The Sovereign Mind

Free thought on politics and real life

Archive for August 2009

I Think We All Know Where It’s Coming From

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At one of Obama’s recent town hall meetings on the health care proposals, a questioner brought up the misinformation that is circulating in the debate:

You touched on this. I would like you to expand a little more. This problem with misinformation in our country, it seems to me that it’s not only just hurting health care reform, health insurance reform, it’s dividing our country. (Applause.) Is it not maybe time — I think we all know where it’s coming from.

Yes, we do. It’s coming from all sides. During that same town hall, as well as those that preceded it, Obama has been using the proposed Medicare Advantage cuts as an example of where we can eliminate waste from the system in order to pay for his plans:

So I’ll give you — let me give you one particular example. We right now provide $177 billion over 10 years — or about $17 billion, $18 billion a year — to insurance companies in the forms of subsidies for something called Medicare Advantage where they basically run the Medicare program that everybody else has, except they get an extra bunch of money that they make a big profit off of. And there’s no proof, no evidence at all that seniors are better off using Medicare Advantage than regular Medicare. If we could save that $18 billion a year, that is money that we can use to help people who right now need some help.

Medicare Advantage is a system in which seniors who would normally qualify for Medicare can instead buy private health insurance plans, and have some of the cost of that plan subsidized by Medicare dollars. In 2003, the system was changed such that private insurers are given a more generous subsidy to provide these services. It is mainly this change that has prompted the concern that tax-payers are lining the wallets of insurance company executives. That is a legitimate concern. However, it is clear that those additional subsidies have encouraged insurance companies to offer more attractive plans to seniors. According to the Congressional Budget Office:

In 2004, Medicare Advantage plans accounted for 13 percent of enrollment in Medicare, the lowest level since 1996. Over the past two years, however, enrollment in those health plans has increased to about 19 percent of all enrollment, or 8.3 million beneficiaries.19 That increase resulted from changes enacted in the Medicare Modernization Act that increased payment rates and added the prescription drug benefit to complement the medical benefits provided under Parts A and B of Medicare. CBO projects that enrollment in Medicare health plans will continue to increase rapidly in coming years, to 22 percent of total Medicare enrollment in 2008 and 26 percent by 2017 (see Figure 1).

So, the higher government subsidy to insurance companies resulted in more seniors seeking after these private plans. There’s a reasonable debate to be had to be sure we are using government money wisely. However, the debate has to recognize a simple fact: if increasing the subsidy caused more attractive plans to be offered to seniors, what will happen when the subsidy is decreased? Will private insurers still offer those same plans as the same premiums to seniors? Reason says no. And yet, there’s this oft-repeated line from the President: “If you like your health care plan, you keep your health care plan.” Unless it’s a Medicare Advantage plan. Then all bets are off.

Some mock the elderly for statements such as “Keep your government hands off my Medicare.” It is true, that statement doesn’t express the frustration well, but the underlying concern is a real one. Maybe, before mocking, we should think about the fact that these people have been around many decades, and maybe have learned a thing or two about how government works. It turns out that, despite the patronizingly reassuring words that are used to try to calm the elderly on this issue, they have good reason to be concerned. If this is Obama’s example of an “inefficiency” in the system, what else might there be?


Written by Mike

August 29, 2009 at 10:34 pm

Cash For Clunkers: Simply Unsupportable

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For those who don’t know, the government will give you $4,500 to trade in your old clunker and buy a brand new car. Sounds like a good deal, but as far as public policy is concerned, the program is simply unsupportable.

There are two reasons that proponents give to support the program:

1) The program supposedly helps the environment by getting gas guzzlers off the road and replacing them with newer, more efficient cars. It is debatable whether the program has any positive impact on the environment at all. And even if it does, the minimal impact begs the question: what else could we have spent that money on that would have helped the environment much more? It’s a little like going out to an expensive restaurant, and then justifying the expense by saying, “Well, we had to eat, right?”

2) The program is supposed to help stimulate the economy by getting people to buy new cars. Even those who see through the environmental argument often agree that it has succeeded in that purpose. And I don’t disagree, but let’s look at the issue more closely.

First, let’s start with the basics: Every dollar that the government spends is a dollar out of the pockets of a tax-payer. That should be obvious, but it seems that we sometimes forget this basic fact, maybe because we don’t see our tax bill increase at the passage of these sorts of programs. But it is true, whether the money comes from tax-dollars directly, or is borrowed (and therefore will be paid by future generations of tax-payers), or is printed (which we pay for because of the inherent devaluation of existing currency). There is no escaping the fact that there is no such thing as free money.

With this is mind, can this program be considered as anything more than taking money away from people who don’t want to buy a new car, and giving it to someone who does? The government is essentially telling you, “If you aren’t going to buy a new car, we’ll take your money and give it to someone who will.” By doing this, the government subverts the dichotomy that, during a recession, it is in each individual’s best interest to save money, but it is in the economy’s interest that we spend. I don’t blame the government for attempting to find ways to stimulate the economy during a recession, but giving people the choice of spending money or losing it is beyond over-reach.

So we must ask ourself this question: is it more important to (slightly and artificially) stimulate a sector of the economy for a very short period of time, or is it more important to respect our freedom to save or spend our money as we please? Maybe some in congress may disagree, but it seems to me that the answer to that question is obvious.

Written by Mike

August 9, 2009 at 9:04 pm

Paul Krugman vs. Paul Curtman

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Paul Krugman, nobel prize winning economist, says that the people protesting at health care town hall meetings are anti-American and amount to a mob.

Tell that to Paul Curtman:

Our country was founded on freedom, not politeness.

For those who might be tempted to brush off his criticism, please read The Federalist #41, written by James Madison, known as the Father of the Constitution.

Written by Mike

August 8, 2009 at 6:25 am