Tag: medicaid

GOP Health Care Alternative: Not as Bad as Advertised

Like my colleague, Michael Cannon, I was convinced by the staff summary and general spin accompanying the Republican health care bill introduced by Sens. Tom Coburn (R-OK) and Richard Burr (R-NC), and Reps. Paul Ryan (R-WI) and Devin Nunes (R-CA) that the bill headed, albeit more slowly, down the same road to government-run health care as expected Democratic proposals. However, a closer reading of the actual bill shows that, while there are still reasons for concern, it may be much better than originally advertised.

First, it should be pointed out that the centerpiece of the bill is an important change to the tax treatment of employer-provided health insurance. The Coburn-Burr-Ryan-Nunez bill would replace the current tax exclusion for employer-provided health insurance with a refundable tax credit of $2,300 per year an individual worker or $5,700 per year for family coverage. This move to personal, portable health insurance has long been at the heart of free market healthy care proposals. The bill would also expand health savings accounts and make important reforms to Medicaid and Medicare.

And, the bill should receive credit for what it does not contain. There is no individual or employer mandate. (I could live without the auto-enroll provisions, but they look more obnoxious than truly dangerous). There is no government board determining the cost-effectiveness of treatment. There is no “public option” competing with private insurance. In short, the bill avoids most of the really bad ideas for health reform featured in my recent Policy Analysis.

Other aspects are more problematic. The authors still seem far too attached to the idea of an exchange/connector/portal. The summary implied that states would be required to establish such mechanism. In reality, however, the bill merely creates incentives for states to do so. Moreover, I have been repeatedly assured that the bill’s authors are aiming for the more benign Utah-style “portal,” rather than the bureaucratic nightmare that is the Massachusetts “connector.” Still, I would be more comfortable if the staff summary had not singled out Massachusetts as the only state reform worthy of being called “an achievement.”

And, if states choose to set up an exchange, a number of federal requirements kick in, such as a requirement that at least one plan offered through the exchange provide benefits equal to those on the low cost FEHBP plan. There is also a guaranteed issue requirement.

Elsewhere, there are also requirements that states set up some type of risk-adjustment mechanism although the bureaucratic ex-post option that I criticized previously, appears to be only one option among many for meeting this requirement. And, I wish the authors hadn’t jumped on the health IT bandwagon. Health IT is a very worthy concept, but one better handled by the private sector.

And, if we should praise the bill for what it doesn’t include, we should criticize it in the same way. The bill does not include one of the best free market reform proposals of recent years, Rep. John Shadegg’s call for letting people purchase health insurance across state lines.

The bills (there are minor differences between the House and Senate versions) run to nearly 300 pages, and additional details, both good and bad, may emerge as I have more opportunity to study them. But for now, the bill, while flawed, looks to have far more good than bad.

CER: A (Slightly) Different Perspective

My colleague, Michael Cannon, makes several good points about comparative effectiveness research (CER), both in his letter to USA Today and in his excellent paper on the subject. I strongly agree with him that we should not reflexively oppose CER—much of health care spending is wasteful or unnecessary, and it makes sense, therefore, to test and develop information on the effectiveness of various treatments and technology, giving consumers tools to evaluate the value of the care they receive. There is also a case for the use of CER in taxpayer-funded programs like Medicare and Medicaid. Taxpayers should not have to subsidize health care that has not proven effective, nor can Medicare and Medicaid pay for every possible treatment regardless of cost-effectiveness.

However, I am more skeptical in general about CER than he is for several reasons.

  • First, “quality” and “value” are not unidimensional terms. In fact, such concepts are highly idiosyncratic with every individual having different ideas of what “quality” and “value” means to them, based on such things as a person’s pain tolerance, lifestyle, feeling about hospitalization, desire to return to work, and so forth. For example, a surgeon may tell you that the only way to ensure a cure for prostate cancer is a radical prostectomy. But that procedure’s side-effects can severely impact quality of life - so some people prefer a procedure with a lower survival rate, but fewer side effects. Who is better suited to determine which of those procedures represents “quality” and “value,” a government board or the person directly affected?
  • Second, comparative effectiveness research too often has a tendency to gear its results toward the “average” patient. But many patients are outliers, whose response to any particular treatment, for either good or ill, can vary significantly from the average. This matters little when the research is simply informative. However, if the research becomes the basis for more prescriptive requirements, for example prohibiting reimbursements for some types of treatment, the impact on patient outliers could be severe.
  • Third, comparative effectiveness research can create a time lag for the introduction of new technologies, drugs, and procedures. The FDA, for example, has already caused delays in introducing drugs that have resulted in unnecessary deaths. Depending on how the final program is structured, comparative effectiveness research could create another layer of bureaucracy and testing between the development of a new drug, for example, and its introduction into the health care system. One only has to look at the difficulty in expanding Medicaid drug formularies to see how this could become a problem.

The advocates of government-sponsored CER clearly intend for it to be used as a basis for rationing care, not just in government programs, but for private insurance as well.

Cannon points out that government-sponsored CER is likely to be corrupted under pressure from special interest lobbies and politicians. I couldn’t agree more. Government-sponsored CER, therefore, is liable to yield the worst of all possible worlds, not only rationing, but rationing that is based on special interest lobbying rather than science.

Health care, is of course, a finite good. Therefore, it will always be rationed in some fashion. But, it is far better if the rationing agent is the consumer himself, rather than the government or any other arbitrary agent. The private sector is already undertaking CER. To the degree that consumers, insurers, and providers make use of this information, that is a good thing. If consumers don’t like how an insurance company, for example, uses CER in determining its reimbursement policy, he or she can choose a different insurer.

Government-imposed fiat rationing allows for no such choice. Therefore, we should oppose any government involvement in CER, and any efforts by the government to use CER to restrict reimbursement, especially in private insurance plans.