Summary of the proposed health-care reform bills.

Nearly all Americans are interested in enacting health-care reform legislation. I think that is because we are a deeply generous, caring people. Surely the dominant interest in reform springs from concern for low-income Americans who cannot afford health insurance.

Recently 5 health-care reform bills have been passed by committees of the U. S. House and Senate. The bills differ in how to cover the costs, but are fairly similar in the proposed benefits. Ironically, about half of the uninsured will remain so if any combination of these bills is finally adopted.

The bills propose major and minor changes to nearly every aspect of American health-care, driving up everyone’s costs and leading us down the path toward rationing. Because each of the bills is so enormous and deals with so many subjects, including some almost unrelated to health-care, very few members of the public, few journalists, and almost certainly few members of Congress have much understanding of the bills’ contents. There remains widespread hope that the bills will address the important issues and leave what we like mostly untouched. Unfortunately, that hope is not justified. The bills exacerbate the most critical issues (like the Medicare and Medicaid financial crises) and leave millions of poor Americans without insurance. Much more could be accomplished with much less expenditure and far less perturbation.

Below I have set forth a summary of the good and bad things the bills would do, along with the really important reforms that they neglect. Highlighted words or phrases provide links to explanatory information. My intent is to update this list as the final bill takes shape, and in the meantime to edit and correct items in the summary as necessary. Please check back.


Good things the proposed bills would do:

1. Provide health insurance to some of the low-income Americans who are not now insured.

2. Make health insurance available to people with pre-existing conditions.

3. Eliminate annual or lifetime benefits caps.

4. Support the view that health-care should be every person’s right.

5. Make minor reforms to Medicare and Medicaid.

6. Provide some incentives to encourage more primary care physicians and rural doctors.

7. Promote certain experiments to seek medical cost reductions.

8. Reduce individual health plan cancellations.


Bad things the proposed bills would do:

1. Impose an excise tax penalty for simply being an American, with an exemption for those of us with “qualified” health insurance plans.

2. Attempt to force healthy young workers to pay much of the cost of insuring “everyone.”

3. Raid the Medicare Trust Fund to misapply hundreds of billions of dollars for non-Medicare purposes, accelerating the pending Medicare financial crisis.

4. Defraud the public by collecting 10 years’ taxes to provide only 5 to 7 years’ benefits.

5. Reduce consumer choices in health insurance plans by forcing all plans to provide a comprehensive list of benefits and a minimum actuarial payout.

6. Impose benefit mandates that many people would not choose and that raise all insurance premiums.

7. Indirectly greatly increase insurance premiums via benefit mandates and “guaranteed issue.”

8. Drive many individuals and families who do not have employer plans to drop their private health insurance plans because of unaffordable increases in premiums.

9. Create a major financial incentive for people without employer insurance to opt out of health insurance, paying a low “excise tax” penalty, and then buy “guaranteed issue” policies for only as long as they have a serious illness.

10. Provide financial incentives for small businesses not to provide health insurance to their employees, or to drop their present insurance plans.

11. Probably destroy the market for non-employer plans. (In New York State, for example, “guaranteed issue” and attendant drastic premium increases have meant a drop in individual coverage from almost 6% of working adults to a bit over 0.2%).

12. Increase drug prices through an industry-wide excise tax.

13. Increase medical device and equipment prices through an industry-wide excise tax.

14. Reduce or eliminate medical innovation by imposing new taxes on the industry.

15. Penalize doctors who prescribe expensive treatments, regardless whether or not they represent “best practice.”

16. Create a cost-shifting environment that leads inevitably to health-care rationing and bureaucratically guided limits on end-of-life care.

17. Eliminate many of the few reasons that exist for consumers to control health-care costs, most obviously Health Savings Accounts and various co-pays.

18. Impose huge added Medicaid cost burdens on all state budgets by mandating increases in eligibility (and penalties for not signing up).

19. Increase job-related costs for all but the very smallest businesses.

20. Discourage job creation in this major recession by imposing new job-related costs on employers and new taxes on the income groups likeliest to create jobs.

21. Apply the wrong fix to “Cadillac” health insurance plans—assess an excise tax on insurers instead of taxing the excess premiums to the insured.

22. Destroy Health Savings Accounts by mandating benefits that are totally incompatible with the high-deductible insurance plan concept.

23. Semi-destroy Medicare Advantage (a Medicare option particularly favored by lower-income and minority people, which is chosen by over 20% of Medicare beneficiaries)--forcing some 8.5 million Americans out of this program.

24. Encourage many doctors to quit their practices, by further increasing physician costs and reducing physician income.

25. Give unfair breaks (such as exemption from “Cadillac plan” excise taxes and waiver of co-pays) to union workers and union retirees—what does that have to do with “reform?”

