Wednesday, February 25, 2004
The positive unintended consequences of allowing reimportation
[David R. Henderson and Charley Hooper, "Hidden drug-reimport potential," The Washington Times, 24 February 2004.]
The authors of this column raise an interesting point about the drug importation argument. If importation is allowed, the result will not be "the silver bullet that will dramatically reduce prescription drug prices in the United States," but rather an end to unsustainable price controls in Canada:
Just as Turkey's price controls on imported oil in 1980 lasted less than a month when the Turks saw those price controls lead to zero imports, so a vocal constituency would develop in Canada for getting rid of, or at least relaxing, the Canadian price controls.
And that's all to the good. Why? Because relaxing Canada's price controls would cause Canadians to start paying their pro-rated share of the research and development costs that drug companies need to recoup to develop drugs in the first place.
Ironically, then, allowing imports for Americans who want a deal will end up eliminating that deal but will create a better deal for all Americans; it will spread the cost of research and development, which is currently borne disproportionately by us.
[David R. Henderson and Charley Hooper, "Hidden drug-reimport potential," The Washington Times, 24 February 2004.]
The authors of this column raise an interesting point about the drug importation argument. If importation is allowed, the result will not be "the silver bullet that will dramatically reduce prescription drug prices in the United States," but rather an end to unsustainable price controls in Canada:
Just as Turkey's price controls on imported oil in 1980 lasted less than a month when the Turks saw those price controls lead to zero imports, so a vocal constituency would develop in Canada for getting rid of, or at least relaxing, the Canadian price controls.
And that's all to the good. Why? Because relaxing Canada's price controls would cause Canadians to start paying their pro-rated share of the research and development costs that drug companies need to recoup to develop drugs in the first place.
Ironically, then, allowing imports for Americans who want a deal will end up eliminating that deal but will create a better deal for all Americans; it will spread the cost of research and development, which is currently borne disproportionately by us.
Tuesday, February 24, 2004
Price controls kill
[James K. Glassman, "Free Riding Isn't Free," Tech Central Station, 23 February 2004.]
At a recent forum on "Price Controls and the Economics of Medical Innovation," James Glassman made some persuasive arguments against price controls for prescription drugs. Put simply, price controls are poor public policy for the U.S., just as they are elsewhere. Rather than importing bad public policy, we should improve our health care system and push for reform in overseas markets.
-Price controls kill. A recent Bain & Co. study compares the U.S. and Germany. Because of price controls on drugs and the inevitable rationing that accompanies such controls, Germans spend more time in the hospital than Americans and lose more working days through sickness. Germans suffering from heart disease and breast cancer have higher mortality rates. There is a triage here. Europe kills its citizens and makes them sicker because it restricts access to drugs it considers too expensive. But just consider these facts: In Germany, 30 percent of diabetes patients are not treated with drugs at all. In France, most patients with multiple sclerosis and eligible for treatment with beta interferon, do not receive such treatment. Only 18 percent of European patients with severe depression get treatment with antidepressants. This is the future for America if price controls are exported to this country.
-The economic development argument is powerful. The Bain study shows that, while Germany saves $19 billion in drug costs through price controls, it loses $22 billion due to reduced R&D spending, bad health outcomes, loss of high value-added jobs (and the tax revenue associated with them), and so on. Free riding isn't free.
-Try to change minds in Europe and Canada. It is their citizens who are suffering now and will suffer far more if importation of price controls succeeds. Also, as John Martin said, private companies need to get tough in their negotiations in Europe and Canada and not accept the low prices imposed on them.
-Repeat with me, "Free Rider. Free Rider. Free Rider." Europeans, Australians and Canadians are doing something immoral. They are not shouldering their responsibility for R&D. In the past ten years, R&D spending in Europe has doubled, but R&D spending in the US has quintupled. As Bain says, free riding can't go on much longer. It is an unsustainable model.
-Americans, ultimately, need to understand a little economics. We shouldn't be shy about educating them. Price controls never work long-term. Why? Because when you set a low price, you reduce supply. Few producers want to make things if the price is artificially low. This reduced supply puts further upward pressure on prices -- increasing the gap between the controlled price and where the natural price would be (where the unfettered supply and demand curves cross). Governments, then, must respond by reducing demand by refusing to allow people to have life-saving or life-enhancing drugs and medical devices. What's remarkable is not that drugs are so expensive, but that they are so cheap. They are a stupefying bargain.
