Labels: Analysis, Insurance

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Seven Simple Rules for Health Care Reform
by Richard E. Ralston (April 30, 2008)

The status quo in American health care is indefensible—an expensive regulatory and bureaucratic mess. What that calls for, however, is not more layers of regulation and complicated mandates. Nor should government take over health care completely and run it as part of a political spoils system.

State government proposals have proven too expensive in California and have collapsed. In Massachusetts expenses for mandatory insurance after one year are spiraling out of control faster than budgets can be printed. New recommendations in Colorado and elsewhere are being shelved because they are also too expensive to be considered at present. The alternative is one of elegance and simplicity: adopt changes now that require no new government expense, but that remove regulatory complexity and allow freedom of choice. To achieve that end, we need to adopt a few simple rules.

The first simple rule: Make all medical services, insurance and personal savings for such expenses exempt from all federal, state and local income and payroll taxes. Those who complain about the cost of medical care and insurance must be confronted with the fact that if we cannot afford medical care, we surely cannot afford to pay taxes on the money we set aside for it.

The second simple rule: Allow an individual or corporate tax deduction equal to double the value of the service for all charity care by medical care providers. At one time America had a vigorous network of private charity care, which was largely destroyed by the government barging in. We need to restore that environment of private charity, which was more efficient, effective and compassionate.

The third simple rule: Pass legislation now proposed in the U.S. Congress that would give every individual or business the ability to purchase insurance in a national market, from insurance companies in any state. That would allow for ownership of health insurance that is more affordable and can follow individuals from job to job and state to state. The increased competition between insurance companies would restrain the cost of insurance.

The fourth simple rule: Allow the purchase of basic health insurance with high deductibles and low premiums that covers major illness or injury and annual exams, in conjunction with tax-free accounts for out-of-pocket expenses, such as deductibles. That, more than anything, would make insurance premiums more affordable for Americans who fear the financial consequences of health misfortune.

The fifth simple rule: Broaden the availability of optional coverage provided by Medicare Advantage, but allow for additional tax-deductible premiums to be paid by those seniors who elect such options. More choices from more options should be available to retirees—but not paid for by taxpayers. This would allow for expanded and more efficient coverage, and reintroduce an element of competition to those who seek to provide health care to seniors.

The sixth simple rule: Allow Medicare patients to utilize their Health Savings Accounts to pay for services from their Medicare physicians. This could bring thousands of doctors back into the Medicare program overnight and eliminate the ridiculous and unjust prohibition on those who want to spend their own money on their medical care.

The seventh simple rule: Limit non-economic or punitive damages in all malpractice or other litigation against medical providers or drug and medical equipment firms to a maximum of $250,000 (indexed for inflation). This would wring the bonanza for a few law firms out of the current ocean of litigation—and the high cost of "defensive medicine" now practiced by providers as protection against such legal extortion. The effect would be a reduction in the cost of medical care and insurance for everyone.

While these changes would result in more efficient, affordable and uncomplicated health care, achieving them will be no simple matter—thanks to those who oppose any improvements as an obstacle to massive new government controls. But we can stop new regulations, mandates, taxes, government spending and administrative agencies. We can uphold the rational alternative—freedom and personal choice—which can improve the quality and affordability of health care without government spending.

Labels: Analysis

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Flawed health-care study poses own risks

...While it is almost certainly true that, all things being equal, it is better to be insured than uninsured, a greater danger is that this deeply flawed study will stampede policy-makers into taking action that will put far more Coloradans at risk.

The Families USA study was not a traditional "double blind" experiment with a control group and a treatment group. Rather, it is a retrospective analysis, which compared the rates of people who died with insurance to those who died without insurance. Since the proportion of people without insurance seemed to be higher than those with insurance, they extrapolated likelihood to project excess deaths due to lack of insurance. But there are just too many outside variables to make such interpretations valid.

...Similarly, a study published in The New England Journal of Medicine last year found that, while far too many Americans were not receiving the appropriate standard of care, "health insurance status was largely unrelated to the quality of care."

Of course this does not mean we should be indifferent to efforts to try to expand insurance coverage. We all want more Coloradans to be insured. However, Families USA's call for greater government control of our health-care system is a cure far worse than the disease.

One thing we know for certain is that government-run health-care systems frequently deny critical procedures to patients who need them. For example, at any given time, 750,000 Britons are waiting for admission to National Health Service hospitals, and shortages force the NHS to cancel as many as 50,000 operations each year. And in Canada, more than 800,000 patients are currently on waiting lists for medical procedures. According to Canada's Supreme Court, many of these individuals suffer chronic pain and some will die awaiting the treatment they've been promised.

Even in this country, excessive government regulations on health care cost lives. A study by Christopher J. Conover with the Center for Health Policy, Law and Management in the Terry Sanford Institute of Public Policy at Duke University found that as many as 22,000 Americans die each year from the costs associated with excess regulation.

