Associated Press photojournalist Noah Berger captured this thousand-word image near the Occupy Oakland demonstrations last month.

(AP Photo/Noah Berger)

Many Cato@Liberty readers will get it immediately. They can stop reading now.

For everyone else, this image perfectly illustrates the ethos of what I call the Church of Universal Coverage.

Like everyone who supports a government guarantee of access to medical care, the genius who left this graffiti on Kaiser Permanente’s offices probably thought he was signaling how important other human beings are to him. He wants them to get health care after all. He was willing to expend resources to transmit that signal: a few dollars for a can of spray paint (assuming he didn’t steal it) plus his time. He probably even felt good about himself afterward.

Unfortunately, the money and time this genius spent vandalizing other people’s property are resources that could have gone toward, say, buying him health insurance. Or providing a flu shot to a senior citizen. This genius has also forced Kaiser Permanente to divert resources away from healing the sick. Kaiser now has to spend money on a pressure washer and whatever else one uses to remove graffiti from those surfaces (e.g., water, labor).

The broader Church of Universal Coverage spends resources campaigning for a government guarantee of access to medical care. Those resources likewise could have been used to purchase medical care for, say, the poor. The Church’s efforts impel opponents of such a guarantee to spend resources fighting it. For the most part, though, they encourage interest groups to expend resources to bend that guarantee toward their own selfish ends. The taxes required to effectuate that (warped) guarantee reduce economic productivity both among those whose taxes enable, and those who receive, the resulting government transfers.

In the end, that very government guarantee ends up leaving people with less purchasing power and undermining the market’s ability to discover cost-saving innovations that bring better health care within the reach of the needy. That’s to say nothing of the rights that the Church of Universal Coverage tramples along the way: yours, mine, Kaiser Permanente’s, the Catholic Church’s…

I see no moral distinction between the Church of Universal Coverage and this genius. Both spend time and money to undermine other people’s rights as well as their own stated goal of “health care for everybody.”

Of course, it is always possible that, as with their foot soldier in Oakland, the Church’s efforts are as much about making a statement and feeling better about themselves as anything else.

The Ethos of Universal Coverage is a post from Cato @ Liberty - Cato Institute Blog

The latest from Jeffrey H. Anderson, which I’ll file under I-Wish-I’d-Said-That:

In a newly released report, the Government Accountability Office (GAO) estimates that, in fiscal year 2010, $48 billion in taxpayer money was squandered on fraudulent or improper Medicare claims. Meanwhile, the nation’s ten largest health insurance companies made combined profits of $12.7 billion in 2010 (according to Fortune 500). In other words, for every $1 made by the nation’s ten largest insurers, Medicare lost nearly $4…

Actually, it may have been even worse than that: The GAO writes that this $48 billion in taxpayer money that went down the drain doesn’t even represent Medicare’s full tally of lost revenue, since it “did not include improper payments in its Part D prescription drug benefit, for which the agency has not yet estimated a total amount.”

Courtesy of The Weekly Standard.

‘Medicare Loses Nearly Four Times as Much Money as Health Insurers Make’ is a post from Cato @ Liberty - Cato Institute Blog

That’s the headline of an article posted this week in Politico:

Rarely have so many political strategists been so wrong about something so big.

But when it comes to the health care bill, everyone from former President Bill Clinton on down whiffed on some of the more significant predictions.

Democrats would run aggressively on the legislation? Nope. Voters would forget about the sausage-making aspects of the legislative process? Doesn’t seem that way, as the process contributed to the sense that the bill was deeply flawed.

And Clinton’s own promise to jittery Democrats that their poll numbers would skyrocket after the bill finally passed also didn’t pan out, as the party is fighting for its life in the midterms.

What can explain the miscalculation?  Maybe religious fervor?

‘Democrats Guess Wrong on Health Care’ is a post from Cato @ Liberty - Cato Institute Blog

Back in May, I suggested:

Senate Judiciary Committee members should be sure to ask Solicitor General and Supreme Court nominee Elena Kagan, during her upcoming confirmation hearings, whether she or her office played any part in crafting ObamaCare or the administration’s defense to the lawsuits challenging that law. If Kagan helped to craft either, that would present a conflict of interest: when those lawsuits reach the Supreme Court, she would be sitting in judgment over a case in which she had already taken sides…

If Kagan played a role in drafting ObamaCare or formulating the administration’s legal defense, and is confirmed by the Senate, propriety would dictate that she recuse herself from any challenges to that law that reach the high court.

