In recent weeks, officials from two states have claimed that if they do not set up an ObamaCare health insurance “Exchange,” the state will lose federal Medicaid or State Children’s Health Insurance Program funds. Idaho Gov. Butch Otter (R), has since walked back that claim. New Hampshire Commissioner of Health and Human Services Nicholas Toumpas has not.

In a January 19 letter to the New Hampshire House of Representatives, Toumpas writes:

The Patient Protection and Affordable Care Act (“ACA”) mandates that states create a virtual health coverage marketplace called an Exchange. To ensure compliance with this federal mandate the law provides that having an Exchange in place by January 1, 2014, is a condition precedent to receipt of Medicaid funding commencing in 2014.

I have not heard the Obama administration or any other ObamaCare supporter claim that the law contains such a mandate. I have made inquiries in a handful of states. None of them report that the Obama administration has said that failing to create an Exchange will result in the loss of Medicaid or SCHIP funds. If what Toumpas says is true, it will certainly come as a shock to the 35 states that have not enacted legislation to create an Exchange, including many states that have flat-out refused.

But is it true? Parts of ObamaCare might seem to support Toumpas’ claim.

• Section 1311 declares that each state “shall” set up an Exchange.
• The law also imposes conditions on the receipt of federal Medicaid and SCHIP funds, and those provisions do make reference to Exchanges. Section 2101 provides that, with regard to certain children who are not eligible for SCHIP, states receiving federal SCHIP funds “shall establish procedures to ensure that the children are enrolled in a qualified health plan that…is offered through an Exchange established by the State under section 1311.”
• Section 2201 provides that as a condition of receiving federal Medicaid funds, states “shall establish procedures for” several things, including “ensuring that individuals who apply for but are determined to be ineligible for [Medicaid and SCHIP] are screened for eligibility for enrollment in qualified health plans offered through such an Exchange.” The words “such an Exchange” refer to the words “an Exchange established by the State under section 1311,” which appear a few lines before.

Thus, sections 2101 and 2201 might seem to require states to establish an Exchange so that the required “procedures” can interface with it. But there are serious problems with that interpretation.

First, the directive that states “shall” create Exchanges does not amend that part of the U.S. code where Congress imposes conditions on Medicaid and SCHIP funds—i.e., the Social Security Act, or chapter 7 of title 42. It instead appears in chapter 157, which is also where Congress explains that the consequence for failing to create an Exchange is that the federal government will create one.

Second, sections 2101 and 2201 provide, respectively, that states “shall establish procedures to” enroll certain children through a state-run Exchange, and that states “shall establish procedures for” enabling the state’s Medicaid-eligibility system to coordinate with a state-run Exchange. One need not diagram those sentences to see that the object of “shall establish” is “procedures,” not “Exchange.”

Third, ObamaCare does create these “coordination” conditions within the Social Security Act. That fact demonstrates that ObamaCare’s authors knew how to make the directive to create an Exchange an explicit condition of receiving Medicaid and SCHIP funds, if that’s what they wanted to do.

Fourth, if ObamaCare’s authors had intended to condition Medicaid and SCHIP funds on the creation of Exchanges, or if that were a defensible interpretation of the law as written, then one might expect to have heard members of Congress discussing it. One might expect the Obama administration to have informed states of this condition as part of their effort to encourage states to implement the law. I have been paying fairly close attention to this issue. I have seen no evidence of either.

Fifth, the Supreme Court has held that “if Congress desires to condition the States’ receipt of federal funds, it must do so unambiguously, enabling the States to exercise their choice knowingly, cognizant of the consequences of their participation.” It is simply not credible to argue that ObamaCare unambiguously conditions Medicaid and SCHIP funds on the creation of an Exchange. The law never does so explicitly, and the language and structure of the law militate against the claim that it does so implicitly.

A more reasonable interpretation of these conditions is that states will be in compliance so long as they have the required procedures at the ready—regardless of whether those procedures are coordinating with a state-created Exchange, a federal Exchange, or no Exchange (in the event that neither level of government creates one).

I have no doubt that, had ObamaCare’s authors had any inkling that two thirds of states might balk at setting up an Exchange, they would have made it a condition of Medicaid and SCHIP participation. But they didn’t foresee the widespread resistance ObamaCare would encounter. When drafting ObamaCare and for some time afterward, they honestly thought, “The more people learn about this bill, the more they [will] like it.” Thus they didn’t create that requirement.