Indeed, if Families USA is truly concerned with expanding the number of Coloradans with health insurance, they might start by attacking some of those regulations that make health insurance so expensive...

Labels: Analysis, Insurance, OpEd

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* The imposition of an individual mandate with minimum coverage requirements will likely mean that thousands of people who currently have health insurance will find that their policies do not meet the minimum standards because their deductibles are "too high" for the officials defining the minimum standards, or because their policies lack certain benefits.

* These decisions will be made by a regulatory body that has no direct knowledge of the incomes, assets, health status or values of the individual policyholders.

* This is what is happening under the failing Massachusetts health reform plan.

From an individual's point of view, a mandate is a tax:

* By forcing people to buy a product they may not want at a price they cannot control, the individual mandate functions as a potentially unlimited tax for health insurance.

* People who currently get health care but have no insurance will be required to purchase insurance, thus increasing their costs.

* People who are allegedly unable to purchase insurance because it is unaffordable will have to be subsidized to a larger extent than they are at present.

* Funding those subsidies will require direct tax increases that will raise costs for all citizens, whether those increases are in the form of taxes on insurance premiums, provider taxes, sales taxes or increases in the income tax.

Labels: Analysis, Insurance

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Labels: Analysis, CO, Free Market, MA

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Let’s look instead at the “study” itself. This is not as easy as it sounds. Yes, it was published in the Annals of Internal Medicine, but the content is available only to paid subscribers. Fortunately a friendly internist was able to send it to me. I opened up the file on my computer and was surprised to learn that it wasn’t a “study” at all. It was a one-page letter to the editor. Now a letter has the distinct advantage of avoiding the peer review process that applies to published articles. It is also able to avoid including any embarrassing information about methodology.

The letter was written by Aaron Carroll, MD and Ronald Ackerman, MD, both of the Indiana University School of Medicine. I don’t know about Dr. Ackerman, but Dr. Carroll is a member of the board of directors of Physicians for a National Health Program (PNHP), so is hardly an unbiased researcher. Interestingly, the Annals requires the disclosure of financial conflicts of interest, but not political conflicts or biases.

The survey itself, though only summarized in the letter, apparently asks only two questions -- 1. In principle, do you support or oppose government legislation to establish national health insurance? And 2. Do you support achieving universal coverage through more incremental reforms? They sent this out to 5,000 physicians and got back 2,193 responses. So the sample was entirely self-selected. And who knows what their cover letter might have said? Coming from a leader of PNHP, it might have been calculated to infuriate physicians who believe in freedom, resulting in these doctors discarding the survey.

So, there was absolutely nothing scientific about this. It was pure propaganda. But the idiotic reporters take it at face value, much as they did a few years ago when the Commonwealth Fund published a startling survey finding that the vast majority of employers supported an employer mandate. Few reporters questioned the unlikely finding, so I dug deep into the survey and discovered that Commonwealth gave these employers only two choices – an employer mandate or a single-payer. Pick your poison. And you wonder why we enact such horrible policies in this country.

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The lead author of this "survey" is Aaron E. Carroll, a single-payer zealot on the Board of the activist group "Physicians for a National Health Program."

This guy routinely produces "studies" and "surveys" that somehow always show that Americans in general and the medical community in particular want government-run health care.

About 500 questionnaires were undeliverable, 197 were returned by physicians no longer in practice, and 2,193 were completed (51% response rate) and returned to Drs. Carroll and Ackermann.

Anyone with a basic understanding of statistical samples will see a red flag here. Surveys of this type are worthless if the sample isn't random, and this one doesn't pass that test. The 2,193 respondents obviously constitute a self-selected group and, as such, are not representative of the larger population of physicians.

Dr. Carroll knows this, of course, yet he disingenuously foists this fraud on the public.

Labels: Analysis

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(1) Forty-seven million Americans do not have health insurance.

(2) Universal health-care coverage can be achieved via "individual mandate."

(3) Expensive prescription drugs are a big reason health-care costs increase.

(4) Drug importation will save patients a fortune.

(5) The state-run health-care systems in Canada and Europe are better and cheaper than America's.

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The Wave of the Future

The wave of the future is the free-standing Emergency Department.

By requiring insurance coverage or full payment at time of presentation, these facilities are able to offer reduced waiting times, concierge-style amenities, and a full array of emergency diagnostic and therapeutic services. And if they refuse to accept Medicare or Medicaid, then they are not forced to follow the restrictive rules of EMTALA.

EMTALA applies only to "participating hospitals" -- i.e., to hospitals which have entered into "provider agreements" under which they will accept payment from the Department of Health and Human Services, Centers for Medicare and Medicaid Services (CMS) under the Medicare program for services provided to beneficiaries of that program.

