This sentence pretty much says it all.
2/18/2008
From the Catoosa County News comes this very apt description of the difference between the two sides of the political aisle on health care reform (and on problem-solving as a whole):
Among the major proposals in front of lawmakers right now [to reform Georgia's health care system and help those in need of coverage to be better able to attain it] is a move by Gov. Sonny Perdue to embrace high-deductible health care plans and accompanying health savings accounts. Also getting attention is a pair of proposals from Lt. Gov. Casey Cagle, one that would give a financial boost to free clinics and another that would provide more information to health-care consumers. Rounding out the bunch is a proposal by Insurance Commissioner John Oxendine to force health insurance companies to get his approval before they can raise premiums.
Critics, though, question how valuable some of those free-market ideas might be and tend to focus on efforts to expand what they see as tried-and-true government programs, like the joint state-federal Medicaid health insurance plan for lower-income Georgians.
These "tried-and-true government programs" will not, in reality, seriously alleviate the plight of the uninsured. Amping up taxpayer-funded "solutions" or attempting to make insurance affordable and available by implementing a form of "managed competition," especially if these programs are funded -- like those proposed or implemented in Washington, Wisconsin, San Francisco, Massachusetts, and elsewhere -- by new payroll taxes, will exacerbate the problem, skew the health care market, and create new problems by imposing artificial ceilings and floors on coverages and practicioners' wages, by making the demand for coverage less elastic, and by taking more money from employers that was being used to pay employees, thereby lowering wages for ordinary workers and possibly resulting in the elimination of jobs.
The health care system as a whole needs help -- but it doesn't need more "tried-and-true government programs."
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Democrat Reps. Shays, Langevin come up with a *brand new* idea -- and it's as brilliant as it ever was!
2/18/2008
Reps. Chris "Has Rafael Palmieri gotten his 300th hit yet?" Shays (Rumored to be "R"-CT) and Jim "I'm such a nobody that not even I've heard of me before" Langevin (D-RI) announced their new plan to solve America's health care problems last week. They're billing their new legislation, called the "American Health Benefits Program," as "the first bipartisan universal health care plan to originate in the U.S. House of Representatives."
Claiming that their plan (which won't be available to the public until later today or tomorrow at earliest) will "cure the health care system," Shays and Langevin want to play up "managed competition" and "shared responsibility" -- awesome, brand new ideas that mean "government control of the market" and "doctors need to take less and do more while taxpayers pay more for their countrymen's health care" -- to make health care "efficient and affordable."
Oh, and they would create yet another government bureaucracy, the Health Benefits Administration, to oversee this program, and to implement and enforce provider rate controls. But hey, don't let a couple simple little things like those turn you off; there's so much more to love about this plan!
For example, under this program, individuals who did not sign up for a plan would be automatically enrolled in one in their region. Further, its estimated $540 billion price tag (a low estimate, as *all* health care program estimates are) would be funded by "employer contributions" -- i.e., as always, a new payroll tax. Hit those nasty corporations where it hurts, and get health care for the people! Yeah!
Only it doesn't work that way, as anybody with the most basic concept of economics can tell you. Just because the federal (or state, or local) government snaps its fingers and implements a new tax on employers doesn't mean that that employer miraculously has more *money* with which to pay that tax. When it comes to payroll tax increases, workers' salaries don't rise in response to the levy, allowing employees to take home the same amount while the business they work for takes a larger financial hit from the new tax. Instead, that money comes straight out of the funds used to pay workers, causing one of two things to happen: (a) wages are cut to make up for the money lost to the new tax, or (b) jobs are cut to make up for the money lost to the new tax.
Capital is a finite resource in business, and countless tax increases eat into that finite total. This is something which those in government -- the one organization which, due to its power to legally take resources at the point of a gun, has the least finite resources of all -- seem chronically unable to understand. When more money has to be given to the government, that money is taken from a different area of a business's operation. In the case of an increased payroll tax, that money can only come directly from the cash set aside to pay workers' wages.
But this is madness! says Langevin, who uses as his rationale for cosponsoring this plan his belief that "We're the only industrialized country [in the world] that doesn't have a universal plan." Very astute, Mr. Congressman. We're also the most advanced, the most successful, with the best health care system, and a great deal of that comes from the fact that we have been blessed with the wisdom to avoid being just like the rest of the world on so many issues, including government-run health care.
In the end, I believe, this entire argument will be moot anyway. Nobody really cares about what two no-names like Shays and Langevin have to say about this issue. Further, this bill will never be subject to a floor vote, because there are myriad Reps with a lot more respect, pull, and seniority than these two who are already queued up to have their versions of socialized medicine heard and voted on.
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Hillary Clinton favors employing wage theft to enforce "universal, voluntary" health care program
February 15, 2008
Update: The plot thickens, as the indispensible Grace-Marie Turner reminds us:
Hillary Clinton criticized an individual mandate in 1994, saying, "The individual mandate...makes it very difficult to determine and monitor who is in the system and who is out. It would require tracking individuals as they move in and out of jobs, as they move in and out of the insurance market. It would require, in our view, the IRS to engage in an enormous administrative oversight of our health care system."***
Senator and presidential candidate Hillary Clinton (D-NY) has made “health care for all Americans” a major plank in her policy platform since the beginning of her run for President last year – though, as those who are familiar with the junior Senator from New York and former First Lady’s history will recall, radical changes to America’s health care system have been a cause dear to Mrs. Clinton’s heart for the better part of the last two decades at least.
The program Mrs. Clinton is currently touting as her solution to the problems in America’s health care system – particularly its high number of uninsured citizens – is officially called the “American Health Choices Plan,” though it is less-than-affectionately referred to by some as “HillaryCare II” in reference to her failed attempt to push a government health care system on the nation during the first years of her husband’s presidency. Under this program, the government alone, with no input from the free market, responsible for the regulation and management of health care. Oxymoronically, the plan whose formal title includes the term “choice” is built around what is known as an “individual mandate” – a government requirement that all Americans, regardless of income or choice, possess at least a (government-established) minimal level of health insurance.
