RALEIGH – Government officials in North Carolina constantly fall victim to the Tar-Baby Syndrome. By no means am I slighting my own state’s political class. I’m merely observing that our politicians differ little from the peers in other climes.
What is the Tar-Baby Syndrome? It’s the tendency for lawmakers, after putting some initial tax money in a questionable enterprise, to attempt to keep it from failing by pouring in additional tax money. No one wants to admit error, which is the implicit message of walking away from a government boondoggle, and in a deluded frame of mind one is an easy mark for skillful lobbyists who promise that “just a little more” will let them spin straw into gold.
A little mixed metaphor, Joel Chandler Harris meets the Brothers Grimm, but I think you get my meaning. The syndrome is evident in a variety of contexts: sports stadiums and convention centers, education reforms, and economic-development projects among them.
Another version of the Tar Baby Syndrome has to do not with cash subsidies but with other kinds of policy interventions. In health care, for example, much of the problems that persist in the American system – waste, bureaucracy, lack of choice – stem from initial government interventions.
Starting in the 1930s, state governments used tax and regulatory policies to prefer some health-care arrangements, such as third-party payment plans from Blue Cross (hospital) and Blue Shield (physician) associations, over systems run by life insurers that paid claims directly to patients. In the latter case, the financial model used by life insurers, patients had strong incentives to scrutinize medical bills and shop around for the best care. Obviously, this arrangement didn’t much appeal to health providers, who preferred less scrutiny and more control over the flow of medical funds. Their influence with state legislators came in handy. Thanks to critical tax and regulatory advantages, the Blue Cross Blue Shield model prevailed in the end.
Meanwhile, during the wartime wage and price controls of the 1940s, the federal government made the situation worse by exempting non-wage benefits provided by employers from income taxation and federal wage caps. The result was an explosion of health insurance as a form of compensation, again taking the individual consumer out of the mix in favor of decisions by bureaucrats – first in the private sector, then increasingly in the government via Medicare and Medicaid.
The consequences of over-reliance on tax-free, third-party payment for routine medical bills should by now be well known. Lacking the appropriate financial incentives, individual consumers pay little attention to cost. Reacting to the resulting cost spirals, insurers attempt to respond with restrictions. These restrictions begin to chafe, leading either to changes in benefits that weaken financial responsibility again or to well-meaning government intervention to forbid certain contracts or business practices.
The Tar Baby Syndrome kicks in on health care when government policymakers, reacting to a set of problems largely caused by the original sin of intervention, attempt to “fix” them with new interventions. Dr. Roy Cordato, vice president for research at the John Locke Foundation, discusses one such costly intervention in a new policy report: North Carolina’s certificate-of-need (CON) laws.
Originally enacted in response to a federal mandate, these laws stayed on the books in North Carolina even after the mandate ended and other states abandoned the practice. CON laws essentially make hospitals and other medical providers get state permission to add major units or services such as beds or testing devices. The notion is that, given the prevalence of third-party payment, the normal economic rules don’t apply. More hospitals and service options means higher rather than lower prices, CON defenders say, because competition can’t reduce the set rates paid on behalf of patients by insurers or government.
The argument may sound plausible, but Cordato argues that it doesn’t meet the real-world test. In the states that got rid of CON regulations, health-care costs aren’t higher than in CON states such as North Carolina that retained the regulations. Some studies show CON states to have higher costs (though that doesn’t have to be true for CON to be invalidated, since even equivalent costs means that consumers are giving up other benefits of choice and competition in CON states for no good reason).
The idea that markets don’t work in health care is “not grounded in either economic theory or empirical evidence,” Cordato concludes. But it has proven politically sticky.
This was the best thing that I found when I researched it - It's not a mental health problem. If you want my opinion, if you have friends or family like that (what you're describing), it sounds like they're not good people.