So these "free-market" emergency facilities can not only refuse treatment of patients who are unwilling or unable to pay, but they can also transfer patients at will without negotiating with a receiving hospital or jumping through a lot of regulatory hoops. Realistically, however, hospitals love receiving transfers from these types of facilities because they know they are getting fully-paying patients. Do you think that a hospital might accept an otherwise healthy well-insured young woman with a gallstone attack in transfer, perhaps causing the cirrhotic Medicaid patient to wait a few more hours in their own ER? I think they just might. The bottom line is a powerful incentive.

As this business model becomes more widespread, hospital-based emergency departments will be faced with an increasingly problematic payer mix, because the higher-paying patients will be siphoned off the top, leaving only the most undesirable trauma and Medicare/Medicaid populations to fill their overcrowded waiting rooms. And when emergency physicians have a broader selection of practice environments to choose from, I suspect the hospital-based ERs will soon have some difficulty filling their schedules as well, thereby compounding their problems even further.

Guess what?

Healthcare isn't a right after all.

Labels: Analysis, Insurance, Medicaid, Medicare

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Brian Schwartz alerted us to an article in the Rocky Mountain news from January 9, 2008 about the fact that Medicare costs for the prescription drug program had caused a 6.7 % increase in health spending during 2006.

Walmart. That's who.

In Sept. 06, Walmart started its $4 prescription program -- which it now reports has allowed consumers to save over $1 billion dollars nationally (and $13 million in Colorado) in just 18 months. That's a great record - and you don't need a Medicare or Medicaid card to get those savings. In fact, you don't need an insurance card of any kind. Now that's a way to reduce health care spending. You can find out from Walmart what drugs are included in the Walmart program, and the savings per state.

Walmart reports that 30% of these prescriptions are filled for those without any insurance -- the uninsured. And these $4 prescriptions are also a huge plus for those Medicare seniors who are in the doughnut hole, which occurs when a senior has between $2,400 and $5,421.25 in drug expenses per year. In that hole, Medicare coverage disappears. So, more people can buy the drugs prescribed by their doctors and take all of the prescribed amounts -- not taking half or skipping doses because of costs. In addition, Walmart has picked up customers. And, as a result, competitors Target, Costco and Kroger have followed with their own programs as well. So, nationally, more and more prescription drug consumers benefit.

In several states, there are government restrictions on Walmart's ability to sell $4.00 prescriptions. These states include Colorado. So, without government restrictions, Colorado consumers could save more. We'll check into this and report back.

In the meantime, imagine a Free Market!

Labels: Analysis, Free Market, Medicare

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For Top Medical Students, an Attractive Field

...As thousands of medical students await word this week on residency programs, two specialties concerned with physical appearance — dermatology and plastic surgery — are among the most competitive.

...Seniors accepted in 2007 as residents in dermatology and two other appearance-related fields — plastic surgery and otolaryngology (ear, nose and throat doctors, some of whom perform facial cosmetic surgery) — had the highest median medical-board scores and the highest percentage of members in the medical honor society among 18 specialties, the report said.

The vogue for such specialties is part of a migration of a top tier of American medical students from branches of health care that manage major diseases toward specialties that improve the life of patients — and the lives of physicians, with better pay, more autonomy and more-controllable hours.

...Dermatologists say they enjoy the variety of a specialty that encompasses serious illnesses like skin cancer and psoriasis as well as conditions like uncombable hair syndrome.

But students interested in such work also often factor in personal benefits. Internists, for example, worked an average of 50 hours a week in 2006 while dermatologists worked about 40 hours, according to an annual survey by Medical Economics magazine. Dermatology also offers more independence from the bureaucracy of managed care, because patients pay up front for cosmetic procedures not covered by health insurance.

And while an internist earns an average of $191,525, a dermatologist earns an average of $390,274, according to an annual survey conducted by the Medical Group Management Association, whose membership includes more than 21,000 managers of medical practices. Dermatologists who specialize in cosmetic treatments or in skin-cancer operations can earn much more.

Labels: Analysis, Free Market

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...So now it's election season 2008, and the candidates are talking about the "health care crisis." It's a funny sort of crisis in one sense, because people are managing to survive to be older and healthier than they were before the crisis. But if a politician insists it's a crisis, who are we to argue? Certainly there is an issue that some people can’t afford to pay cash for day-to-day care, and old-fashioned "major medical" is hard to find.

The solution we have been offered on both sides of the aisle is something like the "Massachusetts Plan," where everyone has to have health insurance. "Has to have," here, being enforced by the government — Senator Clinton has spoken specifically of garnisheeing wages of people who don't want to participate — with some kind of public funding for people who just can't afford it.

Here's where things start to get tricky, though. Some people — young people just out of school for example — aren't making a lot of money, but then don't really want to spend a lot of money on insurance. Normally, they wouldn't have to: other than accidents and very rare diseases, a 25-year-old shouldn't normally need anything more than minor maintenance and occasional hangover cures. The idea of the mandate, though, is that if you include these low-risk people in the whole insurance pool, the premiums they pay can be added back to the pot for older people and people with serious illnesses, which makes the insurance more "affordable" — for them.

