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Friday, December 17, 2004

Importing drugs from where?

[Christopher Rowland, "Drugs from anywhere," The Boston Globe, 16 December 2004.]

As Canadian drug supplies increasingly dry up and American demand rises with state governments like Kansas encouraging the practice of importation, suppliers are looking elsewhere to fill orders:

At the back of the steel warehouse, pharmacists in lab coats are fetching bottles of prescription drugs from dimly lit shelves. They bear labels in French, Spanish, and Italian. Some come from New Zealand, 8,225 miles away.

Next stop: Minnesota.

The importation of drugs from abroad, which is illegal under US law, is going global, and this is the newest beachhead. Increasingly stymied at home, Canadian Internet pharmacies are branching out. They are setting up operations outside of Canada to buy drugs from around world and shipping them to US consumers.

The Bahamas warehouse is operated by CanadaRx.net, a Hamilton, Ontario, company that has been running a website since 1998. Exactly how many Canadian operations have set up shop elsewhere is unclear, but the Canadian International Pharmacy Association says it knows of operations similar to CanadaRx.net in St. Kitts and Barbados.

The new arrangement is a far cry from the relatively simple practice of recent years in which Canadian Internet pharmacies bought US drugs and shipped them to US customers. Americans didn't worry because the drugs were coming from the US-regulated factories and were vastly cheaper than the local drugstore. But globalization raises a question for American consumers who are tempted by discounts of 20 to 80 percent: Is it safe?

In a letter to Representative Bernard Sanders of Vermont, a staunch advocate of prescription imports, the FDA drew attention to illegal schemes [Harvey Organ, a pharmacist who is president and owner of CanadaRx.net] participated in during the 1990s in Canada. Organ pleaded guilty in 1998 to 12 civil charges and paid fines of $300,000 for circumventing Canadian price regulations for pharmaceuticals.

Organ said the six-year-old case had no bearing on his operation in the Bahamas or any of his business with American consumers.

"We're a class act. We do everything by the book," he said.

The drugs in the Bahamian warehouse during a recent visit by a Globe reporter tell a story of convoluted supply lines. The drugs moved from a regulated world into an unregulated one.

Tablets of the migraine medication Zomig stored along the warehouse's back wall, for example, were manufactured in England by AstraZeneca. AstraZeneca sent them to France, where they were put into a package with a French label. Before the Zomig could be sold to French consumers, an English wholesaler brought them back to England, pasted an English label over the French, and then sold them to the mail-order pharmacy in the Bahamas. Another AstraZeneca drug, Zestril, followed a similarly contorted route from Spain.

A spokeswoman for AstraZeneca, Kellie Caldwell, said the shipment of these AstraZeneca drugs out of the European Union is an improper diversion, leaving consumers without any protection.

"Once a drug leaves the EU, there is no longer a governing body responsible for tracking that product or ensuring that it is stored in required conditions," she said. For example, Zomig is supposed to be stored at between 68 and 74 degrees, she said, and she questioned whether the warehouse temperatures in the Bahamas, particularly during power outages, exceeded that range.


[Matthew Hisrich, "Sebelius Is Practicing Black-Market Politics," The Wichita Eagle, 10 December 2004.]

Vaccines: from shortage to surplus

[Daniel Yee, "U.S. Worries Flu Shots May Go to Waste," Associated Press, Las Vegas Review-Journal, 17 December 2004.]



It will be interesting to see how much media attention this item receives: after cries of outrage that the government needed to be in control of the vaccine industry in order to prevent shortages, it turns out that the government may end up wasting vaccines due to mismanagement:

As concerns rise that tens of thousands of doses of flu shots could go to waste, federal officials were considering changing their advice on who should get the shot.

A survey indicated only about half those who are at high-risk even tried to get the shot. Now, a mild flu season seems to have lowered demand for the vaccine and several states are reporting a surplus.

A CDC study found that as of last month, only about 35 percent of high-risk adults, mainly senior citizens, had gotten a flu shot. Another CDC study released Thursday found that people at high risk often do not get vaccinated for various reasons, including a misperception that the shot causes influenza and the belief that it would not be easy for them to get the vaccine.

As a result, health officials have been scrambling to find a way to make use of the remaining supply of flu shots - before they go to waste.

"We really have to work hard to get rid of it," said Dr. William Schaffner, an influenza vaccine expert and head of preventive medicine at Vanderbilt University Medical Center in Nashville, Tenn.


Watching the watchmen

[Associated Press, "Survey: Scientists not confident in FDA," The Topeka Capital-Journal, 17 December 2004.]

Though it is not usually wise to treat the scare tactics of groups such as The Union of Concerned Scientists with much regard, the release of a 2001 survey of FDA scientists, some of whom question the review process for prescription drugs, does raise some important questions about the role of the agency.

About two-thirds of Food and Drug Administration scientists are less than fully confident in the agency's monitoring of the safety of prescription drugs now being sold, according to an FDA internal survey.

Also, more than one-third of those scientists have some doubts about the process for approving new drugs, the survey found.

The survey was conducted by the Health and Human Services' Office of Inspector General. Complete results were released to the public only after an advocacy group filed a Freedom of Information Act request.


