by Jeff Jacoby

The Boston Globe – link to original article

November 4, 2009

Second of two parts (Read Part 1 here).

“MY GUIDING PRINCIPLE is and always has been that consumers do better when there is choice and competition.” So said President Obama in his address to Congress on health care, making an argument for a government-run “public option” to sell health insurance that many Democrats have echoed.

In 34 states, Obama noted, three-fourths of the insurance market is controlled by five or fewer companies. “Without competition, the price of insurance goes up and the quality goes down.” But add a public option “administered by the government just like Medicaid or Medicare,” he said, and competition would revive.

No, it wouldn’t.

A government-run health insurer would radically tilt the health-insurance playing field. It would amount to a new entitlement program, able to undercut the price of private insurance by squeezing hospitals and doctors, reimbursing them at below-market rates. “Just like Medicaid and Medicare,” which also underpay medical providers, the public option would force hospitals and doctors to charge private insurers more. Those insurers, in turn, would be compelled to raise their premiums, eventually losing millions of customers to the government plan.

Obama and other Democrats insist that any public option would have to be self-supporting, properly balancing its premiums and risk and not expecting the government to cover its losses. Sound familiar? The same assurances were made about Fannie Mae and Freddie Mac.

“I have no interest in putting insurance companies out of business,” the president insists now. As a US Senate candidate in 2003, he sang a different tune: “I happen to be a proponent of a single-payer universal health care program. . . . But as all of you know, we may not get there immediately.” Has he changed his mind? Or only his talking points?

More competition among health insurers is a consummation devoutly to be wished. But there are far better ways to get there than a public option.

Here are three:

? Tear down the barriers to buying health insurance across state lines. Under federal law, states are permitted to regulate “the business of insurance” as they see fit, and most of them have seen fit to allow the sale only of insurance policies licensed by their own state insurance commissions. As a consequence, there is no competitive national market for health insurance; there are 50 state markets instead, most of which are dominated by a handful of insurers. This, says Michael Cannon of the Cato Institute, is the “original sin” of health insurance regulation.

When it comes to almost any other product or service, Americans would find a ban on interstate commerce and competition intolerable: Imagine being told that you could buy a car or a computer only if it was manufactured in your state. Consumers in the market for a mortgage are free to do business with an out-of-state lender; those in the market for health insurance should be equally free to do business with an out-of-state insurer.

? Repeal mandatory benefits that make health insurance needlessly expensive. Compounding the lack of interstate competition is the way states drive up the cost of health insurance by making certain types of coverage compulsory. Consumers and insurers should be free to work out for themselves just how comprehensive or limited a policy should be. But state mandates prevent such flexibility by requiring insurance companies to sell a fixed array of benefits that many customers may not want. Individuals seeking plain-vanilla health insurance — a policy that will cover them, say, in case of major surgery or catastrophic illness — may find themselves forced to pay for a policy that also covers acupuncture, in vitro fertilization, alcoholism therapy, and a dozen additional treatments.

When compulsion takes the place of competition, the result is invariably less choice at higher cost.

? De-link health insurance from employment. Nothing distorts America’s health insurance market like the misbegotten tax preference for employer-sponsored health insurance. Until that preference is removed, tens of millions of Americans will continue to rely on their employers’ health plan instead of buying health insurance for themselves, they way they buy every other type of insurance. Fix the tax code, and no longer could insurance companies routinely bypass employees and deal only with their employers. Instead there would be intensive competition for individual customers — and the lower premiums such competition would yield.

Yes, Mr. President, consumers do benefit from choice and competition. The key to both is not more government regulation and control, but less.

(Jeff Jacoby is a columnist for The Boston Globe.)

by Jeff Jacoby

The Boston Globe – link tp original article
November 1, 2009

First of two parts (Next: More competition, less government)

TWO THINGS supporters of a government-run “public option” for health insurance know for sure. One is that private health insurers are raking in obscenely high profits. The other is that only a government rival can force them to compete on price.

In a clever new commercial featuring Heather Graham as an agile sprinter named “Public Option,” the left-wing pressure group MoveOn combines both themes, describing insurance companies as “lazy” and “bloated from the profits of raising our health care costs sky-high.” Why, it asks, should anyone resist the competition a public option would generate? After all, “competition is as American as apple pie.” In a less amusing print ad a few weeks ago, MoveOn charged that “insurance companies are willing to let the bodies pile up, as long as their profits are safe.”

President Obama also attacks health insurers as avaricious profiteers.

“The insurance industry is making this last-ditch effort to stop reform,” he declared on Oct. 16, “even as costs continue to rise and our health-care dollars continue to be poured into their profits (and) bonuses.” When he addressed Congress in September, Obama insisted that only a public option will “keep insurance companies honest.” On the White House Blog, ObamaCare opponents are accused of “fighting to protect insurance industry profits.”