If Toumpas is the only state or federal official who sees this mandate in the law, that’s probably because it isn’t there. Just as important, there is no evidence that the Obama administration sees or is enforcing such a requirement. If Toumpas has such evidence, he should furnish it.

Until then, New Hampshire and the other 49 states can be confident that refusing to create an Exchange will not cost them Medicaid or SCHIP funds.

Will States Lose Medicaid Funds If They Fail to Create an ObamaCare ‘Exchange’? is a post from Cato @ Liberty - Cato Institute Blog

That’s the topic of my latest op-ed, in the Daily Caller.  Here’s the list:

1. The individual mandate
2. Medicaid coercion
3. The Independent Payment Advisory Board
4. The Chrysler bailout
5. Dodd-Frank
6. The deep-water drilling ban
7. Political-speech disclosure for federal contractors
8. Taxing political contributions
9. Graphic tobacco warnings
10. Health care waivers

For descriptions of what makes these things so constitutionally bad, read the whole thing.

Obama’s Top 10 Constitutional Violations is a post from Cato @ Liberty - Cato Institute Blog

New Jersey Gov. Chris Christie’s (R) hearts former Massachusetts Gov. Mitt Romney (R), so much that Christie says it is ”completely intellectually dishonest” to compare RomneyCare to ObamaCare.  Why?  Because Romney didn’t raise taxes, and President Obama did.  Oh.

Avik  (pronounced O-vik) Roy explains how Christie gets RomneyCare so very, very wrong:

There isn’t a single person, left or right, who follows health policy seriously who disagrees with the assertion that Romneycare was the model for Obamacare. And Massachusetts has had to raise taxes, after Romney left office, to pay for the law’s significant cost overruns.

Here are some examples, left and right. But Roy o-mits a few important points.

1. Mitt Romney increased taxes the moment he signed RomneyCare.  RomneyCare increased net government spending.  That in itself is an increase in the tax burden.  All that remains to be determined is who will pay for that added spending and when they will pay it.  The fact that the incidence of that added tax burden fell after Romney left office does not mean that’s when the added tax burden was created.
2. Mitt Romney has raised taxes on as many people as Barack Obama has.  Half of RomneyCare’s new spending was financed by the federal government through the Medicaid program, which is financed through federal taxes, which fall on taxpayers in all 50 states.  That means that when Romney financed half of RomneyCare’s new spending by pulling down more federal Medicaid dollars, he increased taxes on residents of all 50 states.
3. RomneyCare was born of, and expanded, a corrupt scheme by Massachusetts politicians to tax residents of all 50 states.  What motivated Romney to enact RomneyCare, as former Romney/Obama adviser Jonathan Gruber explains here, was the widespread desire (within Massachusetts) to hang on to $385 million of federal Medicaid money that Massachusetts had secured using one of Medicaid’s notorious and fraudulent “provider tax” scams.  In other words, the whole purpose of RomneyCare was to enable Massachusetts to hold on to $385 million that it received by defrauding and taxing residents of other states.  And of course, Romney/RomneyCare caused the tax burden that Massachusetts effectively imposes on non-Massachusetts residents to grow.

RomneyCare: Making a Fool of Every Republican It Touches Since 2006 is a post from Cato @ Liberty - Cato Institute Blog

Back in March, Heritage Foundation scholar Ed Haislmaier wrote that states could blunt ObamaCare’s impact (A) by creating non-ObamaCare compliant, “consumer-centered” Exchanges and/or (B) by creating ObamaCare-compliant, “defensive” health insurance Exchanges.  Many states, including some that are suing to overturn ObamaCare as unconstitutional, saw this as a green-light from the free-market groups and forged ahead with creating an ObamaCare-compliant Exchange.

In a blog post last week, Haislmaier recanted on Strategy B.  He writes that “defensive” Exchanges won’t blunt the impact after all, and that states should refuse to create any type of ObamaCare-compliant Exchange and send back all federal ObamaCare grants:

Initially, while HHS was still deciding how to implement the legislation, a narrow window of opportunity existed for states to pursue a “pushback” strategy of creating a restricted exchange and requiring it to contract with the state’s Medicaid program and insurance department to perform the eligibility, enrollment, and insurance regulation functions that state lawmakers seek to retain control of. HHS effectively closed that window in its proposed exchange regulations issued in July…

The combined effect of these regulations and grant requirements are that a state would have to agree to surrender any last vestiges of meaningful control over how Obamacare is implemented. Thus, a state would now have no more real control over an exchange it set up than over one HHS established…

Consequently, at this point the best course of action for states is to neither apply for nor accept exchange establishment grant funding.