The inclusion of this individual mandate means, of course, that should this plan go into effect, choice at its most basic level – the choice whether or not to have a certain level of coverage (or to have coverage at all) – would be eradicated.
Further, though there would still be Americans who cannot afford health coverage, the mandate would apply to them as well, causing them to be in violation of federal law simply because they cannot afford to comply.
This situation would be exacerbated by the fact that, with every single individual in our nation of the 300 million being required to purchase coverage, demand will become an inelastic element in the economic equation that determines the pricing of health insurance. In other words, prices would continue to rise in response to a new law requiring every person in the nation to purchase insurance regardless of that service’s price.
Mrs. Clinton’s opponent in the Democratic presidential primary asked about this at a debate, saying, “You can mandate [that every American must have health insurance] but there will still be people who can’t afford it. And if they can't afford it, what are you going to fine them? Are you going to garnish their wages?”
The question was answered soon after, as Mrs. Clinton told George Stephanopoulos on ABC’s Sunday morning show that her “enforcement mechanism” could indeed include “going after people’s wages.”
Mrs. Clinton’s admission that she does indeed intend to force every American to have a government-decreed minimum level of health coverage – and that she intends to enforce this by using the power of government to go after working Americans’ income – belies the “choice”-based title of her proposed program. If government mandates that every American purchase something, and uses its power of taxation and wage garnishment to enforce this, then the resulting system may well be closer to being “universal” than any past program, but any semblance of that program’s having a voluntary nature or allowing “choice” has gone right out the window.
This inability to reconcile the opposing natures of universality and choice (or voluntary participation) is, unfortunately, not a new problem for Mrs. Clinton. In 2005, she gave a speech (which was later reprinted as an op-ed in several newspapers) based on Martin Luther King’s famous “I have a dream” oration. In this speech, she envisioned America’s future after her fictional presidency. Among other musings, Mrs. Clinton said that a look at our country after her terms would show that “our universal, voluntary national-service program includes civil-defense workers who supplement our brave first-responders and share the burden of vigilance at home.”
At the time, she shed no light on just how she planned to accomplish the feat of making her national-service program both universal and voluntary. This would, of course, be quite an accomplishment, as obviously a universal program includes all and is thus not voluntary, and a voluntary program will always be far short of universal.
Likewise with her “universal” health care “choice” plan. The fact that Mrs. Clinton currently intends to build her health care plan through forced enrollment – to the point of forcibly taking earned income from American workers to pay for it – while still invoking the theme of consumer “choice” shows that she has still not learned that “universal” and “voluntary” are mutually exclusive attributes.
In reality, Mrs. Clinton’s individual mandate is a call for government to use its power to force people to accept and enroll in a program they may not want or be able to afford. When the fact that the ranks of our uninsured are filled primarily with people who lack health coverage for precisely one of these two reasons is taken into account, this proposal is shown for the undesirable overreach of government responsibility that it is.
Rather than continuing down this path of bigger and more intrusive government that regulates and interferes in people’s lives and wallets, Mrs. Clinton should spend a few minutes studying the free market and learning how things like choice and volunteerism really work. If she is interested, we can point her in the right direction to get started.
Jeff Emanuel is a fellow with The Heartland Institute and managing editor of Health Care News.
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San Francisco health care tax appealed to Supreme Court
February 15, 2008
An association of restaurant operators in San Francisco has asked the U.S. Supreme Court to overrule a decision by the Ninth U.S. Circuit Court of Appeals allowing the city’s health insurance employer mandate law to go into effect. It will be best for all of San Francisco if the Court sides with the association on this one.
The association is seeking reinstatement of a federal judge’s ruling that the city’s Health Care Security Ordinance conflicts with the Employee Retirement Income Security Act (ERISA), a longstanding federal law addressing government regulation of employee benefits.
On December 26, U.S. District Judge Jeffrey White ruled the ordinance violates ERISA. White’s ruling temporarily halted implementation of a mandate, scheduled to go into effect on New Year’s Day, that would have required employers to offer their employees health coverage or pay to support “Healthy San Francisco,” the city’s health care program.
On January 9, a three-judge panel from the Ninth Circuit stayed White’s ruling, pending a full review of the case, and San Francisco’s “pay-or-play” mandate was allowed to go into effect.
Healthy San Francisco requires every business in the city with between 20 and 99 workers to spend $1.17 per employee per hour for health care benefits, and those with more than 100 employees to spend $1.76 per hour, either on their own plan or in payments to the city.
Until the end of 2007, the program catered exclusively to individuals whose income was at or below the poverty line. In his quest to make San Franciscans’ health care solely the purview of the government, Mayor Gavin Newsom is seeking to use the revenue generated by the mandate to expand Healthy San Francisco incrementally until it includes all of the city’s 82,000 uninsured residents. The program is designed to make switching from private insurance to taxpayer-funded health care a viable option for those who already have coverage.
While ensuring affordable health care for all San Franciscans is a laudable goal, expanding government control and forcibly taking money from businesses to fund a one-size-fits-all government program is the wrong way to go about it. Newsom’s Healthy San Francisco expansion will harm both individual San Franciscans’ health care and the city’s economy.
Businesses would have to recoup the money they were forced to spend on health insurance as a result of this mandate by cutting wages, laying off employees, raising prices on goods and services, or forestalling needed investments and dividend payouts.
Businesses do not have endless supplies of capital, after all, so they have to compensate for money lost in any one area by making (or saving) money in another. Preferring to avoid the hardships associated with increased payroll and tax costs, many businesses based in the city may simply decide “enough is enough” and relocate to places that don’t subject them to laws regulating their employees’ benefits and forcibly take resources from them if they do not comply.
Another problem with the program is that other players in the health insurance market will be pushed out by the government-run alternative, the one program backed by a guaranteed funding source, since government is the only organization that can legally force others to contribute. This will stifle innovation and quality in health coverage because with no serious competitors in the marketplace and a legally guaranteed source of funding, the government monopoly will have no reason to innovate or improve—it can’t lose customers unless they take the big step of leaving the city.
