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Monday, May 31, 2004

Drug importation offers few savings, big liabilities for states

[Grace-Marie Turner and Conrad Meier, "Prescription Drug Importation: Just the Facts," Health Care News, The Heartland Institute, 1 June 2004.]

State policymakers faced with rising drug costs and mounting political pressure to engage in drug reimportation from Canada prior to federal approval should be aware that such a move may create more headaches than it solves:

- The commission that administers health insurance for state employees and retirees in Massachusetts found the state would save $10.4 million a year by purchasing lower-cost prescription drugs from Canada. But the commission recommended against moving forward with the plan, saying the savings would shrink to $1.4 million after waivers of copayments to incentivize participation by employees and loss of drug company rebates. And, the commission said, even the $1.4 million potential savings would not be worth the liability risks.

- "It is likely that the intended cost savings for consumers would be absorbed by fees charged by exporters, pharmacists, wholesalers, and testing labs," according to FDA Commissioner Lester M. Crawford.

- Borderless drug stores, including those in Canada, require consumers to sign waivers that hold the seller harmless from any legal responsibility for the quality or effectiveness of the drugs sold. States that promote illegal drug importation programs, such as Minnesota and Wisconsin, say on their Web sites that they expressly disclaim "any and all liability from such importation or reimportation or the use of any products so acquired." The reason is obvious: There is no realistic way to verify the safety of these drugs imported through Canada and other countries.

- "The bottom line is that [the state] will benefit by putting the drugs in the 'stream of commerce' and therefore must also bear the risk of loss if these drugs result in injuries," wrote Shikha Dalmia for Tech Central Station. The Illinois Supreme Court has recognized that "when a city creates a hazardous condition and someone is injured as a consequence, it must respond in damages, just as others are required to do."


Thursday, May 27, 2004

A right to health care?

[John Hood, "You Can’t Create A Fundamental Right," Daily Journal, 25 May 2004.]

The language of rights has become muddled in recent years. The rights to life, liberty and property are now being placed on a par with rights to housing, education, food, safety and health care. John Locke Foundation President John Hood explains that the trend is not likely to improve our lots in life:

A "right to health care" is really an intrusive claim on others, a right to coerce others at the point of a gun to finance one's medical care. It's not like the freedom to speak, the freedom to worship, the freedom to work and keep the fruits of one's labors (a fundamental right recognized in North Carolina's state constitution). These rights constrain government's power to coerce, to deprive individuals of their freedom and dignity. A "right to health care," no matter how benign it may sound, does something like the opposite.

Naturally, and I mean that in both sense of the term, I believe that human beings have a wide variety of moral claims on each other. Helping those in need is one widely recognized by most religions and philosophies of life. What matters for the purposes of constitutional government is which of these claims can justly be enforced by violence or the threat of violence. Constitutions don't create fundamental rights; they recognize preexisting natural rights inherent in the social contract that creates a government, that grants some a monopoly on the first use of physical force to accomplish truly public ends.

Hamilton argued that enumerating rights was dangerous. He didn't know the half of it. Enumerating something like a "right to health care" wouldn't just serve to diminish freedom and expand governmental power by implication. It would do so directly.


[See Charles W. Van Way, III, M.D., "The Strength of a Really Bad Idea," The Flint Hills Center.]

Wednesday, May 26, 2004

Wall Street Journal recommends scamming Medicaid?

[Liz Taylor, "When the well-to-do scheme to use Medicaid, they get what they pay for," The Seattle Times, 10 May 2004.]

Financial advice and ethics do not always go hand in hand, but when a major financial paper argues in favor of the rich living off the dole in their later years, significant damage can result. As columnist Liz Taylor points out, though, taxpayers aren't the only ones getting a raw deal under this arrangement:

Shame on Wall Street. Again. This time it's The Wall Street Journal. On April 28, in a column that was otherwise interesting, "Cutting a Deal with the Kids," Jonathon Clement wrote about several ways an older person can create a stream of retirement income from $500,000 in savings. Buy a private annuity, says Clement, or gift the money to your kids who'll pay you a set amount each month.

What's the advantage of that? Clement asks rhetorically. "If the parents make an outright gift and later need nursing-home care, they will have less assets and income, and thus Medicaid is more likely to pay for their long-term care costs."

It's the old trick of transferring your savings to a family member so that the taxpayers (Medicaid) foot the bill for your care, no matter how wealthy you are. In a newspaper long known for its well-heeled readers, the nonchalance with which this advice was given speaks volumes for how commonly it's assumed to be OK.

Here's another way to look at it.

Let's say you want to buy a car. The price of your dream car, a new Lexus, is around $50,000. Rather than use your own money, an attorney suggests you give your savings to your kids and plead poverty. Voilà, the state buys you a car.

You anticipate the delivery with glee. But instead of a Lexus, you get a 1982 Chevy. There are big dings on the sides, the odometer has six digits, and the motor runs rough. "Hey," you yell, "what happened to my beautiful Lexus?"

"We said we'd buy you a car," says the state, "because that's the safety net society has created. But we never promised a nice car. After all, you came to the welfare department for assistance, and we don't have the money for a Lexus. You're poor, so be grateful."

And that's what the advisers who propose these eldercare schemes fail to tell you: that Medicaid — our country's safety net for the poorest of the poor — may pay for your care, but beware of the care you get. Medicaid is the payer of last resort because it offers you the poorest quality, provides the fewest choices, and gives you the least control over what happens to you. You don't decide; the welfare department does.

The reality is, Medicaid doesn't pay adequately for care — typically 20 percent to 30 percent lower than the private-pay market. It never has — anywhere in this country. It never will. As a result, many care providers won't accept Medicaid, especially the good ones. We've created a two-tier system with a wide array of high-quality choices for those who pay privately and significantly fewer — sometimes dreadful — options for those on Medicaid.

In the scheme of things, I'm not concerned about people who give away $20,000 or $30,000 to get onto Medicaid. That's small potatoes. What sends me up the wall are the people who transfer hundreds of thousands of dollars to their children, then get Uncle Sam (a.k.a. you and me) to pick up the tab for their care. I attended an elder-law conference last year at which the main speaker casually bragged about putting a couple with $3 million on Medicaid.

The outcome? In almost every state, Medicaid budgets are going through the roof. We're a rapidly aging nation, and now, with voters zealously cutting taxes, most states are cutting back on Medicaid, dividing an already small pie among a growing number of people. According to the Center on Budget and Policy Priorities (CBPP), the states are in the midst of the most severe budget crisis in recent memory.

"The most obvious potential spot (for cuts) is long-term care," The New York Times stated in an op-ed piece April 17, "which consumes some 40 percent of the nation's Medicaid budget. One overdue reform is to plug loopholes that allow many middle-class people (to get onto Medicaid) by transferring assets to other family members."


[Stephen A. Moses, "Project Proposal: Controlling Medicaid Long-Term Care Costs," The Flint Hills Center.]

