DRI-291 for week of 6-8-14: The (Latest) V.A. Scandal: So What Else is New?

An Access Advertising EconBrief:

The (Latest) V.A. Scandal: So What Else is New?

The news media has covered the recent medical-care scandal involving the Veterans’ Administration with its usual breathless urgency. Veterans of political economy find this ironic, since no feature of the political landscape is more ritualistic than the administrative scandal. Its elements are by now as stylized as those of the Japanese kabuki dance.

It begins with the uncovering of shocking facts – perhaps by journalistic investigation, perhaps by revelation from an internal source such as a whistleblower, perhaps by random circumstance. The facts are greeted first by denials, starting at the administrative level and proceeding upward – typically to the cabinet level, sometimes ending in assurance by the President of the United States that reports are greatly exaggerated.

Observers generally realize that it is the administrators and politicians who are exaggerating, not the journalists and whistleblowers, since few scandals emerge full-blown without any previous hint of their existence. Eventually, the fundamental truth of the allegations cannot be denied any longer, and the administrators and cabinet secretary in charge of the erring agency must fess up. This is the confessional stage of the scandal. It is characterized by admission of grievous fault, abject apology and plea for forgiveness, or at least understanding. The confession flagrantly contradicts previous insistence that the whole thing was an overblown attempt by political opponents to smear the present administration.

The last phase is the Presidential phase. The President is shocked, shocked to discover that error and scandal have invaded the administration of government on his watch. His attitude toward his administrative subordinates in the executive department is that of the admonishing schoolmaster: fair but firm, reluctant to punish but determined to root out all evil, to banish forever this unaccountable blot on the escutcheon of his tenure. The administrators must go, of course, even though they are able, noble, kind, determined, brave, clean and reverent. There will be an investigation, and when all the details are known, we will proceed to wipe this disgraceful episode from our memories and move on, to greater and more glorious triumphs…

The ellipsis reflects the fact that the entire purpose of the ritual is to pass through the period of scandal with the least possible political damage inflicted on the administration. The collective attitude of that of a child caught in a misdeed. The child is fully conscious of guilt; every word and action is oriented toward escaping punishment and returning to the status quo ante. Neither truth nor justice has any bearing on the child’s behavior. Likewise, they have no effect on the administration’s actions, either.

The recent V.A. scandal contains the classic elements. Not only is it predictable, it was predicted in this space in our previous discussions of the economics of medical care and Obamacare. Now the other shoe has dropped. The utter familiarity of the ritual means that the political aspects can be subordinated to our real object. It is the economic features that claim our interest.

The Details of the Scandal

The V.A. scandal concerns the provision of medical care for discharged members of the armed forces by the Veterans’ Health Administration in Department of Veterans Affairs. This is only one of the functions performed by the Veterans’ Administration, the others being administration of veterans’ benefits and supervision of burials and memorials for veterans. The cost of medical care to veterans depends on the ability to pay – it is either free or accompanied by a co-pay. When a vet is discharged from the service, he must enroll in the V.A. system in one of three ways: by calling a toll-free number, going online or visiting one of the hundreds of V.A. clinics across the country. In order to complete the enrollment process, the vet must possess his DD214 discharge form. At enrollment, the vet is given a means test to determine qualification for a co-pay.

Once enrollment is complete and the vet is accepted within the system, new patients must be seen by a physician within 14 days. Existing patients (who have already been treated and, thus, have already seen a physician for evaluation) must see a doctor within 14-30 days. The failure to meet the stipulated deadlines for these initial appointments is the gravamen of the current scandal.

The head of the V.A.’s health affairs office, Robert Petzer, testified that he knew as early as 2010 that V.A. health clinics were “using inappropriate scheduling procedures” to defer these initial appointments. The deferrals were done because of need; the clinics were simply unable to meet the demand for initial appointments. The excess demand for appointments grew over time and the situation worsened until it reached the epidemic proportions now forming the basis for periodic new revelations. Scandals within the armed forces (and the government at large) are investigated by inspectors general (known as “IGs”). An interim report on the V.A. scandal by the V.A.’s IG called the practice of inappropriate scheduling “systemic.” It involved the use of false or phony waiting lists that were tailored to give the impression that the V.A. was meeting its initial-appointment goals rather than falling further and further short of them.

The scandal erupted after a doctor at the Phoenix, AZ V.A. clinic complained to the IG about treatment delays. It should be noted that this doctor waited until after his retirement to lodge these complaints. The complaints were made in letters written in December, 2013 but did not rise to the level of a public scandal until May, 2014. It transpired that some 1,700 vets were kept on waiting lists and the average vet waited for 115 days for his initial appointment. Meanwhile, official records were falsified to hide these delays.