-Make common cause with the rest of innovative industry - now under attack as well. The drug and medical device sector is not alone. Successful businesses are always under fire.
-How to get drug prices even lower? Simple. Increase supply. If Europe ended price controls, more companies would enter the market, pushing down prices. If the FDA streamlined its standards, costs of bringing new drugs to market would fall, increasing supply. If property rights were protected, the cost of capital for investment in new drugs would fall, increasing supply. That is the answer.
For those interested in learning more about Canada's health care system in particular, Dr. Brian Lee Crowley of the Atlantic Institute for Market Studies recently delivered a speech at a Flint Hills event entitled, “The Top Ten Things People Believe About Canadian Health Care, But Shouldn’t.”
[James K. Glassman, "Free Riding Isn't Free," Tech Central Station, 23 February 2004.]
At a recent forum on "Price Controls and the Economics of Medical Innovation," James Glassman made some persuasive arguments against price controls for prescription drugs. Put simply, price controls are poor public policy for the U.S., just as they are elsewhere. Rather than importing bad public policy, we should improve our health care system and push for reform in overseas markets.
-Price controls kill. A recent Bain & Co. study compares the U.S. and Germany. Because of price controls on drugs and the inevitable rationing that accompanies such controls, Germans spend more time in the hospital than Americans and lose more working days through sickness. Germans suffering from heart disease and breast cancer have higher mortality rates. There is a triage here. Europe kills its citizens and makes them sicker because it restricts access to drugs it considers too expensive. But just consider these facts: In Germany, 30 percent of diabetes patients are not treated with drugs at all. In France, most patients with multiple sclerosis and eligible for treatment with beta interferon, do not receive such treatment. Only 18 percent of European patients with severe depression get treatment with antidepressants. This is the future for America if price controls are exported to this country.
-The economic development argument is powerful. The Bain study shows that, while Germany saves $19 billion in drug costs through price controls, it loses $22 billion due to reduced R&D spending, bad health outcomes, loss of high value-added jobs (and the tax revenue associated with them), and so on. Free riding isn't free.
-Try to change minds in Europe and Canada. It is their citizens who are suffering now and will suffer far more if importation of price controls succeeds. Also, as John Martin said, private companies need to get tough in their negotiations in Europe and Canada and not accept the low prices imposed on them.
-Repeat with me, "Free Rider. Free Rider. Free Rider." Europeans, Australians and Canadians are doing something immoral. They are not shouldering their responsibility for R&D. In the past ten years, R&D spending in Europe has doubled, but R&D spending in the US has quintupled. As Bain says, free riding can't go on much longer. It is an unsustainable model.
-Americans, ultimately, need to understand a little economics. We shouldn't be shy about educating them. Price controls never work long-term. Why? Because when you set a low price, you reduce supply. Few producers want to make things if the price is artificially low. This reduced supply puts further upward pressure on prices -- increasing the gap between the controlled price and where the natural price would be (where the unfettered supply and demand curves cross). Governments, then, must respond by reducing demand by refusing to allow people to have life-saving or life-enhancing drugs and medical devices. What's remarkable is not that drugs are so expensive, but that they are so cheap. They are a stupefying bargain.
-Make common cause with the rest of innovative industry - now under attack as well. The drug and medical device sector is not alone. Successful businesses are always under fire.
-How to get drug prices even lower? Simple. Increase supply. If Europe ended price controls, more companies would enter the market, pushing down prices. If the FDA streamlined its standards, costs of bringing new drugs to market would fall, increasing supply. If property rights were protected, the cost of capital for investment in new drugs would fall, increasing supply. That is the answer.
For those interested in learning more about Canada's health care system in particular, Dr. Brian Lee Crowley of the Atlantic Institute for Market Studies recently delivered a speech at a Flint Hills event entitled, “The Top Ten Things People Believe About Canadian Health Care, But Shouldn’t.”
Thursday, February 19, 2004
How should politicians address the health care issue?
[John Hood, "Diagnosing the Health Care Issue," Daily Journal, The John Locke Foundation, 17 February 2004.]
In this column by John Locke Foundation president John Hood, he asks the important question: What are politicians supposed to do about health care?
As he explains, the best thing they can do for consumers and taxpayers is to simply get out of the way:
[I]f all American voters mean by "address health care" is that they want the government to deliver it, finance it, or regulate its cost, then their sentiment is nothing more than a dressed-up demand for income redistribution. The "government" has no money. Taxpayers have money. Governments exist to do coercive things. If you want the government to give you free or cheap health care, what you really want politicians to do is force some of your fellow citizens to pay for their own health care and for your health care.
