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May 15, 2003

Government Help for the Arts

Friedrich --

How to keep up an interest -- let alone some active participation -- in the arts once you're a grown-up? It's a puzzle, isn't it? The time constraints, the energy limitations ... It amazes me that the arts (especially the non-commercial arts) flourish at all. So far as I'm concerned, "how to find time for the arts" is one of the most important of all arts questions. I find it bizarre that it's so little discussed.

Say you're a grownup arts nut. You've got a bit of a private life. You've got to make a living. (Trust-fund babies not welcome here.) The bills have to be paid, the laundry has to be done, home repairs have to be attended to, doctors have to be seen. There goes 90%, maybe 95%, of your time and energy. And who knows what you'll really feel like doing with that remaining 5%?

Maybe you try to tackle the problem by getting a job in the arts: Combine the job with the passion! But you wake up to discover that you're support staff, getting paid to help people with family money or better connections look good. Perhaps you polish up your skills and go into commercial art -- design, copywriting, restaurants, clothing. Combine your moneymaking with your interest in the arts, this time as the creative one! But you wind up bitter from doing the bidding of sleazeballs, and the job pressures kill your pleasure in your abilities. (Why don't more graphics people spend free time doing their own fine-arts painting? Because they're burned-out at the end of the week, and need a break.)

So you plug away at whatever half-assed job you've settled into, you attend to the friends and family and house and repairs and emergencies, and you dream fondly of those days in college when your hours were your own, when you could finish a book or two, and when you could see a foreign film and talk it over with friends afterwards ...

You're a person with a fulltime job and an arts hobby, that's what you are. You read a bit, and you feel lucky to have one friend who you can swap a little email with about books. You take a writing or painting class every year or two. If you're musical and you have some discipline, you play with a local band or quartet. But weren't you once really serious about the arts? Jesus, how do other people manage? And, worse, you can't keep away an occasional nagging thought along the lines of: Sheesh, if I'd known my energies would be so totally consumed by making a living, I'd have ditched the arts long ago and gotten a sensible degree and entered a sensible profession and made some real money and then maybe I'd be able to take up watercolors once I retired. But you can't turn it all around now because it's too late, and because, well, you aren't really an arts hobbyist, you're an arts junkie.

OK, we're careworn, responsibility-totin' adults now, and a lot of these demands, frustrations and burdens come with age and the passing of time, and it's a privilege to have them, really, because what's the alternative? Even so, does keeping up an involvement in the arts have to be this difficult?

But what else can you do? Only one person in a zillion is able to make a living from doing arts stuff that's satisfying instead of depleting -- and it's such an irrational field that you might as well play Lotto instead. Why not quit your job and go freelance? But freelancers have to spend half their time drumming up work, and then they make less money doing it than you do at your dull but trustworthy corporate desk. So why not go part-time? Nah: I'd be willing to bring home somewhat less money, but then I wouldn't have --

And that's it. That's the sticking point: health insurance.

Such are some of the thoughts and reflections I've had over my couple of (ahem) decades noodling around the arts. I'd circle and muse and think and reflect and wonder some more, and I'd always come back to the same conclusion: that a lot of what's hardest about a life in the arts for the no-trust-funds crowd comes down to the question of health insurance. For the sake of your love of the arts, you're willing to make sacrifices, to live a somewhat oddball life, and to let go of a lot of conventional dreams and pleasures. But who in his/her right mind would give up health insurance? So you're stuck in a fulltime job, and you're tired, and ...

I know plenty of people -- me included, of course -- who'd gladly move to parttime employment if only they could do so and still find decent health insurance. And I'm sure there are plenty of businesses that would be thrilled to let some of their employees move to parttime.

So I got interested in the question: How did this situation come about? And I did a little research. The story begins during World War II, when the U.S. government froze prices and wages. Because American businesses, to attract and hold workers, could no longer offer higher salaries, they had to come up with something else. And what they came up with was health insurance -- you were stuck with the frozen level of pay, but now you were getting health insurance too. The employee didn't have to pay taxes on the benefit, and business were allowed to treat the costs of employee health insurance as a business expense.