26. Promote unionization of the health-care industry—what does that have to do with “reform?”

27. Make the Internal Revenue Service the health-insurance cop.

28. Impose a medley of unpopular new and/or increased taxes.

29.  Introduce a novel exercise in socialism which is clearly intended to be a major step toward a single-payer scheme: The proposed “public option.” It would be a sibling agency to Medicare and Medicaid, and would be in essence an enormous new health insurance company owned and operated by the Federal government. It does not relate to any of the declared goals of health-care reform.


Important things that the bills don’t even attempt to do:

1. Get most of the uninsured Americans insured—health insurance premiums will remain beyond the reach of most middle-income people.

2. Make health insurance affordable to average income individuals and families—the bills will result in higher premiums, widely estimated to be a 40% jump.

3. “Bend the curve” to lower health-care costs—the only idea that actually seems to work is to give consumers more reasons to be conscientious about costs, but the bills actually reduce such incentives.

4. Reduce the rapid escalation of health-insurance premiums. Other than vague ideas to reduce the national costs by improving “quality” and determining “best practices,” the bills provide nothing to reduce premium cost escalation.

5. Address the Medicare and Medicaid financial crises. The bills are designed to exacerbate these problems.

6. Rein in rapidly escalating Medicaid costs, a matter that is critical to state finances as well as Federal. The bills greatly expand eligibility and reduce some co-pay categories.

7. Eliminate ineligible enrollees in Medicaid and S-CHIP.

8. Meaningfully address Medicare and Medicaid waste and fraud (said to cost over $60 billion/year).  That actually doesn't even require legislation--the President could simply order more vigorous enforcement.

9. Reconcile Medicare and Medicaid payments with actual provider costs; underpayment by the Federal programs causes cost-shifting that distorts health-care economics and encourages providers to decline Medicare and Medicaid patients. 

10. Eliminate the painfully unfair scheme where employer-provided health insurance is tax-free and individual plans are not.

11. Establish a nationwide health insurance market. (That reform would be essentially cost-free!)

12. Increase health-insurance competition.

13. Lower drug costs.

14. Provide medical tort reform (including defensive medicine, it imposes a cost burden estimated to exceed $240 billion/year).

15. Eliminate the practice of defensive medicine (estimated to add at least $191 billion/year to American health-care costs).

16. Reform the FDA to reduce the astronomical cost of working a new drug candidate through the approval process.

17. Eliminate the FDA’s practice of protecting existing drugs from competition by setting impossible “efficacy” hurdles for new drug candidates.

18. Expedite FDA approval of new drugs, devices, and procedures.


And the questions:

1.  Is bad legislation in the name of a public good better than no legislation?

2.  Will moderate Democrats and liberal Republicans join the Congressional leadership to ram this atrocious legislation down the throats of the American public?

3.  Can the Congress summon the integrity to junk this wretched set of proposals and start over to reform American health-care in a sincere and bipartisan manner?

Ramming through the Federal health-care takeover.

Here's a straight-talk editorial that summarizes the Congressional health-care "reform" effort quickly and accurately:  http://www.investors.com/NewsAndAnalysis/Article.aspx?id=509361.

Bailing wire and duct tape in the name of health-care reform.

Under current tax law, the cost of employer-provided health insurance is a deductable employer expense and the benefit is tax-free to the employee. This policy is generally recognized to constitute a subsidy to employees—the government forgoes tax revenues that it could otherwise claim through their income taxes. The crazy aspect is that an employer plan can provide an unlimited health insurance benefit to employees, far in excess of most plans.

For simplicity, let’s focus the discussion on family coverage, although it applies to individual employee coverage as well. In some existing “gold-plated” plans (often designed for high income employees) the employer’s cost per family is well above $20,000/year, reaching as much as $40,000/year. In contrast, the Congressional Budget Office estimates that this year’s average US cost for employer-provided family coverage is $13,000 per year. It is absurd and awful public policy to provide such a rich subsidy.

To help pay for the reforms, the Senate Finance Committee health-care reform bill proposes to levy on the insurance provider a 40% excise tax on the amount that the employer’s family premium for such a “gold-plated” health insurance plan exceeds $21,000/year, indexed for inflation. (It is understood that the insurance provider will add the excise tax cost into the premium, passing the cost on to the employer.) This “reform” is deeply flawed: (1) Any reform to the current scheme should certainly set the tax-free ceiling much lower—perhaps at 10% above the average for the employee’s state. A ceiling 60% above the average cost is absurdly high! The bill is designed to scrape up some revenue while allowing an unsound public policy to remain basically unchanged. (2) Furthermore, this excise tax provision will fail to raise the projected revenues, because at 40% the excise tax will cause most employers to reduce their plans to fit under the ceiling. (3) Obviously the correct fix is to make the excess premium over the ceiling taxable income to the employee. The bill ducks a proper reform of the existing law so that we can all pretend that it does not levy an increase in personal income taxes.

Will you support a bill that, in the name of reform, uses bailing wire and duct tape to preserve bad public policy—and by design fails to raise the intended revenues?

How about passing a massive, complex bill that's designed to fail?

