Feeds:
Posts
Comments

Posts Tagged ‘Government-run healthcare’

I wrote last June about an unfortunate British guy who, after his leg was broken by thieves, was told by the government that his injury wasn’t serious enough for an ambulance.

The poor chap eventually was driven home by some cops and then had to take an Uber to the hospital.

While writing about this story, I semi-joked about what would be required to get an ambulance.

If you’re about to die, they’ll send an ambulance. But not for anything less than that.

Little did I realize that the bureaucrats would prove me wrong.

Here are some amazing excerpts from a story in the U.K.-based Telegraph.

A dying pensioner wrote a heartbreaking ‘I love you note’ to his daughters while he waited two hours for an ambulance to respond to his call for help following a heart attack. …The retired mechanical fitter… pulled a cord in his flat in Prenton in Birkenhead, Merseyside, to sound an alarm in a 24/7 emergency call centre and could be heard by the call handler shouting: “Help”. …The call handler dialled 999 but Mr Volante’s case was given a low priority by the ambulance service and paramedics took 1hr 40mins to arrive. They found him dead on his living room floor.

ronald-volante-1_3563047bIn a touching but tragic gesture, the deceased spent some of his wait time writing a note to his daughters.

A heartbreaking note was found in Mr Volante’s flat after his death, which read: “I love you Rita, I love you Deb, Dad.” This was a reference to his two daughters, Debbie Moore and Rita Cuthell.

I suppose, to be fair, that we can’t fully blame Mr. Volante’s death on government incompetence. He may have died even if the ambulance arrived in a timely fashion.

But imagine what it would be like to place a very serious call and to be treated like an afterthought.

Though the government at least offered an insincere apology, so I guess that counts for…um, nothing.

…a North West Ambulance Service spokesperson said: “The Trust would like to express its sincere condolences to Mr Volante’s family during this difficult time.

But let’s look at the bright side. If the ambulance had been on time and Mr. Volante had been admitted to the hospital, the government may have starved him to death instead.

I’m guessing a heart attack – even one where it takes you 90 minutes to die – would be preferable.

Particularly since you can’t be sure whether government-run healthcare will kill you accidentally or kill you deliberately.

P.S. Here’s my collection of horror stories about the U.K.’s version of Obamacare: hereherehereherehereherehereherehere, herehereherehereherehere and here. By the way, Paul Krugman tells us that all these stories are false. So who are you going to believe, him or your lying eyes?

P.P.S. To be fair, some screw-ups are inevitable, even in a perfectly designed healthcare system. But I would argue that horror stories are more common when the profit motive is weakened or eliminated. If you’re a Brit and you die or suffer because of crappy government-run healthcare, there’s no feedback mechanism to punish the doctor and/or hospital (or, in the above case, ambulance service). Their budgets already are pre-determined. Likewise, if you’re an American and you die or suffer because of sub-standard Medicare or Medicaid treatment, there’s presumably no effective feedback budgetary mechanism.

Read Full Post »

Even before it was enacted, it was obvious that Obamacare was going to have a negative economic impact.

From a fiscal policy perspective, the law was bad news because all the new spending and higher taxes increased the fiscal burden of government.

From a regulatory intervention perspective, the law was bad news because it exacerbated the third-party payer problem.

Form a jobs perspective, the law was bad news because it increased the attractiveness of government dependency compared to employment.

But those were just the slap-you-in-the-face impossible-to-overlook problems.

As Nancy Pelosi infamously noted, the law needed to pass so we could know what was in it.

And the more we learn about the contents, the more evidence we find that (as shown in this poster) that more government is never the answer.

A new empirical study by scholars at Harvard and Stanford finds that “free” goodies from the government actually have a hefty price tag.

The dependent care mandate…one of the most popular provisions of the 2010 Affordable Care Act…requires that employer-based insurance plans cover health care expenditures for workers with children 26 years old or younger. …there has been little scholarly work measuring the costs and incidence of this mandate and who pays the costs of it. In our empirical work, ….we find that workers at firms with employer-based coverage – whether or not they have dependent children – experience an annual reduction in wages of approximately $1,200. Our results imply that the marginal costs of mandated employer-based coverage expansions are not entirely borne only by the people whose coverage is expanded by the mandate.

