Archives: July, 2009

Uwe Reinhardt on Health Care Rationing

Health care analyst Uwe Reinhardt takes on critics of the Obama administration effort to “reform” health care, pointing out that the free market is a form of rationing.  He adds:

As I read it, the main thrust of the health care reforms espoused by President Obama and his allies in Congress is first of all to reduce rationing on the basis of price and ability to pay in our health system.

An important allied goal is to seek greater value for the dollar in health care, through comparative effectiveness analysis and payment reform. As I reported in an earlier post on this blog, even the Business Roundtable, once a staunch defender of the American health system, now laments that relative to citizens in other developed countries, Americans receive an estimated 23 percent less value than they should, given our high health care spending.

To suggest that the main goal of the health reform efforts is to cram rationing down the throat of hapless, nonelite Americans reflects either woeful ignorance or of utter cynicism. Take your pick.

Fair ‘nuff.  In a world of infinite wants but finite resources, some form of “rationing” is inevitable.

But Reinhardt leaves liberty out of the equation.  The health care system is a mess, largely because of perverse government incentives through its big health care programs, Medicare and Medicaid, and its tax break for employer-provided insurance.   As a result, we now have a third party payment-dominated system which simultaneously encourages excessive spending and pushes insurers and providers to decide how to “ration” (i.e., limit) care.

What people need is a medical system that allows them to make the basic rationing decisions:  what kind of insurance to buy, what kind of coverage to choose, what kind of trade-offs to make between spending on medicine and spending on other goods and services. 

Such decisions are complex and people with little means will need assistance.  But the specific “rationing” decisions–i.e., the inevitable trade-offs–vary dramatically by individual and family preference and circumstance.  Even today’s system allows many people some choice between plans and providers.  The rise in consumer-directed care is a positive development which is expanding the choices available to Americans.

The worst strategy would be to increase the government’s authority.  Washington already has to “ration” care through its own programs.  Politicizing everyone’s care by increasing federal control would override the differences in preferences and circumstances which are so important for all of us.  It doesn’t matter how bright or thoughtful or well-intentioned the legislators and regulators would be.  They would end up getting it wrong for most Americans.

Is rationing inevitable?  Yes.  Is government rationing inevitable or desirable?  Neither.  The bottom line is:  who should control people’s and families’ medical futures?  Not Uncle Sam.

A Defense for Iranian Reformers

Although the regime in Tehran finally succeeded in suppressing demonstrations protesting the fraudulant elections, other voices are being raised in Iran in defense of democracy.  Reports the Wall Street Journal:

Some members of Iran’s powerful clerical class are stepping up their antigovernment protests over Iran’s election in defiance of the country’s supreme leader, bringing potential aid to opposition figures as the regime is increasingly labeling them foreign-sponsored traitors.

An influential group of religious scholars seen as politically neutral during the presidential election called the country’s highest election arbiter, the Guardian Council, biased, and said the June 12 election was “invalid.” Earlier, it had endorsed the official result that President Mahmoud Ahmadinejad defeated Mir Houssein Mousavi and other challengers by a wide margin.

The group, with no government role, has little practical ability to change the election outcome. But its new posture may carry moral weight with Iranians after security forces have quashed street protests and jailed hundreds of opposition supporters.

It highlights a growing unease among Iran’s scholarly ruling class about the direction of the country, and questions the theological underpinning of the Islamic Republic: that the supreme leader and the institutions under him are infallible.

“I’m not sure of the Persian equivalent of ‘crossing the Rubicon,’ but we are seeing it now. The future of the Islamic Republic, which has in recent years become a fig leaf for keeping a small clique of people in power, is now in question,” said Michael Axworthy, director of Exeter University’s Center for Persian and Iranian Studies in the U.K.

The U.S. isn’t going to be able to bring liberty to the Iranian people.  Only they will be able to throw the repressive political establishment overboard.   But this break within the Islamic establishment, with respected religious leaders denouncing repression, is a critical step forward. 

