Archives: 09/2012

Subsidies for Electronic Medical Records Leads to Higher Medicare Bills

Government subsidies often produce unintended consequences. The latest example comes from the New York Times, which reports that federal subsidizes to encourage doctors and hospitals to use electronic billing and recording records are leading to larger Medicare bills. That means that taxpayers are taking a double hit even though policymakers claimed that electronic record-keeping would make health care delivery more efficient, and thus less costly.

From the article:

Over all, hospitals that received government incentives to adopt electronic records showed a 47 percent rise in Medicare payments at higher levels from 2006 to 2010, the latest year for which data are available, compared with a 32 percent rise in hospitals that have not received any government incentives, according to the analysis by The Times…

Some experts blame a substantial share of the higher payments on the increasingly widespread use of electronic health record systems. Some of these programs can automatically generate detailed patient histories, or allow doctors to cut and paste the same examination findings for multiple patients — a practice called cloning — with the click of a button or the swipe of a finger on an iPad, making it appear that the physicians conducted more thorough exams than, perhaps, they did.

Critics say the abuses are widespread. “It’s like doping and bicycling,” said Dr. Donald W. Simborg, who was the chairman of federal panels examining the potential for fraud with electronic systems. “Everybody knows it’s going on.”

The Times also notes that the subsidies are a bipartisan creation:

Both the Bush and Obama administrations have encouraged electronic records, arguing that they help doctors track patient care. When used properly, the records can help avoid duplicate tests and remind doctors about a possible diagnosis or treatment they had not considered. As part of the economic stimulus program in 2009, the Obama administration put into effect a Bush-era incentive program that provides tens of billions of dollars for physicians and hospitals that make the switch.

But some critics say an unintended consequence is the ease with which doctors and hospitals can upcode — industry parlance for seeking a higher rate of reimbursement than is justified. They say there is too little federal oversight of electronic records.

Of course, now that government has treated a problem by creating a new one, policymakers will argue for more spending on “oversight.” Money for that will come from taxpayers, which means yet another hit for the poor rubes who always get stuck paying for the politicians’ schemes.

See this Cato essay for more on fraud and abuse in Medicare and other government programs.

Squandering Assessment Test

Yesterday the annual summary of SAT—formerly Scholastic Aptitude Test—scores came out, and the news was once again disheartening. Indeed, average reading scores hit a record low, and math remained stagnant. Writing scores also dipped, but that part of the test has only existed since 2006.

There are important provisos that go with drawing conclusions about the nation’s education system using the SAT. Most notably, who takes it is largely self-selected, and growing numbers of people sitting for it—some of whom might not have bothered in the past—could lower scores without indicating the system is getting worse. That said, as the chart below shows, no likely amount of self-selection or changing test-takers can account for the overwhelming lack of correlation between spending and scores. Per-pupil outlays have taken off like a moonshot while scores have either sat on the runway, or even burrowed down a bit.

Sadly, this corresponds to the results from long-term National Assessment of Educational Progress exams—which are nationally representative—for 17-year-olds. Again, as the following chart reveals, spending has skyrocketed while scores have, um, decidedly not skyrocketed.

There are factors that make comparing year-to-year SAT scores imprecise. But the trend clearly reinforces what we should already know: we get almost no return for our education “investment.”

‘I Haven’t Raised Taxes’

Why am I only hearing about President Obama’s gob-smacking “I haven’t raised taxes” claim today, and from Reason?

On CBS News’s “60 Minutes” Sunday night, President Obama said, “Taxes are lower on families than they’ve been probably in the last 50 years. So I haven’t raised taxes.”

As of Monday morning, neither the Washington Post’s Pinocchio-awarding Fact-Checker, nor the Annenberg Public Policy Center’s FactCheck.org, nor the Tampa Bay Times’ Pulitzer-Prize-winning Politifact.com had risen to this opportunity…

Unbelievable. I just checked those websites, and they still haven’t.

Fortunately, Ira Stoll has. He leaves out a number of taxes President Obama has enacted, though, including raising the Medicare payroll tax on high-income earners, applying the Medicare payroll tax to non-payroll income for high-income earners, limiting the tax exclusion for flexible spending accounts, increasing the penalties on certain health savings account withdrawals, the “Cadillac tax” on high-cost health plans…

Foreign Policy Won’t Win the Election

Mitt Romney’s speech at the Clinton Global Initiative is not going to help him win the election. If he continues wasting time trying to move the needle on foreign policy, he is likely to lose.

