Archive for March, 2009
“Fascinating ‘Outside-of-the-Box’ Thinking on Health Insurance Reform”
At Reason Online, Ronald Bailey reviews John Cochrane‘s recent Cato Policy Analysis, “Health-Status Insurance: How Markets Can Provide Health Security.”
Writing in advance of last week’s health care summit held by President Obama, Bailey explains:
Summit attendees will break into various working groups that are supposed to engage in “outside-of-the-box” thinking. As it happens, they now have some fascinating “outside-of-the-box” thinking on health insurance reform to draw on. Earlier this month, University of Chicago economist John Cochrane published an intriguing policy analysis for the libertarian Cato Institute that looked at how “health-status insurance” can provide health security for Americans. Cochrane claims that with health-status insurance, free markets can solve the vexing problem of how to insure people with pre-existing medical conditions and “provide life-long, portable health security, while enhancing consumer choice and competition.”…
Creating and selling separate health-status insurance policies would mean that medical insurance companies would no longer have an incentive to offload sick people. Instead, because those with pre-existing conditions would have the funds to pay higher premiums, insurers would compete for their business. “Constant competition for every consumer will have the same dramatic effects on cost, quality, and innovation in health care as it does in every other industry,” argues Cochrane.
Health-status insurance also helps delink medical insurance from employment because…a worker diagnosed with diabetes…can switch jobs without worrying about whether or not he can obtain medical insurance…
While Cochrane acknowledges that his proposal is not a comprehensive health care reform program, adopting it would go a long way toward satisfying President Obama’s eight health care reform principles, especially affordability, aiming toward universality, portability, and choice, and being fiscally sustainable. “Health-status insurance can simultaneously give us complete and portable long-term insurance, great individual choice, and cost-containment beyond the dreams of any health policy planner,” concludes Cochrane. Asked if he has been invited to the president’s health care reform summit this week, Cochrane said no, but quickly added, “If I got the phone call, I would definitely be there.” Mr. President, there’s still time for your summiteers to hear about this outside-of-the-box thinking.
Who’s Blogging about Cato
Here’s a weekend round-up of bloggers who are writing about Cato:
- Anthony G. Martin links to Michael D. Tanner’s recent article about universal health care on his blog, The Liberty Sphere.
- Thomas Stone‘s web log Philosopher’s Stone links to the most recent Cato Weekly Video featuring Ted Galen Carpenter on Mexico’s drug war.
- The editors at Fiscons.com quote Alan Reynolds in a post about President Obama’s spending plans.
- Peking University Professor Michael Pettis quotes Daniel J. Ikenson on his blog, which covers trade policy in China. The quote was pulled from Ikenson’s latest op-ed in the South China Morning Post.
- Pajamas TV hosts a video debate between Will Wilkinson and Stephen Green over the idea of “liberaltarianism,” the fusion of libertarianism and liberalism.
- Fr33 Agents blogger Morgan Ashcom cites Gene Healy’s Examiner op-ed that criticizes conservative foreign policy.
Let us know if you’re blogging about Cato by emailing cmoody@cato.org or drop us a line on Twitter @catoinstitute.
Hillary’s Shock Doctrine
Hillary Rodham Clinton, the secretary of state who no doubt thinks of herself as “fourth in the line of succession,” tells a European audience how the Obama administration will pass an agenda that Americans have previously rejected: “Never waste a good crisis … Don’t waste it when it can have a very positive impact on climate change and energy security.”
As I’ve written several times, governments throughout the decades have taken advantage of wars and economic crises to expand their size, scope, and power. Bob Higgs wrote about “Crisis and Leviathan” long before Naomi Klein called it “The Shock Doctrine.”
But the striking thing about the Obama administration is that they openly acknowledge that’s what they’re doing — using a crisis to ram through their entire policy agenda while people are in a state of panic. Projects like national health insurance, raising the price of energy, and subsidizing more schooling — the three prongs of President Obama’s speech to Congress — have nothing to do with solving the current economic crisis. But the administration is trying to push them all through as “stimulus” measures. And they keep proclaiming their strategy.
