 |
| Issue #4, November 28, 2005 |
Healthy Competition Book Forum TOMORROW
Be sure to preregister for tomorrow’s Book Forum on Healthy Competition: What’s Holding Back Health Care and How to Free It at the Cato Institute. The Forum begins at 4 p.m. and will be followed by a wine and cheese reception. Speakers will include coauthor Michael F. Cannon, director of health policy studies at the Cato Institute; with comments by Jonathan Cohn, senior editor, New Republic; Dr. John Nelson, immediate past president, American Medical Association; and Sen. Jim DeMint (R-SC). Healthy Competition is holding fast as the no. 2 bestseller on Amazon.com (in the category of “health insurance”).
Cato Scholar Featured in Wal-Mart Documentary
A pro-Wal-Mart documentary released this month, titled “Why Wal-Mart Works & Why That Makes Some People Crazy,” features an interview with Cato Institute director of health policy studies Michael F. Cannon. In the interview, Cannon discusses the generosity of Wal-Mart’s health benefits and the allegation that Wal-Mart is a drain on state and federal governments because many Wal-Mart employees and their dependents enroll in government health programs.
Medicare Rx News
Amid the confusion of seniors struggling to enroll in the upcoming Medicare drug program, a number of related items have received scant media attention.
- On November 1, CQ Today reported that U.S. Comptroller General David Walker weighed in on the Medicare drug program. "We were already in the hole $15 to $20 trillion before Medicare Part D was enacted and that’s just for Medicare,” Walker said, yet “we added another eight [trillion]” in unfunded liabilities with Part D. “If that’s not imprudent, I don’t know what is.” When asked whether he thought Congress should delay implementation of the program, Walker replied: “That’s a policy decision. Let’s just say that we couldn’t afford Part D of Medicare. . . . It’s one thing to say we need some type of prescription drug program. That’s valid. But we need to do that as part of a restructuring of the entire Medicare system and not a layering on of a program that was started in 1965.”
- On November 23, Washington Post columnist Bob Samuelson wrote of the coming drug program: “Some commentators (including me) have suggested repealing the benefit. That would be good policy, because it would cut wasteful spending and allow drug coverage to be included in a major Medicare overhaul that focuses on the neediest and curbs costs. With hindsight, Republicans may someday realize that it also would have been good politics.”
- A study prepared for the Kaiser Family Foundation reveals why proponents want to enroll as many seniors as possible: low enrollment could cause the program to implode. If only 20 percent of seniors enroll, drug plan premiums could be 42 percent higher than if all enrolled: “Premiums could quickly escalate, further deterring enrollment . . . and potentially causing some beneficiaries to change course and disenroll in the future.” In that case, Congress could end up spending nearly as much to provide drug coverage for only a fraction of seniors. Meanwhile, some seniors’ premiums would grow even faster than that average, which would put even more pressure on drug plans to push the sickest seniors out.
- Drug manufacturers, who have long offered free drugs to patients who cannot afford them, are dropping patients eligible for Medicare Part D from those charitable programs. According to one report, “Up to half of the roughly three million to four million charity patients nationwide may lose free access to more than 1,200 brand-name drugs.” That development highlights another example of how Part D will force taxpayers to finance things that the private sector was already providing.
- This week, the Cato Institute will release a study by senior fellow Doug Bandow arguing that Congress must repeal the Medicare drug program to head off the growing threat of price controls on prescription drugs.
California Study Demonstrates Waste in Medicare
In a study published by Health Affairs, John Wennberg and colleagues at Dartmouth Medical School demonstrate that some hospitals in California spend far more on chronically ill Medicare patients than do others, yet the additional resources produce no apparent health benefits.
Through greater intensity of care, hospitals in Los Angeles spend 69 percent more on chronically ill Medicare patients in the last two years of life than do hospitals in Sacramento. Yet Los Angeles hospitals score lower on quality measures. Such discrepancies occur statewide and consume significant resources: “If the per person level of Medicare spending during the last two years of life . . . in Los Angeles had been equal to the amount predicted by the Sacramento benchmark, Medicare would have saved $1.7 billion.”
