Topic: Regulatory Studies

The Antitrust Religion

Many successful American businesses have been accused of anti-competitive practices. In The Antitrust Religion, a new book published by the Cato Institute, attorney and author Edwin S. Rockefeller argues that much of the conventional wisdom about antitrust is wrong. Drawing on 50 years of experience with U.S. antitrust laws, Rockefeller sheds light on why lawmakers, bureaucrats, academics, and journalists use arbitrary and irrational laws and enforcement mechanisms to punish capitalists rather than promote competition.

Rockefeller also participated in a Cato daily podcast about the book.

Legal Trends in Bioethics

Starting with the fall issue of The Journal of Clinical Ethics, my “Legal Trends in Bioethics” column will be available on the Cato website at time of publication instead of only several months later. That means the information provided will be more up-to-date and relevant for anyone interested in tracking legal issues in bioethics.

For those not familiar with the column, it tracks bioethics related issue through all stages of litigation, legislation, and regulation at both the federal and state levels, as well as occasionally mentioning exceptional legal developments in other countries. The topics covered are not always exactly the same, but usually there are sections on informed consent, abortion, children’s rights, vaccines, organ procurement, HIV, mental illness, medical privacy, unconventional treatment, right-to-die, stem-cell research and other new technologies, among other topics depending on what bioethics topics are of legal concern in the U.S.

The column tries to be comprehensive as far as reporting the most relevant developments at each level of government and in each topic area. It is a very useful tool for doing exactly what its name implies – tracking the “Legal Trends in Bioethics.” The following is the introduction to the fall column which will be published in The Journal Clinical Ethics and simultaneously become available on the Cato website next month:

The most troubling development in this quarter is the extent to which legislators continue to intervene in the patient/physician relationship by trying to regulate the relationship down to the smallest specifics of what is said and done. These developments are a great threat to both physician and patient autonomy, but while there have been many attempts to pass such invasive legislation, at this point, few of such bills have actually made it into law. It will be important to watch the next two issues of Legal Trends if someone is interested in seeing how many of such bills actually do end up as laws.

The issue of medical tourism is not new to bioethics, but it is on the brink of attracting more attention in U.S. courts and legislatures. There is no separate heading in “Legal Trends” for “medical tourism,” but it is important for anyone interested in the subject to regularly check the “Legal Trends’ subheading dealing with interesting developments in other countries. In this issue, for example, some Canadians are seeking a police investigation into an assisted suicide in Switzerland. Physician assisted suicide is legal in Switzerland, but illegal in Canada. At issue is whether Canadians have a legal right under Canadian law to travel to Switzerland to avail themselves of a practice that is illegal in their own country. In the United States there is a constitutional right to travel which would make it legal for the patient seeking physician assisted suicide to go to Switzerland (there is no case directly on point but the basic principle is well-established in U.S. constitutional jurisprudence), but even in the U.S., as in Canada, it may be possible to prosecute someone who assists that person in getting to Switzerland. This could be considered aiding and abetting a suicide. The Canadian suit has not even been filed yet, and no such case exists in the U.S., but it is an interesting issue to watch. It may come up as it did in Canada with respect to traveling to Switzerland where it is legal for physicians to assist foreigners in committing suicide (this is not true in the Netherlands); it is also likely to come up in connection with people suffering from kidney disease traveling to Iran, the only country where it is legal to purchase kidneys, and in other situations where the legality of the activity is not the issue but the price of medical treatment.

The “Legal Trends” from earlier this year are available on the Cato website or directly from The Journal of Clinical Ethics.

Upcoming Cato Forum on the Rights of Terminally Ill Patients

In 2006, a panel of the D.C. Circuit Court of Appeals ruled that terminally ill patients have a constitutionally protected right to purchase and use experimental drug treatments not yet approved by the federal government. 

On August 7 of this year, the full D.C. Circuit overturned the panel ruling, holding that terminally ill patients have no such constitutional right.

On September 25, this coming Tuesday, the Cato Institute will host a policy forum titled, “Should the Government Insert Itself between Dying Patients and Unproven Therapies?“ 

Debating the rights of terminally ill patients will be Scott Ballenger, the lead counsel for the plaintiffs in that case; Ezekiel Emanuel, a bioethicist with the National Institutes of Health and a leading critic of the panel’s ruling; and yours truly.

The forum will be from 12-1:30pm, followed by a luncheon.  Register here.

Cato “Neutered” on Electricity Deregulation?

Last week, Peter Van Doren and I had an op-ed in The Wall Street Journal that reflected on the record of electric utility restructuring in light of the recent rate hikes experienced in the “deregulated” states. Libertarian energy consultant Mike Giberson over at The Knowledge Problem, however, was unimpressed.

Giberson offers only two substantive criticisms. First, he takes issue with our claim that the case for vertical integration was scarcely heard during the debate over restructuring:

It isn’t clear from the article where Taylor and Van Doren were during the debates over unbundling, but delving into the voluminous public records of both federal and state regulators of the electric power industry would reveal that vertical integration has been among the matters discussed at length. Earlier in the article they quote MIT economist Paul Joskow, but if they were at all familiar with his work they would not make such “unfortunate” claims.

