U.S. District Judge Rules Against Health Insurance Mandate

After all the spin and misdirection of the health care reform debate, the legal process is going to renew debate on the critical, constitutional American issues. Most importantly, can the federal government force its citizens to buy health insurance? Can the federal government force Americans' involvement in any private market? A lot of complex, convoluted arguments about the the good the legislation will achieve have been used, but they all require the lynchpin of forced involvement. None of this intricate social experiment is going to work without mandated participation.

But judges are already calling a foul. Yesterday a Virginia U.S. District Judge ruled the mandate requiring Americans to maintain health insurance unconstitutional.  As U.S. District Judge Henry Hudson stated in his 42 page opinion, “At its core, this dispute is not simply about regulating the business of insurance -- or crafting a scheme of universal health insurance coverage -- it’s about an individual’s right to choose to participate."

 As stated in a Bloomberg piece on the ruling: Hudson said the “unchecked expansion” of congressional power represented by the insurance requirement “would invite unbridled exercise of federal police powers.” No Supreme Court decision has authorized Congress to “compel an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market,” he wrote.

Judge Hudson's ruling will certainly be appealed and the insurance mandate may soon visit the Supreme Court. With the current composition of the Court, is is likely that the court will agree with Judge Hudson's opinion. What will happen to the legislation if the mandate is removed? 

As stated above, the insurance mandate is really the lynchpin in the reform bill. Without it, the reform bill just doesn't work. The legislation forces the insurance industry to open its doors to all comers without regard to pre-existing conditions. It sets price controls on the how much the industry can charge for its policies and also removes the industry's ability to limit their payout on each patient. The bill will bankrupt the industry, especially if the insurance mandate is not present.

The insurance mandate was implemented to moderate this strangle hold on the insurance industry. With the insurance mandate, the government forced some 40  million Americans into the insurance industry. The majority of these new clients were young and healthy, rarely utitlized health care, and did not have need for comprehensive insurance plans. Congress sold these Americans to the insurance industry to balance the huge financial losses the reform legislation would inflict on the industry.

Without these Americans being forced to participate, the whole house of cards will tumble. Health insurance companies, already doomed to eventual bankruptcy by the legislation, will immediately begin to fall. Health care reform will be shredded with a new set of legislators left to put together the pieces.

Legislators will be forced to revisit health care reform. They will decide if America should continue down this path of socialization, with a blatant takeover of the insurance industry. Or they can recognize the inherent, God-given rights of American people and the constitutional checks on American government. If so, perhaps true reform can take place with the restoration of freedom and resulting access and affordability in the medical market.

Rusty Scalpel

Both Oranges and Health Care Can Be Substituted

(And Why This Is Important)

Imagine that a bored billionaire made it a pet project to research all of the health benefits of eating oranges. The billionaire would hire the best scientists and use cutting edge technology for his research. Imagine the findings that might be produced. The billionaire's new Orange Journal would be brimming with excellent research showing the benefits of eating oranges.

Oranges' antioxidants would be categorized and individually studied. Research might show that eating oranges extends lifespan. The benefits of potassium and Vitamin C would be further studied. Oranges might be shown to have antimicrobial properties. Other findings would show that eating oranges reduces the risk of heart attacks. Research might even show that people that eat oranges have lower incidence of certain cancers. 

With all the research and publicity on oranges, they would become a major craze. Experts would make statements about how many oranges should be eaten daily. People would be seen carrying oranges around the office. All America would be saving lives, one orange at a time.

And yet, despite all the craze, oranges would still be substitutable. This would become especially apparent once orange prices skyrocketed because of the massive orange consumption. In a pinch most of us would still survive with an apple or banana in our lunches. The vitamin C and potassium could be obtained from other food sources. The reduced cancer risk could equally be attained by smoking cessation. Despite all the excitement and research showing the benefits of oranges, most people could get by using substitutes for oranges.

American health care is a lot like oranges. Trillions of dollars of research has been poured into the development of health care services. Pharmaceuticals have been extensively studied and have proven benefits. Health care providers work hard to prove that every intervention is backed by solid research. America has swallowed the pitch that our health care is invaluable. Some even go so far to state that health care is a right, apparently inalienable and inseparable from the human experience. 

But is it? Is our current version of health care irreplaceable? Is there any substitute for American health care?

