CON jobs and collusion

Our human nature leads us to believe that as good people we of course accept that rules are for everyone; it is just that we are special cases. Tax preparers are used to the complaints that this rule is unfair, it should not apply to me; or I am poor, I shouldn’t have to pay that. Economists hear this whine: I believe in competition in general, but my industry is a special case, to wit:

  • We need to work together – cooperation – not competition
  • My competitor wants to cherry pick the most profitable parts of my business
  • I can handle any increase in demand just fine
  • Competition will hurt my industry & increase costs
  • I bring all kinds of benefits to my community
  • Sometimes we hear this argument: My competitor is for profit, whereas I wear the not-for-profit halo

Economists think of another word whenever they hear voices urging cooperation, collaboration, or working together in place of ‘destructive’ competition. That word is collusion.

This blog has written here about the Missouri Certificate of Need (CON) laws and urged their repeal. We write again because all the excuses just listed came up before the Missouri Health Facilities Review Committee which decided the heavyweight contest between the two biggest hospital systems in central Missouri.

Much misinformation centers around the idea that somehow competition or capitalism does not benefit the health care industry. Little justification is ever given besides the brazen contention that the free market is responsible for our healthcare woes. In fact, we haven’t seen anything like a free market in health care for generations; the villain is bad government regulation.

Our favorite excuse is that my competitor is just cherry picking the most profitable parts of my business, as if it were not rational and good business to expand into the most profitable new areas. It strikes us as disingenuous and hypocritical for one to say that state power should be used in the public interest so that I keep my dominant position in the most profitable areas. It is not in the public interest that a hospital’s cash cows should be exempt from competition. Here as elsewhere competition will normally lead to more consumer choice, lower prices, higher quality of service, or all three. Oligopolies, not known for innovation, love sanctioned ‘collaboration’ that keeps potential competitors out of their markets.

Another bogus claim is that productive cooperation is not possible without protection from competition via the CON laws. To the contrary, competition will lead to better cooperation through specialization. One hospital could have a great burn unit, another well known expertise in open-heart surgery. It would normally be foolish for one to compete in the areas of the other’s great strengths; this can lead to sensible competition in the remaining areas, to everyone’s benefit.

Competition will increase costs??? Economists love this excuse because it conceals the true benefits of competition. To compete of course requires some investment or capital costs. But once these are in place the benefits will show themselves in reduced costs, higher quality, & so on. Conversely, keeping competition at bay via state law will enable a hospital to keep chugging along with no incentive to reduce costs.

We have noted earlier that the original motivation for the CON laws was to keep the spigot of Federal money open. That changed three decades ago, but the CON laws have not been repealed in many states. The reason is that CON is very useful in inhibiting competition. Ph.D. economists and attorneys with long experience in the antitrust area at the Federal Trade Commission and the Department of Justice have written about the CON laws. An excellent article from the Goldwater Institute summarizes the consensus and includes many useful references. Below are the highlights:

  • Medical costs are 11% higher in CON states
  • The Federal Trade Commission found in 1988 that “repeals of CON programs would not lead to increased hospital costs”
  • CON states have 99 fewer beds per 100,000 population and lower availability of MRI services, CT scanners, and optical and virtual colonoscopies.
  • In 2008 the Federal Trade Commission and the Antitrust Division of the Department of Justice wrote: The Agencies’ experience and expertise has taught us that Certificate-of-Need laws impede the efficient performance of health care markets. By their very nature, CON laws create barriers to entry and expansion to the detriment of health care competition and consumers. They undercut consumer choice, stifle innovation, and weaken markets’ ability to contain health care costs. Together, we support the repeal of such laws, as well as steps that reduce their scope.

For perspective we note that the Federal government is also in the business of restraining competition. Since 2010 the Feds have approved only a single new bank, just one, not the hundreds we would normally expect; (see here) while the Dodd-Frank disaster harms small and midsize banks and secures the dominance of the large ones. The latter, without competitive pressure to strengthen them, will tend to become “too big to survive.”

Our advice is for all committees and commissions responsible for implementing CON laws to ignore anti-competitive opposition. Perhaps one day legislatures will have the public spirit to put together a mammoth bill repealing all anti-competitive laws and regulations, including CON and franchising laws, along with occupational licensing laws, all of which inhibit economic growth and generally harm the public interest.   Troglo

Troglo

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Compromise and Democrats: a very bad deal

The big news from D.C. is the fight over funding the Federal Department of Homeland Security past the February 28 deadline. The House of Representatives passed legislation funding all of the Homeland Security Department, but prohibiting expenditures in furtherance of President Obama’s illegal executive actions creating amnesty. As this bill reached the Senate all 44 Democrat Senators and both of the two ‘Independents’ filibustered against it. Their action will effectively strip Homeland Security of all funding starting March 1. A minimum of five Democrats and one Independent had expressed concern over the illegality of the President’s amnesty. Yet despite their principled concern, they joined to form the 100% solid Democrat bloc. Details here and here.