The neoconservatives are giving Gov. Romney bad advice. They have repeatedly trashed him on background in the media for not paying enough attention to foreign policy, claiming that focusing on it more would help him win. The facts are not on their side.

If Romney wanted to win the election based on a foreign policy bump, he would have two tasks before him: to make foreign policy a salient issue, and to make voters prefer him on that issue. On the first task, in every poll asking for voters’ top priority, foreign policy/war/terrorism comes in under five percent. However much GOP foreign policy people don’t like it, this election will turn on the economy.

Second, voters prefer Obama to Romney by 15 percent on foreign policy generally, and by 11 percent specifically on foreign policy in the Middle East. Even after the Obama administration’s poor handling of the violence in Egypt and Libya, voters preferred Obama’s response over the Romney camp’s demagoguery by a margin of 45 to 26.

Focusing on foreign policy will not win Romney the election. And if he loses, as in 2008, the Republicans will have the neoconservatives to blame. Whether they would choose to accept the lesson of 2008 and 2012 is another question altogether.

Should States Implement ObamaCare’s ‘Essential Health Benefits’ Mandate?

The Washington Post’s Sarah Kliff writes that the Department of Health and Human Services has decided to “punt” on the “monumental” task of dictating exactly what types of coverage those who get health insurance through the individual market or small employers must purchase. HHS has decided to let each state decide for its own residents what constitutes “essential health benefits.” It was a shrewd move: under the guise of decentralized decision-making, HHS is offering to let state officials take the blame for an inevitably controversial decision and the inevitable higher costs that will result. Yay, federalism! States have until the end of this month to decide just how much coverage they are going to help ObamaCare force their citizens to purchase.

Kliff reports that many states are now wrestling with the unanswerable question, “What health-care benefits are absolutely essential?”

Is acupuncture essential health care? Weight-loss surgery? Under Obamacare, states choose…

California legislators say acupuncture makes the cut. Michigan regulators would include chiropractic services. Oregon officials would leave both of those benefits on the cutting-room floor. Colorado has deemed pre-vacation visits to travel clinics necessary, while leaving costly fertility treatments out of its preliminary package…

A Virginia advisory board recommended that the state adopt a plan that includes speech therapy and chiropractic care. A District subcommittee has endorsed a plan pegged to an existing BlueCross BlueShield package, and public comment remains open through Friday Sept. 28…

Of course, an objective definition of “essential” coverage is impossible. Like “medical necessity,” the only way to determine whether health coverage is “essential” is if the benefits exceed the costs. That is an inherently subjective question that no legislator or regulator, state or federal, can or should try to answer for a diverse population of consumers. When they do, health care providers invariably hijack the process, demanding that consumers be required to purchase coverage of their services. Since the legislators/regulators are handing out benefits while consumers and taxpayers shoulder the costs, the result is predictable: health insurance premiums rise.

Thanks to HHS’s punt, providers now have an even greater incentive to lobby states to mandate coverage of their services. If a state creates its own list of “essential health benefits,” then any benefits the state mandates will be eligible for federal subsidies. If not, the cost of state-mandated benefits continues to fall on consumers or employers, who tend to complain. (Again, shrewd. Corrupt and irresponsible. But shrewd.)

But since ObamaCare is on the books, and HHS gave states a choice, what should states do?

The choice is identical to what states face with regard to health insurance Exchanges: states have the option to implement part of ObamaCare themselves, but no matter what they decide, Washington is ultimately running the show.

The federal government will not let states pick a menu of “essential health benefits” or establish an Exchange with fewer regulatory controls than HHS would impose itself. Since less regulation than the federal government would impose is not an option, implementing these parts of the law can only lead to more regulation, fewer choices, and higher costs. And of course, state officials will take the blame when ObamaCare starts increasing costs and denying care to people. There is simply no good reason for states to assume this impossible, harmful, and thankless task.

Instead of doing the feds’ dirty work, states should use this opportunity to show how ObamaCare rigs the game against states and consumers alike. State officials that want to rid the nation of ObamaCare should submit to HHS a “benchmark” EHB plan that they know HHS will refuse. It could be either the most affordable health plan they can find in their individual or small group markets, or a plan that state officials designed themselves. Leave out benefits that HHS considers dealbreakers. Push the deductible as high as you dare. Allow annual or lifetime limits. The less coverage you include in your EHB benchmark, the more choice consumers will have and the lower the premiums will be. Submit such a proposal to HHS and dare them to reject it. Let your voters see that under ObamaCare, choice is a mirage. Dare HHS to explain why they rejected affordable health plans and forced the Treasury to subsidize more-expensive health plans.

