Dangerous Health-Care Myths

Sally C. Pipes’s latest title, The Top Ten Myths of American Health Care, is a useful handbook for the health-care policy battle ahead. Pipes, the president of the Pacific Research Institute, shatters much of the conventional wisdom about American health care and offers conservatives bountiful ammunition for the coming showdown. On Monday, as President Obama delivered a major speech on health care, Pipes took questions from National Review Online. Among other things, she explains who constitutes “the uninsured,” the lessons from HillaryCare, and how Americans really feel about their health care.

KATHRYN JEAN LOPEZ: What do you make of the president’s health-care dealing?

SALLY C. PIPES: The president has certainly done a good job of aligning the major health-care players in favor of generalized reform, including congressional leaders, private insurance companies, and health-care providers. On May 11, a number of health-care leaders from hospitals, drug companies, medical-device manufacturers, doctors, and insurance companies made a pledge to President Obama to voluntarily reduce health care costs by $2 trillion over 10 years. Pledges are of course free, and I’m sure that each of them plans to limit the other institution’s spending. One person’s waste, after all, is another person’s revenue. Still, the generalized commitment to this plan is part of a major strategy to increase taxes to fund an expanded government system, further restrict private health care, and ultimately ration Americans’ health care.

We all agree that our goal is affordable, accessible, quality health care for all Americans. The question is how best to achieve that goal. First, insurance does not equal access to health care, especially if that insurance is government-provided. Medicaid is a perfect example. It offers a comprehensive benefit package far in excess of even the most lavish private plan. Yet due to low payments to physicians — the very price controls that government leaders want to impose system-wide to control costs — Medicaid patients often struggle to find doctors. The same is increasingly true for seniors under Medicare. Insurance does not equal access to quality health care, and access to quality health care does not require lavish insurance. That point is lost in this debate.

I support the vision of focusing on patient-centered solutions that would reduce costs and lead to universal access to health-care services. The president’s vision, however, is to increase the role of government in our health-care system through increased taxes, subsidies, and mandates. He supports “play or pay” for employers — if health insurance is not offered, the employer will pay into a government fund so that individuals can get insurance in a newly established “public plan.” My view is that such actions would result in the “crowding out” of private insurance and leave Americans with a “Medicare for all” government-run system. This has long been a goal of American liberals and the Democratic party.

LOPEZ: How did you pick the myths that went into your myth-busting book?

PIPES: I was constantly frustrated by reading and hearing in the mainstream media statements about our health-care system that I knew were not true. I felt I had an obligation to the American people to set the record straight on the myths being perpetrated. I wanted the “person in the street” to know the truth about our system before traveling down the path to a system controlled by government and all that that entails. The top three myths are: 46 million Americans have no health insurance and therefore no health care; an individual mandate will lead to universal coverage; and socialized systems such as those in Canada and Europe are cheaper and more efficient than ours. If I were to write the book today, I would add another myth: that America’s health-care system puts our employers at a competitive disadvantage and hurts our economy. No less an authority than the Congressional Budget Office has debunked this myth, noting that it is employees who pay the tab, not the company, as it’s merely a substitute for wages. Yet this is a major selling point in the Democratic push to government health care.

LOPEZ: Is health care a right? Isn’t it heartless to say “no”?

PIPES: Health care is a necessity of life, similar to food, clothing, shelter, and to some degree transportation in modern America. It’s not a right, as traditionally understood in our constitutional system informed by the great truths of the Declaration of Independence’s promise of life, liberty, and the pursuit of happiness. The American Revolution was fought and based on the natural rights of man. Society should be organized to assist individuals in providing these things through the protection of property rights and keeping taxes low so Americans can make their own decisions on how to spend their money rather than putting government in charge. Unfortunately, supporters of government-run health care and the mainstream media have been telling the American people that health care is a right, and that view has been gaining significant momentum over the last few years.

Americans certainly enjoy government-granted rights to health-care services. Medicaid is a categorical program for low-income Americans that meet its criteria. Children have rights under SCHIP [the State Children’s Health Insurance Program], seniors under Medicare, and we all enjoy rights to being treated at hospitals, regardless of our ability to pay. This is similar to how we deal with the other necessities.

When people say health care is a right, there is the underlying notion that it should be provided at zero price at point of consumption, or, worse yet, no cost at all, ever. This is impossible, as doctors, nurses, hospitals, pharmaceutical companies, and other providers in the system can’t be expected to work for free. We don’t expect other necessities to be free or provided by the government or paid for collectively. In fact, we’d be horrified if they were provided this way. A little known fact is that of all of life’s necessities, save clothing, health care is by far the least costly. It’s not until Americans become senior citizens that the average household spends more out of pocket on heath care than entertainment and dining out. Yet we don’t decry the crisis in restaurant bills, football games, and rock concerts.

