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How Republicans can Kill ObamaCare

shikha.dalmia@reason.org (Shikha Dalmia) — Wed, 18 Nov 2009 13:21:00 EST

Republicans are trying to defeat ObamaCare by arguing that its public option -- or government-run insurance plan -- will drive private insurance companies out of business, leaving Americans with less - not more - options. But the fudmental problem with ObamaCare, I note in my latest Forbes column, is not the public option, but its tyrannical designs to force all Americans to purchase coverage through an insurance mandate. Build public support against this, and the whole Rube Goldberg-like edifice that is ObamaCare will come tumbling down.

A mandate will fundamentally alter the relationship between Americans and their government. Instead of the government being accountable to them, they will become accountable to their government. No less than the Congressional Budget Office--a non-partisan government agency--once admitted as much. "A mandate requiring all individuals to purchase health insurance would be an unprecedented form of federal action," it noted. "The government has never required people to buy any good or service as a condition of lawful residence in the United States."

If the government can force Americans to buy coverage on the threat of fines or even imprisonment--an option that Nancy Pelosi has pointedly refused to rule out--every other government diktat becomes small potatoes by contrast. In fact, it becomes necessary. If uninsured Americans must buy coverage, why shouldn't other Americans be taxed to subsidize them? Why shouldn't the insurance industry be required to sell them coverage? Why shouldn't government set insurance prices to ensure affordability? Why shouldn't doctors and hospitals be asked to charge only "reasonable" rates--or offer only government-sanctioned treatments? Nothing about ObamaCare fundamentally changes so long as the individual mandate remains intact.

Therefore, instead of wonkishly droning about the public option, Republicans should counter Democrats' grand appeals for "universal coverage for all" with equally grand appeals for "medical freedom for all." They should stand together on the Capitol steps and issue the health care equivalent of Reagan's Berlin Wall ultimatum: "Mr. President: Tear up this mandate."

Whole column here.

Universal Coverage: A Big Feast for Big Pharma

shikha.dalmia@reason.org (Shikha Dalmia) — Thu, 12 Nov 2009 21:34:00 EST

Every special interest group knows that in Washington, "you are either at the table or on the menu." Big Pharma seems to have taken this motto to heart as Obama & Co. proceed to make mince meat out of the American health care system. And it is coming out a big winner.

Remember the $80 billion that President Obama said he had extracted from the drug industry over the next 10 years in order to fund his universal coverage plans? Well, The New Republic reports that it might have all been a giant sham. Far from eating into the profits of Big Pharma, health care reform is likely to prove a big boon to it.

As evidence, compare the March and the October profit forecast of IMS Health, a respected global research and consulting firm.

Back in March, according to TNR, IMS had projected no growth at all for the drug industry between 2008 and 2013. But in October, it projected average annual growth of 3.5%.

What changed? A major factor, according to IMS, was the emerging details of health care reform.

Health reform, as currently envisioned, wouldn't merely bring coverage to the uninsured. It would also fill in the "donut hole" in Medicare Part D--the gap in coverage that leaves beneficiaries with serious health problems paying for hundred if not thousands of dollars in out-of-pocket prescription costs.

In addition, because it will take several years to close the donut hole, reform relies on voluntary discounts from the pharmaceutical industry to make drugs more affordable in the intervening years. But those discounts would apply only to name-brand drugs, not generics.

Put it all together, and you have more demand for name-brand drugs. As a result, IMS believes, pharmaceutical companies would be able to raise their prices--enough to boost revenue significantly: "If this bill is implemented," the report concludes on page 138, "an increase in prices on new drugs can be expected."

Big Pharma has launched a major counter-offensive to the IMS report. It argues that:

"Projecting annual prescription drug sales is notoriously tricky, evident by the fact that IMS Health has released three different forecasts for 2009. Most troubling, the IMS report is based on incomplete information because it does not take into account discounts and rebates which can significantly lower the cost of drugs to payers.

"In some ways, it's like trying to project annual U.S. auto sales by adding up sticker prices. That's not reality. How many people actually pay full price for a car? Similarly, drug manufacturers often offer steep discounts and rebates through private negotiations. Medicare Part D is a good example. The Medicare Trustees, who unlike IMS have access to rebate data, report that rebates in the Medicare prescription drug program reach 20%-30% for many brand-name drugs and have increased over the past several years.

"The IMS forecast is incomplete in other ways, too. For one thing, it does not include key elements of health care reform legislation now pending before Congress, including a large increase of 8 percentage points in the base formula for the rebates that brand manufacturers pay in Medicaid. Nor does the report take into account the fact that Medicaid eligibility could be expanded to tens of millions of Americans who then would have access to lower-priced medicines.

"Most curious, however, is the notion that pharmaceutical sales will increase dramatically during the forecast period when major coverage expansions won't even kick in until 2013 or 2014, depending on what's in the final bill......"

It is entirely possible that Big Pharma is getting the short end of the bone in this dog fight. But it is also the case that it has spent $150 million in TV and radio ads to promote universal health care. Is it remotely possible that it is doing so purely out of the goodness of its heart even though it will lose money?

Call me difficult, but that's a line I find hard to swallow ....

President Obama's Plan Will Control Every Aspect of the Medical Transaction

shikha.dalmia@reason.org (Shikha Dalmia) — Fri, 11 Sep 2009 17:27:00 EDT

Forbes

For several months now, the American people--as if exhorted by the ghost of William F. Buckley (no particular hero of mine)--have been standing athwart the Democratic agenda of socialized medicine, yelling, "Stop!" But President Barack Obama showed them the policy equivalent of the middle finger Wednesday night.

If there was anything bipartisan about the speech it was that he embraced every bad big-government idea from both sides. If he prevails, the American public won't get "choice and competition" as he proclaimed, but a one-size-fits-all government-prescribed health care plan that it dare not refuse and dare not challenge.

Perhaps the most striking--and disturbing--thing about the speech was the unblinking confidence Obama exuded while breaking key campaign promises he made to voters. He had raked poor Hillary Clinton over the coals for admitting that her road to universal coverage was paved with an individual mandate. "Everyone would be forced to buy coverage, even if you can't afford it," warned Obama in an ad. "You pay a penalty if you don't."

Yet, there he was last night scolding "individuals who can afford coverage but game the system by avoiding responsibility." Never mind that the prime gamers are not the uninsured (whose unpaid bills cost "the system" less than $40 billion every year) but the underinsured covered by Medicare and Medicaid (whom private insurers cross-subsidize to the tune of over $90 billion annually because the government refuses to pay the full cost of their care). Still, he hectored: "Improving our health care system works only if everybody does their part."

Obama didn't say exactly how he would make "everyone do their part"--a question he posed repeatedly to Hillary. But his buddy Sen. Max Baucus, D-Mont., has some rather well-developed ideas on that score. Baucus has proposed a bill that would force the uninsured to pay fines on a sliding scale of income, with those making 300% of the poverty level having to cough up as much as $3,800 a year. In short, Americans would have to pay Uncle Sam for the privilege of remaining uninsured. If there were truth-in-labeling laws for Congress, it would be required to call this bill TonySopranoCare.

Which brings us to the second promise Obama broke Wednesday night: That he would impose no new taxes on anyone making less than $250,000. The penalties that the uninsured--all of whom, I would wager my grandma's life support, make under $250,000--would face are certainly a tax.

He also endorsed a business tax--err, fee--on employers who don't provide adequate coverage that, under a House bill, would be about 8 % of payroll. They will pass this on to their employees in lower wages. And he signed up for an excise tax on high-end insurance plans--many of which are enjoyed by plain union folk, not those rich and famous making over $250,000. Under the Baucus bill, this tax would be as much as 35% of the cost of the plan. One would have thought that if the shame of breaking an explicit promise didn't prevent Obama from imposing this last tax, then the logical absurdity of trying to reduce soaring insurance costs by taxing insurance plans would.

It gets worse. In exchange for these bitter tax pills, Obama promised Americans would get eternal health care "security and stability." To deliver that, he would of course ban insurance companies from denying coverage to those with pre-existing conditions--tantamount to forcing fire insurance companies to write coverage on a burning building. He would also prohibit insurers from putting any limits on the coverage they offer and cap what they can require patients to pay out-of-pocket.

In other words, Obama would encourage unlimited health care consumption by patients while eliminating the last vestige of price consciousness. But the reason America is facing unsustainable health care cost increases is precisely because its third-party system of insurance doesn't encourage prudent consumption by patients. Indeed, if Obama really can tame health care costs by making patients even less cost-conscious, I have an even better idea for him: Simply pass a law banning anyone from falling sick and mandate good health for all. If he can suspend the laws of economics, perhaps he can also transcend the laws of physiology.

The fact of the matter is that not too many health care underwriters will survive such crippling mandates. Many of them will fold, causing further consolidation in the insurance marketplace--not more competition and choice. Last night the president declared--in the spirit of grand compromise--that he would be willing to wait a few years to give private insurers a chance to make more affordable plans available to all Americans. Only if they fail would the so-called public option, the government-run insurance plan so beloved of the left, be triggered. But that's a rigged deal: The same legislation that sets up the trigger is putting in place the conditions that will eventually pull it. Obama is not backing off on his goal of eliminating private insurance--only offering a brief deferment.

