Friday, October 29, 2004
USA Today offers cautious endorsement of HSAs
[Editorial, "A way to curb health costs," USA Today, 25 October 2004.]
Despite citing evidence that addresses the very concerns they raise, the editors at USA Today choose to hedge their bets in this editorial by stopping short of fully embracing health savings accounts. Nonetheless, they hardly condemn the option, either, and seem to display an understanding of the problem HSAs are meant to overcome:
"Is it covered?" That's what many patients ask when considering a medical service. If health insurance covers most of the tab, they have little incentive to shop for a better price, take cheaper generic drugs or avoid unnecessary doctor visits, since their out-of-pocket expense may be just a small co-payment.
That attitude drives up health care expenses. Third-party payment divorces consumers from the true costs of their care, resulting in the ever-increasing premium hikes that have prompted many businesses to scale back or drop coverage.
As employees renew their insurance coverage this fall, many will have a new — though controversial — option: a tax-free health savings account (HSA). Think of it as a 401(k) plan for health care.
While HSAs are no cure-all for the crisis in health care, they could make consumers more cost-conscious and reduce premiums, making insurance more affordable for the 45 million people who lack coverage.
While the potential drawbacks require monitoring, HSAs could ease the two biggest problems in health care: soaring costs and growing ranks of uninsured.
Few other innovative options are available to tackle the nation's health care woes. HSAs are no panacea, but if they offer some relief, they're an experiment worth following.
[Editorial, "A way to curb health costs," USA Today, 25 October 2004.]
Despite citing evidence that addresses the very concerns they raise, the editors at USA Today choose to hedge their bets in this editorial by stopping short of fully embracing health savings accounts. Nonetheless, they hardly condemn the option, either, and seem to display an understanding of the problem HSAs are meant to overcome:
"Is it covered?" That's what many patients ask when considering a medical service. If health insurance covers most of the tab, they have little incentive to shop for a better price, take cheaper generic drugs or avoid unnecessary doctor visits, since their out-of-pocket expense may be just a small co-payment.
That attitude drives up health care expenses. Third-party payment divorces consumers from the true costs of their care, resulting in the ever-increasing premium hikes that have prompted many businesses to scale back or drop coverage.
As employees renew their insurance coverage this fall, many will have a new — though controversial — option: a tax-free health savings account (HSA). Think of it as a 401(k) plan for health care.
While HSAs are no cure-all for the crisis in health care, they could make consumers more cost-conscious and reduce premiums, making insurance more affordable for the 45 million people who lack coverage.
While the potential drawbacks require monitoring, HSAs could ease the two biggest problems in health care: soaring costs and growing ranks of uninsured.
Few other innovative options are available to tackle the nation's health care woes. HSAs are no panacea, but if they offer some relief, they're an experiment worth following.
What's really behind the rise in prescription drug spending?
[Malcolm Gladwell, "High Prices," The New Yorker, 18 October 2004.]
This article provides an excellent overview of the prescription drug price controversy. Gladwell explains that despite the claims of politicians and other advocates, what's going on has less to do with the market abusing consumers than consumers responding to poorly designed incentives:
It is not accurate to say, then, that the United States has higher prescription-drug prices than other countries. It is accurate to say only that the United States has a different pricing system from that of other countries. Americans pay more for drugs when they first come out and less as the drugs get older, while the rest of the world pays less in the beginning and more later.
The second misconception about prices has to do with their importance in driving up over-all drug costs. In one three-year period in the mid-nineteen-nineties, for example, the amount of money spent in the United States on asthma medication increased by almost a hundred per cent. But none of that was due to an increase in the price of asthma drugs. It was largely the result of an increase in the prevalence of usage—that is, in the number of people who were given a diagnosis of the disease and who then bought drugs to treat it.
All told, prescription-drug spending in the United States rose 9.1 per cent last year. Only three of those percentage points were due to price increases, however, which means that inflation was about the same in the drug sector as it was in the over-all economy.
Last year, hospital expenditures rose by the same amount as drug expenditures—nine per cent. Yet almost all of that (eight percentage points) was due to inflation. That’s something to be upset about: when it comes to hospital services, we’re spending more and getting less. When it comes to drugs, though, we’re spending more and we’re getting more, and that makes the question of how we ought to respond to rising drug costs a little more ambiguous.
The core problem in bringing drug spending under control, in other words, is persuading the users and buyers and prescribers of drugs to behave rationally, and the reason we’re in the mess we’re in is that, so far, we simply haven’t done a very good job of that.
It's a good thing consumer-driven health care is taking off. As consumers become more cost-conscious and more educated about their options, this core problem will be addressed. That's certainly a better option than continuing to incentivize consumption on the one hand and then attacking the companies that respond accordingly.
[Malcolm Gladwell, "High Prices," The New Yorker, 18 October 2004.]
This article provides an excellent overview of the prescription drug price controversy. Gladwell explains that despite the claims of politicians and other advocates, what's going on has less to do with the market abusing consumers than consumers responding to poorly designed incentives:
It is not accurate to say, then, that the United States has higher prescription-drug prices than other countries. It is accurate to say only that the United States has a different pricing system from that of other countries. Americans pay more for drugs when they first come out and less as the drugs get older, while the rest of the world pays less in the beginning and more later.
The second misconception about prices has to do with their importance in driving up over-all drug costs. In one three-year period in the mid-nineteen-nineties, for example, the amount of money spent in the United States on asthma medication increased by almost a hundred per cent. But none of that was due to an increase in the price of asthma drugs. It was largely the result of an increase in the prevalence of usage—that is, in the number of people who were given a diagnosis of the disease and who then bought drugs to treat it.
All told, prescription-drug spending in the United States rose 9.1 per cent last year. Only three of those percentage points were due to price increases, however, which means that inflation was about the same in the drug sector as it was in the over-all economy.
Last year, hospital expenditures rose by the same amount as drug expenditures—nine per cent. Yet almost all of that (eight percentage points) was due to inflation. That’s something to be upset about: when it comes to hospital services, we’re spending more and getting less. When it comes to drugs, though, we’re spending more and we’re getting more, and that makes the question of how we ought to respond to rising drug costs a little more ambiguous.
The core problem in bringing drug spending under control, in other words, is persuading the users and buyers and prescribers of drugs to behave rationally, and the reason we’re in the mess we’re in is that, so far, we simply haven’t done a very good job of that.
It's a good thing consumer-driven health care is taking off. As consumers become more cost-conscious and more educated about their options, this core problem will be addressed. That's certainly a better option than continuing to incentivize consumption on the one hand and then attacking the companies that respond accordingly.
Thursday, October 28, 2004
Medicaid musical chairs
[Scott Rothschild, "Medicaid realignment in works," The Lawrence Journal-World, 28 October 2004.]
The Governor is once again hinting at big plans for Medicaid reform, but actually revealing anything concrete is another matter. It's amazing how many news stories can be generated by simply announcing that something will be done at some point. The one new item in this article is the suggestion of plans to "reorganize" Medicaid through consolidation of services. This may lead to some savings, but at this point it's a bit like rearranging the chairs on the deck of the Titanic:
Currently, the many Medicaid programs are administered mostly by the Kansas Department of Social and Rehabilitation Services.
The plan under consideration would move Medicaid away from SRS, possibly into a health care purchasing group that would include the state employee health insurance system. Administration officials say there are study groups working on the proposal.
The idea is to free more dollars through administrative efficiencies
Robert Cauchi, health program director with the National Conference of State Legislatures, said the proposal sounded similar to what had been done in several other states, such as Georgia and Florida.
He said those states had consolidated health care buying programs to try to better negotiate for services under health care contracts.
"There is a certain attractiveness to saying let's bring those things all together," Cauchi said.
But, he said, it is still unknown whether the states have realized any cost savings.
[Matthew Hisrich, "A Backgrounder on Kansas Medicaid," The Flint Hills Center, 19 July 2004.]
[Scott Rothschild, "Medicaid realignment in works," The Lawrence Journal-World, 28 October 2004.]
The Governor is once again hinting at big plans for Medicaid reform, but actually revealing anything concrete is another matter. It's amazing how many news stories can be generated by simply announcing that something will be done at some point. The one new item in this article is the suggestion of plans to "reorganize" Medicaid through consolidation of services. This may lead to some savings, but at this point it's a bit like rearranging the chairs on the deck of the Titanic:
Currently, the many Medicaid programs are administered mostly by the Kansas Department of Social and Rehabilitation Services.
The plan under consideration would move Medicaid away from SRS, possibly into a health care purchasing group that would include the state employee health insurance system. Administration officials say there are study groups working on the proposal.
The idea is to free more dollars through administrative efficiencies
Robert Cauchi, health program director with the National Conference of State Legislatures, said the proposal sounded similar to what had been done in several other states, such as Georgia and Florida.
He said those states had consolidated health care buying programs to try to better negotiate for services under health care contracts.
"There is a certain attractiveness to saying let's bring those things all together," Cauchi said.
But, he said, it is still unknown whether the states have realized any cost savings.
[Matthew Hisrich, "A Backgrounder on Kansas Medicaid," The Flint Hills Center, 19 July 2004.]
A revolution is under way
[Mary Beth Franklin & Kimberly Lankford, "A New Way to Save on Premiums," Kiplinger's, November 2004.]
The latest issue of Kiplinger's magazine includes this excellent article on HSAs:
Looking for relief from soaring health-insurance costs? You just might find it this fall as more employers -- including the federal government -- begin offering a new choice: a high-deductible policy tied to a health savings account (HSA). The high-deductible policy will cut your monthly premiums while the savings account will cut your taxes.
If your employer doesn't offer the option during this year's open season, you might want to start agitating to have it added ASAP. If you're self-employed and buy insurance on your own, you may already have a high-deductible policy because anything else can be prohibitively expensive. If so, you may open a tax-saving HSA on your own.
The plans became available this past January, but you're forgiven if you know little about them. Employers are just beginning to build them into benefit plans. By this time next year, though, HSAs will be widespread. A survey of nearly 1,000 employers, conducted by Mercer Human Resource Consulting, found that three-fourths of them expect to offer HSAs for 2006. "We're looking at a major market change unlike anything we have seen before," predicts Linda Havlin of Mercer's health-care and group-benefits consulting practice.
Bill Lomel, who owns a roofing company in Atlanta, is an early convert. "I was just so discouraged about the cost of health insurance," he says. He was already struggling to pay $750 a month for insurance for himself and his three children when he got a notice that the cost of the group policy for his employees was going to soar. "I thought, There's no way I can charge enough for anything in my business to cover that expense. I want to offer good competitive benefits to my employees, but I can't."
Now, maybe he can. He started by opening an account for his own family. After searching eHealthInsurance.com for HSA-eligible policies, he selected one from Golden Rule that cost just $250 per month. The deductible is a hefty $5,000 per year, but Lomel is saving $6,000 a year in premiums and investing almost that much in a health savings account. He'll use the HSA to pay extra out-of-pocket expenses and to save for future costs.
