A Better Choice: Healthcare Solutions for America

A Better Choice: Healthcare Solutions for America

by John C. Goodman

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ISBN-13: 9781598132090
Publisher: Independent Institute, The
Publication date: 04/01/2015
Sold by: Barnes & Noble
Format: NOOK Book
Pages: 128
File size: 1 MB

About the Author

John C. Goodman is Senior Fellow at the Independent Institute, President of the Goodman Institute for Public Policy Research, and author of the widely acclaimed, and the award-winning Independent book, Priceless: Curing the Healthcare Crisis. The Wall Street Journal and the National Journal, among other media, have called him the “Father of Health Savings Accounts.” Dr. Goodman is frequently invited to testify before Congress on health care reform, and he is the author of more than fifty studies on health policy, retirement reform and tax issues plus ten books, including Living with Obamacare: A Consumer's Guide; Lives at Risk: Single Payer National Health Insurance Around the World (with Gerald Musgrave and Devon Herrick); Leaving Women Behind: Modern Families, Outdated Laws (with Kimberley A. Strassel and Celeste Colgan); and the trailblazing Patient Power: Solving America's Health Care Crisis, that sold more than 300,000 copies. His other books include The Handbook on State Health Care Reform, National Health Care in Great Britain: Lessons for the U.S.A., Economics of Public Policy: The Micro View (with Edwin Dolan), Fighting the War of Ideas in Latin America, and Privatization. Dr. Goodman received his Ph.D. in economics from Columbia University, he has been President and Kellye Wright Fellow in Health Care at the National Center for Policy Analysis, and he has taught and completed research at Columbia University, Stanford University, Dartmouth College, Southern Methodist University and the University of Dallas. In 1988, he received the prestigious Duncan Black Award for the best scholarly article on public choice economics. He regularly appears on television and radio news programs, including those on Fox News Channel, CNN, PBS, Fox Business Network and CNBC, and his articles appear in The Wall Street Journal, Investor’s Business Daily, USA Today, Forbes, National Review, Health Affairs, Kaiser Health News and other national publications. Dr. Goodman was also the pivotal lead expert in the grassroots public policy campaign, “Free Our Health Care Now,” an unsurpassed national education effort to communicate patient-centered alternatives to a government-run health care system. The initiative resulted in the largest online petition ever delivered on Capitol Hill.

Read an Excerpt

A Better Choice

Healthcare Solutions for America


By John C. Goodman

The Independent Institute

Copyright © 2015 The Independent Institute
All rights reserved.
ISBN: 978-1-59813-209-0



CHAPTER 1

Introduction


BARACK OBAMA FAMOUSLY campaigned during the 2008 election season on a platform of change. Pundits and partisans can debate whether or not his tenure in the Oval Office has lived up to that promise on other fronts. But all agree that President Obama's signature legislative victory, the Patient Protection and Affordable Care Act of 2010 has brought major changes to the American healthcare system.

It's also undeniable that "Obamacare," as both its detractors and supporters call it, also known as the Affordable Care Act (ACA), has been mired in controversy. To cite but one indicator, a nationwide survey conducted by the Kaiser Health Tracking Poll only two weeks before open enrollment in the ACA health insurance exchanges was scheduled to end on March 31, 2014, found that only 38 percent of respondents expressed a favorable view about the healthcare law, despite a massive public-relations push by the White House and its congressional allies. Not only has the American public not embraced the ACA, but calls to "repeal and replace" still echo across the land. What should reformers offer in place of the president's healthcare overhaul?

Most critics of the ACA have not systematically identified its flaws or offered a practical, comprehensive market-based alternative to it. In this report, I attempt to remedy that omission by identifying the key problems of the ACA and the solutions that will empower patients, create real competition among health insurers and healthcare providers, and minimize the distorting role of government in the medical marketplace.

Health reform should not be a one-sided affair, an edict imposed from on high onto a hapless polity by legislators who must "pass the legislation in order to know what's in it" (to borrow House Speaker Nancy Pelosi's revealing quip about the ACA). Nor should it be the result of deals struck behind closed doors by career politicians, lobbyists, and special-interest groups. Instead, it should meet the real needs of patients and their doctors and of employees and their employers.

The full case for my proposals can be found in my book Priceless: Curing the Healthcare Crisis (Oakland: The Independent Institute, 2012). In fact, this publication is an outgrowth of that book. Given the wider purposes and scope of Priceless, I decided that it is a bit too unwieldy to serve the more narrow purpose of explaining what most needs to be done.