This situation is being watched closely by city and state governments across the nation. If the Supreme Court refuses to take up the case or decides San Francisco can indeed require employers to offer health benefits or be forced to pay stiff penalties, copycat programs could sweep across the nation in a very short period of time, destroying health care markets everywhere.
This would be catastrophic for state and local economies and would cause even more problems for America’s health care system by replacing what’s left of the market system with a patchwork of government-regulated and -controlled programs that stifle innovation and reduce the quality of care. A win for Healthy San Francisco could lead to a very unhealthy nation.
Jeff Emanuel is a fellow with The Heartland Institute and managing editor of Health Care News.
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Health Care and the FY2009 Bush Budget: Steps in the Right Direction, but an Olive Branch in the Wrong One
February 11, 2008
In his budget for Fiscal Year 2009, though at $3.1 trillion still far too large, President Bush made several steps in the right (government-limiting) direction. Overall, is this effort “too little, too late” for the nearly-lame-duck President?
Perhaps. There is still reason to be encouraged, though.
Of particular significance in the health care field was his recommendation that runaway spending on entitlement programs such as Medicare and Medicaid be checked, and their rate of growth slowed from 7.5% to 5% -- something that caused Rep. Pete Stark (D-CA) to preemptively declare the Bush budget "dead on arrival" in the House.
Regardless of the expected resistance to this "cut" from the Left side of the aisle, the move is a sound one. While the 7.5% to 5% reduction in growth still represents an increase in the overall size of these programs – despite the claims of alarmist commentators that the programs are being "slashed" – the move represents a welcome downturn in the inflated growth of these programs, and should be applauded by all who prefer government and its relationship to health care as it should be: limited in both size and scope.
More troublingly included in this budget, though, was an attempt to meet the Democrat Congressional leadership in the middle on the subject of expanding the State Children’s Health Insurance Program (SCHIP), a topic that had been a hot-button issue last year before the majority's epic cave-in (to the tune of a 411-3 vote) on what they had been touting as a signature plank in their platform.
Rather than sticking to his guns and refusing to authorize the expansion of an inefficient government program until the states receiving funding under it had -- at the very least -- enrolled all of their citizens who are currently eligible, Bush offered his customary (and customarily ignored) olive branch to the opposition, recommending in his FY2009 budget a $19 billion expansion of SCHIP -- halfway between the standard annual increase he had last year maintained was the limit of what he would approve, and the $35 billion expansion Democrat leaders had fought tooth and nail for in 2007.
It is possible that this allowed expansion of $19 billion will be accepted by Congressional leaders and passed in its own bill. However, the far more likely course of action that Democrats will take on SCHIP is that of the proverbial "when given an inch, take a mile." It would not be surprising in the least if Democrats take this olive branch and demand the tree, as it were, and return to insisting on the full expansion that they agitated for so vigorously last year.
Regardless of this potentiality, the President’s FY2009 budget is a step in the right direction in the field of health care. His support for further deregulation of the market, and for common-sense reforms like increasing the availability of Health Savings Accounts , the prevalence of telemedicine, and other innovations that increase consumer choice and decrease the need – and excuses – for excessive governmental involvement in the health care market, show that at least one key figure in the American government understands that less governmental involvement is a positive for consumers and for the economy, not a negative.
If more lawmakers can be convinced of this truth, the health care crisis that America is currently facing can be greatly alleviated -- and President Bush can win greater support for his better (though still far from perfect) 2009 budget . This would be a winning situation for all involved – especially the American people.
Jeff Emanuel is Research Fellow for Health Care policy at The Heartland Institute and is managing editor of Health Care News.
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Shirt? Check. Shoes? Check. Acceptable Body Mass Index? Ummm.....
February 10, 2008
Update: For another entrant into the below-mentioned department of legislation, check out this oldie but goodie from 2006: a Democrat State Senator from Ohio filing legislation that would make it illegal for registered Republicans to adopt in that state.
From the department of "ridiculous legislation ostensibly submitted for the purpose of getting folks' attention" comes this gem from Mississippi.
Known by the stimulating and descriptive title of "House Bill No. 282," legislation has been introduced in the Mississippi state assembly that would prevent restaurants from...serving obese people.
From the bill itself, 282 is:AN ACT TO PROHIBIT CERTAIN FOOD ESTABLISHMENTS FROM SERVING FOOD TO ANY PERSON WHO IS OBESE, BASED ON CRITERIA PRESCRIBED BY THE STATE DEPARTMENT OF HEALTH; TO DIRECT THE DEPARTMENT TO PREPARE WRITTEN MATERIALS THAT DESCRIBE AND EXPLAIN THE CRITERIA FOR DETERMINING WHETHER A PERSON IS OBESE AND TO PROVIDE THOSE MATERIALS TO THE FOOD ESTABLISHMENTS; TO DIRECT THE DEPARTMENT TO MONITOR THE FOOD ESTABLISHMENTS FOR COMPLIANCE WITH THE PROVISIONS OF THIS ACT; AND FOR RELATED PURPOSES.
Those "certain food establishments" are later clarified by the bill as being "any food establishment that is required to obtain a permit from the State Department of Health under Section 41-3-15(4)(f), that operates primarily in an enclosed facility and that has five (5) or more seats for customers."
Now, the chief sponsor of HB 282, Republican state Rep. Ted Mayhall, says that he doesn't expect -- or want -- this bill to pass. According to ABC24:"I do not have any intention of this becoming law," says the Desoto County Republican. "I don't think it has a Chinaman's chance. I'm against intrusive government. I don't think that's what we're here for and what we should be doing."So why draft such controversial legislation?"The reason I put the bill in," says Mayhall, "was to call attention to the seriousness of the obesity epidemic in Mississippi."
Mississippi has ranked number one in the nation for obesity three years running.
