motion and are operated by individuals with their own agendas. These individuals are moral agents responsible for their actions.

Calling the denial of Mitchell’s Sixth Amendment rights an institutional “failure” misses the point I have long tried to make: namely, that “therapeutic jurisprudence”—the name given to the psychiatric subversion of the law by persons who approve of that arrangement—is inherently flagitious.

Kudos to Stossel

I would like to congratulate John Stossel [regarding his] point on competition saving medicine (“Competition Would Save Medicine, Too,” September). I am living proof that this works. In 1996 I moved my family to a high-deductible catastrophic policy that did not include baby delivery (rightfully so, the insurance doesn’t see this as a medical accident; we know where babies come from).

Already having four children, my wife and I didn’t see any reason to stop. For child #5, I went to each of the hospitals in the area (there were two) and explained that we had no insurance for deliveries and would prepay for a reasonable amount. Well, the hospital closest to our home agreed to our use of the labor and delivery facility, the nursing staff, and a 24-hour stay for $350 (which was probably more than they got paid by Medicaid or insurance). We negotiated a trade with the Ob/Gyn to do the delivery. The surprise was the prime rib dinners we each enjoyed after the baby was born—a special the hospital was promoting to attract more deliveries.

For #6, we hired a midwife and had the baby at home. For me, that was the most fantastic of all six deliveries I’d attended; [my wife] delivered our son sitting on my knees while I sat on the edge of the bed. At ten minutes old, he was in bed with his mom and his brothers. (As a side note, the Ob/Gyn who cared for her had to dismiss her as a patient before the midwife delivery as a requirement of his malpractice insurance).

Having this high-deductible, catastrophic policy has proven a boon for me and the health care industry. Incidentally, I have changed jobs three times since I got it, and each time, after I had negotiated my salary, I got an additional $500 or $600 per month in compensation for not taking the employer’s insurance.
—George Schwappach
Dade City, Fla.

Therefore, I am more interested in what will occur after the bill is passed, not the sordid politics behind it. Specifically, I want to take a hard look at the president’s claim (echoed by economists like Paul Krugman) that the new law will reduce costs.

According to the Congressional Budget Office, Obama’s plan will produce “savings” in medical procedures. Not surprisingly, much of the media (and especially the New York Times), has been echoing the same chorus.

However, I think this claim truly falls into the “Not So Fast” category. In my view there is no possibility that the President’s plan will even remotely cut real costs. The true legacy of this bill will be to add costs in ways we hardly can imagine.

Given that the bill imposes new mandates, further subsidizes the consumption of medical services, and orders insurance companies to cover applicants no matter their health status, one is hard-pressed to find the “cost savings.”  Medicare will supposedly cost half a trillion dollars less because the government will order such a state of being into existence. The “waste, fraud, and abuse” that every preceding administration promised to root out will finally meet their match with the Obama administration.

Since the plan won’t really cut costs, medical price controls could be in our future. Without going into the various economic dislocations created by price controls, let me deal with an even more fundamental issue: the nature of costs. It is telling that economists who support the bill because of its alleged “costs savings” are exposing their own ignorance about costs. To them, a “cost” is nothing more than a monetary outlay that is paid for a certain good or service. If government orders the prices paid in those transactions to be lower, then — voila! — costs are lower.

Opportunity Costs

At best, this is a childish view of costs and certainly not a view that any serious economist would hold. Costs, according to basic economic theory, are opportunity costs, or the value to an individual of the closest forgone activity. By imposing lower prices, the government would be raising the opportunity costs to individuals taking part in the exchange. Far from lowering costs, the proposed measures ultimately would result in higher real costs.

For example, if the government forces down the price of a medical procedure below the level at which all service providers can be adequately compensated, then the procedure won’t be done at all. While that would mean no money outlays, “officially” lowering costs, the person for whom the procedure is denied would bear a real cost by having to suffer the malady that drove him or her to the doctor in the first place.

Supporters of ObamaCare claim that Canada and Great Britain have lower medical costs with their government-run systems than America does. However, many of those “savings” come about because people are denied care, or must make do with cheaper but inferior alternatives.

In other words, the “savings” come at the expense of individuals who wish to receive care. It might be possible, through accounting trickery, to show that the new medical “system” has lowered the federal deficit, but it cannot and will not lower the real costs we will pay.