Wow, this is worse than I thought. I assumed the pejoratively nicknamed “slacker mandate” wasn’t a big issue because the types of kids getting coverage (ages 19-26) presumably had very low health expenses.

But if average wages at affected firms are $1200 lower than they otherwise would be, that’s a big hit. Maybe Pajama Boys have physical health problems in addition to their mental health problems.

Now let’s look at another higher-than-expected cost, except this time the victims are taxpayers and other health care consumers rather than workers.

Politico has a depressing story of how people have figured out how to game the system

Obamacare customers are gaming the system, buying coverage only after they find out they’re ill and need expensive care… No one knows precisely how many might be manipulating the system, but the plans say they run up much higher medical bills and then jump ship, contributing to double-digit rate increases and financial losses. Health plans also complain some customers are exploiting a three-month “grace period” — when they can keep getting subsidized coverage even if they’ve stopped paying their share of premiums.

In other words, Obamacare is so poorly designed – thanks to subsidies, mandates, and other forms of intervention – that many people can basically wait until they’re sick before signing up.

Then they incur expenses that are covered by taxpayers and/or passed on to other healthcare consumers.

There’s also another group of victims, though I confess that part of me thinks that the insurance companies deserve to suffer since they (like Big Pharma) endorsed Obamacare.

…those trends make the risk pools skew toward sicker, costlier customers — and under Obamacare, plans can no longer deny coverage to those with expensive medical conditions. That problem has been exacerbated by the large numbers of healthier people who are choosing to stay uninsured rather than shell out money for coverage.

Yup, I experience a warm glow of schadenfreude after reading that passage. But I also know that it won’t be good for the American economy and the American people if the market for private health insurance entered an Obamacare-driven death spiral.

That being said, I also don’t want them to get any bailout cash.

In any event, if the health insurance companies have a meltdown, you could bet your last dollar that the crowd in Washington somehow will blame capitalism and say that the solution is single-payer health care (even though that system is so dysfunctional it was repealed by Bernie Sanders’ Vermont and even though that system leads to endless horrors in the United Kingdom).

P.S. In the interest of fairness, I will admit that there is a group that has benefited from Obamacare.

P.P.S. Actually, there’s another group, so we can say there are two winners from government-run healthcare.

Read Full Post »

In 2009, Paul Krugman assured his readers that government-run healthcare was a good idea, writing that “In Britain, the government itself runs the hospitals and employs the doctors. We’ve all heard scare stories about how that works in practice; these stories are false.”

I guess one could argue that the determination of “scare stories,” like beauty, is in the eye of the beholder.

But if I was writhing in agony on a street because of a broken leg, I wouldn’t be happy with a healthcare system that told me I didn’t need an ambulance.

And if I was part of a system that rewarded hospitals for letting old people die, I might be tempted to say that was a scary system.

Moreover, I would be understandably irked if my I was stuck with a system for healthcare that treated patients with callous disregard.

But if you’re wealthy and well-connected, then perhaps you don’t think these results are scary because you know you’ll always be able to jump the queue in a government-run system and get good treatment for yourself.

In any event, it’s not just the healthcare system that’s scary on the other side of the Atlantic.

A report in the Telegraph paints a grim picture of dental care in the United Kingdom

Dental health standards are falling to “Third World” levels in parts of England because of a crisis of access to NHS treatment, more than 400 dentists claim today.In a letter to The Telegraph, a coalition of professionals from across the country argues that the system is “unfit for purpose” with millions of people seemingly going for long periods without even seeing a dentist, or ignorant of basic dental hygiene.The signatories accuse successive governments of hiding the problem behind a veil of spin and denial. They point to official figures showing large numbers of primary school children having to be admitted to hospital to be treated for serious tooth decay and other dental problems, many of which, they say, could be easily prevented.

