Archives: 09/2006

New England Journal of Medicine Reviews Crisis of Abundance

Arnold Relman reviews the Cato Institute’s latest health policy book, Crisis of Abundance by adjunct scholar Arnold Kling, in the latest issue of the New England Journal of Medicine. Dr. Relman is a former editor of the NEJM and an advocate of socialized medicine. Nonetheless, he compares Kling favorably to other economists who write about health care:

[Kling] has done a much better job than most of his colleagues. His book is clear, concise, and eminently readable; he writes in straightforward English prose, not economic jargon; he is modest, posing questions more often than he answers them; and he considers alternatives to most of the policy options he discusses.

Many readers will know that I am a longstanding critic of the economic approach to health care policy, but I liked this little book and can recommend it highly…

I was attracted by a certain freshness and directness in much of Kling’s argument, and I found myself agreeing with many of his observations…

[Kling] intends only to “raise the level of understanding of the realities, issues, and tradeoffs pertaining to health care policy.” I think he succeeds pretty well at that, so I warmly recommend his book to general readers who want to understand what economics has to say about health care.

NEJM subscribers can click to the full review from here. We expect to be able to link to the full review soon from http://www.cato-at-liberty.org/ and http://www.cato.org/.

Crisis of Abundance is available for purchase here.

GAO Report on HSAs

I just received an e-mail notice from the GAO about a report issued last month on health savings accounts. From my cursory read, the report doesn’t seem to contain anything unpredictable or earth-shattering. Corroborating that impression is the fact that I cannot find where Sen. Max Baucus (D-MT) — a longtime HSA opponent who commissioned the study from the GAO — has released any statement on it. (The GAO doesn’t release its reports until a couple of weeks after it delivers them to the congress-critter who made the request. That lets congress-critters be the first to spin release any GAO report.)

In all, the report brings to mind an observation by the Congressional Research Service that I included in a recent paper on HSAs:

Some less healthy people may find HSA plans attractive because they enable them to circumvent the restrictions of managed care plans. Conversely, some healthy people may find them unattractive because they are very risk-averse; they would prefer to pay more for comprehensive insurance with low deductibles. Older people may find HSA plans attractive because of the tax advantages: being in higher tax brackets (since average earnings increase with age until people are in their 50s), their tax savings from contributions would be greater. People who are 55 but not yet 65 years of age would also be attracted by the additional catch-up contributions they may make. By the same token, younger people with low incomes may consider the HSA tax advantages inconsequential.

The GAO seemed to find that HSAs worked for some people, and not for others. In their current incarnation, HSAs may not be for everyone. But the GAO’s findings hardly tracked the fear-mongering of HSA opponents. Some quotes from the report:

  • “HSA-eligible plans constitute a small but growing share of the private health insurance market.”
  • “[A] 2005 national employer health benefits survey reported HSA-eligible plan premiums that were, on average, 35 percent less than traditional plan premiums for single coverage and 29 percent less for family coverage.”
  • “[A] 2005 national employer health benefits survey reported HSA-eligible plan premiums that were, on average, 35 percent less than traditional plan premiums for single coverage and 29 percent less for family coverage.”
  • “The HSA-eligible plans offered by the three employers we reviewed covered the same broad categories of health care services as did traditional plans in 2005, including preventive, diagnostic, maternity, surgical, and emergency services, and also used similar provider networks.”
  • “HSA-eligible plan enrollees generally had higher incomes than comparison groups, but data on age differences were inconclusive.”
  • “IRS data…suggest that the average age of tax filers who reported HSA contributions was about 9 years higher than the average age of all tax filers under age 65 in 2004…. In contrast, data from several employer groups indicate that the average age of HSA-eligible plan enrollees, excluding retirees, was 2 to 6 years lower than that of other groups of enrollees.”
  • “While focus group participants enrolled in HSA-eligible plans understood the key attributes of their plan, such as low premiums, high deductibles, and the mechanics of using the HSA, they were confused about certain other features. For example, many participants were unsure what medical expenses qualified for payment using their HSA.”
  • “Few participants researched the cost of hospital or physician services before obtaining care, although many participants researched the cost of prescription drugs.”
  • “Most participants reported satisfaction with their HSA-eligible plan, but said they would not recommend these plans to everyone. Participants said they would recommend HSA-eligible plans to healthy consumers, but not to people who use maintenance medication, have a chronic condition, have children, or may not have the funds to meet the high deductible.”

I have argued that requiring people to have a rigidly defined high-deductible health plan in order to qualify for an HSA is unnecessary, and probably does more than anything to make HSAs unattractive to many consumers. 

I have also recommended expanding HSAs to give workers control over every one of their health care dollars, and to allow workers to purchase any type of health insurance they wish.

How Dare You Support Those Who Agree with You!

The New York Times is generally recognized at the nation’s newspaper of record, and rightly so. Times reporting typically is broad, in-depth, nuanced, and thoughtful. It should be on everyone’s daily reading list.

But the Times sometimes allows its general excellence to be interrupted by yellow journalism, as exemplified by today’s prominent article describing (and implicitly decrying) contributions made by the Walton Family Foundation to several public policy groups whose scholars have written or spoken in support of various Wal-Mart practices.

(In the interest of full disclosure, Cato was not mentioned in the article. I have no idea whether Cato receives any contributions from the Walton Family Foundation.)

The upshot:

[T]he financing, which totaled more than $2.5 million over the last six years, according to data compiled by GuideStar, a research organization, raises questions about what the research groups should disclose to newspaper editors, reporters or government officials.

Curiously, buried deep in the article, is this little nugget:

Conservative groups are not the only ones weighing in on the Wal-Mart debate. Ms. Williams of Wal-Mart noted labor unions have financed organizations that have been critical of Wal-Mart, like the Economic Policy Institute, which received $2.5 million from unions in 2005.

