Fixing America: Health Reform

Second in a three-part series on Fixing America

Health reform is not dead. There are bipartisan ideas out there to fix it. And that means to enact reform, the only route out is the bipartisan way.

First Some Common Sense

It is time elected officials stop pursuing an agenda that is so extreme and flawed, it takes a supermajority of only Democrats to enact.

It is time for elected officials to stop believing that good governance means signaling the Democrat majority that you will sign into law any 2,000-page science project cooked up behind closed doors that no one in Congress fully understands, many have not read, but all will vote for after they get a sweetheart deal in shady backroom deals, moves that the Massachusetts voters loudly rejected.

It is time to stop with the rhetoric about shared responsibility, when that responsibility excludes almost every one of the Democrats’ political backers.

It is time to can the rhetoric whereby the president says he won’t sign legislation that adds to the deficit, when the Democrats’ reform entails just six years worth of health reform paid for with 10 years spending.

It is time to stop saying the public option will bring costs down via competition, when an interstate market for insurance would do more to deliver competition and cost savings.

It’s time to stop advocating the public option when that option is really about letting the US government take over a swath of the economy the size of Great Britain and when the government-run Fannie Mae, Freddie Mac, Social Security, Medicare and the US Post Office are virtually insolvent.

It’s time to stop boasting that Medicare’s administrative costs are infinitesimal, when that 2% overhead is spread out over hundreds of billions of dollars worth of plan coverage, and when the reason why Medicare waste and fraud are so rampant is because no one is properly administering or watching the store (never mind that the IRS handles much of the collection of Medicare funds).

And realize that the electorate does not buy the premise that health reform can pay for itself, that Congress can enact autopilot reform paid for with vaporous promises of cost savings from the likes of the American Medical Association, the drug companies and the nation’s hospitals.

Easier to Herd Gnats Through a Hurricane

It’d be easier to herd gnats through a hurricane than to shepherd the nation’s 183,000 doctors, 5,700 hospitals and myriad drug companies into delivering such cost savings.

Just as President Bill Clinton learned, and every president who attempted some kind of health reform going back to Theodore Roosevelt, bipartisan reform is the only way. Anything else is legislative cyanide.

Be Bold, New and Dramatic

You may not know this, but “very little in the Obama health plan is new or original,” notes Robert E. Moffit, Ph.D. director of the Center for Health Policy Studies at the Heritage Foundation, a conservative research group in DC. “Many of its policy initiatives are recycled from the ill-fated Clinton health plan of 1993 and the Kerry health plan of 2004 and strongly resem ble a detailed proposal by the Commonwealth Fund, a prominent liberal think tank.”

Health reform can be fixed with innovative ideas, and by simply seeing what works, like forcing hospitals and doctors to publish their prices ahead of time.

The data below come from, the Kaiser Family Foundation, the Census Bureau; the ideas for reform come from The Heritage Foundation’s Stuart M. Butler, Ph.D., its vice president of domestic and economic policy studies, as well as Nina Owcharenko, deputy director at Heritage’s Center for Health Policy Studies, and Moffit. Ideas and analysis below come also from the National Center for Policy Analysis and the Commonwealth Fund.

Again, let’s be bold, clear eyed, optimistic and rational about the hard choices ahead.

Voters already know that all you can eat, fast food health care is increasingly costly, and they want change.

Diagnose the problem correctly to get proper reform, and stop trying to whip fast balls past voters, stop with the partisan pots and pans clattering around in this debate, voters are tired of it.

And let’s get rid of the hysterics. Everyone knows that we can’t let our nation’s uninsured use emergency rooms as their primary health care.

But there are not 45 million uninsured swamping the nation’s emergency rooms and clinics daily.

Who Are the Uninsured?

According to, the Census Bureau estimates that 45.7 million lacked health insurance at any given time in 2007. But look closer, there are important nuances, and you’ll find that the uninsured tend to be disproportionately young, a minority, or work for small firms:

*26% of the uninsured are eligible for some form of public coverage, but do not make use of it, according to the National Institute for Health Care Management Foundation;

*21% of the uninsured are immigrants, according to the non-partisan Kaiser Family Foundation. That figure includes both those who are here legally and those who are not. The number of illegal immigrants who are included in the official statistics is unknown, Factcheck says;

*20% of the uninsured have family incomes greater than $75,000 per year, according to the Census Bureau. But this does not necessarily mean they have access to insurance, Factcheck notes. Even higher-income jobs don’t always offer employer-sponsored insurance, and not everyone who wants private insurance is able to get it, Factcheck says;

*40% of the uninsured are young, according to KFF. But speculation that they pass up insurance because of their good health is unjustified, Factcheck says. KFF says that many young people lack insurance because it’s not available to them, and people who turn down available insurance tend to be in worse health, not better, according to the Institute of Medicine;

According to Factcheck and Kaiser, 79% of the uninsured are U.S. citizens, more than 80% are from families where at least one person holds a job, and two-thirds earn less than 200% of the federal poverty threshold—meaning less than $42,406 for a family of four in 2007, the most recent year for Census data.