The one Republican idea that Obama did endorse--caps on medical malpractice awards or tort reform--will actually hurt rather than help patient choice. Big medicine has long blamed the unnecessary tests and procedures these awards encourage for rising health care costs. But several studies have shown that this so-called practice of defensive medicine is a smaller driver of costs than excess physician salaries. By capping these awards, Obama will leave patients even less recourse against physician negligence--hardly the American way.

Obama lambasted the critics who claim his reform plan amounts to a government takeover of the health care system. But the plan he laid out Wednesday night will control every aspect of the medical transaction. It will tell patients when, what and how much coverage they must buy; it will tell sellers when, what and how much coverage they must sell. This is not a government takeover of health care? Then Tony Soprano is just a decent, hard-working businessman.

Shikha Dalmia is a senior analyst at ReasonFoundation and a biweekly columnist at Forbes, where this column first appeared.

That's a Lie, Mr. President

shikha.dalmia@reason.org (Shikha Dalmia) — Fri, 11 Sep 2009 10:28:00 EDT

Obama said during his Wednesday night primte-time speechathon that those who accuse him of engineering a big government takeover of health care are lying. But it is President Obama who is lying. As I point out in a Forbes column:

In the plan he laid out Wednesday night, the government will control every aspect of the medical transaction. It will tell patients when, what and how much coverage they must buy; it will tell sellers when, what and how much coverage they must sell.

How so? He'll mandate "everyone do their part" by buying coverage. He didn't say how, a question he posed repeatedly to Hillary.

But his buddy Sen. Max Baucus, D-Mont., has some rather well-developed ideas on that score. Baucus has proposed a bill that would force the uninsured to pay fines on a sliding scale of income, with those making 300% of the poverty level having to cough up as much as $3,800 a year. In short, Americans would have to pay Uncle Sam for the privilege of remaining uninsured. If there were truth-in-labeling laws for Congress, it would be required to call this bill TonySopranoCare.

And he'll:

ban insurance companies from denying coverage to those with pre-existing conditions--tantamount to forcing fire insurance companies to write coverage on a burning building. He would also prohibit insurers from putting any limits on the coverage they offer and cap what they can require patients to pay out-of-pocket.

If this is not a government takeover of health care, then Tony Soprano is just a decent, hard-working businessman.

Read the whole thing here.

What About the Patient In Health Care Debate?

gillespie@reason.com (Nick Gillespie) — Fri, 11 Sep 2009 00:00:00 EDT

As someone under 60 with what passes for private health insurance and, far more important, access to actual health care (insurance and care are two very different things that are routinely and wrongly conflated in discussions of "reform"), I realize that I wasn't the primary audience of President Barack Obama's speech last night. In this, I am more representative than you might think. About 80 percent of people under 65 (who are covered by Medicare) have coverage and upwards of 80 percent of people with health care rate their service very favorably.

Yet as the father of two young kids whose backs are already bowing under the weight of the debt and future taxes our nation has wracked up in the past couple of decades, I'm more than a little concerned. Especially when Obama's speech failed to clarify even the most basic points for which he seemed to be reaching. Those of us who have coverage through existing private and public plans, he explained, can sit tight. Nothing will change. All uninsured people will be forced to get coverage, but precisely what that means is vague, to say the least (especially since half of them could either afford coverage now or qualify for existing programs). Then there's his claim that a plan which will cost almost $1 trillion dollars over the next 10 years will not only not cost us anything but will actually save us money in the long haul. No government official—and certainly not a president who came into office vowing to veto pork-barrel spending and implement a net spending cut and then did the exact opposite—has credibility on that score.

On a more basic level: Is the so-called public option in or out? Without saying it has to absolutely, definitely be part of any reform, Obama likened the mythopoetical public option to public universities that compete with private universities to increase choice for consumers. Leaving aside a host of questions about the analogy, college costs are among the few that have been rising with the speed and intensity of medical costs. So how would this sort of competition reduce costs, one of the main goals, says Obama, of any health care reform worth the name? Indeed, the obvious similarity between higher ed and health care is that both systems rely on a third-party payer system where expenses are heavily subsidized (by employers, tax breaks, parents, federal grants, special loans, you name it) and the end consumers (patients, students) are shielded from knowing the full cost of the services they consume.

And when we look at rising costs, what's to be done with Medicare, which Obama singled out for inviolable preservation (it's "a sacred trust" to him) yet denounced as spendthrift? Following a report by his own economic advisers that said around 30 percent of Medicare spending could be cut without any reduction in quality of service, Obama says we need to squeeze existing government programs for savings that will largely pay for the reforms, which include measures such as capping out of pocket costs and mandatory coverage of routine diagnostic tests such as mammograms that will certainly increase consumption of health care. It's a no-brainer to squeeze a program that wastes 30 percent of its budget, but it begs the question of why it has never been done. Not since Obama took office, and not since Bush expanded Medicare spending by hundreds of billions of dollars on prescription drugs (a plan whose price tag more than doubled in less than five years), and not since LBJ's actuaries underestimated the future cost of Medicare in 1990 by roughly 644 percent.

Obama proudly proclaimed that his plan would "cost around $900 billion over the next ten years" but that it would "not add to our deficit." This is simply not credible and, as my colleague Matt Welch points out with regularity, is exactly what Obama has promised regarding his overall spending plans, which most certainly have added to our deficits for as long as we dare look into the future.

One of the great problems with health care reform is that it always takes place, perhaps necessarily, either at the most grandiose level of abstraction ("Now," thundered Obama, "is the time to deliver on health care," as if it's an easily defined commodity) or the least insightful level of anecdote ("One man from Illinois," intoned the president, "lost his coverage in the middle of chemotherapy because his insurer found that he hadn't reported gallstones that he didn't even know about").

Here's a more basic question when it comes to controlling costs: The easiest way to do this is to make the person doing the buying actually pay the price. You haggle more when the change is coming out of your own pocket. Or, alternatively, you splurge because you're worth it. Earlier this year, my coverage changed from a conventional network preferred-provider plan with a standard co-pay for prescription drugs to a high-dollar deductible plan in which I essentially pay the first $2,000 dollars of medical care I consume in a year (any unused money rolls over in a Medical Savings Account that I can use in the following year). As my doctor prescribed me a brand-name drug, I thought about the cost and whether there were any possible alternatives. For the first time I can recall, I actually had a conversation with my doctor—right there, in the examination room—about medical costs. We settled on a generic alternative, saving me roughly $75 on that particular transaction. More recently, we had a similar conversation, in which he didn't know the costs of a name-brand drug and a generic alternative—a sign that the medical system has a long way to go in terms of customer service. Imagine going into an auto shop and the mechanic not being able to quote you the price difference between a new and refurbished part.

Yet exchanges such as the ones above are small examples of price signals being injected into a system that has consciously erected a series of mufflers, walls, and funhouse mirrors precisely to make it impossible for consumers to even know what they are paying, much less how to evaluate alternative plans of action. The blame here is shared by government policymakers, insurance bureaucrats, and medical providers, all of whom have some stake in a status quo that serves them tolerably well. Any reform that doesn't explicitly and transparently harness the same basic market forces that have driven down prices and improved quality throughout the economy over the past several decades simply will not work at containing costs and thus, expanding access (cheaper, better goods and services, whether we're talking about automobiles or plane tickets or gourmet coffee, have a way of leaching out into every level of society).

Doctors and other health professionals, who assiduously work to limit the number of health care providers in a given field, bitch and moan all the time about how Medicare, Medicaid, and private insurers are driving down reimbursements for basic procedures. Yet somehow the overall cost of health care goes up, up, up. It's because the system, including the vague reforms being championed by Barack Obama in a speech designed to lay out his plan in detail, really don't do anything to empower the person at the center of the drama—the patient, the customer—with the sort of choices that might actually trigger changes that will either curtail costs or, same thing, improve the range and quality of services so that we are happy with the money we're shoveling out.

Until that discussion gets underway, any so-called reform will fail to deliver on anything other than empty promises.

Nick Gillespie is the editor in chief of Reason.tv and Reason.com, where this column first appeared.

BaucusCare = TaxoCare

shikha.dalmia@reason.org (Shikha Dalmia) — Wed, 09 Sep 2009 17:01:00 EDT

Montana Senator Max Baucus has already given his prognosis for the so-called public option - or government-run health care plan - ahead of the president's prime-time health care speech tonight: Dead on Arrival. But he is planning to proceed on his alternative plan, regardless of whether it has bipartisan support or not. "Irrespective of whether there are any Republicans, I will move forward," Mr. Baucus said after meeting Wednesday with Democrats on his committee. He has vowed to "mark up" his bill by Sept. 21.

So what is Baucus' plan? And will it be more government-light (or less government-heavy) than the public option would? Don't bet your grandma's life support on it.

According to a Wall Street Journal story this morning, under the plan, Americans will be mandated to buy health insurance on the threat of fines. People who earn between 100% and 300% of poverty level (or $22,000 and $66,000 a year) would face fines ranging from $750 to $1,500 a year. Those with incomes 300% could pay anywhere from $950 to $3,800. In other words, if your cash flow is tight and you are trying to decide whether to fix that leaky roof or purchase health coverage, the government will make you do the latter - or pay up for the privilege of remaining uninsured. As I have noted before, there is a name for this kind of coverage: TonySopranoCare.