On June 9, 2014, the Department of Veterans’ Affairs released preliminary results of an audit of 731 V.A. clinics that showed about 57,000 vets who have currently waited for their initial appointment for an average time span exceeding 90 days. Some 13% of V.A. schedulers say they have been ordered to falsify appointment-request logs to make them compliant with the rules. The IG calls the current 14-day goal for initial appointment “unattainable” due to the logistical obstacles posed by insufficient money and personnel.

The news from Phoenix triggered a chain reaction of similar revelations from V.A. hospitals and clinics across America. In Fort Collins, CO, clerks were specifically taught how to falsify records to paint a misleadingly favorable picture of initial appointments kept. A police detective found that in Miami, cover-ups were “ingrained into the hospitals’ culture” and drugs were routinely dealt out of hospital premises. In Pittsburgh, PA, an outbreak of Legionnaire’s Disease in 2011-12 was revealed to be the product of “human error” rather than the “faulty equipment” that had been blamed in Congressional testimony last year.

The delays in initial appointments are important because they represent a delay in the potential diagnosis and/or treatment of one or more medical conditions. Much has been made of the statement by IG Richard Griffin that “we didn’t conclude…that the delay[s] caused… death. It’s one thing to be on a waiting list; it’s another for that to be the cause of death.” But in the case of 52 patients seen by the Columbia, SC gastroenterology unit of the V.A., it certainly was determined that those patients had “disease associated with” treatment delays. We are urged every day to visit our doctor, not to put off visits or hide conditions in hopes that symptoms will disappear, reminded that cancer and other diseases are curable with early detection. Now, suddenly, delays in seeing the doctor are downplayed as a factor in actual incidence or severity of disease.

The medical facilities were not the only loci of dereliction. The War on Terror launched by the Bush Administration has produced an avalanche of disability claims filed by veterans of the Iraq and Afghanistan campaigns. In order to claim a compensable disability, a veteran must show not only the existence of a disability but also a likelihood exceeding 50% that it is due to military service. He is not allowed to hire a lawyer (unless the lawyer works pro bono) before the disability determination is made, so as to preclude the lust for private profit from luring private-sector contingency lawyers into the Klondike of military disability determination. But this process of disability determination has been stalled by (you guessed it) a massive backlog of claims waiting to be heard. This backlog reached a high of 611,000 in 2013 before the resulting publicity triggered a mini-scandal that forced action by Eric Shinseki, Secretary of the Department of Veterans’ Affairs. It now stands at about 300,000 cases that so far have taken over 125 days to process.

One of the most highly publicized features of the scandal has been the bonuses received by upper-level V.A. administrators, tied to complying with V.A. rules for initial-appointment timeliness. These bonuses provided a clear-cut incentive for the falsification of records by lower-level employees operating under orders by their superiors.

The Economics of the V.A. System of Medical Care

Previous discussion of health care in this space touched on the V.A. system. Why should a separate system of medical care exist for military veterans?  Why should that separate system be administered by the federal government? If this separate system exists because it is superior to the one available to the rest of us, why not make it available to all? If it is not superior, why does it exist at all?

Some people have actually followed this logic to its ultimate conclusion. In 2011, the left-wing economist and political columnist Paul Krugman made the case that the V.A. does indeed constitute a superior system of medical care which should be broadened to the entire country. Part of his case rested on the V.A.’s success in meeting its initial-appointment guidelines. By doing so, he contended, it avoided the need for any rationing of care.

“Rationing” is the operative word applying to government provision of medical services. The whole purpose of designating government as the “single payer” for medical care is to sell the concept as “free medical care for all regardless of ability to pay.” Private producers cannot distribute goods for free but this is a specialty of government. As always, the big problem government faces is bridging the gap between its expansive claims and its inability to deliver what it claims. A free good is one for which there is no opportunity cost of provision, hence no scarcity. Saying that a good is free doesn’t make it free; it merely causes people to try to maximize their efforts to acquire it. Maximizing the demand for something is the worst possible way to deliver it free to everybody because it places the biggest possible burden on the supply apparatus.

The V.A. headlines its medical services to veterans as free, but upon reading the fine print veterans discover that they will be subjected to a means test and requested to pony up a co-pay. Of course, this is not the same thing as a unit price to an economist, but it does involve a sacrifice of alternative consumption. But this is small potatoes compared to the real shock in store for any veteran who thinks that his military status entitles him to health care in perpetuity.