It's exactly the same situation as if we charge a 25-year-old the same amount for a year's term life insurance as we charge his 75-year-old grandfather: it may make the insurance more affordable for Granddad, but it does so by overcharging young Elmo. Add in the "mandate," so Elmo can't opt out, and we have a universal care plan that forces Elmo to pay for services he doesn't get so that Granddad can pay less for the services he gets. But it's "voluntary" — you get to pick your insurance plan to some extent — and it’s not "tax-supported" because you are just paying the insurance company directly.

Except for the cost of administering the plan itself, and the wages they take through a garnishee if I don't "volunteer."

So in this mandated universal coverage plan, the government comes and makes me give someone money so it can be distributed to other people, and I don't have any choice about participating. Where I come from, we call that a "tax."

Whatever it is, it ain't insurance.

...I'm persistently disturbed by the notion that most of our fellow citizens are intellectual children who need to be forced to do what is good for them even at massive cost to their liberty, and ours.

Megan's final sentence cuts to the heart of the issue: "Whose life is it anyways - yours or the government's?"

When this gets applied to the health care issue, the question becomes:

Should government bureaucrats decide how and for what people can spend their own health care dollars? Or do they respect the individual's right to make that decision according to his own best judgment for his own benefit?

I come down firmly on the side of the second position.

Labels: Analysis, Insurance

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Children with health insurance, studies have shown, are less likely than uninsured kids to end up in emergency rooms, more likely to get key vaccinations, and less likely to be absent from school.

None of five studies Human cited after the fact support her article's statement about what "studies have shown" regarding the effects of insurance on emergency room use, vaccinations and school absences. Indeed four of the five studies she cited do not even address those topics. ...One study cited by Human was relevant, and it directly contradicted her article's claim.

...So Human's pronouncement in her Post article - "Children with health insurance, studies have shown, are less likely than uninsured kids to end up in emergency rooms" - turns out to be not entirely accurate. A large body of research contradicts her claim, and that research is in the very studies which Human pointed to when she was challenged to support her claims.

...In the last two years, the phrase "studies have shown" has appeared in staff-written pieces 31 times in the Rocky Mountain News, and 36 times in the Post. About half the time the phrase is used in a direct quote, or in another way which tells the reader the source of the information. For example, "According to professor Roy Hinkley, studies have shown that minnows . . . "

But the other half of the time, the dailies used "studies have shown" with no source. The unattributed locution was especially common in Post editorials, and in health and nutrition coverage in both papers.

The phrase ill-serves readers who want to learn more about a subject, but who are left in the dark about where to look. The phrase can be used to falsely declare scholarly consensus about a subject. And the phrase can be a crutch for a writer who feels "sure" about a supposed fact, but who doesn't want to take the time to verify it.

Labels: Analysis, Insurance, OpEd

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The Business of Healthcare
By Laura Mazer -- Winter 2007

The state of California has lost more than 90 emergency rooms since 1990 -- and with them, the ability to treat hundreds of thousands of patients. In New York City, eight hospitals have shut down since 2003 after facing a financial crisis. And in Atlanta, Grady Memorial Hospital is threatening to join their ranks. Grady is the only level 1 trauma center in the area, and if it closes, it will mean the loss of almost 1,000 beds, nine community health centers, and the training facilities for two medical schools.

The cause of these and other failures throughout the country is obvious. Hospitals are providing care without receiving payment. Like any other business, hospitals have a constant list of bills to pay every month, from diagnostic tests and drugs, to basic supplies and the salaries of sometimes thousands of people. And all too often, they receive no compensation in return.

What drives the nation's hospitals to operate at an obvious deficit, giving away for free a service that is neither cheap nor easy to produce? They do it in part because they are legally required to do so. In 1986, the Emergency Medical Treatment and Active Labor Act made it illegal for a hospital to refuse care in an emergency setting, regardless of ability to pay. The Act essentially transformed emergency rooms into primary care facilities for the uninsured.

In other industries, services provided for free are considered voluntary charity. They are provided only as far as they can be supported by the business's other income, and they are neither legally nor morally required. But in healthcare, any suggestion that a hospital accept only the patients it can afford to treat is greeted with moral outrage.

Hospitals respond to this combination of legal requirements and community expectations by accepting an unsustainable patient mix that inevitably ends in crushing debt. Healthcare has become a multi-billion dollar industry incapable of demonstrating the kind of economic common sense a child with a lemonade stand instinctively displays.

Bankrupt hospitals are serving as eloquent testimony that the basic principles of economics are just as viable for healthcare as for any other industry. So why is it that fiscally responsible hospitals are considered immoral, and prosecuted as illegal? What is it that makes medicine unique?

The answer can be found in the consumer advocacy groups and professional societies that advocate for socialized medicine. In 2001, a task force assembled by the American Academy of Family Physicians proposed a system of 'free' healthcare for all Americans -- to be paid for by Americans, with a payroll tax. They declared, "There are a set of basic services that most people are expected to utilize in their lifetime, and there should be no financial barrier to these."