The preliminary “scoring” of the new Senate Finance Committee health-reform bill was delivered by the Congressional Budget Office yesterday. It indicates that by 2019 the “reform” will still leave some 25 million people in America uninsured! That’s 9% of the projected population. In his speech to the Congress, President Obama said that there are currently 30 million uninsured, about 10% of today’s population. That means that this enormous and complex “reform” bill will barely move the needle on the problem of the uninsured poor. I will write to you separately about the overall cost of the bill and the proposed financing schemes, but the intent of this message is to point out that the bill is almost a complete failure in terms of its stated objectives. Do you plan to vote for a health-care reform bill even if it is designed to fail?

So every doctor will be a "death panel!"

The new health-care reform bill currently being debated in the Senate Finance Committee has many amazing but nearly undetectable gotchas.  One of the most outrageous is to use financial penalties to force doctors to use cheap diagnostics and treatments or, in effect, be fined.  (No wonder that Senator Baucus is in a great hurry to get the bill out of committee!)

As reported in a Sept. 25 Washington Post editorial “Death panels by proxy:”

“The offending provision is on pages 80-81 of the unamended Baucus bill, hidden amid a lot of similar legislative mumbo-jumbo about Medicare payments to doctors. The key sentence: ‘Beginning in 2015, payment would be reduced by five percent if an aggregation of the physician's resource use is at or above the 90th percentile of national utilization.’ Translated into plain English, it means that in any year in which a particular doctor's average per-patient Medicare costs are in the top 10 percent in the nation, the feds will cut the doctor's payments by 5 percent.

“Forget results. This provision makes no account for the results of care, its quality or even its efficiency.”

Forget also about whether the doctor specializes in difficult or extreme illnesses. Just keep mindlessly slamming him or her in the wallet. The idea is quite simply to drive doctors to choose cheaper treatments even when only expensive alternatives make sense, or make the best sense. It is a corollary of the nonsensical notion that expensive medical procedures are by definition bad and wasteful.  Will you support a so-called health-care reform bill laden with stealth provisions to deny effective care to all Americans?

Take a look before you vote!

Members of Congress should have ample time to read a bill before voting on it, and the press and public should as well. As you know, Congressman Brian Baird (D-WA) and Congressman Greg Walden (R-OR) have submitted a discharge petition that would bring Congressman Baird's "72 Hour Rule" (HR 554) to the House floor for a vote. Please sign the petition and vote for the resolution. You can help inject a little bit of transparency into the law-making process.

FDA rules to suppress competition.

In his op-ed article "The FDA Rejects Another Good Cancer Drug" (Wall Street Journal, Sept. 24), Matt Alsante says that the FDA stipulated that for the drug Yondelis to be approved it would have to show a six-week improvement over the most effective therapy now being used. What awful public policy! Americans don't need the FDA protecting existing drugs from new competition--only Big Pharma needs that. It is especially wrong-headed to block a proven cancer drug, since such drugs typically work for some patients and not for others. More options available to physicians will lead to more remissions. (By the way, even though Yondelis met FDA's demands it was rejected!)  Surely the laws empowering the FDA do not include a mandate to minimize competition for approved drugs. There is reason to question any preemptive FDA role regarding efficacy--how about letting the market work? But suppressing new drugs because they do not out-perform existing drugs is pernicious nonsense, suggestive of corruption. Nearly everyone in America is distressed or outraged about drug costs: It's the FDA's doing. Among our obvious needs is more competition; the FDA sees its role as preventing competition.

Health-care reform smoke dreams--what are they smoking?

President Obama says that, without reform, unnecessary Medicare and Medicaid expenditures resulting from fraud, waste, and inefficiency over the next 10 years will amount to $622 billion. That’s over $60 billion per year! Even in Washington, DC, that’s a lot of money—enough for an aggressive program to eliminate the causes. Yet none of the health-care reform bills under consideration in the Congress will begin to close those senseless rat-holes. Certainly they pay lip service to savings, with 50-odd new boards and Commissions, bonuses to hospitals for improving care, and increased penalties for fraud convictions. But a careful reading shows all of these measures to be hopes and dreams, characteristic of all of the failed attempts throughout history to reign in Federal expenditures and eliminate fraud and predatory raids on the Treasury. It is unreasonable to project substantial savings from such vague hopes, although the promoters of the bills include many billions of such savings in their financial scoring. Will you support a bill that combines enormous new expenditure levels with toothless, token provisions to eliminate Medicare and Medicaid fraud, waste, and inefficiency?

Surely you're joking, Mr. Baucus!

A fundamental concept in the health-care reform proposals of President Obama and Congressional leaders is to nudge all but the smallest companies into providing health insurance to their employees. Weirdly, the new health-care reform bill currently being debated in the Senate Finance Committee would create a perverse incentive for a company without employee health insurance to opt out. The bill would require a company opting out to pay a Federal penalty of only $400/year times its total number of employees. According to the Congressional Budget Office, average employer cost in 2009 to insure an individual will be about $5,000 and about $13,000 to insure an employee’s family. The $400 opt-out would be a terrific bargain! Although most companies that currently provide health insurance would be unlikely to drop their plans, the proposed nudge would be meaningless to the rest. Is this some kind of joke?