Committee members didn’t ask her those questions during the hearings, as The Wall Street Journal explains. Fortunately, a letter to Kagan from all seven Republicans on the committee has (exhaustively) remedied that oversight.

Kagan has already told the committee she would recuse herself from any case in which she “participated in formulating the government’s litigating position.”  Given that she appears to take an expansive view of Congress’ power to regulate interstate commerce, the best possible outcome for opponents of ObamaCare would probably be for Kagan to join the Court but recuse herself from cases challenging that law.

That would also be the worst possible outcome for the administration.  In fact, universal coverage is so important to the Left that if Kagan would leave them with one less pro-ObamaCare vote on the Court, I wouldn’t be surprised to see President Obama withdraw her nomination.  He could then appoint someone as ideologically reliable as Kagan, but who could actually defend the president’s signature accomplishment.

This could get interesting.

Senators (Finally) Press Kagan about ObamaCare is a post from Cato @ Liberty - Cato Institute Blog

Last week, The New York Times published an article subtitled, “In Desperately Poor Rwanda, Most Have Health Insurance.”  The main theme was the contrast between Rwanda’s compulsory health insurance system and the as-yet-non-compulsory U.S. health insurance market:

Rwanda has had national health insurance for 11 years now; 92 percent of the nation is covered, and the premiums are $2 a year.

Sunny Ntayomba, an editorial writer for The New Times, a newspaper based in the capital, Kigali, is aware of the paradox: his nation, one of the world’s poorest, insures more of its citizens than the world’s richest does.

He met an American college student passing through last year, and found it “absurd, ridiculous, that I have health insurance and she didn’t,” he said, adding: “And if she got sick, her parents might go bankrupt. The saddest thing was the way she shrugged her shoulders and just hoped not to fall sick.”

I don’t see anything absurd here, but I do see something remarkable. Rwanda is so poor, its per capita income is about 1 percent that of the United States ($370 vs. $39,000).  Its health care sector is an international charity case: “total health expenditures in Rwanda come to about $307 million a year, and about 53 percent of that comes from foreign donors, the largest of which is the United States.”  That’s roughly $32 per person per year, which doesn’t buy much.  Dialysis is “generally unavailable.”  As are many treatments for cancer, strokes, and heart attacks, making those ailments “death sentences” more often than in advanced nations.  Life expectancy at birth is 58 years, compared to 78 years in the United States.  Rwandan children are 15 times more likely to die before their first birthday (7 vs. 107 deaths per 1,000 live births) and 25 times more likely to die before turning five (8 vs. 196 deaths per 1,000 live births) than U.S.-born children.  (If you want to meet some Rwandan kids struggling to make it to age 5, read my friend’s blog, Life of a Thousand Hills.)  And yet, the saddest thing is a healthy-but-uninsured American college student.

What the Times sees as a paradox isn’t really a paradox.  Yes, the poorer nation has a higher levels of health insurance coverage.  But the wealthier nation does a better job of providing medical care to everyone, insured and uninsured alike. The Times reports that Rwanda’s national health insurance system isn’t fancy, “But it covers the basics,” including “the most common causes of death — diarrhea, pneumonia, malaria, malnutrition, infected cuts.”  Surely, the Times must know that anyone walking into any U.S. emergency room with any of those conditions would be treated, regardless of insurance status or ability to pay.  The same is true of other acute conditions, like heart attacks and strokes, for which uninsured Americans receive better treatment than insured Rwandans.  True, some uninsured Americans end up filing for bankruptcy, but let’s be clear: while bankruptcy is no day at the beach, suffering bankruptcy because you got the treatment is better than suffering death because you didn’t.  (As for dialysis, the United States already has universal coverage for end-stage renal disease through the Medicare program.)  The Healthcare Economist puts it this way: “Would you rather be sick in the United States without insurance or sick with insurance in Rwanda?”  You get the point.  If there’s a paradox here, it’s that insurance status does not necessarily correlate with access to medical care: uninsured people in the wealthy nation actually have better access to care than insured people in the poor nation.

An even bigger paradox, though, is Rwandan attitudes toward the United States. The United States generates many of the HIV treatments currently fighting Rwanda’s AIDS epidemic, as well as other medical innovations saving lives there and around the world.  More than any other nation, we create the wealth that purchases those and other treatments for Rwandans and other impoverished peoples.  The United States is probably closer to providing universal access to medical care for its citizens — and, indeed, the whole world — than Rwanda.  Rwanda’s “universal” system leaves 8 percent of its population uninsured. Though official estimates put the U.S. uninsured rate at 15.4 percent, the actual percentage is lower; and again, uninsured Americans typically have better access to care than insured Rwandans.  The real paradox is here that Rwandan elites think the United States is doing something wrong. Why?