Tuesday, May 25, 2004

There's still time to repeal the Medicare drug benefit

[Michael F. Cannon, "Repeal Medicare Drug Entitlement," The Cato Institute, 23 May 2004.]

Not only were there a host of questionable political maneuvers associated with the passage of the new $400 - $600 million or more Medicare drug benefit, but the whole proposal flies in the face of economic sense. Cato's Michael Cannon explains why legislators should discard it before it ever gets off the ground:

Only after the president signed the program into law did the administration release its higher estimate, which came in at $534 billion.

And this scandal compounds another. When brought to a final vote in the House at 3 a.m. on a Sunday, a clear majority voted against the program. Yet GOP leaders held the vote open for nearly three hours -- rather than the usual 15 minutes -- until they twisted enough arms to change the outcome.

The greatest scandal is the program itself. No one putting his own money on the line would invest in a product like this.

[Chief Medicare actuary Richard] Foster testified before Congress that rather than provide catastrophic-only coverage, the program violates "standard classical insurance principles" by providing coverage that begins at a low deductible then disappears and reappears as one's expenses rise. The point of this bizarre structure, he explained, is political: broad subsidies for non-catastrophic expenses attract more votes. The problem is, they also will lead to over- consumption, inflated drug prices and, if history is any guide, will cost well over $534 billion.

The subsidies were made so broad they will force taxpayers to pick up costs the private sector is now paying voluntarily. The CBO estimates every fourth participant would have had private drug coverage anyway. Employers and unions will receive $71 billion just to keep them from dropping their retirees into the program.

It's hard to remember when more people violated more stated principles to enact such an unprincipled law. Fortunately, the drug program does not take effect until 2006. That gives enough time to repeal it and hold an honest, principled debate about reforming Medicare.


Monday, May 24, 2004

JEC provides further clarity on uninsured

[Leah Uhlmann, The Complex Challenge of the Uninsured, Joint Economic Committee, 13 May 2004.]

There is a wealth of information on the uninsured in this recently released report from the Joint Economic Committee. Here are a few highlights:

- Methodologies for estimating the number of uninsured suffer from several shortcomings that may lead them to overestimate the number of uninsured.

- According to the CPS data, the fraction of Americans who report themselves as uninsured, while varying from year to year, has remained relatively constant over the past decade, at roughly 15% in both 1992 and 2002.

- Regulatory costs increase health expenditures by an estimated 6.4%, driving up health insurance premiums and reducing insurance coverage. One recent study estimates higher costs result in a 2.2% decrease in coverage – or almost 5 million uninsured who might otherwise be able to afford insurance coverage.

- Many in the ranks of the uninsured are between periods of employer-sponsored insurance. In fact, 50% of the uninsured regain health insurance within four months.

- Some people are offered insurance at work and choose not to take it because they feel they do not need it or because they place a higher value on other spending priorities, such as education, transportation, housing, etc.

- Many of the uninsured do not go entirely without care. Some uninsured individuals pay for care directly, from their own resources or those of friends and family. In addition, public hospitals, community health centers, facilities managed by the Department of Veterans Affairs, and other local health organizations all provide some care to the uninsured, usually with little or no compensation. In 2004, for example, the uninsured will receive $125 billion in care, purchasing $33 billion out-of-pocket and receiving $41 billion in uncompensated care.

Health insurance could be made more affordable and available by reducing the real costs of providing it and the health care services it helps to finance. Such steps would include reducing regulatory costs, which would reduce the costs of health care for all Americans, and implementing tax parity for nonworkers, which would level the playing-field for Americans who do not have access to employer-provided insurance.

Health Savings Accounts (HSAs) are a good example of an insurance product that is affordable – due to the lower premiums accompanying high deductible health plan coverage - yet create an incentive for spending wisely – due to the savings aspect of the plans. The tax-preferred savings account mitigates the problem of job transition since funds can be drawn upon between employment opportunities. Because of their low cost and flexibility, HSAs could provide a viable insurance plan alternative for many of the uninsured.

Policymakers should not target the uninsured as a single group that is “typical.” Americans of all walks of life become uninsured because of a host of different reasons: the cost of insurance to themselves or their employer, the limitations of the employer-based insurance system, and, in some cases, calculated decisions about the importance of insurance relative to other spending priorities.


[Matthew Hisrich, "Greatest increase in uninsured found among wealthy," The Flint Hills Center, 10 May 2004.]

Canadian Prime Minister enjoys benefits of private health care

[Mary Anastasia O'Grady, "In Canadian Health Care - Some Are More Equal Than Others," The Wall Street Journal, 21 May 2004.]

Politicians have a way of knowing what's best for you...even when they don't choose to follow their own advice. As Canada's single-payer health system implodes, it is interesting to note that one of its biggest defenders takes advantage of private alternatives:

Ring up Canada's Medisys Health Group in Montreal to inquire about a comprehensive medical exam and you will be told that the cost for such a service ranges between $595 and $1,050. You can pay by check, cash, debit or credit card but you may not use your government medical card to pay for your annual physical at the private clinic. That's because check-ups are considered "preventive" and are therefore not covered by Medicare in Quebec.

If this sounds like a two-tier health-care system, with some folks going to clinics that take Medicare and others going to private clinics where they pay their own way, that's because it is. Medisys reported a first quarter revenue increase of 43%, suggesting that while Canadians pledge allegiance to their traditional, single-tier government monopoly, their revealed preferences seem increasingly to be for choice.

A case in point is Canadian Prime Minister Paul Martin, Canada's most powerful and hard-line advocate of a monopoly government system and also a patient at Medisys. If the prime minister were living by the one-size-fits-all system he swears by, he, of course, could not go to Medisys since his Medicare card wouldn't cover his visit.

The prime minister's office insists that he never pays his own medical bills -- this being something to brag about in Canada. For "anything not insured under Medicare he relies on his medical benefit provided to him as an employee of the government of Canada," his office told me.

Yet this hardly absolves Mr. Martin from the charge that he is a consumer operating on a different tier than most of the rest of Canada. After all, it is government privilege that lets him into Medisys. Ordinary Canadians would either need to carry private insurance -- only allowed for nonessential services -- or pay out of their own pockets. As it turns out, even in egalitarian Canada, some are more equal than others.

Touted as Nirvana for decades by America's left, Canada's official monopoly, single-tier system -- the only one in the world save Cuba -- is breaking down badly.


[Dr. Brian Lee Crowley of the Atlantic Institute for Market Studies recently delivered a speech at a Flint Hills event entitled, "The Top Ten Things People Believe About Canadian Health Care, But Shouldn’t."]

Thanks to Benjamin Pratt for this story.

Friday, May 21, 2004

Consumer driven health care an answer to the uninsured

[Nina Owcharenko, "Curing Health Care with Choice," The Heritage Foundation, 19 May 2004.]

