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Tuesday, March 30, 2004

Medicaid "tidal wave" on its way

[Ken Moritsugu, "Big changes to Medicare on the horizon," The Wichita Eagle, 27 March 2004.]

As the baby boomer generation ages, policymakers are beginning to realize the gravity of the situation:

The breaking point could come with the retirement of the baby boomers, those born between 1946 and 1964. They will swell the ranks of the nation's elderly, driving up health spending. Americans will have to decide whether health care should consume an ever-increasing share of the nation's economic resources.

"The growth of Medicare, Medicaid and health care spending ... is the central domestic policy challenge of our time," said Douglas Holtz-Eakin, the director of the Congressional Budget Office, which projects the cost of federal programs.

"Unlike most tidal waves, this tidal wave will never recede," said David Walker, the head of the government's General Accounting Office. "It is a permanent change in the demographic profile of our country."


The reality is that merely tweaking the system at this point isn't going to accomplish anything. Kansas, like all states, must implement fundamental reforms within its Medicaid program.

[Matthew Hisrich, Staying the Course: Medicaid Reform in Kansas, The Flint Hills Center for Public Policy, February 2004.
Benjamin Pratt, "Staggering Cost," Letter to the Editor, The Wichita Eagle, 28 December 2003.
Stephen A. Moses, "Project Proposal: Controlling Medicaid Long-Term Care Costs," Submitted to Members of the Kansas State Legislature.]


Friday, March 26, 2004

Predicted rise in health care costs may be trimmed as new drugs emerge

["New Drugs Can Reduce Health Care Costs," NCPA Daily Policy Digest, 26 March 2004.]

Famed economist Gary Becker adds some perspective to the discussion of escalating health care costs by pointing out that as new drug treatments are developed, they will likely reduce cost growth. The trick to achieving these savings, though, is to avoid price controls and other government clamp downs on the drug industry:

Health care costs, which currently account for 15 percent of gross domestic product (GDP), are expected to increase to 25 percent of GDP by 2030. However, this growth prediction could be trimmed with the use of new drug therapies, according to Gary Becker of the University of Chicago.

Many new prescriptions are costly, but in the long run they will reduce the need for more expensive hospital stays and in-patient treatments:


The Journal of Clinical Psychiatry reports that antidepressant expenditures increased from $400 per depressed person in 1990 to $1,300 in 2000; however, due to fewer hospital stays, total spending per depressed person actually declined.

New drugs have contributed to the decline in adult mortality in the United States and 50 other countries over the past 20 years.

While new drugs may not provide a full cure for debilitating diseases such as Alzheimer's, Parkinson's and AIDS, they will delay the severity of diseases, resulting in reduced expenses in hospital and nursing home care.

Thursday, March 25, 2004

Minnesota Governor needs a lesson in economics

["Minnesota Gov. Fights Drug Companies," Fox News, 24 March 2004.]

Minnesota Republican Gov. Tim Pawlenty hopes to use his state's pension system to take on U.S.-based Pfizer, the world's largest drug company.

Pfizer charges less for its medicines in Canada and other countries than it does in the United States. Pawlenty says that's wrong.

"There's a difference between innovation and being a chump and we're being played," Pawlenty said.


The problem with this line of reasoning is that it ignores basic facts about the differences between the economies of Canada and the U.S. Even if all price control mechanisms were removed in Canada, residents there would likely still pay less for drugs than they do in the U.S. This is the same thing that occurs with just about any consumer good. The fact is, the Canadian economy is weaker and Canadians generally earn less than Americans (in part due to interventionist policies). Insisting on the same price for drugs in both countries would either A) price many Canadians out of the market, or B) have a tremendous detrimental impact on U.S. drug manufacturers, since the U.S. is where most drugs are sold. The other option, of course, is to try to reduce the standard of living in the U.S. That's perhaps a less politically marketable solution, though.

Wednesday, March 24, 2004

Heritage Foundation highlights Medicare crisis

[Robert E. Moffit, Ph.D., and Brian Riedl, "Medicare's Deepening Financial Crisis: The High Price of Fiscal Irresponsibility," Backgrounder #1740, The Heritage Foundation, 23 March 2004.]

The fiscal crisis in the states brought on by Medicaid is taking place at the federal level through Medicare. The lesson that governments should yield to market forces in this area could not be more clear. Whether policymakers will act on this lesson remains unclear:

Taxpayers face a serious financial problem in the Medicare program. As Professor Tom Saving, a Medicare public trustee, has reported, the program is projected to consume over half of all federal income taxes by 2042.

Taxpayers can expect the real costs of the drug entitlement to be much greater than the initial published estimates. Worse, some Members of Congress are claiming that the current drug entitlement subsidy is not enough and want to fill the entitlement’s unpopular “doughnut hole” and double the initial expenditures on the new entitlement. Such prescriptions would not only worsen Medicare’s already difficult financial problems, but also pave the way for government restrictions on prescription drugs for seniors. To control costs of the drug entitlement program, the government would somehow have to limit the supply of drugs, probably through tighter drug formularies or some form of government price fixing or purchasing mechanism. Yet, with demand for prescription drugs rising rapidly, the government cannot and should not provide more by paying less.

There is a better alternative. Members of Congress should get a handle on the exploding costs of the Medicare program before implementing a universal entitlement expansion. To that end, they should at least delay implementation of the drug entitlement while making the prescription drug discount a permanent feature of Medicare, including the new Medicare Advantage system that will take effect in 2006. Such a policy could establish the foundation for a more rational and responsible Medicare drug program: one that accommodates, rather than displaces, a wide variety of private-sector drug options.


Tuesday, March 23, 2004

The big importation question

[Peter Brownfield, "Pressure Building for Drug Importation," Fox News, 18 March 2004.]

This news story reveals the increasing intensity of the debate over importation of prescription drugs from Canada. The big question is: will allowing importation lead to the collapse of the U.S. drug industry, or the Canadian health care system?

Importing drugs would save Americans 30 to 300 percent of the cost, but industry sources say that with this discount come fewer safety controls and a risk to the development of new life-saving medicines.

As baby boomers inch toward retirement and rising medical needs, politicians on both sides of the aisle are looking for ways to lower drug prices without risking future drug research and development. The easiest fix — allowing Americans to import drugs from Canada, Europe and elsewhere — also creates safety concerns, say opponents, and would create an imbalance in the American market.


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

Monday, March 22, 2004

Palliative Care: Providing comfort to the dying

[Gautam Naik, "Unlikely Way to Cut Hospital Costs: Comfort the Dying," The Wall Street Journal, 10 March 2004.]

Often, counter-intuitive approaches to health-care can result in cost-savings, and in the case of palliative care, they may also be more humane:

The palliative-care unit at Virginia Commonwealth University Medical Center offers plush carpeting, original watercolors and a kitchen for visiting families. A massage therapist drops by often, and a chaplain is available 24 hours. And there's High Anxiety, a fluffy white Lhasa apso that patients love to pet.

In an era of skyrocketing health-care costs, such perks might seem misplaced. In fact, it is all part of an approach that has helped VCU save millions of dollars in an area that is notoriously expensive: treatment of patients diagnosed with incurable illnesses.

Palliative care focuses on comfort, not cure. It tries to relieve a patient's physical and psychological distress, instead of preserving life at any cost. Though palliative care is standard practice in some countries, especially in Britain, it has been slow to catch on in the U.S., where many doctors prefer to use the latest technology or drug to prolong a patient's life, if only for a few months. Fewer than 20 percent of community hospitals in the U.S. use the approach, according to the American Hospital Association.

Now, palliative care is getting new attention, not just because proponents view it as humane, but because it is usually cheaper than standard care. In 2002, there were palliative-care programs in 844 community hospitals, 18 percent more than in the previous year. In palliative programs, less money is spent on drugs, diagnostics, tests and last-ditch treatments.

At VCU, for instance, a typical five-day stint for a cancer patient cost $5,312 in the palliative wing -- 57 percent less than it cost to house a similar patient elsewhere in the hospital. VCU officials calculate that the 11-bed unit, which opened in May 2000, saved the hospital $1 million last year, when the palliative wing broke even for the first time.


(Thanks to Claude Thau for this story.)

Tuesday, March 16, 2004

Bar coding drugs predicted to save big money

[Editorial, "A cure for drug ills," USA Today, 15 March 2004.]

While Bastiat's concern over unseen consequences should underlie any discussion of government regulations "saving" us money, the FDA predicts a $93 billion savings over the next 20 years from requiring drugs to be bar-coded:

Cans of soup and boxes of cereal have bar codes scanned by supermarkets. But doses of medicine typically are dispensed at hospitals without this basic technology — and the results are deadly. Each year, some 770,000 patients have adverse reactions because of medication errors, and 7,000 of them die.

Now, the Food and Drug Administration is requiring pharmaceutical companies to start phasing in bar codes on most drugs used in hospitals. Patients with bar-coded bracelets will be matched to their prescriptions by computerized scanners. Preventable deaths could be cut in half, and nearly 500,000 complications could be eliminated over 20 years, the FDA says.

That's no idle estimate. Bar coding has a proven track record of making sure the right patient gets the right drug and dosage at the right time. A Veterans Administration medical center in Topeka reduced its medication error rate by 85 percent during five years, and all VA hospitals have used bar coding since 1997.

By contrast, only 2 percent of U.S. hospitals have bedside scanning systems. Why this stall on technology that clearly saves lives? Blame a frustrating Catch-22.

Hospitals have been slow to buy the equipment, which costs about $1 million, because most medications don't currently have codes affixed to them. But drugmakers didn't want to retool their production lines to put bar codes on single-unit doses until more hospitals used them.


Just how expensive is the Medicare drug benefit?

[Amy Goldstein, "Official Says He Was Told To Withhold Medicare Data," The Washington Post, 13 March 2004.]

New information surfaces about the true cost of expanding Medicare entitlements to include prescription drugs:

The government's longtime chief analyst of Medicare costs said yesterday that Bush administration officials threatened to fire him last year if he disclosed to Congress that he believed the prescription drug legislation favored by the White House would prove far more expensive than lawmakers had been told.

Richard S. Foster, a nonpartisan Department of Health and Human Services official who has been Medicare's chief actuary for nine years, said he nearly resigned in protest because he thought the top Medicare administrator, and perhaps White House officials, were acting against the public interest by withholding information about how much changes to the program would cost.

"Certainly, Congress did not have all the information they might have wanted, or that we had," Foster said in an interview.

Bush had said he was willing to spend as much as $400 billion for the drug benefits and other Medicare changes during the next decade, and the Congressional Budget Office, the official fiscal advisers to Congress, predicted the law would cost $395 billion.

In late January, the White House said calculations provided by Foster, indicated the law would cost $534 billion. That provoked an outcry from Democrats and conservative Republicans concerned that the drug benefits would deepen the federal deficit.

Internal documents and federal officials made clear that the White House had known of the higher cost estimates for months. Until now, it has not been apparent the lengths to which Bush aides who negotiated the bill with Congress went to keep the figures private.


Tuesday, March 09, 2004

News Flash: Federal government prefers meddling to individual responsibility

[Jacob Sullum, "Gotta Hurt," Reason, 5 March 2004.]

This column provides an interesting perspective on the problem of untreated pain in the U.S.:

Research consistently has found that patients who use narcotics for pain rarely become addicted to them, and those who do typically had pre-existing drug problems.

But...

Swayed by anti-drug propaganda and anxious to avoid legal trouble, physicians are so leery of these drugs that researchers have given their attitude a name: "opiophobia," an unreasonable fear of narcotics that leads to untold suffering by millions of Americans. Opiophobia intensifies every time the government announces a crackdown like this one.

The Office of National Drug Policy says "more than 10 million Americans suffer from chronic pain." According to the American Pain Foundation, the number is more like 50 million. That disparity, which suggests the extent to which drug warriors underplay the need for narcotics, gives you a sense of the gap between the government's assurances and the painful reality.


Thursday, March 04, 2004

Move to privatize Medicare already paying dividends to consumers

[Conrad F. Meier, "Medicare HMO Premiums Plummet," Health Care News, The Heartland Institute, 1 March 2004.]

While certainly controversial, the latest Medicare reform effort does attempt to encourage private provision of Medicare. For consumers, the federal government's efforts are paying off:

Millions of seniors enrolled in private-sector Medicare HMOs are getting a big surprise: lower health insurance premiums and increased benefits. HMOs for the elderly are offering substantial rate cuts and benefit increases in response to a $500 million boost from the federal government this year.

The new Medicare law signed by President George W. Bush in December 2003 not only created a prescription drug benefit but also gave private-sector health care plans a larger role in the program.

Many Republicans--and consumers as well--say private plans are more efficient than the traditional government-run Medicare program. While Democrats insisted private insurers would not save money for taxpayers, the resulting decreases in insurance premiums suggest otherwise.

Many of the 4.6 million Medicare beneficiaries who are enrolled in managed care plans had seen steady premium inflation and cuts in services since 1999. As many as 2 million older Americans lost their HMO coverage as insurers withdrew from the market because Medicare reimbursements have trailed rising health care costs, increasing an average of just 2 percent in 2003.

Leslie V. Norwalk, acting deputy administrator of the federal Centers for Medicare & Medicaid Services, predicted the increased payments, which took effect March 1, will encourage many private plans to return to the Medicare HMO program.

The Bush administration predicted the new Medicare law will encourage people to enroll in HMOs and similar private plans called preferred provider organizations (PPOs). Administration officials estimate that by 2007, 35 percent of Medicare beneficiaries will be members of such plans.


You too could have access to the same great health care prisoners receive

[William L. Anderson, "Health Care in Prison," The Ludwig von Mises Institute, 3 March 2004.]

Using arguments from a recent election, economist William Anderson explains why there's no such thing as a free lunch, even in health care...

If [economist Paul] Krugman were correct, then it would make sense for government to supply all scarce goods, since it would be able to deliver them at lower costs (using Krugman's calculus) and, thus, save consumers money. Product quality would not change and everyone would be better off.

One thing to remember is that when government becomes the monopoly provider of services, then people who receive those services are going to be subservient to the state. People who have no choice must be satisfied with what they receive—or else receive nothing at all. This is a prescription for abuse, and those who have been on the receiving end of government abuse know clearly of what I write.

The task before us is not to tweak the existing system—which already is burdened heavily by government spending and regulations—but rather to turn back to free markets that have provided so much for so many for so long.


Monday, March 01, 2004

Medicaid growth nationwide triple that of population increase

[Dennis Cauchon, "Medicaid rolls reach record 42 million," USA Today, 1 March 2004.]

Despite dire warnings of severe enrollment cuts in Medicaid, enrollment rose by 1.6 million or 3.9 percent last year.

Taxpayers spent $269 billion on Medicaid last year to cover medical care, nursing homes and prescription drugs for the poor. States pay an average 39 percent of the cost, the federal government 61 percent. When state finances began deteriorating in 2001, some officials and advocates for the poor predicted that Medicaid — the fastest growing expense in state government — would be cut to save money.

States continue to allow growth in Medicaid even in the face of fiscal crisis. Kansas must act now to avoid a situation where the program consumes the entire budget. One way to address this is by examining the role nursing home care plays in the equation. According to this article:

State legislators and policy analysts say Medicaid has broad political support because it benefits the middle class, as well as the poor, by covering nursing homes and drugs for the low-income elderly and disabled.

"If we didn't have Medicaid, the middle class would be responsible for taking care of their parents in nursing homes. That's why the program has support ... in both parties," says Connecticut state Sen. Toni Harp, a Democrat who heads the health committee of the National Conference of State Legislatures
.

People are acting under the assumption that Medicaid offers a free alternative to providing for their own long-term care or that of their parents. The costs of this misunderstanding are mounting. A step in the right direction would be to return Medicaid to its stated purpose of assisting the poor.

[Matthew Hisrich, Staying the Course: Medicaid Reform in Kansas, The Flint Hills Center for Public Policy, February 2004.]

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