In the case of our oranges, we saw that despite proven benefits of eating oranges, they could be substituted. The same is the case with our current health care system. A substitute can be recognized or developed for every benefit that medical technology currently offers. These substitutes can be found in dietary and nutritional sciences, in behavioral changes, in further pharmaceutical discovery, or in religious exercise or divine intervention.

For example, what is a viable substitute for diabetes treatment? The answer is diet and exercise. What is a viable substitute for antibiotic treatment for childhood ear infections? Research now shows that no treatment is generally just as effective and is thus a viable substitute. What about a substitute for antidepressant medication? Counseling and therapy are proven viable substitutes. What about chemotherapy for cancer? In many cases there may be no currently recognized substitute, but it is certain that  substitute therapies will be discovered. 

It is an absolute fact that substitutes can be recognized or developed for every medical intervention now currently utilized in the American health care system.

American health care is a commodity. It is an extremely valuable commodity, but still one that can be substituted by other commodities. Unlike the right to freely worship God, the right to free speech, and the right to bear arms, health care can be substituted. It is subject to the laws of economics, as are all other commodities. 

If American health care is "universalized" and made absolutely accessible to the public, it will be consumed out of proportion to its existing supply and prices will skyrocket. Health care will be utilized for silly, trivial purposes and thus become unavailable for serious problems. Instead of attempting to mandate and universalize health care, doesn't it make sense to allow for and encourage substitution? Wouldn't it be better that Americans find viable substitutions for the existing system? 


Rusty Scalpel

The Tax Club

Imagine you are a member of a very well-known and distinguished club. At one meeting you sit around the polished table in the club headquarters to discuss the matter of the annual budget. This year the club has taken on a number of expensive projects and is going to run up short on its budget. It is suggested that the deficit should be made up by increasing membership fees.

At this suggestion everyone looks a little uncomfortable. Times are hard. Increasing membership fees would be difficult for everyone. Someone else suggests cutting down on club projects so that their cost will not exceed current membership fees. There is silence at this suggestion, too. The club members are very proud of the projects and service the club performs for the community. It would be hard to drop these.

You are shocked at the next suggestion that is made. Looking at the other club members, one of members points a finger straight at you and says- “Let’s just increase his membership fees to cover the deficit.” He continues talking without looking you in the face. “We all know that he makes plenty. Why not raise his membership fees since he can afford it.”

You breathlessly attempt to sputter a response, but are cut off.

Greedy, they call you. Don’t you want the club to continue in its noble pursuits? If you are unwilling to pay your dues, perhaps you will no longer be permitted to be a member.

The solution is perfect. The club will be able to continue its work. The hard-working members who cannot afford higher membership fees will not have to pay them. The vote passes by a huge majority. Your fellow members look away from you and raise their hands in favor of the new membership fee formula.

This is the story of our federal budget and its proposed tax scheme. Already we operate under a graduated tax scale. Instead of every person paying a set percentage of their income, the government requires a higher percentage of income the more a person earns. Under the current system, the person making $30,000 a year pays 13.6% of their income as federal taxes while the person earning $300,000 a year pays 28% of their income as federal tax. But like the club members looking for additional funding, the President and members of the House and Senate are unwilling to cut programs and are looking for additional federal revenue. Although high earners already pay more than “their share,” they are seen as ideal targets and helpless against a majority vote.

The vote to raise taxes against high earners is referred to these days as “rolling back tax cuts on the wealthy.” In this way politicians infer that they are simply removing an unfair advantage that the wealthy have been enjoying. If the President is to be taken literally and is planning to restore the tax to pre-President Bush levels, he would be raising the income tax on our $300,000 earner from 28% to 32%. But how much he will actually raise them remains to be seen. He has pledged that he will not raise taxes on those earning under $250,000 a year, just on 5% of Americans making over $250,000 a year.

The solution seems perfect. But here is why an additional tax on the wealthy (and why graduated tax plans in general) hurts and will continue to hurt America.

1) It divides Americans against each other. We talk about class warfare- the rich vs. the poor. But consider what can be more divisive to America than elections where Americans vote about whose taxes they are going to increase. It allows a majority of the American electorate to confiscate the property of their fellow Americans. It causes Americans to examine each other with greed. They begin to vote against their wealthy neighbor, not because he has not contributed his share, but because they see that he continues to have resources that can be taken away. This is not liberty and justice for all. It corrupts politics and makes every man an enemy to his neighbor.