The dust is settling from the media attention surrounding "Cover the Uninsured Week," but what is there to show? Heritage Foundation policy analyst Nina Owcharenko offers some insights on what is left to do:

Last week's "Covering the Uninsured Week" brought a slew of ideas from across the health care policy spectrum. Politicians and activists offered a variety of solutions to help reduce the troubling number of Americans without health insurance (about 43 million people, roughly one out of every seven). Unfortunately, their proposals are just more of the same.

They either offer a piecemeal approach that would make only minor adjustments to current policy, or they rely on the existing, fractured health care system to promise change. Either way, they leave untouched the root of the problem: the continued absence of personal choice and control of health care options.

While some consumer-directed efforts are emerging within the employer-sponsored health-care system, what is really needed is a more aggressive and comprehensive approach to reform. One that offers a fresh perspective that would revolutionize the health-care system. A system based on personal choice and freedom.

There are two fundamental changes that are needed to take place in order to jump-start a health care revolution:

1. Fix the tax treatment of health care. The tax code provides unlimited tax relief for the purchase of health insurance, but only through the workplace. As it turns out, lower-wage workers, particularly those in small firms, get less tax relief than high-wage workers. And if an individual goes outside the place of work to buy a health plan, he or she must do so with after-tax dollars, which often makes the cost of a plan prohibitive.

Ideally, current tax exclusion for employer-based health care should be replaced with a national system of refundable health care tax credits, with more help going to those with need it the most. In the short term, offering low-income individuals and families a health care tax credit would enable them to obtain their own health care coverage, regardless of their place of work or work status.

2. Design a consumer-friendly marketplace. In order for individuals to become more involved consumers of health care, there needs to be a marketplace where individuals are able to select from a wide variety of plans that best meet their individual needs.

Unfortunately, some states have over-regulated their markets, making coverage less accessible and less affordable. So the first step for policy-makers should be to encourage states to fix their markets to better serve consumers.

"Covering the Uninsured Week" is over, but the problem remains. And while politicians deserve some applause for trying to deal with it, the solutions they've offered so far don't go far enough. Half-measures relieve some symptoms for a while — but they can never really cure.



Thursday, May 20, 2004

The truth about "Cover the Uninsured Week"

[Michael F. Cannon, "'Cover the Uninsured Week' -- With Honesty," The Cato Institute, 20 May 2004.]

This column provides some exceptional information on the numbers behind the push for covering the uninsured:

Last week's national "Cover the Uninsured Week" should have kicked off with a little honesty. The campaign is a coalition of over 100 groups that inundated Americans with advertisements, events, and pleas from former presidents and celebrity spokesmen "to publicize the problem of allowing nearly 44 million Americans to live without health care coverage, and to highlight proposed solutions." The first problem the coalition should have addressed is how it is misleading the public.

Originally, "40-something-million-uninsured" meant the persistently uninsured, i.e., those who lacked health insurance for the entire year. The Congressional Budget Office shot holes in that statistic last May when it reported the correct figure is between 21 million and 31 million. Difficult as it may be to believe, an official government statistic was off the mark by maybe 110 percent.

The CBO's figures may still be too high because they count millions of Americans who are Medicaid-eligible, and therefore have coverage whenever they need it. One-third of all "uninsured" children (2.9 million) fall into this category (the CBO gives no estimate for adults). Moreover, the persistently uninsured are mostly young (39 percent are under age 25, and another 22 percent are under age 35) or healthy (86 percent report their health to be "good," "very good," or "excellent").

Not every Cover the Uninsured Week sponsor supports expanding government programs. But once they commit to covering all the uninsured, there is no way to reach that goal short of compulsory health coverage. Whether it is administered by government or the private sector, compulsory health coverage means government-run health care. The campaign's official glossary even defines the underinsured as "people who have some type of health insurance, such as catastrophic care, but not enough insurance to cover all their health care costs." It's clear that Cover the Uninsured Week will drag on until all health care costs are socialized and individual responsibility is nil.

A better goal would be to restore to America's largely socialized health care system the market processes where producers compete to provide consumers with value, and consumers keep costs down by patronizing efficient producers and avoiding inefficient producers. That patient-centered process has begun with the introduction this year of health savings accounts, and it will do more to provide quality, affordable health care to the masses than a century of Cover the Uninsured Weeks.


[For more on debunking the numbers, see Matthew Hisrich, "Greatest increase in uninsured found among wealthy," The Flint Hills Center, 10 May 2004.]

Wednesday, May 19, 2004

Manhattan Institute releases book on Consumer Driven Health Care

Compiling essays from leaders in the field, Regina E. Herzlinger has put together what looks to be an excellent resource for those interested in the future of health care. The website includes essays from and reviews of the book,
Consumer-Driven Health Care: Implications for Providers, Payers and Policy Makers.

Increased consumer control of health care is shaking up the medical and insurance systems. In Consumer-Driven Health Care, Harvard Business School’s acclaimed professor Regina E. Herzlinger states that hospitals, doctors, benefits administrators, accountants, government policymakers, and insurers had better adapt or else they will be replaced.

Professor Herzlinger documents how the consumer-driven health care movement is being implemented and its impact on insurers, providers, new intermediaries, and governments. With additional contributions by health care’s leading strategists, innovators, regulators and scholars, Consumer-Driven Health Care presents a compelling vision of a health care system built to satisfy the people it serves.

This comprehensive resource includes the most important thinking on the topic and compelling case studies of consumer-driven health care (CDHC) in action, here and abroad, including new consumer-driven intermediaries for information and support; types of insurance plans; focused factories for delivering health care; personalized drugs and devices; and government roles.

Regina Herzlinger’s unique perspective covers both the theoretical basis of CDHC and the opportunity for innovation that CDHC offers. Her book is a volume that no leader in health care can afford to be without.


NCPA President John Goodman testifies on Health Savings Accounts

[John C. Goodman, Ph.D., "Statement on Health Savings Accounts," Testimony before the U.S. Senate Special Committee on Aging, National Center for Policy Analysis, 19 May 2004.]

The concept of HSAs is not conservative or liberal. It’s an empowerment idea. It should appeal to liberals who want an alternative to HMO rationing. It should appeal to conservatives who want an alternative to government rationing. It should appeal to everyone who suspects that impersonal bureaucracies care less about us than we care about ourselves. Giving employees more choice and control over their health care makes good sense. It leads to lower costs and more control over the kinds of care they prefer.

[See also, Phyllis Jacobs Griekspoor, "State gets new health accounts," The Wichita Eagle, 19 May 2004.]

The party's over

[Carol M. Ostrom, "Canadian clinics cutting off drugs for Americans," The Seattle Times, 18 May 2004.]

More bad news for reimportation supporters. Canadians are beginning to crack down on the sale of drugs to Americans, and it appears that part of the reason is our lawsuit-happy society:

Canadian medical clinics are quietly informing American patients they will no longer help them obtain prescription drugs, after stern warnings from a major insurer that doctors who are sued by Americans won't be covered.

The move threatens to restrict access to cheaper drugs purchased by hundreds of thousands of Americans who visit Canadian clinics or buy online from Canadian pharmacies.

