Topic: Cato Publications

As the Supply Curve Shifts…

By
Michael F. Cannon

Today’s New York Times runs an oped on the supply of physicians by David C. Goodman, an investigator with the Dartmouth Atlas of Health Care. The Dartmouth Atlas does invaluable work documenting the waste that exists in Medicare and other parts of the U.S. health care sector. Goodman critiques a recommendation by the Association of American Medical Colleges that the United States increase its output of doctors by 30 percent to meet the needs of the growing number of elderly Americans. That critique is excellent as far as it goes, but it seems to miss half the picture.

Goodman argues that increasing the number of physicians will do nothing to improve the quality of health care. He cites the sort of data for which the Dartmouth Atlas is famous:

Many studies have demonstrated that quality of care does not rise along with the number of doctors. Compare Miami and Minneapolis, for example. Miami has 40 percent more doctors per capita than Minneapolis has, and 50 percent more specialists…

The elderly in Miami are subjected to more medical interventions — more echocardiograms and mechanical ventilation in their last six months of life, for example — than elderly patients in Minneapolis are. This also means more hospitalizations, more days in intensive care units, more visits to specialists and more diagnostic tests for the elderly in Miami. It certainly leads to many more doctors employed in Florida. But does this expensive additional medical activity benefit patients?

Apparently not. The elderly in places like Miami do not live longer than those in cities like Minneapolis. According to the Medicare Current Beneficiary Survey, which polls some 12,000 elderly Americans about their health care three times a year, residents of regions with relatively large numbers of doctors are no more satisfied with their care than the elderly who live in places with fewer doctors. And various studies have demonstrated that the essential quality of care in places like Miami — whether you are talking about the treatment of colon cancer, heart attacks or any other specific ailment — is no higher than in cities like Minneapolis.

In other words, doctors in some areas of the country order up a lot of health care that seems to benefit no one but the doctors themselves. All that apparently value-less health care costs workers and taxpayers tens of billions of dollars per year.

But Goodman does not address an equally important question: whether an increase in physician supply could make health care more affordable. In the standard supply and demand model, loosening a constraint on supply shifts the supply curve to the right, which reduces prices. With third-party payers, the process gets pretty attenuated – probably more so when the government is paying than when a private insurer is paying. But that’s not the same thing as saying it breaks down. In fact, it’s hard to believe that increasing the supply of anything by 30 percent over time wouldn’t have an effect on prices.

Goodman might have noted that (1) the persistence of expensive, low-quality care and (2) a relatively unresponsive price mechanism are both enabled by the same same feature of the America’s health care sector: our over-reliance on third-party payment. As Mike Tanner and I noted in Healthy Competition, we even nose out Canada in terms of the share of medical care purchased by third parties.

Fixing that problem could address both cost and quality problems. Miami patients would be less likely to let their doctors order up useless tests if those patients are paying, say, 5 percent or 10 percent of the cost. And price is much more likely to respond to supply shifts if you have 200 million price-sensitive purchasers as opposed to a few hundred third-party payers, not all of which are price-sensitive.

Goodman’s Dartmouth colleague John Wennberg has recommended using medical savings accounts to cut out some of the waste in Medicare. Here’s an idea for getting rid of even more useless medical care: just give Medicare beneficiaries a lump-sum payment, adjusted for their individual health risk, and let them purchase medical care and coverage until it stops providing them value.

That might even change the political dynamics enough that we could eventually put to bed these wasteful political discussions about whether we should allow 30 percent more people to become doctors each year.

Topics: 
Cato Publications, General, Health Care, Regulatory Studies

UK National ID in Collapse - U.S. National ID to Follow?

By
Jim Harper

The Sunday Times (U.K.) reports that “Tony Blair’s flagship identity cards scheme is set to fail and may not be introduced for a generation.” The Times cites leaked e-mails reflecting senior officials’ belief that the plan to subject the U.K. population to the regimentation of a national ID system is falling apart. Even a backup, scaled-down national ID card isn’t “remotely feasible,” according to the e-mails cited by the report. Ministers who are pressing ahead with the plan are “ignoring reality.”

Similar e-mails may well be floating around the U.S. Department of Homeland Security, which will be issuing regulations to flesh out the REAL ID Act this summer this fall after November 7th. (No bureaucrat with an ounce of political acumen would drop a $9-billion-dollar unfunded surveillance-mandate before the mid-term election.)

This is not bad news. A national ID system is useful for controlling a law-abiding population, but not useful for securing against law-breakers, particularly committed threats like terrorists - unless it is part of a total surveillance system.

The failure to implement a national ID system in the U.S. would represent little loss to the nation in terms of security, and a substantial gain in terms of preserved freedom and autonomy. All this is discussed in my new book, Identity Crisis: How Identification is Overused and Misunderstood.

