“A rough rule holds that private insurance covers two-thirds of the population and pays for only one-third of health care,” explained Dr. David Himmelstein of Harvard Medical School in Daniel Gross’s “Economic Scene” column in the New York Times last week. “We’re paying for national health insurance,” he said, “but we’re not getting it.”

Add up the numbers. Taxpayers pay directly for the health care of two-fifth of all covered Americans through Medicare, Medicaid, military health programs, and insurance for government workers. Add in the tax subsidy for employer-provided health care, which is about $208.6 billion in 2006. According to economist Thomas Selden, the government spends about $1.2 trillion on health care each year, or 61 percent of the total that Americans spend on health care. On top of that, add another 5 percent to cover the federal mandate that hospitals provide care to the uninsured, and the government pays right around two-thirds of the cost of health care.

Canada, which has a single-payer system, pays around 70 percent of its citizens’ health care spending. Just four percent more than in the United States.

Single-payer care? We’re already there.

What do we get for all that money? For one, Bill Gates will get generous taxpayer-funded coverage when he turns 65 and enters Medicare. Seniors, most of whom had private drug coverage last year, have mostly government-funded coverage this year. Workers switch coverage when they switch jobs or go without between jobs. Medicaid enrollees search near and far for doctors willing to accept their coverage, and the same is happening more and more for Medicare patients. Even when they are covered through their employers, workers get complicated plans, not of their choosing, that may not meet their needs. Many are pushed into buying coverage that violates their ethical and religious beliefs.

For all that money, $1.2 trillion per year, we don’t get a good health care system.

But the problem definitely isn’t because of competition and reliance on the market. The problem is that government health care spending removes so many Americans from the market. But right now, there is not much of a market, where people can pick and choose the kind of health care they want.

What would happen if you had a market? Paradoxically, the only place where you have anything even approaching a market for health insurance is the federal government itself. In the imperfect but functional Federal Employees Health Benefits Plan, individuals and families get to choose their own care and face incentives to consume health services wisely. Unlike most Americans, who don’t have much choice, federal employees are happy with their choices and their coverage.

Americans still enjoy a bit more competition and choice than Canadians. Perhaps that’s why Canadians sue their government to be allowed to purchase health services on the market and why so many Canadians stream into the U.S. each year to use our health care market.

So competition and choice are our strengths, but as Daniel Gross observes, mandates, regulations, and bad government policies are pushing more and more Americans out of the market and into the government’s arms.

Expanding the government’s role in health care is no solution to what ails us. It’s already the disease.

Posted by Andrew Grossman at 01:05 PM | Permalink | TrackBacks (0)

Heritage's Bob Moffit talks to the Des Moines Register on the Medicare Prescription Drug Benefit:

Mistake from the start might soon get worse

A Republican-controlled Congress created this fiscal monstrosity—a largely unnecessary universal entitlement expected to add another $8 trillion to the long-term debt of the taxpayers who must pay for the promised drug benefits. Now, Democratic leaders soon to take charge say they want to improve the program in two ways: eliminate “gaps” in the drug benefit (the “donut hole”) and cut program costs via some as-yet-ill-defined system of price controls.

Filling in the donut hole will mean pouring in even more taxpayers’ dollars. It’s hard to imagine Congress can slash drug prices enough to offset those additional costs to the taxpayer without creating new problems for seniors in trying to get newer and more effective medicines.

Also, no good ever comes of trying to repeal the economic law of supply and demand by imposing price controls. You have a better chance of repealing the laws of gravity. Lawmakers can’t control consumers’ demand for drugs or anything else. They can only control supply. And that produces the dynamics of the Old Soviet Grocery Store: “Yes, comrades, you are all entitled to free bread. So come back tomorrow, we’re all out today.” Price controls inevitably produce shortages of both quantity and quality in the goods or services controlled.

Forget about tinkering with the Medicare drug program. Congress should get on to the serious business of fixing Medicare itself. Within five years, the first wave of 77 million baby boomers will start retiring. They will hit the Medicare system like a tsunami. It will take huge tax increases or savage benefit cuts just to prop up the system.

Far better to set up a new system for new retirees: Let them enroll in the new Medicare Advantage program, or carryover their existing private health plans — including their drug coverage — into retirement. A fixed government contribution to the plan of their choice would offset their costs, just as it does for today’s federal workers and retirees. The only major difference: the level of assistance would vary according to need—financial or medical. However, there would be a fixed annual limit to the government contribution.