Baucus also wants to replace the government insurance option - to keep private insurers honest, you know - with non-profit insurance cooperatives run collectively by patients and providers or something like that. But the rub is that the government will have to spend tens of billions of dollars to seed these cooperatives. Some of that money will come from the fines on individuals. And the rest? According to the Journal story:

Starting next year, the plan also calls for annual fees of $6 billion on health-insurance providers, $4 billion for medical-device makers, $2.3 billion on drug makers and $750 million on clinical laboratories. The fees would be levied on individual companies based on market share. Insurers also face an excise tax of 35% for any health plan worth more than $8,000 a year for individuals and $21,000 a year for families.

Karen Ignagni, chief executive of America's Health Insurance Plans, an industry lobbying group, said the new fees would make it more difficult for health insurers to contain rising costs. "Our members are talking about that being at odds with the goal of cost containment," she said.

In short, insurance companies will be forced to finance their own competition. By that logic, should Baucus be forced to contribute to the campaign of his Republican opponent in the next elections?

And this is what passes for a "moderate" bill in Washington these days!

Post Script: I have two nagging fears about the President's address: One: that I'll fall asleep before he's done, and I have to write about this tomorrow. Two: that he'll actually call for tort reform - such as capping liability awards -- that the Republicans have made their holy grail. If he does, he will claim to have made a huge bipartisan gesture and demand that Republicans accept the mega government takeover of 17% of the economy that the Democrats are demanding. Then patients will be really screwed: They'll face higher health insurance costs and/or taxes as insurers pass on the new "fees" to them. And they'll have less recourse when their doctors screw up.

The French Patient

shikha.dalmia@reason.org (Shikha Dalmia) — Sat, 29 Aug 2009 00:28:00 EDT

Sometime back I pointed out that the idea that America has a free market in health care was a myth. And now Guy Sorman, a French citizen, points out in the latest issue of the City Journal that the idea that the France's universal health care system is free is also a myth. In fact, it is expensive. Very expensive -- contrary to what Sara Paretsky claimed in the New York Times recently. Paresky recounts in her article, "Le Treatment," the story of how she took her husband, suffering from chest pains during their vacation in France, to a local hospital, where he was treated without delay. A cardiologist correctly diagnosed the problem, pneumonia, and administered the necessary medication. The hospital charged no money up front, though the doctor apologetically said that he would have to bill the couple, as they were not citizens. Six months later, an invoice arrived for $220. Paretsky expresses one minor reservation about what she sees as a nearly perfect health-care system: the hospital staff's behavior was more bureaucratic than cheerful. She concludes, however, that this is a small price to pay for excellent health care at an unbeatable price: "I might put up with a lot of ugly bureaucrats for that."

But Sorman, in his rebuttal entitled, "Paying for Le Treatment," says that Paretsky's adventure is a "parable based on a false assumption: that health care can be public, reliable, and free."

"It may indeed seem free, or close to free, for an American tourist receiving treatment in an emergency; as a French taxpayer, however, I paid a heavy price for Paretsky's husband's treatment. And you, my American reader, did too," he notes.

How so? Sorman explains:

"France's costly national health insurance is mostly financed by taxes on labor. A Frenchman making a monthly salary of 3,000 euros will pay approximately 350 of them (deducted by his employer) for health insurance. Then the employer will add approximately 1,200 euros, making the total monthly cost to the employer of this individual's services not 3,000 euros but 4,200. High labor costs in France affect not only consumer prices but also unemployment rates, since employers are reluctant to pay so much for low-skill workers. Economists agree that unemployment rates and the cost of national health insurance are directly related everywhere, which partly explains why even in periods of economic growth, the average French unemployment rate hovers around 10 percent.

High as they are, taxes on wages are not enough to cover the constant deficits that national health insurance runs. France imposes an additional levy to try to close the insurance deficit-the CSG (contribution sociale généralisée)-which applies to all income, including dividends, and which Parliament increases every year. Altogether, 25 percent of French national income goes toward what's called Social Security, which includes health care and basic retirement pensions for all.

French national health insurance is also subsidized by American patients. This is because France decides which drugs to use and at what prices; American pharmaceutical companies must either accept the dictated prices or lose an enormous market. The companies therefore sell their medicines at higher prices in the U.S. in order to cover their expenses and turn a profit; the surplus is then sold cheaply to the French, who take the same pills as Americans but at half the price or less.

In the end, who paid for Paretsky's husband's nearly free ride in a French hospital? French workers and taxpayers; American patients; and the young, unqualified, and out-of-work French unable to find jobs because of the unemployment that national health insurance engenders. There is no such thing, anywhere, as a perfect health-insurance system. It's always a trade-off among competing goods, and the choices to be made are ultimately political ones. Americans commenting on health-care reform should try to make the costs and consequences of these choices transparent, rather than resorting to misleading morality plays.

As P J O' Rourke noted: "If you think health care is expensive now, wait till it is free." Grab your wallets, dear American taxpayers!

Breaking the AMA Monopoly

shikha.dalmia@reason.org (Shikha Dalmia) — Wed, 26 Aug 2009 18:07:00 EDT

Milton Friedman warned back in 1961 that the American Medical Association was a government-sanctioned guild or trade cartel that would raise health care costs and diminish quality. Today, most economists agree with him. That's because the costs of AMA's aggressive tacticts to keep physician wages up by, among other things, imposing onerous licensure rules, capping the number of new doctors, and harassing nurses, midwives etc. who can treat certain routine conditions more cheaply than doctors have become painfully obvious:

According to a 2007 study by McKinsey&Company, physician compensation bumps up health care spending in America by $58 billion annually, on average, because U.S. doctors make twice as much as their OECD peers. And even the poorest in specializations like radiology and surgery routinely rake in around $400,000 annually.

Doctors--and many Republicans--constantly carp about the costs of "defensive medicine" because it forces providers to perform unnecessary procedures and tests to insulate them from potential lawsuits. But excessive physician salaries contribute nearly three times more to wasteful health care spending than the $20 billion or so that defensive medicine does. "While the U.S. malpractice system is extraordinary," the study notes, "it is only a small contributor to the higher cost of health care in the United States." Meanwhile, other studies have found that doctors' salaries contribute more to soaring medical costs than the $40 billion or so that the uninsured cost in uncompensated care--the president's bete noir.....

But still the Obama Administration and Democrats continues to "pal around" with the organization while reviling town-hall protesters as "evil-mongers" and "unAmerican." If they were serious about bringing health care costs under control, instead of demonizing opponents, they would be looking for ways to break AMA's choke-hold on the medical labor market.

Whole column here.

Will ObamaCare Cure a Stupidity Epidemic in Rhode Island?

shikha.dalmia@reason.org (Shikha Dalmia) — Sat, 22 Aug 2009 22:26:00 EDT

The New York Times last week ran an op-ed entitled, Plain English is the Best Policy, by John Aloysius Cogan Jr., the executive counsel for the Rhode Island Office of the Health Insurance Commissioner, drawing attention to a serious problem with our health care system:

"Every week my office hears from Rhode Islanders who don't understand their insurance coverage and can't get their claims paid," wrote Mr. Cogan. "A cancer patient named Kevin, for example, couldn't figure out why his insurance company had denied his claim for chemotherapy charges. His policy seemed to cover the treatment, but its incomprehensible mishmash of cross-referenced definitions, schedules, exclusions and riders made it hard to tell. When my office pressed company officials to explain the denial, we were told that they were still sorting through the policy; they believed Kevin's claim was not covered, but they needed more time to figure it out. Even the insurance company had trouble understanding its own contract."

"It is hard to believe," Mr. Cogan lamented, "that very many of the 200 million Americans who have private health insurance understand their own coverage."

Here's where I have some news for Mr. Cogan: The 200 million Americans he is referring to don't understand their own coverage because they don't buy their own coverage. Their employers do. Hence, they don't read their coverage, don't know what's in it, and don't really care - till they fall sick and need to use it. One way to fix the problem would be to change the federal tax code so that instead of employers getting a tax deduction for buying individuals insurance, individuals get a tax deduction for buying their own insurance. That'll give them an incentive to read and understand what's in their policies before they sign up. Which, in turn, will give insurance companies an incentive to write these policies in "plan english," just as they do auto, home, life and a myriad other policies that they market to individuals instead of corporate bureaucrats.

But what is Mr. Cogan's solution? He notes that his office's analysis of policies in Rhode Island found that most are written at a college to graduate-school reading level. But the average Rhode Islander reads at an eighth-grade level. So - presto - starting next year, Mr. Cogan boasts, "we have decided to require that all policies in our state be written at that (8^th grade) level."

First of all, it seems to me -- and I could be wrong -- that if an average Rhode Islander reads at the 8th grade level, then his main problem is not lack of well-written insuance policies. It is lack of good schools.

But what I am wondering is how will Rhode Island enforce this mandate? Will it have 8^th graders read the insurance policies and take a comprehension exam? But then how will it know that the 8^th grader reading the insurance policy actually reads at the 8^th grade level? Perhaps it will have to mandate SAT exams for all 8^th graders? But how will it know that the SAT exam is really measuring what 8^th graders ought to be reading at the 8^th grade level? Maybe it will have to mandate that the test makers making the exam take an exam first showing that they know what 8^th graders should be reading at 8^th grade level.

You catch my drift.....