[T]he organization that insures the vast majority of Canadian doctors has gone a step further, warning that if doctors continue the "risky activity" of rewriting prescriptions for American patients, they'll be on their own in the event of a lawsuit.

"The American system has a reputation for being litigious — people are ready to sue for everything," said Dr. Morris VanAndel, head of the B.C. licensing board, called the College of Physicians and Surgeons.

In February, the Canadian Medical Protective Association (CMPA), a "defense union" based in Ottawa that insures about 95 percent of doctors in Canada, issued a strongly worded directive spelling out the insurance limits, making it clear the prohibition applied to "Internet prescribing" as well.

In the directive, Dr. James Sproule of CMPA said licensing boards expect doctors prescribing medication to take a history, perform examinations, diagnose, obtain consent and assure follow-up, as well as keep an appropriate medical record.

"You're not making your expertise available — you're selling your signature for a price," [VanAndel] said. "I won't own this quote, but someone called it 'professional prostitution.'"

VanAndel said his office would initiate "an action" against a British Columbia-licensed physician rewriting American prescriptions without a proper doctor-patient relationship, even if that doctor were located outside Canada.


Fees, waivers enter the health care market as malpractice costs grow

[Joyce Howard Price, "A patient's promise to avoid a lawsuit," The Washington Times, 17 May 2004.]

Doctors across the country are increasingly relying on fees and waivers to avoid medical malpractice suits and offset insurance costs. One problem with these efforts, though, is that until some sort of legislation addresses the issue, they remain in a legal gray zone:

Some doctors are trying to discourage malpractice lawsuits by having patients sign waivers agreeing not to sue them, and growing numbers are charging fees designed to help them pay for the rocketing costs of malpractice insurance.

In Trinidad, Colo., Dr. Stanley H. Biber, 81, says he hasn't performed general or orthopedic surgery for six months because he can't afford to pay $149,000 a year in malpractice premiums.

Therefore, Dr. Biber said he is considering having patients sign contracts agreeing not to sue him, so he can be insured and have "some protection."

Dr. David Vastola, an intern in gastroenterology in North Palm Beach, Fla., says he began using waivers two years ago when his annual costs for malpractice premiums soared from $12,000 to $60,000 in one year, while his coverage plunged from $1 million to $250,000.

Dr. Kenneth Greene, an intern in Towson, Md., said that he knows of some doctors who are charging patients $5 or $10 to renew prescriptions by phone.

Dr. Greene said he does not add extra charges, but he raised $3,000 last year in a mail solicitation program in which he requested $10 donations from patients to help offset rising malpractice costs. He continues to seek $10 contributions from patients who visit him, but stresses they are not required.


Tuesday, May 18, 2004

Wichita hospitals to cooperate

[Phyllis Jacobs Griekspoor, "Matching heart records could mean better care," The Wichita Eagle, 18 May 2004.]

Wichita-area hospitals will implement a plan to streamline and make uniform the paperwork for cardiac patients. Along with barcoding prescriptions, this move seems to signal a growing trend toward improving an "information gap" that has developed in the health care industry. By coordinating information, potential accidents may be avoided and the quality of care may improve:

Cardiac care providers in Wichita soon are all going to be on the same page.

At least as far as their paperwork is concerned.

The Wichita Citywide Cardiac Collaborative, a nurse-led initiative, has been working since November to develop standard doctor's-order forms, discharge forms and patient-education materials for use at all five of the Wichita hospitals that offer cardiac care.

On Thursday they will launch the program they have developed, rolling out uniform paperwork for use at every hospital in town.

The goal is to improve the quality of patient care by making it easier to follow national guidelines.

Darrell Youngman, a cardiovascular disease specialist with Cardiovascular Consultants of Kansas, said the program demonstrates an unprecedented level of cooperation among institutions.

"As far as I know, Wichita may be the only city in the nation where hospitals in competition with each other are cooperating in an effort like this," he said.

Specifically, the program provides a checklist to help doctors and nurses make sure that guidelines, including the administration of recommended cardiac drugs such as aspirin, beta blockers and ACE inhibitors, are followed.

"It's easy for something to get overlooked in the flurry of activity that is often going on at the time a patient is first admitted," said Susan Hendrickson, a registered nurse and leader in the collaborative effort.

The new procedures will lessen the chances of that happening, she said.


Assuming responsibility

[Radley Balko, "'Beyond Personal Responsibility,'" Tech Central Station, 17 May 2004.]

As Cato Institute policy analyst Radley Balko points out in this column, there is a growing sentiment that "we've got to move beyond personal responsibility" to ensure adequate health care. Unfortunately, it is exactly this erosion of responsibility that is undermining the nation's health:

Instead of manipulating or intervening in the array of food options available to American consumers, our government ought to be working to foster a sense of responsibility in and ownership of our own health and well-being. But we're doing just the opposite.

We're becoming less responsible for our own health, and more responsible for everyone else's. Your heart attack drives up the cost of my premiums and office visits. And if the government is paying for my anti-cholesterol medication, what incentive is there for me to put down the cheeseburger?

This collective ownership of private health then paves the way for even more federal restrictions on consumer choice and civil liberties. A society where everyone is responsible for everyone else's well-being is a society more apt to accept government restrictions, for example -- on what McDonalds can put on its menu, what Safeway or Kroger can put on grocery shelves, or holding food companies responsible for the bad habits of unhealthy consumers.

The best way to alleviate the obesity "public health" crisis is to remove obesity from the realm of public health. It doesn't belong there. It's difficult to think of anything more private and of less public concern than what we choose to put into our bodies. It only becomes a public matter when we force the public to pay for the consequences of those choices. If policymakers want to fight obesity, they'll halt the creeping socialization of medicine, and move to return individual Americans' ownership of their own health and well-being back to individual Americans.

That means freeing insurance companies to reward healthy lifestyles, and penalize poor ones. It means halting plans to further socialize medicine and health care. Congress should also increase access to medical and health savings accounts, which give consumers the option of rolling money reserved for health care into a retirement account. These accounts introduce accountability into the health care system, and encourage caution with one's health care dollar. When money we spend on health care doesn't belong to our employer or the government, but is money we could devote to our own retirement, we're less likely to run to the doctor at the first sign of a cold.

We'll all make better choices about diet, exercise, and personal health when someone else isn't paying for the consequences of those choices.


[See Charles W. Van Way, III, M.D., "The Strength of a Really Bad Idea," The Flint Hills Center.]

Monday, May 17, 2004

Government "safety nets" encouraging a lack of responsibility

["Retirees are not saving enough for health care costs," Daily Policy Digest, NCPA, 17 May 2004.]

One of the unintended consequences of creating handouts is that people change their behavior to accomodate them. This is certainly the case in many areas of health care. As a new study reveals, when these behavior changes are based on false assumptions, the results can be devastating. As Stephen Moses has pointed out for Flint Hills on previous occasions, Americans need to change the way they view health care provision and begin to take greater responsibility for their own care:

Retirees drastically underestimate how much they will pay in health care costs by wrongly assuming that Medicare and employer health plans will pick up the tab, says the Wall Street Journal.