If, on the other hand, American voters have the sense that their choices within the medical marketplace are unnecessarily constricted and unnecessarily costly, then the government can address the problem without having to expand the income-redistribution schemes they already operate, and preferably while reducing said schemes. For example, the federal and state income-tax codes warp the market for health care by imposing punitive levies on people who buy their own medical services and (though this is improving somewhat) their own health plans. Additional government-imposed regulations and premium taxes made it hard for individuals to own their own plans and make their own decisions, which is the real answer to the problem of controlling cost without depriving people of needed health care.
For all its faults, the new Medicare legislation has authorized health saving accounts to give Americans more latitude to take the same tax deductions for their medical savings and spending as they -- and to a larger extent their more-affluent peers working at large companies -- have enjoyed for years with regard to employer-based health plans.
If voters want more power, more control, more options, and more savings, the good news is that politicians can certainly deliver without picking someone else's pocket. All they have to do is get themselves, and their biased tax and regulatory policies, of the way.
[Richard B. Warner, M.D., "How Would You Like Your Medicine?," The Flint Hills Center for Public Policy, 24 July 1999.]
[John Hood, "Diagnosing the Health Care Issue," Daily Journal, The John Locke Foundation, 17 February 2004.]
In this column by John Locke Foundation president John Hood, he asks the important question: What are politicians supposed to do about health care?
As he explains, the best thing they can do for consumers and taxpayers is to simply get out of the way:
[I]f all American voters mean by "address health care" is that they want the government to deliver it, finance it, or regulate its cost, then their sentiment is nothing more than a dressed-up demand for income redistribution. The "government" has no money. Taxpayers have money. Governments exist to do coercive things. If you want the government to give you free or cheap health care, what you really want politicians to do is force some of your fellow citizens to pay for their own health care and for your health care.
If, on the other hand, American voters have the sense that their choices within the medical marketplace are unnecessarily constricted and unnecessarily costly, then the government can address the problem without having to expand the income-redistribution schemes they already operate, and preferably while reducing said schemes. For example, the federal and state income-tax codes warp the market for health care by imposing punitive levies on people who buy their own medical services and (though this is improving somewhat) their own health plans. Additional government-imposed regulations and premium taxes made it hard for individuals to own their own plans and make their own decisions, which is the real answer to the problem of controlling cost without depriving people of needed health care.
For all its faults, the new Medicare legislation has authorized health saving accounts to give Americans more latitude to take the same tax deductions for their medical savings and spending as they -- and to a larger extent their more-affluent peers working at large companies -- have enjoyed for years with regard to employer-based health plans.
If voters want more power, more control, more options, and more savings, the good news is that politicians can certainly deliver without picking someone else's pocket. All they have to do is get themselves, and their biased tax and regulatory policies, of the way.
[Richard B. Warner, M.D., "How Would You Like Your Medicine?," The Flint Hills Center for Public Policy, 24 July 1999.]
Wednesday, February 18, 2004
Don't rush into price controls
[Editorial, "Pricing Drugs," The Washington Post, 17 February 2004.]
This editorial from The Washington Post wisely urges caution against legislators looking to price controls on drugs as the answer to rising health care costs:
[B]efore the call for price controls gains too much momentum lawmakers should make sure they've looked at all the options. Governments are notoriously bad at setting prices, and the U.S. government is notoriously bad at setting prices in the medical realm. The Congressional Budget Office has also stated that government interference would have a "negligible effect on federal spending" because the private plans will do just as good a job.
[Richard B. Warner, M.D., "Relief From Health Care Inflation," The Kansas Physician, September/October 2002.]
[Editorial, "Pricing Drugs," The Washington Post, 17 February 2004.]
This editorial from The Washington Post wisely urges caution against legislators looking to price controls on drugs as the answer to rising health care costs:
[B]efore the call for price controls gains too much momentum lawmakers should make sure they've looked at all the options. Governments are notoriously bad at setting prices, and the U.S. government is notoriously bad at setting prices in the medical realm. The Congressional Budget Office has also stated that government interference would have a "negligible effect on federal spending" because the private plans will do just as good a job.
[Richard B. Warner, M.D., "Relief From Health Care Inflation," The Kansas Physician, September/October 2002.]
