The ink isn’t even dry on the big boondoggle — I mean, “stimulus” bill — and the health care industry is already making sure that the $1.1 billion dedicated to comparative-effectiveness research doesn’t accomplish a thing. 

Called it.

Colleague and comrade-in-arms Sally Pipes likens federally funded research comparing medical treatments — to which the so-called “stimulus” bill would devote $1.1 billion — to federally funded research comparing cheeseburgers.

I too think the case for federally funded comparative-effectiveness research is misguided, but it’s stronger than the comparison to cheeseburgers would suggest. Why? Cheeseburgers are not credence goods.

As if there were not enough reasons to oppose the Big Boondoggle, otherwise known as the stimulus bill, it appears that Democrats have slipped in a provision that would take the first steps toward undoing the 1996 welfare reform.

A provision of the bill would establish a $3 billion “emergency fund” for states to use to pay for increases in their welfare rolls. Significantly the legislative language would reward states for increasing their caseloads, regardless of whether the increase was due to increased unemployment or other economic conditions or simply because the state loosened its work requirements or time limits. It also shifts the base for states caseload reduction bonuses in a way that will discourage states from holding down the growth in welfare. And, while the grant does not eliminate welfare reform’s central concept of replacing the individual entitlement to welfare with a state block grant, it certainly weakens the foundation.

This effort to undermine welfare reform, should not be seen in isolation. As an Illinois State Senator Barack Obama was highly critical of the 1996 reform. Recent articles and editorials in the New York Times have signaled a new campaign on the Left to restore welfare to its pre-96 rules. And, of course, the stimulus bill also dramatically increases non-cash welfare benefits like Medicaid and food stamps.

I’m not sure that when the American people voted for change, they were really seeking a return to 40-years of welfare failure.

Dr. James G. Knight (M.D.) is the CEO of Consumer Directed Health Care, Inc. Below, he shares his thoughts on “Does the Doctor Need a Boss?“, a paper coauthored by Arnold Kling and me that has sparked a debate within the consumer-directed health care movement.

RE: Does the Doctor Need More Bosses?

My brother had a job in big business where he reported to more than one boss. Needless to say, it didn’t work out well for him.

Doctors ought to have just one boss, their patient. Patients must be allowed to work with the advice of physicians of their choosing and must have the right to make their own health care decisions. Patients must also have meaningful financial responsibility for the decisions they make. Everybody else is superfluous, except to the degree they too have a share of the financial responsibility.

If fee-for-service has been corrupted by the average physician performing unnecessary services for monetary gain (a premise I totally reject as a mean physician characteristic), then by converting to salaries or capitation these same “corruptible” physicians will be able to profit more by being lazy, doing less, and avoiding the sickest patients; a combination of both greed and sloth versus greed alone.

Cato believes in individual liberty, limited governments and free markets. In my view, big government and big corporations are very often equal threats to individual liberty. As a nation we need a big military to provide for national defence and a few big corporations that can complete huge projects that individuals couldn’t possibly accomplish, but health care is the application of the intellectual rights of individual professionals delivering care to just one patient at a time.

Last month, the Urban Institute published a study by Linda J. Blumberg and Lisa Clemans-Cope critical of health savings accounts. I was about to write a point-by-point rebuttal when I realized that I already had, nearly three years ago. So I’ll just summarize.

• HSAs do provide a larger tax break to wealthy people, but that’s not the fault of HSAs themselves so much as the much larger tax exclusion for employer-sponsored insurance that HSAs were designed to emulate. Yet Blumberg and Clemans-Cope do not criticize the exclusion itself. Sooo … tax breaks for the wealthy are kosher, unless they let workers control their earnings?
• The presence of that large tax break does not mean that HSAs are “most attractive to the high-income and the healthy.” As the Congressional Research Service writes: Some less healthy people may find HSA plans attractive because they enable them to circumvent the restrictions of managed care plans. Conversely, some healthy people may find them unattractive because they are very risk-averse; they would prefer to pay more for comprehensive insurance with low deductibles. Older people may find HSA plans attractive because of the tax advantages: being in higher tax brackets (since average earnings increase with age until people are in their 50s), their tax savings from contributions would be greater. People who are 55 but not yet 65 years of age would also be attracted by the additional catch-up contributions they may make. By the same token, younger people with low incomes may consider the HSA tax advantages inconsequential.”
• As for the cost-containment potential of HSAs, in my 2006 paper I made a back-of-the-envelope calculation that, under current law, HSAs have the potential to “introduced price sensitivity into more than 60 percent of medical expenditures by all nonelderly fully insured individuals.” That ain’t small potatoes. HSAs could do even more to contain costs if we expand them into Large HSAs that let consumers control all of their health-care dollars — not just the first few thousand. 
• There is zero evidence that HSAs will lead to worse health outcomes. In fact, all evidence suggests HSAs will deliver health outcomes comparable to other forms of insurance at a lower cost.