Indeed, there is no shortage of voices characterizing health insurers as greedy villains. Earlier this year, House Speaker Nancy Pelosi praised her party for highlighting “the immoral profits being made by the insurance industry.” On CNN last week, Ohio Senator Sherrod Brown demanded a public option “so the insurance industry can’t continue to game the system and discriminate” against women and the disabled — tactics insurers have used to “quadruple their profits in the last five years.” If quadrupled profits don’t seem rapacious enough, the union-backed Health Care for American Now! ups the ante, claiming, according to the AFL-CIO’s news blog, that “during the past five years, health insurance company profits have soared by 1,000 percent.”

Outbidding them all is Senate Majority Leader Harry Reid. Health insurance companies “are so anti-competitive,” he said last month, “because they make more money than any other business in America today.”

To such overheated agitprop, the only useful response is a cold shower of facts, and the Associated Press supplied a timely one last week. For all the impassioned talk about obscene profits and bodies piling up, AP’s Calvin Woodward reported, “health insurance profit margins typically run about 6 percent” of revenues, a return “that’s anemic compared with other forms of insurance and a broad array of industries.”

On the Fortune 500 list of top industries, health insurance companies ranked 35^th in profitability in 2008; their overall profit margin was a mere 2.2 percent. They lagged far behind such industries as pharmaceuticals (which showed a profit margin of 19.3 percent), railroads (12.6 percent), and mining (11.5 percent). Among health insurers, the best performer last year was HealthSpring, which had a profit of 5.4 percent. “That’s a less profitable margin,” AP noted, “that was achieved by the makers of Tupperware, Clorox bleach, and Molson and Coors beers.”

For the most recent quarter of 2009, health-insurance plans earned profits of only 3.3 percent, ranking them 86^th on the expanded Yahoo! Finance list of US industries. The application-software industry, by contrast, is pulling in profits of nearly 22 percent. Why aren’t MoveOn and the Democrats demanding a “public option” to compete with Microsoft and Adobe and drive down their “immoral” profits?

There are certainly industries doing worse than health insurance — airlines and newspapers, for example — but the notion that health insurers “make more money than any other business in America today” is preposterous. Advocates of a public option may find it tactically expedient to paint insurers as insatiable predators, swollen with ill-gotten profits. The reality is otherwise.

Still, the critics do have one thing right: More competition would bring down health-care premiums. But the way to increase competition is not by adding a government-run health plan to the 1,300 private firms already providing Americans with health insurance. After all, there’s no public option for auto insurance and life insurance, yet they’re sold in a highly competitive national market. There is no reason health insurance can’t be sold the same way.

Next: More competition, less government

(Jeff Jacoby is a columnist for The Boston Globe.)

Many doctors refuse Medicare patients because payments are so low.

Wall Street Journal – SEPTEMBER 10, 2009, – link to original

By GRACE-MARIE TURNER AND JOSEPH R. ANTOS

Also see Medicare for Dummies – link to original

Democratic leaders at both ends of Pennsylvania Avenue continue to battle over whether a new government-run health plan, modeled after the popular Medicare program for seniors, must be included in health-reform legislation.

President Barack Obama told a New Hampshire town-hall meeting last month that “if we’re able to get something right like Medicare, then there should be a little more confidence that maybe the government can have a role.” Did the government really get Medicare right? Here are the top 10 reasons this program should not be a model for reform, and why it would be dangerous for the federal government to be put in charge of any more of our health sector:

1) Medicare is going bankrupt. The Medicare Trustees estimate that the program will run short of money starting in 2017. Medicare will drown in a sea of red ink, with spending over the next 75 years outpacing dedicated revenues by nearly $38 trillion.

2) Private payers are bailing out Medicare. According to Milliman, an independent actuarial firm, Medicare—and to an even greater extent, Medicaid—underpays doctors and hospitals, shifting costs to private insurers. Milliman estimates that the average family in a private PPO health plan pays an additional $1,788 a year to compensate for underpayments by Medicare and Medicaid, representing a “hidden tax” on commercial payers totaling $89 billion a year.

Providers could not keep their doors open without the higher payments from private insurers. A recent letter to Congress from 13 leading health-care delivery organizations, including the Mayo Clinic, said “many providers suffer great financial losses associated with treating Medicare patients.” They said that if these rates were expanded to patients who currently have private insurance, the result “will be unsustainable for even the nation’s most efficient, high quality providers, eventually driving them out of the market.” That means we would say goodbye to some of the best health-care systems in the country.

