Expanding access to health care leads to …less access?

Avik Roy, writing at the Atlantic, has an interesting post that directly illustrates the concept of “the solution is the problem.” He dives into the research and comes up with some evidence that expansion of Medicaid actually reduces people’s access to health care.

Chapin White of the Center for Studying Health System Change has published an important new paper in Health Services Research, a journal of health economics, which suggests that a critical part of the Affordable Care Act–its expansion of Medicaid coverage to 16 million more Americans–may actually reduce those individuals’ access to health care.

White’s report comes on the heels of numerous studies that show that patients on Medicaid, our national government-run health-care program for the poor, do far worse on health outcomes than do those on private insurance, and in some cases, worse than those with no insurance at all. (For an extremely deep dive into these studies, see my three-part series on the topic.)

Briefly, the post gives a few reasons that are all supported by the most basic rules of economics. First, Medicaid underpays doctors. This is, of course, by necessity, as Medicaid is devastingly expensive, and governments simply cannot keep up with health care demand. The flipside, though, is that doctors who are underpaid are less likely to offer their services. This is simple supply and demand, and it cannot be repealed.

Furthermore, Medicaid expansion does not lead to more doctor visits. The reasoning here is exactly the same, but with some crowding-out effects added in. As state coverage expands, private insurance gets crowded out, and access diminishes because less private insurance and more government payments means more underpayments to doctors. And more underpayments to doctors leads to less service offered by doctors.

In fact, it’s really quite simple. But many in the political classes refuse to look beyond the first step.

Bernie Madoff Calls the Whole Government a Ponzi Scheme. He Ought to Know.

This just in, straight from the horse’s mouth – Bernie Madoff was quoted calling the whole government a Ponzi scheme.  And if there’s anybody who knows a thing or two about Ponzi schemes…

Wall Street swindler Bernard Madoff said in a magazine interview published Sunday that new regulatory reform enacted after the recent national financial crisis is laughable and that the federal government is a Ponzi scheme.

“The whole new regulatory reform is a joke,” Madoff said during a telephone interview with New York magazine in which he discussed his disdain for the financial industry and for its regulators.

The interview was published on the magazine’s website Sunday night.

Madoff did an earlier New York Times interview in which he accused banks and hedge funds of being “complicit” in his Ponzi scheme to fleece people out of billions of dollars. He said they failed to scrutinize the discrepancies between his regulatory filings and other information. 

He said in the New York magazine interview the Securities and Exchange Commission “looks terrible in this thing,” and he said the “whole government is a Ponzi scheme.”

Now, I’m sure there are some people out there who will write this off as the rantings of a common criminal, but I happen to think he makes some interesting points. 

First, his contention that banks and hedge funds were complicit is almost beyond question. 

I would also add that regulators were “complicit” to the extent that they wilfully ignored the warning signs and, in several cases, actual written warnings from concerned parties. 

After all, if you look the other way when your job is to scrutinize, you might as well make your sanction of criminal activity explicit.  And as for the banks and hedge funds, their focus was on short-term gain, secure in the knowledge that bailouts were available to anyone who messed up badly enough.  And even if it cost some individuals their jobs, the pay packages they got in the interim would keep most people comfortable for the rest of their lives.

As for the government being a Ponzi scheme, that’s almost beyond question too.  The definition of a Ponzi scheme is an investment vehicle whereby early investors are paid “returns” from the subsequent capital payments of later investors.  Look at Social Security – that is quite literally the business model.  Medicare – same thing.  Medicaid – same thing, but at a quicker pace.  Together those three programs make up the majority of yearly government spending, and they all involve payments to early “investors” coming straight out of the pockets of later “investors.” 

And look at the other core functions of government, even beyond these obviously flawed entities.  I’ve previously referenced how unions (in their current form) cannot be viable without the full backing of government.  The system involves legislators bestowing favors on a chosen group of people, and in return those people ensure that their benefactors are popularly elected.  How is this any less circular?  And how does the story change when inevitably the music stops and some people are left without chairs?

And what of the new regulatory “reform”?  Well, I have personal knowledge about this, and I can assure you Madoff is absolutely right when he says it’s a joke.  Regulators could have – no should have - looked at the DTC transaction log to ensure that Madoff was not running a multi-billion dollar Ponzi scheme, but nobody bothered.  How is this problem corrected by, in essence, shuffling the pieces of the regulatory regime around? 

So some agencies will be consolidated.  Other agencies will come under the purview of the Fed.  A new agency will be set up to “oversee” all the old agencies.  The fact is, smart people will always be one step ahead of the regulators, and it does not matter even a little bit how the regulatory pieces fit together.  Do you think Madoff would have reconsidered embarking on a Ponzi scheme just because thrifts are now regulated by the OCC instead of the OTS?  Do you think Madoff would have thought twice about stealing people’s money if only the Fed had had an Office of Minority and Women Inclusion before this totally-not-wasteful-at-all reform?

Public choice theory merely gets another underscore.  Of course, beyond all the implications of regulatory capture, etc., we see the pure spoils system at work.  The more regulators fail, the more power regulators get.  And of course, the more people who derive their power from Washington, the more power is concentrated there.  One last question – do you think the legislators mind?