My latest podcast, “IPAB: ObamaCare’s Next Constitutional Hurdle.”
My latest podcast, “IPAB: ObamaCare’s Next Constitutional Hurdle.”
Last week, I appeared on NPR’s Tell Me More program. My discussion with host Michel Martin gives a good synopsis of why ObamaCare is both harmful to consumers and unconstitutional. Listen to the segment here.
For a contrary perspective, listen to former Obama administration acting solicitor general Neal Katyal, who appeared on the program the next day. If you do listen to both programs, let me know what you think about Katyal’s comments, specifically this part:
MARTIN: First, I want to play a short clip from Michael Cannon of the Cato Institute who spoke to us yesterday as we said. This is a little of what he told us. Here it is.
MICHAEL CANNON: If the Supreme Court were to uphold this unprecedented and really breathtaking assertion of government power, there would be nothing to stop the Congress from forcing Americans to purchase any private product that Congress chose to favor. That could be a gym membership. That could be stock in Exxon Mobil. That could be broccoli if Congress decided that any of these products move in interstate commerce and that forcing you to buy it was essential to the regulatory scheme they wanted to enact.
MARTIN: What is your response to that?
KATYAL: Well, I mean, that’s a lot of rhetoric and not really a legal argument because it’s not responsive to what the government is asking for here. What the government is saying is, look, everyone consumes healthcare in this country, you and I. And, you know, even if I might say to myself, I don’t need health insurance. I won’t get sick. The fact is, as human beings with mortality, we are going to get sick and it’s unpredictable when.
You could get struck by a heart attack or cancer or hit by a bus and wind up in the emergency room and then it’s average Americans who have to pick up the tab for that. And so the government is not saying here we have the power to force people to buy goods. They’re saying, look, you’re going to already buy the goods. You’re going to use it. And the only question is, are you going to have the financing now to pay for it.
And so the government is regulating financing. It’s kind of like a government law that says you’ve got to pay cash or credit. It’s not the government coming in and saying, oh, consume this product you wouldn’t otherwise consume. And as for the kind of, you know, ludicrous suggestion that this would somehow lead to the government forcing people to eat broccoli or the like, I mean, I would think that someone from the Cato Institute would know that the Bill of Rights and the privacy protections in the constitution would protect against such drastic hypotheticals.
Now, I’ve been at this for a while. I’ve seen people evade uncomfortable questions and mischaracterize things I’ve said. But for some reason, this instance really surprised me. Maybe Katyal was nervous.
Democrats and the left will squeal that Paul Ryan’s budget proposal is a massive threat to the poor, the sick, the elderly, etc, etc. It’s baloney, but a part of me thinks that he might deserve it. Why? Because the excessive rhetoric employed by the left to criticize lower spending levels for domestic welfare programs isn’t much different than the excessive rhetoric Ryan uses to argue against sequestration-induced reductions in military spending. For instance, Ryan speaks of the “devastation to America’s national security” that sequestration would allegedly cause. (See Christopher Preble’s The Pentagon Budget: Myth vs. Reality).
Now I’m sure that I’ll receive emails admonishing me for failing to recognize that the Constitution explicitly gives the federal government the responsibility to defend the nation while the constitutionality of domestic welfare programs isn’t quite so clear. Okay, but what are Ryan’s views on the constitutionality of domestic welfare programs?
At the outset of Ryan’s introduction to his plan, he quotes James Madison and says that the Founders designed a “Constitution of enumerated powers, giving the federal government broad authority over only those matters that must have a single national response, while sharply restricting its authority to intrude on those spheres of activity better left to the states and the people.” That’s nice, but then he proceeds to make statements like this:
But when government mismanagement and political cowardice turn this element of the social contract into an empty promise, seniors are threatened with denied access to care and the next generation is threatened with a debt that destroys its hard earned prosperity. Both consequences would violate President Lyndon B. Johnson’s pledge upon signing the Medicare law: ‘No longer will older Americans be denied the healing miracle of modern medicine…No longer will young families see their own incomes, and their own hopes, eaten away simply because they are carrying out their deep moral obligations to their parents, and to their uncles, and their aunts.’ To fulfill Johnson’s pledge in the 21st century, America’s generations-old health and retirement security programs must be saved and strengthened.