I address other criticisms in my paper, which Blumberg and Clemans-Cope do not cite. 

They do lodge one additional criticism against HSAs that has emerged since my paper was published: that HSAs encourage or enable tax evasion. I addressed that criticism last year and found it groundless: HSA critics have produced no evidence of unlawful withdrawals, nor have they offered any reason why HSAs should be subject to greater scrutiny than other methods of not reporting income. Again, Blumberg, Clemans-Cope, and other critics leave the impression that the identified attribute is not the offending attribute.

I’m critical of HSAs too, but this?

The Orange County Register editorializes on the State Children’s Health Insurance Program expansion that President Obama just signed into law:

Sure enough, as Jonathan Gruber of MIT and Kosali Simon of Cornell demonstrated in a recent paper for the National Bureau of Economic Research, six of every ten families enrolled in SCHIP in recent years already had private health insurance, meaning that subsidized insurance was crowding out private insurance. As Michael Cannon, director of health policy studies at the libertarian Cato Institute put it to us, “Only in government is a program deemed to ‘work’ when it covers four uninsured children for the price of ten.”

The other fallacy embodied in SCHIP (and other programs) is that providing health insurance is the key to improving the health of poor and near-poor children. Helen Levy of the University of Michigan and David [Meltzer] of the University of Chicago medical school have explored extensively the fact that improving health is more complex than generally acknowledged. It turns out that targeted programs, policies that lead to increased incomes and even improved education offer more bang for the buck than providing insurance.

Given all this, it is not difficult to imagine that the real reason to expand SCHIP is to crowd out private health insurance, and when families are faced with fewer and less affordable choices, they’ll opt for a government-run or “single-payer” system. As P.J. O’Rourke once warned us, however, “If you think health care is expensive now, wait until it’s free.”

I would say that increasing incomes, improving education, or targeted health programs may be more cost-effective than expanding access to health insurance. No one really knows, which makes adopting a one-approach-fits-all strategy like SCHIP rather foolish.

I think it’s time to induct the Orange County Register’s editorial page into the Anti-Universal Coverage Club.

Tomorrow, the Cato Institute will release my latest paper, “A Better Way to Generate and Use Comparative-Effectiveness Research.” But since there’s $1.1 billion for comparative-effectiveness research in the, uh, stimulus bill currently before the Senate, we thought we’d sneak it online now.

The high-level executive summary is this: the $1.1 billion for comparative-effectiveness research in the, uh, stimulus bill will be a complete waste of time and money.

The plain-old executive summary is this:

President Barack Obama, former U.S. Senate majority leader Tom Daschle, and others propose a new government agency that would evaluate the relative effectiveness of medical treatments. The need for “comparative-effectiveness research” is great. Evidence suggests Americans spend $700 billion annually on medical care that provides no value. Yet patients, providers, and purchasers typically lack the necessary information to distinguish between high- and low-value services.

Advocates of such an agency argue that comparative- effectiveness information has characteristics of a “public good,” therefore markets will not generate the efficiency-maximizing quantity. While that is correct, economic theory does not conclude that government should provide comparative- effectiveness research, nor that government provision would increase social welfare.

Conservatives warn that a federal comparative- effectiveness agency would lead to government rationing of medical care—indeed, that’s the whole idea. If history is any guide, the more likely outcome is that the agency would be completely ineffective: political pressure from the industry will prevent the agency from conducting useful research and prevent purchasers from using such research to eliminate low-value care.

The current lack of comparative-effectiveness research is due more to government failure than to market failure. Federal tax and entitlement policies reduce consumer demand for such research. Those policies, as well as state licensing of health insurance and medical professionals, inhibit the types of health plans best equipped to generate comparative-effectiveness information.

A better way to generate comparative-effectiveness information would be for Congress to eliminate government activities that suppress private production. Congress should let workers and Medicare enrollees control the money that purchases their health insurance. Further, Congress should require states to recognize other states’ licenses for medical professionals and insurance products. That laissez-faire approach would both increase comparative-effectiveness research and increase the likelihood that patients and providers would use it.