Controlling healthcare costs

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controlling-healthcare-costs

As I've blogged before, would-be reformers need to realize that we should not isolate people from the cost of healthcare, otherwise prices tend to spiral out of control. That is true whether you are relying on tax or insurance to fund your healthcare. Both systems rely on third-party payment, and both therefore cause the same problem.

Imagine a typical third-party payment scenario. You go to the doctors, feeling unwell. You've already paid your taxes or your insurance premium, so you'll want to feel like you're getting your money's worth. In other words, you'll want to maximise the amount of care you receive, regardless of the cost. Now look at it from the doctor's perspective: it is also in his interest to provide as many and as expensive services as possible. The more he does, the more money he earns from the insurance company or the government.

Put simply, in a third-party payment context, both parties to the healthcare transaction have an incentive to maximise costs, while neither has an incentive to contain them. And that feeds back into higher taxes, or higher insurance premiums – neither of which are remotely desirable.

Clearly, third-party payment is good for big-ticket health expenditure. Very few people could cover the cost of a serious illness out-of-pocket, so pooling risk and resources makes perfect sense. On the other hand, it's not sensible at all for dealing with lesser ailments, where its bureaucratic cost can often outweigh the cost of the services provided.

How do you translate this into policy? In the US, the best way would be to stop subsidizing employer-provided insurance, and encourage individual/family insurance instead (perhaps through a tax-credit). You would also want to encourage people to combine high-deductible insurance plans with health savings accounts, so that third-party payment is kept to a minimum. Studies have shown that health plans like this produce 3-year savings of $1m per 1000 participants.

In government-dominated systems like the UK's, it is a little more difficult. Assuming outright privatization is not on the cards (and it should be, at the very least in primary care) then the introduction of user charges and co-payments are the way to go. And really, that is not nearly such a radical suggestion as British politicians seem to think: pretty much every other European country has them.

Don't ask

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dont-ask

Never give a bureaucrat the opportunity to say no. (See here for the other 44 points in Blackwell's guide). Unfortunately for the parents of a Dutch girl they failed to understand that by seeking to play by the rules they would lose their decision making powers over their own daughter for two months. Laura Dekker is a keen sailor, and has been sailing since she was born (she was born on a yacht) she's so competent that at 13 she wants to sail the world. However it's not the seas or the winds, her boat or even her lack of courage that is stopping her from going. It is the Dutch authorities who after denying a request from Laura's parents that she be allowed to take two years of school to complete this challenge then found in favour of the Dutch Child Protection Agency that she become a ward of court.

Of course, I'm sure Miss Dekker has been followed everyday since birth by this agency and they, and the child psychologist who will assess, her, must know her far better than her parents do. In fact, I imagine that Miss Dekker expressed a fear that she was in fact possessed by the spirit of Willem Janszoon and he was controlling her every action! Therefore the safest course must have been to take was this, she needs to be protected. It is such a pity that her parents did not pay any regard to their child when she was growing up as they would then know whether she is capable and mature enough to sail around the world. She has been saved and she will now spend the next two years of her life in school. She might of course ignore everything and learn very little, but it's where the state says she is supposed to be.

Her parents should have pushed her off at the quayside and told her to write rather than doing things by the book. Perhaps others will learn from this and disregard the state as being nothing other than a service for idiots run by idiots. The Dutch should celebrate as another child's life is successfully destroyed.

Off to the shrink

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off-to-the-shrink

Lord Turner of Makebelieve has come up with a new plan to match the capabilities of the FSA he chairs to the size of the industry he represents.  Since the recently expanded FSA is as big as it could be, his answer is to shrink the City to the point that the FSA might be able to cope with it.  He proposes we reduce our last surviving world class industry to the level, say, of our garments industry.  According to Turner (Prospect magazine), it is socially undesirable to have one industry out of proportion with the others and maintaining City competitiveness should be low, or even no, priority for the FSA.
 
What madness is this?
 
The previous suggestion that the remit of the FSA should shrink until it matched its capabilities was clearly too rational for Lord Turner.  Maybe he's the one ready for the shrink.

GCSE reform

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gcse-reform

Another year, another set of record-breaking GCSE results, another row over GCSEs. I took mine last year, and it did get boring hearing adults constantly badger on about how my A*s mean nothing and that I might as well have spent my study leave lying on a beach somewhere for all the difference it would have made.

But it is true that GCSEs need reforming. They’re over twenty years old, in which time schools have built up a bank of past papers and a wealth of experience with which they can cater their teaching more towards the exams. This isn’t crafty teaching but faults with the system: with mocks, end of year exams and GCSEs themselves, there’s no time for pupils to explore subjects beyond what is going to be on the paper. Besides, GCSE grades are currently all there is to show for those two years’ work, and in-depth knowledge and good exam technique can’t be differentiated just by marks. Besides, technique is quicker to teach.

The grade boundaries also need to change. Having 98.4% students passing their exams is impressive, but what does it mean? To pass, students must gain grade E or above. An A*-C is ‘good’. In last year’s Edexcel maths exam 36/100 got a C; 9 an E. Get roughly one out of three answers right and you’re ‘good’ at maths; get less than one in ten right and you’ll still pass. Something’s not quite right.

With the government’s plans to raise the compulsory level of education to 18, there is also the question of whether we need GCSEs at all. At the moment they help potential employers and Sixth Forms differentiate between students, everyone does A-Levels or vocational qualifications then employers will use those to differentiate; and if entrance exams work up to Year 11, then why not after it?