This is the justification offered by all advocates of socialized medicine, in its various forms. Healthcare is required. It is a basic service. It is necessary for life. How can ability to pay determine access to a requirement for life? In a civilized, industrialized country, the argument goes, it is the government's duty to provide basic necessities to its citizens.

This argument relies on the assumption that healthcare is uniquely important for human survival, that while most industries provide optional goods -- items that improve life, perhaps, but are not required for it -- healthcare is not optional. To live, you must have access to life-saving or life-prolonging therapies.

It is true that healthcare is, in certain circumstances, required for life. A patient in renal failure will die without dialysis every week. A child with a bacterial infection needs antibiotics. But reformers forget that a lack of dialysis is not the only thing that can kill the kidney patient. A lack of food, clean water, shelter, or clothing in the winter will be as deadly to the child as a lack of antibiotics.

Medicine often focuses only on the physical act of living -- breathing in and out, keeping the heart beating. But human life is more than the functioning of the moving parts. Although healthcare may be the only requirement for a brain-dead accident victim on life support, it is not the only requirement for the rest of us. To live, we need food, we need shelter, we need companionship, and work, and hundreds of other material and spiritual requirements. Healthcare is a necessity -- and after a car accident, or during a flu infection, it may be the most important necessity. But it is not the only requirement for life.

When people talk about a 'right' to healthcare, they mean an entitlement to healthcare. They mean that unlike other goods and services that must be earned through individual work or trade, healthcare should be provided for free.

Medicine is not the only industry that fulfills a necessity for life, so what entitles us to the products of this particular industry, and not others? Why not food or clothes? And why not those products that provide a good life -- feather beds or paintings or tickets to the movies? Or are we entitled to those as well?

The issue goes far beyond healthcare. It is a question of what the government's role should be in providing for its citizens. Should the government collect taxes to provide citizens with whatever goods and services they deem 'necessary?' Or is it the responsibility of individual citizens to work for whichever products and services they can independently earn -- with the government existing to secure their freedom to pursue these ends?

In other industries, Americans balk at the idea of the government stepping in to provide values to its citizens. The dangers and inefficiencies of government-run industries are well understood. We would not tolerate, for example, the government nationalizing the supermarkets. If a grocer decides to provide food to the hungry, most Americans understand that he does so voluntarily, and with his own money.

What we must understand now is that there is no reason to treat healthcare any differently.

American healthcare is failing. It's only a matter of time before hospitals around the country can no longer support themselves, and we are forced to change the system. The only solution is a means of exchange that does not rely on sacrificing the rights of some individuals to obtain values for others. The only solution is a free market.

If we want to save American healthcare, we have a moral and practical obligation to seek less government intervention -- not more.

Laura Mazer is a second year medical student at Emory University. She has a BA in biology from the University of Chicago.

Labels: Analysis

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Is Romney's Healthcare Plan Conservative?

...Massachusetts was the first state in the country to impose an "individual mandate," which requires everyone in the state to have health coverage or face some significant penalties. Most employers -- those with 11 employees or more -- also face a mandate: Provide health insurance or pay a fine.

The criticism from other Republicans highlights one of the controversial aspects of the Massachusetts plan, which the state's Democratic legislature wanted in the legislation: Should conservatives support the government’s requiring people to buy health insurance?

The conservative Heritage Foundation does -- or at least providing some indication that an individual can pay his medical bills. Heritage analysts even played a role in developing the Massachusetts plan and is now selling it to other states. But most other conservative groups vehemently oppose both an individual and employer mandate, and it must be emphasized that Romney has not included the individual mandate in his presidential reform proposal.

Democrats Point to Massachusetts Model

Massachusetts' individual mandate has initiated a national discussion among many state elected officials, including California Gov. Arnold Schwarzenegger, who also supports an individual and employer mandate. Plus, Democratic presidential candidates New York Sen. Hillary Clinton and former North Carolina Sen. John Edwards have included an individual and employer mandate in their proposals, pointing to Massachusetts as a model.

Defenders claim that without the individual mandate, some people will remain uninsured. And when the uninsured get medical care, they can't pay for it, so those costs are shifted to those who have health insurance, driving up the cost of coverage. Therefore, the reasoning goes, by forcing all citizens to be "responsible" for their own costs (i.e., having health coverage), that will actually lower the cost of health insurance for everyone.

Since conservatives support personal responsibility, these defenders conclude, supporting an individual mandate is a conservative principle.

Ignoring Principles

But this argument ignores some other important conservative principles: one being that we don't like the government's micromanaging our healthcare.

Romney and others like to respond by noting that almost every state requires people to buy auto insurance. True enough, but the auto insurance mandate has been so unsuccessful that millions of Americans buy uninsured motorist coverage to protect themselves against uninsured drivers. The fact is that the auto insurance mandate is seldom enforced in most states, and when it is, the penalties are usually minor.