2) It discourages production. Consider the $250,000 ceiling that President Obama proposes putting on earnings. He is literally legislating a law of diminishing returns. Just imagine how many people will deliberately work and produce less in order to avoid higher taxes. Imagine the impact in health care, where many doctors are making around $250,000. Will doctors continue to see patients at the end of the year when they are already at their maximum earnings and any more patient visits will bump them into a higher tax bracket? We might consider such an action petty. But is there anything petty about quitting when you realize that each additional drop of sweat loses you thousands of dollars?

3) It assumes “enough” for each person. By setting $250,000 as the tax-at-will income, President Obama is attempting to establish by law how much income is “enough” to earn. Anyone making more than $250,000 is fair game because their income is now considered luxurious. But this “enough” is not the same for every person or circumstance. A $250,000 income might be luxurious for one family, whereas for another it might be a shoestring budget. What happens when medical catastrophes, educational expenses, business failures, or other circumstances make this level of income insufficient for survival? If a family is working overtime to pay off medical debt, should they be taxed at double or triple the rate of other Americans because of their high earnings?

4) It decreases spending power. Many Americans seem to think that money is wasted in the hands of the wealthy. If it is to benefit America, money must be transferred to the hands and programs of the federal government. But little do we consider that money taken from the wealthy is money taken away from purchasing American products, from building American businesses, and from hiring American employees. Money taken from the wealthy is money taken from the American economy. It is money taken away that could have been generously devoted to churches and charities. It is instead whittled away in a shuffle of administrators, middle men, and pork-laden spending bills.

5) It provokes the talented to leave the country. This may seem far-fetched, but consider all of the foreign professionals who have brought their skills to America because of the economic freedom and wealth they can enjoy here. If American professionals were to leave for greener pastures, we might consider them leaving the country unpatriotic. But is it unpatriotic to leave the country that turns cannibal and makes you the meal? What will happen when the high-flying earners realize that they can apply their skills and talents in other countries where they will be taxed less? What will we do without their skills and talents?

6) Most importantly, a graduated tax scale and the President’s proposed tax increases further erode America’s already shaky protection of property rights. We consider our rights inalienable and God-given. We believe that governments should not be allowed to take them away. And yet we have developed a tolerance to our President and legislature deciding how much of our property they can confiscate in a given tax year. What’s worse, we allow them to pick and choose who they will tax and how much they will tax them. How can the right to own property be God-given and remain inalienable if legislatures can confiscate property at will?

The graduated tax scale and the President’s proposed tax raises are the signs of a fading America. They will weaken America- discouraging production and encouraging the wealthy to quit or leave. They divide America- pitting Americans against each other in a mad scrabble for tax votes. Worst of all, they show that the Americans no longer care to fight to protect their neighbor’s property rights. Does a person who works extra hard and extra long deserve to enjoy the fruits of their labors? Is this still the home of the American Dream where with sweat and determination anyone can rise to any height? Not if the majority has anything to say about it.

Rusty Scalpel

Keynes and Hayek Rap Economics

Recommended by my good friend Cato, here's something that is a little outside of the normal tone of Free Market Physician. Because of the tank-tops, I won't put the You Tube video directly on FMP, but here's the link. It's a rap in which John Maynard Keynes and Friedrich von Hayek debate economics. Keynes was a British economist who argued that governments could spend their way out of recessions. Von Hayek was an Austrian economist who argued for free-market capitalism. It's a pretty clever production.

Hookworms, Tax Hikes, and a $3.6 Trillion Budget

The most successful parasites are undetectable. Silently they feed on their host, drawing from its energy imperceptibly.

Take the adult hookworm, which lodges in the darkness of the bowels and feeds on its host's blood supply. In an ideal hookworm infection, the host never becomes weakened or anemic from blood loss. The hookworms take just enough to survive and grow. Weakening or killing their host by playing the short-term game of gobble-all-you-can-get threatens the hookworms' survival. So silently they sip, with their healthy host completely unaware of their existence.

Washington Democrats could learn a thing or two from hookworms.

Refusing to enact policies that would allow the creation of national wealth, Democrats propose bleeding the strong to fund federal initiatives. President Obama and the Democrats devise plans that further plunge the nation into debt, with tax hikes on the "rich" as their only means of funding.

After presiding over 2009 and its $1.75 trillion deficit (12% of the gross domestic product), President Obama has proposed a $3.6 trillion budget for 2010.

Prior to unveling the budget, the President said he would consider cutting taxes for Americans, but not for people like Warren Buffett. He must have Warren Buffett confused with someone else. His budget runs on new tax hikes on families making over $250,000 a year.