The dog eats my homework every day!

“This probably sounds a little crazy to some people that we are voting on something before we have seen legislative language.” Chairman Baucus of the Senate Finance Committee has a reason why the health-care reform bill-in-progress “can’t” be shown to the public: It would take his committee staff two weeks to post the bill online. Utter nonsense!

Link to an exceptional blog.

Just discovered the blog "Liberty's Watchdogs."  Highly recommended!  In particular, please see http://libertyswatchdogs.blogspot.com/2009/08/why-obama-gives-us-wee-wee-but-no_23.html#comment-form for a comprehensive, level-headed review of the health-care reform proposals in play.

Bring on the leeches!

On 9/23 in Senate Finance Committee debate, Chairman Max Baucus and others argued that Medicare is on a path to fiscal insolvency, perhaps as soon as 2017, and that diverting $400 billion of Medicare spending to non-Medicare uses would help ward off that disaster. That sounds just like bringing out a bucket of leeches to cure a patient afflicted with pernicious anemia. Do you subscribe to this Alice in Wonderland logic?

Is this some weird trick, or what?

Central features of all of the health-care reform bills under consideration in the Congress include (1) a mandate that every person or family in the United States must have a “qualified” health insurance plan or else pay a penalty tax, (2) “guaranteed issue,” whereby insurers will be prohibited from turning away anyone or cancelling policies because of pre-existing conditions, and (3) “community rating” requiring all insurance premiums be based on the overall population risk pool, not on the health status of any insured person. Together, these reform concepts are intended to lower the actuarial risk per person of the overall pool of insured people by forcing all healthy people into the pool, and at the same time to make affordable insurance available to the less healthy by requiring insurance companies to take on everyone without regard to health status. For years the insurance companies have been saying that they would be willing to eliminate consideration of pre-existing conditions if everyone were in the pool.

The only little problem is that every one of the reform bills will create a system designed to be gamed. For a healthy person without employer insurance, the rational choice will be to pay the fine and only buy insurance when one has an expensive illness--and then to cancel it as soon as good health returns.

For 2009, the Congressional Budget Office expects premiums for individual health insurance to average about $3,500 for a single individual. In Senator Baucus’ new bill, the maximum penalty for an uninsured individual is $950/year, to be paid if one’s income exceeds 3 times the Federal poverty threshold (about $33,000/year). Media rumors suggest that the penalties might be lowered, but let’s assume $950. When you are earning $33,000 a year, $950 looks like a lot of money, but $3,500 is huge!

There are currently far in excess of 10 million uninsured Americans who earn more than $33,000/year. Consider Steve, a young man with no dependents, earning $33,000.  He declines health insurance, thinking that he probably won’t need it. He has lots of good uses for $3,500 and expects to pay far less than that for out-of-pocket medical costs. So when the health-care reform bill passes, Steve makes the rational choice: He continues to decline insurance and angrily pays the $950 fine. But now suppose he turns up with a leaky heart valve and must have it surgically replaced. Big bucks! So just before the surgery, Steve buys the cheapest available “qualified” insurance policy. He can’t be refused and can’t be charged extra because of his condition. He gets the new heart valve, the insurer pays (that’s you and me if he chose the “public option”), and 3 months later, when he has a clean bill of health, he cancels the insurance policy. (Massachusetts has legislated this very “reform,” and healthy people are gaming the system exactly as described here.)

Is this kind of “reform” some weird trick, or what? Will you support a “universal health-care” reform that is designed to fail in its core objectives?

Hat tip to Jeffrey H. Anderson, Critical Condition (National Review Online).  I've slightly changed my paragraph about hypothetical "Steve."

update:  http://online.wsj.com/article/SB10001424052970204488304574434933462691154.html?mod=googlenews_wsj

What kind of trickery is this?

An Associated Press article this morning says that Senate Finance Committee Democrats have rejected a GOP amendment that would have required a health overhaul bill to be available online for 72 hours before the committee votes. Can you explain why the incredible rush, and why the content of the bill must be withheld from the American public until it has been passed by the Committee?

What about the elephant in the Committee chamber?

Although it is emotionally appealing to emphasize the problems of poor Americans who lack health insurance, everyone concerned with health-care reform knows that what really screams for reform is Medicare. It has never been actuarially sound, and in the manner of a Ponzi scheme it relies on new payroll taxes from non-beneficiaries to cover expenditures for mostly retired beneficiaries. The Ponzi scheme is projected to fail within 6 to 7 years, whereupon Congress will have only 2 realistic alternatives: Radically cut benefits (or beneficiaries) or cover the perpetually growing gap between payroll tax revenues and expenditures out of general revenues.

Medicare is said to be abused by fraud (something like $50 billion per year) and overuse of medical facilities and procedures. The fee-for-service scheme biases consumer and provider incentives to ignore cost considerations in medical care choices. For that and other reasons, Medicare expenditures per beneficiary are increasing at a much higher rate than inflation, with no end in sight.

