Archives: 02/2009

James Knight on ‘Does the Doctor Need a Boss?’

Dr. James G. Knight (M.D.) is the CEO of Consumer Directed Health Care, Inc. Below, he shares his thoughts on “Does the Doctor Need a Boss?“, a paper coauthored by Arnold Kling and me that has sparked a debate within the consumer-directed health care movement.

RE: Does the Doctor Need More Bosses?

My brother had a job in big business where he reported to more than one boss. Needless to say, it didn’t work out well for him.

Doctors ought to have just one boss, their patient. Patients must be allowed to work with the advice of physicians of their choosing and must have the right to make their own health care decisions. Patients must also have meaningful financial responsibility for the decisions they make. Everybody else is superfluous, except to the degree they too have a share of the financial responsibility.

If fee-for-service has been corrupted by the average physician performing unnecessary services for monetary gain (a premise I totally reject as a mean physician characteristic), then by converting to salaries or capitation these same “corruptible” physicians will be able to profit more by being lazy, doing less, and avoiding the sickest patients; a combination of both greed and sloth versus greed alone.

Cato believes in individual liberty, limited governments and free markets. In my view, big government and big corporations are very often equal threats to individual liberty. As a nation we need a big military to provide for national defence and a few big corporations that can complete huge projects that individuals couldn’t possibly accomplish, but health care is the application of the intellectual rights of individual professionals delivering care to just one patient at a time.

Does Bipartisanship = Bigger Government?

The Washington Post praises the “attempt to rise above the partisan squabbles that too often have paralyzed Washington” that led to agreement on a massive spending bill. Denouncing “the old ways” and “the customary blame-gamesmanship,” the Post editorializes:

The gang of 20 or so moderate Democrats and Republicans, led by Sen. Ben Nelson (D-Neb.) and Sen. Susan Collins (R-Maine), heeded the president’s call for bipartisanship and hunkered down to produce the bill announced Friday night. Though the details of the package still need to be examined, the senators’ effort was an admirable one.

Being respectful and working together are very nice attributes. But the bottom line must be whether the country is better off with the product of the bipartisanship. And in this case the core of the controversy is whether a government running a $1 trillion deficit should spend another $820 billion (which willl almost certainly be more after it emerges from conference committee) that it doesn’t have. The Post asserts that the bill is “aimed at providing the quick and large injection of funds into the economy experts say is necessary.” But the Post knows very well that many economists disagree with that claim.

The Democratic and Republican senators who have made possible the passage of the largest spending bill in history have done the country no favors. The Post’s editors may disagree with that assessment. But the issue should be freedom, economic recovery, and the morality of piling more debt on our children, not process and politeness.

National Science Foundation Employees Gone Wild

The federal government’s National Science Foundation (NSF) has become the bureaucratic version of Animal HouseLast week I blogged on a NSF inspector general discovery that agency employees were viewing pornography, engaging in sexual online chats, and using taxpayer-funded trips to pursue women. Now comes word from a New Zealand newspaper that NSF employees in Antarctica have been jello-wresting and skinny-dipping in frigid waters.

The quotes from defiant NSF employees are priceless, and demonstrate how little regard they have for the taxpayers paying their salaries:

“I will just say that I was terminated for having harmless jello wrestling…”

“Every trip, there are more and more rules, restrictions and guidelines that seem designed to take all the life out of the place and make it more like a unionised auto factory.”

“Yes, I know it is a workplace, but they are sucking all the fun out of the place.”

As I noted last week, “The House version of the ‘stimulus’ plan being developed in Congress would give the government’s National Science Foundation (NSF) an extra $3 billion, in part, to ‘put scientists to work looking for the next great discovery.’ Three billion dollars is a considerable chunk of change given that the NSF spent more than $6 billion in fiscal year 2008.”

I shudder to think what this gang is going to discover with the additional money.

Urban Institute Study on HSAs

Last month, the Urban Institute published a study by Linda J. Blumberg and Lisa Clemans-Cope critical of health savings accounts. I was about to write a point-by-point rebuttal when I realized that I already had, nearly three years ago. So I’ll just summarize.