3) Expansion of entitlement programs threatens our economic security. Congressional Budget Office Director Douglas Elmendorf broke the bad news in July. Reform legislation before Congress would worsen the federal government’s already bleak budget outlook, increase the deficit, and drive the nation more deeply into debt. Instead of bending the cost curve down, Mr. Elmendorf told senators their reform proposal would “significantly increase” costs.

4) Low administrative costs are a mirage. The claim that Medicare’s administrative costs are only 3% is fantasy. If all Medicare costs—such as revenue collection, personnel and enforcement—were accounted for, its administrative expenses would be at least twice as high. And it still wouldn’t be providing services private insurers do, such as nurse hotlines, decision-support tools and fraud detection, or paying the income, property and provider taxes that private plans must pay.

5) Medicare is rife with fraud. According to the FBI, between 3% and 10% of all health spending is lost to health-care fraud. Despite the president’s promise this money could be recaptured to pay for his reform agenda, Congress has shown itself to be remarkably incapable of curtailing fraud and abuse in government health programs.

6) Medicare short­-changes seniors. Medicare exposes patients to unmanageable costs if they become seriously ill—even limiting the total number of days a patient may spend in the hospital. The program covers only about 50% of the health costs of seniors, and most have supplemental insurance to fill in the gaps. This is not a model for comprehensive coverage.

7) Medicare’s model is obsolete. Its basic benefit structure uses a fee-for-service model designed in 1965 which has not been altered since, except to add prescription drug coverage almost 40 years later. In contrast, private plans are continually evolving. They create incentives for patients to become more informed about their health choices, and offer innovative programs for disease management, wellness and prevention, and care coordination to improve quality and save money.

Payments are too low. Washington decides how much doctors, hospitals and other providers will be paid down to the smallest detail, with mountains of regulation and paperwork to track the politically driven process. Medical professionals are in a perpetual battle with Congress over their payment rates, and many physicians refuse to accept new Medicare patients because payment rates are so low. With few exceptions, Medicare’s solution to cost containment is the club of price-controls, not innovation and efficiency.

9) Medical decisions are made in Washington. Patients and their doctors are slowly losing the ability to decide what course of treatment is best. Medicare’s decisions to cut funding for the cancer drug EPO, implantable cardiac defibrillators and virtual colonoscopies, for example, have led to epic battles between providers and politicians, while patients and their doctors watch from the sidelines. Medical decisions, which should be made by doctors and patients, are being made by politicians.

10) No one is running the show. If the government is so good at running health-care programs, why has the Obama administration not yet nominated an administrator for the Centers for Medicare and Medicaid Services? These government health programs cover 100 million Americans—the largest health insurance plans in the country—and yet the top office is vacant.

Medicare has undeniably guaranteed that all seniors have health coverage, even if that coverage is not as good as advertised. But the program is in trouble. Even though it has a blank check funded by federal revenues, Medicare will not be able to pay all the hospital bills that come in eight years from now. If you think that’s bad, just wait until 70 million baby boomers turn 65 and drive federal budget deficits into the stratosphere.

Instead of pretending that Medicare is the best model for the country, policy makers should recognize that the program is as much in need of reform as the rest of the health system. Before we give the federal government authority over health coverage for tens of millions more Americans, shouldn’t the government prove it can do a better job with the “public plan” we already have?

Ms. Turner is president of the Galen Institute. Mr. Antos is a scholar at the American Enterprise Institute.

We don’t need radical change. Subsidies and high risk pools can get the job done.

By JOHN SHADEGG AND PETE HOEKSTRA

SEPTEMBER 4, 2009

Wall Street Journal -  link to original

When was the last time you asked your doctor how much it would cost for a necessary test or procedure? In all likelihood, you can’t remember. That’s because your employer-provided health plan or the government “paid for it.” In fact, you paid. We all pay for health care.

There’s no denying that our health-care system is complex. However, we can trace most of the problems in the current system to the lack of control individuals and families have over their care. If there’s one lesson we’ve taken away from the thousands of citizens at town-hall meetings, it’s that one massive health-care bill isn’t the solution. Americans nationwide have voiced their desire for greater control over their care and for reform in digestible pieces.

Here’s how the debate over health-care reform breaks down, and what we believe Congress can do to solve these crucial issues.

•Costs and Control. The health-care reform debate centers on how to lower the cost of care, and who should ultimately control health-care decisions. Under the current system, nobody is focused on controlling costs.

Roughly 60% of all health care in America is employer-provided. This third-party payment structure has divorced the consumer—the patient—from the real cost of services. It encourages excess spending, runaway lawsuits, defensive medicine (doctors ordering unnecessary tests and procedures out of fear of being sued), and huge malpractice premiums.

President Obama and Democrats in Congress say that a new federal health-care bureaucracy and a so-called public plan is the answer. They are wrong.

Government has caused the problems we face in health care. Our tax code incentivizes employer-provided health care, rewards health insurance companies by insulating them from accountability, and punishes those who lack employer-provided care.