Friday, February 13, 2004
Hello from Bryan Riley -- I just received the following email from www.galen.org:
Galen Institute
Health Policy Matters
February 13, 2004
Consumer Choice Care
The Galen Institute briefing on Wednesday dazzled the audience with "Reports from the Field" about Consumer Choice Health Care. The hearing room in the Senate Dirksen building was packed, with standing room only.
Six companies presented evidence that dispelled myths about these plans. The facts:
Enrollees are more likely to be older and sicker, not young and healthy.
Despite this, consumer directed plans do lower costs.
Utilization of preventive services increases by as much as 60%.
Patients choose generic drugs up to 50% more often.
Satisfaction and re-enrollment rates are high, up to 98%.
The briefing was organized and moderated by Greg Scandlen, Galen's most able director of our Center for Consumer Driven Health Care, with an introduction by Sen. Larry Craig, chairman of the Senate Special Committee on Aging. "Passage of Health Savings Accounts may be one of the most important accomplishments of this Congress," Craig said.
There also was early good news about HSAs: Scott Krienke of Assurant Health (formerly Fortis Health) says that 30% of those who have signed up for HSA accounts since January 1 were previously uninsured.
The briefing, however, largely focused on experience so far with the more established Health Reimbursement Arrangements, authorized by regulatory action in 2002, that provide employers with an opportunity to allow employees to participate in cost-saving by making wiser use of health services.
Companies represented at the briefing were Aetna, Definity Health, Destiny Health, Assurant Health, Lumenos, and Destiny.
Some highlights:
Aetna conducted a detailed study of enrollees in its consumer choice HealthFund and matched it to a similar population. The results: Eligible charges for the HealthFund group rose by only 1.5% while the control group rose 15.7%.
Participants in the HealthFund programs had an average deposit of $940, with 69% of the money being spent on health services. And 51% of enrollees had money left to rollover in their account at the end of the year.
People pay more attention to their health and use information resources, like nurse hotlines and on-line services, more often.
Populations in Destiny's program were equally mixed between blue and white collar workers, with "lower-income workers more likely to see the value of this savings opportunity than higher-income employees," according to Stuart Slutzky of Destiny.
Bottom line: Accusations that those selecting consumer-directed health plans are "healthy and wealthy" just doesn't hold up against the data. Workers who are older and more likely to need health services see greater value in the control they get over their health choices. And they aren't skimping on preventive services but are making wiser choices on discretionary expenses, are reducing emergency room and outpatient visits, and are using generics more often.
Many participants wrote to us praising the conference. "By far, this was the most informative and productive consumer choice healthcare seminar I have attended over the last two years," one said.
Our website provides a link to all of the speaker materials that are available electronically. Click here for the agenda, contact information on companies, and speaker materials. We plan to produce a paper with more details, so stay tuned. Consumer choice in health care is the future.
Grace-Marie Turner
Galen Institute
Health Policy Matters
February 13, 2004
Consumer Choice Care
The Galen Institute briefing on Wednesday dazzled the audience with "Reports from the Field" about Consumer Choice Health Care. The hearing room in the Senate Dirksen building was packed, with standing room only.
Six companies presented evidence that dispelled myths about these plans. The facts:
Enrollees are more likely to be older and sicker, not young and healthy.
Despite this, consumer directed plans do lower costs.
Utilization of preventive services increases by as much as 60%.
Patients choose generic drugs up to 50% more often.
Satisfaction and re-enrollment rates are high, up to 98%.
The briefing was organized and moderated by Greg Scandlen, Galen's most able director of our Center for Consumer Driven Health Care, with an introduction by Sen. Larry Craig, chairman of the Senate Special Committee on Aging. "Passage of Health Savings Accounts may be one of the most important accomplishments of this Congress," Craig said.
There also was early good news about HSAs: Scott Krienke of Assurant Health (formerly Fortis Health) says that 30% of those who have signed up for HSA accounts since January 1 were previously uninsured.
The briefing, however, largely focused on experience so far with the more established Health Reimbursement Arrangements, authorized by regulatory action in 2002, that provide employers with an opportunity to allow employees to participate in cost-saving by making wiser use of health services.
Companies represented at the briefing were Aetna, Definity Health, Destiny Health, Assurant Health, Lumenos, and Destiny.
Some highlights:
Aetna conducted a detailed study of enrollees in its consumer choice HealthFund and matched it to a similar population. The results: Eligible charges for the HealthFund group rose by only 1.5% while the control group rose 15.7%.