  • HSAs do provide a larger tax break to wealthy people, but that’s not the fault of HSAs themselves so much as the much larger tax exclusion for employer-sponsored insurance that HSAs were designed to emulate. Yet Blumberg and Clemans-Cope do not criticize the exclusion itself. Sooo … tax breaks for the wealthy are kosher, unless they let workers control their earnings?
  • The presence of that large tax break does not mean that HSAs are “most attractive to the high-income and the healthy.” As the Congressional Research Service writes: 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.”
  • As for the cost-containment potential of HSAs, in my 2006 paper I made a back-of-the-envelope calculation that, under current law, HSAs have the potential to “introduced price sensitivity into more than 60 percent of medical expenditures by all nonelderly fully insured individuals.” That ain’t small potatoes. HSAs could do even more to contain costs if we expand them into Large HSAs that let consumers control all of their health-care dollars — not just the first few thousand. 
  • There is zero evidence that HSAs will lead to worse health outcomes. In fact, all evidence suggests HSAs will deliver health outcomes comparable to other forms of insurance at a lower cost.

I address other criticisms in my paper, which Blumberg and Clemans-Cope do not cite. 

They do lodge one additional criticism against HSAs that has emerged since my paper was published: that HSAs encourage or enable tax evasion. I addressed that criticism last year and found it groundless: HSA critics have produced no evidence of unlawful withdrawals, nor have they offered any reason why HSAs should be subject to greater scrutiny than other methods of not reporting income. Again, Blumberg, Clemans-Cope, and other critics leave the impression that the identified attribute is not the offending attribute.

I’m critical of HSAs too, but this?

Transparency, Accountability, and the Debt Bomb

The NPR article containing the interview with House Appropriations Committee chairman David Obey (D-WI) that my colleague Michael Cannon blogged on earlier today ends with statements by former Government Accountability Office (GAO) head David Walker that are worth highlighting:

As it stands now, says David Walker, a former U.S. comptroller general, the bill appears to have no mechanism for directing spending. It’s left up to those state and local officials, who may or may not have the ideas or the means to spend it appropriately. And that will lead to “a series of disappointments that it’s too late to do anything about,” Walker says.

The bill does make it possible for lawmakers and the public to track the money — but only after it’s spent. And that, he says, will lead to bad surprises.

Take, for example, the giant bank bailout known as TARP. That spending has gone all wrong, Walker says. Though the inspector general and the Government Accountability Office are keeping track of the billions spent there, “they’re basically reporting on what didn’t happen,” he says.

“Well, it’s a little bit late,” he says. “And so the question is, what are you going to do on a prospective basis? I mean, you can’t change history. What are you going to do on a prospective basis to minimize the possibility of being disappointed again?”

What are you going to do? Here’s what you (Congress) should do: Don’t spend the money to begin with.

Like the “good government” crowd, a group that includes voices from the left end of the political spectrum to the right, I’m all for transparency with regard to how politicians spend taxpayer money. It obviously makes my job of pointing out the myriad ways in which legislators and bureaucrats waste our money much easier.

Greater transparency was a major theme of President Obama’s campaign. Although the president has gotten off to a rough start (see my colleague Jim Harper’s comments here), his much ballyhooed intentions are reflected in the “stimulus”/debt bomb heading toward his desk. As NPR reported on Wednesday, “budget watchdogs say Obama’s stimulus package contains spending transparency provisions that are nothing short of revolutionary.”

The NPR article also notes George Mason University’s Mercatus Center, “which this week launched its own project-tracking Web site. It details the ‘shovel ready’ projects that members of the U.S. Conference of Mayors have put on their stimulus wish list.” For example, using the Mercatus site, I was able to see that the city of Carmel, Indiana, a wealthy suburb of Indianapolis, has a $428,450,000 wish list.

How hard up for federal taxpayer money is Carmel? In late 2007, the city announced “it will buy 11 additional statues from sculptor J. Seward Johnson to help create a walkable outdoor museum of art in the Arts & Design District. The city is paying $979,000 for the statues.” The slow economy hasn’t put the purchases on hold because the IndyStar reported yesterday that “More statues [are] on the way for Carmel.”

I also noted that Carmel’s wish list includes millions of dollars for construction activities on Keystone Avenue. But just today the IndyStar reported that the city has hired KPMG to audit the “Keystone Avenue project.” Why?  According to the article, “The original price tag of the road project, which includes rebuilding six intersections along Keystone into roundabout-style interchanges, was $90 million. Now the project could need up to an additional $50 million, and council members are hiring an outside consultant to understand why the price tag went up so drastically and how they can cut back and lower expenses.”

Let me circle back. According to Rep. Obey, “”We have more oversight built into this package than any package in the history of man. If money is spent badly, we want to know about it so we can hold accountable the people who made that choice.” Ah yes, accountability.