Beyond a doubt, baby boomers will boost Medicare costs far beyond the tab rung up by The Greatest Generation. But consumer choice and competition will control costs better — and deliver higher quality care — than artificial price controls from Congress.

But it could be worse, of course. At least the benefit is letting private insurers compete with one another to provide seniors with drug coverage, keeping costs below what many had predicted and leaving most seniors satisfied. So it is a boondoggle, but it does show that market competition works and saves taxpayer dollars. If only that principle could be applied to the entire Medicare program, our fiscal future would be in much better shape.

Posted by Andrew Grossman at 09:40 AM | Permalink | TrackBacks (0)

A recent NBER working paper should cause lawmakers who favor some type of price controls on prescription drugs to rethink their position. Joseph Golec and John Vernon examine the effects that prescription drug price controls have in European Union countries. Here's the abstract:

EU countries closely regulate pharmaceutical prices whereas the U.S. does not. This paper shows how price constraints affect the profitability, stock returns, and R&D spending of EU and U.S. firms. Compared to EU firms, U.S. firms are more profitable, earn higher stock returns, and spend more on research and development (R&D). Some differences have increased over time. In 1986, EU pharmaceutical R&D exceeded U.S. R&D by about 24 percent, but by 2004, EU R&D trailed U.S. R&D by about 15 percent. During these 19 years, U.S. R&D spending grew at a real annual compound rate of 8.8 percent, while EU R&D spending grew at a real 5.4 percent rate. Results show that EU consumers enjoyed much lower pharmaceutical price inflation, however, at a cost of 46 fewer new medicines introduced by EU firms and 1680 fewer EU research jobs.

As the paper points out, Europeans do pay less than Americans for prescription drugs. Innovation, however, is the casualty of these lower costs. Even those who bemoan drug companies' profitability should have a hard time arguing on behalf of policies that would adversely affect research--and the new drugs that come from this research--that can improve lives.

Posted by J. Lawrence Scholer at 01:49 PM | Permalink | TrackBacks (0)

From the Raising Farrahzona weblog:

I just finished an 8,459 page partnership tax return with 25 partners. Of those 8,459 pages only 602 relate to the actual tax return. The rest of the return is information the IRS requires to be filed. No impact on taxable income, just a document dump for the IRS. To make matters worse, with these type of disclosures, e-filing is practically impossible. It’s going to take 2 boxes and over $150 to mail the tax return to the IRS.

And lefties want the government to manage our health care? I shudder. I really do.

But don't its proponents take as a given that a government-run single-payer system would cut down dramatically on paperwork (e.g., here, here, and here)? Perhaps someone could direct us to a paper or study that makes this point as more than a bare assertion. For now, the balance of experience, such as recounted above, argues against it.

(via Club for Growth)

Posted by Andrew Grossman at 01:55 PM | Permalink | TrackBacks (0)

As much of a folly as the benefit was to enact at all, the mechanism by which it is organized has turned out to be surprisingly efficient. Competition between drug benefit providers has led to far lower prices--and thus less in expenses to seniors and the federal government--than the government had initially projected.

And the good news in terms of the benefit's market-based implementation continues today. The Times reports the latest:

Medicare beneficiaries will have access to more options for prescription drug coverage in 2007, with many insurers offering better value and a larger number of medications, the Bush administration said Friday.

A bit more detail on what to expect next year:

[Snarky infinitive clause snipped] Medicare officials said the average premium for drug coverage next year would be $24 a month. That is the same as this year and 40 percent less than first estimated for 2007. But, the officials said, the average number of drugs covered by insurers will increase by 13 percent, to 4,390 next year.

Monthly premiums in 2007 will range from a low of $9.50, under a drug plan offered by the HIP Insurance Company of New York, to a high of more than $110 under plans offered by Sierra Health Services in New Jersey and some other states.

OK, pretty impressive, right? Apparently not. Here's the line we snipped from the first blockquote above: "But the potential for confusion may also increase."

The horror!

Posted by Andrew Grossman at 01:03 PM | Permalink | TrackBacks (0)

Oddly enough, one of the freest markets for health care in the United States is run by the federal government. The Federal Employees Health Benefits Program (FEHBP) is the health insurance market in which federal workers, from lowly bureaucrats to senators, purchase coverage. FEHBP participants have access to much more choice and are much more likely to be satisfied with their health coverage than other Americans.

