Topic: Regulatory Studies

There Is No Objective Definition of ‘Medical Necessity’

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?

Now seems like a good time to post what University of Tennessee law professor Haavi Morreim wrote about “The Futility of Medical Necessity“ in Regulation:

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?

HuffPo Oped: ‘The Illiberality of ObamaCare’

My latest:

On Friday, President Obama tried to quell the uproar over his ongoing effort to force Catholics (and everyone else) to pay for contraceptives, sterilization, and pharmaceutical abortions. Unfortunately, the non-compromise he floated does not reduce by one penny the amount of money he would force Catholics to spend on those items. Worse, this mandate is just one manifestation of how the president’s health care law will grind up the freedom of every American.

Pool Grants, Federalism, and the Wellsprings of Government Growth

As part of a 2007 law, Congress decreed the establishment of a new federal program to dangle grants in front of states that agree to enact more stringent laws on swimming pool safety. According to Consumer Product Safety Commissioner Nancy Nord, however, the multi-million-dollar pot Congress has set aside for this purpose has sat unused: “not one state has applied for a grant and not one dollar has been disbursed, despite changes made to improve the program. We will soon have paid CDC [the Centers for Disease Control] almost half a million dollars to administer a grant program with no takers.”

What do you think the odds are that lawmakers will learn from the experience and do away with the grant program? Contrariwise, what do you think the odds are that someone on Capitol Hill right now is preparing to argue that if no states have applied for grants, the amounts on offer must be too low, and new lawmaking is needed to provide for bigger subventions?

In all seriousness, this forlorn little program is a tiny and failed example of a genre of federal initiative that all too often enjoys success: using federal tax dollars to bribe states and localities into raising spending and extending regulation. The proliferation of such programs helps explain why the earlier and sounder idea of federalism – which saw the national and state governments as checking each others’ overweening powers – has given way to a spirit of mutual enablement (“cooperative federalism”) at the expense of the citizenry and its freedom. Thus the Obama administration, realizing that public opinion is not yet ready for a federal-level campaign to demonize fattening and salty foods, is happy to drop millions of dollars on local governments like Mayor Bloomberg’s in New York City to do exactly that. And for decades Congress has been creating programs subsidizing local hiring of teachers, police officers and other public employees – with the presumably unintended result of saddling localities with unsustainable payrolls and pension obligations when times turn tough.

Our friend Michael Greve has a new book out called The Upside-Down Constitution exploring how coordination between once-rival levels of government has been turned into an engine of growth for the leviathan state. You can read more about it here, here, and here at Liberty Fund’s Library of Law and Liberty site. Relatedly, Greve points out in this post something worth keeping in mind: federalism is a structure, not a balance.

Prison Terms for Not Installing ADA Ramps?

We’ve often deplored the continued push of criminal prosecution into matters that were once considered more suitable for regulation or for the operation of civil law. A little-noted report a few weeks back in the Los Angeles Times may indicate the next milestone in overcriminalization:

The U.S. attorney has launched a fraud investigation to determine whether Los Angeles city officials ignored federal laws designed to protect the disabled when building or fixing up housing. …

The investigation spans January 2001 to the present, the letters said. If violations are uncovered, city agencies that used federal housing funds could face financial penalties, lose out on future grants or possibly become the subject of a criminal investigation, said [city official] Bill Carter…

Disabled activists sought an investigation because, to quote the LAT again,

In testimony and in person, activists alleged that doors were sometimes too heavy for wheelchair users to open, elevators were not working in at least one city-funded building, and managers either refused to rent to wheelchair users or did not have apartments available for them, [advocate Becky] Dennison said.

The activists also felt ignored because various management recommendations they made to local officials had been ignored. They already have a right to file civil suits over their grievances: indeed, shortly after the U.S. Attorney’s investigation came to light three advocacy groups did file a civil suit against the city.