A recent study by the Employee Benefits Research Institute found:

- Actual health care costs are five times higher than what most retirees anticipate.
- Despite the new Medicare drug benefit, retirees need to save anywhere from $80,000 to $700,000 in order to pay out-of-pocket health care costs.
- Employers are providing less coverage for retired former employees, and the level of benefits is expected to drop to 10 percent of total medical expenses by the year 2031.
- Currently, only 71 percent of employers are increasing retiree premium contributions.

Paul Fronstin, director of the EBRI study, suggests that individuals:

- Estimate their lifespan, considering factors such as nutrition, health habits and family history.
- Double-check what benefits are offered by their employer; since 1988, the number of employers (with more than 200 employees) offering retiree health coverage has declined by almost 50 percent.
- Assume a life expectancy of 80 and save at least $80,000 to cover health care costs not covered by Medicare.
- Purchase long-term care insurance to cover nursing home expenses, which can run $50,000 per year or more.


[See Stephen A. Moses, "Project Proposal: Controlling Medicaid Long-Term Care Costs," The Flint Hills Center.]

Canada will not be able to supply U.S. drug needs

[Julie Appleby, "U.S. drug needs would overwhelm Canada," USA Today, 16 May 2004.]

Those looking to Canada to solve price issues in the United States are likely to be disappointed. That's the conclusion of a new report released today. Canada is a relatively small market, and cannot support the demand in the U.S. If advocates of such a move assume that American pharmaceutical companies will simply increase the supply in Canada to accomodate U.S. importers, they are equally mistaken, as some firms are already moving to restrict supply.

Canada has doubled its imports of prescription drugs since 1999 — a period that saw U.S. residents increasingly buying drugs from Canada — and would be unable to meet the demand created if U.S. law allowed greater access.

That's the conclusion of a University of Texas-Austin researcher, who studied the issue at the request of two congressmen, using government data from both countries. The study, out Monday, attempts to quantify the potential impact of U.S. demand for pharmaceuticals on Canada and will likely spur further debate about opening U.S. borders to medications from abroad.

The report finds:

• If all U.S. residents bought their prescription drugs from Canada, that nation's supply would be exhausted in 38 days.

• If just half of the elderly in the USA were to buy drugs from Canada, it would have to boost its drug supply by 2.5 times.


Friday, May 14, 2004

Reverse mortgages may be a way to cover long-term care

[Robert J. Bruss, "Profits, pitfalls of reverse mortgages," The Wichita Eagle, 9 May 2004.]

As the baby boom generation ages, state and federal governments will no longer be able to provide the benefit levels granted under Medicaid and other welfare programs. This means individuals must begin to plan for their own care as they face retirement.

As columnist Jane Bryant Quinn points out in her article, "What to Look for in an LTC Policy":

If you have ears to hear, listen to what the government is telling you about nursing-home care. You cannot expect continued expansion in the programs that help pay the bills.

The Medicaid program is being shaved. It will still be there to help nursing-home patients who run out of money, but your benefits may be limited.

What's more, Congress will keep cracking down on middle-class people who hide their assets in order to go on Medicaid earlier than they should.

Over the long run, you're going to have to cover these expenses yourself -- through personal savings, a reverse mortgage against your home, or with long-term-care (LTC) insurance.


A recent article in The Wichita Eagle provides some excellent information on reverse mortgages:

A reverse mortgage pays tax-free income to the senior citizen homeowner. It is the exact opposite of a traditional "forward" mortgage where the homeowner borrows money and then repays that borrowed money, plus interest, to the lender.

To qualify for a reverse mortgage, the homeowner must be at least 62. In the case of husband and wife, both co-owners must be at least 62. If one co-owner spouse is not yet 62, he or she can sign a quit claim deed to the other over-62 spouse who then becomes eligible for a reverse mortgage.

There are no restrictions on how reverse mortgage income can spent by the homeowner. The senior citizen homeowner's credit and income are irrelevant. However, the senior homeowner cannot have any unpaid federal obligations and must not be involved in a bankruptcy.

Most traditional mortgage lenders, such as local banks and mortgage brokers, do not offer reverse mortgages. The largest reverse mortgage originators are Financial Freedom Plan, Wells Fargo Mortgage, Seattle Mortgage and GMAC. Dozens of smaller regional lenders also specialize in reverse mortgages.

The best place to easily locate a reverse mortgage lender in your area is to go on the Internet to www.reversemortgage.org. Then click on your state for a list of lenders and the types of reverse mortgages they offer.

By calling their toll-free 800 numbers listed on the Web site, you will quickly be in touch with a local reverse mortgage representative.


Thursday, May 13, 2004

CVS calls for drug reimportation

[Mark Sherman, "CVS Pharmacy backs imports," Associated Press, The Sun-Sentinel, 6 May 2004.]

Drug store chain CVS recently joined the push for importing drugs from Canada. He is correct to point out that legalization would put an end to what is essentially black market trade, but he is wrong to think that this will be the solution to drug prices in the U.S. Such a strategy will only hasten the collapse of Canadian price controls.

Breaking with others in his industry, the chief executive of CVS Pharmacy called Wednesday for legalizing imports of prescription drugs.

The statement by the nation's largest wholesale purchaser of prescription medicines was issued a day after the Bush administration's health secretary said legalizing imports appears inevitable.

"While many in our industry believe that the importation issue is a fundamentally flawed concept and oppose it without exception, I come with a slightly different view," Thomas Ryan, CVS chairman and chief executive officer, told a government task force on drug importation.

Ryan is the first executive of a large drug store chain to support importing drugs from countries where prices are controlled by governments so that people can fill prescriptions more cheaply than they can at U.S. pharmacies. Ryan said such a move would be a recognition of reality -- a growing, somewhat shadowy business enterprise that he said is valued at $2.5 billion to $3 billion a year, far more than other estimates of the cross-border drug trade.


The long-term cost of drug price controls

["EU Brain Drain on Drugs," Quote To Note, HealthFactsandFears.com, 5 May 2004.]

From The Financial Times:

Research shows that while European consumers are getting drug prices up to a third below U.S. levels, their nations are paying a cost by losing research and development jobs to countries where better profits are being made. Price controls and slow approval processes are viewed by drug companies as hurting Europe's ability to compete with the U.S., and in the long term, the study shows, Europe will pay an economic price for lower drug prices.

Wednesday, May 12, 2004

Tailoring co-pays may be the wave of the future

["Employers Tinkering with Drug Co-Pays to Reduce Costs," Daily Policy Digest, NCPA, 12 May 2004.]