Most Americans receive health coverage through the third-party payer system. Incentivized by the tax code, employers offer their workers coverage, often with little choice. Sometimes these plans are Cadillac plans, and sometimes they are stripped-down. Usually, the employee bears little of the direct costs of his medical expenses--the insurance company pays the bills directly and the employer pays the insurance company. Workers face few incentives, then, to keep down costs.

This is not just idle speculation; it is fact. A week ago, the U.S. Office of Personnel Management, which administers the FEHBP, announced the program's 2007 premiums. Here's the important part:

The U.S. Office of Personnel Management today announced premiums in the 2007 Federal Employees Health Benefits Program will rise an average 1.8 percent, marking the smallest rate increase in more than a decade.... Approximately 63 percent of FEHBP enrollees will not have a premium increase in 2007; another 15 percent will see a premium increase of less than 5 percent.

This increase in FEHBP premiums is below the rate of inflation.

Compare that to the third-party-payer market in which most Americans are insured. With that market's lack of choice, lack of competition, and poor incentives, is this mixed news--reported by AP this morning--really so surprising?

Workers won't find much comfort in the smallest increase in health insurance premiums since 1999. The 7.7 percent increase this year was still more than twice the rate of inflation.... Since 2000, health insurance premiums have gone up 78 percent; wages 20 percent.

So for the privileges of less choice and less control, American workers get to pay more, too. This is unfortunate.

But we know what works. Competition keeps costs down, even the face of massive health care inflation. The FEHBP's success proves this year after year. With Massachusetts set to open its statewide health insurance exchange (scroll down to "Component #1")--based on Heritage Foundation proposals that follow key parts of the FEHBP design--the next few years will be really interesting.

Posted by Andrew Grossman at 10:13 AM | Permalink | TrackBacks (0)

Look to the coming entitlements crunch--when federal spending balloons to unprecedented levels, putting pressure on taxes and other government programs--and one program stands out, head and shoulders above the others. That's Medicare, which is expected to more than triple in cost, as proportion of the entire American economy, by 2040. By 2040, we'll spend about five times more subsidizing seniors' health expenses than we spend on national defense, according to GAO projections; today, we spend about 20 percent more on defense than Medicare.

In short, Medicare's explosive growth will squeeze the economy in every possible way. With the baby boomers on the verge of retirement, this problem begins...about now.

Congress is not serious about the coming entitlements explosion. It balked on reforming Social Security, a task comparatively easy compared to tackling Medicare. But still, it has made some small progress: introducing means testing into Medicare so that Bill Gates gets to pay a little more per month in premiums than a low-income senior. And interestingly enough, many of the same voices that led the charge against Social Security reform are speaking out against means-testing.

In a thoughtful editorial, the Chicago Tribune explains why means-testing really matters:

This is a monumental shift in thinking about Medicare, long overdue. The dollars aren't huge: The charge is expected to raise an extra $20.8 billion over 10 years, said Medicare chief Mark McClellan. That's nowhere near enough to offset the long term Medicare-funding shortfall, caused by spiraling health-care costs and aging Baby Boomers. But it is a refreshing dose of reality.

There is another monumental shift underway that could make an even bigger difference:

Health and Human Services Secretary Michael Leavitt recently told the Tribune editorial board about the federal government's initial efforts to create a more transparent system, so that patients know what things cost and can judge efforts by doctors and hospitals to deliver quality care. He described a system that would give patients, at a glance, vital information to judge cost and quality when deciding on a doctor or a hospital. Creating market competition in medical care is one of the main hopes for controlling health-care costs. That way, affluent seniors asked to shoulder more of their own medical costs will get their money's worth.

Introducing market mechanisms and competition into Medicare is (unfortunately) radical thinking, but there's plenty of evidence that it would work in keeping costs down and providing better value. As the Tribune argues, this--like means-testing--is just common sense.

Posted by Andrew Grossman at 07:53 AM | Permalink | TrackBacks (0)

Now that Congress has returned to business after the summer recess, perhaps the leadership can address the coming disaster in entitlement spending. As Brian Riedl notes, the demographics and added benefits to Medicare and Social Security will see entitlements metastasize from 8.4 percent of GDP today to 18.9 percent in 2050, or almost the entire amount used for the current federal budget.