Mayhall says that fully 30% of adults in the state are obese, and that, "with Mississippi's Medicaid program $168 million dollars in the red this year," illnesses related to obesity -- like diabetes -- are "draining the state's budget."
We'll see if this motivates folks to make some lifestyle changes on their own. While governmental regulation shouldn't be necessary to stem America's growing obesity epidemic -- which is very real, as anybody looking around an airport can see for themselves these days -- legislation like this can serve as excellent comic relief, as well as a wake-up call.
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Will Washington state take Wisconsin's health care sloppy seconds?
February 7, 2008
At the beginning of this legislative session, State Senator Karen Keiser (D-Kent) introduced legislation that would radically increase government control of health care in the state of Washington. The legislation was based almost entirely on a plan that had been considered – and rejected – a year before by a state halfway across the country.
Thanks to the efforts of pro-market legislators like Wisconsin State Rep. Leah Vukmir (R-Wauwatosa), who spent a great deal of time, resources, and political capital educating their fellow representatives, and the state’s voters, about what a poor policy decision it would be to enact the expensive and inefficient program, the 2007 attempt at government-run health care was removed from the state budget it had been inserted into, and was scrapped entirely.
Though Wisconsin managed to avert the debacle that the “Healthy Wisconsin” program would have caused in the state’s health care market, the program’s authors did not give up on their dream of subsuming the health care and health insurance markets entirely into a government-run framework. Instead, remaining true to government’s penchant for rehabilitating failed ideas and policies and presenting them – unchanged, but under slightly new names – as new solutions, they simply exported their idea to Washington, where Sen. Keiser was happy to adopt them and to present them as a "solution" to Washington’s health care woes.
Keiser did not attempt to hide the fact that her proposal was the exact replica of a horribly failed measure from another state – instead, she flaunted that fact, by actually having Wisconsin State Senator Jon Erpenbach (D-Middleton), primary sponsor of the failed Healthy Wisconsin program, appear in the Washington State Senate with her when she introduced her legislation.
Keiser’s bill, SB 6221 (also known as the “Washington Health Partnership”), would, of course, be as bad for the state of Washington as its original form would have been for Wisconsin. Volumes could be written on just why this is, but the simplest explanation can simply be made by dealing with the issue of cost.
The Washington Health Partnership is expected by its proponents to cost, at the beginning, around $15 billion per year – most of which would be funded by an increased payroll tax, the rate of which would be set by a board established to oversee the program. The payroll tax rate necessary to raise the $15 billion needed to initially fund the program has been estimated at no less than 14 percent – a significant increase in Washingtonians’ tax burden. In fact, the $15 billion in additional tax revenue needed to get the Washington Health Partnership off the ground represents more in tax revenue than the state currently takes in through sales, income, and corporate taxes combined.
As Michael Tanner, the Cato Institute’s director of health and welfare studies, explained during his October 2, 2007 testimony to the Wisconsin Assembly Committee on Health and Health Care Reform (when the Badger State was considering the exact same proposal), the payroll tax would theoretically be “split, with the employee paying four percent and the employer paying 10.5 percent.
“But, while it might be politically appealing to claim that business will bear the new tax burden, nearly all economists would see it quite differently. The amount of compensation that a worker receives is a function of his or her productivity. The employer is generally indifferent to the composition of that compensation. It can be in the form of wages, benefits, or taxes. What matters is the total cost of hiring that worker.Further, small businesses – the life’s blood of America’s state and national economies – will be hardest hit by the severe payroll tax increase. Most small businesses pay less than ten percent payroll tax, and few provide health insurance. Therefore, these businesses will see their tax burdens per worker skyrocket without any corresponding savings that would come from no longer having to provide employee health plans.Mandating an increase in the cost of hiring a worker by adding a new payroll tax does nothing to increase that worker’s productivity. Employers will therefore seek ways to offset the added cost by raising prices (the most unlikely solution in a competitive market), lowering wages, reducing future wage increases, reducing other benefits (such as pensions), reducing hiring, laying off current workers, or outsourcing. In the end, one way or another, workers will bear the full cost.”
In order to relieve themselves of this added hardship, businesses can – and will – leave the state as a result of the Washington Health Partnership’s passage. Given that Washington’s tax burden is already significantly worse than its neighboring states, the increased weight of the Washington Health Partnership is an almost certain recipe for slowed economic growth and lost jobs. The non-partisan Tax Foundation currently ranks Washington 16th in the nation in terms of state and local tax burden (rankings go from 1=highest tax burden to 50=least tax burden). By comparison, Idaho ranks 35th, Oregon 37th, and Montana 41st.
Washington state has been enjoying moderate job growth in recent months and years. Passing a bill like SB 6221 would do much to reverse that trend, and would severely damage the state’s economy – not to mention the state’s health insurance and care market. Even if businesses do not relocate to escape the increase in their payroll costs, the national rate of health care inflation is too far ahead of projected wage and revenue increases for the Washington Health Partnership to avoid running a sever deficit within the next few years.
Further, with its health care-by-geographical-area framework, Sen. Keiser’s retread proposal would not only eliminate consumers’ ability to choose their providers, but would, in Tanner’s words, “set up a perverse set of incentives that will encourage healthy and insured residents to move out of state, while also encouraging uninsured and sick from out of state to relocate to, or at least take jobs,” in Washington.
This would significantly strain the health facilities in the state’s border areas, acting as a magnet for those to whom it alone extends coverage, such as undocumented immigrants and extends low-income pregnant women. This outcome would increase program costs exponentially, while also creating several other problems for Washington state.
Beyond these issues, the Washington Health Partnership would create a situation in which health care is rationed and prices are inflated due to the outlawing of competition. Rather than cause serious damage to the health care market and to the state’s economy as a whole, Washington should seek common sense reform to help solve the health care crisis. Opening up the market to greater competition, decreasing the number of procedures and operations whose coverage is mandated by law from the current total of 23 – including “port wine stain” birthmark removal – would do a great deal to alleviate the current biggest problem with health insurance: its affordability. Further, the state should amend its insurance laws to allow the sale of any health insurance plan approved for sale by any state – something which is not allowed by most states, but which would work wonders in bringing down health insurance costs through the tried-and-true method of simple competition.