Lomel was so impressed with his experience that he plans to fund HSAs for his 25 employees in lieu of offering group health insurance that was costing him up to $1,100 per month for each of his employees' families. By switching to high-deductible policies, he'll save thousands of dollars in monthly premiums. He plans to use some of that money to contribute to his employees' HSAs, which they can then use for out-of-pocket costs.
"What I like about HSAs is that they force consumers to be invested in their health care," says First National Bank president Mark Young. He notes that when an employee's son injured his ankle, the doctor diagnosed a sprain and prescribed a boot and crutches, which his office could supply for a fee. The employee decided to buy the boot at a discount drugstore and borrow crutches from a neighbor. "Therein lies the benefit of an HSA," says Young. "If consumers don't spend the money, they can carry it forward to the next year."
For many self-employed people, early retirees and part-timers without benefits at work, an HSA will often prove the best choice. That's what Carl Blachowicz discovered when his wife, Debbie, retired from AT&T. As the owner of a one-man auto-repair business in Orlando, Carl didn't worry about insurance as long as Debbie was working: The couple paid about $80 a month for coverage for themselves and their two children. But when Debbie retired, the premium would have jumped to more than $1,200 to stay on the AT&T policy.
Then Blachowicz discovered a better way to protect the family. Debbie stayed on the AT&T policy -- for $440 a month -- while Carl and the kids shifted to a policy from Assurant Health that had a $5,000 deductible. Premiums cost $230 per month. Most of the savings goes into an HSA.
HSA contributions lower the family's tax bill, and because Carl is self-employed, he can also deduct 100% of his premiums. He currently keeps the HSA money in Assurant's fixed-rate account, which is earning 3% per year, and will switch to an investment account once he builds a bigger balance. "It's one of the better things I've done since I've been in business," he says.
[Greg Scandlen, "Choice is revolutionizing health care," The Wichita Eagle, 28 September 2004.]
[Mary Beth Franklin & Kimberly Lankford, "A New Way to Save on Premiums," Kiplinger's, November 2004.]
The latest issue of Kiplinger's magazine includes this excellent article on HSAs:
Looking for relief from soaring health-insurance costs? You just might find it this fall as more employers -- including the federal government -- begin offering a new choice: a high-deductible policy tied to a health savings account (HSA). The high-deductible policy will cut your monthly premiums while the savings account will cut your taxes.
If your employer doesn't offer the option during this year's open season, you might want to start agitating to have it added ASAP. If you're self-employed and buy insurance on your own, you may already have a high-deductible policy because anything else can be prohibitively expensive. If so, you may open a tax-saving HSA on your own.
The plans became available this past January, but you're forgiven if you know little about them. Employers are just beginning to build them into benefit plans. By this time next year, though, HSAs will be widespread. A survey of nearly 1,000 employers, conducted by Mercer Human Resource Consulting, found that three-fourths of them expect to offer HSAs for 2006. "We're looking at a major market change unlike anything we have seen before," predicts Linda Havlin of Mercer's health-care and group-benefits consulting practice.
Bill Lomel, who owns a roofing company in Atlanta, is an early convert. "I was just so discouraged about the cost of health insurance," he says. He was already struggling to pay $750 a month for insurance for himself and his three children when he got a notice that the cost of the group policy for his employees was going to soar. "I thought, There's no way I can charge enough for anything in my business to cover that expense. I want to offer good competitive benefits to my employees, but I can't."
Now, maybe he can. He started by opening an account for his own family. After searching eHealthInsurance.com for HSA-eligible policies, he selected one from Golden Rule that cost just $250 per month. The deductible is a hefty $5,000 per year, but Lomel is saving $6,000 a year in premiums and investing almost that much in a health savings account. He'll use the HSA to pay extra out-of-pocket expenses and to save for future costs.
Lomel was so impressed with his experience that he plans to fund HSAs for his 25 employees in lieu of offering group health insurance that was costing him up to $1,100 per month for each of his employees' families. By switching to high-deductible policies, he'll save thousands of dollars in monthly premiums. He plans to use some of that money to contribute to his employees' HSAs, which they can then use for out-of-pocket costs.
"What I like about HSAs is that they force consumers to be invested in their health care," says First National Bank president Mark Young. He notes that when an employee's son injured his ankle, the doctor diagnosed a sprain and prescribed a boot and crutches, which his office could supply for a fee. The employee decided to buy the boot at a discount drugstore and borrow crutches from a neighbor. "Therein lies the benefit of an HSA," says Young. "If consumers don't spend the money, they can carry it forward to the next year."
For many self-employed people, early retirees and part-timers without benefits at work, an HSA will often prove the best choice. That's what Carl Blachowicz discovered when his wife, Debbie, retired from AT&T. As the owner of a one-man auto-repair business in Orlando, Carl didn't worry about insurance as long as Debbie was working: The couple paid about $80 a month for coverage for themselves and their two children. But when Debbie retired, the premium would have jumped to more than $1,200 to stay on the AT&T policy.
Then Blachowicz discovered a better way to protect the family. Debbie stayed on the AT&T policy -- for $440 a month -- while Carl and the kids shifted to a policy from Assurant Health that had a $5,000 deductible. Premiums cost $230 per month. Most of the savings goes into an HSA.
HSA contributions lower the family's tax bill, and because Carl is self-employed, he can also deduct 100% of his premiums. He currently keeps the HSA money in Assurant's fixed-rate account, which is earning 3% per year, and will switch to an investment account once he builds a bigger balance. "It's one of the better things I've done since I've been in business," he says.
[Greg Scandlen, "Choice is revolutionizing health care," The Wichita Eagle, 28 September 2004.]
Wednesday, October 27, 2004
Lessons from the flu vaccine shortage
[Melanie Coffee, "Illinois trying to buy French vaccine," Associated Press, The Wichita Eagle, 26 October 2004.]
Illinois Governor Rod Blagojevich is pushing the FDA to allow him to import flu vaccine from France. As is often the case, though, such government intervention in the face of "market crises" does not address the root causes of the problem, which can usually be traced to...government intervention.
This is certainly the case with regard to the flu vaccine shortage. Why are we down to only one major supplier in the U.S.? The vaccine industry is one of the most heavily regulated in the country. As a result, while there used to be a number of companies producing the vaccines, most have either shut up shop or moved overseas.
There is an important lesson here for the future of medicine. As calls grow for the government to "clamp down" on greedy pharmaceutical companies, it is vital to recognize that what has taken place in the vaccine market could just as easily occur in the market for prescription drugs. In order to effectively meet demand, markets need less regulation, not more.
[Melanie Coffee, "Illinois trying to buy French vaccine," Associated Press, The Wichita Eagle, 26 October 2004.]
Illinois Governor Rod Blagojevich is pushing the FDA to allow him to import flu vaccine from France. As is often the case, though, such government intervention in the face of "market crises" does not address the root causes of the problem, which can usually be traced to...government intervention.
This is certainly the case with regard to the flu vaccine shortage. Why are we down to only one major supplier in the U.S.? The vaccine industry is one of the most heavily regulated in the country. As a result, while there used to be a number of companies producing the vaccines, most have either shut up shop or moved overseas.
There is an important lesson here for the future of medicine. As calls grow for the government to "clamp down" on greedy pharmaceutical companies, it is vital to recognize that what has taken place in the vaccine market could just as easily occur in the market for prescription drugs. In order to effectively meet demand, markets need less regulation, not more.
Tuesday, October 26, 2004
HSA savings for small businesses documented
["Small Businesses Are Saving 44% Today on Their Health Insurance Premiums With Health Savings Accounts (HSAs)," The Center for Health Transformation, 25 October 2004.]
Looking for real-life examples of the savings possible through HSAs? The Center for Health Transformation recently compiled a list of 31 cases from across the country where HSAs are lowering the cost of insurance for individuals and employers:
The following 31 examples are of small businesses or self-employed individuals saving money today on their health insurance premiums because they adopted health plans with Health Savings Accounts (HSAs).
In 27 of these examples we have data to calculate the percentage that these companies are saving in 2004 by adopting HSA plans. For these 27 small businesses, they are saving an average of 44% on their health insurance premiums. The savings are so substantial that many of these businesses are able to make significant contributions to the HSAs of their employees.
With savings like these, thousands of previously uninsured individuals, families, small businesses, and family farms are finding affordable insurance either for the first time or the first time in a long time. Assurant Health reports that 43% of its HSA applicants were previously uninsured. Similarly, eHealthInsurance reports that approximately 33% of its HSA purchasers were previously uninsured.
Additional substantial savings on health insurance premiums for individuals, families, small businesses, and family farms will be possible if current policy proposals are implemented to create a national health insurance market and make deductible the premiums paid on HSA plans.
The Flint Hills Center, together with The Kansas Health Partners Benefit Association, will be hosting an in-depth workshop on lowering health insurance costs in November. For more information or to register, visit www.flinthills.org.
[Matthew Hisrich, "HSAs are increasing Americans' health coverage," The Topeka Capital-Journal, 26 September 2004.]
["Small Businesses Are Saving 44% Today on Their Health Insurance Premiums With Health Savings Accounts (HSAs)," The Center for Health Transformation, 25 October 2004.]
Looking for real-life examples of the savings possible through HSAs? The Center for Health Transformation recently compiled a list of 31 cases from across the country where HSAs are lowering the cost of insurance for individuals and employers:
The following 31 examples are of small businesses or self-employed individuals saving money today on their health insurance premiums because they adopted health plans with Health Savings Accounts (HSAs).
In 27 of these examples we have data to calculate the percentage that these companies are saving in 2004 by adopting HSA plans. For these 27 small businesses, they are saving an average of 44% on their health insurance premiums. The savings are so substantial that many of these businesses are able to make significant contributions to the HSAs of their employees.
With savings like these, thousands of previously uninsured individuals, families, small businesses, and family farms are finding affordable insurance either for the first time or the first time in a long time. Assurant Health reports that 43% of its HSA applicants were previously uninsured. Similarly, eHealthInsurance reports that approximately 33% of its HSA purchasers were previously uninsured.
Additional substantial savings on health insurance premiums for individuals, families, small businesses, and family farms will be possible if current policy proposals are implemented to create a national health insurance market and make deductible the premiums paid on HSA plans.
The Flint Hills Center, together with The Kansas Health Partners Benefit Association, will be hosting an in-depth workshop on lowering health insurance costs in November. For more information or to register, visit www.flinthills.org.
[Matthew Hisrich, "HSAs are increasing Americans' health coverage," The Topeka Capital-Journal, 26 September 2004.]
Cal Thomas on Sally Pipes in The Journal-World
[Cal Thomas, "Choice may improve care," The Lawrence Journal-World, 21 October 2004.]
