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July 5, 2007 11:22AM

Does Cost‐​Sharing for Rx Reduce Health?

Unknown, say Dana Goldman, Geoffrey Joyce, and Yuhui Zheng of the RAND Corporation. 

In this week's Journal of the American Medical Association, the team presents a meta-analysis of "132 articles examining the associations between prescription drug plan cost-containment measures, including co-payments, tiering, or coinsurance[;] pharmacy benefit caps or monthly prescription limits[;] formulary restrictions[;] and reference pricing[;] and salient outcomes, including pharmacy utilization and spending, medical care utilization and spending, and health outcomes."

Here are their principal findings and conclusions, from the abstract:

Increased cost sharing is associated with lower rates of drug treatment, worse adherence among existing users, and more frequent discontinuation of therapy. For each 10% increase in cost sharing, prescription drug spending decreases by 2% to 6%, depending on class of drug and condition of the patient. The reduction in use associated with a benefit cap, which limits either the coverage amount or the number of covered prescriptions, is consistent with other cost-sharing features. For some chronic conditions, higher cost sharing is associated with increased use of medical services, at least for patients with congestive heart failure, lipid disorders, diabetes, and schizophrenia. While low-income groups may be more sensitive to increased cost sharing, there is little evidence to support this contention.

That last sentence was certainly interesting. But here comes the kicker.

While increased cost sharing is highly correlated with reductions in pharmacy use, the long-term consequences of benefit changes on health are still uncertain.

That echoes points I've made previously in this blog:

Read the rest of this post »
July 4, 2007 7:25PM

Unequal Justice?

There it was, emblazoned across the front page of the Washington Post, a headline made especially disturbing by its publication on July 4:

Justice Is Unequal for Parents Who Host Teen Drinking Parties

What did it mean, I wondered. Poor parents go to jail, rich parents walk? The law is enforced in black neighborhoods, winked at in white suburbs?

Not exactly. In fact, the Post reported,

In Virginia and the District, parents who host such parties can be charged with contributing to the delinquency of a minor, a misdemeanor that can carry jail time. In Maryland, hosting an underage drinking party is punished with a civil penalty, payable with a fine, even for multiple offenses.

So it's not a story about unequal justice, just about different jurisdictions with different laws. But the Post sees it differently:

The stark contrast in punishments is just one inconsistency in a patchwork of conflicting legal practices and public attitudes about underage drinking parties.

Read the rest of this post »
July 4, 2007 2:05PM

The Germans Attack Tax Competition…Again

Germany’s finance minister Peer Steinbrueck wants to curtail tax competition by prohibiting countries from having corporate tax rates of less than 30 percent. Since German politicians have been whining about competition from low‐​tax nations in Eastern Europe for quite some time, this is hardly news.


But this new round of sour grapes is particularly amusing because Herr Steinbrueck is trying to close the barn door when the horses are galloping in the fields. The average corporate tax rate in the European Union already has fallen to about 24 percent and more corporate tax cuts are about to take effect — including a tax rate reduction in Germany.


Bloomberg reports:

The European Union needs a “level playing field” in areas including tax competition…if there is to be greater integration among member states, German Finance Minister Peer Steinbrueck said. A “race to the bottom” regarding…taxes, social and environmental standards risks discrediting the idea of a more united Europe among the continent’s citizens, Steinbrueck said in a speech prepared for delivery today in Frankfurt an der Oder, on the eastern German border with Poland.


…The average corporate tax rate in Europe shouldn’t fall below the threshold of just under 30 percent, which will go into effect in Germany next year, Steinbrueck said. Eastern European governments…can’t finance the infrastructure demanded by their citizens if taxes are lowered too much, he said.

July 4, 2007 1:59PM

Another Flat Tax Nation?

Moldova, a former Soviet Republic, is a poor and backwards nation with too much government. Seeking a brighter future, a part of Moldova has declared independence and is calling itself Pridnestrovie. Though this new country has not yet been recognized by the world, Pridnestrovie has wisely decided to implement free market reforms — including a flat tax that has been reduced from 15 percent to 10 percent according to a story from last year in the Tiraspol Times:

Parliament in Pridnestrovskaia Moldavskaia Respublica approved new lower tax rates for the emerging but unrecognized country. Previously, the nation taxed incomes for physical persons at 15%, but starting next month the rate will be just 10% flat.


…Since its declaration of independence on 2 September 1990, Pridnestrovie has gradually transformed itself from a post‐​Soviet system to a free, Western‐​style market based economy. In the process, it has found that a flat tax provides the best incentives for citizens and investors alike.


Hoover Institution political scientist Alvin Rabushka points to a number of different countries in the former Soviet bloc that have adopted some form of flat tax in recent years. In addition to Russia, Pridnestrovie and Slovakia, they are Romania, Georgia, Estonia, Latvia, Serbia and Ukraine.

Not surprisingly, the flat tax is having a positive impact. The Tiraspol Times now reports that tax revenues have more than tripled and lawmakers understand that lower tax rates can lead to more revenue — just as the Laffer Curve illustrates:

Thanks to reform in the tax code, and a lowering of rates, income from taxes has gone up three and a half times in Pridnestrovie, says the parliamentary press service. …Tax revenues went from 63.4 million dollars in 2001 to a whopping 221.6 million dollars in 2006, the last full year for which the numbers are available.