The war ends, people start getting used to the system ... And soon everyone starts taking it for granted that people should get their health insurance through a third party. And that's why, even today, if we want to go parttime but still need health insurance, we're stuck working fulltime jobs.

So here's my simple proposal: stop making health-insurance expenses deductible for businesses and start making them deductible for individuals (up to a certain level). It'd lead to big improvements. As people take over responsibility for their own health-insurance needs, the market will flourish. A variety of plans will be created to meet demand. Some people will order a la carte coverage from ultra-deluxe outfits. Others will join groups that'll negotiate terms. Others will pay the minimum for catastrophic insurance only. Competition and self-rationing will drive medical costs overall down, so that at least some of the people who today can't afford health insurance will be able to do so. And a ton (or so I imagine) of people who'd rather not be working fulltime will be able to go parttime instead, and recover a little bit of their lives.

I don't propose this as a solution to everything on the face of the planet. But from a wanting-to-lead-an-arts-life point of view? From a helping-the-country's-cultural-life-flourish point of view? I can't think of anything the government could do -- or un-do, which is the case here -- that'd help the arts more.

Thomas Sowell tells a bit of the crazy-American-health-insurance story here.



posted by Michael at May 15, 2003


Excellent idea. Tying health insurance to a job causes all sorts of growth erroding distortions, similar to rent control. (Both are chains cleverly disguised as freedom). How many people have not taken a chance on a new business venture because health insurance chains them to their current job (which they hate and are not productive in!)

Posted by: Paul Mansour on May 15, 2003 4:47 PM

Having a personal deduction for health insurance seems like a good idea to me, too, but the mess may be too complicated for that to be a solution.

The hot new insurance product is relatively cheap insurance (say, $7/week with $1000 annual cap, $2000 for injuries) for people with low-paying jobs and employers who can't/won't cover insurance. (Source, Wall Street Journal, this past Wednesday) From what I hear, it's more like can't than won't--insurance costs to employers are going up a lot faster than inflation. For those who don't reflexively do mental arithmetic, we're talking about paying $365/year, and possibly getting $1000 back in coverage.

Also, (from radio coverage in Philadelphia where medical malpractice insurance is a hot topic--I think the doctors are still on strike for non-emergency care), it may not be a matter of high jury awards. Insurance companies make their money in the stock market (they have all that premium money to play with), so when the stock market drops, they're rather suddenly broke and raise their rates.

I'm not sure where this is going--I find it rather amazing that insurance companies charge a fortune for non-job health insurance, but don't use medical examinations as a screen for prospective clients. Instead, they use "well enough to hold a job" as their only screen.

A lot of companies just don't insure fat people instead of offering a higher rate or checking blood for cholesterol and testing for diabetes.

I get the impression of an industry that pretty much doesn't bother. Maybe the added competition from a personal deduction would help, but I wonder.

Posted by: Nancy Lebovitz on May 16, 2003 4:46 AM

Michael -- Just a quick question on two matters of fact: (1) are you sure that part-timers can't get health insurance? The lovely TurboKitty would seem to be a counterexample; and (2) are you sure that individual health insurance payments aren't deductible? I'm pretty sure I deducted mine.

I'm astonished you basically came up with a fantastic argument for universal healthcare and then wimped out at the last minute. If you believe for a nanosecond that "medical costs overall" will ever, ever get "driven down" by market forces as opposed to legislation, you're obviously living in la-la land.

