Monday, March 15, 2010

First, Do No Harm

The Correct Approach

Nothing poisons the health care reform debate more than the idea of the "right" to health care. No such right exists. Personal rights extend only as far as they don't impinge another person's rights. Coercing another to provide or pay for a product or service is tyranny - a kinder, gentler form of slavery. It's generally not looked upon as such because the providers and recipients are mutually anonymous. Natural rights, like those delineated in the Bill of Rights are protections from the encroachments of others, not claims upon others' time, talents, efforts or property.

Note that this doesn't even touch on the complex question of what constitutes health care. Words like "adequate" or "necessary" might be used but these have wildly different meanings to different people. Why deny a person who believes that it's necessary to have weekly physical exams? Or a month long hospital stay following a normal childbirth? Or an MRI for every headache? Who's to say no? It's a right.

Conversely, the government may (and probably will) decide to take a minimalist approach in defining what is "adequate" health care. One potential feature of Obamacare is the utilization of Comparative Effectiveness Research (CER) to determine the appropriate type of care a patient should receive. Oncologist and molecular pharmacologist Dr. Leonard A. Zwelling makes the point in a WSJ op-ed that CER can't keep up with the rapid pace of medical advancement. New, improved therapies don't have enough data points to merit consideration. And CER certainly doesn't make allowances for ideosyncratic differences between patients. No matter. From the government's vantage point, the "right" to health care can become the right to a one-size-fits-all standard of treatment. Take it or leave it.

Saying that there's a right to health care isn't just morally wrong. The concept is a leading cause of the current problems in our health care system, notably high cost and lack of universal access.

But just because there's no "right" to health care doesn't mean there should be no interest in ensuring that access to care is provided as extensively as possible. Such a goal is desirable aside from its appeal to conscience. As a practical matter, improved access to health care strengthens the economic foundation of society. A citizenry is more productive, more prosperous, the healthier it is. Thus, if done correctly, everyone will benefit from health care reform. Any government involvement should be undertaken with this symbiotic outcome in mind.

Conservative dogma, properly understood, includes a commitment to improving the lives of all citizens - promoting the general welfare - as the Constitution put it. (Which was written by classical liberals like James Madison. Classical liberalism is today's conservatism). Rejected is the modern liberal's view that life is a zero sum game with one group gaining at the expense of another. Conservatives are also acutely aware of the Law of Unintended Consequences, especially when undertaking "comprehensive" reform. Things can always become worse - much worse - than they are.

Conservatives view private enterprise as the true engine of progress, not merely a source of funding for wasteful projects. That view holds that successful, profitable concerns - which in the area of health care includes doctors, hospitals, medical device makers, pharmaceutical companies and even insurance companies - are responsible for the remarkable advances in medicine achieved over the past century. Penalizing these concerns is grossly counterproductive.

More often than not, the liberal, Robin Hood approach hurts all parties - even - especially - those targeted for benefits. Much harm was, and continues to be, inflicted on poor minorities by LBJ's "Great Society" programs.

Or consider "Cap and Trade", the quintessential example of a liberal policy resonse to a perceived problem.
It's a program viewed as a moral imperative - an obligation of society to its citizens and the world. Proponents are doing "good". Opponents are opposing "good".
It calls for a vast intrusion of government over large swathes of the economy. (The program's true purpose).
It mandates ruinous expenditures.
Successful, profitable, vital enterprises are demonized and targeted as funding sources.
It does nothing to fix a problem for which there is scant evidence in the first place.
The legislation is purposely made complex so that a variety of unrelated measures, items on liberals' wish lists, can be and are, buried in it.
When the program inevitably proves ineffective, its insufficient scale is blamed.

The Democrats' approaches to health care reform and "global warming" are identical in most respects. (At least there are real problems to address in health care). If implemented, the shortcomings of our present system - excessive government control, restricted choice, rationed care, unequal levels of care, high cost - would worsen. Democrats who challenge the Party line (and resist considerable pressure from Party leadership and special interest groups) are candid about this. Rep. Glenn Nye (D- Va.) explains his opposition.

[I]f the bill that is put forth does not contain significant changes and does not actually reduce health care costs for Americans and small businesses, it will not have my support.

I believe it is absolutely imperative that any health care reform bill reduces costs for families and small businesses, allows Americans to keep their existing plan and choose their doctor, is bipartisan, is deficit neutral, does not force Americans to use a certain type of health insurance, maintains Medicare benefits for seniors, and lowers the overall costs of health care. H.R. 3962 does not meet these criteria, which is why I do not support it.

The Senate bill, which the House is now considering, is similar to H.R. 3962. Its principal difference, aside from its lack of abortion funding language, is its inclusion of corrupt side deals - The Cornhusker Kickback, The Louisiana Purchase, Gator Aid, The Union Exclusion and many others.

