Topic: Regulatory Studies

Andy Stern’s Angle on Universal Coverage

Last night, I debated Andy Stern on the Jim Bohannon radio showStern is president of the Service Employees International Union, which represents 1.8 million nurses, health care workers, janitors, security officers, and public employees. He is definitely not a member of the Anti-Universal Coverage Club.

I was pleased to find that we agree that the employment-based health insurance system cannot last. What I found most interesting, though, were two weaknesses in the case he makes for universal coverage.

First, Stern argues that unless we have universal coverage, American firms won’t be able to compete with foreign firms. To me, that claim is economic nonsense, as I explained in our debate and in Health Care News:

Employers don’t need the government to save them from the rising cost of health benefits. Just as Dorothy always had the power to return to Kansas by clicking her heels, employers have always had the power to pare back their health benefits…

All else being equal, firms that contain their labor costs this way will beat the firms that don’t. Those companies that support ‘universal coverage’ want to increase the labor costs of their competition, whether through higher taxes or health premiums. Universal coverage won’t make America more competitive — it will cripple America’s most competitive firms to protect its least competitive firms.

And, of course, that’s the entire point…. Companies that support ‘universal coverage’ never bother to mention that covering all the uninsured would cause health spending to explode, because they don’t really care about overall health spending. All they care about is that their competitors spend as much as they do.

Nor does Stern seem to mind if health spending explodes. I think that may be because…

Second, Stern argues that we could get a better deal on prescription drugs if Medicare were allowed to negotiate with drug companies. But seeing as how he represents so many health care workers, I don’t think he’s going to be leaning on Medicare to be that tough a negotiator. During our debate, I invited him to discuss SEIU’s role in helping Medicare set the payment rates that affect his members. He didn’t take the bait.

Darn Those Stubborn Market Failures

Queues in Massachusetts! A fascinating article [$] in today’s Wall Street Journal reveals that Massachusetts residents wait an average of seven weeks for an appointment with a primary-care physician. The queues apparantly have nothing to do with the new Massachusetts health plan – aside from illustrating that a paper guarantee of “health coverage” does not necessarily translate into health care:

“Health reform won’t mean anything for the state’s poor if they can’t get a doctor’s appointment,” says Elmer Freeman, director of the Center for Community Health, Education, Research and Service in Boston…

“Health-care coverage without access is meaningless,” Gov. Deval Patrick said in March…

“I thought insurance was supposed to be some kind of great thing, but it hasn’t changed” anything, [newly insured hairdresser Tamar Lewis] says.

No, the big question that article raises is, why is the market not resolving the shortage of primary-care physicians?

One hint can be found in the first two sentences of the article:

“Tamar Lewis runs a makeshift hair salon out of her one-bedroom apartment in Roxbury, a low-income neighborhood [in Boston]. She’s 24 years old and has been cutting hair since she dropped out of high school in 2002.”

There’s a good chance that Ms. Lewis is breaking the law. Massachusetts requires hairdressers – yes, hairdressers – to be licensed by the government. Asipiring hairdressers must (a) complete “a course of at least six months, which course must have included 1000 hours of professional training in a cosmetology school approved by the Board,” (b) pass an examination, and (c) pay a fee before they may become an apprentice hairdresser. After completing two years as an apprentice, the aspiring hairdresser must pass another exam and pay another fee to become a licensed hairdresser. Licensing a salon requires paying a fee, having an approved floor plan, and other restrictions that make it unlikely that Ms. Lewis’ salon is up to code. In all likelihood, the enlightened Commonwealth of Massachusetts could nail young Ms. Lewis for cutting people’s hair without a license, operating an unlicensed salon, and employing an unlicensed hairdresser (herself).

Too subtle? Another, much bigger hint can be found in an oped titled “Our Soviet Health System” [$] that the Wall Street Journal ran last month:

The limited number of endocrine specialists is a not a consequence of limited demand – everyone is aware of the epidemic of diabetes we are facing. There are also shortages of generalists and other specialists, and the reason is the absence of market signals – i.e., market-based prices – for influencing the supply of physicians in various specialties…

The essential problem is this. The pricing of medical care in this country is either directly or indirectly dictated by Medicare; and Medicare uses an administrative formula which calculates “appropriate” prices based upon imperfect estimates and fudge factors. Rather than independently calculate prices, private insurers in this country almost universally use Medicare prices as a framework to negotiate payments, generally setting payments for services as a percentage of the Medicare fee structure.

