Swiss stake: Their healthcare vs. ours.

The proxy for praxctical

I have taken all my information from, and

Why has the mantra “Medicare for all” become so popular? An unavoidable lesson from other high-income countries is that voters like government-run health care. Conservative Prime Minister Boris Johnson, fresh off of securing a substantial majority in the U.K’s December election, has stated that his number one priority is securing more funding for the National Health Service (NHS). Voters see personal autonomy and responsibility as non-negotiable on most matters, but when it comes to their health needs, they want others—mainly their physicians—to make the majority of decisions for them, and the government to take care of the bills. It’s not an irrational point of view. Consumers grasp that, when it comes to medical care, they don’t know what they don’t know. Even in the internet era, most lay patients are not in a position to second guess what their doctors recommend. Further, health care consumers have little faith that “the market” will offer them acceptable low-cost options, as it does in other sectors of the economy.

Why not make the best of government-run health care, as other rich countries have been trying to do for decades? The reason is that the market, despite the political difficulties, offers something that the government cannot deliver: productivity improvement. Productivity growth is what allows enterprises to generate more value each year at the same cost, or the same value at less cost. The added value from productivity improvement goes to higher wages for workers, improved products and services, and rising standards of living. With productivity improvement, cost discipline in health care is possible while maintaining or improving the quality of services provided to patients. Without productivity improvement, cost control, imposed either by the government or private payers, will, by definition, lead to diminishing quality, likely in the form of waiting lists for care, undercapitalized facilities, and more restricted access to beneficial treatments, all of which are present in Canada, the U.K., and other “socialized medicine” countries. In Canada, the U.K., Germany, and many other countries, costs are lower than in the U.S. because the central governments have imposed price limits on what can be charged for the services provided to patients (in the U.K.’s case, the government essentially owns the hospitals and employs the physicians, which allows for an even stricter level of control).

Switzerland is considered to have one of the most effective healthcare systems in the world. Swiss citizens buy insurance for themselves; there are no employer-sponsored or government-run insurance programs. This is a crucial difference between their system and ours. Hence, insurance prices are transparent to the beneficiary. The government defines the minimum benefit package that qualifies for the mandate. Critically, all packages require beneficiaries to pick up a portion of the costs of their care (deductibles and coinsurance) in order to incentivize their frugality. That’s another thing that Americans hate, fomented by Democrat rhetoric.

The Swiss government subsidizes health care for the poor (of which there are much fewer than here) on a graduated basis, with the goal of preventing individuals from spending more than 10 percent of their income on insurance. But because people are still on the hook for a significant component of the costs, they often opt for cheaper packages; in 2003, 42% of Swiss citizens chose high-deductible plans (i.e., plans with significant cost-sharing features). Those who wish to acquire supplemental coverage are free to do so on their own. 99.5% of Swiss citizens have health insurance. Because they can choose between plans from nearly 100 different private insurance companies, insurers must compete on price and service, helping to curb health care inflation. Most beneficiaries have complete freedom to choose their doctor, and appointment waiting times are almost as low as those in the U.S., the world leader. Get that? That’s the biggest draw of U.S. healthcare!

The Swiss have an individual mandate. The government defines the minimum benefit package, which has been subject to expansion from special-interest lobbying, and is more comprehensive and less consumer-driven than it could be. The government has enacted Medicare-style price controls for hospital and physician reimbursement. Insurers must charge similar rates to the young and old (“community rating”), must cover pre-existing conditions, and must operate as non-profit entities. Princeton economist Uwe Reinhardt describes Switzerland as “a de facto cartel of insurers and health care practitioners who transact with one another in a tight web of government regulations.”

The most significant difference between the Swiss and American systems is in the ability of individuals to consume healthcare in value- and cost-conscious ways. Only one tenth of Americans buy insurance for themselves (at a ridiculous cost, because they are INVOLUNTARILY helping to subsidize group insurance) the rest getting coverage through their employers or the government. In Switzerland, everyone buys insurance for himself. The fundamental problem in American health care is that the federal government is providing open-ended financial support for health insurance coverage. Most Americans get their insurance through Medicare, Medicaid, or employer-sponsored insurance. And in each case, the federal government’s support for that coverage increases commensurately with costs. So when costs or premiums rise by an extra dollar, the federal treasury is picking up a sizeable portion of the added expense, thus substantially undermining the incentive for economizing by those enrolled in the coverage or those providing the services.

A good starting point would be to make it much easier for patients to compare prices for services that are amenable to such comparisons. These would be routine services and procedures that are self-contained and can be scheduled, like necessary but non-emergency surgeries. The federal government could strengthen the consumer role by forcing all providers of these services to disclose “walk-up prices” for a standardized list of interventions. Standardization will allow consumers to compare pricing on an apples to apples basis, which will intensify competition among those providing the services. The pricing should include all of the needed services to fully complete the interventions successfully.