But how long will the host remain strong? The feeding frenzy is on. Democrats have forgotten the rules of successful parasitism. Never weaken the host.

Blood is flowing freely now.

Rusy Scalpel

America Excluded from Health Care Reform

Taxation without representation. That was one of the sparks that ignited the American Revolutionary War. The American Colonists were tired of being taxed by a government in which they had no representation. King George and the British Parliament were not necessarily out to get the American colonists. But the Americans did not have elected representatives to speak for their interests or protect their rights and for this reason they sought independence.

In the final days of the health care reform bill, millions of Americans are no longer represented in the House or Senate. All illusions of bipartisanship have been thrown aside as Democrats have seized control of the bill and excluded Republicans and the states and districts they represent from the discussion. Unless a posturing moderate like Olympia Snowe votes in favor of the bill, not a single Republican voter will have been represented in health care reform.

Health care reform was supposed to be a great collaborative process. President Obama and the House and Senate Democrats promised involvement from both major political parties and all parts of the health care industry. Everyone would be involved in developing a solid and comprehensive health care reform. Yet, in the final hours, not just Republicans have been excluded. Health care providers and insurers, those who had the most to offer in drafting the bill, find themselves on the outside looking in on health care reform.

In the early days of the debate, many doctors showed lukewarm support of the proposed ideas despite the loss of independence they were likely to suffer. Doctors did have two major priorities for health care reform: medical malpractice tort reform and updating of the antiquated SGR formula that determines physician reimbursement for Medicare Part B. Sure, reform health care, many said. While you're at it, just make sure that we get paid for our work and don't have our earnings stripped by the judicial system.

Not only will the final version of the bill introduce a new nightmare of bureaucracy and host of middle men, but medical tort reform and updating of the SGR will not be included. They never even made it out of committee.

The health insurance industry is the industry that will most be affected by the legislation. It had even less involvement in any collaboration process. From the beginning of the debate, insurance companies were branded by the President and Democrats as crooks. Democrats said the health insurance industry was ripping off Americans, pocketing hard-earned money while denying claims. They needed to be taken over. America swallowed the bait, despite reports showing narrow profit margins by the industry. With the final legislation, the government takes over the health insurance industry.

How can the rights and interests of physicians, insurers, and conservatives in general be represented if they have no part in the legislative process? What sort of bill is written when the legislature does not represent its constituents? We're about to find out. Using the bill that came out of the house, we can make a pretty good guess. The bill is designed to insure all Americans. It helps pay for those who can't afford insurance and criminalizes those who don't want to buy it. It is estimated to cost $894 billion over the next 10 years. Here's who will pay for it:

1) The bulk of this sum will come from the wealthy- individuals who make over $500,000 a year or families who make over $1,000,000. These individuals will have an additional 5.4% tax added to their already considerable 35% federal income tax.

2) Also footing the bill are doctors and hospitals who will be reimbursed even less for Medicare and Medicaid.

3) An honorable mention goes to the insurance companies, whose contributions are not being figured into the $894 billion, but whose cooperation allows the price tag for the bill to be as low as it is. They will be offering special low-priced premiums to all of America while the Legislature holds them at gunpoint. How long these premiums can be maintained before the industry goes bankrupt remains a question.

4) Consideration is currently also being given to those who are already insured with expensive comprehensive plans. Although it may not make sense to the general public why patients with health insurance would be taxed in order to provide health insurance to patients, Democrats are currently working it into the bill.

The Democrats have put together a health care reform bill that does not represent anyone in the health care industry, that threatens to bankrupt health insurers, and that is currently supported by less than half of America. This is the sort of representation they have provided. Instead of thoughtfully voting on a well-crafted collaborative bill, they will try to push through a half-baked, unread 1000+ page piece of legislation this weekend.

I realize that this is not the first time one party has overrun the legislature and left others in the dust. However, Democrats have pitted Americans against each other in a game of winners and losers that is contrary to American Philosophy and rights of representation fought for in the Revolution. Instead of protecting rights or even implementing a more efficient process, they simply take from one group to give to another. They would create prosperity through robbery. They try to stabilize the economy through a smash and grab operation.

Taxation without representation. It is one of the sparks that ignited the Revolutionary War. It is the reason why America is no longer governed by ruling bodies in Great Britain. Taxation without representation is the reason this legislation has been so hard to push through. It is also why Democrats are likely to find themselves out of majority power in the very near future.

Rusty Scalpel