First it was Rahm Emanuel: “You never want a serious crisis to go to waste. And this crisis provides the opportunity for us to do things that you could not do before.” Then Joe Biden: “Opportunity presents itself in the middle of a crisis.” Not to mention Paul Krugman and Arianna Huffington. And now Hillary.
Not since George Bush the elder told the media that his campaign theme was “Message: I care” has a president been so open about his political strategy. But these people are displaying a contempt for the voters. They’re telling us that we’re so dumb, we’ll go along with a sweeping agenda of economic and social change because we’re in a state of shock. They may be right.
But voters and members of Congress should remember Bill Niskanen’s sobering analysis of previous laws passed in a panic.
There Ain’t No Such Thing as Market-Based Universal Coverage
Over at The Corner, Harvard Business School professor and Manhattan Institute scholar Regina Herzlinger urges conservatives to support universal coverage — but in a market-oriented way. That is an absurdity. Once the government adopts a policy of universal health insurance coverage, a free market is impossible and the casualties begin to mount.
As a model, Herzlinger points to Switzerland, “which enables universal coverage without any governmental insurance through this system.” Switzerland requires all residents to purchase “private” health insurance; dictates the content of that insurance; and dictates the price. As I explain in a recent Cato paper, once the government controls those decisions, you’ve got socialized medicine.
My colleague Mike Tanner observes that the Swiss government’s power to control the content of “private” health insurance allows special interests to lard up people’s health insurance with their services — whether Swiss consumers want them or not:
The expansion of benefits has driven up the cost of insurance…As Uwe Reinhardt has noted, “Over time, the growth in compulsory benefits has absorbed an increasing fraction of the consumers’ payment, thus compromising the consumer-driven aspects of the Swiss system.”
Tanner also reports that the government’s power to dictate health insurance premiums is harming the sickest Swiss:
Evidence shows that the community rating requirements are…leading to the over-provision of care to the healthy and the under-provision of care to the sick. In addition, the prohibition on risk management discourages the development of new and innovative products.
In this Cato paper, University of Chicago business school professor John Cochrane explains how such price controls harm sick patients and suppress innovative new products.
Herzlinger is an extremely passionate and knowledgeable advocate of market-based health care. But when it comes to universal coverage, readers of National Review are better counseled by the magazine’s editors, who write:
to achieve universal coverage would require either having the government provide it to everyone or forcing everyone to buy it. The first option, national health insurance in some form or other, would either bust the budget or cripple medical innovation, and possibly have both effects. Mandatory health insurance, meanwhile, would entail a governmental definition of a minimum package of benefits that insurance has to cover…
Republicans should go in a different direction, proposing market reforms that make insurance more affordable and portable. If such reforms are implemented, more people will have insurance.
Some people, especially young and healthy people, may choose not to buy health insurance even when it is cheaper. Contrary to popular belief, such people do not cause everyone else to pay much higher premiums. Forcing them to get insurance would, on the other hand, lead to a worse health-care system for everyone because it would necessitate so much more government intervention. So what should the government do about the holdouts? Leave them alone. It’s a free country.
Herzlinger is correct that “it is 2009, not 1992.” If we want America to remain a free country in 2009 and beyond, we must reject universal coverage.
You Don’t Say
President Obama recently indicated that he would cut the fiscally irresponsible (yet minimally market distorting) direct payments that flow to farmers regardless of their production. An outcry from farming groups has, predictably, ensued.
Just as predictably: “A source in the administration says the proposal is being reconsidered because of the opposition it has received.“
Corruption Rewarded in Government
In Downsizing the Federal Government, I discussed some of the corruption surrounding former Senator Ted Stevens:
Another example of abuse engineered by Senator Stevens involves Alaska Native Corporations. Because of rule changes slipped in by Stevens, these shadowy businesses based in his state are allowed to circumvent normal federal procurement rules and win no-bid contracts. The result of such loopholes is that taxpayers do not get value for their money. For example, in 2002 a half billion dollar contract for scanning machines at U.S. border crossings was given to a native corporation with little experience in the technology, instead of established leaders in the field who were not allowed to bid.
