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| Issue #1, September 19, 2005 |
Introducing Healthy Competition, the Book
America's health care sector has no shortage of vexing problems, including rising costs, uneven quality, a lack of information for patients, and underuse of information technologies. In addition, the system places a large and growing burden on taxpayers. 
In a new book released by the Cato Institute, authors Michael F. Cannon and Michael D. Tanner write: "We do not claim to know any particular solution to these problems. We do, however, propose a method of discovering them." Cannon and Tanner then show how market competition provides the solutions.
Many people believe that health care is a special case, where market competition does not work. However, the authors give numerous examples of market competition making even acute medical care (such as heart surgery) more accessible. Unfortunately, in the health care market, government tax, spending, and regulatory policies have created a dense thicket of rules and restrictions that disable the competitive market process.
Health savings accounts (HSAs) are an important step toward restoring the necessary conditions for market competition. Cannon and Tanner offer proposals that would further restore market competition and make quality health care available to an ever-increasing number of consumers. Their proposals include the following:
- Expanding HSAs to allow workers to control all their health care dollars and decisions;
- Injecting choice, competition, and ownership into Medicare, and prefunding Medicare through personal accounts;
- Reforming Medicaid along the lines of the successful 1996 welfare reform law;
- Deregulating health insurance by allowing people to purchase coverage from any state;
- Creating a competitive certification process for new medical technologies;
- Eliminating waiting lists for transplantable organs by allowing payments to organ providers;
- Making care more accessible by reducing barriers to entry for providers, clinics, and hospitals; and
- Allowing individual patients to choose the level of malpractice protection they desire.
In a foreword, former secretary of state George P. Shultz writes: "Cannon and Tanner offer proposals that would further tap the power of markets to make health care more valuable and more affordable. That makes Healthy Competition essential reading."
Milton Friedman, Nobel Laureate in Economics, lauds: "Surprisingly readable, extraordinarily comprehensive, highly persuasive. Read how the key to improving health care in the United States is to convert the patient from a ward of the state to an independent, self-interested customer."
Order copies of Healthy Competition: What's Holding Back Health Care and How to Free It.
Introducing Healthy Competition, the E-Newsletter
Welcome to the inaugural issue of Healthy Competition, an electronic newsletter produced by the Cato Institute. This periodic newsletter will feature health policy news, commentary, and resources from a free-market perspective.
The dominant view in health policy is that greater government involvement is required to make high-quality medical care more accessible. This newsletter will present the view that individual choice and free markets do the best job of making products of ever-increasing quality available to ever-increasing numbers of people.
We aim to make this newsletter useful to those who make, influence, and report on health policy. We invite you to send your feedback to healthycompetition@cato.org. If at any time you would like to unsubscribe, please go here.
Health Policy News
Katrina Is the Best Argument to Date for Medicaid Reform
Many observers have called on Congress to abandon efforts to curb the growth in Medicaid spending by $10 billion over five years. As Cato scholars explained at a September 9 briefing on Capitol Hill, reforming Medicaid is even more important in the wake of hurricane Katrina.
Cato senior fellow Jagadeesh Gokhale presented projections showing that Medicaid's federal outlay commitments exceed Social Security's unfunded obligations and rival those of Medicare.
Cato director of health policy studies Michael Cannon explained that Medicaid now covers many people who could obtain their own coverage and that welfare-style reforms would help rededicate Medicaid to the truly needy, including those devastated by hurricane Katrina.
In a Cato study titled, "Aging America's Achilles' Heel: Medicaid Long-Term Care," Steve Moses, the president of the Center for Long-Term Care Reform, showed how many nonpoor Americans feign poverty so Medicaid will pay for their nursing home care. At the briefing, Moses spoke of the necessity of returning Medicaid to the truly needy, commenting, "Wouldn't it be tragic if we allowed our failure to plan ahead for a natural disaster to derail our efforts to plan ahead for a public policy disaster?"