As you might expect, the bureaucracy claims everything is just fine.

NHS England denied that there is a crisis…a spokeswoman for NHS England insisted: “These claims are wrong – more patients are getting the dental care they need, and 93 per cent of people got an NHS dental appointment when they wanted one in the last 24 months.”

But the numbers tell a different story.

NHS figures show that almost half the adult population of England (48 per cent) and a third (31 per cent) of children have not seen a dentist within two years. Crucially almost 62,500 people are admitted to hospital in England per year because of tooth decay – three quarters of them, or 46,400, children. …“The NHS dental system in England is unfit for purpose,” the dentists wrote. “Far from improving, the situation has worsened to such an extent that charity groups normally associated with providing dental care in Third World arenas now have to do so in England.

None of this sounds very good, though let’s acknowledge that the dentists in the U.K. are an interest group that presumably wants to get a bigger slice of government money.

So they presumably would have an incentive to exaggerate the downside of British dental care.

But this underscores the problem with government takeover of a sector. Instead of a system of voluntary and beneficial exchange, you suddenly have a zero-sum, third-party-payer-driven system where consumers, providers, and taxpayers suddenly have an incentive to squabble.

P.S. For other U.K. “scare stories,” see herehereherehereherehere, here,hereherehere, here, hereherehere, herehere, here and here.

Read Full Post »

I feel compelled to comment on the Supreme Court’s latest Obamacare decision, though I could sum up my reaction with one word: disgust.

  • I’m disgusted that we had politicians who decided in 2009 and 2010 to further screw up the healthcare system with Obamacare.
  • I’m disgusted the IRS then decided to arbitrarily change the law in order to provide subsidies to people getting insurance through the federal exchange, even though the law explicitly says those handouts were only supposed to go to those getting policies through state exchanges (as the oily Jonathan Gruber openly admitted).
  • I’m disgusted that the lawyers at the Justice Department and the Office of White House Counsel didn’t have the integrity to say that handouts could only be given to people using state exchanges.
  • But most of all, I’m disgusted that the Supreme Court once again has decided to put politics above the Constitution.

In theory, the courts play a valuable role in America’s separation-of-powers system. They supposedly protect our freedoms from majoritarianism. And they ostensibly preserve our system of checks and balances by preventing other branches of the federal government from exceeding their powers.

To be sure, the courts – including and especially the Supreme Court – have not done a good job in some areas. Ever since the 1930s, for instance, they’ve completely failed to limit the federal government to the enumerated powers in Article 1, Section 8, of the Constitution.

The Supreme Court’s first Obamacare decision back in 2012 then took that negligence to a higher level.

Now we have a second Obamacare decision. And this one may be even more outrageous because the Supreme Court decided to act as a pseudo-legislature by arbitrarily re-writing Obamacare.

Here’s what George Will wrote about the decision.

The most durable damage from Thursday’s decision is not the perpetuation of the ACA, which can be undone by what created it — legislative action. The paramount injury is the court’s embrace of a duty to ratify and even facilitate lawless discretion exercised by administrative agencies and the executive branch generally. …The decision also resulted from Chief Justice John G. Roberts Jr.’s embrace of the doctrine that courts, owing vast deference to the purposes of the political branches, are obligated to do whatever is required to make a law efficient, regardless of how the law is written. What Roberts does by way of, to be polite, creative construing (Justice Antonin Scalia, dissenting, calls it “somersaults of statutory interpretation”) is legislating, not judging. …Thursday’s decision demonstrates how easily, indeed inevitably, judicial deference becomes judicial dereliction, with anticonstitutional consequences. We are, says William R. Maurer of the Institute for Justice, becoming “a country in which all the branches of government work in tandem to achieve policy outcomes, instead of checking one another to protect individual rights.

Here’s the bottom line, from Will’s perspective.

The Roberts Doctrine facilitates what has been for a century progressivism’s central objective, the overthrow of the Constitution’s architecture. The separation of powers impedes progressivism by preventing government from wielding uninhibited power.

