Obamacare to Come: Seven Bad Ideas for Health Care Reform
President Obama has made it clear that reforming the American health care system will be one of his top priorities, and congressional leaders have promised to introduce legislation by this summer.
In a new study, Cato scholar Michael D. Tanner breaks down the key components of any plan likely to emerge from Congress, and explains how those proposals would “dramatically transform the American health care system in a way that would harm taxpayers, health care providers, and — most importantly — the quality and range of care given to patients.”
At National Review online, Tanner explains the different aspects to Obama’s plan, all of which could be coming to a hospital near you. In today’s Cato Daily Podcast, he expands on his paper, describing what health care will look like in years to come.
The Coburn-Burr-Ryan-Nunes Mandate-Price-Control Bill
Today, Senators Tom Coburn (R-OK) and Richard Burr (R-NC), along with Reps. Paul Ryan (R-WI) and Devin Nunes (R-CA) announced that they will introduce a health care reform bill. If my reading of the bill summary is correct, their bill would:
- Mandate that states create a new regulatory bureaucracy called a “State Health Insurance Exchange,”
- Mandate that all plans offered through those exchanges meet federal regulatory standards,
- Mandate “guaranteed issue” in those exchanges,
- Mandate “uniform and reliable measures by which to report quality and price information,”
- Impose price controls on those plans by prohibiting risk-rating,
- Launch a government takeover of the “insurance” part of health insurance, by means of a “risk-adjustment” program intended to cope with the problems created by price controls, and
- Fall just short of an individual mandate by setting up (mandating?) automatic enrollment in exchange plans at “places of employment, emergency rooms, the DMV, etc.” — essentially, trying to achieve universal coverage by nagging Americans to death.
Needless to say, I am troubled.
The bill summary is self-contradictory. On the one hand, it lists “No Tax Increases” as a core concept. Do its authors not know that imposing price controls on health insurance premiums imposes a tax on healthier-than-average consumers? And where do they think the money for “risk-adjustment” payments will come from? Heaven?
The bill sponsors seem to want to cement in place the monopoly regulation that currently exists at the state level — when they’re not encouraging Congress to take over that function. Have they abandoned their colleague Rep. John Shadegg’s (R-AZ) proposal to allow for competitive regulation of health insurance?
And if Massachusetts created an “exchange” on its own, why do other states need federal legislation?
The bill includes some ideas for which I have more sympathy, like its tax-credit proposal and expanding health savings accounts.
But the above provisions would sow the seeds of a government takeover of health care — so much so that The Washington Post‘s Ezra Klein is salivating:
The word of the day is “convergence.” That — and that alone — is the definitive message of the conservative health reform alternative developed by Sens. Tom Coburn (Okla.) and Richard Burr (N.C.), as well as Rep. Paul Ryan (Wisc.). For now, some of the key provisions are about as clear as mud. The plan’s changes to the tax code, in particular, are impossible to discern. So I’ll do another post when I can get some clarity on those issues. The politics, however, are perfectly straightforward.
A superficial read of the Patients’ Choice Act — which I’ve uploaded here — would make you think you’re digging into a liberal bill. A fair chunk of the rhetoric is lifted straight from Sen. Ted Kennedy’s office. “It is time to publicly admit that the health care system in America is broken,” begins the document. “Health care is not a commodity in the traditional sense,” it continues. “States should provide direct oversight of health insurers to make sure they are playing by fair rules,” it demands. The way we pay private insurers in Medicare “wastes taxpayer dollars and lines the pockets of insurance executives,” it says. Elsewhere, it praises solutions that have worked in several European countries.”
And though it’s still too early to say how the policy fits together, it’s clear that many traditionally Democratic concepts have been embraced. To put it simply, the plan wants to encourage a version of the Massachusetts reforms — which it calls a “well-known, bi-partisan achievement of universal health care” — in every state. There are some differences, of course. The plan doesn’t have an individual mandate. It doesn’t have an obvious tax on employers. But it strongly endorses State Health Insurance Exchanges. And that, for Republicans, is a radical change in policy.