Every night on television there are dozens of commercials from Geico, Progressive, Allstate and other companies offering us better auto insurance at lower costs. But there are virtually no commercials for health insurance. This is because the federal government protects health insurance companies from real competition. Insurers don’t have to market to consumers. They only have to satisfy employers. In addition, a person living in New York, for example, is currently only permitted to purchase individual insurance in New York. Allowing competition across state lines would drive down cost tremendously.

We believe the solution to this problem is patient choice. What appears to be a free market in health care today is not. The health-care market is a stacked deck that favors insurance companies rather than patients.

We must stop punishing Americans who buy their own plan by forcing them to purchase their care with after-tax dollars, making it at least one-third more expensive than employer-provided care. Individuals should be able to take their employer’s plan, or turn it down and select insurance of their own choosing without any tax penalty.

•Pre-existing Conditions. Americans agree that no one should go bankrupt because of a chronic disease or pre-existing conditions like multiple sclerosis or breast cancer.

In 2006, the Republican Congress and President Bush passed legislation encouraging states to create “high-risk” pools where those with pre-existing conditions could receive coverage at roughly the same rates as healthy Americans. State-based high-risk pools spread the cost of care for those with chronic diseases among all insurers in the market. The additional cost of their care is subsidized by the government.

Unfortunately, some states have not created high-risk pools, and some need to be restructured to ensure timely access to care. Republicans have proposed fixing this problem by expanding and strengthening this safety net, and by creating reinsurance or risk-adjustment pools so that Americans with chronic medical conditions can get the care they need at an affordable cost.

•Uninsured Americans. Most Americans recognize that the quality of health care in the U.S. is excellent. Thousands of foreigners come to America to get care each year; in 2008, some 400,000 people traveled here for treatment. The five-year survival rates for all cancers beat the rates in Canada, Europe and England. The problem is that some in America cannot access this care.

Republicans and Democrats agree that we should cover all Americans. In large part, we already do. Anyone in the country can walk into an emergency room and receive care regardless of his or her ability to pay.

The political disagreement is not whether to cover everyone, but how to do so. The president and congressional Democrats say we should create a new government-run plan, outlaw the health coverage Americans enjoy today, and let federal bureaucrats control the content and price of health plans. Their bill, H.R. 3200, is filled with more than a thousand pages of new mandates, penalties, regulations and taxes. It is nothing short of a complete takeover of the entire health-care system by Washington politicians.

We believe that all Americans deserve the ability to select health-care coverage that meets their needs—not the preferences of politicians. Republicans in Congress want to empower Americans to make their own choices by providing a dollar-for-dollar tax credit for you to purchase the plan of your choice. Those who cannot presently afford coverage would be able to select and purchase their own plan using a health-care voucher provided by the federal government.

If we give citizens the ability to control their own care, cover pre-existing conditions, and provide resources to the uninsured, we will have fixed health care in America. No bureaucrats. No new czars. No mandates. Just choice and coverage for every American.

Mr. Shadegg is a Republican congressman from Arizona. Mr. Hoekstra is a Republican congressman from Michigan.

BY STEPHEN L. CARTER

WWW.WASHPOST.COM

The Miami Herald – link to original

July 3, 2009

A specter is haunting America: the specter of profit. We have become fearful that somewhere, somehow, an evil corporation has found a way to make lots of money.

Flash back three years. In 2006, Exxon Mobil announced the highest profit in the history of American corporate enterprise. Politicians and pundits stumbled over each other to call for an investigation and for some sort of confiscatory tax on the money the company earned. Profit, it seemed, was an evil, but large profit was even worse.

Today, the debate on the overhaul of the health-care system sparks a shiver of deja vu. The leitmotif of the conversation about the coming shape of health insurance is that the villain is the system of private insurance. “For-profit” firms come under constant attack from activists and members of Congress.

Thus, a recent news release from the AFL-CIO began with this evidently alarming fact: “Profits at 10 of the country’s largest publicly traded health insurance companies rose 428 percent from 2000 to 2007.” Even had the figures been correct — they weren’t — we are seeing the same circus. Profit is the enemy. America could be made pure, if only profit could be purged.

This attitude was wrong in 2006. It is wrong now. High profits are excellent news. When corporate earnings reach record levels, we should be celebrating. The only way a firm can make money is to sell people what they want at a price they are willing to pay. If a firm makes lots of money, lots of people are getting what they want.

To the country, profit is a benefit. Record profit means record taxes paid. But put that aside. When profits are high, firms are able to reinvest, expand and hire. And profits accrue to the benefit of those who own stocks: overwhelmingly, pension funds and mutual funds. In other words, high corporate profits today signal better retirements tomorrow.