The Iranian people deserve better.  For nearly six decades they have suffered, first under the Shah, and second under the Islamic theocracy.  They deserve to be free.

Yet Another Imperial Outpost in Pakistan

Visit an American embassy almost anywhere in the world and it is likely to be a large, hulking, ugly fortress.  Both size and security are dictated by the U.S. government’s seeming attempt to be dictatress of the world.  Following the biblical principle that God is aware whenever a sparrow falls to earth, Washington wants to be consulted whenever a country adjusts a local education ordinance.

Very often the U.S. government keeps busy propping up unpopular regimes and intervening in internal political disputes.  As a result, Americans are targeted by demonstrators and terrorists alike.  Our embassies need to be large to accommodate all of the officials who are busy micro-managing the local society and fortified to protect those same officials.

The result isn’t particularly good for America’s image.  And it is expensive. 

Consider the taxpayer tab for new and expanded facilities in Pakistan.  Reports the Christian Science Monitor:

The US is embarking on a $1 billion crash program to expand its diplomatic presence in Pakistan and neighboring Afghanistan, another sign that the Obama administration is making a costly, long-term commitment to war-torn South Asia, US officials said Wednesday.

The White House has asked Congress for – and seems likely to receive – $736 million to build a new US embassy in Islamabad, along with permanent housing for US government civilians and new office space in the Pakistani capital.

The scale of the projects rivals the giant US Embassy in Baghdad, which was completed last year after construction delays at a cost of $740 million.

Senior State Department officials said the expanded diplomatic presence is needed to replace overcrowded, dilapidated and unsafe facilities and to support a “surge” of civilian officials into Afghanistan and Pakistan ordered by President Barack Obama and Secretary of State Hillary Rodham Clinton.

Other major projects are planned for Kabul, Afghanistan; and for the Pakistani cities of Lahore and Peshawar. In Peshawar, the US government is negotiating the purchase of a five-star hotel that would house a new US consulate.

U.S. policy towards Pakistan has been roughly 60 years of incompetence, mistakes, bad judgment, ignorance, inadequate moral conscience, wasted aid, counterproductive actions, and utter failure.  But Washington continues to try to fix Pakistan.  It seems like time for U.S. officials to learn from their experience.

Biden’s Situational Sovereignty

Vice President Biden was on “This Week” with George Stephanopoulos yesterday talking about Israel bombing Iran:

STEPHANOPOULOS: But just to be clear here, if the Israelis decide Iran is an existential threat, they have to take out the nuclear program, militarily the United States will not stand in the way?

BIDEN: Look, we cannot dictate to another sovereign nation what they can and cannot do when they make a determination, if they make a determination that they’re existentially threatened and their survival is threatened by another country.

The vice president made this point three times.

I suppose it would have been tangential to point out that Biden’s view of sovereignty has not always been so robust. Or that he is effectively renouncing the international laws of war, which dictate what self-defense allows.  But Stephanopoulos might have at least acknowledged the irony of this particular exchange. Iran, the country being bombed in his question, is also a sovereign nation. Biden’s needlessly universal principle – U.S. deference in the face of a sovereign nation’s determination that it is in danger – would protect its right to build nuclear weapons. 

Biden is being overly broad to obscure the fact that he’s granting Israel special rights, of course. But it’s still worth pointing out that it’s a bad principle, if “not dictating” means never saying “bad idea.” When considering war, the opinions of other nations are generally worth knowing. Some of our European friends argued in 2002 that invading Iraq would not enhance our security, after all. Useful advice! Offering our opinions is perfectly consistent with a policy of military restraint.

The problem here goes beyond the principle though. We give Israel all sorts of aid. The F-16s and F-15s carrying out the bulk of the attack would be U.S.-made. They might pass through Iraqi airspace that the U.S. effectively controls. Historical U.S. support for Israel means that people around the world reasonably hold Americans responsible for what Israel does to Iran. Sooner or later, probably sooner, an Israeli attack on Iran would be likely to produce blowback, diplomatic or otherwise, that would damage us. Given that, our position should be that attacks on Iran are unacceptable, and would cost Israel our support.