Cal Thomas weighs in on the emerging trend toward consumer-driven health care in this recent column, and has some kind words about recent Flint Hills speaker Sally Pipes:
When real issues manage to rise above the smoke and mirrors of political warfare in this exhausting presidential campaign, the cost of health care and medical insurance is just behind terrorism and keeping the country safe in top voter concerns.
President Bush and Sen. Kerry have fundamental differences in their approaches to health care and insurance. Sen. Kerry wants to increase reliance on private health insurance subsidized by employers and expand the number of people covered under Medicaid for the poor and Medicare for seniors. The problem with his idea is that government control and subsidies for employers have brought on the current crisis. Even a retooling of an unworkable system will not guarantee that system reforms itself.
President Bush's proposal would free more of us to shop for insurance coverage and medical services, selecting those that fit our needs and wallets. He believes market forces would then limit health care inflation as they do in practically every other realm of commerce.
The problem for most Americans is that we understand very little about health care. I'll bet you didn't know (I didn't until I looked it up) that the average annual cost of health care per individual in America in 2002 (the most recent data available) was $2,350, according to the Bureau of Labor Statistics.
Eighty-six cents of every dollar paid for health care comes from someone else's pocket. Individuals pay just 14 cents on the dollar. As the economist Milton Friedman notes, no other necessity -- not food, housing or transportation -- receives such a subsidy, nor do we expect our employer to subsidize such things. Why, then, do we think we should pay much less than the true cost of health care, especially when it is the best in the world?
Possibly the most concise and readable explanation of why health care and insurance have become so expensive and beyond the reach of many is contained in a new book by Sally C. Pipes, president of the Pacific Research Institute, a think tank based in San Francisco: "Miracle Cure: How to Solve America's Health Care Crisis and Why Canada Isn't the Answer." Pipes is a Canadian who lives in the United States. She fears, "If (the United States continues) on the present path of giving more and more power to the state, this country will suffer the same problems as are being faced north of the border."
The book is a short but well-researched and well-reasoned critique of the American and Canadian health care systems. Pipes writes, "The public needs to know that it can safely move away from a tax system that encourages employer-provided health insurance. In Canada, the public must be weaned off a system in which public health care brooks no competition. In both instances, less government intervention can yield greater affordability, access and quality."
There is much more in Pipes' book, including recommendations for moving away from the dominant system of insurance in the United States -- managed care -- and toward a system directed by consumers, such as Health Savings Accounts, which empower individuals to make decisions affecting their health.
The Bush plan fulfills more of Pipes' recommendations than the Kerry plan. Armed with such information and given the power, individuals can make their own choices -- for better and more affordable health care, and for a president who will allow them to have it.
[Matthew Hisrich, "A Better Alternative to Kerry Plan Already Exists," The Topeka Capital-Journal, 8 August 2004.]
[Cal Thomas, "Choice may improve care," The Lawrence Journal-World, 21 October 2004.]
Cal Thomas weighs in on the emerging trend toward consumer-driven health care in this recent column, and has some kind words about recent Flint Hills speaker Sally Pipes:
When real issues manage to rise above the smoke and mirrors of political warfare in this exhausting presidential campaign, the cost of health care and medical insurance is just behind terrorism and keeping the country safe in top voter concerns.
President Bush and Sen. Kerry have fundamental differences in their approaches to health care and insurance. Sen. Kerry wants to increase reliance on private health insurance subsidized by employers and expand the number of people covered under Medicaid for the poor and Medicare for seniors. The problem with his idea is that government control and subsidies for employers have brought on the current crisis. Even a retooling of an unworkable system will not guarantee that system reforms itself.
President Bush's proposal would free more of us to shop for insurance coverage and medical services, selecting those that fit our needs and wallets. He believes market forces would then limit health care inflation as they do in practically every other realm of commerce.
The problem for most Americans is that we understand very little about health care. I'll bet you didn't know (I didn't until I looked it up) that the average annual cost of health care per individual in America in 2002 (the most recent data available) was $2,350, according to the Bureau of Labor Statistics.
Eighty-six cents of every dollar paid for health care comes from someone else's pocket. Individuals pay just 14 cents on the dollar. As the economist Milton Friedman notes, no other necessity -- not food, housing or transportation -- receives such a subsidy, nor do we expect our employer to subsidize such things. Why, then, do we think we should pay much less than the true cost of health care, especially when it is the best in the world?
Possibly the most concise and readable explanation of why health care and insurance have become so expensive and beyond the reach of many is contained in a new book by Sally C. Pipes, president of the Pacific Research Institute, a think tank based in San Francisco: "Miracle Cure: How to Solve America's Health Care Crisis and Why Canada Isn't the Answer." Pipes is a Canadian who lives in the United States. She fears, "If (the United States continues) on the present path of giving more and more power to the state, this country will suffer the same problems as are being faced north of the border."
The book is a short but well-researched and well-reasoned critique of the American and Canadian health care systems. Pipes writes, "The public needs to know that it can safely move away from a tax system that encourages employer-provided health insurance. In Canada, the public must be weaned off a system in which public health care brooks no competition. In both instances, less government intervention can yield greater affordability, access and quality."
There is much more in Pipes' book, including recommendations for moving away from the dominant system of insurance in the United States -- managed care -- and toward a system directed by consumers, such as Health Savings Accounts, which empower individuals to make decisions affecting their health.
The Bush plan fulfills more of Pipes' recommendations than the Kerry plan. Armed with such information and given the power, individuals can make their own choices -- for better and more affordable health care, and for a president who will allow them to have it.
[Matthew Hisrich, "A Better Alternative to Kerry Plan Already Exists," The Topeka Capital-Journal, 8 August 2004.]
Wednesday, October 20, 2004
Meaningful health care options
[Jack Strayer, "Steps toward affordable care," The Lawrence Journal-World, 19 October 2004.]
No mention of HSAs here, but the point remains the same - a focus on freeing up the private sector to meet health care needs will be far more effective than expanding government-based programs to address the problems created by government regulation and intervention in the first place:
Everyone running for office in the upcoming election is talking about health care. And who can blame them? When 45 million Americans lack health insurance and costs continue to soar, voters are seeking solutions.
Unfortunately, in the heat of a political campaign many candidates often push simplistic but misguided solutions -- increased government control of health care, job-killing employer mandates or the import of potentially unsafe medicines.
Such programs may be politically popular at first blush, but they're economically unsustainable and threaten the quality, safety and innovation of our health care system.
Politicians looking for guidance on health care should pay attention to a number of recent developments in the private sector that hold great promise for sharply reducing the ranks of the uninsured.
One of the basic principles of insurance is that it gives the beneficiary access to negotiated pricing. Several private-sector initiatives now offer the uninsured the benefit of negotiated prices -- a longtime staple of private health insurance, but heretofore unavailable to the unemployed and to lower-paid working Americans struggling to afford coverage.
Numerous hospitals, for example, now are voluntarily offering discounted rates to people who lack insurance. Insurers are increasingly developing low-cost basic coverage policies aimed at uninsured families and individuals.
And many pharmaceutical companies are supporting Together Rx, a program that helps low-income seniors save approximately 20 to 40 percent on brand-name prescription medicines.
This month, pharmacists nationwide began filling prescriptions under Pfizer Pfriends, a new program that provides uninsured patients of any age or income level substantial savings on that company's prescription medicines -- savings similar to those insured Americans take for granted.
Despite their desire for answers, voters are skeptical about campaign sound bites on health care because they realize there is no one-size-fits-all solution for all of the nation's 45 million uninsured.
Candidates would be wise to tone down their political rhetoric and emulate the private sector's focus on common-sense steps aimed at helping the uninsured gain access to coverage. The task ahead is difficult, but working together Americans can achieve high-quality health care for everyone.
[Matthew Hisrich, "A Better Alternative to Kerry Plan Already Exists," The Topeka Capital-Journal, 8 August 2004.]
[Jack Strayer, "Steps toward affordable care," The Lawrence Journal-World, 19 October 2004.]
No mention of HSAs here, but the point remains the same - a focus on freeing up the private sector to meet health care needs will be far more effective than expanding government-based programs to address the problems created by government regulation and intervention in the first place:
Everyone running for office in the upcoming election is talking about health care. And who can blame them? When 45 million Americans lack health insurance and costs continue to soar, voters are seeking solutions.
Unfortunately, in the heat of a political campaign many candidates often push simplistic but misguided solutions -- increased government control of health care, job-killing employer mandates or the import of potentially unsafe medicines.
Such programs may be politically popular at first blush, but they're economically unsustainable and threaten the quality, safety and innovation of our health care system.
Politicians looking for guidance on health care should pay attention to a number of recent developments in the private sector that hold great promise for sharply reducing the ranks of the uninsured.
One of the basic principles of insurance is that it gives the beneficiary access to negotiated pricing. Several private-sector initiatives now offer the uninsured the benefit of negotiated prices -- a longtime staple of private health insurance, but heretofore unavailable to the unemployed and to lower-paid working Americans struggling to afford coverage.
Numerous hospitals, for example, now are voluntarily offering discounted rates to people who lack insurance. Insurers are increasingly developing low-cost basic coverage policies aimed at uninsured families and individuals.
And many pharmaceutical companies are supporting Together Rx, a program that helps low-income seniors save approximately 20 to 40 percent on brand-name prescription medicines.
This month, pharmacists nationwide began filling prescriptions under Pfizer Pfriends, a new program that provides uninsured patients of any age or income level substantial savings on that company's prescription medicines -- savings similar to those insured Americans take for granted.
Despite their desire for answers, voters are skeptical about campaign sound bites on health care because they realize there is no one-size-fits-all solution for all of the nation's 45 million uninsured.
Candidates would be wise to tone down their political rhetoric and emulate the private sector's focus on common-sense steps aimed at helping the uninsured gain access to coverage. The task ahead is difficult, but working together Americans can achieve high-quality health care for everyone.
[Matthew Hisrich, "A Better Alternative to Kerry Plan Already Exists," The Topeka Capital-Journal, 8 August 2004.]
A healthy trip to India
[Chidanand Rajghatta, "Outsourcing blues? Have a heart!," The Times of India, 30 September 2004.]
When Greg Scandlen spoke at Flint Hills luncheons in Kansas recently, he mentioned the growing trend toward a global economy in health care. Along those lines, here is a great story about a man who travelled from the U.S. to India to undergo heart surgery - at a fraction of the cost:
India's great outsourcing debate with the United States may have just moved from software to 'heartware.'
Defeated by exorbitant health care costs in the United States, a North Carolina worker flew into New Delhi over the weekend for a heart surgery on the cheap.
Howard Staab was wheeled into the Operation Room at Escorts Heart Institute at 9 a.m. on Monday listening to "Oh Brother, Where Art Thou," with dhanyavaad written on his chest with a purple marker.
He was out in the Recovery Room by 3.30 p.m. with "every best case scenario plan implemented," according to his partner Maggi Grace. A team of doctors led by the well-known cardiologist Dr Naresh Trehan fixed a broken mitral valve in his heart.