Another reason to celebrate profit is the incentive it creates. When profits can be made, entrepreneurs provide more of needed goods and services. Consider an example common to the first-year contracts course in every law school: Suppose that the state of Quinnipiac suffers a devastating hurricane. Power is out over thousands of square miles. An entrepreneur from another state, seeing the problem, buys a few dozen portable generators at $500 each, rents a truck and drives them to Quinnipiac, where he posts them for sale at $2,000 each — a 300 percent markup.

Based on recent experience, it is likely the media will respond with fury and the attorney general of Quinnipiac will open an investigation into price-gouging. The result? When the next hurricane arrives, the entrepreneur will stay put, and three dozen homeowners who were willing to pay for power will not have it. There will be fewer portable generators in Quinnipiac than there would have been if the seller were left alone.

When political anger over profit reduces the willingness of investors to take risks, the nation suffers. According to news reports, one reason the Obama administration has had so much trouble finding buyers for the toxic assets it hopes to remove from financial institutions’ balance sheets is a concern by financiers that should they go along with the plan and make rather than lose money, they will be hauled before Congress to explain themselves.

And although it is easy to be dismayed by excess, trying to regulate profit makes things worse. Capital flows to places where returns are highest. The more exercised our political leaders become when profits rise, the more investment capital will remain abroad.

The search for profit has dangers. There are few legal ways to enhance profits other than cost-cutting, improving efficiency or innovating. This can lead to wondrous inventions — the iPod, say — but it can also create serious dislocations, as when companies close plants and lay off workers. Remedying those human costs is part of what most of us want government to do. What we must avoid, however, is making the remedy so severe that profitability becomes impossible.

Consider the bills in Congress that seek to limit the freedom of federally aided automakers to close dealerships or to build the cars that buyers want. Preserving local jobs and building greener cars are admirable objectives, but a firm that is forced to sacrifice profitability to attain them is unlikely to be competitive over the long haul. Indeed, one reason the “public option” health insurance program under debate may turn out to be more expensive than advocates suggest is that here, unlike in Europe, we are unlikely to put up with government restrictions on what sorts of care will be available, especially for seniors. A board of experts might decide to limit access to hip replacements, for instance, but there is little chance Congress will let them get away with it.

Private insurers, by contrast, will cut whatever they can. This puts them at constant war with regulators and patients, but beneath this tension is a certain useful discipline. We want health care to be cheaper, and the for-profit health-care industry has every incentive to make it so. Supporters of the public option tout Medicare’s cost advantages over private insurance, but those are largely obtained by setting below-market reimbursement rates for medical services (meaning that private patients subsidize Medicare patients). Moreover, the costs of compliance with the hundreds of pages of Medicare regulations are also transferred to the providers, and thus, again, to private patients.

I have no problem with a system in which private patients subsidize public patients. I do not even mind calling it a tax. Those who have good jobs should be helping out, and carping about it is uncharitable, especially now. But an expanded public option will be possible only if the for-profit sector remains vibrant and strong — and profitable. Thus, we should all await, with grateful anticipation, the day when American firms again begin to earn the highest profits in history.

Stephen L. Carter, a Yale law professor, is most recently the author of “Jericho’s Fall.”

——————————

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The ghosts of Clinton Care

A better idea to make health insurance affordable everywhere. link to original – link to original article

Wall Street Journal - 

August 25, 2009

“Competition” has become a watchword of Team Obama’s push for its health-care bill. Specifically, the Administration has defended its public insurance option as a necessary competitive goad to the private health insurance industry.

Health and Human Services Secretary Kathleen Sebelius routinely calls for more choice and competition in health care. In his weekly address this past weekend, President Obama raised the issue directly: “The source of a lot of these fears about government-run health care is confusion over what’s called the public option. This is one idea among many to provide more competition and choice, especially in the many places around the country where just one insurer thoroughly dominates the marketplace.” We take it this refers to a state in which one insurer holds most of the business.

It is no secret that this page is all for competition in the marketplace. If indeed that’s the goal, allow us to suggest a path to it that will be a lot easier than erecting the impossible dream of a public option: Let insurance companies sell health-care policies across state lines.

This excellent idea has been before Congress since at least 2005, when Rep. John Shadegg of Arizona proposed it. It came up again recently in an exchange between Chris Wallace of Fox News Sunday and John Rother, executive vice president of AARP.

Mr. Wallace: “If you really want competition why not remove the restriction which now says that if I live in Washington, D.C. I’ve got to buy a D.C. health plan, and instead create a national market for health insurance, so that if there’s a cheaper plan in Pennsylvania, I could buy in Pennsylvania?”