Alternatively, state who are not inclined to confrontation can tell the Obama administration the same thing they should say with regard to health insurance Exchanges: it’s your stupid law, you implement it.

When Obama and Romney Talk Foreign Policy, Who Wins?

The presidential campaign will focus on foreign policy for a few hours on Tuesday when President Obama addresses the United Nations General Assembly in New York City while his Republican challenger Mitt Romney will address the Clinton Global Initiative just a few miles away. Each will try to wring some political advantage from speeches that are generally directed at foreign audiences.

Neither candidate is likely to come out a winner, although for different reasons. It will be difficult for President Obama to convince the electorate and the world that U.S. policies, particularly in the volatile Greater Middle East, are succeeding. But Mitt Romney’s challenge is greater. He must convince voters that his policies would result in tangible gains. It isn’t clear that they would, however, nor that his policies are sufficiently different from the president’s to convince voters to change horses in mid-stream.

The president is likely to call for staying the course. Echoing Secretary of State Hillary Clinton’s remarks from last week, he will try to convince the people of the Middle East that the United States remains their friend and partner, and he will tell skeptical Americans that the feeling is mutual. He may point to the large quantities of aid that U.S. taxpayers have sent to the region to win points with foreign audiences, but this risks alienating the voters here at home.

Obama may also emphasize that the United States intends to maintain a large military presence in the region so as to, as Secretary Clinton said last week, “help bring security to these nations so that the promise of the revolutions that they experienced can be realized.” But foreign listeners aren’t convinced that the United States has helped bring security to anyone, and they certainly don’t want U.S. help now.

Obama’s message to Americans, delivered between the lines of his UN speech, is that the United States cannot afford to disengage from the region. Be patient, Obama will say. Many decades of trying to manage the political affairs of other countries, often with the heavy hand of the U.S. military, has carried high costs and delivered few clear benefits, but it could have been worse.

Not so, says Romney and the Republicans. President Obama’s outreach to the Muslim world has clearly failed, they claim. The Cairo speech in 2009, followed by the belated support for anti-Mubarak protesters in Egypt in 2011, and finally the decision to use U.S. military power to topple Muammar Gaddafi in Libya, don’t appear to have purchased us much good will. On the contrary, anti-American sentiment is running high, higher even than when Obama took office, according to some polls. The violence against U.S. officials and property merely punctuates the grim statistics, and invites ominous parallels to 1979.

But while Obama’s task will be difficult, Mitt Romney has an even higher hill to climb. He must differentiate his policies from the president’s and persuade U.S. voters, especially, but also the skeptics abroad, that his policies would be much better. His surrogates have implied that the events of the past fortnight certainly would not have occurred had Romney been in the Oval Office, but they haven’t explained how or why that is true.

Meanwhile, the few concrete policies that Romney champions are deeply unpopular in the region, and not much more popular with U.S. voters. His calls to add nearly $2 trillion in military spending over the next decade suggest a willingness to increase the U.S. military presence around the world, but especially in the Greater Middle East. Most Americans want U.S. troops to be brought home. His leading foreign policy adviser has criticized the Obama administration for refusing to intervene in the Syrian civil war. This suggests that the problem with U.S. policy has been too little meddling in the internal affairs of foreign countries, whereas most Americans believe that there has been too much. And Romney did not endorse Sen. Rand Paul’s effort to tie U.S. aid to conditions, so it is hard to see how he can score points against President Obama by promising to stick with the status quo.

However, all of these other issues pale in comparison to the most visible U.S. policy in the region of the past decade: the Iraq war. That disastrous conflict will hang heavily over Romney’s speech, as it has over his entire campaign, and over the GOP for several election cycles. Although most Americans now believe that the war never should have been fought, and most non-Americans never thought that it should have been, Romney refuses to repudiate it. On the contrary, he has staffed his campaign with some of the war’s leading advocates. Given his famous aversion to anything that might be construed as an apology, Romney is unlikely to evince any doubts about the war in his speech on Tuesday. But if he wants to convince voters that he will be a more capable steward of U.S. foreign policy than Obama has been, he must at least explain what lessons he takes away from an unpopular war. Otherwise, his implicit assertion that it couldn’t get any worse will fall flat with those who believe that it certainly could.

