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Dr. Cardin’s Misdiagnosis
Maryland congressman Ben Cardin is running for the Democratic nomination for US Senate. But apparently he has a higher calling in mind. Cardin promises that if he’s elected, we will find a cure for cancer. He even released a television commercial in which a cancer survivor credits Cardin, who is not a doctor, with saving his life. “Thanks to Ben Cardin, others can have their chance. … He’s literally a lifesaver.” (The ad is an apparent reference to Cardin’s advocacy of early screening under Medicare.)
However, if Cardin truly wants to help cancer patients, perhaps he should reexamine his policy proposals. The congressman is a supporter of single-payer national health care. However, the rationing under such national health care systems means more cancer patients die. For example, even though American men are more likely to be diagnosed with prostate cancer than their counterparts in other countries, we are less likely to die from the disease. Fewer than one out of five American men with prostate cancer will die from it, but 57 percent of British men and nearly half of French and German men will. Even in Canada, a quarter of men diagnosed with prostate cancer die from the disease.
That is in part because in most countries with national health insurance, the preferred treatment for prostate cancer is… to do nothing. Prostate cancer is a slow-moving disease. Most patients are older and will live for several years after diagnosis. Therefore it is not cost-effective in a world of socialized medicine to treat the disease too aggressively. The approach saves money, but comes at a significant human cost.
Another Year Older and Deeper in Debt
Social Security turns 71 today. One can argue about whether or not the program was a good idea in 1935, but there should be no question about its inadequacies today. And its flaws just get worse with each passing year.
Social Security will begin running a deficit in just 11 years. Of course, in theory, the Social Security Trust Fund will pay benefits until 2040. That’s not much comfort to today’s 33-year-olds, who will face an automatic 26 percent cut in benefits unless the program is reformed before they retire. But even that is misleading, because the Trust Fund contains no actual assets. The government bonds it holds are simply a form of IOU, a measure of how much money the government owes the system. It says nothing about where the government will get the money to pay back those IOUs.
Overall, the system’s unfunded liabilities—the amount it has promised more than it can actually pay—now totals $15.3 trillion. Yes, that’s trillion with a “T.” Setting aside some technical changes in how future obligations are calculated, that’s $550 billion worse than last year. In other words, because Congress failed to act last year, our children and grandchildren were handed a bill for another $550 billion.
Moreover, Social Security taxes are already so high, relative to benefits, that Social Security has quite simply become a bad deal for younger workers, providing a low, below-market rate-of-return. In fact, many young workers will end up paying more in taxes than they receive in benefits. They will actually lose money under the program.
But the single most important problem with the current Social Security system is that workers have no ownership of their benefits. The U.S. Supreme Court has ruled, in the case of Flemming v. Nestor, that workers have no legally binding contractual or property right to their Social Security benefits, and those benefits can be changed, cut, or even taken away at any time. This means that workers completely dependent on the goodwill of 535 politicians when it comes to what they’ll receive in retirement. And because workers don’t own their benefits, those benefits are not inheritable. This particularly disadvantages those groups in our society with shorter life expectancies, such as African-Americans.
Social Security reform was once a bipartisan issue. Democrats like Senators Bob Kerrey and Daniel Patrick Moynihan were outspoken in warning about the program’s looming insolvency, and in calling for innovative approaches to fixing it. The Democratic Leadership Council and its think tank arm, the Progressive Policy Institute, explored many approaches to reform, including personal accounts. Congressmen like Charlie Stenholm reached across the aisle in search of compromise. Even President Clinton led a national debate to “Save Social Security First.”
But since President Bush called for reforming the nation’s troubled retirement program, congressional Democrats have had only one answer: “No.” No to personal accounts. “No” to changes in benefits. “No” to offering a real reform plan of their own. “No” to any discussion or negotiation.
At the same time, Republicans—apparently terrified of offending AARP and other special interests—have scurried for cover, running from positions they should know are correct. Republicans seem to believe that if the just stick their heads far enough in the sand for long enough, Democrats won’t attack them. The result is a choice between Democratic obstructionism and Republican cowardice.
And we wonder why so many young people are turned off to politics?
No Need for a Mandate
Much of the justification for an individual health insurance mandate, like that pushed by Massachusetts Governor Mitt Romney and the Heritage Foundation, is that people who lack insurance in the current system still receive medical treatment when needed. The cost of treating these “free riders” is shifted to the insured and the taxpayer. In particular, it is suggested that these uninsured individuals will end up at hospital emergency rooms. Advocates of universal single-payer systems often make similar arguments.
But a new study in Health Affairs shows that that there is no significant difference in emergency room use between insured and uninsured populations. The study concludes that increases in the number of uninsured are not likely to lead to an increase in emergency room visits. However, the study does show that Medicaid beneficiaries use emergency rooms more than either the insured or the uninsured. This may result both from the difficulty that Medicaid patients have in finding primary-care physicians willing to treat them at Medicaid’s low reimbursement rates, and from the fact that emergency room visits are essentially free for the Medicaid patient.