One hopes that the political class can do better than D.C.’s latest effort to show Medicare savings, however. As the AP reported two weeks ago, Medicare will simply delay payments in an attempt to shove a few billion dollars out of this year’s ledger:

Many health care providers will have to make do next month without a government paycheck or two. The Bush administration says it will not make any Medicare reimbursements to hospitals, doctors and scores of other providers during the last nine days of the current budget year, from Sept. 22-30. Congress ordered the hold.

The providers taking care of older people and the disabled will get paid in full after the new budget year begins Oct. 1. They should not count on any interest on the amount they are owed.…

By delaying payments, the government moves $5.2 billion in Medicare expenses to next year's budget, rather than the current one.

This type of shell game has been tried in the past during the 1980s. Congress allowed it to occur on one occasion, but stopped it on the other. As we can see, the “check’s in the mail” method of saving money does little to reform the system, but instead penalizes health-care providers for participating in the system.

While entitlement spending remains one of the nation’s sacred cows, we can expect little substantial effort for reform. Eventually, however, politicians will have to address the demographic time bomb, and the longer we wait the more painful it will be. As Heritage wrote last December, this “is merely an accounting gimmick and an insult to doctors and other medical professionals.” Robert E. Moffit presented a much more effective plan to address the critical flaws of the current system, and reformers should use it as a starting point for real change.

Posted by Ed Morrissey at 02:34 PM | Permalink | TrackBacks (0)

Last week, Washington Post columnist David Broder highly praised a "provocative piece" on the tax treatment of health care by Jason Furman of the Center for Budget and Policy Priorities, a left-wing think tank that often attacks the Heritage Foundation's research. Furman piece appeared in the new publication Democracy: A Journal of Ideas, which aims "to build a vibrant and vital progressivism for the twenty-first century that builds on the movement’s proud history, is true to its central values, and is relevant to present times." And so perhaps it is strange that we too write in praise (mostly).

In "Our Unhealthy Tax Code" (free subscription required for full text) Furman makes the argument, near and dear to our hearts, that the first major step in curing health care in the U.S. is "to put the tax code on the examination table"--something, Furman rightly notes, that his partisan allies have been unwilling to do. The current tax treatment of health care, he describes, tilts the playing field in favor of employer-provided coverage and is, in effect, quite regressive. Worse, "The tax code also increases wasteful and unnecessary spending by subsidizing health insurance pland that discourage health consumers from being cost-conscious." The way we tax health coverage, he concludes, "is literally making America sick."

Furman inevitably nods towards the expected--"A single-payer national health care system would, by definition, remedy the problem"--but then changes tack towards pragmatism. This is the reform plan he sketches:

In fact, if we turned our irrational health tax subsidies right-side up--by curbing subsidies for higher-income workers and those with more generous health insurance plans--we could raise tens of billions of dollars annually, money that could go toward increasing access to health insurance. Taking it a step further, we could scrap the current deduction altogether and replace it with progressive tax credits that, together with other changes, would ensure that every American has affordable health insurance. In either case, reducing subsidies for pricey plans would likely lead to a health insurance system that includes more cost sharing, promotes more consumer consciousness, and plays a modest, but potentially meaningful, role in restraining health spending.

Getting down to details, a lot of what Furman proposes is predictable and bad: wasting more money on an expanded Medicaid, employer mandates that cement in place some of the biggest drawbacks of the current system, and subsidies to join the Federal Employees Health Benefit Plan (FEHBP). But then there's the tax credit part--that sounds familiar.

In fact, that part of Furman's plan reads a lot like Heritage VP Stuart Butler's tax credit proposal for the employees of small businesses (which Furman identifies, rightly, as "the weakest link of the employer-sponsored system"). The key part of Butler's proposal is this "Create a refundable tax credit for workers in small firms in order to eliminate the bias against employees choosing their own coverage and to subsidize those who need the most help."

More broadly, Furman's progressive tax credit sounds a lot like Butler and Ed Haislmaier's 1989 manifesto "A National Health System for America," published by Heritage. Here's a tidbit:

[E]xisting tax policies are most responsible for the system's problems and failures.

While, at one time, the longstanding policy of excluding the value of employer-provided health insurance from tax liability expanded access to health care, today it is a major cause of the inflation afflicting the system. This tax policy encourages Americans to think that their health care is paid for by someone else. As such, they lack the normal incentives to question the need for care or the prices charged for it....