Free-market groups are now united on these points.

Haislmaier still recommends that states pursue  Strategy A: a “consumer-centered,” non-ObamaCare Exchange using only state-government dollars.  As I explain here, however, there is no such thing as a non-ObamaCare Exchange.  Insurance carriers will not patronize non-ObamaCare Exchanges, and the federal government will commandeer them or push them aside to create an ObamaCare Exchange.  Creating any type of Exchange merely lends manpower to ObamaCare’s federal takeover of health care.  States should refuse.

Heritage Scholar Urges States: Don’t Implement ObamaCare Exchanges, Send Back Grants is a post from Cato @ Liberty - Cato Institute Blog

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:

‘Biggest Crackdown Ever’ Shows Medicare’s Anti-Fraud Efforts Are a Fraud is a post from Cato @ Liberty - Cato Institute Blog

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:

An 85 Percent Increase in Health Care Fraud Prosecutions? Be Still My Beating Heart… is a post from Cato @ Liberty - Cato Institute Blog

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.

$154 Million Medicaid Fraud Settlement a Sign of Govt Failure, Not Success is a post from Cato @ Liberty - Cato Institute Blog

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.

Medicare Fraud: Et Tu, Reverend? is a post from Cato @ Liberty - Cato Institute Blog

Available here. Something about Medicaid employees coaching faux Russians on how to hide income and assets so as to enroll their father in Medicaid.

I’m not sure how much of what Project Veritas has found counts as fraud. But I’m pretty sure it’s chump change compared to this stuff:

It is interesting, and consistent with the thesis of this video and my National Review article, that Project Veritas’s Medicaid-fraud videos haven’t garnered nearly as much attention as their other “stings.”

‘Project Veritas’ Releases New Medicaid Fraud Video is a post from Cato @ Liberty - Cato Institute Blog

The “Gang of Six” senators has released an outline of budget reforms that would supposedly reduce deficits by $3.7 trillion over 10 years. Revenues would rise by at least $1 trillion, while spending would be theoretically trimmed by various procedural mechanisms. The plan promises to “strengthen the safety net,” “maintain investments,” and “maintain the basic structure” of Medicare and Medicaid, which doesn’t sound very reform-minded to me.

The Gang of Six plan is a grander version of Sen. Mitch McConnell’s recent debt-limit proposal, which was aimed at putting off any spending cuts. The Gang outline has a few specific cuts, but the document mainly consists of promises to restrain spending and raise taxes in the future.

I’m surprised that Sen. Tom Coburn supports the Gang plan because his office has just released a massive study chock-full of specific spending-cut ideas. The Gang plan is all about avoiding specifics, while Coburn’s plan has 621 pages of details.

Coburn’s “Back in Black” plan would reduce deficits by $9 trillion over the next decade. The plan includes some tax increases, but the core of the document is a line-by-line analysis of every department’s budget, with lists of programs to cut and terminate. The plan includes a wealth of useful information that will aid policymakers interested in cutting spending for years to come.

So congratulations to Roland, Joelle, and the whole Coburn team for their late nights spent pouring through the budget, and for their great job documenting their findings with more than 3,000 endnotes.

Every Senate and House office should perform a similar exercise of proposing specific cuts. The government faces a debt crisis, yet only Coburn, Sen. Rand Paul, and perhaps a few others in Congress have put any effort into identifying unneeded programs.

Look on the official websites of most members of Congress and you will see discussions in support of spending on education, seniors, energy, research, highways and many other activities. When members are in front of TV cameras, they sound like they take the debt crisis seriously, but most congressional websites reveal a different mindset where federal spending is always wonderful and helpful to society.

Coburn’s staff tells me that about a dozen staffers chipped in on its Back in Black effort in recent months. If other House and Senate offices went through such an exercise, it would help members clarify their positions about the role of government and help them think about spending trade-offs.