One other finding is worth noting as well. Contrary to public perception, noncitizen immigrants actually use emergency rooms less than citizens. Emergency rooms are not being overrun by illegal immigrants.
HSA Realism
John Hood has a column today on Health Savings Accounts that cites Michael Cannon’s recent paper on the topic. As Hood notes,
You can learn more about some of the issues involved – fairness to the health and sick, tax benefits for the wealthy and poor, adverse selection and the stability of health-insurance pools – by reading an excellent paper out last month from the Cato Institute. Michael Cannon, director of health policy studies at the libertarian think tank, has produced one of the better policy studies I’ve read on any subject in a long time. It takes the concerns of critics seriously – studying carefully and then rejecting some, studying and agreeing with others, and proposing changes that will make consumer-driven health care make more sense for more Americans over time.
Health Savings Accounts are one of the most important health care innovations of recent history, with the potential to significantly increase consumer involvement in health care decision-making. But they are not a silver bullet. The Left has long had a “utopian complex,” believing that some simple legislative change can solve this or that complex problem. Lately, too many conservatives have fallen in to that trap as well. Cannon’s paper is an important contribution to the debate that should be read by both supporters and opponents of consumer-driven health care reform.
An Actual Anti-Communist Movie
At a time when most of Hollywood still sees Fidel Castro as a hero, it is interesting that a new movie portrays him as anything but. The Lost City, starring Andy Garcia, Ines Sastre, and Bill Murray (Dustin Hoffman also has a terrific walk on) is a chilling story of the communist rise to power in Cuba. The love story is bit sappy, but the movie is worth it just for the scene in which the communists ban saxophones as “an imperialist instrument.” And the soundtrack is a treat. If you’re looking for a change from Al Gore, check it out.
Faith-Based Health Insurance Reform
I had the opportunity yesterday to meet with Tim Murphy, Massachusetts secretary of health and human services, to discuss Governor Romney’s Massachusetts health care reform. Secretary Murphy, who is smart, knowledgeable and personable, clarified a great many questions about the plan. Unfortunately clarity was not reassuring.
Secretary Murphy essentially confirmed that the concerns I raised in my recent Briefing Paper were correct. But he said we shouldn’t worry about them. For example, there were questions about whether the Massachusetts Health Connector, the new government agency that operates as a clearinghouse for the individual and small group health insurance markets, would have the power to limit the insurance plans it would offer. The Heritage Foundation had insisted it had no such authority. However, Secretary Murphy confirmed that it did. He believed, however, that this would not be a problem for two reasons: 1) he had faith that the board would not abuse its power and would offer a wide range of plans, and 2) if a future board did attempt to limit the type of available plans, people could choose to buy plans outside the connector. He was confident that the Connector would not squeeze out an independent market in small group and individual insurance, although he admitted that the Connector would not be competing on an even playing field.
He also said that we shouldn’t worry about new mandated benefits driving up the cost of the mandatory insurance policy, because voters would object to rising costs and resist any new mandates. He said that if the program’s cost rises too much voters will demand that the program be cut back. And he admitted that the plan was a form of managed competition, but believed that they had devised the right incentives and penalties to make it all work.
In essence, this is a faith-based health insurance program. Governor Romney has set up a program that depends on future insurance providers, legislators, governors, and voters all behaving in exactly the way he expects. For example, legislators will never respond to special interests by adding new mandates and regulations. Voters will react to rising costs not by asking for increased subsidies but by cutting back on the program. (Can anyone recall the last time voters did that?). Businesses won’t drop health insurance coverage and let taxpayers pick up the tab.
Maybe Governor Romney and Secretary Murphy are right, though I wouldn’t hold my breath. But shouldn’t we wait and see what happens before other states or the federal government rush to copy it? The Heritage Foundation has announced a major effort to convince other states to adopt Massachusetts-like reform. California, Louisiana, Maryland, Michigan, Wisconsin, and the District of Columbia are reportedly considering it. Lawmakers in those states should think twice about going down this road toward more government control of the health care system.
Private Answer to Stem Cell Debate
Harvard has announced that it is launching a privately funded, multi-million dollar program to clone human embryos for use in stem cell research. In this 2004 column, I argued for exactly this kind of private sector initiative to solve the politically divisive debate over stem cells.
I wrote in part,
By its very nature, government politicizes everything it touches. Science is no exception. Stem cell research needs neither government money nor politics. It is better to get the government out and let the private sector continue its good work. Those people calling for increased funding could take out their checkbooks and support it. Those who oppose embryonic stem cell research would not be forced to pay for it.
Harvard is proving one again that civil society can do what government can’t.