This idea — present in every Democratic proposal but absent in Arizona Sen.John McCain’s plan — would empower states to create heavily regulated marketplaces of insurers. The plans offered would have to “meet the same statutory standard used for the health benefits given to Members of Congress.” Cherrypicking would be discouraged through risk adjustment, which the PCA calls “a model that works in several European countries.” The government would automatically enroll individuals in plans whenever they interacted with a government agency and states would be able to join into regional cooperatives to increase the size of their risk pool.
In essence, Coburn, Burr, and Ryan are abandoning the individual market entirely. Like Democrats, they’re arguing that individuals cannot successfully navigate the insurance market, and they need the protection of government regulation and the bargaining power that comes from a large risk pool. This is literally the opposite approach from McCain, who attempted to unwind the employer-based insurance and encourage families to purchase health coverage on the individual market. The core elements of this plan, in other words, make it the same type of plan Democrats are offering. A plan that enlarges consumer buying pools rather than shrinks them. It’s pretty much exactly what I’d expect a Blue Dog Democrat to propose. And it’s further evidence that the argument over health reform is narrowing, rather than widening. And it’s narrowing in a direction that favors the Democrats.
The Wonders of Socialized Dentistry
As we all know, the American health care system is less than perfect. An inefficient amalgam of government spending, federal tax incentives, employer-based insurance, and private providers, the U.S. system costs us more than it should for the services provided. Nevertheless, medicine in America remains far more directed by and for patients, in contrast to nationalized systems, which are usually organized by and for bureaucrats.
The results sometimes are horrific. Indeed, the best way to understand the consequences of Britain’s National Health Service is simply to read stories in British newspapers. Consider this one in the Daily Mail about the lack of adequate dental care:
Like so many young women, Amy King always took great pride in her appearance.
Standing in front of the mirror to check her make-up before a night out, the 21-year-old would always try a smile – friends told her they loved the way it lit up her face.
Eight weeks ago, all that changed. The student from Plymouth was admitted to hospital where, in a single operation, she had every tooth in her mouth removed.
Obviously, not all foreign systems do so little for their patients. France, Germany, and Switzerland all provide care differently, and in all of these nations people receive better treatment than in Britain. But no where is turning health care over to government the best way to ensure quality yet affordable medical care. Instead, control over health care should be placed back in the hands of those who have the most at stake: patients.
A Not So Happy Anniversary for the “Massachusetts Model”
Three years ago yesterday, then-Governor Mitt Romney signed into law the most far reaching state health care reform plan to date. At the time, we warned that the plan, with its individual and employer mandates, new regulatory bureaucracy (the Connector), and middle-class subsidies would result in “a slow but steady spiral downward toward a government-run health care system.” Sadly, three years later, those predictions appear to be coming true.
- While the state has reduced the number of residents without health insurance, some 200,000 people remain uninsured. Moreover, the increase in the number of insured is primarily due to the state’s generous subsidies, not the celebrated individual mandate.
- Health care costs continue to rise much faster than the nationally. Since the program became law, total state health care spending has increased by 23 percent. Insurance premiums have been increasing by 10-12 percent per year, nearly double the national average.
- New regulation and bureaucracy is limiting consumer choice and adding to costs.
- Program costs have skyrocketed. Despite tax increases, the program faces huge deficits in the future. As a result, the state is considering caps on insurance premiums, cuts in reimbursements to providers, and even the possibility of a “global budget” on health care spending.
- A shortage of providers, combined with increased demand, is increasing waiting times to see a physician, especially primary care providers.
With the “Massachusetts model” being frequently cited as a blueprint for state or national health care reform, it is important to recognize that giving the government greater control over our health care system will have grave consequences for taxpayers, providers, and health care consumers. That is the lesson of the Massachusetts model.