The government also should require insurers to make available to consumers fixed dollar payments for the services covered in the standardized pricing list. The payments would equal the amounts the insurers would make for the same services to in-network providers.These two changes would allow consumers to easily see if they might save money by going to low-cost providers. And it would encourage providers to set their prices low to attract patients.

Regardless of the details, what is needed is a fundamental shift in thinking, from defined benefit TO defined contribution. Traditional “pension plans” are defined benefit=you receive a known income at payout time. 401(k) plans and most other modern retirement accounts are defined contribution=you contribute a known amount and your account grows based on your contributions and the investments in them. You decide how much income your account can sustain, once you are retired. Defined benefit retirement plans were popular with large corporations but have been scrapped by most. Why? Primarily, they were underfunded, because the assumptions about investment growth didn’t pan out. Defined benefit plan, social security and Medicare are all “hope and a prayer” schemes based on wishful thinking about investment returns AND utilization.

In Medicare, the Ryan-Rivlin proposal picks up on a key feature of Rep. Ryan’s “Roadmap” budget plan, which is that new enrollees in Medicare after 2020 would receive their entitlement in the form of a fixed contribution from the federal government rather than today’s defined benefit program structure. These Medicare enrollees would then apply their entitlement against the cost of health insurance. The value of the defined-contribution payment from the government would grow at a rate of GDP per capita plus one percentage point. The plan would also restructure Medicare for current beneficiaries by rationalizing the cost-sharing with a single, higher deductible and more uniform coinsurance across care settings, as well as an out-of-pocket cost limit. Secondary insurance plans would be prohibited from covering the first $500 of the deductible or more than half of the cost-sharing for services.

We have to change our thinking FROM “government or my employer is responsible for taking care of me” TOI am responsible for taking care of me and my family through systematic investment and savings.” Do I realistically expect to see that change in my lifetime? One can hope, but wishful thinking was never a part of my makeup.

The false shibboleth of inequality.

Some pigs are more equal….

Those who argue that only the rich have gotten richer, and blame “capitalism”, do not consider the facts. The stock market has made nearly everyone richer, not only in terms of income but also in terms of the overall quality of life and the products that they own. If Jeff Bezos is the richest person in the world–because of the value of his Amazon stock (he owned 17% of all shares in 2017)–what about the tens of thousands of people who also own that and other growth stocks, in their mutual funds, 401(k)’s, pension plans or as individual investors? Have they not also gotten richer?

The Mises Institute points out that the “capitalism blamers” (my term, they call them “leftists”) also ignore income mobility in market economies, when studies show that in fact most people born to the richest fifth of Americans fall out of that bracket within twenty years while most of those born to the poorest fifth climb to a higher quintile and even to the top. Why? As Ludwig von Mises pointed out in The Anti-Capitalistic Mentality, the businessman owes his wealth to his customers, and this wealth is inevitably lost or diminished when others enter the market who can better satisfy the consumer through lower prices and/or a better quality of goods and services.

The problem with income inequality today is that it isn’t entirely a byproduct of the free market but instead is the result of a market crippled by interventionist policies, such as (often) inappropriate or overly restrictive regulations, expensive licenses, and the most complicated tax system in the history of this country. Such restrictions have limited competition and made wealth creation more difficult, leading to the stagnation of the middle and lower classes. Though “regulation lovers” (leftists again) contend that these restrictions protect people from the “dangers” of the free market, they actually protect the corporate interests that progressives claim to stand against.

Colossal businesses like Amazon and Walmart favor higher minimum wages and increased regulations, because they have the funds to implement them with ease, and such regulations end up acting as a protective barrier, keeping startups and potential competitors from entering the market. With competition blocked, such businesses can grow artificially large and don’t have to work as hard to earn people’s business. Instead they can spend money on lawyers and DC lobbyists to fence small businesses out of the market. Ironically, efforts to regulate businesses in the name of protecting laborers and consumers harms small businesses and makes everyone less equal than they could be in a free I remind everyone of my recent post, The Beauty of Unintended Consequences.

Voluntary exchanges in capitalism are mutually advantageous. If they weren’t, the exchange would never take place. People who live in countries with more economic and social freedom enjoy greater incomes and a higher standard of living. Free trade has contributed more to the alleviation of poverty than have all the government-run programs. Socialist intervention in the market can only distance man from eradicating poverty and from happiness, as history has demonstrated over and over. Only free enterprise competition driven by profit can bring about the expansion of choice, the fall in prices, and the increased satisfaction that make us wealthier.