Implementation of the plan wouldn't even attain its stated, central goal. Millions of Americans would remain uninsured. Non-partisan, CBO estimates put the total, with the Democrats' plan in place, at 23 million by 2019.

And the cost would be exorbitant. The proposals come with an estimated price tag of $200 billion per year. Mona Charen points out the following.

In 1966, Medicare cost taxpayers $3 billion. The House Ways and Means Committee estimated that by 1990, we might be spending as much as $12 billion. The actual 1990 figure? $107 billion. In 1987, Congress estimated that the Medicaid DSH (disproportionate share hospital) costs would be less than $1 billion in 1992. The actual cost? $17 billion.

An ultimate cost of more than a trillion dollars a year would not be unlikely. That, or severe rationing will be needed.

Identifying The Real Problem

True health care reform would attack the problem at its source - its high and continually increasing cost. Out of control cost is the inevitable outcome of the absence of free market competition. Why is there minimal competition in the area of health care? A book review by Joseph Rago (WSJ - 3/12) of Roger Battistella's, "Health Care Turning Point" quotes the author,

"Because most consumers of health care are largely insulated from directly paying for the services they use, health care is generally perceived as an unlimited free good. . . . Wants and needs become insatiable when care is believed to be free."

Battistella cites the origin of this entitlement mentality with the advent of employer provided insurance 65 years ago. This benefit was offered tax free as a way to circumvent FDR's wartime wage controls. Aside from originating the expectation of "free" health care, it forever linked people's access to health insurance with their employment status.

Mr. Battistella begins with the original sin of modern American health care: the government's World War II-era decision that gave businesses tax incentives to sponsor insurance for their workers but that did not extend the same dispensation to individuals. Since third parties were paying most of the bills—employers at first and eventually, with the creation of Medicare in 1965, the government as well— no one had any reason to be assiduous about controlling the cost of care. Patients always seemed to be spending someone else's money.
(My emphasis)

George Will, in a recent column, put it this way.

Employer-paid insurance is central to what David Gratzer of the Manhattan Institute calls "the 12 cent problem." That is how much of every health care dollar is spent by the person receiving the care. Hence Americans' buffet mentality -- we paid at the door to the health care feast, so let's consume all we can.

The Democrats make a pretense of addressing the problem of cost. The following is from an essay written for the Washington Times by Milton Wolf, a doctor who just happens to be Barack Obama's 2nd cousin once removed.

The justification for Obamacare has been to control costs, but the problem is there is little in Obamacare that will do that. Instead, there are provisions that will ration care and artificially set price. This is a confusion of costs and price.
As one example, consider the implications of Obamacare’s financial penalty aimed at your doctor if he seeks the expert care he has determined you need. If your doctor is in the top 10 percent of primary care physicians who refer patients to specialists most frequently – no matter how valid the reasons – he will face a 5 percent penalty on all their Medicare reimbursements for the entire year. This scheme is specifically designed to deny you the chance to see a specialist. Each year, the insidious nature of that arbitrary 10 percent rule will make things even worse as 100 percent of doctors try to stay off that list. Many doctors will try to avoid the sickest patients, and others will simply refuse to accept Medicare. Already, 42 percent of doctors have chosen that route, and it will get worse. Your mother’s shiny government-issued Medicare health card is meaningless without doctors who will accept it.

(My emphasis)

The Solution

Any serious reform package would begin by addressing the government created market distortion. The solution - Employer provided health insurance should be taxed as ordinary income. This is one of Paul Ryan's proposals in his "Road Map for America's Future". It was part of John McCain's presidential campaign platform. And its advocates include thoughtful commentators like Charles Krauthammer.

The potential revenue produced by this tax is estimated to be $250 billion per year, or more than what the Democrats' plan is claimed to cost. It would be returned to all people, employed or not, in the form of refundable vouchers to purchase health insurance. (Refundable meaning that even those whose tax liability was less than the value of the voucher, would still receive the entire voucher). Though Ryan's plan doesn't specify it, the dollar amount of the vouchers could be linked to the income level of the recipients. That way, government subsidies would be provided based upon income level, not employment status. Such a "progressive" approach should be embraced by liberals. It isn't, because labor unions are bitterly opposed. Democrats caved when Big Labor protested the proposal to tax its "Cadillac" health care insurance plans. Union members are not scheduled to pay until 2018. Naturally, non-union employees would begin paying immediately.

Another government impediment to free market competition in health care is the prohibition of purchasing insurance policies from other states. There's no other item of commerce that's restricted in this way. (At least none I can think of). Krauthammer gives an analogous hypothetical example of residents of a state, say Wisconsin, being restricted to buying oranges produced only in that state. The cost of oranges to that state's residents would be prohibitive without access to Texas or Florida markets. And wealth producing economic activity would be stifled.