But here's a thought: If Rhode Island can require insurance policies to be understandable to 8^th graders, can't we require the same of any health care legislation that Congress passes? I don't know what such a law would look like. But I know that it damn well wouldn't be 1,000-plus pages long. And that would be an improvement right there.

Obama's Heavenly Care

shikha.dalmia@reason.org (Shikha Dalmia) — Sat, 22 Aug 2009 00:45:00 EDT

Even as President Obama is pushing America toward CanadaCare - Canadians are flocking to America for health care. The Detroit Free Press reported this morning that many Detroit hospitals are forging lucrative arrangements with the Ontario government to provide services - including cardiac, imaging tests, and bariatric -- to Canadians that their government is unable to provide in a timely way.

"The agreements show how a country with a national care system...copes with demand for care with U.S. partnerships, rather than building new facilities," the Freep cheerfully tells us.

Consider the case of Dany Mercado, a leukemia patient from Kitchener, Ontario. He is cancer-free after getting a bone marrow transplant at the Barbara Ann Karmanos Cancer Institute in Detroit.

Told by Canadian doctors in 2007 he couldn't have the procedure there, Mercado's family and doctor appealed to Ontario health officials, who agreed to let him have the transplant in Detroit in January 2008. The Ontario government paid $200,000 for the procedure. (How is that for saving money?)

Mercado is from around Windsor. But Pat Somers, vice president of operations at Windsor's Hotel-Dieu Grace Hospital, said government "ministries are quite aware of" waits for care in other cities as well. But worry not, they have everything under control! "That's why we are investing in a wait list strategy," Somers assured the Freep reporters. They have very good ways, for example, to determine "how to prioritize cases for people who need hip and knee replacements, cataract surgery and treatment for cancer."

The wait-listed folks make a bee-line for Detroit hospitals, which is certainly great for these hospitals given that they have been losing patients as the city's residents move out.

"In the last few years, we've seen more and more Canadian patients," Dr. J. Edson Pontes, senior vice president of international medicine at the DMC, said. "About 300 of the DMC's 400 international patients last year came from Canada," Pontes estimated.

Here is my question: Canadians suffering under nationalized health care come to America for care. Where will Americans suffering under ObamaCare go?

Open the Pearly Gates, please!

Whole story here.

It's How the Co-Ops Get Started That Matters

anthony.randazzo@reason.org (Anthony Randazzo) — Wed, 19 Aug 2009 18:18:00 EDT

NYTimes blogger Timothy Egan wrote up a post yesterday about the value of co-ops in general and suggesting that all the negative rhetoric towards them should be quelled a bit. He's right in the sense that attacks on co-ops in the form of senseless "death panel" critiques don't really help the opposition argument gain supporters (though it probably does increase the resolve of many who are already opposed). But he seems to be ignoring a key point that I don't really see getting discussed in the value of co-ops: sure, a consumer owned competitor to the current companies may be a somewhat viable model, but the point is not necessarily about whether it would work as much as it is about the source of funding for the co-op.

It is significant that, to start a non-profit health insurance co-op, the government would be kicking in $3 to $6 billion in starter cash. It may not be the HHS running like they might a public option, but it is dishonest to argue the government wouldn't be involved at all. Egan mentions this, but only to say it is "a mere week in the life of bank bailouts." Frankly, appealing to a program that shouldn't have been started in the first place isn't very convincing.

In addition, appealing to the bailouts brings up an important point—look at all of the problems we've dealt with the past year with the government meddling in the businesses of banks. The government just doesn't have the right incentives and has too much political baggage weighing down its decisions to effectively manage the banks. The same would happen with a supposedly privately owned and managed co-op. And lets not just ignore the problem of Fannie and Freddie as government-sponsored entities running themselves on the (accurate) assumption that the government would cover any major losses if it came down to crunch time. We want to create more quasi-government organizations?

My colleague Ron Bailey over at Reason magazine has a great piece on co-ops published yesterday as well that is worth reading for anyone confused about co-ops vs. a public option and what the pit falls are. Ultimately, the co-op might be better than a public option in the spectrum of bad ideas, but the fact is that the government should be focused on creating incentives for there to be more price competition in the provision of health care to bring down prices rather than try to get coverage for the unnecessarily high prices from taxpayer supported government organizations that compete with the private sector.

New Public Option, Same As the Old Public Option?

rbailey@reason.com (Ronald Bailey) — Tue, 18 Aug 2009 11:05:00 EDT

What a difference a month of raucous town hall meetings makes. In June, President Barack Obama declared, "I strongly believe that Americans should have the choice of a public health insurance option," and the Democratic leadership in the House of Representatives rammed through 1,018 pages of health care reform, including $2 billion in seed capital to establish a public health insurance option.

But by Saturday, Obama backed down from his government-run health insurance scheme, saying in Grand Junction, Colorado: "The public option, whether we have it or we don't have it, is not the entirety of health care reform." A day later, his Secretary of Health and Human Services, Kathleen Sebelius, told CNN that the government run health insurance was "not the essential element" of the Democratic Congress' health care reform plans.

Obama and Sebelius have both hinted at an alternative to the hated private insurers—health insurance co-ops—and have started talking more about the importance of competition in general. "There will be a competitor to private insurers," Sebelius added in her CNN appearance. "That's really the essential part, is you don't turn over the whole new marketplace to private insurance companies and trust them to do the right thing." Democratic firebrand and government single payer health care advocate Rep. Anthony Weiner (D-N.Y.) was more colorful on this point. "Leaving private insurance companies the job of controlling the costs of health care is like making a pyromaniac the fire chief." Given the current burn rate of the government's Medicare health insurance program, the congressman might consider looking in the mirror to find the real arsonists.

OK, so what is a health insurance co-op? Many Americans are familiar with neighborhood food co-ops in which members join and then purchase a variety of produce, meats, and other groceries at cost. Some 120 million Americans are served by various co-ops according to the National Cooperative Business Association. Unlike most private companies, cooperatives are owned and controlled by their members, not by outside investors. In addition, co-ops return any surplus revenues they may earn to members.

In June, Sen. Kent Conrad's (D-N.D.) floated a plan for creating consumer-owned nonprofit health insurance cooperatives as an alternative to the Democratic plan. Conrad is part of a senatorial gang of six which includes three Republicans and three Democrats that has been trying to hammer out a bipartisan health care reform package for several months. He sees rural electric cooperatives and agricultural cooperatives as models for his health insurance cooperatives.

The details are still fuzzy, but reports suggest that under Conrad's plan the medical co-ops would receive $3 to $4 billion in start-up funds from the federal government and operate under a national structure with state affiliates at first. Afterwards, they would function independently, living solely off the premiums charged to co-op members, and maintaining the same financial reserves that private companies do in order to cover any unexpectedly high claims. Ideally, membership would be around 500,000 to give the co-ops sufficient bargaining power with physicians, hospitals, and drug companies. "For those against a public option because they fear government control, the co-op structure has some appeal because its not government control," declared Conrad. "It's membership control, and membership ownership."

Health care co-ops could function in two ways. A co-op might be a group of consumers who band together to negotiate the best coverage deal from private insurers. Or like mutual life insurance companies, a health insurer could be a co-op owned by its member policyholders. Policyholders would be pushing for the co-op to cut costs to keep premiums low while simultaneously encouraging the co-op's management to expand benefits. As members, co-op policyholders would not likely try to control costs by denying claims or limiting access to medical care. True co-ops are funded by members and controlled by members. The conservative Heritage Foundation cautiously agrees that such medical cooperatives might be marginally useful, but correctly worries that government start-up funding of co-ops would lead to federal control since Congress would justify its further interference on the grounds that federal officials are stewards of taxpayer dollars.

Fostering more competition among health insurers is a great idea. Right now, most states are dominated by one or two insurers. To really get co-ops going, Congress and the administration need to change tax laws to grant nonprofit tax status to mutual health insurance companies just like credit unions enjoy today. Congress also needs to give consumers the same tax breaks for getting insurance from a co-op (or any other private insurer) as they currently get from their employer. But more competition could also be had by the simple expedient of passing legislation allowing insurers licensed to sell policies in one state to offer them to residents of any other state. This would immediately create a competitive nationwide market for individual health insurance policies.

One reason we don't have much health insurance competition right now is that the proliferation of coverage mandates in each state operates as a barrier to entry for many insurers, keeping them from expanding into new states. Mandates also lessen the scope for competition since all policies must essentially offer the same coverage. The Council for Affordable Health Insurance identified 2,133 mandated benefits in a 2009 report, and estimates that state and federal mandates increase the cost of basic health coverage by between 20 and 50 percent. "Mandating benefits is like saying to someone in the market for a new car, if you can't afford a Cadillac loaded with options, you have to walk," notes the report. Allowing insurers to sell policies not loaded up with mandates would significantly lower premiums.

In fact, however, Democrats are unlikely to give up on the dream of a public health insurance scheme in favor of truly private co-ops or real competition. Sen. Charles Schumer (D-N.Y.) has recently said that he could support the idea of health insurance co-ops. But Schumer insists that what he calls "co-ops" must be national in scope, jump-started with $10 billion in federal government funding, have the power to negotiate payment rates to medical providers nationwide, and be governed by a presidentially-appointed board of directors. Discerning any differences between Schumer's idea of co-ops and the government health insurance option that the Democrats in the House of Representatives have already passed would take the equivalent of a public policy electron microscope.