Participants in the HealthFund programs had an average deposit of $940, with 69% of the money being spent on health services. And 51% of enrollees had money left to rollover in their account at the end of the year.
People pay more attention to their health and use information resources, like nurse hotlines and on-line services, more often.
Populations in Destiny's program were equally mixed between blue and white collar workers, with "lower-income workers more likely to see the value of this savings opportunity than higher-income employees," according to Stuart Slutzky of Destiny.
Bottom line: Accusations that those selecting consumer-directed health plans are "healthy and wealthy" just doesn't hold up against the data. Workers who are older and more likely to need health services see greater value in the control they get over their health choices. And they aren't skimping on preventive services but are making wiser choices on discretionary expenses, are reducing emergency room and outpatient visits, and are using generics more often.
Many participants wrote to us praising the conference. "By far, this was the most informative and productive consumer choice healthcare seminar I have attended over the last two years," one said.
Our website provides a link to all of the speaker materials that are available electronically. Click here for the agenda, contact information on companies, and speaker materials. We plan to produce a paper with more details, so stay tuned. Consumer choice in health care is the future.
Grace-Marie Turner
Thursday, February 12, 2004
U.S. Senators make a push for drug price controls
["Latest Medicare Reform Proposal Is 'Just Plain Politics,' Think Tank Says," Press Release, The Heartland Institute, 5 February 2004.]
The federal Medicare Prescription Drug, Improvement, and Modernization Act, while a tremendous additional cost to the Medicare system, at least makes an effort to keep the distribution of the drug benefit a private sector activity. As elections approach, now even this is under fire:
[T]wo U.S. Senators, Ron Wyden (D-Oregon) and Olympia Snowe (R-Maine) plan to introduce legislation allowing the federal government to directly negotiate drug prices with private drug companies. The legislation, called the “Medicare Enhancements for Needed Drugs Act,” also takes steps to legalize the importation of drugs from Canada and penalize drug companies that limit their exports to Canada.
Under the [current] law, competitive bidding occurs between drug companies and private benefit management companies competing to provide the most popular plans. This clause simply keeps the government from bullying into the process by imposing national price controls. This clause is a good thing--a reminder that this program is to be privately delivered, not run by government bureaucrats.
As this press release details, price controls are bad news for consumers. Allowing competition to prevail will result in better outcomes for all Americans.
["Latest Medicare Reform Proposal Is 'Just Plain Politics,' Think Tank Says," Press Release, The Heartland Institute, 5 February 2004.]
The federal Medicare Prescription Drug, Improvement, and Modernization Act, while a tremendous additional cost to the Medicare system, at least makes an effort to keep the distribution of the drug benefit a private sector activity. As elections approach, now even this is under fire:
[T]wo U.S. Senators, Ron Wyden (D-Oregon) and Olympia Snowe (R-Maine) plan to introduce legislation allowing the federal government to directly negotiate drug prices with private drug companies. The legislation, called the “Medicare Enhancements for Needed Drugs Act,” also takes steps to legalize the importation of drugs from Canada and penalize drug companies that limit their exports to Canada.
Under the [current] law, competitive bidding occurs between drug companies and private benefit management companies competing to provide the most popular plans. This clause simply keeps the government from bullying into the process by imposing national price controls. This clause is a good thing--a reminder that this program is to be privately delivered, not run by government bureaucrats.
As this press release details, price controls are bad news for consumers. Allowing competition to prevail will result in better outcomes for all Americans.
Wednesday, February 11, 2004
Exploding health care costs
[Mark Sherman, Associated Press, "Health care spending: $1.7 trillion," The Wichita Eagle, 11 February 2004.]
While the trend has moderated slightly, health care costs continue to rise and are expected to do so far into the future:
The CMS report, released on the Web site of the journal Health Affairs, said that health care spending grew a projected 7.8 percent in 2003, down from 9.3 percent in 2002.
Health care spending, however, is projected to outpace growth in the rest of the economy for the next 10 years, CMS said. By 2013, annual spending on health is expected to reach $3.4 trillion and be more than 18 percent of gross domestic product.
Dan Crippen, the former director of the Congressional Budget Office, said that huge changes in health care spending lie just beyond 2013, the end of the period covered in the report, when Baby Boomers start reaching retirement age.
"It will be the beginning of something we haven't seen before," Crippen said.
The outlook may be bleak, but policymakers can and should take action now to help prevent the coming crisis.