The cost of the procedure and after care in India – less than $20,000, compared to the $200,000 Staab was asked to fork out in the US.
Although 'health tourism' and outsourcing of medical procedures has been on the horizon for some time, this is one of the first instances of an American worker seeking out India for high-end medical treatment.
"This is happening because of the prohibitive cost of health care in the US," Dr Vinay Malhotra, a Seattle cardiologist said in an interview while assessing the milestone event. "I don't see the medical profession here objecting to this, but if this becomes a trend, the insurance companies could well be up in arms."
According to Dr Malhotra, India is a relative newcomer to the healthcare tourism from the U.S. Americans have been trickling into specialized hospitals in Thailand and Singapore even as healthcare costs have been rising fast enough to cause cardiac arrests among the working class and senior citizens here.
[Chidanand Rajghatta, "Outsourcing blues? Have a heart!," The Times of India, 30 September 2004.]
When Greg Scandlen spoke at Flint Hills luncheons in Kansas recently, he mentioned the growing trend toward a global economy in health care. Along those lines, here is a great story about a man who travelled from the U.S. to India to undergo heart surgery - at a fraction of the cost:
India's great outsourcing debate with the United States may have just moved from software to 'heartware.'
Defeated by exorbitant health care costs in the United States, a North Carolina worker flew into New Delhi over the weekend for a heart surgery on the cheap.
Howard Staab was wheeled into the Operation Room at Escorts Heart Institute at 9 a.m. on Monday listening to "Oh Brother, Where Art Thou," with dhanyavaad written on his chest with a purple marker.
He was out in the Recovery Room by 3.30 p.m. with "every best case scenario plan implemented," according to his partner Maggi Grace. A team of doctors led by the well-known cardiologist Dr Naresh Trehan fixed a broken mitral valve in his heart.
The cost of the procedure and after care in India – less than $20,000, compared to the $200,000 Staab was asked to fork out in the US.
Although 'health tourism' and outsourcing of medical procedures has been on the horizon for some time, this is one of the first instances of an American worker seeking out India for high-end medical treatment.
"This is happening because of the prohibitive cost of health care in the US," Dr Vinay Malhotra, a Seattle cardiologist said in an interview while assessing the milestone event. "I don't see the medical profession here objecting to this, but if this becomes a trend, the insurance companies could well be up in arms."
According to Dr Malhotra, India is a relative newcomer to the healthcare tourism from the U.S. Americans have been trickling into specialized hospitals in Thailand and Singapore even as healthcare costs have been rising fast enough to cause cardiac arrests among the working class and senior citizens here.
Tuesday, October 19, 2004
Greg Scandlen reviews a new book on HSAs
[Greg Scandlen, "Next Gen Healthcare," The New York Post, 17 October 2004.]
Greg Scandlen of The Galen Institute, who recently joined us here in Wichita and Kansas City to provide an overview of health savings accounts, writes in this column about the pros and cons of a new book on the subject: The Small Business Guide to HSAs.
Health Savings Accounts (HSAs) are the first step in a profound and dramatic transformation of the Ameri can health-care system.
JoAnn Mills Laing's new book is the first of many that are sure to come along to herald this new era. "The Small Business Guide to HSAs" lives up to its name. It provides an excellent explanation of how HSAs work as well as their potential for small businesses.
Unfortunately, it does a very poor job of explaining the insurance portion of the package. This is due, in part, to the evolving guidance from the IRS, mostly around defining what HDHPs are. But it is also because many of the people Laing consulted are in the financial services industry, not insurance; they lack a clear understanding of how health insurance works.
Laing doesn't understand, for instance, that federal law requires "guaranteed issue" of coverage for all employers with two or more employees, and she gets the requirements for family deductibles wrong.
Elsewhere, the insurance explanations are poorly expressed or confusing. This contrasts sharply with the majority of the book which deals with the savings accounts themselves. Here her writing is clear and fluid.
The support services available for the financial side of HSAs are well explained, but, again, Laing seems unaware of the real sizzle of these programs: the increasingly sophisticated support for consumers' health-care needs. Many HSA vendors have done fabulous work developing patient support in the form of "personal health coaches," online price and quality comparisons, information about treatment alternatives and disease support groups. Insurance brokers tell me that these services are what really sell HSAs.
Still, for the first HSA guide out there, it presents a lot of useful information.
[Greg Scandlen, "Choice is revolutionizing health care," The Wichita Eagle, 28 September 2004.
Matthew Hisrich, "HSAs are increasing Americans' health coverage," The Topeka Capital-Journal, 26 September 2004.]
[Greg Scandlen, "Next Gen Healthcare," The New York Post, 17 October 2004.]
Greg Scandlen of The Galen Institute, who recently joined us here in Wichita and Kansas City to provide an overview of health savings accounts, writes in this column about the pros and cons of a new book on the subject: The Small Business Guide to HSAs.
Health Savings Accounts (HSAs) are the first step in a profound and dramatic transformation of the Ameri can health-care system.
JoAnn Mills Laing's new book is the first of many that are sure to come along to herald this new era. "The Small Business Guide to HSAs" lives up to its name. It provides an excellent explanation of how HSAs work as well as their potential for small businesses.
Unfortunately, it does a very poor job of explaining the insurance portion of the package. This is due, in part, to the evolving guidance from the IRS, mostly around defining what HDHPs are. But it is also because many of the people Laing consulted are in the financial services industry, not insurance; they lack a clear understanding of how health insurance works.
Laing doesn't understand, for instance, that federal law requires "guaranteed issue" of coverage for all employers with two or more employees, and she gets the requirements for family deductibles wrong.
Elsewhere, the insurance explanations are poorly expressed or confusing. This contrasts sharply with the majority of the book which deals with the savings accounts themselves. Here her writing is clear and fluid.
The support services available for the financial side of HSAs are well explained, but, again, Laing seems unaware of the real sizzle of these programs: the increasingly sophisticated support for consumers' health-care needs. Many HSA vendors have done fabulous work developing patient support in the form of "personal health coaches," online price and quality comparisons, information about treatment alternatives and disease support groups. Insurance brokers tell me that these services are what really sell HSAs.
Still, for the first HSA guide out there, it presents a lot of useful information.
[Greg Scandlen, "Choice is revolutionizing health care," The Wichita Eagle, 28 September 2004.
Matthew Hisrich, "HSAs are increasing Americans' health coverage," The Topeka Capital-Journal, 26 September 2004.]
Friday, October 15, 2004
Health care at a crossroads
[David Gratzer, "HSA Man Vs. Healthzilla," The Wall Street Journal, 12 October 2004.]
Well, the final debate is over and few can claim to be all that much more enlightened about the particulars of the two candidates' plans for health care. One thing is certain, though - what can be found out outside of the debates reveals two starkly different visions for the future direction of health care in this country:
John Kerry has offered up more of the same for health reform. In sharp contrast, President Bush proposes a package that could rout Hillary Clinton's statism and create a health-care revolution.
There have been two major reform ideas that dominated the years since the Health Care Security Act of 1994: government meddling and managed care.
While the White House failed in its grand design, many states forged ahead -- expanding Medicaid, and regulating the price and scope of insurance. Today, across America, there are many more regulations on the books and the number of Medicaid enrollees has swelled (from 30 million in 1994 to 44 million today), but the political enthusiasm for statist interventions has waned. No wonder. Consider Medicaid. Between 1999 and 2002, the program's bottom line grew 36%, from $189 billion to $258 billion.
Support for managed care proved just as transient. The original impulse for Hillarycare was cost-control. The White House in 1993 predicted that, without major reforms, health spending would suck up 19% of the GDP by decade's end. Managed care was the private sector answer to the problem of health inflation. And it worked: health spending was reined in. Hospital spending actually dropped through much of the mid-1990s (in 1997, by an astonishing 5.3%). But the thuggish methods employed by HMOs led to a consumer and political backlash.
Why did both fail? Government meddling and managed care awkwardly attempt to compensate for the central problem: Americans don't directly pay for the health care they receive. Out-of-pocket expenses -- that is, the amount not covered by public and private insurance -- account for just 14 cents on every health dollar spent in the U.S. American health care is dominated by third-party payment. Nelson Sabatini, Maryland's secretary of health, observes: "Using health care in this country is like shopping with someone else's credit card." If the last decade seems to have done so little to address the woes of the system, no wonder: Consumers were never brought into the equation.
A decade after Hillarycare, there is an alternative that places Americans, not government bureaucrats, in charge of their own health care.
Created by the Medicare Modernization Act of 2003, HSAs are personal medical savings accounts used in conjunction with a high-deductible health insurance plan. For smaller expenses, then, individuals pay out of their HSA -- money that can follow them from employer to employer and can accrue from year to year. Catastrophic insurance covers larger expenses.
How much could this help? Writing on this page, economist Martin Feldstein noted that a typical Blue Cross of California family policy costs $8,460 (with a $500 deductible per member). But a similar HSA-style high deductible policy costs just $3,936 (with a $2,500 deductive). The difference ($4,524), then, far exceeds the maximum additional out-of-pocket expense that the family would face if they reached the maximum deductible ($2,500). In other words, the HSA approach results in great savings. Data from eHealthInsurance, a leading online insurance brokerage, suggests that a majority (55%) of customers purchasing health insurance through the HSA approach pay less than $100 per month. Not surprisingly, about a third of these HSA-plan enrollees were previously uninsured.
HSAs have the potential, though, to do more than just save some money on premiums. Individuals empowered with health dollars will begin to act like consumers of health care. Third-party payment, in fact, will be pushed to catastrophic events. Thus, the market forces that reshaped the rest of the economy may soon transform the health industry.
[Greg Scandlen, "Choice is revolutionizing health care," The Wichita Eagle, 28 September 2004.]
[David Gratzer, "HSA Man Vs. Healthzilla," The Wall Street Journal, 12 October 2004.]
Well, the final debate is over and few can claim to be all that much more enlightened about the particulars of the two candidates' plans for health care. One thing is certain, though - what can be found out outside of the debates reveals two starkly different visions for the future direction of health care in this country:
John Kerry has offered up more of the same for health reform. In sharp contrast, President Bush proposes a package that could rout Hillary Clinton's statism and create a health-care revolution.
There have been two major reform ideas that dominated the years since the Health Care Security Act of 1994: government meddling and managed care.
While the White House failed in its grand design, many states forged ahead -- expanding Medicaid, and regulating the price and scope of insurance. Today, across America, there are many more regulations on the books and the number of Medicaid enrollees has swelled (from 30 million in 1994 to 44 million today), but the political enthusiasm for statist interventions has waned. No wonder. Consider Medicaid. Between 1999 and 2002, the program's bottom line grew 36%, from $189 billion to $258 billion.