Study: Medicaid Provides Inferior Access to Post-ER Care Compared with Private Options
A study in last week's Journal of the American Medical Association highlights one of the unseen costs of Medicaid and its crowd-out effect on private health insurance. The study simulated patients who had recently been to an emergency room and required an urgent follow-up appointment at an ambulatory clinic. Those participants claiming Medicaid coverage were half as likely to get an urgent appointment (within one week) as those claiming private coverage or offering to pay cash. The study provides further evidence that substituting Medicaid for private insurance can reduce access to care. But the problems don't end there. One-third of privately insured and even cash-paying patients were unable to obtain an urgent appointment. That suggests other forces, such as supply constraints, may be at work.
Canada: Higher-Risk Heart Patients Less Likely to Get ACE Inhibitors
Another study in last week's JAMA found that the likelihood that Canadians with heart failure will be prescribed ACE inhibitors or other important drug therapies is inversely proportional to their mortality risk. That is, sicker patients received those drugs less often than healthier patients.
Those findings are reminiscent of a study released earlier this year that found a similar mismatch of resources in some U.S. hospitals. In that study, Daniel P. Kessler and Jeffrey J. Geppert found that in less competitive hospital markets, less severely ill heart attack patients received more intensive treatment than similar patients in more competitive hospital markets (with no improvement in health outcomes). Heart attack patients who were more severely ill received more intensive coverage in competitive hospital markets and less intensive coverage in less competitive markets.
Study: Drugs May Be as Effective as Surgery for Small Heart Attacks
A study in last week's New England Journal of Medicine cast doubt on the effectiveness (and cost-effectiveness) of existing guidelines for treating patients who suffer small heart attacks. When such patients had evidence of arterial blockages, they fared as well with anti-clotting drugs as with bypass surgery or angioplasty—which, though standard procedures, are more costly and invasive.
Upcoming Cato Institute Events
Cato Health Policy Director Michael Cannon to Address HSA Conference
2nd Annual Health Savings Accounts Strategies Forum
September 27–28, 2005
The Scottsdale Plaza Resort
For more details and registration information, click here.
Cato Senior Fellow Jagadeesh Gokhale to Testify on Medicare Drug Benefit
Senate Homeland Security and Governmental Affairs Committee
September 22, 2005–2:30 p.m.
Dirksen Senate Office Building Room 342
Michael Cannon to Discuss Healthy Competition on the Eric Novack Show
KKNT 960 AM Phoenix
October 2, 2005 - 6 p.m. EST
Recent Cato Institute Events and Publications
"The Trouble with Medicaid," Cato Institute Hill Briefing, September 9, 2005.
"Drug Cops and Doctors: Is the DEA Hampering the Treatment of Chronic Pain?" Cato Institute Conference, September 9, 2005.
"A Cure for What Ails Medicaid," Michael Cannon, San Francisco Chronicle, September 8, 2005.
"Medicaid and the Long-Term Care Crisis: Who Should Pay?" Cato Institute Policy Forum, September 7, 2005.
"Treating Sniffles with a Jail Term," Doug Bandow, Copley News Service, September 2, 2005.
"HSAs Are No Solution for Medicaid," Michael Cannon, Cato Institute Daily Commentary, September 1, 2005.
"Aging America's Achilles' Heel: Medicaid Long-Term Care," Stephen A. Moses, Cato Institute Policy Analysis no. 549, September 1, 2005.
"Medicaid's Unseen Costs," Michael F. Cannon, Cato Institute Policy Analysis no. 548, August 18, 2005.
"Treating Doctors as Drug Dealers: The DEA's War on Prescription Painkillers," Ronald T. Libby, Cato Institute Policy Analysis no. 545, June 6, 2005.
"Combining Tax Reform and Health Care Reform with Large HSAs," Michael Cannon, Tax & Budget Bulletin no. 23, May 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.