Many if not most administratively determined prices fail to take into consideration supply and demand. Unlike prices set on the market, errors are not self-correcting. That is why, despite an expanding cohort of patients with diabetes, thyroid disease and other endocrine disorders, the number of people entering this field is actually dropping. Young physicians are accurately reading inappropriate price signals.

Darn those stubborn market failures.

Finally Legal!

I can finally report that I am driving a legal automobile.

As readers will recall, this was my third trip (see here and here for previous installments in the saga). Actually, it was my third and fourth trip. When I got to the DMV this morning, happily clutching the Fairfax County tax receipt to my chest, I was told that I also needed an emissions test. It would have been nice of the bureaucrats to tell me that on my first trip, but why expect miracles.

So I had to exit the line, go back out to my car, and drive (illegally, once again) to a nearby service station. This interaction with the private sector was predicatably brief, so I was back at the DMV in less than 30 minutes. Unfortunately, Dan Griswold must have been hard at work in the interim since there was now a long line of people, none of whom appeared to be native-born Americans.

But after a 90-minute wait, I got up to the counter, and was able to get registered - but only after dealing with a libertarian quandary. While twiddling my thumbs, I noticed that I could request a vanity plate. Wouldn’t it be nice, I thought, to have a license plate reading “anti gov.” But getting a special plate also involved paying more money - funds that presumably would help finance the sloth-like bureaucracy that I despise. After wrestling with my conscience (which usually comes out on the short end), I decided that the cause of freedom would be best served by having the vanity plate.

I feel guilty about giving government more money, but I somewhat compensated by paying for my registration and vanity plate with a credit card, which means at least some small slice of the $103 gets diverted to the financial services industry. It ain’t easy being libertarian, but I somehow muddled through.

Air Traffic Control

You often need a crisis, real or imagined, to get major policy changes enacted. There are two looming challenges in our backwards and bureaucratic air traffic control system that might nudge Congress toward reform. The first is that the government system is having a hard time keeping up with the continued growth in air travel.

The second, as Government Executive magazine reports today, is that a large group of controllers are nearing retirement and the government might have a hard time finding replacements.

These challenges add to the woes of the Federal Aviation Administration, which has mismanaged the air traffic control (ATC) system for decades. The FAA has struggled to modernize ATC technology in order to improve safety and expand capacity. Its upgrade projects are often behind schedule and far over budget, according to the Government Accountability Office. (Discussed in here). 

Privatization of U.S. air traffic control is long overdue. During the past 15 years, more than a dozen countries have partly or fully privatized their ATC, and provide some good models for U.S. reforms.

Canada privatized its ATC in 1996, setting up a fully private, non-profit corporation, Nav Canada, which is self-supporting from charges on aviation users. The Canadian system has received rave reviews for investing in new technologies and reducing air congestion, and it has one of the best safety records in the world.

The United States should be a leader in air traffic control, especially given the nation’s legacy of aviation innovation. A privatized system would allow for more flexible hiring policies, replacement of expensive human controllers with machines, and access to private capital for infrastructure upgrading. It is also likely that privatization would help improve safety and reduce air congestion by speeding the adoption of advanced technologies.

Should We Execute Bad Regulators?

I just sent this letter to the editor of the Washington Post:

The lack of outrage about China’s horrific execution of a corrupt food and drug regulator in a recent editorial [“Rough Justice,” July 14] was itself outrageous.
 
Zheng Xiaoyu was put to death for (allegedly) taking bribes that enabled unsafe products to reach the market. The death toll thus far is hundreds of lives lost in China and Panama.
 
Dr. David A. Kessler was commissioner of the U.S. Food and Drug Administration (FDA) from 1991 through 1996. In 1988, researchers at Harvard University had demonstrated that widespread use of aspirin at the onset of a heart attack and daily for 30 days afterward could save 5,000 lives per year in the United States. Yet Dr. Kessler’s FDA refused to let aspirin manufacturers advertise that extremely important information until 1996. That policy resulted in as many as 30,000 unnecessary deaths during Dr. Kessler’s tenure. No one has ever accused Dr. Kessler of taking bribes. But he surely benefited personally from his position and from his aggressive regulatory policies, going on to be named dean of Yale University’s medical school.
 