Sometimes, counter-intuitive approaches make the most sense. Certainly in health care, one-size-fits-all measures are rarely ideal, and companies are beginning to realize this. By differentiating between health groups, some are actually able to lower costs while reducing co-pays:

Rising health-care costs are forcing some employers to increase employee co-pays, with the hopes that employees will use their dollars more wisely. However, Pitney Bowes Inc. actually reduced co-pays for asthma and diabetes drugs to 10 percent. As a result:

- The median cost of a diabetes patient fell by 12 percent -- for an asthma patient, 15 percent.

- Emergency room visits by employees dropped 35 percent among diabetes patients, and 20 percent among asthma patients between 2001 and 2003.

- The company estimates its new co-pay system will save the company $1 million in 2004.

Most employers are more likely to increase co-pays, fearing that providing more coverage will increase their costs. Indeed, a Rand Corporation study shows that doubling patient co-pays from $5 to $10 reduces the average annual drug cost per worker by 22 percent.

However, the challenge is determining at what point employees will stop purchasing drugs when faced with higher co-pays. A study done by Harvard Medical School and Medco Health Solutions published in the New England Journal of Medicine indicated that making drastic changes to co-pays, such as switching from a one-tier to a three-tier system showed that:

- Sixteen percent of patients taking third-tier ACE inhibitors stopped treatment, while 21 percent of patients taking the most expensive cholesterol drugs stopped their treatments as well.

- More modest increases ( say, moving from a two-tier to a three-tier co-pay system) resulted in very few patients stopping treatments altogether.

Health experts believe that tailoring co-pay plans to different disease areas is the wave of the future, either through various co-pay tiers or even replacing co-pays with generic drugs.


AMA proposes tax credits for the uninsured

[E.J. Mundell, "AMA Seeks Tax Credits for Uninsured," Forbes, 11 May 2004.]

Tax credits as a means for alleviating the problem of the uninsured in the U.S. are gaining steam. The American Medical Association suggests that they may be the answer to the problem:

Most of America's 43 million uninsured could finally gain full medical coverage if Washington offered them tax credits specifically earmarked for health insurance, say top officials at the American Medical Association.

The AMA, the largest organization representing the nation's doctors, advocates abolishing the current tax exclusion for employer health benefits and replacing it with tax credit vouchers that the working poor could use to purchase individual insurance packages.

"The AMA proposal allows people to select their own insurance. It allows them a mechanism so they can afford the insurance with the refundable tax credit," said AMA President Dr. Donald J. Palmisano. "It puts people in control of their own destiny."

The health-care funding proposal, written by Palmisano along with two experts at the AMA's Center for Health Policy Research, appears in the May 12 issue of the Journal of the American Medical Association.


Tuesday, May 11, 2004

Reimportation unlikely to reduce costs, but could lead to reform

["Reimportation Could Spur Reform," Daily Policy Digest, NCPA, 11 May 2004.]

Allowing drug reimportation from Canada will only have a minimal affect on prices, but according to the Congressional Budget Office, the move might force other countries to cave in on their price controls:

Legalizing the reimportation of prescription drugs from low-cost venues such as Canada would cut U.S. drug prices only a bit and would have little impact on the drug industry's profits, according to a report by the Congressional Budget Office.

The CBO also found:

- The cost of patented prescription drugs is indeed lower -- 35 percent to 55 percent lower -- in other industrialized countries than in the United States.

- However, reimportation from Canada alone would hardly make a difference, and that re-importing from a broad range of developed countries might save $40 billion in 10 years, or 1 percent of U.S. drug spending.

- If importation is legalized, both foreign governments and drug firms would move to limit supplies to other countries, and drug firms might charge foreign governments more to ensure an adequate margin on drugs reimported to the United States.

Thus, if nothing else, lowering the barriers to drug reimports might give drug firms reason to make foreign buyers pay something closer to their fair share, says Investor's Business Daily.


[See the archived blog entry, "The positive unintended consequences of allowing reimportation," 25 February 2004.]

Health Savings Accounts stirring up panic - among politicians

[Michael F. Cannon, "Hillary's Worst Nightmare," The Cato Institute, 9 May 2004.]

Health Savings Accounts are expected to revolutionize health care in the United States. Apparently the thought of greater consumer choice is enough to sound a rallying cry for the defenders of heavy-handed government programs:

Ever since the Clinton administration's proposal to direct America's health care system from Washington, D.C., went down in ignominious defeat a decade ago, its chief architect, Hillary Rodham Clinton, has shied away from "comprehensive health care reform," preferring instead to take smaller steps toward government-run health care.

That is, until now.

Tucked away in the recently enacted Medicare prescription drug bill is a deceptively small provision allowing personal, tax-free health savings accounts. Health savings accounts mark a fundamental shift in federal health care policy. Health savings accounts treat an individual's medical expenditures and savings on a par with tax-free employer expenditures. As a result, they empower individuals to become stewards of their own health care dollars rather than force people to depend on their employer to spend those dollars wisely.

Just as IRAs and 401(k)s made the political landscape more hospitable to Wall Street and free markets by turning Americans into investors, health savings accounts will generate the political will to enact consumer-based Medicare reforms by turning millions of Americans into sovereign health care consumers.

Former Sen. Phil Gramm quips that the left reacts to health savings accounts like a vampire reacts to a cross, because the left knows that once patients get a taste of freedom, all hope of achieving a government-run health care system will vanish.

Clinton inadvertently acknowledges this reason for her change in strategy by veering off-message for several column-inches to denounce health savings accounts and similar reforms. She argues that as stewards of their own health care dollars, consumers aren't sophisticated enough to demand value from medical providers and will harm themselves by forgoing needed care to save a few bucks. Like all opponents of consumerism, the real object of her disapproval is the public's intelligence. More importantly, health savings accounts and similar reforms threaten, as she puts it, "what we consider traditional insurance."

To the most ardent supporters and opponents of health care consumerism, Clinton's desire to accelerate socialization makes perfect sense. Considering how health savings accounts will transform America's health care sector, it's imperative.

For the first time, advocates of socialized medicine are on the run. This ought to be good.


Monday, May 10, 2004

Christian Science Monitor highlights HSAs

[Jonathan P. Decker, "A better way to pay for healthcare," The Christian Science Monitor, 10 May 2004.]

This is an interesting article from today's Christian Science Monitor that discusses the health and tax benefits of HSAs, and reports on their growing popularity:

It's rare when a government program actually earns heaps of praise from a taxpayer. But when Health Savings Accounts were included in the Medicare Act of 2003, it was exactly what Dave Limberg of Bloomington, Minn., was looking for.

Not only have HSAs reduced healthcare costs for Mr. Limberg's family, the accounts have also kept a lid on costs at Standard Dynamics, a printing equipment distributor with nine employees, where Limberg serves as the company's controller.

"It was a no-brainer for us," says Limberg, who personally pays $490 every month for his wife's three prescriptions. "We had 17 percent increases in premiums over the past five years. Since we implemented HSAs, our overall healthcare costs have remained flat, compared with a 10.2 percent increase had we stuck with our previous plan."