The essential first step is to eliminate the tax exclusion of employer-provided health insurance and treat these benefits as the rest of a worker's cash income is treated. This would give workers an incentive to seek lower cost medical care or insurance by allowing them to pocket any resulting savings....

The way to avoid the political opposition to eliminating the tax exclusion for employer-provided health insurance would be to offset it with expanded tax deductions or tax credits in the personal income tax code for health insurance purchased directly by workers for themselves and their families.

The Heritage proposal is, at its essence, a conservative approach to achieve the widely shared goal of universal coverage. It accomplishes this through the market and by relying on personal responsibility. What, if anything, is "progressive" is the manner of its political pragmatism and its fairness. Leveling the playing field, knocking down the regressivity of the current system--along with all the distortions it introduces--and broadening coverage are goals shared by conservatives and progressives, and so progressives could support the Heritage proposal as, at least, a workable second-best solution.

And Furman isn't the first on the Left to be drawn to this work, either. Then-Editor of The New Republic Michael Kinsley called it "the simplest, most promising, and in an important way, the most progressive idea for health care reform." But to be sure, there haven't been many admirers from that ideological camp.

And so it's good that Furman sees the light, and perhaps some of his allies will be drawn in, too.

Posted by Andrew Grossman at 04:31 PM | Permalink | TrackBacks (0)

The Los Angeles Times reports that more and more states are moving ahead to reduce the ranks of the uninsured within their borders. In large part, state legislators are driven by costs: not covering the uninsured can swell states' Medicaid programs, causing costs to explode. But the economics of health care coverage have also made this a hot political issue:

On the topic of health insurance, legislators are responding to clamor from voters who say they cannot afford the kind of regular medical maintenance it takes to stay well — and really cannot afford treatment if they get sick. State lawmakers know they keep their jobs by creating policy that people want and need, Tobler said.

As large and small employers slash insurance benefits — sometimes eliminating coverage entirely — much of the states' efforts are directed at the working poor. Health insurance premiums have climbed so high that some people cannot afford coverage even when they are eligible, Tobler said

With that political reality, states are moving ahead, but many are moving in the wrong direction. Maine's command-and-control solution has proven unpopular in the state and, according to the Times, barely costs less than more flexible private plans. This is fortunate for Maine--if the state plan were more popular, it would cost the state's taxpayers plenty.

Other states, as one analyst quoted in the article puts it, "are, at best, moving chairs on the deck." Sometimes this can bring about marginal improvements. For example, matching subsidies with patients, rather than hospitals, can change the incentives that hospitals face to pursue cost-effective care. While a good move, though, that's hardly revolutionary.

Really only one state has struck out into revolutionary territory. Massachusetts's new plan, due to go into effect next year, involves all manner of contortions to work around the federal tax policy, which heavily advantages employer-purchased insurance. A new "Connector" will serve as a clearinghouse for health insurance of the state and allow workers without insurance to purchase it with the benefit of that federal tax advantage. A disadvantage of this complex may be its complexity, something necessitated by the federal tax code's preferences. Still, this market-based approach is promising and likely to fare better than Maine's government-controlled approach.

It is a waste of time and resources (in states that aren't discouraged from pursuing reforms altogether) that so much energy and through muse be directed towards working around the more restrictive parts of federal tax law, benefits law, and the like. State-level health care reform--with all of its potential benefits for the entire nation--needn't be so difficult or complex. That's the promise of legislation proposed by Sens. Voinovich and Bingamin. Their "Health Partnership Act" would give states that chance to attempt health care reforms that have been blocked by partisan bickering in Washington for years. States could spend more time considering the principles of their reform programs and less time applying them to the rough terrain of federal law.

Is this some risk in this approach? Michael Cannon argues that the deck would be stacked against pro-market reforms because states would just be fishing for more federal dollars, and Stuart Butler (in his first and perhaps last weblog post) responds that this is not so. But consider the list of states working on health care and named by the LA Times: Vermont, Massachusetts, Maine, Arkansas, Florida, Oklahoma, Tennessee, Kentucky, Montana, Iowa, West Virginia, Hawaii, and New Mexico. Massachusetts's approach, arguably, is pro-market. Florida is undertaking some good pro-market reforms. Most of the rest, however, are hewing closer to Maine's approach (put the government in control) or even Tennessee's former and failed Tenncare (let's get everyone on the rolls!).