My summer homework assignment for every congressional office is to go through a Coburn/Paul-style budget downsizing exercise. That could lead to more serious spending debates and more concrete proposals than the generally meaningless bullets points issued by the Gang of Six.

Budget Plans: Gang of Six and Senator Coburn is a post from Cato @ Liberty - Cato Institute Blog

Today, the Government Accountability Office will release a new report on fraud in Medicare and Medicaid.  By my count, it is the 159th report the GAO has issued on fraud in these programs since 1986.  According to the Associated Press:

The federal government’s systems for analyzing Medicare and Medicaid data for possible fraud are inadequate and underused, making it more difficult to detect the billions of dollars in fraudulent claims paid out each year, according to a report released Tuesday.

The Government Accountability Office report said the systems don’t even include Medicaid data. Furthermore, 639 analysts were supposed to have been trained to use the system – yet only 41 have been so far, it said.

The Centers for Medicare and Medicaid Services – which administer the taxpayer-funded health care programs for the elderly, poor and disabled – lacks plans to finish the systems projected to save $21 billion. The technology is crucial to making a dent in the $60 billion to $90 billion in fraudulent claims paid out each year.

In this article for National Review, I explain that there are reasons why those tools are, and will remain, “inadequate and underused.”

GAO’s 159th Report on Medicare/Medicaid Fraud Finds Anti-Fraud Measures ‘Inadequate’ is a post from Cato @ Liberty - Cato Institute Blog

Columbia Business School economist Ray Fisman has a piece at Slate.com discussing the first-year results of the Oregon Health Insurance Experiment.  In brief, when Oregon transferred an average of $3,000 from taxpayers to poor people in the form of Medicaid coverage, it did those poor people some good.

Fisman’s interpretation of the results is different from mine in mainly two respects.  First, I describe the one-year benefits of Medicaid coverage as modest; he says they’re “enormous.”

A more fundamental difference concerns whether expanding Medicaid was a cost-effective use of the taxpayers’ money.  Fisman writes:

Given the added expense, did the Medicaid expansion prove to be cost-effective? That is, did the treatment group actually have better health outcomes?

That’s not what cost-effectiveness means.  For Medicaid to be cost-effective, it must (A) produce benefits and (B) do so at the same or a lower cost than the alternatives.

The OHIE establishes only that there are some (modest) benefits to expanding Medicaid (to poor people) (after one year).  It tells us next to nothing about the costs of producing those benefits, which include not just the transfers from taxpayers but also any behavioral changes on the part of Medicaid enrollees, such as reductions in work effort or asset accumulation induced by this means-tested program.  Nor does it tell us anything about the costs and benefits of alternative policies.

Just as some opponents of ObamaCare over-interpreted previous Medicaid studies, Fisman and other ObamaCare supporters are over-interpreting the OHIE.

ObamaCare Supporters Are Over-Interpreting Oregon Medicaid Study is a post from Cato @ Liberty - Cato Institute Blog

The Oregon Health Insurance Experiment is the first experiment since the dawn of time that randomly assigns some households to receive health insurance (Medicaid) for purposes of comparing their medical consumption, health outcomes, and financial security to similar households that do not receive Medicaid coverage.  Some of the nation’s top health economists have released the first batch of results from the OHIE.

At National Review (Online), I summarize the OHIE’s first-year results and offer the following analysis:

Supporters of President Obama’s health-care law may tout these benefits, but the OHIE does not provide the vindication they seek. First, despite being eligible for Medicaid, 13 percent of the control group had private health insurance — suggesting that on some dimension, Medicaid’s eligibility rules are already too broad.

Second, the OHIE extended coverage to the most vulnerable population of uninsured Americans, yet the improvements in health and financial security are so far apparently modest. At higher income levels, where individuals have greater baseline access to health insurance and medical care, the benefits of expanding coverage are likely to be smaller and the costs (to the extent that crowd-out is higher at higher income levels) will be greater.

Third, supporters must show not only that expanding coverage improves health but also that it does so at a lower cost to taxpayers than alternative policies. Health economists generally agree that discrete programs promoting highly effective treatments (for hypertension, diabetes, etc.) could produce health gains as large as expanding health insurance would, but at far less expense. Reducing taxes could plausibly reduce financial strain to a similar degree by expanding job creation.