A Better Choice spells out the reasoning that undergirds the key pillars on which I believe health reform should rest. Although much of this material draws directly from Priceless, I have included additional discussion that sheds light on more recent problems with the ACA. Some of this draws on pieces of mine published at the websites of Forbes, Psychology Today, and the Independent Institute, and I am delighted that this material is available in a single coherent volume.

CHAPTER 2

Six Major Problems of the Affordable Care Act (ACA)


THERE ARE SIX major flaws in the Affordable Care Act (ACA). These cannot be solved by executive order and are not going away unless changed by new legislation. Although this study is primarily a prescription, not a prognosis, a brief review of the ACA's failures is useful for underscoring the need for reforms based on sound principles.


Problem 1: The ACA Imposes an Impossible Mandate

For the past forty years, healthcare spending in the United States has grown at about twice the rate of growth of national income on a real, per capita basis. Although growth in spending slowed modestly after the introduction of Health Savings Accounts (HSAs) and the onset of the Great Recession, there is no reason to think we won't revert back to this trend. The long-term growth in spending is not unique to the United States, nor is the slowdown of recent years. Our healthcare spending growth rate is in the middle of the pack among developed countries. Clearly, the trend cannot go on forever. With each passing year, healthcare crowds out more and more other goods and services that we want to consume. If it were possible to stay on the path we are on, eventually we would have nothing to eat, nothing to wear, and no place to live — but all of us would have a lot of really great healthcare.

President Obama did not create this problem. But the Affordable Care Act will keep us on this path by refusing to allow us to choose better, more efficient insurance alternatives. For example, under the law healthy women with no symptoms are entitled to free mammograms — with no deductible or copayment — even though giving mammograms to healthy women is an increasing controversial activity. However, a woman with actual symptoms that indicate a mammogram is needed may have to pay the full cost ($300 or more) out of pocket. Given the freedom to reverse those provisions, insurers could lower the cost of health insurance and raise the expected quality of care at the same time.

One of the promises of health reform was a more efficient, less costly healthcare system. In pursuit of that goal, the Obama administration is spending millions of dollars on pilot programs and demonstration projects "to find out what works" so those projects can be copied. But the federal government has direct control over only what happens in Medicare. Even there, three Congressional Budget Office reports have concluded that the pilot programs aren't working.


Problem 2: The ACA Makes Promises That Aren't Paid For

While forcing the private sector to buy something that year by year will grow faster than our income, the ACA limits the government's exposure in three ways.

First, under the ACA, Medicare is set to grow only a tiny bit faster than the growth of national income — forever. This provision is reminiscent of an aspect of Congressman Paul Ryan's Medicare reform plan. When Ryan proposed that the "premium support" that seniors get to buy private insurance would grow at a slower rate than the conventional forecast of healthcare costs — thereby shifting more and more of the cost to seniors — Democratic critics howled. Yet this is exactly what the ACA does to all of Medicare. The difference is that the Ryan plan was an undeveloped concept, whereas the ACA is the law of the land.

How does the ACA keep Medicare on this spending path? Absent any successful supply-side changes, Plan B for the ACA is price controls. This implies draconian cuts in Medicare fees for doctors and hospitals — a fact that has been neglected by the mainstream healthcare media.

These cuts by themselves would not reduce total healthcare spending, however, because every dollar of reduced spending on seniors will be used to increase spending on health insurance for young people. Moreover, if seniors react by turning to concierge doctors (described later) and other direct-pay medical services, total spending surely will increase. To make everything even more problematic, many Washington insiders think the spending cuts will never take place. Similar cuts in doctor fees were legislated in 1997, but Congress has postponed the reduction fourteen times. (The "doctor fixes.")

At least as the law is now written, however, spending on the elderly and the disabled will be growing at one rate while the rest of the healthcare system will be growing at twice that rate.

Second, Medicaid hospital expenses are set to grow no faster than Medicare. The Medicare Office of the Actuary included two graphs in the 2012 Medicare Trustees report showing what all this will mean. Figure 2.1 projects approved fees for inpatient hospital services. It shows Medicare and Medicaid fees falling year after year compared to spending by private health insurance. Figure 2.2 shows Medicare-approved fees for doctors dropping below Medicaid fees in the near future, and falling progressively behind Medicaid and private-sector payments indefinitely into the future. Third, buried deep in the 2,700-page legislation is the little-reported fact that after 2018, subsidies for private health insurance are also scheduled to grow at the same rate as Medicare.

Think about all of this for a moment. The new law will force all of us to purchase health insurance whose cost is likely to grow faster than our incomes. But government's share of the burden is capped — insuring that more and more of the cost is shifted over time to ordinary citizens.


