Topic: Health Care & Welfare

Ezra Klein, Libertarian?

Since I’ve disagreed with Ezra Klein in the past, I am pleased to report that we agree on what to do about the 7,000 Americans who die every year while waiting for transplantable organs. In a recent post, Klein notes that the shortage of organs is due to a ban on payments to organ providers. Klein advocates lifting that ban.  My favorite line:

We’ve stupidly disallowed payment for organs (if money can’t buy you life, why keep it around?)…

Klein brought to mind an observation made by Prof. Richard Epstein last week in the Wall Street Journal:

Only a bioethicist could prefer a world in which we have 1,000 altruists per annum and over 6,500 excess deaths [to] one in which we have no altruists and no excess deaths.

In Healthy Competition, Mike Tanner and I argue for repeal of Sen. Orrin Hatch’s 1984 National Organ Transplant Act, which prohibits payments to organ providers. 

In a recent issue of Cato’s Regulation magazine, Prof. Lloyd Cohen throws up his hands and issues a challenge to those opposed to such payments. Cohen has re-written his will to ensure that when he dies, his organs cannot be harvested unless his estate is paid $864.27 per organ. Why? Because that requirement will create a real-life situation where paying up will generate more transplantable organs. That will force the bioethicists to explain to four, maybe five families who have their checkbooks in hand, We’re sorry, but your loved one must die for our principles. Cohen urges others to insert similar clauses into their wills, just to get the message through the bioethicists’ heads.

Cohen and other powerful presenters will speak at a June 12 conference on organ markets at the American Enterprise Institute.

Abusing the Idea of Free-Market Health Care Reform

At about 6 pm yesterday, I received an invitation to a Heritage Foundation event titled, “Another Step forward for Free-Market Health Care Reform.” The event was anything but.

Heritage hosted Rep. Mike Rogers (R-MI), who proposes to allow health savings accounts in Medicaid. In the book Healthy Competition and elsewhere, Cato scholars have explained that Medicaid HSAs are not a free-market health care reform and instead distract Congress from reforming Medicaid the way it reformed welfare in 1996.

In fact, Rep. Rogers proposed a number of non-free-market health reforms:

  • Expanded federal regulation of the health insurance markets (a.k.a. “association health plans”)
  • Federal health information technology reforms
  • Federal malpractice liability reform

Rep. Rogers concluded his opening remarks by saying that health care “is the one place where we know how to tinker, we know where to tinker, [and] now we just [need to] have the will to tinker.”

I demur. Free-market reforms reduce the influence of government over the economy. The proposals offered by Rep. Rogers do the opposite. Then again, I have only listened to the Heritage event. I have not seen the most recent iteration of Rep. Rogers’ legislation, which is not yet available online. I hope Rep. Rogers or someone from the Heritage Foundation will explain what makes Medicaid HSAs (or the other proposals) a free-market health care reform.

How to Pay Directly for Health Care

A New York Daily News column by “money coach” Jean Chatzky shows consumers that it is possible to comparison-shop for health care services. Chatzky notes some of the resources available to patients:

[Health care] prices are starting to emerge. Private insurers like Aetna have started programs in parts of the country (Cincinnati is an early example) where they’ll publish online the exact prices they’ve negotiated with doctors in the area for hundreds of medical procedures and tests…

Healthgrades, which is the largest provider of quality information on doctors and hospitals, is now publishing information on 55 different surgeries and procedures and what they cost on average, in total, across the country…

Chatzky offers patients the following advice:

Price Shop… Get the difference between the list price (what doctors and hospitals bill for, on average) and the discounted or negotiated price that a health plan negotiated (which you and your insurer typically share). These prices can be hugely different.

Negotiate… 70% of adults who talked with a hospital say they were successful in negotiating a lower price for their medical bills… 61% who negotiated with a doctor were successful…

Ask About Cheaper Options. There are often less costly choices to what the doctor has prescribed…

And last. If you’re one of the 40 million people without health insurance, you should know that one of these high deductible plans may in fact make insurance affordable for you.

Chatzky even tells the story of Cato board member Lew Randall, whose doctor recommended a less-expensive barium X-ray (instead of an MRI) when Randall noted he would be paying cash. “If it were my shoulder, that’s what I’d have,” the doctor said. Randall saved $900 on that visit alone.

Health savings accounts have passed an important milestone now that consumer advocates are debunking the myth that health care is too complicated for consumers to be making their own decisions.

How Much to Trust the Medicare Trustees’ Projections?