Social contract? Well, so much for those enumerated limits on federal power.
Ryan’s “Statement of Constitutional and Legal Authority” only cites Congress’s general power to tax and spend. Based on the contents of his proposal, which would do little to rein in the federal government’s scope, one could conclude that Ryan’s view of federal power is almost as expansive as that of his Democratic colleagues. Yes, Ryan would reduce the size of government by reducing federal spending as a percentage of GDP. But as I often point out, promises to reduce spending in the future don’t mean a lot when you have a federal government that has the ability to spend money on pretty much any activity that it wants. And under Ryan’s plan, the federal government would be able to continue spending money on pretty much any activity that it wants.
House Budget Committee chairman Paul Ryan (R-WI) has introduced his annual budget blueprint. The plan will likely pass the House but won’t become law this year.
However, the plan signals the direction that House Republicans want to go in budget battles with the Democrats this year, and it also shows the likely thrust of policy under a possible Republican president next year.
Here are a few highlights:
In sum, Ryan’s proposals would make modest reforms to the giant federal welfare state. By Washington standards the Ryan plan is bold, and Paul Ryan certainly deserves his reputation as the sharpest and most energetic budget reformer on Capitol Hill.
However, there is too much happy talk in the Ryan plan about how failed big-government programs can be made to work better, and not enough focus on terminating activities that are properly state, local, and private in nature.
P.S. I think my budget-cutting plan is a better one.
A number of people have asked me what is causing the current shortages in certain types of drugs. Here’s what I’ve been able to discern so far:
In general, there are two reasons why shortages might appear in a market. The first is high fixed costs. These include regulatory costs, the costs of converting a manufacturing plant to a new use, or the costs of creating a new factory. Industries with high fixed costs will see temporary shortages after either supply shocks (e.g., a factory goes offline) or demand shocks (e.g., an increase in the population needing a drug). The price mechanism eventually resolves such shortages. The duration of the shortage is related to the size of the fixed costs.
Shortages also appear when something interferes with the price mechanism’s ability to resolve a shortage. The classic example is government price controls (i.e., a binding price ceiling). Such shortages persist as long as the price controls (e.g., rent control) remain in place and binding.
From my study of the current spate of drug shortages, the best accounting for these shortages appears in this publication by the U.S. Department of Health and Human Services: “Economic Analysis of the Causes of Drug Shortages,” Issue Brief, October 2011.
I initially suspected these drug shortages were caused by Medicare’s Part B drug-payment system. Others, including Scott Gottleib and the Wall Street Journal, have made that claim. However, this study and a lengthy discussion with the U.S. Department of Health and Human Services’ assistant secretary for planning and evaluation have persuaded me that not only is Medicare’s Part B drug-payment system not the cause, that system doesn’t even impose binding price controls. Rather, it controls the margins that physicians earn for administering a drug. (If Medicare did impose binding price controls, would we see mark-ups of 650 percent or more for the shortage drugs?)
Rather, the shortages appear to be the result of a number of dynamics in the market for rare drugs:
This analysis suggests that, rather than impose reporting new requirements on manufacturers, Congress should reduce the fixed costs that the FDA imposes on drug manufacturers. Medicare’s Part B drug-payment system is no doubt encouraging physicians to switch to higher-margin drugs, but it doesn’t seem to be playing much of a role in these shortages.
I’d be interested to know if others think I’m missing something.
California regulators are coming down on Kaiser Permanente. According to HealthLeaders Media, the regulators reviewed a batch of coverage denials and “found that in excess of 75% of the cases the services indeed were medically necessary, and 10% were not.” Indeed?