Not so with the Massachusetts mandate. Those who don't get coverage will face a $219 fine (tax?) for the first year (2008), but that fine will go up to at least $150 per person per month in the following year, according to the Boston Herald.

And that's why some of the other Republicans were chiding Romney: An annual $1,800 for each uninsured person can be a significant penalty on a lower-income family of three or four. So significant, in fact, that the state recently decided to exempt 20% of the low-income uninsured from the mandate.

One reason for that exemption was the cost of the plan. On the plus side, the uninsured are signing up in droves, faster than anticipated, although mostly for the subsidized part of the program. As a result, it appears the plan will have nearly a $150-million budget shortfall.

But wait! The whole justification for forcing everyone to have coverage was to avoid cost-shifting from the uninsured to the insured. And if you exempt 20% of the uninsured, haven't you just undermined the whole effort?

Moreover, expanding the health insurance pool apparently isn't lowering insurance premiums, as supporters have claimed it would. The Boston Globe recently reported: "Striving to hold down costs to taxpayers, a state panel [i.e., the Connector Authority, an unelected quasi-government body that governs the healthcare reform initiative] yesterday approved a range of changes for next year for the rapidly growing subsidized health insurance program. The changes will probably cut payments to doctors and hospitals, reduce choices for patients, and possibly increase how much patients have to pay."

The health plans are facing as much as a 14% increase -- higher than many health policies not associated with the Connector. So Commonwealth Care, the state-subsidized part of the Massachusetts reform initiative for modest-income workers, wants to cut healthcare provider reimbursements by 3% to 5%, according to the Globe.

Acting Like Medicaid

Said Connector Authority CFO Patrick Holland, "There's no justification to be paying more than Medicaid rates."

Wrong. At least one justification for paying more is that patients can actually see a doctor. Medicaid's low reimbursement rates are increasingly making it difficult for patients to see a doctor. The Connector wants to impose that burden on the Massachusetts plan as well. But, hey, if you're going to act like Medicaid, why not just call it Medicaid?

Several months ago, the Globe carried a story about Connector employees' salaries. Half of them made more than $100,000, and the head Connector made $225,000. I have been closely monitoring the papers to see how much their salaries are being cut in order to "keep the program affordable."

And I'm still looking.

The trouble with health insurance reform schemes is that the problems usually don't manifest themselves until a few years, maybe many years, into the new program. By that time the politicians who pushed them through have often moved on to higher office, maybe even President.

But the Massachusetts healthcare reform plan is quickly shedding any pretense of being a market-oriented solution or public-private "partnership" for covering the uninsured. Instead, it is becoming a demanding, heavy-handed, top-down program that demands people have coverage and fines them if they don't.

Mr. Matthews Jr., Ph.D., is a resident scholar for the Institute for Policy Innovation.

Labels: Analysis, Insurance, MA

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The Truth About Health Costs
By INVESTOR'S BUSINESS DAILY | Posted Thursday, January 10, 2008

Health Care Reform: Democrats claim high medical costs are a "failure of the free market," and they demand a government takeover. But a new study says government's to blame.

Public health programs account for almost half of the $2 trillion spent on U.S. health care, a Hoover Institution report says. An astonishing 80% or more of all medical-care pricing is based on government reimbursement rates set by Medicare.

As for private costs, they would be lower if government didn't interfere in the market. Regulations imposed on the industry cost more than $330 billion a year, Hoover says.

Perverse tax policies have created a third-party payer system. Patients no longer have first-dollar responsibility for medical bills thanks to employer insurance.

Someone else is paying, so inflation goes unchecked and unabated.

"Patients have no idea what their doctor visits, surgeries, diagnostic studies or other medical services — whether urgent or elective — will cost until the bill comes weeks later," said Dr. Scott W. Atlas, a senior Hoover fellow and chief of neuroradiology at Stanford University Medical School.

Even then, they seldom flyspeck the bill. Why bother, when they're responsible for just 10% to 20% of it?

Meanwhile, demand climbs higher and higher, and insurance premiums along with it, taking a bigger bite out of employer paychecks and putting health care completely out of reach for a growing number of Americans.

So if Uncle Sam made health care so unaffordable, why do so many voters like Democrats' plans to expand government control of health care? Because they've bought into the myth that the private sector has failed and begs for government rescue.

Democrats' solution to this failed government-heavy system is more government in the form of mandatory health coverage. Public plans offered by Hillary Clinton, John Edwards and Barack Obama all boast of "using government to lower costs and ensure affordability for all."

But if you think health care is expensive now, just wait until government makes it "free."

Hillary calls for expanding coverage through public health plans like Medicare or the Federal Employees Health Benefit Program. Yet Medicare already costs more per capita than any other industrial nation's public medical program.

The way to control costs isn't to expand a health care bureaucracy that already is divorcing patients from market-price decisions. The answer is letting them choose between health care and money.

