Because the number of Americans that are actually denied medical care is zero, the administration has chosen to cite the fact that 47 million Americans lack medical insurance (another myth) as the reason for its urgency in passing a huge bill that congressmen can’t be bothered to read. Why, just yesterday the administration and its army of sales people began to talk about health insurance reform; this after years of hearing about the need to reform healthcare. Ahh! The power of focus groups. Now we need single-payer universal healthcare to bring down costs (prices) and to protect the sick from “discrimination” at the hands of evil insurance companies.

So the cause of our national distress is the private health insurance industry, which no doubt explains why A) Obama has made back room deals with the insurance and pharmaceutical industries and B) why the bill making its way through the House of Representatives devotes exactly 6 of its more than 1000 pages to insurance reform.

Conservatives of course have long pointed to the over-reliance on insurance companies and other third party payers as one of the major causes of the increase in healthcare costs. It is worth remembering that the largest insurer in the nation is the federal government through Medicare and Medicaid. And how’s that working out?

A recent study from the National Bureau of Economic Research found that about half of the increase in health expenditures nationwide since 1965 was caused by the creation of Medicare and Medicaid. Why? One reason is that under the government programs prices are not the result of contracts between providers and patients. Instead, prices are set between providers and the U.S. Government. In practice, this means the U.S. government says what’s covered and what the price is (regardless of the actual cost), and providers and patients have no choice in the matter.

Worse, since patients do not negotiate price, they don’t care what the price is and have no incentive to seek out a provider with a lower one. On the other hand, they have every incentive to take health risks they couldn’t otherwise afford and use services they might not otherwise be willing to pay for. There is a similar incentive for providers to charge for things covered by Medicare and Medicaid and do those things as rapidly as possible, whether or not that is what the art of medicine indicates would be the best treatment. So price – the most effective way to allocate scarce resources – isn’t determined by negotiation but rather by politics, (as has already been demonstrated by Obama’s back room deals) which invariably leads to shortages and rationing.

And what of the huge cost savings that Obama promises will magically appear under reform with the same perverse incentives?

According to the National Center for Policy Analysis, “Medicare’s total unfunded liability is more than five times larger than that of Social Security.” In fact, the new Medicare prescription drug benefit enacted in 2006 (Part D) has proven to be twice as much as the original congressional budget office estimates and alone adds some $17 trillion to the projected Medicare shortfall – an amount greater than all of Social Security’s unfunded obligations.” The liability for Medicaid is off the charts because unlike Medicare Medicaid has no “trust fund” but is paid for by the states with matching grants from the fed. I can’t speak for you, but I am overflowing with confidence that a government takeover of healthcare is just the ticket to solve our fiscal problems.

The reform the new left is attempting to force upon us is the wrong kind of reform. It will not bring down costs, it will not improve the overall health of Americans and it will not encourage innovation and entrepreneurship. What it will do is dramatically increase the number of Americans dependant upon government for their medical care and their livelihoods. That may be a good way to build a political base, but it ain’t reform.

USA’s new series “Royal Pains” is about Dr. Hank Lawson (Mark Feuerstein), who serves as a “concierge doctor” to the rich and semi-famous residents of the Hamptons.  In the course of the show, there are some unfortunate public policy claims made. In the second episode, entitled “There will be food,” Dr. Hank is trying to provide health care to a not particularly well-to-do fisherman. Hank gives a short lecture on price gouging and hospitals “screwing” people. A heavily discussed theme in this episode involves the need for a free clinic for the regular people who make the Hamptons run and the selfishness of the person who would have been the biggest donor to the clinic who is instead spent his money on a retirement party for a ballerina. In any case, the dialogue for this segment that I would like to focus on is as follows:

Dr. Hank Lawson: I’m back.

Fisherman: I’ll get my harpoon.

Hank: As inviting as that sounds, I won’t stay long.

Fisherman: The doctor’s mantra.

Hank: But you know for what it is worth, I am not a big fan of hospitals myself. In fact, I just got fired by one a few weeks ago.

Fisherman: Well, that is reassuring.

Hank: Naw, not for medical reasons. Look, hospitals are bureaucracies, right? Bureaucracies screw people, they overcharge you if you are insured, and they really do it if you are not, just because they can. You get zero leverage and no alternatives, so you get screwed. It is like out here with the gas docks when they price gauge after a hurricane. The system sucks. But you are sick and you are going to get sicker if you don’t get treatment. I would like to help you.

Fisherman: That is what they all say. Then the bill comes.

Hank: there is no bill. No, I am going to be here for you week in, week out. No red tape, no forms, no harpoon, just me.

Fisherman: So, what is the catch?

Hank: You are the fisherman, you tell me.

It seems like you can’t watch a doctor show without it constantly making digs about medical insurance and the uninsured.

Here is the problem that is faced after a hurricane — people want more gas than is available. Higher prices allocate gas purchases to those who value the gas the most. When prices aren’t allowed to rise, gas stations in many states resort to “putting up signs asking drivers to buy as little gas as possible.” Drivers aren’t apparently too thrilled by that idea. One news story quoted one driver as calling the signs “ridiculous.” Another asked why shouldn’t he buy more, why should he risk running out of gas?

It is quite common for consumers and politicians to complain about prices before a storm even hits. But higher prices before the storm reduce consumption and increase inventories and thus reduce how much prices will rise after the storm hits. The overall increase in price will actually be less.

The possibility of higher prices when disasters strike also gives oil companies an incentive to put aside more gas to cover those emergencies. Storing gas is costly, and if you want them to bear those costs, you had better compensate them. The irony is that letting the companies charge higher prices actually reduces customers’ total costs when you include such things as having to wait in long lines, because there will be more gas available when the disaster strikes.

Memories have apparently faded too much after the 1970s gas shortages. Price controls didn’t stop the cost of gasoline from rising. They just changed how we paid for them. Instead of prices rising until the amount people wanted equaled the amount available, chronic shortages of gasoline had Americans waiting in lines for hours. Yet, the supposedly permanent shortages disappeared instantly as soon as price controls were removed in 1981.

Everyone would like to have lower prices. The problem is that when people want more gasoline than is available, you either let prices rise or you have shortages.

The second issue in this short segment from “Royal Pains” is the claim that everyone, especially the uninsured, are dissatisfied with how the medical system works. In fact, a 2006 survey found that 89 percent of Americans were satisfied with their own personal medical care, while only 44 percent were satisfied with the overall quality of the American medical system.  Yet, even 70 percent of the uninsured were also satisfied with the quality of the medical care that they received. To put it differently, only 2.3 percent of people are both uninsured and very dissatisfied with the quality of their medical care and a mere 3.9 percent are both uninsured and dissatisfied in anyway with their medical care.

As to the fisherman’s concern that doctors don’t spend enough time with patients, Americans spend much more time with their doctors than do patients in other countries such as Canada, Australia, and Britain. While 30 percent of Americans spend more than 20 minutes with their doctors, only five percent of Brits spend more than 20 minutes.