The authors write: “Evidence at the regional level suggests that greater spending, more resource inputs, and more frequent use of hospitals and physician services are not associated with better performance on technical measures of the processes of care. Neither are they associated with improvements in survival, functional status, or satisfaction with care.”
Decades of literature on variations in Medicare spending show that government and health care providers are poor stewards of taxpayer dollars. In Healthy Competition, Michael F. Cannon and Michael D. Tanner propose to give Medicare enrollees ownership of their Medicare benefits. If seniors owned the dollars they are spending on health coverage and care, they would reward efficient providers and penalize inefficient ones. The authors propose to assist chronically ill Medicare patients by adjusting the size of the vouchers for anticipated medical expenses, so higher-cost seniors are not left high and dry.
Markets Continue to Respond to Consumer Demand
More entrepreneurs are rushing to meet the demand created by HSAs and other consumer-directed health plans for convenient care and useful price and quality information.
- The St. Paul Pioneer Press reports, “Health insurers are responding with Internet tools to help people make budgetary decisions about their medical care.” In Minnesota, HealthPartners and PreferredOne are posting information for their members on the prices and the quality of different services and providers.
- The Los Angeles Times reports on TelaDoc, a new Dallas-based service that makes routine care more affordable and convenient: “The controversial service fields calls from patients, then guarantees that one of its doctors will call the patient within three hours or the service is free. The doctor spends a few minutes collecting a patient’s medical history, then runs through symptoms as best as possible from afar. TelaDoc doctors can write prescriptions, except for controlled substances such as narcotics.” Services such as TelaDoc and Doctokr give patients quick access to doctors at prices that are relatively low and spelled out in advance. The services also make arrangements for in-person consultations when necessary. (State medical societies have criticized and even sought to block these and similar services.)
Coverage Limits
Work in health policy long enough and you will discover an unspoken understanding among its practitioners: the prime directive is to expand health coverage. But insofar as expanding coverage discourages patients from weighing the costs and benefits of their options, it inhibits the market forces that deliver what everyone really wants: to make better health care available to more people.
Moreover, the United States has pushed coverage about as far as it can go, as an article in the latest issue of Health Affairs explains. Donald Moran argues that past coverage expansions have flooded the market with demand. The skyrocketing costs that followed are now forcing health plans to “thin out” the coverage they offer as a necessary part of squeezing excess demand out of the market. Moran argues the United States has reached the limit of its ability to expand coverage, and public policy likely will—because it must—focus on direct provision of care: “Although the ideological impetus toward universal coverage cannot be expected to dim in our lifetime, all of the forces in the health care marketplace appear to be moving solidly in the opposite direction.”
Combining HSAs & Managed Care
In another Health Affairs article, Mark Hall and Clark Havighurst explain that health savings accounts (HSAs) and managed care can go hand in hand. Building on previous work by Joseph Newhouse, the authors show that far from being incompatible, some degree of managed care is essential to making HSAs work. Moreover, HSAs will take some of the sting out of managed care by giving patients assets that they may put toward services not covered by their health plans.
In Healthy Competition, Michael F. Cannon and Michael D. Tanner propose allowing consumers to open an HSA with any type of health insurance. Their “Large HSAs” proposal would allow consumers to reap whatever savings managed care offers, but it would also give consumers the power to choose their own health plan and thereby avoid plans they find too restrictive.
Recent Cato Institute Events & Media Appearances
The Great Depression, Will Wilkinson, November 27, 2005.
The State Healthcare Debate, feat. Michael F. Cannon, NPR's On Point, November 18, 2005.
Medicare's Muddled Meddling, Alan Reynolds, Townhall.com, November 19, 2005.
Eight Reasons to Delay the Imprudent Drug Program, Michael F. Cannon, The Hill, November 9, 2005.
Medicare Drug Plan: Repeal or Join?, Michael F. Cannon, Detroit Free Press, November 7, 2005.
Out With the HSAs?, Michael F. Cannon, Nationalreview.com, October 31, 2005.
Healthy Competition is a periodic newsletter produced by the Cato Institute. It features news and commentary on current health policy issues from a free-market perspective. If you wish to subscribe to this free weekly newsletter, update your address, or be removed from our list, please click here and follow the instructions.