Regardless where Washington goes from here, further regulation of its health care market will only serve to exacerbate the state’s problems. Instead of repackaging recently failed attempts to legislate an area of the market that is already suffering from over-regulation, the state legislature of Washington should seek out real reform – reform that would decrease government involvement, increase consumer choice, and work to the benefit of the market as a whole.
Disclosure: Jeff Emanuel is Research Fellow for Health Care policy at The Heartland Institute and is managing editor of Health Care News.
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Michigan government’s attempt to micromanage health insurance market will hurt quality and limit consumer choice
January 6, 2008
In late 2007, after a single perfunctory committee meeting, the Michigan House of Representatives passed a series of four bills which, if approved by the Senate and signed into law by Gov. Jennifer Granholm, will have a very negative effect on the health insurance market in the state.
House Bills (HBs) 5282 through 5285 regulate in insurance market in several ways, including by implementing mandates on how private insurance companies allocate the money they earn in policyholder premiums. Should these bills be passed, private health insurance carriers will be required by law to spend no less than 70% of premium income on health benefits. If a smaller percentage is used to fund health care for policyholders, state law would require carriers to issue refunds to their customers of such an amount as t o reduce the amount of capital use on anything other than health care to 30% of premium income or less.
This law would effectively cap insurance company profits, limiting them to whatever percentage of the 30% of income not spent on health benefits remained after all other operating and administrative costs were covered. Passing a series of bills regulating how much of their earnings insurance providers are allowed to keep and how much must be dedicated to certain expenditures will have a noticeably negative effect on the health insurance market since, as with any industry, capping profits stifles innovation and significantly reduces quality of service, as the main impetus for improvement is removed.
The effect of these bills on the health insurance market would not be limited to the negative results of mandated interference in private companies’ financial decisions. In fact, HBs 5282-5 would virtually eliminate the health insurance market in Michigan altogether by naming one single carrier the de facto official health insurance company of the entire state.
Health care giant Blue Cross Blue Shield (BCBS) has long enjoyed tax-exempt status in Michigan, as the result of a 1938 deal BCBS made with the state to be the “insurer of last resort” for otherwise uninsurable consumers. This means, for tax purposes, that the carrier was treated as a non-profit corporation, while actually operating as a for-profit business.
In the time since that deal was struck, BCBS’s operation has continuously expanded, and it now owns nearly 70% of the state health insurance market (for comparison’s sake, the largest market share owned by any carrier in any other state in the country is currently 38%).
There is little fault to be found in a company accepting benefits in exchange for filling a necessary gap in the health insurance market. In this case, that benefit is the eligibility to claim nonprofit tax status while actually being a for-profit company. However, HBs 5282-5 would sweeten BCBS’s deal considerably, not only by “repeal[ing] limitations on for-profit subsidiaries of Blue Cross Blue Shield (the Accident Fund insurance company) selling auto, disability, workers compensation and other types of insurance,” but by adding to BCBS’s financial benefits at the expense of the rest of Michigan’s private carriers.
If these bills pass, all private insurers in the state will be forced, according to the language in HB 5282, to “assume full liability for all excess losses and commissions in the guaranteed-access health benefit plans.” What this means is that every private insurer in the state of Michigan will be held financially liable for losses suffered by BCBS due to its guaranteed-access health benefit coverage, and will be forced to pay a “proportional share” of the total amount necessary to “offset” BCBS’s losses.
What this means is that Blue Cross Blue Shield of Michigan, which recorded $210 million in net earnings in 2006, and $337 million the year before that, would have its profits boosted even further by the government’s forcible redistribution of capital from BCBS’s much smaller insurance-providing counterparts in the state.
According to HB 5852, the “proportional share” that each carrier is responsible for paying BCBS would be “based on each carrier’s share of covered lives in the individual market.” In other words, the more successful a carrier is at providing health coverage to individual Michiganders, the more capital will be taken from it and given to Blue Cross Blue Shield by the state government.
Combined with regulating profit and insurance provider spending, mandating the forcible confiscation of money from carriers in the state to “offset” BCBS’s losses, based proportionally on the size of those carriers’ clienteles, will discourage private companies from attempting to expand their respective market shares. In other words, besides stifling innovation and removing incentive for quality improvement, these bills would punish insurance providers for the portion of the market they occupy, and would do a great deal to discourage active recruitment of new policyholders.
This combination of regulations and mandates would effectively leave only one place to go for Michiganders seeking health coverage: Blue Cross Blue Shield. Any incentive for other carriers to innovate, improve quality, or acquire new policyholders would be eradicated, leaving BCBS as the only carrier in the state with incentive to expand its market share.
Michigan HBs 5282-5285 meddle in the health care market by regulating the financial decisions of private businesses and by rewarding a single health insurance provider at the expense of the rest of the carriers in the state. The result of these bills, which serve to artificially narrow the market, will be to decrease the quality of health insurance and to drastically limit consumer choice.
If the goal of Michigan’s government is really to reform health care, and not simply to play favorites in the insurance market, then its members should seek to encourage more innovation and competition, instead of penalizing private insurance carriers for actively seeking to insure more people.
Jeff Emanuel is research fellow for health care policy at The Heartland Institute, a free-market public policy organization, and is managing editor of Health Care News.
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San Francisco health care mandate violates federal law, District Judge says
January 6, 2008
A US District Judge has ruled that a controversial city health care plan expansion violates a federal law regarding government regulation of employee benefit plans. Judge Jeffrey White’s ruling halted the city of San Francisco’s attempt to expand its public health care program by preventing a mandate from going into effect that would have required employers to offer their employees health coverage or pay to support the city program. The city is appealing the ruling to the 9th Circuit Court of Appeals. Analysts say the mandate, if implemented, would have a negative effect on San Francisco’s economy, while doing very little to ease the plight of the uninsured.