The news is of course being met with calls for stiffer regulation. This is the traditional response when a public program is found to be ineffective - rather than looking for structural flaws, the assumption is that more resources, more oversight, and more rules will naturally solve any problem that should arise. The question left unaddressed is whether the current investment in federal drug approval is yielding enough of a return to justify its continued funding.

Consider the behavior of public agencies when compared to private firms. Due to competition, businesses must constantly strive to perform the same or better functions more efficiently - in less time for less money. In the public sector, taxpayers are more often than not asked (or told) to spend more to fund functions that are performed at an increasingly less efficient level.

Thursday, December 16, 2004

President Bush on HSAs: "I just signed up for one two days ago"

["Bush's Closing Remarks at Economy Summit," Federal News Service, The Los Angeles Times, 16 December 2004.]

The White House economic summit recently wrapped up, and consumer driven health care reform was one of the main topics. President Bush made the following remarks at the close of the summit:

Chris Krupinski owns an art and design studio in Fairfax. I talked to her last night. She's pretty enthusiastic about HSAs. If you didn't hear her talk, you should have. First of all, she is a -- she went to insurance agent after insurance agent after insurance agent trying to find something she could afford, and eventually she was paying $900 a month for insurance for she and her family. Then she heard about health savings accounts, innovative ways for people to cover catastrophic care for their family, at the same time manage the cash flow needs, their own cash flow needs so they can provide primary care as well. Now she pays $340 a month for a high-deductible plan and she puts $290 a month into her HSA; puts her own money in, money that'll earn interest tax-free, money she can take out tax-free, money -- it's her own money. And she's saving money for her family at the same time; in other words, this innovative plan enables her to control her own destiny when it comes to health care, and at the same time provides her comfort in knowing that if there is a catastrophe, the health care insurance will cover it for she and her family. She's paying less overall, she chooses her own doctor, she saves her own money, and she makes the health care decisions.

Fast-rising medical costs are a drag on this economy, and so there are some things we need to do together. One is expand health savings accounts. Two, promote association health care plans. Congress needs to allow small businesses to pool risk. Three, pass medical liability reform. Four, continue to expand information technology throughout the health care system.

Five, move -- move generic drugs faster to the market.

In all we do -- in all we do to reform health care, we've got to make sure the decisions are made by doctors and patients, not by bureaucrats in our nation's capital.


Medicaid reform presentations available

The Texas Public Policy Foundation recently held a major Forum on Medicaid reform. The presentations - including one by Flint Hills speaker Dr. Michael Bond - are now available online. These are excellent resources for those interested in reforming the broken Medicaid system in Kansas:

- Medicaid Reform, Buckeye Institute Senior Fellow Mike Bond

- Reforming Medicaid, NCPA President John Goodman

- Reforming CHIP, NCPA Senior Fellow Devon Herrick

[Matthew Hisrich, "A Backgrounder on Kansas Medicaid," The Flint Hills Center, 19 July 2004.]

Wednesday, December 15, 2004


New HSA brochure available for physicians


[Editorial, "Inform your patients about HSAs," American Medical News, 20 December 2004.]

The American Medical Association now has a downloadable brochure available for doctors to display in their waiting rooms:

One key to the success of HSAs will be making sure that patients are knowledgeable and, in turn, comfortable about moving away from the health coverage to which they've grown accustomed.

That's where a new AMA brochure, "Health Savings Accounts at a Glance," will come in particularly handy.

The brochure is a concise primer on HSAs. It explains how they work, what patients should do if they want one and their employer doesn't offer one, and gives sources of additional information. It also distills numerous government regulations on HSAs into an easily readable format.

The brochure starts out by answering what is likely to be the most pressing question for many patients: What exactly is a health savings account? Then, using a question-and-answer format, it addresses the particulars of the accounts including deductibles, eligibility and whether HSAs are good for people with chronic conditions.

When patients have health savings accounts, they -- not their health plans -- choose how to spend their health care dollars. And they also have an incentive to spend those dollars in an effective, cost-conscious manner because the money is truly their own.

"Health Savings Accounts at a Glance," is the perfect way to interest patients in the concept. The guide, which can be downloaded from the AMA Web site, would make a useful addition to the waiting room. Patients could pick it up, read through it and begin contemplating whether an HSA would be right for them.


Evidence-based medicine questioned

[Press Release, "WAKE-UP CALL: Technocrats are Taking Over the Practice of Medicine," Citizens' Council on Health Care, 13 December 2004.]

As health care costs continue to rise, policymakers are beginning to become more desperate for methods of bringing them under control. In contrast to the bottom-up approach of consumer-driven health care, some are beginning to consider top-down solutions that result in government decrees of what can and cannot be done to treat medical problems - essentially a form of managed care, but operated by the government instead of a company. Evidence-based medicine is at the forefront of this discussion, and a new report suggests that the idea will not put the interests of the patient first:

"The public needs to understand that evidence-based medicine is an attack on the patient-doctor relationship. EBM is not individualized care. It is group-think medicine," says Twila Brase, president of CCHC and author of the report.

CCHC stresses the following five points:

1)* The term "evidence-based medicine" (EBM) cannot be taken at face value*. EBM/ is/ managed care. Same game, different name.