When the administration backed off the public option, fury from left-wingers was swift. "You can't have reform without a public option," said former Democratic Party chair Howard Dean on CBS on Monday, "Let's not pretend we're doing reform without a public option." Daily Kos blogger-in-chief Markos Moulitsas warned, "I wonder if the White House truly understands the depth of anger they'll face from the progressive side if they fail to pass health care reform with a strong public option."

But the left should calm down. Co-ops, implemented a certain way, will essentially be their public option. Senate Majority Leader Harry Reid (D-Nev.) summed up Democratic intentions well: "We're going to have some type of public option, call it 'co-op,' call it what you want." Sen. Orrin Hatch (R-Utah) has clearly been listening to his colleague from Nevada. In The New York Times, Hatch noted, "You can call it a co-op, which is another way of saying a government plan."

If it stinks like a skunk, it's most likely a skunk. And no matter what health care co-op plan emerges from the Democratic Congress in September, it is unlikely to pass this smell test.

Ronald Bailey is Reason magazine's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books. This column first appeared at Reason.com.

Canada's Health Care System Has Been Diagnosed Terminally Ill

anthony.randazzo@reason.org (Anthony Randazzo) — Mon, 17 Aug 2009 12:56:00 EDT

Canada's health care system has been diagnosed terminally ill. In coming president of the Canadian Medical Association Dr. Anne Doig says her country's health care system is in desperate need of treatment. According to a story from The Canadian Press:

Dr. Anne Doig says patients are getting less than optimal care and she adds that physicians from across the country - who will gather in Saskatoon on Sunday for their annual meeting - recognize that changes must be made.
"We all agree that the system is imploding, we all agree that things are more precarious than perhaps Canadians realize," Doing said in an interview with The Canadian Press.
"We know that there must be change," she said. "We're all running flat out, we're all just trying to stay ahead of the immediate day-to-day demands."

Paul Krugman points out that we're not exactly pursing this exact same system, but the principals are the same. And we should avoid the same traps. Just a thought.

Read the whole story here.

Obama's Axis of Evil on Health Care

shikha.dalmia@reason.org (Shikha Dalmia) — Sun, 16 Aug 2009 23:02:00 EDT

Oye Vey.

President Obama just doesn't get it. He has an op-ed in the New York Times this morning excoriating insurance companies for our allegedly crappy health care system, whose primary problem, btw, is no longer the large number of uninsured - but the crummy benefits those with the misfortune of having coverage get. That'll of course be news to the vast majority of patients who have repeatedly told pollsters that they are really quite satisfied -- thank-you, very much -- with their insurance plans. They are no doubts victims of false consciousness that the public option will have a way to cure!

There are too many internal contradictions in Obama's op-ed to get into here. But let me mention one very briefly: The administration has been claiming - and Rachel Maddow was regurgitating on Meet the Press just this morning -- that the public option, which is designed along the lines of Medicare, will keep insurance companies honest by forcing them to compete with the superior administrative efficiencies that Medicare offers. (Michael Cannon of the Cato Institute has debunked this laughable claim by pointing out that Medicare has bought these so-called "superior efficiencies" by, among other things, ignoring fraud). But the president's op-ed claims that he will pay for coverage for the millions of uninsured by "cutting hundreds of billions of dollars in waste and inefficiency in federal health programs like Medicare and Medicaid." So which is it? Is Medicare so efficient that it should serve as a model for the rest of the industry or so inefficient that making it more efficient can fund health coverage for all?

But I digress.

The most striking thing about the president's op-ed is the startling similarity between his approach to health care and Bush's approach to foreign policy. Bush was always on the prowl for "evil-doers" abroad. And Obama, it seems, is on the prowl for "evil-doers" at home. First, he targeted evil Republicans who were blocking his reform. That didn't work, because, as it turns out, Republicans are not the main impediment to his government power-grab; Blue Dog Democrats are. Second, he went after Big Pharma. But Big Pharma buckled down and cut a deal with him. And now - in a calculated attempt to rile up middle-class anxieties about their insurance coverage eg its lack of portability - he is going after those Big Bad Insurance Companies. Talk about the axis-of-evil!

But this won't work any better than his previous efforts at demonization. No matter how much Dems dismiss folks at townhalls as stooges of the insurance companies, they are expressing a real fear out there that Obama's government-heavy prescriptions won't solve their real health care problems; they will make them worse by taking away the options they already have. Going after their insurance carriers only heightens that fear - not allays it.

Obama seems to be finally backing off on the public option. That's good. Robert Gibbs said on CBS's "Face the Nation" that the president "will be satisfied" if the private insurance market has "choice and competition." That would be really good - but only if Obama means what he is saying and starts examining government policies that have stymied more intense competition in the health insurance industry. These include all the laws that prohibit insurers from selling policies across state lines and the failure of Uncle Sam to give individuals buying coverage the same tax treatment that companies get.

But if he simply pushes more regulations and mandates such as "guaranteed issue" and "community rating" (the first forces insurance companies to sell coverage to everyone regardless of risk and the second tells what prices they can charge), he will drive many insurers out of business, producing more market concentration and less choice.

But the first thing he needs to do is drop his preoccupation with the enemy. It didn't serve Bush well. It is not serving him well. And it certainly won't serve the country well.

Obama's "Astro-Turf" Health Care Conversation

shikha.dalmia@reason.org (Shikha Dalmia) — Sat, 15 Aug 2009 09:35:00 EDT

The Wall Street Journal this morning reprinted the excerpt below from an interview that President Barack Obama gave to columnist David Leonhardt in the April 14 New York Times magazine:

"The President: Now, I actually think that the tougher issue around medical care-it's a related one-is what you do around things like end-of-life care.

Mr. Leonhardt: Yes, where it's $20,000 for an extra week of life.

The President: Exactly. And I just recently went through this. I mean, I've told this story, maybe not publicly, but when my grandmother got very ill during the campaign, she got cancer; it was determined to be terminal. And about two or three weeks after her diagnosis she fell, broke her hip. It was determined that she might have had a mild stroke, which is what had precipitated the fall.

So now she's in the hospital, and the doctor says, Look, you've got about-maybe you have three months, maybe you have six months, maybe you have nine months to live. Because of the weakness of your heart, if you have an operation on your hip there are certain risks that-you know, your heart can't take it. On the other hand, if you just sit there with your hip like this, you're just going to waste away and your quality of life will be terrible. And she elected to get the hip replacement and was fine for about two weeks after the hip replacement, and then suddenly just-you know, things fell apart.

I don't know how much that hip replacement cost. I would have paid out of pocket for that hip replacement just because she's my grandmother. Whether, sort of in the aggregate, society making those decisions to give my grandmother, or everybody else's aging grandparents or parents, a hip replacement when they're terminally ill is a sustainable model, is a very difficult question. If somebody told me that my grandmother couldn't have a hip replacement and she had to lie there in misery in the waning days of her life-that would be pretty upsetting.

Mr. Leonhardt: And it's going to be hard for people who don't have the option of paying for it.

The President: So that's where I think you just get into some very difficult moral issues. But that's also a huge driver of cost, right? I mean, the chronically ill and those toward the end of their lives are accounting for potentially 80 percent of the total health care bill out here.

Mr. Leonhardt: So how do you-how do we deal with it?

The President: Well, I think that there is going to have to be a conversation that is guided by doctors, scientists, ethicists. And then there is going to have to be a very difficult democratic conversation that takes place. It is very difficult to imagine the country making those decisions just through the normal political channels. And that's part of why you have to have some independent group that can give you guidance. It's not determinative, but I think has to be able to give you some guidance. And that's part of what I suspect you'll see emerging out of the various health care conversations that are taking place on the Hill right now."

Well, guess what, Mr. President, you got your wish. The nation is having that "very difficult democratic conversation" right now. So why are you upset? Could it be because you can't control this "difficult" conversation -- unlike the ones you routinely hold at "astro-turf" townhalls stacked with your supporters?

Massachusetts Health Care Flop and the Way Forward

sam.staley@reason.org (Samuel Staley) — Sat, 08 Aug 2009 14:41:00 EDT

The National Center for Policy Analysis has released three new highly topical health-care reports worthy of reading:

Three Lessons from Massachusetts

The Massachusetts experiment in health care reform offers many lessons that are applicable to the current debate in Congress. The Obama proposals would use similar means to achieve their goals, requiring individuals to purchase insurance and creating an "insurance exchange" where they can buy heavily regulated, heavily subsidized health insurance. Some of the lessons to be learned from the Massachusetts experience have been well-chronicled. But a new NCPA report takes a look at three lessons that remain to be explored.

http://www.ncpa.org/pub/ba667

Can Health Reform Save Money?

One of the big questions asked about the Health Care Reform proposal is whether or not the health reform can save money. The administration's plan to cut health care costs by changing the way we pay under Medicare will not work, and will likely cost more than it will save, according to a new study by former Medicare trustee Thomas Saving.

http://www.ncpa.org/pub/ba668

10 Steps to Free Our Health Care System

To confront and resolve America's health care crisis, the most effective solution for Americans' well-being and budgets is to arm patients with more information and options, not increase spending, regulations and bureaucracy, according to a new NCPA report. The NCPA has come up with a 10-point proposal to health care reform, based on two and a half decades of research on health care systems in virtually every developed country.

http://www.ncpa.org/pub/ba669

When Obama Speaks, "I Hear a Symphony"

shikha.dalmia@reason.org (Shikha Dalmia) — Sat, 08 Aug 2009 10:50:00 EDT

President Barack Obama's legendary charm is wearing thin with the general public. More people now think that Obama's first six months in office are a failure than thought that George W. Bush's first six months were a failure. But Obama seems to have lost none of his allure for the liberal glitterati.