Here’s one answer: Rwanda’s government explicitly guarantees health insurance to its citizens, and for some people that guarantee has value apart from any health improvements or financial security that may result.  Dr. Agnes Binagwaho, “permanent secretary of Rwanda’s Ministry of Health,” illustrates:

Still, Dr. Binagwaho said, Rwanda can offer the United States one lesson about health insurance: “Solidarity — you cannot feel happy as a society if you don’t organize yourself so that people won’t die of poverty.”

Set aside that a (permanent) third-world bureaucrat is telling the United States how to keep people from dying of poverty.  Binagwaho cannot feel happy without that government-issued guarantee.

How might such a guarantee increase happiness? It could make people happier by reassuring them that they themselves will be healthier and more financially secure (self-interest), or that others will be (altruism).  Yet altruism and self-interest probably cannot explain the “happiness benefits” that people enjoy when governments guarantee health insurance.  As I have argued elsewhere, the jury is out on whether broad health insurance expansions like ObamaCare result in better overall health; they may, but it is entirely possible that they would not.  The jury is also out on whether ObamaCare will produce a net increase in financial security.  It will subsidize millions of low-income Americans, but it will also saddle them with high implicit taxes that could trap millions of them in poverty.  Meanwhile, ObamaCare’s new taxes will reduce economic growth and destroy jobs.  If such a guarantee doesn’t improve health or financial security, it’s not worth much in terms of altruism or self-interest.

But there’s another potential “happiness benefit” that might accrue to supporters of a government guarantee of health insurance: it could make them happier by allowing them to signal something about themselves — e.g., that they are compassionate.  If people use a government guarantee of health insurance in this way, that could explain why Rwandan elites feel bad for uninsured Americans.  They may feel empathy for uninsured Americans because they perceive the American electorate has not sent uninsured Americans a valuable signal (“We care about you!”).  Meanwhile, the act of expressing pity for uninsured Americans allows Rwandan elites to signal something about themselves (“We are compassionate!”).  Robin Hanson has a lot to say about why people might use health insurance and medical care to signal loyalty and compassion.

My hunch is that this is an under-appreciated reason why some people support universal coverage: a government guarantee of health insurance coverage provides its supporters psychic benefits — even if it does not improve health or financial security, and maybe even if both health and financial security suffer.

If that’s the case, then we’re facing the same problem that Charles Murray identified in Losing Ground, his seminal work on poverty:

Most of us want to help. It makes us feel bad to think of neglected children and rat-infested slums…The tax checks we write buy us, for relatively little money and no effort at all, a quieted conscience. The more we pay, the more certain we can be that we have done our part, and it is essential that we feel that way regardless of what we accomplish…

To this extent, the barrier to radical reform of social policy is not the pain it would cause the intended beneficiaries of the present system, but the pain it would cause the donors. The real contest about the direction of social policy is not between people who want to cut budgets and people who want to help. When reforms finally do occur, they will happen not because stingy people have won, but because generous people have stopped kidding themselves.

One thing is for certain.  When Rwandan elites pity uninsured Americans, there is something very interesting going on.

While I’m at it, the health-policy advice I offered to China and India also applies to Rwanda:

Does not the fact that “these countries lack the fiscal resources required for universal coverage because of their…low average wages” suggest that many residents have more pressing needs than health insurance? For things that might just deliver greater health improvements? In a profession where universal coverage is a religion, such questions are heresy, I know.

China and India are in the process of a slow climb out of poverty. It is entirely possible that the best thing those governments could do to improve [health care] markets and population health would be to enforce contracts, punish torts, contain contagion, and nothing else.

Of course, if Rwandan elites support universal coverage largely because they want to signal something about themselves, this advice may fall on deaf ears.

Rwanda and the Psychic Benefits of Universal Coverage is a post from Cato @ Liberty - Cato Institute Blog

Still doubt that the Church of Universal Coverage is a bona fide religion?  Consider:

1. The American people have been solidly against the Democrats’ universal-coverage plan since July 2009.
2. Roughly 60 percent of the public wants Congress to scrap that legislation and start over.
3. President Obama will nevertheless use that legislation as the starting point for negotiations with Republicans at next week’s health care summit.

Mmmm, that’s good fervor.

Republican summiteers shouldn’t spend too much time discussing their own ideas — which aren’t going anywhere, and really aren’t that great anyway — lest they unwittingly aid Democrats in changing the below-illustrated narrative.  They should instead focus like a laser beam on the dangers of the Democrats’ legislation, and how dangerously close it is to becoming law.

