Charlie Martin, who has a real knack for simplifying fairly complex mathematical concepts, has a post today about the fact that, when it comes to Obamacare versus math, math wins every time. I’d like to add my mite to that, which is that, when you have no dog in the fight, you don’t care how expensive the fight is. As you’ve gotten used to, I’m going to make the journey from the specific (that would be me and my experiences) to the general (a wholesale condemnation of big government, which is the same as bad economics.)
I go to a different dentist from the rest of my family, because I started going to him 15 years ago, and never saw any need to change when they jumped ship to a different guy. I like the man, I like his office staff, and I like the care I’ve been getting there.
Because we have dental insurance, I’ve never once written a check to my dentist’s office. I get my teeth cleaned twice a year, like clockwork, and I have no idea how much it costs.
I went recently for a cleaning (you’d be dazzled by my smile) and, as always, didn’t pay. My husband also went recently and, as always, didn’t pay. The insurance statements for both our treatments came in on the same day. These statements revealed that both dentists charge more than our coverage allows for a cleaning, and that both dentists accepted as payment in full the coverage maximum, even though it was less than their “official” charge. One could say that this proves that insurance works, since the dentists’ willingness to cut their price to the insurance maximum shows that dental insurance controls costs. Maybe….
What was just as interesting, though, was the fact that my dentist charges $36 more for a cleaning than my husband’s dentist does. (If that dollar amounts sounds interesting to you, that’s also the recent decrease in food stamp money for a family of four over the course of a month.) My husband was upset that my guy charges more. I wasn’t: (a) I’m not paying it and (b) the insurance company “stiffed” both guys, so it’s the dentists who should care.
The really important point, and the one that completely eluded my husband was that — and I’m repeating myself here — I didn’t care. I get the services, but I don’t pay. I have no incentive whatsoever to shop around for a cheaper, yet still good, dentist, and my dentist has no incentive to change his prices. Either the insurance pays him his rate or it doesn’t. If it does pay his rate, his high charging gamble paid off; if it doesn’t . . . well, he tried, so no harm no foul.
This is a marketplace distortion, where there is no connection between services rendered and money paid. The problem isn’t greedy insurance companies; it’s disinterested consumers. As for the insurance companies, they don’t negotiate either. They just set caps and that’s the end of it.
I had the same situation years ago, when Kaiser paid for a jaw guard for me because I was grinding my teeth to dust. I made two visits to the dentist, the first to get a mold for the jaw guard, and the second to get the jaw guard fitted. The total time I spent there was about 40 minutes. I saw the dentist for less than ten minutes, total. I paid for the guard myself ($250 in lab costs). Kaiser just paid for the dentist’s time and services. I should add that this took place in the early 1990s, when money had more meaning. The dentist charged Kaiser $800 for his time and service — and Kaiser paid every cent. I actually called Kaiser to complain. I was pleased with my jaw guard, but this was still highway robbery. Kaiser was unmoved. The dentist’s charge fitted into its chart, and that was the end of that.
That event, incidentally, was when I figured out that the problem with America’s healthcare market wasn’t rising medical costs or greedy insurance companies (although both are factors). It was that the customer doesn’t pay, so the customer has no incentive to shop around or strike bargains. Because the person getting the services couldn’t care less about the price (it’s other people’s money), there is no competition and there are no cost controls.
My realization about medical costs twenty years also started my turn towards conservativism. That’s because I figured out that the more things that the government pays for, the worse the market distortion. The government is not using its own money, it’s using your and my money. We care about our money, but the government doesn’t. If it overspends, it just uses its police power to demand more money from us. That’s its nature, just like the scorpion’s nature. The only way to control this is to make sure that government is responsible for paying for the smallest number of things possible.
What frustrates me is that people in my neck of the woods don’t get it. I suspect we have one of the highest concentrations of MBAs in the world right here in Marin, and that we’ve probably got a fair percentage of American’s with STEM backgrounds too. But try to explain market realities (engaged consumers, competition, and distortion) to them, and you can see the moment that logic flees and faith takes over. Their eyes start whirling in their heads and they say “No, government is big enough to force price cuts.” Worse than this economic lunacy is the fact that they don’t recognize that they are advocating tyranny by applauding government’s coercive power to force free citizens to offer services to the government for lower than market prices. (In this regard, please note that Democrats now want to force doctors who, last I checked, weren’t slaves, to accept patients who will bankrupt them.)
If you want more information about government’s deleterious role in the marketplace, check out Wolf Howling, who calls Obamacare the “mother of all market distortions.”