One of the great ironies is that by pursuing rights improperly understood, like the right to have someone else pay for one’s health care, we actually risk limiting our natural rights, which include the right to secure health-care services with our own resources. As a former Canadian who lived under a system where no private insurance is allowed to compete with government insurance, I know this to be true. The solution is not to assert false and impossible rights, but to expand freedom. If the tax code were changed to remove the tax exclusion that those who obtain their insurance through their employer get and individuals do not, if costly mandates were removed, and if patients and doctors were put in charge of their health care, we could reduce health-care costs, increase competition, and reduce the number of uninsured.

LOPEZ: But don’t we need more government involvement to insure poor Americans?

PIPES: Not necessarily. Follow the debate closely, and it’s clear that Democrats are engaged in a bait-and-switch scheme. Under the guise of insuring the poor, they will end up increasing taxes and moving the middle class to government-provided health care. Low-income Americans already enjoy myriad insurance programs and direct access to taxpayer-subsidized health care through clinics and hospitals.

Our health-care system is already dominated by government. We do not have a market- based health-care system today. Forty-seven percent of the American health-care sector is in the hands of government through Medicare, Medicaid, SCHIP, and the Veterans Administration. Today’s political leaders and the Obama administration want to take over the other 53 percent.

Of the almost 46 million Americans counted as uninsured by the U.S. Census Bureau, 14 million of them are eligible for existing government programs but have not signed up. Another 17 million of them are earning over $50,000 a year but do not buy insurance because they feel it is too expensive. Two-thirds are young people between 18 and 31 who consider themselves “invincible.” They would buy insurance if it were cheaper and available to cover catastrophes, which is why one has insurance. Because 64 percent of Americans get their insurance through their employer and insurance is not portable, many of the uninsured are just between jobs and hence counted as uninsured, even if they are only uninsured for a short period of time. There are only about 8 million uninsured that need some assistance.

LOPEZ: Are most Americans really satisfied with their health care?

PIPES: Yes. According to a recent poll by Harvard professor Robert Blendon, 82 percent of Americans rate their health care as good or excellent. This statistic would drop significantly if the government became the only provider, with a global budget set by government to control costs. Or if people got shunted to a Medical Home, the current Orwellian term for staff-model HMOs, and were told they could only see a restricted number of specialists after their overworked and underpaid primary-care doctor had granted permission. They would be very dissatisfied if, in order to keep costs under control, government denied care, long waiting lists appeared, they were denied access to the latest technological innovations, and they faced a shortage of doctors. This is the situation in Canada today.

LOPEZ: So what needs reform?

PIPES: Instead of increasing the role of government in the system, we need to put patients and doctors in charge of health-care decisions. The tax code needs to treat the purchase of health care equally, whether a family secures it in the private market, through an employer, through being self-employed, or through a trade association or other affinity group. This would allow many coverage options to emerge, some of which would surely guarantee a lifetime of coverage, just as private insurance guarantees disability insurance over a working life and life insurance until death.

The key is to free up options for innovation. There are about 2,000 mandates on insurance companies across the nation adding between 20 to 50 percent to the cost of premiums. Guaranteed issue and community rating (not allowing coverage to be based on health status or age) also increase costs. These costly mandates should be eliminated. Individuals should be allowed to buy insurance across state lines so they can get the type of insurance that fits their particular needs.

Last but not least, there should be medical-malpractice reform. A lot of doctors practice defensive medicine for fear of being sued. This practice also adds to costs.

If we can offer Americans universal choice, we will be able to achieve universal coverage or, more important, universal access to care and indemnification from financial ruin due to health-care expenses.

LOPEZ: Why are drug companies so easily demonized? Should they be?

PIPES: This industry is today’s easy target. Others who have come before and will emerge again include private insurance companies, HMOs, and doctors. We all need villains and saviors. Consider the strange public-relations career of HMOs. They have gone from the solution in the late 1970s to the villain in the late 1990s. They are back again as saviors under Democratic plans.

The drug companies have been criticized for earning outlandish profits while charging patients high prices for drugs. Yet it costs about $1.3 billion to bring a new drug to market, and most do not pass the trial process. In order to recapture the costs of research and development, drugs have to be protected by patents. Most of the research on drugs and biologics is done in America because we don’t have price controls like most other countries. Hence, people in other countries are free-riding off our R&D. If price controls are introduced on drugs in this country, the innovative process will be sharply reduced, which will have a negative effect on our ability to live long and healthy lives. This will actually increase overall cost. For every $1.00 spent on newer pharmaceuticals, we save $7.17 on hospital costs. But the media and activists engage in single-entry bookkeeping, focusing only on the cost of the new drug treatment while ignoring the cost of the replaced invasive therapy.

Here’s a prediction: If we get the public option and an accompanying massive movement into this “Medicaid for all” plan, physicians and hospital administrators will be the next targets. The focus will shift to expenditures, and doctors will be decried as greedy for making too much money off human suffering.

