On Health Care

I consider myself totally unqualified to comment on health care, more so on its reform. And that my friends, is the purpose of blogs and talk radio -- to comment on those things about which you are unqualified.

Moving on, it seems to me that there is one single, driving force in health care that leads us to the mess we have today: there's no money to be had from a healthy population.

"Oh that's not true," you say. "The insurance industry wants a healthy population. Keeps their costs down." To a degree, that's true. But imagine for a moment that the entire nation was in excellent health, not a dialysis machine or a stent needed from sea to shining sea. Who among us would pay for health insurance? At best, they could get a fraction of their current income for what amounted to accident insurance. Even if they could still get -- what is it thirty percent of every health dollar spent -- fat lot of good it would do them if the number of dollars slid down to teensy. No, having sick people around provides several positive benefits to the insurance industry. First and foremost, it scares healthy folks into thinking they need insurance, for someday "that could be me." Second, when you get a decent slice of the pie, having sick people in the pool makes the pie that much bigger. Having too many sick people would become an unmanageable problem for the insurance industry, I suppose, but we're probably not yet near that upper limit. (The phrase "supply-side sickonomics" keeps rumbling through my head, but I've no idea what the practical interpretation of that would be.)

Once you get past the insurance industry, the rest is easy. The best customer for the health care industry is one that is in need of its services for that person's entire life. Preferably, whatever the person has shouldn't significantly shorten their lifespan (not more than five or ten percent), or be so debilitating that they can't earn enough to cover premiums. From this, it's obvious that people with diabetes, arthritis, asthma, obesity, depression, or even allergies are all the health industry's best customers. And guess what? These are exactly the kinds of diseases that we've seen steadily increase in the last several decades, in lockstep with the growth of the health care industry itself.

This is not a coincidence. We've put the health care industry into a (somewhat) free market, and that market has done what markets do: find growth strategies. I'd like to think that no one in the world said out loud, "...and if we push more corn sweeteners on Americans, the income from our medical arm will rise proportionately with obesity", or at least I hope that no one in any position of power was saying that, but marketplaces have a way of finding efficiencies that are beyond the ken of the average human or the most sophisticated economic model. (I believe economics is a matter of vast numbers of interactions combined with huge stochastic, psychological and often irrational components that are either largely ignored and/or misunderstood. To talk about the efficiencies of the marketplace is somewhat misguided. A marketplace is efficient the way an ant colony is efficient at constructing burrows or foraging. It's an illusion of patterns and order arising from an enormous number of events, most of which are random. In other words, a marketplace will usually be more efficient than chaos. Conversely, since a planned economy can't actually take into account all the variables involved and is thereby constrained to using gross simplifications, it will always be less efficient than chaos. This may be why Somalia rolls on while the Soviet Union has collapsed.)

I think there's a way to correct this situation, but I'm not bright enough to find an implementation. All the same, here's the general notion. Restructure the market to place value on people being healthy. One possibility would be to place future contracts on the health of individuals. These contracts would pay premiums based on the projected quality and length of life for the individual. Everyone would have buy-in on the future, and the payout is the best for everyone (health providers and providees) when the person is living a long an healthy life.

Unhealthy individuals would benefit when someone takes it upon themselves to buy up their futures and increase their value, say by finding a cure for their disease.

I don't know how to make such a market work. Most futures markets don't look out that far, and this market would have to look forward four score and ten, give or take a decade. I don't know how we'd make trading on the options work, either. And I can certainly see some grim possibilities for abuse of such a market. The mafia don who's first inkling that he has a problem is when his own health futures start to plummet; the meat inspector that passes a load of contaminated hamburgers headed to the public schools, and then shorts the futures of the kiddies.

Well, maybe there's an alternative out there that could make some sort of market incentive work, and invert the setup we currently have. Otherwise I don't see how any market-based reform is going to work. Instead, we're going to have to remove market influences from the health care industry.

Would Rezoning Help the Housing Crisis?

As millions of homeowners face foreclosure, the government is (slowly) moving forward with a combination of aid packages, mostly aimed at attempting to help people stay in the homes they are in and scale down their mortgages to something they can afford.

In many cases, this will be a losing battle. For example, in California I'm sure that many people who bought homes in the last five years kept up with the non-mortgage costs of ownership (CA's notorious real estate taxes plus upkeep and insurance) by drawing on the rising equity of their home. But that line of "cheap" credit has dried up, as home prices continuing to wilt. Even if their mortgage payments go to zero, many people won't be able to cover their remaining costs because they were borrowing against the future, and presumably infinite increase in the value of their home.

In other words, the hole is so deep that the billions committed to fill it will hardly matter. In six months it will have made as much difference as the money that was poured into the auto companies last December.

So are there other alternatives that are not being discussed that could help alleviate this situation? Say, rezoning neighborhoods that have high default rates?

Most neighborhoods (and I'm willing to bet most of the neighborhoods that are in real trouble today) are zoned as single-family dwellings, often with strict limits on the number of unrelated occupants, and the types of businesses allowed, if any are allowed at all.

If these zoning laws were relaxed to allow reasonable numbers of boarders into homes, or to allow subdivision of McMansions into duplexes or triplexes, and if small businesses like restaurants and convenience stores were allowed to operate, jobs would be created, incomes generated, and owner costs lowered as owners made legitimate business deductions against their property. On the state's side, that reduction in real estate taxes would probably be offset by the other gains in sales and income taxes.

Another possibility would be to allow selective homesteading of foreclosed and abandoned homes. I hear that this is already happening, unhindered, in some parts of the country.

Of course, when markets collapse another way to prop up prices is to reduce the supply, in this case bulldozing a significant number of houses. That doesn't really look practical.