Tag: health care reform

Looking to a Failed Model for Health Care Reform

CNN health care correspondent Sanjay Gupta, who was briefly considered for surgeon general in the Obama administration, reports that the administration is looking to Massachusetts as a model for its forthcoming health care reform proposal. That model would involve an individual mandate, an employer mandate, a “connector” with increased insurance regulation, and massive subsidies for the middle class.

Given that the Massachusetts plan is expected to run $2-4 billion over budget over the next 10 years, has failed to come close to universal coverage, has done nothing to reduce health care costs (indeed, may have driven up insurance costs), and has actually led to increased wait time for primary care physicians, that may not be the best model out there. In fact, perhaps the Obama administration might like to look at studies by David Hyman and me detailing the Massachusetts model’s many problems.

More Praise for Cochrane’s ‘Health-Status Insurance’

This time, it’s coming from Reihan Salam at Forbes.com:

Choice and Security: Professor John Cochrane’s advice to President Obama

Last week, at a White House forum on reforming health care, President Obama issued a challenge to advocates of less government control of the medical marketplace.

“If there is a way of getting this done [i.e., reforming health care] where we’re driving down costs and people are getting health insurance at an affordable rate and have choice of doctor, have flexibility in terms of their plans, and we could do that entirely through the market, I’d be happy to do it that way.”

More to the point, Obama added that he’d be just as happy to pursue an approach that involved more government control as well, and that seems to be the tack he’s taking…

Congressional Republicans have criticized Obama’s approach, and they’ve been particularly hostile to the idea of a new public insurance plan. They argue that Obama’s reforms will eventually lead to a nationalized health care system. But as of yet they’ve failed to offer an alternative that meets Obama’s criteria for a successful health care reform.

Enter John Cochrane, an economist at the University of Chicago Booth School of Business. Professor Cochrane has long advocated a proposal he calls “health-status insurance,” an approach that could guarantee long-term health security while also freeing medical insurers to compete for customers. To most health care reformers, this sounds like a contradiction in terms.

Cochrane’s paper is, “Health-Status Insurance: How Markets Can Provide Health Security.”

“Fascinating ‘Outside-of-the-Box’ Thinking on Health Insurance Reform”

At Reason Online, Ronald Bailey reviews John Cochrane’s recent Cato Policy Analysis, “Health-Status Insurance: How Markets Can Provide Health Security.”

Writing in advance of last week’s health care summit held by President Obama, Bailey explains:

Summit attendees will break into various working groups that are supposed to engage in “outside-of-the-box” thinking. As it happens, they now have some fascinating “outside-of-the-box” thinking on health insurance reform to draw on. Earlier this month, University of Chicago economist John Cochrane published an intriguing policy analysis for the libertarian Cato Institute that looked at how “health-status insurance” can provide health security for Americans. Cochrane claims that with health-status insurance, free markets can solve the vexing problem of how to insure people with pre-existing medical conditions and “provide life-long, portable health security, while enhancing consumer choice and competition.”…

Creating and selling separate health-status insurance policies would mean that medical insurance companies would no longer have an incentive to offload sick people. Instead, because those with pre-existing conditions would have the funds to pay higher premiums, insurers would compete for their business. “Constant competition for every consumer will have the same dramatic effects on cost, quality, and innovation in health care as it does in every other industry,” argues Cochrane.

Health-status insurance also helps delink medical insurance from employment because…a worker diagnosed with diabetes…can switch jobs without worrying about whether or not he can obtain medical insurance…

While Cochrane acknowledges that his proposal is not a comprehensive health care reform program, adopting it would go a long way toward satisfying President Obama’s eight health care reform principles, especially affordability, aiming toward universality, portability, and choice, and being fiscally sustainable. “Health-status insurance can simultaneously give us complete and portable long-term insurance, great individual choice, and cost-containment beyond the dreams of any health policy planner,” concludes Cochrane. Asked if he has been invited to the president’s health care reform summit this week, Cochrane said no, but quickly added, “If I got the phone call, I would definitely be there.” Mr. President, there’s still time for your summiteers to hear about this outside-of-the-box thinking.

This Is Why Universal Coverage Is a Religion — and Not about Compassion or Saving Lives

I was invited to participate in an email/online/sorta exchange for the Washington Post yesterday.  Unfortunately, the effort was spiked after just a few rounds of emails.  But rather than let my participation go to waste, I thought I’d post one exchange that I think highlights why I’m not just being colorful when I describe supporters of universal health insurance coverage as the Church of Universal Coverage.  I could summarize the exchange, but I’m lazy.  So I’ll just copy and paste.