This has happened time and again. Democrats act in unison, while Republicans almost never form a solid bloc. If there is to be compromise, the Democrats have the advantage. Ideally in compromise, each side brings forward the issues most important to it that might be acceptable to the other party. The result is a kind of win-win for the country. But when one party will not give in to the other, compromise means the Democrats get the permanent change they crave, while Republicans can barely manage to get something they want and then often only on a temporary basis. With the news media biased in favor of Democrats, they can now dishonestly claim regarding Homeland Security funding the Republicans are shutting down the government and perhaps win the opinion-poll wars. [See note 1 below.] Over time this leads to a ratcheting effect, with the Federal government drifting inexorably leftward. With a progressive President in power and the ability of the Federal government to bully states and localities by threatening to withhold Federal funding, we have a very dangerous situation. Congress should stand its ground.

In our view, the Republican Party needs to change. Not drastically, but substantially in several respects.

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Political Quickie: Who pays income tax?

The Tax Foundation has recently released its summary of the IRS’s data on the 2012 tax year. Click here for the report.

There are two big takeaways:

97.2% The percentage of taxes paid by the top 50% of individual taxpayers
2.8% The percentage of taxes paid by bottom 50%

This tells all we need to know about the progressivity of the federal income tax system. A further tidbit useful in gentle discussions with progressives is this:

38.1% The percentage of all taxes paid by the top 1%

Given that above a certain point tax rate increases produce declining revenues, if government continues to grow, the bottom 50% will start having to pay more. At that point the free ride ends. Shouldn’t we all be pressing for a reduction in the size and scope of government?   Troglo

Troglo

We’ll miss you, Doctor (and Senator) Coburn

Over the years we have figured among the biggest fans of Senator Tom Coburn, an Oklahoma obstetrician who never ‘evolved’ and turned Washington. He is well known for his honesty and struggle to reform the Washington Way. We want to express our gratitude for his service and the honest, open, sincere, non-lawyerlike way in which he carried out his Senatorial duties. This great patriot is the author of several books:

The Democrats on the Senate Ethics Committee did him the great honor of threatening censure for continuing to practice medicine while a Senator. (We are not making this up.) He kept his promise to retire after two terms. In a parting shot across the bows of the Big Government fat cats, he has now issued a 320-page report, The Tax Decoder, specifying in detail over $900 billions in outrageous giveaways scattered throughout the tax code. This brief 59 second YouTube video is a great introduction to the report. We recommend a quick glance at the highlights .The press release with the link to the entire report is here.   Troglo

Troglo

Socialism does not work – Hannan’s Oxford Union debate

The great Daniel Hannan, author of the brilliant book, Inventing Freedom, is captured in this 13-minute video making telling, forceful points about the true nature of socialism. While we are most impressed with his concluding points, about the invention of capitalism and freedom in early modern Britain and its export to the New World, this quotation, about two minutes into the video, gives the flavor of his talk:

Socialism rests on compulsion; its defining ethic is not equality, but compulsion.  Troglo

Troglo

 

 

Is the Hobby Lobby case about contraceptives?

Despite what we have heard in the media, it is not. Hobby Lobby’s health insurance plan offered to employees has long covered many contraceptives. The Patient Protection and Affordable Care Act, as interpreted by the Department of Health and Human Services, requires all health insurance offered by business to include twenty drugs under the rubric of contraception. Four of these drugs are really abortifacients, drugs designed to prevent conception and, if unsuccessful, to induce abortion. In other words, if life begins at conception, as Hobby Lobby believes, then these drugs, after conception, can destroy embryos, which all of us were very early in our life. Hobby Lobby explains its position quite clearly on its own website.

So why have the media not made this clear?

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The next Messiah and constitutional government

In an interview with Piers Morgan the television journalist and personality Barbara Walters recently stated this about President Barack Hussein Obama:

We thought he was going to be — I shouldn’t say this at Christmas time — but the next Messiah.

This is an astonishing admission and not just because of the use of the term ‘messiah’ to a political figure. The telltale pronoun ‘we’ reveals that the great majority of the journalistic fraternity failed to see through Mr Obama’s false promises and lies. Groupthink and naivete gripped those on the left who longed for a fundamental transformation of American society and government, not to speak of healing the planet wounded by the misdeeds of the Great Satan.

Evan Thomas, an editor of the once important magazine Newsweek, made a similar comment in 2009 on the television program Hardball during a discussion of President Obama’s celebrated Cairo speech, ‘A new beginning:’

I mean in a way Obama’s standing above the country, above – above the world, he’s sort of God.

Clearly Mr Obama is above it all, no mere mortal, at least a demiurge.
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