Then they can all return to the drawing board and come back with better ideas.

Health Summit: A Public Co-Option? is a post from Cato @ Liberty - Cato Institute Blog

Blogger Matthew Yglesias has a response to my post on Ezra Klein’s slander that Sen. Joe Lieberman (I-CT) is okay with the mass murder (or the mass negligent homicide) of hundreds of thousands of uninsured Americans.

Yglesias claims that only one of the three studies I cited speaks to what he claims is the central point: the Institute of Medicine’s estimate of how many Americans die each year because they lack health insurance.  Yglesias is incorrect.  The central point/threshold question is whether giving the uninsured health insurance will save lives.  All three studies speak to that point, and all three all cast doubt on the intuitively appealing idea that giving uninsured people health insurance ipso facto saves lives.

To rebut the one study that Yglesias believes to be on point (Kronick), he offers two others.  Yet all studies are not created equal.  Kronick, Finkelstein/McKnight, and Levy/Meltzer represent the most reliable work that has been done on the relationship between health insurance and health.  If I am wrong about that, I hope that one of those authors or another expert in the field will correct me.

But if I am right, it means that Yglesias and Klein are slandering Joe Lieberman and millions of others based on their (Yglesias’ and Klein’s) limited and distorted understanding of the world.  (And even if I’m wrong, the Washington Post‘s Charles Lane explains why Klein’s slander is still wrong.)

Then again, considering that Yglesias also has another post suggesting that Lieberman and House Minority Whip Eric Cantor (R-Va.) are “dumb” Jews free-riding on the intelligence of other Jews, I’m not sure that the Church of Universal Coverage is open to persuasion right now.

Yglesias, Defending Klein’s Slander of Lieberman is a post from Cato @ Liberty - Cato Institute Blog

I cannot disagree with Uwe Reinhardt’s response to my previous post at National Journal‘s Health Care Experts blog. But his response bears clarification and emphasis.

Improving “population health” generally means “helping people live longer.”

To paraphrase, Reinhardt then writes:

If helping people live longer were our objective in health reform, we could do better than universal coverage. But health reform is not (solely or primarily) about helping people live longer. It is (also or primarily) about other things, like relieving the anxiety of the uninsured.

I applaud Reinhardt for acknowledging a reality that most advocates of universal coverage avoid: that universal coverage is not solely or primarily about improving health.

Will Reinhardt go further and acknowledge that, since universal coverage is largely about some other X-factor(s), that necessarily means that advocates of universal coverage are willing to let some people die sooner in order to serve that X-factor?

(Cross-posted at National Journal‘s Health Care Experts blog.)

Universal Coverage Means ‘Willing to Let You Die Sooner’ is a post from Cato @ Liberty - Cato Institute Blog

The problem that Democrats have faced from Day One is finally coming to a head.

The Left and the health care industry both want universal health insurance coverage.  The industry, because universal coverage means massive new government subsidies. The Left, because that’s their religion.

But universal coverage is so expensive that Congress can’t get there without taxing Democrats.

• Sen. Jay Rockefeller (D-WV) is the biggest opponent of Sen. Max Baucus’ (D-MT) tax on expensive health plans because that tax would hit West Virginia coal miners.
• Unions vigorously oppose that tax because it would hit their members.
• Moderate Democrats in the House oppose Rep. Charlie Rangel’s (D-NY) supposed “millionaires surtax” because they know it would hit small businesses in their districts.

And on and on…

But if congressional leaders pare back those taxes, they lose the support of the health care industry, which wants its subsidies.

• That’s why the health insurance lobby funded this PriceWaterhouseCoopers study saying that premiums would rise under the Baucus bill: the $500 billion bailout they would receive isn’t enough.  They also want – they demand –  steep taxes on Americans who don’t buy their products.
• The drug companies, the hospitals, and the physician groups are likewise demanding big subsidies, and will run ads to kill the whole effort if those subsidies aren’t big enough.

As always, health economist Uwe Reinhardt put it colorfully:

It’s no different from Iraq with all the different tribes…‘How does it affect the money flow to my interest group?’  They are all sitting in the woods with their machine guns, waiting to shoot.

Once the shooting starts, industry opposition will sway even Democratic members, because there are physicians and hospitals and employers and insurance-industry employees in every state and congressional district.

Can President Obama and the congressional leadership satisfy both groups?  My guess is, probably not, and this misguided effort at “reform” will therefore die.  Again.