Vertical integration was in fact a big part of the policy conversation in the state legislatures and regulatory hearing rooms during the course of restructuring. But as Economist Robert Michaels at U. Cal., Fullerton argues, those discussions were superficial, uninformed, and politically charged conversations primarily concerning utility market power and the need to corral it. Paul Joskow’s work on this matter (which we are indeed well acquainted with) along with that of other academics who’ve investigated vertical integration in the electricity sector from an I/O perspective was given little serious attention by policymakers. That was our point.

Second, Giberson seems to take issue with our contention that vertical integration is an efficient means of remedying hold-up problems between generators and power distributors, facilitating efficient investment in transmission, and maintaining system reliability. Giberson finds it “curious that Cato Institute writers are so skeptical about the ability of decentralized arrangements (like prices and contracts) to lead to efficient results.”

Market arrangements indeed have their place, but if they were always preferable to alternative arrangements, then the firm as we know it would not exist – a point well made by Ronald Coase (no enemy of markets he) in his classic essay “The Nature of the Firm” back in 1937. Just because one has great faith in the power of markets does not necessarily mean that one should enter a daily spot market in the search for secretarial help or, alternatively, daily spot markets for electric power. For a longer discussion on why “decentralized arrangements (like prices and contracts)” are problematic in the electricity business, see this Cato study from the aforementioned Robert Michaels.

With the substance now put aside, let’s examine the kicker:

And it dawns on me that through it all, the Cato authors don’t advocate anything at all, not even the “true deregulation” that they describe in the final paragraph. They discuss history, explain some economics, call the loss of vertical integration unfortunate, speculate on preferences for contracts, and suggest that a totally unregulated world might turn out to be like the old regulated world.

We are to some extent guilty as charged. We did indeed spend a lot of our available word count explaining how electricity markets work. But it seemed to us that this was necessary in order to fully explain why the current emphasis on recent price increases in deregulated electricity regimes is misleading. Consumers seem advantaged by regulation during fuel-price upswings and disadvantaged by regulation during fuel-price declines. But over a longer time frame (1990-2006), the average price increases in regulated and deregulated regimes are not statistically different. Thus the differences between the old and new regimes are more apparent than real.

We go on to argue (as we did more robustly in this study published a few years ago) that a totally deregulated world of independent generators, transmitters, and distributors and consumers buying spot would not be efficient or stable because of the hold-up problem. We speculate that the arrangements to which firms and consumers would agree would resemble vertical integration which returns certainty for firms and price limits for consumers. Giberson might not like that argument, but it’s hard to miss.

Often Cato is bold, or insightful, or both, and sometimes it is over-dramatic in asserting the costs of this-or-that government program or the benefits of some tax cut or another, but almost always Cato offers clear advocacy for liberty. Taylor and Van Doren don’t give us that Cato in their rambling Wall Street Journal essay. Instead we get what amounts to an implicit defense of the old status quo.

While we do criticize the regimes produced by “restructuring,” we do not defend the old regime. In fact we do not defend any particular substantive market outcome at all. Instead, we defend an idea – that business owners – not politicians – should decide how market enterprises are organized and operated. If there is a more libertarian argument, then I have not heard it.

Pregnancy as a Random Occurrence

In 2004, the American College of Obstetricians and Gynecologists tried to get California’s legislature to require consumers who purchase their own health insurance to buy coverage for … wait for it … the services of obstetricians and gynecologists.

The following comes from an analysis of the failed legislation that is available on the California Senate’s web site:

In response to the suggestion that mandated coverage for maternity care will promote adverse selection, ACOG asserts that empirical evidence shows women cannot accurately predict when they will become pregnant, and therefore would not be able to time a purchase of insurance with an expected birth.

Healthcare Economist Critiques My P4P Article

Thanks to Jason Shafrin for sharing his thoughts on my article, “Pay-for-Performance: Is Medicare a Good Candidate?

Shafrin points to a problem with my preference for (I must apologize in advance for all these modifiers and hyphens) privately administered third-party pay-for-performance financial incentives:

Cannon’s point of using competition between insurers to allow each to experiment is wise assuming that insurers want the best care for their patients. As Dr. Fogoros notes in his GUTHealtcare website, patients generally do not pay for their health insurance, employers do. And for employers “As long as we don’t hear more than the average number of complaints from our employees, the health coverage we provide is, by definition, good enough.”

True enough: insurers and employers are not always good agents for employee-patients. In the Medicare setting, however, seniors can choose a private “Medicare Advantage” plan themselves – that is, they are not assigned to a plan by an employer. So in Medicare Advantage, there may be more competitive pressure for private insurers to get P4P right.

Now Who Looks Stupid?

People who argue that patients are too dumb to make their own health care decisions rarely consider how dumb government is.  According to yesterday’s New York Times:

In a significant policy change, Bush administration officials say that Medicare will no longer pay the extra costs of treating preventable errors, injuries and infections that occur in hospitals, a move they say could save lives and millions of dollars.

That’s right.  For the past 42 years, the federal government has paid hospitals to give grandma an infection, drop her on the floor, or leave a sponge inside her – and then paid the hospital more to put her back together again.  That is, if the infection didn’t kill her.

Does anyone really believe that if each patient controlled the health care dollars that employers and the government now control, that it would take patients 42 years to stop rewarding hospitals for medical errors?  In other areas of your life, how often do you give more money to a business that screwed you over?