A Quibble with Kling
Arnold Kling points out a disagreement we have over whether Americans spend too much on health care. There is no doubt that Americans spend more on health care than any other country. But why is that necessarily a bad thing? There is no “right” amount to spend on health care or anything else. The United States spends more on athletic shoes than any other country. No one speaks of the athletic shoes crisis.
Economists consider health care a “normal good,” meaning that spending rises or falls with income. As incomes rise, people demand more and better health care. America’s wealth determines its spending on healthcare. And we receive value for our money. If you’re sick, American health care is still the best in the world. For diseases such as cancer, heart disease, and AIDS, outcomes are far better in the U.S. than in other countries.
Of course much health care spending is wasted. Many of the drugs, procedures and services we purchase are relatively useless. Some may even do more harm than good. But who is best placed to make that decision? After all, health care purchasing is based on a wide range of personal preferences, not all of which are measurable in terms of outcome. Pain tolerance, time away from work, desire to pursue certain activities, and even peace of mind may all influence my decision. Only individual consumers can really make such decisions — and there really is no wrong answer.
Where Arnold is right is in pointing out that those decisions are currently distorted by our third-party payment system. Because those purchasing health care are able to pass the bill onto third parties, the usual market disciplines don’t apply. We consume health care with even the most marginal perceived value. That is why health-care reform must focus on giving consumers a greater stake in the decision-making process.
If consumers were spending more of their own money on health care, would total spending go down? Probably. But, then again, I don’t care — and neither should the rest of us.
With Supporters Like This….
In today’s Washington Post, columnist E.J. Dionne becomes the latest liberal to endorse Massachusetts Governor Mitt Romney’s health care reform legislation. The plan has also been endorsed by Sens. Ted Kennedy, John Kerry, and Hillary Clinton.
Since Governor Romney and the Heritage Foundation (which helped to write the bill) keep insisting that it is “free market” reform, one has to wonder about their strange new bedfellows.
While much of the attention has been focused on the legislation’s unprecedented individual mandate requiring all Massachusetts residents to purchase health insurance, the heart of the reform is the creation of a new state entity, the Connector, to manage the state’s individual and small group markets. The Connector is a form of managed competition similar to the failed Clinton health reform of 1993. It would create an artificial marketplace where individuals could purchase a limited number of “approved” and regulated products. This is not a free-market reform. As University of Chicago Law Professor Richard Epstein says, managed competition is “an oxymoron. One can either have managed health care or competition in health care services. It is not possible to have both simultaneously.”
Liberals must also love the bill’s massive subsidies. Subsidies would be available for those with incomes ranging from $30,480 for a single individual to as much as $130,389 for a married couple with seven children. A typical married couple with two children would qualify for a subsidy if their income is below $58,500. Subsidies at this level will extend dependence on government well into the middle class.
This bill is a pretty clear example of big government conservatism on the march. No wonder the Left is so happy.
Surrendering the Argument on Health Care
A new Rasmussen poll shows that a third-party presidential candidate promising universal health care coverage would run virtually even with a Republican candidate and ahead of a Democrat. This is the latest sign of dissatisfaction with our current health care system.
But it also shows what happens when we abandon principles and co-opt the arguments from the left. From Massachusetts Governor Mitt Romney’s individual mandate to President Bush’s Medicare prescription drug benefit, many Republicans and conservatives appear to have conceded to the idea that expanded—indeed universal—coverage should be the goal of health insurance policy.
Very seldom do you see anyone making the case that government-run health care will inevitably lead to rationing and the denial of care. Even less do you see anyone, outside of Cato, arguing that we must shift the health care debate away from its single-minded focus on expanding coverage to the bigger question of how to reduce costs and improve quality through greater consumer control.
Given a choice between national health care and national health care “lite,” it’s not surprising that a great many people favor the real thing. We are not going to win this argument unless we a) make a clear case against more government involvement in health care, and b) offer a clear consumer-based alternative.
The High Cost of Obstructionism
Michael’s posts below looked at the Medicare Trustees Report. The 2006 Report issued by the Social Security Trustees isn’t any better. With another year of inaction, Social Security’s problems have grown worse. The program will begin running a deficit in just 11 years. In theory, the Social Security Trust Fund will pay benefits until 2040, a year earlier than predicted last year. That’s not much comfort to today’s 33-year-olds, who will face an automatic 26 percent cut in benefits unless the program is reformed before they retire.
But even that is misleading, because the Trust Fund doesn’t contain any actual assets. The government bonds it holds are simply a form of IOU, a measure of how much money the government owes the system. It says nothing about where the government will get the money to actually pay those IOUs.
Overall, the system’s unfunded liabilities—the amount it has promised more than it can actually pay—now totals $15.3 trillion.
That’s “trillion.” With a T.
Setting aside some technical changes in how future obligations are calculated, that’s also $550 billion worse than last year. In other words, because Congress failed to act last year, our children and grandchildren were handed a bill for another $550 billion.
How long will Congress continue to duck this issue?
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