2)* Science, the purported foundation of EBM, is not incontestable*. In research, there are subjective choices all along the road to creating the "evidence" of EBM.

3)* Practice guidelines, used to implement EBM, have significant problems*. These include out-of-date, biased, conflicting with each other, lack of individualization, and single-disease focus.

4)* Under EBM, practice guidelines are becoming treatment mandates*. Financial consequences are increasingly a possibility for doctors who do not follow guidelines issued by health plans or government. Computer systems to track and report physician adherence are being established.

5)* Patient harm can result from EBM, and its treatment mandates*. Practice guidelines are written based on data collected from medical records of many patients. They do not focus on the care, or the unique circumstances and physiology, of individual patients. And, as has been reported in England, they can be used to implement health care rationing.

"Control over medical decisions is being shifted from doctors to data crunchers; from professionals at the bedside to bureaucrats in big offices," says Ms. Brase.

"The public should not be fooled by the nifty-sounding names. Evidence-based medicine is managed care masquerading as science."


Drug trouble brewing in Canada

[Clifford Krauss, "Internet Drug Exporters Feel Pressure in Canada," The New York Times, 11 December 2004.]

Some Canadians are beginning to question the ethics of doctors signing off on prescriptions for patients they have never seen, and worries are also beginning to surface over their own supply of drugs:

Canadian officials, worried about the threat of liability lawsuits and the problem of maintaining an adequate, reasonably priced supply of prescription drugs for their own population, are casting an increasingly wary eye on the industry.

At the same time, online pharmacies are having an ever more difficult time finding supplies because, they say, the major pharmaceutical companies are threatening wholesalers who do business with them.

Currently, before a pharmacy can fill a prescription, a Canadian doctor co-signs an American customer's prescription, after reviewing the original doctor's diagnosis and prescribed treatment. But the practice of co-signing a prescription without examining a patient may be a violation of professional medical standards. Stiffening those requirements would remove the threat of lawsuits but, if extended to other provinces as the industry fears, also kill the online industry in Canada.

Canada's health minister, Ujjal Dosanjh, has raised this issue repeatedly and indicated that he would shut down the industry if he felt it was necessary. "We will do the right thing, and if the consequence is that cross-border Internet pharmacies don't exist anymore, then that's the consequence," he said in a recent television interview.

Another commonly expressed fear is that the online drug industry may ultimately reduce supplies for Canadians, raise prices and jeopardize the financial health of provincial governments, which finance purchases of prescription drugs.

"It is difficult for me to conceive of how a small country like Canada could meet the prescription drug needs of approximately 280 million Americans without putting our own supply at serious risk," Mr. Dosanjh said in a speech last month. "Canada cannot be the drugstore of the United States."

Industry leaders are trying to ease concerns in Canada that their businesses could reduce Canadian supplies by emphasizing that they are interested only in filling the needs of uninsured and underinsured Americans. They do not want to overreach and antagonize the Canadian government by making bulk sales to American insurance companies, health maintenance organizations and state governments seeking to pass on savings.


[Matthew Hisrich, "Sebelius Is Practicing Black-Market Politics," The Wichita Eagle, 10 December 2004.]

How to shoot yourself in the foot, with some help

[Henry I. Miller, "How lawsuits can kill," Competitive Enterprise Institute, 10 December 2004.]

There is a conception, no doubt prodded on by trial lawyers, that companies have "plenty of money," and that there is no reason for the average person not to get a piece of the action. That sort of logic is clearly having an impact on the state of industry in this country, though. What seems to be taking place is a case of concentrated costs/concentrated benefits, and dispersed costs/dispersed benefits. Individual companies pay large sums of money to individual law firms, and consumers receive small settlements and will see a minor decline in innovation and availability of treatments on an individual level. That's hardly a sustainable model, and something will eventually have to give:

In spite of a generally high level of quality control in the industry and intense scrutiny by the FDA, drug and vaccine manufacturers are tempting targets for litigation. The threat of liability suits—even in the absence of evidence of any wrongdoing or product defect—makes these companies wary, but it also shifts their focus from whether the product actually is safe to how vulnerable the product is to lawsuits. A perfect example is a drug called Bendectin, which for many years was an excellent treatment for the morning sickness of pregnancy, until the manufacturer stopped selling the drug in the United States.

Safety problems? Unprofitability? Not at all. Frivolous, debilitating lawsuits killed this drug and relegated American women to munching crackers and quack cures. During the 1970s and 1980s, almost 2,000 lawsuits were filed, alleging that Bendectin had caused birth defects. Not a single judgment went against the manufacturer, but Bendectin was pulled from the market because of fears that an unreasonable and hostile jury might someday award huge damages.

Runaway litigation also drives up costs for health care, makes doctors practice medicine defensively and stifles innovation. A study by Price Waterhouse Coopers said it best: "In the last 20 years, personal injury lawyers have found litigation against health-care providers and pharmaceutical manufacturers to be a lucrative growth area in their practices. Litigation that has enriched personal-injury lawyers, however, is adversely impacting both the quality and the cost of health care for the rest of us." ("The Factors Fueling Rising Health-care Costs," April 2002)

The scare tactics used by some personal-injury lawyers trolling for clients frightens patients off their medications, discourages doctors from prescribing others and causes parents to withhold vaccinations from their children. How can we possibly have quality health care in such an environment?