Mr. Rother: “There are states and localities where health care is much less expensive than others, and if we allow people to buy all their insurance from those places, it will raise the rates there. And it’s called risk selection. It’s a real problem, given the fact that health care costs can vary substantially from one place to another. So I think while the idea sounds appealing, the consequence would be it would make health care more expensive for those people who live in those low-cost areas.”

How did Mr. Rother arrive at this conclusion?

His claim assumes that what makes insurance expensive in places like New Jersey—where the annual cost of an individual plan for a 25-year-old male in 2006 was $5,880—is merely the higher cost of medical services in the Garden State. He sounds an alarm in the rest of the country by suggesting that an individual living in, say, Kentucky—where an annual plan for a 25-year-old male cost less than $1,000 in 2006—would be asked to subsidize plan members living in high-priced states.

That’s not how interstate insurance would work. Devon Herrick, a senior fellow with the National Center for Policy Analysis who has written extensively on this subject, notes that insurance companies operating nationally would compete nationally. The reason a Kentucky plan written for an individual from New Jersey would save the New Jerseyan money is that New Jersey is highly regulated, with costly mandated benefits and guaranteed access to insurance.

Affordability would improve if consumers could escape states where each policy is loaded with mandates. “If consumers do not want expensive ‘Cadillac’ health plans that pay for acupuncture, fertility treatments or hairpieces, they could buy from insurers in a state that does not mandate such benefits,” Mr. Herrick has written.

A 2008 publication “Consumer Response to a National Marketplace in Individual Insurance,” (Parente et al., University of Minnesota) estimated that if individuals in New Jersey could buy health insurance in a national market, 49% more New Jerseyans in the individual and small-group market would have coverage. Competition among states would produce a more rational regulatory environment in all states.

This doesn’t mean sick people who have kept up their coverage but are more difficult to insure would be left out. Congressman Shadegg advocates government funding for high-risk pools, noting that their numbers are tiny. The big benefit would come from a market supply of affordable insurance.

Mr. Rother also said “risk selection” is a problem. But the coverage mandates cause that. As more healthy people opt out of health insurance because it is too expensive relative to what they consume, the pool transforms into a group of older, sicker people. Prices go higher still and more healthy people flee. High-mandate states are in what experts call an “adverse selection death spiral.”

Interstate competition made the U.S. one of the world’s most efficient, consumer driven markets. But health insurance is a glaring exception. When the competition caucus in Team Obama has to look for Plan B, this is it.

EDITORIAL: Unfair government competition

The Postal Service is a scary model for health care – link to original article

By THE WASHINGTON TIMES | Monday, August 17, 2009

According to President Obama, government health insurance will create competition in the health insurance industry. It simply would provide another alternative to existing plans offered by private companies, the argument goes. Like many Americans, we simply don’t believe it. Whenever the government enters into a market, it will try to expand its share and take over the sector.

During a town hall meeting last week at Portsmouth, N.H., Mr. Obama pointed to the U.S. Postal Service as evidence that private companies don’t need to worry about competition from the government. “If you think about it, UPS and FedEx are doing just fine, right? No, they are. It’s the post office that’s always having problems.”

If the president considers the Postal Service as an example, we should all be scared. The Postal Service is a classic example of both inefficiency and extreme monopoly power.

The Postal Service has staunchly resisted competition from UPS and FedEx since their infancy. Even though the Postal Service loses money in the overnight delivery business, it resisted infringement on its turf. The Postal Service has often increased its first-class mail rate to be well above cost, then used those profits to subsidize its overnight delivery service. For example, it raised first-class stamps to 33 cents in January 1999 and simultaneously reduced the price of domestic overnight express mail from $15 to $13.70, even though it was already losing money at the $15 rate.

Despite numerous advantages that FedEx and UPS could only dream of having, the Postal Service loses money. In addition to direct subsidies, the Postal Service is exempt from paying state sales, property and income taxes. It uses some of the most expensive real estate in the country rent-free. Perhaps Mr. Obama has not noticed, but nobody else but the Postal Service is allowed to deliver regular first-class mail, and only the Postal Service has access to Americans’ mailboxes.

The Postal Service has not managed to kill off UPS and FedEx because these private companies have better on-time delivery and much lower costs. But that is not because the government postal business did not try to squeeze out the competition. When a government agency gets into an industry, it tries to get bigger, even when it is not profitable.

The competition that Mr. Obama envisions between government and private insurance companies won’t be fair. Many proposed regulations, such as eliminating caps on what insurance companies will pay out or preventing insurance companies from discriminating against those with pre-existing conditions, will eliminate private insurance. But even if the government only tilts the playing field partially in favor of a government insurance plan, making it artificially cheaper, a lot of Americans will give up their private insurance to save money. Government insurance gradually will take over, and service will deteriorate.

