Zeal For Truth

People complaining about government spending will often make the statement that government doesn’t grow the economy, it only consumes resources. The question that this has brought to my mind is why that would be the case. The common answer is that government doesn’t have to run things effectively because it is a non-profit funded by taxes. However, the fact that an organization has a non-profit based revenue stream does not mean it can’t still be effective. In fact, stock selling is a way that most companies raise capital without selling a product. In exchange for a partial ownership in the company, people contribute money for no actual product. The only reason any company has to be effective is because its owners require it to be effective. In this analogy, government is obviously owned by the taxpayers (who in a democracy also do so in exchange for a vote in how the company is run) and therefore if it is not effective in its goals the cause isn’t any level of inherent inability but rather a lack of expectation of effectiveness by the owners (voters/taxpayers).

The TARP bailout is an interesting example of government ineffectiveness. A year ago banks were in serious trouble due to poor lending policies having caused them to become overextended. Worse, because large banks were failing nobody wanted to lend money to allow them time to unwind their mistakes. This was potentially a huge opportunity for anyone with access to vast amounts of debt. Warren Buffett at the time claimed that someone with access to hundreds of billions at a low interest rate could make massive profits by assisting banks in extracting themselves from the mess. There are two things that a large stable government can do better than most private sector institutions. One is apply physical force to a situation, and the other is borrow large sums of money at lower than normal interest rates. The TARP bailout should have been an opportunity for the government to not only avert economic turmoil, but to do so in a way that presented a longer term profit rather than a loss.

So why are we now hearing that the profits from the loans aren’t even expected to exceed the losses? The answer is because we as owners of the government haven’t expected or demanded it, and the board of directors we hired are stable in their jobs even if they lose us money. The majority of banks are doing much better now, and are repaying their emergency loans. Those that are not doing well are going under, and the government is going unpaid. Why is this? Because the money paid out in emergency funding was often in the form of stock purchases or low priority debt in a bankruptcy. This seems the exact opposite of what one would do when loaning emergency funding to a troubled company. The ONLY form of funding that should be provided to a troubled company would be the kind that gets first priority in a bankruptcy, and all loans should have been at interest rates that more than covered the cost of the program.

People from a more “progressive” standpoint will tend to suggest that government spending should not be intended to be profitable, but that it is charitable spending that we should expect to never see a monetary return for. The problem with this approach is that it leaves no way to determine the effectiveness of the actions taken. Looking at the TARP loans, we have no way of knowing today whether the money was well spent or wasted, because its direct economic return was negative. Had it been profitable, it would have demonstrated that the money loaned out was multiplied by the borrower to create more wealth that was used to make the loan. When the borrow doesn’t pay back as much as was loaned, there is no way to know if what was done was positive.

I’d like to see this pattern of lending used in more cases as well. Someone needing health care might not be able to afford it out of pocket, but they are more likely to be at least a little more responsible in their spending if they know they will be expected to at least try to repay the costs at some later point. Obviously it doesn’t make sense to crush someone struggling financially under monthly payments, but once we help them back up doesn’t it make sense to prove we’ve actually made a difference by expecting repayment? The same is true of unemployment benefits and other welfare. Only expecting repayment on an “as able” basis is charitable, but not requiring any kind of repayment encourages abuse.

To summarize, I really don’t see any good reason why government CAN’T be effective, other than the fact that we don’t require it to be so. Using a more “corporate” governance policy for government charitable spending seems like it would be a good way to start.

The health care debate has been one of extremism on both sides, with nobody really seeking to find a middle ground. This article will attempt to do exactly that.

Emergency Health Care
One thing many people opposed to universal health care fail to recognize is that we actually already have it. Any person can walk into any emergency room at any time and cannot be refused service for lack of ability to pay. This law has directly resulted in many emergency rooms going out of business since they have been forced to provide health care to patients with no ability to pay. We really do have to examine this area first to determine whether we view health care as a “right” or a “privilege”. Those who truly view it as a privilege ought to oppose this existing requirement, and can accurately point out that it is greatly increasing the cost of emergency services for everyone. Since I haven’t heard much complaint about it though even from those strongly opposed to current reforms, I would assume that most Americans are in favor of mandatory emergency care.

