Author Archive
How to Spot Failure
Ezra Klein writes that “libertarianism fails in health care,” by which he means he has identified something he does not like: in a free society, no one would force you to purchase health insurance, whether for yourself or for others, from the government or from private insurers. Klein doesn’t like that, because of something neither of us likes: it means some irresponsible and/or unfortunate people would end up with expensive medical bills or worse—dead.
But that is like saying, “The Yankees fail because they have a lousy third baseman.” (Do they? I have no idea.) It tells us nothing about how well the Yankees perform (how many lives Libertopia would save) on the mound (preventive care), at first base (primary care), in the outfield (acute care and new medical technologies), on double plays (care coordination), or by avoiding unforced errors (same). It tells us nothing about whether the Yankees’s left fielder plays shallow or the team otherwise adjusts to minimize the lousy-third-baseman problem (whether people would take better care of their health and more people would purchase health insurance), how well the Yankees perform at the plate (generating wealth, improving living standards, and reducing the cost of care to bring it within reach of the poor), or lots of other things that a free economy would do that I could graft onto this lousy simile.
Klein doesn’t even begin to examine how other ways of organizing health care, including our very own health sector, perform on any of these dimensions. And he certainly doesn’t tell us the score. All he tells us is what we already knew: that a free market isn’t perfect. Which is to say, he tells us nothing.
Potato Chips Are Awesome
No, wait. The emergent order of the market is awesome, as evidenced by this EconTalk podcast on potato chips.
Cooling out the Marks in Uncle Sam’s Ponzi Schemes
The flap over whether Social Security is a Ponzi scheme reminds me of two passages about Social Security’s sister program, Medicare, from Cato adjunct scholar David Hyman.
The first is from his book Medicare Meets Mephistopheles, which remains the best (and only) satire ever written about Medicare:
Consider what happened when I presented some considerably less pointed remarks at the conference at Washington and Lee University School of Law. One of Medicare’s most enthusiastic supporters responded by making an impassioned speech that it was improper to describe Medicare as a “Ponzi scheme,” and the program should not be judged by the standards that would apply to a private pension because it was actually a “sacred bond” between the generations. (Leave aside the fact that I never used the word “Ponzi” in my remarks. I did note that the Medicare program bore certain similarities to an inter-generational pyramid scheme, which is something quite different. Of course, it is possible that the use of this term by the commentator was a Freudian slip.) His words brought enthusiastic applause from those members of the audience who had heard enough bad news of the sort found in this book and were more than ready to ignore Medicare’s problems on the basis of empty political sloganeering.
The second is from Hyman’s response to a critic of Medicare Meets Mephistopheles:
Finally, my reply is titled “Cooling Out the Marks, Medicare Style.” This is a reference to a well-known article by a famous sociologist, on con games and the social process of adaptation to failure:
“Sometimes, however, a mark is not quite prepared to accept his loss as a gain in experience and to say and do nothing about his venture. He may feel moved to complain to the police or to chase after the operators. In the terminology of the trade, the mark may squawk, beef, or come through. From the operators’ point of view, this kind of behavior is bad for business. It gives the members of the mob a bad reputation with such police as have not yet been fixed and with marks who have not yet been taken. In order to avoid this adverse publicity, an additional phase is sometimes added at the end of the play. It is called cooling the mark out. After the blowoff has occurred, one of the operators stays with the mark and makes an effort to keep the anger of the mark within manageable and sensible proportions. The operator stays behind his team-mates in the capacity of what might be called a cooler and exercises upon the mark the art of consolation. An attempt is made to define the situation for the mark in a way that makes it easy for him to accept the inevitable and quietly go home. The mark is given instruction in the philosophy of taking a loss.” Erving Goffman, “On Cooling the Mark Out: Some Aspects of Adaptation to Failure,” 15 Psychiatry 451, 451-52 (1952).