Support for managed care proved just as transient. The original impulse for Hillarycare was cost-control. The White House in 1993 predicted that, without major reforms, health spending would suck up 19% of the GDP by decade's end. Managed care was the private sector answer to the problem of health inflation. And it worked: health spending was reined in. Hospital spending actually dropped through much of the mid-1990s (in 1997, by an astonishing 5.3%). But the thuggish methods employed by HMOs led to a consumer and political backlash.
Why did both fail? Government meddling and managed care awkwardly attempt to compensate for the central problem: Americans don't directly pay for the health care they receive. Out-of-pocket expenses -- that is, the amount not covered by public and private insurance -- account for just 14 cents on every health dollar spent in the U.S. American health care is dominated by third-party payment. Nelson Sabatini, Maryland's secretary of health, observes: "Using health care in this country is like shopping with someone else's credit card." If the last decade seems to have done so little to address the woes of the system, no wonder: Consumers were never brought into the equation.
A decade after Hillarycare, there is an alternative that places Americans, not government bureaucrats, in charge of their own health care.
Created by the Medicare Modernization Act of 2003, HSAs are personal medical savings accounts used in conjunction with a high-deductible health insurance plan. For smaller expenses, then, individuals pay out of their HSA -- money that can follow them from employer to employer and can accrue from year to year. Catastrophic insurance covers larger expenses.
How much could this help? Writing on this page, economist Martin Feldstein noted that a typical Blue Cross of California family policy costs $8,460 (with a $500 deductible per member). But a similar HSA-style high deductible policy costs just $3,936 (with a $2,500 deductive). The difference ($4,524), then, far exceeds the maximum additional out-of-pocket expense that the family would face if they reached the maximum deductible ($2,500). In other words, the HSA approach results in great savings. Data from eHealthInsurance, a leading online insurance brokerage, suggests that a majority (55%) of customers purchasing health insurance through the HSA approach pay less than $100 per month. Not surprisingly, about a third of these HSA-plan enrollees were previously uninsured.
HSAs have the potential, though, to do more than just save some money on premiums. Individuals empowered with health dollars will begin to act like consumers of health care. Third-party payment, in fact, will be pushed to catastrophic events. Thus, the market forces that reshaped the rest of the economy may soon transform the health industry.
[Greg Scandlen, "Choice is revolutionizing health care," The Wichita Eagle, 28 September 2004.]
Tuesday, October 12, 2004
Health Savings Accounts help create savvy consumers
["Health Savings Accounts: A Variety of Treatments," NCPA Daily Policy Digest, 12 October 2004.]
NCPA's Devon Herrick was interviewed for a column on HSAs in today's Wall Street Journal. One of the concerns raised was whether patients will have the sophistication to handle to numerous decisions that go into caring for their own health. Perhaps HSAs will improve, not detract from, our ability to do just that:
With the cost of health insurance on the rise for both employers and individuals, proponents say Health Savings Accounts (HSAs) give individuals more incentive to manage their health care and its costs -- especially when the first few thousand dollars are out-of-pocket. The idea is that once individuals with high deductibles put their money into an HSA, they will think about whether certain treatment or medication is necessary, and they will look to negotiate on price much as they would when shopping for a car. What's more, HSAs are touted as another way to save tax-free because unused money rolls over year after year.
Pam Wimbish was the first person in the country to buy into a new health savings account earlier this year. Since then, she has definitely gotten more involved in -- and choosy about -- her care:
- Before the surgery on her foot, she asked how much it would cost; she offered to pay upfront on the day of the procedure and got a 50 percent discount in return, reducing the surgery center's fee to $630 from $1,260.
- When she found out an anesthesiologist was going to be brought in to numb her foot, Wimbish asked for the doctor performing the operation to do it instead; the doctor's total bill was negotiated down to $275 from $400.
- Lastly, she decided to fill a prescription the doctor gave her for antibiotics, but not one for a painkiller.
Devon Herrick, a senior fellow with the National Center for Policy Analysis, says it isn't that hard for consumers to do a better job of managing their own health care. "For any given ailment there are a variety of treatments," he says. "The trouble is no one ever bothers to ask.”
[Greg Scandlen, "Choice is revolutionizing health care," The Wichita Eagle, 28 September 2004.]
["Health Savings Accounts: A Variety of Treatments," NCPA Daily Policy Digest, 12 October 2004.]
NCPA's Devon Herrick was interviewed for a column on HSAs in today's Wall Street Journal. One of the concerns raised was whether patients will have the sophistication to handle to numerous decisions that go into caring for their own health. Perhaps HSAs will improve, not detract from, our ability to do just that:
With the cost of health insurance on the rise for both employers and individuals, proponents say Health Savings Accounts (HSAs) give individuals more incentive to manage their health care and its costs -- especially when the first few thousand dollars are out-of-pocket. The idea is that once individuals with high deductibles put their money into an HSA, they will think about whether certain treatment or medication is necessary, and they will look to negotiate on price much as they would when shopping for a car. What's more, HSAs are touted as another way to save tax-free because unused money rolls over year after year.
Pam Wimbish was the first person in the country to buy into a new health savings account earlier this year. Since then, she has definitely gotten more involved in -- and choosy about -- her care:
- Before the surgery on her foot, she asked how much it would cost; she offered to pay upfront on the day of the procedure and got a 50 percent discount in return, reducing the surgery center's fee to $630 from $1,260.
- When she found out an anesthesiologist was going to be brought in to numb her foot, Wimbish asked for the doctor performing the operation to do it instead; the doctor's total bill was negotiated down to $275 from $400.
- Lastly, she decided to fill a prescription the doctor gave her for antibiotics, but not one for a painkiller.
Devon Herrick, a senior fellow with the National Center for Policy Analysis, says it isn't that hard for consumers to do a better job of managing their own health care. "For any given ailment there are a variety of treatments," he says. "The trouble is no one ever bothers to ask.”
[Greg Scandlen, "Choice is revolutionizing health care," The Wichita Eagle, 28 September 2004.]
Monday, October 11, 2004
The difference between medicine and computers
[Ed Hudgins and Sam Kazman, "Medicine Could Reach For Stars, FDA Willing," The Investor's Business Daily, 6 October 2004.]
Unless Microsoft founders Bill Gates and Paul Allen change their strategy, their investments in medicine may be undermined by the regulatory burden faced in the industry:
When Bill Gates and Paul Allen founded Microsoft in 1975, they shot for the stars and succeeded.
More recently, Allen shot for the stars again. The two successful launches of his SpaceShipOne won the $10 million Ansari X competition for private manned space flights. This feat may ultimately do for private space ventures what Charles Lindbergh's crossing the Atlantic did for commercial aviation.
The success of these enterprises obviously depended on such factors as genius, guts and foresight. It also depended on the less obvious absence of something as well-government regulation.
This brings us to medicine, a field in which both Gates and Allen have become major philanthropists. Gates has contributed billions to global health issues, including in July a $50 million international grant to fight AIDS and malaria.
Last year Allen gave $100 million to establish the Allen Institute for Brain Science. Its goal is to produce a comprehensive cellular map of the brain-the neurological equivalent of the human genome project.
The involvement of such figures as Gates and Allen in medicine should be an exciting prospect. Medicine, like computers and space flight, is a field rich in technological promise. Any day, it seems, a new scientific breakthrough could open the door to a world of new treatments for previously incurable conditions. If Gates and Allen manage to duplicate in medicine a mere fraction of their computer achievements, the health payoffs could be astounding.
But this image may also be a false one. Medicine is pervasively regulated. Because of the Food and Drug Administration, with its inclination toward deadly overcaution, it can require 10 to 15 years and nearly $1 billion to create, test, and bring to market a new drug.
That's only for the one in 5,000 drugs that succeed. How many "medical Microsoft" startups could survive such hurdles?
Men such as Gates and Allen may enter medicine, but whether they'll be able to revolutionize it is another matter. Consider how the heavily regulated field of biotechnology has produced hardly any billionaires.
What's to be done? The conventional wisdom is that massive government oversight is essential to assuring the safety and effectiveness of medical therapies.
But Gates and Allen didn't get to where they are by accepting conventional wisdom, and for that reason they should rethink just where to put their money and effort.
Devoting just a fraction of those resources to researching medical regulation, rather than medical science, could be incredibly fruitful.
Advances in medicine may require difficult scientific breakthroughs. Advances in medical regulatory policy might only require the reframing of basic questions, such as the role of FDA.
FDA's veto power over new therapies has a gruesome side effect: Every approval of a new life-saving drug or device means that people died waiting for that approval to be issued.
Is FDA really the only institution capable of evaluating new therapies? Are doctors and patients truly incapable of deciding whether to use experimental therapies?
Rethinking these issues, especially in the context of the very information technologies that Gates and Allen helped create, might well change the world.
[Ed Hudgins and Sam Kazman, "Medicine Could Reach For Stars, FDA Willing," The Investor's Business Daily, 6 October 2004.]
Unless Microsoft founders Bill Gates and Paul Allen change their strategy, their investments in medicine may be undermined by the regulatory burden faced in the industry:
When Bill Gates and Paul Allen founded Microsoft in 1975, they shot for the stars and succeeded.
More recently, Allen shot for the stars again. The two successful launches of his SpaceShipOne won the $10 million Ansari X competition for private manned space flights. This feat may ultimately do for private space ventures what Charles Lindbergh's crossing the Atlantic did for commercial aviation.
The success of these enterprises obviously depended on such factors as genius, guts and foresight. It also depended on the less obvious absence of something as well-government regulation.
This brings us to medicine, a field in which both Gates and Allen have become major philanthropists. Gates has contributed billions to global health issues, including in July a $50 million international grant to fight AIDS and malaria.
Last year Allen gave $100 million to establish the Allen Institute for Brain Science. Its goal is to produce a comprehensive cellular map of the brain-the neurological equivalent of the human genome project.
The involvement of such figures as Gates and Allen in medicine should be an exciting prospect. Medicine, like computers and space flight, is a field rich in technological promise. Any day, it seems, a new scientific breakthrough could open the door to a world of new treatments for previously incurable conditions. If Gates and Allen manage to duplicate in medicine a mere fraction of their computer achievements, the health payoffs could be astounding.
But this image may also be a false one. Medicine is pervasively regulated. Because of the Food and Drug Administration, with its inclination toward deadly overcaution, it can require 10 to 15 years and nearly $1 billion to create, test, and bring to market a new drug.
That's only for the one in 5,000 drugs that succeed. How many "medical Microsoft" startups could survive such hurdles?
Men such as Gates and Allen may enter medicine, but whether they'll be able to revolutionize it is another matter. Consider how the heavily regulated field of biotechnology has produced hardly any billionaires.
What's to be done? The conventional wisdom is that massive government oversight is essential to assuring the safety and effectiveness of medical therapies.
But Gates and Allen didn't get to where they are by accepting conventional wisdom, and for that reason they should rethink just where to put their money and effort.
Devoting just a fraction of those resources to researching medical regulation, rather than medical science, could be incredibly fruitful.
