Friday, May 29, 2009

U.S. Health Care Dysfunction & U.K. Parliamentary Expense Scandal

Today's Wall Street Journal had good editorial on taxing health care, pointing out that the President and Congress are struggling to figure out how to raise enough taxes to pay for President Obama's health-care take-over. The most likely target is the exclusion of employer-based benefits from taxation, which moves Democrats closer to John McCain's position in last year's election. However, the goal of McCain's reform was to give health-care dollars to American families instead of their employers. Obama's goal is to seize health-care dollars for the government.

The WSJ also ran an op-ed on "Parliament and the Laffer Curve" explaining that the exclusion of "expenses" - very broadly defined - from British legislators' taxable compensation has led to taxpayers paying for cleaning moats and repairing duck ponds in politicians' country estates. The op-ed diagnosed the erupting scandal in terms equally applicable to American health care: "Members of Parliament face a 100% tax rate on their unclaimed allowances."

The current tax treatment of employer-provided health insurance causes Americans to over-insure. And (unless they have a Health Savings Account) the type of insurance they have is use-it-or-lose-it. Failure to consume health services of even marginal value means forgoing those benefits forever.
A few days ago, I reported on my successful visit to the Arizona House of Representatives' Health & Human Services Committee. Here's the published version of my spoken testimony.

Freddie Mac or Fannie Doc? Choices uncer ObamaCare

My op-ed in the Los Angeles Daily News.

Thursday, May 28, 2009

Expanded Coverage = Less Access to Care

I've always said that the closer the state gets to "guaranteeing" "universal" coverage, actual access to care decreases. This has been the case in Massachusetts, since the 2006 reform that mandated health insurance for all.

A recent white paper by the New England Healthcare Institute suggests that access to primary care in Massachusetts is actually worse than in other states, where health insurance is voluntary. Remaking Primary Care: From Crisis to Opportunity, reports data from the Massachusetts Medical Society. The share of primary-care practices accepting new patients dropped significantly from 2006 to 2008: 90% to 78% in pediatrics, 69% to 52% in internal medicine, and 75% to 65% in family medicine (p. 13, figure 3).

However, the same page cites a national survey with data from 2003-2004, that 94% of primary-care practices were accepting new patients. However, only 74% were accepting new Medicare patients, and only 64% were accepting new Medicaid patients (footnote 20).

The message is pretty clear: more government coverage equals less access to care.

Yes, I Do Have A Nerve: And Hit Them, Too.

My blog essays over at KQED National Public Radio's Healthy Ideas online forum are starting to grate on the others, who advocate more government control over health care. My latest posting takes it all in stride.

Wednesday, May 27, 2009

Health Freedom Returns in Arizona

Last November, Arizona's Proposition 101 was narrowly defeated at the ballot box. Prop 101 would have prevented the government from enrolling people in a government or private health plan against their choice, or otherwise preventing them from spending their own money on their own health care.

But good ideas never die: the principle behind Prop 101 is now championed by State Rep. Nancy Barto, who invited me to testify to the Arizona House of Representatives Health & Human Services Committee yesterday on HCR 2014, which contains substantively the same language as Prop 101.

Like Prop 101, HCR 2014 is a proposed constitutional amendment. However, Prop 101 required an expensive drive for citizens' signatures to get on the ballot. If HCR 2014 passes the legislature, it will go on the ballot without the need for signatures (likely in November 2010), and the campaign will have more money to educate the public.

So, although Prop 101 failed at the ballot box last November, it obviously had enough of an impact to convince the majority in the legislature that it was worth championing. Indeed, after the hearing (in which the comittee passed the bill in a 6-3 vote), we had a press conference in which the Speaker of the House, Kirk Adams, announced his commitment to pass the resolution through the whole House.

The new resolution has more precise language than Prop 101, and the likelihood of the federal government monopolizing access to health care is much greater now than last November. These might be enough to influence the majority of voting Arizonans to protect their health services from government take-over when they see the amendment on the ballot.

As well, I'm obliged to compliment Rep. Barto on her command of the issues. Many health-policy analysts have seen Republican politicians flounder when challenged on issues of the uninsured, international comparisons of health outcomes, and the "fairness" of allowing individuals to navigate their own choices in health care. Rep. Barto was well prepared, citing reports by analysts such as Mike Tanner of the Cato Institute, and alluding to research by the NCPA's John Goodman, and other health-policy scholars.