CER: A (Slightly) Different Perspective
My colleague, Michael Cannon, makes several good points about comparative effectiveness research (CER), both in his letter to USA Today and in his excellent paper on the subject. I strongly agree with him that we should not reflexively oppose CER—much of health care spending is wasteful or unnecessary, and it makes sense, therefore, to test and develop information on the effectiveness of various treatments and technology, giving consumers tools to evaluate the value of the care they receive. There is also a case for the use of CER in taxpayer-funded programs like Medicare and Medicaid. Taxpayers should not have to subsidize health care that has not proven effective, nor can Medicare and Medicaid pay for every possible treatment regardless of cost-effectiveness.
However, I am more skeptical in general about CER than he is for several reasons.
- First, “quality” and “value” are not unidimensional terms. In fact, such concepts are highly idiosyncratic with every individual having different ideas of what “quality” and “value” means to them, based on such things as a person’s pain tolerance, lifestyle, feeling about hospitalization, desire to return to work, and so forth. For example, a surgeon may tell you that the only way to ensure a cure for prostate cancer is a radical prostectomy. But that procedure’s side-effects can severely impact quality of life – so some people prefer a procedure with a lower survival rate, but fewer side effects. Who is better suited to determine which of those procedures represents “quality” and “value,” a government board or the person directly affected?
- Second, comparative effectiveness research too often has a tendency to gear its results toward the “average” patient. But many patients are outliers, whose response to any particular treatment, for either good or ill, can vary significantly from the average. This matters little when the research is simply informative. However, if the research becomes the basis for more prescriptive requirements, for example prohibiting reimbursements for some types of treatment, the impact on patient outliers could be severe.
- Third, comparative effectiveness research can create a time lag for the introduction of new technologies, drugs, and procedures. The FDA, for example, has already caused delays in introducing drugs that have resulted in unnecessary deaths. Depending on how the final program is structured, comparative effectiveness research could create another layer of bureaucracy and testing between the development of a new drug, for example, and its introduction into the health care system. One only has to look at the difficulty in expanding Medicaid drug formularies to see how this could become a problem.
The advocates of government-sponsored CER clearly intend for it to be used as a basis for rationing care, not just in government programs, but for private insurance as well.
Cannon points out that government-sponsored CER is likely to be corrupted under pressure from special interest lobbies and politicians. I couldn’t agree more. Government-sponsored CER, therefore, is liable to yield the worst of all possible worlds, not only rationing, but rationing that is based on special interest lobbying rather than science.
Health care, is of course, a finite good. Therefore, it will always be rationed in some fashion. But, it is far better if the rationing agent is the consumer himself, rather than the government or any other arbitrary agent. The private sector is already undertaking CER. To the degree that consumers, insurers, and providers make use of this information, that is a good thing. If consumers don’t like how an insurance company, for example, uses CER in determining its reimbursement policy, he or she can choose a different insurer.
Government-imposed fiat rationing allows for no such choice. Therefore, we should oppose any government involvement in CER, and any efforts by the government to use CER to restrict reimbursement, especially in private insurance plans.
Democrats Agree on Health Plan Outline: Be Afraid, Be Very Afraid
The New York Times reports that key congressional Democrats have agreed on the basic provisions for a health care reform bill. And while many details remain to be negotiated, the broad outline provides a dog’s breakfast of bad ideas that will lead to higher taxes, fewer choices, and poorer quality care.
Among the items that are expected to be included in the final bill:
- An Individual Mandate. Every American will be required to buy an insurance policy that meets certain government requirements. Even individuals who are currently insured — and happy with their insurance — will have to switch to insurance that meets the government’s definition of acceptable insurance, even if that insurance is more expensive or contains benefits that they do not want or need. Get ready for the lobbying frenzy as every special interest group in Washington, both providers and disease constituencies, demand to be included.
- An Employer Mandate. At a time of rising unemployment, the government will raise the cost of hiring workers by requiring all employers to provide health insurance to their workers or pay a fee (tax) to subsidize government coverage.