About 15% of all Americans are completely without coverage. Also, 45% of the uninsured are uninsured for less than four months; one out of seven remain uninsured for more than a year and a half.

And just 9% of Americans directly buy their own health insurance.

Health Care Costs The U.S. spends over $2.4 trillion on health care, about a sixth of GDP. The Democrats plan would have cost an additional $1.6 trillion, financed by tax increases and promised quixotic cost savings from Medicare, Medicaid, doctors and the drug companies. The government accounts for almost one-half of all health care spending through Medicare and Medicaid, which economists say causes private insurance costs to go up, as doctors pass along costs to private plans.

That’s one reason why employer-based family insurance has rocketed from an average of $6,438 in 2000 to $12,680 in 2008.

According to recent government calculations, Medicare and Medicaid spent $818 billion in 2008 and are projected to reach $1.7 trillion by 2018. In 1970 20.4 million individuals were enrolled in Medicare—by 2008, more than 40.8 million Americans were enrolled. With the baby boomers retiring in droves, Medicare has a $38 trillion unfunded obligation.

Health Insurance Reform Ideas

Tort reform It strains credulity that the White House and Congress would pressure the nation’s doctors, hospitals and drug companies to deliver cost savings, when they do not ask the same of the nation’s tort bar, the single largest contributor to the Democrat party in recent years.

Yes, lawyers have protected the vulnerable, but they’ve also filed frivolous, rifle shot cases and profited mightily, and President Obama never mentions them in his speeches about health reform.

The president was booed last June at the American Medical Association’s annual meeting by an audience filled with medical experts for stating he was “not advocating caps on malpractice awards.”

But it not only costs upwards of tens of billions of dollars annually for doctors to defend themselves against medical malpractice suits, it also wastes doctors’ valuable time defending themselves, time that could be spent saving lives.

Don’t be fooled when opponents only cite data, say, from the actuarial consulting firm Towers Perrin that says medical malpractice tort costs were just $30.4 billion in 2007, the latest available.

The figures don’t include the extra tests and procedures doctors order to protect against such suits.

Defensive medicine, estimates the AMA and the libertarian/conservative Pacific Research Institute, wastes more than $200 billion a year.

Just half that sum could provide a $5,000 health insurance grant — $20,000 for a family of four–to the uninsured poor (U.S. citizens ineligible for other government health assistance), says columnist Charles Krauthammer.

A Massachusetts Medical Society study (remember, the state enacted its own health reform), notes that five out of six doctors said they order tests, procedures and referrals–about 25% of the total ordered–to protect themselves against lawsuits.

The president did cite the cost of “unnecessary tests and procedures as part of a ‘defensive’ medicine culture created in part by the risk of medical malpractice lawsuits,” such as excessive use of cat scans

Excessive, because the malpractice suit that ranks number one as having the most success at winning are misdiagnoses of cancer—which is why all the cat scans.

One in 10 obstetricians has stopped delivering babies, unable to pay malpractice premiums on the order of $1,000 per baby, according to the American College of Obstetricians and Gynecologists.

Now, it’s a long shot to get lawyers in Congress to recuse themselves from voting on health reform if they don’t pass tort reform (reminds me of some Irish common sense from my grandmother, who once said that any male legislator who votes no on the issue of abortion should have a vasectomy first. THIS IS A JOKE, YOU JUST READ A JOKE).

Instead, enact special health courts modeled after workers compensation courts, where a judge or an expert panel well-practiced in health care issues can rapidly and dependably distinguish between good and lousy care.

America has a long tradition of special courts for situations where expertise and consistency are important—bankruptcy courts, tax courts, workers compensation tribunals, vaccine liability tribunals, Social Security tribunals, and many more, says Philip Howard, a lawyer and author, is chairman of the Common Good.

Look to Texas Texas voters approved a constitutional amendment in 2003 capping damage awards in medical malpractice lawsuits.

In turn, doctors are swarming to Texas, swelling the ranks of specialists at Texas hospitals and bringing professional health care to some long-underserved rural areas, reports the New York Times (no state income tax helps, too).

Texas’ malpractice reform stopped judges from meddling in damage claim limits set by the state legislature on medical malpractice recoveries.

For pain and suffering, so-called noneconomic damage, patients can sue a doctor and, in unusual cases, up to two health care institutions for no more than $250,000 each.

Plaintiffs can still recover economic losses, like the cost of continuing medical care or lost income, but the amount they can win was capped at $1.6 million in death cases.

All but 15 states have adopted some limits on medical damage awards, according to the National Conference of State Legislatures. But Texas went further than many states. Malpractice insurance premiums dropped an average 21.3% annually since reform, not counting rebates for renewal, the Times reports.

Interstate Competition An interstate market in health insurance would deliver more competition than a public option. The Dems’ health reform did not break the insurers’ monopoly on the insurance market, in order to get their buy-in to their legislation.

Instead, break that monopoly and let taxpayers buy insurance across state lines.

We can buy auto insurance, life insurance across state lines, but not health insurance. You don’t see a public option floated for auto or life insurance, do you?

