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Tag: John Goodman

Can Everyone Become a Billionaire?

I’m going to tell you something that Barack Obama doesn’t understand.

And because he doesn’t understand it, our country is wasting hundreds of millions of dollars at a time when we cannot afford to waste hundreds of millions of dollars.

Time and again President Obama has told us how he intends to solve our health care problems: spend money on pilot programs and other experiments; find out what works and then go copy it. He’s also repeatedly said the same thing about education. The only difference: in education we’ve already been following this approach with no success for 25 years.

Still, if the president were right about health and education, why wouldn’t the same idea apply to every other field? Why couldn’t we study the best way to make a computer, or invest in the stock market and do any number of other things — and then copy it?

I want to propose a principle that covers all of this: entrepreneurship cannot be replicated. Put differently, there is no such thing as a cookbook entrepreneur.

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Why Everything We Are Doing in Health Policy May Be Completely Wrong …

A relatively obscure paper (gated) published in an academic journal the other day was completely ignored by the mainstream media. Yet if the study findings hold and if they apply to a broad array of health services, it appears that the orthodox approach to getting health services to poor people is as wrong as it can be.

At first glance, the study appears to focus on a rather narrow set of issues. Although most states try to limit Medicaid expenses by restricting patients to a one-month supply of drugs, North Carolina for a period of time allowed patients to have a three-month supply. Then the state reduced the allowable one-stop supply from 100 days of medication to 34 days and at the same raised the copayment on some drugs from $1 to $3. Think of the first change as raising the time price of care (the number of required pharmacy visits tripled) and the second as raising the money price of care (which also tripled).

The result: A tripling of the time price of care led to a much greater reduction in needed drugs obtained by chronically ill patients than a tripling of the money price, all other things remaining equal.

This study pertained to certain drugs and certain medical conditions. But suppose the findings are more general. Suppose that for most poor people and most health care, time is a bigger deterrent than money. What then?

If that idea doesn’t immediately knock your socks off, you probably haven’t been paying attention to the dominant thinking in health policy for the past 60 years.

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Is Medicare A Good Deal?

Think about everything you will pay to support Medicare: the payroll taxes while you are working, the premiums during retirement, and your share of the income taxes that subsidize the system. Then compare that to the benefits of Medicare insurance, say, from age 65 until the day you die.

Are you likely to come out ahead? That depends in part on how old you are. If you are a typical 85-year-old, for example, you can expect about $55,000 of insurance benefits over and above everything you have been paying into the system. If you’re a typical 25-year-old, however, you will pay an extra $111,000 into the system, over and above any benefits you can expect to receive.

By the way, this is not the sort of calculations you want to try at home on a pocket calculator. It’s too complicated. Fortunately the heavy lifting has already been done by Andrew Rettenmaier and Courtney Collins in a report for the National Center for Policy Analysis and summarized in this chart.

In terms of dollars in and dollars out, Medicare breaks down this way:

  • A typical 85-year-old is going to get back $2.69 in benefits for every dollar paid into the system in the form of premiums and taxes—a good deal by any measure.
  • People turning 65 today don’t do nearly as well — they get back $1.25 for every dollar they pay in.
  • The average worker under age 50 loses under the system — with a 45-year-old getting back only 95 cents on the dollar.
  • That’s better than the deal 25-year-olds get, however; they can expect to get back 75 cents for every dollar they contribute.Continue reading…

Death by Regulation

“How many of you have not been able to get a drug you needed to properly deliver anesthesia to a patient?” I asked.

Every hand in the room went up.

“How did that affect your patients?” I asked. “Two of our patients died,” one woman answered.

I was speaking to a group of nurse anesthetists, enrolled in a business management program at Marshall University in West Virginia. I wish I could say their experience is unusual. It isn’t.