Problem 3: The ACA Promises What It Cannot Deliver

The healthcare law aims to insure an additional 26 million people. If economic studies are taken as a guide, the newly insured will double their consumption of healthcare. In addition, millions of employees and their employers will be forced to upgrade their health insurance — making it more generous (and more expensive) than before. Again, more insurance coverage inevitably leads to more spending. Then there is a lengthy list of preventive services that must be covered, with no copayment or deductible. Even seniors on Medicare are affected. Although no serious scholar has asserted that it has any medical benefit, seniors are eligible for a free "wellness checkup" every year — all of which will take doctors' time and use valuable resources.

In a 2003 study, researchers at Duke University Medical Center estimated that it would take 1,773 hours a year — or 7.4 hours every working day — for the average doctor to counsel and facilitate patients for every procedure recommended by the U.S. Preventive Services Task Force. And remember, every so often, a screening test turns up something that requires more testing and more doctor time.

The current supply of medical personnel cannot come anywhere close to providing what has been promised, at least for the next 10 to 15 years. In addition, screening tests and similar services add to healthcare costs, rather than reduce them.

What we are describing is a huge increase in the demand for care. But the ACA does nothing to increase supply. This mismatch is virtually guaranteed to put upward pressure on prices. To the extent that prices are prevented from rising, the law will create more rationing by waiting. In other words, your access to care will be controlled by waiting times — similar to what's happening at the Veterans Administration. And almost anything patients and doctors do to circumvent the cost of waiting will also add to the money cost of care.

For example, a growing number of primary care doctors are turning to concierge practice. For a fee of about $2,000 a year, patients get same- day or next-day appointments, more time with the physician, and someone who will act as their agent in dealing with other parts of a complex healthcare system. Yet physicians who become concierge doctors typically reduce the size of their practice from about 2,500 patients to about 500. So as concierge practices grow, the rationing problem becomes worse for everyone else.

The most vulnerable patients will be those who are in plans that pay below-market fees. These include the elderly and the disabled on Medicare, poor families on Medicaid, and newly insured enrollees in subsidized private plans sold in the health insurance exchanges.

What effects will all of this have on people's health? In the White House, within the Democratic chambers in Congress, and among the (overwhelmingly liberal) health policy community, there was considerable anguish in May 2013. The reason: a study published in the prestigious New England Journal of Medicine. Thanks to a state budget crunch in Oregon, scholars were able to perform a double- blind study (the gold standard for researchers), and the findings came out very badly for the supporters of the ACA. Researchers found that (as far as physical health is concerned), there was no difference in outcomes between those enrolled in Medicaid and those who were uninsured. Further, most of the patients went to the emergency room for treatment, rather than to a doctor's office — just as they had before Medicaid enrollment.

(Actually, the results weren't a complete disappointment. Oregon Medicaid enrollees reported less depression, somewhat greater levels of happiness, and among those who had out-of-pocket expenses, savings of about $215 each year. But remember, we could have given the enrollees this amount and spent far less than was actually spent on this program.)

It's hard to exaggerate what a blow this was to the people who gave us the ACA. Everything about the ACA — from the money we are spending to the damage being done to the labor market to the hassles the whole nation is going through — depends on one central idea: that enrolling people in health insurance plans will give them access to better health. (Tens of thousands of lives will be saved every year, the president told us.)

But the gap between rhetoric and reality gets worse. The ACA is expected to insure an additional 26 million people. About half of these will enroll in Medicaid. The other half are supposed to get their insurance in health insurance exchanges, where most will qualify for generous premium subsidies paid for by federal taxpayers. If the Massachusetts health reform is precedent, however, these people will be in health plans that pay doctors about 10 percent more than what Medicaid pays. Think of these plans as Medicaid Plus.

Yet, if Medicaid doesn't make people any healthier than they were when they were uninsured, that implies that the entire ACA program could be one huge waste of money.

Healthcare analysts Aaron Carroll and Austin Frakt argue on their blog, The Incidental Economist, that the Oregon study was "underpowered" — failing to show significant effects because there were too few people in each disease category. However, as the Wall Street Journal editorial page pointed out, if Oregon's Medicaid program were a drug, it would fail to get FDA approval.

The Oregon study is not the first one to find that enrollees in Medicaid do no better than the uninsured. Other studies have found that Medicaid enrollees find it more difficult to get a doctor's appointment and have worse health outcomes than the uninsured. A 2014 study of the effects of health reform in Massachusetts did find a significant decrease in mortality as a result of health reform in that state.

However, the gains in life expectancy were small relative to the cost.

