Friday, July 31, 2009

Demonize and Divert

Nancy Pelosi has attacked the insurance industry, an easy target for demagogues. It is so obvious: demonize and divert, a well-known tactic of power-seeking extremists who cannot persuade using reason and facts. That was why Hitler targeted the Jews.

Every time Pelosi makes a pronouncement, it is an embarrassment to the position of Speaker of the House. I am no fan of contemporary politicians or the role that they have assumed to run our individual lives and take our money to do it. But there have been many solid people, even if they were liberals, who held the position that were respected by the public and their peers -- Sam Rayburn, John McCormack and Tip O'Neill, for example. None of them were loudmouths. Most exercised quiet leadership. And none of them stood before the public and spewed such silly, irrelevant nonsense. She is a caricature, a stereotypical radical left-wing demagogue. Even Ted Kennedy's style is more reserved these days.

I have never been a fan of insurance companies either. My bias comes from sad and extensive experience with them in the area of commercial liability insurance, where the companies' written procedures revealed their dark side in surprisingly candid terms: they were in business simply to take your money, keep it and give you nothing in return.

My experience with major liability carriers was especially revealing. Once I sued 18 of the largest carriers in the United States; and, because it was clear that they were denying my client's claims with no justification whatsoever, we were able to force them to settle the claims -- but only after a protracted battle in which they attempted to overwhelm the client with legal costs. It did not hurt our case that a key public decision of a state insurance commissioner, which had mysteriously vanished from the commission's files, somehow appeared in the confidential files of the insurance industry's trade association. The resulting implication that insurance companies might steal official files or otherwise not engage in honest litigation or practices left me with a life-long bias that "insurance companies are evil." When representing a client, I need to be persuaded otherwise.

But it would be an over generalization to extend my bias against liability carriers to, for example, automobile insurance (where my experience has been positive) and health insurance (where I have had only a few minor negative experiences). And any bias, whether against liability insurance carriers or others, needs to be regularly confirmed by the contemporaneous facts.

Too many of us, even (and perhaps especially) in the area of health insurance have bitter memories that still make our blood boil. Do you think this will get better or worse if a government bureaucracy is placed in charge? Pelosi is pandering to people's anger at the petty, misguided bureaucrats who gave us such a hard time about intensely personal matters. But in recent years, in my experience, health insurers have done a better job at communicating in advance what they cover, which leads to improved understanding and less contention. But even if the insurance companies were perfect, it wouldn't fix the system.

When interviewed recently Nancy Pelosi said, "Let me assure you: There will be a health care reform bill passed and it will make a big difference in the lives of the American people." No doubt, if a bill is passed, her prediction will be correct, except that the difference will not be positive when compared to the existing system.

As explained by Shikha Dalmia, except for those without health insurance (who use the emergency rooms for free), our health care payment system is a private insurance system which removes from the consumer the responsibility for negotiating the price or controlling the cost directly. She compares the systems in France, Germany and the USA:

For the same flat fee—regardless of whether it is paid for primarily through taxes as in France in Germany or through lost wages as in America—patients in all three countries effectively get an ATM card on which they can expense everything (barring co-pays) regardless of what the final tab adds up to. (Catastrophic coverage plans are available in America, but the market is extremely limited for a number of reasons, including the fact that most states have issued Patients Bill of Rights mandating all kinds of fancy benefits even in basic plans.)

Thus, in neither country do patients have much incentive to restrain consumption or shop for cheaper providers. In America and Germany, patients don't even know how much most medical services cost. In France, patients know the prices because they have to pay up front and get reimbursed by their insurer later—a lame attempt to ensure some price consciousness. But since there is no cap on the reimbursed amount, the French sometimes shop for doctors based on such things as office decor rather than prices, according to a study by David Green and Benedict Irvine, researchers at Civitas, a London-based think tank. (Green and Irvine reported this as a good thing.)

The health care system in the U.S. needs to be fixed to enable the consumers to pay for and control the cost of their own health care and for physicians to treat their patients without the state dictating the terms, access or methods. In other words, the government should get out of the way rather than imposing more control. Cliff Asness, in a lengthy article (see Health Care Mythology), which is worthy of study, has said it better than all others.

It appears that the Senate will approve a health care bill
. Then it ultimately will end up in Conference where the bill will be changed to one that can be subscribed to by both houses. The problem with Conference is that negotiations between members of the two houses are behind closed doors. The phrase, "Nellie, bar the door," comes to mind. If they get out, "it will make a big difference in the lives of the American people."

This is not a time to be a sheeple unless you want your children and grandchildren to be sent like lambs to the slaughter. It is time to become politically active and persuade others so that many, many respectable voting citizens can have their voices heard. Remember, numbers is the only thing your elected representatives respect.

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