If Dr. Kessler’s political opponents in the U.S. government had put Dr. Kessler to death for his actions as a regulator, I think the Post would denounce his execution as barbaric. But then why be so blithe about an equally barbaric execution in China?

I’m used to people valuing the lives of the FDA’s Type I victims more than the lives of its Type II victims. But valuing the lives of Type I victims more than the lives of the regulators themselves is a new one by me.

Science, Values and Politics

Today’s NYT features a front page, above-the-fold story about former surgeon general Richard Carmona’s charge that the Bush administration interfered with his office by (in the words of the NYT) ”repeatedly [trying] to weaken or suppress important public health reports because of political considerations.” He made the charge yesterday in testimony before the House Committee on Oversight and Government Reform.

Carmona described Bush administration behavior that ranged from petty (urging him not to attend Special Olympics events because of the Kennedy family’s connection to the program) to outright worrisome (directing him, again in the words of the NYT, “to put political considerations over scientific ones”). His claims add to the image of a Bush White House in which political considerations and ideology trump all others.

However, Carmona’s prepared statement suggests that the Bushies aren’t the only folks caught up in ideology.

Carmona considers himself a person of science, and scientists have an important role in policymaking. They try to determine the existence of various empirical relationships (e.g., certain emissions trap heat in the atmosphere; exposure to tobacco smoke increases the risk of cancer) and use those determinations to make predictions about the future (e.g., ongoing emission of greenhouse gases at certain levels will affect the climate; reduced tobacco use will decrease the incidence of cancer). In this way, science informs policymaking by predicting the outcomes of various policy choices.

But though science informs policy choices, it cannot make those choices. Science is a non-normative endeavor, and cannot answer such questions as whether climate change should be avoided, and whether reducing tobacco use should be used as a means to reduce the incidence of cancer. Those are the subject of value judgments — and, for public decisions, of politics.

Many “people of science” do not appreciate this limit on science’s role in policymaking. They assume that once a relationship is established scientifically, policy choices cogently follow. In making this assumption, they enter their own value judgments as suppressed premises in their analyses. Many doctors see bad health outcomes as not just undesirable, but so undesirable that they should be avoided even at high costs; many environmental scientists have the same opinion about environmental damage. Hence, they would argue that “objective, nonpartisan science” calls for policies to limit greenhouse emissions and reduce smoking. In fact, science can do no such thing; value judgments call for (or against) various choices.

To better understand this, consider the role of a doctor. Five separate times in his testimony, Carmona refered to the surgeon general as “the nation’s doctor” (conjuring the image of 300 million Americans sticking out their collective tongues and saying “ahh”). I trust my doctor to make a scientific determination of the state of my health and to lay out various courses of action concerning my health (e.g., lose weight, take medication, exercise more, quit smoking). But I am the one who sets policies concerning my health — I decide whether the costs of some course of action (e.g., the side effects of some drug, or the pleasure forgone by dieting) is worth the health benefits. Likewise, public health policy should be set by elected representatives who are directly accountable to the citizenry, not by “the nation’s doctor.”

But Carmona apparently wants the surgeon general to become a policymaker. He told the House committee:

[T]he Surgeon General [should] speak and act openly and as often as necessary on contemporary health and scientific issues so as to improve the health, safety, and security of the nation.

Indeed, that role may be too modest for Carmona’s surgeon general; he repeatedly argued that the surgeon general should “serve the people and the world.” He offered lawmakers a five-point plan for the U.S. Public Health Service that included the following:

  • Recognize and plan for the fact that tomorrow’s best hope to achieve millennium goals, extinguish asymmetries, eradicate social injustices, and make the world [a] healthier, safer and more secure place may be the newer, softer force projection of health diplomacy via prospective ongoing sustainable missions globally.

So, instead of just being the nation’s doctor (with policymaking power), Carmona’s surgeon general would be a force projector for the world.

Carmona is correct that politicians should not interfere with the scientific analysis of the surgeon general — the surgeon general should follow an empirical question wherever the science leads. And he may even state his personal opinion — couched as such — on the value judgments that ensue from the science. But the surgeon general should not supplant the politicians in making public policy decisions, nor supplant private individuals in making personal health decisions. And, of course, the surgeon general should not doctor scientific findings to conform them to his own value judgments.