For analysis on Israel’s ability to disable Iran’s nuclear programs, read Whitney Raas and Austin’s Long’s work.

Rhode Island Studies Marijuana Decriminalization

Criminalization of marijuana use never did make sense.  Surely the results of the Drug War–billions of dollars wasted, tens of millions of regular users, millions of people arrested–have made it even more obvious that prohibition is a failure.  And now,with the U.S. suffering through a nasty recession, it is even more foolish to waste resources in a vain attempt to stop recreational drug use.

Before heading home for the July 4th weekend the Rhode Island Senate set up a committee to study the idea of decriminalization.  Reports the Providence Journal:

Weeks after legalizing the sale of marijuana to sick people, lawmakers have voted to explore how much Rhode Island might collect in revenue if it were to make all sales of marijuana legal and impose a “sin tax” of $35 per ounce.

During the General Assembly’s aborted rush to adjournment Friday, the Senate approved a resolution — introduced earlier the same day — to create a nine-member special commission to study a swath of issues surrounding marijuana. Among them: “The experience of individuals and families sentenced for violating marijuana laws … The experience of states and European countries, such as California, Massachusetts and the Netherlands, which have decriminalized the sale and use of marijuana.”

Drug prohibition has failed.  Rhode Island legislators have an opportunity to help the nation change direction in the way it deals with drug abuse.

The Politicians and the Founders

Both President Obama and Sen. John McCain cited the Founders in their weekly radio addresses today, as they made the case for government actions that would have appalled those Founders. Obama invoked “the indomitable spirit of the first American citizens who made [independence] day possible” in arguing for a federal takeover of education, energy, and health care.

He might have trouble explaining how his policies reflect the spirit of the men who left us such words as these:

He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.

If we can prevent the government from wasting the labors of the people, under the pretence of taking care of them, they must be happy.

Were we directed from Washington when to sow and when to reap, we should soon want bread.

A wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government.

Meanwhile, McCain called for the American government to more vigorously support the protesters in Iran. What would the Founders say to him?

The great rule of conduct for us in regard to foreign nations is in extending our commercial relations, to have with them as little political connection as possible….Harmony, liberal intercourse with all nations, are recommended by policy, humanity, and interest.

Peace, commerce, and honest friendship with all nations, entangling alliances with none.

[America] has abstained from interference in the concerns of others, even when conflict has been for principles to which she clings, as to the last vital drop that visits the heart. …Wherever the standard of freedom and Independence has been or shall be unfurled, there will her heart, her benedictions and her prayers be. But she goes not abroad, in search of monsters to destroy. She is the well-wisher to the freedom and independence of all. She is the champion and vindicator only of her own.

Maybe each week there should be three national radio broadcasts: one from the incumbent president, one from the other big-government party, and one reflecting the views of the Founders.

Chait Calls Out Conservatives on Rationing

I’ve been struggling with how to respond to an article by The New Republic’s Jonathan Chait, who accuses conservatives of hypocrisy and Republicans of whorishness when it comes to wasteful spending in Medicare and other government health programs.  I have grudgingly decided that a good fisking is the only way to go.

Chait writes:

Two weeks ago, President Obama offered to cut several hundred billion more dollars out of the Medicare and Medicaid budget to help make room for health care reform. This sort of gesture ought to appeal to conservatives, right? Apparently not. The Heritage Foundation warned, “At a time when Medicare is dangerously close to bankruptcy, it is shortsighted to funnel funds into the creation of another government-run program instead of shoring up Medicare.” A National Review editorial complained, “These cuts in Medicare and Medicaid payments are nothing more than reimbursement reductions with no empirical or economic basis to justify them.”