The occupational hazard for Medicare’s defenders is the tendency to become coolers on the program’s behalf. Professor Horwitz largely avoids this temptation, although she is not (yet) willing to concede how hot things actually are in the place in which we find ourselves. The same cannot be said for Medicare’s more ardent defenders, who routinely justify and excuse Medicare’s pathologies on the grounds that it is a “sacred inter-generational trust,” and not just another mediocre government program. Yet, even these ardent defenders may eventually find themselves wondering, in the dark of night, how it came to pass that they became coolers, giving instruction to the poor and working classes on the philosophy of taking a loss at the hands of a program that was supposed to help them, but ended up treating them as marks. With friends like that, who needs enemies?
Adler on the Glitch that Could Defund ObamaCare
Law professor Jonathan Adler — who first brought to my attention this latest glitch in ObamaCare — has his own take here.
Latest ObamaCare Glitch Enables States to Block New Entitlement Spending
Investors Business Daily reports on the latest glitch found in ObamaCare‘s 2,000-plus pages:
Because of a quirk in ObamaCare, people who buy health insurance through a federally run exchange may not be eligible for premium subsidies.
Government-created exchanges are places for individuals to shop and purchase health insurance. ObamaCare will require individuals and families to buy insurance, starting in 2014.
Those with incomes at 100% to 400% of the federal poverty level will be eligible for taxpayer funded subsidies — a tax credit to help pay for the premium.
It turns out that the legislation isn’t so clear, the latest example of what analysts predicted would be a stream of surprises from the mammoth health law.
Section 1311 of ObamaCare instructs state governments to set up an exchange. If a state refuses, Section 1321 lets the federal government establish an exchange in the state.
Yet ObamaCare states that the tax credit is available to people who are enrolled in an “an exchange established by the state under (Section) 1311.” It makes no mention of people enrolled in federal exchanges being eligible for the tax credit.
“There is this technical problem in the law,” said James Blumstein, a professor at Vanderbilt Law School. “I don’t see how you get around that.”
I guess the folks who chanted, “Read the bill!” seem a little less crazy now.
Regrettably, the IRS has tried to “get around” the clear meaning of the law. In a proposed rule, the IRS writes that taxpayers will be eligible for ObamaCare’s “tax credits” — which are more government spending than – if they are enrolled in a health plan “established under section 1311 or 1321” [emphasis added]. But that’s not what the law says. As I told IBD:
“Congress did not delegate this discretion to the IRS,” Cannon said. “Congress created a tax credit for A, and the IRS is saying it applies to A and B. If the IRS offers this tax credit to federally run exchanges, the IRS will be assuming powers the Constitution vests only in Congress to alter the tax code and spend money.”
Citizens have until October 31 to share with the IRS their thoughts about the agency’s overly broad interpretation of its powers (see here).
More broadly, this bug feature means that states can block ObamaCare’s new entitlement spending, and possibly the entire law, just by refusing to create an Exchange:
“The whole structure of the law collapses without a state-run exchange,” said Michael Cannon, director of health policy studies at the libertarian Cato Institute. “That forces Congress to either repeal ObamaCare or significantly alter it.”
Yesterday, Rep. Michael Burgess (R-Texas) helpfully suggested that the so-called “Super Committee” should meet its target of $1.5 trillion in spending reductions by cutting ObamaCare’s new entitlement spending:
The Select Committee is getting to work, and I encourage both parties, all 12 members, to put the Affordable Care Act on the table, alongside other entitlements in need of reform…The easiest money to save is money you haven’t yet spent…This new select committee could easily achieve almost their entire target of reducing the nation’s deficit, and…almost every dollar would come from benefits that do not yet exist.
The wonderful thing about this newly discovered feature of ObamaCare is that states don’t have to wait for Congress to act. They can reduce federal spending simply by not creating a health insurance Exchange.
‘Biggest Crackdown Ever’ Shows Medicare’s Anti-Fraud Efforts Are a Fraud
The Obama administration somehow continues to garner positive coverage for arresting (alleged) Medicare fraudsters who bilk the program for, say $295 million. See this CBS News report:
Combating fraud is a good thing, but $295 million is chicken feed compared to the $100 billion or so that Medicare and Medicaid lose to fraudulent and other improper payments each year.
