As I blogged last fall, I had the opportunity to participate in a Fred Friendly Seminar on the future of health care reform. Hosted by NYU law professor Arthur Miller, the program featured — in addition to me — AARP CEO Bill Novelli, former U.S. Comptroller General Dave Walker, Washington Post Bureau Chief T.R. Reid, and Harvard Business School professor Regina Herzlinger, along with family doctors, business owners, hospital administrators, and health policy experts in a lively debate over how to control health care costs, expand access, and improve the quality of care. That debate will be broadcast by PBS the week of January 18. For information on when it can be seen in your area, click here.

The latest issue of the journal Health Affairs publishes a letter I wrote to the editors concerning articles on health care regulation in China and India. The entire letter follows (links added):

Recent articles on China and India (Jul/​Aug 08) share the assumptions that markets for medical care and health insurance require extensive government regulation and that each nation should focus on universal coverage.

I am unfamiliar with the history of regulation in those nations. But the track record of clinician and insurance regulation in the United States is not encouraging. Both have been used by incumbents to block competition, leading to higher costs and lower quality. Gerald Bloom and colleagues worry that unless India imposes clinician licensing, “the natural process of competition is expected to force each insurer to come up with its own accreditation policy and reimbursement procedures.” Does that mean that prepayment would compete openly with fee-for-service? And that physicians could not increase costs by blocking health plans from employing mid-levels when appropriate? Dear God—not that.

Ashoke Bhattacharjya and Puneet Sapra write, “It is encouraging to note that notwithstanding the myriad issues and challenges discussed above, both countries are developing a constructive working framework to balance the interests of government, providers, employers, the insurance industry, and patients, en route to the goal of universal coverage and fairness in health care financing.” That’s just the problem: a policy of universal coverage puts too much power in the hands of elites. It inevitably “balances” those interests, when patients’ interests should trump all others. Does not the fact that “these countries lack the fiscal resources required for universal coverage because of their…low average wages” suggest that many residents have more pressing needs than health insurance? For things that might just deliver greater health improvements? In a profession where universal coverage is a religion, such questions are heresy,I know.

China and India are in the process of a slow climb out of poverty. It is entirely possible that the best thing those governments could do to improve these markets and population health would be to enforce contracts, punish torts, contain contagion, and nothing else.

Michael F. Cannon
Cato Institute, Washington, D.C.

Louisiana Gov. Bobby Jindal’s (R) proposed Medicaid reforms are getting a lot of press. Jindal proposes to expand eligibility for Medicaid, enroll Medicaid patients in private managed-care plans, and do other things to improve the quality of care. Writing in The American Spectator, Joseph Lawler says the approach is “market-based” and “could forestall universal health care.”

A friend asked my thoughts about Jindal’s proposal. Here’s what I emailed back:

Why is it that when politicians propose giving taxpayer dollars to private companies, people think that’s “market-based”?

Jindal’s plan is not market-based reform. As a general matter, market-based charity care is just that: private charity. So the only market-based Medicaid reforms are those that remove people from the Medicaid rolls — e.g., federal block grants, eligibility restrictions, etc.

Jindal wants to expand eligibility. For a welfare program. And we call that market-based?

Jindal may be able to improve the quality of care through greater coordination. Which looks good on paper. But if the quality of care in Medicaid improves, more people will enroll. Only 2/3 of those eligible actually sign up for the program. (Many of the 1/3 who don’t enroll actually have private coverage.) So improving Medicaid benefits could cause enrollment to increase 50 percent. And that’s before Jindal expands the eligibility rules.

With all the additional cost pressure, what’s going to happen to Medicaid payments and enrollees’ access to docs? (There are reasons why Medicaid pays so little.)

Louisiana’s Medicaid program could someday achieve the most coordinated system of care that no one can access. Should we pull people out of private health plans for that?

Expanding enrollment in a government-run health plan is supposed to forestall universal coverage? Discerning consumers of market-based ideas should keep shopping.

With left-wing Democrats controlling Congress and the White House, and many special-interest groups clamoring for reform, people are starting to talk about comprehensive health care reform as if it were a done deal.

Yet comprehensive reform could easily crater — and it should crater if it includes any of the following:

1. Government-run health care for the middle class
2. Mandates
3. Price controls

Those reforms would effectively nationalize health insurance, regardless of whether we continue to call it “private” insurance.

Republicans, moderate Democrats, and independents should kill any reforms that include any of those three items. Here’s why, and how.

Claiming hardship due to _________ (noun), state governors and legislators are demanding that Congress give them more money for their _________ (noun) programs. Of course, the states do this every time a _____________ (frequent, predictable occurrence) happens.