Medicare reimbursements to hospitals fail to cover the actual cost of providing services. The Medicare Payment Advisory Commission (MedPAC), an independent congressional advisory agency, says hospitals received only 94.1 cents for every dollar they spent treating Medicare patients in 2007. MedPAC projects that number to decline to 93.1 cents per dollar spent in 2009, for an operating shortfall of 7%. Medicare works because hospitals subsidize the care they provide with revenue received from patients who have commercial insurance. Without that revenue, hospitals could not afford to care for those covered by Medicare. In effect, everyone with insurance is subsidizing the Medicare shortfall, which is growing larger every year.

From Medicare For All Isn’t The Answer

Eight things we can do to improve health care without adding to the deficit.

By JOHN MACKEY

The Wall Street Journal – link

“The problem with socialism is that eventually you run out of other people’s money.”

—Margaret Thatcher

With a projected $1.8 trillion deficit for 2009, several trillions more in deficits projected over the next decade, and with both Medicare and Social Security entitlement spending about to ratchet up several notches over the next 15 years as Baby Boomers become eligible for both, we are rapidly running out of other people’s money. These deficits are simply not sustainable. They are either going to result in unprecedented new taxes and inflation, or they will bankrupt us.

While we clearly need health-care reform, the last thing our country needs is a massive new health-care entitlement that will create hundreds of billions of dollars of new unfunded deficits and move us much closer to a government takeover of our health-care system. Instead, we should be trying to achieve reforms by moving in the opposite direction—toward less government control and more individual empowerment. Here are eight reforms that would greatly lower the cost of health care for everyone:

• Remove the legal obstacles that slow the creation of high-deductible health insurance plans and health savings accounts (HSAs). The combination of high-deductible health insurance and HSAs is one solution that could solve many of our health-care problems. For example, Whole Foods Market pays 100% of the premiums for all our team members who work 30 hours or more per week (about 89% of all team members) for our high-deductible health-insurance plan. We also provide up to $1,800 per year in additional health-care dollars through deposits into employees’ Personal Wellness Accounts to spend as they choose on their own health and wellness.

Money not spent in one year rolls over to the next and grows over time. Our team members therefore spend their own health-care dollars until the annual deductible is covered (about $2,500) and the insurance plan kicks in. This creates incentives to spend the first $2,500 more carefully. Our plan’s costs are much lower than typical health insurance, while providing a very high degree of worker satisfaction.

• Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits. Now employer health insurance benefits are fully tax deductible, but individual health insurance is not. This is unfair.

• Repeal all state laws which prevent insurance companies from competing across state lines. We should all have the legal right to purchase health insurance from any insurance company in any state and we should be able use that insurance wherever we live. Health insurance should be portable.

• Repeal government mandates regarding what insurance companies must cover. These mandates have increased the cost of health insurance by billions of dollars. What is insured and what is not insured should be determined by individual customer preferences and not through special-interest lobbying.

• Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year. These costs are passed back to us through much higher prices for health care.

• Make costs transparent so that consumers understand what health-care treatments cost. How many people know the total cost of their last doctor’s visit and how that total breaks down? What other goods or services do we buy without knowing how much they will cost us?

• Enact Medicare reform. We need to face up to the actuarial fact that Medicare is heading towards bankruptcy and enact reforms that create greater patient empowerment, choice and responsibility.

• Finally, revise tax forms to make it easier for individuals to make a voluntary, tax-deductible donation to help the millions of people who have no insurance and aren’t covered by Medicare, Medicaid or the State Children’s Health Insurance Program.

Many promoters of health-care reform believe that people have an intrinsic ethical right to health care—to equal access to doctors, medicines and hospitals. While all of us empathize with those who are sick, how can we say that all people have more of an intrinsic right to health care than they have to food or shelter?

Health care is a service that we all need, but just like food and shelter it is best provided through voluntary and mutually beneficial market exchanges. A careful reading of both the Declaration of Independence and the Constitution will not reveal any intrinsic right to health care, food or shelter. That’s because there isn’t any. This “right” has never existed in America

Even in countries like Canada and the U.K., there is no intrinsic right to health care. Rather, citizens in these countries are told by government bureaucrats what health-care treatments they are eligible to receive and when they can receive them. All countries with socialized medicine ration health care by forcing their citizens to wait in lines to receive scarce treatments.

Although Canada has a population smaller than California, 830,000 Canadians are currently waiting to be admitted to a hospital or to get treatment, according to a report last month in Investor’s Business Daily. In England, the waiting list is 1.8 million.

At Whole Foods we allow our team members to vote on what benefits they most want the company to fund. Our Canadian and British employees express their benefit preferences very clearly—they want supplemental health-care dollars that they can control and spend themselves without permission from their governments. Why would they want such additional health-care benefit dollars if they already have an “intrinsic right to health care”? The answer is clear—no such right truly exists in either Canada or the U.K.—or in any other country.