In the Congress 4 health-care reform bills have been passed by committees and a 5th and 6th have been drafted in the Senate Finance Committee. Yet in none of these bills is the core Medicare problem (that it is financially unsound and heading for a cliff) addressed. Worse, the bills envision diverting some $50 billion per year or so out of Medicare revenues to be applied to non-Medicare uses! The many other deficiencies of the Medicare system are addressed with only nominal or token “reforms,” whose impact cannot be quantified. Copays to many beneficiaries are to be reduced or eliminated, exacerbating the acceleration of Medicare expenditures. Medicare in its entirety is a creature of the Congress; it is on the verge of financial failure; and nothing is being done to fix Medicare in the half-dozen health-care reform bills. Do you intend to support the plans of the President and the Congressional leadership to leave Medicare accelerating toward the financial cliff?

Only the facts, ma'am!

As a medical layperson very interested in the broad subject of health-care reform, I’ve expended a lot of effort trying to find the facts underlying the many proposals in the various Congressional bills. I have no doubt worked much, much harder at it than most members of the public (I’ve even read/scanned HR 3200 twice!). The subject is amazingly opaque, as are most of the specific elements of the bills. It’s unreasonably hard to get real data—and I am still working on that. At the same time, it is obvious and seriously annoying that President Obama and the Congressional leadership keep repeating “facts” that are untrue, at least in the context in which they are offered. (A couple of examples: “47 million uninsured Americans” suddenly became “30 million uninsured Americans” in the President’s recent speech to the Congress; and both the White House and Senator Baucus scrambled to add features to screen out illegal aliens to the President’s “plan” and to the Senator’s work-in-progress after Congressman Joe Wilson’s outburst.)

The public has been told that over 10 years Federal expenditures will have to be increased by $1.5 trillion, or $1.1 trillion, or $900 billion, or $780 billion, but we have never been shown a spreadsheet or even a simple list of where those unthinkable amounts of money will go. Likewise, all of the bills propose to redirect hundreds of billions in Medicare expenditures away from Medicare, and no one tells the public which elements of Medicare will be cut—we have only vague promises that no one will experience cutbacks (and that is obviously untrue, since the very popular Medicare Advantage plans are targeted for extreme cutbacks). The President and various Congressional leaders seem unable to fathom why a majority of Americans trust neither the health-care reform process nor their public statements on the subject. It is impossible to earn the public’s trust by concealing facts and plans, withholding explanations, relying on emotional appeals, and trying to paper over the whole story with misleading assertions of “facts.”

This is not some super-secret National Security Agency budget! It’s a set of major changes to American life that will profoundly affect nearly every one of us, economically and existentially. Don’t you feel, as I do, that the public needs and deserves factual explanations and true accounts of the problems, the costs, and the changes envisioned? Will you step out and promote an honest and thorough disclosure of the factual health-care problems warranting reform and the costs and effects of each of the major reform proposals?

What's worse than a poll tax?

Poll taxes are unconstitutional in the United States. Poll taxes were historically imposed as an obstacle to prevent freed slaves and their descendents from voting. State poll tax laws often waived the tax for anyone who had ever previously voted.

But how about an existence tax that penalizes some people and exempts others? A tax that would be imposed just because you are a United States resident, but waived if you have a certain kind of health insurance policy? Every one of the health-care reform bills promoted by President Obama and the Congressional leadership features a universal mandate: To live in the US, you would either have to get a “qualified” insurance policy or pay a stiff existence tax. In the Constitution, the enumerated powers of Congress certainly do not permit such a Federal mandate; and what a stretch of the Commerce Clause it would be, with no interstate commerce whatsoever entailed! Constitutional law scholars have argued that such a mandate would indeed be unconstitutional, but I recognize that an activist Supreme Court majority can somehow allow laws that unrecognizably distort the meaning of the Constitution. Certainly, however, the mandate would be un-American: Basically a warmed-over poll tax, unlike any duty ever imposed on United States residents in history. Will you vote for a bill grounded on this unconstitutional and un-American mandate, the existence tax?

Can't fix health-care without fixing the FDA.

The pharmaceutical industry is a major part of the US and global economy. For 2008, US pharmaceutical sales are estimated to be $291 billion, and the world market is estimated to exceed $900 billion. The worldwide industry is dominated by US companies, and even big European pharmaceutical companies have large operations here. The industry has long been profitable and relatively recession-proof. Pharmaceutical stocks are an anchor investment in most equities-oriented mutual funds, college endowment portfolios, and retirement funds (including union and public employee funds). We are at the most exciting stage in medical history, with a wide range of wonderful new discoveries based on the emergence of real science knowledge about micro-biology, DNA, diseases, and drugs.

