Saturday, May 17, 2008

Unaffordable Health Care Invades the Middle Class

New Jersey has recently expanded an existing state program that subsidizes middle income earners for the purchase of health insurance for their children. According to this news release from the website of the Governor’s office:

“Under the new ‘buy-in’ provision of the NJ FamilyCare program, children in families whose annual family income exceeds current eligibility limits - $72, 275 annual income for a family of four (350 percent of the federal poverty guidelines) can enroll in the program.” (emphasis added)

While the new, higher income applicants will theoretically not be directly subsidized by the state (at least for now), they will become dependent on government in a more covert way, through the cozy arrangement between NJ and Horizon Blue Cross Blue Shield of New Jersey. “Thanks to the state's purchasing power with insurers,” says the report, “the costs are significantly lower than private health insurance premiums.” But the insurance industry is a heavily regulated business, especially health insurance. Thus, the leverage of the state is not remotely the same as that of private employers. Who knows what “backroom” regulatory deals, implied or otherwise, were extended to Horizon, which already enjoys tax-exempt status. The coercive, regulatory power of the state nullifies any suggestion that this deal represents fair and open market competition. “[T]he the costs [that] are significantly lower than private health insurance premiums” “negotiated” between the state and Horizon are in fact a further assault on the free market and private insurers, bringing closer the day when the only insurer will be the government.

This new program, as stated above, is an expansion of an existing program, and will serve as a springboard for further expansion down the road. According to one of the bill’s sponsors, Senator Joseph F. Vitale (D-Woodbridge):

“ ‘When I wrote the law creating this new program, I believed then, as I do now, that affordable universal healthcare access for all children is a fundamental right, and an example of how as a state we can move toward a similar program for our 700,000 uninsured adults.’ ”

Leaving aside Vitale’s preposterous assertion that health care is a “right” (see Leonard Peikoff’s Health Care is not a Right) this is a classic example of the creeping statism that, like a coiling snake slowly tightening around its victim, is delivering us slowly but steadily into the hands of a health care dictatorship. Each new intrusion into medicine engineered by “humanitarian” politicians using other people’s money and the coercive power of the state leads inevitably to the next, and then the next, and so on. And with each new tightening by the snake, the freedoms of all of us…patients, doctors, providers of medical products and services, etc…. are steadily eroded as the health care decisions and judgements are shifted from private citizens to government bureaucrats.

There is much else wrong with this picture. For example:

“The program is budget neutral for the state…” In other words, it’s a free lunch. Why? According to New Jersey Star-Ledger columnist Tom Moran, “The cost would be small, he [Vitale] says, because the state's bill for covering the uninsured in hospitals, now more than $700 million a year, will drop.” In other words, the taxpayers will continue to be on the hook for $700 million (and rising), except now they will be paying for the insured!

And this is the time bomb that blows the “budget neutral”, “cost will be small” free lunch fantasy to smithereens:

“…families must demonstrate that their children did not have health care coverage for the previous six months. This is to prevent individuals who currently have insurance from dropping their coverage to enroll in the program.” Remember that Familycare is now eligible to all income levels, and the politicians seem to be aware of the perverse incentives they have created. Their “fix” is the six-month provision. Right. Do they think people are stupid? What do they think will happen when the person struggling to cover his family at $1000 or more bucks a month discovers that his wealthier neighbor is getting coverage for a fraction of the cost, courtesy of schmucks like him? What do they think will happen when a business owner who dutifully covers his employees notices that his competitor, who doesn’t offer coverage, gets his employees entered into the state program?

With thousands of dollars in savings at stake for each family each year, don’t be surprised when droves of people and businesses begin dropping their existing health coverage, gambling the six month wait in order to get in on the state program. Hello exploding costs. Goodbye free lunch. And as for those too responsible and too honest to gamble their children’s health for six months, there will arise demands for inclusion into the state plan to correct the “unfairness” of a scheme that forces some people who are paying full price to also foot the bill for others who may make the same, or more, in earnings.

And keep in mind that this will be “an example of how as a state we can move toward a similar program for our 700,000 uninsured adults.” The escalating costs for the growing army of state-subsidized insured will have to be financed by rising taxes, in one form or another, on individuals and businesses. This increasing burden will inevitably make it harder for people and employers outside of the state plan to continue affording health insurance, driving ever more people into the outstretched arms of the state.

It is likely that most of the politicians voting to enact this legislation, as well as similar welfare-state schemes, believe they are making a “common sense” decision. Their narrow, concrete-bound focus on the immediate problem of the uninsured ignores the broader question…why is health insurance, and health care itself, becoming ever more unaffordable to a growing slice of the middle class?