[Richard B. Warner, M.D., "Relief From Health Care Inflation," The Kansas Physician, September/October 2002.]
[Mark Sherman, Associated Press, "Health care spending: $1.7 trillion," The Wichita Eagle, 11 February 2004.]
While the trend has moderated slightly, health care costs continue to rise and are expected to do so far into the future:
The CMS report, released on the Web site of the journal Health Affairs, said that health care spending grew a projected 7.8 percent in 2003, down from 9.3 percent in 2002.
Health care spending, however, is projected to outpace growth in the rest of the economy for the next 10 years, CMS said. By 2013, annual spending on health is expected to reach $3.4 trillion and be more than 18 percent of gross domestic product.
Dan Crippen, the former director of the Congressional Budget Office, said that huge changes in health care spending lie just beyond 2013, the end of the period covered in the report, when Baby Boomers start reaching retirement age.
"It will be the beginning of something we haven't seen before," Crippen said.
The outlook may be bleak, but policymakers can and should take action now to help prevent the coming crisis.
[Richard B. Warner, M.D., "Relief From Health Care Inflation," The Kansas Physician, September/October 2002.]
Thursday, February 05, 2004
Nebraska Medicaid reform model gaining supporters in other states
[Liz Taylor, "New report offers model for long-term care reform," The Seattle Times, 26 January 2004.]
Flint Hills recently brought Stephen Moses of the Center for Long Term Care Financing in to speak about the situation in Kansas and his recent audit of Medicaid in neighboring Nebraska. His report on Nebraska -- "The Heartland Model for Long-Term Care Reform" -- provides many lessons for Kansas and other states, and is beginning to get the attention of the media:
[I]n recent years, an urban myth has taken hold that the government — Medicaid — pays for our care, no matter how wealthy we are. It's an attitude of entitlement that has numbed vast numbers of people into taking no responsibility for what's going to happen to them when they reach 85 (the fastest growing segment of the American population).
So, most people do nothing until a crisis hits — when it's too late to save or buy long-term care insurance — while many who are well-to-do play games and transfer their assets to family, making themselves eligible for free care under Medicaid.
The outcome? Imagine a speeding train going off a steep cliff. Medicaid budgets everywhere are soaring off the charts, increasing by 7 to 10 percent each year, while the quality of publicly funded care plunges to new depths, with no new taxes in sight. As I've written before, the system is not sustainable. But look out — we haven't even begun to care for 76 million aging boomers.
Every state is in trouble, and each must undo the perverse public policies that created this mess. One state has begun — Nebraska — and a recently published report, "The Heartland Model for Long-Term Care Reform," outlines what needs to be done. It's a fascinating study of the painful, politically and personally difficult, delicate steps that are needed everywhere. Authorized by the Nebraska Legislature and researched and written by Seattle's own Center for Long-Term Care Financing, a national non-profit think tank.
Every state faces Nebraska's dilemma, having allowed citizens to snooze while cruising into old age unprepared. The sooner we start, the less draconian the remedies will be. The Heartland Model gives us direction. The question is: Is anyone listening?
["Forum Speakers Chart a Course for Medicaid Reform in Kansas," Flint Hills Center.
Matthew Hisrich, "Kansas Needs Bold Medicaid Reform," The Wichita Eagle, 21 January 2004.]
[Liz Taylor, "New report offers model for long-term care reform," The Seattle Times, 26 January 2004.]
Flint Hills recently brought Stephen Moses of the Center for Long Term Care Financing in to speak about the situation in Kansas and his recent audit of Medicaid in neighboring Nebraska. His report on Nebraska -- "The Heartland Model for Long-Term Care Reform" -- provides many lessons for Kansas and other states, and is beginning to get the attention of the media:
[I]n recent years, an urban myth has taken hold that the government — Medicaid — pays for our care, no matter how wealthy we are. It's an attitude of entitlement that has numbed vast numbers of people into taking no responsibility for what's going to happen to them when they reach 85 (the fastest growing segment of the American population).
So, most people do nothing until a crisis hits — when it's too late to save or buy long-term care insurance — while many who are well-to-do play games and transfer their assets to family, making themselves eligible for free care under Medicaid.
The outcome? Imagine a speeding train going off a steep cliff. Medicaid budgets everywhere are soaring off the charts, increasing by 7 to 10 percent each year, while the quality of publicly funded care plunges to new depths, with no new taxes in sight. As I've written before, the system is not sustainable. But look out — we haven't even begun to care for 76 million aging boomers.