Clinical artificiality The ill fit between “necessity” and ordinary medical care is immediately obvious in the question facetiously bandied about when health plans first considered what to do about a recently approved drug for male impotence: How often per month (per week? per day?) is drug-assisted sexual intercourse “medically necessary”?
As typified by that case, most medical decisions do not post clear choices of life versus death, nor juxtapose complete cures against pure quackery. Rather, the daily stuff of medicine is a continuum requiring a constant weighing of uncertainties and values. One antibiotic regimen may be medically comparable to and much less expensive than another, but with slightly higher risk of damage to hearing or to organs like kidneys or liver. For a patient needing hip replacement, one prosthetic joint may be longer-lasting but far costlier than an alternative. Of two equally effective drugs for hypertension, the costlier one may be more palatable because it has fewer side effects and a convenient once-a-day dosage.
Across such choices, it is artificially precise to say that one option is “necessary” — with the usual connotation of “essential” or “indispensable” – while the other is “unnecessary” — with the usual connotation of “superfluous” or “pointless.” Various options have merits, and often no single approach is the clear, “correct” choice. A given option might be better described as “a good idea in this case,” “reasonable, given the cost of the alternative,” “probably better than the alternative, given a specific goal,” “about as good as anything else,” or “not quite ideal, but still acceptable.”
In many cases, the real question is whether a particular medical risk or monetary cost is worth incurring in order to achieve a desired level of symptomatic relief or functional improvement, or to reduce the risk of an adverse outcome or a missed diagnosis. A huge array of treatments fits that description: more or less worthwhile, but the patient will not die without it and other alternatives (that might have some drawbacks) exist. [Emphasis mine.]
More broadly, concepts like necessity, appropriateness, and effectiveness can only be defined relative to a goal. For example, antibiotics are not clinically effective for all illnesses; they are effective against bacteria but, barring placebo effect, they are ineffective against viruses. Hence, it makes no sense for a physician to prescribe antibiotics to eradicate a viral infection. However, if the goal is to placate a relentlessly demanding patient who insists on antibiotics for his viral infection, the prescription may indeed serve that latter aim – which is probably why so many physicians write so many antibiotic prescriptions for viral illnesses.
Choices in this realm require a level of clinical complexity that is not reflected in simplistic notions like necessity, and that should not be hidden under blanket categories connoting a façade of precision. It would be far better to acknowledge that, across a broad spectrum of such choices and trade-offs, it is legitimate for people to come to different conclusions about what sort of price is worth paying, medically and financially, to achieve specific goals. To presume that a medical intervention is objectively either necessary or unnecessary belies the legitimacy of such variation in human goals and values.
So the question becomes: who will do a better job of deciding whether and when hip replacements or antibiotics or Viagra are “medically necessary?” Regulators? Or patients choosing health plans (in part) based on how those plans define medical necessity?
It’s an interesting question. Romney is under age 65, which means that he would have to obtain private health insurance. He jokes that he is unemployed, which means he may have to purchase it on his own. Or he may get it as a retiree benefit from Bain Capital.
The question is interesting because Romney is so wealthy that to spend his money on health insurance might seem like a waste. (Of course, Romney may be very risk averse, and a man to whom $10,000 is a small wager probably isn’t going to notice a $20,000 health insurance premium. But Romney could pay for whatever medical care he and his wife – and his children, and his grandchildren – could possibly need.) On the other hand, if Romney doesn’t have private health insurance, it would look bad that he forced other people to buy it.
Moreover, Romney turns 65 on March 12, meaning he becomes eligible for Medicare on March 1. He likely received his Medicare card in the mail two months ago. If Romney does not enroll in Medicare, it would again look bad that he who forced others to purchase health insurance is opting not to obtain health insurance himself. But if he does enroll in Medicare, it’s worth asking whether the 99 percent should subsidize people like him.
This work by Cato Institute is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.