Here’s how my Cato colleagues reacted, starting with Michael Cannon, our healthcare expert whose heroic efforts at least got the case to the Supreme Court.

…the Supreme Court allowed itself to be intimidated. …the Court rewrote ObamaCare to save it—again. In doing so, the Court has sent a dangerous message to future administrations… The Court today validated President Obama’s massive power grab, allowing him to tax, borrow, and spend $700 billion that no Congress ever authorized. This establishes a precedent that could let any president modify, amend, or suspend any enacted law at his or her whim.

Now let’s look at the responses of two of Cato’s constitutional scholars. Roger Pilon is less than impressed, explaining that the Roberts’ decision is a bizarre combination of improper deference and imprudent activism.

With Chief Justice Roberts’s opinion for the Court, therefore, we have a perverse blend of the opposing positions of the judicial restraint and activist schools that reigned a few decades ago. To a fault, the Court today is deferential to the political branches, much as conservatives in the mold of Alexander Bickel and Robert Bork urged, against the activism of the Warren and Burger Courts. But its deference manifests itself in the liberal activism of a Justice Brennan, rewriting the law to save Congress from itself. As Scalia writes, “the Court forgets that ours is a government of laws and not of men.”

And Ilya Shapiro also unloads on this horrible decision.

Chief Justice Roberts…admits, as he did three years ago in the individual-mandate case, that those challenging the administration are correct on the law. Nevertheless, again as he did before, Roberts contorts himself to eviscerate that “natural meaning” and rewrite Congress’s inartfully concocted scheme, this time such that “exchange established by the state” means “any old exchange.” Scalia rightly calls this novel interpretation “absurd.” …as Justice Scalia put it, “normal rules of interpretation seem always to yield to the overriding principle of the present Court: The Affordable Care Act must be saved.” …like three years ago, we have a horrendous bit of word play that violates all applicable canons of statutory interpretation to preserve the operation of a unpopular program that has done untold damage to the economy and health care system.

Now I’ll add my two cents, at least above and beyond expressing disgust. But I won’t comment on the legal issues since that’s not my area of expertise.

Instead I’ll have a semi-optimistic spin. I wrote in 2013 that we should be optimistic about repealing Obamacare and fixing the government-caused dysfunctionalism (I don’t think that’s a word, but it nonetheless seems appropriate) of our healthcare system.

This latest decision from the Supreme Court, while disappointing, doesn’t change a single word of what I wrote two years ago.

P.S. Since today’s topic (other than my conclusion) was very depressing, let’s close by looking at something cheerful.

I’ve commented before that America has a big advantage over Europe because of a greater belief in self-reliance and a greater suspicion of big government.

Well, now we have further evidence. Here’s some polling data from AEI’s most recent Political Report. As you can see, there’s a much stronger belief in self-sufficiency in the United States than there is in either Germany or Italy.

Polling data like this is yet another sign of America’s superior social capital.

And so long as Americans continue to value freedom over dependency, then there’s a chance of fixing the mess in Washington. Not just Obamacare, but the entire decrepit welfare state.

Read Full Post »

When I criticize government-run healthcare, I normally focus on programs and interventions that distort and damage the American health sector.

So I’ve written a lot on the failures of Medicaid, Medicare, and Obamacare, as well as the counterproductive effects of the tax code’s healthcare exclusion.

But if some government is bad for the health sector, then lots of government must be even worse.

And that’s exactly what we find when we peruse stories about the British National Health Service.

Here are some excerpts from a remarkable story in the U.K.-based Independent.

A London man whose leg was broken after thieves stole his bike was forced to take an Uber taxi to the hospital after he was told that his injury “wasn’t serious enough” to warrant an ambulance. …Suffering from a broken leg and lying on the ground in agony, he called 999, only for the person on the other end to tell him to call the 111 non-emergency number as his injury wasn’t sufficiently serious for an ambulance. Eventually, three police officers picked him up and drove him home. He then had to book an Uber taxi to take him to the hospital.