"HSAs are like an IRA on steroids," says John Goodman, the president of the National Center for Policy Analysis, who has been called "the father of medical savings accounts" by former House Ways & Means Chairman Bill Archer. "They are also another way to sock money away, especially when we don't know what will happen with the Social Security and Medicare systems in the future."


Health Savings Accounts now available in Kansas

[Phyllis Jacobs Griekspoor, "New health insurance plan on tap for Kansans," The Wichita Eagle, 9 May 2004.]

Kansans now have greater consumer choice when it comes to health insurance as Health Savings Accounts are now available and may soon become much more widespread. These tools not only encourage saving and better management of health care spending, but they may also make insurance more affordable, and therefore more likely to be within the reach of some of the uninsured:

A new option for paying for health care is emerging around the country.

Health Savings Accounts, or HSAs, coupled with high-deductible health insurance policies, are expected to be rolled out soon by major insurance carriers in Kansas.

Their arrival has been delayed by a legal "glitch" that requires a change in Kansas law, advocates of the new product said.

But the Legislature has passed a bill to fix that, and Gov. Kathleen Sebelius is expected to decide this week whether to sign it.

In the meantime, HSA products have already arrived in Wichita. Providers cannot legally offer them as a package deal with insurance, but people who already have high-deductible insurance policies can legally establish them.

That was enough to encourage Terry Goodnight and her husband, Alan, to start their company, DirectCare, which sets up and manages HSAs.

DirectCare does not offer insurance policies but will help people find a high-deductible policy.

"This is absolutely one of the most fantastic options ever to be offered from a consumer standpoint," said Jim Jasnoski, owner of Design Benefits, a Wichita health insurance sales company employing more than 300 agents in Kansas, Missouri, Oklahoma and Texas.

Like DirectCare, Design Benefits is now offering only savings account management.

But Jasnoski said he believes Sebelius will sign the bill authorizing the sale of insurance policies in Kansas that include HSAs.

"It's a no-brainer. It's good for all of Kansas, especially the uninsured," Jasnoski said.


[See Matthew Hisrich, "Greatest increase in uninsured found among wealthy," The Flint Hills Center, Policy Brief, May 2004.]

New Fraser Institute study reveals true state of Canadian healthcare

[Joseph Brean, "'Mediocre' care at high price," The National Post, 7 May 2004.]

With Americans lining up to import Canada's socialized drug prices, it is worth noting that the nation does not even stack up well against other welfare state countries. Is this truly the direction we want to head to solve the health care difficulties here in the U.S.?

Canada's universal medicare system achieves only middling success compared to other industrialized nations, despite being tied with Iceland's as the most expensive to run, a new analysis shows.

Sweden, Japan, Australia and France all permit some private involvement in their public health care systems, and all achieve lower mortality rates on a number of separate indicators, according to the report released yesterday by the Fraser Institute.

"For [Canada's] high level of spending, we get mediocre health outcomes, some of the longest waiting times in the world, and terrible access to doctors and technology.... Our performance is just not commensurate with our level of spending. We're not getting the value for money," said Nadeem Esmail, a senior health policy analyst at the conservative think-tank, which sponsored the study. His co-authors were Michael Walker, the institute's executive director, and Sabrina Yeudall, a researcher.

Their study compared public health care systems in 28 nations of the Organization for Economic Co-operation and Development, all of which guarantee universal care, and most of which force patients to share in the costs. It ignored the U.S. and Mexico, which do not guarantee universal care.

"Shackling patients to a government monopoly with no alternative choices results in a more expensive and lower standard of care than would be available otherwise," Mr. Esmail said.

He said his results demonstrate the value of a competitive market environment for hospitals and the need for user fees on public health services.

"Patients are far more responsible with their own money than they are with anyone else's," Mr. Esmail said.


Friday, May 07, 2004

Ignoring the truth about tobacco

["Second-Hand Lies About Tobacco," Daily Policy Digest, NCPA, 7 May 2004.]

In a recent Wall Street Journal column, Sally Satel of the American Enterprise Institute takes an interesting view of anti-tobacco zeal, and how ignoring the relative safety of smokeless tobacco may be endangering the lives of Americans for the sake of an ideal:

While ignoring substantial evidence that the risks of tobacco product use can be cut drastically by switching from cigarettes to smokeless tobacco, public health officials are quick to embrace spurious research that supports their unsubstantiated claim that second-hand tobacco smoke is a major carcinogen.

[R]eplicated, large-scale studies show that switching to smokeless tobacco can dramatically reduce the health risks to smokers. In Sweden, for example:

- Although 40 percent of men use tobacco products, Swedes have the lowest rate of lung cancer in the European Union. This is largely because moist snuff represents half of all the tobacco that Swedish men use. (The other half smoke.)

- Risks of mouth cancer, depending on the smokeless product used, range from negligible for snuff to half the risk associated with smoking, for products like chewing-tobacco.

Despite the evidence, the U.S. surgeon general told Congress that "there is no significant scientific evidence that suggests smokeless tobacco is a safer alternative to cigarettes."


[See also, Jabob Sullum, "Snuff Treatment," Reason, 26 December 2003.]

Thursday, May 06, 2004

Removing the middleman

[Rep. Ron Paul, MD, "Free Market Medicine," LewRockwell.com, 5 May 2004.]

Texas Representative Ron Paul provides us with a history lesson about how we got where we are with regard to health care, and as he explains, two government wrongs do not make a right:

We should remember that HMOs did not arise because of free-market demand, but rather because of government mandates. The HMO Act of 1973 requires all but the smallest employers to offer their employees HMO coverage, and the tax code allows businesses – but not individuals – to deduct the cost of health insurance premiums. The result is the illogical coupling of employment and health insurance, which often leaves the unemployed without needed catastrophic coverage.

While many in Congress are happy to criticize HMOs today, the public never hears how the present system was imposed upon the American people by federal law. In fact, one very prominent Senator now attacking HMOs is on record in the 1970s lauding them. As usual, government intervention in the private market failed to deliver the promised benefits and caused unintended consequences, but Congress never blames itself for the problems created by bad laws. Instead, we are told more government – in the form of “universal coverage” – is the answer.

We can hardly expect more government to cure our current health care woes. As with all goods and services, medical care is best delivered by the free market, with competition and financial incentives keeping costs down. When patients spend their own money for health care, they have a direct incentive to negotiate lower costs with their doctor. When government controls health care, all cost incentives are lost.


[Richard B. Warner, M.D., "How Would You Like Your Medicine?," The Flint Hills Center, 24 July 1999.]

Wednesday, May 05, 2004

Direct to consumer drug ads paying off - for consumers

["Direct-to-Consumer Advertising and Physician Practice," Daily Policy Digest, NCPA, 5 May 2004.]

There is an ongoing debate over the benefit or harm arising from pharmaceutical firms advertising their products directly to consumers. Detractors claim that they have an undue influence on patients who should be deferring to their physician on such matters. Proponents point out that many who otherwise might not visit a doctor now do so because they saw an ad for a particular drug. Recent research calls the detractors' argument into question, while backing up that of the proponents.