On key issue that came up was the fate of a successful state constitutional amendment protecting health freedom, if the federal government were to take over health care. Some witnesses suggested that the U.S. Constitution's supremacy clause would invalidate the relevent clause in Arizona's state constitution.

Well, I'd prefer that the U.S. Constition's 10th amendment win that fight, but I'm not going to predict the outcome of a state's judicial challenge to an (as yet undefined) federal "universal" health plan. For those interested in preparing for such a fight, I'd recommend Levy & Mellor's The Dirty Dozen: How Twelve Supreme Court Cases Radically Expanded Government nd Eroded Freedom, especially chapter 1.

Thursday, May 21, 2009

Health-Care Union Cartel Rises Up

Yesterday's announcement by the Service Employees International Union that it had inked a deal with the California Nurses Association/National Nurses Organizing Committee to collude in support of the Orwellian "Employee Free Choice Act" (which will take away workers' right to a secret ballot for union certification) goes far beyond that abominable piece of legislation.

As I wrote a while back, the primary beneficiaries of government-monopoly health care are public-sector unions. Behind every effort to increase government control of health care, you'll find a union boss. This was embarrassingly disclosed by Gov. Schwarzenegger, fed up that the SEIU was bullying the White House into withholding California's Medicaid bailout (as punishment for the governor's reducing home-health-care workers' wages to plug the deficit).

I believe that one important reason for the failure of the government to monopolize health care has been the discord between the SEIU and the CNA/NNOC. This erupted during the 2007 debate over health reform in California, where the SEIU supported Schwarzenegger's scheme for compulsory enrolment in private insurance, whereas the CNA supported pure single-payer. The CNA's ally, state senator Sheila Kuehl, killed Schwarzenegger's bill in the senate.

So, if these two powerful unions have buried the hatchet, we should expect to see an even more comprehensive assault on individual choice in health care, as they combine to lobby for government take-over in every state capitol and DC.

Today's "Public Options" for Health Coverage are Already Bankrupt

My latest column for KQED's Healthy Ideas online forum on covering the uninsured.

Wednesday, May 20, 2009

The Few, The Proud, The California Tax-Killers

A few dozen Californians bravely strode forth and slayed Gov. Schwarzenegger's tax dragon. Five tax-hiking propositions that the governor and other Sacramento politicians tried to con us into believing would fix the budget deficit failed to get past the voters. (The solution is to shrink the state government, as Jason Clemens wrote today.)

Two of the initiatives would have broken into two piggy-banks funded by previously approved taxes for mental health and children's health, and rolled those dollars into the general fund. I'm glad that the voters rejected them, but I've previously argued that the original taxes were also harmful, although they were sure winners years ago at the ballot-box.

But fans of Big Government need not despair: President Obama has recanted his previous nullification of the Golden State's Medi-Cal (Medicaid) bailout. Perhaps he was embarassed when Gov. Schwarzenegger and his subordinates disclosed that the Service Employees International Union (SEIU) participated in his teleconference with the White House, when they discussed reducing wages to home-health workers. Certainly, the SEIU expressed extreme displeasure that the governor disclosed this information.

But the federal bailout of Medi-Cal will not suffice to feed the relentless growth of California's government-run health-care behemoth. What's next? Well I've been around long enough to be pretty confident that I can identify the next target: those pesky smokers.

In case anyone wants to prepare for that fight, here's my 2006 paper debunking the notion that hiking California's tax on smokers will solve any problems, either health or budget related.

Tuesday, May 19, 2009

States, U.S. Collude to Hike Rx Prices

I'd bet that Avis, Hertz and other car-rental businesses pay a lot less per car than I do. After all, they buy entire fleets and I buy only one car every few years. Imagine if I could get a law passed that made it illegal for cars to be sold to different customers for different prices. Would I be able to buy cars cheaper?

Probably not: Depending on how many cars were sold to corporate fleets versus how many to individuals, the price of cars to corporate fleets would rise. Renters would pay a higher price.
So, governments generally allow different prices to prevail in markets - but not when the government competes against private customers. For example, it is illegal for a private patient or organization to pay less than the government for prescriptions. We've known for years of evidence that this increases prices to private buyers of medicines (which I discussed in a 2003 report, pp. 10-12, 25-26).