There are very real problems of fraud – plain old graft and money-raking – on the L.A. public housing scene. But the idea of redefining fraud to include ADA noncompliance is a different matter. If taken seriously, it would mean exposing ordinary as well as dishonest local officials across the country to the specter of criminal liability. It’s notoriously hard to assure that either new or renovated buildings are 100% compliant with ambitious interpretations of the law; a design fix that satisfies three ADA consultants may displease a fourth. Criminal liability should arise from very clear, preannounced standards of conduct. That’s not the ADA.

Maybe the U.S. Attorney’s office is just raising the criminal issue as a bit of bravado to please its friends in the advocacy world and strong-arm the city into settling. But as playwrights know, if a shotgun is shown above the fireplace in Act I, by the middle of Act III a shot will ring out. This misguided extension of federal fraud law is worth challenging now.

Indian Gaming: The Lobbyists Always Win

One of the issues discussed in my new essay on the Bureau of Indian Affairs (BIA) is the lobbying by groups of American Indians seeking official tribal status. The BIA has the power to confer tribal status, and it does so in a non-transparent manner. With official status comes tribal access to a wide range of federal subsidy programs plus the ability to earn monopoly profits with a casino. The gaining of official status for tribes was one of Jack Abramoff’s specialty services.

The most recent BIA decision to confer tribal status is a classic case. The 221-member Tejon tribe in California received a thumbs up from the BIA in January 2012. The group’s reservation and its tribal status had been dissolved decades ago, but it hired some powerful Washington lobbyists to work their magic. An article in the Bakersfield Californian notes, “In their quest to gain recognition, the Tejons had the help of an unnamed ‘financial backer’ who had paid $300,000-plus to the tribe’s attorneys.” This financial backer was “banking on a casino.”

A Mountain Enterprise story says that once the Tejon tribe’s status was official, “speculation began almost immediately about the tribe’s plans to affiliate with Tejon Ranch Corporation and Las Vegas investors to establish a casino facility.” Famous D.C. lobby shop Patton Boggs earned $120,000 in fees on the deal.

For the Tejons, the lobbyists produced results. There are hundreds of Indian groups who have petitioned the BIA for tribal status, and the BIA only confers status to a few tribes a year. Yet somehow the Tejons managed to jump to the front of the queue. This list (and this one) appear to show that the tribe ranked low on the recognition waiting list at #230 (but I admit I’m not an expert on how the system works).

The tribes who hire lobbyists don’t always win. Here’s a story about the 450-member Muwekma Ohlone of California:

Financed by their own casino sugar daddy, Florida real estate tycoon Alan Ginsburg and his associates, as well as with proceeds from the tribe’s own archaeological consulting firm, the otherwise humble Muwekma have spent millions of dollars on the effort. Much of that money has gone toward procuring the aid of a high-powered Washington, D.C., law firm…. [R]ecognition would open the door for the tribe… to place land in federal trust as a ‘reservation’ on which it could open a casino. Indeed, should they attain recognition, the Muwekma almost assuredly will become the envy of non-gaming tribes from outlying regions of the state who’ve tried and thus far not succeeded at ‘reservation shopping’ — that is, attempting to set up casino operations in urban areas far from their aboriginal homeland.

The Muwekma Ohlone tribe lost an important court ruling last year, which has set back their search for official recognition. In this case, the only winners were the lawyers and lobbyists, who apparently pocketed huge fees from the tribe. This data source shows that lawyers and lobbyists gain about $20 million a year in fees on Indian gaming-related issues. Jack Abramoff alone raised $80 million from half a dozen tribal clients in the early 2000s for lobbying on a wide range of tribal issues.

Indian gaming and other complex regulatory schemes usually generate “rent” or monopoly privileges that groups vie for a manner that is unproductive to society as a whole. When the government confers special benefits through regulation, wealth is channeled to lawyers and lobbyists but the overall economy shrinks due to the misallocation of resources.

The best policy for gaming would be to repeal all government restrictions and to treat gaming like any other industry. That would eliminate rents and the related lobbying, and it would create an equal and competitive playing field for Indians and non-Indians alike.

The good thing about Indian gaming is that it has shown that Indians are every bit as entrepreneurial as other Americans. But gaming is not likely to be a stable platform for long-term Indian economic development. That’s because as tribal and nontribal gaming continues to expand, profit levels in tribal gaming are likely to decline.