This time, the states want more money for their Medicaid programs. Again. The states claim their Medicaid rolls are swelling due to the economic downturn. Yet economic downturns are predictable — completely so, even if the timing isn’t predictable. The effect of an economic downturn on Medicaid enrollment is also predictable. Thus, bailing out the states right now would essentially reward them for not planning for the future.

Here’s how the AP reported my take:

Medicaid insures nearly 1 in 6 … people in the United States. The program typically covers the very poor and about half of enrollees are children. Spending came to $333 billion in the budget year ending Sept. 30, 2007. Washington picks up about 57 percent of that; the states cover the remainder.

Michael Cannon, director of health policy studies at the Cato Institute, a libertarian think tank, sympathizes with new families now relying on Medicaid. Still, he disagrees that the federal government should reward states that did not plan adequately for the bad times. Better planning would mean setting aside more money for rainy-day funds and not expanding the scope of Medicaid during the good economic times, he said.

“The states make these promises they know they can’t keep and then they run to Congress to bail them out,” Cannon said. “And Congress typically ends up bailing them out.”

Cannon said the net result is that the government gradually is becoming more responsible for paying for health insurance coverage.

As I wrote last year, the states play the same game with funding for the State Children’s Health Insurance Program:

States such as Georgia sometimes spend all of their allotted SCHIP funds before the end of the fiscal year. The CBO estimates that 11 states will do so in 2007. Typically, those states then petition the federal government for additional funding. So far, Congress has twice bailed out such states, effectively rewarding states that commit to spend more federal dollars than they have been allotted.

To stop this racket, we need Medicaid/SCHIP reform. A federal balanced budget amendment wouldn’t hurt, either.

The Church of Universal Coverage is telling us that national health insurance will stimulate economic growth.

• Senate Finance Committee chairman Max Baucus (D‑MT) says universal health insurance coverage is the key to a healthy economy.
• MIT economist Jonathan Gruber says “health care reform is good for our economy.”
• Business Week columnist Chris Farrell writes, “Universal coverage would stimulate the economy [and] boost the financial security of ordinary Americans.”

That seems to contradict their usual spiel — which happens to be correct — that America’s health care sector is wasteful and inefficient. Americans spend twice the amount that other advanced nations spend on medical care, yet we’re not noticeably healthier. Researchers estimate that one third of U.S. medical spending produces nothing at all — that’s about $700 billion wasted per year. How is pumping more money into such an inefficient economic sector supposed to stimulate growth?

It also doesn’t seem to square with the facts. If anything, the economy appears to grow faster when Congress rejects universal coverage.

• After Congress defeated President Harry Truman’s proposal for national health insurance in 1949, the nation enjoyed four years of robust economic growth.
• The defeat of the Clinton Health Security Act in 1994 was followed by six years of robust economic growth.
• The largest step Congress has taken toward universal coverage was when it launched Medicare and Medicaid in 1966. Real economic growth averaged 5.7 percent in the four years prior to 1966, but only 2.7 percent in the four years that followed.

If history is any guide, politicians who want to stimulate the economy should be trying to defeat universal coverage.

Source: Bureau of Economic Analysis

The right kind of health care reform will reap economic dividends. Letting consumers control their health care dollars and choose their own health plan will make us healthier and wealthier by encouraging innovation, eliminating wasteful spending, and making health care more affordable. Nationalizing health insurance, on the other hand, will suppress innovation and encourage wasteful spending, as evidenced by Medicare, Medicaid, etc.

My favorite New Yorker cartoon shows a bar patron telling his compatriot, “I figure if I don’t have that third Martini, then the terrorists win.” People will seize on a crisis to justify, well … anything.

Today’s The USA Today tells the story of “Phyllis Smith, a 60-year-old uninsured seamstress in Yantis, Texas, [who] goes without medications for high blood pressure and diabetes because she can’t afford a visit to her doctor to get her prescriptions refilled.” The article quotes Smith:

With the condition this world is in right now, [Barack Obama] has his hands full.… Whether I get my high-blood-pressure medicine is not going to be high on his priority list.

Sort of argues against giving some distant ruler that much control over your life, doesn’t it?

And who knows? Were those distant rulers not doing so much to make health insurance more expensive, perhaps Smith wouldn’t be uninsured.

Were they not doing so much to make routine care so expensive, perhaps Smith could afford that doctor’s visit, or have a nurse practitioner adjust her prescription.

Were they not doing so much to make prescription drugs more expensive, perhaps Smith could better afford her medications too.