The House is expected to vote today on an expansion of the State Childrens Health Insurance Program (SCHIP). My colleague, Michael Cannon, has frequently written on the problems of this poorly targeted program that moves six children from private to public coverage for every four uninsured children that it covers. However, it is interesting to note that the $33 billion expansion is supposedly paid for primarily through a 61-cent-per-pack increase in the federal cigarette tax. Yet, at the same time, President-elect Obama announced that his choice for Deputy Secretary of Health and Human Services is William Corr, an anti-tobacco lobbyist and executive director of the Campaign for Tobacco-Free Kids. So we can shortly expect the Obama administration to step up efforts to stop people from smoking, thereby reducing the taxes they are counting on to pay for their SCHIP expansion. One hardly knows whether to wish them success.

• Writing for Independent Advocate, a political blog devoted to “independently minded news analysis,” Wes Kimbell quotes Senior Fellow Richard W. Rhan’s December op-ed about Obama’s proposed stimulus plan.

• The Hill’s Congress Blog posts analysis from Senior Fellow Michael D. Tanner on Barack Obama’s proposals for Social Security and Medicare.

• The International Law and Policy Blog links to Cato Trade Policy Analyst Sallie James’s appearance on Reason TV, discussing presidential trade policies.

• Blogging for the Weekly Standard, Brian Faughnan cites Director of Health Policy Studies Michael F. Cannon’s recent post on Obama’s proposal to eliminate Medicare Advantage, which would oust nine million seniors from their health plans.

• Baltimore Sun financial columnist and blogger Jay Hancock plugs an upcoming forum at Stanford University on the similarities and differences between liberals and libertarians, featuring Cato Research Fellow Will Wilkinson and Vice President for Research Brink Lindsey.

• Writing for the Peace Freedom & Prosperity Movement Web site, Michael Shanklin discusses Cato’s video on the auto bailout.

In their zeal to achieve universal health insurance coverage, President-elect Barack Obama and congressional Democrats are likely to exacerbate a real crisis in America’s health-care sector.

Americans generally receive medical care from a fragmented collection of doctors, hospitals, pharmacists, and other health care providers. All too often, those providers don’t communicate and collaborate. The result is too many unnecessary services and too many medical errors. The problem is particularly acute when it comes to complex patients with multiple conditions.

In a paper released today by the Cato Institute titled, “Does the Doctor Need a Boss?”, Arnold Kling and I explain that government prevents coordination of care, and that improving coordination requires reducing government’s role:

Medical care typically lacks coordination, in part because payment systems such as Medicare have not kept pace with technology and patients’ changing needs, and because many doctors are unwilling to cede authority to a boss. Medicare and other payers continue to pay doctors according to the independent-craftsman model. For example, Medicare’s payment system generally does not reward coordination. Instead, Medicare and other fee-for-service payers tend to favor technologically intensive specialist services over those of general practitioners who might be best suited to play the role of project manager…

In the home-building analogy, it is as if the concrete contractor, the drywall contractor, the electrician, and the plumber all refuse to work under a general contractor. Instead, they each try to do their jobs independently, regardless of the impact on the rest of the project.

The culprit is not market forces, but government interventions that protect physicians from competition from better-coordinated providers.

Licensing of medical professionals, state health insurance regulations, corporate-practice-of-medicine laws, and policies that encourage fee-for-service payment (i.e., Medicare, Medicaid, and the federal tax code) hold at bay the market forces that would improve coordination of care…

Improving coordination of care requires two consumer-empowering reforms:

First…consumers should control the money that purchases their health insurance, and should be free to choose their insurer and health care providers.

Second, state licensing regulations make it difficult for corporations to design optimal work flows for health care delivery. Under institutional licensing, regulators would instead evaluate how well a corporation treats its patients, not the credentials of the corporation’s employees. Alternatively, states could recognize clinician licenses issued by other states. That would let corporations operate in multiple states under a single set of rules and put pressure on states to eliminate unnecessarily restrictive regulations.

