Health Care Proposal – Revisiting Old Propositions
by John Weckerle
In an October 14 article, Gadabout-Blogalot.com relays to us “another health care reform possibility,” encapsulated in six rather brief bullet points “from the states” on how health care should be handled. According to the article, this approach is endorsed by “think tanks” in 33 states. The approach is described as “patient-centered health care reform.” As the author correctly noted, none of these were new proposals, but we had not seen them grouped together in this particular format before. The article did not provide any links to the source of the proposal, but it was easy enough to find.
What we found was interesting, if a bit predictable. It also inspired a few thoughts about “think tanks,” economics, and health care reform.
Thinking In A Tank
Sometime when I was very young, I heard about “think tanks,” probably on the evening news. Somehow, I developed the impression that think tanks involved a group of almost supernaturally intelligent people who worked together – more or less sequestered – on incredibly difficult problems, without the solutions to which we would all die or be swallowed up by Communists. In my version of think tanks, this work was conducted in stark, underground facilities, from which the members of the think tank sent minions to gather data and food. All of this was commissioned by the government, and there were not many think tanks – we probably had a couple, and the Soviets probably had a couple; there might have been one in China and maybe SMERSH had one. There could only be so many people that smart.
As life would have it, think tanks are not exactly what my young mind had envisioned – and perhaps less so in recent years than when I was of single-digit age. As it turns out, there are multitudes of organizations calling themselves think tanks. Unlike my childhood think tanks, which were provided with a question, some data, and a lot of pizza, and required to provide an answer, quite a few of the real ones – perhaps a majority – start out with an answer and then gather data and conduct studies to support their foregone conclusions. These institutions, which technically satisfy Webster’s definition of “think tank” (an institute, corporation, or group organized for interdisciplinary research [as in technological and social problems] —called also think factory) might be more accurately defined as policy advocacy organizations, but apparently all it takes to be a think tank is to call yourself one. There are think tanks of this nature operating throughout the political and ideological spectrum. Of course, such think tanks certainly run the risk of ignoring viable solutions outside their ideology or endorsing nonviable approaches simply because they fit within a given world view.
We took the time to visit the web sites of each and every “think tank” listed as having endorsed this “patient-centered health care reform” and found that, with one exception (the Empire Center for New York State Policy), all the organizations identify themselves as dedicated to “free enterprise” and or “limited government.” We had to go to the web site of the Empire Center’s parent organization to find that endorsement. Now, we don’t have any problem with people advocating what they believe in; belief, however, is one thing, and analysis quite another. We think it important to “consider the source” when “think tanks” speak, and we don’t often cite them as a result.
The Magic of Economics
The “very viable alternatives” described by bullet points in the Gadabout-Blogalot.com article come from an article documenting the “research” of “internationally renowned economist” Art Laffer. Those of us who have taken graduate courses in economics – or have seen the movie Ferris Bueller’s Day Off – will remember Dr. Laffer as one of the chief proponents (several decades ago) of supply side economics – denounced as “voodoo economics” by former President George H.W. Bush. Not surprisingly, there are some issues with the report. For example, the section titled “Diagnosing the Health Care Industry: Strengths” focuses on polls regarding insured Americans’ satisfaction with their health care and/or insurance. There is no real discussion of what the health care industry is doing right, or what it is doing wrong. The section seems to indicate that most of us believe that there really is little or no problem with our health care and insurance system at all – which is difficult to swallow given the widespread concern associated with the issue. The section on the “health care wedge” seems to suggest that the escalation in health care costs is a result of doctors and patients making inappropriate and expensive choices because they are shielded from the impact of the costs of their decisions. The section on current health plans is a rather poorly formulated argument for shifting many health care costs currently covered by health plans from insurance companies to individuals or families, comparing health insurance to automobile insurance.
In the section on government policy, in which Dr. Laffer conveniently neglects to provide links or specific citations to his sources, he suggests that the problem with health care costs is primarily associated with government involvement, and provides a quote from (but not a link to), a report by the President’s Council of Economic Advisers. While Dr. Laffer correctly cites one of the reported sources of inefficiency in the health care system, he for some reason does not explore the others – and it is hard to avoid the impression that the omission is made because not all the others support his conclusions. At any rate, it should be noted that the Council of Economic Advisers report does not recommend an elimination of government involvement in health care.
We could go on with a section-by-section review of the Laffer report, but this article is going to be long enough as it is. Some may see the report as supporting its conclusions, but we do not, and we have to wonder whether Dr. Laffer is not just – to twist a phrase from the movie Blazing Saddles – again doing that voodoo that he do so well.
We’re Losing Our Patients
We would like to make what we consider a very important distinction between those who are ill and those who are purchasers of medical insurance. The latter are not “patients.” They are insureds, or clients. They are not patients until they are being treated for something. We consider this distinction important because quite a lot of the people – perhaps a majority – who are affected are sick at any given time. We have to wonder whether use of the word “patient” is intended to divert attention from the possibility that the proposal in question might just be an expansion of the status quo – in the favor of the insurance companies.