Most of the Republican plans would help patients make that choice by expanding health savings accounts with high-deductible insurance plans. HSAs are tax-deferred accounts that patients set up to pay for routine medical care and to save for future unexpected medical expenses.

The key, however, is making the accounts attractive enough to shift incentives from the current employer-based system of insurance to the individual market.

Right now only about 17 million Americans buy their own health insurance. If 50 million did so through HSAs, we'd see at least a 30% reduction in medical costs, studies show, thanks to increased competition in the market.

By putting the patient back in charge of health care, making him a buyer as well as a user of care, a nationwide HSA rollout would create a large enough consumer-driven market to control costs.

Then the health care market would work more like a real market.

The medical costs Americans complain about were caused by government, not the private sector. This is a little recognized fact.

More government will not only ramp up costs, but deteriorate the one thing American patients seldom complain about — the quality of their health care.

The plight of the uninsured is a SYMPTOM. It is NOT the disease. If our attempts at health care reform do not recognize this fact, the real disease will continue to metastasize. What is the real disease? Perverse incentives caused by a series of government interventions in the health care market, not the least of which being misguided tax breaks for employer-provided insurance.

Labels: Analysis, HSA, Insurance

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The Right Vision Of Health Care
Yaron Brook 1.08.2008

With the primary season in full swing, the presidential candidates are fighting over what to do about the spiraling cost of health care--especially the cost of health insurance, which is becoming prohibitively expensive for millions of Americans.

The Democrats, not surprisingly, are proposing a massive increase in government control, with some even calling for the outright socialism of a single-payer system. Republicans are attacking this "solution." But although they claim to oppose the expansion of government interference in medicine, Republicans don't, in fact, have a good track record of fighting it.

Indeed, Republicans have been responsible for major expansions of government health care programs: As governor of Massachusetts, Mitt Romney oversaw the enactment of the nation's first "universal coverage" plan, initially estimated at $1.5 billion per year but already overrunning cost projections. Arnold Schwarzenegger, who pledged not to raise any new taxes, has just pushed through his own "universal coverage" measure, projected to cost Californians more than $14 billion. And President Bush's colossal prescription drug entitlement--expected to cost taxpayers more than $1.2 trillion over the next decade--was the largest expansion of government control over health care in 40 years.

Today, nearly half of all spending on health care in America is government spending. Why, despite their lip service to free markets, have Republicans actually helped fuel the growth of socialized medicine and erode what remains of free-market medicine in this country?

Consider the basic factor that has driven the expansion of government medicine in America.

Prior to the government's entrance into the medical field, health care was regarded as a product to be traded voluntarily on a free market--no different from food, clothing, or any other important good or service. Medical providers competed to provide the best quality services at the lowest possible prices. Virtually all Americans could afford basic health care, while those few who could not were able to rely on abundant private charity.

Had this freedom been allowed to endure, Americans' rising productivity would have allowed them to buy better and better health care, just as, today, we buy better and more varied food and clothing than people did a century ago. There would be no crisis of affordability, as there isn't for food or clothing.

But by the time Medicare and Medicaid were enacted in 1965, this view of health care as an economic product--for which each individual must assume responsibility--had given way to a view of health care as a "right," an unearned "entitlement," to be provided at others' expense.

This entitlement mentality fueled the rise of our current third-party-payer system, a blend of government programs, such as Medicare and Medicaid, together with government-controlled employer-based health insurance (itself spawned by perverse tax incentives during the wage and price controls of World War II).

Today, what we have is not a system grounded in American individualism, but a collectivist system that aims to relieve the individual of the "burden" of paying for his own health care by coercively imposing its costs on his neighbors. For every dollar's worth of hospital care a patient consumes, that patient pays only about 3 cents out-of-pocket; the rest is paid by third-party coverage. And for the health care system as a whole, patients pay only about 14%.

The result of shifting the responsibility for health care costs away from the individuals who accrue them was an explosion in spending.

In a system in which someone else is footing the bill, consumers, encouraged to regard health care as a "right," demand medical services without having to consider their real price. When, through the 1970s and 1980s, this artificially inflated consumer demand sent expenditures soaring out of control, the government cracked down by enacting further coercive measures: price controls on medical services, cuts to medical benefits, and a crushing burden of regulations on every aspect of the health care system.

As each new intervention further distorted the health care market, driving up costs and lowering quality, belligerent voices demanded still further interventions to preserve the "right" to health care. And Republican politicians--not daring to challenge the notion of such a "right"--have, like Romney, Schwarzenegger and Bush, outdone even the Democrats in expanding government health care.

The solution to this ongoing crisis is to recognize that the very idea of a "right" to health care is a perversion. There can be no such thing as a "right" to products or services created by the effort of others, and this most definitely includes medical products and services. Rights, as our founding fathers conceived them, are not claims to economic goods, but freedoms of action.

