Topic: Health Care & Welfare

Upcoming Cato Forum on Quality in Medicare

Just announced: the Cato Institute will host a forum on using “pay-for-performance” to improve quality in Medicare, the federal health care program for the elderly and disabled. The forum will feature Harvard’s David Cutler, National Medical Association president Sandra Gadson, Institute of Medicine Pay-for-Performance Advisory Committee co-chair Gail Wilensky, and yours truly. Date/time/location: Thursday, November 2, 4pm, the Cato Instiute. Interested parties can preregister or watch the forum online here.

The Fog Is Getting Thicker…

Over at Cato Unbound, Harold Meyerson argues that as employer-provided health benefits erode,

[c]ompanies that persist in offering such benefits are placed at a disadvantage when their competitors don’t. And consumers clearly can’t afford those benefits, either. As some recent surveys have made clear, precious few Americans can afford to buy medical insurance on their own or to utilize the Health Savings Accounts that the president is peddling.

Taking Meyerson’s points in reverse order:

  1. His comment that HSAs are unaffordable makes no sense.  Does he mean premiums?  HSAs are required to be coupled with high-deductible insurance, which has lower premiums than other types of insurance.  So the insurance component of HSAs is more affordable than … well, anything else.  Does he mean out-of-pocket expenses?  Sherry Glied and Dahlia Remler report that “the group responsible for half of all medical spending would see no change or a decline in cost sharing at the margin and on average” with HSAs.  That is, the people who need the most medical care would have less financial exposure with HSAs.  Soooo, Meyerson should like HSAs, right?
  2. Meyerson plays blame-the-victim with the individual health insurance market.  Meyerson writes that “precious few Americans can afford to buy medical insurance on their own,” as opposed to having their employer purchase coverage for them.  Let’s set aside that workers pay for the cost of those benefits through reduced wages.  The feds and state officials have wrecked the individual market by (A) diverting consumers to employer-sponsored insurance and Medicaid, and (B) driving customers out with costly regulations.  If Meyerson and I set up fruit stands on opposite sides of the street, and the government whacks people with a 2x4 whenever they tried to cross to Meyerson’s side, would he attribute his lack of business to, say, market failure?
  3. Meyerson fails to consider that the market may be sending him a message.  He complains that consumers cannot afford to purchase for themselves the benefits that employers had been purchasing for them.  Again setting aside that workers were paying for those benefits all along, might that mean that traditional employer-provided health benefits were unsustainable?  Perhaps that they were contributing to rising health care prices & premiums?

Kaiser Flubs HSAs

A new report on health savings accounts (HSAs), published by the Kaiser Commission on Medicaid and the Uninsured, is wrong or misleading in nearly every particular.  In essence, the report claims that HSAs are not good for poor people, when in fact all it shows is that poverty is not good for poor people.

I briefly considered doing a point-by-point response.  But then I remembered that I had already done so, in a paper titled “Health Savings Accounts: Do the Critics Have a Point?”, released five months ago.

Medicaid & the Free-Market Movement

This weekend, something pretty important happened, at least with regard to how the free-market movement approaches Medicaid and medical care for the needy. 

Saturday was the final day of the State Policy Network’s 14th annual meeting in Milwaukee. The State Policy Network provides guidance to 48 state-focused free-market think tanks in 42 states. Part of the annual meeting was a panel on Medicaid, the joint federal-state program originally created to provide medical care to the truly needy. 

Of course, Medicaid has swelled well beyond that goal. The program now covers 52 million people even though there are only 36 million U.S. residents below the poverty line. Medicaid also destroys private markets for health insurance and medical care, and induces low-income Americans to become dependent on government. For example, policymakers universally acknowledge that a welfare check induces dependence on government. Yet average Medicaid benefits for the program’s least expensive enrollees (the non-elderly) are worth twice as much as the average welfare check. Moreover, there are 10 times as many people who receive Medicaid benefits.

For years, several market-oriented groups have advanced Medicaid reforms that, in the name of empowering Medicaid enrollees or improving their quality of care, would expand enrollment and make Medicaid’s problems even worse. Principally, the reforms involve introducing health savings accounts and vouchers into Medicaid. Those groups have fed the rest of the free-market movement a steady diet of those bad ideas, often with some success. A few states have even experimented with those reforms.

On Saturday, I sat on a panel with one of the leading advocates of those proposals. We each presented our side to an audience comprised of the leaders of dozens of state-focused think tanks. I think one audience member probably spoke for many in the room when he said he felt conflicted. My paraphrase: “Part of me wants to improve Medicaid, but that would increase enrollment. And part of me wants to blow it up, but that’s a tough sell politically.” 

