Over the weekend, Democratic presidential candidate John Edwards said he wants to make preventive care mandatory in his mandatory health insurance system. Once you turn over your freedom to the government, the intrusion clearly doesn't stop.
If you are forced to buy health insurance, politicians must determine what qualifies as insurance, what you must pay, and ultimately what treatments will be available. Now we learn from Mr. Edwards that he wants to force you to get the care that he decides you should have — another step toward political control of the health care economy.
Eventually, there will be penalties, as we learn from across the Atlantic: In the government-run health system in the UK, the conservatives have proposed that "patients who refuse to change their unhealthy lifestyles should not be treated" by the National Health Service.
People could earn "points" if they lose weight and quit smoking. But they also would be penalized if they don't. A Tory panel said people should not "expect that the state will underwrite the health implications of any lifestyle decision they choose to make."
In the US, some employers are using carrots and sticks to encourage better health habits among their workers, as are some public programs, such as West Virginia's Medicaid plan. Clearly people need better incentives to make healthy choices. But it becomes Orwellian when big brother is watching, especially in a federally-controlled health system.
Wouldn't it be so much better for people to have incentives to take care of themselves and their health spending? Evidence shows that this can work.
And to that point:
The lead editorial in The Wall Street Journal on Wednesday weighs in on moving toward a system in which individuals would have more control over their health care and health spending. The editors endorse a tax deduction over a refundable tax credit to facilitate individual ownership of health insurance.
They argue that a refundable credit that would "go to individuals who pay no taxes at all — essentially in the form of a government handout to buy individual insurance."
The Journal explains how the Republicans are divided on this crucial financing issue:
"One camp, led by President Bush and Arizona's Jon Kyl in the Senate, supports a 'standard deduction' along the lines unveiled by the White House earlier this year. Mr. Bush's proposal would replace the unlimited health-care tax deduction for employers with a $15,000 deduction for a family, or $7,500 for an individual. The deduction would apply both against the income and payroll tax, and would go a long way toward creating a more affordable private insurance market. Presidential candidates Rudy Giuliani and Mitt Romney also now favor a version of the tax deduction policy.
"On the other side are several Senators, led by South Carolina's Jim DeMint and Oklahoma's Tom Coburn, who agree on ending employer subsidies but want to give individuals a 'refundable' tax credit. North Carolina Senator Richard Burr has proposed a tax credit of $5,400 per family, and $2,160 per individual."
While the Journal says that either alternative would be preferable to "the current slow march to government-run health care," the editors don't explain how the millions of uninsured people will be helped if they make too little for the deduction to have much value.
An individual tax deduction would be preferable to the current invisible exclusion of health insurance from the taxable income of workers, with all of its distorting consequences. But people at the lower end of the income scale need more help to buy insurance.
A new paper by Professor Bryan Dowd of the University of Minnesota, published by AEI, does an excellent job of explaining the policy and the price of the current system. He argues that a credit is preferable, and he explains several ways it could be structured.
He estimates that if the current $189 billion annual "tax expenditure" for job-based health insurance were divided among all of the 224 million Americans not eligible for Medicare and Medicaid, it would provide a refundable credit of $840 per person.
He makes the argument that we heavily subsidize health insurance for wealthier Americans but not for those who have fewer resources and options to buy health insurance. Dowd says that the subsidy could be adjusted by income and geography.
He praises the Bush administration for putting the issue front and center in the policy debate and for "encouraging both greater equity in the tax code and debate over our current system."
My take: It may be that we need to combine a tax credit and a deduction to make progress.
The refundable credit would be more valuable to those at the lower end of the economic scale by providing meaningful help to purchase health insurance. And a deduction would be more like the tax benefit that those with job-based insurance currently receive through the tax exclusion. The deduction should be capped to limit the open-ended tax benefit it provides to those with the most generous health benefits, as President Bush has proposed.
The specifics can flow from the budget numbers to determine the amount of the credit and deduction and what the cutoff and triggers points would be.
The good news: At least we are having this debate. The bad news: The encroachment of government programs continues in the meantime.
Wall Street Journal columnist Kim Strassel hit a nerve with her commentary on "What Women Want." She explains that our progressive income tax system puts a disproportionate burden on married working women by taxing their income at the family's highest marginal rate.
