Topic: Health Care & Welfare

Johnson and Weld Are Right, Clinton Is Wrong: Congress Should Privatize the VA

Listening to Hillary Clinton put her big-government ideology before the needs of veterans (see below video) brings to mind an email exchange I had recently with a correspondent who had questions about privatizing Medicare, Medicaid, and the Veterans Health Administration.

The video is an interview with Libertarian presidential and vice presidential candidates Gary Johnson and Bill Weld into which MSNBC interjected a telephone interview with Democratic candidate Hillary Clinton. Clinton protests (starting at 4:20) that Congress should not privatize the VHA, while Bill Weld, a former two-term Republican governor of Massachusetts, gives one of the best explanations I’ve seen of why it should (10:00).

The email exchange follows the video.

Wanna Fight Superbugs? Stop Overprescribing Government

PHILADELPHIA, PA - JUNE 15: Dr. Ezekiel Emanuel speaks onstage at the Klick Health Ideas Exchange on June 15, 2015 in Philadelphia, Pennsylvania. (Photo by Neilson Barnard/Getty Images for Klick Health)

Ezekiel Emanuel notices that inflated demand for antibiotics has led to overuse, and that antibiotic-resistant infections may be killing 23,000 Americans per year. He notices the pharmaceutical industry is focusing more on expensive non-cures for cancer that only extend life by months than on new antibiotics. But he hasn’t noticed that government intervention is causing these problems, so he thinks the solution is—you guessed it—even more government.

Government Inflates Demand for Antibiotics

In the Washington Post, Emanuel warns that “high patient demand leads to overprescribing” of antibiotics, which “breeds resistance” and can lead to superbugs against which we humans have no defenses.

Yet the main reason patient demand is so high is that the federal government—through Medicare, Medicaid, the tax code, Emanuel’s beloved ObamaCare, and other measures—have anesthetized patients to the cost of antibiotics and everything else. We would have less antibiotic overuse and resistance if government just let people keep their own money to spend on health care.

Government Distorts Pharmaceutical Research

Emanuel then complains pharmaceutical manufacturers are spending far more money to research and develop cancer treatments that only add a few months to cancer patients’ lives (and cost more than $100,000 a pop) that they spend developing lower-cost antibiotics.

If this state of affairs fails to reflect patients’ preferences, perhaps the reason is that Medicare offers to make drug companies and oncologists fantastically wealthy by paying for cancer treatments regardless of value.

Overprescribing Government

Rather than admit that government can be incompetent to the point of contributing to the problems it is trying to solve—as his fellow Obama-administration alumnus Larry Summers does—Emanuel doubles down on the Big Government ideology. He proposes requiring hospitals to track antibiotic (over)use as a condition of receiving Medicare subsidies.

Does it occur to Emanuel that a Medicare program stupid enough to subsidize five decades of antibiotic overuse might not be competent enough to track, much less solve that problem?

Next, Emanuel illustrates why the passive voice should be unconstitutional: “every antibiotic prescription should be electronically reviewed to be certain it meets national guidelines.” Like many devotees of the passive voice, Emanuel employs it to hide what he means, which is: “The federal government and its agents should review every antibiotic prescription you and your family receive, even when the government isn’t paying for it.”

What could possibly go wrong? I mean, can you imagine any reasons why people might want a little privacy when it comes to their use of antibiotics? Emanuel can’t—or he doesn’t care.

Finally, he proposes to have the federal government award $2 billion prizes to anyone who secures FDA approval for a new antibiotic. A system of prizes might actually do a better job than the federal government’s patent system of encouraging antibiotics R&D. But Emanuel does not address such thorny questions as who gets to define which new antibiotics will qualify; who sets the amount of the prize; what sort of complications financing the prizes would create; how this award would affect the FDA, and lobbying of the FDA; or whether the net effect of this system would be positive or negative.

Ezekiel Emanuel has no time for such trifles. He’s got himself a hammer, and by God he’s found a nail.

Conclusion 

Government is like antibiotics. Some amount is necessary. But overprescribing it makes things a lot worse.

A good indication you’ve overdosed on the statist Kool-Aid is when you make dismissive comments like this one Emanuel levels at current antibiotic-tracking programs: “Unfortunately, they are voluntary.”