This has not stopped states and the federal government from acting aggressively to artificially increase Rx prices for American patients. The latest is a multi-state and federal lawsuit against Wyeth Pharmaceuticals, in which 16 states and the U.S. are colluding on a lawsuit charging that private hospitals got lower prices for Protonix Oral and Protonix IV acid-reflux medicines than state Medicaid programs were able to negotiate.

The business case for these discounts was that the patients would be loyal to those medicines once discharged from the hospitals, and encourage their doctors to keep them on those meds as out-patients.

Horror of horrors! Competition between Wyeth and other drug-makers who make different therapies for acid-reflux disorder (such as a certain purple pill). And the states were little more than ineffective bystanders. Well, we just can't have that.

The result of this lawsuit will not be lower Rx prices to state Medicaid programs: Rather, it will be higher drug prices for hospitals and out-patients, and a higher likelood of fewer patients having access to a broad choice of anti-reflux therapies.

Monday, May 18, 2009

Do Small Businesses Need a Health Insurance Exchange?

Anyone in libertarian-conservative health-policy circles knows that we can tie ourselves in knots pretty quickly over the idea of a health-insurance "exchange". If the federal government amended the federal tax-code to give American families the same ability to buy health insurance that American employers currently have, we wouldn't have to worry about "exchanges".

Unfortunately, because of the federal tax-code, state reformers often throw "exchanges" (a.k.a. "connectors") in the mix: Witness Massachusetts or (most recently) Utah. Nevertheless, the option of an exchange embraces a fundamental flaw in the way most people think about health insurance: That employer-based groups pool risk better than individuals.

No: they do not. If they did, we would get all of our insurance from our employers - including life, homeowner's and auto. Our great ally James Capretta has written an excellent essay in National Review which appears to suggest pooling small businesses in large groups as an advantage of health-insurance exchanges:
"Moreover, job-based coverage doesn’t work nearly as well for workers in smaller firms. Insurers charge premiums based on the known risks of the group they are covering, and the smallest firms simply are not big enough to spread these risks broadly. Most states have rules requiring insurers to treat all small businesses as if they were part of one large group, but there’s usually some give in the rates they can charge, allowing for adjustment based on a business’s recent claims history. Consequently, it is not uncommon for a small business with one or two workers newlyiagnosed with cancer to see premiums jump 20 or 30 percent, and sometimes even more, in just one year."
I may have misunderstood the paragraph. However, a "known risk" is not, of course, a "risk" at all, and the aggregate risk of all the employees in any one firm is trivial to the block of business of the health insurer.

If this understanding of pooling risk were correct, then the small business with one or two workers newly diagnosed with cancer, whose premiums jump 20% or 30%, would have had its problems solved by the small-group reforms of the early 1990s. Many states imposed a modified community rating on small-group policies, but this neither contained premium hikes nor insured more small businesses (as I wrote about in my analysis of Gov. Schwarzenegger's failed California reforms.)

The problem with the small-group market is not instability of insured risks, but instability of employment. One or two people quitting or new ones getting hired changes the health-risk of the small business. So, small businesses and carriers write policies that last only one year, which is a ridiculous term for health insurance.

It works okay for auto or homeowner's insurance, because you are insuring against an acute event (e.g. theft or fire). However, catastrophic health events last longer than one year. If you were free to buy your own health insurance, you'd never buy a policy with a one-year term. You'd buy one with guaranteed renewability, and a mechanism to ensure the insurer did not "game" the block of business, by investing in health-status insurance as described by Professor Cochrane).

Even with the current prejudice against individuals buying their own health insurance, the individual market functions much better than the media reports. Professor Pauly has studied the data and concluded that guaranteed-renewability works quite well even in today's malformed individual-insurance market, (as I reviewed in my analysis of Senator McCain's presidential proposal).

Mr. Capretta (whom I've had the pleasure of meeting a couple of times when the zookeepers allow me out of the cage to mix with my betters) also has another important essay in the Weekly Standard, in which he recommends health-insurance exchanges. I'm not against an exchange qua exchange, but we've got to clear our heads of the notion that people can only buy health insurance effectively buy shopping in large groups, like mastodons marauding the pre-historic tundra.

Thursday, May 14, 2009

Why Obama Won't Give California Its Medicaid Bailout

What's up with the President turning off the spigot to the Medi-Cal program? Sure, he's following the direction of the Service Employees International Union (SEIU), but I think there's more going on: Taking away Medi-Cal patients' power to choose their home-health aides, and giving it the the union. Read about it in this month's Capital Ideas.