But these women often carry yet another burden: Many are locked into jobs that they would like to quit but can't because they can't afford to lose the health insurance that covers them and their families. If they have health insurance at all?
This is not a new issue: A public opinion poll conducted before the presidential elections in 2000 found that a large majority of women — 72 percent — would like their health insurance to be independent of their employment. This was not even one of the issues the pollsters had intended to ask about, but they said it came up repeatedly.
Twenty-first century health policy would allow portability of health insurance by allowing the tax break for health insurance to follow the individual as a person. It's an essential policy change in our mobile society in which one of four workers changes jobs every year.
And we have new evidence about the dangers of political control of health care decisions this week: A study presented at the European Society of Cardiology Congress reported that patients in the UK who were switched from Lipitor to cheaper generic cholesterol drugs — often without their knowledge — had a 30% higher risk of heart attacks, stroke, or death compared to patients who remained on Lipitor therapy. When governments are more concerned about short term costs, patients suffer. See our Articles Round Up below for more and a link.
And we have a new paper out on what Congress should do to break the logjam on the State Children's Health Insurance Program, "Stay Focused on SCHIP."
RECENT NEWS ARTICLES AND STUDIES:
Patients Who Switched from Established Lipitor Therapy to Simvastatin Experienced a Significant 30 Percent Increase in Relative Risk of Cardiovascular Events or Death, New Observational Study Shows
Business Wire, 09/05/07
An observational study finds that patients who switch from a branded statin like Lipitor to simvastatin, a cheaper generic drug, may suffer a 30% increase in the relative risk of major cardiovascular events, including heart attacks, strokes and certain types of heart surgeries, or death. The data was culled from a retrospective analysis of a medical database of anonymous patient records entered by general practitioners in the United Kingdom known as The Health Improvement Network (THIN). The study was conducted by, among others, scientists from Pfizer. The analysis included 11,520 patients (2,511 patients who had taken Lipitor for six months or more and were switched to simvastatin vs. 9,009 patients who were taking Lipitor for six months or more and then remained on Lipitor therapy). A secondary analysis of the same data showed that patients who were switched from Lipitor to simvastatin were more than twice as likely to discontinue their treatment compared to those who remained on Lipitor therapy.
Market Forces in Health Care
American Express to Dump HSA Card
Healthcare Finance News, 07/16/07
American Express is discontinuing its ?HealthPay Plus? HSA card two years after entering the market. The card was linked to a consumer?s health savings account and facilitated access to funds while enabling consumers to have access to a line of credit. "The level of investment needed to get this to the next level is significant, and acceptance is moving more slowly than we anticipated," a spokesman said. Although HSAs are relatively new, there is $6 billion now under management, and that amount is expected to grow to nearly $50 billion by 2010.
Restoring the American Social Contract
Stuart M. Butler, Ph.D.
The Heritage Foundation, 08/29/07
Butler writes that the American idea of the social contract can be restored by returning to its original principles as a bargain between society and the individual. This can be accomplished by transforming our existing social insurance programs into "true insurance"; deciding how much of our resources we are willing to contribute to such programs; stimulating greater individual responsibility by encouraging more private savings and insurance among middle- and upper-income individuals; and empowering individuals and families to link the security and provision of health and financial protections to the civil society institutions with which they identify most closely. These steps would allow our American-style social contract to be based more solidly on institutions that individuals value as integral parts of their lives, with the government dimension appropriately limited, sustainable, and more just to future generations.
Health Care Costs: A Primer
Key Information on Health Care Costs and Their Impact
The Kaiser Family Foundation, 08/08/07
This study by the Kaiser Family Foundation examines health care costs and the impact of spending growth on various parts of society. Key findings:
- In 2005, the U.S. spent $2 trillion on health care, which is 16% of GDP and $6,697 per person.
- Health care costs have grown on average 2.5 percentage points faster than U.S. GDP since 1970.
- Private funds pay for about 55% of total health spending while public programs, including Medicare, Medicaid, and SCHIP, pay for about 45% of health spending.
- Almost half of health care spending is used to treat just 5% of the population.