“Healthy San Francisco,” established in 2005 by Mayor Gavin Newsom, is the city’s attempt at gradually providing universal health care coverage to San Franciscans. The program is built around public clinics where citizens can obtain regular medical care. The majority of funding for the program’s current annual budget of approximately $23 million currently comes from federal tax dollars, via the California state Health Care Coverage Initiative (HCCI).
The mandate struck down by Judge White in his December 26 ruling would have required businesses with between 20 and 99 workers to spend $1.17 per employee per hour, and those with more than 100 to spend $1.76 per hour, either on their own plan or in payments to the city. Newsom had planned to use the revenue from this tax increase to expand the Health San Francisco program to include all of the city’s 82,000 uninsured residents, as well as to make switching from private insurance to taxpayer-funded health care a viable option for San Franciscans who already possess coverage. Until the end of 2007, Healthy San Francisco catered exclusively to individuals whose income was at or below the poverty line. According to the program website (www.HealthySanFrancisco.org), 3,969 people were enrolled at last count.
White ruled that the directive violates the 1974 Employee Retirement Income Security Act (ERISA), a federal law which, in part, governs employer-sponsored health benefits. City Attorney Dennis Herrera filed an appeal with California’s 9th US Circuit Court of Appeals. A three-judge panel from the 9th Circuit, the most overturned Circuit Court of Appeals in the country, held a preliminary telephone hearing January 3, during which Judge William Fletcher intimated that there could be grounds for overturning White’s ruling that the San Francisco plan violated ERISA.
Herrera also filed a motion requesting that the 9th Circuit grant an emergency stay to allow the mandate to take effect as scheduled pending an official hearing on the matter. The motion was not immediately granted, and at time of printing the court had not yet decided whether to hold a full hearing to evaluate the appeal.
White’s ruling has implications beyond the city of San Francisco. Concerns have now been raised about the viability of similar health care programs under consideration by city and county governments across California, as well as the statewide health care coverage expansion being pushed by Gov. Arnold Schwarzenegger (R) and Assembly Speaker Fabian Núñez (D).
Sally Pipes, CEO of the Pacific Research Institute (PRI), a free market public policy institute based in San Francisco, called the mandate “very bad” for the city. “There is a reason companies like Chevron [and] Bank of America…are no longer headquartered in San Francisco,” she said, adding that the Healthy San Francisco expansion was “another prohibitive program” that would “[increase] the cost of doing business” in the city, and would further result in “chas[ing] business out.”
John Graham, PRI’s director of health care studies, agreed, calling the city’s appeal of Judge White’s ruling, which was “in line with a judgment against Maryland in January 2007,” a waste of taxpayer’s money.
Devon Herrick, a senior fellow at the National Center for Policy Analysis, said, "The authority to regulate employer benefits rests with the federal government, not the states – and definitely not a city.” However, Herrick warned, some legislators might not be willing to accept ERISA as a check on state and local governments’ legislative power.
There has been talk among some politicians about allowing states to experiment,” he said, “which is a codeword for enacting laws that violate ERISA. However, this has not occurred yet.”
Said Graham, “The only jurisdiction to legally succeed in forcing so-called “universal” health care on its residents in the face of an ERISA lawsuit is Hawaii, because it passed its law before ERISA came into force in 1974.”
The lesson to be learned from this one exception is clear, he said. “In 1974, one in fifty Hawaiians were uninsured. Today, after more than three decades of mandatory insurance, that number stands at one in ten. The number of uninsured in this country has nothing to do with having a law ordering people to buy health insurance. Instead, it has to do with too much government control of health insurance already.”
The solution, according to Graham? “Instead of wasting San Francisco taxpayers’ dollars on legal fees in a futile appeal of Judge White’s decision, San Francisco should advocate tax reform that gives health care money back to the people, not government agencies.”
Jeff Emanuel is The Heartland Institute’s Research Fellow for health care policy and is managing editor of Health Care News.
Internet Info:
“Status report on the implementation of the San Francisco Health Care Security Ordinance”: http://www.sfhp.org/files/PDF/SFHAP/HSF_Implementation_Status_07_07.pdf
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Alabama's Mongomery Advertiser misses the mark on Bush, Congress, and SCHIP legislation
12/24/2007
Yesterday, the Montgomery (Alabama) Advertiser newspaper ran an editorial in which the writers referred to President Bush’s December veto of a massive expansion of the State Children’s Health Insurance Program (SCHIP) as putting him on par with "Scrooge" and "the Grinch." Unfortunately, the authors badly missed the mark on several counts.
In disapproving Congress’s early December SCHIP legislation, President Bush did not veto children’s health care, nor did he prevent reauthorization of the program. What his veto prevented was a wasteful attempt by Congress to expand a flawed program SCHIP by $35 billion, which would have greatly expanded eligibility for the incredibly flawed program – a bad move while there are still many people in this country who are already eligible for the program, but not yet enrolled.
When vetoing Congress’s first attempt to expand the program, President Bush made clear how far above the current levels of SCHIP funding he would be willing to go. Contrary to the editorial, Bush was far from being the only one “not willing to compromise” on the issue. Rather, after meeting the first veto with hysterical rhetoric (like “[Bush] used his cruel veto pen to say '’I forbid 10 million children from getting the health benefits they deserve’” – Rep. Nancy Pelosi, D-CA), Congress rewrote the SCHIP expansion – again far larger and more inclusive than the President had requested – and sent it back, again accompanied by hysterical language (like “How many children will be dead” if the President doesn’t sign the SCHIP expansion bill? – Rep. Lloyd Doggett, D-TX).
For an issue that was presented as being a matter of life-and-death urgency, the Democrat majority’s decision to schedule the attempt to override Bush’ second veto for January 23 – six full weeks after the President refused the bill – demonstrated both the lack of seriousness on the part of the majority on this issue, and the extend to which this was not a bipartisan effort, despite there having been just enough Republicans voting for the original legislation for the Advertiser’s editors to claim that “a coalition of Democrats and Republicans in Congress supported expanding the program.”