One of the more controversial health care issues to emerge during the past decade is direct-to-consumer advertising (DTCA) of prescription drugs. In 1997 the U.S. Food and Drug Administration (FDA) released guidelines that enabled broadcast advertising for drugs. The result was that DTCA more than doubled between 1997 and 2001 -- from $1.1 billion to $2.7 billion.

Does DTCA influence physician prescribing when patients requested a drug by name? According to a study in Health Affairs based on a survey of physicians:

- Physicians prescribed the requested DTCA drug in 39.1 percent of the cases, but were just as likely to recommend a lifestyle change (39.1 percent).

- Other actions doctors took included prescribing another drug (22.4 percent), referring the patients to a specialist (5.8 percent) or recommending a diagnostic test (9.3 percent).

- Interestingly, 12.2 percent of the time they recommended an over-the-counter drug.

When the DTCA drug was prescribed:

- Some 46.1 percent of physicians said it was the most effective drug, while 48.4 percent said it was as effective as other medications and wanted to accommodate their patient's request.

- Patient encounters with the physicians led to new treatment for conditions more than half the time.


Explaining the difference between prices and costs

[Thomas Sowell, "The 'cost' of medical care," Townhall, 4 May 2004.]

In this column, Thomas Sowell points out that there is no free lunch. If a politician changes the price of a good, then there will be consequences. In the market, supply and demand are constantly shifting toward equilibrium. When this mechanism is replaced with artificial prices, there are still corresponding shifts, but they no longer reflect people's desires.

If you ask most people about the cost of medical care, they may tell you how much they have to pay per visit to their doctor's office or the monthly bill for their prescription drugs. But these are not the costs of medical care. These are the prices paid.

The difference between prices and costs is not just a fine distinction made by economists. Prices are what pay for costs -- and if they do not pay enough to cover the costs, then centuries of history in countries around the world show that the supply is going to decline in quantity or quality, or both. In the case of medical care, the supply is a matter of life and death.

The average medical student graduates with a debt of more than $100,000. The cost per doctor of running an office is more than $100 an hour. The average cost of developing a new pharmaceutical drug is $800 million. These are among the costs of medical care.

When politicians talk about "bringing down the cost of medical care," they are not talking about reducing any of these costs by one cent. They are talking about forcing prices down through one scheme or another.

Many of the same politicians who are gung ho for imposing price controls on prescription drugs, or for importing Canadian price controls by importing American medicines from Canada, have not the slightest interest in stopping frivolous lawsuits against doctors, hospitals, or drug companies -- which are huge costs.

Price control zealots likewise seldom have any interest in reducing the amount of federal requirements for getting a drug approved for sale to the public -- a process that can easily drag on for a decade or more, costing millions of dollars, and also costing the lives of those who die while waiting for the drug to be approved by bureaucrats at the Food and Drug Administration.

For political purposes, what "bringing down the cost of medical care" means is some quick fix that will win votes at the next election, regardless of what the repercussions are thereafter.


Tuesday, May 04, 2004

Deregulation and tax deductible insurance may lower health care costs, reduce number of uninsured

["Better Health Insurance Markets," Daily Policy Digest, NCPA, 4 May 2004.]

An column in today's Wall Street Journal reports that more effectively regulating health insurance and fully utilizing health savings accounts may go a long ways toward improving the health care market:

According to John F. Cogan, former Bush administration director of the Office of Management and Budget; R. Glenn Hubbard, former chairman of the Council of Economic Advisers; and Daniel P. Kessler, a Hoover Institution senior fellow:

- Each percentage-point rise in health-insurance costs increases the number of uninsured by 300,000, and the typical worker now pays $750 more per year in health costs than just three years ago.

- There are nearly 1,500 specific state insurance coverage requirements in addition to laws requiring insurers to sell policies to any customer (any-willing-provider laws) and these add an average of 7 percent and 17 percent to the cost of health insurance, or $600-$1,500 per year for the typical family health plan.

- Based on the RAND Corporation's National Health Insurance Experiment, consumers would reduce their health care spending by $65 billion per year if the average annual deductible rose from its current level of $250 to even $500 and the typical coinsurance rate were to rise from 20 percent to 25 percent.

To meet those out-of-pocket expenses, they suggest fully tax deductible Health Savings Accounts (HSAs) -- which would keep the savings account feature of recently enacted HSAs, but allow them to be coupled with any health insurance policy.

Tax preferences are the primary reason five out of every six dollars of health-care spending are paid by third parties. Since people are wiser consumers when they are spending their own money, leveling the playing field so that out-of-pocket health expenses and a variety of health insurance policies receive the same tax advantages can make the market much more efficient.


Monday, May 03, 2004

Newly-improved fiscal health of states masks looming Medicaid problems

[Robert Tanner, "Report: States struggle with slow growth," Associated Press, The Wichita Eagle, 3 May 2004.]

Most states tweaked their budgets to avoid catastrophe as finances turned sour. Few actually addressed the root causes of costs outpacing income. Legislators are playing with fire, though, as Medicaid quickly grows to a point where budget patches are no longer adequate and the federal bailout dollars dry up:

The nation's governors are the latest group to document signs of improving finances for their states, but - as they issued a new report Monday - the states' top officials tried to dampen expectations of a quick economic recovery.

The National Governors Association, reporting on state finances in the fiscal year that ends next month and the year that begins in July, found steady signs of improvement. But it also found weaknesses, particularly with Medicaid growth and still-weak cash reserves.

The state share of Medicaid spending is projected to be back at double-digit growth next year, at 12.1 percent. This year's growth of the state share of the state-federal health care program for the poor was kept to 4.6 percent, but only because of the $20 billion federal bailout approved last year to help states.


[Matthew Hisrich, "Kansas needs bold Medicaid reform," The Flint Hills Center, 21 January 2004.]

"Cheap drugs make for good politics, but poor economics"

[Sally C. Pipes, "AARP Bad Medicine: A Few Will Benefit, Many More Will Pay," Investor's Business Daily, 15 April 2004.]

Pacific Research Institute President Sally Pipes takes the AARP to task for it's media blitz in favor of reimporting Canadian prescription drugs:

AARP, the nation's largest special-interest group, may well tell its senior membership that all it takes to make drugs cheaper is to send them over the border and bring them back again.

But the organization is really just extracting benefits for the few at the cost of depriving the many; that's bad policy in the long run.

A 2001 Canadian study concluded that 75% of the 27 most popular generic drugs were significantly cheaper in the U.S. One good example is generic Prozac -- $13.19 for 100 20-mg pills in the U.S. The next lowest price in any other nation is a sticker-shock $49.78 for 100 pills.

The reality of socialist medicine is vastly different from the promise. If there were any truth in advertising, AARP's commercials would show a desperate Canadian suffering from AIDS, Hepatitis C or arthritis.

Take it from me -- a Canadian -- America doesn't want Canada's price controls, at any cost.


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