Why the Democrats’ Health Care Overhaul May Die is a post from Cato @ Liberty - Cato Institute Blog

Since at least February, President Obama and other elders of the Church of Universal Coverage have labored to create the impression that universal coverage is inevitable, because a sense of inevitability reduces its cost.  If interest groups think this train is leaving the station, they are less likely to stand in its way.  Lobbyists are more likely to cut whatever deal they can if their clients believe, “It could have been much worse.”  That’s why Obama has demanded haste: the longer the process, the harder it is to maintain a sense of inevitability.

Here’s a sampling of today’s health care headlines from the non-partisan Bulletin News, which summarizes news media coverage:

• Senate, Obama Back Off Healthcare Reform August Deadline.
• Obama Rakes In Cash For DNC, Criticizes Media Coverage Of Healthcare Debate.
• Obama’s Performance At Wednesday’s Press Conference Comes Under Fire.
• President’s Media Strategy Raises Eyebrows.
• House Democrats Consider Sidestepping Committee.
• Democratic Caucus Holds “Contentious” Meeting.
• Black Caucus Blasts Blue Dogs; AARP, Unions Also Criticize Group.
• Freshmen Senators Ask Baucus To Hold Costs Down, Praise His Efforts.
• More Criticism Of Obama.

Now that reform seems less inevitable, interest groups will be less likely to settle for a bad deal.  Instead, they will be more likely to demand higher payoffs than before, because their clients believe the expected cost of alienating Church elders has moved away from “getting punished” and toward “the status quo ante.”

So, good luck paying for this thing.

The Price of Universal Coverage Just Went Up is a post from Cato @ Liberty - Cato Institute Blog

From my oped in today’s Investor’s Business Daily:

As it turns out, “universal coverage” may not be so inevitable after all. Much to the chagrin (and apparent surprise) of President Obama and congressional Democrats, squabbling has erupted in earnest over who will spring for the exorbitant cost.

Fortunately, Obama has an exit strategy: “If there is a way of getting this done 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.”

Well, there is a way: Let individuals control their health care dollars, and free them to choose from a wide variety of health plans and providers. If Congress takes those steps, innovation and market competition will make health care better, more affordable, and more secure.

A Better Way to Reform Health Care is a post from Cato @ Liberty - Cato Institute Blog

Add former Senate Majority Leader Howard Baker (R-TN) to the Church of Universal Coverage faithful:

Health care reform and universal coverage is [sic] indeed something [sic] whose time has [sic] come.

Baker joined fellow former Senate Majority Leaders Tom Daschle (D-SD) and Bob Dole (R-KS) to introduce a health care reform package.  Daschle is already a high priest in The Church.  For backing this proposal, Dole probably is too, but I don’t have any juicy quotes handy.

Howard Baker and Universal Coverage is a post from Cato @ Liberty - Cato Institute Blog

President Barack Obama has declared that his goal in health care reform is “expanding coverage to all Americans.”  So what’s the price tag on universal coverage?

Some reformers are throwing around numbers like $1 trillion or $1.5 trillion.  But according to the Urban Institute, the cost would be closer to $2 trillion.

Jack Hadley and his colleagues estimate, “If all uninsured people were fully covered [in 2008], their medical spending would increase by $122.6 billion.”  If we assume that the cost of covering the uninsured will grow at the same rate the federal government assumes for all health spending growth (6.2 percent), then from 2010 through 2019, the cost of covering the uninsured would be $1.8 trillion.

That’s at a minimum.  According to Hadley et al., their estimate “is neither the cost of a specific plan nor necessarily the same as the government’s costs, which could be higher, depending on plans’ financing structures and the extent of crowd-out.”  Crowd-out is like collateral damange.  When you’re dropping money from the sky, some will inevitably strike innocent bystanders (i.e., the insured).  To ensure you hit the uninsured with $122.6 billion, you need to drop a lot more than that amount.

Thus the full cost of covering the uninsured would be closer to — and possibly well over — $2 trillion.

How Much Will Universal Coverage Cost? is a post from Cato @ Liberty - Cato Institute Blog

Earlier this morning, my colleague, Michael Cannon, blogged a devastating critique of the Coburn-Burr-Ryan-Nunez alternative to the Obama health plan. As he shows, while the bill has some good features (changing the tax treatment of health insurance, expanding HSAs), the good is swamped by a bizarre collection of regulation, mandates, and hidden taxes.