In response, Chris Kofinis, communications director for WakeUpWalmart.com, an arm of the United Food and Commercial Workers Union that gives money to liberal research groups, said: “While we openly support the mission of economic justice, Wal-Mart and the Waltons put on a smiley face, hide the truth, all while supporting right-wing causes who are paid to defend Wal-Mart’s exploitative practices.”

So, the New York Times gives the scandal treatment to the Walton Family Foundation’s handing out a little over over $400,000 a year to a bunch of public policy groups that write favorably about Wal-Mart, but barely acknowledges that anti–Wal-Mart forces gave out $2.5 million in just one year to just one group that criticizes Wal-Mart. And the Times lets the leader of one of those anti–Wal-Mart groups give a hammer quote decrying think tanks as Wal-Mart hacks.

What’s most disappointing is that the Times didn’t give any consideration at all to what should have been the fundamental question of the article: Is there merit to the pro–Wal-Mart arguments made by think tanks that receive Walton money? Or, are those arguments flawed, suggesting their authors may have been influenced by the Walton money?

The Times article is, in essence, a pathetic ad hominem attack.

And that is a ridiculous failure for a newspaper as fine as the Gray Lady.

Topics:

Coming Monday: “9/11 Five Years After: Reassessing the Terrorist Threat and Homeland Security”

Monday is the fifth anniversary of the deadly terrorist attacks on the World Trade Center and the Pentagon, that precipitated the Global War on Terror internationally and the creation of the Department of Homeland Security domestically. While the Global War on Terror has received a vast amount of commentary, less has been said about the effectiveness of the government’s policies to guard against terrorist attacks on U.S. soil. Is there, in fact, enough of a terrorist threat to justify the astronomical sums spent securing landmarks in third-tier cities? Has domestic anti-terrorism policy actually made us any safer? Was the DHS even a good idea? How is it spending our tax money?

All these questions and more will be debated in the imminent September edition of Cato Unbound, “9/11 Five Years After: Reassessing the Terrorist Threat and Homeland Security.” Ohio State University political scientist John Mueller will kick off the conversation with “Some Reflections on What, If Anything, ‘Are We Safer?’ Might Mean.” Mueller will get feedback and pushback from: Clark Ervin, head of the Homeland Security Program at the Aspen Institute and the first inspector general of the United States Department of Homeland Security; Veronique de Rugy, a resident fellow at the American Enterprise Institute and expert on DHS budgeting priorities; and Timothy Naftali, soon-to-be director of the Richard Nixon Presidential Library and Museum and author of Blind Spot: The Secret History of American Counterterrorism.

Glad to be Proven Wrong

In a recent op-ed for the Indianapolis Star, I wrote that Indiana University’s Center for Evaluation and Education Policy (CEEP) had a vested interest in finding school choice to be unpopular with voters — because it was a part of the University’s Department of Education, and that department could well be rendered obsolete under a large scale school choice program. As it turns out, the Center is largely financially independent of the Department, and so would not likely go down with the ship under a voucher or education tax credit program.

I also expressed concern about the Center’s pattern of polling on school choice, which seemed to be moving away from the sort of neutral, general question that elicits more favorable responses, and toward narrower questions that elicit lower support. After speaking with CEEP’s director, Jonathan Plucker, I’m informed that they already have plans to ask their initial general voucher question once again, on their next survey, and so the appearance of a move away from such questions was illusory.

I’m delighted to hear both of these facts, should have taken the time to obtain them in advance, and owe Dr. Plucker and his staff an apology.

Now if Phi Delta Kappan, the publisher of an annual nationwide education survey, is willing to return to THEIR original voucher question, I will be delighted to apologize to them as well. Still not holding my breath on that one.

Private Voucher Schools Less Racially Segregated

Reaffirming earlier research, new studies of the voucher programs in Cleveland (.pdf) and Milwaukee (.pdf) find that private voucher schools are less racially segregated than the public schools in their districts.

This should come as no surprise. Economist Thomas Nechyba (.pdf) has shown that public schools’ geographically-based student assignment system lowers not only school-level integration, but neighborhood integration as well. By de-coupling school choice from place of residence, considerably higher levels of integration become possible and, as the research shows, actually take place.

As in so many other cases, the argument that government-run schooling is necessary to promote integration is precisely backward. Government schools are an impediment to integration and to the achievement of minority students.

Anyone who truly believes in the ideals of public education should support the free market reforms that can actually fulfill those ideals, and abandon the government-run monopoly system that so consistently fails to advance them.

Silly Patient, Power Is for Experts!

Yesterday, I lamented that market critics simultaneously (1) argue that information asymmetries mean that patients are too ignorant to control their health care dollars and decisions, and (2) argue for policies that keep patients ignorant.

As if on cue, Ezra Klein pounced on the same hook I used: a column by David Wessel that cited a study showing that elderly patients are often highly satisfied with their care even when the technical quality is sub-par. Klein argues the study is proof that “consumer-directed health care is a silly idea.” 

Or, perhaps, those findings show that the policies Klein supports (e.g., government-provided coverage) are keeping patients ignorant.

Klein writes, “patients have no capability to separate good medicine from bad…for all their good intentions, [they] are easily fooled by a firm handshake, a pleasant nurse, and a well-decorated waiting room.” Klein continues, “If doctors need watchdogs, then we need to empower institutions or individuals with the education and ability to actually watch over them.” 

Presumably, Klein thinks a free market would not do so. But if that means the government should monitor quality, how would Klein insulate that effort from the political influence of providers, whose incomes would depend on what the watchdogs decide? Are politicians never fooled by a ($2,000) handshake? Which is easier: to fool all of the people all of the time, or to fool 535 people at any given time?