Less than a week after this second veto, Congress sent the President a bill extending the current program until March 31, 2009. Far from being a “short-term extension” which was “cobble[d] together,” this move extended the program far longer than previous bills had. Rather than being the product of a “Grich” President, the sixteen month SCHIP extension was the result of a majority party which, after not getting its way, threw a temper tantrum and passed SCHIP off to the next administration and the 111th Congress.
The claim that a simple extension of SCHIP in its current form will adversely impact Alabama or other states with shortfalls in program funding is an incorrect one, as well, and demonstrates a lack of knowledge on the part of the Advertiser’s editors with regard to the contents of SCHIP extension bill. Rather than needing to “move quickly next year to ensure there is enough money provided to the states that no children who are eligible under current guidelines lose their health insurance,” as the editorial demanded, Congress has already seen to it that “shortfall states” will be covered in the event that they lack the funding to continue their SCHIP-based programs at the current capacity. In the sixteen month extension as passed by both houses of Congress (by a 511-3 majority) and signed by the President, a maximum amount of $1.6 billion is allotted to make up for state funding shortfalls in fiscal year 2008, with an additional $250 million allotted for the first two quarters of FY 2009 (taking the states up to the expiration date of this extension). The impact of the extension on Alabama’s ALL Kids program will be negligible, as funding will be provided should the state meet the shortfall criteria laid out in the bill.
There is no question that SCHIP is a flawed program, which must be addressed in the not-too-distant future. However, simply expanding the program by billions of dollars while leaving its infrastructure intact will serve to exacerbate SCHIP’s problems. When it comes to health care, real solutions are needed, and throwing billions of dollars at SCHIP is not a real solution.
The President’s prudent veto of a foolhardy $35 billion program expansion did not “deny” health care to anybody. In fact, the only group “denied” anything by the end result of the SCHIP debate was the Congressional majority, whose eyes were bigger than their stomachs on this issue, as they traded away an opportunity to make a real change in government-subsidized children’s health care for a chance to score what they thought would be some easy political points against the President and the Republican minority.
Jeff Emanuel is a research fellow for Health Care policy at the Heartland Institute and is managing editor of Health Care News.
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If passed, bipartisan California health insurance plan will cause the state more problems than it will solve
December 19, 2007
Last Friday, after nearly a year of tense negotiations, California Governor Arnold Schwarzenegger (R) and Assembly Speaker Fabian Nunez (D) jointly announced that they had reached a compromise on a plan to add 3.6 million of California’s 5 million uninsured citizens to the rolls of the insured by 2010. Called “an incredible plan” by Speaker Nunez, the proposal – which, if passed by the State Legislature, will appear on the California ballot in November – includes a mandate requiring that nearly all Californians either acquire private health insurance or enroll in a government program which will be expanded to meet the additional demand. Further, the measure would prohibit insurers from denying coverage to people because of existing medical ailments, and would require them to spend at least 85% of premiums exclusively on medical care
Expected to cost $14 Billion annually, the compromise plan agreed upon by Schwarzenegger and Nunez will, if approved by voters, receive funding from four separate sources: a $2.3 Billion tax on hospitals, a new payroll tax of 1% to 6% on businesses in the state, an additional $1.50 to $2.00 per pack tax on cigarettes sold in the state, and $2.3 Billion more in funding from the federal government.
The new program is being rushed through California’s state legislature in two parts. The first, which lays out the changes and expansions being made to the state health care system, was presented to the General Assembly Monday and, by Monday night, had been passed by a party-line vote and sent on to the Senate. The second piece of legislation, which deals with the aforementioned funding of the program, will work its way through the state government more slowly, since, as a tax increase, it requires 2/3 approval to pass. This requirement means that some Republicans must get on board in order for the measure to make it onto the November ballot. To this end, Governor Schwarzenegger, who has already threatened members of the state legislature with a January special session to deal with the health care issue, can be expected to put as much pressure as possible on those members of his own party who can potentially be swayed on the issue.
Despite the cautious approach of state Senate President Pro Tem Don Perata (D), who wants to figure out how best to deal with California’s $14 Billion budget deficit (without shrinking or eliminating entitlement programs) before agreeing to such a massive expansion of government programs, the Governor’s proposal is expected to make its way through both houses of the state legislature before too long.
Unfortunately, this plan to decrease the numbers of the uninsured in bankrupt California is not only inefficient, but will cause far more problems for the health care system and the state economy than it will solve.
First, taxing the state’s hospitals an additional $2.3 Billion – despite the claim that the move is "supported by the industry" – will simply result in a raising of the prices being paid by those who purchase medical services, as the money lost to increased taxes must be recouped by the industry.
Second, funding yet another government program on the backs of tobacco consumers only builds even higher the house of cards on which so many government programs are now being built. Due to the declining number of smokers in California (ostensibly the goal of the state and federal governments when they began levying prohibitive taxes on tobacco products several years ago), the pool of money from which to pull funding for legislators’ pet projects, including state health care, is steadily shrinking – and adding $1.50 to $2.00 per pack in taxes to what is already being charged will just cause that pool to dry up even quicker, as people turn to the black market or out of state sources, or forgo cigarettes altogether.
Third is the payroll tax increase, which will take from small businesses and corporations alike a percentage of their payroll for the purpose of providing health insurance to uninsured workers. While this measure may allow Sacramento to claim a small victory in its quest to move more names into the “insured” column on the state’s rolls, adding to the tax burden felt by small business owners will make less capital available for hiring new workers or paying existing ones. This will ultimately result in depressed wages and exacerbated unemployment in California, as well as in even more businesses leaving the state (or deciding against coming) due to the oppressive tax climate. Based on tax climate, California already rates as only the 47th best state for business in the country (according to the nonpartisan Tax Foundation). The state’s next-door neighbor, Nevada, ranks third; how long can it be before more of California’s businesses, fed up with subsidizing (along with smokers) every one of Sacramento’s social welfare projects, pick up and move two hundred miles to the east?