Advances in medicine may require difficult scientific breakthroughs. Advances in medical regulatory policy might only require the reframing of basic questions, such as the role of FDA.
FDA's veto power over new therapies has a gruesome side effect: Every approval of a new life-saving drug or device means that people died waiting for that approval to be issued.
Is FDA really the only institution capable of evaluating new therapies? Are doctors and patients truly incapable of deciding whether to use experimental therapies?
Rethinking these issues, especially in the context of the very information technologies that Gates and Allen helped create, might well change the world.
Online pharmacies slow to catch on
["Study: Few Americans buy drugs online — let alone from Canada," Associated Press, USA Today, 10 October 2004.]
While internet shopping is taking off in the U.S., the market for purchasing prescription drugs online is still in its infancy. As the article mentions, the target population is also perhaps the least web-savvy. Market incentives have a way of quickly changing those types of constraints, though, and certainly the internet will impact pharmaceuticals just as it has every other area. How international laws fit into the equation is another matter entirely...
Only 4% of Americans have ever used the Internet to buy prescription drugs — and even fewer do so through foreign pharmacies — despite Web sites maintained by a handful of states to help citizens import medicines more cheaply from Canada, a new study finds.
A majority — 62% — believe drugs bought online are less safe than those purchased from a local pharmacy, accepting the federal government's stated concerns in opposing drug imports, the Pew Internet and American Life Project said in a report Sunday.
The U.S. Food and Drug Administration said it cannot guarantee the safety of drugs sold through foreign pharmacies, though it has not stopped states from setting up sites to help consumers buy drugs through Canadian pharmacies.
Minnesota, Wisconsin, North Dakota and New Hampshire are among states that established such sites before Pew's May 15-June 17 survey period. Rhode Island linked its state-run prescription drug site to Wisconsin's. Illinois's came online later in the summer.
Of the 4% of Americans who bought online, the vast majority went to pharmacies based in the United States, meaning the population of online drug importers is even smaller. Most said the site required a prescription and said they had one from their doctor.
The online drug buyers tend to live in higher-income households and have six or more years of online experience. Three-quarters of the online drug buyers say their most recent purchase was for a chronic medical condition, such as arthritis or high blood pressure, and most said they were satisfied and planned to order online again.
Most cited convenience and cost savings as reasons for buying online.
Susannah Fox, Pew's director of research, said Americans may be cautious now, but they will likely grow more comfortable as friends and neighbors order without trouble.
For now, the Internet is chiefly used to research drugs — Pew finds that 26% of Americans have used the Internet to find information about prescription drugs, either by themselves or having someone else do it for them.
David MacKay, executive director of the Canadian International Pharmacy Association, said member Canadian pharmacies that ship to the United States use Web sites chiefly as a marketing tool. Patients would research prices and other information, but "inevitably they don't use the Internet to place the final order," MacKay said.
Only 10% of orders come through the Internet, and most of the rest use a toll-free phone number, he said.
Experts note that the elderly population most likely to be needing prescription medications for chronic illnesses are also the least likely to have an Internet connection.
Nonetheless, Internet sales are growing. IMS Consulting estimates online sales at $407 million in 2003, more than twice the $160 million a year earlier.
["Study: Few Americans buy drugs online — let alone from Canada," Associated Press, USA Today, 10 October 2004.]
While internet shopping is taking off in the U.S., the market for purchasing prescription drugs online is still in its infancy. As the article mentions, the target population is also perhaps the least web-savvy. Market incentives have a way of quickly changing those types of constraints, though, and certainly the internet will impact pharmaceuticals just as it has every other area. How international laws fit into the equation is another matter entirely...
Only 4% of Americans have ever used the Internet to buy prescription drugs — and even fewer do so through foreign pharmacies — despite Web sites maintained by a handful of states to help citizens import medicines more cheaply from Canada, a new study finds.
A majority — 62% — believe drugs bought online are less safe than those purchased from a local pharmacy, accepting the federal government's stated concerns in opposing drug imports, the Pew Internet and American Life Project said in a report Sunday.
The U.S. Food and Drug Administration said it cannot guarantee the safety of drugs sold through foreign pharmacies, though it has not stopped states from setting up sites to help consumers buy drugs through Canadian pharmacies.
Minnesota, Wisconsin, North Dakota and New Hampshire are among states that established such sites before Pew's May 15-June 17 survey period. Rhode Island linked its state-run prescription drug site to Wisconsin's. Illinois's came online later in the summer.
Of the 4% of Americans who bought online, the vast majority went to pharmacies based in the United States, meaning the population of online drug importers is even smaller. Most said the site required a prescription and said they had one from their doctor.
The online drug buyers tend to live in higher-income households and have six or more years of online experience. Three-quarters of the online drug buyers say their most recent purchase was for a chronic medical condition, such as arthritis or high blood pressure, and most said they were satisfied and planned to order online again.
Most cited convenience and cost savings as reasons for buying online.
Susannah Fox, Pew's director of research, said Americans may be cautious now, but they will likely grow more comfortable as friends and neighbors order without trouble.
For now, the Internet is chiefly used to research drugs — Pew finds that 26% of Americans have used the Internet to find information about prescription drugs, either by themselves or having someone else do it for them.
David MacKay, executive director of the Canadian International Pharmacy Association, said member Canadian pharmacies that ship to the United States use Web sites chiefly as a marketing tool. Patients would research prices and other information, but "inevitably they don't use the Internet to place the final order," MacKay said.
Only 10% of orders come through the Internet, and most of the rest use a toll-free phone number, he said.
Experts note that the elderly population most likely to be needing prescription medications for chronic illnesses are also the least likely to have an Internet connection.
Nonetheless, Internet sales are growing. IMS Consulting estimates online sales at $407 million in 2003, more than twice the $160 million a year earlier.
Friday, October 08, 2004
Canada's health care spending unsustainable
["Canada's universal health care system is sick," NCPA Daily Policy Digest, 8 October 2004.]
A quick look at demographic trends in the U.S. reveals that government health care assitance programs such as Medicaid and Medicare cannot continue to be funded at their current levels going forward. And yet, some propose that these programs be either expanded or folded into an overarching universal health care program along the lines of Canada's. Does Canada's health care system really represent an improvement over our own? The Canadian Fraser Institute suggests we should look elsewhere for solutions:
No country spends more than Canada to maintain a universal-access health care system. Yet most Canadians readily acknowledge that their health care system is failing. The solution, according to all of the parties in a recent federal election, is more spending.
Yet the current size and pace of health care spending by the provinces is remarkable, says researcher Nadeem Esmail:
- Health care expenditures already consume an average of 36 percent of provincial program spending, 4 percentage points higher than 5 years ago.
- On average, provincial program spending on health care has been increasing at a rate of more than 1.4 times that of total program spending.
This suggests that current growth rates in health care spending among the Canadian provinces are unsustainable and they will likely crowd out all other forms of spending in less than two decades if structural changes are not adopted, says Esmail.
Assuming that growth in total program spending will be about 3.5 percent (reflecting inflation and population growth) and holding real per capital provincial program spending constant, Esmail estimates that:
- By 2021, Newfoundland will be the first province to spend all of its funds on health care, leaving nothing for other programs such as police, education and the judiciary.
- All the 10 provinces will be spending their entire provincial budgets on nothing but health care by 2040.
Interested in finding out more about Canadian health care and answers to health care problems in the U.S.? Join us for a luncheon featuring Sally Pipes of The Pacific Research Institute October 14th in Kansas City. For more information or to register, visit the Flint Hills homepage: www.flinthills.org.
["Canada's universal health care system is sick," NCPA Daily Policy Digest, 8 October 2004.]
A quick look at demographic trends in the U.S. reveals that government health care assitance programs such as Medicaid and Medicare cannot continue to be funded at their current levels going forward. And yet, some propose that these programs be either expanded or folded into an overarching universal health care program along the lines of Canada's. Does Canada's health care system really represent an improvement over our own? The Canadian Fraser Institute suggests we should look elsewhere for solutions:
No country spends more than Canada to maintain a universal-access health care system. Yet most Canadians readily acknowledge that their health care system is failing. The solution, according to all of the parties in a recent federal election, is more spending.
Yet the current size and pace of health care spending by the provinces is remarkable, says researcher Nadeem Esmail:
- Health care expenditures already consume an average of 36 percent of provincial program spending, 4 percentage points higher than 5 years ago.
- On average, provincial program spending on health care has been increasing at a rate of more than 1.4 times that of total program spending.
This suggests that current growth rates in health care spending among the Canadian provinces are unsustainable and they will likely crowd out all other forms of spending in less than two decades if structural changes are not adopted, says Esmail.
Assuming that growth in total program spending will be about 3.5 percent (reflecting inflation and population growth) and holding real per capital provincial program spending constant, Esmail estimates that:
- By 2021, Newfoundland will be the first province to spend all of its funds on health care, leaving nothing for other programs such as police, education and the judiciary.
- All the 10 provinces will be spending their entire provincial budgets on nothing but health care by 2040.
Interested in finding out more about Canadian health care and answers to health care problems in the U.S.? Join us for a luncheon featuring Sally Pipes of The Pacific Research Institute October 14th in Kansas City. For more information or to register, visit the Flint Hills homepage: www.flinthills.org.
Health care regulation is costing us billions
[Christopher J. Conover, "Health Care Regulation: A $169 Billion Hidden Tax," Policy Analysis, The Cato Institute, 4 October 2004.]
Regulations place a burden on the economy, but it is often difficult to measure the full effect. Duke University's Chris Conover has attempted to do just that for the health care industry, though, in this recent Cato Institute report. The results are startling:
Surprisingly, given that the health industry is often viewed as among the most heavily regulated sectors of the U.S. economy, previous estimates generally have ignored the cost of regulating health care services.
Using a "top-down" approach, one can arrive at a "back-of-the-envelope" estimate that health services regulation imposes an annual cost of $256 billion per year (with a range of $28 billion to $657 billion), suggesting that health services regulations could increase estimates of overall regulatory costs by more than 25 percent.
A far more accurate "bottom-up" approach suggests that the total cost of health services regulation exceeds $339.2 billion. This figure takes into account regulation of health facilities, health professionals, health insurance, drugs and medical devices, and the medical tort system, including the costs of defensive medicine. Moreover, this approach allows for a calculation of some important tangible benefits of regulation. Yet even after subtracting $170.1 billion in benefits, the net burden of health services regulation is considerable, amounting to $169.1 billion annually. In other words, the costs of health services regulation outweigh benefits by two-to-one and cost the average household over $1,500 per year.
The high cost of health services regulation is responsible for more than seven million Americans lacking health insurance, or one in six of the average daily uninsured. Moreover, 4,000 more Americans die every year from costs associated with health services regulation (22,000) than from lack of health insurance (18,000). The annual net cost of health services regulation dwarfs other costs imposed by government intervention in the health care sector. This cost exceeds annual consumer expenditures on gasoline and oil in the United States and is twice the size of the annual output of the motion picture and sound recording industries.