He’s right. That is a tough political sell. But it would be substantially easier were the free-market movement to abandon the fool’s errand of trying to improve the program and instead educate the public about the full range of harms Medicaid causes:

  • A per-capita tax burden that is currently over $1,100 and growing
  • An annual deadweight economic loss of some $70 billion
  • Crowd-out of private efforts to provide medical care for the poor, including private insurance, private charity, and self-help
  • Increased dependence on government
  • Higher prices for private health coverage and medical care, which makes Medicaid dependence more likely
  • Lower-quality care than is provided through private markets
  • The indignity of states having to beg Washington for permission to spend their own money as they wish

(For what it’s worth, free-market think tanks should acknowledge that Medicaid does a lot of good: it provides medical care to many who desperately need it. Yet that fact will hardly carry the day, considering that researchers have difficulty finding where Medicaid has any positive overall effect on health.)

Only after we prepare the ground will we be able to achieve serious reform, which should emphasize three things: block grants, block grants, and block grants. Replacing Medicaid with a system of block grants was a component of the 1996 welfare reform law until President Clinton insisted on its removal. Nowadays, no politicians are talking about block-granting Medicaid, largely because free-market groups have abandoned the field. (Until we get block grants, state-level reforms will not make much difference, though free-market groups should oppose those that make Medicaid more attractive and support those that make it less attractive.)

In short, this emperor has no clothes. If the free-market movement does not carry that banner, no one will. 

This weekend’s SPN meeting should be the start of a debate within the movement over how to approach Medicaid. (More details on my approach can be found here.) Thanks to Tracie Sharp of SPN and Mary Katherine Stout of the Texas Public Policy Foundation for getting the ball rolling.

Who Shall Live? Who Shall Die?

DETROIT–Over at Cafe Hayek, Russell Roberts looks at the ethics of distributing flu vaccines amid an artificial shortage and does a good job of cutting to the core question: why the hell is there a shortage? Roberts lays the blame at the feet of politicians — particularly state attorneys general — who have interfered with the market’s ability to make vaccines (like shoes, oranges, etc.) plentiful.

The ethical problems created by the artificial shortage of vaccines are like those created by the artificial shortage of transplantable organs (also a creature of government interference).  Once the shortage exists, and the state controls distribution, there’s really no good way — no “most ethical” way — to decide who should receive them. In other words, there’s no good way to decide who shall live and who shall die. If it’s ethics you’re interested in, try this: Don’t interfere with the market’s ability to supply vaccines and transplantable organs.

But as long as we’ve got these artificial shortages, my two cents is this: the politicians should be last in line.

Crisis of Abundance in the New York Times

A number of reports purport to show that the U.S. health care sector lags behind those of other nations. I’d be the last to argue that our health care sector should be a model for the rest of the world. But those supposedly objective reports are often based on subjective value judgments about which people will differ. They also tend to overlook objective strengths of the U.S. health care sector.

For example, New York Times columnist Tyler Cowen writes today about how the United States leads the world in medical innovation. We spend far more on medical research than other nations, which increases our level of health expenditures. But the benefits of all that spending are not confined to our borders; they help keep the “ferriners” alive longer, too.

Cowen also draws a lesson from Arnold Kling’s book Crisis of Abundance:

The American system also produces benefits that are hard to find in the numbers. The economist Arnold Kling in his “Crisis of Abundance: Rethinking How We Pay for Health Care” (Cato Institute, 2006) argues that the expected life span need increase by only about half a year for the extra American health care spending to be cost-effective over a 20-year period. Given that many Americans walk less and eat less healthy food than most Europeans, the longevity boost from health care in the United States may be real but swamped by the results of poor lifestyle choices. In the meantime, the extra money Americans spend to treat allergy symptoms, pain, depression and discomfort contributes to personal happiness.

Those interested can purchase Crisis of Abundance here, or click here to watch the Cato book forum featuring the author, Sebastian Mallaby of The Washington Post, and Jason Furman of NYU.

Extremism in Defense of Liberty

Michael Cannon, Mike Tanner, and other libertarian health care gurus may appreciate this.  I recently came across an intriguing quote by Founding Father Benjamin Rush, surgeon general of the Continental Army and signer of the Declaration of Independence.  So I did what everyone does these days and went to Wikipedia.  There I learned that:

Rush believed that Americans should enshrine the right to medical freedom in their Constitution, much as the right to freedom of religion is expressly guaranteed in that document.

Rush is reported to have argued that “Unless we put Medical Freedom into the Constitution, the time will come when medicine will organize into an undercover dictatorship … to restrict the art of healing to one class of men, and deny equal privilege to others, will be to constitute the Bastille of Medical Science. All such laws are un-American and despotic and have no place in a Republic … The Constitution of this Republic should make special privilege for Medical Freedom as well as Religious Freedom.”

(Of course, if you read a little further, you learn that some of his medical theories were not so hot). 

Rush was also a rabid antimilitarist who proposed in 1792 that two captions be painted “over the portals of the Department of War”: “An office for butchering the human species” and “A Widow and Orphan making office”–though that’s an idea that would probably be even less popular today.