…Key to the reform package were measures which makes filing simpler, as well as a comprehensive program of tax relief. Five taxes which existed before 2001 have now been abolished and instead replaced with a single, simple tax.


…With both personal and corporate tax rates well below those of Ireland, the growth in Pridnestrovie’s tax income is even more impressive. As taxes have been simplified and rates have been lowered, revenues have gone up three and a half times.

Addendum: The good news about Pridnestrovie may not be so good after all. My Cato colleague Justin Logan rained on my flat tax parade by telling me that Pridnestrovie, AKA Tansnistria (I guess even the name of the place is in dispute), is not exactly the Hong Kong of Eastern Europe. The breakaway province has a very poor reputation for corruption. It also is not exactly a role model of democracy, since the boss of the country recently won 103 percent of the vote in one region (eat your heart out, Castro). Alas.

July 4, 2007 1:51PM

Hillary’s Chutzpah

Sen. Hillary Rodham Clinton denounces the Libby commutation as “disregard for the rule of law” and a “clear signal that in this administration, cronyism and ideology trump competence and justice.”


She has a point. But hello?! Wasn’t she part of the Clinton administration? Speaking of disregarding the rule of law.


And abusing the pardon power? The Clinton administration was notoriously stingy in pardoning real victims of unjust sentences. When it did use the pardon power, it seemed to have an unerring instinct for scandalous and undeserving beneficiaries. In 1999, as Hillary Clinton began her Senate campaign, President Clinton pardoned 16 members of the Puerto Rican terrorist organization FALN, raising questions about whether the pardons were intended to curry favor with New York’s Puerto Rican electorate. And then there was the infamous last day in office, when Clinton managed to pardon or commute the sentences of

  • Marc Rich, a fugitive tax evader whose ex‐​wife was a major contributor to the Clintons;
  • Susan McDougal, who loyally refused to testify in the Whitewater scandal;
  • Child‐​molesting Democratic congressman Mel Reynolds;
  • Post Office‐​molesting Democratic congressman Dan Rostenkowski;
  • Cocaine kingpin Carlos Vignali, whose father was a major Democratic contributor;
  • Four Hasidic shysters alleged to have promised and delivered Hasidic votes to Hillary Clinton’s first campaign;
  • Clinton’s half‐​brother Roger;
  • and various crooks who paid fees to Hillary Clinton’s brothers Hugh and Tony Rodham to lobby the First Family.

With so many people in jail who deserve a pardon, as Gene Healy and I have discussed in earlier Cato@Liberty posts, it’s appalling that both President Clinton and President Bush have used their pardon powers in such ways. And if anyone lacks credibility to criticize the Libby pardon, it would be President Clinton and Senator Clinton.

July 3, 2007 6:16PM

Why People Hate the IRS

My wife and I received a notice from the IRS yesterday regarding our 2006 income tax return. At first glance, I thought it said we underpaid by $107, which would be no big deal and I’d go ahead and pay.


Then I looked closer at the calculations the notice showed:


Total Tax On Return: $xx,242.00


Total Payments and Credits: $xx,241.63


Underpaid Tax: $0.37


Penalty: $106.65


Interest: $0.01


Total Amount You Owe: $107.03


You’ve got to be kidding – we underpaid our taxes by 37 cents and the IRS is dinging us with a $107 penalty?!


Page 22 of the 1040 instruction book clearly says that rounding to the nearest whole dollar is OK. I think this needs more investigation. 

July 3, 2007 5:14PM

Cato@Liberty’s Health Care Content Ranked #24?

Last week, I entered the Cato@Liberty blog you’re reading in the health​care100​.com rankings of health care blogs. Which might have been unfair. Most or all of the blogs in that ranking are exclusively focused on health care. Cato@Liberty covers many other issues and could get credit for visits and incoming links that have nothing to do with health care. So I made sure to enter only the health‐​care‐​specific URL and RSS feed.


The results (as of July 2, 2007) are in: Cato@Liberty (Health Care) tied with three other blogs for 24th. That put it ahead of such popular blogs as:

We have yet to eclipse The Health Care Blog (tied for 7th), but Matthew Holt is on notice.


I am not convinced that Cato@Liberty’s health care content deserves that ranking, however. The “Cato@Liberty (Health Care)” entry on the health​care100​.com list links to Cato@Liberty’s main page, rather than the health‐​care content page. In contrast, the WSJ​.com: Health Blog entry links to that blog’s health‐​care content. 


I’m guessing that using the health‐​care‐​specific URL and RSS feed actually would tend to understate the popularity of Cato@Liberty’s health care content, since many readers presumably access our health‐​care content along with the rest. The health‐​specific RSS is certainly Cato@Liberty’s weakest suit in the health​care100​.com rankings. But when we edge out The Health Care Blog, I don’t want to hear any talk about asterisks.


A bigger concern is that Cato@Liberty’s strongest showing is in the “Technorati Authority Ranking” portion of the health​care100​.com algorithm: “Technorati’s authority ranking shows the number of unique blogs that have linked to a particular blog over the past six months.” This must be capturing non‐​health‐​care‐​related links to Cato@Liberty. I hope the good folks at health​care100​.com will let us know if that’s the case and whether it can be remedied.


My favorite blog name on the list: Fingers and Tubes in Every Orifice (tied for 71st).