Though maybe this is an example of karma.

“That is the most disappointing thing. At the time I was incredulous. I’m always a defender of the NHS but I want to know why they didn’t listen to my call properly.”

Sort of like when a defender of the IRS experiences an audit.

So how does the government defend the fact that it ignored a man with a broken leg?

In a statement to the Standard, the LAS said: “From the information given us, the patient was concious and alert and had no immediately life-threatening injuries…”

Gee, how comforting. If you’re about to die, they’ll send an ambulance. But not for anything less than that.

I guess the National Health Service sets policy based on scenes from Monty Python movies. If you just have a “flesh wound,” you’re out of luck.

Some readers may be wondering if this is an isolated example of incompetence that shouldn’t be used to indict the British system.

That’s a fair point. Indeed, there are doubtlessly similar example of malpractice in the United States (particularly with Medicare and Medicaid) and other jurisdictions where government doesn’t run the entire healthcare system.

So let’s shift to a story in the U.K.-based Telegraph that is a searing critique of the overall track record of nationalized health care.

NHS delays diagnosing and treating cancer are costing up to 10,000 lives a year, experts have warned. …Britain has one of the lowest cancer survival rates in Western Europe.  Nice said too many GPs are “guessing” whether symptoms could mean cancer, with late diagnosis responsible for thousands of deaths. … Britain is eighth from bottom in league tables comparing cancer survival in 35 Western nations, latest research shows, on a par with Poland and Estonia. …Each year, the UK has around 10,000 more cancer deaths which could have been prevented, compared with similar countries in Europe.

Hmmm…, I guess I was right in my spat with a British television host.

The (potentially) good news is that there is an effort to address this terrible track record.

For the first time, GPs will be issued with checklists of symptoms to help them spot the disease, in a bid to prevent at least half of the needless deaths. …Roger Goss, from Patient Concern, said he was surprised that doctors needed to be given such advice.  “I would be quite worried if GPs don’t know the basics of common cancers and what to look out for,” he said.  He also said that in too many areas, family doctors were under pressure to reduce the number of patients referred for tests, in order to save money.

The last sentence in the excerpt is worrisome. One of the big problems with government-run healthcare is that everybody is playing with other people’s money, and healthcare providers don’t have much incentive to be efficient or to cater to the needs of patients.

Which is, unfortunately, quite similar to the problems we have in the United States thanks to pervasive government intervention, which has caused a huge third-party-payer problem.

So I’m not overly optimistic that a new set of guidelines is going to have much effect on the quality of care on the other side of the Atlantic.

Oh, I almost forgot. Why does the title of this column include the parenthetical statement about not telling Paul Krugman about these examples of horrible results in the U.K.’s government-run healthcare system?

For the simple reason that we don’t want to burst his bubble. Krugman assured us back in 2009 that government-run healthcare was a good idea, writing that “In Britain, the government itself runs the hospitals and employs the doctors. We’ve all heard scare stories about how that works in practice; these stories are false.”

So I guess these horror stories we just reviewed are just a figment of someone’s imagination.

And I guess we have to also conclude that all the other horror stories we’ve previously shared (see here, here, herehere, herehere, here, hereherehere, here, hereherehere, herehere, here and here) also must be false.

P.S. We also have some horror stories about government-run healthcare in Sweden.

P.P.S. Though I should point out that there are good things about Sweden.

Heck, there are also good things to say about the United Kingdom.

Read Full Post »

In the grand scheme of things, the most important development in health policy is the pending Supreme Court case revolving around whether subsidies can be provided to people obtaining health insurance from the federal exchange, even though the law explicitly says handouts are only available to people getting policies via state exchanges.

If the Court rules correctly (unlike, ahem, the last time the Justices dealt with Obamacare), it will then be very important that congressional reformers use the resulting mess to unwind as much of the law as possible.

That will be a challenge because statists already are arguing that the “only” solution is to re-write the law so that subsidies are also available via the federal government. For what it’s worth, my colleague Michael Cannon outlines the right strategy in Cato’s newly released Policy Priorities for the 114th Congress.