LOPEZ: If you could highlight a point or two for House and Senate conservatives — the most compelling arguments against Obamacare — what would they be?

PIPES: I would focus on the fact that Obamacare will lead inevitably to exploding taxpayer costs and will also degrade the quality of health care enjoyed by the average American. Asserting something over and over does not make it true. The inevitable result of the current efforts will be Americans’ paying more taxes and getting less health care.

Conservatives need to get specific. They should refer to the Congressional Budget Office’s analysis of all the health-care reform options. The CBO is a credible source that engages in detailed analysis. They should compare actual policy proposals to Democratic leadership claims for these proposals to the CBO’s estimates of likely outcomes. I did this in a Wall Street Journal op-ed on Sens. Max Baucus and Ted Kennedy — nearly every assertion they had made in an op-ed was contradicted by the CBO.

That addresses the costs. For the consequences, they need to use real examples of how these proposals work in practice. Look to Britain’s NICE [the National Institute for Health and Clinical Excellence] for evidence of how comparative effectiveness research impacts real people. This humane system tells a 45-year-old that he or she isn’t worth having access to a new drug because it costs more than the $44,235 that a year of life is worth to the government. Imagine if Americans really understood this.

Conservatives need to talk about how global budgets and expenditure controls really work: They turn patients from revenue centers to be attracted and served, into cost centers to be avoided, shunted off, and treated as cheaply as possible. How many American seniors currently enjoy greater quality of life due to joint replacements that, under Obamacare, wouldn’t be considered worth the cost? Conservatives need to defend the use of specialists. In every other area of the economy, specialization is good; so too in health care. It’s a giant step backwards to keep care relegated to an HMO Medical Home, where it will be provided by overworked generalists who are willing to accept low payment rates.

Conservatives must put real flesh and human faces on the debate. It’s that important. Government control is a one-way ratchet to denied care.

The three worst pillars under Obamacare are (1) the “play or pay” mandate that would be placed on employers; (2) the public plan within a national insurance exchange that would compete with private insurers; (3) comparative effectiveness research — there is $1.1 billion in the stimulus bill for this — under which a Federal Health Board would make decisions about which treatments and procedures are cost-effective instead of medically effective.

The Lewin Group estimates that 118.5 million people who currently get their coverage through their employers will be shifted to the new public plan. It is likely that the public plan will be priced cheaper than private plans, all of which will be required to include mandates, guaranteed issue, and community rating. This will lead to “crowding out” of private insurance, leaving all of us in the public plan — “Medicare for all.” Government will face greatly increased costs and therefore will have to set a global budget. Demand for care will exceed the budget and, as a result, care will be denied, long waiting lists will emerge, the latest equipment for diagnosing and treatment will not be available, and there will be a doctor shortage.

LOPEZ: Why did Hillarycare fail? What are the lessons from that fight? Or is this a wholly different one?

PIPES: Hillarycare went down to defeat in 1994 following a major discussion in the public arena about what her plan would do to Americans and their ability to choose their own doctor and health plan. Hillary and company made a few key mistakes that the Obama team has learned from. First, she developed her plan with the administration and did not work with Congress. This proved to be a major stumbling block to reform. Second, she actually developed a plan and published it. Her plan was very complicated and was over 1,300 pages in length. Once the American public saw the plan in a diagram, they knew this was not going to be in their best interest, and the plan went down to defeat. So far, the Democrats have dealt only in fluffy ideas, and they plan to limit debate on the actual product. It will be a repeat of the stimulus debate, where no one knows what is in the final bill.

President Obama said during the campaign that he was committed to health-care reform and it would be done under his tenure. He has been working with the administration and Congress so that everyone has a stake in the process. Nancy-Ann De Parle is the White House health czar, Kathleen Sebelius is secretary of HHS, Peter Orzag and Ezekiel Emanuel are at OMB, and Doug Elmendorf is at CBO. We have seen about $136 billion in the stimulus bill and $634 billion to be put into a reserve fund over ten years to ensure health-care reform happens. All the experts say that the reform will cost well over $1 trillion and probably a lot more. The taxpayers will face significant increases to pay for this program.

LOPEZ: What will you try to drive home over the coming weeks?

PIPES: The American public and doctors are going to have to get involved if this reform plan is to be slowed down and defeated. A major grassroots effort must be mobilized now so that people realize what the Obama plan means for their future health care. The public needs to lobby its elected representatives to focus on a plan based on patient-centered solutions rather than a government takeover of our health-care system.

My efforts will focus on public education through speaking, debating, radio and TV commentary, testimony, and writing op-eds for newspapers. As a person who grew up in Canada under a government-run system with denied care and long waiting lists, I say: If we get this system in America, where will our best doctors — and we as patients — go to get our care?

—Sally C. Pipes is president and CEO of the Pacific Research Institute, a free market think tank based in California.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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