What’s wrong with this scene? It costs way too much to get a new drug approved by the FDA. Since over a billion dollars must be risked in the development and testing of every new drug, most participants in the industry only look for drugs that are potential “blockbusters,” with annual US revenue potential approaching a billion dollars or more. None of the hundreds of newer, small pharmaceutical companies can raise the risk capital required to get new drugs through the approval process, so a small player with a promising drug must contract to be a minor partner with one of the huge, cash-rich companies. (The big-pharma companies are likely very happy with this situation!) The world depends on high US prices for new drugs to provide the necessary profit incentives for companies to take on the risk and huge expense of getting them approved. Therefore new drugs in the US are ridiculously high priced. But if the health-care reform drives down the prices materially, the new drug pipeline will dry up.

Health-care reform should include a radical reduction in the FDA-determined cost to get new drugs approved. A populist bill that mandates lower drug prices without reducing the FDA-controlled cost to create new drugs will quite simply cause the pharmaceutical industry to wither on the vine. Do you plan to vote for a health-care reform bill that starves health-care innovation and strangles one of the most economically important US industries?

Hey, Congressperson: who needs doctors?

A recent survey indicates that 2 of every 3 practicing physicians oppose the health-care reform plans under consideration in Washington, and hundreds of thousands would think about shutting down their practices or retiring early if it were adopted. Four of nine doctors, or 45%, said they "would consider leaving their practice or taking an early retirement" if Congress passes such a plan. The U.S. today has just 2.4 physicians per 1,000 residents, below the median of 3.1 for member nations of the Organization for Economic Cooperation and Development. The number of U. S. doctors is already lagging population growth. From 2003 to 2006, the number of active physicians in the U.S. grew by just 0.8% a year, versus overall population growth of 1% a year. Patients, in short, are already being added faster than physicians, creating a medical bottleneck. And the plans being proposed by Congress the President Obama envision adding at least 30,000,000 people to the insurance rolls, while doing nothing about the doctor shortage—in fact, exacerbating the shortage greatly if indeed many doctors give up and quit their practice. Will you vote for a health-care reform bill that promotes a critical shortage of doctors?

Compare and contrast: gov't health care today v. welfare in the 1990s

The Congress needs to reform Medicaid and S-CHIP the way it reformed welfare during President Clinton’s administration. Medicaid almost perfectly mirrors the old, corrupt welfare system. It encourages states to expand their rolls, and there are too many people on Medicaid who don’t need to be there. Congress should give each state a fixed block of money and the flexibility to target that money to the truly needy. The results will be similar to those of welfare reform: Medicaid rolls will plummet, and non-needy people will start providing for themselves. Will you instead vote for a massive health-care reform bill that greatly expands Medicaid and S-CHIP enrollment and leaves all of the existing corruption and abuses unchanged?

Hey, Congressperson: will you tax my toothbrush?

I understand that the Senate Finance Committee is contemplating a $40 billion excise tax on medical devices and diagnostics products, to be levied upon all manufacturers of medical device and diagnostics products as defined by the Food Drug and Cosmetic Act. That would levy an excise tax on as many as 80,000 products currently sold in the US, ranging from toothbrushes to eyeglasses to condoms to stethoscopes to syringes to blood pressure monitors to hospital beds to artificial heart valves to pacemakers to advanced diagnostic equipment. Such a tax would raise almost all health-care costs and drain R&D money out of the medical device industry, impeding the development of cost-effective medical technologies. In the intense quest to finance a costly health-care reform bill, will you vote to support a perverse and counter-productive tax on medical devices?

Should health care reform trump economic recovery?

Unemployment has reached unexpected highs, and all analysts are projecting very slow (multi-year) recovery in the job market. The Congress should be focusing on economic recovery by avoiding tax increases and exercising maximum caution as to any new spending. It should encourage job creation by wherever possible reducing payroll-related burdens on employers. It should be reducing long-term budget deficits by slowing the growth of entitlement spending. The pending health-care reform bills instead mean higher taxes, lower wages, huge new expense burdens on small employers, and exploding entitlements and government debt. If one of these bills becomes law, it will be the most significant change in economic policy in years. Health reform is also an economic issue! Do you plan to vote for a health-care bill that torpedoes our economic recovery?

Comments on Obama's 9/10/09 speech to Congress

Last night I watched President Obama’s speech to the joint session of Congress on health-care reform. His “plan” was essentially HR3200 warmed over (and widely different from Senator Baucus’ proposal of September 8). Aside from a very vague statement that he wants someone to look into health-care oriented tort reform, there was nothing new. He continued to malign all Americans like me who have concerns about whether the Congress is going about health-care reform in the right way. He offered almost no real justification for most elements of the “plan,” just the usual feel-good emotional appeals. His only factual statement that I recall is that 30 million Americans lack health insurance—an amazing drop from the 47 million that he has been asserting at every opportunity for the past 2 years. Are you going to vote for this very flawed and unpopular “plan” promoted by a President who cannot explain or justify it?

Hey, Congressperson: how's about enabling a little interstate competition?

