Tag Archives: Health Care

Obama: Why Not Socialism?

And private insurers have to make a profit. Nothing wrong with that. That’s what they do. And so you’ve got higher administrative costs, plus profit on top of that. – Pres. Obama, Oct. 3, 2012


Amid the hoopla about the candidates’ relative perspicacious energies during last week’s debate, the above quote by Pres. Obama seems to have been lost. In his worst line in the debate, Obama reveals his socialist instincts and complete ignorance of how the private sector works. That line alone renders him unfit for public office because it shows his ideologue faith in big government and misunderstanding of the critical value of profit in a free market.

Obama’s posit underlying his quote is that government can be more efficient than for-profit companies. First off, the quote belies his repeated promise that people can keep their insurance if they like it; he is clearly implying that government insurance is better, so it will eventually replace private insurance. Obama has advocated for a single payer (i.e. socialized) healthcare system, so this gaffe has legs.

The argument behind Obama’s quote is that government healthcare like Medicare and Medicaid has a lower administrative overhead than does a typical insurer. Further, that insurer must earn a profit. Both of these drain money from services to patients, and reduce the quality of health care. Even so, Obama’s arguments do not support his conclusion that government health insurance results in better or cheaper care for patients. The key to Obama’ error is understanding profit.

As Obama would probably agree, profit is the thin and uncertain margin between revenue and expense. Profit is the goal, the only goal, of business. Profit is to be maximized, and the risk of failure to profit is to be avoided. Businesses innovate and invest to increase and protect their profits. What Obama appears to not know is that profit also is the messenger particle of business.

Businesses study each other’s profits, and emulate the best practices of their peers. When a company earns a superior profit, its peers move to compete by either providing a better product or a similar product at a lower price. This competition drives down overall profits to the level only the most efficient company can tolerate.

By competing for each other’s profits, companies also attempt to optimize the amount of administrative overhead they require. Reducing administrative headcount is often a path to more profit, but not always, and Obama’s allegation that the government is more efficient is suspect. If the government overpays for services or is wasteful in its distribution, it causes administrative overhead to appear lower. Further, governments often apply their administrative efforts to tasks unrelated to customer service; governments work for themselves, not the people. Without profit as a measure of success, government bureaucrats are inclined to maintain the status quo even when it is wasteful. Therefore, applying the private sector’s metric of administrative overhead to government is not helpful.

If Obama’s argument for socialized healthcare were valid, why then is his administration now outsourcing flights to the International Space Station to Space X, a for-profit company? Their profit motive should be costing taxpayers money, yet Space X’s cargo rockets are far cheaper than the Space Shuttle they are replacing. Also, why does the government allow for-profit airlines, car companies, or anything? The obvious answer is that this idea was tried in communist Europe and Asia, and it failed so miserably that it killed 100 million people.

Voters should listen to Obama’s own words. He wants a socialized single payer healthcare system for the US. Anyone who thinks that is a bad idea really should not vote for him.

Obama’s Best Hope

As early as Monday, the US Supreme Court is expected to rule on the legality of Obamacare, with most prognostications for at least a partial striking of the act. Conventional wisdom suggests that Pres. Obama will suffer politically if his signature achievement is reversed, but in fact Obamacare’s downfall may be Obama’s best hope for reelection.

As Shout Bits has argued on several occasions, Obamacare is deeply flawed both in principle and in policy. In principle, Obamacare inserts itself in private decisions where it is not wanted. The act compels individuals to buy a minimum amount of health care as well as outlawing buying more than a maximum amount (unless they are union members). Obamacare mandates certain medical products such as birth control and abortion, even for those who do not want them. In these areas, Obamacare is generally unpopular because Americans are rightly wary of further government intrusion into their lives.

Obamacare is also bad policy. The penalty for not buying government approved health care is less than its cost, which only encourages people to wait until they are sick to buy insurance. While even Solicitor Donald Verrilli argued that the “guaranteed issue” clause, which mandates insurance for sick people, should not stand without the individual-mandate, guaranteed issue is bad policy. Private insurance cannot work when insurers cannot isolate risk pools, which is what guaranteed issue does. Intentional or not, guaranteed issue is a one way path to single payer socialized health care. Guaranteed issue is actually popular with most Americans, but it is a socialist Trojan horse nonetheless.