To a lot of Americans comparing healthcare outcomes with their money cost is an abhorrent idea. But in his book Critical: What We Can Do about the Health-Care Crisis, Tom Daschle, President Obama's first choice to head the Department of Health and Human Resources, said that such healthcare rationing is essential if we are to control costs. Daschle pointed to Britain as a country that routinely does what he had in mind. Other officials associated with the implementation of the ACA are on record expressing similar ideas.

But if it's good to subject all medical procedures to a cost effectiveness standard, isn't it equally good to apply that standard to the entire health reform program? When we do it turns out that the ACA fails the test.

Duke University health economist Chris Conover used estimates of the health gains in Massachusetts as the basis for a calculation and he bent over backwards to make assumptions most favorable to the ACA. "Even under the most wildly optimistic assumptions possible, Obamacare costs a jaw-dropping $224,000 per (quality adjusted) year of additional life," he writes. "In the worst case, the costs would be as high as $1.3 million." This is way beyond the range that Daschle and others consider reasonable. Each of these studies has been subjected to much nitpicking on various grounds, however, and a fair-minded person would probably have to say that how much difference Medicaid makes is an open question.

The authors of the Oregon Medicaid study didn't speculate on the reasons for their findings, but I will. The uninsured in the United States have access to a patchwork system of "free" care when they are unable to pay for it out of their own pockets. In Dallas, Texas, where I live, for example, the entire county is part of a health district that makes indigent healthcare available to needy families. It covers people up to 250 percent of the poverty level, with a sliding scale of copayments, based on family income. Parkland Memorial Hospital and its satellite clinics are the primary providers.

You could argue that uninsured, low-income families in Dallas are actually "insured" in this way, although they face the problems of rationing by waiting and other nonprice barriers to care. Officially, they are counted as "uninsured." However, when these very same individuals enroll in Medicaid, they enter a different system of patchwork care and are classified as "insured." But one-third of the doctors aren't taking any new Medicaid patients. So those who enroll face the same problems of rationing by waiting and other nonprice barriers to care that the uninsured face. Often, the uninsured and Medicaid enrollees get the same care from the same doctors at the same facilities — even though one group is labeled "insured" and the other "uninsured."

Consider the case of Parkland Hospital. Both uninsured and Medicaid patients enter the same emergency room door and see the same doctors. The hospital rooms are the same, the beds are the same, and the care is the same. Consequently, patients have no reason to fill out the lengthy forms and answer the intrusive questions that Medicaid enrollment so often requires. Furthermore, the doctors and nurses who treat these patients are paid the same, regardless of patient' enrollment in an insurance plan. Therefore, they tend to be indifferent about who is insured by whom, and even indifferent about whether they're insured at all. In fact, the only people concerned about who is enrolled in what plan are hospital administrators, who have to pay the bills.

At Children's Medical Center, next door to Parkland, a similar exercise takes place. Medicaid, CHIP, and uninsured children all enter the same emergency room door; they all see the same doctors and receive the same care.

Interestingly, at both institutions, paid staffers make heroic efforts to enroll people in public programs — even as patients wait in the emergency room for medical care. Yet they apparently fail to enroll eligible patients more than half the time. After patients are admitted, staffers valiantly go from room to room to continue this bureaucratic exercise. But even among those in hospital beds, the failure-to-enroll rate is significant — apparently because it has no impact on the care they receive or the financial burden they incur.

Prior to the ACA, more than one-third of all people who were eligible for Medicaid were not enrolled, indicating that millions of potential beneficiaries did not view the program as very valuable. In Oregon, the situation is even more dramatic. Avik Roy wrote the following in 2013:

Of the 35,169 Oregonians who "won" the lottery to gain enrollment in Medicaid, only about 30 percent actually enrolled. Indeed, only 60 percent of those who were selected bothered to fill out the forms necessary to sign up for the benefits — which tells you a bit about how uninsured Oregonians perceive the Medicaid program.


(Continues...)

Excerpted from A Better Choice by John C. Goodman. Copyright © 2015 The Independent Institute. Excerpted by permission of The Independent Institute.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Table of Contents

Contents

1 Introduction,
PART I Problems and Principles,
2 Six Major Problems of the Affordable Care Act (ACA),
3 Six Principles for Commonsense Reform,
PART II Taking a Closer Look at the Principles,
4 Understanding Choice,
5 Understanding Fairness,
6 Understanding Universal Coverage,
7 Understanding Portability,
8 Understanding Patient Power,
9 Understanding Real Insurance,
PART III Curing the Healthcare Crisis,
10 Can the ACA Be Fixed?,
11 The Case for a Fixed-Sum Tax Credit,
12 Why I Am More Egalitarian on Healthcare Than Most Liberals,
Notes,
Index,
About the Author,

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