About 90 percent of all the anesthesiologists in the country report they are experiencing a shortage of at least one anesthetic. Drug shortages are also endangering cancer patients, heart attack victims, accident survivors and a host of other ill people.  The vast majority involve injectable medications used mostly by medical centers, in emergency rooms, ICUs and cancer wards. Currently, there are about 246 drugs that are in short supply and, as the chart shows, the number has been growing for some time.

So what’s going on?

 

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All the Care that Money Will Buy

I believe we could spend our entire national income on health care. Not by frittering money away, but by spending it on goods and services that even in small ways could improve the odds of better health. (Examples below.)

I find that most people in health policy agree with that assessment, but rarely do they see its logical (and I would say obvious) implication. If we spent all our income on health, we would have nothing to eat, nothing to wear, no place to sleep. There would be only health care. Since that’s clearly an undesirable state of affairs, it must be good for people to refrain from obtaining all the useful care that money will buy. Further, such restraint needs to be exercised quite often.

What brings this to mind is a new RAND study finding that people with Health Savings Account plans consume less care than people with conventional insurance and have lower health care costs. The people who were studied cut back on such “useful care” as mammograms, screenings for cervical and colorectal cancer and even childhood vaccinations.

Some critics pounced on this result and claimed that consumer-directed care is bad for patients. The critics are, of course, very wrong.Continue reading…

An Alternative to Malpractice

About three decades ago, University of Chicago law professor Richard Epstein proposed a radical alternative [gated, but with abstract] to our system of malpractice liability. He called it “liability by contract.” The idea: let patients and doctors voluntarily agree in advance how to resolve things if something goes wrong.

In nonmedical fields, Epstein’s idea is actually quite commonplace. Contracts for performance often have provisions detailing what the parties will do if something goes awry. If the parties disagree, contracts often spell out dispute resolution procedures (such as binding arbitration).

One version of this idea in medicine has already been tried. For years, hospitals asked admitting patients to sign a form agreeing not to sue the hospital or the doctors, no matter how negligent they were. When these forms showed up at the courthouse, however, judges routinely dismissed them on the grounds that the patients were too sick, too scared and too uninformed for there to have been a true meeting of the minds.

My colleagues and I at the National Center for Policy Analysis believe we have found here and here. Let the state legislature decide on the minimum elements (including the amount of monetary compensation) that must be in such contracts in order to make sure patients are fairly protected. Then widely publicize these elements so that people generally understand (before they get sick) what will happen if they opt out of the malpractice system. Courts would be required to accept these contracts as binding.

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How Should Medicare Pay for Medical Care?

There are basically five possibilities. To compare them, let:

S = each unit of service, or a package of services

P = the price of each unit of service, or the price of a package of services

Then the government can:

1.     Dictate every service it will pay for and the price it will pay for each of them (fix S and P), leaving providers to compete only on amenities, including waiting times.

2.     Dictate S, but leave providers free to compete on P, say, through a system of competitive bidding.

3.     Dictate P, but leave providers free to compete on what S they will provide for that price.

4.     Initially fix S and P, but leave providers free to opt out, substituting different bundles of S & P as long as government’s cost goes down and quality of care goes up.

5.     Initially fix S and P, but allow patients to opt out, managing a portion of the funds directly and making their own purchasing decisions.

Alert readers will recognize (4) and (5) as NCPA solutions, (3) as the Rivlin-Ryan plan, and (1) as the status quo. But I’m getting ahead of the story.

Under the current system (Method 1), Medicare establishes a list of about 7,500 physician tasks it will pay, and sets the price for each of them. These prices differ, however, for every city, town, and hamlet in the land. So that in fact there are millions of prices that Medicare is administering every day.

One important drawback of this system is that it’s in no one’s interest to curtail spending. Every provider maximizes profit and every patient maximizes utility by exploiting the reimbursement formulas.

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Bureaucrats vs. Entrepreneurs

I used to think the biggest obstacle to getting agreement about health care reform was ideology (socialism vs. capitalism). Then I decided it was sociology (engineers vs. economists). I now am inclined to believe it is psychology (bureaucrats vs. entrepreneurs).