Five Facts about the Minimum Wage

1. A dozen California metropolitan areas – including big cities like Fresno, Stockton, Bakersfield and Modesto – already have unemployment rates from 8.0% to 18.6%. Yet California’s statewide minimum wage is now scheduled to rise every year through 2022.

2.  News reports imagine that raising the minimum wage will push up other wages, so average wages would supposedly rise more quickly. On the contrary, three of the four most recent increases in the federal minimum wage were quickly followed by prolonged stagnation in average wages.  change in avg and min wage

3. In 2015, twice as many earned less than the $7.25 federal minimum wage (1,691,000) as the number paid that minimum wage (870,000).

4. Every time the federal minimum wage has been increased the number earning less than that minimum always increased dramatically.  This was not just true of teenagers but (as the graph below shows) also for those over 25.  When the minimum wage is pushed up faster than the market would have moved it, the effect is to greatly increase the proportion of jobs paying less than the minimum (including working for cash in the informal economy).  Employers offering less than the minimum, legally or otherwise, then enjoy a flood of unskilled applicants unable to compete for scarcer opportunities among larger businesses subject to minimum wage laws. Such intensified rivalry for sub-minimum-wage jobs then pushes the lowest wages even lower.more were paid less than min when min wage went up

 5. Regardless of federal, state or city laws, the actual minimum wage is always zero.

A Glimmer of Good News: Widespread Gains in Life Expectancy at Birth

Some recent studies have presented evidence that inequality of mortality is increasing, and that life expectancy is actually falling for some groups. Those studies generally focus on life expectancy at a certain age threshold, usually 50. In a recent paper in the Journal of Economic Perspectives, authors Janet Currie and Hannes Schwandt instead focus primarily on gains in life expectancy at birth. They find that, along this metric, inequality in mortality has fallen significantly in recent years, and that the gains in life expectancy have been widely shared. Given the impact of childhood health on health later in life, these findings suggest “today’s children are likely to face considerably less inequality in mortality as they age than current adults.” Despite the headlines, there have been impressive gains in life expectancy and reductions in mortality in recent years, especially for children.

There are three different methods of analyzing inequality in mortality: across counties, by educational attainment, and by career earnings. The latter two approaches have been more commonplace in the recent literature. As the authors note, analyzing by education suffer from changes in the underlying composition of the categories they are using. In people with only a high school education in 2010 was much different than the group with the same level of educational attainment twenty years ago. Using relative income levels runs into some data limitations and problems with reverse causality, in that some cases poverty or limited might be caused by health issues instead of the other way around. For these reasons, the authors instead turn to the third method and analyze inequality in mortality by geographic region, counties in this case.

Little Sisters Win as John Roberts Again Balks at Calling Balls and Strikes

The Supreme Court issued a short, unanimous opinion in the contraceptive-mandate cases known as Zubik v. Burwell. There’s plenty of punditry out there for you to read so I’ll just offer three thoughts:

1. This was the biggest punt in Supreme Court history.

The Court abdicated its duty to say what the law is in favor of wiping the slate clean and telling the lower courts to facilitate a settlement between the parties. This is a cop-out. If the justices were hopelessly deadlocked 4-4 regarding the legal issue presented in the case – whether there was a way for the government to achieve its free-contraceptives-for-all goal in a way less-burdensome on religious employers – then they should’ve held the case for reargument at such a time as there’s a ninth justice to provide the tie-breaking vote.

2. The challengers win.

Although the opinion goes out of its way to state that the Court takes no position on the questions of whether (a) the contraceptive mandate poses a “substantial burden” on religious free exercise, (b) the government’s interest was compelling, and (c) the current regulations are the least-restrictive means of achieving that interest, it’s clear that the justices think that the government and nonprofit challengers are close enough in their legal positions that they can just “work it out.” In other words, after an unusual round of supplemental briefing wherein the Court asked the parties to speculate on what kinds of regulations might avoid involving religious employers in what they consider to be sinful behavior, the justices think there may well be a workable solution: simply have the employers object and let the government handle the rest (dealing with insurers and otherwise). Even Justices Sotomayor and Ginsburg, who concurred specially to protest (too much?) that lower courts should be free to continue ruling for the government, essentially accepted the “I object” solution so long as the resulting insurance/contraceptive coverage is “seamless.” 