Finding ways to reduce or eliminate this excess cost should be an urgent priority for policymakers. It would appear from this preliminary assessment that medical tort reform offers the most promising target for regulatory cost savings, followed by FDA reform, selected access-oriented health insurance regulations (e.g., mandated health benefits), and quality-oriented health facilities regulations (e.g., accreditation and licensure).
[Matthew Hisrich, "State Mandates reduce insurance affordability," The Flint Hills Center, May 2004.]
[Christopher J. Conover, "Health Care Regulation: A $169 Billion Hidden Tax," Policy Analysis, The Cato Institute, 4 October 2004.]
Regulations place a burden on the economy, but it is often difficult to measure the full effect. Duke University's Chris Conover has attempted to do just that for the health care industry, though, in this recent Cato Institute report. The results are startling:
Surprisingly, given that the health industry is often viewed as among the most heavily regulated sectors of the U.S. economy, previous estimates generally have ignored the cost of regulating health care services.
Using a "top-down" approach, one can arrive at a "back-of-the-envelope" estimate that health services regulation imposes an annual cost of $256 billion per year (with a range of $28 billion to $657 billion), suggesting that health services regulations could increase estimates of overall regulatory costs by more than 25 percent.
A far more accurate "bottom-up" approach suggests that the total cost of health services regulation exceeds $339.2 billion. This figure takes into account regulation of health facilities, health professionals, health insurance, drugs and medical devices, and the medical tort system, including the costs of defensive medicine. Moreover, this approach allows for a calculation of some important tangible benefits of regulation. Yet even after subtracting $170.1 billion in benefits, the net burden of health services regulation is considerable, amounting to $169.1 billion annually. In other words, the costs of health services regulation outweigh benefits by two-to-one and cost the average household over $1,500 per year.
The high cost of health services regulation is responsible for more than seven million Americans lacking health insurance, or one in six of the average daily uninsured. Moreover, 4,000 more Americans die every year from costs associated with health services regulation (22,000) than from lack of health insurance (18,000). The annual net cost of health services regulation dwarfs other costs imposed by government intervention in the health care sector. This cost exceeds annual consumer expenditures on gasoline and oil in the United States and is twice the size of the annual output of the motion picture and sound recording industries.
Finding ways to reduce or eliminate this excess cost should be an urgent priority for policymakers. It would appear from this preliminary assessment that medical tort reform offers the most promising target for regulatory cost savings, followed by FDA reform, selected access-oriented health insurance regulations (e.g., mandated health benefits), and quality-oriented health facilities regulations (e.g., accreditation and licensure).
[Matthew Hisrich, "State Mandates reduce insurance affordability," The Flint Hills Center, May 2004.]
Thursday, October 07, 2004
Employer-based coverage leads to "job-lock"
["Employer-provided health insurance inhibits job mobility," NCPA Daily Policy Digest, 7 October 2004.]
Recent research confirms what makes sense intuitively - if your coverage ends when you leave a job, you are probably less likely to leave even if you would like to:
Economist Scott Adams says that because employers are the primary providers of health insurance in the United States, some people who would prefer to leave their current jobs may remain to avoid losing health benefits.
Some legislation has been put in place to reduce this phenomenon, called “job-lock.” Adams suggests that job-lock is inefficient because it impedes the optimal allocation of labor, so it is important not only to identify whether it exists but also to quantify its impact. In his research, Adams finds that:
- Among men aged 25 to 55 with spouses, there is an approximate 22 percent to 32 percent reduction in job mobility stemming from health insurance coverage.
- Slightly more job lock is found among married women.
- It is estimated that job lock has increased since 1988.
Overall, Adams’ results are consistent with earlier studies that found job mobility was reduced by 26 percent to 31 percent due to the lack of portability of employer-provided health coverage.
["Employer-provided health insurance inhibits job mobility," NCPA Daily Policy Digest, 7 October 2004.]
Recent research confirms what makes sense intuitively - if your coverage ends when you leave a job, you are probably less likely to leave even if you would like to:
Economist Scott Adams says that because employers are the primary providers of health insurance in the United States, some people who would prefer to leave their current jobs may remain to avoid losing health benefits.
Some legislation has been put in place to reduce this phenomenon, called “job-lock.” Adams suggests that job-lock is inefficient because it impedes the optimal allocation of labor, so it is important not only to identify whether it exists but also to quantify its impact. In his research, Adams finds that:
- Among men aged 25 to 55 with spouses, there is an approximate 22 percent to 32 percent reduction in job mobility stemming from health insurance coverage.
- Slightly more job lock is found among married women.
- It is estimated that job lock has increased since 1988.
Overall, Adams’ results are consistent with earlier studies that found job mobility was reduced by 26 percent to 31 percent due to the lack of portability of employer-provided health coverage.
Wednesday, October 06, 2004
Golden Rule reports customers are putting millions into HSAs
["Golden Rule Customers Exceed $110 Million Saved in Health Savings Accounts," Press release, Business Wire, 29 September 2004.]
The investment in Health Savings Accounts is growing - and insurance company Golden Rule has the numbers to prove it. According to this recent release, sales are up and customers are truly taking advantage of the opportunity:
Golden Rule Insurance Company today announced that its customers have exceeded more than $110 million saved in tax-advantaged Health Savings Accounts (HSAs).
Golden Rule also said that monthly sales volumes have nearly tripled since this time last year with the number of HSA applications up 133 percent since January. Golden Rule pioneered the Medical Savings Account, predecessor to the HSA, ten years ago and began offering Health Savings Accounts as soon as the law allowed on January 1, 2004.
Nationally, the U.S. Congress Joint Committee on Taxation estimates that one million HSAs will be sold this year and a top-ranking IRS official recently predicted three times that many. With more than 16.5 million Americans faced with buying their own health insurance, Health Savings Accounts provide a new, lower-cost alternative to traditional co-pay plans while still offering quality coverage.
"On average, we find Golden Rule's customers saving 45-55 percent on annual insurance premiums alone," Andy Grim, Golden Rule vice president of marketing, said. "Our customers are getting the coverage they need without paying for coverage they don't."
Janet and Ted Lippzer understand just how expensive health insurance can be - and how important quality coverage is. Several years ago, Ted experienced significant health problems but today he's doing fine. The couple, who own an ice cream shop, live in Elizabeth, Pennsylvania, with their teenage daughter.
The Lippzers switched from traditional insurance to an HSA when their premium skyrocketed to over $900 a month. Today, the Lippzers have cut their premium to under $200 a month and they're building savings for future medical expenses, tax deferred.
"Health insurance shouldn't require a compromise that you either take care of yourself or you live your life," Janet Lippzer said. "An HSA makes it affordable so you can take care of yourself."
Russ Griffith, a self-employed engineering consultant in Granville, Ohio, also knows how costly traditional health insurance can be. Prior to establishing an HSA with Golden Rule, Griffith says he and his wife Kathy, who works part-time in retail, were spending $1,111 a month for health insurance.
"To me, our Health Savings Account is true insurance, the kind of insurance I think I've always wanted," Griffith explained. "Every time you go to the doctor's office, you don't have to submit a claim and have them pay part of it and you pay part of it. It reduces the paperwork. It makes a whole lot more sense."
The Griffiths are now spending less than a third of what they were previously on their monthly premium alone. "When you count the insurance premium, as well as our out-of-pocket medical expenses, we'll be spending less than half of what we spent with our previous medical insurance," he said.
[Greg Scandlen, "Choice is revolutionizing health care," The Wichita Eagle, 28 September 2004.
Matthew Hisrich, "HSAs are increasing Americans' health coverage," The Topeka Capital-Journal, 26 September 2004.]
["Golden Rule Customers Exceed $110 Million Saved in Health Savings Accounts," Press release, Business Wire, 29 September 2004.]
The investment in Health Savings Accounts is growing - and insurance company Golden Rule has the numbers to prove it. According to this recent release, sales are up and customers are truly taking advantage of the opportunity:
Golden Rule Insurance Company today announced that its customers have exceeded more than $110 million saved in tax-advantaged Health Savings Accounts (HSAs).
Golden Rule also said that monthly sales volumes have nearly tripled since this time last year with the number of HSA applications up 133 percent since January. Golden Rule pioneered the Medical Savings Account, predecessor to the HSA, ten years ago and began offering Health Savings Accounts as soon as the law allowed on January 1, 2004.
Nationally, the U.S. Congress Joint Committee on Taxation estimates that one million HSAs will be sold this year and a top-ranking IRS official recently predicted three times that many. With more than 16.5 million Americans faced with buying their own health insurance, Health Savings Accounts provide a new, lower-cost alternative to traditional co-pay plans while still offering quality coverage.
"On average, we find Golden Rule's customers saving 45-55 percent on annual insurance premiums alone," Andy Grim, Golden Rule vice president of marketing, said. "Our customers are getting the coverage they need without paying for coverage they don't."
Janet and Ted Lippzer understand just how expensive health insurance can be - and how important quality coverage is. Several years ago, Ted experienced significant health problems but today he's doing fine. The couple, who own an ice cream shop, live in Elizabeth, Pennsylvania, with their teenage daughter.
The Lippzers switched from traditional insurance to an HSA when their premium skyrocketed to over $900 a month. Today, the Lippzers have cut their premium to under $200 a month and they're building savings for future medical expenses, tax deferred.
"Health insurance shouldn't require a compromise that you either take care of yourself or you live your life," Janet Lippzer said. "An HSA makes it affordable so you can take care of yourself."
Russ Griffith, a self-employed engineering consultant in Granville, Ohio, also knows how costly traditional health insurance can be. Prior to establishing an HSA with Golden Rule, Griffith says he and his wife Kathy, who works part-time in retail, were spending $1,111 a month for health insurance.
"To me, our Health Savings Account is true insurance, the kind of insurance I think I've always wanted," Griffith explained. "Every time you go to the doctor's office, you don't have to submit a claim and have them pay part of it and you pay part of it. It reduces the paperwork. It makes a whole lot more sense."
The Griffiths are now spending less than a third of what they were previously on their monthly premium alone. "When you count the insurance premium, as well as our out-of-pocket medical expenses, we'll be spending less than half of what we spent with our previous medical insurance," he said.
[Greg Scandlen, "Choice is revolutionizing health care," The Wichita Eagle, 28 September 2004.
Matthew Hisrich, "HSAs are increasing Americans' health coverage," The Topeka Capital-Journal, 26 September 2004.]
Tuesday, October 05, 2004
Estate recovery makes sense
[Editorial, "Payback?," The Lawrence Journal-World, 30 September 2004.]
This recent editorial hits the nail right on the head when it comes to what the state does and does not owe Kansans. The entitlement paradigm is unsustainable, and public officials should not be labeled heartless for working to restore Medicaid to its original role as a program for the truly needy:
What should we expect from our government?