That  said, there is still the problem of who pays for it. Under current laws, hospitals are required to simply eat the cost of emergency health care. This appears to be a fundamentally unfair requirement. If the federal government is going to require hospitals to provide emergency care, the very least they can do is to ensure that compensation of expenses is provided. For this reason, I would be willing to support a “mandatory emergency insurance” program enforced on all citizens, legal residents, and legal visitors. People from all three groups will be granted access to our emergency services if needed, and should be able to guarantee payment. This insurance program doesn’t necessarily have to mean that the insurance company covers all expenses, but rather that the insurance company guarantees that the hospital gets paid. Individual contracts between patient and insurer would determine whether the insurer pays out of pocket, with a “health savings loan” to be repaid by the patient, or  from a “health savings account” owned by the patient. Obviously, the premium cost of the first would be the highest and that of the last would be lowest. Even in the last case though, the insurer would have an obligation to work out with the patient how any costs in excess of the account balance.

Health Care for Minors
The next area of  likely agreement is with regard to children. In the US, we consider those under 18 years old to be legally unable to make their own decisions, delegating these decisions to the parent with some supervision from the state. Most children have little to no choice whether they have medical insurance, and again most Americans would argue that children should not be refused medical treatment by hospitals. Statistics show that around 8 million children are uninsured. One assumes that most people would support programs to insure these children, and in fact “Nearly three quarters of uninsured children are eligible for health insurance coverage under Medicaid or SCHIP. The remaining uninsured children are not eligible primarily because their family incomes exceed program eligibility levels (Figure 3).” This leaves only 2 million kids in non-poor families uninsured.

This gives us another low hanging fruit that is being intentionally ignored in the current debate. Rather than arguing about universal  health care for adults, why don’t we first enroll the 6 million uninsured children who are eligible for government care? This can be done through a combination of health care drives where we pull together all the people needed to enroll these children and explain the benefits to their parents and by simplifying the enrollment process. No major legislation or national debate needed. For the remaining 2 million children, I would be willing to support either mandating that they be insured or extending government programs to cover them.

Insurance for the Rest
Getting clearly specified preventative care should be a pre-requisite for all insurance. A great deal of the expense in insuring people results from not catching problems early, and insurance companies have a (moral) right to try to reduce their expenses in this way. The easiest way is to just tack the cost of a yearly visit onto all policies, and provide the patient with a mandatory appointment if they fail to make their own by a pre-determined date. Insurance companies would be allowed to set their own rules about this though, since their interest is in reducing total cost. If a company decides yearly visits are unnecessary, they wouldn’t have to pay for them. In fact, a more piece-meal approach to insurance is desireable all around. Insurance as a concept is really only useful for unlikely disasters, since it is only in those cases that the average person can ever expect to get more out than they put in. That being the case, other than mandatory checkups as described above most insurance should probably be high deductible insurance.

Insurance that kicks in at 5 or 10 thousand dollars has always been cheaper, and allows people to have help when they really need it without paying inflated premiums when they don’t. Current estimates of the uninsured are around 48 million. Subtract the 8 million kids we already discussed above, the 6 million people who aren’t here legally to begin with (but will still get ER care), 9 million making more than $75k, and another 6 million non-minors who also qualify for existing benefits to get 21 million (note that these groups may have a little overlap). What would it cost for this group to get a high deductible plan? Maybe those worried about their status would be better off creating a medical relief charity to buy them coverage than trying to use tax dollard to do so?

All such insurance should be owned by the individual, though it can be purchased through collaborative negotiating groups if desired. Tax benefits that favor employer based coverage should be ended or shifted to cover all insurance plans whether through an employer or not. By having the plan owned by the individual, one wouldn’t experience changes in insurance due to job changes. (That said, an employer might still offer negotiated rates from insurers, though those rates would not change due to a future employment change.)

Health Savings and Health Loan Accounts
The  final piece needed is coverage for the expenses between the mandatory office visits and the point where the high deductible insurance kicks in. The best place for this is in health savings accounts, which could remain tax exempt to encourage contribution. Companies wanting to attract talent could also provide automatic or matching funding, much like they do with 401k plans. (My own company currently provides $1500 a year in a health savings account to anyone choosing a high deductible plan.) Throw in a loan program for those who encounter expenses before accumulating enough savings, and you have a nearly complete program.

Conclusion
The above provides health care for almost everyone with very few changes to the existing system. Most people can probably agree about the children, and the ER coverage ought to have been part of whatever bill mandated that ERs take all comers (so you should either support the coverage or oppose the mandate). Encouraging a greater focus on savings and responsible lending should also be acceptable to everyone. I understand the last part is likely contentious, but it really is the best solution for everyone else. The only people whose needs WOULDN’T be met by the above are those with extreme long term illnesses that have an early onset. For these people, the high deductible every year would be a problem, but my hope would be that these people can be addressed through friends, family, charitable organizations, or even government welfare.