But let’s set aside that issue because we have a great opportunity to review another example of how government-run healthcare is a miserable failure.

Our topic for today is government-dictated electronic health records (EHRs). Dr. Jeffrey Singer is on the front lines of this issue. As a physician in Arizona, he deals with the real-world impact of this particular mandate.

And he’s so unhappy that he wrote a column on the topic for the Wall Street Journal.

Starting this year, physicians like myself who treat Medicare patients must adopt electronic health records, known as EHRs, which are digital versions of a patient’s paper charts. …I am an unwilling participant in this program. In my experience, EHRs harm patients more than they help.

By way of background, he explains that EHRs were part of Obama’s failed “stimulus” legislation and they were imposed on the theory that supposed experts could then use the resulting data to make the system more efficient and effective.

The federal government mandated in the 2009 stimulus bill that all medical providers that accept Medicare adopt the records by 2015. Bureaucrats and politicians argued that EHRs would facilitate “evidence-based medicine,” thereby improving the quality of care for patients.

But Dr. Singer says the real-world impact is to make medical care less effective and more expensive.

Electronic health records are contributing to two major problems: lower quality of care and higher costs. The former is evident in the attention-dividing nature of electronic health records. They force me to physically turn my attention away from patients and toward a computer screen—a shift from individual care to IT compliance.The problem is so widespread that the American Medical Association—a prominent supporter of the electronic-health-record program—felt compelled to defend EHRs in a 2013 report, implying that any negative experiences were the fault of bedside manner rather than the program. Apparently our poor bedside manner is a national crisis, judging by how my fellow physicians feel about the EHR program. A 2014 survey by the industry group Medical Economics discovered that 67% of doctors are “dissatisfied with [EHR] functionality.” Three of four physicians said electronic health records “do not save them time,” according to Deloitte. Doctors reported spending—or more accurately, wasting—an average of 48 minutes each day dealing with this system.

Here’s what he wrote about costs.

The Deloitte survey also found that three of four physicians think electronic health records “increase costs.” There are three reasons. First, physicians can no longer see as many patients as they once did. Doctors must then charge higher prices for the fewer patients they see. This is also true for EHRs’ high implementation costs—the second culprit. A November report from the Agency for Healthcare Research and Quality found that the average five-physician primary-care practice would spend $162,000 to implement the system, followed by $85,000 in first-year maintenance costs. Like any business, physicians pass these costs along to their customers—patients. Then there’s the third cause: Small private practices often find it difficult to pay such sums, so they increasingly turn to hospitals for relief. In recent years, hospitals have purchased swaths of independent and physician-owned practices, which accounted for two-thirds of medical practices a decade ago but only half today. Two studies in the Journal of the American Medical Association and one in Health Affairs published in 2014 found that, in the words of the latter, this “vertical integration” leads to “higher hospital prices and spending.”

Last but not least, Dr. Singer explains that electronic health records don’t reduce errors or increase efficiency, notwithstanding the claims of advocates.

The EHR system assumes that the patient in front of me is the “average patient.” When I’m in the treatment room, I must fill out a template to demonstrate to the federal government that I made “meaningful use” of the system. This rigidity inhibits my ability to tailor my questions and treatment to my patient’s actual medical needs. It promotes tunnel vision in which physicians become so focused on complying with the EHR work sheet that they surrender a degree of critical thinking and medical investigation. Not surprisingly, a recent study in Perspectives in Health Information Management found that electronic health records encourage errors that can “endanger patient safety or decrease the quality of care.” America saw a real-life example during the recent Ebola crisis, when “patient zero” in Dallas, Thomas Eric Duncan, received a delayed diagnosis due in part to problems with EHRs.

Wow, not exactly an uplifting read.

Indeed, Dr. Singer’s perspective is so depressing that I hope he’s at least partially wrong. Maybe after a couple of years, and with a bit of luck, doctors will adapt and we’ll get some benefits in exchange for the $20 billion-plus of taxpayer money that has been plowed into this project (not to mention all the time and expense imposed on the medical profession).