Monday, December 13, 2004

Costs and benefits of reimportation

[Donald R. May, "We should not covet Canada’s prescription drugs," Townhall.com, 11 December 2004.]

The search for low-cost prescription drugs from abroad is often couched in terms of consumer freedom. What is really at issue is whether or not it makes sense to exploit another country's socialist price settings. The outcome will likely either be the collapse of those settings or the industry that provides the goods. Which will come first is difficult to say, but pursuing a course of action that leads to those outcomes is high-stakes public policy when less drastic measures exist:

What seems to be too good to be true often is. Is a savings of even $40 or $50 worth the risk? For some drugs, prudent shopping will often result in lower costs right here in the United States. The new Medicare discount cards can save patients as much as 25 percent on their prescription drug purchases, which can make the drugs less expensive than those purchased on the internet or in Canada or Mexico.

For the poor, Medicaid provides prescription drugs. For those not covered by Medicaid, the pharmaceutical companies provide discounted and free medications, with more than 18 million prescriptions being filled last year at no charge by PhRMA member drug companies.

Other developed countries are getting a free ride courtesy of U.S. patients and are not paying their share for pharmaceutical research and development. If prices were more equitable in other countries, many of these countries would have their own drug research programs. This would increase the number of new medications developed worldwide and provide many new jobs.

Our best solution is to reduce the costs of our drug development. To achieve this, we must eliminate unnecessary bureaucratic rules and regulations, stop the persistent attempts to fully socialize our health care economics, and prevent the unwarranted attacks of legal predators from destroying our health care system. This will decrease the cost of drugs for everyone and increase the resources necessary to develop more new drugs.


[Matthew Hisrich, "Sebelius is practicing black-market politics," The Wichita Eagle, 10 December 2004.]

Friday, December 10, 2004

New guide to HSAs released

[Dan Perrin, "HSA Road Rules for Consumers, Employers, Insurers, Banks, Credit Unions and Administrators," The HSA Coalition, 7 December 2004.]

Offering an excellent overview of all of the ins and outs of Health Savings Accounts, this new publication from The HSA Coalition is a handy tool. These "Universal Principles," for instance, are just the tip of the iceberg:

Universal HSA Principles

1. You must have an HSA qualified high deductible health plan to open or contribute to a Health Savings Account.

2. Switching to a high deductible health plan from a traditional low deductible health plan will cut the cost of your health plan substantially. You deposit the savings gained into your Health Savings Account. The whole point of a health savings account is to allow you to use that money on a tax-free basis to pay for your health expenses below your new, higher deductible.

3. The money in your Health Savings Account is your own. This means your employer cannot tell you what to do with your own money or restrict what you can spend it on. Since it is your money, it goes with you when you change jobs.

4. You are in charge of your Health Savings Account funds, making you and your doctor the decision makers, not some third-party. Spending your own money also means that you will/should ask about the cost of health care expenditures, which will bring marketplace competition to the world of health care.

5. You decide whether to spend from the account for your medical expenses and how much to spend, or whether to spend out-of-pocket and to save the HSA money for the future.

6. You decide which company will hold the account, and what type of investments you make with your account. Any investment allowed for IRAs is allowed for HSAs.

7. IRS Publication 502 provides a list of allowable expenditures from your Health Savings Account.


The government is trading your life away

[John A. Vernon, Rexford E. Santerre, and Carmelo Giaccotto, "Are Drug Price Controls Good for Your Health?," Medical Progress Report, No. 1, The Manhattan Institute, December 2004.]

New research from The Manhattan Institute indicates a direct correlation between greater government purchase of prescription drugs and lower investment in research and development. In other words, the government is trading the cures of tomorrow for lower prices now.

Collecting national data for the U.S. for 1960–2001 and using multiple regression analysis, we find that from 1992 to 2001 a 10 percent increase in the growth of government's share of total spending on pharmaceuticals was associated with a 6.7 percent annual reduction in the growth of pharmaceutical prices. Two new laws, OBRA of 1990 and the Veterans Act of 1992, aimed at controlling drug prices under public programs, account for much of this impact.

Using these regression results, we then simulate how the prices for medicines would have differed throughout the period from 1960 to 2001 in the absence of any government influence. The simulation implied that the ratio of the pharmaceutical price index to the general price index would have been 1.27 rather than 0.94 in 2001, suggesting that pharmaceutical prices would have been about 35 percent higher, on average, in the absence of this government influence.

Using the predicted trend in pharmaceutical prices without government influence and an established elasticity of R&D spending with respect to drug prices from prior research, we determined that the resulting government-induced loss of capitalized pharmaceutical R&D expenditures was $188 billion (in 2000 dollars) from 1960 to 2001. This "lost" R&D may be translated into human life years "lost"—literally, increased pain and suffering and shorter lives caused by the absence of new medicines and future research—by using results from recent econometric work on the productivity of pharmaceutical R&D in the U.S. over the same period. We conclude that the federal government's influence on real drug prices cost the U.S. economy approximately 140 million life years between 1960 and 2001.


Thursday, December 09, 2004

Healthy Minnesota

[David S. Broder, "Minnesota fighting health care costs," The Wichita Eagle, 9 December 2004.]

Minnesota Governor Tim Pawlenty should be commended for taking a leadership role on health care. At the same time, however, it appears that he may be focusing on yet another top-down approach involving "big solutions" rather than changes in individual behavior. Along these lines, it is encouraging to see the inclusion of health savings accounts in the plan, but Pawlenty is likely underestimating their value in creatin a bottom-up revolution in health care:

No one is immune from the problem of runaway costs in the dysfunctional American health-care system. Not individual families, not businesses and certainly not state and federal governments. The universality of the problem is what makes an experiment being launched in Minnesota this month an important national story.

Gov. Tim Pawlenty on Nov. 29 announced the formation of the Smart Buy Alliance, an unprecedented partnership of state government and private employers that will, he hopes, mobilize the purchasing power of three out of every five consumers in Minnesota to raise the quality, improve the efficiency and reduce the cost of health care.

Pawlenty’s plan does not change the financing of health care or its provision. It includes an idea popular with President Bush: the option for individuals to set up savings accounts, which combine high-deductible medical insurance with a tax-free savings account that can be rolled over from year to year if not needed.

But the accounts are useful only for minor, routine expenses. As Pawlenty noted, chronic illnesses, such as diabetes and heart disease, push up medical costs. His plan uses market forces to seek more effective results in treating these expensive conditions.


[Greg Scandlen, "Choice is revolutionizing health care," The Wichita Eagle, 28 September 2004.]

Wednesday, December 08, 2004


Hysteria sells


[Radley Balko, "Big Reasons for Fat Skepticism," Cato Daily, 8 December 2004.]

When issues of obesity and the uninsured hit the news, the stories generally have a common theme: CRISIS. Once the dust settles and the numbers that drive such pronouncements of doom are analyzed, the news cycle has long since moved on. The problem is that politicians plan careers around solving such "crises," and by the time the failures of their policies are analyzed, they have long since moved on. According to Radley Balko, everyone needs a healthy dose of skepticism:

The Centers for Disease Control announced recently that the often-mentioned figure of 400,000 American deaths each year due to obesity is based on a study that's plagued by methodological errors. The CDC estimates that the number may be off by 20 percent, but longtime critics of the figure say it may be closer to four times the number of early deaths attributable to obesity.

The CDC's announcement represents a tidy anecdote for what's wrong with the fat debate. The problem, put simply, is that hysteria sells. It sells research to grant writers, it sells executive summaries to media outlets, and it sells newspapers to the public.

Anyone who took a close look at the 400,000 number could see obvious flaws in its computation. In the New York Times, the University of Chicago's Dr. Eric Oliver pointed out that there are only 2 million deaths each year in the United States, total. Since obesity has little effect on the mortality rates of people over 65, and since 70 percent of annual deaths are among people over 65, in order for the 400,000 figure to be correct virtually every single death among people under 65 would have to have been caused by obesity.

There were other obvious problems. The Journal of the American Medical Association study that came up with the number was a meta-study, which examined other studies dating back as early as the 1940s and then extrapolated the data to today's population. Obviously, several ailments that killed us 60 years ago are treatable and preventable today. Most remarkably, the study's researchers admitted that their calculations "assume that all excess mortality in obese people is due to their adiposity."

That's an astounding concession. It means that every person in the study's data who was obese and died early was assumed to have died because of obesity. There are thousands of things that could cause an obese person to die early -- getting hit by a car or succumbing to cancer, for instance -- that aren't related to weight at all.

Despite these obvious flaws, the 400,000 figure was recited ad nauseum by government officials, nutrition activists, and the media. Researchers such as the University of Virginia's Glen Gaesser and Dr. Katherine Flegal had been criticizing the figure since it was published, yet they were rarely consulted or quoted in press accounts.

A Lexis search finds over 1,500 mentions of "obesity" and "400,000" in the last two years. And that does not include mentions of "obesity will soon overtake smoking as America's number-one killer," a statement widely perpetuated in the obesity debate that was also based on those alleged 400,000 deaths.

If all the obesity hype is true, we should at least be seeing the front end of this pending health care disaster by now. It simply isn't happening.



Canadian questions appeal of socialized medicine


[Julie Lukic, "Canada is not paradise," The Kansas City Star, 8 December 2004.]

There may be a growing body of research indicating that single-payer health care systems such as that in Canada are ill-equipped to adequately provide for the needs of the public, but some nonetheless remain unconvinced. Perhaps testimonials from individuals who have lived in both the U.S. and Canada will be more persuasive. Sally Pipes gave her account of the downside of Canadian health care for Flint Hills earlier this year. Today, The Kansas City Star ran a column showing that this is not a rare perspective:

As a Kansas City woman married to a Canadian, I'd like to share some information with the disillusioned Americans who've threatened to make a run for the Canadian border.

I think I have some credibility on the subject because I spent a year and a half living there, and my husband spent the greater part of his life there.

For starters, the Canadian health-care system is a shambles. Socialized medicine doesn't work for a variety of reasons.

With no incentive to work hard, good doctors leave Canada and come to the United States. This leaves a severe shortage of doctors in Canada; creates long waits for standard medical procedures; denies people the ability to choose their own doctors, forcing many to accept a doctor the government assigns them; and creates an environment where doctors provide terrible service because they have no worries about losing patients to their competition.

It is also important to note that the health care in Canada is not free. Many Canadians pay 58 percent of their income in taxes to support this system that fails them miserably. Even after paying astronomical taxes, many Canadians choose to come to the United States for medical treatment because the risk of waiting in Canada could cost them their life. I waited eight months to get an appointment with a specialist for standard care.

Our country was built on capitalism. It is what makes us one of the strongest nations in the world. A socialist society creates an enormous ineffective government and robs people of income, prosperity and drive. It takes away people's incentive to work hard and creates a huge population who rely on the government for full support.

Let's not forget what made our country the superpower it is. Just ask the Americans who have spent time living in Canada (like me), or the Canadians who've left Canada to become U.S. citizens (like my husband). The grass is not greener on the other side.



FDA as racketeer


[Sunni Maravillosa, "The FDA is Going to Kill Me," The Price of Liberty, 7 December 2004.]

The chains of regulation wrap tightly around the pharmaceutical industry, and the cost to bring a new drug to market now reaches to $800 million. At the same time, though, it should not come as a surprise that these same pharmaceutical companies receive some benefits from this regulation. As Sunni Maravillosa explains, regulatory agencies serve to some degree the same role as the mafia - exacting a toll on those they oversee, but also providing "protection" from others. On balance, everyone loses in this scenario but the ones who get to set the rules:

The FDA is the main agency involved, and it's responsible for very much of what's wrong with health care in America. For an excellent, highly informative examination of the FDA, see the Independent Institute FDA Review web site. The history page is not to be missed. It lays out the wholesale power grab by the agency -- a sneaky effort that involved codifying a private, voluntarily adopted standard, and twisting a law intended to get consumers more information into today's prescription-only and OTC (over the counter) categories of drugs. The process has had far-reaching consequences, including: anointing one class of health-care providers as The Chosen Ones, who wield the power to dispense potent nostrums even though they very often have a poor understanding of what they're doing; making it extremely difficult for consumers to obtain intelligible information, or to evaluate claims and counterclaims; and sucking almost all power and dignity from an already-vulnerable individual, using the guise of "informed consent" as a disguise that few Americans seem to see through.

I chose the title of this essay because I do think it will be the FDA that ultimately kills me -- as it's done thousands of individuals before me, and will continue to do until it meets its own richly-deserved death. I'm increasingly unwilling to do what it requires of me to get the health care I need. I know the medicine I need, the proper doses and such, and know how to tell if it isn't working -- who has the right to tell me that I can't obtain it in a private transaction free of gatekeepers and permission slips? Who has the right to keep any individual from obtaining easy to understand, accurate information about any medical condition and treatment options? Who ought to decide what treatment an individual is able to try?


Tuesday, December 07, 2004


Wall Street Journal on Healthy Kansas, er...TennCare


["Publicly funding health insurance balloons Tennessee budget," NCPA Daily Policy Digest, 7 December 2004.]

Before the election, rumors were circulating that Governor Sebelius would present a sweeping overhaul of health care in Kansas along the lines of Maine or Tennessee. Fortunately for Kansans, a far more modest "Healthy Kansas" initiative emerged post-election. The underlying structure of the reforms outlined in that proposal, however, still rest on the basic premise of expanding state-run programs such as Medicaid to address the uninsured. As The Wall Street Journal points out, Kansas has little to emulate in following the path of Tennessee:

TennCare, a program where the state of Tennessee provides health insurance to its citizens, is about to be dismantled after suffering a decade of mismanagement, lawsuits and bloated budgets, according to the Wall Street Journal.

In 1994, Tennessee adopted a government-managed health care system similar to the one Hillary Rodham Clinton pitched to the nation. Ostensibly, the program was designed to reduce costs and cover more of the uninsured. After 10 years, however, both political parties concede the program is not viable:

* TennCare now accounts for one-third of the state’s entire budget.

* About 1.3 million of the state’s 5.8 million people are covered, including some six-figure income earners.

* Prescription drug costs increased by 23 percent last year, and there are effectively no limits on the number or types of drugs the system will pay for.

* Three of the 11 firms that insure TennCare patients have gone into bankruptcy; even Blue Cross Blue Shield has all but refused to participate in the program.

Attempts at reform have failed, as social activists have sued the state with impunity to underwrite the cost of nearly unlimited care. Also, fighting each appeal for denying claims to care costs the state as much as $1,600 in legal fees and there are about 10,000 appeals filed each month, says the Journal.


[Press Release, "Sebelius Health Care Plan Includes Positive Steps," The Flint Hills Center, 10 November 2004.]

Kansas City a great spot for buying health insurance

[Julius A. Karash, "KC ranks No. 1 for individual health plans," The Kansas City Star, 7 December 2004.]

Kansas City residents have reason to be pleased - the city was just ranked number one in the counrty for individual health insurance affordability:

Online broker eHealthInsurance has ranked Kansas City as the most affordable city in the country for health insurance outside the group market.

The rankings were based on a survey of premium costs available for a family of four. Such policies can be obtained in Kansas City for as low as $171.86 per month, the survey said.

California-based eHealthInsurance is a broker that operates an online clearinghouse for buying individual, family and small group health insurance. The rankings released today look at family coverage that consumers obtain on their own through the eHealthInsurance Web site.

“This is the first time we've done this type of analysis,” said Bob Hurley, vice president of customer care for eHealthInsurance.

“We're seeing families faced with increasing health-insurance costs passed onto them by their employers. They're not just taking it lying down anymore, they're doing something about it.”

He said the Internet has made it easier for consumers to shop for insurance.

Kansas City came in first because of keen insurance industry competition and a relatively low level of state mandates regarding insurance coverage, Hurley said.

Area residents who have benefited from the competitive environment here include Denise and David Gilliland of North Kansas City. The two recently switched their health insurance after shopping the eHealthInsurance Web site.

“I could quickly compare policies and premiums,” Denise Gilliland said.

The Gillilands' new policy carries an annual deductible of $2,500 and a premium of about $90 a month, Gilliland said. The old policy had a $5,000 deductible and a $190 a month premium, though the coverage provided by the two policies is virtually the same, she said.


[Matthew Hisrich, "State Mandates reduce insurance affordability," The Flint Hills Center, May 2004.]

Monday, December 06, 2004


Theory versus practice


[Jonathan Weisman, "Theoretically, Tax Reform Should Fly," The Washington Post, 3 December 2004.]

President Bush is outlining plans to do away with the tax breaks given to employers for providing health insurance. The move would put an end to a bias that undermines insurance availability for small employers and those seeking to insure themselves:

If you want to understand why the Bush administration is pondering eliminating the tax deduction for employer-provided health insurance, consider this year's Economic Report of the President. There, White House economists assert that the deduction unfairly subsidizes employees of some companies while encouraging overly generous health policies that focus on routine medical care.

"If automobile insurance were structured like the typical health policy, it would cover annual maintenance, tire replacement, and possibly even car washes," said the report, concluding that "health insurance markets can be improved . . . [to] focus on large expenditures that are truly the result of unforeseen circumstance" and "to provide a more standardized tax treatment of all health care markets."

The argument points to a certain truth about President Bush's free-market economic policies that Bush supporters say is unappreciated: In crafting a broad agenda for his second term, Bush is trying to adhere strictly to economic theory, perhaps even more so than during the Reagan administration's early battles over deregulation and taxes.


The article proceeds, somewhat disingenuously, to portray the situation as one of theory vs. real world experience. This of course largely ignores the fact that the theories in question are indeed based upon empirical data. The idea that "if you subsidize a certain type of behavior, more people will engage in it or will engage in it to a greater degree" is not merely the stuff of fantasy. A nice try on the part of The Washington Post to undermine the value of consumer-driven reforms, but destroying straw men rarely proves that convincing. The exciting part of the article is that these reforms may actually come to fruition.

Friday, December 03, 2004

Decisions on the margin do matter

[Randy Scholfield, "Subsidies made me eat it," The Wichita Eagle, 3 December 2004.]

Today's column from Randy Scholfield is a tongue-in-cheek take on the impact subsidies have on consumption:

The Eagle ran a story Sunday quoting some nutrition experts and critics who complain that USDA farm subsidies for grain commodities such as corn and wheat help make possible irresistibly cheap junk food such as Ho Hos and Ding Dongs that convert instantly to fat on your body.

At the same time, the USDA mostly doesn't subsidize fruit and vegetables, which makes these beneficial foods increasingly expensive and resistible, especially for low-income Americans, who are twice as likely to be obese.

So, the argument goes, Americans keep getting fatter and fatter. Almost 1 in 3 Americans are now obese. Despite all the billions of dollars spent each year on diet and exercise products.

Because of farm subsidies.

Sen. Pat Roberts, R-Kan., its principal author, has a lot to answer for.

Of course, he dodged responsibility in the article, instead resorting to heavy sarcasm:

"I am not aware of any action taken by any farmer or rancher or caused by any agriculture program that has forced American consumers to go into their favorite food establishment and order the supersized No. 3 menu item, the two appetizers preceding and the dessert following the main entree, followed by 10 to 12 hours of television."

Whoa! Wait a minute, senator. You're going too fast. Are you trying to make a point about choices and responsibility?


There is certainly something to be said about choice and responsibility - and, ultimately this is what personal consumption decisions boil down to. But the problem is that people make decisions on the margin. While health-consciousness factors into food decisions, price is a major factor as well.

In fact, regardless of income, price will generally play some role in the decision of what foods to purchase. The lower a consumer's income, though, the more price sensitive he or she is likely to be. So it is not as though anyone is "forced" to eat a particular item, but subsidizing one kind of food over another will invariably impact consumption, and that impact will likely be spread out disproportionately.

Again, this is not to say that personal responsibility is not an issue, but there is a difference between a neutral policy and one that creates incentives for certain behavior. Not unlike when the federal government grants subsidies to tobacco farmers and at the same time attacks tobacco producers, the irony here is that government officials are increasingly looking to intrude upon personal decision-making for the sake of our health while distorting the marketplace to negatively impact consumption decisions.

Policymakers should not so blithely disregard the consequences of their actions.

Third party payments incentivize consumption of drugs

[Randolph E. Schmid, "More Americans taking medications, report says," Associated Press, The Wichita Eagle, 3 December 2004.]

Americans are taking more prescription drugs than ever, according to a new report:

More than 40 percent of the population is taking at least one prescription drug, and one person in six takes three or more, the government said Thursday. Both figures are up about 5 percentage points in recent years.

How is it that drug prices continue to rise, but consumption increases at the same time? In a typical market, price increases would dampen demand - does medicine not fit into this model? Research actually does show that consumers, despite the claims of some, do generally display similar behavior in regard to changes in price for health care services as they do for any other good.

So we are again left with the question of what is taking place. The answer can be found in a system that does not reveal changes in price to consumers directly. Under most insurance programs, enrollees pay the same amount for a new drug as an old one, for an more expensive drug as for a less expensive drug. Where gradations exist, they typically do not reveal the full difference in cost. Therefore, consumers continue to demand drugs that improve their quality of life - a perfectly rational decision - but the demand is likely overstated from what it would be if costs were paid out-of-pocket.

This overstated demand leading to higher costs is exactly why a shift to consumer-driven health care is so important. Restoring direct consumer participation in purchasing will help bring about behavior that more accurately reflects costs and benefits at the individual level.

Thursday, December 02, 2004

Mandatory health insurance?

[Ron Bailey, "Mandatory Health Insurance Now!," Reason, November 2004.]

First Nick Gillespie questions the value of low taxes and now Ronald Bailey wants to put an end to freedom of contract in health care. What's going on at Reason?

There’s no reason to put off the campaign for a mandatory private system until we’ve worked out all the details. To keep the great American health innovation machine running, it is vital to keep medicine private and consumer-driven, and that means going on the offensive now.

Maintaining our private medical system is vital because American health care and medical science are the most advanced and innovative in the world. If a national single-payer health care system is adopted, most medical progress will be stopped in its tracks. The proposal for mandatory health insurance offers a way to maintain our private system, expand consumer choice, lower costs, and allow medical progress to continue.


With all of the progress being made in consumer driven health care already - from HSAs to calls for reform of the tax code - there is absolutely no reason to implement a halfway house to socialized medicine. Certainly, Bailey does point out some persuasive arguments for mandated coverage:

"Mandated coverage would replace Medicaid and state Children’s Health Insurance Programs because lower-income and unemployed people would receive a voucher to purchase private health insurance," says Wharton’s Mark Pauly. "This would mean full privatization for people under age 65." He holds out an even brighter prospect: "Actually, in principle, mandated coverage could replace Medicare too." The entire medical system could be privatized. The slowly expanding Medicare, Medicaid, and S-CHIP behemoths that are inexorably absorbing more and more of the U.S. health care system could be eliminated.

It is hard to see how this would not be a devil's bargain, though. In The State, economist Anthony de Jasay explains that "The state is a capitalist state if it does not demand ownership to be justified, and does not interfere for his own good with a person's contracts." This includes "the extremely important freedom not to contract at all" (emphasis original). Mandated coverage moves us away from that model, not toward it, and involves the all-too dangerous temptation of sacrificing liberty for security. The reason that we have a welfare state today is that Americans were sold a bill of goods claiming that we needed a little bit of socialism to save capitalism. We should have learned enough from the failure of those policies to not travel down that road any further.

Wednesday, December 01, 2004

Lessons from Tennessee...and Texas

[Chris Patterson, "Drowning In Health Care Costs?," The Texas Public Policy Foundation, 2 December 2004.]

Medicaid is swamping the state budget in Texas. And yet, policymakers in the state continue to offer expansions of the program as though they were gifts to the public. Sound familiar? TPPF's Chris Patterson offers an alternative:

Economists say Medicaid and CHIP will bankrupt every state, including Texas, by 2014. Signs of the impending crisis are evident in health care cost over-runs and budget shortfalls.

Because the price of government health care is expected to double within the next ten years, no state – not even Texas - can bankroll Medicaid and CHIP.

Before expanding enrollment and making more Texans dependent on a sinking program, it would be useful to look at Tennessee. Ten years ago, Tennessee lawmakers offered a government-subsidized health care program to residents not covered by other insurance.

Today, TennCare covers nearly 25 percent of the state’s population and consumes nearly 33 percent of Tennessee’s budget. Tripling costs forced lawmakers to institute draconian controls and now Tennessee rations medical care – 12 doctor visits per year and 6 prescriptions per month. Anticipating a $650 million deficit in funding for TennCare in 2005, Democratic Governor Phil Bredesen is proposing to jettison the program.

Although Texas is traveling the same route as Tennessee, there is an alternative. Health Savings Accounts pair a major medical insurance policy – for big medical expenses after a deductible is met – with a tax-exempt savings account that pays for routine medical expenses such as preventive care.

For lawmakers, HSAs offer a way to control government health costs. Securing a federal waiver to expand Medicaid vouchers (now used for acute and long-term care in Texas), HSAs could be provided for Texans enrolled in government health programs.

Recognizing that socialized health care cannot work any better in Texas than it has in Tennessee, Canada, and Europe, some legislators will propose an alternative: HSAs offer reliable, affordable lifeboats for all Texans.



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


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