Nearly all economists and I think all health-care analysts agree that barriers to interstate sales of health insurance should be removed in order to promote competition and improve portability of health insurance policies across state lines. Yet none of the 3 bills that have been approved by House committees nor the similarly approved Senate bill nor the Senate Finance Committee bill (nor this week’s new proposal by Senator Baucus) contains any provision whatsoever to remove these insurmountable state line barriers. Will you vote for a bill that ignores the most obvious and flagrant impediment to a competitive health insurance market?

Where's the fire?

What sense does it make to be in such an enormous rush to legislate on something that is literally a matter of life and death for millions of Americans? There is no valid reason to avoid the normal law-making process of holding Congressional hearings on the needs, hearing the pros and cons, and facilitating public discussions of the innumerable provisions in the proposed legislation. The Congress should work in a sincere bipartisan spirit to write a health care reform bill to rein in out-of-control insurance companies and provide for the needs of the uninsured poor. At the same time, you should make sure that it does not raise taxes for anyone, does not add to the deficit, does not regulate personal medical choices, and does not ration health care or restrict American citizens' freedoms in any way. In short, you need to kill the existing bills and go back to the drawing board. As a Democratic Congressman from an eastern state told constituents last month, “The bill that’s coming through the House, with or without the public option, isn’t good for America.” Do you plan to support the Congressional leadership in its haste for a bill, regardless what the public thinks of the bill or the process?

Why do employers get a subsidy on health insurance, when individuals don't?

Nothing in the health-care reform bills under consideration in Congress attempts to correct the obviously unfair tax scheme as it applies to health insurance costs. Employer costs are untaxed either to the employer or the employee, but such costs for Americans with individual policies and for self-employed persons are taxed. Do you plan to correct this tax discrepancy?

Will health care reform kill Health Savings Accounts (HSAs)?

Health Savings Accounts were created by Congress in December, 2003, to foster a kind of health insurance with built-in incentives to encourage individuals and families to consider cost in their health-care decisions. Millions of Americans have embraced this innovative concept in the few years that it has been available. It was reported that by January, 2008, more than 6.1 million Americans were covered by HSA-qualified plans. By now, the number has likely reached 10 million. HSAs are popular with low and moderate-income Americans—it is estimated that 83% of HSA account participants have household incomes less than $75,000. President Obama and many others have often stated that if you like your present health-care scheme you can keep it. Yet the health-care reform bills under consideration in Congress propose to kill the increasingly popular Health Savings Accounts. In killing HSAs, the bills will destroy the only important attempt to “bend the cost curve” toward reduced health-care spending. Do you intend to kill HSAs?

Hey, Congressperson: do you want to promote or inhibit competition?

One of the primary goals cited for health-care reform (especially by President Obama) is the need to promote more vigorous competition in the health insurance industry. Ironically, the health-care reform bills under consideration in the House and Senate would impose the opposite of competition. They would forbid real choice. In place of the variety of products that competition now generates, the bills would force us to "choose" among virtually identical insurance plans. Government would define these plans down to the last detail. Everyone would be required to have at least the same "basic" coverage, including physical exams, maternity benefits, well-baby care, alcoholism treatment and mental-health services. Consumers could not buy a cheap, high-deductible catastrophic policy. Every insurance company would have to use an identical government-designed pricing structure. Prices would be the same for sick and healthy. In HR 3200, provisions to create a "public option" would deliver a government insurance plan that is identical in every way to the mandated private insurance plans. Will you vote for a health-care reform bill that is designed to destroy competition in the name of promoting competition?

Who will decide what treatment a patient needs?

The health-care reform bills under consideration in the House and Senate envision creating a “Health Benefits Advisory Committee” whose real purpose is obviously to facilitate rationing of medical care, especially denial of end-of life care, and at the same time permit Members of Congress and the President to claim that they have no part in such decisions. Will you vote for a health-care reform bill that will create a board of politicians and bureaucrats to override decisions made by me and my doctor?

Hey, Congressperson: some day, granny won't be around to complain

The health-care reform bills under consideration in Congress propose to take $313,000,000,000 dollars (yes, $313 billion!) out of the Medicare budget to be used for other health-care purposes. Do you support a radical reduction of health-care services for senior citizens? Is that what reform proponents (such as President Obama and Secretary Sebelius) mean when they say, “If you like your current coverage, you can keep it?” Will you vote for a health-care reform bill that plunders Medicare to divert funds to other uses?

Hey, Congressperson: how's about a generational war?

The health-care reform bills under consideration in the House and Senate envision forcing healthy young people to buy insurance policies and pay premium rates much higher than the fair value of the insurance so that older and less healthy people can get a huge discount (via mandated “community rating”) below the fair value of their policies. Around 9,000,000 Americans have chosen not to own health insurance and have incomes above the proposed subsidy level; they will suddenly be forced to pay some $6,000 per year for over-priced health insurance that they don’t want! And tens of millions of Americans who now have individual policies will suddenly experience huge premium increases of around $4,000 per year! As you are very aware, we senior citizens of America are terrified at how we will be affected by the proposed health-care reforms. Evidently the younger people have not yet realized what the legislation will do to crater their personal budgets. Will you support health-care reform legislation that will create a personal financial crisis for 30,000,000 or more younger Americans? If you do, do you suppose they will vote to reelect you?

