PRI’s John R. Graham visits the Paddock

Healthcare Horserace (American Liberty Alliance), June 15, 2009
As the debate on Capitol Hill continues to focus on just how much government is too much government in the healthcare industry, we thought you might like to hear an alternative point of view. So, we enlisted John R. Graham, Director of Health Care Studies at San Francisco’s Pacific Research Institute (PRI). Founded in 1979, Pacific Research Institute’s mission is to champion freedom, opportunity, and personal responsibility for all individuals by advancing free-market policy solutions. Mr. Graham gives us his take on the Affordable Health Choices Act and discusses alternatives to government-controlled healthcare in an exclusive interview with (HCHR). We welcome Mr. Graham to the Healthcare Horserace paddock.

HCHR: The Healthcare Horserace seems to be taking shape now that Senator Kennedy has released the Affordable Health Choices Act. What is Pacific Research Institute’s knee-jerk reaction to a bill calling for an employer-mandate and public-option insurance plan?

Mr. Graham: I wouldn’t call it a “knee-jerk reaction”, because we know that Senator Kennedy has always believed that the government should have total control over each American’s health care. But this is a sick joke: Calling it the “American Health Choices Act” is as Orwellian as calling the bill to abolish secret ballots for union-certification the “Employee Free Choice Act”.

This bill mandates that every American buy a health-insurance policy designed by the government – specifically a new “Medical Advisory Council”. (However, just to make sure no lobbyist is left behind; the MAC’s decisions can be over-ruled by Congress). If you don’t buy one of these policies, the bill levies a tax on you. If an employer doesn’t offer a plan, it also taxes that business. Incredibly, the bill abdicates the level of the tax to the Secretary of Health & Human Services – a clear abdication of legislative responsibility. In order to ensure everyone buys a policy, it offers tax credits to everyone up to 5 times the poverty level! Furthermore, the share of the premiums for which beneficiaries are liable increases only at the rate of the Consumer Price Index, which has historically been lower than the rate of medical inflation. So the taxpayers’ liability for the share of premium must increase every year.

The bill also proposes a poorly defined “affordable access plan”, which I believe would be the lowest-cost qualifying plan. Any Medicare provider would have to accept an affordable access plan paying Medicare rates, which are well known to be below the cost of care. So, doctors will either drop Medicare patients to avoid this mandate, or quit practicing medicine.

To allegedly improve individuals’ choice of plans, the bill subsidizes “Gateways” operated by states, and offers handouts for new boondoggles called “Navigators.” Because these Gateways will be government bureaucracies that are impossible for individuals or businesses to navigate on their own, we’ll have to engage a government-sponsored Navigator to do it for us! If Senator Kennedy really wanted to increase our choice of health plans, he would put forward a bill to erase the tax prejudice favoring corporate-based versus individually purchased health insurance.

Furthermore, the bill outlaws insurers’ from pricing risk, forcing them to accept all applicants at the same premium, and imposing a government-run method of retrospective risk-adjustment to compensate insurers who enroll more expensive beneficiaries. This insures cost-plus provision of health services, instead of healthy innovation by health plans, which would motivate them to collaborate with providers to reduce the cost of expensive treatment. Nor should we let him suck us into using the term “public option”: It’s a government program, pure and simple.

HCHR: The Democrat proposals must have some merit. What do you see coming from the left that you’d support as part of a sound approach to healthcare reform in America?

Mr. Graham: Well, Senator Baucus appears to understand that the tax prejudice that forces us to get health benefits from our employers, because any other choice is made with after-tax dollars, leads to fragmentation and the high number of uninsured in the country. Health insurance should be portable from job to job and from state to state. Unfortunately, whenever we propose amending the tax code to increase people’s choices to buy health benefits with pre-tax dollars, either individually or through an association like a church, opponents of reform basically say: “Oh no! People are too stupid to choose their own health insurance. They need a human-resource manager to do it for them.” So whenever the tax prejudice is threatened, like Senator McCain did in last year’s presidential campaign, they rally around and support the corporate serfdom of employer-based health benefits.

Everyone knows that this exclusion leads to a large number of frictionally uninsured, and it’s hard to avoid the conclusion that this benefits the advocates of government-monopoly health care. These “exchanges” or “connectors” that keep coming into the mix are often proposed as another way to achieve portability, but they always end up being very heavily laden with government regulation.

HCHR: We reported last week that President Obama is employing the rope-a-dope when it comes to healthcare reform. Do you think there’s a difference between the successful healthcare systems he’s holding up as examples (specifically the Mayo Clinic and Green Bay, Wisconsin) and the proposals coming out of Congress? Or, are we chomping a little too hard on the bit with this one?

Mr. Graham: Of course, there is. These successes at the Mayo Clinic and in Green Bay came from determined leadership, co-operation, and teamwork, not federal-government commands!

President Obama deludes himself if he thinks he can just pass a law to eliminate variance in health spending and outcomes. That is the core fallacy of socialism. Health care is far too complex for us to explain all the variance. Plus, it’s not all bad. If there were no variance, how would we know what best practices are? President Obama is not the only one to suffer from this.

Steve Burd, CEO of Safeway, had an op-ed in the Wall Street Journal on Friday trumpeting Safeway’s success at using financial incentives to improve employee’s behavior: People with unhealthy behaviors (such as smoking) pay higher premiums. Unfortunately, federal law limits Safeway’s ability to charge accurately for these risks. So, Mr. Burd called for regulatory relief to allow him to improve the incentives in Safeway’s health plan. However, he also called for the government to impose Safeway’s model on everyone else in the country!

HCHR: It seems that whenever conservatives use the free-market as a model for healthcare reform, the left accuses them of promoting a “do nothing” approach and labels Republicans as the party of “no.” Are there viable free-market solutions to our nation’s healthcare crisis? And, how can that message be better communicated?

Mr. Graham: It’s a strange accusation. Whatever the U.S. health care is, it is certainly not free market!

The left says “no” to health reform that returns health-care dollars to American families to spend on health care of their choice instead of a human-resource manager’s choice. Tools like Health Savings Accounts have proved very powerful in returning control of health care to American patients. They reduce cost-trends significantly, according to a new report by the American Academy of Actuaries.

One communications challenge is that people’s responses to questions about individual responsibility for health care are incoherent. Although they want to make decisions in partnership with their doctors, not the government or an insurance company, they don’t make the connection with who pays their doctor. In a recent survey by Republican pollster Frank Luntz, 58.3% agreed that “decisions about my healthcare should be between me and my doctor and no one else”, and 52.5% that “I should have the right to choose the healthcare that’s right for me”. However, only 9.3% agreed that “my healthcare belongs to me”, and 11.8% that “the right to spend my own money for my own healthcare must be protected/preserved”.

We need to communicate that patients – not the state and not the boss – must control their health-care dollars.

We want to thank John Graham for lending us his perspective on the healthcare reform debate.

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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