Finally, the OHIE illuminates an unflattering feature of the push for Obamacare. For a century, the Left has advocated universal health insurance despite not knowing what benefits it might bring. In 2010, Congress and President Obama vastly expanded Medicaid without waiting for the results of the one study that might tell them what taxpayers would get in return for their half a trillion dollars. As the law’s supporters seek to cajole doctors into practicing evidence-based medicine, it is no small irony that they themselves dove head-first into evidence-free policymaking.

To the Church of Universal Coverage, the benefits of universal coverage, whatever those might be, are an article of faith.

Oregon Health Insurance Experiment: No Vindication of ObamaCare is a post from Cato @ Liberty - Cato Institute Blog

That’s the theme of my article in the current issue of National Review:

The budget blueprint crafted by Paul Ryan, passed by the House of Representatives, and voted down by the Senate would essentially give Medicare enrollees a voucher to purchase private coverage, and would change the federal government’s contribution to each state’s Medicaid program from an unlimited “matching” grant to a fixed “block” grant. These reforms deserve to come back from defeat, because the only alternatives for saving Medicare or Medicaid would either dramatically raise tax rates or have the government ration care to the elderly and disabled. What may be less widely appreciated, however, is that the Ryan proposal is our only hope of reducing the crushing levels of fraud in Medicare and Medicaid.

The three most salient characteristics of Medicare and Medicaid fraud are: It’s brazen, it’s ubiquitous, and it’s other people’s money, so nobody cares…

The full article is now available at the Cato website.

Ryan Plan Would Reduce Medicare & Medicaid Fraud is a post from Cato @ Liberty - Cato Institute Blog

This new video, based in large part on the good work of Michael Cannon, explains why Medicaid should be shifted to the states. As I note in the title of this post, it’s good federalism policy and good fiscal policy. But the video also explains that Medicaid reform is good health policy since it creates an opportunity to deal with the third-party payer problem.

One of the key observations of the video is that Medicaid block grants would replicate the success of welfare reform. Getting rid of the federal welfare entitlement in the 1990s and shifting the program to the states was a very successful policy, saving billions of dollars for taxpayers and significantly reducing poverty. There is every reason to think ending the Medicaid entitlement will have similar positive results.

Medicaid block grants were included in Congressman Ryan’s budget, so this reform is definitely part of the current fiscal debate. Unfortunately, the Senate apparently is not going to produce any budget, and the White House also has expressed opposition. On the left, reducing dependency is sometimes seen as a bad thing, even though poor people are the biggest victims of big government.

It’s wroth noting that Medicaid reform and Medicare reform often are lumped together, but they are separate policies. Instead of block grants, Medicare reform is based on something akin to vouchers, sort of like the health system available for Members of Congress. This video from last month explains the details.

In closing, I suppose it would be worth mentioning that there are two alternatives to Medicaid and Medicare reform. The first alternative is to do nothing and allow America to become another Greece. The second alternative is to impose bureaucratic restrictions on access to health care—what is colloquially known as the death panel approach. Neither option seems terribly attractive compared to the pro-market reforms discussed above.

Block-Granting Medicaid Is a Long-Overdue Way of Restoring Federalism and Promoting Good Fiscal Policy is a post from Cato @ Liberty - Cato Institute Blog

Remember how ObamaCare inadvertently kicked members of Congress out of their health insurance plans?  (Just kidding!  The Obama administration ignored that part of the law!)

Well, today we learned that ObamaCare also inadvertently gives free health care to millions of middle-class Social Security recipients:

President Barack Obama’s health care law would let several million middle-class people get nearly free insurance meant for the poor, a twist government number crunchers say they discovered only after the complex bill was signed.

The change would affect early retirees: A married couple could have an annual income of about $64,000 and still get Medicaid, said officials who make long-range cost estimates for the Health and Human Services department.

Up to 3 million people could qualify for Medicaid in 2014 as a result of the anomaly. That’s because, in a major change from today, most of their Social Security benefits would no longer be counted as income for determining eligibility.

Medicare chief actuary Richard Foster says the situation keeps him up at night.

“I don’t generally comment on the pros or cons of policy, but that just doesn’t make sense,” Foster said during a question-and-answer session at a recent professional society meeting. It’s almost like allowing middle-class people to qualify for food stamps, he suggested.

What other surprises lurk in ObamaCare’s 2,000-plus pages?