Who needs Medicare Advantage?

Millions of Americans covered by Medicare (about 1 in 4 of Medicare benificiaries) have chosen Medicare Advantage. It is especially popular among minorities. Will you support a health-care reform bill that takes the Medicare Advantage option away from all of these people? Is that what reform proponents (such as President Obama and Secretary Sebelius) mean when they say, “If you like your current coverage, you can keep it?”

Hey, Congressperson: who bought you lunch today?

Do you oppose including medical malpractice tort reform in the health-care reform bill? A huge amount of the total U.S. health-care expenditures are consumed in “defensive medicine.” Malpractice insurance premiums, whose cost is built into the fees we pay, are astronomical. Nevertheless, the health-care reform bills under consideration in the House and Senate totally ignore this huge cost burden. Surely “health-care reform” must address these huge, unnecessary costs. Is your position that leaving medical malpractice tort reform untouched is consistent with the idea of American health-care reform?

Is it OK to make our children and grandchildren pay for a health care Ponzi scheme?

By far the greatest challenge in American health-care is Medicare's unfunded liability for future benefits, estimated by Medicare Trustees at $38 trillion. Medicare created this massive liability by charging current enrollees too low a price: government used the payroll tax from working non-beneficiaries to make up the shortfall. That is called a generational pyramid scheme, a type of Ponzi scheme. If Medicare were a private insurance company, it would have to increase its costs by an additional trillion dollars annually to account for the interest on this debt (assuming 3% interest). But the federal government's accounting ignores this expense. The health-care reform bills under consideration in Congress propose a massive expansion of what amounts to Medicare with a new “public option” to insure tens of millions of Americans, with no incentives to hold down costs and an enormous expansion of the unfunded health-care liability. Will you support a health-care reform bill that not only ignores but greatly exacerbates the most serious part of the American health-care problem?

Do market principles apply in health care decisions?

In daily speeches and Town Hall meetings, President Obama has been emphasizing controlling health-care costs. The only serious opportunity to “bend the curve” on health-care costs is to eliminate the wrong cost incentives in the present system—that is, to introduce incentives encouraging patients and providers to be conscientious about costs. The sense in which Medicare and Medicaid are “broken” is that neither the patient nor the provider has a meaningful incentive to consider cost in medical decisions. The result is an incentive scheme that guarantees escalation of health-care costs (bending the curve ever upward): If the patient thinks more tests and procedures might help, he or she is free to seek them without concern for the cost (and arguably care providers may have an incentive to load on extra tests and procedures to collect more fees). The health-care reform bills under consideration in the House and Senate contain essentially nothing to change these wrong incentives, but propose instead to create a huge new Medicare-like service with the same wrong incentives built in. Do you support a “reform” that preserves and extends the most problematic economic feature of the present scheme?

Who should get health insurance?

We are told every day that there are some 47 million uninsured people in the U.S.—a number that seems rather shocking. However, the number of Americans without affordable options is only about 12 million, or one-fourth of the reported 47 million. Over a fourth of the uninsured opt out of available health insurance, more than a fifth are not legally eligible, and another fifth qualify for existing public health-care programs but have not enrolled.

Twelve million is not nearly such a shocking number of uninsured. And private health insurance for 12 million people could surely be obtained for less than $70 billion per year, which is far less over 10 years than the roughly $1.5 trillion of expenditures envisioned in the health-care reform bills under consideration in the House and Senate.

Here is a detailed breakdown:

Americans without affordable options, 12 million (26% of the uninsured)

Eligible for employer-sponsored insurance but opt out, 6 million (13%)

Eligible for government programs but not enrolled, 9.7 million (20%)

Uninsured individuals earning more than $75,000, 9 million (19%)

Legal immigrants, 5 million (11%)

Illegal immigrants, 5.2 million (11%)

Do you support Federal health insurance for illegal immigrants? For all non-citizen immigrants? A new program for qualified Americans who fail to enroll in existing programs such as Schip and Medicaid? For high income people who choose not to buy health insurance? For employees who opt out of employer-sponsored plans? Will you vote to spend $1.5 trillion where less than half that is really needed?

Keep your eye on the goal

President Obama says nearly everyone agrees that we need to lower costs, promote choice and provide coverage for every American. But the health-care reform bills under consideration in the House and Senate will not lower costs (according to the Congressional Budget Office). They will do nothing to promote choice except to establish the "public option," a sort of Government-owned insurance company to compete with the private sector insurance companies. And, also according to the Congressional Budget Office, they will not succeed in providing coverage for every American. Will you support a massive health-care reform bill that is not designed to achieve the stated goals?

Questions for members of Congress

Exactly what is the hurry to enact a health-care reform bill without substantial public review and discussion? Are you more committed to doing reform right or enacting it quickly?