A couple of problems here.  Chait takes the National Review quote out of context.  The magazine’s most recent issue states: “Republicans should not have only harsh words for Obama’s ideas. If he truly believes that he can squeeze hundreds of billions of dollars from federal health programs, then he should be encouraged to do so. But the savings should be banked before they are spent.”  The Heritage quote is odd in that it suggests that conservatives should make “shoring up Medicare” a priority.  But it makes essentially the same argument.  Chait gives a false impression when he suggests that all conservatives are knee-jerk opponents of reducing wasteful Medicare spending.

No empirical basis to justify them? Since when do conservatives require an empirical basis to justify cutting social spending?

Ah, the gratuitous swipe.  Chait actually has something useful to say about conservatives’ approach to health care.  Too bad they just stopped listening.

The health care debate has been presented as a conflict between spendthrift Democrats and skinflint Republicans. The reality is closer to the opposite. Conservatives may make up the strongest opponents of new government spending (to cover the uninsured), but they also make up the strongest opponents of cutting existing spending. Health care has become the new defense spending–a category of public outlay that the right has trained itself to defend in even the most wasteful iterations.

Actually, the conventional wisdom fits the reality pretty well.  Democrats’ desire to reduce the rate of growth in projected Medicare and Medicaid spending is not a sign of parsimony.  They want that money so they can hand out new government subsidies, and they then want to raise taxes to hand out even more new subsidies.  Mo’ money, mo’ money.  I defy Chait to find me a conservative so eager to spend other people’s money.  As for the Right defending wasteful health care spending, see the National Review quote above.

The U.S. health care system, as you probably realize, is a vast cesspool of waste… Alas, every dollar of what we call waste is what somebody in the industry calls “income.” So anything that makes the system more efficient makes somebody unhappy, and that somebody has a team of lobbyists.

I have no quibble with this, except that the Left endlessly bleats that the U.S. health care sector is wasteful, but never draws any connection to the fact that government controls half of it directly and even more indirectly.

This may help explain why conservatives have embraced the rather unlikely cause of stopping cuts in Medicare payments to doctors and hospitals. It would also explain the conservative attachment to “Medicare Advantage”–the program created in 2003 that enrolls some Medicare prescription-drug recipients into private insurance rather than traditional Medicare. Medicare Advantage costs $922 more per recipient than traditional Medicare, which makes it a lucrative boondoggle for the insurance industry. Conservatives defend it on the grounds that it offers “better benefits and better value,” as the Heritage Foundation puts it.

Medicare pays for things using price controls.  At present, those price controls unjustly enrich doctors, hospitals, and insurers.  Obama proposes to reduce future Medicare spending by ratcheting down those price controls.  Conservatives object.  Chait suggests the reason is because conservatives are in bed with the doctors, hospitals, and insurers.  Yet there are other potential explanations.

One, conservatives may be indifferent to how Medicare’s price controls look. (Does anyone really expect Washington to come up with the right price, or the right per-unit measurement?)  But since they object to the overall direction of Obama’s health care reforms, they may want to highlight the downsides of these particular changes.  That’s exactly what Obama did to Sen. John McCain (R-AZ) during the 2008 presidential election: “Senator McCain would pay for part of his plan by making drastic cuts in Medicare.”

Two, the Heritage Foundation may be right that the controlled prices that Medicare Advantage plans receive are closer to optimality than what Obama proposes.  The cost comparisons Chait and others use typically omit some of the benefits of Medicare Advantage and some costs of traditional Medicare.  (Medicare Advantage plans do more than just dispense drugs.)

So the right defends having the government shell out more money in order to have (allegedly) better entitlement programs.

A third explanation is that conservatives fear a government that has the power to make people’s medical decisions more than they fear the higher taxes that result from lots of wasteful Medicare spending.  I rather suspect that is how most conservatives feel.  Most Americans, too.  Sure would explain why Medicare looks the way it does.

Even the staunchest free marketers have started to sound like the AARP. The Cato Institute’s Michael Cannon protested that Obama “ought not begin the [health care reform] effort by proposing to take something away from seniors, America’s largest and most politically active voting block.”