Every state is in trouble, and each must undo the perverse public policies that created this mess. One state has begun — Nebraska — and a recently published report, "The Heartland Model for Long-Term Care Reform," outlines what needs to be done. It's a fascinating study of the painful, politically and personally difficult, delicate steps that are needed everywhere. Authorized by the Nebraska Legislature and researched and written by Seattle's own Center for Long-Term Care Financing, a national non-profit think tank.
Every state faces Nebraska's dilemma, having allowed citizens to snooze while cruising into old age unprepared. The sooner we start, the less draconian the remedies will be. The Heartland Model gives us direction. The question is: Is anyone listening?
["Forum Speakers Chart a Course for Medicaid Reform in Kansas," Flint Hills Center.
Matthew Hisrich, "Kansas Needs Bold Medicaid Reform," The Wichita Eagle, 21 January 2004.]
Tax credits for the uninsured receiving little attention
[Robert Pear, "Sluggish Start for Offer of Tax Credit for Insurance," The New York Times, 25 January 2004.]
A new program that offers tax credits for buying insurance to individuals who have lost their jobs due to overseas competition is facing very limited enrollment. The credits are seen as a prototype for tax credits for the uninsured generally as well as an alternative to dumping people into Medicaid. High costs of insurance are blamed to some extent, but states could make a greater effort to track down those eligible:
The program, the Health Coverage Tax Credit, was created in 2002 to aid workers who lose jobs because of foreign imports.
Administration officials have hailed the program for displaced workers. In a letter to governors last February, Treasury Secretary John W. Snow and Tommy G. Thompson, the secretary of health and human services, said the tax credit "could help over 500,000 Americans each year." And Mr. Snow described it last summer as "a real innovation in tax policy, a bold step in the direction of affordable health care for all Americans."
But the results to date are modest, in part because displaced workers are still required to spend substantial amounts of money on insurance premiums before they can get the benefits of the tax credit.
At the end of December, the Bush administration said, only 8,374 workers were receiving tax credits for health insurance under the program. The total number of people taking advantage of the program, including dependents, is perhaps 25,000, or 5 percent of those expected to benefit.
[Robert Pear, "Sluggish Start for Offer of Tax Credit for Insurance," The New York Times, 25 January 2004.]
A new program that offers tax credits for buying insurance to individuals who have lost their jobs due to overseas competition is facing very limited enrollment. The credits are seen as a prototype for tax credits for the uninsured generally as well as an alternative to dumping people into Medicaid. High costs of insurance are blamed to some extent, but states could make a greater effort to track down those eligible:
The program, the Health Coverage Tax Credit, was created in 2002 to aid workers who lose jobs because of foreign imports.
Administration officials have hailed the program for displaced workers. In a letter to governors last February, Treasury Secretary John W. Snow and Tommy G. Thompson, the secretary of health and human services, said the tax credit "could help over 500,000 Americans each year." And Mr. Snow described it last summer as "a real innovation in tax policy, a bold step in the direction of affordable health care for all Americans."
But the results to date are modest, in part because displaced workers are still required to spend substantial amounts of money on insurance premiums before they can get the benefits of the tax credit.
At the end of December, the Bush administration said, only 8,374 workers were receiving tax credits for health insurance under the program. The total number of people taking advantage of the program, including dependents, is perhaps 25,000, or 5 percent of those expected to benefit.
Tuesday, February 03, 2004
No free lunch principle applies to Canadian drugs, as well
[Wayne T. Brough, Ph.D., "Good Medicine?," Citizens for a Sound Economy, 30 January 2004.]
Individuals and now states are advocating, and often going ahead with, the purchase of prescription drugs reimported from Canada and other countries. As Citizens for a Sound Economy Chief Economist Wayne Brough points out, though, some deals are just too good to be true:
Price caps threaten the ability to recoup these [research and development] costs, and drug re-importation policies simply import these price caps into the United States, effectively expanding the size of the regulated market. Alternatively, drug companies could refuse to sell drugs at lower prices in other nations. But this would reduce the size of the market, making some investments that previously made sense no longer feasible. Thus, while other nations may be free riding, Americans clearly benefit from the innovations available in the current system.
