October 3-4, 7, 2009

Health Insurance and Envy

The health care debate lately has taken an odd turn, from discussions about money, who should pay for what, who should decide what about health care, and alternative proposals such as tort reform and health care savings accounts. The debate has now turned to vitriol at the salaries made by some players in today's health care system. These concerns may be best exemplified by Sen. Rockefeller's denunciation of insurance companies, "They're getting away with banditry, and they revel in it." (http://online.wsj.com/article/SB125424025772149687.html)

This seems more like an appeal to envy rather than a real reason to implement a policy. Because certain people make a lot of money under a certain system is not necessarily a reason for the government to introduce new regulations into it. We do not see this immediately because we do not wish to see it, and because the impact may not be apparent, but if we imagine alternative targets, we might begin to see why listening to envy might be a bad idea.

For example, what if people who thought that Apple Computer charges too much for its popular electronics products started accusing its CEO Steve Jobs of price gouging? What if our government (again) accused Apple's competitor Microsoft of "banditry"? What would we think if our own industry, whatever it may be, which we've worked in for many years and provides valuable services to people and which has enjoyed some degree of success, were suddenly vilified by a man who is supposed to be a representative of us, the people?

One of the many appeals of the United States is that people can come here and reap the rewards of their hard work, and these rewards will not be stolen by thugs or carted off by the dictator's friends. If we disagree with someone's business practices, we're free to buy elsewhere, or even outcompete the person. If a business actually violates the law, then the government gets involved. However, if we allow envious rhetoric to convince us to allow the government to reduce the money that one business earns, we have allowed the government power to reduce the money our own business earns. For after all, if the government gets to determine how much profit one industry is allowed, an industry consisting of many rich and powerful people, what is to prevent them from determining how much money every one of us makes? If the government's role is to determine how much money can be made in the health insurance industry, why not in other banditrous industries? If the government throttles the profits of big corporations, I predict that it will do so to small businesses too, for after all, wouldn't that be the only fair solution? If we listen to the cries of "banditry", we could find that the government controls how much money everyone makes, from Wal-Mart to mom-and-pop stores, from pharmaceuticals to health food stores, from corporate farmers to urban organic farmers.

Should that day come, we'll find that hard work doesn't matter, because the government will have destroyed the proposition that more effort yields more reward. There'll be less and less point to starting a new business, because no matter how much effort is invested into it, the government would only allow the owners to make a certain amount of money from their work. There'll be even less point to staffing that new business, since neither the corporation nor the new hire will get more money for the addition of the new hire's labor.

What, then, do I say to an old argument that I've heard recently applied to health insurance CEOs, that they make too much money and that it should not be allowed? I should say several things. First of all, since we haven't yet passed a bill which fines or sentences to prison anyone who doesn't have insurance, we are free to not fund such CEOs' salaries by purchasing their products. We could buy other health insurance plans, start health care savings accounts, or join private health care cooperatives, or save our own money for health costs and emergencies, or we could seek out the charity of many doctors and health care professionals who donate their time in emergency rooms and free clinics. Secondly, we could put our money where our mouths are and become shareholders of these health insurance corporations. Voting and lobbying with other shareholders for reduced salaries for these CEOs then becomes possible. Admittedly, this is a difficult process, but don't we put a great deal of effort into negotiating our own salaries? We shouldn't expect any less negotiating from CEOs where their salaries are concerned. In any event, agreements, or at least understandings, between shareholders and executives who have direct interests in the profits and salaries of the business, will be better informed than the government, which has no direct interest at all in the corporation's success, and which has the power to cram a solution down everyone's throats.

My third objection to this argument is that at least one current proposal, the one from the Senate Finance Committee, costs more than the salaries of many CEOs combined: $856,000,000,000 (Press Release from Sen. Baucus). That is eight hundred fifty-six billion dollars, which is a number uncomfortably close to a trillion dollars. This is a rough estimated cost, and of course, in government and in the corporate world, estimates for complex projects often grow to much larger sums than we had originally anticipated. So it seems to me that the solution advocated by proponents of the argument that CEOs make too much money is a solution unlikely to save us any money. If we argue that the Senate Finance Committee's proposal, or some similar proposal, is worth such a high price because it provides a valuable service, then I would have to point out that health insurance companies do presently offer us a valuable service.

The difference is that if we do not think a corporation's service is worth the price, we can find a cheaper competitor, or an alternative service, or a free substitute, or even do without. A government service, however, costs all of us money through taxes on us or on other people, even if we never use the service. A government also has the power to dictate terms, not only for its services, but also the services of all its competitors in private industry. Imagine the antitrust suit the government would file if a health insurance company sought to dictate to other insurers who should be covered, and what would and would not be covered! Yet this is the audacity that our government has, as it has already passed laws to force insurers to cover certain persons and conditions, and is drafting new laws to set up its own services, be they insurance or cooperatives. A government also has the power to unilaterally remove the services that people have paid for in taxes all their lives. The Senate Finance Committee plan relies upon removing some billions of dollars from Medicaid, for which many people have paid thousands of dollars in taxes for. How long would it be before a health insurance company found itself in court if it arbitrarily canceled policies to save money? Yet the government can do it with impunity. A government, finally, can also punish you for daring to freely choose your own path. There are rumors of fines and even prison time in bills under debate if you should freely determine that health insurance from any provider, including the government, is not worth the costs.

I doubt we shall ever find a perfect system, in the public or private sectors, but I implore the American people and their representatives to not allow demagoguery and envy to convince us to give government leeway to throttle our nation's businesses and ultimately, its people. I implore us all to take our health and our decisions about how to provide for it into our own hands, and to make our decisions with the advice of the professionals we trust, whether we are on current public plans like Medicare or private plans like health insurance. However complex or confusing or difficult such a path is, it is the path of freedom, and if we take it, we will not have to suffer the regret of seeing our children forced into suboptimal choices because their freedom to chose how to take care of themselves was diminished.