Reading current newspaper accounts of the scandal would leave the impression that discharged vets enroll for medical benefits on a first-come, first-served basis. This is not so. Upon applying for benefits, vets are assigned to one (or more) of 8 “eligible priority groups.” The word “priority” hints at the purpose of these groups; they decide whose applications get processed first and in what order. In other words, medical care for veterans is rationed by the Veterans Health Administration from the instant of application for enrollment.

To erase any doubts about the veracity of this statement, we have the word of the V.A. itself. “Unfortunately, the Veterans Health Administration does not have enough resources to provide care to all veterans who need it. To address this issue, the VA has created eight priority groups for enrollment.” There we have it – the dirty little secret of VA medical benefits. Veterans are lured into the system with the promise of free benefits. Before they are even accepted, they find out that the benefits aren’t free and they may not even get them – or, if they do, the effective price may include a hefty upcharge for waiting time. At worst, that upcharge may be the loss of their life.

Each of the 8 eligible priority groups contains multiple subcategories of prioritization. Any connection to medical need or severity is tenuous at best. Group 1, the highest priority for enrollment, includes vets who are 50% or more disabled due to service-connected disability, then picks up those who are unemployed due to service-connected disability. Of course, it could be true that a 50% disability carries with it an immediate need to see a physician. It could also be utterly untrue; it depends on the specific medical circumstances.

Right away, we see that the criteria governing rationing are political and bureaucratic. Political because a disabled vet is a highly visible and ongoing political liability, much more so than a vet who dies awaiting treatment. In a free-market system, decisions about medical treatment are made by you and your doctor in consultation. You know your economic capabilities and your doctor knows you and your medical needs; together you can compare the value you would receive from each incremental bit of medical treatment with its cost. But in the VA, your medical decisions will ultimately be made by bureaucrats who know little or nothing about medicine. That is why criteria like “50% disabled” are necessary; they provide a pseudo-objective basis upon which medically untutored bureaucrats can affirm or deny treatment.

Group 2 includes 30-40% disabled vets. Group 3 is headlined by former prisoners of war, Purple-Heart holders, holders of the Medal of Honor, vets with lower disability status and those who disability was actually caused by treatment or rehabilitation. Again, politics is evident in this ranking with the inclusion of POWs and medal-winners. Why should medical care be turned into a popularity contest? Then again, once we have excluded the free market from consideration, any other system of allocating benefits would be arbitrary.

The lower-ranking Groups introduce other arbitrary criteria like service in Vietnam and exposure to atomic radiation at Hiroshima, Nagasaki or test sites. Low-income vets receive precedence over high-income vets; willingness to fork over a co-pay buys the vet a higher place in line.

When we combine the economics of the V.A. system with the known facts of the current V.A. scandal, the latter becomes easier to understand but harder to stomach.

The Economics of the Scandal

Note the fundamental difference between scarcity as it exists in a free-market context and in the command-and-control context of a politically motivated bureaucracy. Economists define scarcity as the condition in which we cannot have all that we wish to consume and must choose the things we value most. Nobody is automatically or inherently excluded from consumption; price tells us the value that people place on a good and its cost in alternative (or foregone) output. People choose how much to buy based on their incomes and tastes; they can buy small, medium or large quantities and vary their consumption as their incomes change and prices vary. At the V.A., the government chooses what to give you and how much to give you based on (mostly) arbitrary criteria that ignore price and cost. It frankly admits that some people will be excluded – once more based on arbitrary criteria.

Economic logic tells us that the government system is wildly inefficient. Moreover, its inefficiencies will get worse and worse over time because it encourages customers to demand more medical care than can be supplied.

There is nothing remotely surprising or shocking about the current scandal. And as the Washington Post points out, “President Obama has been talking for years about fixing the system.” According to Press Secretary Jay Carney, “This is not a new issue to the President.” Here is one sure sign that Krugman, et al, have missed the boat analytically; you don’t fix a system that is working brilliantly.

Everybody is acting as if the scandal is the result of something going terribly wrong with the system. But this is merely the system working as we expect a system of rationing to work – by excluding some people from service altogether. The V.A. itself says it is designed to do this and explains how it does it – just how surprised should we be when that is exactly what happens? The scandal is not that something has gone wrong with the system; the scandal is the system.

Economic logic tells us that the system is designed to ration care by excluding vets from medical benefits, thereby reducing the amount of medical care provided. This exclusion by rationing takes several forms. First, the vet may be excluded by not qualifying at all. Second, he may fall in the last (8th) eligible priority group, get tired of waiting to be processed and accepted and simply seek out paid care in the private sector. This relieves the V.A. of the burden of serving him. Third, he may die while waiting to be seen, as vets have done and continue to do. The larger the number of vets who face delays in acceptance and processing, the greater the likelihood that this will happen. And the longer the delays, the greater the likelihood that this will happen. Once more, this relieves the V.A. of the necessity of serving him. Fourth, the longer the delay faced by the vet, the worse (on net balance) will be his condition when he is finally accepted, seen and treated. This will shorten his life span and reduce the total amount of medical care the V.A. will be required to give him. (In this shorter time span, however, it will increase the need for greater spending on him, which will give the V.A. leverage to demand larger budget allocations in Congress. This is politically valuable to bureaucrats and their political sponsors.)

Of course, the V.A. can haul out testimonials from some vets who crow about the outstanding medical treatment they have received. In any bureaucracy – police, fire, public education, even the federal government itself – some individuals will stand out by ignoring the lack of incentives for performance and adhering to their own personal standards. And the fact that the V.A. picks and chooses who it treats, when it treats them – “we will treat no veteran before his time” – and how it treats them will allow the agency to provide good service to some vets. But claims of competitive superiority for the V.A. are a mockery considering that it is able to rig the game through rationing and, we now belatedly realize, rig its own statistics internally.

Claims by Krugman and others that the V.A. is a model for health care in general are false on their face. What little success the V.A. has enjoyed depends on the failures highlighted here. The V.A. cannot exist in its present form without the concurrent existence of a private-sector (or public-sector) alternative where its rejects can be dumped and where consumers can seek out consistently higher-quality treatment at a price. An attempt to impose the V.A. model on the country at large simply produces the kind of socialist, “national health service” health care found in countries such as Great Britain and Canada. These are characterized by long waits for care, lower-quality care, poorer medical technology and almost no new drug development. According to Krugman, we should be clamoring for access to the superior medical care provided by the V.A. Americans should be “health tourists,” traveling to Great Britain, France and Canada for their health care. Instead, though, the flow of health tourists runs the other way – into the U.S.

Democrats insist that the Bush Administration caused the V.A. scandal by overloading the system with applicants through its foreign wars. They cannot have it both ways. How can their system be superior if it falls apart when the demand for its product increases, which is the average business’s idea of paradise? Free-markets use flexibility of prices and quantities to handle variations in demand; they use higher prices to attract more resources into the system to handle the larger demand. It is command-and-control rationing systems, deprived of vital pricing tools, which crumble under the pressure of demand increases.

Public shock over the incentive bonuses paid to V.A. administrators for initial-appointment compliance not actually attained is likewise naïve. After all, critics of free markets and corporations scream bloody murder when CEOs are not paid for performance. The V.A. was simply trying to curry favor with the public by mimicking the private sector’s performance incentives. The problem is, of course, that the V.A. is not the private sector. In a free market, a firm couldn’t get away with faking its performance because you can’t fake the bottom line; failure to perform will reduce profits. But there is no bottom line at the V.A. and no way (short of audit) to detect the kind of fakery that went on at the V.A. for years and years. Sure, veterans complained, but nothing happened because vets did not control the bureaucracy and had no political clout. The only reason the scandal was uncovered was that the doctor who blew the whistle had recently retired and no longer had to fear bureaucratic retaliation for his actions.

Speaking of political clout…

Cui Bono?

Why has a federal agency so inimical to the interests of a beloved constituency persisted – nay, thrived – since its inception in 1930? The great myth of big government is that it serves the interests of its constituents. But as we have seen, this is hardly true.

The real beneficiaries of big government are government employees, bureaucrats and politicians. The V.A. has metastasized into a cabinet-level bureaucracy with over 330,000 employees, including thousands of mid-level bureaucrats. Most of its employees belong to a powerful public-sector union. Employees and bureaucrats vote for the politicians who vote the appropriations that pay their salaries and lucrative benefits.

These people are invisible in the current scandal, except for the passive role they play as order-takers and functionaries. But they are the reason why the system is not “reformed.” There is no reforming this kind of system, only tinkering around the margins. Genuine reform would disband the V.A. altogether since its rationale is utterly misguided.

That will not happen. The falsity of the V.A.’s guiding premise is irrelevant. It is not really intended to serve veterans, so its failure to do so does not really matter to politicians. Its real purpose is to win votes by conferring benefits on employees and bureaucrats and it is fulfilling that purpose just as well, if not better, by failing veterans as it would by serving them.

That is why the stern promises to “fix the problem” are so much hypocritical cant. There will be no fix and no reform – only the next scandal.

Cant Rules in Public Discussions of the V.A.

Why do we watch numbly as the V.A. scandal unfolds – the latest in a never-ending series? By now, we know the ritual by heart. What is that has us hypnotized?

Human beings mix reason with emotion, and we apparently remain enthralled by the cant that surrounds the V.A. “We love and revere our veterans – so much that we cannot entrust their physical well-being to the mundane ministrations of marketplace medicine. Veterans deserve only the very best. So, naturally, we put their welfare in the hands of the federal government, because it handles all our most important jobs and never fails to satisfy us. We will never rest until veterans are well-cared for, because their happiness and security is our first priority.”

In one part of our mind, this rationale reigns supreme. In the other part, we store all that we know about how the V.A. – and the federal government – actually operates. If those two parts ever commingled, they would probably short-circuit our mental processes indefinitely. We have not yet outgrown our fantasy of government as benevolent, omniscient, omnipotent parent.

In reality, the failures of government are all too painfully obvious. It is not that government has anything special against veterans, other than the fact that they keep showing up at the door expecting to be medically treated. No, government double-crosses and fails veterans just as it does the rest of us. When its failures become manifest, it lies about them. And the people who have placed their ideological and occupational bets on government lie, too.

DRI-267 for week of 10-27-13: ObamaCare and the Point of No Return

An Access Advertising EconBrief:

ObamaCare and the Point of No Return

The rollout of ObamaCare – long-awaited by its friends, long-dreaded by its foes – took place last week. In this case, the term “rollout” is apropos, since the program is not exactly up on its feet. Tuesday, Oct. 22, 2013 marked the debut of HealthCare.gov, the ObamaCare website, where prospective customers of the program’s health-insurance exchanges go to apply for coverage. By comparison, Facebook’s IPO was a rip-roaring success.

A diary of highlights seems like the best way to do justice to this fiasco. We are indebted to the Heritage Foundation for the chronology and many of the specific details that follow.

Tuesday, Oct. 22, 2013: This is ribbon-cutting day for the website, through which ObamaCare’s state health-insurance exchangesexpect to do most of their business. One of the most fundamental reforms sought by free-market economists is the geographic market integration of health care in the U.S. Historically, each state has its own state laws and regulatory apparatus governing insurance. This hamstrings competition. It requires companies to deal with 50 different bureaucracies in order to compete nationally and limits consumers solely to companies offering policies in their state. But ObamaCare is dedicated to the proposition that health care of, by and for government shall not perish from the earth, so it not only perpetuates but complicates this setup by interposing the artificial creation of a health-care exchange for each state, operating under a federal aegis.

Only 36 of those state exchanges open for business on time today, however. Last-minute rehearsals have warned of impending chaos, and frantic responses have produced lateness. Sure enough, as the day wears on 47 states eventually report applicant complaints of “frequent error messages.” Despite massive volume on the ObamaCare site, there is almost no evidence of actual completed applications.

Wednesday, Oct. 23, 2013: The Los Angeles Times revises yesterday’s report of 5 million “hits” on HealthCare.gov from applicants in California downward just a wee bit, to 645,000. But there is still no definitive word on actual completed applications, leading some observers to wonder whether there are any.

Thursday, Oct. 24, 2013: The scarcity of actual purchasers of health insurance on the ObamaCare exchanges leads a Washington Post reporter to compare them in print to unicorns.  More serious, though, are the growing reports of thousands of policy cancellations suffered by Americans across the nation. The culprit is ObamaCare itself; victims’ current coverage doesn’t meet new ObamaCare guidelines on matters such as openness to pre-existing conditions. Ordinarily, a significant pre-existing health condition would preclude coverage or rate a high premium. In other words, writing policies that ignore pre-existing conditions is not insurance in the true, classical sense; insurance substitutes cost for risk and the former must be an increasing function of the latter in order for the process to make any sense. ObamaCare is not really about insurance, despite its protestations to the contrary.

Friday, Oct. 25, 2013: CNBC estimates that only 1% of website applicants can proceed fully to completion and obtain a policy online because the system cannot generate sufficient valid information to process the others. A few states – notably Kentucky – have reported thousands of successful policies issued, but the vast bulk of these now appear to be Medicaid enrollees rather than health-insurance policyholders. Meanwhile, the Department of Health and Human Services (HHS) announces that its website will be offline for repairs and upgrading.

Saturday, Oct. 26, 2013: In an interview with Fox News, Treasury Secretary Jack Lew refuses to cite a figure for completed applications on the HealthCare.gov website. Among those few that have successfully braved the process, premiums seem dramatically higher than those previously paid. One example was a current policyholder whose monthly premium of $228 ballooned to $1,208 on the new ObamaCare health-care exchange policy.

Monday, Oct.28, 2013: Dissatisfaction with the process of website enrollment is now so general that application via filling out paper forms has become the method of choice. It is highly ironic that well into the 21st century, a political administration touting its technological progressivity has fallen back on the tools of the 19th century to advance its signature legislative achievement.

Official Reaction

This diary of the reception to ObamaCare conveys the impression of a public that is more than sullen in its initial reaction to the program – it is downright mutinous. It was hardly surprising, then, that President Obama chose to respond to public complaints by holding a press conference in the White House Rose Garden a few days after rollout.

Mr. Obama’s attitude can best be described as “What’s the problem?” His tone combined the unique Obama blend of hauteur and familiarity. The Affordable Care Act, he insisted, was “not just a website.” If people were having trouble accessing the website or completing the application process or making contact with an insurance company to discuss an actual plan – why, then, they could just call the government on the phone and “talk to somebody directly and they can walk you through the application process.” (How many of the President’s listeners hearkened back at this point to their previous soul-satisfying experiences on the phone with, let’s say, the IRS?) This would take about 25 minutes for an individual, Mr. Obama assured his viewers, and about 45 minutes for a family. He gave out a 1-800 number for his viewers to call. Reviews of the President’s performance noted his striking resemblance to infomercial pitchmen.

Sean Hannity was so inspired by the President’s call to action that he resolved to heed it. He called the toll-free number on-air during his AM-radio show. He spoke with a call-center employee who admitted that “we’re having a lot of glitches in the system.” She read the script that she had been given to use in dealing with disgruntled callers. Hannity thanked her and complimented her on her courtesy and honesty. She was fired the next day. Hannity declared he would compensate her for one year’s lost salary and vowed to set up a fund for callers who wanted to contribute in her behalf.

Health and Human Services Secretary Kathleen Sebelius was next up on the firing line. Cabinet officials were touring eight cities and selected regional sites to promote the program and at Sebelius’s first stop at a community center in Austin, TX, she held a press conference to respond to public outrage with the glitches in the program.

On October 26, 2013, the Fox News website sported the headline: “Sebelius Suggests Republicans to Blame for ObamaCare Website Woes.” Had the Republican Party chosen the IT contractor responsible for setting up HealthCare.gov‘s website?

No. “Sebelius suggest[ed] that Republican efforts to delay and defund the law contributed to HealthCare.gov‘s glitch-ridden debut.” Really. How? Sebelius “conceded that there wasn’t enough testing done on the website, but added that her department had little flexibility to postpone the launch against the backdrop of Washington’s unforgiving politics. ‘In an ideal world, there would have been a lot more testing, but we did not have the luxury of that. And the law said the go-time was Oct. 1. And frankly, a political atmosphere where the majority party, at least in the House, was determined to stop this any way they possibly could…was not an ideal atmosphere.”

It takes the listener a minute or so to catch breath in the face of such effrontery. The Obama Administration had three years in which to prepare for launch of the program. True, there were numerous changes to the law and to administrative procedures, but these were all made by the administration itself for policy reasons. The Democrat Party, not the Republican Party, is the majority party. The Republican Party – no, make that the Tea Party wing of the Republican Party – proposed a debt-limit settlement in which the individual mandate for insurance-policy ownership would be delayed. It was rejected by the Obama Administration. Ms. Sebelius is blaming the Republican Party for the fact that Democrats were rushed when the Republicans in fact offered the Democrats a delay that the Democrats refused.

Were Ms. Sebelius a high-level executive in charge of rolling out a new product, her performance to date would result in her dismissal. But when queried about the possibility of stepping down, she responded “The majority of people calling for me to resign, I would say, are people I don’t work for and who did not want this program to work in the first place.” Parsing this statement yields some very uncomfortable conclusions. Ms. Sebelius’s employer is not President Obama or his administration; it is the American people. Anybody calling for her resignation is also an American. But clearly she does not see it that way. Obviously, the people calling for her resignation are Republicans. And she does not see herself as working for Republicans. The question is: Who is she working for?

Two possibilities stand out. Possibility number one is that she is working for the Democrat Party. In other words, she sees the executive branch as a spoils system belonging to the political party in power. Her allegiance is owed to the source of her employment; namely, her party. Possibility number two is that she sees her allegiance as owed to President Obama, her nominal boss. This might be referred to as the corporatist (as opposed to corporate) view of government, in which government plays the role of corporation and there are no shareholders.

Neither one of these possible conceptions is compatible with republican democracy, in which ultimate authority resides with the voters. In this case, the voters are expressing vocal dissatisfaction and Ms. Sebelius is telling them to take a hike. In a free-market corporation, Ms. Sebelius would be the one unfolding her walking papers and map.

Whose Back is Against the Wall?

It is tempting to conclude that ObamaCare is the Waterloo that the right wing has been predicting and planning for President Obama ever since Election Day, 2008. And this does have a certain superficial plausibility. ObamaCare is this Administration’s signature policy achievement – indeed, practically its only one. There is no doubt that the Administration looks bad, even by the relaxed standards of performance it set during the last five years.

Unfortunately, this view of President Obama with his back against the wall, despairing and fearful, contemplating resignation or impeachment, simply won’t survive close scrutiny. It is shattered by a sober review of Barack Obama’s past utterances on the subject of health care.

As a dedicated man of the Left, Barack Obama’s progressive vision of health care in America follows one guiding star: the single-payer system. That single payer is the federal government. Barack Obama and the progressive Left are irrevocably wedded to the concept of government ownership and control of health care, a la Great Britain’s National Health Care system. In speeches and interviews going back to the beginning of his career, Obama has pledged allegiance to this flag and to the collective for which it stands, one organic unity under government, indivisible, with totalitarianism and social justice for all.

The fact that ObamaCare is now collapsing around our ears may be temporarily uncomfortable for the Obama Administration, but it is in no way incompatible with this overarching goal. Just the opposite, in fact. In order to get from where we are now to a health-care system completely owned and operated by the federal government, our private system of doctors, hospitals and insurance companies must be either subjugated, occupied or destroyed, respectively. That process has now started in earnest.

Oh, the Administration would rather that private medicine went gentle into that good night. It would have preferred killing private health insurance via euthanasia rather than brutal murder, for example. But the end is what matters, not the means.

Certainly the Administration would have preferred to maintain its hypnotic grip on the loyalty of the mainstream news media. Instead, the members of the broadcast corps are reacting to ObamaCare’s meltdown as they did upon first learning that they were not the product of immaculate conception. But this is merely a temporary dislocation, not a permanent loss. What will the news media do when the uproar dies down – change party affiliation?

For anybody still unconvinced about the long-run direction events will take, the Wednesday, October 30, 2013 lead editorial in The Wall Street Journal is the clincher.

“Americans are Losing Their Coverage by Political Design”

“For all of the Affordable Care Act’s technical problems,” the editors observe, “at least one part is working on schedule. The law is systematically dismantling the private insurance market, as its architects intended from the start.”

It took a little foresight to see this back when the law was up for passage. The original legislation included a passage insisting that it should not “be construed to require than an individual terminate coverage that existed as of March 23, 2010.” This “Preservation of Right to Maintain Existing Coverage” was the fig leaf shielding President Obama’s now-infamous declaration that “if you like your existing policy, you can keep it.” Yeah, right.

Beginning in June, 2010, HHS started generating new regulations that chipped away at this “promise.” Every change in policy, no matter how minor, became an excuse for terminating existing coverage at renewal time. This explains the fact that some 2 million Americans have received cancellation notices from their current insurers. Of course, the Obama Administration has adopted the unified stance that these cancellations are the “fault” of the insurance companies – which is a little like blaming your broken back on your neighbor because he jumped out of the way when you fell off your roof instead of standing under you to cushion your fall. Stray callers to AM radio can be heard maintaining that at least half of these cancellations will be reinstated with new policies at lower cost in the ObamaCare exchanges. If only those hot-headed Tea Partiers would stop dumping boxes of tea and behaving like pirates! Alas, a Rube Goldberg imitation of a market cannot replace the genuine article – with apologies to Mr. Goldberg, whose roundabout contraptions actually worked.

ObamaCare creates 10 types of legally defined medical benefits. They include general categories like hospitalization and prescription drugs. No policy that fails to meet the exact standards defined within the law can survive the ObamaCare review. It is widely estimated that about 80% of all individual plans, which cover 7% of the U.S. population under age 65, will fall victim to the ObamaCare scythe.

The law is replete with Orwellian rhetoric of progressive liberalism. HHS defines its purpose as the “offer [of] a small number of meaningful choices.” Uh…what about allowing individuals to gauge the tradeoff between price and quality of care that best suits their own preferences, incomes and particular medical circumstances? No, that would have “allowed extremely wide variation across plans in the benefits offered “and thus “would not have assured consumers that they would have coverage for basic benefits.” This is doublespeak for “we are restricting your range of choice for your own good, dummy.”

Liberals typically respond with a mixture of outrage and indignation when exposed as totalitarians. It is certainly true that they are not eradicating freedom of choice merely for the pure fun of it. They must create a fictitious product called “insurance” to serve a comparatively small population of people who cannot be served by true insurance – people with pre-existing conditions that make them uninsurable or ratable at very high premiums or coverage exclusions. The exorbitant costs of serving this market through government require that the tail wag the dog – that the large number of young, healthy people pay ridiculously high premiums for a product they don’t want or need in order to balance the books on this absurd enterprise. (Formerly, governments simply borrowed the money to pay for such pay-as-you-go boondoggles, but the financial price tag on this modus operandi is now threatening to bring down European welfare states around the ears of their citizens – so this expedient is no longer viable.) In order to justify enrolling everybody and his brother-in-law in coverage, government has to standardize coverage by including just about every conceivable benefit and excluding practically nothing. After all, we’re forcing people to sign up so we can’t very well turn around and deny them coverage for something the way a real, live insurance company would, can we?

It is well known that the bulk of all medical costs arise from treating the elderly. In a rational system, this would be no problem because people would save for their own old age and generate the real resources necessary to fund it. But the wrong turn in our system began in World War II, when the tax-free status of employer-provided health benefits encouraged the substitution of job-related health insurance for the wage increases that were proscribed by wartime government wage and price controls. The gradual dominance of third-party payment for health care meant that demand went through the roof, dragging health-care prices upward with it.

Now Generation X finds itself stuck with the mother of all tabs by the President whom it elected. The Gen X’ers are paying Social Security taxes to support their feckless parents and grandparents, who sat still for a Ponzi scheme and now want their children to make good. To add injury to injury, the kids are also stuck with gigantic prices for involuntary “insurance” they don’t want and can’t afford to support their elders, the uninsurables – and the incredibly costly government machinery to administer it all.

It’s just as the old-time leftist revolutionaries used to say: you can’t make an omelette without breaking eggs. Across the nation, we have heard the sound of eggs cracking for the last week.

The Point of No Return

The “point of no return” is a familiar principle in international aviation. It is the point beyond which is it closer to the final destination than to the point of origination, or the point beyond which it makes no sense to turn back. This is particularly applicable to trans-oceanic travel, where engine trouble or some other unexpected problem might make the fastest possible landing necessary.

In our case, the Obama Administration has kept this concept firmly in mind. By embroiling as many Americans as deeply as possible in the tentacles of government, President Obama intends to create a state of affairs in which – no matter how bad the current operation of ObamaCare may be – it will seem preferable to most Americans to go forward to a completely government-run system rather than “turn back the clock” to a free-market system.

A free-market system works because competition works. On the supply side of the market, eliminating state regulation of insurance would enable companies to expand across state borders and compete with each other. But this involves relying upon companies to serve consumers. And companies are the entities that just got through issuing all those cancellation notices. For millions of Americans today, the only disciplinary mechanism affecting companies is something called “government regulation” that forces them to do “the right thing” by bludgeoning them into submission. That is what regulatory agencies are doing right now – beating up on Wall Street firms and banks for causing the financial crisis of 2008 and ensuing Great Recession. The fact that this never seems to prevent the next crisis doesn’t seem to penetrate the public consciousness, for the only antidote for the failure of government regulation is more and stronger government regulation.

On the demand side of a free market, consumers scrutinize the products and services available at alternative prices and choose the ones they prefer the most. But consumers are not used to buying their own health care and vaguely feel that the idea is both dishonest and unfair. “Health care should be a right, not a privilege,” is the rallying cry of the left wing – as if proclaiming this state of affairs is tantamount to executing it. No such thing as a guaranteed right to goods and services can exist, since giving one person a political right to goods is the same thing as denying the right to others. In the financial sense, somebody must pay for the goods provided. In the real sense, virtually all goods are produced using resources that have alternative uses, so producing more of some goods always means producing fewer other goods.

This is not what the “health-care-should-be-a-right-not-a-privilege” proclaimers are talking about. Their idea is that we will give everybody more of this one thing – health care – and have everything else remain the same as it is now. That is a fantasy. But this fantasy is the prevailing mental state throughout much of the nation. One widely quoted comment by a bitterly disappointed victim of policy cancellation is revealing: “I was all for ObamaCare until I found out I was going to have to pay for it.” On right-wing talk radio, this remark is considered proof of public disillusion with President Obama. But note: The victim did not say: “I was all for ObamaCare until I found out what I was going to have to pay for it.” The distinction is vital. Today, a free lunch is considered only fitting and proper in health care. And the only free lunch to be had is the pseudo-free lunch offered by a government-run, single-payer system.

As it stands now, few if any Americans can recall what it was like to pay for their own health care. Few have experienced a true free market in medicine and health care. Thus, they will be taking the word of economists on faith that it would be preferable to a government-run system like the one in Great Britain. It is a tribute to the power of ideas that a commentator like Rush Limbaugh can make repeated references to individuals paying for their own care without generating a commercially fatal outpouring of outrage from his audience.

Grim as this depiction may seem, it accurately describes the dilemma we face.