Free Prescriptions for Unemployed

I am supposed to be a free-market, conservative, capitalist, health-policy analyst, but seem to have spent a lot of my recent time attacking some of the antics of private-sector interests who have given up a lot of ground on the current health-reform "debate". (That is, if we can really dignify it as a "debate.")

So, I suppose I'd better write something positive about "corporate health care" before folks start thinking I'm an MSNBC reporter in camouflage. I was impressed to see news from Pfizer that the firm will give its medicines for free to anyone unemployed during 2009 and had been using Pfizer meds for at least three months before losing his job.
Sure, the press release was a little gushy, but the program is straight-forward enough: Just fill in a one-page application (on the honor system, apparently) and you get free meds for a year. Why Pfizer issued the press release before the program is actually launched on June 1, I cannot say, but this sounds like the real deal.

So, unemployed people will get their meds for free for a year (or until they get new jobs). That's great, but there are a few things this program will not do, for which I'm sure it will draw criticism:
  • It will not employ even one more government bureaucrat to administer another welfare program.
  • It will not give the government more control over which medicines doctors prescribe, in the name of "cost-containment."
  • It will not add one cent to the unfunded liabilities of the welfare-state programs that will burden our descendants with a massive tax load.

So, no, Pfizer's new program to expand access to medicines does not achieve all the goals of "universal" health care, but it's a start!

Obama's Granny's Hip Replacement: The Immorality of State Health Care

Barack Obama would spend his last dollar for his grandmother's hip replacement, but when he takes control of your grandmother's access to a hip replacement, the answer will be different. My latest column at Freedom Politics.

Wednesday, May 13, 2009

Single-Payer and Group-Coverage Emplower the Government, Not the People

I've been posting over at KQED National Public Radio, and will be once a week for a few more weeks. Other expert-bloggers all advocate a much bigger role for government than I do. See my latest entry here. (And the whole dialogue via the widget at the bottom right of this page.)

Deciphering the Polls: How To Win Health Reform

Health reform only comes in two flavors: more individual choice or more government power. We know where the president stands. Politicians who frame this properly can seize the initiative from the president. This month's Health Policy Prescription.

Tuesday, May 12, 2009

Graham on ABC News on Health Reform

ABC News investigated the health-care "industry"'s promise to President Obama that they would collaborate on long-term cost-savings. This time, they really, really mean it!

I made some critical remarks. Of course, they only took the first part of my statement, the criticism, and edited out the second, which contained a proposal. But thems the breaks. Here are my full comments:

“If the interest groups in any other American industry colluded on a plan to control costs, they’d be charged under the anti-trust laws. Only in health care do Americans persist in believing that Soviet-style central planning can increase quality and reduce costs. We’ve been trying this since the 1980s, when the Reagan administration completely out of character) announced that Medicare would start fixing prices. But the massive increase in government control and spending for almost half a century since Medicare and Medicaid were imposed on taxpayers have resulted in out of control costs, uncertain quality, and the warning signs of rationed access to care in the near future. The American people should not tolerate health-care interest groups collaborating with the government to form the mother of all cartels, rationing our health care to adhere to a federal budget. Only 16 cents of every dollar spend on U.S. health care is controlled by patients. The rest is controlled by government and health insurers. The key to ensuring value for money lies in returning a bigger share of the dollar to individual Americans.”

California's Fiscal Bankruptcy: Conference Proceedings

A few days ago, I had the privilege of speaking about health reform at a conference on "California's fiscal bankruptcy". The producer has just posted a brief summary of the proceedings. Enjoy!

Friday, May 8, 2009

Will Politicians Stop Patients from Reforming Health Care?

While state and federal politicians agitate to change the way Government controls health care, patients are reforming health care themselves, thanks to previous reforms that allowed them to take more control of their health-care dollars.

Although this started in the 1990s, with Health Reimbursement Arrangements and Flexible Spending Accounts, patients' ability to reform American health care really took off with the introduction of Health Savings Accounts in January 2004.

Greg Scandlen has just written a compelling review of the evidence of these reforms, especially the last five years of HSAs. 20% of privately insured American households now have a "consumer-directed" health plan, which incorporates one of these tools.

One of the "questionables" is how providers and payers would respond to patients taking control of more of their health-care spending. Originally, they were hopeless: unable and/or unwilling to disclose prices or simplify billing and payment.