You are free to see a doctor and pay him for his services--no one may forcibly prevent you from doing so. But you do not have a "right" to force the doctor to treat you without charge or to force others to pay for your treatment. The rights of some cannot require the coercion and sacrifice of others.

So long as Republicans fail to challenge the concept of a "right" to health care, their appeals to "market-based" solutions are worse than empty words. They will continue to abet the Democrats' expansion of government interference in medicine, right up to the dead end of a completely socialized system.

By contrast, the rejection of the entitlement mentality in favor of a proper conception of rights would provide the moral basis for real and lasting solutions to our health care problems--for breaking the regulatory chains stifling the medical industry; for lifting the government incentives that created our dysfunctional, employer-based insurance system; for inaugurating a gradual phase-out of all government health care programs, especially Medicare and Medicaid; and for restoring a true free market in medical care.

Such sweeping reforms would unleash the power of capitalism in the medical industry. They would provide the freedom for entrepreneurs motivated by profit to compete with each other to offer the best quality medical services at the lowest prices, driving innovation and bringing affordable medical care, once again, into the reach of all Americans.

Yaron Brook is managing director of BH Equity Research and executive director of the Ayn Rand Institute.

Labels: Analysis, CA, Free Market, MA, Medicaid, Medicare, OpEd

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A warning for Colorado: Court ruling suggests several health-care plans violate federal law

The prospects for dramatic changes in Colorado's health-care delivery system got a little more murky last week, thanks to a court order issued by a federal judge in San Francisco.

That's a positive development, in our view. As we said two months ago, presidential candidates are giving medical reform a prominent role in the campaign. So any state legislation enacted in 2008 may well be pre-empted by federal action in 2009.

Next month, lawmakers are expected to begin reviewing five proposals that were selected this year by the Colorado Blue Ribbon Commission for Health Care Reform. As they do, they should keep in mind Wednesday's ruling by U.S. District Court Judge Jeffrey White.

The decision suggests that any state-based measures that affect workplace benefits could violate federal law. And this ruling is no outlier; federal courts in Maryland and New York have recently come to similar conclusions.

The implication for Colorado is that our lawmakers might be wasting their time if they craft reforms that affect employer medical plans.

White struck down a universal health-care program that was to take effect Jan. 1 because the measure violated the Employee Retirement Income Security Act, or ERISA. That's the federal law that gives Washington rather than states the right to regulate workplace benefit plans. ERISA was designed to prevent companies from having to satisfy a hodgepodge of state regulations when they set up pensions and other benefit packages.

The San Francisco system would have required employers to either provide comprehensive medical benefits to workers or pay taxes to subsidize the uninsured.

The court cited several ways the employer mandate ran afoul of ERISA: The benefit package would force some businesses to pay for medical coverage they haven't previously offered; the ordinance's record-keeping mandates would affect how employers managed their medical benefits; and the ordinance would require national employers to offer unique benefits to their workers in San Francisco.

If White is correct, then at least three of the five reform plans from Colorado's commission look suspect.

The single-payer proposal would establish a uniform package of medical benefits for every Coloradan and outlaw nearly all private insurance, invalidating health benefits offered by employers.

The "Plan for Covering Coloradans" has a "play or pay" employer mandate along the lines of the San Francisco system.

And even the fifth or hybrid proposal crafted by the commission might have ERISA issues because of how it lets workers deduct pre-tax money from their paychecks.

Several legal blogs have speculated that the only reason the medical plan in Massachusetts, which has an employer mandate, is still functioning is because it hasn't faced an ERISA challenge.

The lesson: Major policy fixes to the health care system will have to originate in Washington. And if Judge White's ruling stands, even small fixes that affect employers may need congressional approval.

Labels: 208, Analysis, CO, Insurance, OpEd

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Free the market; Government interference hampers healthcare reform

By Yaron Brook and Keith Lockitch
November 26, 2007

The Democratic presidential candidates are agitating to have the government do something about the spiraling cost of healthcare, especially the cost of health insurance, which is becoming prohibitively expensive for millions of Americans.

Insinuating that the free market has failed to produce affordable health insurance, they offer a variety of government "solutions," including proposals for universal coverage that range from systems of mixed public and private insurance plans to the outright socialism of a single-payer system.

But these proposals cannot and will not cure our ailing medical system because they misdiagnose the disease: It is not the free market that has caused the healthcare crisis, it is government interference in medicine.

The notion that America has a private, free-market medical system is a widespread misconception. More than 45% of total spending on healthcare in 2004 was government spending. Our semisocialist blend of Medicare, Medicaid and government-controlled, employer-sponsored health plans-with its onerous system of regulations and controls on medical providers-is the opposite of a free market.

Our system is built not on the premise that each individual is responsible for his own well-being and healthcare, but on the premise that healthcare is the collective responsibility of "society." Our system aims to relieve the individual of the "burden" of paying for his own healthcare by coercively imposing its costs on his neighbors. Far from being consistent with American individualism, this is the essence of collectivism.