Kudos to Rick Foster and the Associated Press‘s Ricardo Alonzo-Zaldivar.

ObamaCare’s Latest ‘Glitch’: Medicaid for Millions of Middle-Class Retirees is a post from Cato @ Liberty - Cato Institute Blog

The New York Times reports on a study published in today’s New England Journal of Medicine:

Children with Medicaid are far more likely than those with private insurance to be turned away by medical specialists or be made to wait more than a month for an appointment, even for serious medical problems, a new study finds…

Sixty-six percent of those who mentioned Medicaid-CHIP (Children’s Health Insurance Program) were denied appointments, compared with 11 percent who said they had private insurance…

In 89 clinics that accepted both kinds of patients, the waiting time for callers who said they had Medicaid was an average of 22 days longer.

“It’s very disturbing,” [study author] Dr. [Karen V.] Rhodes said. “As a mother, if I had a kid who was having seizures or newly diagnosed juvenile diabetes, I would want to get them in right away.”…

Another physician not connected with the study…said: “It’s interesting to think you even need a study to prove that. It’s pretty much common knowledge.”…

This month, Dr. Rhodes and her colleagues had a similar study published in the journal Pediatrics, finding that dentists were far less likely to accept children with public insurance than those with private coverage, even for an urgent problem like a broken front tooth. Another study of hers uncovered patients’ difficulties in obtaining psychiatric care.

Here’s a graph from the study, showing how often kids with private insurance and Medicaid got appointments with various specialists:

Half of ObamaCare‘s projected coverage gains (16 million out of 32 million U.S. residents) comes from expanding the Medicaid program.

NEJM Study: ObamaCare’s Main Coverage Vehicle Makes Kids Wait for Care is a post from Cato @ Liberty - Cato Institute Blog

Indiana learns just how much flexibility states have when administering federal health care programs.

A Medicare pilot program bearing a striking resemblance to ObamaCare‘s “accountable care organization” program turns out to be a flop.

Newsflash: Medicare’s Soviet-style price controls get the prices wrong.

From This Morning’s Health Care News is a post from Cato @ Liberty - Cato Institute Blog

Defending ObamaCare in federal court yesterday, the Obama administration’s acting solicitor general, Neal K. Katyal, peddled the widely discredited claim that the uninsured increase your and my health insurance premiums by $1,000:

“When people self-finance their health care,” Katyal contended, “that raises the cost of health care overall by $43 billion a year, and that raises the average family’s premiums by $1,000 a year. That will price untold numbers of people out of the market.”

That estimate comes from two left-wing groups, Families USA and the Center for American Progress Action Fund.

When President Obama himself made this claim, FactCheck.org reported:

[Obama] said ”the average family pays a thousand dollars in extra premiums to pay for people going to the emergency room who don’t have health insurance.” That’s from a recent report by Families USA, a group that lobbies for expanded government coverage. But another study for the authoritative Kaiser Family Foundation thinks that figure is far too high.

Serendipitously, the same day that Kaytal was repeating this discredited claim in federal court, USA Today reported:

Jack Hadley, senior health services researcher at George Mason University in Fairfax, Va…has found that privately insured individuals don’t end up paying higher premiums to make up for the uninsured because hospitals that serve lower-income families don’t have a lot of patients with insurance. He said the government pays about 75% of those unpaid hospital bills either by direct payment or through a disproportionate payment of Medicaid. (emphasis added)

Obama Admin. Repeats Discredited Cost-Shifting Claim in Federal Court is a post from Cato @ Liberty - Cato Institute Blog

Over at The Incidental Economist, Austin Frakt challenges a couple of claims I made on NPR about Medicare reform.  (Here’s how NPR reported my comments in print.)

My claims are pretty simple.

1. If Medicare subsidizes enrollees by giving them a fixed amount of money, much like Social Security does, they would be more cost-conscious than they are under the current open-ended subsidy, because enrollees who avoid wasteful spending would themselves get to keep the savings.  Put more plainly, people spend their own money more carefully than they spend other people’s money.
2. Health insurers and health care providers would compete to serve these cost-conscious Medicare enrollees on the basis of both cost and quality.  Prices would fall while quality improves.

I’m not really sure to what extent all this would occur under the Medicare reforms the House passed a couple of weeks ago, because we don’t yet know to what extent each enrollee’s subsidy would resemble a fixed amount of money.