Health care remains an important issue for most Americans, but short-sighted policies to re-import cheaper drugs is a poor salve for a much bigger problem. Cost containment in the health care system requires significant reforms of Medicare and Medicaid, as well as improvements in private health care markets. Replacing the distorted incentives of the third-party payer system with a market-based health care system would go far in controlling costs. In addition, reforming the costly and inefficient drug approval process would reduce the costs of bringing a drug to market and ensure continued investments in life-saving therapies.
[Wayne T. Brough, Ph.D., "Good Medicine?," Citizens for a Sound Economy, 30 January 2004.]
Individuals and now states are advocating, and often going ahead with, the purchase of prescription drugs reimported from Canada and other countries. As Citizens for a Sound Economy Chief Economist Wayne Brough points out, though, some deals are just too good to be true:
Price caps threaten the ability to recoup these [research and development] costs, and drug re-importation policies simply import these price caps into the United States, effectively expanding the size of the regulated market. Alternatively, drug companies could refuse to sell drugs at lower prices in other nations. But this would reduce the size of the market, making some investments that previously made sense no longer feasible. Thus, while other nations may be free riding, Americans clearly benefit from the innovations available in the current system.
Health care remains an important issue for most Americans, but short-sighted policies to re-import cheaper drugs is a poor salve for a much bigger problem. Cost containment in the health care system requires significant reforms of Medicare and Medicaid, as well as improvements in private health care markets. Replacing the distorted incentives of the third-party payer system with a market-based health care system would go far in controlling costs. In addition, reforming the costly and inefficient drug approval process would reduce the costs of bringing a drug to market and ensure continued investments in life-saving therapies.
Monday, February 02, 2004
New drugs and medical devices increase competition
["Competition in Health Products Good for Consumers," Daily Policy Digest (Dallas, TX: The National Center for Policy Analysis, 30 January 2004).]
Often the claim is made that companies jump on the profit bandwagon by offering "me-too" products that treat the same conditions as previous products. The concern is that this is a burden on the health care system and is harmful to consumers.
A recent study in the New England Journal of Medicine shows that this is hardly the case:
Through the power of competition, these newly introduced drugs (or medical devices) actually serve to lower rather than to increase consumer health costs:
- For example, when drugs are first approved for consumer use, the product developers are rewarded with high prices, reflecting both the demand for new and better drugs, but also to offset costly research and development.
- Over time, new products are introduced into the marketplace by competitors as a result of ongoing research that, at times, has stretched back for decades.
- Because these newer products -- sometimes referred to as "me-too" drugs -- treat the same ailment as established first tier drugs, they can only be profitable if they are more effective or come at a lower cost.
["Competition in Health Products Good for Consumers," Daily Policy Digest (Dallas, TX: The National Center for Policy Analysis, 30 January 2004).]
Often the claim is made that companies jump on the profit bandwagon by offering "me-too" products that treat the same conditions as previous products. The concern is that this is a burden on the health care system and is harmful to consumers.
A recent study in the New England Journal of Medicine shows that this is hardly the case:
Through the power of competition, these newly introduced drugs (or medical devices) actually serve to lower rather than to increase consumer health costs:
- For example, when drugs are first approved for consumer use, the product developers are rewarded with high prices, reflecting both the demand for new and better drugs, but also to offset costly research and development.
- Over time, new products are introduced into the marketplace by competitors as a result of ongoing research that, at times, has stretched back for decades.
- Because these newer products -- sometimes referred to as "me-too" drugs -- treat the same ailment as established first tier drugs, they can only be profitable if they are more effective or come at a lower cost.
Understanding the uninsured
[Sally Pipes, "Health Care and the Uninsured," Tech Central Station, 30 January 2004.]
The crisis of the uninsured turns out to be not much of a crisis at all. As Sally Pipes of the Pacific Research Institute points out in this article, the uninsured are not necessarily not receiving health care, may be uninsured by choice, and do include many with substantial incomes.
[W]hat no politician can offer short of instituting compulsory, government monopoly health insurance -- is a total solution to the problem of the uninsured. For some, going without health insurance is simply a rational choice.
[Sally Pipes, "Health Care and the Uninsured," Tech Central Station, 30 January 2004.]
The crisis of the uninsured turns out to be not much of a crisis at all. As Sally Pipes of the Pacific Research Institute points out in this article, the uninsured are not necessarily not receiving health care, may be uninsured by choice, and do include many with substantial incomes.
[W]hat no politician can offer short of instituting compulsory, government monopoly health insurance -- is a total solution to the problem of the uninsured. For some, going without health insurance is simply a rational choice.