When I went to work for Sen. Tom Coburn’s oversight committee, I quickly learned that our office had become favorites of the GAO for the sad reason that we actually pursued their recommendations to clean up wasteful federal endeavors. Lots of federal legislators talk about accountability, but very few are actually serious about it. I have no problem stating that David Obey doesn’t give a fig about accountability. If he did, he wouldn’t have passed out of his committee a bloated $800+ billion “stimulus”/debt bomb that distinguished Harvard economist Robert Barro recently called “garbage.” It took me five seconds to spot five programs in Rep. Obey’s bill that are notorious for wasting taxpayer money.

Transparency has its place, and those of us opposed to this non-stimulus boondoggle should obviously welcome it. But let’s make sure the public understands that whether you get incinerated by a bomb dropped from 50,000 feet in the air or go before a firing squad in which you know the name, rank, and serial number of the shooters, the result is the same.

Japan’s Stimulus Model

As 200 economists said in the New York Times, ” More government spending did not solve Japan’s ‘lost decade’ in the 1990s.”

And it looks like Times reporters can confirm that:

Japan’s rural areas have been paved over and filled in with roads, dams and other big infrastructure projects, the legacy of trillions of dollars spent to lift the economy from a severe downturn caused by the bursting of a real estate bubble in the late 1980s. During those nearly two decades, Japan accumulated the largest public debt in the developed world — totaling 180 percent of its $5.5 trillion economy — while failing to generate a convincing recovery.

Hitting Bone Is the Least of Our Worries

Once again, the monthly jobs report is woeful except in education, health services, and government, where there were employment gains. Yet a huge part of the ever-growing “stimulus” — about $140 billion, last I’d heard — is aimed at education, including $79 billion to help ensure that states don’t have to cut a nickel from their public schools and possibly let some staffers go. I mean, the situation is dire, right?

“We’re well past cutting through the fat, through the flesh, muscle,” Miami-Dade superintendent Alberto Carvalho frantically warned in USA Today  last month. “We’re now sawing into bone.”

Ignoring the infamous dysfunction in Miami, is there any reason to believe that nationwide, many states or districts are really about to hit bone? I mean, when was the last time they even saw muscle, much less what lies beneath it?

Let’s take a look at some long-term trends and see how lean and mean our schools really are, keeping in mind that throughout the last few decades long-term reading and math scores on the National Assessment of Education Progress have been essentially stagnant, especially among 17-year-olds, our schools’ final products.

First, let’s examine per-pupil expenditures. The chart below, taken from table 174 of the federal Digest of Education Statistics, has a line for every state showing inflation-adjusted, current per-pupil expenditures between 1969 and 2004 (the latest year with available data). Obviously, you can’t pick out individual states, but I wanted to show that the overall trend for every state is upward. In addition, to help better put this chart into context, know that the average, per-pupil expenditure nationwide went from $4,060 in 1969 to $9,266 in 2004, a 128 percent increase. Also, the bottom line in the chart represents Utah, and even that state saw a 73 percent funding increase between 1969 and 2004. Finally, note that these are expenditures covering current costs, which exclude capital costs like building construction and maintenance, so the numbers do not reflect full educational expenditures.

What about the threat to jobs? Public employees and officials are masters of warning about falling skies, so there’s a good chance that without any stimulus schools wouldn’t have to let nearly as many people go as some officials claim. But the important question from education and tax-paying standpoints is not whether people will have to be let go, but whether it can be done without hurting the final product. Keeping in mind the stagnant academic results we’ve gotten over the last several decades, the answer seems to be “Yes, it can.”

The next chart, taken from table 61 in the Digest, helps make this clear, showing changes in public school pupil/teacher ratios between 1970 and 2005. We have certainly been adding a lot of teachers, with the ratio dropping from 22.3 pupils per teacher in 1970 to 15.7 in 2005, a 30 percent decrease in the number of students per teacher.

The same thing has happened with administrators, as shown in the last chart, which uses data from Digest table 77. In 1969 there were 697.7 students per public school administrator. By 2005 that number had dropped to 435.3, a 38 percent decrease in the number of students for each administrative employee.

In light of these trends, here’s my diagnosis: We’ve been employing a lot more people and spending oodles more money to get essentially the same results, so we definitely do not need to worry about hitting this patient’s bones. Indeed, what we need to worry about is quite the opposite: As quickly as possible, getting him the life-saving financial lipo he so desperately needs!