Unlike the U.K., where a national ID is apparently a project identified with Tony Blair, the Bush Administration does not have to look for a face-saving alternative. The U.S. national ID was not a Bush Administration project, but something it accepted in a political bargain. The Administration can now (rightly) declare it impossible to implement and inconsistent with American values, then work with Congress to repeal the REAL ID Act.

Topics: 
Cato Publications, Foreign Policy and National Security, Government and Politics, Law and Civil Liberties, Telecom, Internet & Information Policy

New at Cato Unbound: What to Do about Iran?

By
Will Wilkinson

In this month’s Cato Unbound, “What to Do about Iran,” Reuel Marc Gerecht, resident fellow of the American Enterprise Institute and author of The Islamic Paradox, argues in a provocative new essay that diplomatic attempts keep Iran’s clerical regime from getting nuclear weapons will fail, so the U.S. must choose between preemptively bombing Iran’s nuclear facilities or allowing the mullahs to have the bomb. Arguing that the latter option “would empower its worst enemies in Tehran and spiritually invigorate all Muslim radicals who live on American weakness,” Gerecht advises the former: a policy of preemptively bombing Iran’s nuclear sites.

This week and next, a panel of defense strategy and foreign policy experts will challenge Gerecht’s argument, starting with Ted Galen Carpenter, vice president of defense and foreign policy studies at the Cato Institute, and followed by Edward N. Luttwak, senior fellow of the Center for Strategic and International Studies and author of widely discussed recent article in Commentary, “Three Reasons Not to Bomb Iran — Yet,” and Anthony H. Cordesman, Arleigh A. Burke Chair in Strategy at the Center for Strategic and International Studies and author of Iran’s Developing Military Capabilities.

Is Gerecht right? Are all non-military approaches to the Iranian nuke bound to fail? If so, should the U.S. resign itself to a nuclear Iran and rely on deterrence as it did during the Cold War? Or is deterrence ill-suited to a regime run by religious extremists?

Stay tuned for incisive commentary and criticism by some of America’s leading defense policy thinkers.

Topics: 
Cato Publications, Foreign Policy and National Security, General

Competitive Federalism Can Reform Health Insurance, Med Mal

By
Michael F. Cannon

In a previous post, I suggested that my brother and his family could save thousands on their health insurance if they moved in with his former college roommate’s family in Pennsylvania, rather than settle and buy coverage in New Jersey.

I thought that former roommate’s wife (Kristin, another college friend) would shoot me virtual daggers. Instead, she wrote:

Wow — guess we’re pretty lucky! Although, we can’t seem to keep our doctors here in PA due to high malpractice insurance costs. So maybe the best deal for everyone would be to buy their insurance in PA, then drive to NJ for their doctor’s appointments.

That’s one way to get around unwanted costs imposed by a state’s medical malpractice laws. In our book Healthy Competition, Mike Tanner and I suggest another: Let patients, doctors, hospitals, and insurers agree up front on the level of malpractice protection that patients receive.

 

You like caps on non-economic damages? Sign yourself right up. You want more malpractice protection than that? It might cost you more, but the choice is yours. The contracts that providers are willing to write could even tell patients something about the quality of care.

Patients can already choose a different level of malpractice protection by traveling out-of-state or out-of-country for treatment. Why not let them do so without leaving home?

Topics: 
Cato Publications, General, Health Care, Law and Civil Liberties, Regulatory Studies

Medicare Part D: Who Is the Main Constituency?

By
Michael F. Cannon

Watson Wyatt Worldwide has just released a survey showing – again – that Medicare Part D’s employer subsidies and the availability of the new stand-alone drug plans are bailing out employers who can no longer deliver on their promises to retirees:

Despite widespread use of the Medicare federal subsidy, a vast majority of employers are planning to curtail their retiree medical plans for current and future retirees in the next five years…

Fourteen percent of employers plan to eliminate the benefit entirely for future post-65 retirees and 6 percent plan to eliminate it for their current post-65 retirees…

The lesson from the Pension Benefits Guarantee Corporation and other corporate bailouts could not be more clear: if government lets corporations escape the costs of making promises they can’t keep, we’ll get more corporations making promises they can’t keep.

Topics: 
Cato Publications, General, Health Care, Regulatory Studies

Health Care Provider Finds No Tragedy in This Commons

By
Michael F. Cannon

An article from the Minneapolis Star-Tribune on competition between physicians and nurse practitioners includes this endearing quote, which encapsulates how some providers see the U.S. health care sector:

The American Medical Association is against giving full autonomy to nurse practitioners, stating as its official policy position that a physician should be supervising nurse practitioners at all times and in all settings…

“There is an element within the physician community that gets a little antsy. … They think it’s going to take away revenue and business from them,” said Dr. Jan Towers, director of health policy for the American Academy of Nurse Practitioners. “Really, there’s more than enough for everybody.”

Cue “We’re in the Money”….

For more, be sure to check out Medicare Meets Mephistopheles, to be released by the Cato Institute in September.

Topics: 
Cato Publications, General, Health Care

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