If that’s correct, then the Court has essentially conceded that the challengers should have won their claim under the Religious Freedom Restoration Act – wherein, as the Hobby Lobby case showed two years ago, the government loses if there’s a way it can achieve its goal in a way that imposes less of a burden on the religious rights of the objecting parties. So really, the end result, assuming the lower courts don’t engage in a bout of judicial disobedience (not a slam-dunk assumption given how some courts have treated the Second Amendment in the wake of Supreme Court rulings in that regard) should be the same as if the Court, with Justice Scalia, had ruled 5-4 for the Little Sisters et al.

3. The legal precedent doesn’t matter.

RFRA is an unusual statute in that it’s meant to be applied case-by-case, so a ruling in favor of peyote-smokers says nothing about how judges should rule regarding prison beards – or objectors to contraceptive mandates. Contra the progressive alarmists in the wake of Hobby Lobby, a successful RFRA claim regarding one aspect of Obamacare implementation doesn’t mean that left-handed lesbians now have to sit in the back of the bus (or however the tired parade of horribles went). So even though the Court declined to adopt my argument (or any other) in the case, it doesn’t mean that our liberties are diminished in future or that the government can exceed its lawful powers in some future case.

In sum, the wily chief justice persuaded his colleagues to go in for a non-judicial non-decision. I may like the practical result here, but this isn’t law.

A New Legal Blow Against Obamacare

The federal district court sitting in D.C. yesterday handed a victory to those who believe in following statutory text, potentially halting the payment of billions of dollars to insurers under the Affordable Care Act’s entitlement “cost-sharing” provisions.

Since January 14, 2014, the Treasury Department has been authorizing payments of reimbursements to insurers providing Obamacare coverage. The problem is that Congress never appropriated the funds for those expenditures, so the transfers constitute yet another executive overreach.

Article I of the Constitution provides quite clearly that “No Money shall be drawn from the Treasury but in Consequence of Appropriations made by Law.” The “power of the purse” resides in Congress, a principle that implements the overall constitutional structure of the separation of powers and that was noted as an important bulwark against tyranny by Alexander Hamilton in the Federalist 78.

It’s a basic rule that bears repeating: the executive branch cannot disburse funds that Congress has not appropriated.

Accordingly, in a win for constitutional governance, Judge Rosemary Collyer held in House of Representatives v. Burwell that the cost-sharing reimbursements authorized under the ACA’s section 1402 must be appropriated by Congress annually, and are not assumed to be appropriated.

Judge Collyer gave a biting review of the federal government’s argument in the case: “It is a most curious and convoluted argument whose mother was undoubtedly necessity.” The Department of Health and Human Services claimed that another part of the ACA that is a permanent appropriation—section 1401, which provides tax credits—also somehow included a permanent appropriation for Section 1402. Hearkening to the late Justice Scalia’s lyrical prose, Collyer explained that the government was trying to “squeeze the elephant of Section 1402 reimbursements into the mousehole of Section 1401(d)(1).”

Indeed, this ruling is a bit of a feather in Cato’s cap as well. The legal argument that prevailed here—that the section 1402 funds cannot be disbursed without congressional appropriation—first was discussed publicly at a 2014 Cato policy forum. The lawyer who came up with the idea, David Rivkin of BakerHostetler, refined it in conjunction with his colleague Andrew Grossman, also a Cato adjunct scholar who spoke at the forum. After BakerHostetler had to withdraw from the case due to a conflict, George Washington University law professor Jonathan Turley (who also spoke at the forum) took over the case.

Judge Collyer stayed her injunction against the Treasury Department pending appeal before the U.S. Court of Appeals for the D.C. Circuit. Regardless of how that court decides – as in King v. Burwell, even if there’s a favorable panel, President Obama has stacked the overall deck – the case is likely to end up before the Supreme Court. If Chief Justice Roberts sees this as a technical case (like Hobby Lobby or Zubik/Little Sisters) rather an existential one (like NFIB v. Sebelius or King), the challengers have a shot. But because Democrat-appointed justices simply will not interpret clear law in a way that hurts Obamacare, this case, like so much else, turns on the presidential election and the nominee who fills the current high-court-vacancy.

