October 18, 1999
Major Medical
Air Bags And Windbags
Airfares Taking Off?
Britain Firsters
Major Medical
Rep. Bill Thomas (R-Calif.), chairman of the House Ways and Means Health Subcommittee, has introduced a bill that would restore $15 billion in Medicare cuts made by the 1997 balanced budget agreement, AP reports. The windfall would raise Medicare reimbursement rates for managed care companies, hospitals, nursing homes, rehabilitation services, home health care, physicians and teaching hospitals. About two-thirds of the money, to be restored over five years, would come from legislative changes to Medicare, while the rest would come from administrative changes to the program.
But "[t]he Medicare system is no longer sustainable in its current incarnation as a first-dollar insurance plan," Doug Bandow and Michael Tanner wrote in the 1995 Cato Policy Analysis "The Wrong and Right Ways to Reform Medicare". "Demographics, technology, and the incentives of a third- party payment system will continue to drive up costs. The most commonly suggested solutions--raising the payroll tax, increasing premiums, reducing reimbursements, and forcing the elderly into managed care--will not address the problem. Instead, Congress should increase the age of eligibility, raise deductible levels, and allow the elderly to opt out of the system. That would begin the transformation of Medicare to a back-up catastrophic insurance program. Only through such a revolutionary transformation of the Medicare system can we ensure that the elderly will continue to have access to the health care they need."
In the 1998 Cato Policy Analysis "The Next Steps for Medicare Reform", Peter J. Ferrara makes a similar case: "The Medicare system cannot be saved by raising taxes and cutting benefits. That would impose too much harm on both workers and retirees. If allowed to continue on its present course, Medicare will ultimately bankrupt workers, the federal government, and the elderly. The solution lies in reforming the system to take advantage of the efficiencies, incentives, competition, and productivity of the private sector… First, retirees would each be allowed to use their share of Medicare funds to purchase more cost-effective private coverage that in many instances would provide better benefits than Medicare, as was begun in the 1997 reforms. Second, workers would be allowed to save and invest their Medicare funds through the private sector instead. The cost-reducing effects of the private alternatives under the first component along with the increased resources resulting from the second component would be sufficient to eliminate the enormous long-term financial deficits of the current Medicare system, with little or no cost burden to retirees. Indeed, through the reform retirees would be guaranteed that Medicare premiums would grow no faster than their incomes, unlike the current system under which such premiums would grow enormously over time. Retirees would also be able to get better benefits through the private alternatives than are offered by Medicare. Retirees would enjoy as well greater freedom of choice, power, and control over their health and its care."
Air Bags And Windbags
The federal government is warning that side air bags in car doors may kill or injure children, AP reports. The National Highway Traffic Safety Agency is issuing the consumer advisory as more automakers are installing side air bags as either standard or optional equipment. The agency wants auto manufacturers to ship the vehicles to dealers with the air bags deactivated, giving dealers the responsibility of turning on the air bags for consumers who want them after they are advised of the risk to children.
Will this latest air bag uproar lead to still more lawsuits? "Over the years the boundary between tort and contract has shifted sharply toward tort. For example, physicians serving rural areas are often not allowed to contract with patients for a lower price in return for diminished care. And courts have allowed consumers who buy cars without air bags to recover from manufacturers for injuries that only air bags would have prevented. Sometimes courts even ignore compulsory arbitration provisions that waive the usual judicial procedures for resolving disputes. Even worse, rules have sprung up that prohibit ordinary commercial contracts. A person forbidden to sell certain products-because a government agency has determined they are too dangerous-may also be forbidden to sell his own labor-because the state has determined that the wages he would accept are too low. Contracts once freely negotiated, and subject to private suit in the event of fraud or failure to perform, are increasingly replaced by regulation. Unhappily, once government has advanced a plausible rationale for prohibiting consensual behavior in one area, its tentacles inevitably extend to other areas as well," Michael I. Krauss wrote in the Cato Policy Analysis "Restoring the Boundary: Tort Law and the Right to Contract", released in June.
And in Regulation, in an item entitled "NHTSA Air Bag Mandate Misfires", Sam Kazman of the Competitive Enterprise Institute reminded that the air bag craze began with the government itself, and in fact with the exact same agency: "They would 'provide protection against injury without car occupants having to take any action at all.' They were 'an extension of the passive protection philosophy embodied in many other public health and safety measures such as inoculation programs, pasteurized milk, and fire sprinkler systems.' Claims that 'not enough is known about these systems' were baseless, because they had 'undergone more research, development, and testing under all kinds of laboratory and real world conditions than any auto safety device ever proposed.' They were air bags, the year was 1977, and that was the rosy picture painted in one brochure produced by the National Highway Traffic Safety Administration as it campaigned for its new passive restraint mandate."
Airfares Taking Off?
Airfares are rising slightly, with America's largest airlines deciding to increase advance-purchase ticket rates by $20, AP reports. Continental was the first to make the increase, reportedly because of higher jet fuel costs, and Delta, America West and American Airlines quickly followed.
But if greater competition was allowed, would the increase have been required? "Opening U.S. skies would inject capital and competition into the U.S. aviation market, leading to even lower fares and more improved service, especially on feeder routes to destinations overseas. British-based Virgin Atlantic Airways has expressed interest in starting a low-cost U.S. domestic service to feed its transatlantic service, but U.S. law prohibits Virgin from owning a controlling share in a U.S. domestic carrier. Foreign competition and investment would provide the ultimate, free-market check on 'predatory pricing' and domestic price collusion and would negate any arguments for imposing federal price regulations and antitrust sanctions. America's closed domestic market weakens the U.S. negotiating position abroad. Under the current policy, the U.S. government seeks to open international markets through its 'Open Skies' initiative while keeping the world's largest domestic market, which represents more than one-quarter of global air travel, closed to foreign competition. America's closed market has proven a sticking point in efforts to liberalize international travel across the Atlantic and Pacific," Kenneth J. Button wrote in the 1998 Cato Trade Briefing Paper "Opening U.S. Skies to Global Airline Competition". The Regulation article "Airline Deregulation: Twenty Years and Counting" (pdf) and the Cato Handbook for Congress (pdf) also discuss U.S. air travel policy.
Britain Firsters
In Great Britain, former Conservative Prime Minister John Major lambasted his party's opposition to increased European integration as "absurd and crazy," AP reports. Major believes that the Conservatives' call for increasing isolation from Europe may lessen the electoral appeal of the party, a view shared by EU Commissioner Chris Patten, a former Conservative chairman.
"That Britain will join the European Union--probably within five years--is not in doubt. The mystery is why, no matter whether conservatives or socialists are in power, Britain once again cannot get to the European dance on time. It was not as though accession to the European Union lacked powerful advocates; the financial, industrial and labor communities were solidly in favor. On the economic fundamentals, Britain was well qualified to participate. Nonetheless, the British system somehow failed to deliver the necessary critical mass for commitment at the same time as the rest of Europe. The result will be an orgy of Margaret Thatcheresque theatrics when the time comes to join. Britain's half-heartedness toward Europe is not just a matter of mild regret for America. For several important reasons, the U.S. needs Britain at, in [Labour Prime Minister Tony] Blair's words, 'the heart of Europe,'" Jonathan Clarke wrote in a 1998 commentary, "U.S. Benefits if Britain Is Wholeheartedly European".