I came to this realization after reading through a long list of comments to a Health Alert I posted the other day about a health care entrepreneur (more on that below).

The entrepreneurial approach is the way we are trying to solve big problems in many other fields. Take the Ansari X Prize, established by citizen-astronaut Anousheh Ansari and her husband, Amir. They awarded $10 million to the first group to build a privately-funded spacecraft capable of carrying three people 100 kilometers above the earth’s surface twice within two weeks. Interestingly, 26 teams from seven nations spent more than $100 million competing to win the prize.Continue reading…

Ponzi Schemes

Jack Lew is lucky he isn’t in prison. Were he representing a private pension fund and if he made the sort of statements he made in USA Today the other day, he might well be sharing a cell with Bernie Madoff.

So who is Jack Lew? And what did he say?

Lew is the Director of the federal Office of Management and Budget. About Social Security, he wrote: “Taxes are placed in a trust fund dedicated to paying benefits owed to current and future beneficiaries. When more taxes are collected than are needed to pay benefits, funds are converted to Treasury bonds — backed with the full faith and credit of the U.S. government.”  As a result of these investments, the Social Security trust fund will be able “to pay full benefits for the next 26 years.”  Not only is this preposterous, Charles Krauthammer called it a “breathtaking fraud.”

Before dissecting Lew, let’s consider why Bernie Madoff is in the hoosegow. Madoff told investors he was investing their funds in real assets, when in fact he was not. He secretly used their funds for personal consumption and to pay off other investors. Either figuratively or imaginatively, Madoff wrote IOUs to himself, all backed by the full faith and credit of Bernie Madoff. Maybe in the beginning he fully intended to pay off. But that’s beside the point. Inducing people to give you money with this sort of lie is criminal fraud. It’s against the law.

Like most government-sponsored retirement programs in the world today, our Social Security system is pay-as-you-go. All payroll tax revenues are spent — the very minute, the very hour, the very day they are received by the U.S. Treasury. Most of these revenues are spent on benefits for current retirees. Any additional amount is spent in other ways.

But there is no funding of future benefits. No money is being stashed away in bank vaults. No investments are made in real assets.Continue reading…

Does the GOP Have a Health Plan?

The Republicans have no plan to insure the uninsured.

How do I know that? A New York Times editorial told me. So did Ezra Klein, writing in The Washington Post. Matt Miller, also writing in the Post, went further. “I’m willing to repeal ObamaCare,” he wrote, provided the Republicans can “cover the same number of uninsured” and “do it at a lower cost.”

So why don’t the Republicans have a plan? That’s easy. “They’re against reform because it would cover the uninsured — and that’s something they just don’t want to do,” wrote Paul Krugman in The New York Times. The Times’ own editorial said the same thing.

All this has caused me to suffer a bout of severe depression. But, wait a minute. Wasn’t health care the biggest issue in the last presidential election? And…how memory fades…didn’t the Obama campaign spend millions of dollars…promoting his own plan?…no, that’s not right…

Ah, now I remember. The Obama campaign spent tens of millions of dollars on TV commercials attacking the John McCain health plan! It spent more money than has ever been spent for or against any policy proposal in the history of American politics.

The McCain plan, for all those suffering from collective amnesia, proposed to replace all existing health care tax and spending subsidies with a universal health grant, structured like a refundable tax credit. The Patients’ Choice Act version of the idea is sponsored by Tom Coburn (R-OK) and Paul Ryan (R-WI). It promises $2,300 (individual) or $5,700 (family) to everyone who isn’t enrolled in a government health plan.

So what was candidate Obama’s problem with that? Did he object that the plan wasn’t generous enough? Too few regulations? No, none of that. The Obama TV ads focused like a laser on raw self-interest. McCain’s health plan, the ads said, will cause your withholding taxes to go up (without mentioning the offsetting credit that would cause them to go down).Continue reading…

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