With the incentives the states face today, and the hurdles that they must overcome to create level markets in insurance so that more of their citizens can afford and purchase coverage, this is no great surprise. This reality is the counterfactual to Cannon's criticisms of the Voinovich-Bingamin plan to give the states greater flexibility to see what works in health care.

Posted by Andrew Grossman at 01:38 PM | Permalink | TrackBacks (0)

"Thud" was Michael Cannon's initial response to my paper on legislation to break the health care reform stalemate in Washington by allowing state-level action. Expounding a bit more in a later post, Michael argues that this "federalism approach," based on a paper I co-authored with Henry Aaron in 2004, would be inevitably a step in the wrong direction--towards big-government health care.

Michael seems to make two objections to my proposal to foster competitive health policy experiments at the state level. One is that market-based proposals wouldn't be proposed by any states. The other is that if they were approved they wouldn't survive anyway. Well, that's a pretty dismal prognosis for his own efforts, and mine, to persuade people that markets should be tried in health. It's a bit like running up the white flag, I suppose.

But let's review the idea and his objections to using competitive federalism as a tool to break out of the gradual slide to socialized medicine.

Just as political freedom combined with information permits people to compare social arrangements, so, in my view, promoting state experimentation permits a comparison of approaches to solving social problems. The idea of a commission offering financial rewards for success in reaching health goals is a strategy to encourage more "fringe" ideas to be tried competitively at the state level -- market-based ideas as well as collectivist. By fringe ideas I mean plausible proposals that the currently deadlocked national political process will not permit to be implemented over the whole country. I think that if one state were to experiment with a vigorous HSA-based approach next to a state experimenting with expanding Medicaid, for instance, we would be able to demonstrate the superiority of the former and push the consensus in our direction.

As John Milton put it: "Let truth and falsehood grapple; who ever knew truth put to the worse, in a free and open encounter?" I guess Michael does not have Milton's confidence. Or to be fairer, he feels we won't get a free and open encounter.

Michael's argument is that in the competition, states just wouldn't propose market-based reforms, such as capping or block-granting Medicaid spending. Yet even in today's much more restrictive environment, many states are pushing towards market approaches. States like Florida and South Carolina are pushing the envelope. Florida has received a waiver to move to a define contribution model for its Medicaid enrollees. South Carolina has been at pushing to experiment with a Health Savings Account model for some of its Medicaid populations. See "Florida and South Carolina: Two Serious Efforts to Improve Medicaid." With greater freedom to experiment, we'll see more comprehensive market approaches.

The other argument seems to be that market-based approaches will always lose out in any competition because rewarding measurable performance gives the advantage to big government proposals. Market benefits are too diverse and diffuse, he says, to stack up well against in a measurable competition with concentrated government benefits. If that were so we would see free economies consistently losing out to centralized systems in the competition for public approval. Yet, of course, it isn't so.

To be sure, goals and measurement rules can be rigged to favor one side or the other, and in the current environment any rigging would probably help those who want to expand government. That is an aspect of any commission we need to work hard to get as right as possible. But even if the prize-giving were stacked, most supporters of markets and freedom I know would still seek to advance that approach if given greater opportunity through a commission-sponsored competition. And Cato and Heritage would be there, encouraging them to do so.

Posted by Stuart Butler at 10:38 AM | Permalink | TrackBacks (0)

The New York Times reports on Britain's ongoing dentistry riots:

"I snapped it out myself," said William Kelly, 43, describing his most recent dental procedure, the autoextraction of one of his upper teeth....

Since moving to Rochdale, a working-class suburb of Manchester, he has been unable to find a National Health Service dentist willing to take him on.

Every time he has tried to sign up, lining up with hundreds of others from the ranks of the desperate and the hurting — "I've seen people with bleeding gums where they've ripped their teeth out," he said grimly — he has arrived too late and missed the cutoff.

Here the Times describes the problem:

Britain has too few public dentists for too many people. At the beginning of the year, just 49 percent of the adults and 63 percent of the children in England and Wales were registered with public dentists.

And now, discouraged by what they say is the assembly-line nature of the job and by a new contract that pays them to perform a set number of "units of dental activity" per year, even more dentists are abandoning the health service and going into private practice — some 2,000 in April alone, the British Dental Association says.

You mean the government can't just replace supply and demand by fiat? Surprise, surprise.