Obamacare essentially raises the minimum pay of millions of uninsured workers to the point where their employment is unprofitable. An employee is a tool for an employer to make a profit, and the government cannot arbitrarily add ten thousand or more dollars to the cost of an employee without reducing the profit he generates. The employer’s only rational response is to lay-off or simply not hire new employees. The US’s labor participation and unemployment rates demonstrate an extremely weak jobs market, and Obamacare’s bad policy is a main contributor. Without Obamacare’s incentive to not hire moderately skilled and below workers, millions more people would be employed today. The US economy would clearly be better off without Obamacare’s cloud of regulation, cost, and uncertainty.

If Obamacare is struck down, the Supreme Court will have handed Obama two swords. First, he will rail against the Court as being a political tool of the right. He will argue to his base that he must be given a second term to prevent the Court from listing even further right. The Court canard is perfect for Obama who prefers rhetoric over substance; also it is separated from his many policy failings. Second, without Obamacare, the economy and jobs market ought to improve. Voters like results more than excuses. Even if the economy were weak but improving, Obama would have the opportunity to get off his looser argument that ‘it was Bush’s fault’ and return to his hope and change classics.

Shout Bits would gladly trade four more years of Obama for a complete reversal of Obamacare because unsustainable entitlements will be burdens until the final day the US Government exists, while second term Presidents rarely achieve much of anything. Shout Bits has also promised that everything Obama has done will be undone. So, if the Supreme Court this week exercises Solomonic judgment and strikes down Obama’s health legislation in its entirety, don’t be unduly sad if the decision leads to his reelection.

Let Them Die In The Gutters?

A self-denying socialist friend of this author recently defended universal health care with the oldest argument in the book – that without socialized medicine, people would ‘die in the gutters.’ With last week’s one year anniversary of Obamacare, this argument needs to die in the gutter itself.

The ‘die in the gutter’ argument states that without universal access to health care for serious diseases like COPD and cancer, poor people will go without treatment and face ugly and painful deaths. While this argument seems obvious in today’s health care system, the argument sits atop a number of lies and market distortions caused by government meddling.

The biggest lie ever told is perhaps Medicare. Medicare is a socialist promise that, in exchange for 2.9% of a worker’s lifetime wages, the government will largely pay for any and all expensive medical care starting at age 65. Unlike real insurance, but exactly like Social Security, Medicare is a Ponzi scheme that has no reserves to back its promises. Medicare has no plan to continue operations as US demographics shift from a worker class to a retiree class. Medicare has no plan to cope with rapidly expanding health care options and costs. Medicare is a lie and a robbery; those who are working today are this crime’s victims. There is no money to pay for Medicare’s promise, and the Ponzi scheme is about to collapse.

Rather than simply stating that Medicare was a crime and that workers are its victims, Pres. Bush (43) chose to expand the crime. Pres. Obama chose to wave a magic wand at Medicare by pledging to cut $500 billion from its operations without reducing its services. Precious few in Washington, save a few brave warriors like Rep. Paul Ryan, even acknowledge these crimes. Instead, as the author’s friend does, Washington Pols claim that cutting or reforming Medicare will leave poor people ‘dying in the gutter.’ That is a false argument because Medicare will not prevent these deaths either; Medicare cannot treat everyone with every new treatment. Medicare promises what it cannot deliver, so eventually it is the socialist lie that will leave poor people ‘dying in the gutter.’

Government induced market distortions are also to blame for our socialist friend’s perception that without universal health care, people will ‘die in the gutter’. Consider that last week Bristol-Myers Squibb received FDA approval for a new metastatic melanoma treatment that will cost $120,000 per treatment, but it will raise the two year survival rate to 20% from 14%. $120,000 for an extra one in twenty chance of living an extra two years? Is that a call for universal health care? No, the new drug’s price reflects the market distortions of government health care and abusive regulations.

By pumping trillions of dollars into health care, the government has sent the market a message: we will buy any marginal medical treatment no matter what the price. The market has responded by developing expensive treatments that would not find buyers if they had to spend their own money. Further, the FDA’s counterproductive approval process adds billions to the cost of developing a drug, thus reducing the barriers to competition once a drug is approved. The combination of restricted competition and an unrestricted budget is the cause of many boondoggles like Bristol’s $120,000 melanoma drug.

Our socialist friend humanely worries that society will not tolerate leaving poor people untreated, but he ignores that government meddling caused the runaway costs and impossible expectations to begin with. The government alone caused the health care problem, yet many well intentioned people think more socialist policy will resolve it. It may seem cruel, but not everyone can have everything. Here’s hoping that the collapse of the US government is not required to bring universal health care socialists back to earth.