Chris Matthews, the MSNBC host, famously declared after a campaign speech by Obama that every time His Awesomeness spoke, he felt this thrill going up his leg. "I don't have that too often," Matthews cooed.

And now the National Journal reports that after a recent health care luncheon with the president, Democratic Montana Senator Max Baucus was heard having this conversation with Sen. Charles Schumer, D-N.Y., in the White House driveway: "One of the senators was saying to me as we walked out, 'You know, it's just so wonderful to hear him speak.'"

And then Baucus offered his own review of the president's oratory: "You know, it's like a symphony. It's like a great meal. He is so good."

Back in a Senate hours later, Baucus was still gushing.

"It's like going to a great symphony," he said. "He is so good."

Here is my suggestion: Taxpayers should spring for therapy sessions to help smitten lawmakers get over their Obama infatuation during the August recess. Maybe then, when they return in fall, we might be able to hammer a sensible health care reform plan.

Sticker Shock Over ObamaCare: Part 2

shikha.dalmia@reason.org (Shikha Dalmia) — Thu, 06 Aug 2009 23:16:00 EDT

Talking about sticker shock over the Congressional Budget Office's estimate that ObamaCare will end up costing more than $1 trillion over 10 years, as it turns out even this figure is almost certainly too low. The Wall Street Journal reminds us this morning that Congressional actuaries have a history of under-estimating the ultimate cost of such programs.

"[They] expected Medicare to cost $3.1 billion in 1970. In 1969, that estimate was pushed to $5 billion, and it really came in at $6.8 billion. House Ways and Means analysts estimated in 1967 that Medicare would cost $12 billion in 1990. They were off by a factor of 10-actual spending was $110 billion-even as its benefits coverage failed to keep pace with standards in the private market. Medicare spending in the first nine months of this fiscal year is $314 billion and growing by 10%," the WSJ notes.

Nor is the CBO likely to break its streak of low-ball predictions this time. In fact, according to Stephen T. Parente in the City Journal, the CBO estimate is off by - hold on to your wallets - about one trillion dollars! That means that ObamaCare might cost twice as much as the CBO claims -- or two trillion dollars.

Parente was John McCain's health care advisor so ObamaCare supporters are likely to dismiss his claims. But Parente is a principal of Health Systems Innovations that routinely provides health care estimates to both Republican and Democratic members of Congress. He is also director of the Medical Industry Leadership Institute and an associate professor in the finance department at the Carlson School of Management at the University of Minnesota so there is reason to think that he knows what he is talking about.

His contention is that the CBO under-estimates the final price tag of both the House and Senate versions of ObamaCare because it under-estimates the number of people who will switch from a private to a public option. Like the Urban Institute - no bastion of right-wing misinformation on the issue -- Parente estimates that large and small employers would collectively dump roughly 40 million people on to the subsidized public option. But the CBO assumes that large employers would use the public plan only sparingly and that only 11 million people would move from private to public insurance.

Why the difference in these estimates? Parente believes that this is because the CBO uses simulation models of health-insurance plans based on much older health-plan data-typically from 2001 or even 2000. His estimates are grounded in 2006 commercial-insurance data to which the CBO doesn't have access (the data are not publicly available and the CBO didn't make provisions to purchase them). "These data reflect the advent of much cheaper, high-deductible health plans and limited-provider network plans. If the government modeled its public option on these inexpensive plans, the result would be cheap enough to lure far more people away from private health insurance than the CBO estimates," he notes.

He could be wrong, but he claims that his model has a good track record. "The last time government introduced a major health-insurance innovation was 2004, which saw the introduction of Health Savings Accounts. We [HSI] used the same model to predict that 3 million people would adopt these HSAs by the beginning of 2006. Our estimate, which we published in the peer-reviewed journal Health Affairs, was spot-on, predicting the market response more accurately than most other models, which produced adoption-rate estimates at least one-third lower," he notes.

I think I am getting heart burn in addition to sticker shock. Will someone please stop Parente by reporting him to the flag@whitehouse.gov before I have to pop another Malox. When it comes to ObamaCare, all unfavorable predictions are by definition lies!

Obama's Manufactured Indignation

shikha.dalmia@reason.org (Shikha Dalmia) — Wed, 05 Aug 2009 22:17:00 EDT

White House press secretary Robert Gibbs this week derided constituents who had the temerity to confront their elected leaders about ObamaCare. He dismissed their worries that the president's "reform" plan would end up socializing 15% of the U.S. economy as "manufactured anger."

"I hope people will take a jaundiced eye to what is clearly the AstroTurf nature of so-called grass-roots lobbying," he mocked.

Meanwhile, left-wing radicals masquerading as researchers at The Policy Center, an outfit whose mission in its own words is to "develop a universal access health care delivery and single-payor financing system in the United States," accused the protesters of nothing less than "subverting the democratic free speech process."

"What do you call it when people with political axes to grind purposely disrupt public meetings for partisan political reasons," the "think-tank" cuttingly asks on its website? "You call that the Birth of Mobocracy, n - rule by the mob."

So imagine my surprise when I got a personal e-mail from none other than President Barack Obama this afternoon urging me to sign up for an event by the Organization of America to petition my member of Congress in support of his health care "reform" plan. Protesters of ObamaCare, the president notified me, "are filling the airwaves and the internet with outrageous falsehoods to scare people into opposing change." So my job was to "get out there, fight lies with truth, and set the record straight." He also asked me to donate to this noble organization - no doubt so that it can keep doing god's work. (The whole thing pasted below.)

So let's see: When the president's opponents use social networking sites and e-mail to mobilize their grassroots to defeat ObamaCare, we are supposed to take a "jaundiced eye" of the "manufactured, astro-turf nature" of their mob-like protests. But when the president himself uses social networking sites and e-mail to mobilize his grass-roots supporters in favor of ObamaCare, we are supposed to view this as what? Promoting civic participation? Or manufacturing indignation?

This is not "politics as usual." It is "politics as usual" wrapped in a patina of holy sanctimony. Way to go, Mr. President.

Letter from President Obama

Shikha --

This is the moment our movement was built for.

For one month, the fight for health insurance reform leaves the backrooms of Washington, D.C., and returns to communities across America. Throughout August, members of Congress are back home, where the hands they shake and the voices they hear will not belong to lobbyists, but to people like you.

Home is where we're strongest. We didn't win last year's election together at a committee hearing in D.C. We won it on the doorsteps and the phone lines, at the softball games and the town meetings, and in every part of this great country where people gather to talk about what matters most. And if you're willing to step up once again, that's exactly where we're going to win this historic campaign for the guaranteed, affordable health insurance that every American deserves.

There are those who profit from the status quo, or see this debate as a political game, and they will stop at nothing to block reform. They are filling the airwaves and the internet with outrageous falsehoods to scare people into opposing change. And some people, not surprisingly, are getting pretty nervous. So we've got to get out there, fight lies with truth, and set the record straight.

That's why Organizing for America is putting together thousands of events this month where you can reach out to neighbors, show your support, and make certain your members of Congress know that you're counting on them to act.

But these canvasses, town halls, and gatherings only make a difference if you turn up to knock on doors, share your views, and show your support. So here's what I need from you:

Can you sign up to attend an event near you?

In politics, there's a rule that says when you ask people to get involved, always tell them it'll be easy. Well, let's be honest here: Passing comprehensive health insurance reform will not be easy. Every President since Harry Truman has talked about it, and the most powerful and experienced lobbyists in Washington stand in the way.

But every day we don't act, Americans watch their premiums rise three times faster than wages, small businesses and families are pushed towards bankruptcy, and 14,000 people lose their coverage entirely. The cost of inaction is simply too much for the people of this nation to bear.

So yes, fixing this crisis will not be easy. Our opponents will attack us every day for daring to try. It will require time, and hard work, and there will be days when we don't know if we have anything more to give. But there comes a moment when we all have to choose between doing what's easy, and doing what's right.

This is one of those times. And moments like this are what this movement was built for. So, are you ready?

Please RSVP for an event in your community to build support for health insurance reform:

http://my.barackobama.com/AugustAttend

Let's seize this moment and win this historic victory for our economy, our health and our families.

Thank you,

President Barack Obama

Questioning the "Right" to Health Care

anthony.randazzo@reason.org (Anthony Randazzo) — Thu, 30 Jul 2009 11:02:00 EDT

A British doctor, Anthony Daniels, had a piece in The Wall Street Journal earlier this week questioning the sometimes assumed "right" to health care. A friend of mine asked me about this issue last weekend, when she was surprised to learn that not only was I opposed to the current health care reform plan in Congress on economic grounds, but that I don't believe there is a human right to health care any more than I believe there is a human right to groceries at Whole Foods.

Daniels, writing under the pen name Theodore Dalrymple, makes my point better than I can:

People sometimes argue in favor of a universal human right to health care by saying that health care is different from all other human goods or products. It is supposedly an important precondition of life itself. This is wrong: There are several other, much more important preconditions of human existence, such as food, shelter and clothing.