Still, fortunately for Britons, there is a nice market solution that's still available:

In extremis, Britons can always buy dental emergency supplies made by a company called Passion for Health DenTek. These include materials that allow people to replace lost fillings, treat gum pain or reattach cracked crowns "until they can actually get in and see a dentist," said Jennifer Stone, the company's sales and marketing director. Sales in Britain have increased by 40 percent in the last year, Ms. Stone said.

Posted by Andrew Grossman at 04:52 PM | Permalink | TrackBacks (0)

Lefty weblogger Mark Kleiman stumbles across a shocking realization:

I hate to steal Brad DeLong's line, but why can't we have a better press corps?

Wednesday's New York Times runs a story claiming that the prescription drug plan may turn out to be a plus for the Republicans after all. I suppose that's barely possible. But the story never mentions the major reason it probably won't be true: the "donut hole."
...
Let's see: it's six months to Election Day. So anyone who has coverage by now and spends at least $400 a month on drugs will run out of coverage before it's time to vote; those who signed up earlier will run out even if they spend somewhat less.

So pretty soon now — and well before November — seniors in large numbers are going to start running into that gap. They're going to show up at the pharmacy with their shiny Part D card and be told that they're going to have to pay full retail price for their drugs. (Because, of course, the Republicans who wrote the fill forbade Medicare from negotiating the same discounts the big hospital chains get.)

[300+ words on the NY Time's right-wing bias excised...]

Heritage's Ed Haislmaier made a similar point, with somewhat more background analysis, in March 2005:

[T]he unavoidable result of this design was that it includes a large “coverage gap” or “doughnut hole” in the mid-range of drug spending. Once a beneficiary has spent $2,250 on prescription drugs, with Medicare reimbursing $1,500 of those costs, he or she will receive no further Medicare reimbursement until reaching a total of $3,600 in out-of-pocket drug costs. That means the beneficiary must pay entirely out-of-pocket for the next $2,850 of drugs, after the first $2,250. Of course, this “coverage gap” or “doughnut hole” feature of the Part D benefit design is likely to prove highly unpopular with Medicare enrollees....

The interesting question then, is how might the conflicting political dynamics – particularly, beneficiary support for generous front-end drug coverage and beneficiary dissatisfaction with the coverage gap – play out next year when the Part D benefit is scheduled to take effect? Given that 2006 will not only be the first year of the new program but also an election year, it will be a test of whether Congress got its political calculations right.

And this remains an open question. One thing that is clear, at the moment, is that the drug benefit has helped to stoke conservative discontent with congressional Republicans, said by many pollsters to be among the party's bigger problems heading towards November.

(Just for the sake of completeness, Kleiman has little idea what he's talking about w/r/t government negotiation and "big hospital chains." The big negotiators are the enormous Pharmacy Benefit Managers, each of which has a larger customer base than Medicare. These PBMs, of course, are participating in the drug benefit. It just happens that Haislmaier has a fair bit to say about this, as well.)

Posted by Andrew Grossman at 03:09 PM | Permalink | TrackBacks (0)

Heritage Fellow Ed Haislmaier, who lent many ideas to the Romney Administration in the creation of its health reform proposal, knocks down many criticisms of it from well-meaning but less-than-fully-informed conservatives who have come out against the plan.

Two provisions have particularly raised conservatives' hackles: the "individual mandate" and a new fee that businesses who do not purchase insurance for their workers would have to pay to the stated uncompensated care fund.

Haislmaier's main argument is that, in the context of the overall plan, these are minor issues and are far outweighed by the plan's emphasis on market mechanisms and individual responsibility. In health care reform, the Massachusetts plan is a very new and radical thing. It is nothing like Hillarycare redux.

Beyond that, on a practical level, neither provision is likely to have much effect. The "individual mandate," while philosophically troubling, will end up punishing few if any Massachusetts citizens because of new options that will be available in the state's insurance market. The employer fee, first, isn't likely to cost nearly so much as the maximum in the bill due to insurance market reforms and, second, can be easily avoided by any firm that signed up to take advantage of the state's new insurance clearinghouse.

Finally, the most important part of the plan for conservatives is the one that has received the least coverage, and that's the Connector--the state-chartered insurance marketplace. Haislmaier, who is too modest to write on his role in developing the Connector concept, explains in great detail what it is, how it works, and why it should be love at first sight for those who'd care to see more market-driven behavior in U.S. health care.

Look for much more here on the Mass plan in the days ahead.

Posted by Andrew Grossman at 07:15 PM | Permalink | TrackBacks (0)