Instead of merely parroting the government’s press releases on its anti-fraud efforts, it would be nice to see some media outlet examine why Medicare and Medicaid fraud is so prevalent, so persistent, and why politicians have no incentive to do anything serious to combat it. They could start with this article and this video:
Nearly Two-Thirds of ObamaCare’s Supposed Beneficiaries Think It Won’t Help Them
Here are a few takeaways from the Kaiser Family Foundation’s most recent monthly poll.
1. Nearly Two Thirds of ObamaCare’s Supposed Beneficiaries Think It Won’t Help Them.
ObamaCare‘s actual beneficiaries are politicians, government bureaucrats, insurance companies, drug manufacturers, etc.—but that’s another blog post for another time.
The law’s supposed beneficiaries are the uninsured. Yet 61 percent of them think the law will either not help them or will hurt them (see pie chart below). The main takeaway: Congress can repeal ObamaCare and its supposed beneficiaries won’t even care.
2. Some of the Uninsured Who Think ObamaCare Will Help Them Are Wrong.
One respondent said that under ObamaCare, you “can go to the doctor with no problems, unlike now you have to worry about insurance and bills.” Yeah. Good luck with that.
3. ObamaCare Is Less Popular than Ever.
In August 2011, support for ObamaCare hit an all-time low in the KFF poll:
ObamaCare Less Popular than Pollster.com Suggests
From time to time, I’ve posted Pollster.com’s trend estimate of all polls gauging public opinion on ObamaCare. It’s a great little tool. But recently, I noticed something.
The Kaiser Family Foundation’s monthly tracking poll not only finds the most support for ObamaCare, but it also gets disproportionate weight in the Pollster.com trend estimate, simply because KFF polls the public on ObamaCare more frequently than others. Since President Obama signed the law on March 23, 2010, KFF has polled this question more often than the next two most frequent polls combined. That makes the gap between opposition and support smaller than it would be if KFF conducted its poll as frequently as other groups conduct theirs (or vice versa).
To illustrate, here’s what the trend estimate looks like incorporating all polls. As of this month, opposition leads support by 7.3 percent (45.3 percent opposed to ObamaCare vs. 38 percent in favor).
Here’s what the same graph looks like when we exclude the KFF polls. The margin of opposition nearly doubles to 13.9 percent (49.9 percent opposed vs. 36 percent in favor).
Of course, this graph gives the KFF poll zero weight, which is unfair. But it shows that if all polls received equal weight, opposition to ObamaCare could easily lead support by 10 percentage points or more.
An 85 Percent Increase in Health Care Fraud Prosecutions? Be Still My Beating Heart…
USA Today reports that the Obama administration’s efforts may yield an 85 percent rise in federal fraud prosecutions. Yawn.
Fraud expert Malcolm Sparrow:
By taking the fraud and abuse problem seriously this administration might be able to save 10 percent or even 20 percent from Medicare and Medicaid budgets. But to do that, one would have to spend 1 percent or maybe 2 percent (as opposed to the prevailing 0.1 percent) in order to check that the other 98 percent or 99 percent of the funds were well spent. But please realize what a massive departure that would be from the status quo. This would mean increasing the budgets for control operations by a factor of 10 or 20. Not by 10 percent or 20 percent, but by a factor of 10 or 20. [emphasis added]
That’s not going to happen, as I explain here and in this video:
$154 Million Medicaid Fraud Settlement a Sign of Govt Failure, Not Success
The federal government, four states, and a whistleblower have extracted a $154 million settlement from Par Pharmaceuticals for fraudulently inflating the prices it charges Medicaid, according to the Associated Press.
With Medicare and Medicaid losing roughly $100 billion each year to fraud and other improper payments, however, the fact that a paltry $154 million settlement is news can only mean that federal and state governments are not even trying to combat fraud in any serious way. As I explain in this video, that’s because politicians have almost zero incentive to do so — which makes massive amounts of fraud an inherent part of these programs:
Under ObamaCare, Medicare and Medicaid fraud will only get worse.