With A Bullet – Or Seven
Now, let’s take a look at Dr. Laffer’s recommendations:
- Begin with individual ownership of insurance policies. The tax deduction that allows employers to own your insurance should instead be given to the individual. This one was not included in the Gadabout-Blogalot.com article. This flies in the face of Dr. Laffer’s discussion of what is good about the health care system – that most Americans are happy with their health plans. It also essentially eliminates group rates and employers’ ability to negotiate – at least a little – on the point of rates with insurance companies. The tax savings would not likely make up for the additional premium cost to the employee. The tax deduction applies to the portion of premiums paid by the employer.
- Leverage Health Savings Accounts (HSAs). HSAs empower individuals to monitor their health care costs and create incentives for individuals to use only those services that are necessary. HSAs are very useful, but everything in them comes out of the individual’s pocket. Again, this seems to shift costs onto the individual or family.
- Allow interstate purchasing of insurance. Policies in some states are more affordable because they include fewer bells and whistles; consumers should be empowered to decide which benefits they need and what prices they are willing to pay. It is hard to know where to begin with this one. Dr. Laffer provides no support for the statement about the relationship between policy costs, “bells and whistles,” and geographic location. As likely as not, premiums are lower in some states than other as a result of differences in the provisions of health insurance regulations from state to state. Opponents of this proposal state that this would result in a “race to the bottom,” with most or all insurance being sold out of a small number of states with the least stringent requirements. However, this probably isn’t the real issue, either. The proposal is unworkable, because health insurance is to a large extent regulated by the states. Under the current regulatory framework, allowing interstate purchasing raises a conundrum: the insurance would be subject to the regulations of the state from which it is sold, but neither the state of origin or the purchaser’s state would be in a position to enforce the requirements. The state of origin would not have jurisdiction in the purchaser’s state, and the purchaser’s state would not have the ability to enforce laws that are not on its own books. The only way to make this work would be to create a set of Federal regulations and an agency to enforce them.
- Reduce the number of mandated benefits that insurers are required to cover. Empowering consumers to choose which benefits they need is effective only if insurers are able to fill these needs. Wait a minute…again…What happened to the part where Americans were happy with their health insurance and didn’t want to lose what they have? How many people would feel “empowered” by this proposition?
- Reallocate the majority of Medicaid spending into simple vouchers for low-income individuals to purchase their own insurance. An income-based sliding scale voucher program would eliminate much of the massive bureaucracy needed to implement today’s complex and burdensome Medicaid system. It would also produce considerable cost savings. Well, I suppose it is not surprising to find vouchers in here somewhere. At any rate, this is a vague and simplistic suggestion, and no support for it is provided. Without providing a discussion of current costs, costs of the proposed new structure, and a reasonable cost-benefit analysis, it is impossible to even consider such a move. However, we will note this: it is very easy to propose to “voucherize” somebody else’s insurance. We wonder just how some of those promoting this idea would continue to do so if we wrapped their benefits – say, Medicare, veterans’ health care, and retirement health care benefits from State employment – into this concept.
- Eliminate unnecessary scope-of-practice laws and allow non-physician health care professionals to practice to the extent of their education and training. Retail clinics have shown that increasing the provider pool safely increases competition and access to care—empowering patients to decide from whom they receive their care. This seems a vague and nearly incoherent proposal. It is not clear what it actually means, and there appears to be no detailed discussion anywhere in the paper. However, it is hard to argue against allowing professionals to perform duties appropriate to their positions. It’s anybody’s guess just how much of an issue this is.
- Reform tort liability laws. Defensive medicine needlessly drives up medical costs and creates an adversarial relationship between doctors and patients. We refer the reader to the recent Congressional Budget Office report on the subject. The report concludes that tort reforms proposed to date would reduce the nation’s total health care expenditures by 0.5 percent, or about $11 billion per year. Half a percent. This just is not a major contributor to the cost of health care, and it seems to have gotten an awful lot of attention for something that is relatively minor in impact. Further, it is entirely unsupported by Dr. Laffer’s report; in fact, this appears to be the only place in the report that the word “tort” is even used. Finally, the recommendation is inconsistent with Dr. Laffer’s assertion that government intervention should be ended – if there should be no interference, that should mean no interference, and not just interference that benefits the health insurance.
So, we have a report by a supply-side economist, which includes (but does not seem to adequately support) proposals previously put forth by insurance industry supporters, supported by 33 “think tanks” that universally espouse solutions in the context of free enterprise and limited government. There is nothing surprising about that. Whether we agree in principle with that context or not, we consider our observation regarding organizations that start with an answer and search for a justification for it to be particularly relevant.