In fact, the bill appears to be based, in large part, on what its sponsors call “the well-known, bi-partisan achievement of universal health care through a private system in Massachusetts.” But the Massachusetts model has failed to either achieve universal coverage or control health care costs. Rather, as I noted in this recent blog, it has led to more regulation, less consumer choice, and increased insurance premiums, while running huge budget deficits that have already led to one tax increase and are now causing the state to consider premium caps and global budgets. One wonders why congressional Republicans would want to head down that road.

Notably, Coburn-Burr-Ryan-Nunez abandons Rep. John Shadegg’s proposal to allow Americans to buy insurance across state lines in favor of a requirement that states establish Massachusetts-style connectors. But the Massachusetts Connector has been one of the worst aspects of that state’s reform, acting as a super-regulatory body, adding new mandated benefits, restricting consumer’s choice of plans, and adding both regulatory and administrative costs to insurance. (In fact, the Connector adds its own administrative costs, estimated at 4 percent of premium costs, for plans that are sold through it.) What the Connector has not done is live up to its promise of breaking the link between employment and insurance, giving workers personal, portable insurance that they could take with them from job to job, and which they would not lose when they lost their jobs. Unfortunately, the Connector has not lived up to its promise in the latter regard. In fact, as of May 2008, only 18,122 people had purchased insurance through the Connector. That’s very little gain for so much pain.

Since there is virtually no chance that the Coburn-Burr-Ryan-Nunez will actually be enacted, perhaps one shouldn’t get too excised about its failings. No doubt it is far superior to Obamacare. And, it is understandable that congressional Republicans want to appear as more than the “party of no.” Still, this looks like a sadly missed opportunity.

GOP Health Care Alternative: Drinking the Massachusetts Kool-Aid is a post from Cato @ Liberty - Cato Institute Blog

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 Coburn-Burr-Ryan-Nunes Mandate-Price-Control Bill is a post from Cato @ Liberty - Cato Institute Blog

Last Monday, when lobbyists for the six biggest health care industry groups joined President Obama to announce their support for reducing health care spending by $2 trillion over 10 years, I penned and voiced my suspicion that the real motivation was to pressure the Congressional Budget Office to assume that Democrats’ health care reforms would reduce spending, despite the lack of evidence.  My wife said that hypothesis sounded a little . . . conspiratorial.

Last Thursday, when it was revealed that there was no actual agreement and that the White House basically manipulated the industry to get a week’s worth of good health care press, I started to doubt whether strong-arming the CBO was really the goal of that media stunt.  Then Jonathan Cohn set me straight.

In an article for The New Republic aptly titled, “Numbers Racket,” Cohn acknowledges that the biggest problem facing Democrats is that the $2 trillion cost of universal coverage has to come from somewhere.  Cohn, like many Democrats, complains that the “curmudgeonly” CBO isn’t letting reformers off the hook by assuming that universal coverage will (partly) pay for itself.  Cohn also acknowledges that pressuring the CBO was a likely purpose of last week’s media stunt:

The CBO took nearly the same positions back in 1994 — a fact not lost on either the White House or congressional leaders, who have communicated their concerns publicly and privately. One apparent purpose of bringing industry leaders to meet Obama this week was to showcase the potential for cutting costs; see, the administration seemed to be signaling, even the health care industry thinks it can save money by becoming more efficient.

Democrats have set their sights on legislation that would give government enormous power over Americans’ earnings and medical decisions.  The main political obstacle to those reforms is their cost, thus Democrats are pressuring the CBO to pretend that those costs don’t exist.  The CBO (and everybody else) should resist the Democrats’ effort to make truth yield to power.

Church of Universal Coverage Begins Its Campaign against that Pesky CBO is a post from Cato @ Liberty - Cato Institute Blog

I count both Ramesh Ponnuru and Ezra Klein as friends.  (I’m so post-partisan.)  Why, oh why must they force me to choose between them??

Ponnuru had an op-ed in yesterday’s New York Times where he reaffirmed his membership in the Anti-Universal Coverage Club.  Klein responded in a way that’s sure to satisfy his base, but I think he left the reality-based community wanting.  Are you ready for the fisk?

Klein suggests that if “80+ percent of Americans . . . think the system needs fundamental changes or a complete rebuild,” then 80+ percent of Americans must support universal coverage.  Hmmm, bit of a stretch.  In fact, I can recall one poll where nearly one-third of likely Democratic primary voters rejected universal coverage.