By centralizing control in Washington, the ruling Democratic left will give new strength to the protectionist forces that have blocked quality improvements in health care.

On This Week with George Stephanopolous, president-elect Barack Obama proposed eliminating the ENTIRE Medicare Advantage program:

We’ve got to eliminate programs that don’t work, and I’ll give you an example in the health care area. We are spending a lot of money subsidizing the insurance companies around something called Medicare Advantage, a program that gives them subsidies to accept Medicare recipients but doesn’t necessarily make people on Medicare healthier.

And if we eliminate that and other programs, we can potentially save $200 billion out of the health care system that we’re currently spending, and take that money and use it in ways that are actually going to make people healthier and improve quality. So what our challenge is going to be is identifying what works and putting more money into that, eliminating things that don’t work, and making things that we have more efficient.

Medicare Advantage allows seniors to choose a private health plan rather than get their health coverage from the traditional Medicare program. The Left has complained Medicare Advantage costs taxpayers more than if those seniors remained in the traditional Medicare program. (I agree, though the reason is not because government is more efficient than private insurance.) The Left has long dreamt of eliminating Medicare Advantage, in part because it poses a threat to their plans for a completely government-run, single-payer health care system. Yet the Left has had to settle for attacking and attempting to eliminate the “overpayments” that Medicare Advantage plans receive. Of course, one can eliminate Medicare Advantage stealthily by reducing payments to private plans until none will participate.

For Obama to suggest eliminating Medicare Advantage outright, however, is extraordinary. First, Obama made a campaign promise that he will let Americans keep their current health insurance. Eliminating Medicare Advantage would force 9 million seniors out of their current health plans and back into traditional Medicare. Second, a man who wants to reform America’s health care sector ought not begin the effort by proposing to take something away from seniors, America’s largest and most politically active voting block. Maybe the Obama folks haven’t learned the lessons of the Clinton health care battle.

Eliminating Medicare Advantage would be bad for non-seniors, too, because it would block innovations that make medicine better, cheaper, and safer. The main reason that the U.S. health care sector fails to coordinate care, fails to provide patients with electronic medical records, and fails to prevent medical errors is that whenever providers try to do those things, the traditional Medicare program’s change-resistant payment system punishes them for doing so. (Universal coverage kills.) Medicare Advantage plans use different financial incentives that actually encourage coordination, EMRs, and error reduction. What a novel thought…

I thought Obama’s remarks were a misprint when I first read them. But then I saw the video.

One has to give Barack Obama at least half a point for political courage. In warning that Social Security and Medicare are ticking fiscal time bombs, the president-elect took on one of his party’s most prized shibboleths–the idea that there is nothing wrong with those programs that repealing the Bush tax cuts wont fix. After all, hardly any Democrat anywhere campaigns without attacking his Republican opponent for wanting to destroy Social Security and Medicare.

But to get full courage points, Obama would have to come up with an actual plan to reform the two troubled programs. So far, he hasn’t. The Social Security plan he put forward during the campaign, a 4% payroll tax hike on those earning more than $250,000 per year, would give the United States one of the highest marginal tax rates in the world, with devastating economic consequences, but would do almost nothing to extend Social Security’s cash-flow solvency.

In the end, there are only three ways to fix Social Security: raise taxes, cut benefits, or allow private investment. Moreover, as Cato has long pointed out, solvency is only one of the problems facing Social Security. Social Security taxes are already so high, relative to benefits, that Social Security has quite simply become a bad deal for younger workers, providing a low, below-market rate of return. In fact, many young workers will end up paying more in taxes than they receive in benefits. They will actually lose money under the program. And the single most important problem with the current Social Security system remains that workers have no ownership of their benefits. This means that workers are left totally dependent on the good will of 535 politicians to determine what they will receive in retirement. This lack of property rights also translates to poorer bequests. Since workers do not own the money they pay in Social Security taxes, they are unable to pass their inherited retirement savings on to their heirs. No matter how much a worker has paid in Social Security taxes, his benefits are reduced at death and then expire with the spouse.

