Topic: Health Care & Welfare

Well That’s Another Fine Mess You’ve Gotten Us into

AARP and Families USA are screaming about rising prescription drug prices, without and within Medicare Part D. The New York Times is calling for price controls on drugs purchased under Part D.

A 2004 study by the Manhattan Institute estimated that applying the type of price controls found in Medicaid and the Veterans Health Administration to Medicare would reduce pharmaceutical R&D by nearly 40 percent and reduce Americans’ aggregate lifespans by 277 million life-years.

In other words, the logic of “negotiating drug prices” is that everyone under the age of 65 should die one year sooner so 42 million geezers (sorry, Dad) can save a few bucks on Lipitor. But is the logic of opposing price controls that workers should have to pay through the nose to pump these geezers full of drugs?

Part D puts us all in a no-win situation: either pay up and bankrupt the nation or control prices, suppress R&D, and prepare to check out early. It is a trap, set by the Left and sprung by the GOP.

That’s why – if the repeal train has left the station – the only sane option left is a radical overhaul of the entire program. With a little luck, Republicans will come to see the box in which they have put themselves and rediscover their interest in Medicare reform.

AMA: We’ll Cure Those Market Forces

It should have been an invigorating story for free-marketers.

Saturday’s New York Times describes how competition from health care clinics in retailers such as Wal-Mart and CVS is pushing traditional doctor offices to be more responsive to customer needs:

Professional societies for family doctors and internists are urging their members to break with tradition by making it easier to schedule appointments — or even making appointments unnecessary in the case of walk-in patients who need immediate attention.

“It’s a big trend,” said Amanda Denning, a spokeswoman for the American Academy of Family Physicians, which has about 94,000 members.

The academy is spending $8 million on consultants who visit doctors nationwide to suggest improvements in patient care. The advice is meant to “keep them from going to an in-store clinic,” Ms. Denning said, while also benefiting doctors by making office procedures more efficient.

Speedier appointments for patients who need immediate attention, more efficient office operations, and (the article later states) increased doctor office revenues as more (satisfied) patients are treated. American health care would certainly benefit from such a shot-in-the-arm.

So, naturally, the American Medical Association wants to perform a competition-ectomy. The Times goes on to report:

At its annual meeting this month, the American Medical Association called on the clinics to accept a list of principles that would limit their scope to simple services and ensure that a physician oversees the operations.

“Patients want quick and easy access to health care services, but they shouldn’t have to worry about the safety and quality of care provided in these clinics,” said Dr. Rebecca J. Patchin, an A.M.A. board member.

Once again, the AMA is making sure health care providers will do no harm … to AMA members’ bottom lines.

Clive Crook on the Massachusetts Plan

Clive Crook writes (note: link probably will expire in a month),

How to do national health reform worthy of the name? First, and most important, create a level playing field tax-wise for individuals and firms, so that nobody has a financial incentive to prefer employer-provided insurance to the individually purchased kind. You could do this by extending Connector-style tax relief to all taxpayers, or by abolishing it for employers. Abolition would be better. It would raise a lot of revenue (which will be needed in my plan) and would jolt people into changing their insurance arrangements.

Second, the free-rider problem makes the case for an individual mandate compelling, in my view. Massachusetts is right about that. And the mandate, in turn, makes health subsidies for the poor, which would be desirable in any case, unavoidable… . But to avoid the enormous problems of enforcing and administering the mandate … give everybody a voucher sufficient to buy stripped-down, Connector-style coverage.

Third, impose one other global restriction on insurance companies: If they offer a policy to anyone, they must offer that same policy to everyone, regardless of age, sex, current health, and other risk factors. Again, the Connector has provisions of this kind. This would preserve the risk-pooling feature of private insurance, while still allowing vigorous competition on price and offering.

I strongly disagree with the third point. As I pointed out here, it is these sorts of regulations that aggravate the problem of the uninsured in the first place. Force insurance companies to offer the same policy to everyone at the same price, and naturally health insurance will be a bad deal for young, low-risk people. Like Massachusetts, you will end up with a problem of such people being uninsured. As I said in my talk, the Massachusetts plan at best solves a problem that was created by regulation in the first place. Listen to the talk.

“Cursive Is Illegal”

Evergreen State elementary school teachers, take note: Olympia is moving against some of your more affluent failures.

Everyone knows that doctors’ horrible handwriting causes problems for patients and pharmacists.  As of this month, it is illegal for doctors in Washington state to write prescriptions in cursive.  (Will italics be next??)