But now we learn that hospitals are taking the initiative to discuss billing and pricing with patients before scheduled surgeries, and that at least one insurer has figured out how to charge fixed prices for "episodes of care" - prompted by brokers who were sorting this out for patients.

Now I learn that an entire conference has been scheduled for providers and payers to discuss how to simplify payments from patients who control their own health-care dollars. Topics include "patient-friendly billing" and "payment kiosks & patient portals".

Reform is happening - but it's being driven by patients, providers, payers, and most importantly entrepreneurs who are working around the health-care mess the politicians have created.
Let's not let politicians posing as "reformers" stop what they're achieving.

Thursday, May 7, 2009

Wall Street Journal Joins the Media Chorus on "Universal" Health Care

When the Wall Street Journal starts fretting over the uninsured, we have a problem. This morning's paper featured two recently unemployed men: one in Illinois and one in the town of Hohenlockstedt in the German state of Schlewsig-Holstein.

Right off the bat, the reporter notes the key difference in outcomes for the two unemployed men: the American lost his health benefits and the German did not. I'm no fan of employer-based health "benefits", largely because they artificially inflate the number of uninsured. So, I have long advocated tax reform to give American families the same tax-break as American businesses for health insurance. It would make the price of health benefits transparent and give workers better opportunity to save money for a spell of unemployment, which they could use to pay premiums.

The featured American unemployed worker decided to give up snowmobiling and other recreation, because he had no health insurance. "It's scary being without insurance," he says, "but what do I give up? Food?."

Well, Illinois is not the easiest state for affordable health coverage, but it's not the worst: Various government interventions take it down to number 35 of 50 states in the U.S. Index of Health Ownership.

So, I had some sympathy for the fellow - until I got to the tail of the article, where the journalist decided to drop a pretty important fact: the worker received $64,000 of severance when he lost his job!

What did he do with the money? Paid off debts. So, now he cannot take responsibility for his own health insurance. And one man's inability to plan his personal finances becomes another excuse for government-run health care.

Wednesday, May 6, 2009

Massachusetts Health Reform: Hospital Profits Cut in Half

I'm going to miss the Boston Globe, if the New York Times decides to shut it down. Its coverage of the consequences of the 2006 state law mandating "universal" coverage has been excellent. (Indeed, that might be one reason that the New York Pravda wants to shut it down: "universal" health care is a mantra of its editorial page.)

Reading this blog's coverage of the Massachusetts reform has been like Chinese water torture - drip, drip, drip. Well here's more: According to the BoGlo, the state hospital association claims that hospitals' profit margins have dropped from 0.7% to 0.3% in the last year. Patients are deferring surgeries, and hospitals are delaying capital investments.

Hospitals were big supporters of the 2006 reform. Will they change their mind and support reforms that empower patients and not government? Perhaps not: patients interviewed in the story are unhappy about taking financial responsibility for any part of their hospitalization - perhaps a result of decades of government-led infantilization.

Increasing government control is quickly turning into a lose-lose-lose situation: bad for patients, providers, and taxpayers.

Tuesday, May 5, 2009

Doctors & Medi-Cal: When to Leave an Abusive Spouse?

I have previously scribbled with concern about doctors' increasing dependency on the state. Well, they're at it again.

California's Medicaid program, Medi-Cal, has traditionally underpaid, or even stopped paying, providers. The orgy of lobbying around the federal "stimulus" bailout led many to believe U.S. Senator Boxer's promise that the bill would drop $11 billion our way. It was not to be. Last month, we learned that the stimulus would not bailout Medi-Cal.

Unfortunately, California's primary-care doctors learned the wrong lesson: they think that by suing the state for more money, the state will begin to treat them with more respect.
Wikipedia reports the term "Battered Person Syndrome" to describe someone who suffers from "learned helplessness" as the result of a "cycle of violence" at the hands of a partner.
It's not my place to play amateur psychiatrist, but I think it describes the physicians' position to a tee.

Medi-Cal's failure is not just a budgetary crisis, it is a crisis of government dependency - for both patients and providers.

KQED Online Forum on Health Reform

KQED, Northern California's largest National Public Radio affliate, invited me to join a group of health-policy analysts to answer the question "How do we cover the uninsured?" My response proposes another goal of health-system reform than "covering the uninsured." Please have a look at all the contributions, comment and vote!