11th Circuit Finds ObamaCare’s Individual Mandate Unconstitutional
Here’s the meat of the majority opinion:
We first conclude that the Act’s Medicaid expansion is constitutional. Existing Supreme Court precedent does not establish that Congress’s inducements are unconstitutionally coercive, especially when the federal government will bear nearly all the costs of the program’s amplified enrollments.
Next, the individual mandate was enacted as a regulatory penalty, not a revenue-raising tax, and cannot be sustained as an exercise of Congress’s power under the Taxing and Spending Clause. The mandate is denominated as a penalty in the Act itself, and the legislative history and relevant case law confirm this reading of its function.
Further, the individual mandate exceeds Congress’s enumerated commerce power and is unconstitutional. This economic mandate represents a wholly novel and potentially unbounded assertion of congressional authority: the ability to compel Americans to purchase an expensive health insurance product they have elected not to buy, and to make them re-purchase that insurance product every month for their entire lives. We have not found any generally applicable, judicially enforceable limiting principle that would permit us to uphold the mandate without obliterating the boundaries inherent in the system of enumerated congressional powers. “Uniqueness” is not a constitutional principle in any antecedent Supreme Court decision. The individual mandate also finds no refuge in the aggregation doctrine, for decisions to abstain from the purchase of a product or service, whatever their cumulative effect, lack a sufficient nexus to commerce.
The individual mandate, however, can be severed from the remainder of the Act’s myriad reforms. The presumption of severability is rooted in notions of judicial restraint and respect for the separation of powers in our constitutional system. The Act’s other provisions remain legally operative after the mandate’s excision, and the high burden needed under Supreme Court precedent to rebut the presumption of severability has not been met.
Here is my colleague Ilya Shapiro’s statement on the ruling.
Medicare Fraud: Et Tu, Reverend?
From today’s Los Angeles Times:
On Tuesday, a jury found [south Los Angeles pastor Christopher] Iruke, his wife and an employee who worked for the couple guilty of healthcare fraud and conspiracy to commit fraud…
Authorities said Iruke and associates often supplied power wheelchairs to Medicare patients perfectly capable of walking on their own —including one who did jumping jacks to show agents he never needed one. Also among the patients Iruke and his associates filed reimbursement claims for were two people who were deceased, according to court papers…
After purchasing the wheelchairs at about $900 wholesale and paying for the prescriptions, he pocketed the remainder of about $6,000 in taxpayer money he received as Medicare reimbursements, according to court documents. The pastor operated four medical equipment supply companies between May 2002 and September 2009 as part of the scheme, according to authorities.
In all, Iruke’s companies filed for $14.2 million in claims and received about $6.6 million in reimbursements.
The money funded a lavish lifestyle, including several luxury cars, international travel, and about half a million dollars of remodeling on his Baldwin Hills home, prosecutors contended in trial…
The case was brought as part of a federal strike force on Medicare fraud, which has resulted in charges against more than 1,000 people across the country who billed the program $2.3 billion, according to a Department of Justice press release.
Apologies for the long excerpt, but this stuff is fascinating for several reasons. The ease with which these folks defrauded Medicare. The vast gulf between the market price for a wheelchair ($900) and what Medicare pays ($6,000) — which practically begs people to defraud the program. The fact that DOJ pats itself on the back for nabbing the perpetrators of $2.3 billion of fraudulent billings even though that represents a much smaller number of fraudulent payments, which in turn account for a teeny-tiny share of the official estimate that Medicare loses $48 billion to fraud and other improper payments per year, which itself understates the extent of fraud in the program.
As I explain in this article and the below video, the extent of Medicare and Medicaid fraud is truly mind-blowing.
ObamaCare will bring even more fraud. And efforts to combat Medicare, Medicaid, and ObamaCare fraud will always be inadequate until Congress reforms or scraps these entitlement programs.
Cato on Facebook
Cato on Twitter
Cato on Google+
Cato on YouTube