Klein suggests that giving consumers the freedom to avoid unwanted state health insurance regulations would mean that Arizonans wouldn’t get coverage for colorectal cancer screening, and that there would be no mammogram coverage in Idaho.  Mmm, that’s good crazy.  I refer my right honorable friend to the episode where The New Republic‘s Jonathan Cohn made a similar claim about mandates for prostate and cervical cancer screening.  I looked up the services covered by the plans made available to the Cohn family by the University of Michigan.  It turned out that six out of the seven available plans cover both prostate and cervical cancer screening — even though Michigan requires insurers to cover neither.  (I offered to wager Cohn a fancy dinner that his family has coverage for both, but I never heard back from him.  Foolish, really, to let me know where he gets his insurance. Klein would never give me such an opening . . . or would he?) What Ponnuru proposes is to let Arizonans and Idahoans and everyone else choose what their health plan covers.   Imagine that: people rationing medical care according to their preferences, rather than the preferences of employers, interest groups, bureaucrats, health policy wonks…  Why Klein clings to such regulations despite zero evidence that they actually increase access to the targeted services is beyond me.

Klein criticizes Ponnuru for proposing to replace the current tax preference for job-based coverage with a tax credit available to everyone, much like John McCain proposed during his (latest) presidential campaign.  Ponnuru cites a study estimating that tax credits would reduce the number of uninsured by 20 million.  Klein counter-cites one study estimating that tax credits would have zero net effect on the number of uninsured, and a second study estimating that those who transition from job-based coverage to the “individual” or “non-group” market would pay an additional $2,000 per year for an identical policy.   Klein’s criticisms sound persuasive — provided you know precious little about the topic.  For one thing, the two studies Klein cites are actually the same study.  Pity, really.  Had Klein found a second study to support his position, perhaps it would not have been quite so flawed as the one he did find.  Here’s what I wrote back in September about that study’s flaws:

Thomas Buchmueller et al. estimate that replacing the tax exclusion for employer-sponsored insurance (ESI) with Sen. John McCain’s proposed health insurance tax credit would have zero effect on the uninsured. Yet their estimates neither incorporate nor even acknowledge factors that would tend to increase coverage. First, workers who lose ESI would see their wages rise significantly as labor markets force employers to “cash out” those workers.

That effect would help all workers afford health insurance — but particularly older and sicker workers, because they would get cashed-out more.

Second, the authors estimate that non-group enrollment would double, yet they ignore that administrative costs would fall in a thicker non-group market.

So that $2,000 mark-up really wouldn’t be $2,000.  Even if some mark-up remained, workers could reduce their premiums by purchasing less coverage.  Not all that crazy a concept, considering that the tax treatment of job-based insurance encourages people to buy too much coverage.

Then there’s this effect, which would further reduce premiums for healthy workers:

Third, the authors acknowledge that employment-based insurance forces the healthy to subsidize the sick, yet they ignore that the non-group market would reduce premiums for a majority of workers by allowing them to avoid that hidden tax.

The study’s authors also ignored the premium-lowering effects of McCain’s proposal to allow people to avoid unwanted regulatory costs (e.g., mandated benefits):

Fourth, though the Congressional Budget Office estimates that state health insurance regulations increase premiums an average of 13 percent, the authors ignore that McCain’s proposal to let consumers shop nationwide for insurance would further reduce premiums by allowing consumers to avoid that hidden tax as well.

A few random clarifications.  Klein fears living “in a space where insurers could still discriminate based on pre-existing conditions.”  That’s Church-of-Universal-Coverage-speak for, “I want price controls on health insurance.”  Government can outlaw the practice of charging higher premiums to the sick, but it cannot outlaw the reasons behind those higher premiums.  So when government prohibits insurers from competing on price, insurers respond to those underlying reasons by competing to avoid the sick.  Yes, yes, it’s that pious preference for price-controlled premiums that unleashes the beast of adverse selection — and prevents the market from developing innovative insurance products that help sick people pay those higher premiums. Klein fears a world “where millions of Americans will still lack access to health insurance,” because to the devout, access to insurance matters more than access to health care.  Klein fears that when people move from ESI to the individual market, risk pools will get smaller and insurers will get stronger.  Yet risk pools would get bigger, and insurers weaker relative to consumers.  Klein believes we can “ensure that all Americans have health coverage, [and] that their coverage is comprehensive,” and that we can do all that without rationing “access to health services.”  How?  Just “bring down costs in the system.”  Riiiight.

To cap things off, Klein claims that Ponnuru and I think the U.S. health care sector as it exists is “fine.”  I really can’t blame him for arguing with straw men.