The Washington Post did a good job of bringing the scandal of ANCs to light a few years ago. Did the spotlight on ANCs and connections to disgraced Senator Stevens convince Congress to move ahead with reforms? Hardly. From Government Executive today:
In fiscal 2008, companies owned by Alaskan regional and tribal corporations earned a record $5 billion in federal contracts, nearly 10 times the $506 million they earned in fiscal 2000 … ANCs earned two-thirds of the $24 billion they accumulated in prime contracts since fiscal 2000 through the Small Business Administration’s 8(a) Business Development program … Federal acquisition specialists said the data shows that the program, which was designed to help small and disadvantaged companies, has been undermined by a system that rewards companies that earn hundreds of millions in annual revenue.
In the story, Steven Schooner, of George Washington University, summed up the scam well: “The ANC program, as currently implemented, is a blunt instrument that distorts the procurement system, injects well-founded cynicism into the process, and reinforces the belief that government procurement is more about allocating political spoils than ensuring that the government receives value for taxpayer money.”
President Obama has promised procurement reform. He could start be eliminating ANCs and other forms of procurement favoritism.
Obama Administration Agrees with Cato on Auto Fuel Efficiency
Well, sort of. The Obama administration signaled last week their belief that it would be better to have one national fuel efficiency standard than a multiplicity of different state fuel efficiency standards. Now, we have long maintained that fuel efficiency standards — federal or state — are a bad idea. Consumers should be free to buy whatever sort of car they want without government economic coercion. But if we must do violence to consumer sovereignty, better to do so via one national standard rather than via a hodge-podge of differing state standards.
This is the very argument I made late in January over at The New York Times when asked about California’s petition to establish its own fuel efficiency standard as a means of addressing greenhouse gas emissions. Alas, I was pilloried on the NYT comments board at that time for all sorts of sins against man and nature. Now it appears that President Obama has come over to the dark side. Welcome to my world, Mr. President.
Put Surveillance Cameras on Police Guns, Not Street Corners
Mayor Daley of Chicago is planning to put a surveillance camera on every corner to aid first responders and deter terrorism. As I’ve said before, cameras don’t deter terrorism, but they do satisfy the need to “do something” without really improving security. Police officers prevent attacks with traditional investigation and intelligence gathering; cameras are only useful in picking up the pieces after the attack is done. My colleague Jim Harper is cited in this piece that addresses their utility in more detail. Cameras didn’t stop the 7/7 bombings in London, but they took lots of pictures of the attack (creepy Big Brother shots here). The London police doubled down on mass surveillance, but reported that the cameras have not reduced crime. Worse yet, the British have effectively outlawed taking photos of police officers, prompting photo protests.
Chicago isn’t the first major American city to take this route. New York did so, as did the District of Columbia. The cameras in D.C. have not prevented crime, and this piece makes the case that they are a waste of resources – no one can point to a prosecution that used the camera footage to obtain a conviction, and several murders have been committed within a block of a surveillance camera.
Surveillance cameras can and should play a prominent role in law enforcement – mounted on officers’ firearms. A company is now producing a camera that attaches to the tactical rail found on modern pistols and rifles. A New York county has invested in the technology for its officers, and their experience looks promising. Putting a camera on the guns of SWAT officers will keep them honest and prevent falsification of evidence after the fact to cover up a mistaken address or unlawful use of lethal force.
Mayor Cheye Calvo can attest to these horrors, as detailed in a recent Washington Post Sunday Magazine cover story, this Cato Policy Report, and this Cato Policy Forum, “Should No-Knock Police Raids be Rare-or Routine?” Click here for video – Mayor Calvo calmly captures the raw shock of having your life turn into a tactical problem for a SWAT team to solve, and he is now advocating for a Maryland state statute to mandate tracking the deployment of tactical law enforcement teams. As Radley Balko would tell you, this is long overdue.
Work, Social Production, and Inequality
Matt Yglesias links to an interesting discussion about the growth of activities that raise our standard of living without being captured in economic statistics. Wikipedia is a great example of this: it’s tremendously valuable to hundreds of millions of Internet users, but because it’s given away for free that value is not reflected in our economic statistics.
I think this general insight is right, but I don’t agree with John Quiggin’s conclusions about the social implications. In particular, Quiggin writes:
It seems unlikely that large inequalities in income are beneficial to anyone except the recipients of high incomes.
If improvements in welfare are increasingly independent of the market, it would make sense to shift resources out of market production, for example by reducing working hours.
