Round and round

This excellent post from Don Boudreaux, reminded me of my less worthy attempt at this in 2012.

This is the dynamic in a nutshell:

1. In a freer health care market, the costs of being unhealthy or uninsured is borne by individuals. This provides strong incentives to stay healthy and insured.

2. In #1, some people will still fall through the cracks. Some because of bad choices they made, but others because of unfortunate circumstances.

3. Attempts to solve #2 that involve anything other than encouraging people to make better choices creates moral hazards* that cause even more people to take less responsibility for their health and not buy insurance. This increases costs for those who pay.

4. The same compassionate people who wanted to solve #2 try — with no apparent awareness of this — reproducing the natural incentives in #1 to stay healthy and insured by dictating both. This appears in mandates that sound like, If we’re paying for you health care, then we have the right to tell you how to live your life.

We already see evidence of this in New York City with bans on salt, trans fats and large, sugary drinks. New York was already well down the Obamacare path, which is why New York City was one of the first areas in the U.S. to show signs of #4.

Here’s an example from Japan. I see evidence of this starting here. My employer, for example, is now collecting my BMI and waist size and will soon want to start tracking my exercise activity.

Of course, the First Lady’s efforts to reduce childhood obesity are also initial steps in the direction of #4.

*Moral hazard – A moral hazard is created when some measure taken to reduce risks, increases the risks people are willing to take.

One example of this can be seen in football. Wearing helmets sounds like a logical safety measure, but has resulted in players hitting each other harder and even taking measures (like doping on steroids to build muscle mass) to hit ever harder.

The link to the post about the BMI penalties in Japan provides an example of moral hazard in medicine.

Nanny State – Kansas

Kansas lawmakers are considering a soda tax to raise tax revenues.

This is wrong on a few levels.

Thomas Jefferson sums up the first level with this quote:  “A government big enough to supply everything you need, is big enough to take everything you have.”

From the article:  “Obesity-related illnesses in Kansas cost Medicaid and Medicare $281 million every year.”   I digress: obesity-related illness in Kansas costs Medicaid and Medicare nothing.  It costs taxpayers.  Medicaid and Medicare are nothing more than a pass-through for taxpayer funds.

This is how the nanny state, or the big government Jefferson describes, works.  It’s intrusive rationale goes like this: If “we” supply your health care, then “we” have the right to raise your taxes on the things we think increase “our” costs.

Where will it stop?

The second level why this is wrong is because the reason Kansas is thinking about this tax is because it is running a deficit.  Like many governments, it increased spending too much in the good times and now, with the economy in a downturn, it needs to plug holes in the budget.   We’re tightening our belts.  Government needs to do the same thing.   Hypocrisy.

The third level is that this is a perfect illustration of how meddling government causes unintended consequences and then tries to fix those consequences with more intrusions.  Those intrusions costs more consequences.  If they left things alone, things would work out.

People don’t pay the direct costs of increased medical care caused by their irresponsible eating habits because much of health care spending has been pushed to third parties – government and insurance companies.

Further, government doesn’t allow insurance companies to charge premiums based on key health risk factors.  Home and auto insurers can.  Higher auto insurance rates for risky driving keeps us more prudent into our driving habits.  We take responsibility because we don’t want to face higher insurance rates.

So, through government we’ve managed to remove some of the natural signals that tell people to stay health and, shocker, people aren’t taking care of themselves.

So, now we try to push the cost back onto them in the form of a soda tax.  Soon it could be a Snicker’s tax, a motorcycle tax, a driving your car more the 25 miles to work tax.  New York is already going after salt intake.

Thomas Jefferson knew how this would play out 200 years ago.