The recently released Medicare Trustees Annual Report [pdf] contains a stark reminder of the Alice in Wonderland nature of Medicare’s financial projections and policy-making. Page 219 of the report carries the chief actuary’s “Statement of Actuarial Opinion.” Its contents should be mandatory reading for those worried about the program’s future. The statement’s second paragraph is reproduced here:

…the Board of Trustees has emphasized the strong likelihood that actual Part B expenditures will exceed the projections under current law, due to further legislative action [emphasis added] to avoid substantial reductions in the Medicare physician fee schedule. While the Part B projections in this report are reasonable in their portrayal of future costs under current law, they are not reasonable as an indication of actual future costs. Current law would require physician fee reductions totaling an estimated 37 percent over the next 9 years—an implausible result.

In other words: Despite Medicare being in a deep financial hole, don’t expect policymakers to stop digging for a while yet.

The funny part is that the actuarial method used in making projections is perfectly legitimate; it makes projections by completely ignoring future policy changes—no matter how likely they are. But the chief actuary is also correct to point out that certain aspects of current Medicare law are ridiculously out of touch with political reality.
Most official budget analysts have thrown a fit whenever I’ve used the words “debt” or “liabilities” to describe current-law Medicare obligations to future retirees. “We don’t ‘owe’ anyone anything because Congress can change current laws!” they’ve protested.

The chief actuary’s statement exposes the hypocrisy: His statement means that we are also obligated to pay future medical providers MORE than current laws stipulate. And, oh, by the way, don’t call that “debt” either because, in this case, Congress can choose NOT to change the laws!

Punting on Medicare Reform

I just returned from lunch with Mark McClellan, MD/PhD (economics) and administrator of the Centers for Medicare & Medicaid Servicesa very smart guy. The lunch was hosted by Grace-Marie Turner of the Galen Institute and Merrill Matthews of CAHI. (Thanks for lunch, guys.) 

Dr. McClellan told the group of the success of Medicare Part D, including the fact that it has (so far) cost less than projected. 

When recognized for a question, I made the following points:

  1. Part D has contributed to a rift in the president’s base, as evidenced by an editorial in this morning’s Wall Street Journal.
  2. Though there is disagreement over the significance of Part D’s lower-than-expected spending projections, there is no question that Part D made it more difficult to meet Medicare’s already unsustainable promises. 
  3. One result of Part D is that people who would otherwise be talking about Medicare reform are talking only about whether Part D is a success. 

I asked Dr. McClellan when the president might begin pushing Medicare reform, in particular the kind of reforms discussed by the National Bipartisan Commission on the Future of Medicare in 1999. 

McClellan answered that the president’s budget proposes (a) slowing the growth of Medicare spending on hospital care, (b) requiring wealthier seniors to pay more for their Medicare benefits, and (c) having Congress create another Medicare commission to tackle the problem.

The first two proposals are both potentially helpful and woefully inadequate. The third is a punt. 

Today’s Wall Street Journal also reports that yesterday Alan Greenspan “repeated a warning to lawmakers, saying Medicare spending is unsustainable and could one day drive government debt and interest rates substantially higher.” The president has acknowledged his duty to address those unfunded liabilities. 

An anxious nation waits … and waits … and waits … .

Driven to Distraction

Not 24 hours after President Bush signed into law the latest round of tax cuts (which have no effect on the size of government), Republicans from around town gathered to gush about their Medicare prescription drug program (which increases the size of government).

I’ll not name names, but there were a few faces at the GOP love-fest who, in their hearts, truly want to reform Medicare.  The greatest tragedy of Part D might be the way it has distracted those Republicans from that purpose.

(Erratum: On a previous occasion, I accused the GOP of throwing your tax dollars off the back of a truck.  It appears Republicans have been using a bus rather than a truck.  I apologize for the error.)

GOP Proposes $1.7b More for Medicare Rx

A couple of days ago, I blogged that Republicans are thinking about eliminating the late enrollment penalty for Medicare Part D. Reneging on that penalty would (1) defeat the only sensible aspect of Part D, (2) increase the tax burden of Part D by $1.7 billion over five years, and (3) ruin the credibility of future cost-containment efforts that hinge on changing seniors’ behavior.

Lo and behold, the drive to eliminate the late enrollment penalty has begun. Front and center is the Republican chairman of the Senate Finance Committee—Chuck Grassley of Iowa. Co-sponsors of Grassley’s bill include such conservatives as Jon Kyl (R-AZ) and Rick Santorum (R-PA).

And the Republican campaign to expand the federal government marches on…