- A Government-Run Plan, competing with private insurance. Because such a plan is subsidized by taxpayers, it will have an unfair advantage, allowing it to squeeze out private insurance. In addition, because government insurance plans traditionally under-reimburse providers, such costs are shifted to private insurance plans, driving up their premiums and making them even less competitive. The actuarial firm Lewin Associates estimates that, depending on how premiums, benefits, reimbursement rates, and subsidies were structured, as many as 118.5 million would shift from private to public coverage. That would mean a nearly 60 percent reduction in the number of Americans with private insurance. It is unlikely that any significant private insurance market could continue to exist under such circumstances, putting us on the road to a single-payer system.
- Massive New Subsidies. This includes not just subsidies to help low-income people buy insurance, but expansions of government programs such as Medicaid and Medicare.
- Government Playing Doctor. Democrats agree that one goal of their reform plan is to push for “less use of aggressive treatments that raise costs but do not result in better outcomes.” While no mechanism has yet been spelled out, it seems likely that the plan will use government-sponsored comparative effectiveness research to impose cost-effectiveness guidelines on medical care, initially in government programs, but eventually extending such restrictions to private insurance.
Given the problems facing our health care system-high costs, uneven quality, millions of Americans without health insurance–it seems that things couldn’t get any worse. But a bill based on these ideas, will almost certainly make things much, much worse.
Or maybe it’s all just a massive April Fool’s joke.
Deadly Canadian Care
An Illinois physician is arguing that actress Natasha Richardson might have survived her skiing accident if it had occurred in the United States rather than Canada. Explains Dr. Cory Franklin:
Canadian health care de-emphasizes widespread dissemination of technology like CT scanners and quick access to specialists like neurosurgeons. While all the facts of Richardson’s medical care haven’t been released, enough is known to pose questions with profound implications.
In the U.S. Richardson likely could have been both diagnosed locally and flown to emergency care in a nearby city. Adds Franklin:
What would have happened at a US ski resort? It obviously depends on the location and facts, but according to a colleague who has worked at two major Colorado ski resorts, the same distance from Denver as Mt. Tremblant is from Montreal, things would likely have proceeded differently.
Assuming Richardson initially declined medical care here as well, once she did present to caregivers that she was suffering from a possible head trauma, she would’ve been immediately transported by air, weather permitting, and arrived in Denver in less than an hour.
Who’s Blogging about Cato
Here’s the latest round-up of bloggers who are writing about, citing and linking to Cato research and commentary:
- Blogging about Real ID, AxXiom for Liberty posted Jim Harper’s piece about DHS officials who skirted open meeting laws to promote the program.
- The Club for Growth‘s Andrew Roth interviewed Cato Chairman Bob Levy about his book, The Dirty Dozen.
- No Land Grab, a blog covering eminent domain abuse, posted the latest Cato video on the Susette Kelo case. Jason Pye, who wrote a commentary on the case for the Georgia Public Policy Foundation, linked to it as well.
- Sights on Pennsylvania blogged about international health care systems, citing Michael D. Tanner’s January article on health care reform and a 2008 Hill Briefing that compared various systems around the world.
- Wes Messamore, AKA The Humble Libertarian, is compiling a list of 100 libertarian blogs/Web sites, and looking for recommendations. Last week, Wes penned his thoughts on the role of the U.S. in foreign policy, making heavy use of a recent Cato article by Benjamin Friedman and a 1998 foreign policy brief by Ivan Eland, citing military intervention overseas as a cause of terrorist activity against Americans.
- David Kirkpatrick shared an excerpt from the Cato Weekly Dispatch with his readers about Obama’s marijuana policy.
If you’re blogging about Cato, contact Chris Moody at cmoody@cato.org.
Third-World Accommodations
In the 2003 film The Barbarian Invasions, a patient’s wealthy son offers a handsome bribe to the administrator of a decrepit, chaotic, state-run hospital in Montreal that is (mis)treating his dying father. “This is silly,” the startled administrator exclaims. “We’re not in the Third World.”