Everyone agrees that hunger is a bad thing (as is overeating), but few suppose there is a right to a healthy, balanced diet, or that if there was, the federal government would be the best at providing and distributing it to each and every American.

Now, some people will counter this by arguing that we offer food stamps to the poor and have homeless shelters that offer food. To begin with, this is a misnomer because most charity for the homeless is driven by the private sector. Food stamps are merely a monetary form of redistributing wealth to the lower class. The same argument can be made that giving unemployment checks to those that drink beer is a recognition that there is a right to drink alcohol. Oh, and food stamps have been known to buy more than just the essentials. Just ask any grocer near the projects in New York.

But the real point that Daniels-Darlymple is making is not about a right to any food, but a right to a "healthy, balanced diet." That is not what homeless shelters offer (most of the time). That is not the goal of food stamps. That's not what's driving unemployment checks. Those subsidy programs, besides having a perverse effect on the drive to produce, offer the bare minimum for survival. And the bare minimum for survival is not what the health care insurance debate is about.

We already have that for everyone. Anyone who is dieing must be cared for by an emergency room, even without insurance or the ability to pay. Every major city has some clinic offering free health services, although with long lines and bare minimum care. The point is that any one can survive in America, it just isn't convenient.

The notion that I want to combat is this perceived notion that there is a "right" to have someone pay for your expensive care. We don't have water bill insurance. We don't have "deleted that Word file with all my passwords" insurance. But because health care can be so expensive, with procedures that can bankrupt families or be too much to get the best care, companies started offering a deal. You pay in a certain amount each month to a pool, and then if something happens, you get to draw out of that pool based on certain conditions. It is a system of having another party cover the costs for your care. It is not a "right", human or otherwise.

Which "right" seems more reasonable to you: the right to keep the money that you make from a job you do, or the right to have other people pay for the cost of your health care because you can't afford it. Sure, it would be great if everyone had coverage. But it seems the thing to do is figure out ways that we can reduce the cost of health care, not necessarily provide insurance to everyone. The less we tax people (taking the money we make) the more money people will have to purchase insurance on their own. The less we tax medical care providers, the less they will charge. The less we regulate the drug industry, the easier it will be to develop medicines, and the more competition in the drug market there will be, bringing down prices.

There are ways to reform the system, things we can do to help people. Just because there isn't a morally discernable right to health care doesn't mean we leave people to die in the streets. But to approach the health care debate from that perspective means trying to heal a symptom, and ignoring the disease.

America Doesn't Have a Free Market Health Care System

shikha.dalmia@reason.org (Shikha Dalmia) — Wed, 29 Jul 2009 16:47:00 EDT

My latest Forbes column is up:

The fact of the matter is that America's health care system is like a free market in the same way that Madonna is like a virgin--i.e. in fiction only. If anything, the U.S. system has many more similarities than differences with France and Germany. The only big outlier among European nations is England, which, even in a post-communist world, has managed the impressive feat of hanging on to a socialized, single-payer model. This means that the U.K. government doesn't just pay for medical services but actually owns and operates the hospitals that provide them. English doctors are government employees!

But apart from England, most European countries have a public-private blend, not unlike what we have in the U.S.

The major difference between America and Europe of course is that America does not guarantee universal health insurance whereas Europe does. But this is not as big a deal as it might seem. Uncle Sam, along with state governments, still picks up nearly half of the country's $2.5 trillion annual health care tab.

More importantly, contrary to popular mythology, America does offer public care of sorts. It directly covers about a third of all Americans through Medicare (the public program for the elderly) and Medicaid (the public program for the poor). But it also indirectly covers the uninsured by--at least in part--paying for their emergency care. In effect, anyone in America who does not have private insurance is on the government dole in one way or another.

This is not radically different from France, where the government offers everyone basic public coverage, of course--but a whopping 90% of the French also buy supplemental private insurance to help pay for the 20% to 40% of their tab that the public plan doesn't cover.

Meanwhile, in Germany, about 12.5% of Germans who are civil employees or above a certain income opt out of the public system altogether and rely solely on private coverage--even though they know it is well nigh impossible to return to the public system once they switch. And more Germans likely would go private if they were not legally banned from doing so.

The most striking similarity between America, France and Germany, however, is the model of "insurance" upon which their health care systems are based. In other insurance markets, the more coverage you want, the more you have to pay for it. Consider auto insurance, for instance. If you want everything--from oil changes to collision protection--you'd have to pay more than someone who wants just basic collision protection. That's not how it works in health care.

For the same flat fee--regardless of whether it is paid for primarily through taxes as in France in Germany or through lost wages as in America--patients in all three countries effectively get an ATM card on which they can expense everything (barring co-pays) regardless of what the final tab adds up to. (Catastrophic coverage plans are available in America, but the market is extremely limited for a number of reasons, including the fact that most states have issued Patients Bill of Rights mandating all kinds of fancy benefits even in basic plans.)

Thus, in neither country do patients have much incentive to restrain consumption or shop for cheaper providers. In America and Germany, patients don't even know how much most medical services cost. In France, patients know the prices because they have to pay up front and get reimbursed by their insurer later--a lame attempt to ensure some price consciousness. But since there is no cap on the reimbursed amount, the French sometimes shop for doctors based on such things as office decor rather than prices, according to a study by David Green and Benedict Irvine, researchers at Civitas, a London-based think tank. (Green and Irvine reported this as a good thing.)

So what are the consequences?

Full Column At Forbes.com

Reason's Health Care Coverage

The Myth Of Free Market Health Care In America

shikha.dalmia@reason.org (Shikha Dalmia) — Wed, 29 Jul 2009 16:15:00 EDT

Forbes

ObamaCare is in retreat. That much was clear the moment the president started springing B-grade Hollywood references to "blue pills and red pills" in its defense during his news conference last week. But before ObamaCare can be beaten back decisively, its critics need to answer this question: How did his plan for a government takeover of roughly a fifth of the U.S. economy get this far in the first place?

The answer is not that Democrats have a lock on Washington right now--although they do. Nor that Republicans are intellectually bereft--although they are. The answer is that both ObamaCare's supporters and opponents believe that--unlike Europe--America has something called a free market health care system. So long as this myth holds sway, it will be exceedingly difficult to prescribe free market fixes to America's health care woes--or, conversely, end the lure of big government remedies.

But apart from England, most European countries have a public-private blend, not unlike what we have in the U.S.

So what are the consequences of this "insurance" model and how are the three countries coping with it?

America, as Obama continuously reminds us, spends 16% of its gross domestic product on health care--the highest percentage in the world. If current trends persist, in 75 years health care will consume about 50% of the GDP--and all of the federal budget. But France is not doing a whole lot better. Its health care system is the third most expensive in the world with over 11% of its GDP going toward health care--nearly three times more than the amount in 1960. The French fork over more than 20% of their income in taxes for public coverage (and another 2.5% to purchase supplemental private coverage)--yet their public program suffers from chronic deficits. Germany, similarly, spends about 11% of its GDP on health care with Germans contributing more than 15% of their income toward buying health care.

If France and Germany are not spending even more on health care, one big reason is rationing. Universal health care advocates pretend that there is no rationing in France and Germany because these countries don't have long waiting lines for MRIs, surgical procedures and other medical services as in England and Canada. And patients have more or less unrestricted access to specialists.

But it is unclear how long this will last. Struggling with exploding costs, the French government has tried several times--only to back off in the face of a public outcry--to prod doctors into using only standardized treatments. In 1994, it started imposing fines of up to roughly $4,000 on doctors who deviated from "mandatory practice guidelines." It switched from this "sticks" to a "carrots" approach four years later, and tried handing bonuses to doctors who adhered to the guidelines.

Meanwhile, in Germany, "sickness funds"--the equivalent of insurance companies--have imposed strict budgets on doctors for prescription drugs. Doctors who exceed their cap are simply denied reimbursement, something that forces them to prescribe less effective invasive procedures for problems that would have been better treated with drugs. But the most potent form of rationing in France and Germany--and indeed much of Europe–is not overt, but covert: delayed access to cutting-edge drugs and therapies that become available to American patients years in advance.

The point is that there is no health care model, whether privately or publicly financed, that can offer unlimited access to medical services while containing costs. Ultimately, such a model arrives at a crossroads where it has to either limit access in an arbitrary way, or face uncontrolled cost increases. France and Germany, which are mostly publicly funded, are increasingly marching down the first road. America, which is half-publicly and half-privately funded, has so far taken the second path. Should America offer even more people such unlimited access through universal coverage, it too will end up rationing care or facing national bankruptcy.

The only sustainable system that avoids this Hobson's choice is one that is based on a genuine free market in which there is some connection between what patients pay for coverage and the services they receive. That is emphatically not what America or any Western country has today. Looking to these countries for solutions as Obama and other advocates of universal health coverage are doing will lead to false diagnoses and false cures.

Shikha Dalmia is a senior analyst at Reason Foundation and writes a biweekly column for Forbes, where this column first appeared.