In the end, Klein’s case against Ponnuru boils down to the same absurdity I found in Buchmueller and colleagues’ case against McCain:

The McCain plan would eliminate forced subsidies: of the sick by the healthy (via ESI and community rating) and of particular providers by unwilling consumers (mandates for chiropractic coverage, etc.). Buchmueller et al. would have us believe that if we stop robbing Peter to pay Paul, not even Peter would benefit. A more balanced critique might have been more persuasive.

Klein spends a lot more time thinking about health policy than Ponnuru does. But you’d never know it.

Health Policy Death Match: Klein vs. Ponnuru is a post from Cato @ Liberty - Cato Institute Blog

An editorial in today’s Wall Street Journal earns that page a membership in the Anti-Universal Coverage Club.

The editors explain that the universal-coverage scheme Massachusetts enacted in 2006 is a perfect microcosm of what congressional Democrats are trying to foist on the rest of the nation: compel universal coverage now, worry about the costs later.

Massachusetts is three years into that strategy, thus its experience shows us where that strategy leads.  Much as my colleague Mike Tanner predicted (repeatedly), it leads to higher taxes and government rationing.  The WSJ editors write:

The state’s overall costs on health programs have increased by 42% (!) since 2006.

Like gamblers doubling down on their losses, Democrats have already hiked the fines for people who don’t obtain insurance under the “individual mandate,” already increased business penalties, taxed insurers and hospitals, raised premiums, and pumped up the state tobacco levy. That’s still not enough money.

So earlier this year, [Gov. Deval] Patrick appointed a state commission to figure out how to control costs and preserve “this grand experiment”…

The Patrick panel is considering one option to “exclude coverage of services of low priority/low value.” Another would “limit coverage to services that produce the highest value when considering both clinical effectiveness and cost.” (Guess who would determine what is high or low value? Not patients or doctors.) Yet another is “a limitation on the total amount of money available for health care services,” i.e., an overall spending cap…

[Patrick] reportedly told insurers and hospitals at a closed meeting this month that if they didn’t take steps to hold down the rate of medical inflation, he would.

The editors conclude:

The real lesson of Massachusetts is that reform proponents won’t tell Americans the truth about what “universal” coverage really means: Runaway costs followed by price controls and bureaucratic rationing.

What ‘Universal Coverage’ Really Means: Higher Taxes, Government Rationing is a post from Cato @ Liberty - Cato Institute Blog

Amid reports that the Obama administration, congress, and some conservative groups still consider Massachusetts to be a model for health care reform, the New York Times reveals that despite assessing insurers and hospitals, raising the penalty on noncompliant businesses, increasing premiums and co-payments for consumers, and raising the state tobacco tax, the program’s financing remains unsustainable.

Massachusetts has significantly reduced the number of people in the state who lack health insurance. However, it has not achieved, nor does it expect to reach, universal coverage. (The best estimates suggest that more than 200,000 state residents remain uninsured). And, significantly, roughly 60 percent of newly insured state residents are receiving subsidized coverage, suggesting that the increase in insurance coverage has more to do with increased subsidies (the state now provides subsidies for those earning up to 300 percent of the poverty level or $66,150 for a family of four) than with the mandate.

The cost of those subsidies in the face of predictably rising health care costs has led to program costs far higher than originally predicted. Spending for the Commonwealth Care subsidized program has doubled, from $630 million in 2007 to an estimated $1.3 billion for 2009.

Now the state is turning to a variety of gimmicks to try to hold down costs, including possibly cutting payments to physicians and hospitals by 3-5 percent. However, the Times quotes health reform experts who have studied the Massachusetts system as warning “the state and federal governments may need to place actual limits on health spending, which could lead to rationing of care.”

The more one looks at the Massachusetts “model,” the stronger the argument for keeping the government out of health care.

More on that Massachusetts ‘Model’ is a post from Cato @ Liberty - Cato Institute Blog

CNN health care correspondent Sanjay Gupta, who was briefly considered for surgeon general in the Obama administration, reports that the administration is looking to Massachusetts as a model for its forthcoming health care reform proposal. That model would involve an individual mandate, an employer mandate, a “connector” with increased insurance regulation, and massive subsidies for the middle class.

Given that the Massachusetts plan is expected to run $2-4 billion over budget over the next 10 years, has failed to come close to universal coverage, has done nothing to reduce health care costs (indeed, may have driven up insurance costs), and has actually led to increased wait time for primary care physicians, that may not be the best model out there. In fact, perhaps the Obama administration might like to look at studies by David Hyman and me detailing the Massachusetts model’s many problems.

Looking to a Failed Model for Health Care Reform is a post from Cato @ Liberty - Cato Institute Blog