Here’s what Frakt does with my claims:

[A]s I heard these words I wondered if we had any evidence on hand about the relationship between lower premium subsidies and health care cost inflation. Indeed we do! Premiums in the commercial market are subsidized by the government at a lower rate than those in Medicare. [Emphasis added.]

He then throws up the chart, shown below the jump, showing that for common benefits, the rate of growth in per-enrollee spending is “pretty similar” in Medicare and private insurance.  He concludes: “With data like this, I think we need to reexamine some of our theories about what lower premium subsidies can do.”

Oy, where to begin?

First, Frakt does not actually challenge my claim.  My claim is that voucher-like Medicare reforms will lead to reductions in the per-unit cost of producing certain goods and services, and therefore to lower prices. Frakt responds with data on health care spending.  When someone predicts that P will fall, introducing into evidence what has historically happened to P x Q is no kind of rebuttal. The confusion Frakt sows is rooted in the fact that both prices and spending can be accurately described as costs.  Such confusion could be avoided were everyone to honor Cannon’s First Rule of Economic Literacy: Never say costs when you mean spending.

Second, though the tax preference for employer-sponsored health insurance distorts relative prices the same way an open-ended subsidy does, it is not a subsidy.  This isn’t really relevant to the matter at hand, but it’s worth emphasizing to avoid such silliness as this.

Third, it would be great if there existed one chart that would settle once and for all whether Medicare or a free market does a better job of containing costs.  Alas, this is not that chart.  Frakt uses it to make a less-ambitious point about the effects of larger versus smaller policy-induced price distortions, but its shortcomings nevertheless confound that comparison, too.  In addition to measuring increases in spending (whose effect on social welfare is ambiguous) rather than increases in cost (which are always bad), this chart handicaps private insurance by leaving off three or four years of explosive growth in per-enrollee Medicare spending (1966-1969).  Worse, it reeks of endogeneity problems.  Amy Finkelstein finds evidence that Medicare itself increases spending among those with private insurance (mostly by increasing hospital capacity), and that this effect has grown over time.   Moreover, as Medicare spending rises, so do average marginal tax rates, which increases the price distortion created by the tax exclusion, which increases spending on private insurance.  For all the play it gets on the Left, this chart serves no useful purpose that I can discern.  Economists should be embarrassed to use it.  If it were a farm animal, and social scientists farmers, they would have to take it behind the barn and put a bullet in its head.

Fourth, we are not yet at the point where we need to reexamine the theory that demand curves slope downward.  There is ample evidence to show that Medicare enrollees will respond to voucher-like reforms by choosing more economical health plans, and that health plans and providers will respond with greater efficiency.  Thomas Buchmueller reports:

Two notable experiments…took place in the mid-1990s: the University of California (UC) and Harvard University both offered a menu of plans that varied in generosity, but adopted a “fixed dollar contribution” policy. The plans also varied significantly in cost, so employees had a greater incentive to consider price when selecting a health plan…

In both cases, employees were quite sensitive to price, and were willing to switch plans to save as little as $5 per month in out-of-pocket premiums…In addition to this demand response, participating insurers lowered their premiums in order to compete for enrollment.

Fifth, there is plenty of evidence that prices can and do fall in health care – from research on the markets for laser-eye and cosmetic surgery, to the work of Clay Christensen and his colleagues, to the research of David Cutler and Mark McClellan.  (If spending increases while prices are falling, it is because changes in Q dominate changes in P — which could be due to all these open-ended government subsidies and other price distortions.)

Finally, as a response to the general theme of that NPR story: we’re a long, long way from the point where we have to worry that reductions in the growth of Medicare spending are going harm enrollees’ health.  Relying on data from the Dartmouth Atlas, President Obama’s Council of Economic Advisers reminds us that ”nearly 30 percent of Medicare’s costs [spending!] could be saved without adverse health consequences.”  And there is plenty of evidence, from the RAND Health Insurance Experiment and elsewhere, that plans with greater cost-sharing or care management reduce utilization without harming patients’ health.

I cannot fathom what has opponents of Medicare vouchers so spooked.  It cannot be the effects that vouchers would have on Medicare enrollees and taxpayers.

How Not to Criticize Medicare Vouchers is a post from Cato @ Liberty - Cato Institute Blog