HSA Realism

John Hood has a column today on Health Savings Accounts that cites Michael Cannon’s recent paper on the topic.  As Hood notes,

You can learn more about some of the issues involved – fairness to the health and sick, tax benefits for the wealthy and poor, adverse selection and the stability of health-insurance pools – by reading an excellent paper out last month from the Cato Institute. Michael Cannon, director of health policy studies at the libertarian think tank, has produced one of the better policy studies I’ve read on any subject in a long time. It takes the concerns of critics seriously – studying carefully and then rejecting some, studying and agreeing with others, and proposing changes that will make consumer-driven health care make more sense for more Americans over time.

Health Savings Accounts are one of the most important health care innovations of recent history, with the potential to significantly increase consumer involvement in health care decision-making.  But they are not a silver bullet.   The Left has long had a “utopian complex,” believing that some simple legislative change can solve this or that complex problem.  Lately, too many conservatives have fallen in to that trap as well.  Cannon’s paper is an important contribution to the debate that should be read by both supporters and opponents of consumer-driven health care reform.

Updating “An Unnecessary, Expensive, and Probably Unconstitutional Board”

Last week, I wrote about the Public Company Accounting Oversight Board (PCAOB). Here’s an update:

Last week, the Securities and Exchange Commission appointed an obscure member of the Federal Reserve Board as chairman of the PCAOB, increasing his annual salary from $165,200 with the Fed to $615,000. 

Again, Congress ought to use this occasion to question the purpose and structure of one of its recent creations. 

A Key Reform for Budget Process Reform

Senate Budget Chairman Judd Gregg’s “Stop Over-Spending” (SOS) plan, announced last week aims at reinstating tight fiscal controls — after letting them erode over many years by gutting pay-as-you-go budget rules and pushing through massive supplemental spending outside of the regular budget process.

The proposal includes a line-item veto for the President to cut wasteful spending and a bipartisan commission for devising solutions to entitlement program shortfalls. 

Its main focus, however, is to set deficit caps tied to mandatory spending cuts similar to the Gramm-Rudman-Hollings Deficit Control Act from the mid-1980s.  That act, however, proved ineffective and had to be revised multiple times.

The key to whether lawmakers are really serious about budget process reform is whether proposed changes are based on short-term deficit measures or forward-looking long-term unfunded obligation measures. 

Spending control laws based on short-term budget measures are likely to mislead policymakers into adopting inadequate or inappropriate reforms.  Imagine if we were to determine the need for Social Security reform based on its net cash flow today–which is in surplus.

And we’ve been here before–we thought the pay-as-you-go constraints from the Budget Enforcement Act had done their job and turned them off in 2002–only to see a federal spending spree like never before.  If adopted (which appears unlikely) SOS may work for a time, but history is likely to repeat itself.

The key to a budget process is the budget measures on which spending constraints are based.  Using the same old budget measures will not deliver a new process.  It’s time to make fundamental changes by adopting more appropriate fiscal yardsticks.  Unless budget measures fully reflect the budget problems that lie ahead and correctly reflect the consequences of policy changes, we will continue to lurch from one reform to the next without making any improvement–at best.

The Common Law Court and Other Myths

I’ve posted my latest law review article on SSRN.  The article argues that some of the same rules that apply to executive branch agencies, like the SEC and EPA, should apply to “class action lawmaking” in ordinary courts.  A warning:  much of it will seem rather dry and esoteric to non-lawyers.   

Even so, I hope it will help highlight a serious blind spot of many Hayek-flavored policy proposals advanced by fellow libertarians.  These flawed proposals go like this:  “Agency A has identified a regulatory problem and offered a command-and-control solution.  But command and control solutions often have unanticipated consequences.  By contrast, the incremental case-by-case approach of common law courts allows regulation to adapt to unexpected problems as they arise. Hence, it’s better not to regulate and leave the issue to the common law process.”  (If you search through Cato policy analyses, you may find a few arguments that fit this mold.) 

Here’s the problem with that argument:  Over the last 50 years, courts have rejected the utility of incremental case-by-case decisionmaking, now seen as too “costly” for a mass industrial economy, and have instead patterned their proceedings after administrative agencies.  Now trial judges use procedures like the class action and mechanisms for case consolidation to put hundreds of thousands of recurring disputes raising similar facts before a single “expert” judge or special master tasked with sheparding these disputes into one global settlement.   As a result, in many cases, a choice between courts and agencies is a Hobson’s choice:  both courts and agencies are forums for the sweeping, centralized, one-shot regulation that Hayek so distrusted. 

Unfortunately, many libertarians ignore the sea change in the way our courts run themselves, envisioning that beyond the hulking canyons of Southwest D.C.’s alphabet gulch, there is a pristine land of 19th century “common law” courts, preserved in amber, waiting to rescue us from our zest for central planning.  The persistence of this myth shields us from the difficult libertarian trade-offs between modern-day judicial and administrative regulation. 

My article doesn’t venture an answer to these complicated trade-offs.  (I’m just a humble caveman lawyer.)  Instead, I  suggest a far more modest first step:  That courts start talking about class action law and administrative law in the same legal language, using the same legal concepts, putting us all on notice about the essential similarity between modern judicially managed and agency-managed regulation. 

A Modern-Day James Madison

As summarized over at the To the People blog, a Congressional Quarterly article (sorry, no link) on a proposed flag burning amendment includes this priceless passage:

Before approving the resolution, the committee rejected by voice vote an amendment by Joseph R. Biden Jr., D-Del., that would have prohibited burning, mutilating or trampling U.S. flags with an exception for disposing worn or soiled flags. Biden said he believed the resolution as written is too vague.

Supporters, including Hatch and Jon Kyl, R-Ariz., said the language is intentionally vague to leave the task of writing more precise language to a future Congress.

“What’s necessary here is to grant the broadest possible authority to Congress to legislate,” Kyl said.

Ah, yes. I believe it was in the long-lost, little-known “Federalist 86” that Madison conveyed the importance of a Constitution that grants the “broadest possible authority to Congress to legislate.” 

Word has it that Sen. Kyl owns the only surviving copy.