A more durable strategy for Indian prosperity is to make institutional reforms on reservations to encourage broad-based investment in a range of industries, as discussed here.

But, But…Price Controls Poll Well!

Politico’s Jason Millman writes:

How much does Rick Santorum hate President Barack Obama’s health care law? So much that he even opposes the parts a lot of Republicans like.

The Republican presidential candidate, talking health care across the street from Minnesota’s Mayo Clinic Monday morning, blasted parts of the Affordable Care Act that poll well even among Republican voters — like guaranteeing coverage for people with pre-existing conditions and making health insurers cover preventive care.

Santorum, who has touted free market health principles like health savings accounts as an alternative to the Affordable Care Act, defended insurance industry practices the law eliminates, like setting premiums based on people’s health status.

Sigh. I refer my right honorable friend to the smack-down I gave such silliness some time ago:

Asking people whether they support the law’s pre-existing conditions provisions is like asking whether they want sick people to pay less for medical care.  Of course they will say yes.  If anything, it’s amazing that as many as 36 percent of the public are so economically literate as to know that these government price controls will actually harm people with pre-existing conditions.  Also amazing is that among people with pre-existing conditions, equal numbers believe these provisions will be useless or harmful as think they will help.

But as the collapse of the CLASS Act and private markets for child-only health insurance have shown, and as the Obama administration has argued in federal court, the pre-existing conditions provisions cannot exist without the wildly unpopular individual mandate because on their own, the pre-existing conditions provisions would cause the entire health insurance market to implode.

If the pre-existing conditions provisions are a (supposed) benefit of the law, then the individual mandate is the cost of those provisions. If voters don’t like the individual mandate–if they aren’t willing to pay the cost of the law’s purported benefits–then the “popular” provisions aren’t popular, either.

Or, as Firedoglake’s Jon Walker puts it, ObamaCare is about as popular as pepperoni and broken glass pizza.

Even among Republican voters? Good grief.

The Ethos of Universal Coverage

Associated Press photojournalist Noah Berger captured this thousand-word image near the Occupy Oakland demonstrations last month.

(AP Photo/Noah Berger)

Many Cato @ Liberty readers will get it immediately. They can stop reading now.

For everyone else, this image perfectly illustrates the ethos of what I call the Church of Universal Coverage.

Like everyone who supports a government guarantee of access to medical care, the genius who left this graffiti on Kaiser Permanente’s offices probably thought he was signaling how important other human beings are to him. He wants them to get health care after all. He was willing to expend resources to transmit that signal: a few dollars for a can of spray paint (assuming he didn’t steal it) plus his time. He probably even felt good about himself afterward.

Unfortunately, the money and time this genius spent vandalizing other people’s property are resources that could have gone toward, say, buying him health insurance. Or providing a flu shot to a senior citizen. This genius has also forced Kaiser Permanente to divert resources away from healing the sick. Kaiser now has to spend money on a pressure washer and whatever else one uses to remove graffiti from those surfaces (e.g., water, labor).

The broader Church of Universal Coverage spends resources campaigning for a government guarantee of access to medical care. Those resources likewise could have been used to purchase medical care for, say, the poor. The Church’s efforts impel opponents of such a guarantee to spend resources fighting it. For the most part, though, they encourage interest groups to expend resources to bend that guarantee toward their own selfish ends. The taxes required to effectuate that (warped) guarantee reduce economic productivity both among those whose taxes enable, and those who receive, the resulting government transfers.

In the end, that very government guarantee ends up leaving people with less purchasing power and undermining the market’s ability to discover cost-saving innovations that bring better health care within the reach of the needy. That’s to say nothing of the rights that the Church of Universal Coverage tramples along the way: yours, mine, Kaiser Permanente’s, the Catholic Church’s

I see no moral distinction between the Church of Universal Coverage and this genius. Both spend time and money to undermine other people’s rights as well as their own stated goal of “health care for everybody.”

Of course, it is always possible that, as with their foot soldier in Oakland, the Church’s efforts are as much about making a statement and feeling better about themselves as anything else.