Britain’s health-care system is perhaps slightly less state-dominated than Canada’s. Yet today comes the following report:
The British government apologised Wednesday after a damning official report into a hospital likened by one patient’s relative to “a Third World” health centre…
Between 400 and 1,200 more people died than would have been expected in a three-year period at the National Health Service (NHS) hospital, according to an investigation by the Healthcare Commission watchdog.
Receptionists with no medical training were left to to assess patients arriving at the hospital’s accident and emergency department, the report found.
Julie Bailey, whose 86-year-old mother Bella died in the hospital in November 2007, said she and other family members slept in a chair at her bedside for eight weeks because they were so concerned about poor care.
“What we saw in those eight weeks will haunt us for the rest of our lives,” said the 47-year-old. “We saw patients drinking out of flower vases they were so thirsty.
“There were patients wandering around the hospital and patients fighting. It was continuous through the night. Patients were screaming out in pain because you just could not get pain relief.
“It was like a Third World country hospital. It was an absolute disgrace.”
The politicians quoted in the story promised, again, that, you know, they would improve things.
Wednesday Podcast: ‘The Science of Medical Marijuana’
Speaking at a Cato forum Tuesday, Dr. Donald Abrams, director of Clinical Programs at the University of California Osher Center for Integrative Medicine, discussed the science behind medicinal marijuana, and explained why the drug should be allowed for patients who suffer from a variety of symptoms.
After the event, Abrams spoke with Caleb Brown for Wednesday’s Cato Daily Podcast, explaining the promise of marijuana as medicine:
One of the reasons I am in favor of people using the plant is because… we no longer have a health care system in the United States, we have a disease management system, and it is very expensive largely due to pharmaceuticals. If there is a plant that is a medicine that people can grow for themselves in their own backyard then I think we can really go a long way to decrease some of the costs of health care. But if we are saying that a physician is going to be able to prescribe this entity to a patient then unfortunately, or fortunately depending on how you look at it, it does need to be regulated or approved and the only way to do that is through the standard route.
More Praise for Cochrane’s ‘Health-Status Insurance’
This time, it’s coming from Reihan Salam at Forbes.com:
Choice and Security: Professor John Cochrane’s advice to President Obama
Last week, at a White House forum on reforming health care, President Obama issued a challenge to advocates of less government control of the medical marketplace.
“If there is a way of getting this done [i.e., reforming health care] where we’re driving down costs and people are getting health insurance at an affordable rate and have choice of doctor, have flexibility in terms of their plans, and we could do that entirely through the market, I’d be happy to do it that way.”
More to the point, Obama added that he’d be just as happy to pursue an approach that involved more government control as well, and that seems to be the tack he’s taking…
Congressional Republicans have criticized Obama’s approach, and they’ve been particularly hostile to the idea of a new public insurance plan. They argue that Obama’s reforms will eventually lead to a nationalized health care system. But as of yet they’ve failed to offer an alternative that meets Obama’s criteria for a successful health care reform.
Enter John Cochrane, an economist at the University of Chicago Booth School of Business. Professor Cochrane has long advocated a proposal he calls “health-status insurance,” an approach that could guarantee long-term health security while also freeing medical insurers to compete for customers. To most health care reformers, this sounds like a contradiction in terms.
Cochrane’s paper is, “Health-Status Insurance: How Markets Can Provide Health Security.”
Schism in the Church of Universal Coverage
On the Diane Rehm Show last week, I predicted that all the lovey-dovey coalition-forming by the Church of Universal Coverage would fall apart as soon as people started talking about actual reforms instead of vague principles.
Today, The New York Times reports:
Two labor unions have pulled out of a broad coalition seeking agreement on major changes in the health care system.
The action, by the American Federation of State, County and Municipal Employees and the Service Employees International Union, shows the seeds of discord behind the optimistic talk at a White House conference on health care this week.
It also illustrates the difficulty of reaching agreement on two of the knottiest issues in the health care debate: whether to offer a new government-sponsored insurance option, and whether to require employers to help pay for employee health benefits.
I made a similar prediction in this op-ed, where I urged that a new government-sponsored insurance option and mandates are two of three proposals that must be blocked at all costs. The third: price controls.
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