It would be one thing if the NJ Familycare subsidies were aimed only at the Liberals’ favorite prop, the “poor”. Aside from a small slice of that group that is actually unable to care for themselves, a case can be made that people who are poor are so because of their own bad choices, laziness, incompetence, or lack of personal responsibility. It can also be logically argued that, being free and of sound mind and body, a responsible “poor” person can take the necessary steps to lift himself out of poverty (as, in fact, most do) and so is not “entitled” to government “assistance” taken from those who have done just that. Either that, or he would have to rely on private, voluntary charity.

But we are not dealing with the poor here, but with people making $60, 70 thousand and up. That’s certainly not wealthy, but clearly, what we are talking about here are not slouches, but solidly productive middle class people. Who is the middle class? The best description of this group that I have seen comes from Ayn Rand:

“A nation's productive—and moral, and intellectual—top is the middle class. It is a broad reservoir of energy, it is a country's motor and lifeblood, which feeds the rest. [I]t is the product of upward mobility…
The common denominator of its members, on their various levels of ability, is: independence. The upper classes are merely a nation's past; the middle class is its future.”

How could it be that something as basic as healthcare can be so far out of reach for the middle class in the richest country the world has ever seen? The truth is, the middle income earner that this state subsidy is aimed at can in fact afford health insurance. He is, in fact, already paying for it! The problem is, thanks to massive government intervention in American medicine, the earnings that should be able to buy coverage, are drained away to pay for the healthcare expenses of others.

Depending upon what estimate you use, America spends between 15% and 17% of gross domestic product on health care…or about $7500 for every man, women, and child. That’s $30,000 per family of four. Of that amount, roughly half (47%) represents government spending. That comes to more than $14,000 per family of four. Where does that money come from? It comes from taxes, of course. And who pays those taxes? The productive members of society, including the vast middle class. This would, of course, include the individual making $72,000 and up who is now eligible for the NJ FamilyCare program!

While unable to afford a policy of his own, the $72G-and-up earner is paying, through his taxes, the healthcare expenditures of: the elderly (Medicare), the poor (Medicaid), other peoples’ children (SCHIP), other uninsured people (“charitable” aid to hospitals to cover “free” emergency room care, including for illegal aliens, under the federal law EMTALA), etc., etc., etc. In addition, there are research grants to universities and colleges. And don’t forget foreign aid healthcare spending, including President Bush’s $50 billion Aids relief package to Africa. Undoubtedly, there is more.

At the same time that the middle class earner is having his money drained away by taxes, the Trenton politicians are busily driving the cost of health insurance farther and farther out of reach of that same hapless uninsured taxpayer. Mandate after mandate is enacted into law that forces insurance companies to add to their policies coverages that their customers may not want, cannot afford, and may in any event be unwilling to pay for. These mandates violate the rights of both the insurer and its customer to enter into voluntary contractual insurance agreements to mutual advantage. They are therefore immoral and, in fact, are nothing more than wealth redistribution schemes masquerading as insurance that force some people to subsidize the health needs of others.

The whole idea that health insurance has become unaffordable to the middle class is absurd on its face. As mentioned above, at least $7500 (and rising) per capita is spent on health care in America. That money doesn’t come out of thin air. It has to come from somewhere. That money comes from Americans...the very same Americans who allegedly can’t afford it, and who are now to be put on the state dole! Of course it is affordable. The problem is government intrusions and our ridiculous tax code imposed third-party-payer system, which stands as a “Berlin Wall” between insurers and insured. As a result of the current system, 87% of this nation’s health care dollars represent people spending other people money…governments, businesses, labor unions, etc. People, both the insured and uninsured, are paying through the nose. But thanks to massive government intervention, the people actually paying have little control over their own expenditures.

While New Jersey rushes headlong into the quagmire of state-run medicine, the causes of the current crises are either little understood or ignored. People are being convinced that free market medicine is failing, where no free market even exists (see Moral Health Care vs. "Universal Health Care" in The Objective Standard). This must change soon, because our freedom to control our own health care issues, what freedom we have left, is at grave risk. And our time is running out.

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1 comment:

Sue said...

The average person is so out of touch with actual healthcare costs and where their money goes. More people need to sit up and take notice of where their health care dollars are going (employer and employee insurance portions, copays and tax dollars for the entitlement programs). Only then, along with the deteriorating health care options will more people feel the sting from the repeated slaps in the face. And hopefully fight against universal healthcare.