I don’t know which upsets me more: being lumped in with the Right or likened to the AARP.  Either way, it appears Chait was casting about for evidence to confirm his thesis and missed the fact that I was making a tactical point rather than a policy argument.  (I’m all for putting geezers on ice floes, but you don’t want to say that’s what you’re doing.)

And then you have the conservative apoplexy over “comparative-effectiveness research,” or CER. Right now, the federal government has little solid information to help figure out what treatments to fund under Medicare. That’s one reason why Medicare winds up finding so many unnecessarily costly medical interventions like expensive copycat drugs–or even interventions that do no good at all. In the stimulus bill, Obama got $1 billion to fund comparative-effectiveness research, which, as you may have deduced, helps compare the effectiveness of different medical interventions.

GOP Senate Minority Leader Mitch McConnell is co-sponsoring a bill to prohibit federal health care programs from using this research. Fellow Republican Jon Kyl, the bill’s sponsor, demands that CER not be used “to deny coverage of an item or service under a federal health care program.” The really silly thing here is that Medicare already has the ability to deny coverage for services it deems cost-ineffective. CER would merely arm the government with facts to make better-informed decisions…

I see three really silly things here.  The first is the Left’s approach to CER; I won’t get into it here, because I wrote a whole paper about it.

The second is Chait’s claim that Medicare already has the ability to make coverage decisions based on cost-effectiveness. Medicare has the legal authority to do so, but it definitely does not have the ability.

The third really silly thing is that Chait blames that inability — and the resulting wasteful spending — on industry lobbying or conservatives whipping up public fears about government rationing.  Chait and other Medicare supporters have no one to blame for wasteful Medicare spending but themselves.  If you support putting health care under the control of the political system, you cannot then blame that system (or the actors within) for doing what it always does.  You might as well blame a cow for going moo.  As I tried, tried, tried to explain to Paul Krugman: “Unless you have a plan to abolish Republicans, they’re part of your plan.”

Conservatives CERtainly [ha!] have understandable ideological reasons to oppose the Obama health care reform as a whole. It’s the particulars of their opposition that arouse curiosity. The right has presented its opposition to health care reform as principled disagreement with “big government.” But opposing “big government” can mean different things… The Republican Party and its ideological allies have defined it increasingly as whatever suits the profitability of the health care industry…

The health care industry has spent vast sums to influence politicians and opinion leaders, mostly on the right. Health care is an issue where precious few conservatives have paid any attention to the details of policy. And the industry is a natural ally of the conservative goal of preventing single-payer health care. So the industry has managed to define its self-interest as the conservative position on health care.

For the most part, I have to agree.  With precious few exceptions, conservatives couldn’t care less about health care.  (How else can we explain why the GOP tolerates things like Medicare Part D and Mitt Romney?)  When Democrats try to reform health care, many conservatives have no more to add to the conversation than “government rationing — bad.”

And therein lies the danger that Chait reveals.  If conservatives do nothing but object to government rationing — if they decide they prefer (A) high taxes and wasteful government spending to (B) a government that has the power to make people’s medical decisions — the growing cost of health care will generate public support for a government-takes-all solution, by which time conservatives will be seen as apologists for a pack of rent-seeking weasels.  If conservatives continue to ignore the details of health policy, they will increasingly fall prey to the fallacy that anything “private” is good.  Universal coverage through the private sector?  No problem.  Government subsidies for private insurers?  Hey, at least it isn’t socialized medicine.  Doctors/hospitals/drugmakers/devicemakers complaining the government isn’t paying them enough?  Well, if they’re in the private sector, they must be right.

But they’re not right.  People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

If conservatives choose either (A) or (B), the Left wins.  Conservatives need a way out of that box: (C) let seniors control the money and let markets set prices.  I can’t remember the last time I heard a movement conservative articulate that approach to Medicare reform.