I wrote:

All the interest groups are meeting with all the right politicians and making all the right noises, thus the Church of Universal Coverage says the stars have aligned for fundamental reform… Everyone is at the table right now because no one wants to be on the menu.  But when the Democratic leadership makes its intentions clear, today’s love-fest will turn into a bloodbath.

Andres Martinez of the New America Foundation (who owes me a taco al pastor) responded:

I am a proud member of the church, Michael.  As New America’s own recent study on the urgency of reform – which reads like a strong courtroom closing argument – noted, how can the world’s most prosperous nation afford to have tens of thousands of its citizens die each year because they lacked access to health care?  Health care reform is a moral imperative, so your reference to a church (um, even if sarcastic) is appropriate…

I replied:

The Institute of Medicine estimates that every year, about 20,000 Americans die because they lacked health insurance, but as many as 100,000 die from preventable medical errors.  What moral code compels the Church of Universal Coverage to solve the first problem before addressing the second?

Elise Gould of the Economic Policy Institute (whose working paper, “Who is Adversely Affected by Limiting the Tax Exclusion of Employment-Based Premiums?”, I am keen to read) chimed in:

In an answer to Michael’s post about the deaths caused by lacking health insurance as compared to those from preventable medical errors, I’d argue that it’s much easier to solve the second when you have people in a common system (i.e., solving the first).

Me again:

To say that universal coverage will make it easier to reduce medical errors is pure fantasy.

The principal reason we have too many medical errors is that fee-for-service payment dominates America’s health care sector, and fee-for-service rewards medical errors and punishes efforts at error reduction.  The reason fee-for-service dominates is government.  Medicare – the single-largest purchaser in the world – pays largely on that basis.  Ditto Medicaid.  And the federal tax code encourages fee-for-service by insulating consumers from the cost of their health coverage.  If you think it’s hard for government to change payment systems now, just wait until universal coverage gives government even more control over payment systems and makes even more providers dependent on those decisions for even more of their income.  (As an aside, when consumers control their health care dollars and choose their health plans, they can change payment systems in a heartbeat.)

This is why universal coverage is a religion: supporters believe that universal coverage has magical, supernatural powers to suspend political reality and the laws of economics.  I do not exaggerate.  See here and here.

Health care reform is a moral imperative.  But universal coverage is not a moral imperative, nor is it about compassion or saving lives.

For those who are interested, the Anti-Universal Coverage Club is still accepting new members.

Has He Read the Book?

At yesterday’s White House Summit on Health Care Reform, President Obama had this to say:

If there is a way of getting this done, where we’re driving down costs and people are getting health insurance at an affordable rate and have choice of doctor, have flexibility in terms of their plans, and we could do that entirely through the market, I’d be happy to do it that way.

Well, Mr. President, may I recommend Healthy Competition: What’s Holding Back Health Care and How to Free It for a detailed proposal for how to accomplish this without turning one-seventh of our economy and some of our most important, personal, and private decisions over to the tender mercies of the federal government.

Of course, as my colleague Michael Cannon points out, no one who supports free market proposals to drive down costs and give consumers greater choice of providers and insurers was actually invited to the summit.

The ball is back in your court, Mr. President.

Who’s Blogging about Cato

Here’s a round-up of bloggers who are writing about Cato this week:

  • Writing at the Adam Smith Institute blog, Phillip Salter discusses Patrick J. Michaels’s proposal that scientific articles should be available online for public comment.
  • Penning his thoughts on Obama’s plan to raise taxes on oil and gas usage, Wintery Knight cites Jerry Taylor’s research that shows why similar price control programs didn’t work in the 1970s.
  • Reihan Salam quotes William Niskanen on The Atlantic’s Washington blog in a post about the “starve the beast” theory that says lawmakers can slow government’s growth by lowering taxes and running up deficits.
  • Think Progress blogger Matthew Yglesias responds to Michael Cannon’s work on health care reform in a post about Obama’s White House health care summit.
  • Dr. Paul Hsieh of FIRM (Freedom and Individual Rights in Medicine) and Brian Schwartz of Patient Power cite John H. Cochrane’s Cato paper on free market solutions to health care security.