Rather than increase government spending and control, we need to address the root causes of poor health. This begins with the realization that every American adult is responsible for his or her own health.

Unfortunately many of our health-care problems are self-inflicted: two-thirds of Americans are now overweight and one-third are obese. Most of the diseases that kill us and account for about 70% of all health-care spending—heart disease, cancer, stroke, diabetes and obesity—are mostly preventable through proper diet, exercise, not smoking, minimal alcohol consumption and other healthy lifestyle choices.

Recent scientific and medical evidence shows that a diet consisting of foods that are plant-based, nutrient dense and low-fat will help prevent and often reverse most degenerative diseases that kill us and are expensive to treat. We should be able to live largely disease-free lives until we are well into our 90s and even past 100 years of age.

Health-care reform is very important. Whatever reforms are enacted it is essential that they be financially responsible, and that we have the freedom to choose doctors and the health-care services that best suit our own unique set of lifestyle choices. We are all responsible for our own lives and our own health. We should take that responsibility very seriously and use our freedom to make wise lifestyle choices that will protect our health. Doing so will enrich our lives and will help create a vibrant and sustainable American society.

Mr. Mackey is co-founder and CEO of Whole Foods Market Inc.

My company ran a hospital in London. We don’t want to go the government route.

By ALAN B. MILLER

Wall Street Journal – link to original article

August 12, 2009

With Congress now in recess, the debate over health-care reform has moved to each member’s home district. The American people have rightly been asking elected officials many probing questions. While few Americans deny we need health-insurance reform (too many people lack adequate coverage), most believe we receive the best quality health care in the world and do not want to see it compromised.

Several advocacy groups and members of Congress want a single-payer insurance system, modeled after Medicare, to cover all Americans. They say Medicare works to provide health care to seniors, so government should extend the program to Americans of all ages. Others want to create a government-run plan, sometimes called a “public option,” which they say would compete with private insurance but would only be two steps away from a single-payer system.

There are more than 1,300 insurance companies competing for business without unneeded competition from a federal government plan. Backed by tax dollars, a government-run option could offer artificially low rates without regard to profitability, or even meeting operating expenses. That would push businesses to move employees to the public-option plan, ultimately putting private insurers out of business and leaving only a single-payer system run by the government.

A single-payer system may appear attractive to some. But as someone with more than 30 years of experience running a leading hospital company with international operations, I have firsthand knowledge of the hidden costs.

Medicare reimbursements to hospitals fail to cover the actual cost of providing services. The Medicare Payment Advisory Commission (MedPAC), an independent congressional advisory agency, says hospitals received only 94.1 cents for every dollar they spent treating Medicare patients in 2007. MedPAC projects that number to decline to 93.1 cents per dollar spent in 2009, for an operating shortfall of 7%. Medicare works because hospitals subsidize the care they provide with revenue received from patients who have commercial insurance. Without that revenue, hospitals could not afford to care for those covered by Medicare. In effect, everyone with insurance is subsidizing the Medicare shortfall, which is growing larger every year.

If hospitals had to rely solely on Medicare reimbursements for operating revenue, as would occur under a single-payer system, many hospitals would be forced to eliminate services, cut investments in advanced medical technology, reduce the number of nurses and other employees, and provide less care for the patients they serve. And with the government in control, Americans eventually will see rationing, the denial of high-priced drugs and sophisticated procedures, and long waits for care.

My company’s experience with health care in the United Kingdom illustrates the point. In the 1980s, we opened The London Independent Hospital to serve the private medical market in the U.K. The hospital had not been open long when representatives of a 1,000-bed government-run hospital located a short distance away approached us to borrow high-tech equipment and instruments. Because people were ill and needed procedures the government hospital could not provide, we provided that hospital with the help it needed. But that experience convinced me that under a single-payer system hospitals do not receive the money required to purchase advanced technology or provide quality care.

Advocates of a single-payer system say that hospitals would survive if they learned to operate more efficiently. While we are always looking for ways to improve efficiency, the economic conditions of the past few years have already forced most institutions to reduce expenses and increase efficiency as much as possible.

The reality is that Americans have come to expect the best health care in the world, and to provide that, hospitals must continue to invest in advanced medical technology, salaries for well-trained nurses and technicians, and state-of-the-art facilities. If hospitals were required to operate solely on revenue from a single-payer system, they could no longer afford to provide the care that Americans deserve.

Single-payer systems have proven to be wholly inadequate in Canada and the U.K. Most people in America are satisfied with the care they receive, so it is important that we take the time to fix only the parts of our system that need repair. Let’s not destroy a system that works well for most Americans. Let’s judiciously change only the areas in need.

Mr. Miller is chairman and CEO of Universal Health Services Inc.