The first point ignores the fact that rich people are a crucial part of many public-spirited enterprises. Jimmy Wales was able to finance the initial development of Wikipedia (then called Nupedia) because he had previously earned profits building commercial websites. The Ubuntu project, creators of an extremely popular Linux-based operating system, is supported to the tune of millions of dollars a year by successful entrepreneur Mark Shuttleworth. Brewster Kahle used the profits from his successful Internet businesses to build the Internet Archive, a crucial repository of public domain works. John Gilmore, who made his fortune as one of Sun’s first employees, has used his wealth to promote a variety of free software projects, including GNU radio and Gnash. I could provide plenty of other examples.
The important thing to recognize is that these projects could only exist because of the combination of their founders’ expertise and their money. Without cash, these folks would have been unable to provide the support necessary to get these projects off the ground. But even more important, these projects also wouldn’t have succeeded without their deep understanding of their fields. Only someone with years of experience in the software industry would have the judgment and the relationships necessary to make a project like Ubuntu successful.
This Is Why Universal Coverage Is a Religion — and Not about Compassion or Saving Lives
I was invited to participate in an email/online/sorta exchange for the Washington Post yesterday. Unfortunately, the effort was spiked after just a few rounds of emails. But rather than let my participation go to waste, I thought I’d post one exchange that I think highlights why I’m not just being colorful when I describe supporters of universal health insurance coverage as the Church of Universal Coverage. I could summarize the exchange, but I’m lazy. So I’ll just copy and paste.
I wrote:
All the interest groups are meeting with all the right politicians and making all the right noises, thus the Church of Universal Coverage says the stars have aligned for fundamental reform… Everyone is at the table right now because no one wants to be on the menu. But when the Democratic leadership makes its intentions clear, today’s love-fest will turn into a bloodbath.
Andres Martinez of the New America Foundation (who owes me a taco al pastor) responded:
I am a proud member of the church, Michael. As New America’s own recent study on the urgency of reform — which reads like a strong courtroom closing argument — noted, how can the world’s most prosperous nation afford to have tens of thousands of its citizens die each year because they lacked access to health care? Health care reform is a moral imperative, so your reference to a church (um, even if sarcastic) is appropriate…
I replied:
The Institute of Medicine estimates that every year, about 20,000 Americans die because they lacked health insurance, but as many as 100,000 die from preventable medical errors. What moral code compels the Church of Universal Coverage to solve the first problem before addressing the second?
Debating the War on Drugs in Mexico
Yesterday I was invited to Pajamas TV to discuss the increasingly violent situation in Mexico, where the drug-related death toll continues to skyrocket. The other guest was journalist Matt Sanchez.
The discussion rapidly turned into a debate with Sanchez on the merits of drug legalization as an alternative to the current mayhem. If you’re interested in the topic, the video is available here, and the audio here.
Len Nichols Is Wrong: This Debate Is about Socialized Medicine
Over at “The New Health Dialogue Blog,” my friend Len Nichols writes:
I am disappointed to hear the health reform conversation devolve once again into a contrived debate about a single payer, government-run health system. This is an old dispute about “socialized medicine” and one that has already been settled in the minds of a critical mass of policymakers.
A couple of things strike me about his post.
First, this debate is obviously about socialized medicine, and to argue anything else is absurd. We have a president who advocates single-payer. That president just held a health care summit to which he invited other single-payer advocates, but not a single free-market advocate. As I explain in this paper, all the bluster about “public-private partnerships” is an intellectually dishonest smokescreen. Nichols and other members of the Church of Universal Coverage hate the term “socialized medicine” not because it inaccurately describes their policies, but because it accurately describes their policies and rankles a large segment of the American public. Rather than adjust their policies, they are trying to convince the public that policies generally considered socialist really aren’t.
Second, this “old dispute” obviously has not been “settled in the minds of a critical mass of policymakers.” If that mass of opinion were truly critical, then (by definition) the fact that some are crying “socialized medicine” wouldn’t bother Nichols at all.
I think I’ll shoot my friend an email and invite him to speak at a Cato Institute policy forum where we can discuss whether President Obama is trying to move us closer to socialized medicine.
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