Whatever happens down that line, Judge Collyer’s succinct ruling makes a powerful statement in favor of constitutional separation of powers as a bulwark for liberty and the rule of law.

Update (June 2, 2016): It has come to my attention that this suit was conceived in a different manner than described above. As seen here, here, here, and here, it was Florida International University law professor Elizabeth Price Foley who conceived of the lawsuit and developed it with David Rivkin, both in terms of legal doctrine and amassing political support in the House. We’re proud to have Foley on the editorial board of the Cato Supreme Court Review.

Berniecare Would Increase Federal Expenditure by $32 Trillion Over Next Decade, Twice as Much as Campaign Claimed

Fresh off his resounding victory in the West Virginia primary, Senator Bernie Sanders has intimated that he has no intent of dropping out of the race any time soon, even though he trails his rival Hillary Clinton significantly in pledged delegates. One of the cornerstones of the Sanders campaign has been his health care plan, which would replace the entirety of the current health care system with a more generous version of Medicare. His campaign has claimed the plan would cost a little more than $13.8 trillion over the next decade, and he has proposed to fund these new expenditures with a clutch of tax increases, many of them levied on higher-income households. At the time, analysts at Cato and elsewhere expressed skepticism that the cost estimates touted by the campaign accurately accounted for all the increases in federal health expenditures the plan would require, and incorporated costs savings estimates that were overly optimistic. Now, a new study from the left-leaning Urban Institute corroborates many of these concerns, finding that Berniecare would cost twice as much as the $13.8 trillion price tag touted by the Sanders campaign.

The authors from the Urban Institute estimate that Berniecare would increase federal expenditures by $32 trillion, 233 percent, over the next decade. The $15 trillion in additional taxes proposed by Sanders would fail to even cover half of the health care proposal’s price tag, leaving a funding gap of $16.6 trillion. In the first year, federal spending would increase by $2.34 trillion. To give some context, total national health expenditures in the United States were $3 trillion in 2014.

Sanders was initially able to restrict most of the tax increases needed to higher-income households through income-based premiums, significantly increasing taxes on capital gains and dividends, and hiking marginal tax rates on high earners. Sanders cannot squeeze blood from the same stone twice, and there’s likely not much more he could do to propose higher taxes on these households, which means if he were to actually have to find ways to finance Berniecare, he’d have to turn to large tax increases on the middle class.

There are different reasons Berniecare would increase federal health spending so significantly. The most straightforward is that it would replace all other forms of health care, from employer sponsored insurance to state and local programs, with one federal program. The second factor is that the actual program would be significantly more generous than Medicare (and the European health systems Sanders so often praises), while also removing even cursory cost-sharing requirements. In addition, this proposal would add new benefits, like a comprehensive long-term services and support (LTSS) component that the Urban Institute estimates would cost $308 billion in its first year and $4.14 trillion over the next decade. These estimates focus on annual cash flows over a relatively short time period, so the study doesn’t delve into the longer-term sustainability issues that might develop from this new component, although they do note that “after this 10-year window, we would anticipate that costs would grow faster than in previous years as baby boomers reach age 80 and older, when rates of severe disability and LTSS use are much higher. Revenues would correspondingly need to grow rapidly over the ensuing 20 years.”

Even at twice the initial price tag claimed by the Sanders campaign, these cost estimates from the Urban Institute might actually underestimate the total costs. As they point out, the authors do not incorporate estimates for the higher utilization of health care services that would almost certainly occur when people move from the current system to the generous, first-dollar coverage in the more generous version of Medicare they would have under this proposal. They also chose not to incorporate higher provider payment rates for acute care services that might be necessary, and include “assumptions about reductions in drug prices [that] are particularly aggressive and may fall well short of political feasibility.”

Berniecare would increase federal government spending by $32 trillion over the next decade, more than twice as much as the revenue from the trillions in taxes Sanders has proposed. And this might not be underselling the actual price tag, and only considers the cash flow issues in the short-term. There could be even greater sustainability problems over a longer time horizon. One thing is for certain the plan would require even more trillions in additional tax hikes.