Washington’s Disdain for Wealth Creators Is a Big Part of the Problem

Like too many other long-reigning fixtures on Capitol Hill, Senator Carl Levin (D-MI) doesn’t appreciate the magnitude of the challenge to the authority he presumes to hold over America’s job and wealth creators. Or maybe he does, and frustration over that fact explains why he besmirches companies like Apple, Google, Microsoft, and Hewlett-Packard.

Levin presided over a Senate hearing last week devoted to examining the “loopholes and gimmicks” used by these multinational companies to avoid paying taxes – and to branding them dirty tax scofflaws. Well here’s a news flash for the senator: incentives matter.

The byzantine U.S. tax code, which Senator Levin – over his 33-year tenure in the U.S. Senate (one-third of a century!) – no doubt had a hand or two in shaping, includes the highest corporate income tax rate among all of the world’s industrialized countries and the unusual requirement that profits earned abroad by U.S. multinationals are subject to U.S. taxation upon repatriation. No other major economy does that. Who in their right minds would not expect those incentives to encourage moving production off shore and keeping profits there?

Minimizing exposure to taxes – like avoiding an oncoming truck – is a natural reaction to tax policy. Entire software and accounting industries exist to serve that specific objective. Unless they are illegal (and that is not what Levin asserts directly), the tax minimization programs employed at Apple, Google, Microsoft, and Hewlett-Packard are legitimate responses to the tax policies implemented and foreshadowed by this and previous congresses. If Levin is concerned about diminishing federal tax collections from corporations (which, of course, reduces his power), the solution is to change the incentives – to change the convoluted artifice of backroom politics that is our present tax code.

Combine the current tax incentive structure with stifling, redundant environmental, financial, and health and safety regulations, an out-of-control tort system that often starts with a presumption of corporate malfeasance, exploding health care costs, and costly worker’s compensation rules, and it becomes apparent why more and more businesses would consider moving operations abroad – permanently. Thanks to the progressive trends of globalization, liberalization, transportation, and communication, societies’ producers are no longer quite as captive to confiscatory or otherwise suffocating domestic policies. They have choices.

Of course many choose to stay, and for good reason. We are fortunate to have the institutions, the rule of law, deep and diversified capital markets, excellent research universities, a highly-skilled workforce, cultural diversity, and a society that not only tolerates but encourages dissent, and the world’s largest consumer market – still. Success is more likely to be achieved in an environment with those advantages. They are the ingredients of our ingenuity, our innovativeness, our willingness to take risks as entrepreneurs, and our economic success. This is why companies like Microsoft, Apple, Google, and Hewlett-Packard are born in the United States.

But those advantages are eroding.

While U.S. policymakers browbeat U.S. companies and threaten them with sanctions for “shipping jobs overseas” or “hiding profits abroad” or some other manifestation of what politicians like to call corporate greed, characterizing them as a scourge to be contained and controlled, other governments are hungry for the benefits those companies can provide their people. Some of those governments seem to recognize that the world’s wealth and jobs creators have choices about where they produce, sell, and conduct research and development. And some are acting to attract U.S. businesses with incentives that become less necessary every time a politician vents his spleen about evil corporations. Not only should our wealth creators be treated with greater respect from Washington, but we are kidding ourselves if we think our policies don’t need to keep up. As I wrote in a December 2009 Cato paper:

Governments are competing for investment and talent, which both tend to flow to jurisdictions where the rule of law is clear and abided; where there is greater certainty to the business and political climate; where the specter of asset expropriation is negligible; where physical and administrative infrastructure is in good shape; where the local work force is productive; where there are limited physical, political, and administrative friction.

This global competition in policy is a positive development. But U.S. policymakers cannot take for granted that traditional U.S. strengths will be enough.  We have to compete and earn our share with good policies. The decisions made now with respect to policies on immigration, education, energy, trade, entitlements, taxes, and the role of government in managing the economy will determine the health, competitiveness, and relative significance of the U.S. economy in the decades ahead.

Since another hearing devoted to thanking these companies for their contriubtions to the U.S. economy is unlikely, perhaps Senator Levin should at least consider the perils of chasing away these golden geese.