In some cases, Americans' idea of what they are entitled to in the way of government services seems a little out of whack.
A state law that takes effect Friday apparently has triggered a fair amount of concern and criticism from people who receive state Medicaid payments. The law allows the state, under some circumstances, to claim assets from Medicaid recipients or their estates to help recover some of the cost of paying for their care.
There are many exceptions to the law. It only affects people who are 55 or older or who receive long-term care services through a nursing facility. For married people, any seizure of assets would be delayed until after the death of the person's spouse. Funds also couldn't be recovered from an estate that involved a minor child or a child with disabilities. The goal is not to leave anyone destitute, just to use whatever assets are left over to help the state meet its ever-growing Medicaid demand.
Medicaid is an important safety net for low-income Kansans, but the money to support it doesn't fall from heaven; it comes from taxes paid by hard-working Kansans with homes and medical costs of their own. Because we, as a state and a nation, think it's important to take care of those who are less fortunate, we fund Medicaid so people can receive needed medical care and, in some cases, continue to live in their own homes. It's not reasonable, however, to expect taxpayers to also provide an inheritance for a Medicaid recipient's family.
Where did we get the idea that we're entitled to have someone take care of us, whether that means providing medical care or even preserving our inheritance? Repaying the state or any other entity that has taken care of us in a time of need just seems like the honorable thing to do. It's almost too bad it takes legislation to force people to do the right thing.
[Matthew Hisrich, "Staying the Course: Medicaid Reform in Kansas," The Flint Hills Center for Public Policy, February 2004.
Charles W. Van Way, III, MD, "The Strength of a Really Bad Idea," The Flint Hills Center, 8 May 2004.]
[Editorial, "Payback?," The Lawrence Journal-World, 30 September 2004.]
This recent editorial hits the nail right on the head when it comes to what the state does and does not owe Kansans. The entitlement paradigm is unsustainable, and public officials should not be labeled heartless for working to restore Medicaid to its original role as a program for the truly needy:
What should we expect from our government?
In some cases, Americans' idea of what they are entitled to in the way of government services seems a little out of whack.
A state law that takes effect Friday apparently has triggered a fair amount of concern and criticism from people who receive state Medicaid payments. The law allows the state, under some circumstances, to claim assets from Medicaid recipients or their estates to help recover some of the cost of paying for their care.
There are many exceptions to the law. It only affects people who are 55 or older or who receive long-term care services through a nursing facility. For married people, any seizure of assets would be delayed until after the death of the person's spouse. Funds also couldn't be recovered from an estate that involved a minor child or a child with disabilities. The goal is not to leave anyone destitute, just to use whatever assets are left over to help the state meet its ever-growing Medicaid demand.
Medicaid is an important safety net for low-income Kansans, but the money to support it doesn't fall from heaven; it comes from taxes paid by hard-working Kansans with homes and medical costs of their own. Because we, as a state and a nation, think it's important to take care of those who are less fortunate, we fund Medicaid so people can receive needed medical care and, in some cases, continue to live in their own homes. It's not reasonable, however, to expect taxpayers to also provide an inheritance for a Medicaid recipient's family.
Where did we get the idea that we're entitled to have someone take care of us, whether that means providing medical care or even preserving our inheritance? Repaying the state or any other entity that has taken care of us in a time of need just seems like the honorable thing to do. It's almost too bad it takes legislation to force people to do the right thing.
[Matthew Hisrich, "Staying the Course: Medicaid Reform in Kansas," The Flint Hills Center for Public Policy, February 2004.
Charles W. Van Way, III, MD, "The Strength of a Really Bad Idea," The Flint Hills Center, 8 May 2004.]
Monday, October 04, 2004
HSA luncheons a success
We had over 90 attendees in Wichita and over 50 in Kansas City to hear Greg Scandlen of The Galen Institute speak about HSAs. The audiences were very engaged and asked quite a few questions.
While Scandlen was in town, we visited with a number of papers and groups, so there may be some follow-up coverage, and he certainly helped amplify the buzz surrounding the products.
We will be posting some of this coverage on our homepage, and hopefully we will also have Greg's presentation up soon, as well.
We had over 90 attendees in Wichita and over 50 in Kansas City to hear Greg Scandlen of The Galen Institute speak about HSAs. The audiences were very engaged and asked quite a few questions.
While Scandlen was in town, we visited with a number of papers and groups, so there may be some follow-up coverage, and he certainly helped amplify the buzz surrounding the products.
We will be posting some of this coverage on our homepage, and hopefully we will also have Greg's presentation up soon, as well.
Drug reimportation explained by way of Coca-Cola
[Robert Lawson, "The Reimportation Question," Division of Labour, 30 September 2004.]
Economic Freedom of the World co-author Robert Lawson explains how property rights impact the drug reimportation debate in this excellent analysis on his blog, Division of Labour:
Professor Bainbridge asks what's the conservative position on importing drugs from Canada.
"shouldn't the conservative position be one of promoting markets and individual choice by allowing foreign drug sources to compete for the dollars of US citizens?"
I'd certainly agree with him if in fact we were talking about "foreign drug sources" but we're not. Here we are talking about American drugs being sent to Canada and then Americans buying them back. Wait a second! Why would we do something like that? Think about it. In a normal rational world it would make no sense to make a drug in say New Jersey, ship it to Windsor, and then ship it back to New Jersey. But we don't live in a normal rational world. We live in a world where Canada imposes price controls on drugs.
From an economic point of view reimportation is less about importing drugs than importing price controls. And I KNOW what the conservative position is on price controls.
Furthermore, as a libertarian I support the right of American drug companies to market their products in other countries under the condition that the drugs not be resold. This is common practice in many businesses. Airlines prevent people from reselling tickets. My university charges some students $20k and others $2k per year. It is perfectly within our rights to prohibit a student from enrolling at $2k and reselling the spot to someone for $20k. Similarly, it seems to me that it's perfectly ok for drug companies to sell to Canada (at their ridiculous price controlled prices) under the condition that they not be resold to the U.S.
P.S. I've noticed a lot of my students are buying cheap international editions of American textbooks. I got on them a bit about this too.
UPDATE: A reader wrote in with this, "I don't know about the reimportation of drugs equaling the reimportation of price controls. The analogy between a spot at Capital and drugs isn't complete, because the spot at Capital doesn't move... it's more of a lease. Drugs, once they are sold, are gone: if we are transferring property rights then the right to re-sell must be included, right?"
My reply: In a private property rights regime buyers and sellers may contract in any way they see fit. In this case, the drug sellers want to impose a contractual condition on the buyers that they not resell the product. This is not inconsistent with liberty. Indeed to prohibit this sort of contract would be inconsistent with liberty.
Consider another example: Suppose Coca-Cola wants to secure a contract to supply pop [we are in the midwest so it's pop] at Ohio State University. OSU, being big and having some degree of market power, is able to secure a low price on the Coke products supplied by the firm. But Coke also wants to sell to nearby High St. businesses at its usual retail prices. So it gets OSU to agree contractually not to sell Coke off-campus. Now, suppose Coke decides to buy up lots of Coke products at the low prices and then resell to High St. businesses thus undercutting Coke's own position on High St. Clearly OSU has violated the terms of the agreement and this should not be permitted. I argue the drug case is very much the same.
So my position is not against reimportation per se. It is against reimportation when such reimportation violates the contractual terms of the sale. Also please note that my argument against reimportation is based on contract theory not public policy grounds. I do reject the FDA's ridiculous argument that only THEY can determine what drugs are safe.
Interested in finding out more about reimporting drugs from Canada? Visit the Flint Hills homepage to find out about our upcoming luncheon on the subject featuring Sally Pipes of The Pacific Research Institute: http://www.flinthills.org
[Robert Lawson, "The Reimportation Question," Division of Labour, 30 September 2004.]
Economic Freedom of the World co-author Robert Lawson explains how property rights impact the drug reimportation debate in this excellent analysis on his blog, Division of Labour:
Professor Bainbridge asks what's the conservative position on importing drugs from Canada.
"shouldn't the conservative position be one of promoting markets and individual choice by allowing foreign drug sources to compete for the dollars of US citizens?"
I'd certainly agree with him if in fact we were talking about "foreign drug sources" but we're not. Here we are talking about American drugs being sent to Canada and then Americans buying them back. Wait a second! Why would we do something like that? Think about it. In a normal rational world it would make no sense to make a drug in say New Jersey, ship it to Windsor, and then ship it back to New Jersey. But we don't live in a normal rational world. We live in a world where Canada imposes price controls on drugs.
From an economic point of view reimportation is less about importing drugs than importing price controls. And I KNOW what the conservative position is on price controls.
Furthermore, as a libertarian I support the right of American drug companies to market their products in other countries under the condition that the drugs not be resold. This is common practice in many businesses. Airlines prevent people from reselling tickets. My university charges some students $20k and others $2k per year. It is perfectly within our rights to prohibit a student from enrolling at $2k and reselling the spot to someone for $20k. Similarly, it seems to me that it's perfectly ok for drug companies to sell to Canada (at their ridiculous price controlled prices) under the condition that they not be resold to the U.S.
P.S. I've noticed a lot of my students are buying cheap international editions of American textbooks. I got on them a bit about this too.
UPDATE: A reader wrote in with this, "I don't know about the reimportation of drugs equaling the reimportation of price controls. The analogy between a spot at Capital and drugs isn't complete, because the spot at Capital doesn't move... it's more of a lease. Drugs, once they are sold, are gone: if we are transferring property rights then the right to re-sell must be included, right?"
My reply: In a private property rights regime buyers and sellers may contract in any way they see fit. In this case, the drug sellers want to impose a contractual condition on the buyers that they not resell the product. This is not inconsistent with liberty. Indeed to prohibit this sort of contract would be inconsistent with liberty.
Consider another example: Suppose Coca-Cola wants to secure a contract to supply pop [we are in the midwest so it's pop] at Ohio State University. OSU, being big and having some degree of market power, is able to secure a low price on the Coke products supplied by the firm. But Coke also wants to sell to nearby High St. businesses at its usual retail prices. So it gets OSU to agree contractually not to sell Coke off-campus. Now, suppose Coke decides to buy up lots of Coke products at the low prices and then resell to High St. businesses thus undercutting Coke's own position on High St. Clearly OSU has violated the terms of the agreement and this should not be permitted. I argue the drug case is very much the same.
So my position is not against reimportation per se. It is against reimportation when such reimportation violates the contractual terms of the sale. Also please note that my argument against reimportation is based on contract theory not public policy grounds. I do reject the FDA's ridiculous argument that only THEY can determine what drugs are safe.
Interested in finding out more about reimporting drugs from Canada? Visit the Flint Hills homepage to find out about our upcoming luncheon on the subject featuring Sally Pipes of The Pacific Research Institute: http://www.flinthills.org