Buy Now, Pay Later

peter.suderman@reason.org (Peter Suderman) — Fri, 24 Jul 2009 11:38:00 EDT

Listen to liberal advocates of health-care reform and you'll hear two constant refrains: We must expand coverage to everyone, and we must control costs. Democrats tend to sell this as a package deal, a sort of political version of the Billie Mays pitch—but that's not all! And while they've put forth a number of plans that would expand coverage by varying degrees, the tacked-on bonus—as is the case with most info-mercials—is essentially a scam: Claims that the Democrats' current proposals will rein in health-care spending are sketchy at best.

Nor is that surprising. Despite all the talk of cutting costs, the tacit plan, from the beginning, has been to pass reform by building a coalition that would collectively agree to give members whatever they wanted now, while cheerfully talking around the serious budgetary complications posed by universal coverage.

This strategy was sketched out in a March New York Times article on lessons learned by advocates of national reform during the recent overhaul of the Massachusetts health-care system, which expanded coverage but saw costs rise sharply. According to some who backed the Massachusetts overhaul, however, that was a necessary ingredient in the recipe for reform. As the Times notes:

Yet, even now, the lawmakers and strategists behind the Massachusetts plan strongly defend their incremental approach. Only by deferring the big decisions on cost containment, they said in recent interviews, was it possible to build a consensus among doctors, hospitals, insurers, consumers, employers and workers for the requirement that all residents have health insurance.

The piece quoted strategists and stakeholders agreeing that, as Washington attempted to implement reforms similar to those in Massachusetts, the key would be to focus on building the coalition—presumably through dealmaking and handouts—while carefully avoiding anything more than platitudes on the sensitive issue of spending. Defenders refer to it as an "incremental approach," but seedy salesmen have long used the same gimmick to unload get-it-out-the-door-now stinkers under a different name: Buy Now, Pay Later!

Subsequently, this year's health-care debate in Washington has featured a raft of insider deals and stakeholder handouts—to everyone from Wal-Mart to the drug industry—as well a lot of talk about cost-control without much substance to back it up. That's partly due to a string of sobering reports from the Congressional Budget Office that have made the fiscal aspect impossible to ignore. The independent office says that the current path for the country's health-care entitlements is "unsustainable," and, without major changes, will likely cause "substantial harm to the economy."

And those changes, the CBO says, are not to be found in the current legislation. Indeed, none of the bills the CBO has examined would sufficiently tamp down on health-care expenses. To the contrary, CBO chief Douglas Elmendorf told members of the Senate Budget Committee, the legislation would "significantly expand the federal responsibility for health-care costs." Specifically, the House bill would add $202 billion to the federal deficit by 2019.

Both Massachusetts and Obama have, in the past week, announced strategies they hope will deal with the problem of paying for health care. A Massachusetts health-care commission voted unanimously to end fee-for-service payments to doctors and other medical practitioners in favor of capitation, which means care providers are paid per patient rather than per service. Obama, meanwhile, came out in favor of a commission of his own, the Independent Medicare Advisory Commission (IMAC).

But the tricky politics of both ideas means that neither appears to be a likely solution. Capitated payments are deeply unpopular with both doctors and patients. Doctors stand to make less money, while patients find themselves in the hands of providers with the financial incentive to provide as little care as possible.

Details on IMAC are still somewhat vague, but according to Office of Management and Budget Director Peter Orszag, the commission—which is really just an expanded, more powerful version of the current Medicare advisory group, MedPAC—would "have the authority to make recommendations to the President on annual Medicare payment rates as well as other reforms." The idea is to keep politically motivated legislators out of the business of determining Medicare pay rates and reimbursements. But rather than insulating health care from legislative politics, it insulates legislators from the political backlash against rationing and restrictions on care. IMAC would essentially turn Medicare into a government-run HMO, leaving seniors stuck with the sort of micromanaged coverage much of the country rejected throughout the 90s—and perhaps exacerbating the potential for care shortages as doctors look to avoid treating those covered by low reimbursement rates.

The fact is, health-care costs are rising across the developed world, even in the most widely praised systems. Britain, for example, has kept total health-care spending as a percentage of GDP lower than many other Western countries through stingy, centrally rationed care, but its costs are on the rise, and its National Health Service is facing a severe financial crunch. And while advocates of liberal reform hold up countries like France and the Netherlands as models of high-quality care, even boosters must admit that these countries, too, face troublesome rising costs.

Health-reform advocates here in the states think savings may be found in a number of other measures—health IT, comparative-effectiveness review, various changes in provider payment structures—but all are untested. They also have important political constituencies invested in their defeat. That makes them tough issues for politicians who like to sell the public on the wonders of their plans while sweeping the costs and complications aside. In other words, like the dearly departed Billie Mays, politicians are pitchmen—always urgently, enthusiastically peddling something new and shiny in the desperate hope that you, their political constituents, are buying.

Peter Suderman is an associate editor of Reason magazine. This column first appeared at Reason.com.

Framing Developments in the Health Care Debate

anthony.randazzo@reason.org (Anthony Randazzo) — Tue, 21 Jul 2009 20:23:00 EDT

President Obama is pushing for universalish health care to be passed before the end of the month. The GOP, Blue Dog democrats, and others want him to slow down. So far, the plunging presidential approval ratings and public support for the current health care plans are leaning towards the right. If the president wants to get this passed, he'll have to work on his Billy Mays sales pitch. If opponents of the health care idea want to win, they need to realize their message will be short lived.

Right now, opponents are focusing on the fact that Congress is moving too fast. And they are solidly right. Any time Congress moves fast on something they screw it up. With this in mind Mitt Romney made a plea today for the president to take his time. Given that the former Massachusetts governor is one of the few Americans with first hand experience in developing significant health care reform, the president may be wise to listen to him.

But what are opponents going to say in two months if Congress does take its time in passing the massive spending bill? Because the reality is that Massachusetts, for all its careful planning, wound up with healthcare reform that is unsustainable, more expensive for the state and residents than before, and causing people to leave the state, hurting the economy. Congress doesn't need to slow down, it needs to stop.

The more important issue that critics should be focusing on is what the spending bill will do.

First, we're creating a public option that will eventually create the same problems we face with the unfunded liabilities of Medicare and Medicaid.
Second, we are severely compromising the affordability of private health insurance by pitting the government against private firms.
Third, the quickly becoming famous "Section 102" of the house bill is a near death blow to many private insurers.
Fourth, the proposed taxes will hurt production and destroy small business in the middle of a recession. And that is bad even in an economic boom. (My colleague Shikha Dalmia wrote about this earlier today.)
Fifth, the bill is seriously threatening states with unfunded mandates that are scaring the progressiveness out of even the most left leaning governors. (See Reason's Sam Staley on this issue from earlier today.)

And that doesn't even get into things like the effectiveness of what is proposed, the fact that it leaves people uncovered, and the ultimate tragedy: a discussion on the missed opportunity this will be to reform the health services system by making it more transparent, getting rid of costly regulations for the drug industry (which would bring down prices), making lawsuits against doctors more reasonable, and addressing the reasons that health insurance is high in the first place—high prices in the provision of health care.

Fun Taxes on Health Care

shikha.dalmia@reason.org (Shikha Dalmia) — Tue, 21 Jul 2009 18:35:00 EDT

If you want less of something, you tax it more -- if you want more of something, you tax it less. That's a pretty basic principle of economics. And by that principle, one would think, given that Obama and his fellow Democrats have made providing "affordable" medical coverage to every man, woman and child in America their holy grail, they would do everything in their power to lower taxes on insurance plans. Right? Wrong.

Obama's ambitious overhaul of our health care system has hit - oh, what does he call it? - "bumps" on the road, thanks to its astronomical $1 trillion-plus price tag. So Democrats are desperately looking for ways to pay for it - lest the "bumps" turn into "boulders" and crater their reform agenda. One idea that was floated to raise revenues was a variation on the McCain plan to remove the tax deduction that existing employer-provided health care plans enjoy and using the revenue to subsidize coverage for the uninsured. But that trial balloon was quickly popped by, among others, labor unions who, over the years, have used this deduction to strong-arm their employers into providing fully loaded "Cadillac" plans to their rank-and-file. If these plans were suddenly taxed, companies would cut back on their coverage, forcing union members to make do with plans similar to what ordinary mortals enjoy.

So Massachusetts Democrat, Sen. John Kerry - former presidential candidate best known for his habit of flip-flopping on issues - has had another brain wave, reports the National Journal: Instead of taxing health care benefits, he wants to tax insurance companies that sell such expensive "Cadillac" plans (never mind that often these companies have no choice but to do so because of state mandates requiring them to cover everything from routine colds to hair prostheses to Viagra).

Although Kerry is with-holding further details, the beauty of his idea is that it would allow Obama to keep his promise of not raising taxes on anyone making less than $250,000 a year while actually raising them! Similarly, Sen. Charles Schumer, D-N.Y., is mulling a tax on insurance firms to raise approximately $100 billion. Senate Finance Committee Chairman Max Baucus - a Montana Democrat - thinks these ideas are "interesting, they're creative; some are kind of fun."

It's just great that our elected representatives are having "fun" thinking up of secret ways to tax us. We wouldn't want them to feel bad or anything you know, but here is an un-fun fact for them to ponder: Insurance companies won't just swallow the higher taxes, of course. They will likely pass them on to patients in the form of premium increases. And for every 1% increase in premiums a few hundred thousand people loose coverage.

This would be insane at any time, but taxing insurance companies when you want them to sell coverage to more people exceeds even Congressional standards of insanity.

But then sanity is no fun!