The sad thing is that health care markets have become so calcified that this really, really dumb law might actually enhance efficiency.  I just hope we won’t have to wait long before some medicine-socializer argues that this proves that government planning is superior to free-market health care.  (Any takers?)

Big Government Health Care

I have been trying to make the point that we cannot magically make health care affordable by having our health care services paid for by the government. I have been trying to use Medicare and Medicaid spending to make that point. Now, Laurence J. Kotlikoff and Christian Hagist have found a good way to make it.

European critics of the U.S. health care system often focus on the private provision of health care and health insurance. Yet the more important difference between the United States and other developed countries is the failure to control government spending. Other countries employ global budgets and control access to expensive drugs and new technology. The United States, by contrast, has very meager spending controls. If current trends continue, U.S. government health care spending will consume an ever growing portion of national income — far more so than any other developed country

…If current trends hold in the United States, by 2050 government health care spending will claim one-third of GDP.

I added the emphasis on the word “government.” The point is that even if we only have government pay for seniors and the poor, our government system will outspend other countries’ government systems that pay for everyone.

What’s different about America, as I argue in Crisis of Abundance, is that we do nothing to constrain the use of premium medicine (specialists and high-tech procedures.)

Fuzzy Math

This one is a few days old, but last week the Bush administration lowered by 500,000 its rah-rah-Medicare-Part-D estimate of the number of seniors with drug coverage. Seems they double-counted half a million veterans who had enrolled in a private Part D drug plan. Oops.

Two observations.

First, given the administration’s track record, journalists should just start using disclaimers like, “Remember, these Medicare figures were provided by the Bush Administration. Wink, wink.”

Second, I’m not a big fan of either Part D or the Veterans Health Administration. But left-wingers love the latter and hate the former. I wonder how they explain veterans leaving their preferred model for the one entitlement program they detest.

Thud, Part III

Stuart Butler responds here to my critique of his paper/proposal to break the “health care reform stalemate.” As one might expect, the Heritage guy and the Cato guy agree that federalism is good because “state experimentation permits a comparison of approaches to solving social problems.” Those social problems include low-quality, unaffordable health care and other consequences of excessive government.

My skepticism of Stuart’s proposal stems from the fact that he would have the federal government (1) offer financial incentives that induce states to conduct policy experiments and (2) judge the success of those experiments. That actually runs counter to the idea of federalism and sets up a process where advocates of markets are bound to lose.

State officials know that if they don’t maintain or improve quality of life, people and jobs leave. Thus the freedom to choose one’s state of residence both encourages policy experiments and holds states accountable for them. That decentralized accountability mechanism pretty much cannot be fouled up unless a state prohibits its residents to leave or (more likely) finds some way to shift the costs of its experiments to other states.

Having the feds offer states cash to induce policy experiments would favor collectivist over government-limiting experiments. First, it would shift the tax burden of collectivist experiments to other states and therefore make such proposals more attractive to state legislators. (That is the #1 problem with Medicaid.) Proposals to limit government would be on the losing end of that concentrated benefits/diffuse costs problem. By definition, rolling back government involves taking something away from an organized interest group. Were any state to deliver such a proposal to Stuart’s commission, it would have to arrive tied to other proposals that buy off those interest groups. Thus states would present Stuart’s commission with proposals that either increase government intervention or (at best) have no impact on government intervention. On net, that means more government intervention.

Stuart has more confidence than I do that states would propose market-based reforms. As evidence, he cites recent experiments with defined contributions and health savings accounts in Medicaid. But here I think Stuart makes my point for me. As I explain elsewhere, those are not government-limiting reforms. Vouchers and HSAs make Medicaid more like cash assistance, and therefore just trade some of Medicaid’s current problems for problems associated with cash assistance (read: welfare checks). As long as Congress keeps giving states a dollar-for-dollar incentive to expand their Medicaid programs (what I call “pay for dependence”), vouchers and HSAs likely will increase Medicaid spending.

But suppose a state proposed a fantastic health care reform: eliminating the tax exclusion for employer-provided health insurance and lowering marginal tax rates. That and other tax-based reforms would probably fail because even some people who are generally supportive of the concept (like me) would oppose giving the feds the ability to write different tax rules for different states.

It is true that Congress could reject the inevitably collectivism-heavy package of proposals that the commission would submit. I personally have no confidence that any Congress would do something so sensible, much less that this Republican Congress would. But even if we could rely on Congress to act sensibly, why tempt them?

Finally, having the feds judge the results would create a centralized accountability mechanism susceptible to special interest lobbying, which Stuart acknowledges “would probably help those who want to expand government.” It is in the forum of Stuart’s commission, rather than in society at large, where I fear market-based approaches would not survive.