The National Center for Policy Analysis and the Commonwealth Fund have noted that the price of policies varied tremendously, due mainly to state regulations rather than variation in health care costs. States have a vapor lock on health insurance, which needs to be dialed back as well.

“In states where health insurance costs are the highest, a portion of the premiums paid is being used to cross-subsidize the premiums of high-risk individuals,” the NCPA says. Enacting pools across state lines might bring costs down even more.

And why else are costs high? State mandates. For example, New York requires every insurance policy sold there to cover podiatry, the NCPA says. Acupuncture coverage is mandated in 11 states, massage therapy in four, osteopathy in 24, and chiropractors in 47, the NCPA says. There are an estimated 1,800 or so such insurance “mandates” across the country, and the costs add up.

Republican Senator John McCain advocated interstate competition while running for President, but the President mocked him by saying “he wants to run health care like they’ve been running Wall Street,” setting aside the fact that life and auto insurance can be purchased across state lines.

The President and the Dems say they oppose an interstate health insurance market because it would lead to a “race to the bottom”, whereby insurers would all run to the states with the loosest standards, and other states will be forced to lower their standards to compete.

But you didn’t see that happen in other forms of interstate markets for insurance, so this is a scare tactic—and it underestimates the states’ ability to flush out shysters trying to game the system. Yes, state legislatures have been corrupted. But interstate competition would bring sunlight and transparency to this market.

Tax Equity Individuals who get coverage at work get an unlimited tax break on their health care benefits. But those who buy coverage on their own get no comparable tax break, the Heritage Foundation notes. The value of this “tax exclusion” is over $200 billion, or about 10% of all the nation’s spending on health care.

There is broad bipartisan agreement, especially among health care economists and experts, that the current tax treatment of employer-based coverage is inequitable and regressive, the Heritage Foundation says.

Ideally, Congress should replace the current tax exclusion with a system of universal tax credits, the Heritage Foundation advises. Those credits could go towards buying portable health savings accounts.

Congress could also provide tax relief for those who buy coverage on their own and redirect other health care spending to help low-income individuals and families purchase private health insurance coverage.

A top White House adviser, Jason Furman, along with Senate Finance Committee Chairman Max Baucus (D-MT) recently discussed similar tax reform in his “white paper” on health coverage. Secretary of State Hillary Clinton (D-NY) had proposed this tax cap during the primaries.

State-Based Reform Health reform won’t work as a federal, one-size-fits-all solution. Some states face high health care costs, while others face high rates of uninsurance.

So how about a federal-state partnership that would let the states devise health reform that works for them? The President has advocated a model program, and the Feingold-Graham State-based health care reform bill would allow for pilot tests.

Model it after Congress’s consumer-choice system, Heritage suggests. The Democrats had this idea in their reform, and it’s a good one.

Federal employees have enjoyed the Federal Employees Health Benefits Program (FEHBP), which is effectively a “health insurance exchange” that functions like a shopping mall for plans, making it easy for families to shop each year for plans and to have portable coverage, Heritage says.

Plans range from managed care to health savings accounts. There is no standard, congressionally mandated benefits package, meaning, members of Congress choose the benefits that are right for them, Heritage says.
The FEHBP consists of truly competing private plans, with no “public plan” enjoying a sweetheart deal. And it has private options available throughout the nation that even the sickest employees can afford, Heritage says.

Avoid the public plan—it will drive costs higher, end in rationing, and make Americans miserable, Heritage advises. Recent estimates from the Lewin Group, a leading health econometrics firm, suggest that more than 22 million Americans would experience an unexpected change in coverage with a public plan in place.

Automatic enrollment in private plans, not mandates The main reason why working Americans are uninsured is that they cannot afford coverage, and instead turn to hospital emergency rooms. Here’s an alternative: “auto-enrollment” in private plans, in which the default is that working families are automatically signed up and must actively decline coverage if they don’t want it, Heritage suggests.

Studies suggest that default enrollment sharply increases sign-ups for medical plans as well as retirement plans, helping Americans save; President Obama had supported legislation to make it easier and affordable for firms to institute such enrollment procedures.

Say “No” to the Daschle Federal Health Board Avoid a “central bank of health” proposed by White House nominee for Secretary of Health and Human Services, former Senator Tom Daschle (D-SD).

Daschle’s Federal Health Board, a secluded panel of unelected ‘experts’ not vetted by Congressional hearings, would have an intolerably outsized, unchecked power over medical decisions affecting taxpayers, breaking the President’s vow to give Americans choice.

Daschle has said that this board would be “insulated from politics, and Congress and the White House would relinquish some of their health-policy decisions to it.”

It would have “teeth,” Daschle has also said, and would potentially decide things such as premiums, what services are insured and which are not, and “all federal programs would have to abide by [its recommendations],” the former senator has noted.

The board could also go so far as to decide which health reform ideas get tax breaks, as Daschle has said that the board would “link the tax exclusion for health insurance to insurance that complies with the Board’s recommendations.”

Unchecked, secret panels overseeing a sixth of the country’s economy is not what America is about.

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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