But the big-picture lesson to be learned is that planners, politicians, and bureaucrats in Washington should not be in charge of the healthcare system.

Which brings us to the real challenge of how to put the toothpaste back in the tube.

Government intervention is so pervasive in the healthcare sector that – with a few rare exceptions – normal market forces have been crippled.

As such, we have a system that produces higher and higher costs accompanied by ever-rising levels of inefficiency.

Amazingly, the statists then argue that more government is the only solution to this government-caused mess. Sort of Mitchell’s Law on steroids.

But that path leads to single-payer healthcare, and the horror stories from the U.K. should be enough to show any sensible person that’s a bad outcome.

The only real solution is to restore a free market. That means not only repealing Obamacare, but also addressing all the other programs and policies which have caused the third-party payer crisis.

P.S. Just like yesterday, I want to finish a grim column with something uplifting.

Here’s a sign that will irk statists driving through one part of Pennsylvania.

Now take the IQ test for criminals and liberals and decide whether this means more crime or less crime.

If you’re having trouble with the answer, here’s a hint from Chuck Asay.

Read Full Post »

One of the good things about working at the Cato Institute is that there’s never any pressure to put your thumb on the scale to help any political party.

Our loyalties are to libertarian principles, many of which are reflected in the Constitution, so we’re free to criticize or praise politicians based on their ideas rather than their partisan affiliation.

That’s why we criticized President Bush’s pro-centralization No Child Left Behind education scheme just as much as President Obama’s pro-centralization Common Core education scheme.

It’s also why I criticized Bush for being a big spender like Obama (indeed, Bush was a bigger spender, even for domestic programs!).

I’m giving this background because today I’m going to say something nice about Obamacare.

Not because I like the overall law, but because honesty is the best policy.

Regular readers know that our healthcare system is screwed up by bad government policy. More specifically, spending programs such as Medicare and Medicaid, combined with tax preferences and regulations that encourage over-insurance, have created a giant third-party payer problem.

Only 11 percent of health care spending in America is directly financed by consumers. The rest is paid for by taxpayers, insurance companies, and other third parties.

This has eviscerated the normal working of a competitive market. When people are spending their own money, they are careful and prudent. When they spend other people’s money, however, they are not overly concerned about cost.

As a result, we have a needlessly expensive system. And because third-party payer requires lots of administration and paper work, bad government policies also have caused absurd levels of inefficiency.

Well, there’s one small piece of Obamacare that actually is helping to mitigate this problem. The law includes a so-called Cadillac tax that caps the special tax preference for fringe benefits (if your employer provides you a health insurance policy as part of your compensation, that type of income isn’t taxed, unlike your cash wages).

And that reform is having a positive impact. Here are some passages from a Bloomberg story.

Large employers are increasingly putting an end to their most generous health-care coverage as a tax on “Cadillac” insurance plans looms closer under Obamacare. Employees including bankers at JPMorgan Chase & Co. (JPM) and college professors at Harvard University are seeing a range of moves to shift more costs to workers. …The tax takes effect in 2018, and employers are already laying the groundwork to make sure they don’t have to pay the 40 percent surcharge on health-insurance spending that exceeds $27,500 for a family or $10,200 for an individual. Once envisioned as a tool to slow the nation’s growing health-care tab, the tax has in practice meant higher out-of-pocket health-care costs for workers.

The last sentence in the excerpt, by the way, is economically illiterate.

The Cadillac tax will restrain health spending because it means higher out-of-pocket costs for consumers. They are going to have more authority and responsibility of how to spend their own money.

Think of this analogy. Will you eat more if I give you $25 to buy a meal or if I give you a pre-paid voucher for a $25 all-you-can-eat buffet?

If you’re a normal person, you’ll take the $25 cash, buy a meal for less than that amount, and save the extra money for something else.

But if you’re given a pre-paid voucher for the buffet, you’ll pig out because there’s no additional cost for consuming more items.