Posted by: Felix on May 16, 2003 9:02 AM


I'm not sure any forces, including those of legislation, will ever drive down medical costs overall. In America we have reached a kind of Pareto optimum for gold-plated health care: the service providers (doctors, pharmaceutical companies, etc.) are vigorously for-profit, while the costs of medical consumption have been effectively socialized. In short, nobody has any incentive to manage costs aggressively, or to forego treatment when the cost/benefit ratio gets too high. Managed care was essentially a successful, but one-time attempt to squeeze inefficiencies out by negotiating volume discounts with the service providers.) Universal, government-controlled health care will more broadly spread the costs, and no longer force people with insurance to pay for those who lack it, but I'm skeptical that it can really crack the whip on the medical and pharmaceutical supply industry or on medical consumers. After all, in industrial countries everyone has gotten it firmly in their heads that the marginal (i.e., next-dollar) cost of health care consumption is (and should be) zero--at least out of their pocket. And who can come up with a sensible economic arrangement with that as an assumption?

Actually, the only legislative solution that might actually work--not that it will ever be proposed or adopted--would be to outlaw health insurance altogether, or alternatively convert it to a system where insurers don't pay for medical costs, but rather loan consumers the money to pay for medical emergencies. Cost discipline would be rather abruptly re-introduced, and I guarantee you that the cost of all forms of medical care would plummet--and stay down. Of course, a lot of doctors would leave the field, but America has about double the number it needs now anyway.

Posted by: Friedrich von Blowhard on May 16, 2003 10:42 AM

Michael, for someone who can bandy around jargon like "Pareto optimum", you don't seem to get economics at all. Let's just adopt your lunatic hypo for a millisecond and see where it takes us. People who could afford healthcare would pay for it; people who couldn't afford healthcare would be forced to take out loans from erstwhile insurance companies. Anybody who could get a cheaper loan elsewhere certainly would, so the insurance companies would only insure those people who couldn't get a loan anywhere else -- precisely the people who are least likely to be able to pay them back. So they'd all go bust immediately.

As for all the industrialised countries where the marginal cost of healthcare is zero, what makes you say that none of them is sensible? Certainly the US, with its tens of millions of uninsured, has a crazy system. But everywhere else in the OECD seems to get along more or less OK. People always moan about the quality of hospitals, but in general the system in Australia or Germany or Canada or Japan or Norway or any number of other countries is basically good, no?

Posted by: Felix on May 16, 2003 11:25 AM

Let me dodge this one fast and point out that only Friedrich von, and not Michael, would dare use a term like "Pareto Optimum."

I'll evaporate from this conversation after saying a couple of mild things. First is that, despite some changes, health-insurance costs these days are at best semi-deductible for individuals. (Lots of fudge factor allowed for here -- medical savings accounts, a rising but still partial percentage of costs that can be deducted, state-by-state variations in how things are organized, etc. But there's still a big diff between what businesses can write off and what individuals can -- ie., there's still an incentive for people concerned about health insurance to prefer fulltime jobs, which is the point of my posting.)

Second is that, for what it's worth, I don't think there's much chance that a centralizing, nationalizing, social-democrat approach to healthcare is ever going to happen in this country. I could be wrong about this, of course. But I think the odds against it are so long that it makes far more sense to abandon the fantasy entirely and do our best to work with what we've already got, and try to find ways to make it somewhat more efficient.

By they way, some interesting discussions of health care are going on over at Jane Galt's blog, here, here, and here. The comments are endless, but well worth riffling through.

Posted by: Michael Blowhard on May 16, 2003 11:40 AM


Perhaps I was opaque but you appear to be completely missing my point; I was responding to your statement, to wit:

If you believe for a nanosecond that "medical costs overall" will ever, ever get "driven down" by market forces as opposed to legislation, you're obviously living in la-la land.

I agree with you that market forces won't control healthcare costs in the U.S. because they have been undercut for years by very high levels of public-sector involvement in areas like tax-deductiblity of insurance, regulation of who gets to be a doctor and who gets to open a treatment facility, granting of valuable monopoly privileges to doctors regarding the writing of drug prescriptions and putting patients into hospitals, subsidization of roughly 40% of U.S. healthcare spending via Medicare and Medicaid, etc. All of these make healthcare more expensive by allowing suppliers to manipulate the markets and by subsidizing consumer demand. Even the modest use of HMOs to negotiate volume discounts has been successfully demonized by doctor propoganda that they harm patients (as opposed to the real issue, which is that they harm physician wallets.) As I point out, such public sector initiatives have also created an expectation that marginal health care costs are zero, which pretty much makes the notion of setting total health care supply and demand by a market mechanism completely unworkable. My "thought experiment" was simply to show that the only way to reintroduce such a market mechanism would involve politically unpalatable initiatives.

And as for your notion that everyone is happy with governmentally provided healthcare, that's self-evidently not true. Such schemes work by (1) constricting demand with waiting lines and not implementing many treatments with high cost- to-benefit ratios, etc., thus dissatisfying people who are forced to wait and who suffer or die as a result of never getting to have various procedures, (2) reducing supplier costs by fiat, thus dissatisfying doctors and other suppliers, (3)restricting medical and pharmaceutical R&D, thus dissatisfying sick people who would have been treated as well as medical device and pharmaceutical industries. Two factors reduce the expression of this dissatisfaction: one, many of these facts are not well understood by the average citizen (I'm sure governments are very loathe to publicly share the kinds of data they use to make many of these decisions) and two, this being a coercive system, people don't get to vote with their feet. (Actually, there's a third factor that mutes dissatisfaction: government-provided healthcare systems get a very considerable free ride from U.S.-developed and paid-for technology.)

Despite all this, I probably agree with you that this is the way things have to go in the U.S., as it is simply lunatic to have a for-profit provider community feeding off a socialized revenue pool. But it will be difficult to get Americans to tolerate many of the restrictions I mention above, so the financial savings will probably not be very impressive.

Posted by: Friedrich von Blowhard on May 16, 2003 2:15 PM

Friedrich: of course you're right that there's a kind of R&D subsidy going on where the rest of the world benefits from US-funded technological advances. If the US went all "socialised" tomorrow, then there's a good chance that pharmaceutical stocks would collapse and R&D spending collapse along with them. But most commercial R&D spending is pretty fluffy these days: the big drugs companies can make a lot more money by giving old men more hair or longer-lasting erections than they can by finding a cure for malaria, say. Assuming the CDC budget wouldn't be cut, I'm not convinced that the world in aggregate would be much worse off as a result. Certainly if the "socialisation" was accompanied by looser intellectual property laws, we could get rid of the ludicrous situation as it stands right now where the government funds research but the patents and profits all go to the drugs companies. What should happen is that important drugs -- especially those developed with government funds -- get put in the public domain, to be manufactured by just about anyone. That would bring healthcare costs down enormously, and doctors wouldn't need to take home a penny less in income.

I never came close to saying that everyone, or even most people, were happy with governmentally-provided healthcare: I can't see where you got the idea that I did. My point was just that the one system was better than the other -- a point with which you "probably agree".

But to answer your other points, treatments with high cost-to-benefit ratios are of course available throughout the world -- if you pay for them. In the US, they're not available to anyone without health insurance, and they're often hard to get even for people with it.

Posted by: Felix on May 16, 2003 3:38 PM

Note to Nancy: "The hot new insurance product is relatively cheap insurance (say, $7/week with $1000 annual cap, $2000 for injuries) for people with low-paying jobs.... we're talking about paying $365/year, and possibly getting $1000 back in coverage." Not really. We're talking about paying around $365 a year, and getting $1,000 in coverage that, because of deep discounts provided by the network, are worth perhaps twice as much - and in many cases without losing the opportunity to hit the country for some of your health-care needs. I've just flipped through my medical bills for 2002, and, in most cases, my friends at Aetna paid 50- to 75-percent of the billed charge. These cheapie insurance plans provide the same discounts.

Is this the market adapting? Or, grifters exploiting the poor? And, is there any difference?

Posted by: j.c. on May 19, 2003 11:01 PM

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