With these two steps - redirected government subsidies and the elimination of the out of state ban on insurance purchases - a consumer, with tax voucher in hand, could then compare a wide variety of policies offered by a dozen or more insurance companies with respect to types of coverage, cost of coverage, co-pays, deductible levels, out of pocket limits, lifetime maximums, lists of doctors and hospitals networking with the insurance companies, premiums, reputation of insurers, etc, etc. This is how people shop for just about anything today - cell phones, cameras, TVs, cars, financial advisors, even life and auto insurance. Insurance companies would be forced to compete with each other. So would health care providers vying for patients' business. Costs would come down as efficiencies were implemented. Importantly, people would become aware of the true cost of their health care and take steps to purchase it wisely.

An absolutely essential step to further reduce health care costs is tort reform. At least $50 billion worth of precious medical resources is wasted yearly trying to protect doctors and hospitals from lawyers. The solution - Cap monetary awards and throw out junk lawsuits. Doctors' liability premiums and the ordering of unnecessary defensive measures would both plummet. Of course, this is another area the Democrats won't go near since lawyers own the Party, paid for with box car loads of campaign cash.

Another step to increase flexibility for health care consumers - The continuation of health care savings accounts - tax free repositories of funds to be used for medical care. Make the HSAs unlimited in terms of their duration and the amount of money that they can hold. The only requirement is that the money can only be used to pay for specified medical expenses.

High risk patients would be covered by state run pools funded with a combination of insurance company contributions and government subsidies. Something along the lines of the system that exists for unemployment insurance.

There. The problems of health care are solved. I leave the details to be worked out by the likes of Paul Ryan and Eric Cantor. Ryan's website lists some other suggestions such as state run automatic enrollment programs and small business pools to lessen the strain of offering coverage to their employees. I'm sure it can all be explained in something smaller than a Form 1040 instruction booklet. Certainly less than 2000 pages. (27oo pages for President Obama's latest proposal). One thing I don't have a fix for is the unintentional health care subsidy that the U.S. provides to the world. Just as our military spending provides a defensive umbrella, free of charge, under which our democratic allies can survive and operate their welfare state economies, so does our relatively unencumbered entrepreneurial economy provide the innovations and improvements that allow the world's socialized medical systems whatever functionality they're able to manage. It's just our destiny, I suppose, to act as the free world's guarantor of safety and principal generator of medical miracles. Unappreciated, of course.

An Unintended Consequence - Job Destruction

Finally, here's an excerpt of a recent article in The Weekly Standard written by James Capretta and Yuval Levin.

Beyond taxes and spending, Obama-care would also wreak havoc on the labor market. Because employers would get penalized if any of their low- and moderate-wage workers ended up in the new subsidized insurance pool, they would avoid hiring such workers. Democrats claim they want to jam through health care reform so they can turn their attention to jobs, but the bill provides a strong disincentive for businesses to hire those who need jobs the most.

The plan would, moreover, trigger an inefficient and costly re-sorting of American labor. Under the bill, despite the enormous cost of subsidizing coverage in the new government-run “exchanges,” only 18 million people would be getting such subsidized coverage in 2016—even though there are 127 million Americans today with incomes in the targeted range of between one and four times the poverty rate. The vast majority of workers would still be in job-based plans and get no additional help. Gene Steuerle of the Urban Institute estimates that a worker making about $60,000 per year in 2016 would get $4,500 more in federal aid if he were able to get his insurance through an exchange rather than through his employer. That’s a powerful incentive for workers and firms to rearrange their operations to take advantage of the federal money. In time, the American economy would be divided into companies with low-wage workers getting government-subsidized health care and others with higher-wage workers who continue to get employer-based plans. This would make the labor market far less efficient (harming productivity), and it would mean that the subsidies themselves would cost far more than the CBO now estimates.

And for those workers who do end up getting federal subsidies for their insurance, the program is a trap. If they get a pay raise, they will lose some of their insurance subsidy. Indeed, the schedule of subsidy withdrawal is so severe that it will push many low-wage families into effective tax brackets of 60 percent to 80 percent, according to a CATO Institute analysis. Obama-care would thus provide a strong disincentive to work and so undermine the most successful policy initiative in generations: welfare reform.

The health care debate is not just about health care. The Democrats’ bill is so massive, so far-reaching, and so poorly designed that its implications for the larger economy (and especially for employment, which should now be Washington’s top priority) could be immense—and disastrous. For the sake of the economy, no less than for that of American health care, Congress should pause, think, and start over.

Amen to that.






Capretta and Levin

Ryan's health care website

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