 

Illiberals

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illiberals

When is a liberal not a liberal? According to many it is when they reside in America. The 'liberals' in America are correct to label themselves this as they are diametrically opposed to the conservatives. The conservatism we see in America (or did see) was one that stood for the protection of the Constitution and the freedom of the individual that it enshrined. The liberals sought to change this by side-stepping the constitution and expanding the government. They would 'liberate' the masses from the tyranny that is the constitution and cradle them in the warm safe bosom of federal government.

When we look at the history of the word, liberal, it's first usage as a political term was one of abuse. It wasn't until a group of Spaniards established the political group Liberales that it became associated with change. A change that on continental Europe was one that sought to overthrow the entrenched monarchies and free man from his role as a feudal serf. A change that had gradually been taking place in Britain in a more natural way from 1688 onwards in association with the Enlightened thought of the day. Throughout the 19th century the waters of liberty were darkened as new so-called liberal authors developed the idea of utilising government to act to free sections of society. There was little thought given to the unintended consequences of this resulting in many people actually losing their freedom as government expanded. Modern liberalism took on a new political form that had little to do with classically liberal thinking, and limited governmental powers over the individual.

It was not until Hayek, Friedman et al. began fighting back against the rising tide of government intervention that classical liberalism was revived and the idea of man being free was once again mooted. The Conservatives were doing little to stem the tide of the liberals here and in America (a situation we still find ourselves in today). The liberals of today are only liberal with other people's money. They have no regard for the idea of man being liberated, they desire everyone to live towards a 'general will'. The crux is that they hold the correct political party term 'liberals', yet are fundamentally illiberal.

Senator Edward Kennedy

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senator-edward-kennedy

The scale of the BBC's praise for the late Senator Edward Kennedy has been so lavish that it's a wonder they have not been calling for a National Day of Mourning. To me, he was a deeply flawed character.

Yes, he did a bit of good in terms of the Northern Ireland peace process. He started out, of course, as very much on the Republican side, and helping Republican fundraisers. But after one too many horrific IRA murders, just as the peace process was underway, he snubbed Jerry Adams on a visit to the US, and so might well have made the Republicans realize that they could not negotiate through the political process and support violence at the same time.

So give him credit for that. But balancing that small plus is the major minus of Chappaquiddick, where Kennedy seemed more intent on saving his own political skin than his unfortunate passenger's life. Perhaps it was in the genes. His brother Jack Kennedy had some of the same character flaws. But perhaps much of Ted Kennedy's prominence was due to his rich and famous relatives too. Apart from the Pitts and 'Bob's your uncle', we have not had many political dynasties in Britain. Perhaps our system is better at weeding out people who rise only because of family or wealth.

Of course, the BBC talks of Kennedy as a great 'liberal' – and liberal he was, in American terms. But it suggests that Kennedy was liberal in the European sense. One BBC News report even spoke of his liberalism in contrast to 'left and right'. But in the US, liberal and left-wing are the same. And boy, was Ted Kennedy a liberal. For decades he attempted to force a UK-style National Health Service on Americans, despite having no understanding or first-hand experience of how it actually works – or doesn't. American healthcare is rotten, sure enough – over-regulated, run by doctors and politicians, and therefore expensive – but America doesn't need to jump out of that frying pan into the fire of nationalized healthcare. Americans know that, and have turned up in their hundreds and indeed thousands to protest against Obama's healthcare plans in the 'town meetings' that politicians have been calling to try to promote the idea. The plans are getting watered down by the day. I like to think of myself as a liberal. And I resent how American politicians have hijacked the terms to mean the opposite. Even more, I resent how our metropolitan state broadcaster are trying to shoehorn the same usage into the British political debate. Time they were privatized and exposed to some real competition.

Is there a future for fixed-line telephony?

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is-there-a-future-for-fixed-line-telephony-

By 2010, it is expected that more call minutes will originate from mobile phones than from fixed-line connections. Given that mobile phones started to appear in the 1980s - when they were sold by BT’s Cellnet and a very modest offshoot of Racal, called Vodafone - their progress has been remarkable.

Remember, too, that initially mobile phones more closely resembled bricks than the sleek miniature models that are sold worldwide today. Such a quick-moving trend is unusual for utilities. After all, technology in the water sector has barely changed since the 1970s. It also raises the question as to whether there is a future for fixed-line telephony, given that many people - especially the young - far prefer the instant accessibility of mobile telephony.

For BT, the shrinking of the number of the UK’s fixed telephone lines – down from 34.9 million in 2003 to 33.2 million in 2008 - has been compounded by the reduced number of minutes that the average user spends on fixed-line phones. To be sure, BT is investing heavily in rolling out broadband lines in the conviction that it will gain materially from convergence in the communications sector. Equally, with a weak share price – albeit somewhat higher than its low point earlier this year - £10 billion of net debt and a burgeoning pension deficit, BT is not exactly perfectly positioned. And, unlike Deutsche Telekom, France Telecom and, Telefonica, which now owns O2, BT has no serious mobile revenues to generate revenue growth.

Moreover, the march of mobile telephony may claim another unlikely victim. A recent opinion poll suggests that over half of those owning a mobile phone use it as an alarm clock. Perhaps the humble alarm clock will become as dated as the slide rule.

But, even more importantly, is there a future for fixed-line telephony?

Climate change hypocrisy

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climate-change-hypocracy

Nothing is more hypocritical and immoral than rich Westerners driving their gas-guzzling SUVs emoting about the threat to Spaceship Earth from the millions of Indians who want to drive Nanos. Whilst the salving of their consciences by buying carbon offsets (as Al Gore claims to do every time he jets around the world) is akin to the Papal indulgences sold by the Catholic Church, which allowed its richer adherents to assuage their guilt and ‘fornicate on clean sheets’.

Deepak Lal 'Spiking the road to Copenhagen' Buisiness Standard.