Despite the changing economic landscape in the state and in America as a whole, the fact remains that there is no such thing as a free lunch – and that all added costs and taxes are eventually passed along to the consumer and to the taxpayer. Leaving aside the issue of integrity – Governor Schwarzenegger was elected and reelected, at least in part, on the bases of his willingness to take a “no new taxes” pledge – the cost of the Schwarzenegger-Nunez health care plan will be devastating to the citizens of California, who, should this measure pass, will see their quality of health care decline, revenue to the state decrease, and employers leave the state – all for the sake of a state government’s vain desire to claim a Pyrrhic victory over the problem of the uninsured in their state.
Jeff Emanuel is a research fellow for Health Care policy at the Heartland Institute and is managing editor of Health Care News.
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Massachusetts Doctors Move to Fill Low-Radiation Market Niche
December 13, 2007
The increasing use of Computed Tomography (or “CT”) scans in today’s hospitals has prompted health professionals to take a closer look at the potential effects of the radiation from those scans, and to consider how patient radiation exposure during the procedure can be minimized.
Earlier this month, a group called RCG Health Care Consulting, led by Dr. Giles Boland, Vice Chairman of the Department of Radiology at Massachusetts General Hospital (MGH), announced that it had established a series of CT practices and protocols which would allow radiologists to reduce radiation exposure while still being able to obtain diagnostic-quality images from their CT scans.
Dr. Boland and his colleagues in the MGH Department of Radiology have spent ten years devising specific protocols for adult and pediatric scans. These protocols, which include exact parameters for each step of each different CT scan, are expected to enable a physician to decrease the patient’s total level of radiation exposure by up to 60%.
“There are more than 64 billion CT scans being performed in the U.S. each year,” Dr. Boland told me in a telephone interview conducted earlier today. “[A CT scan] is now on the critical pathway of most major diseases. More physicians want CT scans so that they can look at blood vessels and inside structures.”
When these tests are ordered, he said, “it is the responsibility of radiologists to have protocols in place to minimize the level of radiation” exposure to patients, so as to reduce the risk of radiation-induced cancer.
Due to the fact that there is no “tangible” evidence of the adverse effects of medical radiation, said Boland, many organizations still haven’t addressed issue. “The science is still theoretical,” he said. “Most of the data we have on the potential risk of cancer is still derived from Hiroshima data [from the after-effects of the 1945 atomic bomb] and extrapolated from there.” Further, the ability to decrease radiation while maintaining CT quality is “just not readily available at a medium-sized hospital.” To come up with a system for doing so, a radiologist “would have to reinvent the method, protocol by protocol” – something practitioners simply do not have the time to do.
Having themselves completed the process of devising the over 100 radiation-reducing CT protocols, Boland and RCG moved to fill the growing opening in the radiology market by transforming their new, low-radiation technique into a product which will be available to radiologists outside of major medical centers.
“There has been considerable academic interest” in the protocols, said David Charpie, Executive Director of RCG. Whether this new method will be mandated by government or will be voluntarily adopted by hospitals across the country remains to be seen (it will “probably be a combination of both at the end of the day, said Charpie). However, Boland pointed out that, with the work on developing the straightforward protocols already having been done, this new method can be “seamlessly” integrated by radiologists “with minimal disruption of their workflow,” leaving little reason for hospitals not to voluntarily move toward lower-dosage CT scanning.
“It took ten years of development to get where we are today,” said Boland. “Doctors will want to [lower CT radiation] as quickly as they can, rather than do ten more years of work on their own.”
Jeff Emanuel is The Heartland Institute’s health care policy research fellow and managing editor of Health Care News.
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President Vetoes SCHIP Bill — Again
December 13, 2007
On December 12, President George W. Bush vetoed Congress's second attempt at to passing the controversial 2007 version of the State Children's Health Insurance Program (S-CHIP), a program which would dramatically expand government-provided health insurance for children.
The slightly modified second version of the bill would have made nearly four million additional people eligible for government-funded health insurance. The cost of the expansion would have been $35 billion over five years, which Congress largely sought to pay for with new taxes on cigarettes. Nearly six million people are already on the rolls of the existing program.
President Bush returned the slightly modified bill to the House, admonishing legislators with the admonition that "our nation's goal should be to move children who have no health insurance to private coverage -- not to move children who already have private health insurance to government coverage."
Massive Crowd-Out
If The latter would be a likely outcome of the latest version of Congress's passing S-CHIP were to become law, the most likely result would be massive crowd-out of private insurance, in its current form, according to the Heritage Foundation, a free-market group based in Washington, DC.
“SCHIP expansion would encourage families in that income range with current private coverage to switch their children to the "lower-cost" or "free" public SCHIP coverage -- a phenomenon known as "crowd-out," said Edmund F. Haislmaier and Greg D'Angelo, of Heritage's Center for Health Policy Studies, in a December 6 report entitled “Expanding SCHIP: Not the Best Option for States.”
“Indeed,” the report continued, “ in estimating the federal costs of such an expansion, the Congressional Budget Office (CBO) assumes that for every two children that gain coverage through the expansion, one will have previously been uninsured and one will have previously had private coverage--a 50 percent crowd-out rate.”
Michael F. Cannon, director of health policy studies for the Cato Institute, a libertarian think tank in Washington, DC, agreed, saying that the proposed S-CHIP expansion would serve to "make private insurance more expensive for everyone else."
Faced with the options of voting immediately to override or sustain the presidential veto or postponing that vote until a particular date certain (NOTE: “date certain” is the actual language in House rules), Democratic House leaders -- who went on record in late autumn about the need for to expand SCHIP immediately -- decided after Bush’s early December veto to postpone the vote until January 23, five days before the President's 2008 State of the Union address.
Jeff Emanuel is a research fellow in Health Care policy at the Heartland Institute and managing editor of Health Care News.
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