- Prescription drug spending is 10% of total health spending, but contributes to 14% of the growth in spending.
Behind the Numbers: Healthcare Cost Trends for 2008
PricewaterhouseCoopers' Health Research Institute, 07/07
Although it is too early to evaluate the long-term impact of CDH plans, their cost trend is running about 2.5% below cost trends for HMOs and PPOs. In 2008, average medical costs are expected to rise 9.9% for preferred provider organizations (PPOs), 9.9% for health maintenance organizations (HMOs), and 7.4% for consumer-directed health (CDH) plans. The downward trend in medical spending growth is influenced by a number of factors including slower spending growth for prescription drugs, increased transparency and cost sharing with employees, total-health-management approach to benefits, and broadening of the digital backbone in healthcare. The study also says the market share of CDH plans is expected to triple by 2008.
Seismic Shifts in the Health/Wealth Landscape
Aamer Baig, Andrew Rocklin, and Srinivas Velamoor
Diamond Management & Technology Consultants, 08/07
The lines between the healthcare and financial services industries are rapidly converging to create a new health/wealth market. Banks, health plans, and technology infrastructure providers that have focused on their traditional domains must now consider how they will respond to the demands of consumers and employers for a seamless healthcare experience. Diamond estimates that the health/wealth landscape will generate an aggregate $40 billion worth of demand for new products and services over the next five years. The study also examines HSA growth and estimates there will be 15 million HSA accounts by 2010, with $65 billion worth of assets under management.
Who Pays for Health Insurance?
Clark Havighurst and Barak Richman, Duke Law School
The Wall Street Journal, 09/06/07
New census data showing that the number of Americans without health insurance increased by 2.2 million in the past year (to 47 million) undoubtedly deserves the attention it is getting, write Havighurst and Richman. But the increasing size of the uninsured population is only a symptom of deeper problems in American health care, not the problem itself. Under the current system, employers are the principal purchasers of health insurance, and workers seldom know how much their employers pay. They also don't realize what economists have repeatedly concluded: Employer outlays for health insurance translate directly into less take-home pay for employees. A good way to prepare the public for needed health reforms would be to expose consumers to the true cost of health insurance. President Bush's pending proposal to tax the value of employees' health benefits as income, while also providing a compensating standard deduction or tax credit, would serve the useful purpose of stimulating market and political demand for low-cost alternatives, including coverage that stops short of paying for everything seemingly mandated by professional (that is, non-economic) standards. Congress is making a mistake in ignoring the president's proposal. If voters realized that it is not only the uninsured whom the current system victimizes, would-be reformers of all stripes might finally find a broad constituency willing to support fundamental change.
Vulnerable Populations And Health: How Can We Improve Outcomes?
Health Affairs Briefing
Tuesday, September 11, 2007, 10:45 a.m. – 12:15 p.m. (Lunch Included)
Sinking SCHIP: A First Step toward Stopping the Growth of Government Health Programs
Cato Institute Capitol Hill Briefing
Thursday, September 13, 2007, 12:00 p.m. (Lunch Included)
7th Annual Physician Hospitals of America Conference
Physician Hospitals of America Event
September 13 – 15, 2007
Las Vegas, NV
Grace-Marie Turner will participate in a panel discussion titled, "The Future of Healthcare in America" on Friday, September 14.
Healthcare Reform: The Economics of "Pay or Play" Employer Mandates
Cornell University Symposium
Friday, September 14, 2007, 1:00 p.m. – 5:00 p.m.
Creating a 21st Century Medicaid System
Center for Health Transformation Event
Tuesday, September 18, 2007, 9:30 a.m. – 6:00 p.m.
Is SCHIP Expansion a Step towards Socialized Medicine?
The Urban Institute Debate
Wednesday, September 19, 2007, 9:00 a.m. – 10:00 a.m.
Health Policy Matters is a weekly newsletter containing summaries of timely and informative studies and articles on free-market health reform. It features research and writings by participants in the Health Policy Consensus Group, articles of interest from the health policy world, and announcements of coming events. Health Policy Matters is published by the Galen Institute, a not-for-profit public policy organization specializing in information and education on health policy. For more information about the newsletter and our organization, please visit our website at www.galen.org.
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