Having bucked his party on whether Social Security needs to be reformed, will Obama have the courage to go further and allow younger workers the option of privately investing a portion of their Social Security taxes through personal accounts?

On Medicare, the president-elect has been equally lacking in specifics. During the campaign, he actually called for expanding Medicare, notably by increasing coverage under the prescription drug program, eliminating the so-called “donut hole.” Now he talks mostly about eliminating the Medicare Advantage program, the program’s private managed-care option. Managed care providers may indeed be overcompensated under that program, but the program’s real long-term problems lie in its open-ended indemnity-style, fee-for-service payments. Obama also suggests that his overall health care reform will reduce the growth in health care spending, thereby reducing Medicare costs. That’s more a prayer than a program.

But speaking of health care reform, it seems somewhat oxymoronic for President-Elect Obama to warn about the dangers of entitlement spending while calling for a massive new entitlement in the form of national health care.

Obama has shown the first signs of political courage. But the devil is in the details. Let’s see what he actually proposes. Only then will we know if his courage is more than rhetoric deep.

Matthew Holt implausibly says no.

Tom Daschle is a former majority leader of the U.S. Senate, and president-elect Barack Obama’s pick to head the Department of Health and Human Services. Daschle will also head up the Obama administration’s health care reform efforts.

Which is why Daschle’s proposal for a Federal Health Board has received so much attention. Holt reports:

the main role of the Federal Health Board would be as a cost-effectiveness review organization with teeth—in that Medicare, Medicaid & FEHBP would all be bound to follow its guidelines.

Holt continues:

Critics on the loony right … will call this rationing.

What’s interesting about that comment is that Holt merely associates the “rationing” claim with people who are loony. He doesn’t actually say they’re wrong. In fact, Holt himself writes:

we need to make cardiologists in Miami behave like cardiologists in Minnesota with a consequent impact on the incomes of doctors, hospitals and stent & speedboat salesman in high cost areas … If the Federal Health Board has teeth, that’s what it’ll do, and the AMA, AHA, AdvaMed, PhRMA et al know it. Which is why the PhRMA front organizations have been railing against cost-effectiveness for so long.

So Holt acknowledges that the point of comparative- and cost-effectiveness research — and Daschle’s Federal Health Board — is to do something that would reduce the incomes of doctors, hospitals, and drug/​device manufacturers. That something would be so dramatic that it has the providers and manufacturers up in arms and funding front organizations. If that something is not refusing to pay for some medical services — i.e., rationing — then what is it?

Rationing medical care is not just essential, it’s unavoidable. And the way we ration medical care today is unconscionable. But so too would be having the government ration medical care. Which is probably why proponents of government rationing don’t want to call it that.

It appears that Barack Obama will name CNN health reporter Sanjay Gupta as the next US Surgeon General. Although I strongly disagree with Dr. Gupta on many issues, such as his support for national health care, he is probably as good a choice as any. But the bigger question is why do we need a surgeon general in the first place? After all, can anyone name our current (acting) surgeon general?

In reality, the surgeon general is little more than the “national nanny,” hectoring us to stop smoking, lose weight, exercise more, and never ever go out without a condom. I’ve been flipping through my copy of the Constitution, and I can’t find the authorization for the federal government to take taxpayers’ money to establish an office to tell us how we should live our lives. There are plenty of private groups that are fully capable of instructing us on how to be healthy, wealthy and wise without the government’s getting involved. The American Lung Association can tell us not to smoke. Alcoholics Anonymous can preach sobriety. The American Medical Association can lecture couch potatoes on the benefits of losing weight and exercising more. Planned Parenthood and the Family Research Council can fight it out over when and how we should have sex.

The surgeon general does oversee the Public Health Service. But we have a Department of Health and Human Services that is supposed to be running the government’s health care programs. Why not let HHS take over any useful functions of the Public Health Service and dump the rest, including the surgeon general?

President-Elect Obama says he wants to be a different type of president. Fair enough. Why not start by letting people live the way they want, without a surgeon general looking over our shoulder and nagging us.