And the Bloomberg story includes evidence that giving consumers more control over their income is having the predicted positive effect.

The tax on Cadillac plans — named after the luxury vehicle to denote their lavishness — is one reason the growth in health-care premiums has slowed since the Patient Protection and Affordable Care Act took effect in 2010. …The tax “is having the effect that was intended, which is the cost of these plans are being reduced,” Christopher Condeluci, a former Senate Republican aide who helped design it, said in a phone interview. …Premium increases for employer-provided health insurance, which covers about 48 percent of Americans, “slowed markedly” in 31 states since 2010, the year the Affordable Care Act became law, the New York-based Commonwealth Fund reported today. Nationally, premium growth fell by about a percentage point after the law, to 4.1 percent a year on average, the report said.

By the way, I should hasten to add that I’m not happy about the way the Cadillac tax was adopted, for a major reason and a minor reason.

The major reason is that it was part of a law that is otherwise a very expensive disaster.

The minor reason is that, for reasons of both good tax policy and good health policy, I want to eliminate loopholes and tax preferences only if we can use every penny of revenue to finance lower tax rates.

And that’s exactly what you get with a flat tax, which is a system where you don’t even need a Cadillac tax because there’s no healthcare exclusion.

Under Obamacare, by contrast, the Cadillac tax limits the healthcare exclusion, but politicians used the money to finance bigger government.

Now let’s say something bad about Obamacare.

John Goodman of the Independent Institute has a column in today’s Wall Street Journal. He points out that the law is hurting many of the people it was supposed to help.

…the law is already hurting some of the people it was intended to help. By this time next year, we may find that many workers who earn within a few dollars of the minimum wage have less income and less insurance coverage (as a group) than they did before the mandate began to take effect.

How does John justify these assertions?

Because he did some real-world research, surveying 136 fast-food restaurants with 3,500 employees.

The results are not encouraging, at least for the workers.

Before 2014 about half the employees were “full time” as defined by ObamaCare; that is, they worked 30 hours or more a week. The potential cost to the employers of providing mandated health insurance to their full-time staff would have been about $7 million a year. But by the time the employers took advantage of all their legal options they were able to reduce their cost to less than 1% of that amount. The first step was to make all hourly workers part time. …workers in the survey whose hours were reduced to part time…can get subsidized insurance through an exchange, but they will be asked to pay up to 9.5% of their income for what is unattractive coverage. Some of them previously had mini-med plans, but this kind of insurance is no longer available to them. …Those few remaining full-time employees will get mini-med insurance for themselves, but they are unlikely to be able to afford coverage for any dependents they have. They will not get an ObamaCare bronze plan unless they fork over about one-tenth of their take-home pay, and they won’t be able to get bronze coverage for other family members unless they forfeit more than half their income. Out of 3,500 employees, only one that we know of got the kind of insurance that the architects of the Affordable Care Act wanted everyone to have.

One out of 3,500? Sounds like the typical success rate for a government program.

But we shouldn’t joke. It’s not funny that low-income workers are being hurt. Just like it’s not funny that young adults, retirees, and kids are being disadvantaged by Obamacare as well (on the other hand, it is somewhat amusing that politicians, IRS agents, and Harvard professors are upset about the law).

The bottom line is that an overwhelming percentage of Obamacare provisions make the healthcare system more expensive and less effective.

Yes, there are some positive effects of the Cadillac tax, but those are easily offset by all the features of the law that increase the size and scope of government.

P.S. Since I mentioned that third-party payer has messed up our healthcare system and caused prices to rise, I should point out that there are a few sectors where consumers are still in charge. And in those areas, such as cosmetic surgery and abortion, prices are falling in relative terms.

P.P.S. The folks at Reason TV put together a must-watch video on how a hospital can be more efficient and affordable in the absence of third-party payer.

Read Full Post »

Older Posts »

Follow

Get every new post delivered to your Inbox.

Join 3,132 other followers

%d bloggers like this: